Smaller sterndrives keep falling, while high-end stays strong
Picture yourself out on the water, enjoying a thrilling cruise in a stylish boat that glistens in the sun as it cuts across the waves. While some may imagine themselves in a pontoon or fishing boat, most see the fiberglass sterndrive as the consummate sport boat, even as the category’s sales have plummeted in the last six years.
Mainstream sterndrive runabouts — fiberglass V-hulls from 18 to 36 feet — have been impacted by a variety of factors ranging from the required addition of catalytic converters, improved refinement of outboard engines, financially squeezed middle class consumers and shifting market tastes that have boosted the relative popularity of pontoons and aluminum fishing boats. As a result, many of the industry’s best-known sterndrive builders have seen their sales shrink to a fraction of their pre-recession volumes.
While regions of the country have been impacted in different magnitudes — California, for example, sold only 14 percent of the 16- to 35-foot sterndrives in 2013 that it did in 2003 — the most stark difference is by size, where sterndrives 25 feet and below have borne the brunt of the category’s decrease, while larger sterndrives have grown in sales. Cobalt posted its best-ever year in 2013 on the strength of higher-end customers.
To find out what these shifting trends mean and where sterndrives are heading, Boating Industry spoke with three key manufacturers for their insight, and collected regional sales data to better understand the future of this still-crucial category.
Stingray diversifies its lineup
Headquartered in northeastern South Carolina, Stingray Boats focuses on the 18- to 25-foot market with a lineup that’s comprised of approximately 85 percent sterndrive sport boats. It has recently waded back into outboards in response to increased consumer demand, but its corporate bread and butter remains sterndrive V-hull boats.
Stingray’s product lineup falls squarely in the segment of the category that’s been most severely impacted in recent years, and Mark Skeen, vice president of global sales, said the lower end of the market might only now be hitting bottom.
“With the last few weeks of the show season … and even into the fall, it feels like there’s definitely a renewed interest in sterndrive product in the marketplace,” he said. “That’s exciting, and it makes me feel like maybe we have turned the corner a bit, and will be able to see the needle start going back up.”
As the market has struggled in the last five years, Stingray has responded by focusing its development muscle on bowriders and hybrid-style sport deck runabouts.
Skeen added that the sales trends favoring larger boats aren’t necessarily clear-cut, as the company saw strong interest in its 18s and 19s at this season’s Midwestern boat shows. That said, Stingray has seen its average unit price increase as dealers change their orders in a reflection of entry-level sterndrive customers continuing to shrink as a portion of the overall sterndrive marketplace.
In response, the company has put an emphasis on keeping prices as low as possible, which has become difficult with the increased cost of on-board technology, emission controls and sterndrive engines themselves.
“We do all we can to keep prices as low as we can, but we have seen our average [selling] price going up, meaning people are buying larger products,” Skeen said, acknowledging a silver lining to the trend. “It’s more profitable for us, too.”
Stingray’s recent addition of outboards has been a shot in the arm to add incremental volume, while also giving its dealers a new type of product that consumers have been asking for.
“The technology of the outboard product now makes it an acceptable power choice for a runabout-style boat,” Skeen said. “We understand how people like to use a sterndrive boat, so it makes us feel like we can do a better job designing … an outboard boat that has the attributes of a sterndrive boat with a large sun deck, the ability to have as much swim platform as you can and still have outboard power and really integrate the outboard into a more traditional sterndrive platform for that buyer.”
The company doesn’t expect its sterndrive-to-outboard mix to change dramatically going forward, but it’s hedging its bets with a more diversified product portfolio.
“We’re going to continue to evaluate the outboard market and continue to put models in where we feel like there’s the ability to give our dealers something that’s unique that they can sell, and give us incremental volume,” Skeen said. “Obviously we’re going to keep moving and doing the things we can to drive volume into our plant, and if that means the outboard segment becomes more a part of our portfolio then so be it.”
To support its outboard expansion, Stingray has created several outboard models to show consumers and dealers that the company is truly invested in the category, rather than just experimenting with a few outboard boats.
Skeen was careful to reiterate the company’s ongoing support of the sterndrive segment, and the company has recently introduced a new 19-footer as well as the reintroduction of a 25-foot sterndrive.
He added that the company is pleased with advancements in sterndrive engine technology, but hopes that the engine OEMs focus on maintaining costs as volumes decrease.
“We are hopeful that both [Volvo Penta and Mercury] do all they can to keep our costs as low as possible, because at the end of the day any time they switch technology and go with something different it’s going to cost,” Skeen said. “We understand why they have to do it, but we are hopeful that they can keep costs in check to keep our prices as low as possible.”
