Nathan Ali Barber (00:02):
I had the most insightful and interesting conversation with Rupert Gatty, the CEO of CoolKit. They are the UK's leading manufacturer of temperature controlled vans. He talked about everything from his unique journey into the commercial vehicle industry and the hard work and determination that has propelled him in the business to the top of the industry. We talk about the problems that CoolKit solve for their customers, why customers choose to work with them over the competition, how they ensure the longevity of the brand, both now and over the next 10 years. We also talked about what the biggest growth areas are for the business and how COVID-19 has affected them and how they've responded. You're going to absolutely love the conversation. From Red-fern Media, this is ReMake Manufacturing.
Nathan Ali Barber (00:56):
My guest this week is Rupert Gatty, the CEO and owner of CoolKit, the UK's largest multi-award winning manufacturer of refrigerated vans. He has been in the industry since 1995 and their products are used by the food service, pharmaceutical, wholesaling, catering, sampling, and courier industries, and since 2010, they have grown the business by more than 40% year on year. Welcome into the show, Rupert.
Rupert Gatty (01:23):
Thanks for making me welcome, Nathan.
Nathan Ali Barber (01:25):
Well, I'm really looking forward to getting into your background and history and success in a lot more detail because you've been on a fascinating journey. So you get into the commercial vehicle industry in around 1995. Give us a thumbnail sketch of how you got into the business to begin with and what have been some of the most significant milestones that have gotten you to where you are in your career today.
Rupert Gatty (01:49):
Prior to getting into refrigerated vehicles, I'd been in the business of hiring and leasing equipment of one kind or another. And one day a friend of mine offered me an opportunity to help him to grow a fledgling business that had found itself specialising in renting refrigerated vehicles, having previously just been an ordinary everyday van and truck rental company. So we found ourselves specialising in renting refrigerated vans for a living.
Rupert Gatty (02:19):
After a period of fairly rapid growth, the owner of the business sold it and I worked for the company that it was sold to for a while. But following that, we decided that instead of renting vehicles for a living, we'd look at building these specialist vehicles for a living, such had been our frustration with the supply chain at the time. So we set about doing that by acquiring a company in difficulty.
Rupert Gatty (02:47):
That was probably going back to about 2002, but by 2005, it became clear that there was severe difficulties with this company and it was placed into administration. And that was the point at which I decided to go it alone. So I bought, what's described as the business and assets from the administrator and I incorporated CoolKit with just four employees. Well, since then, it's grown 20 fold. We employ about 100 people these days.
Rupert Gatty (03:18):
The greatest challenges, the milestones that you asked for, I guess, there have been plenty, but two of the most substantial ones, back in 2013, there was a whole load of additional legislation and regulatory controls that were known as Whole Vehicle Type Approval. And basically this meant they had to be instantly well qualified before you were permitted to modify brand new vehicles. So that put us in a kind of elite of people who carried the necessary certification.
Nathan Ali Barber (03:54):
Rupert Gatty (03:55):
More recently, just in the last year or two, there's been another new set of regulations, which are known collectively as WLTP, and it's the worst acronym in the world, but it's the Worldwide Harmonised Light Duty Vehicle Testing Program.
Nathan Ali Barber (04:11):
Wow. I preferred WLTP.
Rupert Gatty (04:14):
Yeah. Well, WLTP is all about the impact of what we do when we modify vehicle on its emissions, because obviously vehicle emissions are a very hot topic with the government's announcement that everything must have an aspect of electrification by 2030. So hopefully, that gives you a good background into how I ended up there, and some of the things that more challenging.
Rupert Gatty (04:41):
There are other things. We have to comply with the requirements of our customers' own regulations. So you mentioned in your introduction that we're in the business of providing vehicles for pharmaceutical distribution, and everybody in this COVID era will have heard by now of the MHRA, which is the Medical and Healthcare Regulatory Agency, and they set very demanding standards for the style in which goods are transported. So if I was to encapsulate the most challenging aspects of this in a nutshell, it would be regulation.
