Insider Interview: Cesar Gueikian, CMO of Gibson

There were plenty of big unveilings at the 2019 NAMM Show but perhaps the biggest of all was over at the Gibson booth. For years, Gibson’s unorthodox management style – and financial woes – garnered more attention than their guitars. Of course, quirks like mandatory robot tuners and a shrinking dealer base didn’t help matters. 

Gibson’s debts were mounting and things were looking pretty dire when, in 2018, Gibson’s new owners took over. CEO Henry Juszkiewicz – long the butt of many industry jokes – left the company he had helmed since 1986 and new management was put in place. And the 2019 Gibson NAMM booth? It was a bit of a revelation: filled with pleasant surprises – a back-to-basics focus on the brand’s core guitar lineup, a nod or two to its deep history and a sense that this was a fresh start for the struggling company.

It turns out that a lot of the new energy in that room was due to one guy: Cesar Gueikian. Officially, he’s the company’s CMO or Chief Merchant Officer, but his Gibson roots go much further back. What’s most impressive about Gueikian is that he’s both a finance and numbers guy as well as a guitar guy. He’s not trying to sell Gibson as a lifestyle brand or expand its reach into the world of electronics… he just wants to make amazing guitars.

Though we rarely focus on the “business” of musical instruments, I had a chance to sit down with Gueikian and I found his story—and hopes for Gibson—fascinating. Sure, he had some marketing points he wanted to get out into the world but he also had plenty of insights that I think most guitar geeks would agree with. What follows for you Insiders is our full, hour-long interview, which took place here in Seattle at the company’s semi-private showroom. I hope you enjoy it.

Fretboard Journal: So the big news at NAMM was obviously the change of leadership at Gibson. I don't usually talk to folks about the business side of musical instruments, usually I'm talking to the craftsmen, but with a story as big as this, I feel like we need to address it. Tell me about your background and how you came into this role. 

Cesar Gueikian: This journey for me starts over 10 years ago when I met Henry [Juszkiewicz] and the prior owners ...

FJ: Sure.

CG: I'd been doing private equity investments, buying companies, investing in businesses across the industries, helping businesses get restructured and going back to profitable growth. Through that journey, I met the prior [Gibson] owners, because I'm am not only a music fanatic and guitar fanatic, but I'm also Gibson freak. I have about 100 guitars in my collection, 80 of which are Gibsons. That didn't happen in the last couple of months, it's a two-decade project and out of pure passion. I started helping with anything I could from the sort of business side. I was approached in early 2012 by the prior owners to see whether I was interested in participating in a group to finance the acquisition of all the expansion that they were planning into Gibson audio, which I wasn't interested in doing. 

However, I then started following what was going on with that. They issued a fairly big pool of capital that was raised through the bond issuance. I kept tracking that, because the moment you issue a bond, which is a security, reporting requirements kicking in, very similarly to how a public company reports.

The consumer audio businesses really had nothing to do with the company's core. 

I mean, this is a musical instruments company. It’s an iconic, Americana company with obviously 125 years of history, and a huge influence across music in different genres all around the world, and going into a consumer audio business? That is the complete opposite, right? From being a US-centric, manufacturing, driven, heritage business to going into an Asian-based model of high volume, low margins, high competition… I never understood that.

Those difficulties started to show up in the company's finances, to the point where the trading in the bonds started cracking. Those bonds started trading at a big discount. So I started getting involved in buying those securities and accumulating a position. Then I called a dear friend of mine, Nat Zilkha at KKR, one of the largest private equity firms in the world. [He is] someone who I respect highly for his business mindset and investing philosophy. We’ve done things together in the past with other businesses. So I presented the case to him and he got his team involved… but the reason I called him initially was because he and I played in a band together! We were doing business together on one side, on the other side, we used to play in a band together, getting together at 10:00 p.m. after working all day to rehearse, and then we'd do the club scene in London.

