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FOCUS PSB V-twin 18 •April 3, 2017 • Powersports Business www.PowersportsBusiness.com Victory closure allows Polaris to focus more on other brands BY LIZ KEENER SENIOR EDITOR When Polaris announced in early January that it was shutting down its Victory Motorcycles brand, the industry was aghast. Most people understood the closure — Victory hadn't been the success story Polaris would've liked it to be. As the company said in the announcement, "Victory has struggled to establish the market share needed to succeed and be profitable. The competitive pressures of a challenging motorcycle market have increased the headwinds for the brand." But there was still disappointment, as no one wants to see any brand in our already small industry falter. However, the closure of Victory means more investment and focus in Polaris' more success- ful V-twin motorcycle venture, Indian. Since Polaris acquired the brand in April 2011 and released its first all-new models in August 2013, Indian has been a highlight for the company. The year 2016 was another year of growth for Indian, Steve Menneto, president of Motor- cycles for Polaris, reported. In the 2016 fourth quarter, ending Dec. 31, Indian retail sales were up about 20 percent over Q4 2015. And the worldwide dealer count grew to about 400 by the end of the year. "If you think about it, we've only been in the marketplace for 3-1/2 years with our new products, and in 3-1/2 years we started at zero and having that many dealers, having officially we're up to 10 models with the Roadmaster Classic, so 3-1/2 years of continual growth and growth in dealerships and models. It's just kind of that start, so a good start, but as the old say- ing goes, 'You haven't seen anything yet.' We've got a lot in front of us, a lot of big plans and opportunities in front of us to continue to grow the brand and the overall business," Menneto told Powersports Business. The fourth quarter was the 16th consecutive quarter for market share and overall volume growth for Indian. Driving consumers to the brand, Menneto said, has been the historic brand, the value proposition and high quality of the products, the grassroots marketing efforts that put Indian staff face-to-face with Indian riders and prospects, and the passion of Indian dealers worldwide. "That's what we're striving for: to make great product, to continue to grow our brand and to continue to connect with our current owners and prospects in a grassroots, one-to-one level. I think that's what's making Indian an attractive brand to purchase," he said. VICTORY CLOSURE EFFECTS INDIAN Though Polaris struggled with its Victory brand, which it launched from the ground up for the 1999 model year, Menneto says the les- sons learned with that brand have led to a more successful Indian and Slingshot. "The learnings that we had with Victory plowed right into Indian and allowed us to make high-quality bikes right out of the gate and understand how to build a brand, under- stand how to build a dealer network, all of those learnings are coming through through Indian and making Indian a better division and brand and profitable," he said. "And our Sling- shot brand, under our Motorcycle division, is a profitable [brand], so when you look at it, you have two brands that are very profitable for us, and we're working on making them more prof- itable for our dealers and for us over the future, while we're satisfying our customers. So that's the benefit of Victory." Of course, he and others at Polaris have received a slew of negative comments from loyal Victory customers and dealers, who were disappointed in the decision, but it made the most sense business-wise, Menneto pointed out. "We clearly have been losing money over 18 years, and when we looked at it, and said 'OK, what does the next 5-10 years look like with investing a lot of different money in terms of marketing and building the brand and prod- uct?' the return on that investment and where we looked at the ability to grow that brand didn't meet the criteria that we needed to meet to continue to invest in the business with all of those losses. It would've resulted in more losses," he explained. "With that said, that was a tough decision. We had employees for years; we had upset consumers. Like you could imag- ine, we've received a lot of feedback that there's a lot of folks that didn't like our decision, and again, that's a tough business decision. It was not made lightly, and it's very hard to make that [decision] because we're very emotional about the Victory brand." The Victory closure could open space for competitors to take share from Polaris, how- ever, the goal is to strengthen the Indian brand in Victory's absence. "Our competitive friends will poke at it and say, 'Well they're not going to stay in Indian.' Well, that's ludicrous. That's what they're hop- ing from a competitive