As the U.S. dollar has continued to strengthen, Canada’s dollar has been subject to dramatic fluctuations. That has created hesitancy among Canadian consumers and is a problem for dealers, who have been forced to hedge to attempt to offset the spikes and dips.
Canadian dealers are not the only ones that have been affected. U.S. dealerships and manufacturers also are feeling the effects as the hottest export market cools to boat buying.
Though at the time of publication the Canadian dollar was strengthening and the U.S. dollar had softened some, it was on the heels of several months of weakening versus the increasingly strong greenback, and analysts predicted that the overall slump will continue for the immediate future. The Canadian currency plunged to a 13-year low of $1.4689 on Jan. 20.
“If you crush a currency, you lose the purchasing power of the people,” says Chuck Cashman, vice president of sales and marketing for MarineMax. “We used to get a ton of Canadian customers, and now some are on the sidelines — they know they’re buying at a premium because their currency is devalued. They’ve got to really want that boat.”
It’s not MarineMax’s northern stores that are feeling the brunt, he says, but the Florida locations. “We have Canadians that come south for the winter. They’re great people. They come and boat in the summer, and sometimes they don’t take their boats back,” Cashman says. “Their boat is like a second home in Florida, and they come down in the winter. Some go back and forth, but most really don’t.”
Usually the Canadian dollar has a lesser value than the U.S. dollar, but two years ago it actually became stronger. That seems to have colored how Canadians consume, Cashman says. “When they were up, we did see an awful lot of money come down.”
Several dealers at the Toronto Boat Show mentioned the currency situation as a deterrent to boat sales. Andy Blenkarn owns Desmasdon’s Boatworks in Pointe au Baril, Ontario, about three hours north of Toronto, and sells the Grady-White, Rossiter and Key West brands. He says dealers are left on the hook when there are big price increases because of currency fluctuations. “We are 100 percent on the hook for that unless the builder decides to give Canadian pricing in Canadian funds,” Blenkarn says. “You can buy currency forward in hedges. In the last two years, if I bought double what I needed, I could be a very wealthy man now, but are you a currency trader or a boat dealer?”
Canadian dealers who sell U.S. brands have to get creative to offset the costs and avoid passing them all on to customers. Margins have already taken such a beating it’s hard to pull more out of that bucket, Blenkarn says. “I was smart. I bought some currency forward, so I was able to sell product at a little better rate than the current exchange rate,” he says.
Premium brands, such as Grady-White, are still doing well, but the midlevel brands are struggling. “The price shocks are even higher. The debt load of the Canadian consumer is higher than it was for the U.S. consumer at the time of the crisis,” Blenkarn says. “Only the high-end boat buyer can afford our high-end brands. And even he’s hurting and he’s harder to close. But if he’s going to spend six figures on a midlevel brand, he’s more apt to add 20 to 30 percent to that and get the more premium brands in that market segment.”
Blenkam says he heard from other dealers that many of the value U.S. brands were struggling in the Toronto show. And the Canadian brands are outperforming all of the U.S. brands. He also has customers who are prepared to buy premium brands, but continue to hold off in hopes the dollar will improve.
“I had a customer last year ready to buy a 25-foot Grady-White, and it’s not inexpensive,” Blenkarn says. “He priced it in November, and then in January our currency had fallen 15 percent, and he didn’t buy. He said, ‘Oh, the dollar will get better,’ and here he is this year, he still hasn’t bought. But he’s wishing he’d bought last year. So what we need is for the currency to stabilize. It is not healthy for the U.S. economy or the Canadian economy to have wild currency fluctuations of 10 to 20 percent over a several-month period.”
Manufacturers are feeling the slowdown as well, even if they’re not bearing the brunt. “In 2015 the Canadian retail boat market was down 10 percent,” Brunswick Corp. CEO Dusty McCoy said during a conference call discussing the most recent quarterly earnings. “Outboard powerboat sales were down mid- to high-single digits, our sterndrive boats were down in greater percentage.
“Ontario, which comprises over 40 percent of the Canadian market, grew marginally but was offset by double-digit declines in Quebec and oil-sensitive Alberta,” McCoy said. “Our marine sales in constant currency grew 1 percent, led by strong outboard engine sales.” McCoy said the company is betting on the boat market to continue to decline in 2016.
But Blenkarn says dealers are the ones who are really taking the hit. “I think many would say that the U.S. builder and his view of how important the Canadian dealer is has diminished,” he says. “All dealers here would say builders have really short memories. We were there for them when they were really hurting. They’re here for us, but not like they used to be. I was getting incentives that I’m not getting now because the builders are busy and don’t feel they need to give as much as they once did.”
“It’s definitely been more challenging in the past couple of years, but we find solutions with our dealers to make sure we can continue to represent the brand,” says Jeanneau America president Nicolas Harvey. “Solutions come from an array of different tools that we have, both on the marketing side of things and on the commercial side of things, as well — supporting dealers better, in terms of even training their salespeople because you know it’s going to be a harder sale because the price tag has gone up.”
Blenkarn agrees that the Canadian consumer is a tougher sale, but he also acknowledges that they are buying boats. Desmasdon’s Boatworks had one of its best Toronto shows.
“You’ve got to get them to think about the great things about the boat, Cashman agrees. “Family time, and the places you’ll go. You can’t get hung up on the cost of entry.”
This article originally appeared in the March 2016 issue.