Thank you everyone for joining us today and welcome to the BRT Club 2019. Today we'll have management presentation from a few of our members of our management team. Before we get into the presentation, I just want to reiterate that there may be some forward looking statements in the presentation. You may refer to our MD and A for this risk and uncertainties. So with that, we'll turn it over to Jose.
Good morning, everyone. How was Ryker? Sounds good. Very good. I would like to introduce to you a few people in the room.
First, Willett Popp and Alain Bolt Doming from the Board. Welcome. And a few people from the management team that's Tracey Crocker, Sandeep Carlin, Patna, CFO that you all know, you saw them on stage last night, Leslie Fuentes, VP, Communications Andreas Starr, Manager of the Company for Sportsport and Nelly Laderge, Senior VP, Global Marketing and Communication, Monte Perot, Famous Now. And Desil Lapointe, Senior VP, is probably wearing the Ryker shirt. Good morning, everyone.
Then this morning my presentation, I want to go back I want to do a scorecard
of what
we introduced to you the 2020 challenge. And we do that once a year at year peak between ourselves and I just want to flash to you what we consider really great achievement and some areas that need improvement, but I wanted to give you at least the perspective of the management team. As you remember, in Austria in the spring 2016, we introduced to you the 2020 ish balance and our focus on growth at Beauty Gaming Enterprise. And we're targeting by the end of 2020 or fiscal year 2021 to deliver $6,000,000,000 in sales and $3.50 of EPS. And this is the result of our fiscal year 2019 first half.
Our revenue is 17% up, normalized EBITDA 47, EPS 103% and North America Parks for retail, 50 percent. Then obviously, we have a very good momentum. And like some of you wrote in their report after the quarterly result with firing from Hollister Leiter and we're very happy. One thing that is very important and Anne Marie joined us 2 years ago. And when I sat with Anne Marie Laberge, I said to her, we need to bring our brands to the next level.
We need to talk about more and more and we need to be focused. And Anne Marie, who joined 2 years ago said to me, we need to define our brand framework to make sure that when we do think we're all aligned. And we never talked to you about it and Anne Marie will present later on this morning. But basically, she teach me that we needed to define our purpose, our positioning, our point of reference, character and tone of our communication and marketing, our value related to the HR and also our brand promise. And typically, and then he told me that the company would take 18 to 24 months to do it.
I gave her 12. We ended up doing it in 14.
But for
us, this brand framework is very important to make sure that we're all aligned in terms of marketing material, communication and the way we present ourselves to the consumer and then Mehdi will tell you more about the initiatives in a minute. And for me green check mark. Also the dealer network development, when we came out in 2015 when we came out public 5 years ago, we set the objective to sign 250 to 300 people. We achieved 289. There is some attrition a yearly basis plus or minus 20, but basically the dealer network is quite stable.
We improved our U. S. Coverage by 20% 25% and our side by side coverage by 60% then we've delivered our dealer network evolution and we have the best value proposition in the industry. And for me check mark, green, very well done by the dealer network team. The other one we've talked a lot because industry data is easy to get in North America, but North America grew 27% in the last 3 years.
But when you look at the performance in other regions, EMEA 17% was pulled down by Russia, but overall good growth despite the Russia slowdown. Asia Pacific 51% and Latin America 35%. And as you can see, we're growing on our product line. We're growing in every single country of the world and we're very, very pleased about that, check mark green. The other one, I'm super proud of the performance we have in our mature the 2 mature product.
I mean, it's snowmobile since we introduced the G4 platform. We have great momentum to do that 50% plus market share. Watercraft, 55% plus market share worldwide. And what I'm very proud of right now those market share is the highest in this area of both brands and extremely proud of what we have accomplished. And I would say the best is to come.
We have more things to come to continue to fuel the growth into those 2 product lines and the Sea Doo fish grow that you saw last night, we believe will have a lot of traction. Then for us, green check mark, the side by side business plan. Introducing 1 in September 2015, we commented on the stage to introduce a new side by side every 6 months for the next 4 years. The purpose was to see to the rest of the world that we're serious about the side by side and to attract the best dealer and we succeeded that. And so far we have delivered 7 new platforms in the last 3.5, one more to come next spring.
And don't be worried after that Phase 1 there will be others product news, but at least we'll have done 8 in 4 years. Super impressed with the delivery of the Q1 H2 facility, building the building in 1 year ramp up production and now we've been increasing capacity Phase 1 is done, Phase 2 is ongoing. And doing all this, that sequence of new product on top of increasing capacity when you're producing product every day. The team has been able to do that with incredible quality. This is quite an achievement.
And since we introduced the Defender in September 2015, our volume of side by side has doubled. I'm very, very happy about the plan and that we will deliver the plan, green check mark. Overall, BRP, we're focused on grow Agility and Lean and we're delivering and I'm super proud of the way we execute our plan. I just want you to realize that in the last 3 years, UIA II was built, Queretaro has been under significant improvement, enlargement and also construction industry that you visit and the Velcro were totally modeled. And we never missed a beat in production.
On top of that, we have our process for product development and we're delivering on the plan. And we're doing all this and today we have the interpretation of outpacing the industry for innovation. And we're doing all this keeping our quality our cost of quality below 1%, which is we believe a benchmark into the industry. And we never talk about it, but we measure on a yearly basis the employee engagement. And obviously success generates success.
But last year, the last report, our employee engagement at BRT was 87%. And when you score above 75, you state of the art. Then we're very, very happy about the execution overall at BRP for us green check mark. Now the 3 wheel vehicle business, I put it yellow, might surprise you, but we're happy, but not satisfied. First, we depleted the inventory in the last 2 years, cost us more than what we had anticipated.
This year, because of the very bad April, we decided to advance our non current program by a month. And that's why I read it yellow. But I'm super happy about the program that Jose Perouse team has put together. And this morning, you will heard more about the numbers behind the school program, the Ryker, the RTF3 repricing, the leasing program and also the inventing the business model 3 SKU 75,000 ways of customizing. And for me and the plan and you will see the number of JOSE and we have the data to back our goal.
But our objective with the Spider business or the fuel vehicle business is to triple the business in the next 5 years. We will be disappointed if we would be not doubling the business. And that's the goal that we fix for the 2 wheel vehicle business with the plan that Jules Perro have put together. The Marine business, first we're not it's not easy for Evinrude because the industry is against us. We're very, very a lot of our sales is repowering, putting a new engine behind an existing boat and this market is shrinking.
And also the new boat and the new engine package boat is growing. We are behind our plan for G1 to G2 transition. Right now, the G2 above 150 is out. Below 150 behind. We will correct that in the next 18 months.
But despite that, it's difficult for the Evinrude market situation and the G1 transition, we're super confident about the Marine strategy. And Tracey will go a bit more give you a bit more color about the buy and build and transform strategy to fully unlock the full potential of VIN room. We don't think there will be significant impact on our results in the short term, 1 to 2 years, and we'll talk about it. We already full use Tencent for next year. But when you will hear the plan that 3C is putting together, you will see that it's a diversification and a growing factor for the business.
And happy about the various plan. We cannot not be happy about the new share price evolution, but above and above the share price that have grown quite a lot in the last 2 years. The management team with the Board have worked to do NCIB, SIB dividend and we returned DKK 900,000,000 of cash to the investor. Then happy to be able to return good return for the shareholder and return cash to the shareholders. Now the creation of the 2 new groups, BRP is growing.
There is a lot more product. We have a lot of opportunity globally, worldwide. And I felt that it was time to have more focus with 2 groups. Then we created the powersport group, which includes Kidu, Lynx, Snowmobiles, Seadu Watercraft, Can Am Off Road, Can Am Spyder under Jose's subject part to me and the Rotax brand. In the Marine Group, we have Evinrude right now, Alumacraft and Manitou and more to come.
Like we said on the call 2 weeks ago, we are right now exploring maybe other acquisition in the boat industry. We'll see if it fits our guideline or what we're looking for. We might conclude, but we see more to come. And the goal of creating those two groups is to make sure that the team continue to focus, improve efficiency, continue the growth and the diversification. Then that's in a nutshell the story of and why it was fine to create those 2 groups to make sure that we bring BRP to the next level.
Then word on the next step on the 2020 challenge. Then in spring 2015, we've launched it. We are halfway there, 2.5 years past. We have 2.5 years ago. But some investor and some of you are saying when do you will restate the 2020 challenge because the 350 is coming fast.
Then the plan that we have is we're working right now on the next plan, probably a year from now. We already give you that we're targeting or we're confident to deliver at least $350,000,000 for fiscal year 2020, 1 year in advance. And we will probably meet together by the end of 2019 to define to restate what's next. Then we wanted at least to give you a guideline then when the next challenge, call it the 2025 for the time being, will happen. But in a year from now we'll be able to give you a perspective on the long term plan or the long term objective of the company.
And that's in a nutshell. What I wanted to give you as an update. This is what we're planning for this morning. Anne Marie Laberge, who is Senior VP Global Marketing and Communication. Anne Marie has been with us for 2 years.
She came from Telus, the big telecommunication company in Canada. And then Mehdi will talk to you about humanizing the BRP brand, followed by Tracey. Tracey has been with the company 1 year, about 1 year now. He's leading Evinrude and now the Marine Group. Then Tracey will give you an update on why we enter the Marine business.