Then, when we moved to New York, we did a bit of that in New York. He understood what the Gibson brand meant and was bringing a similar passion to what that means to all of us as Gibson enthusiasts, understanding the heritage of the company, and how to really pay tribute to that if anything happened Also, from a business angle perspective, he's one of the smartest guys I know. So we tackled this together to the point where then KKR took over, because they're very large and they became the majority owner of the bonds and had a controlling position. Fast forward to today, when the company was unable to refinance the bonds because the consumer audio businesses had not done well, the change of control happens and here we are today. The majority owner being KKR.

That’s my path to where I am today. After that, we started thinking, "Okay, now we're going to equitize our debt position and we're going to become the owners of the company. What’s the management team going to look like?”

So KKR reached out to [James] “JC” Curleigh, who was at Levi's at the time. Nat met with them, then I met with JC, and then they both asked me to stay. JC and Nat and the KKR team asked me if I would stay and be part of the management team. That was primarily driven by all the work that I had done with KKR during the three-year process, from when they got involved through the change of control, my knowledge of the industry, my knowledge of the company, knowledge of the dealer base, knowledge of the product… I'm a product geek!

Product is under my purview across our brands and I get involved in every single detail of everything that goes into the instrument. When we redesigned our new collection of guitars and showed up at NAMM, every single thing that went into it, from each capacitor, from each pot, from each spec to each pickup and the magnet of the pickup, and the radius of the fret, fretboard, and the neck, every single piece where we are putting Klusons or Grovers or whatever it was, I was involved in absolutely everything.    

I’m also unlocking the knowledge that we had in the company, by the way. It was pretty amazing to see how, how much knowledge was in the company that wasn't allowed to speak up from our people in the factories, from everyone in our team. That was why my responsibility is product across our brands, marketing, artist relations, anything that has to do with music and sales. This is the only company for which I would have done this and change my career, which has always been for the last 20 years, investing in companies, fixing companies, buying companies to fix them to then turn around. 

FJ: So that you could eventually sell them?

CG: This is the only intersection of my biggest personal passion, which is not only music and not only the guitar, but the Gibson guitar, with my business background. I truly believe it is that once in a lifetime opportunity, which not a lot of us get.

FJ: You got yourself a day job. 

CG: Yeah.

FJ: That's amazing. You’re clearly a very analytical, smart guy, but I'm guessing when you first started tracking Gibson, you had no way of anticipating how this was going to play out. Were you aware beyond the consumer electronics stuff what was going on with the company? Was Gibson letting you down as a Gibson fan?

CG: Yeah.

FJ: What about it was?

CG: It’s reflected in what we're releasing at the end of the month [April 2019].

Our release is April 29th for our new collection. We’re fixing all of that. I was very let down, and I think when you read the forums… I'm not alone. There was a big deviation from what made Gibson famous and what was so much part of Gibson's DNA. Addressing that was one of the big tasks, to go back, and recalibrate our line, pay tribute to that iconic past, bring those originals back, fix nomenclatures, and lean into the future with a collection of modern instruments that don't necessarily have to have gimmicks on them. It's more about playability, and the features of the instrument, rather than, you know, putting on an auto tuner, obviously that was one of the biggest mistakes ...

FJ: Sure.

CG: So the Modern collection is more about weight relief, or having the neck have a shaved asymmetrical profile that fits your hand better, and a shaved Axcess heel, and bringing ebony back, and replacing Richlite… those are innovations that are learnings from the past and then applications into the modern collection.

But we’re also bringing the classic instruments back, like the [Les Paul] Standard, so the Standard will never change.

If we're going to do something different because we're testing it and it's embraced, fans love it, and our artists love it, we'll call it something else. We're launching the Les Paul and the SG Moderns as models. That to me was one of the first things to tackle, which was get the product right. We didn't have a lot of time from when we took over with JC to get to NAMM, but I think the team did a spectacular job of reacting quickly, pivoting, adjusting to what we wanted to do as a group and making it happen to show up at NAMM with relevant, compelling product that people ended up loving. To me that's, that was the first overriding principle was we wanted, we wanted to be seen again as the most relevant, played, and loved guitar in the world and that's where we’re at, that was our mission ...

