Arctic Cat shows new products – July 3, 2006

CANCUN — Arctic Cat dealers from the United States and Canada who attended the manufacturer’s business meeting in this Mexican seaside resort town saw new 400cc and 650cc two-up ATVs, four Limited Edition models, two concept vehicles and a load of new parts, garments and accessories.
Arctic Cat’s 22-model ATV line-up for 2007 includes the new 400cc and 650cc TRV PLUS, convertible with a two-up seat, Speedrack system or cargo box; the 700 EFI; 650 H1; 650 H1 TBX; a 500 in automatic and five-speed; a 400 in automatic and five-speed; and the returning 250 2×4.
Also in the line-up are the DVX 250 and 400 sport quads; the 90 and DVX 90 youth machines; four Limited Edition models, the 700 LE, TRV Plus LE, 650 LE and 400 LE; and two Prowlers, a new standard model in addition to the returning XT.
Items not returning to Arctic’s line-up for 2007 include the 500cc TRV and the Kawasaki 650cc V-2 engine.
“What started as a snow company making a few ATVs has grown into an off-road company; and every ATV offered in 2007 has been introduced during the past three years,” Arctic Cat CEO and Chairman Chris Twomey told assembled retailers, many of whom were ATV-only dealers located outside of the snow belt.
In fact, 54 percent of Arctic Cat revenue last year resulted from the company’s ATV business. Arctic Cat’s consolidated net sales for the year ended March 31 were $732.8 million, up from $689.1 million in the previous fiscal year. ATV sales accounted for $394.9 million, up from $341 million; snowmobile sales totaled $238.1 million, down from $252.5 million; and sales of parts, garments and accessories were $99.8 million, up from $95.7 million.
“The main message we’re conveying here at this event is that the ATV industry in the United States is still good, but what is really good is that Arctic Cat is outperforming the industry again at retail,” Twomey told Powersports Business, quoting Motorcycle Industry Council (MIC) figures that showed ATV sales dropped from 812,970 units in 2004 to 780,433 units in 2005. “Last year we outperformed the industry in every category and this year we’re up over last year.”
He said he expects dealer retail sales to be up 5 percent to 10 percent this year.
While a number of dealers told Powersports Business their main issue was a surplus of year-old and even two-year-old models, others expressed a need for additional units that proved difficult to obtain.
Twomey addressed the issue in his presentation to dealers. Dealer inventory is almost exactly the same this year as last year, he said, adding that sell-through increased by 5 percent last year.
“We’re attempting to balance inventory,” he said. “I think we have all the categories. What we need is the appropriate level of inventory to show those units.”
In the past, ATV orders have been made twice each year — at the dealer show in June and again in December.
“Because engines and components are ordered in September, this year we’re taking full-year orders here at the dealer show,” said U.S. Sales Manager Joe Klosterman. “They’ll be able to adjust their model mix in August and again in October, and we’ll offer 30 extra days of paid flooring.”
Dealer Network
Arctic Cat supplies approximately 1,000 ATV dealers in North America, and added 75 new locations in 2005. Still, according to Twomey, the total number of retailers in the United States remains too low for adequate market penetration. The manufacturer brought 50 to 60 prospect dealers to the event in an effort to, he said, “show them the product and give them a chance to interact with other Arctic dealers.”
“Right now we have less dealers than every other manufacturer in the business. So, as we look at our opportunities, we think we can expand by 50 to 100 dealers,” he said. “But these are really ‘rifle shots’ rather than ‘shotguns’ — in other words, we know right where we need to be, we know where we’re not represented or under-represented in the market, and we need to just go to those spots and set up a retailer.”
More To Go On
Arctic Cat showed dealers a number of new ancillary products at the event, including new Speedpoint pull-behind attachments designed for landscaping and farming, an updated line of customized helmets and goggles, a larger selection of windshields, winches, trailers and bags, and a wide variety of new ArcticWear garments.
Indicating the utility aspect of the ATV market has proven to be a boon for Arctic, Parts, Garments and Accessories Manager Tim Benedict said the company’s Speedrack accessory sales were up 72 percent last year.
He said Arctic PG&A generates margins of 40 percent to 45 percent, and said the company will maintain pricing on 85 percent of the accessories and apparel offered in 2007.
Piaggio Group
Arctic Cat’s dealer meeting also was attended by representatives of Piaggio Group Americas.
In March, Arctic Cat and Italy’s Piaggio & Co. SpA announced a partnership they said would expand and strengthen their respective distribution in North America and Europe, and potentially lead to other areas of future collaboration.
Officials of both companies said an initial phase would allow sharing access to dealers — Arctic Cat would be able to sell its product through selected Piaggio dealers in Europe and Piaggio would sell motorcycles and scooters through selected Arctic dealers in North America.
Paolo Timoni, president of Piaggio Group Americas, and Gary Pietruszewski, vice president of sales and dealer development, both spent time in Mexico speaking with Arctic Cat dealers.
“When we surveyed the dealers, the number one thing they requested was additional off-road product offerings,” Twomey said. “And, when you think about it, it makes sense — we’re already offering performance snowmobiles and ATVs, so off-road motorcycles are a logical extension.”
But Arctic dealers weren’t interested in only Aprilia off-road bikes. Dealers at the meeting also were interested in Aprilia and Moto Guzzi road bikes and Piaggio and Vespa scooters.
“We are talking with Arctic dealers from all over the country, but the partnership also allows us access to dealers in the smaller markets that would have been difficult to enter with our brands,” Timoni told Powersports Business. “We’ve introduced all of the brands to Arctic dealers. But, depending on the market and the business model of the dealership, some of them are choosing only one brand while other guys are picking up two or even three brands.”
New Engine Facility
Concerning Arctic Cat’s engine facility in St. Cloud, Minn., Twomey said: “The walls were up in early May, the roof was on by the end of May, and I suspect we’ll be producing engines in St. Cloud around October.
“We’ve used the year that we’ve been building the engines in Thief River Falls to fine-tune the manufacturing process, and so it’ll be a very fast ramp-up.” The 56,000-square-foot facility may employ up to 150 people. He said supervisors are already being trained.
“Again, strategically, this facility lets us provide engines to the market as we see they are needed. And that’s really the reason we did it. Over time, we will drive our price down to be more competitive. But we’re the smallest engine manufacturer in the industry, so it’s tough to say we’ll be a low-cost producer. What we will be able to do is make engines for cheaper than others are willing to sell them to us for. And, we’ll also be able to make the engines that we see our customers want.” psb