Trailcraft complements boat business

A new producer in Western Australia’s caravan industry, Henderson-based Trailcraft, is making rapid inroads into the sector, which has traditionally been dominated by Fleetwood subsidiary, Coromal Caravans.

Best known as an aluminium boat builder, Trailcraft is aiming to be a major player in the caravan sector after just a year in the business.

Managing director Brett Martin, a WA Business News 40under40 award winner, was attracted by the caravan industry’s strong growth and the potential for continued expansion.

The industry’s growth has been extraordinary by any standards.

Recreational vehicle production, which declined during the 1980s and was static in the early 1990s, has tripled during the past decade to nearly 18,000 units in 2005, according to data compiled by the Recreational Vehicle Manufacturers’ Association of Australia.

In the current year, Australians are expected to buy about 18,000 new caravans, 2,000 motor homes and 1,650 camper trailers, according to the Caravan, RV and Accommodation Association of Australia.

As a mature, albeit fast growing industry, it might seem difficult to find a competitive edge, especially as the major players have also been expanding.

Coromal has recently completed its second major expansion in five years and now has about 280 staff at its factory in Forrestfield.

The big manufacturers in Victoria, such as Jayco, Supreme, Roadster and Fleetwood subsidiary Windsor, have also been expanding their production capacity, though in most cases they have been adversely affected by labour shortages, which have cut output.

In addition, small WA producer Western Caravans has been expanding, moving recently to new premises that will allow it to double output.

The challenge of breaking into the established caravan industry did not deter Mr Martin, who applied the manufacturing and marketing skills he gained in the boating sector to develop a business model that is distinct from his competitors.

He spent $1 million and 18 months on research and development before entering the caravan sector.

This started with knocking on doors in caravan parks to invite caravan owners to participate in focus group research.

That research produced some surprising results: for instance, most people felt their caravans were not solid enough and many complained that they leaked.

Mr Martin set about designing caravans that addressed these issues, for instance by building a sturdy steel chassis but including lightweight internal fittings to keep the overall weight down.

He also set about building a more efficient and faster production process, which features a custom-built cutting machine.

Labour comprises 50 per cent of total costs in Trailcraft’s boat factory, yet in the caravan factory next door, labour comprises just 15 per cent of total costs.

Trailcraft is currently producing about five caravans per week and is aiming to lift production to 1200 caravans a year.

That would enable the privately owned company to lift total revenue from $60 million currently to $150 million within five years.

Over the same period, Trailcraft is expected to double its manufacturing staff to 400 people

If Mr Martin achieves his goals in the caravan sector, it would match his success in the boating sector.

Five years ago, he bought a fledgling aluminium boat builder with two staff producing 10 boats per year. It now has 200 staff producing 1,200 boats per year, making it the biggest producer of plate aluminium trailer boats in the world.

“We’re excited to be where we are now, we think we’ve built a really strong brand,” Mr Martin said.

He acknowledged the decision to use the Trailcraft brand on the caravans was “a little bit of a gamble”.

It could have caused some confusion in the market, but on balance he decided to leverage the existing brand awareness, especially as many boat owners also buy caravans.

“It’s certainly paid off for us, we’re not just a start-up brand in the caravan market.”

A feature of Mr Martin’s business strategy has been a strong desire to maintain control over all aspects of the business.

As a result, he has never been reliant on bank funding, instead using the cash flow from his existing operations to fund expansion.

Last year, he raised additional funds by selling the 3.15-hectare Henderson manufacturing site to Aspen Diversified Property Fund for $8.4 million, which he said was double the valuation his bank had put on the property.

Mr Martin said the relationship with Aspen had developed further, with Trailcraft winning orders to build on-site caravans for some of Aspen’s parks.

He is also building a vertically integrated business, for instance by replacing external suppliers with in-house production of windscreens and upholstery for the boats.

Trailcraft also manufactures the trailers for its boats and has established a trucking business to transport its boats to the east coast.

Ironically, Trailcraft makes extra income by trucking competitor’s boats back to WA.

To boost its efficiency, Trailcraft has moved to a “production line” approach to manufacturing, which Mr Martin said was rare in WA.

It was only after he employed an operations manager who had worked in the automotive sector that Trailcraft was able to maximise efficiency.

A key aspect was giving each staff member specialised tasks and paying them on ‘piece rates’.

Mr Martin believes this boosts efficiency and provides greater certainty on labour costs.

He believes a lot of the knowledge and skills gained from the boating business are directly applicable to the caravan business.

“Inventory management and operational management are identical, and so is the sales and marketing and a lot of the customers you are trying to appeal to,” he said.

Mr Martin said one of the major lessons he learned was the importance of having accurate and timely management information.

“That was a major thing for us,” Mr Martin told WA Business News.

“If I could have my life over again, that is one thing I would make sure was right from day one, because if you can’t measure you can’t manage.

“There is nothing worse than finding out that what you did six months ago wasn’t what you thought it was.”

Those difficulties are now in the past, and instead the supremely positive Mr Martin says he is having the time of his life.

He is particularly pleased that the initial success in the caravan industry is only adding to the value of the Trailcraft brand.