Gary Beckett reports on the latest efforts of the US recreational marine industry to make boating more
attractive - at home and overseas.
REACHING OUT
Welcome to the world's largest recreational marine market. The United States ranks second to none in
both the number of registered boats operating on its vast array of waterways and the number of companies
catering to this diverse and ever-changing market. America's marine product makers also are among the world's
most sought after for everything from accessories and electronics to marine engines and power and sailboats.
Indeed, US-based marine product makers also rank among the world's largest suppliers of recreational marine
gear and boats. Considering the size of the US market, that's not surprising.
Pleasure boating ranks among America's most popular recreational activities, according to the National
Sporting Goods Association, in Chicago, Illinois.
More than 78.4 million Americans went boating last year, up from about 77.7 million in 1996,
estimates the National Marine Manufacturers Association, also in Chicago. The US Coast Guard said
around 12.06 million sail and powerboats were registered in the 50 US states and territories in 1997,
up from about 11.74 million in 1996. Indeed, no other market sports more boaters.
That huge consumer market supports a US recreational marine business that rang up more than US$17 billion
in retail sales in 1997, according to NMMA. Sales of new powerboats - outboards, stern drives, inboard
run-abouts and ski boats and inboard cruisers - accounted for just under a third of the market with more t
han US$5.2 billion in sales. Outboard engine sales alone totaled more than US$2 billion last year, said NMMA.
Yes, this is quite a market. And it's led by some of the best known recreational marine companies in the
world. They include the Mercury Marine engine division of Brunswick Corporation, the world's largest
supplier of outboard and stern drive marine engines. Then there is Brunswick's Sea Ray Boats unit in
Knoxville, Tennessee, and its US Marine division in Arlington, Washington, both among the world's largest
powerboat makers. Outboard Marine Corporation, in Waukegan, Illinois, remains a leading maker of outboards
and powerboats while Genmar Holdings, the Minneapolis, Minnesota-based builder of such well-known international
brands as Hatteras Yachts and Wellcraft powerboats, ranks among the top boat builders worldwide.
The good news about the American pleasure boat market is that it's growing. Indeed, estimated retail sales
of new powerboats in the recently concluded 1998 model year rose by five percent or more, according to
reports from boat and engine builders. That growth was especially strong in the over-30ft market, where
sales of larger boats rose for another year.
While most of that growth came from the US, American boat, engine and accessories makers are
reaching out with efforts anew for international business. US marine exports totaled US$657.8 million in
1996, the last year for which NMMA has statistics. That's down slightly from 1995 when exports reached US$685.2
million, but still way ahead of the US$539.5 million in marine goods exported in 1995.
However, US marine product makers are positioned for export growth. Today, many of America's major boat and engine brands meet European market certification standards, thanks to a strong push by NMMA.
In fact, everywhere you look US marine manufacturers are pushing the envelope in terms of product development. Indeed, innovation is driving America's new pleasure boat market growth, as is an initiative by manufacturers and retailers alike to raise the level of customer service and product quality.
NMMA is also behind a push to establish certification of boat dealer and boat builder personnel. The effort should improve the level of follow-up sales and service support and create programs designed to make boating easier and more hassle free.
However, there's more to this effort than simply improving customer service. Manufacturers also are delivering better products which, increasingly, are built from state-of the-art advanced composite materials. Following the lead of automakers, boat builders are offering more streamlined hull designs that manoeuvre faster and with less drag. Interiors are more ergonomic with auto-styled gauges, plush seating and features designed with infinite detail in mind.
A couple of factors are behind this move, lead among them is the increasingly demanding US consumer - US boaters want the best. They've come to expect it in everything they buy. Pressed for time, they want more boating with fewer hassles. They want watercraft that basically just start up and go. And, they want fast, dependable service after the sale.
For years the industry failed to take notice. However, a two-year study pioneered by NMMA brought the message home in a big way. Recognizing that a variety of societal changes are shifting the nature of the market, US boat, engine and accessories makers have responded.
Innovations in marine engines are everywhere. Nowhere is that more apparent than in outboards. Electronic fuel injection and high powered four-stroke outboards are becoming more common.
Again, American engine makers are leading the way with new more fuel efficient, cleaner burning outboards that also run quieter. OMC's new FICHT Fuel Injection technology now encompasses a variety of models between 90- and 225-hp. At Mercury, the OptiMax direct fuel injection technology is available on close to half a dozen models.
This push to cleaner-burning engines is in response to new engine emissions guidelines imposed by the US Environmental Protection Agency (EPA) on all off-road vehicles, including watercraft. Starting with the 1998 model year, outboard engine makers are required to cut hydrocarbon emissions by 75 per cent by 2007. The US pleasure boat industry worked with US EPA officials to develop standards that will make boating a cleaner, more environmentally friendly sport.