We've done the acquisition and the buy and build strategy. Bertrand Bertrand have been with us for 6 months, 2 months on the road, the road visiting all the sites, many, many regions and even 4 months in the office beside me. Bertrand will give you his perspective on the powersport group. Sandeep, as you all know, Senior VP of Global Sales and Services. I think you met Sandeep a few times now.
Sandeep will give you an update on the retail trend, the global retail trend and the product news. And Jose Perrault, we kept the best for the last. Jose Perrault will talk about the Canons we will recall plan. Jose Perrault has been with us for 2 years. She comes from Oakleigh, the glass company.
And she's been working a bit behind the scene to put together the plan that we've launched last night with the dealer, and she will give you more detail about the 3 wheel vehicle plan. We're planning about 15 minutes by presenter and I would ask you to keep the question for the end. And we're planning a 15 minute presentation max, 5 to 10 minute question at the end, and we believe we can pack all of this within 2 hours. All right. Thank you.
And Mehdi?
I am so hurt to back for lunch. Welcome everybody. I'm very, very excited to be here. I have been at BRT, like Jotin said, for, I would say, 22 months, 7 days, 6 hours, but it's been a little less 2 years and it's been quite the right indication. When I first joined BRP, I thought that HD stands for high definition.
And I said, why do they talk about high definition so much at BRP? But it's been an incredible ride. And I would have to start by saying that for a brand professional to be able to be the shepherd of these 6 iconic brands is the most exciting thing that can happen in your career. So I joined for these brands and I joined, of course, after meeting with Jose, but no one could resist coming to work for him. It's evaluation time, so I'm just laying my way away.
But I think that the whole strategy and I will tell you in one line what the marketing strategy moving forward at BRT is going to be. We have 6 incredible iconic brands. We have brand worshippers. I have spent my career in the telecommunication industry trying to having people stop hating
us and
trying to move non believers to believers. When I was interviewing with Jose, I said, oh my God, like people are just in love. Visiting YouTube and what's being said on social, we don't have you don't have brand ambassadors, you have brand worshippers. So could you imagine the power of unleashing these iconic brands and brand worshippers to be able to turn and yield a positive business return. And that's what we've been focusing on for the past few years and we're going to be focusing on in the next year.
As you know, doing analyst community on marketing is a little touchy. I wish I could bring you in the kitchen because we've been doing some exciting things, but they won't let me. I'm going to share some of the stuff. I'm going to try to bring it as real as possible. So you don't think unless here thinking that we have great theory, but no real action, okay?
So I'm going to try to do this. The first thing is every year we do a brand benchmark survey. So we've been doing this now for a few years. And what this does is it actually helps you understand what each brand is at within the path of purchase. So as you know, there is not one way to looking at engaging with consumers.
It is absolutely critical that we understand are the brands known. Secondly, do people understand what their brand stands for? And then thirdly, do people want to buy them? You. Historically, brands have a tendency of hanging out in the low funnel.
Buy me, buy me, buy me, buy me, buy me. This is where companies are comfortable. They're pushed by Sandy's colleagues that are saying, if I give you a marketing dollar, yield me a dollar in sales and I'm like, wait a second here. I won't be able to sell if people don't know why they should buy me. And furthermore, maybe they will buy, but what happens is you need to discount.
That's why you need to do $2,000 $3,000 because I go straight to buy me. Consumers don't really know why, so they need an incentive. And we have proven that when investing in the upper funnel, brand equity, we spend less in promotion and we have relocated that growth path. So what we did is we said, okay, see do, see do awareness is super high. There's no surprise there.
Conversion is not as high as it should be. And the reason for this is that we stopped telling people why Ski Doo, why Ski Doo. We love these products. We know we're the best. And honestly, usually, hero brands have a tendency of doing this.
So we need to start again and talking to consumers about why SKU is the best product out there and why SKU is the best product out there. Immediately, once you pull up conversion, you'll see sales go up. On TanM off and on road, I'll start with off road. Really the opportunity is awareness and conversion. I will share with you a specific case with what happens when you invest in those 2 and the results in sales.
Jose might be Jose Boisjali's favorite, Jose Peyrou, but she has the greatest challenge. And that challenge is that not only does she have to bring up awareness in 3 wheel, but in the 4 of her products Ryker and Spider, but she has to bring invest in awareness in 3 wheel category. So it's not that people don't know the product, they don't know the category. And so that requires more marketing dollars. So if we would share, which we're not, but if we would share our promotional dollars on revenue, definitely here we would spend more on 3 wheel category because we need to invest in having people aware of the entire category.
So now I'm going to share with you 2 pillars to that strategy on increasing ourselves for each one of our brands. We're going to be investing in brand equity and digital transformation. Brand equity is really to go get share of 1 and wallet of consumers by investing into our brand consideration. So the why that I've just talked to you about. Digitization historically powers for business, very poor in digitization.
So there needed to be a massive investment. You cannot build consumer intimacy and humanizing our brand without the power of digital. So I will share with you a bit what BRP has been doing on that front. So if we start with brand equity, I wanted to start by this. As you know today, consumers there's a whole marketing revolution where consumers have kicked out brands from the driver's seat.
They've pushed us in the back seat and now they have the control. And with this, there is a global social movement where now consumers buy experience and don't buy products. So 20 years ago, consumers with buy product, product became commodity. Then it was all about service, service, service. I remember when I was in telecommunication in 2,009, we had a big epiphany that we were not a telco but a service company.
Everybody was talking about service. Today, people buy experiences. And so if people buy experiences, we're not competing with powersports organization anymore. We're competing with any organization that is fighting for discretionary dollars. So that could be Walt Disney World and it could be Samsung Home Theater.
And you would say to me, okay, well, what is that change in your strategy? Well, here's what it changes. For example, when we buy keywords on Google, instead of buying snowmobiles, we're going to buy wintertime. So that is really addressing an important change in the way that we see this. This is absolutely key and central in our strategy.
If you don't believe me, which I'm sure that you do, but Watermark is a research firm, a consulting group that is out of Connecticut, did a whole survey in 2014 that demonstrated that organization outperformed broader start market by more than 25% when focusing on CRM. So we are we make the best product. We do believe that we make the best product in Power Sport in the world. We believe that. But we don't need to sell just the product.
We need to talk about the experience. And this is what consumers are already doing. So this is the transformation that is happening. So they talk to you about this. And it may seem fluffy, but having a brand framework is actually the North Star of our organization.
As you know, BRT is a teenager with an old school. We are 15 years old. We're going to be celebrating in December. So very young organization with old brand. It was time for us if we're going to be building brand equity, we first need to solidify who we are, what do we stand for.
What is BRT? And the importance of the purpose is that it will inspire everything that we do, how we behave as an organization, how our employees behave and even inspire our organic and non organic growth opportunity. So it did take us 14 months to develop this whole thing, but as you can see, it actually defines the DNA. Our purpose is we exist to create new ways to move people so that experiences are measured in emotion rather than distance. We reimagine the way you assess your world and this is inspirational to where VR team might want to go in the future, but it's also very representative for today.
I won't read the rest, but I want to talk about one thing. I do believe that a brand is actually comped and fired from what's happening with it. I use the term imposed from within, but I think it's a bad French translation. But without having all of the employees carry this purpose, there's absolutely no point of having one. So very rare, it's actually the first time in my career and I've been at it for a while, that an organization has the courage to revisit its value to ensure that we can deliver on the brand and we did that at BRT.
So now we have 4 values that will entice the right behavior for employees to be able to deliver. Finally, the brand promise, I'm going to share with you a little video. So a brand promise is basically our commitment to consumers. And we'll just run a quick video. So what does adventure by design mean is that whatever the product or whatever purpose you write is, BRT will be as best in delivering the best experience.
And that's that. So what we
did is that brand framework that I showed you, we redid it for our 6th product brands. If you can imagine, the perception of what Canada would stand for across the organization was very different. You could interview and ask people, oh, you know what, it's all about money, no, it's all about growth, no, it's all about fee. And so it's very important that if we're going to build equity, we absolutely needed to define what these brands were. So we did that for the 6 product brands.
And then we can actually behave and add that brand framework represents. So the tone and the voice of each one of these brands. It was really important for us as well to humanize to be able to humanize our vendor. What I mean by that is that consumers aren't the drivers. Consumers do not want to connect with a corporate entity.
They want to connect with a human organization. And the language for this is very important. So I call the language to the left, this was an old ad, I call it R2D2, I'm a Star Trek fan, but it's very kind of product defined and oriented, Where we're moving now to a much more human, so Can Am's, Tone, it's all about gutsy, but it's about real and it's about human. And so you will see that all of our apps, if you were there yesterday, we're built for this. We're built for this means that I'm a mother and I'm built for that, but my machine is also built for this.
And same thing with the farmer. The farmer is built for farming, but the product is actually built as we always say that we build our product right or down. So if you look at the language is where our work ethic, this whole campaign was specifically targeting farmers. What we did is we obsessed in visiting farmers, looking at farmers, the language. We use real farmers in our eyes now.
So we do talk about the product in a lot of the case. We specifically talk about the technical element. But when connecting on the brand equity and on the brand awareness front, we want to connect with your heart. When I talk about connecting with hearts and minds, this is the heart portion. So the results.
