U.S. sailboats a tough sell in the E.U.
Posted on 20 November 2008
Been to Europe lately? If you have, you know the sting of sticker shock. Trading at more than a buck-fifty, the Euro hurts the travel budget if you’re paid in dollars. But with a little freeloading and couch surfing, I managed to scout the boat show in Düsseldorf, Germany, which claims to be the “world’s No. 1 yachting and water sports trade fair.”
Official numbers suggest the show attracted nearly 280,000 people, a staggering number that probably includes the weasels who snuck in with fake press passes. By comparison, the U.S. Sail and Powerboat shows in Annapolis, Md., each draw 40,000 to 50,000 visitors.
So, yes, it was a big affair with 17 halls and 1,700 exhibitors from 57 countries who displayed everything from bikinis to megayachts. If you’d wanted to see it all, you’d have needed all eight days and copious amounts of beer and bratwurst. Personally, I was eager to find out how American sailboat builders are kicking butt in Europe by turning a low dollar into high profits … or so I thought.
Under the radar
After a Borat moment with the woman at the press office, who looked at my credentials and refused to accredit me with the comment that “zis kaad is a joke,” I found Nadine Timm, executive assistant at Die Yacht, the German magazine that organizes the European Yacht of the Year contest. “Hi, welcome to Düsseldorf. Here’s your ticket for the awards dinner.” Then she hustled me into the ballroom before the fashion police could stop me for dress-code violations.
This shindig is a Who’s Who of the European boating industry. Nearly 400 executives and media representatives came to listen to a saxophone duo and raid an exquisite buffet, while finding out which boats are hot and which are not, as decreed by a jury of 11 European boating magazines. There were five categories with five nominees in each — 25 boats culled from approximately 80 entrants. None of the nominees was from the United States, which might sound surprising, but is actually par for the course.
From a total of 107 boats nominated since the contest’s inception in 2002, only two came from the States: the J/100 in 2005 and the C&C 115 in 2006. That’s less than 5 percent. This number suggests that American builders don’t make what Europeans want, or don’t have the budgets to make Europeans want what they make. Like, for instance, Harley Davidson does.
If nearly 4,000 participants in a German magazine reader survey were marginally truthful, U.S. sailboat builders have simply slipped under the radar. The list of top sailboat brands does not include a U.S. yard, with more U.S. strikeouts in the categories of reliability, quality, service, price/value and appearance. As the only U.S. brand mentioned in the survey, J/Boats got seventh in the list of “modern and progressive boats” and second in “sport boats.”
“It’s a big and interesting market, but it’s also a tough market, [and] we’re scratching our heads,” says Cuyler Morris, president of Bass Harbor, Maine-based Morris Yachts, which exhibited the M36 daysailer in Düsseldorf. “We are not a big production yard, but we’d love to increase our sales here — without breaking the bank.”
A medium-size display space at a major European show can cost up to $150,000, according to one U.S. executive. While the European Union economy is big, the individual markets are also quite diverse. That means domestic brands still have clout in their respective countries, because they understand customer preferences.
A cultural divide
With 40 years of mucking around with sailboats in the United States and Europe, my personal impression is that American consumers are more pragmatic than Europeans, who love to get bogged down with geek stuff. In Düsseldorf, I saw a Hobie Cat 14 with a new chop top main next to a Flying Dutchman, which brought this difference into focus: here, a simple, bare-bones boat that is affordable, easy to sail and just as easy to maintain; there, a tricked-out racing machine with carbon rig, dual spinnaker poles and a million cleats and strings for fine-tuning.
“As a U.S. company you have to respect the regional and cultural differences,” says Stephen Cutsforth, international sales director at Alachua, Fla.-based Hunter Marine, which closed its U.K. manufacturing facility after building approximately 650 vessels there during six years of operation. “Europeans put more emphasis on design and style, while Americans are more interested in comfortable interiors,” he explains, pointing out that Hunter has retained a European design firm to assist with styling. “Cockpits must be big and open in the Med, but closed and protected in Scandinavia. Brits love boats with bilge keels.” And they love small boats.
