K2K has plans to disrupt the $US8bn adrenaline motorsports market
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For K2K Holdings, the global market for powered watercraft (PWC) is ready for disruption.
The company found some early traction with its line of Krash branded jet-skis, but CEO and co-founder Nick Barton has bigger plans for the future.
At the heart of the Krash product is Barton’s KV-997 drivetrain, which he developed following a successful career as a freestyle jet skier.
Speaking with Stockhead, Barton said the idea was was a by-product of the constant modifications he made to his own watercraft. In the end, he decided to make his own.
A mechanical engineering degree and around 4500 hours of product development later, Barton and his team had something new and improved; lighter weight but with more power.
“It weighs about 45kg and generates about 140 horsepower, so in one of our jet ski units it has almost the same power-to-weight ratio as an F1 car,” Barton said.
“So you can hit the throttle and get that rush but at the same time it’s only water — you can flip over or land on your side and have a laugh about it. That’s what a lot of people enjoy about our sport.”
Globally, the PWC market has sales of around 115,000 units but it is run as a duopoly, Barton says — two companies account for more than 95 per cent of sales.
The US market represents around 55 per cent of that and Barton highlighted that in the state of Texas alone, there are almost 100 PWC dealerships.
“To give you a gauge on the US market, we did a fairly conservative marketing campaign in the June quarter, with small social media spend. That converted into over 1000 enquiries and about $950,000 worth of sales.”
“People ask us, how? Well, the product’s already attractive. What we’re saying to investors is ‘OK, if we can put a bit more fuel on the fire it will really drive that sales growth’.”
The K2K executive team was in Sydney and Melbourne this week, pitching to raise capital via a $1.5m convertible note. The funds will be used primarily to ramp up production at the company’s Melbourne factory to around 85 units per month, along with some additional sales and marketing spend.
On the inventory side, K2K buys most of the components for its drive trains and ski hulls from other manufacturers, and assembles the products in-house.
“That allows us to run a just-in-time manufacturing model, which means we have to hold less inventory and we’re not relying on other manufacturers for finished goods,” Barton said.
And to get a US footprint, K2K’s strategy is all about “boots on the ground”. K2K has expanded its US dealer network from one to 26 stores across the country in 2019.
“We’ve got a presence there now because dealers are kind of like consumers in a sense. Once they see evidence they can sell your product, they want to order more,” Barton says.
“We’re very engaged with our US dealer network. As more direct leads come in we say ‘here are two sales for you, if you buy three more units on the back of that we’ll offer an exclusive stock agreement within a 30-mile radius.”
“Our space is a duopoly, so what we’re positioning for is to pick up 10-20 per cent of that market over the next five or six years,” Barton says.
Having begun as a manufacturer of competitive, high-end jet skis, K2K plans to expand into the leisure PWC market in 2020.
But more broadly, K2K has a bigger goal in mind; to get first-mover advantage in the shift towards hybrid, environmentally efficient models for the two-stroke combustion engines used adrenaline power-sports.
Conceptually, that creates an expanded market that includes not just watercraft but other vehicles such as snowmobiles and ATVs (quad bikes).
“K2K is really a tech company in terms of how we power our unit,” Barton said, adding that sometimes the company gets pigeon-holed as a WTC manufacturer in a niche market.
“Actually, the tech behind our drive train and product designs is how we power that, and it’s just one vertical within our operations.”
In addition to other vehicle models, the company is also applying its engine technology to different sectors including autonomous marine devices.
“Everything’s built around the drive-train tech that we currently have and the software that helps run it. That’s at the heart of what we do, and what vehicles or models we put around it — it could be anything.”