Nathan Ali Barber (05:17):
Really interesting. So we'll come back to some of those bigger trends a little bit later, and terms of how the market has shifted and moved over the years. What type of businesses do you typically work with? We mentioned some of them at the top of the introduction, but give us an idea of what the vans are typically transporting, who are typically some of your biggest clients.
Rupert Gatty (05:39):
Okay. So as you were kind enough to say, our customers are in the business of wholesaling food and pharmaceuticals. They also come from the catering industry, so whether that's industrial catering, like a canteen at a big factory, or whether it's catering at somebody's wedding, for example, there's a need to get produce to that place where the food's being served, and to maintain in a satisfactory condition until it gets there.
Rupert Gatty (06:15):
We also supply what I refer to as the sampling industry. What does that mean? Well, basically again, it's to do with regulation. If you think back to various food scandals, like the horse meat scandal, where certain retailers were accused of selling horse meat instead of steak, there's a lot of burden of proof on those retailers now to prove that what they're selling is as per description.
Nathan Ali Barber (06:46):
Rupert Gatty (06:47):
And therefore, a whole business has evolved, whose role it is to drive around food production plants, collecting samples of the products that have been prepared and taking them to a laboratory for analysis. And to be effectively analysed in laboratory, they need to be maintained in a regulated and temperature controlled environment. So that means that there's a job for us to do, to see to it that the product doesn't deviate from the temperature at which it left that plant or factory.
Rupert Gatty (07:21):
Going further with the sampling industry, each of the water companies around the UK, in the Northwest of England, where I'm based, that's a company called United Utilities, but there are others like the Yorkshire Water and Welsh Water, companies in every region. But they have a very serious obligation to satisfy the water regulator, Ofwat, who you may have heard of, the office for water regulation. They have to take samples of water from catchment area and from their sewers and wastewater locations to ensure that they're maintaining satisfactory bacterial levels in those fluids.
Rupert Gatty (08:06):
Then over and above that, we found ourselves satisfying the needs of the home delivery market, which is growing quite substantially and rapidly, especially since everybody's been housebound with COVID. Just recently, we've secured a large contract with a company called The Modern Milkman, who's seen real steep growth in demand for their services, delivering produce to the doorstep, in the style of the old fashioned milkman, but delivering a broader range of products.
Rupert Gatty (08:41):
Some of the businesses we deal with, particularly in the catering sector, they're very small businesses. They might be sole traders or small partnerships, or in some cases when we're dealing with some of the biggest pharmaceutical operations in the UK, we supply the companies that supply the high street names, Boots Chemist and Lloyd's Pharmacy. And obviously, these are huge multinational corporations, and therefore we've got to keep looking at how we're approaching our customers and how we're going about finding solutions to their widely differing needs.
Nathan Ali Barber (09:18):
Really interesting. So, as you said, you work with clients that have very different requirements, very different needs, and very different problems that need to be solved, but all with a regard to keeping very high standards as far as the temperature control in your vans are concerned. How do you ensure that the temperature is something that clients can always rely on? How are clients made comfortable by the fact that they know that the temperature that you set is the temperature that will be delivered, considering that they're transporting very valuable temperature sensitive products all around the country?
Rupert Gatty (09:59):
Well, there's two aspects to maintaining a temperature controlled environment. The first aspect is keeping out as much of the heat as you possibly can from the outside world, and you do that by effectively insulating the interior. So putting up a layer of competent thermal insulation that protects what's happening in the ambient temperature outside with the temperature inside the vehicle.
Rupert Gatty (10:23):
Now, obviously, that's always a compromise if we're going to retain the functionality of the original shape of the van, its original doors and that kind of thing, so that it's easier to get in and out of, and easier to use and easier to keep secure. So, because it's a compromise, it means that it's much less than perfect and some heat inevitably leaks in. So what we do is we fit a refrigeration unit in conjunction with the insulation, and provided you choose a refrigeration unit that can extract heat from the inside of the van more quickly than the insulation lets it leak in, then you can keep in control of the temperature, if you understand, by turning the refrigerated system on and off as necessary.