With that we said, "We need to bring the classics back ... " And then we need to address how we're going to lean into the future with our portfolio of modern instruments. 

FJ: What's your philosophy on pricing? That’s always been a contentious thing with Gibsons, they've always pushed the boundaries, even from the 1920s, of what a guitar should cost. Are you able to pull off all of these historically authentic things without it costing an arm and a leg for the end consumer? What’s the balancing act there? 

CG: Let’s start with, “What is Gibson?” Gibson is iconic. It’s a company that has a tremendous amount of legacy, it's crafted and it's an aspirational brand. We own Epiphone, which is a more accessible authenticity. Gibson is aspirational authenticity, so we're never going to be a company with bolt-on necks to make it cheaper. We're never going to be a company that cuts a corner and doesn't put the binding on, or doesn't use the best of the best specs. Anything that goes into the guitar is the best that we can, that we can make. We're not going to deviate from that. 

Having said that, the strategy of increasing prices for no particular reason was the wrong one in the past. So you’re going to see that in the new collection, we've recalibrated pricing ... the new Les Paul standard is $2499. We’re bringing back the Special TV Yellow, not as a Custom Shop product. We're bringing it back as part of our core line, which is $1599.

FJ: Wow!

CG: The single dog ear P-90 Junior tobacco burst, we're bringing back as part of our line at $1499. We’ve recalibrated pricing across our entire line. We're also introducing as part of our Modern collection, a Les Paul Junior, a double cut for $899, made in the USA by the same hands that are making everything else, a Special version of it for $999. So pricing was one of the things we needed to tackle. And then, at the other end of the spectrum, you have the Custom Shop, which is the pinnacle of craftsmanship, and sound excellence of Gibson. That is where we go crazy with what we make, and we make the most accurate replicas every year. I think today we are in the 25^thyear of Custom Shop history and we are at probably the best year in terms of being historically accurate. Our 60th anniversary, ‘59 [‘Burst] reissue out of the custom shop is $6499. And we're sold out and back ordered on that.

That tells you there is a big audience for authenticity, craftsmanship, excellence in sound, re-creations of the originals by year. There’s an incredible amount of demand. I think that the fan today is looking at his or her lifestyle and is looking for authenticity across all the categories on how you want to present yourself, your style of your life.

That is something that we bring to the table, we are probably the most authentic guitar brand in the world.

FJ: You talked about getting rid of the consumer electronics stuff and that being a godsend. You obviously had to pare things down. You were making a lot of guitars, right?

CG: Yes.

FJ: And you reduced that number dramatically, right?

CG: Yes. We rationalized what we were making down to something that's manageable, that is easy for our fans to understand. One of the very first things to do was to rationalize that line down to something that made sense to you. [In the past] when you showed up through any one of our dealers and you searched for “Gibson Les Paul,” you probably had like 50 different models to choose from. It was very confusing. And the nomenclature was confusing also, because you would search for a “Les Paul Standard” and you'd be seeing this weird thing. There was also something called High Performance, which I never understood, right? What does it mean?

Does it mean that everything else is low performance, if this is high performance? That was a bad call from the past that we got rid of. All that is out. All of these different things that were introduced, all that's gone, and even the Modern line is very simple. All it has is a little bit of weight relief, a push-pull system to toggle between the humbucker and the P-90 sound a phase and a bypass. There are no DIP switches on the back, it’s got a shaved profile, we created a new one—it's not the Axcess heel that you might be familiar, it's a new shaved profile of an asymmetrical neck when it joins the body to get really full access to a high frets. 

