Is it possible Harley-Davidson is the “most American” brand in the global marketplace today? Here in the States you certainly won’t find a more patriotic brand. The first American to enter Germany after WWII rode in on a Harley – or at least so goes the popular myth. Since that time, it has been immortalised in nostalgic movies like The Wild One and Easy Rider. Popularity amongst homecoming soldiers has been passed on to their generational Boomer offspring in waves of nostalgia. Today it’s as American as bbq’s on the Fourth of July. Harleys are big, loud, and brash. They speak to some of the most American aspects of our nature; a lifestyle of exploration and non-conformism, the inner maverick in us all.
This is all buildup to me asking you a couple of questions. First, does that message travel? Harley sells over 60% of its bikes in the US. It has more than 50% market share in the US – compared to below 15% internationally. All of those attributes I listed earlier are generally what drives everyone else nuts about Americans. Australia actually represents one of Harley’s better markets, but are motorcycle enthusiasts there willing to buy in?
And second, are demographics going to be a long-term headwind for the company? The average Harley customer is white, male and over 35. Demand for motorcycles in the US has slowed considerably the last few years, and the Boomers are aging out of the market. Will future generations, less white and less ‘American’ in a traditional sense, have the same willingness to fork out a premium for the Harley badge?
At the 2013 Berkshire Hathaway AGM, Charlie Munger said “Any company that gets customers to tattoo ads on their chests can’t be all that bad.” Will the ink still be flowing in 20 years’ time?
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.