Rupert Gatty (11:05):
Now, of course it's all thermostatically controlled and automated, but to answer your question about how we precisely ensure the temperature can be relied upon, a lot of it's about testing and testing and testing, and about calibration and measurement, and through experience as well. Building large numbers of these products for our customers in these very diverse applications. To satisfy the needs, especially those in pharmaceutical wholesaling, we've had to submit our vehicles for extensive thermal testing, using facilities like the one operated by an organization called MIRA. MIRA is the Motor Industry Research Association, and they have climatic chambers for testing what happens in different environments.
Nathan Ali Barber (11:59):
Rupert Gatty (12:00):
And if we can satisfy the owner's requirements of those tests, it gives people a lot of confidence in what we do. But thereafter, it's all about providing an appropriate frequency and of maintenance to ensure that the equipment's maintained to a high standard, because being refrigeration systems that contain refrigerant under pressure, they're highly volatile and they're prone to failure if you don't look after them.
Nathan Ali Barber (12:29):
So why do clients choose to work with CoolKit over some of the other competitors that may be available to them in the market?
Rupert Gatty (12:37):
I suppose it depends on what type of business they are, because we sell to such a diverse range of customers, they value different things. So for example, if we're selling to a major fleet, quite often, whilst our agree on what we're building is with the end user, as we call the fleet that's going to be using the vehicle, our contract is, is often actually with a vehicle leasing company, which is often a bank owned entity, that's selling finance for vehicles. So they would choose us because they have confidence that we're highly accredited to all the standards required by the Whole Vehicle Type Approval and the WLTP that I referred to, and also that we're compliant with other standards that ensure that the vehicles are safe in use.
Rupert Gatty (13:30):
So for example, that might mean that we have to comply with standards that measure the ability of the vehicle to withstand the impact of a moving load in the event of a collision. So there's an international standard for how much weight a bulkhead, that separates a driver from his moving load, that the standard measures how much weight can be withstood in such an event. And if we can demonstrate compliance with that, then quite often we'll be chosen solely for reasons of that compliance because banks being largely risk-averse institutions will buy from vehicle converters who present themselves as the least risky proposition.
Nathan Ali Barber (14:17):
Rupert Gatty (14:18):
Now, at the other end of the scale, if we're dealing with a small business, it might be a butcher's shop for example, and he might only have one van. Now, this kind of buyer, he doesn't care too much about risk aversion or any other advanced accreditations that we might have taken. What he needs, if he's won a new contract, or if he's been unfortunate enough to be in a collision with his existing vehicle, or if it's blown up because it's become too old, what he needs is something really quickly, because if he has to rent a refrigerated van, it'll cost him a fortune, on a spot hire arrangement, like a daily rental arrangement. So he's keen to avoid that cost at all times, and he'll choose to buy a vehicle off us because we already built for him. And therefore he won't have to wait months for a factory to build him with and then maybe another month for me to convert or modify it. So that's a different kind of arrangement that he requires.
Nathan Ali Barber (15:23):
Rupert Gatty (15:24):
And then your ordinary, average, everyday food service company that forms them the mainstay of our customer base, they often buy from us for reasons of the productivity that they get from the vehicles that we modify. So what that means is we modify them using methods and materials which forfeit as little of the precious payload that they have left aboard their vehicle, which means that if they can carry more load on every journey, then ultimately they need fewer vans and fewer drivers, fewer risks, and fewer costs at large.
Nathan Ali Barber (16:01):
One of the things that springs to mind is what you said earlier around the trend towards electrification, that the industry seems to be moving towards, for obvious reasons, sustainability and the human beings damaging the planet as we are.
Rupert Gatty (16:15):
Nathan Ali Barber (16:15):
What are some of the challenges that CoolKit and other suppliers like yourselves have when moving towards greater electrification of their vehicles, and moving away from traditional carbon-burning, traditional engines?