But the task won't be cheap. The effort could cost US engine makers alone in excess of US$500 million in product development costs over the nine years they have to phase in the EPA guidelines. Nonetheless, the effort is producing a new generation of outboards that for the first time in decades will give consumers real choices in outboard technology.
Innovations also are occurring at the retail level. Responding to the call to improve the quality of boating, American marine dealers are offering more services designed to keep boaters on the water. Many dealers today sponsor on-water outings for boat buyers. These so-called flotillas get novice boaters out on boats with more experienced mariners who can show them the ropes.
Dealers also are turning to more innovative sales practices in an effort to woo new consumers to boating. Witness the growing popularity of demonstration days as sales events.
The sailing industry has had the upper hand here. NMMA's sailing arm, the National Sailing Industry Association, has offered free introductory sails to the public for well over a decade through its Discover Sailing program. Sail America, the Newport, Rhode Island-based sailing industry marketing group, has sponsored a summertime Go! Sailing promotion for two years.
Over on the powerboat side, marine dealers are taking the hint. Dealers typically sponsor Demo Days promotions at their dealerships or at marinas with other dealers. The idea here is to let people try out the sport in a no-hassle sales environment. And, according to retailers, the idea is working.
As noted earlier, all of these changes are making a difference in the US market. Boat sales are up and more and more retailers are jumping on the bandwagon to improve service.
That's quite a turn-around from earlier in the decade. After experiencing an unprecedented boom in the 1980s that led to one of the most prosperous markets in American recreational marine history, the industry in 1989 entered a precipitous two-year decline. Overall boat retail sales volume fell from 749,020 units in 1988 to 439,300 units in 1991.
Worsening the decline was a general economic recession and a disastrous 10 per cent federal luxury tax on the value of boats exceeding US$100,000. Signed into law by then president George Bush in 1991, the tax devastated the cruiser market and all but wiped out the big boat segment. Yacht makers saw sales unit volumes fall to near zero as they collectively laid off thousands of workers.
However, America's boating industry fought back. An all-industry, grassroots lobbying campaign, backed by NMMA's Washington government relations staff, led to repeal of the tax in 1993. Just as the US economy exited a two-year recession, America's recreational marine market took off.
US new boat sales, including the hot personal watercraft market, have nearly regained all of the ground lost during the recession. True, sales of core inboard, outboard and sterndrive boats, remain about 30 per cent below those late 1980s record levels. Nonetheless, prospects for future growth should lead all levels of the US market to new highs early in the next century.
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THE MARKET
So what makes American marine manufacturers some of the best in the world? The answers are numerous and somewhat obvious. In a way, the US invented the recreational marine market.
Pioneers, such as Ole Evinrude, inventor of the outboard motor, and Carl Kiekhaefer, founder of Mercury Marine and inventor of the sterndrive, paved the way for boating's growth. Boatbuilding visionaries like Orin Edson pioneered fiberglass production techniques that made boating affordable and accessible to all.
Driving boating's growth, of course, is its ever-increasing popularity with consumers. Americans long ago discovered the fun, the diversity and the family appeal of boating. Second and third generation boaters are not unusual.
Boating's growth has been powered by other less obvious factors. Lead among them are America's economic growth and entrepreneurial spirit, which have helped make its citizens the wealthiest people in the world.
Indeed, America's economy leads the world in new job creation and stability. Interest rates and unemployment remain at historic lows. All the while, inflation has remained in check while companies in manufacturing and services post sizable gains in worker productivity. A shift to just-in-time inventory methods, powered by computerization, has led to increased productivity in manufacturing and retail distribution that has helped boost corporate profits while keeping retail prices in check.
A revived entrepreneurial spirit is leading the investment in new businesses, which is driving economic growth as the world heads into the 2lst century.
There's another factor behind the strength of America's boating market: this nation's abundant natural water resources. Bounded by two major oceans, on its east and west coasts, and the Gulf of Mexico to the south, America offers thousands of miles of ocean coastline and salt-water access.
Inland, America supports thousands of man-made and natural fresh water lakes; which include everything from small reservoirs developed by the US Army Corps of Engineers to the world's largest freshwater bodies, The Great Lakes. Add in the thousands of miles of navigatable streams and rivers, and it's easy to see why boating here takes on so many forms.
Boating in much of America is seasonal. However, the south supports a year-round boating season. Indeed, boating in states like Florida, the Carolinas, Georgia, Louisiana and coastal Texas, is simply a part of everyday life.
