More people are living along our nation’s coastline than ever before. And that growth is being reflected in the saltwater boat market.
Just ask Scott Deal, president of Maverick Boats. He lives in Vero Beach, Fla., a vibrant and growing boating community.
“I’m a boat builder, not an economist,” he says, “but I would say the growth in the saltwater boating market mirrors the population migration of people to warmer, near-coastal communities over the last decade.”
The growing number of coastal homes has created a healthy saltwater fishing boat market, one that has outpaced the industry at large over the past decade and proven to be resilient during tough economic times.
For years, independent boat builders have dominated this market, benefiting from its strength. As the 2005 boating season approaches, however, both Brunswick Corp. and Genmar Holdings are taking aggressive steps to capture a larger piece of the saltwater pie.
While this interest may be seen as a threat to some independents, many are confident that not only will they be able to maintain their current market share, they may actually be able to grow it.
Acquisitions to be a success?
Brunswick’s acquisitions of the Sea Pro, Sea Boss and Palmetto Custom boat brands in early January and its subsequent acquisition of Albemarle Boats two months later weren’t really considered a surprise. They were consistent with the company’s well-publicized strategy of creating a full line-up of products for its dealers to offer consumers.
The entry-level saltwater and sportfishing markets are two of several areas – including the tournament ski boat, high-end pontoon boat and prominent bass boat markets – where Brunswick appeared to be lacking representation. And the entry-level market is of further interest because of its strength.
“Our analysis shows the saltwater outboard market has had an annual growth rate of about 5 percent over the past 5 years,” says Mike Myers, president of Brunswick’s new Saltwater Group. “That’s one of the reasons it attracted Brunswick.”
The new Saltwater Group now includes Boston Whaler as the premium anchor brand, with Sea Pro falling into the middle price range, Sea Boss acting as the price point product and Palmetto filling in the performance fish boat sector. Together, these brands give Brunswick about 18 percent market share in the saltwater outboard boat market, significantly more than its nearest competitor, according to Info-Link Technologies.
Similarly, the acquisition of the Albemarle line has allowed Brunswick to create the Hatteras Group, a combination of Hatteras Yachts and the newest member of the Brunswick family. Brunswick says Albemarle is the perfect complement to both Hatteras and the saltwater group. According to Info-Link Technologies, there were 67 new Albemarle registrations reported by states and/or the Coast Guard in 2004. The company may have sold more boats, but Info-Link can’t track offshore registrations. Twenty-seven of those registrations were inboards while the other 40 were sterndrives. You can read more about this and other Brunswick acquisitions at www.boatingindustry.com.
Typically, Brunswick’s entrance into a new market is cause for concern for the competition, but that doesn’t seem to be the case with the Sea Pro, Sea Boss and Palmetto acquisition. Sea Pro’s competitors are skeptical about the effectiveness of its entrance into this market. In fact, some independent saltwater builders speculate that the acquisitions will benefit their business.
Regardless, Brunswick is confident in its ability to grow its Sea Pro business. Myers points out that Sea Pro has lots of room to grow on the West Coast and in the inland markets. It also has a very small international presence.
“Through Brunswick’s strong international dealer network,” he explains, “there is an opportunity to grow and advance the business and level of sales.”
Mercury anticipates growth
The other area of growth the acquisitions represent for Brunswick is in its Mercury outboard business. As Myers states, Sea Pro, Sea Boss and Palmetto boats were primarily Yamaha-powered, with some BRP product on Sea Boss. Now, Mercury outboards are likely to be increasingly packaged with the three brands.
The speed at which this change in power will take place was accelerated when, soon after the announcement of the acquisition, both Yamaha and BRP Inc. said they were canceling their supply contracts with the three brands. As BRP Executive Vice President Roch Lambert put it, “This decision reflects our long-term strategy to support the independent boat builders and build our common success with dealers that are committing to our brands.”
The decision has caused some scrambling – mostly for the brands’ dealers, but as Mercury’s vice president of sales and marketing, John Hoagland, points out, “Brunswick had no control over what the other engine companies did.” He adds that Mercury actually plans to offer the boat brands’ dealer’s engine choices for the foreseeable future.
“I don’t think anyone agrees that the dealer base would be satisfied with 100-percent Mercury engines in the near-term,” he states.
That’s actually what Sea Pro’s competitors – as well as Yamaha and BRP – are counting on. With Yamaha serving as the dominant engine choice in the saltwater market, many independents are betting that saltwater dealers and consumers are going to turn to boat brands with long-term strategies of allowing consumers to make their own engine choices.
