Slowly Turning Europe into Hog Heaven
If few things soothe the French palate like a round of Roquefort, nothing stirs the American imagination like the image of Peter Fonda's starred-and-striped Harley rumbling along the floor of Monument Valley in Easy Rider.
So, in late March, when European Union Trade Commissioner Pascal Lamy listed American goods to target in retaliation for the Bush Administration's steel tariffs, perhaps it was only fair that Harley-Davidson motorcycles were among them. After all, the U.S. did the same thing by aiming higher tariffs at Roquefort. In trade spats, it seems, national symbols make good targets.
HIGHWAYS AND INROADS. Harley may yet be spared from sanctions as Lamy's latest list doesn't include the Milwaukee-based motorcycle maker. But Harley definitely has a lot at stake in Europe. Thanks in part to the Old World's narrow streets and high gasoline prices, Europeans are major buyers of motorcycles. Indeed, they purchased 553,000 bikes with engines of 500cc or larger in 2001, vs. the 507,000 sold in the U.S.
Harley boasted European revenues of $302 million in 2001, around 9% of its worldwide total of $3.36 billion. And in the first quarter of 2002, its European sales jumped a healthy 16.6% -- less that its overall revenue growth of 19.6%, but way ahead of the paltry 3.7% increase in Japan.
The question now: Can Harley maintain rapid growth in Europe, even if it avoids becoming a victim of the transatlantic trade spat? The brand's big advantage is that many Europeans love the cachet of owning a Harley "hog." Even Federico Minoli, CEO of rival Ducati, concedes Harley is the "master of lifestyle."
"LONG WAY TO GO." Tara Genet, manager of Harley's flagship Paris dealership and herself a long-time enthusiast, sees the brand's mystique working its magic every day on customers. "It's a legend. For every French biker, the dream is to do Route 66," she says, flanked as she speaks by shelves full of Harley-Davidson sunglasses, jeans, keychains, shot glasses, riding gloves, helmets, and several tanneries worth of leather.
Still, Harley faces some major challenges in Europe. It may be the leader of the pack in the U.S. and Asia/Pacific heavy-cycle markets, but in Europe it trails Honda, Suzuki, Yamaha, BMW, and Kawasaki. John Russell, vice-president and managing director of Harley-Davidson Europe, attributes this to the nature of the Continent's bike market: "In Europe, 75% of the market is sports and sports-touring bikes and only 25% custom bikes. In the U.S., it's the reverse." Russell adds that Harley is "making improvements [in Europe], but we've got a long way to go."
Another reason Harley has lagged behind, notes Michael Millman, a New York-based Salomon Smith Barney analyst, is that it got off to a late start in Europe. "Until a few years ago, there was no [local] management structure," Millman says.
NO MOUNTAIN BIKE. Topography also plays a role. "Harleys are big, built for the wide-open road in Wyoming," says Ducati's Minoli. "Their functionality doesn't apply to Europe, where you need more of a light, fast-cornering bike. Try taking a [Harley] Electra Glide up mountain passes in the Alps for three hours, and you've got a problem." In Europe, he adds, Harleys are selling only on the strength of their lifestyle appeal, which he sees limiting the market for the big machines.
Louis Bailoni, an automotive analyst at ABN Amro in London, points to distribution as another hurdle. Under European laws, it's much harder to set up exclusive dealerships and maintenance shops for motorcycles than for cars. "All the big [motorcycle] dealers in the U.K., for example, are multifranchise," Bailoni says. "The competition for shelf space is very cutthroat, and it's more difficult for brands like Harley or Ducati that depend on a whole retail environment, with the clothes and the accessories and everything."
Still, Russell believes Harley's potential in Europe is significant. Despite the difficulties, 60% of its European dealers are exclusive, and an additional 30% have units dedicated exclusively to Harley, he notes. It also has been adding dealers at a quick clip: 50 last year, 40 the year before, and between 40 and 50 this year.
LURING NEW BUYERS. At the same time, Harley has been making a concerted effort to create the same sort of buyer's community on the Continent that exists in the U.S. The strategy seems to be working: Two-thirds of its European bike sales are to first-time Harley buyers, and last year's European rally in St. Tropez boasted 10,000 participants -- up from 2,500 five years ago.
Harley also is trying to tailor its products and marketing to local buyers. Back in 1997, having seen little change in European sales, CEO Jeff Bleustein admitted that "we have learned that, in addition to continuing to upgrade our infrastructure, we will need to adapt our products more specifically to European markets."
Since then, Harley has pushed its smaller Sportster line in Europe, as well as the sporty street bikes made by Harley's Buell unit. The real push for performance-oriented Harleys, however, bore fruit only this year, with the clamorous unveiling of the V-Rod. A sports model featuring an engine built in a joint venture with Porsche, it has earned universal acclaim in the motor press. Now arriving at European dealerships, the new model has long waiting lists of potential buyers.
