Brunswick buries an old business modelPosted on Written by Reagan Haynes
Bayliners, Sea Rays share showroom space in the streamlined company’s dealer-driven strategy
Brunswick Corp. has long touted itself as a manufacturer that listens to its dealers. Now, with the Great Recession clinging stubbornly to life, the company seems even more intent on strengthening its retail network and paying close attention to what dealers have to say about their markets.
Brunswick has begun adding brands to about 50 dealerships, creating showroom pairings that in the past would have been unthinkable. In some cases, Sea Rays now sit next to Bayliners and Boston Whalers alongside Trophys, a brand that nearly didn’t survive with Brunswick. And Meridian has been added to some Sea Ray or Bayliner dealerships after it was determined that the brand attracts “completely different customers than Sea Ray,” Sea Ray president Rob Parmentier says.
It’s all part of what Parmentier calls a more holistic approach.
“We’ve kept our focus on the health of distribution,” he says. “The company with the best dealers is the company that’s going to win.”
It was dealers who pressed Brunswick to reconsider its decision to drop Trophy, asserting that they could sell the boats to value-conscious consumers. After listening to their arguments, the company decided to keep the line – albeit with fewer models, Brunswick Corp. president Andrew Graves says.
“We knew we could discontinue [Trophy] and frankly, in the tough market we’re in, these are not easy choices,” he says. “The dealers said, ‘We really like that brand; we could do lot with it, and we’d like to add it to our portfolio.’ They pressed us pretty hard.”
That kind of attention to the retail side might be paying off as roughly the same number of boatbuilders competes for about 30 percent fewer dealers, creating an intense competition for the cream of the crop, Graves says.
“Dealers are looking to see who are the best builders they can partner with,” Graves says. “The dealer body is under a lot of stress, and it’s a real focus for boatbuilders.”
The industry has lost as many as 1,500 dealers, and in many locales the Sea Ray dealer was one of two left – and sometimes the only one, Parmentier says.
“Let’s just say there are 30 percent fewer dealers than before the downturn due to bankruptcy and people leaving, but there are only 3 percent fewer boatbuilders,” Graves says. “So you have only a few less boatbuilders chasing a lot less dealers.”
Some of the dealerships that have failed have been Brunswick outlets. A prime example is Olympic Boat Centers, a major West Coast chain with 21 locations selling Bayliner, Meridian and Trophy in California, Washington and British Columbia. But Sea Ray and Boston Whaler dealerships also have folded, Graves says.
So instead of looking for dealers unfamiliar with Brunswick – and maybe more important, dealers Brunswick is unfamiliar with – company brass started to rethink the idea that certain brands should not share dealership space.
“We’ve spent millions of dollars keeping our dealer network healthy,” says Steve Schwepler, Northeast district business manager for Brunswick. “Why should we go look for a B or C dealer to take those brands because A is off-limits?”
Brunswick lost about 150 dealers through the recession, Graves says, but has added about the same number.
“In a world of a lot less dealers, I would tell you the geographic representation that we have in the U.S. and Canada is about equal to before the recession, and the quality is better than the dealer body we had in 2005,” Graves says.
“It’s been a real focus for us to build and win the best distribution in every local market,” he adds. “So it’s not by happenstance. We have been very focused to attract and manage and help our dealers, and that should clearly be paying dividends to us in quality and in the tough environment we have.”
Relatively few Brunswick dealers have defected despite appealing offers from builders trying to pick them off, Graves says.
“We know a number of our competitors … are trying to penetrate into our dealers,” he says. “The dealers that are truly Brunswick partners, they will forgo that,” recognizing that it would not be good “for their health or the health of the industry,” he adds.
Those who do choose to go elsewhere are being shortsighted, Graves says. “The dealers who do think, I can make a buck over the next three months with this builder, at our expense, they’re probably not good partners for us down the road.”
And although the dealer network is strong, Brunswick will continue to strengthen it, Parmentier says.
“By no means are we done,” he says. “We’ve got to make sure we’ve got great brands that are appropriate for certain segments of the market – that they do not overlap each other and that they complement each other.”
Parmentier adds: “If you look at GM, one of the things they were able to do right away, they cleaned out all of their brands that [were] on top of each other. You’re not going to do well if you own a bunch of brands competing with each other. You find out what does well in what market, and that’s what you go with.”
Keeping dealers happy means listening to them. When several were approached about taking on Meridian and Bayliner, they said they wanted Trophy, too, even though they knew Brunswick was considering dropping the brand, says Larry Russo, owner of Medford, Mass.-based Russo Marine. For him and a number of other dealers, Trophy was an important element in the decision to take the additional brands.
After selling its Triton Boats brand to Platinum Equity in July, Brunswick wasn’t sure whether to keep Trophy, the line that had been produced alongside Triton in Brunswick’s plant in Ashland City, Tenn.
“There was strong Trophy support, and we put a plan together with [the dealers],” Graves says.
The boats are still being made in the old facility but will be transitioned into two other Tennessee plants at the end of the year. The Ashland City facility will be sold – the 17th boatbuilding facility Brunswick will have closed since 2007, leaving 10 still in operation, spokesman Daniel Kubera says.
“Trophy has a strong position in some of those markets,” Graves says, and the dealers recognized that. “It was good to hear them say that and good for them to commit to us,” he says.
