SRAM: A Bike Parts Tour de Force

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Antitrust Suit Against Shimano

Although SRAM bombed at first in road bikes, it got a second chance. Day's brother had pitched a handlebar twist-shifter for mountain bikes. Day nixed the idea. Luckily for SRAM, Frederick ignored his older brother and continued to work on the project behind his back. In 1989, SRAM launched the CX shifter. It was a hit with mountain bikers.

But there was one problem. While local bike shops started to carry the CX, SRAM couldn't get bike manufacturers to put it on their frames as original equipment. The reason: Shimano charged manufacturers a lower price if they bought all the components for a single bike, and more if any parts were excluded. SRAM filed an antitrust suit, and the two parties settled in 1990, with Shimano dropping the pricing practice. Shimano didn't return calls seeking comment.

SRAM's shifter sales then took off. The company rounded out its ability to sell a full set of mountain-bike parts through four acquisitions, including one of German manufacturer Sachs Bicycle Components. SRAM now sells components for about half the high-end market for mountain bikes, which cost $2,500 and up, bicycle dealers say. All that gain came at Shimano's expense, because Campagnolo makes parts only for road bikes.

Standout Shifting Technology

Now SRAM is taking on both Shimano and Campagnolo again in the road market. The move is one part prestige. "There is more elegance, speed, and history to the road market," says Day. It's also one part financial. "That is where the dollars are," he says. More baby boomers are turning to road riding because it's easier on the body than pedaling a mountain bike. And many are willing to pay big bucks for the carbon-fiber frames and wheel rims. Sales of $12,500 road bikes aren't uncommon. At independent shops, where most high-end bikes are sold, road bikes make up 15% of unit sales but 50% of dollar sales, Day says.

In 2006, SRAM launched its first two component sets for road bikes, a premium line called Force, and a midtier one, Rival. Its standout technology was in the shifting action. With Campagnolo and Shimano, riders have to use two levers to shift—one to go up, and the other to go down. With SRAM components, a rider needs only one lever to shift. Two SRAM engineers conceived the idea on a cocktail napkin while drinking Pabst Blue Ribbon at Weeds, a nearby bar. Hence, SRAM's name for its two-way shift: Double Tap.

SRAM representatives also work bike shops, making frequent visits to try to convince store owners of the advantages of the new road products. If a dealer gets behind a product, Day says, SRAM starts pushing bike makers to install it on new bikes. The calls are another way to distinguish SRAM from Shimano and Campagnolo. "The other two companies do not come to our store," says Chris Dimmick, general manager of Turin Bicycle in Evanston, Ill.

Specialized and other high-end brands, such as Scott Sports of Switzerland, now offer road bikes with SRAM parts. And SRAM's newest and priciest part set, Red, is sparking more interest. It is lighter than previous weight-winner Campagnolo and costs slightly more at $2,220. Competitive Cyclist, one of the nation's biggest online bike retailers, has presold dozens of the Red part sets, which doesn't happen often with a launch, says co-owner Hap Seliga. "That speaks volumes about people's expectations," he says.

Berner is a correspondent for BusinessWeek in Chicago .