Brunswick Corp. CEO Dustan E. McCoy is projecting that the company’s boat business will become profitable for the first time in two years and he responded to a question he often gets: “Why is Brunswick in the boat business?”
“A lot of people ask us fundamentally, why are you in the boat business,” McCoy said Tuesday at the Raymond James 35th annual Institutional Investors Conference in Orlando, Fla., on Tuesday. “If we step back and look at Brunswick Marine over the years, our business is at its core a business that is driven on earnings growth from parts and accessories. And the key to a great and strong parts and accessories business is having a very large installed base. I go back to [the fact that] every boat we sell under 40 feet carries a Mercury engine on it.”
Margins have been growing on boats under 40 feet, and the company has been significantly growing its share, “especially in all our outboard boat brands during this time, Mercury has been growing share,” McCoy said. “As we do that, we get tremendous leverage as we work through our business, so for those who look at just the boat business, we continually say, ‘You’re not quite understanding what our strategy is, and what we do.’ ”
This year the engine business will have record profitability in its 75-year history in a market that’s just over half what it was in 2007, McCoy said.
“So we’re comfortable in running this strategy in both these businesses together, even though we do get a lot of questions about the boat business,” he said.
The parts and accessories arm accounts for 43 percent of the company’s total sales, he said.
“When people stay on the water and boat, they need their engine to be running and that feeds our P&A business,” he said. “So it’s having a large installed base, great service, and the ability to get a part to any dealer on the same or next business day that feeds our parts and accessories business.”
The outboard business now accounts for 43 percent of sales, McCoy said. Sterndrive makes up 14 percent. “That is a complete flip from say, 2006, 2007,” he said. “Prior to this recession this company, our engine business would not have made it. Our outboard business only used to be about 20 percent of sales, and we lost money selling base outboards,” McCoy said.
“Now the outboard business is 80 percent of engine sales, 43 percent of total sales. We make money on every engine we sell, and it feeds our parts and accessories business. And because our engines go not only into our boats, but in other boats, we’ve got to be the best partner for other boatbuilders.”
“We’ve got to stay focused on a winning culture,” he added. “We’re the only American company that has competed with Japan Inc. every year for 25 years and beat them every year, without any help from our government.”