Seeking New Business During a Pandemic

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Seeking New Business During a Pandemic
A Jet Ski watercraft in action. As North American consumers shy away from travel and the automotive and aerospace industries continue to slump during the COVID-19 pandemic, some sectors – including sales of boats and recreational vehicles – are booming. © Darren Baker

Advice for lubricant manufacturers weathering the COVID-19 storm continues to point toward finding new sources of revenue. During a Sept. 16 webinar organized by the Independent Lubricant Manufacturers Association, agriculture and power sports came to the forefront as potential opportunities.

Annie Jarquin of Parsipanny, New Jersey-based consultancy Kline & Co. emphasized that surviving in the current market requires “understanding how to leverage your product features and the benefits that make you win, and understanding how to leverage those across other end-use sectors to maintain sales.”

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Panelists highlighted several specific markets where this could happen. As North American consumers shy away from travel and as the automotive and aerospace industries continue to slump, some sectors – including sales of boats and recreational vehicles – are booming, stated Scott Schwindaman of Wichita, Kansas-based Lubrication Engineers.

“This is a value area if you’re capable of hooking up with a tier 1 or tier 2 supplier,” he said, pointing to a watersports equipment supplier in the Wichita area that had already sold its entire allocation of Jet Skis for 2021. The business typically sells 1,000 such units per year.

Data from the National Marine Manufacturers Association in the United States backs up Schwindaman’s anecdote. According to its quarterly Marine CEO Sentiment Report, 39% of marine manufacturers reported business was expanding in the second quarter, and 49% said that business conditions were stable. The association also reported that June retail sales of new power boats were up a seasonally adjusted 6% from a record-setting month in May. Numbers published in August showed 2020 cumulative sales of personal watercraft up 10%, jet boats up 9% and saltwater fishing boat sales up 5% compared to last year.

Agriculture is another area of growth, Schwindaman said. The arm of John Deere in western Kansas “can’t get enough new large equipment down to lawnmowers for homeowners” to meet demand.

Farm equipment sales have indeed grown in both the U.S. and Canada. Year-to-date tractor sales in the U.S. were up 14% in August, and combine sales were up 3.6% – the fifth month of consecutive increases, according to the Association of Equipment Manufacturers. Sales in Canada increased year to year for the third consecutive month.

The trend seems to be picking up steam. In the month of August, farm tractor sales in the U.S. rose 12.8%, compared to the same month of 2019, while self-propelled combine sales grew 1 percent. Sales of four-wheel-drive units increased for the first time last month, climbing 14.1%. Canada’s tractor sales – mainly smaller units – gained 22% in August, and combines leapt nearly 36% over the previous month, AEM reported.

While some pandemic trends may be short-lived, farm equipment sales have potential staying power. An early September forecast from the U.S. Department of Agriculture’s Economic Research Service says farm income will increase $19 billion, or 22.7%, to $102.7 billion in 2020, continuing an upward trend that began in 2018.

Schwindaman also recommended that lube suppliers turn an eye toward small outdoor equipment, as well as servicing. “Don’t just look at an OEM opportunity,” he said. “Look at repair and maintenance of equipment.”

“COVID has really put the skids on [capital expenditures],” he explained, and companies are trying to make do with what they have. Most manufacturing sectors are unlikely to reach pre-pandemic levels of expenditure until about 2022. “Maintaining equipment will be a high emphasis.”

“There are opportunities in this,” Jarquin agreed, highlighting openings for metalworking fluid marketers. “As people delay purchasing a new vehicle, there are certainly opportunities for players serving those tier 2 companies that are producing aftermarket parts.”

Some lubricant customers may also want to shift into different markets, said Richard Camper of Pacific Precision Formulators in Vernon, California. Lube marketers should be poised to help customers identify those new markets, give them contacts and ensure they have the right lubricant products on hand. For example, he said, when moving into aluminum rolling from steel production or from cast iron to composites, manufacturers may need different lubricants to provide satisfactory performance.

Camper also believes that robotics will play a larger role in manufacturing as automakers retool for electric vehicle production.

Jim Carroll of Schaeffer Manufacturing in St. Louis, Missouri, also anticipates an expansion of robotics. As companies bring manufacturing facilities back from China to the U.S. in an effort to better control their supply chains, robotics will help ensure they are less dependent upon workers in the case of another quarantine or similar disruption. Applications include welding and distribution warehouses, among others. “This presents opportunity for lubes to be introduced,” he said. (For more on lubes used in robots, see this story from the June 2020 issue of Lubes’n’Greases magazine.)

“The dynamics in our economy right now are changing very, very rapidly,” Schwindaman said. “I encourage you to pay attention to capture value.”