8/28/2014 7:45 PM ET|
Winnebago rolls again
The iconic maker of motor homes is on the rebound. Can a flood of retiring baby boomers restore the company to its full glory?
Consider the Winnebago. Just five years ago, the brontosaurus of consumer vehicles looked as if it might be on the point of extinction. Sales had been sliding for several years before plunging off a precipice as the financial crisis deepened into a global recession in 2009.
That year, Winnebago Industries (WGO) tallied $211 million in sales, less than a fifth of the 2004 figure. The whole recreational vehicle (RV) industry appeared to be wheezing toward its demise. In what seemed like seconds, 20 players closed or were acquired.
That's why it's so surprising to see Winnebago on Fortune's list of fastest-growing companies -- it's No. 56 in 2014 -- for the second year in a row. (Or perhaps not so surprising, as we'll see.) Sales have come roaring back with the recovery -- to $803 million last year, and $884 million in the most recent four quarters -- though not yet to their peak of a decade ago. The company's market share has surged from 17.2 percent to 20.3 percent in the 12 months that ended in May, according to data provider Statistical Surveys. (Thor Industries (THO) is No. 1 with 24.6 percent.)
It would be easy to dismiss this as the latest boomlet in an industry famous for its cycles, were it not for a demographic tidal wave -- the so-called silver tsunami -- that has already begun: The retirement of America's 76 million baby boomers. The largest group of U.S. retirees in history has entered its prime RV-buying years, and Winnebago thinks it has precisely the right mix of nostalgia, adventure and cushy comfort they're yearning for.
That thinking was visible in April at Winnebago's annual Dealer Days, at which the company rolls out its newest motor homes. The convention's most anticipated event brought hundreds of RV dealers and a handful of financial analysts to a darkened hall in Las Vegas's Mirage Hotel.
By its reserved standards -- Winnebago is self-effacing in just the way you might expect a small-town Iowa company to be (and I say that as a native of Cedar Rapids) -- the company lit up the joint. There were flashing lights, and "The Age of Aquarius," the Fifth Dimension's hit song from the musical Hair, exploded just as the drapes fell to reveal a pair of boxy, upright RVs. To the untrained eye, they could have passed for shiny bread trucks. But this was a knowledgeable audience: There were gasps, a few whistles, and the roar of applause.
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The crowd-pleasing vehicle was the 2015 Brave, a model that harks back, in name and aesthetics, to the iconic motor home of the company's heyday. Introduced in 1970, the original Brave became the company's first sensation, easily recognized by its "flying W" logo and its bunk-over-the-cabin "eyebrow." (Until 1966, the company made only trailers.)
The modern Brave has all those retro trappings and then some: It comes in three color schemes (Mello Yellow, Crimson 'n Clover and Woodstock), with a choice of Cherry Cola or Cream Soda cabinetry. If those aren't enough historical allusions for you, there are also psychedelic, Peter Max–lite graphics on the website promoting the $95,000 vehicle.
Of course, the retro elements are limited to matters of style. The Brave's toys and accoutrements are very much of the moment: a flat-screen TV, a bunk with power lift and a Murphy-style sofa bed that can even convert to a dining table.
"Do you like it? Did it make you smile?" Winnebago CEO Randy Potts asked me eagerly when I mentioned the Brave on a recent visit to the company's headquarters in Forest City, in the heart of north Iowa farmland. The vehicle is something of a labor of love for the company, subject of a two-year creative process in which plans were scrapped more than once and its rollout delayed. Orders have poured in for the Brave, and Potts talks about it like a pleased, if still affirmation-seeking, parent. He says he told his team, "We only have one chance with this. This has to be something that makes people happy because of the memories."
People with lots of memories (a.k.a. retirees) are the company's sweet spot, and they make for a loyal and engaged customer base. Witness the 11,500-strong members of the company's Winnebago-Itasca Travelers Club, who socialize at spirited rallies across the country. According to the club web page, optional activities include "cow-chip tossing," a pastime that apparently predates even the Age of Aquarius. The company says it is also encouraging bicycling events and other more contemporary pursuits.
Company executives aren't about to ballyhoo the kinds of sales they think the Brave could deliver. They're too diffident for that sort of boasting. About as much as they're willing to allow is that the company could benefit from a "favorable demographic trend." But Winnebago thinks it could be a hit. If so, the company just might be able to break out of the boom-and-bust cycles that have trapped it for decades.
Winnebago Industries annual revenues
The era of the original Brave was a heady one for Winnebago. In 1971, its first full year as a public company, its stock rose more than any other, by 470 percent, according to the company's museum. For a time Forest City, whose population hovers near 4,000, claimed more millionaires per capita than any other place in the U.S.
Winnebago owes its existence to John Hanson, a Forest City mortician and camping enthusiast. Hanson was a civic-minded fellow, and back in the 1950s he worried that his hometown lacked industry and was losing young people who no longer wanted to work on farms. Looking to breathe life into the local economy, Hanson and others coaxed a California travel-trailer company to set up a factory in Forest City. It folded within a year, and in 1958, Hanson took over. He named the company Winnebago for Forest City's river, which itself was named for the Native Americans who originally inhabited the area.
Hanson also ran his family's furniture business, and he saw synergies with Winnebago. He outfitted the trailers with finer furnishings and sturdier walls, building the reputation for quality products that the company still carries today. (Hanson died in 1996, after retiring and retaking the reins several times.)
With the Brave, Winnebago took off, and motor homes quickly became the company's mainstay. The industry peaked in 1977, when U.S. shipments reached 160,200. During that period, Winnebago introduced a nearly identical second brand, Itasca, to maximize the company's showroom space in independent dealerships.
Things have never again been so sweet. The energy crisis gave way to an endless cycle of ups and downs, with sales bottoming out anytime fuel prices soared or the economy tanked. (So reliable is the pattern that RV sales are considered a leading economic indicator.) Winnebago learned to adapt: To protect its low-volume business in lean times, the company stopped carrying inventory and debt, the latter of which sometimes irritated investors.
Then came 2009. Just 13,000 motor homes shipped industrywide, less than a quarter of the 55,000 in 2007. Winnebago was pounded. The company shuttered facilities and laid off more than half its 4,000-plus workforce.
Potts, 55, an unassuming Iowa native and engineer, became CEO in 2011, 28 years after he started as a temporary tool designer at Winnebago. He saw in those dark days a rare and valuable opportunity to reshape the company. "I would get on my soapbox," he says, "and preach to my top management group, 'This is probably one chance you'll have in your life to regrow a business in your vision.'"
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