Rupert Gatty (16:31):
Fossil fuels. Yeah.
Nathan Ali Barber (16:32):
Fossil fuels. That's the word.
Rupert Gatty (16:34):
Okay, Nathan. So that's a good question. It's the hottest topic in the industry really. Since the prime minister's announcement that 2030 was his new ambitious goal, the wheels have been turning much more quickly, and this presents a multitude of problems for us as converters of refrigerated vehicles.
Rupert Gatty (16:57):
So the most obvious ones perhaps are to do with the range of the vehicle and the productivity of the vehicle. So in terms of the range, everybody knows, or has heard the expression range anxiety. So when you're driving an electric vehicle, the chances are you're going to be very nervous about whether or not you're going to make it to the next charging station, whether or not you're going to have the right app to download any electricity. The concept of range anxiety is something that the motor manufacturers have to overcome to really boost sales of electric vehicles.
Rupert Gatty (17:33):
The way that this affects us at CoolKit is that if we need power of our own to make the refrigeration functional, and we're further depleting the vehicle's batteries by taking power for that purpose, you can end up with an even worse range scenario because the vehicle's battery is in fact, potentially powering two appliances, one being a vehicle, one being a refrigeration unit. So we have to choose equipment that only consumes a limited amount of electricity, or we have to provide an independent array of batteries, which means that the vehicle's own power source won't be affected by this additional item on board that's consuming electricity.
Rupert Gatty (18:26):
So by choosing cooling equipment, which A, is very efficient in its operation and suited to electrical powering, we have a choice of using either an independent or an integral power source, but whichever we choose is really important that we use really what I'd call heavy duty insulation. So it's at the high end of specification to make sure that that minimum amount of heat leaks into the vehicle, which in turn means that there's much less heat for the refrigeration unit to extract, and therefore it's got more chance of lasting a whole working day in operation before it runs out of power.
Rupert Gatty (19:09):
So the that's one aspect of it. And of course, the other that I mentioned is if we do go for independent battery arrays, then those are fine, but you've got to remember that batteries are pretty heavy things, and you have to be careful that you don't add too much unwelcome weight to the vehicle to render it dysfunctional in having a totally inadequate payload. On top of that, you can supplement your power on board by using onboard charging devices or by using solar panels attached to the outside of the vehicle, which can generate a small current, even in our climate, and it could make the difference between completing a day's work without fully depleted batteries or not.
Rupert Gatty (20:00):
So those are some of the things that are appropriate. The other thing in conjunction with the WLTP directive I mentioned is that there's a lot of focus on the shape and frontal area of a vehicle, with view to ensuring that it's as streamlined as possible. Therefore, we're studying closely the options to have refrigeration units, which don't have any visible external components and therefore, which have less potential to affect the vehicle's original aerodynamics. For decades, we've taken mechanical energy from an engine and almost overnight, we've got to completely rethink that. So that's the big challenge that we're all dealing with.
Nathan Ali Barber (20:44):
So let's talk a little bit about the growth of the business over the years, because as we said at the top of the show, you're the UK's largest leading manufacturer now of temperature controlled vans. How will you ensure that that growth continues in the same way over the next five to 10 years, let's say?
Rupert Gatty (21:03):
Right. Well, I think that's straightforward. Much as we have done over the last 10 years, probably the most important thing is that we continue to present ourselves as great innovators, and that's how my small company gets itself noticed. In fact, we've won numerous awards for innovation, the most recent in December, which was What Van? Award for innovation for 2021. And we were recognised by the judges for describing our selection of materials that we use in the construction of our conversions, which for the first time in this industry eliminates wood completely from the construction. What this means is that by using alternative lightweight materials, we end up with far better payload on board the vehicle, but also crucially for me as an employer, it means that some of the components that we're moving around in the assembly of these vehicles are much lighter and much safer for manual handling. So that's typical of one of the recent innovations.