nature, hoping for that, but that's not going to happen. … We're going to be highly more competitive, and they're hop- ing for us not to be there, but they're going to have to reckon with us," Menneto said. The Victory closure opens more opportu- nities for Indian, as the brand can broaden its reach without having to worry about overlap- ping with its sister brand. "You're going to see different designs, per- formance bikes, being in segments that we've never been in before, different powertrains, so the excitement around what the future holds for Indian and Slingshot in terms of an addi- tional and more focused investment in two brands that are profitable, it's going to be really exciting for our customers, our dealers and for Polaris, so that's the upside of it," he added. Plans are to unveil those new models in the next two to five years. Of course Victory was also using electric technology acquired from Brammo in January 2015 in the Victory Empulse, and Polaris will continue exploring electric. "The electric technology is an interesting one at Polaris. They're going to think electric as a technology and a capability. And Polaris is bigger than just being a motorcycle division, so we actually moved our electric technology and capability into what we call central engineer- ing, or into our technology group, so we're trying to grow that across all of our businesses," Menneto reported. New innovations in Polaris' electric vehicles will likely be seen on the market in the next 4-10 years, he said, while an electric Indian won't be released for at least five years. "In motorcycle, for Indian specifically, we will have an electric bike. It will not be just taking the current Victory Empulse and just branding it an Indian. We'll be working on new bikes, but that's in our out-years. That's kind of years five and out," Menneto explained. 2017 EXPECTATIONS Though Indian clearly has a number of plans for the future, the brand's staff is also excited about the season raring up now. "2017 is starting out great. Like anything else, Jan./Feb. are small seasonality. We've done super in those last two months, ahead of last year, gaining market share, doing really well across our product line," Menneto said. "But like anything else, it's early in seasonal- ity, and with some of the warmer weather, you have to be a little cautious. Is it an early warmth, or is it going to be a strong year in the marketplace? We expect to do really well because of where we're at and still growing and more new bikes and getting the brand on its feet and starting to kick into another level, another gear. We continue to expect it to grow and do well." The Scout has been moving well, and Indian is growing share in that segment. The Chieftain with Ride Command has also been well received, since it was announced in July. "The Ride Command technology on our bikes, our Roadmasters and Chieftains that have that, they're growing even faster that when we didn't have [Ride Command], so that's very cool. We haven't had a full year of that yet, so we look at '17 as our mid-size business is going to go well," Menneto said. At Daytona Bike Week in early March, Indian unveiled its latest limited edition Jack Daniel's Indian Chieftain, following a suc- cessful rollout of limited edition Jack Daniel's Springfield and Vintage models last year. And more unveils are planned for the coming months and into the summer. "Between some of the introduction stuff that we did last year, heading into a full year of retail with Ride Command and then some of the new stuff coming out and our mid-size stuff, we're pretty bullish and excited about 2017," Men- neto said. Indian also plans to grow its dealer network in 2017, with the ultimate goal of reaching 300-350 dealers in North America and 200-250 outside of North America. "We don't want to go with huge distribu- tion," Menneto said. "We're trying to make sure that it's a very high-service touch, high connec- tion to the consumer and very well done, and you have to balance that as you start out of the gate, and that's what we're running right now. We want methodical, very well-planned dealer location adds over time." PSB Indian continues market share growth Indian has grown its cruiser market share with the popu- larity of its Scout models. u VICTORY SUPPORT Steve Menneto, president of Motorcycles for Polaris, says neither dealers nor consumers need to worry about Polaris' support of Victory Motorcycles, despite the closure of the brand. Polaris has committed to supply parts for 10 years, along with service and warranty cov- erage to Victory dealers and owners. "We did shut down our watercraft division; we're still 13 years later supporting it with parts and technical service and so forth, so we're not going to abandon our Victory cus- tomers and servicing dealers," Menneto said. The Indian Chieftain with Ride Command has been a hot seller for Indian Motorcycle.