The SG Modern has 24 frets in the new line. We've adjusted pricing on the Modern line as well, so the new Les Paul Classic, which has the push-pull system and the slim taper neck is $1999. The Studio went down, as well, from $1699 to $1499. We’ve made adjustments across everything

By the way, going forward, I'm launching a Gibson Lab, which is going to be all about testing.

FJ: Nice.

CG: So we’re never going to put something in the guitar because I think it's cool, or because JC thinks it's cool. We're going to test and we are working very, very closely with all of our artists.

Chris Traynor [Helmet, Bush] was at our showroom in LA last week testing and doing demos. Slash has been doing demos of everything. I've been sending him product and he's been directly sending me feedback as he plays, as he tests, as he plugs in and rehearses live with the instruments

... and not necessarily Custom Shop stuff. Slash is today touring and playing onstage the first prototype of the new Les Paul Standard. He has it. That's how much he loved it. He is a musician that pushes the envelope on everything he does. If we are all about sound excellence, he translates that on stage and he never compromises. So the fact that he thought that he loved it and that he went on tour with them, that tells you something. That's energizing. 

FJ: What kind of constructive feedback does Slash give you? What are the things that he's nitpicky about?

CG: One of the good comments he gave me: I sent him four different variations of bursts— a tobacco burst—we were a little too harsh in the contrast between the black fading onto the yellow , it wasn't fading. It wasn't enough of a fade, it was too harsh of a contrast. He pointed that out, and we adjusted.

Sometimes I'm so into everything we're making that I stop seeing things and then an outsider like him comes in and says, "This is, all looks amazing, but what about that?" So I took that feedback from Slash and made the adjustment and I'm actually building one now, repainting one now to send to him.

FJ: I'm sure you know this as a guitar guy. Everyone in the industry is trying to turn out more models. Every company is trying to grow, grow, grow, but the guitar audience isn't necessarily growing. 

CG: Yeah.

FJ: As you talk about paring things down at Gibson, and focusing on core products, and a couple of new things, does that run contrary to how you normally would look at an investment where you want to grow it a company X-fold, recoup your investment and then spin it off or sell it? 

CG: Yeah, I think so. I think it's a contrarian approach to growth, simplification to drive growth. It might seem an odd choice, but we think that from a growth perspective, it's actually going to create better conditions for success for us by simplifying.

We truly believe that simplification, in this case of our line, of our collections, of our nomenclature, the way we organize the collection for our fans, is actually going to create better conditions for success.

FJ: Do the main investors want it to get to a certain place? Are they setting goals, or are they happy with where you’re at?

CG: Well, we have a shareholder that is patient and is not looking for a quick sale. First of all, KKR is a company with over 40 years of history, doing exactly this, helping companies grow ... helping companies get better, and their lead times are much, much longer than any other investor you might think of.

They're patient in that. Let's do this foundation work right now, so that we create better conditions for the company. 

FJ: What's your take on the retail space right now? Gibson famously had fewer and fewer dealers over the years. I know you guys put the grips on them…   

CG: We were a very difficult company in the past. We've addressed that. That was another one of the big topics to get done quickly, make it easier to do business with Gibson.

And, as a result of being a difficult company to do business with, we became one of the less distributed companies in the musical industry and musical instruments. Not by choice, but because dealers dropped us. So we did a listening tour. We went around JC and I did a listening tour, we talked to every single dealer, owners, CEOs… and we took all of that information and feedback, and all of the business knowledge that we bring to the table, and re-created the conditions to do business with Gibson to be much more dealer-friendly, to allow dealers to promote online the fact that they are dealers, to promote what they're carrying as part of inventory, to drop what we had in the past that people refer to almost as a joke, which was called “reauthorization,” which was essentially, the dealer agreement expired every year and if you wanted to remain a dealer, you had to get reauthorized every year. Reauthorized meant you also had to give a 12-month fixed order plan, otherwise you wouldn't get reauthorized, and there were fixed SKUs. So Gibson used to say to the dealer, "This is what you must buy, and you must buy this for 12 months in order to get reauthorized."

