When executives at the Trek Bicycle Corp. signed a contract with Lance Armstrong in 1998, they were betting the public would see the cyclist recovering from testicular cancer as a human interest story.
Seven years later, Armstrong still rode a bicycle Trek manufactured in this southern Wisconsin town in his seventh straight -- and last -- Tour de France last week.
Armstrong's prowess and personal story have reinvigorated American interest in cycling, and no company has felt the impact more than Trek, the privately held company that is the top U.S. manufacturer of bikes.
"It was just a gamble that paid off dividends that we could never imagine," said Zapata Espinoza, a spokesman for Trek. "It was like putting a penny in a slot and winning a million bucks."
The Lance factor, as Trek executives call it, is hard to quantify but has certainly been real. Combined with an aging baby-boom generation that is turning to cycling for fitness and leisure, that means big business in road bikes, the fast, lightweight cycles used by Armstrong and other world-class racers.
Road bikes, which cost an average of $1,150, accounted for 28 percent of dollar sales by specialty dealers in 2004, up from 16 percent in 2002, according to the National Bicycle Dealers Association. Overall, the U.S. bicycling industry has been flat since 1999, with bike, parts and accessory sales of about $5.5 billion in 2004, the group says.
At Trek, sales are up and the company is expanding its headquarters in Waterloo, a town of 3,200 just 30 miles east of Madison, by about one-third.
The project will allow the factory to produce more of the lightweight carbon bikes that are Trek's trademark around the world. The business makes more than 1 million bikes a year, including road bikes, mountain bikes and kids' bikes.
"We have seen a significant increase in sales and production because of demand," said company official Steve Swenson, speaking in Trek's factory in front of racks filled with finished bike frames.
Trek refused to release sales figures, but Ash Jaising, president of the Bicycle Market Research Institute in Boston, estimated Trek's sales have grown from less than $50 million in 1990 to $500 million this year.
Jaising said the company is No. 1 in units sold and value of sales in the specialty market sector, and has increased its market share to 30 percent. The company's success has allowed independent bicycle dealers that sell Trek bikes to increase their market share, which had been losing ground to sporting goods stores and large retailers.
"The growth is high among the more serious bikers. People are spending more money for the equipment and that has helped Trek," he said. "Trek has the momentum and has had it for the last couple of years."
Trek, which started producing steel bike frames with five employees out of a red barn in 1976, now has more than 1,500 workers, most of whom are in America. The business is still owned by the Burke family. CEO John Burke is the son of the founder, Dick Burke.
The company says it does make low-end bikes in Asia. Still, the company is considered a success story for American manufacturing at a time when 99 percent of bikes bought in the U.S. are made overseas.
The factory churns out 700 bike frames a day that are shipped to a plant in Whitewater, Wis., for assembly and sold under the Trek, Gary Fisher, Klein and Greg LeMond brand names.
Armstrong is deeply involved in designing and testing his bikes. The Trek Madone SSLx, which he is racing this year, features a stiffer frame to climb hills, could go on sale by next month. Previous Armstrong models have cost up to $4,500.
The affiliation with Armstrong is a source of pride at Trek's headquarters, where four of Armstrong's winning bikes hang in the lobby and dozens of employees take spins on their bikes over lunch hour.
Workers followed the Tour de France on a big-screen projection monitor, hoping Armstrong can pull off one last victory in the race that ends today. The chatter is about what happens when Armstrong retires from racing.
Derek Deubel, the Trek brand manager, said the company has a contract with Armstrong through 2010 that won't be affected by his retirement, as well as a two-year deal with Armstrong's Discovery Channel team. Trek officials hope the next champion will be a Discovery rider they can claim as their own.