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Sunday, 02 August 2015 22:00

S2 Yachts shifts product development process to match buyers’ habits

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As consumers’ boating behaviors change, Holland-based S2 Yachts Inc. launched new products that are more versatile and fit with boaters’ shift to shorter weekend and day trips. To keep its operations nimble enough to launch multiple new products per year, the company relies on incorporating technology into its manufacturing process. S2 predicts that it will grow its sales 10 percent per year to in excess of $100 million as consumers with discretionary income come to the market. As consumers’ boating behaviors change, Holland-based S2 Yachts Inc. launched new products that are more versatile and fit with boaters’ shift to shorter weekend and day trips. To keep its operations nimble enough to launch multiple new products per year, the company relies on incorporating technology into its manufacturing process. S2 predicts that it will grow its sales 10 percent per year to in excess of $100 million as consumers with discretionary income come to the market. COURTESY PHOTO

HOLLAND — Like many manufacturers of luxury products, S2 Yachts Inc. didn’t sell all that many of its high-end vessels during the recession years as consumers pulled back on their discretionary spending.

As the economy continues to improve and boat buyers again open their wallets, the Holland-based maker of Tiara Yachts has experienced three years of slow but sustained growth. But while consumers are buying again, their boating habits have changed, forcing the company to revamp its line of yachts, said Tom Slikkers, president and CEO of S2.

“We’re emerging from a bad era as it relates to the economy,” Slikkers said. “Not only did we recalibrate the business as a result of the new economy, but we also had to recalibrate what people expected out of our product.”

With less discretionary income on hand, consumers began to spend less time per trip on their boats, Slikkers said. While boat owners may have taken their vessels out for two weeks at a time to travel to a destination prior to the recession, consumers started to focus more on weekend or day trips in recent years, he said.

In reaction to changing consumer behavior, the company launched a series of new products over the last two and a half years – including its newest Tiara Q44 yacht – that reflect the new trends in boating. The Q44 was designed as a “Swiss army knife” of the boating world, outfitted for either day trips or longer hauls, Slikkers said.

The company’s Tiara yachts range in price from $400,000 to $2 million, while models in its Pursuit line sell for $80,000 to $500,000, Slikkers said. The yachts range from 23 feet to 50 feet in length.

To better react to consumer habits, the company has adopted a strategy of regular new product development as a way to hedge against the cyclical yacht business, which can be particularly vulnerable during economic downturns, Slikkers said.

“Our new product development is really the catalyst that we feel is our best way to counteract what’s happening in the marketplace,” Slikkers said. “It seems a little bit counterintuitive to start investing in new product at a time when people seem to be kind of pulling their horns in.”

To maintain a sustainable growth trajectory, S2 has built in an intentional cadence to its product design and engineering process. At any given time, the company will have three projects in various stages of development. S2 has launched approximately 10 new products in the last four years.

CONTROLLING GROWTH

Despite its focus on new product development, S2 aims to keep its future growth sustainable and inline with that of overall boating market.

“We’re looking at slow, controlled growth because the recession took a lot of our reserves,” Slikkers said. “Now we’re trying to rebuild those reserves but also be cautious about growth. We’re evaluating some of those surges in the marketplace and (want to) determine if these are more of a fad or if they have some kind of a trend to them.”

The company expects to grow 10 percent and is on track to generate annual sales in excess of $100 million this year, Slikkers said.

To keep its manufacturing operations nimble enough to handle the regular influx of new products, S2 has integrated automation and other technology into its two manufacturing lines at its Holland facility.

“Like most manufacturers, we’re trying to balance because we’re low-volume (and) high SKU,” Slikkers said. “We’re trying those sweet spots where we can take any portion of our process and automate to reduce dependency and streamline our ability to produce product and reduce cost.”

As consumer spending and confidence continues to rebound after the recession, industry analysts are confident that the boating industry will continue along a steady growth trajectory, according to a June 2015 U.S. boat building industry report by IBISWorld.

The commercial boat building industry, which comprises yachts, motorboats, sailboats and other vessels, is expected to grow to $10.2 billion by 2020, with an annual growth rate of 2 percent per year, according to the report. The pace slowed from the 9 percent annual growth the industry experienced between 2010 and 2015 largely because boat sales are now approaching pre-recession levels.

For insight into the trajectory of the boating industry, S2 relies on economic indicators such as sales of high-end automobiles and motorhomes to gauge customers’ spending habits. The company has also drawn a correlation between its business and the real estate market, Slikkers said.

“We believe that the connection to the real estate market has something to do with the fact that our owner demographic has a significant investment in real estate,” Slikkers said. “They have their primary homes, secondary homes and businesses, and that somehow creates either a comfort to buy a boat or not.”

While the downturn shifted how S2 operates its business, Slikkers said he is confident that the company’s operational structure and new products that are designed to resonate with consumers will position the company for future growth.

“We’re not anywhere back to what we once were, but like most companies during the downturn, you have to recalibrate how you do business and how you’re going to do business and go forward,” Slikkers said. “We made a lot of cost adjustments and cost savings and understand that the market may not ever come back to that degree again, but that’s OK.”

Sidebar: Wind turbine blade maker Energetx closes

At a time when S2 Yachts Inc. has focused on restructuring its yacht-building business to be more nimble, the company also realized it was time to pull the plug on its alternative energy business.

The Holland-based S2 recently shut down the operations of sister company Energetx Composites LLC, a manufacturer of utility-scale composite wind turbine blades, according to President and CEO Tom Slikkers.

Established in 2008 in the middle of the recession, the company looked to translate its composite material expertise from the boat business to making wind turbine blades, which the state identified at the time as a key growth industry and diversification target.

At the time, Energetx projected it would create more than 1,000 jobs to scale up production as part of a $37 million investment. The state backed the move with more than $25 million in state tax credits.

In 2011, the company also received an undisclosed investment from The Windquest Group, a Grand Rapids-based private equity firm headed by Amway Corp. scion Dick DeVos.

Slikkers declined to elaborate on what led the company to shutter Energetx, which operated in the increasingly volatile wind energy manufacturing industry that struggled to take off in Michigan. The company had exported some products to Spain, according to past MiBiz reports.

— Reported by John Wiegand

Read 6206 times Last modified on Sunday, 09 August 2015 09:40

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