Piaggio Promises Change
December 7, 2005
Filed under Features
In attendance were approximately 175 dealer representatives plus Roberto Colaninno, Piaggio group chairman; Paolo Timoni, Piaggio USA president; Federico Musi, Piaggio USA vice president of marketing; and Gary Pietruszewski, Piaggio USA vice president of sales and dealer development. Rocco Sabelli, Piaggio Group CEO; Leo Mercanti, vice president of Aprilia; and Daniele Bandiera, head of Moto Guzzi and Vespa, joined via tele-conference from Italy.
While one Piaggio official described the North American market as “a fundamental driver of growth” for the company's four main brands - Aprilia, Moto Guzzi, Piaggio and Vespa - dealers interviewed by Powersports Business said brands within the newly formed Piaggio Group have been difficult to work with during the past couple of years. Dealers' tales of lackluster product supply and technical support from Aprilia and Moto Guzzi were common, and Piaggio officials themselves called the Piaggio and Vespa spare parts business “a mess.”
Banking on the heritage of the Vespa brand name, Piaggio re-entered the U.S. market in 2000 by opening brand-only “boutiques” and advertising product alongside high-end consumer goods. While Vespa sales have slowly increased during the past five years, company officials have realized they need increased access to the powersports market as well as a broader selection of scooters and price points to satiate the North American consumer.
Separately, the Aprilia Group had its own issues to deal with during the past few years. While 2003 Aprilia Group worldwide sales were up 2.8% to 539 million euro, the company defaulted on payment of a 100 million euro loan in May 2003 and, in 2004, announced a restructuring plan that subsequently opened the door for its acquisition by the Piaggio Group. At the same time, in the U.S., Aprilia's business was in disarray, dealers were questioning the company's future, and sales slipped drastically.
Piaggio's purchase of the Aprilia, Moto Guzzi and Laverda brands, finalized Dec. 28, 2004, forced the formation of a new business plan for the multi-brand group. Now, nearly one year after completion of the deal, company officials say they are ready to put the plan in motion.
“We have made a lot of mistakes in the past and are conscious that we have to address those and build your confidence,” Sabelli said in his opening statement to the assembled dealers. “This convention is a great opportunity for us. It signifies the kick-off of a new strategy.”
According to Sabelli, Piaggio Group's immediate worldwide plan is to:
- Enhance scooter leadership;
- Enhance motorcycle position;
- Accelerate the light transport vehicle business in India;
- Continue implementation of the Chinese joint venture with Zongshen; and
- Increase penetration into the North American market.
“The North American market is very important for us,” said Colaninno. “It represents much more than a normal market. And, if we can't find success here, then we can't be successful in other parts of the world.”
The company's plan for North America includes bringing leadership of all brands under one roof in New York, outsourcing warehousing needs, adding team members experienced in the powersports industry, formulating a stronger dealer network, and creating a better line of communication between those dealers and the Piaggio Group USA.
Piaggio Group USA leadership includes Paolo Timoni, president and CEO; Gary Pietruszewski, vice president of sales & dealer development; Federico Musi, vice president of marketing; John Velez, in charge of supply chain; Marco Ciccolini, head of spare parts; and Erick Larson, lead for technical support.
“One of the tasks we have is to fully leverage the identity of each of the brands, even though the business aspects will be similar,” said Timoni. To do that, he said, Piaggio Group will need to: 1) introduce well-designed product; 2) develop a dealer network covering all major markets; 3) develop a solid infrastructure with “best in class” service and support; 4) provide existing customers with maximum support and potential customers with maximum exposure; and 5) have a team capable of making all of the above happen.
“It would be impossible for you to continue to do business with us using the same system we've had in the past,” Pietruszewski told dealers. “We need to make it easier for you to do business with us, so we're looking at how we're doing business with you, and the best way of doing business with you.”
Pietruszewski said an initial step was adding a team of powersports veterans for each business category - dealer relations, marketing, PG&A, supply chain, tech support, etc.
Further steps, he said, include the creation of a national dealer advisory panel for each brand; the offering of technical training to increase dealer product knowledge; and the update and multi-brand synchronization of the Group's computer system. He said all of those projects are expected to be complete by the end of 2006.
Piaggio Group USA suspended Aprilia and Moto Guzzi parts and accessories shipments in November for time to out-source warehouse duties and move remaining staff in Georgia to New York.
Timoni said Piaggio leadership needs to complete seven specific steps to bolster Aprilia's position in North America: 1) complete the transition from Georgia to New York; 2) manage introduction of new product; 3) improve understanding of customers and markets; 4) assess the current dealer network; 5) develop new racing initiatives; 6) increase and improve tech support and logistics; and 7) reformat the IT system.
Concerning Moto Guzzi, Timoni said the needs are similar, but also include the development and execution of a program to re-launch the brand.
“We are back in the States and we want to be successful again,” Daniele Bandiera, CEO of Moto Guzzi and Vespa, said via live link from his office in Italy. “The average Moto Guzzi dealer sells five units each year - we want to triple that in three years.”
Leo Mercant, vice president of Aprilia, said Piaggio Group plans to invest $130 million in Aprilia research and development between 2006 and 2008. The brand is debating entry into U.S. off-road racing with its new 450cc RXV and SXV bikes, and plans to enter World Superbike competition in 2008 with a RSV 1000-based machine.
“A lack of market coverage is the main cause preventing Piaggio and Vespa from achieving better results in the U.S.,” said Timoni, highlighting that the brands are in only 72 of 300 local markets. “What we need to do is open more dealerships in those areas where we're lacking coverage.”
He said a second cause preventing better results is a l ack of performance at existing Piaggio and Vespa dealerships. Breaking the dealers up by category, he said 15 were “best performers” who grew sales by 100% year over year; 16 were “performing” dealers; 34 were “underperforming”; 22 were new; and five closed within the past year.
The Piaggio and Vespa spare parts business is a third problem. Timoni said Vespa had 1,145 back-ordered parts and 771 back-ordered accessories on August 26. While parts back-orders were whittled down to 832 by November 11, and accessories back-orders were slashed to 161, “It is still critical,” Timoni said. “Our commitment is to get on top of the problem by year-end.”
To allow Piaggio and Vespa to achieve better results in the U.S., Timoni proposes to: 1) improve logistics and sales and technical support; 2) expand the dealer network to undercovered markets; 3) introduce a new annual sales program; 4) continue to expand marketing and communications initiatives; 5) improve consumer knowledge of the Piaggio brand; and 6) reformat the IT system.
Piaggio & C. S.p.A. ended its 2003 business year with revenue of 987.2 million euro and a loss of 140 million euro. The company expects to end 2005 with revenue of 1.45 billion euro and profit of 10 million to 15 million euro.
“When I decided to buy Piaggio three years ago the company was in bad shape,” Colaninno told assembled retailers. “After two years of hard work, that has totally changed.”
Piaggio & C. S.p.A. reported net sales of $1.164 billion for the nine-month period ended September 30, 2005, up 5.9% compared to sales of $1.099 billion for the same period last year.
Aprilia had sales growth of 8% during the nine-month period, Moto Guzzi posted sales growth of around 46%, and Vespa sales were up 54%. Sales for Piaggio USA were up 44.8% during the nine-month period. In fact, for the 10 months through October, Vespa/Piaggio dealers in the U.S. sold more scooters than during all of 2004.
Company officials said sales growth was helped by a recovery of Aprilia, Moto Guzzi and Vespa brands; a boost in U.S. sales; continued growth in light transport vehicles (LTV) both in Europe and India; and further efficiency gains within the organization.
- Guido Ebert