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An industry where technology is king

Soundings Trade Only sat down for a Q&A session with Graeme Solloway, director of the Marine High-Impact Program at New Zealand Trade & Enterprise. Here, he talks about the boating industry’s emphasis on “reinvention” and the importance of technology to that strategy.

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Q: What are the priorities of New Zealand Trade & Enterprise promoting the marine industry in global markets?

A: Working with high-tech companies to build their position in the supply chain for overseas manufacturers — how can we get those companies that make that stuff in New Zealand into markets that are not dependent on building boats in New Zealand? Next, we see growth opportunity for commercial workboats and specialized performance vessels for government agencies around the world, especially in emerging markets. Then there is a high level of competence in composite manufacturing that has value in non-marine applications. How do we extend that? We also ask ourselves what’s driving demand in Asia, not just for boats but also as a manufacturing location. It ties in with our strategy for the supply chain of high-tech equipment. And lastly, we need to market New Zealand as destination for cruising, refits and premium-quality builds, which links to the superyacht segment.

Q: How do you structure the priorities among those initiatives?

A: Asian markets will be a priority in the long run, even though the equipment supply chain story will probably be more important over the next five years. We have to motivate companies to collaborate on innovation, market entry and development, sharing distribution networks, maybe looking at equipment that can be packaged.

Q: Are New Zealand companies reluctant to move manufacturing overseas?

A: Key to a successful offshore manufacturing strategy is keeping control of quality and intellectual property. There are challenges to do that. We have to encourage manufacturers to think of their business models as integrated from design to service and support. We also can facilitate contacts to in-market advisers overseas, who can provide valuable advice through a program called Beachheads.

Q: What is the size of the boating business in New Zealand?

A: If you analyze our economy, most of it is linked to growing stuff on farms. But the marine industry is the largest non-food manufacturing industry, which surprises a lot of people. There are roughly 8,000 employees who generated NZ$1.7 billion in 2011. Of those NZ dollars, 640 million were exported. It’s less than it was before the recession but still significant. Growth was strong in the early 2000s for recreational and specialized performance vessels. Revenue peaked in 2008 before exports and domestic demand hit a wall in the global financial crisis. There was a bit of a perk-up in 2010, when buyers of superyachts came back. The high end does a lot to drive the overall figure. However, in the long run the value within the industry is in the equipment and supply chain.

Q: What are the key selling points to bring business across the oceans?

A: The innovation DNA within the industry, the passion for the experience of being on the water, combined with a performance culture. In fact, the strong drive for success produces innovation in this industry. It’s a fundamental pillar.

Q: What are the challenges for the companies that came through the recession?

A: Trying to build sustainable businesses in this environment. A sense of perfection is all very well, but if you can’t monetize it, it’s not of value. An example are the Swiss, who’d been very good with their watch-making industry despite going nearly belly-up in the 1970s. Looking at its business models, our industry faces challenges of reinvention. Yes, you’ll see innovation, but there are many classic problems of manufacturing industries.

Q: What are some of those problems?

A: Companies are small and undercapitalized. They are a long way away from their markets. They have to sell at a high Kiwi dollar, and the exchange rate is unlikely to fall. Companies that want to grow must take on lots of debt early in their life cycle, or they have to go offshore with their marketing and for investment. These are typical problems for small businesses in small markets.

Q: Wouldn’t foreign investment help small, innovative companies survive and thrive?

A: The challenge is that it comes in and often sucks the asset out, takes the innovation and people offshore. We’ve seen this in the IT sector. But the great thing with marine is it’s sticky. It goes back to the innovation DNA. Why are Kiwi marine companies successful? Because people here go out on the weekends and muck around in their boats. You can’t separate people from the environment.

Q: What are some examples of successful acquisitions in the New Zealand marine sector?

A: Fusion Electronics with Peter Maire, who founded Navman, [which] grew before it was bought by Brunswick. Navico is a good example, too, as is BEP [which was acquired by Actuant], Hella Marine and Gurit [formerly branded as SP-High Modulus]. And, of course, Southern Spars. They were bought by North Technology early in their growth cycle.

This article originally appeared in the July 2013 issue.

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