Manufacturers are finding the European market a needed shot in the arm during America’s economic downturn
In 2006, executives at Burlington, Wash.-based Nordic Tugs began researching international export opportunities and spent a year getting the approvals needed to export three models to Europe.
In 2007, the company signed its first international dealer — an outlet in Southampton, U.K. — and made its European debut in September at the Southampton Boat Show.
Less than a year later, the European market makes up 10 percent of the company’s annual sales.
“I think we are probably a little bit surprised by [that figure], pleasantly surprised, and we do hope that it will grow because we feel as if we’ve sort of just scratched the surface of the market potential there,” says David Goehring, Nordic Tugs executive vice president. “We hope it will be a larger percentage of our business in the future.”
As the U.S. economy continues to sputter, with a weak dollar, a slumping housing market and soaring fuel prices, many U.S. boat makers are turning to Europe and elsewhere to make up for lackluster domestic sales.
“You’ve got some builders whose domestic sales may be down, but in many cases it’s offset, in part or in whole, by their export business,” says Thom Dammrich, president of the National Marine Manufacturers Association. “American-made products are [a bargain] everywhere in the world.”
It takes time
Dammrich said he’s talked to boat makers who previously dabbled in the international marketplace and are now focusing on developing their export markets.
“Unfortunately, it’s not something you can just turn on overnight,” he says. “It takes a few years to develop. People who are starting today, it’s a good thing, but it’s probably not going to give them any immediate help.”
Manufacturing executives agree that overseas success generally takes time and effort.“We are expending a tremendous amount of time in international sales,” says Wayne Porter, vice president of sales for Indiana-based Formula Powerboats. “International customers are more relationship-oriented, I would say, than domestic people, so we’re going over to their turf to share with them our product and also thank them for their business.”
“The cultural differences between the U.S. and Europe are amazing,” says David Barrow of Barrow International, a U.K.-based international marine distribution company.
There are differences in how products should be marketed, how customers should be approached and even differences in how meetings should be conducted. Idioms and business terms commonly known throughout American boardrooms may be meaningless abroad.
Barrow, who also is the European counsel of Home Port Marine Communications, a Virginia-based marketing company, says he has sat in on board meetings in the United States and thought certain decisions were made, only to find out later he was not on the same page as his U.S. counterparts.
Genmar Holdings chairman Irwin Jacobs says his 14 boat lines have made design changes to give overseas clients what they are looking for.
“A lot of our boats are being designed and manufactured for those international countries’ needs, strange as it may sound,” Jacobs says. “Everybody’s appetite isn’t the same for the exact boat everywhere you go. Some countries like sunbathing, other countries don’t like it; they like enclosed boats. Some people like sunbathing on the front of the boat, some like it on the back of the boat.
“There’s a lot of thought going into each one of our companies for the worldwide market — more than we ever had before,” Jacobs says.
Rick Gasaway, chief sales and marketing officer for Nautic Global Group, says his company, too, has noticed cultural differences, depending on the country. People in Scandinavian countries, for example, like enclosed boats because of the weather. Deck boats are more in demand in southern Europe.
“There’s a great desire for boating worldwide,” Jacobs says. “[Dealers] want diversification of product. We’ve got dealers today who have two or three of our lines around the world, where it used to be before they’d have one.”
While none of the executives interviewed would disclose exact figures, all say increases in overseas sales have been significant.
The most recent year for which NMMA has complete export figures for 2007. In that year, Western Europe was the top destination for boat and engine exports, followed by Canada.
Boat and engine exports to Western Europe represented 32 percent of the U.S. total in dollars — a 2 percent decrease from 2006.
Today, “There’s no question that our exports are substantially up. We’ll be up this year about 40 or 50 percent, maybe even higher,” says Jacobs. International sales account for about 20 percent of his company’s total sales, up from less than 10 percent three or four years ago.
For Nautic Global Group, which comprises the Rinker and Godfrey brands, international sales have increased by double-digit percentages year after year — anywhere from 10 to 15 percent, Gasaway said. Exports account for about 20-25 percent of the company’s overall sales.
Porter, the Formula vice president, says international sales account for 12 percent of the company’s sales, whereas five years ago it was only 3 to 5 percent.
Boats at ‘half price’
It’s the weak dollar, executives say, that is primarily responsible for the spike in export sales.
“When you’re looking at the euro and the weakness of the U.S. dollar in Europe, it literally makes the U.S. product very, very attractively priced,” says Gasaway. “Right now, the euro’s at around 1.6 (dollars), so it’s like buying a boat for half the price for them.”
Dammrich says the increase in international sales hasn’t necessarily been seen in past economic downturns.
“You don’t always have a weak dollar during a downturn, so there’s a little bit of serendipity here,” he says.
As the demand for U.S.-made boats rises, many boat makers point to corresponding increases in the numbers of dealers in their overseas networks.
Meghan Stout, director of marketing for Chris-Craft, says the company has 80 dealers — two-thirds of them international — and plans to increase that number.
The biggest challenge for Chris-Craft, she says, is figuring out how to ship its boats to Europe. Given the international growth in all industries, port space has become a hot commodity.
Formula has 25 international dealers, with nine new dealer accounts established just this year. The increased presence overseas has also led to more media exposure and greater recognition of the brand, says Formula’s Porter.
Eastern bloc growth
Gasaway says European dealerships represent about 15 percent of its overall retail network. About 20 percent of its total dealer base is international.
Nordic Tugs now has two international dealers, including a recently signed outlet in Russia, and six domestic dealers.
Some companies say Eastern Europe and Russia, in particular, hold the greatest potential.
“We have probably grown more in the Eastern bloc nations, whether [they] be Latvia, Croatia, Bulgaria, a variety of those countries, and especially Russia, which will probably be our No. 1 international dealer this year,” says Porter.
Goehring, too, says there seems to be a lot of activity around the Black Sea, where there’s infrastructure developing to support more recreational boating. Turkey, Russia and Croatia are among the countries in which boating interest is on the rise, he says.
Manufacturers, however, emphasize that Australia, Latin America, Dubai and other places also have a strong interest in American-made boats.
“We have a global economy today that is obviously different than any other time before, because it isn’t terrible everywhere at any time, and it isn’t great everywhere at any time, so you have to be everywhere to balance all of this,” says Jacobs.
Porter says marketplace dynamics have reached the point at which manufacturers can’t really separate domestic sales from international sales.
“It all should be thrown into one sales operation,” he says. “You need to focus on all areas of the world because it’s a world economy.”
This article originally appeared in the June 2008 issue.