So we another thing that we did, so the brand attitude is absolutely critical. I talked to you about focusing on the path of purchase. Am I at a point now with this brand where I need to talk about awareness or consideration or am I at the point of sales? The other thing that we did is we realized that it's impossible for us to attack the world with each one of the brand. We'd be spending 1,000,000 and 1,000,000 and 1,000,000 in marketing.
What we're doing now, working with Fendi very closely is we focus on opportunity and we're so good at it. And we go in and we laser in and we understand that market, what is the need, who are we talking to, where in the path to purchase are the consumers and we basically go in with a full on marketing strategy. This specific campaign is for North America and it was for SSD, NATD. And the results of this campaign were from 2018 in the spring, campaign 2018 in the spring to the campaign that ended in the fall of 2017. And I don't know how much you know about marketing, but to yield a 7% increase in unaided awareness in that timeframe is extraordinary.
But you know what's more extraordinary is we spent $1,000,000 less. So on grant equity, the Y Pan Am, so what we did is we call it putting butts in seats. Today, you went writing this morning. Isn't there a better marketing tool than actually writing the product? I don't believe that.
We truly believe that if somebody sits in one of our products, we will buy it. And we have the proof to that. So we're spending a lot of dollars less in advertising at that level and way more in experiential. We bought trucks and machines and we go and we drop products at our customers. So this yielded 2.2% of market share increase in that time and an incredible 18% in retail sales in Immuno West spending 1,000,000 of dollars less in promotion levels.
I could bring you share you an example the same example for CU, same example for CU, but Seth didn't want to give me the time to do that. But I think this brings the message home. Now let's talk about digital. I won't ask for you getting too technical on this, but this is the path of purchase that I've talked earlier. So digital is absolutely critical to be able to connect with consumers' hearts and minds throughout the entire customer purchase.
There is moments of truth, as you know, from I don't know you exist to oh my God, I want to buy again or I want to buy more products. We are now setting up platforms, CRM platforms and marketing automation platforms at BRT that will allow us to actually speak to you at the right time, at the right place, talking to you about the right product. So this is really what we're trying to do. I don't need to sell you guys the fact that digital is the single most important marketing tool today, not just in powersports or automotive, this is an automotive, but overall. So it was absolutely critical that DRT brought its speed into the physical world.
There's 4 pillars to our strategy in digitizing DRP. Automation, this is recent scale. How can we talk to more people? Like we are a global company. We are in hundreds of countries.
And again, it would be completely inappropriate for us to start deploying a full on marketing strategy for all these countries, but digital will allow us to be able to connect with more people. The tailored messages to personalization, contextualization, talk to me at the right place at the right time. There is a great travel site that I won't name. Every time that I use it to book a trip, when I come back, they try to sell me an ad about the same place I just came back They would need my team's help. So, this is all around conceptualization.
And innovation, this is all about using AI and machine learning into ensuring that I'm more and more pertinent. I wanted to bring you some results again to demonstrate that things are real and they're happening and they're moving. So on the site performance, so do you know that 75% of the people will never revisit a site if it takes more than 15 seconds or 10 seconds to load, fully load, okay? So getting our site speed better, improving it was actually critical. In 1 year, we improved it 327%.
Build Your Own is the single most important marketing tool to drive people from building your machine to going into the dealership and buying it. We have increased 106% the amount of people that filled out Build
Your Own on our site.
SEO SEM, I'll quickly explain in case you don't know what it is, search engine optimization, search engine marketing. This is when you go in Google and you type in words and the first thing optimization is organic. So the first thing that comes that don't say AD next to it, this is on page. And then this is paid, search engine marketing. You want search engine optimization to be at its best because this is free entry into your website.
We had double the amount of people that came into our website from organic search in a year, which is incredible because we don't pay for that. And that was specifically I'm bringing this on the SKU front, but we're doing same kind of performance on every one of our products. I don't know if you knew that on search engine marketing, when you go into Google, the word the tucatan, there's an option, companies option for it, tries to change all the time. So you need expert, we brought in incredible people that are experts into search engine optimization and marketing that help us. And one example here is we decreased 40% of the cost of the words that we pay for, but yet we are more efficient than ever.
So increasing the amount of people that come in from SEM into our website. I'm going to at the end of my presentation, but I wanted to be very transparent with you guys. This is a Deloitte paper that we found. And basically what it says is that there is a path to digitization. This curve to me should be hockey stick.
If it was truly representative, I'll call Deloitte to tell them. But what it is, is that you start from being from exploring digital to truly being digital. And I believe today BRT is in between doing and becoming digital. What happens is that once you start really becoming digital, you're warped. Things go super fast because you have the tool.
More importantly for organization to become digital is the people. And we have built a best in class team at BRP now that I am so thrilled to have. And we're seeing things the speed into which we're moving is getting faster and faster. The last point I want to leave you on is the future. Where are we going in marketing?
I like to say that I'd like to work myself out of a job within 5 years. And the reason for this is if we do our job very well, what we should focus on today, but not what we should, what we are focusing on today is building a megaphone. That's exactly this whole digital thing is we're just building a megaphone to give the voice to our brand worshippers and ambassadors. And all VRP should be doing is actually becoming an air traffic controller to all these things because after all, how many companies can claim that their customers have given them skin real estate, like people said to our brands on their part. And so this can you imagine if we let these people speak on behalf of us, that would be absolutely incredible.
So the future is exciting. It's happening fast and that's it for me. Thank you very much.
Is there any questions? We maybe have time for 1.
Go ahead. So as you change the marketing towards experience, are you getting a different demographic coming to the top of the funnel?
Yes, absolutely. So what we're doing, talking about experience, is we are opening accessibility. And we are seeing a different demographic. I can think right now specifically on 2 of our products. Because and you'll see even on Ski Doo, we're doing some things right now where we're really opening because people that ride snowmobiles are more like kind of a tight group and we're working on opening this tight group and reaching out a much broader crowd.
So it will be.
Thank you, Amari. Tracy?
Thank you. Excuse me. Let me start by saying, you'll find working at BRP when you have yellow check marks surrounded by green check marks. We're going to do something about that and it's going to start with this new BRP green strategy. So a little bit about myself, you can see my background there, very excited to be here leading BRP Marine and operationalizing the strategy that we'll walk you through a little bit later on here this morning.
To do that today, I'll break it into 2 parts. The first, I'll just give you a kind of a quick snapshot of why VRP marine and why getting into the boating industry. And then I'll follow that with unpacking the buy, build and transform strategy that Jose alluded to a little bit earlier. Okay. So it starts with the size of the sandbox or maybe I think we should decide the swimming pool now where you've got in the U.
S. Alone $185,000,000 sorry, dollars 185,000,000 being spent on recreational vehicle gear and accessories. It's a huge number. And water sport, fishing and water sport by itself is $41,000,000,000 of that $185,000,000,000 almost twice as big as off road motorcycle and snow combined. So as a starting point and this is not new to us, but this is a big market.
Equally as important, it's a growing market. You look at the bar chart here and you can see that since the recession, it has been a very impressive recovery. In fact, it's predicted here in 2018, we will have recovered to pre recession levels, driven by new boat sales versus pre owned growing at about a 2:one rate that helps drive this growth. We're also seeing and Jose alluded to it, the package business is a trend that's driving this growth package where you get both engine and trailer in 1. Now 3 out of every 4 boats are part of a package versus repower.
And as part of that, you're seeing the horsepower go up, which is driving great margin and good for the industry, not as good for Evinrude. So it gives you an insight as to where and why we need to unlock this to really see unlock all of Evinrude's potential in this area. Last and certainly not least that ties into a lot of what Anne Marie was saying is, we know these consumers and these consumers know us. They don't not only know us, they love us. 27% own an ATV, 34% of snowmobile, 44% of PWC and you can immediately start thinking about the cross promotional opportunities as we leverage the growth and momentum that we have in our powersports business into our boating business.
So there's more to that in terms of what built and our focus on this strategy. But as a starting point, big growing opportunity to cross promote and that led us to really a 3 phased strategy. The first phase by we're thinking of this in kind of a 12 to 24 month timeframe, followed by build. Build is more of your 2 to 3 years timeframe. And then finally transform and think about that in 3 to 4 years.
Obviously, these are all working concurrently with each other, but in terms of ultimately delivering the objective for each, those are the timeframes that we've outlined. So let's start with buy. And it begins with getting a critical mass. Critical mass really means finding the right boating segments and then the right brands within those segments that we can bring our core competency and competitive advantages to help them grow. So to give you an example of that, and I'll break this slide down.
There's a lot going on here, but you've got the gray is international, the yellow is North America. And this looks at total boats sold globally in 1,000. And you've got it broken down by the segments here. And what pops out immediately is the size of all around fishing and pontoon. In the U.
S. Alone, half of all the boats sold in the industry fall in just those two categories. Okay. So great place to start. Looking at gray international yellow, North America and different way of looking at it aluminum fiberglass.
And here you have that all around fishing and pontoon for North America representing over 80% of all of the boats sold. And as a company that knows how to design and manufacturing aluminum, that gives us a really great focus and certainly why not better place to start than buying a company that actually got aluminum into its name. And we did that with the acquisition that we made in late June with Alumacraft. And Alumacraft is a great business, headquartered out of St. Peter, Minnesota.
They've been around for 75 years. They've got market share in the mid teens. They compete against LUNS and Crestliner, and we love how they're positioned. They have a great what we think is a revolutionary technology, twin plated TXB, 2XB I should say, hulls that these are riveted versus welded boats and it really gives it a performance profile like no other boat in the aluminum fishing in terms of noise vibration without compromising any of the activity. So a good first acquisition.