We changed that to an automatic renewal and dropped the 12-month requirement. So we're a much more flexible company to work with, we're not only allowing, we're encouraging and promoting dealers to go online, not to have a shopping cart necessarily, that's more controlled, but to promote the fact that they're carrying Gibson.

FJ: It seems that so many brands want to do the Apple store model, and eventually sell through their own storefront. Do you have any thoughts on if there will ever be a Gibson store?

CG: A physical store?

FJ: Yes.

CG: Let me ask you a question. Where would you go today to get the Gibson experience?

FJ: In Seattle?

CG: Anywhere. You have a time machine, you can go anywhere in the world you want. You say to yourself, "I want to go to the Gibson experience. I want to go live the Gibson experience for four hours." Where do you go?

FJ: To be honest, I'd probably go to Nashville and visit Carter Vintage just to see all the vintage Gibsons.

CG: There you go. 

FJ: Because I wouldn't know where else. I mean in Seattle there is a Guitar Center, but I try not to go there too often.

CG: Your answer is a great one ...you’d go to Carter's. Carter is in Nashville and that's where you can experience Gibson better than anywhere.

FJ: Sure.

CG: Somebody else owns that today; we need to own that. So we are going to open a Gibson Experience Center, which is going to be about showcasing Gibson, showcasing our history, our heritage, our legacy. We're going to have a vault in there. There's going to be a bit of history, a museum, a stage, you might see Clapton show up there, you might see Slash show up there unannounced. We're going to give you the Gibson experience, showcase everything we do, how we make instruments, maybe we have our luthier there, bringing the factory experience to the Gibson experience and how we make things and educating people. It’s going to start in Nashville and we fully expect, and hope, that it will become a destination.

When you go to Nashville, you're going to see, you're going to have a list of things to do, which is to go to the Country Music Hall of Fame and to the Gibson experience.

FJ: When is that going to launch?

CG: At the end of this year, it'll be open.

FJ: Right at the factory or somewhere else?

CG: No, in the Gulch.

FJ: Was that one of your ideas?

CG: That was something that JC and I were kicking around. We need to own this. We need to have our own place where our fans can go in and immerse themselves into the Gibson experience. We developed it together, it was something that we really needed.

FJ: We've been talking electrics. We’ve featured a gazillion Gibson's over the 15 years we've been around, a lot of which have been on the acoustic side of things. Where are things headed there and what's going on in Bozeman [where Gibson builds acoustic instruments]?

CG: Just like we're investing a significant amount of capital in Nashville, in our factories, we're doing the same thing in Bozeman. We're going to be increasing our footprint there, increasing our capacity and a very big focus on acoustics. We're also recalibrating our line, you'll see when we release our new line generally at the end of April.

We have a custom shop in Bozeman now that is going to be centered around same, same sort of vintage recreations of the originals. I'm very excited about what we're doing in our acoustic line, I think is, is one of our biggest opportunities for growth.

FJ: Yeah, and mandolins and banjos?

CG: We continue to make mandolins at the custom shop in Nashville. And we have an Epiphone line for banjos. We're not making them [as Gibsons] still for the moment, other than what we're doing at the custom shop. They are more niche. We'll probably get there soon enough. I think that the challenge initially for us was, was the much bigger picture of redoing our entire line and our biggest selling products, right? Which are electric and, electric and acoustic guitars.

The other thing that, that we did, which is equally as important, was move the production of semi-hollow body electrics into Nashville. We had to make a decision, JC and I spent a lot of time talking about this together with Christian Schmitz, our Chief Production Officer. We were being kicked out of Memphis. Our lease expired and we had a certain timeframe to get out of the building. We had two choices, one was to move to another location in Memphis, and the other one was Nashville.

