Aug. 10, 2009 – Polaris: Putting more emphasis on its street side

By Neil Pascale
Some 10 years ago, it was merely part of a crowd of new American-made motorcycle brands. Excelsior-Henderson. Indian. Victory.
Fast forward a decade and the only brand to keep afloat out of that group, Victory, faces an equally daunting task today. The shadow of its segment’s market share leader looms larger than ever before. And, the space that Polaris Industries’ on-road product occupies, the cruiser market, is suddenly spiraling downward in a challenging consumer climate.
But just like when Polaris overcame initial production delays to distribute its first V92Cs, it is equally adamant about growing its on-road business in the face of those considerable challenges.
But not without significant changes, and not just on two wheels.
In a matter of days in mid-July, the Medina, Minn.-manufacturer unveiled a taste of what’s to come from its newly established
on-road division by showing off new two-wheel and four-wheel products. It figures to be just the start of a period in which the on-road market — two- or four-wheeled — takes on a higher level of importance. After all, Polaris’ current five-year strategic plan calls for an increase in organic growth by 5-8 percent and an added $100 million-$300 million through its adjacent business initiatives.
“We clearly need a more global business. We clearly need a bigger on-road business, and we believe we need a bigger motorcycle business,” Mark Blackwell, Polaris Industries’ vice president of motorcycles, said in an interview with Powersports Business. “That doesn’t mean we’re abandoning our interest or commitment to the off-road side of the business. They are absolutely the bread and butter of the company today.
“But longer term, we believe those areas are going to continue to be under pressure with land-use issues and changing consumer trends and so on. So that’s why growing the on-road side of the business overall strategically is very, very important to Polaris.”
Just as clearly, Polaris won’t continue on the same business path it has over the past decade as the Victory business grew from 1 percent of its overall sales back in 2001 to become 5 percent of its total revenue today. New Polaris Industries CEO Scott Wine has made that clear in his remarks.
“The Victory strategy largely has been a product strategy,” Wine said in an interview with Powersports Business. “We build great bikes. We introduce a new model, we sell a couple of thousand of them and it starts to trail off. We introduce a new bike, sell a couple thousand of them, it starts to trail off ... and that’s not interesting to me.
“We need to prove that we can get meaningful volume from the great products that we have.”
To Blackwell that means improving core business areas, from marketing to the dealer network. “You can’t just keep launching new products, you need other things to work,” Blackwell said. “You need your brand to get stronger, you need to create more consumer pull, you need to get your dealer productivity up. Just building new products isn’t enough.”
Nor will be concentrating solely on the two-wheel market. For Polaris, growing its on-road market means diversifying its product offering. At least part of that diversification will be entry into a niche part of the low-emissions category. In a quarterly report to investors in mid-July, Polaris announced its launch into the electric vehicle market with its Breeze, a four-seater designed for master communities. The market is relatively small, at 35,000 annual retail sales, but growing, Wine said during the quarterly report.
What’s more, the vehicle, with its entirely electric operating system, appears to be just the start for Polaris in the low-emissions market as company officials point to it as a “first step.”
The company also took a step in changing its Victory business, with significant changes to its model lineup. (See more on pg. 32) The 2010 lineup will provide more depth at the different spectrums of the market.
“When you think about the dealer’s floor, they don’t need such a huge assortment of motorcycles to meet the customers’ needs,” Blackwell said, noting the company’s decision to widen the model range but considerably lessen the variations in those models.
“It’s just going to make the business model, we think, a lot easier for the dealers.”
Polaris, however, is clearly looking beyond the 2010 model range as it has added more resources to the Victory brand. For example, Blackwell, as part of the company’s recent move to create an on-road division, has been asked to look at fresh ways to grow the motorcycle brand globally. Polaris tried unsuccessfully to do that four years ago when it bought a minority share of KTM, the Austrian manufacturer.
Taking a fresh look at two-wheel opportunities is “even more important than a few years ago because a very clearly stated part of our strategy is a much bigger, more global motorcycle
business,” Blackwell said.
What could Polaris eventually do with its two-wheel business? It could develop its own brand, perhaps even develop an off-road motorcycle with the Polaris brand name. Or acquire another brand, or perhaps a combination of the two with a joint venture with another company, similar to what it has done with Bobcat in the off-road market.
Either way, a dramatic move doesn’t seem farfetched for Victory in its next 10 years of operation. After all, just more than a decade ago the company spent more than $20 million on tooling and capital expenditures — at the time the largest amount ever committed to a single product — to create an on-road presence.
That presence is something Polaris’ CEO Wine is adamant about growing. “We’re going to say let’s bring in the most important products and keep the development cycle going there,” he said, “but let’s not worry about all of these other models because quite frankly I want to prove that I can sell 10,000 bikes.”

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