We love the way this brand is positioned. We followed that up 30 days later by acquiring a pontoon company Manitou. Manitou is again a brand that has been around for a while, 1988, over 150 dealers. But they are in the low single digit in terms of their market share. But again, they are a premium pontoon boat, both in terms of the design, the look of the pontoon as well as the fit and finish.
But what we really love about this, similar to Alumacraft is they have some patented technology, TriTune technology, that's the 3rd tube that they've integrated into the design of the boat that gives it a great performance relative to any other pontoon in the industry. Now 5 years ago, you would never have used performance in pontoon in the same sentence, but with a Manitou pontoon, you can do that. And part of that has really we have benefited from that. We have almost 40% of all the engines sold on Manitou because of the technology that we have high performance engines on a high performance pontoon has really created a great synergy between both of our companies. So like Alumacraft, we love the positioning of this brand in this market.
So a good place to start in terms of the by part of our strategy. And we with that as a cornerstone, if you will, we'll move into the second phase, which is driving growth and efficiency. And this will be broken off into 2 areas. The first one is really building out the dealer network. It starts with dealer optimization, being able to take Alumacraft dealers and match them up with Manitou dealers to match those up with Evinrude dealers.
We'll have lots of conversion opportunity when we start that process, shared opportunity between the brands. And then the second part of that is bringing our manufacturing capabilities and our ability to increase their capacity as we sort of set them up for future growth. Here's an example of how we're going to optimize these networks. And you can see the Evinrude dealer network on the left, over 1,000 dealers spread across most of all in North America. The Olimacraft dealer base still more of an upper Midwest.
And then the Manitou dealer base again not as spread out as Alumacraft. And so the combination of that really sort of gives you a good visual of how we'll be able to optimize this newer network. At the same time, we've got lots of expansion, lots of white space that we can bring all three brands into a single value proposition and really grow the network underscored by the fact that there's only 14 dealers that sell both Alumacraft and Manitou boats, great way to start lots of opportunity. In addition, we've got a lot of the Evinrude dealers that are out there that are not putting Evinrude on Manitou's and aluminum crafts. So we're getting a lot of what we think low hanging fruit in the short term.
We're also we've been able to time up these acquisitions with their dealer meetings, which allowed us to get out ahead and control the narrative. And as a result, we're pleasantly surprised by how many dealers have raised their hand, non Evinrude dealers have raised their hand to be and are considering Evinrude, far exceeded our expectations this early in the game. So that's going to be a nice part of what we focus on here over the build phase. In addition, we talked about aluminum as being an important part of this strategy. And there's 2 parts to this.
Certainly, we've got lots of technology, lots of know how, whether that's computer aided, designed assembly, well oiled and riveting technology that these companies and really the industry has not seen yet. And you combine that with our know how and resources to be able to increase their capacity, we think we'll set this up for the 3rd phase. And I would say the most exciting phase, which is really to transform the industry. And that transform the industry really harkens back to a lot of what Anne Marie was just saying, is we want to change the boating experience. It's the experience you have before you're on the boat, the experience as you get to the marina, get to your boat, experience that you have when you're out on the boat and the experience after you leave the boat.
And our ability to do that will really hinge on us taking an industry that as a voter, I can say hasn't seen a lot of innovation. That experience hasn't really changed much in the last 30 years. And if you think other than maybe pontoon dabbing upholstery and nicer furniture, we haven't seen a lot of innovation and we think we have the ability to begin bringing that level of innovation to the industry. And while I think this is a very basic diagram, I think one of the things that we will be able to do is address that experience through propulsion. We have technology, technology that is unique to Evinrude combined with expertise that we have on the Sea Doo side to be able to take that outboard engine and put it under the transom.
So we're not going to necessarily go into all of what that technology is here today, but we've already gone through the proof of concept. And as you think about what that does to the boat and what a consumer is looking for, They don't want to see it. That is not for engine. They don't want to hear it. They don't want to smell it.
They don't want to fear it, meaning that somebody is swimming or doing toe sports on the back and they certainly don't want it to intrude with their overall experience, whether they're tubing on the back or fishing. And what we've been able to what we will be able to do with this transformation is do what every boat builder ultimately wants to do, is to find more usable space on that boat. So clearly very excited about the potential of this. We have built it into our new product development plans and this will be a big this is just one of several initiatives that we have that will be part of this overall industry transformation. So with that, I'll pause, open it up for questions.
Yes, sir.
Yes. I'm looking at the floating market. Obviously, aluminum is a big part of it, but there's also this fiber glass. So could you talk about your intention to come back into the fiberglass net market eventually?
Well, we're looking at all of the segments. And as important as the segment is what is the brand within the segment? Does it what does it have a competitive point of difference? But knowing what we can bring to aluminum, we're going to focus there first.
You talked about dealer optimization. You have like 1,000 dealers for that group to 150 or maybe 2,000,000 to 55,000,000. What would be the best
what would be the optimal dealer size
in the marine group in the U. S?
We're currently in the process of evaluating that, building out what we call the right dealers in the right markets. So we don't have that number exact today. We know it's probably it's certainly more than 250, 150 in the case of Aluna Craft and Vanta 2. But it's really finding, like I said, it's less about the number and it's more about finding the right dealer in the right market.
Because each boat brand has its dealership. So when you look at Evinrude, we're not thinking about 1 dealership network, we're thinking about 3 dealership networks for the Evinrude brand, for the both brands as well. And so there's synergies that will happen. So let's take them many to the aircraft dealers, etcetera, but we're still very focused on optimizing the individual purchase. So you're saying this configuration would be obviously different from the outboard, but also different than inboard outboard for us, right?
Yes. Good question. This is an outboard engine. This has all of the attributes of an outboard engine because it will be an outboard engine. Engine.
The technology that we have will enable us to put it underneath the transom, put it outside, no noise, no smell and obviously creating more usable space on the boat. But so when I say all the attributes of an outrovision that means you're able to bore it, service it, fits onto the same bolt pattern, but we also then have the added advantage of working with our boat companies to integrate it into
Maybe you can say why we're showing that today, but for us, it's a bit like the commitment on side by side. We want to say to the boating industry that we're serious about this and we're committed about this. And it's created it's creating obviously a goal for the team in the Marine group. But at the same time, now we can talk to dealers who are not sure if they want to work with Alumacraft and us or whatever and has something is coming. And for competitive reason, we don't intend to say more than that for the time being.
Yes.
My understanding is that the boating industry is a low CapEx business, but also a thinner margin. I would be curious if you're going to make huge CapEx over the next 5, 10 years in comparison to the rest of the Boeing industry. Would you expect margins to be expand across the
Well, I wouldn't say we have to make huge CapEx. The nice thing about both of the boat companies we bought thus far is that they've got the kind of geographical footprint that we can expand with reasonable CapEx. I think over time, yes, we would think our expertise, our synergy, our leverage is going to help expand margins.
The other thing, Benoit, when you look at the project goes, there is a lot of value in this. When you give that real estate in the back of a boat, there is a lot of value. Now it's too early to but we believe we can input the margin there in time.
With this strategy, in some ways, you're telling your current engine suppliers that you're not part of our future, which is part of the risk of coming from A to B.
How have they received this message? And is there a
transition period where you actually see your volumes dip before they recover in this scenario?
Yes. Yes. So within the boat companies, the engine companies that they do business with, yes, so we have not shared this yet. So this is not out there. But in terms of the announcement has been made, we have said to the dealers that we are here to help our new boat company that sell boats and we believe that's part of offering consumers choice and we want to work with all outboard engine companies.
There have been a couple that don't look like they're going to want to do that And so there could be a short term impact of that as we go through this transition. We are pleasantly surprised, however, how many and again, this is very early on, how many have raised their hand, how many were having productive conversations, but this gives us some confidence that this transition period won't be long.
The other thing, Craig, even if that new, let's call it, the Ghost platform, that do not eliminate the G2. The G2 will be still out there. And some boat that with the traditional boat could stay there. Then that's not totally imitating what we're doing today. Thank you.
Thank you, Dmitry. Next up is Dirk Han for PowerScored Group update.
Hello, everyone. So I'm the new one. Very pleased to meet you. I heard that some of you wanted to know what I've done before. So I'm going to try to summarize, but it's quite easy.
I spend pretty much my time in the 20 12, mostly with 1 more company with different brands. You can see both this loan KG from the alternative groups that was deeply involved at some point with those luxury brands. And then I moved to distribution, I was involved with distributing 2 of our network. 1, COCFO, which is mostly Europe and Emerging Markets and recently based in Dubai with Alftain to one of the largest automotive distributor in the world, roughly selling 250,000 units, mostly in euros. And I was lucky to leave not so far from here in Detroit, USA for some years, working a lot on the strategy office and the finance company as well based in Europe and Middle East and Africa and I've been living in Asia Pacific as well nearly 8 years, 4 years in Bangkok and the rest in Turkey.
So I would say I have some global geographical experience and now Canada, which is my new home. The presentation I'm going to make, as Judith said, I'm here only for 6 months and we're
going to be dealing with the
business on a daily basis for 4 months. Would be sharing with you what I'm considering as one of our successful today and maybe giving you a hint of what could be the growth pillar for the future for the Power Sports Manufacturing. So the summary is very simple. So the put it in a very simple way and we're lucky that with a green mark. So the situation for us is simple.
