Pumped on purpose — Exporter Magazine

Les Mills International’s group fitness and team training programs have fast become a global phenomenon encompassing 90,000 certified instructors and 14,000 clubs spanning 80 countries. Exporter caught up with CEO Phillip Mills to learn about this remarkable export journey.It’s difficult to comprehend the exact scale of the worldwide Les Mills fitness juggernaut without having a personalised tour of their international headquarters, as I was fortunate enough to experience when I caught up with Phillip Mills recently. Close to Auckland’s Victoria Park Market, the multi-storey building houses a fair-sized team of, understandably, rather fit looking individuals engaged in the development, sales and marketing of the 13 Les Mills group fitness and team training programmes – programmes which have, quite literally, become famous around the world.This is an export success story we need to remind ourselves of – indeed it was recognised late last year when Les Mills took out the supreme award at the Westpac Auckland Central Business Awards. It is unique, not just because of its global footprint, but the fact that it’s built on the back of a highly worthwhile cause – to make the inhabitants of planet earth a whole lot fitter and healthier.In the top floor staff kitchen Phillip provides a quick history lesson on the origins and evolution of New Zealand’s best known fitness brand. It would take a rather large book to cover everything – right from that day in 1968 when Phillip’s parents opened the first Les Mills gym in Auckland. Phillip’s involvement in the business, apart from his schoolboy days, dates back to the 80s when he returned home from studying in the US and began developing group fitness programmes. By then, a number of social trends had driven the growth of the gym industry worldwide, and ‘aerobics’ classes were fast catching on. Going to the gym would eventually become the biggest adult sport in the Western world. “Today there are more adults going to the gym than there are playing golf, tennis and soccer combined. In Auckland alone there are 200 gyms,” says Phillip.Les Mills programmes were soon licensed around New Zealand and Australia, but the global export story for the brand got really serious in May 1997 with the establishment of Les Mills International. In a very short time the BODYPUMP™, BODY ATTACK™, BODYFLOW™, BODYSTEP™, RPM™ and later, BODYCOMBAT™ programmes were launched internationally. Other Les Mills programs, all involving quality-controlled standardised classes and choreography, teacher training and management systems, would follow.Phillip acknowledges that it was a tough “somewhat quirky” industry sector to get your head around – but the biggest factors that encouraged its growth were technology and the advent of motivational spin teachers who took the boredom out of going to the gym.“The gym industry suddenly realised that it wasn’t in the exercise business so much as the motivational business – motivating people by being social, by being more of a health solution, and above all making exercise more fun and enjoyable.“Group exercise became the sharp end of the exercise industry,” says Phillip, “and we found we were the best in the world at it. We got our best teachers to design the classes and have all the other instructors teach those standardised programmes. We turned teachers into performers and, as a result, peak classes today can have200 to 300 people.”

The export journey

The growth of export sales for Les Mills International has been nothing short of spectacular. It began with moderate success in Australia in the 80s, but when Bill Robertson became distributor, many hundreds of Aussie gyms suddenly began running their programmes. “So we said, right let’s go out and emulate Bill’s successful model – let’s look for more distributors like him,” recalls Phillip.“We learnt fast. Looking further afield, sometimes we’d use gym equipment companies, or fitness industry federations. We made mistakes. In some countries we used big gym chains and that was a mistake because they didn’t want to sell our programmes to their competitors, or their competitors didn’t want to buy off them. “It might have been a good way to gain a foothold, but over time it limited us in that market,” he says.There’s no doubt that the distributor model worked; today there are around 30 major distributors covering 80 countries.“Some of our [independent] distributors have as much as 80 or 90 percent of all gyms in their respective countries taking our programmes,” says Phillip.Countries where Les Mills had good industry contacts were targeted first – the likes of UK, US, France, Germany, Italy, Brazil and Sweden. “We’d met a lot of these distributors through going to various trade exhibitions over the years,” recalls Phillip, singling out France, Holland, Belgium and northern Europe as specific success stories.Italy, however, didn’t go so well and it’s only some 15 years later that he can safely say the brand has fully recovered from appointing the wrong distributor in that market.Meanwhile Asia still offers plenty of potential – there are some 1,500 gyms taking their programmes, including around 300 in China and more than 500 in Japan. China, not surprisingly,is seen as the market of the future.Interestingly, the ‘New Zealand story’ associated with the programmes isn’t important to gym/goers – but it does resonate with the 90,000 certified Les Mills teachers around the world. “When we train them we explain the New Zealand story,” says Phillip, “and our sports ethic and heritage in athletics such as distance running.“When we first went international, the aerobics industry was a little tainted because people thought it was all ‘women, leotards and leg-warmers’. Our classes were seen and sold as something different. We’d dress all in black, talk about the All Blacks, our Maori warrior heritage, and so on, and use our country’s heritage to help build the culture with our teachers.” It worked, generally program adoption would go viral.Where things didn’t initially work well, aside from Italy, was in the US. The original aim there was to break it up into half a dozen territories – but they ended up going with just the one distributor. Phillips says they put contractual minimums in place, but those minimums were not achieved. It was tough making the decision to part company with a distributor they’d built up a relationship with. But after five years it was back to plan A – and they’ve since rationalised down to four US distributors – two of which are owned by Les Mills International.Other distributors around the world have also been bought out by Les Mills and offices set up in-country. Currently there are head offices in Stockholm, London, Baltimore and San Francisco, and the German distributorship is part-owned by Les Mills. “Gradually as distributors retire or look to sell, we’re buying them back,” says Phillip.Having independent distributors initially is a good way to grow fast in each particular market, he explains – and these distributors have stuck around because the products and the association with Les Mills is a lot of fun. “Even running the big quarterly teaching workshops is fun – nowadays they can involve thousands of teachers. It’s a bit like going to a rock concert.”Many distributors became relatively wealthy from the programmes he admits. But over time, some wind up with a divergence of interests and stop putting in the effort. And while Les Mills were busy reinvesting profits in continuous quality improvement, some distributors were looking to cut costs, compromise on quality and pocket too much profit.“For various reasons, we ended up buying them out. It’s really a natural progression.”