“We’re expanding our capacity at our present location and looking for opportunities to take advantage of some of the disruption in the market caused by Brunswick’s activities,” says Maverick Boats’ Deal. “I would say that [the acquisition] will probably go down as one of the best things that could have happened to our business this year.”
This theory assumes that saltwater consumers are more likely to be loyal to their preferred engine brand than the boat brand.
Yamaha Marine Group President Phil Dyskow suggests that while that isn’t necessarily the norm in the boating industry, it may be the case this time. Within the segment of the market held by Sea Pro, there are a wide range of options for consumers, he points out. Many of these alternative brands will be offered with Yamaha power, which a large percentage of saltwater consumers consider their “preferred brand.”
“Engine choice is a more integral part of the buying decision in saltwater than in certain other markets,” he says. “The brand loyalty to Yamaha is very strong in saltwater.”
Time will tell. If Sea Pro, Sea Boss and Palmetto Custom dealers are going to look at boat and engine alternatives, they are likely to make changes during the dealer meeting season in the late summer. Carolina Skiff President Joseph Kirkland speculates that, under the right circumstances, the Sea Pro dealer network could actually remain stable over the long-term, driving up Mercury’s share in the saltwater market.
“I think it will take time for the dealer network to become convinced that they can sell as many Sea Pro products with Mercury as they did with Yamaha,” he explains. “There will be some shakeouts, but I think with strong incentives from Mercury, the dealer network could very well be as strong as ever.”
While Mercury historically has focused on the freshwater fishing market, the company is optimistic that it will eventually dominate the saltwater segment. It began turning its attention to saltwater in the early 90s, “realizing it was becoming a higher growth segment as more and more people tended to vacation and retire in Florida,” explains Tom Mielke, outboard marketing director.
That led to the development of saltwater-specific product that was more robust, with features like freshwater flushing attachments and corrosion-resistance. But now Mercury is moving away from saltwater-specific products. Beginning in 2006, all of Mercury’s outboards will be built to saltwater specifications.
This is intended to simplify manufacturing and logistics, while making ordering easier for dealers and boat builders, Mielke explains. The decision was driven in part by the success of Mercury’s Verado four-stroke line, which was built to be used in either saltwater or freshwater.
In fact, Mielke says recent growth in Mercury’s saltwater share is largely due to the introduction of Verado, “which is perfect for big saltwater boats.” Add in Sea Pro, and maybe Mercury’s goal of moving up from No. 2 in the saltwater market to No. 1 doesn’t seem so unlikely.
“We feel very good about saltwater right now,” he explains. “We’re on a roll. Our product plan is coming together. The engines we’re creating right now are being built for a global standard of robustness.”
With that said, Mercury seems to have a ways to go. Dyskow says Yamaha’s share in large engines over 100 hp approaches 50 percent. While he doesn’t know what percentage of those engines end up on the backs of saltwater boats, some boat builders estimate that between 50 and 70 percent of the boats at major saltwater boat shows have Yamahas on the transom.
Saltwater market in Genmar’s sights
Brunswick isn’t the only large builder looking to expand its presence in the saltwater market.
Genmar Holdings Chairman Irwin Jacobs also serves as chairman of FLW Outdoors, which recently announced the launch of two saltwater fishing tournaments. This news came less than a year after the boat builder declared it planned to target and eventually dominate the entry-level fishing market.
Jacobs’ plans for the saltwater market have changed over time, however. While he originally planned to develop very basic entry-level saltwater boats using the VEC process, he says he has realized that the consumer is now demanding a more sophisticated product.
“Consumer buying habits have changed,” he explains. “The average saltwater boat sale is up per unit by 30 to 40 percent.”
As a result, Genmar is planning to develop “a better product for entry-level than we originally thought,” Jacobs says. This new product, which the company still plans to manufacture using the VEC process, is expected to be available beginning in model year 2006.
The details of the project are being kept under guard. Jacobs says he can’t reveal the brand names under which the saltwater boats will be launched. But he feels more strongly than ever that Genmar’s new strategy, in concert with the new FLW Outdoors saltwater fishing tournaments, will allow the boat builder to dominate the entry-level fishing boat market over the long term.
Independents growing too
While Brunswick and Genmar are looking to grow their share in the saltwater segment, so are the independents that already have a presence in the marketplace.
When interviewed for this article, Carolina Skiff, for example, was completing a 40,000-square-foot building expected to come on line by the end of February and planning to add a 100,000-square-foot facility before summer. That’s in addition to the 155,000 square feet of manufacturing space it already had.
“We will continue to improve our existing lines as well as add new ones,” says Kirkland. “Look for Carolina Skiff to create and fill niches in both the salt- and freshwater markets.”
