KKR-owned Accell seeks to restore trust in Babboe cargo bikes

KKR-owned bicycle maker Accell Group is hoping it can revive its cargo bike brand Babboe after a quality scandal that led to the recall of 22,000 unsafe bikes and a criminal investigation by Dutch authorities.

The Netherlands Food and Consumer Product Safety Authority NVWA banned sales of the bikes in February citing “serious” safety risks, with some frames prone to dangerous cracks. It ordered a recall and launched a criminal investigation of Babboe’s handling of the matter.

The crisis has so far cost Accell, one of Europe’s largest bicycle groups with brands including Raleigh, Batavus and Ghost, €50mn. It hit the company at a time when it was already struggling with a slump in demand after an unexpected boom in cycling during the pandemic.

Accell was bought by private equity group KKR in 2022 for €1.6bn, a 42 per cent premium to its undisturbed share price. Since then, the group’s earnings before interest, taxes, depreciation and amortisation fell more than 90 per cent to €12mn last year. It is also struggling to service its €1.2bn of debt and is in talks with lenders over a debt restructuring. Chief executive Tjeerd Jegen told the Financial Times in an interview that the goal was to generate liquidity to “invest in our business”. KKR declined to comment.

Jegen, who joined the group in November last year from fashion discounter Takko, acknowledged that he had been “caught a bit off guard” by NVWA’s intervention because the problems at Babboe had not been on his radar. The brand was founded in 2005 to produce affordable cargo bikes. It was bought by Accell in 2018 but remained operationally independent. “That was a mistake but I cannot change the past,” said Jegen.

An internal investigation launched after the NVWA ban uncovered that the subsidiary — at one time one of Europe’s largest cargo bike brands — lacked an effective quality control management system, with no systematic record of recurring defects or investigation of root causes, Jegen said.

Hence it went unnoticed over the years that the frames of some models, in particular the two-wheelers, were too weak and prone to cracking, putting riders at risk.

The NVWA said in a statement earlier this year that Babboe had received “a large number of reports of broken frames” in recent years but failed to “follow up on these reports as required by law”. It warned that the flaws could lead to “very serious injuries”, including a scenario in which “children fell out of the [cargo] box” in heavy traffic.

Since February, Babboe has been fully integrated into the group and uses “the same quality system” as the other brands, Jegen said.

The recall will be completed by the end of the year. Until then Babboe will not sell cargo bikes, focusing instead on producing replacements for customers affected by the recall. So far close to 10,000 affected bikes have been collected, with some customers receiving replacements.

The future of Babboe will be decided only after the recall has been completed. “In principle, in my view, if we do a good job on the recall and get great safe bikes back on the road, we should earn back the trust of our customers. At this stage, I am not writing off Babboe.”

What is clear already is that Accell will pull back from the cheaper end of the cargo bike market. Jegen said that one thing they had learned was that Babboe bikes, which started at about €2,500, were positioned at a price level “where you can’t produce a safe and high-quality bike”.

The NVWA told the FT that its investigation was ongoing and declined to comment further.