Galati Yacht Sales is one of the best dealers in the world. And one of its key manufacturers recently dropped it.
“It is a blow to the industry when a manufacturer moves away from someone that was performing on top of their game,” says Carmine Galati, dealership principal. “We have never been cancelled ever in our entire history. It certainly was a blow, no question about it.”
Galati’s story is not a sad one, though. Despite this hiccup in its plan for the year, the company expects to exceed its sales forecast by embracing a wider range of models from its other two boat brands. But the separation has serious implications for the rest of the industry. If a boat builder can choose to part ways with Galati, it sends a message that, truly, no dealer is safe. And all dealers, no matter how highly rated, should insist on a dealer agreement that provides reasonable protection for their business.
It wasn’t just any boat builder that made this decision. It was Brunswick Corp. The industry giant, which purchased Cabo Yachts in February, initially told Galati that it would not require Brunswick dealers to be exclusive. But this summer, in discussions with Galati, it shared a new distribution plan, one that would eventually require Galati to adopt another Brunswick brand and stop selling competing brands or risked being cancelled. Galati chose to end the relationship, and Brunswick chose MarineMax and Gulf Coast Hatteras to replace Galati.
Brunswick Chairman Dusty McCoy says following the acquisition, the Hatteras Collection is just now beginning to refine its distribution strategy, one that includes bringing many Hatteras and Cabo dealers together.
“We have a range of sportfish convertibles that begins in the 30-foot range and goes up to the 90-foot range, and we felt for both a great consumer experience and dealer profitability, we ought to have that whole range in one set of dealers,” he explains. “We had Hatteras in one and Cabo in another, and that didn’t make any sense. Galati is a great dealership; they’re a fabulous dealership. And we believe they will continue to be a fabulous dealership.”
More change ahead
This isn’t the first time that a newly acquired Brunswick brand has undergone a turnover in its dealer network as part of the transition. To a certain extent, as painful as it can be for dealers, that’s part of the course of business. As market conditions evolve and boat brands change hands, manufacturers adjust their strategies, making dealers vulnerable to cancellation. It’s the terms under which those cancellations are carried out that can make the difference between a dealer being able to adjust and move on vs. suffering permanent damage.
Brunswick does say it’s committed to offering its dealers equitable agreements, and the evidence supports its claim.
McCoy actually served on the Dealer-Manufacturer Agreement Task Force that released a suggested list of dealer agreement guidelines in 2005, and he says Brunswick plans to incorporate those recommendations over time.
“We are working to put all of those principles in place in our dealer agreements across all our brands,” he said. “One of our clear goals is in fact to have things such as multi-year dealer agreements so that each party can make long-term commitments to the other. And in making those commitments, we always do them in a way that asks what is going to be best for the consumer, and that was the guiding principle for us every step of the way in that task force work.”
Multi-year agreements, in fact, are already being offered to dealers who obtain certification through Sea Ray and Boston Whaler’s Master Dealer program and US Marine’s Pro Dealer program. While they involve a relatively small percentage of the company’s total dealer network, these programs have set the industry bar for dealer-manufacturer relationships, and Brunswick plans to expand them.
In addition, some Brunswick Boat Group brands offer dealers who meet certain performance standards extended territory protection within their agreements. Beginning in 2007, all of the Brunswick boat brands’ dealers also have been offered agreements describing the process for getting approval for succession plans or the sale of the dealership.
As far as exclusivity is concerned, Brunswick has not been shy about its desire to be all things to more of its dealers.
“We believe dealers who deal with fewer OEMs take the friction out of their dealership and have the ability to offer better customer service and make more money,” says McCoy. “For example, with five brands, everything the dealer has to do is multiplied by five.”
He’s not sure whether the seven- to 10-year strategy will eventually leave Brunswick with fewer dealers.
“We have now enough brands and enough consumer coverage that the real question is who has the best model for dealing with a particular brand or brands in a marketplace,” he explains. “And those are discussions and decisions we make market by market, working with dealers. It’s something we’re doing every day, and other manufacturers are doing it every day too.”