Carolina Skiff is not alone in its efforts to grow capacity. But in addition to individual builder’s expansions are the efforts of the independents’ buying groups, like the United Marine Manufacturers Association and the Independent Boat Builders Inc. In fact, within a week of Brunswick’s announcement of its saltwater brand acquisitions, IBBI reported that it had formed its own Saltwater Group, which represents a new strategy for the group.
Previously, IBBI had focused on purchasing items that would be used by 80 percent or more of its members. But with the recent addition of Scout Boats, the group has significant volume in the saltwater market. Therefore, when Edgewater Boats’ Peter Truslow suggested IBBI consider forming a task force to address the specific purchasing needs of that segment, it was well received, according to Deal, who serves as IBBI chairman.
While the formation of IBBI’s Saltwater Group certainly is intended to make those builders as competitive as possible, the timing of the announcement, coming so soon on the heels of the formation of Brunswick’s Saltwater Group, was a coincidence, says Deal. With that said, he is confident in IBBI members’ ability to compete with Brunswick.
“We believe we are purchasing as well as any other company, including the Brunswick Boat Group companies,” Deal states. “We believe that, combined, our ability to develop new technologies and manufacturing is equal to theirs. And the fact that we are entrepreneur-based means we will always … react much more quickly to changing market conditions and trends.”
UMMA, the members of which also have a significant share in the saltwater market, already has purchasing agreements in place for products specific to those builders, according to Kent Wooldridge, president. The group is laying the groundwork for more aggressive purchasing, however, something Wooldridge says is necessary to compete with the increasing buying power of Brunswick. And as Brunswick expands its presence in the marine marketplace, the amount of Brunswick product his members are purchasing is on the decline.
“I certainly think that there’s an inverse ratio between the success of Brunswick in implementing their vertical integration plans and the support they can expect from the independent builders,” he says.
Fierce competition ahead
Regardless of any one group or company’s efforts to grow its saltwater share, one thing is clear – the saltwater boat market is becoming one of the most competitive segments of the industry. Any share that is captured in the next few years will have been hard won.
This will be especially true if the health of this sector is threatened. While there are no immediate indicators that this will occur, among the possible future threats are a decline in public water access and a reduced fish population.
Conservation groups have focused on preserving saltwater fish populations for many years, and water access is finally beginning to draw the attention it deserves. However, the long-term effectiveness of these actions remains to be seen.
“The quality of the fishery is a serious, long-term problem,” admits Wooldridge. “Certainly, if someone takes up fishing and spends a whole day and doesn’t get a fish, it can be frustrating. It’s entirely possible that the pace of growth of this particular segment could slow.”
“The emergence of baby boomers in a more affluent position will continue to drive saltwater boat sales for a while,” predicts Deal. “But as lines form and get longer at boat ramps, as people pass their individual thresholds for abuse, they will pick up golf clubs rather than the keys to their fishing boat. I think those are real issues.”
Bigger is better
Consumers are demanding bigger, faster and better outfitted saltwater fishing boats, driving growth in the saltwater boat and engine market.
Consumers are spending more on saltwater outboard boats than ever before.
“People have a willingness they didn’t used to have to invest large sums of money in an outboard boat, where they used to spend it on an inboard,” says Scott Deal, president of Maverick Boats. “They don’t have time to slug it out real slow, and the perception is that maintenance is lower on outboards.”
In the case of offshore boats, not only are the boats getting bigger, they are becoming more powerful, outfitted with double and triple high-horsepower outboards, in many cases.
Increasingly, they also are four-strokes. Four-stroke outboards account for 50 percent of the coastal fishing market, up from 31 percent in 2003, according to J.D. Power & Associates 2005 Marine Engine Competitive Information Study.
Meanwhile, inshore fishing boats are getting more technical in nature. As there is more pressure on the inshore fishery, the ability to run in shallow water is more important, for example.
Deal says that retail consumers used to buy inshore because they couldn’t afford offshore, but now even high-end consumers are choosing inshore boats.
“Offshore requires a bigger commitment and a more cooperative Mother Nature,” he explains. “People are more squeezed for time these days – I know I am.”
Carolina Skiff President Joseph Kirkland says even inshore consumers are buying bigger boats these days.
“People seem to be moving up in size,” he states. “I believe one of the reasons can be attributed to easy financing. It seems a lot easier to sell a person a 20-foot boat who may have actually had their mind on a 17-footer.”
In addition, there are many high-end consumers that have more than one saltwater boat.
“Visit any upscale saltwater neighborhood,” says Phil Dyskow, Yamaha Marine Group president. “One saltwater boat is not enough.”