We spoke earlier of the diversity of recreational boating products built by US manufacturers. That diversity comes in response to multifaceted demands from American consumers.
Boating here comes in seemingly endless forms - starting with power and sail.
Power boating is driven largely by the popularity of fishing. The American Sportfishing Association counts nearly 60 million anglers nationwide. NMMA estimates that 60 per cent of all boats sold here are used mainly for fishing in both fresh and salt water.
Waterskiing is another popular sport, accounting for just over 10,000 unit sales in 1997. Indeed, NMMA said roughly 11.7 million people water skied in 1997.
Another element driving boating's popularity is marina development. Boaters with craft of 30ft and over often use their boats like waterfront cabins. Rarely do they venture out into open water. For that reason, marinas - both in salt and freshwater markets - have been transformed into full-service family vacation lands offering pools, restaurants, ship's stores, ship yards and special activities tailored to the entire family.
Consolidation is changing the nature of the marina market. Large operators, such as industry leader Westrec Marinas, in Encino, California, are creating networks of branded marinas, similar to hotel chains, where boaters can count on full amenities and available slips when traveling.
However, power boating in America isn't limited to big boats. Trailerable boats, which typically carry outboard power, accounted for about half of all units sold last year.
Not every boater owns a power boat, but sailing isn't as popular here as in other major markets. Sailboat sales accounted for about 3 per cent of all new boat sales in 1997. Still, America's sailing market is sizable. As in other markets it's divided between racing and cruising enthusiasts. Chartering and day-sailing are also popular choices.
Serving this diverse market are some of the world's best known sailboat builders. They include Catalina Yachts, Hunter Marine Corporation, Sabre and Island Packet. Beneteau, one of the world's largest sailboat builders, also operates a plant here.
As we said, America's boating market is diverse. There are more types of watercraft cruising salt and freshwater than ever before. To get a better picture, take a look at the statistics.
Total US watercraft sales reached about 600,000 units in 1997. Core inboard-outboard-stern-drive boat sales totaled about 305,000 units in 1997, down more than 30 per cent from the 445,400 core power watercraft products built in 1989. However, sales of personal watercraft and jet boats - two products not counted by NMMA in 1989 - totaled 187,700 units last year. Clearly, a shift is underway as boaters take to the water in faster, smaller, easier-to-use products that also are less costly, easier to transport and store in the off season.
But there's another factor driving the change. Owners of traditional boats - both new and used - are among the prime buyers of these quick new fun watercraft because they're great for the kids.
While these market shifts have forced some dramatic, and at times painful changes in the way boat manufacturers and their dealers service boaters, they also demonstrate how resilient US marine product makers have become. They've become more adept at reading and reacting to changes in the market.
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EXPORT EXPERIENCE
American-made marine products have long been in demand around the world. Hence the reason why so many major builders already have established distribution systems in most major international boating markets.
Both Mercury and OMC distribute their outboards and sterndrives internationally. And, both are market share leaders in much of the world.
America's boat builders also increasingly are courting overseas buyers. Sure, OMC and Brunswick, which owns Mercury, Sea Ray and Bayliner, are experienced overseas distributors. However, some of this country's major independent builders have been selling internationally for years. They include Regal Marine Industries, Fountain Powerboat Industries, Hunter Marine, Island Packet, Sabre, Viking Yachts and Silverton Marine.
Boatbuilders aren't the only marine product makers selling into international markets. Some of this country's major accessory makers also are doing a wealth of business overseas. They include Attwood Corporation, Teleflex Inc.'s marine division, which includes marine electronics maker Technsonic Industries, and sailing accessories manufacturer Harken.
Advances in electronics also are reshaping the marine landscape. Again, US companies are forging the way. Trimble Navigation and the Magellan division of Orbital Sciences, paved the development of marine Global Positioning Systems. Now they are leading the development of smaller, lower-cost models, including hand-held GPS units.
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FAVORABLE TRADE CONDITIONS
In summing up, never has there been a better time to buy American-made marine products. Vast investments in new manufacturing processes and technologies have led to explosive growth in new products. Vertical integration by the engine companies combined with consolidation in the boatbuilding business has created larger, more sophisticated, export savvy companies. That, combined with a maturation of the American recreational marine market, has forced them to seek more business from abroad.
American-made products are often market-ready for international customers. Agreements with the European Union and other international bodies have led to boat, marine engine and accessories manufacturer efforts to build products acceptable for use in overseas markets.
And, the strong US economy, combined with trade agreements in Europe, South America. Canada and Mexico, have created some of the most favorable international trade conditions in years.
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