Ryko Riding It Out

Economic slowdown prompted extended annual shutdown, but exec remains optimistic

Greg Lindenberg, Editor, CSP

GRIMES, Iowa -- Car wash equipment manufacturer Ryko Manufacturing is nearing the end of a four-week shutdown, extended from its traditional annual one-week break. Such seasonal shutdowns are not uncommon in the car wash industry, Dean Cheramie, the Grimes, Iowa-based company's vice president of sales and marketing, told CSP Daily News. But what does the extension of such a shutdown auger for the car wash industry in 2009?

"Ryko shuts down in January of each year for a full inventory, and because the car wash equipment business is typically slow in January due to [image-nocss] adverse construction situations in the northern markets and because customers typically want their immediate needs shipped prior to yearend," Cheramie said. "Ryko extended the shutdown initially to 2 weeks, then to 4 weeks, due to slowness in heavy equipment orders caused by the economic situation, and more difficulty for our smaller customers to get their funding in place."

He asserted that the shutdown will not extend beyond four weeks. He said the company is bringing some employees back this week to begin production on units that will ship the first week of February.

"Like other equipment categories serving the convenience industry, the car wash equipment industry has been slower than normal for several years due to delays in construction and rebuilding programs while the industry deals with major oil retail divestitures and wide fluctuations in gasoline pricing and margins," said Cheramie. "Recently, smaller customers have been delaying construction and equipment reload projects due to availability of funding; however this has been a real factor only in the last several months."

Ryko business is directly associated with monthly car wash counts. Counts at a particular location are subject to weather patterns, the offering at the store and competition. "We hear anecdotal reports that wash counts decline during periods when gas prices are rising quickly, and we believe that this is probably true; however we have not seen overall car wash counts decline during the economic slowdown," he said.

Cheramie added that chemical volume is another indicator of overall car wash volume "and we have not seen a decline in the demand for car wash chemicals." The company's Des Moines chemical blending facility was not part of the equipment plant's extended seasonal shutdown.

Despite the current tough economic times, Cheramie said he believes that the car wash equipment market will be "quite strong" as there is a large installed base of car wash equipment at convenience stores that needs to be upgraded and replaced on a regular basis. "Whether this happens in 2009 or later will be driven by the pace of major oil company divestitures, and by the availability of funding for the smaller convenience store operator," he said.

Mike Perry, owner of Total Marketing Concepts Inc., an Atlanta-based consulting and marketing company for carwash distributors and operators, told CSP Daily News that "2009 will be a challenging year for many businesses, especially so for the in-bay market.... The in-bay market started to slow down before the recession at the end of last year, because of the absence of any consistent marketing focus, and it will be slower than most retail businesses to recover."

He added, "Ryko is not alone in facing a shortage of orders in-house.... The in-bay market is under considerable strain, and faces significant challenges. These challenges are part of the overall downturn in the economy, but I fear that the in-bay market will not recover as quickly as other c-store suppliers, primarily because they have defined their role as a supplier so narrowly."

Many petroleum and c-store operators "have old and underperforming equipment, and many operators are not able to upgrade or replace their current car wash at a time when they face the prospect of a faltering economy for many more months, plus the added cost of buying a new piece of equipment," Perry said.

Perry said marketing is a key component. "The turnaround in the in-bay market will come not from another generation of new and improved car washes, but from a willingness on the part of distributors and manufacturers to help their mutual customers-the in-bay operator-to make more money with their current equipment," he said. "More revenues in the field will lead to more orders ultimately at the factory."

Ryan Essenburg, COO and vice president of Holland, Mich.-based Tommy Car Wash Systems, a car wash manufacturer, and Quality Car Wash, a retail gas station, c-store and car wash operation, acknowledged that the industry is in "very bad shape." He told CSP Daily News that the company grew last year by winning additional market share, not from industry growth.

Concerning 2009, he said, "Strangely enough, we still see continued new investors building car washes in '09, due to investors pulling money out of stock market and investing in personal business, as well as groups like grocery stores and car dealers building washes to supplement their income."