Even Ducati's Minoli professes a hope that the American bike-maker will do well in Europe. "If you think about it, who needs a motorcycle? Nobody!" Minoli says, adding: "What we're selling is a dream." And, if nothing else, a Harley gets potential buyers dreaming of the open road. "Harley attracts customers and helps the market grow, and that helps us all," Minoli says. Indeed, it's probably only a matter of time before a lot more European riders go Hog wild
So, in late March, when European Union Trade Commissioner Pascal Lamy listed American goods to target in retaliation for the Bush Administration's steel tariffs, perhaps it was only fair that Harley-Davidson motorcycles were among them. After all, the U.S. did the same thing by aiming higher tariffs at Roquefort. In trade spats, it seems, national symbols make good targets.
HIGHWAYS AND INROADS. Harley may yet be spared from sanctions as Lamy's latest list doesn't include the Milwaukee-based motorcycle maker. But Harley definitely has a lot at stake in Europe. Thanks in part to the Old World's narrow streets and high gasoline prices, Europeans are major buyers of motorcycles. Indeed, they purchased 553,000 bikes with engines of 500cc or larger in 2001, vs. the 507,000 sold in the U.S.
Harley boasted European revenues of $302 million in 2001, around 9% of its worldwide total of $3.36 billion. And in the first quarter of 2002, its European sales jumped a healthy 16.6% -- less that its overall revenue growth of 19.6%, but way ahead of the paltry 3.7% increase in Japan.
The question now: Can Harley maintain rapid growth in Europe, even if it avoids becoming a victim of the transatlantic trade spat? The brand's big advantage is that many Europeans love the cachet of owning a Harley "hog." Even Federico Minoli, CEO of rival Ducati, concedes Harley is the "master of lifestyle."
"LONG WAY TO GO." Tara Genet, manager of Harley's flagship Paris dealership and herself a long-time enthusiast, sees the brand's mystique working its magic every day on customers. "It's a legend. For every French biker, the dream is to do Route 66," she says, flanked as she speaks by shelves full of Harley-Davidson sunglasses, jeans, keychains, shot glasses, riding gloves, helmets, and several tanneries worth of leather.
Still, Harley faces some major challenges in Europe. It may be the leader of the pack in the U.S. and Asia/Pacific heavy-cycle markets, but in Europe it trails Honda, Suzuki, Yamaha, BMW, and Kawasaki. John Russell, vice-president and managing director of Harley-Davidson Europe, attributes this to the nature of the Continent's bike market: "In Europe, 75% of the market is sports and sports-touring bikes and only 25% custom bikes. In the U.S., it's the reverse." Russell adds that Harley is "making improvements [in Europe], but we've got a long way to go."
Another reason Harley has lagged behind, notes Michael Millman, a New York-based Salomon Smith Barney analyst, is that it got off to a late start in Europe. "Until a few years ago, there was no [local] management structure," Millman says.
NO MOUNTAIN BIKE. Topography also plays a role. "Harleys are big, built for the wide-open road in Wyoming," says Ducati's Minoli. "Their functionality doesn't apply to Europe, where you need more of a light, fast-cornering bike. Try taking a [Harley] Electra Glide up mountain passes in the Alps for three hours, and you've got a problem." In Europe, he adds, Harleys are selling only on the strength of their lifestyle appeal, which he sees limiting the market for the big machines.
Louis Bailoni, an automotive analyst at ABN Amro in London, points to distribution as another hurdle. Under European laws, it's much harder to set up exclusive dealerships and maintenance shops for motorcycles than for cars. "All the big [motorcycle] dealers in the U.K., for example, are multifranchise," Bailoni says. "The competition for shelf space is very cutthroat, and it's more difficult for brands like Harley or Ducati that depend on a whole retail environment, with the clothes and the accessories and everything."
Still, Russell believes Harley's potential in Europe is significant. Despite the difficulties, 60% of its European dealers are exclusive, and an additional 30% have units dedicated exclusively to Harley, he notes. It also has been adding dealers at a quick clip: 50 last year, 40 the year before, and between 40 and 50 this year.
LURING NEW BUYERS. At the same time, Harley has been making a concerted effort to create the same sort of buyer's community on the Continent that exists in the U.S. The strategy seems to be working: Two-thirds of its European bike sales are to first-time Harley buyers, and last year's European rally in St. Tropez boasted 10,000 participants -- up from 2,500 five years ago.
Harley also is trying to tailor its products and marketing to local buyers. Back in 1997, having seen little change in European sales, CEO Jeff Bleustein admitted that "we have learned that, in addition to continuing to upgrade our infrastructure, we will need to adapt our products more specifically to European markets."
Since then, Harley has pushed its smaller Sportster line in Europe, as well as the sporty street bikes made by Harley's Buell unit. The real push for performance-oriented Harleys, however, bore fruit only this year, with the clamorous unveiling of the V-Rod. A sports model featuring an engine built in a joint venture with Porsche, it has earned universal acclaim in the motor press. Now arriving at European dealerships, the new model has long waiting lists of potential buyers.
Even Ducati's Minoli professes a hope that the American bike-maker will do well in Europe. "If you think about it, who needs a motorcycle? Nobody!" Minoli says, adding: "What we're selling is a dream." And, if nothing else, a Harley gets potential buyers dreaming of the open road. "Harley attracts customers and helps the market grow, and that helps us all," Minoli says. Indeed, it's probably only a matter of time before a lot more European riders go Hog wild