Here’s the situation

The Les Mills worldwide distributor network is a major strength of the company. Today some $200 million is spent annually developing and distributing product. Les Mills programmes are now in 15,000 gyms, conducting on average four programs each.In the B2B market space, Les Mills is the biggest player, with the only serious competition coming from Zhumba, which started in the B2C home market and has a different business model.“However, there are more people in gyms globally taking BODYPUMP™ classes than there are doing Zhumba,” says Phillip. Adding that Zhumba openly admits to borrowing ideas on culture creation from the Kiwi company.Les Mills is moving into the consumer market too and looking to make strategic alliances. It is banking on the success of a partnership with a US home exercise informercial company, which is about to release the BODYPUMP™ and BODYCOMBAT™ series on DVD in the States –  a considerable, but calculated, investment risk representing around $2.5 million.Discussions are also underway with a gaming company to develop a home fitness game.“If we can succeed in the B2C market, it’ll be a game/breaker,” says Phillip.“TV brand exposure encourages people to try out the programmes in gyms as well, and therefore further drive B2B sales.”Phillip is confident that they have the best content, the best classes and the world’s best presenters. So confident are they in what they’re doing, that the goal is to double the size of the company in the next few years.“There’re about five million people per week who do our classes, and the goal is to lift that figure to 20 million, just in live classes, by 2020.”

Purpose driven

Les Mills’ export earnings are in the vicinity of $80 to $90 million. But while there are always commercial motives driving any business enterprise, it’s well known that Phillip and his wife Dr Jackie Mills (a former GP with a passion for obstetrics and nutrition who is now in charge of producing all Les Mills product) are both active in lobbying for a fitter, greener planet. Fitness, health and sustainability are all inter-linked and the couple are outspoken on a number of health and environmental issues. Les Mills is very much a purpose-driven business – and on a world scale.Dance4life is an international project that uses the language of music and dance to empower young people to push back the spread of HIV and AIDS – Les Mills inspires clubs to fundraise for this cause.Phillip and Jackie’s book Fighting Globesity: A Practical Guide to Personal Health and Sustainability highlights how it’s up to individuals to make healthy changes in their lives and halt society’s continuing damage to the environment.Phillip tells me about a bunch of goals they have relating to energy saving and the environment, which they want to promote on a global scale through overseas gyms and conventions. On the health front they want to see people eating better and exercising more, right from school-age. The key to this, they say, is better education, and therefore greater motivation. Currently a number of Les Mills kids exercise programmes are being trialled and rolled out here and around the world.“The most important thing we can do for New Zealand and for the world, it to make people healthier. Improve peoples health and you will dramatically improve the economy. Because right now health spending is out of control,” he says.Although he dislikes the term ‘purpose driven’, for Phillip and his team profits are about achieving a purpose. They’re intertwined. Business, and indeed exporting, is successful when achieved in the context of a bigger picture – planet Earth and its inhabitants.“I worry about being part of a future society that is not economically strong – because we haven’t dealt with some of the big issues like health or global warming.“As a business person I worry about this massive amount of energy we, as a team, have put into Les Mills over the years. I don’t want to see the world economy destroyed by environmentally-driven disasters. There are bloody good logical reasons why we should be trying to deal with these problems now.“If we introduce strong regulations and incentives for New Zealand companies to act now – there may be some short-term pain, but long-term our economy will be much more successful.”

Glenn Baker is editor of Exporter.

Publishing Information

Magazine Issue 

Exporter Magazine Mar/April 2013 issue 27