RVBusiness had a rare opportunity on Wednesday, July 26, to have lunch in Elkhart, Ind., with Winnebago Industries Inc. President and CEO Mike Happe, who’s based out of the manufacturer’s Eden Prairie, Minn., headquarters and was touching bases with his company’s significant Elkhart-area divisional operations including Winnebago Towables, Grand Design RV, Newmar Corp. and Barletta Boats.
Of course, the main dish for us – other than the impressive cheeseburgers at Sports Time Family Pub & Grill – was an intriguing interview that touched on the market in general and Winnebago in particular, a company that has been coping with all of the same economic hurdles as the rest of the RV market. Meanwhile, we’re told, Winnebago’s marine brands – Barletta and Chris-Craft – have done comparatively well.
Suffice to say that Happe, who joined Winnebago in 2016 and recently earned Ernst & Young’s Entrepreneur of the Year Heartland Award, took the high road in his big-picture assessment of the RV marketplace as you can see in the following exchange:
RVB: Mike, could you give us a bit of your 30,000-foot view of today’s RV marketplace?
Happe: We still believe that the RV business is, from a long-term perspective, going to be very healthy. The interest in the outdoors continues to be very strong from an engagement and a participation standpoint. Younger, more diversified consumers coming outdoors for a variety of different activities continues to bode very well for the RV industry.
In the short term, there’s no doubt that customers are definitely more careful in terms of making a purchase decision as we stand today. I think a lot of it has to do with the affordability formula being challenged here in the last six to 18 months with the inflation we’ve experienced on the products and the cost of financing increasing for consumers. And, so, the combination of those two, I think, has impacted in more uncertain macroeconomic times the consumer’s decision on whether to buy something new.
RVB: So, in addressing the same question that the rest of the U.S. RV marketplace is asking right now, how does this current tough spot in the market play out in your opinion so that industry people can retrieve some sense of marketplace normalcy?
Happe: Well, I think most in the RV industry would agree that historically the RV industry tends to be on the leading edge of macroeconomic, challenging times, and I don’t think this time is any different. We obviously thrived and prospered in the midst of the pandemic for a variety of different reasons. But as the economy cooled in the later stages of the pandemic, the RV industry started to cool. And that shouldn’t be, I think, a surprise, given historical patterns or behaviors. I don’t think anyone knows if we’re at the trough (bottom) of the current cycle. I think we all hope we are, but I don’t think anybody really knows if we’ve seen the retail sales cycle hit the bottom of the valley yet.
But we at Winnebago Industries with our three RV brands (Newmar, Grand Design and Winnebago) are going to be smart, disciplined and optimistic — and we’re not going to get ahead of ourselves in terms of what retail will be in the future. We’ll look for signs of retail optimism and react accordingly with our strategies and production rates. But we’re going to be disciplined and confident in turning production rates higher only when we start to see retail velocity go the right direction and dealers comfortable with the inventory and the turns that they want to have in their business.
Listen, I think we’re in the later stages of the down cycle. I think we’re closer to the end of the down cycle than we are to the beginning. And I think we’re all hoping that as we begin another model year, as we begin another fall and then winter and spring retail show season, we’ll start to see customers get a little bit more comfortable with the economics of getting into the lifestyle.
RVB: So, is Winnebago healthy as we sit here today?
Happe: Winnebago Industries is a healthy, stable company, financially. The work we’ve done over the last seven or eight years has put us in a much stronger position financially to manage through difficult times and to invest strategically in our future when the time and opportunity is right.
RVB: The work you’re alluding to, we assume, is the company’s well-publicized diversification into the outdoor arena, something you’ve been pretty focused on, right?
Happe: Absolutely. We have five great OEM brands — three RV and two marine. We also recently made an acquisition with a battery company called Lithionics at the end of April, more of a vertical supply component. But we also will not only serve ourselves with Lithionics battery packs and other components and systems that they make, we’ll look to serve other OEMs in some of the outdoor industries as we can earn their business.
So, yes, we’re talking about the diversification of the portfolio, but also the overall health of each of the businesses and brands is obviously contributing to financial stability and the strength of the company. What I’m most proud of at Winnebago Industries over the last seven or eight years is not just that we’ve acquired great brands, great companies and great people, but that we truly authentically feel that those businesses are better after joining our company and have all grown in their own way strategically, financially and culturally. But they’re also contributing to the enterprise and the other parts of the portfolio.
Our culture at Winnebago Industries is about collaboration internally and working together to raise all ships as best we can. Every business and its leadership teams are accountable for their performance and their future, but they know they have peers and other resources within our company that they can turn to at any moment to help them work on a problem or what have you. We work very hard to try to lower organizational boundaries or silos at our company between our businesses or brands. That is, I think, a little bit different than most of our bigger competitors, but it works for us.
RVB: What, then, are the prospects in your view in the third week of September for the Elkhart RV Open House at which, we’re told, all three of your RV brands will be at separate displays, with Winnebago’s towable and motorized products on hand again this year at Elkhart’s Elcona Country Club?
Happe: We believe that the Open House is a very important week in the industry for the OEMs and the dealers, suppliers and other stakeholders to gather and collectively and individually talk about how we can do business together and continue to grow the industry. Certainly, this Open House comes during a downcycle and everyone will be very focused on finding mutually beneficial opportunities to grow together.
We are very cognizant of our dealers’ profitability. We’re aware of their long-term health. We want to work with them to earn their business on products and solutions that are right for them and can turn effectively on their lots and their showrooms and provide them the margins that they’re targeting. We also want to work with them on the inventory turn side, so this is where it would be a really important Open House: To hear everybody’s perspective on the industry from their point of view and to understand their sense of where we think the market is and when the headwinds are going to turn back into tailwinds.
RVB: Are you anticipating decent Open House dealer attendance?
Happe: We anticipate there’ll be strong dealer attendance. I think dealers these days are no less engaged in the RV business. In fact, in some ways they have to be more engaged to close every possible sale that they can. They’re watching their inventories very carefully. They want the freshest inventory and the models that are turning. And, they want to understand what’s new and coming so that they can plan for those models and bring them in and start supporting and retailing them.
I think what is changing, though, in terms of Open House attendance is that dealer consolidation is beginning to probably affect the total numbers of dealer representatives that some of the larger dealer groups are bringing. They may have more centralized inventory managers. So I think the leadership groups from some of the larger dealer bodies may, as consolidation continues, get a little leaner during Open House week. But I’m sure that will vary from dealer body to dealer body.