Cost management will remain a key factor for the sterndrive market going forward, he said, and Stingray puts a strong focus on producing high-value products to appeal to its customer base. Skeen also sees style differentiation as a way to drive sales growth in the category, as well as integrating new features and technologies.
While economic indicators became mixed as extreme winter weather hit much of the United States, he says Stingray remains positive about its fortunes as the 2014 selling season ramps up.
“What we’re seeing at the boat shows makes me believe that and talking to dealers about the activity of consumers and what’s going on really makes me feel positive about ’14,” he said. “The fact that people are looking at sterndrives again, in conjunction with a positive outlook on the future, these next 12 to 18 months makes me feel good.”
Monterey bets on versatility
Located 25 minutes southwest of Gainesville, Fla., Monterey Boats offers a full lineup of runabouts, performance ski boats, high-performance sport boats and sport yachts. The company classifies its sport boat runabouts as up to 28 feet, and its product range is almost entirely powered by sterndrive engines.
As the sterndrive market has shifted, Monterey has fared better than some of its competitors and has recently seen a slight increase in sales, which is welcome news after years of decreased volumes.
Like many in the marine industry and beyond, marketing manager Martin Rusin said the company has been impacted by the difficult winter weather, and speculated that foot traffic at the recent Miami International Boat Show was down as a winter storm cancelled flights across the East and Southeast.
As sterndrive boats have increased in cost, Monterey responded by wading into the outboard market for the first time in 2013. While diversifying the company’s portfolio, Rusin also feels that outboards will help the company reach new markets where runabout-style boats might be popular, but outboard power would be preferred to sterndrive.
“It’s really a question of demand, and the ability to reach into markets that have not previously been available to us, such as the saltwater runabout market,” he said. “We’ve even seen penetration into northern climates, because the winterization of an outboard is significantly less than an I/O.”
Like Stingray, Rusin added that Monterey isn’t expecting outboards to become a major portion of the company’s sales mix.
As its sterndrive runabout sales have improved, Monterey has found particular success in its mid-range to large models, particularly in the 24- to 29-foot category. Rusin said the clientele is still there for that segment of the market, and that has played well with the company’s fresh product lineup in the midsize-and-up range.
Its 264FS bowrider sport boat has been particularly successful, with an integrated swim platform, swiveling dual bucket seats, an L-shaped lounge that doubles as a sun pad and a recessed telescopic swim ladder that tailor the model to active family users.
Monterey offers its customers the choice of either Volvo Penta or Mercury powertrains, and Rusin said he feels improved engine technology is a big buying factor that has the opportunity to drive sales going forward.
“The overall current trends globally, whether it’s the latest and greatest phone or the latest and greatest car or the latest and greatest anything has driven this to anything that’s got a new and innovative technology is going to be appealing to a consumer,” he said.
The company is also betting on its sustained research and development, which has provided the company’s dealers a total of eight new boats within the latest two years. Rusin said Monterey’s new product assault is going to continue, and the coming two years will keep pace with the previous years.
“The people who are selling stale bread are the ones who aren’t going to fare as well,” he said. “Our R&D department has been in full swing the last several years, and I think that’s something that’s going to help us in the long term.”
Rusin sees technology as a major driver of new product trends, including the continued proliferation of joystick docking technology, integrated navigation functions and overall customer entertainment.
“We now offer things like cockpit TVs in the boats, stereos with multi-zone sound control, things that enhance the user experience onboard as opposed to maybe design improvements,” he said. “We’re always searching for better design and usability, but technology really plays a very important role in the development of our boats.”
Without opening its product playbook, he added that its next round of models would demonstrate clear advancements in the user experience, technology, functionality and usability for customers.
Boat usage surveys also have impacted product planning, as more boat owners spend time anchored out on sandbars rather than “spending the entire day at full throttle.” This has resulted in innovations in seating configurations that alter how users are positioned and what they’re doing to pass the time on their boats.
While accommodating everyone and every use is impossible, Rusin said the company’s larger new 268SS and 288SS models demonstrate this trend of greater versatility with the option of an onboard wet bar in the cockpit, which can be substituted with an extra seat instead.
As sterndrives as a whole continue to struggle in the face of a marine market that’s growing as a whole, Rusin, a former auto guy, equates the growth in pontoons as a trend seen the automotive market.
“There was a time when everybody had to have a conversion van with a TV in it and a fold-down bed in the back and every possible option you could have, and then everybody had to have a minivan, and that trend died off into the sport-utility,” he said. “Sooner or later, [we’re] going to get to the point where I just want to take my family, my wife and 2.5 kids and go fast again.”
