During the unveiling of Mercury Racing’s new 450R outboard in Nashville on Tuesday, Brunswick CEO David Foulkes outlined the company’s growth strategy in an acronym.
ACES stands for autonomy, connectivity, electric and shared access. Autonomy is progressing through Mercury’s Joystick Piloting System and advanced joystick including docking assistance. Connectivity includes the Vessel View mobile App and Brunswick-owned Nautic-On boat monitoring system now being standard on larger Sea Rays and Boston Whalers. Electrification is the continued integration of Power Products into the Brunswick and Mercury family. “It’s been a great integration, but we’re really on the first states,” Foulkes told Trade Only Today.
Shared access is Brunswick’s recent acquisition of Freedom Boat Club. “We’ve been talking a lot about shared access models in other verticals whether it’s Uber, Air BNB or other examples and Freedom showed they could be very profitable,” Foulkes said. “The most accurate predictor of boat ownership is boat usership. We see it as very profitable and see it as a way to access boaters.”
He continued, “People look at the economics of club membership versus ownership. You arrive at the club and the boat’s ready and you get off the boat and someone takes care of it.” Foulkes also said that the clubs do more than just provide boats. “They run social events and people become immersed in the boating experience and culture.”
The acquisition of Freedom Boat Club is one part of Brunswick’s growth strategy and Foulkes said that investors are happy with how that plan is being executed and with the recent separation of the company’s separation of the fitness segment.
In February, Foulkes told Trade Only Today that Brunswick is going to be a “combination technology and lifestyle company.” Brunswick is continuing to look at acquisitions and building organically. Foulkes has been focusing on operation margin expansion for the boat group. “Our core businesses will continue to follow the strategy that’s in place and our DNA business will continue to deliver stable margins,” he said. “We’re at 7 percent now and are pursuing double digits.”
After a slow start to the 2019 season, Foulkes expects to see consumer interest in boats increase. “Memorial Day was relatively good for some of our brands,” he said.
Foulkes added that the markets are “pretty flat” outside the U.S., but said that Brunswick brands are gaining shares. He sees the relief on the tariffs in Canada and the decision not to implement tariffs in Mexico as positive, but called the China tariffs a “headwind,” saying that they had a net earnings impact between $17 and $22 million in 2019.
“As a company we make the large majority of our product in the U.S. and sell the large majority of our product in the U.S.,” he said.
Looking ahead, the Brunswick CEO remained positive. “I think markets will pick back up,” he said. “A lot of the economic indicators for good boating are good. Interest rates are low, unemployement is low. The economic outlook is still good for boating fundamentally.”