Trade Winds

A sail manufacturer rides the weak U.S. dollar to new markets overseas. But what happens when the greenback rebounds?

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Last June, Bob Pattison was sailing across the Atlantic in a 44-foot yacht when a monster storm hit. The wind kicked up to 55 knots. Swells reached over 20 feet. Many sailors would have faced such a violent squall with dread. But Pattison stared it down with confidence. The 46-year-old Las Vegas native had designed the yacht's sails himself, and he knew that they'd get the vessel and its crew to Crookhaven, Ireland, safely, no matter how treacherous the conditions. "When you're in the middle of the seas in a gale, you come to appreciate the work you do," Pattison says.

Back home, at the Milford, Conn., headquarters of Neil Pryde Sails International, Pattison and his partner, Tim Yourieff, are piloting their sail manufacturing business through rough economic waters. Until recently, the company derived 90% of its revenue from the U.S. market. But because of terrorism fears and the economic slump, Neil Pryde's sales to charter sailboat operators dropped 80% in 2003, as would-be vacationers nixed plans for cruises. That, coupled with fewer orders from other customers, sent Neil Pryde's revenue down about 11% this year. What's more, U.S. growth opportunities are few and far between: Sailboat sales have dropped 22% from 2000, according to the National Marine Manufacturers Association. All of which led the partners to a sobering conclusion: "Having 90% of your business in one market is dangerous," Yourieff, 48, says.

So the pair is charting a new voyage to the Continent--pushing to get their sails into the lucrative European boating market. High tariffs had long rendered Europe off-limits. But the U.S. dollar has lost considerable value compared with the euro, making Neil Pryde's sails competitive for the first time in years. But how does a lean, three-person operation become an exporter without major investment? And is it wise to base a strategy on fickle currency fluctuations, considering that the greenback will eventually make a comeback?

Yourieff, managing director, and Pattison, technical director, are no strangers to trying new tacks. Six years ago, their sail-making business was a division of a larger sports equipment company, Hong Kong-based Neil Pryde Limited, founded by the legendary New Zealand sailor and former Olympic competitor Neil Pryde. As the parent company expanded beyond sails to consumer goods such as gym bags and tennis racket covers, the duo grew frustrated at being just another business unit. So in 1997, Pattison and Yourieff purchased the sail-making unit. In exchange for royalties, they gained the exclusive license to make and market sails with the Neil Pryde name and distinctive, blue bull's-eye logo.

Yourieff and Pattison now manufacture about 4,000 sails a year--everything from $170 standard sails for smaller boats to $20,000 custom models that power former America's Cup racing yachts. Using proprietary software, Pattison and designer Scott Mogle design the sails in Milford and e-mail the specifications to manufacturing facilities in China. (All Chinese business is transacted in U.S. dollars.) Computer cutters slice sheets of fabric--from woven polyester to pricey, high-tech laminates--into panels that are stitched together on $40,000 sewing machines. Finished sails can weigh up to 250 pounds.

Since Yourieff and Pattison took over, the company's revenue has risen 10% annually on average, to nearly $3 million in 2002. "These guys have been pretty far ahead in seeing that if you take good fabrics and good designs, you can send those to cheaper labor markets and wind up with very good sails at very good prices," says Duncan Skinner, president of Contender U.S., a Fall River, Mass., fabric supplier to the sails industry.

That was true everywhere but the boating world's most prized market--Europe. Boatmaker Beneteau USA, Neil Pryde's biggest U.S. customer, for example, produces about 400 boats a year. The company's French division, by contrast, cranks out 4,000 annually. Unfortunately, tariffs of some 14% made Neil Pryde sails much more costly than European brands. The dollar's slide gave Pattison and Yourieff a rare chance to use exports to offset slowing sales and even expand.

For two lifelong sailors, crossing the seas in search of new markets seemed like a natural step. But the journey was potentially perilous. After all, Europe was new territory, with unfamiliar languages, regulations, and business customs. Scariest of all was the possibility that the dollar might rebound, raising Neil Pryde prices and forcing deep cuts in profit margins to stay in the game. Was it worth taking a risk?

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