In a sink-or-swim economy, selling a boat is no easy task.
With everything from $100,000-plus yachts to the Queen Mary for sale at bargain prices, who needs a new pleasure craft?
Some folks out there are still buying, though, and by focusing on those people an Orange County company has found a way to navigate through the recession.
Yamaha Marine Group in Cypress, a division of Yamaha Motor Corp. USA, has increased its share of the outboard-motor market despite one of the worst downturns the industry has seen. The company says it has done so by figuring out what people want--and what they don't.
"We've always used the target market, whereas our competitors have tried to increase their total market share," said Michael Waninger, senior vice president of the Marine Group, which has 550 employees in Orange County. "The two most important criteria in this business are, No. 1, know who you are, and, No. 2, know who you are not."
" . . . It's almost like a separation of church and state," he said. "It's such a segmented market. If I'm an offshore fisherman, don't call me a bass fisherman."
Analysts say that Yamaha Marine Group, which had 1991 revenue of $300 million, has also been able to grow by offering its network of dealers and boat builders volume discounts on outboard motors and supporting those discounts with marketing dollars available on the local level. For example, the company has awarded $1,000 each to winners of fishing tournaments in what it calls its Unique Angler Program, thus promoting not only its products but also local dealerships.
"They're buying their way into the marketplace, offering sweet deals not only to the dealer but the manufacturer," said Jerry P. Melin, a boating industry analyst and vice president at Rothschild Inc., an investment bank in New York.
As the recession has reduced the amount of money that consumers are willing--or able--to spend for leisure activities, boat and motor makers across the nation have been forced to target narrow segments of the market. A company might promote its products specifically to the bass fishing enthusiast, for example, or to the Midwest family forced to abandon exotic vacations in favor of weekends on the lake.
After years of spiraling growth, the industry peaked in 1988 with sales of 460,000 outboard motors. That fell to 352,000 sold in 1990 and just 289,000 in 1991. Yamaha managed to swim against the tide, though, raising its market share.
Yamaha had just less than 10% of the outboard marine engine market in the 12 months that ended in June, 1990. Through the 12 months that ended June, 1992, the company's market share was nearly 15%.
The figures include sales of a smaller segment of the market: stern drive engines. The marine group also has a water vehicle division that makes the Waverunner, the company's answer to Kawasaki's Jet Ski.
Waninger said his company has boosted sales not only for itself but also for powerboat makers by marketing Yamaha motors for offshore fishing boats sold to enthusiasts in coastal areas, particularly in the Southeast.
"That's a buyer that tends to be white collar," Waninger said. "They've got the bucks. That's a segment that may be somewhat recession-proof."
When Yamaha Marine Group, a subsidiary of Yamaha Corp. in Hamamatsu, Japan, was founded in the United States in 1984, domestic companies Outboard Marine Corp. and Brunswick Corp. dominated outboard-motor sales. The competition for newcomer Yamaha became stiffer when Outboard Marine and Brunswick, both based in the Chicago area, went on a buying frenzy, grabbing up boat makers so that they could sell their motors on subsidiaries' boats as a package deal.
Yamaha and some other motor makers took a different tack: They began building partnerships with boat manufacturers and dealers. Under the strategy, Yamaha would negotiate an agreement under which a boat builder's watercraft would be packaged exclusively with Yamaha motors for retail sales. Other companies--including the marine division of American Suzuki Motor Corp. in Brea--use similar partnerships, mirroring the Keiretsu system used by most major industrial companies in Japan.
Yamaha "hired some excellent marketing people and executives," said Allan Price, president of Marine Matrix, a boating industry research group in Evanston, Ill. "The larger companies for many, many years were arrogant. They were run by engineers rather than marketing people. Japanese companies like Yamaha had a fresh slate."
The partnerships allow Yamaha to spend money on advertising in several areas, including promotions at boat shows and training of sales forces. Yamaha also provides marketing support for retailers.
"They take good care of the dealers and good care of the customers," said Marie Schock, co-owner of Schock Boats in Newport Beach, one of Yamaha's first U.S. dealers. "They support us, and that's what we needed."
Analysts doubt whether Yamaha or any other motor maker will overtake Brunswick and Outboard, even though both have laid off workers and posted heavy losses during the downturn. Brunswick reported a loss of $23.7 million for 1991 on sales of $2.1 billion. Outboard reported a loss of $84.3 million on revenue of $983.6 million.
The two companies together command about 80% of the market, though, and are taking steps to hold their position against smaller competitors.
And the two giants of the industry have name recognition on their side, analysts say.
"Brand preferences die hard," said Greg Proteau, a spokesman for the National Marine Manufacturers Assn. in Chicago.
Waninger, a former marketing executive for Ford Motor Co. who came to Yamaha in 1990, said that the company's goal is to stay lean. He doubts that Yamaha will ever go much beyond its network of 570 dealers and 41 builders.
"If we put a dealer on every corner, we overpopulate the dealer network," he said. "We don't try to get the most dealers; we try to get the best. The credibility of our product is boosted. If we put a Yamaha motor on every boat out there, that dilutes its value."
Marine Matrix ranked Yamaha's outboards at the top in dependability in an annual survey released in July. The motors also have earned high marks from Marine Matrix for their two-year limited warranty.
But analysts say that price is the final determinant among most buyers.
"With discretionary spending down, you're going to think about the price," Rothchild's Melin said. "And the dealer will cut you a deal today he wouldn't consider in 1988. If you wanted the highest-performing engine out there, you wouldn't automatically go to Yamaha."
Indeed, boat-motor makers and manufacturers--including Yamaha--have been aiming for the low end of the market with watercraft costing less than $25,000. At boat shows, the National Marine Manufacturers Assn. has been placing emphasis on the family boat, one that is 17 feet to 19 feet long and costs between $10,600 and $17,300 with motor and trailer.
"You've got this baby-boom generation with their homes and their cars," Waninger said. "It really is a society thing. It's one of the few things you can do as a family unit. It's a natural fit for what is happening."
Navigating the Boat Market
Despite a soft economy and a decline in money spent on boating nationwide in the past three years, Yamaha Marine Group has managed to stay afloat in rough seas by understanding its market and capitalizing on the steadyily increasing number of registered boat owners in Southern California.
The number of boat registrations has been steadily climbing in Orange and San Diego counties. Los Angeles County last year reported its first decrease in six years; it had nearly 400 fewer than in 1990.
Orange Los Angeles San Diego 1986 57,970 111,587 46,699 1987 60,231 114699 49,107 1988 62,790 117,555 51,749 1989 64,893 119,763 53,893 1990 67,544 123,824 56,363 1991 68,502 123,438 57,964
Reasearched by TED JOHNSON and DALLAS M. JACKSON / Los Angeles Times