We are clearly leading in 2 key pillars, which is the snow and the aircraft. And we are becoming a strong contender on the 2 others and doing tremendous progress in the side by side book. So we are a fast growing challenger in this area. And if you look at the geographical footprint, we're growing fast pretty much everywhere with very strong progress in our home base, which is the U. S, Canada area.
But even the other markets, they are growing at such pace. So this is a pretty good balance between the different geographical footprint. The four elements behind this growth, if you would like to summarize it and that's my perspective, but of course I share it with you, what I will call diversification and I'll come back on it in 1 minute. Innovation, which is clearly our DNA. Strong distribution network and manufacturing footprint.
So if you take the first one and I'm sure you can correct with some of our competitors, we're pretty lucky because we have a pretty well balanced. We have a balanced portfolio between product which are able to be sold year on and the one which are seasonal. But we're growing in the back area with a lot of accessories. So that's making us quite well balanced in those different areas. We have a geographical footprint where international business is growing.
So of course, we are enjoying a very good economy right now. But the reality is if anything
happens to
the North American economy, we still have a strong footprint in international and we want to push it.
And the last element from the manufacturing
footprint, we have a combination of very mature and very technologically advanced manufacturing footprints, which are our historical footprint in Canada and of course in Australia. And we have a second area where we are clearly developing our future growth which here is Mexico where we are developing and producing more and more. Of course, the cost base is much lower. Now if we look at the product innovation, I think there is 3 areas I'd like to cover. We have been investing in a very consistent way across the years and that's giving us a fantastic situation in terms of product innovation.
And the benefit are extremely simple. The first benefit is we are being able to create sub segments. I would say the best example is the SPOT Tricks. Nobody was thinking about using a wire craft in the way it's done. And nowadays it's becoming one of the best selling machine in the industry in this area.
The second element is the pace of the introduction. It's very fast because we have a lean and flexible production system. And the combination of those two things create a situation where we are extremely connected to the customer and we are able at the end of the day to have less discount and a better premium. So from a profit perspective, it's very obvious. And the last element which is extremely important for us and Denis is in the room, we have an extremely strong design and it's not us selling it.
It's pretty much all the big rewards around the world. We're not talking about 1 or 2, we're talking about 18. So we are very well recognized for the quality of design and the innovation. The 3rd element and talking about dealers, I'm sure you have been facing some of our friends at Coveyere saying we have a very good dealer value proposition. I don't want to make the game of the beauty contest here.
I'm going to say very simply that if you look at the situation, we are able to attract Tier 1 dealers and to do it in a very good way around the globe. If you look at places like USA, we have been growing by 21% from a distribution network perspective, very strong company. Same in China, where we are clearly leading the markets of power sports in this country and you know the size of China with 1,300,000,000 people. In Brazil, same situation. And I think the last element which is showing how strong we are from a value proposition and Sandeep will cover it in a lot of details.
We have decided because it's a substantial future, big markets for us to go direct in Russia. And in this exercise, all the dealers came on board and we launched no one. We were extremely happy to sign with us. Manufacturing footprint, again, why Valcour and Caucasian, which is the engine, are so important to us? They are the technological hub and heart of our company.
But we need to keep those hub for the future because they are really the place where we can develop not only the technique itself, but the people who are going to run the company somewhere else in the world. If Mexico had been such a success for us, it's because we have those 2 hubs where we have been able to take people and transfer those in all power and to teach and train the people locally. And now we have this well balanced organization where we have those hubs. Even with higher level cost, we continue to develop those hubs, but for 2020 is the last example where we're bringing the latest technology. And we can basically support the growth here.
The second element with those 3 Mexican sites is we have a lot of flexibility and we need it because you saw the growth. And I heard the question, do you have the capability to grow without the CapEx? We are in a situation today where in Mexico, just to show you, we have been growing by 30% for the year we are living. And for next year, we're assuming that we can still be growing by 50% without massive investments because the site has been designed by the people who did it in wireless tool for the side by side business in a way that we can expand it without having to build and create the new plant. And a new plant is, of course, a lot of money.
So the site is flexible enough and you have a feature of the way it was designed here originally we add pieces, but we still have room for this growth. And that's extremely important for keeping up with the momentum. Now going forward, I will not give you the full strategy because I don't think it's finished yet, but I would just highlight 3 elements. The first one is side by side linked to the 3 wheels you have just seen with Josep Arou. The second one I just mentioned it, but how we are going to go further with international markets and further diversification.
And the third one and some of the elements presented by Anne Marie were showing why it's so important for us and Sandy will cover the other points. So I'm coming back to those three points. The first one, the side by side is extremely simple. We have been growing between 18% sorry, 15% to 18% by 66%. So it's the fastest growth in the industry.
But in reality, if you look at our performance, it's very simple where the yellow line here, especially in this area in Utility, we still have a runway ahead of us. And with the quality of the product we're bringing, there is no reason why we cannot grow to a bigger number. So I'm not going to give you any number today, but you can imagine that we are not going to be shy. The second one in terms of international diversification, there is we believe 3 markets which are important for our growth. All are important, of course, but those three ones are extremely important: Russia, China and Brazil.
And in the Russian market, it's probably the only big snow markets where to date we can say the volume is not what it could be. So that's why we're going direct and there is clearly an ATV business as well there. So we are definitely going directly in Russia to expand these markets. The second one, we're already market leader and we're very happy with that. The team has done a very good job.
But again, we're still in small numbers in 1,300,000,000 people markets. So we really need to adapt the way we're making business to be compatible with this territory, which is in many ways very unique. But we are definitely going to focus our energy on this. In Brazil, Brazil is recovering even if it's still fragile and it's a big business for snow for sea, sorry, and we are growing and growing extremely fast. The 3rd element and that's probably the combination of the 3 element I was mentioning before.
We want to be effective in keeping our customer because attracting new customer without being able to retain them is extremely expensive. And Anne Marie with his digital digital frame was showing that very well. The first one product and accessories, we are in a situation where today I think we are kicking the mark in a good way and we want to continue to do it, really being able to tailor product to aspiration. The second one is how we are going to treat people visiting our dealerships. What's the customer experience when you visit one of our dealers?
And not only for the sales experience, but the service experience. We used to sell small product. We are now selling things which are nearly as big as car. When you look at the Maverick X3 Max, it's a huge product. So we clearly need to adapt our organization to that.
And the third one I think was very well covered with Anne Marie is how we are going to create the relationship from a digital perspective with the customer to be first more connected to the people, but having a more cost effective approach with them. So I think she said that in a very good way, so I'm not going to come back on this point. So summary, and again, you have to forgive me, it's only a few months. I think we have a very strong momentum based on very strong foundation. We have further opportunity.
And the last point I'd like to make and it's probably a little bit more personal. Great company and great growth are built not only on assets, but they are built on people. And if I compare the people inside PRP from the company I'm coming from, especially the big auto makers, I can't see any big difference in terms of talent pool. And we really have the talent pool to be able to grow and to go further because it's really everywhere, not only in the engineering side. We do have a huge quantity of young and people.
I believe you have seen some of those people on stage last time. So that's what I wanted to share with you today. Any question?
The powersports industry can get competitive discount in especially as a growth become an issue. How do you intend to manage that if you're taking share from competitors who don't really give that up?
I think there's 2 questions. First, you're right. This thing will definitely increase. And if we talk take side by side as an example where we definitely want to what challenges do. So we know we're going to become more aggressive and we're going to create a reaction.
I don't think our competition is going to be shy from those kind of attitudes. So there is a risk that we're going to be forced to be more aggressive. But aggressive doesn't always discount. There is different ways to be aggressive. I think the best answer is the fact that we believe we're able to create more targeted and more segmented products.
So they are more relevant to our customer and we see that already. The second thing is the strategy from a digital perspective that Nari is putting in place allow us to basically on a per unit basis be more cost effective. So that will give us more runway to be aggressive. But of course, if we enter lower segments from a percentage perspective margin wise, we have a risk to maybe further be lower. But it's still very high margin.
So I don't think it's a big issue for us. Any other questions? Thank you. Thanks, Jessica. Next up is Zantin.
Good morning, everyone. I think I have the easiest portion. As you look at the results so far, it's very solid results everywhere. Most of the regions are double digits. North America being the biggest pie, obviously, this is where the focus is.
But looking at Latin America and Asia Pacific at 27% and 8%, 17% respectively, is pretty strong. This is largely driven by side by side, but also the watercraft season has been phenomenal so far. So this is for H1. Obviously, for EMEA, what's not fair is that we actually ran out of snowmills at the end of the season only because the winter was also great in Scandinavia. If you put that back into EMEA, it will probably be double digit as well.
So phenomenal momentum as we speak. If we zoom into North America, this is not only about solid economics in North America. Clearly, there's a contrast between our performance and what's happening with our competitors. So and as you look at when you look at side by side, mid single digit growth for the competitors of mid-30s for BRP tells a lot. I'll go back to side by side in a couple of slides showing you the opportunities in
a little bit more
details. ATV in a slowing down industry, we are actually gaining momentum, so getting market share there as well. We're still the leaders in the top CC segment and we're fast growing in the mid CC segment for ETB. We're actually been growing in the past 4 years significantly in that
entry level segment. For Watergraph, it's largely
has has been surprising us all the way, so a huge increase is there as well. So the watercraft, especially with a combination of mother nature cooperating this pretty much everywhere on the planet, some of our dealers actually ran out of products in June from the new platform. So it tells you about the attractiveness of our product lineup for watercraft. For snowmobile, obviously, right now, we're in off season, but the foundation for this fall and this winter are solid. We finished with relatively low level of inventories as compared to the year before.