For the rest of 2014, Rusin sees the potent winter as another advantage, where people who have been hit hard will be further motivated to enjoy the outdoors when the spring thaw finally arrives.
Cobalt doubles down
Few, if any, sterndrive builders have fared as well in recent years as Cobalt. The southeastern Kansas-based manufacturer of high-end sterndrive boats experienced its best sales year ever in 2013, and is forecasting continued success in the years ahead.
“We are continuing to drive sales with new product innovation,” said Gavan Hunt, vice president of sales and marketing. “Our newest models, our R series, are showing tremendous success at the boat shows. We’re seeing the SD series perform very well all over the U.S., and our new twin sterndrive 336, a bowrider/cruiser crossover measuring almost 35 feet, has been a huge hit.”
Compared with many of its competitors, Cobalt’s entire product lineup is powered by sterndrives, and the manufacturer has no plans to reevaluate its powertrain mix.
“They ride tremendously well in rough seas and choppy water, and there’s no better way to propel our boats than a sterndrive,” Hunt said. “For our customers’ use, which is a combination of tow sports and a focus on smooth ride and passenger comfort with a large sun pad and a wonderful swim platform on the back of the boat providing water access that is not possible on an outboard, for us, it’s a better way to propel the boat.”
He said the company’s entire product lineup is currently selling well. Looking at the wider market, smaller sterndrive-powered boats have fallen sharply enough to distort the strength of the overall sterndrive category — particularly in the 18- and 19-foot range.
“I think what you’ll see is a continued decline of the smaller sterndrives, because a lot of builders aren’t building small boats with sterndrives anymore, they’re going to put outboards on them because there is a limited small engine offering in sterndrives and some builders have figured out a way to make them more efficiently,” he said. “As you get into larger 20- to 40-foot pleasure boats, there’s no better way to power them than with the twin-prop drives, which are typically more expensive, but they serve the customers’ needs better — especially in a sharp turn or in reverse, where the dual-prop sterndrives will not cavitate.”
As sales improve, Cobalt has continued driving further sales with innovation and new models, such as the company’s R and SD series models, its new 336 35-foot bowrider and the A40 Sport Yacht launched at the Miami boat show.
The opulent A40 is designed to offer high performance in an elegant package, with high-end features like a hydraulic swim platform, stainless steel top, convertible sun pad, frameless windshield, Austrian free-range leather and granite countertops.
Hunt said evolving technology from both Volvo Penta and Mercury have given customers reasons to upgrade, and that Cobalt has been pleased with both manufacturers’ powertrain strategies.
“People love to buy new toys, and when they have a reason to buy a new toy and a reason to upgrade, it makes it a lot easier to justify,” he said. “These innovations, even the small ones, give people an excuse to upgrade to a new boat.”
He cited examples such as digital throttle control, electronic digital gauges and shift- or drive-by-wire systems that have been filtering through the marketplace. The company has its eyes on advanced cockpit gauges from ski boat builders and luxury automakers such as Jaguar and Land Rover.
Going forward, Cobalt is working to broaden its product mix in all categories, particularly in the 23-and-up category.
“It’s fun to help people with those segments,” he said. “The customers are out to take their families out on the water for an enjoyable day and the sterndrive powerplant, the dependability, the durability [and] the flexibility is serving them well.”
The company has also recently implemented its Extra Eyes program that has increased its quality control checks before a boat leaves the manufacturing facility. It hasn’t been marketed or communicated to its customers, but has been implemented to make sure the company maintains quality levels as its sales grow.
As smaller sterndrive sales continue to contract, the company is concerned about a smaller feeder system driving customers into larger sterndrives, but Hunt said jet boats and smaller, less expensive boats still move people into the sport of boating. To convince boaters of the merits of sterndrive power, he said, “They just have to ride in it.”
As early-season boat shows show Cobalt’s retail sales growing 10 to 15 percent compared with last year, Hunt said the company’s previous forecast of 10 to 15 percent growth for 2014 appears accurate.
“Our business tracks almost identically with the Dow Jones Industrial Average, so as business gets better and the market goes up, amazingly enough, so do boat sales — I don’t think that’s just us,” he said. “We’re going to try to make our product continually more appealing to our segments of the market while keeping a watchful eye on opportunities in other sectors, but at the end of the day we still have 100-percent confidence in what we’re doing. While others are pulling out of some areas of sterndrives, Cobalt is investing more resources in sterndrives.”