Magazine article New Zealand Management

Putting Wind in Export Sales: Building a Flagship for Brand New Zealand: Built on Both Traditional Skills and Leading-Edge Innovation, New Zealand's Boating Industry Could Be Seen as a Flagship for the Kiwi Business Spirit and Manufacturing Know-How. Can It Hold Its Course as a Brand Leader in Competitive Offshore Markets? Vicki Jayne Goes Fishing for Clues

Magazine article New Zealand Management

Putting Wind in Export Sales: Building a Flagship for Brand New Zealand: Built on Both Traditional Skills and Leading-Edge Innovation, New Zealand's Boating Industry Could Be Seen as a Flagship for the Kiwi Business Spirit and Manufacturing Know-How. Can It Hold Its Course as a Brand Leader in Competitive Offshore Markets? Vicki Jayne Goes Fishing for Clues

Article excerpt

Glance briefly south-westward from Auckland Harbour Bridge and the spiky forest of masts rocking gently at berth in one of the southern hemisphere's biggest marinas is just one hint of how big the business of boating is in New Zealand.

Basecamp for upwards of 1800 boats--many millions of dollars worth of hulls and hardware--Westhaven and its surrounds also serve as the nerve centre for a marine industry worth an annual $1.8 billion and, despite tough selling conditions offshore, still growing. Loss of the America's Cup and a high Kiwi dollar may have taken some wind out of export sales but, according to a report released late last year by research company Market Economics, the industry as a whole is still making way.

The independent report proved a pleasant surprise for Peter Busfield, executive director of the Marine Industry Association (MIA), which represents 470 member companies.

"We thought if we were marking time we'd be happy because up to 2003 we'd had exponential growth domestically, and export-wise we had all this activity around the America's Cup. New Zealand was really booming."

From 1997 the marine export sector had been enjoying a 23 percent compounding growth rate year on year, some of it fuelled by favourable exchange rates but much gained from leveraging New Zealand's reputation for quality and innovation in offshore markets. Then the Cup went north, the dollar ditto and the world was rocked by terrorist attacks, war and the SARS outbreak.

"Trading conditions for our members have been pretty difficult over the past couple of years so it was encouraging for us to see this increase in turnover. I think we've done very well to grow exports in these circumstances," says Busfield.

Although it is based on a strong domestic market (over 100 new boats go into New Zealand each week), the industry has to look offshore for growth if it's to meet its forecast turnover in 2020 of $3.16 billion--a sum that involves quadrupling the income from its superyacht sales.

As New Zealand's largest manufacturing sector, the marine industry faces many of the same challenges outlined in our cover story--a high dollar, rising interest rates, competition from emerging countries, skills shortages, paucity of venture capital sources, plus rising fuel and raw material costs. On the plus side, it has built a brand that has something of a roaring 40s impact in northern hemisphere markets--we are known for punching above our weight in terms of design, innovation and quality of our marine products.

A summary of marine sector turnover for 2005 shows the largest and fastest growing sector in dollar terms is the supplies/services/components sector now worth $457 million and representing 29 percent of the total market share. Although the annual turnover for superyachts and race yachts has declined a little over the past couple of years, trailer powerboats have bounced up, as have refits and maintenance.

"What these figures don't show you is the volume of goods being exported," says Busfield. "A number of our members report very good, strong growth in offshore sales but that's not reflected in dollar values at this stage because of trading conditions. Anecdotally, the export side of superyacht sales and trailer powerboat sales overseas has been very good and orders are starting to roll in at the high exchange rate."

He reckons dollar stability, even at a higher rate, is an important factor because it gives quotes a longer shelf life. Given that most top-end boat purchases tend to have a one- to three-year timescale, buyers can be put off if the price keeps going up.

And at the top end of the market, you're talking big bucks. Just the rigging for a 100-foot superyacht can set you back $1.5-$2 million or up to $5 million for something bigger. But even in more dollar sensitive mass production areas such as equipment and accessories, Kiwi-made is holding its own, says Busfield. …

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