We also had a phenomenal spring break. So I think the bases are very solid for snow build going forward for the next couple of quarters. In terms of international, the highlights here is simple. China is leading the pack. China has been growing 40% to 50% year over year for the last 3 to 4 years.
So great momentum there. As Bertrand said, Brazil is recovering with a vengeance. Watercraft business in Brazil has been really good for us. There are Tampa seasonal market. There are even retail units off season during their winter or summer.
And there's also Mexico, we can't forget Mexico is driving a lot of growth with the side by side business. And we believe that we present a fair amount of share in Mexico. So that being said, again, side by side is the is most of the driving force, but watercraft as well throughout the world has been really good. A word on EMEA. A couple of things are happening in the EMEA.
The ORD industry is actually softening a little bit and the reasons behind it, it has went through the last couple of years a huge transition in terms of obligations. As you may know or may not know, in Europe, mainly ATBs and side by side can actually go on road. And European authorities in 2016 changed the dynamics, so noise regulation, speed regulations. We actually right now have the only ATV lineup with ABS that can go over 40 kilometers an hour. So there's been some consolidation from the OEMs in terms of which strategy to choose.
We believe we have one of the best strategies in Europe to go forward. If we look at the lineup and what's relevant for the next waves of growth, obviously, Mavericks Sport 60 inches this spring. This was kind of expected from our network that we went to the MAX version. So and just to give you an idea, and then a very short time, we were able to grow our market share significantly in the sports segment. We believe that the aging platform that exists from our competitors allows us to go more rapidly into this segment relative to the other segments.
So we're doing extremely good with the Maverick Trail and the Maverick Sport category. This is one of the recipes that we're pretty good at as well. It's creating some specialty packages, top of the line, great margin for dealers, great margins for us as well. So the continuation of applying the XRC package in the Maverick Sports segment, We launched last night the XMR as well in the Maverick Sports segment and not to forget the Defender Max XMR. This will be very popular units in our network.
And lastly, to be able to hit the $10,000 less mark, especially in the U. S, we can end up with the 6x6 with DTS and the 450 engine. Now if you look at
a little bit of
our history, but also in terms of industry volumes, Obviously, we're looking at the Rexford 60 inches and the Rexford 64 inches mid HP. Those were areas where we had some gaps in the lineup. Talked about what we launched this spring with the 60 inches and now what you saw yesterday is actually filling some of the holes in these categories. So now we're better equipped to go faster and more aggressively within these segments. And also in terms of the Rexport 64 inches plus top HD, we're doing extremely well in the high end category.
And we know we have to go more aggressive and more of the base entry levels of that category. But as you probably know, we've been ramping up production capacity. We've been a little bit behind demand in terms of supply. So the dealers are actually focusing on the high end because they just can't get what they need through the whole lineup. So as we get more capacity starting this November and then in February and then ramping up faster, we'll be able to fill these holes much rapidly and the dealers will be able to commit on these segments as well.
So really interesting dynamics right now. Now zooming in into the Utility segment, I just talked about the Sports segment. That kind of showed the runway we have in front of us. It's with the momentum we're having right now and the capacity that's going to be able to follow demand, we believe this is going to be a very interesting next at least year and a half, 2 years. Look at the 5 top states in the U.
S. For utility, Texas being by far the biggest opportunity we have, Minnesota, Wisconsin, Michigan and Florida. Just to say that in the last year, we've been focusing on Texas. Anne Marie talked about lasering into a market and really mobilizing the dealers and the retail ops team with the marketing teams. And the last year, this is the result of what we've been able to do in Texas, plus 65%.
So it gives you an idea. We have the recipe in our hands right now when we want to focus on a market, the results follow automatically. So really happy with what the team has put forward and the momentum we're having and you can expect more focus in these states in the coming months. Switching to watercraft, obviously, the Fish Pro is, in my view, a hidden gem. Even dealers I talked to yesterday are just realizing why how come we didn't think of this earlier.
This is already a trend in North America, but it's a lifestyle already in some of the countries like South Africa or the New Zealand, sorry about that. And so we believe that with what we're seeing from New Zealand specifically because the volumes are much larger there. If this trend continues in North America, this could be much bigger than a lot of people think. In terms of the accessories is a concern. Last year when we launched a new platform, we included the link system and everything around the new platform and we've had phenomenal success with that.
This is a continuation on the Spark platform. Now obviously with Matrix, Don't forget there's about 100,000 units of these in the market right now. This is all repurpitable. So this is quite interesting, but also more focus from our teams on the rental business, which has not been a focus in the past. Now we have a unit that is purpose built for the rental business.
So we're going to go aggressively on that segment as well. As I said earlier, in terms of the success we've had in the accessory area, in the last 3 years, we've grown the dollars per unit. So that's fleet neutralized dollars per unit by 24%. You add the fleet that's increasing, so it adds up pretty quickly. And this is an example of what we've been able to apply to the Spark platform as we did to the last year's new platform in watercraft.
Now none of this would have been possible if it wasn't with the support of our network. Jose talked about it a little bit earlier, dealer value proposition for us is key. The network is one of our most important assets we have. We have a recipe in place. It's an ecosystem of a lot of elements I won't go into right now, but just to give you proof that, that ecosystem and strategy is paying off big time.
When you look at the side by side growth in multi line dealers versus single line dealers, we're actually growing twice as fast when we have competitors beside us. So this is quite telling. And with all the dealers we've added in the network in the last couple of years, the number of units per dealer actually increased as well. So another proof that we've got our fingers on the dial in terms of the dealer value proposition. In terms of engagement, we're one of the lowest OEMs in terms of churn, so losing dealers over time.
And we just won this year or ranked the number one UTV mystery shopper survey in terms of customer satisfaction for the DRP brand. So this is really easy work.
That's all I have.
Any questions or Sanjit?
Can you talk about the broader SSP demand environment with the ad buyer, the oil tax and then everything excluding those?
Obviously, this is we see right now a lot of growth in our utility markets. For us, this is really important. You need to understand that it's still relatively new for the BRP dealers to focus on the utility market, whether it's utility, whether it's oil and gas and so on. But obviously, we a good portion of our network is with part of our competitors. So we are making a lot of inroads in there and the quality of our products is also showing big time and when you're competing with the others.
So obviously, the perspective we have right now is quite encouraging. The economies are strong pretty much everywhere. It's our focus in Australia as an example. It's purely defender because you cannot ride with the next three on public land in Australia. You can ride with the motor class and the 4 by 4, but not with the next three.
So it's mostly farmers and utility. So the teams are actually mobilizing the network to be able to twist their business model to be more focused on that section or that part of the business. And now that we have our lineups in our hand, we can go more aggressive. Does that answer your question?
Mark? I'm
not sure if this is a question for you or who, but you just
talk about the leasing program that was talked about last night? Yes. What that means? How material the change that is? What that means for the dealer economics and also for the year?
I mean, it changes a lot of the dynamics. And it's surprisingly nobody or very few players in the powersports business actually ever launched Nissan. BMW is certainly one of them and they find in Europe very successfully. But in North America, it's basically unheard of. And this is not a leasing program that the dealer is responsible for the repurchase of the unit.
So this is what you're used to see in the auto industry. So for us, this is about accelerating the repurchase cycle. This is as we've done financing for years years and the terms go from 48 to 60 months to 72 to 84 months, we're keeping these people out of the market. With leasing, we'll be able to accelerate that repurchase and pump more volume and then also create more volume for the used market. So that's for us this is a fit move and it's really exciting and the theaters see that as well.
We have a slide in Jose's Pero presentation about this. The other comment maybe, all our products except Spider are the 3 wheeled vehicle now is off road. And when you use a product off road, you can abuse and it's very difficult to fix a residual value. That's why for us, the 3 wheeled vehicle segment or category was the best to start because this is an area where we have scheduled maintenance for the consumer in BRP certified dealer to make sure that when the customer bring back the vehicle, it's well maintained. But we have a slide which was in a few minutes.
Just one quick one. Could you talk about the future of the Commander right now given the lineup that you've been able to put in place for the
The Commander is actually stabilized in terms of volume. It's actually doing good. Obviously, we won't share anything about the future products.
But for now, we're happy with what the Commander is delivering. Jose, if you want to speak to us, you're coming on the lease period, it makes sense on the 3 gold first. But then what about that contemplated on the marine side or?
I mean to be honest, well, let's see. We've been able to define guidelines for maintenance and everything on the road product, which is the easiest, and we'll see how it goes. If it goes well and our partner want to continue, we could expand, but let's see what it will give on the on road first as a beginning.
Will we see that repurchase commitment for these leases show up anyway on the balance sheet?
It's going to be a it's an off balance sheet commitment. Disclosed on the financial statements. Obviously, if there were any changes to the original value expectation versus initial contracts, then you might have SKL liability pop up. But for now, it's going to be a disclosure requirement.
