ELKHART -- During one of the worst recessions to hit the recreational vehicle industry, two manufacturers have consistently outpaced their rivals and are emerging stronger and more dominant in the marketplace.
Forest River, a subsidiary of Berkshire Hathaway, and Thor Industries Inc., parent company of many towable and motorhome makers, have acquired manufacturers, opened new operations and gobbled marketshare throughout the downturn. As the entire industry prepares for the 48th annual National RV Trade Show, set to open in Louisville, Ky., this week, Forest River and Thor combined control 63 percent of the retail RV market.
Representatives from various sectors of the industry are neither surprised nor concerned about the long shadows these two companies are casting. Other manufacturers have been in the top spot before and if they do not continue to pay attention -- treating dealers well, building quality units for the consumers and providing a supply to meet demand -- they could shrink or close altogether.
"In the RV business, integrity matters and wrong decisions have consequences," said Debbie Brunoforte, former chair of the Recreation Vehicle Dealers Association.
BECOMING A POWERHOUSE
Forest River and Thor had resources, namely capital, going into the economic storm. Consequently, they were able to add to their portfolios while other RV makers were closing, contracting or just trying to hold on.
Forest River acquired industry flagship Coachmen in 2008 and has since opened towable manufacturers Prime Time and Shasta. Meanwhile, Thor scored a major win when it took over Heartland in September for $200 million and has entered the high-end fifth wheel market with the launch of Redwood RV.
"These two companies have found the magic out there," said Tom Walworth, president of Statistical Surveys Inc. "Both of these companies have used the resources that are available to them well."
Charting Forest River and Thor as they exist today, Walworth found the manufacturers have 63.2 percent of the retail market. And while they lost ground in 2008 and 2009, they still turned in better numbers than the industry as a whole.
Having the market dominated by just two companies is the "new normal," said Mark Bowersox, executive director of the Indiana Manufactured Housing Association and Recreation Vehicle Indiana Council. "It's a reflection of the fact that the industry is in a consolidation mode right now."
Forest River and Thor are bringing stability to the industry with their access to capital and growing marketshare, Bowersox continued. In addition, they are offering programs to help dealers, many of whom remain in fragile condition, that other smaller manufacturers are not able to do.
Walworth believes the duo survived the recession in such good shape, in part, because of their size and they carried less debt. Also, he said, the units they put on dealers' lots may not be the cheapest but they are giving consumers the best value.
NOTHING IS PERMANENT
However, in the RV industry holding the pre-eminent position does not guarantee permanent success.
Forest River and Thor could be vulnerable as production kicks up in the spring and summer, Walworth said. Historically, as the market improves past leaders have become stressed trying to meet customer demand, which would open the door for smaller manufacturers with similar products and shorter lead time to capture more marketshare.
Competitors like Jayco in Middlebury and Newmar and Gulf Stream Coach in Nappanee are not slouches, Walworth noted. They could increase production and gain additional retail sales.
Also, Forest River and Thor have to remember that relationships matter in the RV industry and any misbehavior will be regulated by the market, said Brunoforte, president of the Arizona-based Little Dealer Little Prices. For example, if either or both of the big players start dictating terms to dealers, like the automakers direct their networks, RV dealers would likely bolt and carry units produced by other companies.
Dealers are not under pressure to be especially accommodating to Forest River and Thor, Brunoforte said. The individual manufacturers that comprise both giants operate autonomously and independent from the corporate office so having a problem with one company does not translate into having a problem with the entire family.
"It's a small industry so you always want to make nice," she said. "You certainly don't want the reputation as someone who's difficult to do business with."
Rarely do buyers go to a dealership and specifically mention Forest River or Thor by name, Brunoforte said. Instead they refer to the towables and motorhomes by the brand names or, most commonly, arrive with no knowledge of brands or manufacturers and only have a list of features they want.
Still, Brunoforte conceded, some of the better known brands are made in Thor and Forest River factories.
While dealers, at least in theory, have the option of walking away from the dominant pair, suppliers are in a more precarious position.
The companies that make or distribute the components that go into an RV got squeezed hard in the ailing economy, Bowersox said. Consequently, with Forest River and Thor having somewhat of a monopoly on the industry, the danger arises that suppliers could be forced to sell at greatly reduced prices or cutting special deals for those two.
To Mike Rospopo, sales manager at JSI Corp., switching prices between manufacturers is the best way to for a supplier to kill its business.
Purchasing agents at all companies always inquire if they can get a better price, Rospopo said, adding he sees it as part of their job. But giving a cheaper rate to just one manufacturer can stir trouble for a supplier. Employees in the RV world are very mobile and when they sit behind the desk of companies that are not receiving sweet arrangements, the supplier could lose customers.
"You don't want to burn a bridge in this industry," Rospopo said.
Despite having the strength, Bowersox said Forest River and Thor are not flexing their muscles and strangling opponents in the market.
"I haven't seen anything where I would say they have intentionally done anything to slow down the industry or hurt a competitor," he said. They are growing marketshare by selling their products and not by stopping competitors from selling.
FROM THE LITTLE GUYS
Although the other manufacturers are clamoring in the remaining 37 percent of the retail market, they are not insignificant and incapable to making important contributions. In particular, Brunoforte noted many of the new products and innovations creating the pre-Louisville show excitement are coming from the smaller companies rather than Forest River and Thor.
Evergreen RV in Middlebury and Earthbound RV in Marion are examples of two companies -- small, startup manufacturers -- pushing the green movement in the RV industry, she said.
Bowersox and Walworth expect Forest River and Thor to maintain their kingpin status for the foreseeable future. More acquisitions and new operations are possible from the big two but, Bowersox said, the "entrepreneurial mindset" of Elkhart County will keep new RV manufacturers springing up.
Inevitably, Bowersox said, someone at Forest River or Thor will get an idea. He or she will think of doing something different and leave to start a new company.
FOREST RIVER VS. THOR IN THE RV RETAIL MARKET
Forest River has 28.4 percent
Thor Industries has 34.8 percent
* August 2008 to August 2009
Forest River down 24 percent
Thor down 23 percent
Industry down 29 percent
* August 2009 to August 2010
Forest River up 16 percent
Thor up 7 percent
Industry down 6 percent
NUMBER OF UNITS SOLD
* 2008 January through August
Forest River: 42,790
Industry as a whole: 203,778
* 2009 January through August
Forest River: 33,099
Industry as a whole: 143,897
* 2010 January through August
Forest River: 38,511
Industry as a whole: 135,792
Source: Statistical Surveys Inc.