Despite high demand for guitars, Fender's CEO says that supply chain bottlenecks are holding back the company's rapid growth during the pandemic.
"We jokingly refer to it as whack-a-mole, there is a new challenge that seems to emerge every single day, and we have to be creative to find ways to navigate around it," Andy Mooney, CEO of Fender, told Yahoo Finance Live (video above). "We're definitely facing supply chain challenges in terms of chip shortages for amplifiers and raw material ... And most of all, recently, transportation challenges."
Mooney estimated that while the company will grow by about 35% this year, "we could have grown easily 50% this year" were it not for the supply chain woes.
'Adopting guitar in droves'
Pre-pandemic, the industry was growing at about 10%, Mooney said, but the demand for guitars as the pandemic drags on really accelerated the trajectory of the industry.
"We grew about 35% during the height of the pandemic, [and] we're continuing to grow at that rate again. This year, we'll have another record year," Mooney said.
According to a Fender-YouGov survey, around 16 million Americans between the ages of 13 and 64 started to learn how to play the guitar over the last two years, with 62% citing lockdowns as a "major motivator." Additionally, 77% of those surveyed said they picked up the guitar because they had additional free time during this period.
"About half of all new players up are women. They tend to gravitate towards an acoustic guitar as their first guitar," Mooney said. But "the thing that really kind of caught our attention in this study and this time around was the percentage of Latine population who are really adopting guitar in droves — about nearly 40% of new guitar players are of Latin descent."
But as interest surges, addressing the total demand has been a challenge due to capacity constraints.
"We're able to meet demand ... [at a] higher level than probably anybody in the industry, but we're not able to meet the total demand that's out there," Mooney explained. "There's probably at least 50% of additional growth that we could have had this year, had we been able to either get capacity or get the product here on time."
Meanwhile, the company has raised prices, given the tight scenarios that are elevating costs. So far, the consumer has been willing to stomach the hikes, Mooney said.
Despite the challenges of meeting capacity, Fender continues to encourage music education among the youth, not just through its products but also through philanthropy.
Mooney shared that Fender took on a proactive approach to reach young aspiring guitar players during the lockdown periods, when many students were forced to attend school remotely. The company worked with school districts such as the Los Angeles Unified School District to distribute instruments and help students continue their music education. It also provided a Fender Play subscription for the students.
"It's a very unique program in that we ship the guitars to the home of the student," Mooney said. "The teachers have been very, very supportive of that because involvement in any creative endeavor and music and arts is fundamentally good in terms of engagement for kids in both learning overall. ... We're committed to it for the long run and we'd like to continue to expand it over time."
Aarthi is a reporter for Yahoo Finance. She can be reached at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.