Do you know what the underlying assumptions might be in
terms of the year, I'm assuming? Yes, we're looking at residual value in the range of, let's say, 45% to 50%. That's what we're looking at. So that would be the type of commitment. Obviously, we've ran some models as to what could be the take rate on it.
Could the contingent liability go as high as $100,000,000 Yes. But again, that would mean that we have a very good business on the Spider side. So that would be positive. And again, the secret is managing those residual values and managing the closing process of the lease when the consumer returns to lease consumer returns to lease to make sure that there is a proper inspection done and there's proper if there are any flaws in the vehicle or damage that was done that we highlight those and get compensated
accordingly. One more question. Thank you Sandeep.
Next one is Jotin Payroll. Good morning.
So 10 years ago, we reinvented the three wheel business with the launch of Spider. And today, we're in a position where we're saying we're reimagining it. So to reimagine the 3 wheel business, we need to address 2 key things that will increase the accessibility of new riders to the 3 wheel category. And that's, 1st of all, the accessibility to get a 3 wheel license and secondly, address pricing. Pricing is still the number one barrier, and this time, we decided to address it in all angles.
So we hinted to it last night in the reveal. There's a few things that we're going to address. And this morning, we met with all the dealers during the business meeting. And basically, what we told them is that we are right now putting everything on the table. And in the spirit of GSP's visit last night, the gloves are off, and we're really ready to fight for the success of the 3 wheeled business.
So the four points we're going to be addressing in the plan starting now or season 2019 is, 1st of all, expand the rider education program, reprice RC and F3 introduce the 1st leasing program and obviously, the introduction of Ryker. So we'll go over these four points during the presentation today. So rider education, just to put everybody into context, basically, we are taking 2 wheel riding independent schools in the U. S. And implementing a 3 wheel rider education curriculum that will allow consumers or new entrants into that market to get their license to drive, okay.
When we started that in Florida about 2 years and a half ago, we discovered that there was one school in Florida that offered 3 Bill rider education. Then we looked beyond that into 7 key states as the plan last year and still there was nobody offering them back. So this year starting in February, we put a dedicated team and their only job was to go and open schools that would offer 3 wheelerider education. And we've been very successful. So if you look at the U.
S, by the year end, we'll have 150 schools open. Today, we have about 142. And the coverage of the U. S. In terms of last year when we left at Christmas, we had 7 states.
And by year end this year, we'll have 42 states. In terms of Canada, we know that the benchmark in the Golden State or Province was Quebec, okay? It started all with Quebec, 119 schools in Quebec, but there was nothing in the rest of Canada. So our goal was to mimic what we did in Canada and the U. S.
And start opening in the rest of Canada. So as we open schools, basically we're registering and we're giving license to more people. This gives you an idea about since February, about 8,000 people signed up to take the class. And out of those 8,000 people, 5,000 people since Feb already have their license. So that's 5,000 people more than last year that are capable and legally riding a 3 wheel, okay?
Of these 5,000, over 15% have converted to a spider, okay? The profile of the 8,000 people taking the classes, there's 2 important nuggets there. First of all, it's the gender split. Over 30% of these people are women. If you compare to the motorcycle industry, the gender split is 1585.
So we believe we have something strong there, okay? Secondly, of the people of again, the 5,000 people who got their license, 45% are saying that they're really interesting in purchasing a three wheel, but it was too expensive. Now we have Ryker. So for us, these are very important nuggets that we're going to attack with the launch of Ryker. Repricing.
We have to address 3 things. First of all, over the last 2 years, we were discounting heavily, and that's never good for the brand equity. Secondly, when we introduced our Spider F3 a few years ago, we realized that we probably priced it too aggressively and we need to address it. Thirdly, as we introduced Ryker, we are now in a position to introduce a good, better, best pricing strategy. And as we looked at the whole pricing ladder between Ryker RT, it was not very smooth.
So we did address the pricing according to a better transition in upgrades of pricing. Overall, the price difference for the average weighted average price decrease is around 2,500. We are decreasing the price more on S3 because we had alignment issues with the PEVL product versus RT. And if you look at versus the discount we were giving over the last few years and the price decrease of that we've announced today to the dealers, it's about $800 per product, the difference, okay? Leasing, very, very important for us.
First of all, in the U. S, it's critical that we advertise a monthly payment. It is monthly payments that attract consumers to the product. And with leasing, it allows us to advertise $149 a month, which is huge for us and huge for the dealers. Secondly, if you look at the financial terms of a Spider owner right now, it's 69 months.
And with leasing, we will reduce the ownership period either from 24, 26 to 48 months, which like Sandy alluded to, will escalate the repurchasing cycle. That's the story about leasing. And it's launched in the U. S. As of now only.
Canada, we're looking into it, but it's not launched yet.
Ryker.
So as we launch Ryker, there's a lot of stats out there that are showing us that the market is right for the introduction of Ryker. First of all, if you look at the on the three wheel side, on the Spider side, 63% of our total registering sales were used units, and the average price that people were paying for Spider was $13,500 Consumers were willing to purchase up back up to model year 11 to get a good deal. And then we put the parallel to what happened with Seadu and Spark. When Spark was introduced into Seadu, used units were 66%. And we have the business increase of what Spark did to CIBU.
And I think I believe Jose and I have discussed that a lot in the last year or so. So this is the baby. Hopefully, you enjoyed riding Ryker this morning. Ryker is not a spider because Ryker is a different ride with different ride, okay? We are obviously doing 2 parallels with Spark, because first of all, Spark rider is for 3 wheelers with Spark for Seahou.
It's a fun product like Spark is. Ryker is a totally a blast to ride. Hopefully, you'll concur with me. And secondly, Spark did propel the C2 business, and we know that Ryker should propel the 3 wheel business as well. If I go back to the features of and the technology behind Ryker, hopefully, you had a chance to witness this this morning, but it's jam packed of cool and high end technological features that make the product super high end for the price.
It is not a cheap product. You saw it last night, you saw it this morning. It's easy to ride, it's awesome. The 2 engine options of the 600 or an 800, the CVT transmission, highly durable Draught stock like high end motorcycles, customization, U Fit, that's only just to name a few. But we know that for that price of H5, it's loaded of benefits, okay?
Our riders, our riders are different than our current spider riders. You know that the current spider riders is on average a white male that's 60 2 years old. There's 2 types of riders for Rykers. We call him Connected Carlo. Connected Carlo is between 30 40 years old.
He is a bit younger, a bit more diverse in terms of ethnicity. Also, connected Carlos is not close to powersports. In its youth, it's probably driven an APV, probably driven a snowmobile or Ski Doo. That's one part of the ridership. 2nd part is on the move Greg and on the move Margot.
These are a bit older, okay. It's a couple, they're older, 40 to 50 years old. Greg loves to ride, but most importantly, Margo is used to riding on the back of the bike. Now she wants her own ride, okay? And when we said initially that 30% of our people signing up for classes are women, this is Margot.
If you look at addressable market and market size, of people having the intent of buying a 3 wheel over $15,000 in the U. S, is $4,800,000 If you do that same research for people having the intention to look and buy a tree wheel below 15,000, that's $8,600,000 for a total addressable market of 13,400,000, dollars okay, about 2.8 times the size of the actual market. So we feel good about the addressable market, And that's why when Jill Zigu did that, our business in the next 5 years, we hope to triple it. That's one reason why.
So if you look at
the go to market for Ryker, we are trying to address the shopping trends or the retail trends going on. We all know that it starts with the phone. 83% of people start their shopping experience with the phone. Technology is at the forefront of the retail experience, and AR, augmented realty, is the most engaging technology right now. Product customization is the new norm.
71% of the people who are willing to pay more to customize their product. And lastly, a good retailer is the one who is obsessing on retail experience. So for Ryker, our team has tried to address all four points in a comprehensive go to market plan. I'm only going to address a few things here, but trust me, we have a bigger plan that we can't cover today. So it starts with the personalization or customization of Ryker.
Like Jose mentioned yesterday, one platform, 3 SKUs and 75,000 ways to customize the product, okay? And that's critical. Our plan is to put really customization at the heart of the experience in terms of the phone and also in terms of the dealership. So to be at the forefront of where our consumers are shopping, which is in the phone, we're introducing the new Can Am Ryker app. The Ryker app is based on augmented reality and then allows you to personalize your bike and see it on augmented reality either in your garage, living room, kitchen.
And we hope that that first touch point with the product will push the consumers into the dealership.
Because we
talk a lot about online shopping, but we know that 90% of people still finish their shopping journey in our dealership. So for us, what we've done is that we've established a new writer in my class to allow the consumer to finish that customization process in the dealership. It's also there's also a sensors technology there to the touch screen in the middle, people will be able to customize their bike on the touch screen and then take the panels and design their bike to have the last touch and feel of the product. So that's basically what we're doing. Again, I'm saying that we're doing way more.
The launch is in 3 phases. Right now, at Bub, over the next 3, 4 months, we're going to have a heavy PR campaign. We're going to obviously launch the app and also address every people that took the rider education class and did not convert. We call them the low hanging fruit and we believe that's the first point we need to address. And lastly, this is in February, it's the time where we're doubling down on marketing investment and we're making a lot of noise.
So we believe that we've put everything on the table. Truly, the gloves are off and we feel very confident on the success of the 3 wheel categories. We believe it's a different rider and a different ride. F3RT are more long distances ride. I don't know if you tested it this morning, but it's for really shorter ride.