Taking on new brands
Russo says two Bayliner dealers have gone under since 2008 in his market – one in Massachusetts and one in Rhode Island. When Brunswick asked him to take on the Bayliner brand, he wasn’t immediately sold. But new-boat sales continued to lag in the long-winded recession. There were declines at both ends of the market – value and premium – so Russo Marine decided to attack at both ends.
“There are more Chevys sold every year than Cadillacs,” Russo says. “We talked to dealers in Knoxville in August [at the Sea Ray dealer meeting] and said, ‘We need to do this. We’re never going to sell as many Sea Rays as we did in the past.’
“Now I’m picking up that market share,” he says. He introduced his Bayliner and Trophy models at the Boston Fall Boat Show and planned his Meridian debut at the Fort Lauderdale show.
“We get phenomenal top-down support,” Russo says. “We’re living the Brunswick dream. This shake-up opened up the perfect opportunity.”
Russo Marine used to sell 500 units a year, but that figure dropped to 232 in 2009, Russo says. This fall, sales for 2010 were about 330, but Russo wants another 150 to 175 to get closer to the old days. The two Bayliner dealerships that went under sold about 400 boats a year, Russo says, so even if you cut that in half, to 200, it takes Russo Marine where he wants it to be.
Not the same buyer
Market research was a factor in the decision-making process, executives say. Although Brunswick’s strategy had been to separate brands, the company now realizes that they weren’t competing against one another to the extent executives had thought.
Additionally, a Brunswick survey showed that customers want a Sea Ray above all other boats, Schwepler says. But the boat most often purchased was Bayliner. That gave Brunswick reason to believe Bayliner is the entry-level boat for customers who might eventually upgrade to Sea Ray.
Seattle-based Lake Union Sea Ray took on Bayliner, Meridian and Trophy in 2008 after Olympic filed for bankruptcy, and grew at a time when many dealerships were going belly up.
“We had three Sea Ray dealerships, and the local Bayliner dealer had five Bayliner dealerships,” owner Kevin Roggenbuck says. “When we took on the brand, we went from a total of eight dealerships to four and still increased market share.”
Having a strong Brunswick presence has been key to Lake Union’s success in a depressed market, Roggenbuck says.
“We look at it like, we have the top five boating brands in the country,” Roggenbuck says. “That brings a lot of attention to our dealership.”
Brunswick’s strategy is no secret, Roggenbuck says. The strongest representation nationwide has traditionally been from Brunswick dealers and, specifically, Sea Ray dealers, he says. And those are the dealers who are best poised for growth.
In some cases it was the Sea Ray dealer who went under and Brunswick approached established Bayliner dealers to take the brand, Parmentier says. He cites as an example, Galey’s Marine in Bakersfield, Calif., which took Sea Ray about a year ago.
Not all Brunswick dealers are exclusively Brunswick, Graves says. Some offer ski or towboat brands – something Brunswick doesn’t build – but others carry competing lines, Graves says. For example, a Bayliner dealer might carry a pontoon line that competes with Brunswick in that segment.
“We don’t have a specific strategy to drive our dealers to an exclusive relationship, but I will tell you … it’s in the dealers’ interest to be exclusive [because] we can have a closer relationship to those who have a relationship with just us,” Graves says. “And clearly market by market, dealer by dealer, as we are seeing, more dealers migrate to Brunswick brands and become exclusive.”
Still, Parmentier is working with others, including Bayliner president Jeff Behan, to figure out a way to replace those competing brands with Brunswick lines.
An edge in support
Brunswick can offer its dealers perks as well, company officials and dealers are quick to point out.
Roggenbuck and Russo say that dealing with one parent company means easier management of several brands. In the days before Russo became exclusively Brunswick he sold seven brands of boats and three brands of outboards and dealt with five engine manufacturers.
The process of dealing with so many different companies was “suicidal,” Russo says.
Roggenbuck and Russo say that having the same process for warranty claims, for example, makes offering five brands relatively easy.
Brunswick also has a credit arm, Brunswick Acceptance Corp. (an affiliation with GE), that makes it easier for dealers to secure financing for customers at a time when banks are scrutinizing each applicant under a microscope.
“Brunswick kills everyone with the backroom opportunities,” Parmentier says. “We have our own retail financing arm. Our dealers are able to call one place and get all those opportunities to make money, and [people at GE] feel comfortable because we’re a company they trust.”
During the last couple of years Brunswick has been aggressively helping its dealers clear inventory, Parmentier says. As a result, Brunswick lost relatively few dealers.
Now “we just need some help from the economy,” Parmentier says.
Parmentier thinks Americans are shopping differently, and he speculates that the change might be a long-term one.
“I don’t think you’re going to see things like the days of yore because the banks won’t allow it,” Parmentier says. “It’s going to be a tough winter. People didn’t have a great summer, and winter is always a hard time for boatbuilders, so if they’re not capitalized properly they’re going to have a tough go.
“All I know is, we have positioned ourselves as well as we possibly can to be in a good situation when we come back,” Parmentier says. “You have to change with the cards you’ve been dealt. If you don’t, you’re going to be one of the guys who are gone.”
This article originally appeared in the December 2010 issue.