Proof that Chris-Craft Corp. is on a return trip to the glory days goes deeper than an expansion in sales or payroll.
It’s not that the Manatee County-based boat builder doesn’t have those elements. Annual revenues, for example, are up 33% to a projected $40 million in 2013 after a dip to around $30 million in 2011 and 2012. The employee count, which shrank to 25 at the depths of the downturn, is up to around 200 today. Those figures, albeit an improvement, still lag the company’s 2008 heyday, when it had nearly 500 employees, facilities in Florida and North Carolina and about $65 million in sales.
The growth trend, nonetheless, points upward, and the preeminent piece of comeback evidence is this: Chris-Craft now has two full-time engineers with positions devoted totally to finding and evaluating the best of the best in materials and parts. That ranges from Myanmar-imported teak to DuPont ChromaBase paint to bird’s-eye maple.
Those positions would have been excessive in recent years, given the sales decline. But, now, Chris-Craft President and CEO Stephen Heese says those employees form the foundation of the firm’s mission, which is to cater to the high end of high-end boat buyers. Chris-Craft boats vary in price from around $10,000 to more than $100,000.
“We were always positioned at the top,” Heese says. “But we’ve taken it even higher. (The) buyers are out there. There are people who want something special.”
With a history that dates back to 1874, Chris-Craft aims to deliver that kind of special to a select list of clients worldwide, from Chicago to China. The firm’s famous customers over the last 70 years include John F. Kennedy, Franklin D. Roosevelt, Frank Sinatra and Elvis Presley.
“In my opinion, when you go to a boat show, it’s all a sea of sameness,” says Heese. “With our products, it’s completely different. It’s exotic wood. It drips in stainless.”
The fact that Chris-Craft remains in business at all, much less back on a growth track and once again pumping luxury, counters the state of boating in the downturn. Indeed, several nationally known boat makers collapsed or filed for bankruptcy in 2009 and 2010, while others, like Clearwater-based MarineMax and Fort Lauderdale-based Ferretti Yachts, downsized but hung on.
Yet the field seems to have begun to right itself — a combination, analysts say, of the rise in the stock market and fatigue over political and economic uncertainty. Industry-wide sales, for instance, rose 10% in 2012 to $32 billion, according to the National Marine Manufacturers Association. The association projects sales will rise another 5% to 10% in 2013.
Chris Ramey, chairman of the Luxury Marketing Council Florida, says high-end boat builders that “surprise and delight” affluent customers by emphasizing experiences over commodities are at the front of the rebound.
“The boat industry has returned with a vengeance after the recession,” says Ramey, who also runs Miami-based Affluent Insights, a luxury sales consulting firm. “I really do see an optimism that I didn’t see a year ago.”
MarineMax, similar to Chris-Craft, sees it, too. Annual sales there increased each of the last two years, to more than $524 million in 2012. And the firm is expanding, from acquisitions to new hires.
‘Dreams and aspirations’
The Chris-Craft comeback, meanwhile, is actually a story of two survivals traced back to 2000.
That’s when Chris-Craft’s then parent company, Outboard Marine Corp., filed for bankruptcy. A group of investors, including Heese and his Harvard Business School classmate Stephen Julius, founder of London-based Stellican Ltd., a private equity firm, bought the business out of bankruptcy in 2001. Julius, a Great Britain native, remains chairman of Chris-Craft today. Heese is from Tampa; and he ran a construction parts business in Australia before he invested in Chris-Craft.
Julius’ mission with Stellican was to find heritage brands, mostly in the recreation industry, that he could reinvest in and revive. Other acquisitions include Riva, a popular Italian yacht manufacturer; a soccer team in the Italian Premier League; and Indian Motorcycle, which is now based in Iowa. The firm has since sold Riva and Indian.
But another part of the attraction to buy Chris-Craft was clearly the price: $5 million. The boat builder was shuttered for the last 10 months of bankruptcy, so Heese and Julius were essentially in the odd position of treating a 125-year-old business like a startup. They rehired a chunk of employees and contracted with a local yacht architect to redesign some boats.
The duo also didn’t hesitate to back up its purchase with a more significant investment. That includes
$6.5 million to restart production and launch six new models.
“While the industry was pulling back, we were pouring money into this business,” Julius told the Business Observer in a 2005 story. “Our view was that there was a market for our product, irrespective of whether we were in a recession. There will always be a market for beautiful objects that meet the dreams and aspirations of people.”
The strategy worked. In fact, Julius and Heese, who both dreamed of building Chris-Craft into a
$100 million business, opened the firm’s second facility in Kings Mountain, N.C., when annual sales passed
$50 million in 2007. But sales soon stalled, and by 2009 Chris-Craft shut down the second plant to focus on its Manatee County facility, which is across the street from the Sarasota-Bradenton International Airport.
That hunker-down mentality was the first step, says Heese, in the second comeback. And that’s why a key lesson he took away from the recession was the importance of expense control early in a downturn. Otherwise, says Heese, “False hope can be lethal.”
False hope, further, can be costly, and not only in lost jobs and sales. Chris-Craft, for example, returned about $50,000 to the North Carolina Department of Commerce last year — a clawback payment over performance-based job incentives on which it failed to come through.
The North Carolina experience also humbled the company. “We are a more conservative group of people,” Heese says. “We are much better able to withstand issues.”
The firm, however, still craves sales growth. That’s why one of Heese’s current priorities is to find more dealers in international locations, especially emerging wealth markets such as China, India and Brazil. China, for one, projects its boating industry will explode in the next seven years, from 3,000 vessels in 2012 to 100,000 by 2020, according to the China Cruise and Yacht Industry Association. Chris-Craft recently opened a sales office in Shanghai.
One challenge in global expansion is import duties in many countries Chris-Craft targets are almost unworkably high, says Heese. Those fees could raise the sale price of a boat by 45%. One option the company has considered is to build boats in the countries it wants to do business in, rather than ship finished products there. That option, though, says Heese, would bring up potential quality-control issues.
Chris-Craft currently has about 100 dealer locations worldwide, and Heese aims to surpass 130 locations within the next few years. To reach that goal, Heese will have to weigh his recession lesson to control expenses against spending resources on finding the best dealers.
It could be a delicate balance because Heese says the three areas a company should be thoughtful in cutting costs are marketing, customer service and new-product development. Cut too much in those categories, says Heese, and “you may not have a path to revenue recovery.”
Chris-Craft currently spends 2% of sales on marketing, a figure Heese expects to maintain. The firm also attends at least 300 boat shows a year, where it woos potential dealers and customers.
Those conversations with prospective boat buyers, says Heese, are where he gets some of his best market intelligence about what luxury boat buyers want. Much of that goes back to providing the ultimate high-end experience.
“Our customers buy only the best stuff,” says Heese. “He wants to touch it with his hands, see it with his eyes.”
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