We're investing so much capital in Nashville, we have the space, we have the capacity, we used to make them in Nashville, so why not relocate it in there? Have everything under one roof in the quest for absolute quality. So we've relocated most of our people to Nashville, and that's today fully operational, we're making everything semi-hollowbody also in Nashville now.

FJ: How many people are working in Nashville, roughly?

CG: We have about 500 people in the factory. 

FJ: Has that number been holding steady?

CG: No, we've added. We've added people, we’ve brought in a very big initiative on quality control, creating modern day manufacturing practices inside, running tests and adding more people.

FJ: The employees must be excited by the changes, right?

CG: Absolutely.

FJ: Yeah. Was it hard to penetrate the existing corporate culture?

CG: It was quite remarkable how welcomed we were from day one. I think that the environment under which they had been working in the past… it's no secret, was not the best one. I'm there every other day walking around, talking to people, looking at how we're making things, making changes, paying attention to detail, talking to people and JC does the same thing, Christian is there all the time. From day one, I think it almost felt like everybody grew up a couple of inches immediately. Everybody was proud, proud to be a Gibson employee, and proud to be working in the factory, and creating the, these beautiful instruments that we make.

FJ: Coming from the world of collecting guitars for decades to seeing how they're made, what's been one of the surprising things that you had never thought about?

CG: I think what's really amazing, and I get this from everybody, is when somebody comes, an artist comes that hasn't been there before, or somebody that's a friend of the company comes over, and we give them a tour, the level of appreciation to what goes into making our instruments and the craftsmanship that goes into how much is really handmade and the, the level of detail we go into, and how long it takes ...

The level of appreciation grows dramatically. That’s the first comment I get from everybody, and I get it every day that I walk into that factory. It doesn't grow old to me, every time I walk into that factory I say, "This is one of the most amazing places in the world."

FJ: And now that you’re in the trenches, what has been the most frustrating thing to you about the musical instrument industry as a whole?

CG: Frustrating? Infringement. That's really frustrating, because we spend more than a century, you know, perfecting our craft, creating what we've created, and, and seeing the level of trademark infringement that's out there, it's frustrating.

FJ: You guys have been more litigious in the past than most companies, so it's probably less a factor for you guys, but I know it's widespread.

CG: It's widespread ...and it is something that's frustrating for all of us as an industry. I recently had an opportunity to meet with Bob Taylor and we were talking about it. It's frustrating because, we all spend so much capital in research and development, and in everything we do. It's just very frustrating to see that it is so easy for others to go and copy what we make after we've spent so much time, effort, and capital developing it.

But, but on the other hand, again, authenticity matters … and what makes me feel better is that, as a fan, you look at an instrument that is a copy, and that's not authentic. You know, that's not original, it's a copy.

Why would you buy a copy if you can get the original?

FJ: You seem very practical. If we can just do the kid in Willy Wonka's factory for a second, what is your dream guitar? Even if it has no marketplace value, what would you love to see Gibson make right now?

CG: I'm working to see if we can source Korina wood. It’s a difficult material wood, African Limba. It’s the White Mahogany, that we used in the, in '58 to make the Flying Vs and the Explorers. Right now, I am on a quest to try to find a reputable source with all the certifications of African Limba, and I would love to do a reissue of those original '58 Korina Vs and Explorers.

FJ: Final question: What is the last guitar you purchased that wasn't a Gibson?

CG: It's a Spanish guitar nylon string. That was a one-year process of development with a luthier, that was my one-and-only guitar professor. I had him when I was 11 to 13 years old. He moved to Spain after teaching me and made instruments for all the big, you know, Spanish guitarists. Then he moved to Germany five years ago, and I reconnected with him only a couple of years ago. We then started on this quest to make a custom Spanish guitar for me.

His name is Willy Burgos and it's one of the most amazing instruments of that type, because it really was a one-year process of us back and forth. He makes everything from scratch. The only two things in the instrument that he didn't make are the tuners and he didn't go diving for the abalone that went on the sound hole. Other than that, everything else was made by hand ...