It's like we don't feel that the guy or the girl is going to be on a Ryker is going to go riding 500 kilometers a weekend. So that being said, there might be a few cannibalization with the baseline of the S3, but not the S3 limited or the IT.
Maybe if I can. When we've introduced the Spark, it was the same thing. I don't think there is much cannibalization on the new product, but on the use, there will be some adjustment.
So it
will be probably a 12 to 18 months transition.
And when do the shipment start?
In the first half of December.
Yes. Did you change any
of the manufacturing process or the suppliers that help offset the lower retail price?
No. Well, it's going to be manufactured in Mexico.
No, no, no. But it's
currently reducing the price. No, no.
Just that 15% conversion figure that you mentioned from
other education, is that what you're actually seeing? Is there
any reason to think that that you see difference or change
in the overall This is actually what we're seeing.
And that's what you're expecting.
We hope to improve that considerably.
Yes. How many dealers to be outselling this fighter right now? And I'm just wondering what would you expect in terms of the dealership network because you'll be asking some dealers to index. So it could be probably a key
catalyst also for develop other Spire and Ryker a
year or so.
Right now, we have in North America, we have close to 500 dealers currently selling Spider. Honestly, I don't expect that we're going to have a big drop off rate in terms of putting a mandatory investment because just to be clear, we're saying to all our dealers, if you want Ryker, you need to invest in the Ryker Design Lab because customization is really at the heart of the product. And if you can't offer the customization in your dealers, you're not offering the proper experience with Ryker. So look, it's really hard to say. But right now, with what I saw last night, what I heard this morning, there's a lot of excitement.
There's a lot of people we've heard that don't even sell Spider right now and they're asking about it. So maybe it's going to be net neutral.
And do you know what type how many dealers is this profitable? Let's say, you currently have 500, but I assume that some will be asking to distribute this product.
Yes. And what I have honestly, I have 0.
But to
be honest, Benoit, if we lose some, probably we don't want those. It's probably a good thing, and you have opportunity to sign up dealers in the area.
Yes.
How much sales do you
need to do on this platform to earn your return on investment hurdles for
the company?
The volume is not so high. Yes, it's an important investment, but we're leveraging already the engine that was developed for other platforms. So it's basically vehicle development. So the breakeven point is not too significant. We could achieve that breakeven point after 2 years of selling in terms of overall margin.
Yes?
It's about 200 square feet. And it's just currently in their BRP platform.
Okay. That's the dollar investment for you?
It's $9,000 in the U. S, but we have we are offering it with the TCF. TCF, thank you. And it's $500 a month for the next 18 months.
So it's financed through
the floor plan partner we have, so they provide financing.
And it's Zero interest. And it's fully serviced, I mean, with the company that It's
a turnkey solution. That means they sign up and we show them and we show at their dealers and we install everything and we have the maintenance of the design lab.
What is the average selling price you expect dealers to sell the Ryker? I mean, if you do a parallel with the Spark
you're working You mean the mix?
You listed at $4,999 but I don't know, I think you were the average price was $2,000 higher with all the accessories. So I'm just curious to know what type of accessories you could put on that and where is the Spark right now since the launch in terms of average?
Maybe I'll take the Spark question. Obviously, with the introduction of the Trix, we saw margins improve quite a bit on the Spark platform. And so you saw at least 300 to 400 basis point improvement in margin because of the Trix. The Trix is 50% of the volume of Spark is Trix. And so that's brought margins up quite significantly.
And the mix that we're forecasting on Ryker We have bets going on.
Go ahead.
High percentage on the 900cc engine and a lower than 30%
is The big and when we look at the mix, the biggest part of the mix was mostly on the 900. But as we are hearing the comments, we're thinking that we probably are going to see a higher proportion on the Rally and less around the 600, which is great. But like you say, I have a bet with my boss and I have a bet with my team.
Any other question?
And the beauty of the Ryker is the 3 SKUs reduces complexity a lot for the dealer. There's not 15 SKUs he needs to order and he's betting on making sure he has the right SKU. He only has to determine the mix on 3 SKUs. So that's a big advantage as well.
The other thing maybe to we can't we settled on stage yesterday, when we say defining a new business model, 3 SKUs, 75,000 way of customizing, we can change a lot of accessories in the future, but keep the 3 basic SKU at least for a period of time, no change. And it's very simple for the dealers, very simple for us. And if we can be successful with the design lab and everything, there is maybe a new business model there. Yes?
The price reduction of $2,500 that
you're taking on average, is
this on new shipments or is it on the existing
Where it's going to be on the season 2019 product, but we're also going to price protect everything that was in the inventory right now. So as we launch the new units, we're going to have to price protect everything the inventory back in the dealership. That means that we're going to have to double down on the discount, so to make sure that our dealers are not losing profits.
In our guideline.
In the U. S, it's going to be a $5,500 advertised discount.
So that's all factored in our guidance. It's all built into our projections for this year. Obviously, before we launched this repricing, we knew the inventory we had in the field, model year 2018, model year 2017. We already had important discounts for non current models. And so that's been all adjusted for in our guidance.
Just to make sure you get it right, the average price reduction is $2,500 but net to us after discount and everything, we estimated $800 per unit going forward.
Just to clarify that, so the average is $2,500,000 No, no,
no. We when we launched the F3, we made a mistake and we you know you do PVA what you compare with the competing product and we probably price it too high from the get go. And the RT was reduced a bit, but the main reduction came from the F3. And we saw in the last few years that F3 at the minute that the non current at the end of the season program happened, you can see the retail increasing significantly. Then at the end of the day, we said that we better to early adjust the pricing.
The average readjustment is $2,500 but net to us after discount, it's about 800 We should have a less discount going forward with the readjustment. That's the point. Yes. Can you just give us a relative sense of the profitability by Spryker and various Spryker products after all this pricing is sorted out?
Yes. Obviously, similar to when we introduced the Spark, Ryker is an entry level products and therefore margins are slightly lower than on the traditional Spider product line. But when you look at the overall impact on bottom line that the Ryker generates is obviously favorable. The plan with Ryker as we had it with Spark as well There'll be availability to upsell the consumers. And so when you come out with models like the Rally, then the Rally gets much closer to a traditional spider and then with the accessorization.
And don't forget the flexibility with accessorization today is you'll have people buying 2 sets of panels. I'll buy a blue and I'll buy a green, I'll buy the red and white. And so that's another element where it's going to be driving additional margin as well. So slightly lower when you factor in all the customization and accessory business that you can sell with it, but still very profitable to us.
I would encourage you that you download the apps during the next few days and you will see competitive our accessories is priced. We believe some people will change panel every year just to give it a different flavor. And just for broader context, how does Spire compare today to the rest of year end?
On the we'll split it in 2 on the contribution margin. So we'll take the selling price and that's the material cost and labor. Spider is very competitive versus the other year round products. Where we are investing more is obviously in marketing and in R and D as a business is not necessarily to the scale that our other year on product businesses are. And so with the target that we gave Jose to triple the business, well, obviously, that's going to bring profitability to the comparable level of what we have with Slide by Step.
Just to follow-up on that, I guess, what level of sales do you need to get with Spider to bring the overall profitability level of with the rest of the year round product.
That's doubling the Spider business. We're going to be in line with the other side year round product business.
And with respect to the global review, if we look at the Ryker, it will be available in the first half of December. Talking to one dealer that focused also on RV Davidson, it seems that when they do the global review, the product become available 6 days after. So it is very unfortunate for ERP to keep momentum and distribute the products more closer after the global renewal? Or is there part of the strategy to wait?
I mean each program is different. Obviously, there was a few challenges when we started the development of the Ryker. And the ideal timing would be you announce and you ship the day after. But we did face a few challenges in this program, and we will be starting in December. Then we have a pilot run of about 2 of the unit.
Yes, pilot
run-in the 1st October. But in the meantime, we're also going to be training. We have to train the whole pipeline of dealers on the new product because there's a lot to it. And as of November, we're going to start deploying the retail environment. There's like the Ryker Lab for when they receive the unit, they'll be ready to come.
Yes.
How will this roll out internationally outside of North America?
So we're launching it in Europe at the Montes De La Motue in Paris October 3 in Portugal. And then we are launching it in Asia in their motor show in Australia in end of November and then in Japan in early next year.
Which fiscal quarter should we expect initial rider sales to end here?
In Q4. So you'll see sales hitting in Q4, moderate sales and Q1 is going to be a bigger quarter of next quarter.
Which quarter should be the largest?
Q1 should be the largest. Q4, you'll see some probably 30% of the year volume could happen in Q4 because we're in Q4 for the retail season and then the big chunk is going to be in Q1, a bit like
Thank you.
And maybe just as a closing, I'll get to the slide a bit. As you can see, I just want
to come back on
this. We're very proud over the last few years. We have great momentum worldwide
and we can't count on it.
It's a bit funny lately we're meeting investor and they are asking another question. When you finish your introduction on time by time, we're stopping there. We will not stop there. We will definitely get to that. Never saw a DRP product pipeline so interesting and so excited that you can count on us that we will continue to push innovation and the technology.
And again, some of you are asking when you will be faced. The plan is probably at this time next year, we'll restate the 2020 challenge with our long term plan for probably the next 5 years. That's the message. Thank you very much for coming. Always a pleasure.
I wish
you a good trip back.