“There is a higher percentage of adults who race dinghies,” says Jeff Johnstone, who heads Newport, R.I.-based J/Boats, which builds in France. “And for them it is a natural progression to step into a performance keelboat as they get older.”
Johnstone also says his builders “have some subcontract work done in lower-cost labor markets.”
Jochen Rieker, editor of Die Yacht, talks about the upwind slog for U.S. boatbuilders in Europe, with an oblique reference to Volkswagen’s “Fahrvergnügen” ad campaign. “Europeans love the cult of mobility — sleek, fast and well-engineered cars that are sinfully expensive but nice to look at and fun to drive,” he says. “Some of this spills over to pleasure boats, and from my perspective it seems that U.S. manufacturers are not always grasping the particular and varied tastes of European customers.” Daimler Chrysler, anyone?
But not all is doom. Werner Stolz, the German representative of Corsair Marine, the Chula Vista, Calif., company that produces folding trimarans, likens current economic conditions to a good breeze on the beam. “We ship directly from our factory in Vietnam to the European dealers,” says Stolz. “I remember 1999, when the dollar was high. It was tough, but we still sold boats. Business started growing in 2002, and now we are at 30 units per year.”
Tim Jackett, CEO and chief designer at Novis Marine, the company that builds Tartan and C&C yachts, says he keeps his eyes on Europe. “Those who have invested in the market 10 or 15 years ago reap the benefits now,” he says. “But you need feet on the ground, and building a sales organization takes time and money.”
On Jackett’s map, Europe includes Russia, where Tartan/C&C has planted its flag by signing up a representative in Moscow.
If consolidation is an indicator of difficult times, the recent acquisitions of boatbuilders could be points on a temperature curve. During the Düsseldorf show it was announced that Dehler, the German builder enjoying a resurgence, bought the Belgian Etap yard; in the States, Novis Marine was acquired by a private equity group; earlier in January, Malö Yachts of Sweden was snapped up by a Swedish investor; in February, Oyster Marine, the British manufacturer of luxury yachts, was bought by Balmoral Capital, a private equity fund; last year, Bavaria Yachtbau of Giebelstadt, Germany, one of the world’s largest yacht builders, was bought by Bain Capital, a U.S. investment firm; and Danish X-Yachts has been looking for a buyer.
While not all companies that are acquired are necessarily in dire straits, they almost always seek to improve their positions, just as you would on the starting line of a race. The objective might be to strengthen their presence in established markets or to move to the most popular place in the world, which is called “upmarket.” Another goal, without a doubt, is the timely expansion into emerging markets.
Groupe Beneteau, the world’s largest builder of recreational vessels with brands such as Beneteau, Jeanneau, Wauquiez, Lagoon and CNB, reassures stockholders with positive forecasts, saying it will match the projected revenue of 860 million euros ($1.28 billion) for its boat business. The company says it relies on “productivity gains … enabling boats to be offered at increasingly attractive prices,” and “geographical expansion … notably India and China … and [the] expansion of the offering [by] conquering the segments for larger boats — up to 24 meters.”
The consensus among experts in Düsseldorf was that even a more favorable exchange rate on the dollar won’t trigger a sudden U.S. invasion of the European production sailboat market. Outfits that have building operations and a network of competent dealers in place are in a better position to face off against competitors that grow fewer in number, but larger in size.
At home, U.S. manufacturers might get some reprieve from slowing demand, because imported boats are becoming more expensive. This means either a higher sticker price or smaller profit margins, if the manufacturer carries the currency risk, which only big players can sustain. To offset these challenges, builders say they will focus on powerboats, investments in new markets or the luxury segment that supposedly is less affected by market swings.
“It won’t be pretty for everyone,” a European colleague mused over a nightcap after the gala in Düsseldorf. “But it sure will be interesting.”