Brunswick Sets Course to ‘Cover Waterfront’

A handcrafted, vintage-1880 pool table adorns the executive suite at Brunswick Corp. headquarters, emblematic of the company’s roots.

The elegant table stands cluttered with papers, however, and Chief Executive George Buckley has never shot a game on it. He’s preoccupied with plotting Brunswick’s next course on the water.

Founded on billiards and best known for bowling, Brunswick is a fast-expanding power in the boating business. From runabouts to cruisers to $10-million yachts and the engines that power them, the company gained more than 80% of its $5.2 billion in sales last year from boats and marine engines.

What’s really drawing attention lately, though, is Brunswick’s aggressive strategy as it tries to reshape an industry that has seen millions of boaters quit the pastime since the 1990s.

The 160-year-old company, which didn’t get into boating until the ripe age of 115, has been buying up boat and engine brands and suppliers and trying to extend its influence to all parts of the business.

In the last year, Brunswick has scooped up seven brands -- including such well-known names as Lund and Sea Pro -- to leapfrog Genmar Holdings Inc. as the world’s largest manufacturer of recreational boats. Those acquisitions came after the 2003 purchases of Land ‘N’ Sea and Attwood -- both top marine parts suppliers.

More deals are envisioned as Brunswick, which makes more than 130,000 boats a year, barrels ahead with an ambitious strategy it unabashedly calls “cover the waterfront.”

“What that means is we want to be in engines and boats, we want to be in related services, we want to be in marina management,” Buckley said. “We want to be essentially everywhere the consumer is spending money.”

The fifth-year CEO aspires to make his company the Toyota of the boating industry -- selling well-engineered products at every price level and every market, backed by a powerful dealer network and service for boat owners after sales are completed.

As part of its push into every aspect of boating, Brunswick is even creating a used-boat business.

Analysts largely endorse the company’s expensive strategy. Brian Rayle of FTN Midwest Research sees it as benefiting customers by offering an integrated product that might make it easier for them to pursue their hobby, and bringing more efficiency to the boating business in general.

“Boat manufacturing had been a cottage industry,” he said. “They’re adding the scale to it that the industry really needs.”

But Brunswick’s quest for dominance has perhaps inevitably thrown a scare into independent builders and suppliers and made many dealers uneasy about devoting their loyalties to a single company.

The United Marine Manufacturers Assn., the largest organization of independent boat builders, has urged its members to avoid buying the company’s products because “Brunswick intends to put you out of business.” Group president Kent Wooldridge likens the big manufacturer to Wal-Mart Stores Inc. with its growing presence and clout.

“We would have no issue with Brunswick if they would split off their power [engine] company from their boat company and simply conduct business on a level playing field,” he said.

Buckley maintains that the changes are aimed at letting Brunswick take control of all elements of a boat, thus lessening the hassle and cost for consumers, and not at running competitors out of business.

“This is a design and process issue, not a Machiavellian plot,” he told analysts recently.

No one disputes Brunswick is on a roll. After being hurt by the recession that damped consumer demand from 2000 to 2003, the company outpaced the industry last year with a 16% sales jump, excluding acquisitions. Profit doubled to $270 million.

The gains came despite the fact the estimated number of 72 million U.S. boaters is flat compared with 15 years ago and down more than 6 million from its 1997 peak, according to the National Marine Manufacturers Assn. Sales are now climbing again as boats get bigger and fancier, thanks largely to affluent baby boomers.

The average boater is 48 years old with an annual income of $71,000, and the resurgent economy has helped some afford yachts outfitted with flat-screen plasma TVs and staterooms. Sales of Hatteras yachts, Brunswick’s most luxurious line, soared at boat shows this winter.

“With demographics and where they’re positioned with their products, things are looking pretty good for not only Brunswick but the recreational boating industry as a whole,” said Timothy Conder, an analyst at A.G. Edwards & Sons.

Brunswick’s chief rival takes a darker view of its rise to boating superpower.

Irwin Jacobs, the outspoken chairman of Minneapolis-based Genmar, claims that the Lake Forest, Ill.-based Brunswick is alienating the industry with its tactics. He says it is buying up boats just to provide much-needed business for its Mercury and Mariner engines.

“They’re trying to buy the market any way that they can,” Jacobs said in an interview. “The marketplace will rebel.”

Jacobs, who sold Crestliner, Lowe and Lund to Brunswick last year for $191 million, called the competitor “as arrogant as any company I’ve ever done business with.”

Some of the tension results from a trade dispute over Brunswick’s claim that Japanese outboard-engine makers were “dumping” their products on the U.S. market at unfair prices. Federal trade officials denied the claim last month, but Genmar contends that Brunswick and Mercury tried to use the trade issue as an excuse to raise prices.

Buckley, who has a reputation for feistiness, dismissed that charge and responded diplomatically to the criticism of his company.

“Somebody has to lead the improvement of the marine industry if it is to grow, and we are trying to do it in the best way we know how,” said the 58-year-old native of Sheffield, England.

“Not everyone is going to feel comfortable with our doing this, some would like things to stay just as they are....But as they say, to make an omelet you have to break a few eggs.”