Monday, Jul 27, 2009

Gulf News

Dubai: There is no doubt that the global recession has been hitting luxury good sales across the board over the past months. But certain niche markets seem more resilient as they are apparently following their own rules.

One niche market is the UAE luxury yacht manufacturing business, represented for the most part by Ajman-based Gulf Craft.

The company, founded in 1982, passed the $100 million (Dh367 million) mark in turnover last year after continuously growing at an annual rate of 30 per cent over the last few years and is expecting further growth in 2009.

Erwin Bamps, Gulf Craft executive manager toldGulf News in an exclusive interview at the company's manufacturing site in Umm Al Quwain why he does not fear the fallout of the credit crunch affecting his business.

"For many boat builders across the world the crisis has triggered the need for painful restructuring", Bamps said.

"Particularly companies with a critical debt ratio were facing fundamental problems. 30 to 40 per cent of all boat builders worldwide are already defunct".

Gulf Craft instead, maintaining a healthy cash flow despite the crisis and not burdened by debt obligations, was able to increase its market share in the Gulf and to boost its exports.

"We are gaining market share in the recession," Bamps said. There have been three specific reasons for this, he explained.

First, Gulf Craft yachts have a price advantage compared to their main competitors, European-based Ferretti and Azimut-Benetti, both based in Italy, and Beneteau, based in France.

Gulf Craft has the advantage of lower manufacturing and labour costs in the UAE, better economies of scale, a broad product range at comparatively reasonable prices and low overhead costs with only about 100 staff in sales, marketing and back office out of a total of 1,500 employees, Bamps claimed.

As far as luxury yacht buyers have turned out to be more price-conscious, they are beginning to favour a custom-built yacht from the UAE over a Ferretti craft for which they would have to pay a surcharge for the brand and the 'Made in Italy' logo, Bamps argued.

"We used to consider ourselves as a 'lower premium' brand, but we are working to overcome that prejudice."

Secondly, the trademark 'Made in UAE' has experienced a significant upgrade in recent years as yacht customers began to associate the region with abundance in luxury, as a place to be for high net worth individuals as well as celebrities and an upscale leisure holiday destination, apart from the tax-free environment.

All these factors caused the Gulf Craft brand name to appreciate constantly. "Customers in Europe have significantly changed their approach towards UAE-built craft," Bamps said.

Third, the Gulf Craft manufacturing sites and private shipyards in the UAE are in easy reach of new customers from emerging markets such as India, South East Asia and Russia, Bamps said.

He noticed a growing interest for custom-built yachts from those regions, with prospective buyers frequently visiting the shipyard in Umm Al Quwain where the top range of Gulf Craft's yachts is assembled, even from as far as Vladivostok in Far East Russia.

For Indian customers, Gulf Craft in the UAE seems to be the first choice, because "there is not a single marina in India despite thousands of kilometres of coastline", Bamps said.

However, his strongest customer base resides in the Gulf countries. With a market share of 30 per cent, Gulf Craft is by far the biggest seller of luxury yachts in the region and has also a very buoyant fleet sales business for its smaller boats which are used by coast guards and for commercial tourist purposes throughout the Gulf.

What counts most for the brand name is the fact that "several VIPs" - whose names Bamps would not disclose - across the Gulf are customers of Gulf Craft. More than 10,000 craft are currently in use throughout the Gulf, he said.

While dozens of yacht manufacturers all over the world went bust due to financial difficulties as a result of the credit crunch, Gulf Craft holds on to its expansion plans which include takeovers of smaller firms to expand its product range.

After a UAE competitor in the mid-range yacht business - GC Marine - was acquired in a hostile takeover in 2005, more acquisitions are planned.

"It's the time to buy," Bamps said. Actually, the company had planned a stock listing in the UAE this year to pursue its takeover plans, but the IPO has been put on hold for the time being.

"We will reconsider the listing next year because we see the market recovering in 2010."

By Arno Maierbrugger, Staff Reporter

Gulf News 2009. All rights reserved.