Rupert Gatty (22:19):
Prior to that, we won an innovation award for producing a small insulated body for a local food service company, where they had a goal of carrying 1,200 kilograms on board. And this had been a challenge in recent times because the vehicles themselves keep getting heavier. Now, this time they're getting heavier because of batteries of motors, but previously they were getting heavier because of the need to add additional equipment and liquids to the vehicle. So you may have heard of the expression AdBlue, and AdBlue is a substance that treats exhaust gases, so there are few fewer nitrogen oxides emitted, and these are very unwelcome gases, which cause a lot of ill health and all sorts of unpleasant side effects. So we're recognised for coming up with methods of building body work, which forfeited far less of the vehicle's usable payload. So I hope I'm making sense and not getting too technical in terms of vehicles.
Nathan Ali Barber (23:32):
I think I'm with you still.
Rupert Gatty (23:34):
Right now, as we discussed this challenge of vehicle electrification to deal with, it is indeed a challenge, but it provides huge scope for creative thinking and identifying how to tackle the range of problems that this trend brings. It's a great thing to immerse ourselves in to stay ahead of other conventional thinking. Obviously, we've got to stay real good at what we're doing, and we've just got to stay ahead of, albeit a limited field of competitors. But there is a great deal of innovation going on elsewhere, and I'm never so arrogant and complacent as to think we'll simply prevail if we don't continue to think differently and to continue to position ourselves as a partner of great value to our customers.
Nathan Ali Barber (24:32):
So we've talked about what the next five to 10 years would look like and what the roadmap is for that success. What do you think are the biggest risk factors or the biggest blockers that will stop you from seeing that success that you've just outlined?
Rupert Gatty (24:47):
Okay. Well, probably the biggest threat in the short term, believe it or not is the availability of new vans because without new vans, we've got little to do. And the reason there are so few vans is the legacy of COVID-era factory shutdowns, where all the hand manufacturers in the world closed for several months during the first lockdown. And the legacy of that, coupled with other things that are very current, for example, there's a worldwide shortage of semiconductors that's often reported in the media these days, because I think what's reported is that during COVID, van manufacturers and car manufacturers have stopped manufacturing because their non-essential supply chains and retail outlets have had to close.
Rupert Gatty (25:41):
Whereas on the other hand, everybody residing at home and not going to work means there's have been a huge surge in sales of video gaming, and therefore the people who make video gaming consoles have commandeered supply of all the micro chips, and therefore it's reeking havoc for the motor industry as there's now an inadequate supply of these components. And many van manufacturing factories are working short time, or even closing for periods such as the acuteness of the shortage.
Rupert Gatty (26:13):
There are other things that are risks to us. Certainly now, we've past the Brexit transitionary period. Some uncertainty has been unlimited, but we're still finding it's taken a long time for supplies to go either way across the EU UK border these days. Another factor is of course the relationship between pound stealing and the euro, that has a huge potential to disrupt what we might attempt to produce our business planning models on, if the currency goes the wrong way, just by a small amount. So to hedge against that, we do some forward buying of currency and that kind of thing, to protect us against some of that volatility.
Rupert Gatty (27:02):
Of course, I don't know, the other threat that lingers whilst it's declining mercifully in the UK, there is still a COVID threat, and so we have to remain focused on upholding the recommended guidance for workplaces, regularly reviewing the implications of all the developments in that context. And on the bright side, of course, we expect a strong resurgence of demand as the economy recovers. And particularly as pubs, hotels, the licensed trade and the catering trades are permitted to reopen, I expect that we'll see a steep upturn in demand for our products to satisfy that growth
Nathan Ali Barber (27:43):
Really interesting. Rupert, we end the show every week with the same question that we ask everyone, which is tell us the one invention that if it was never manufactured, your life would be unbearable.
Rupert Gatty (27:59):
Okay. Well, that's a tough one because there's so many useful things these days, aren't there? But surely for me, it has to be the great invention of refrigeration.
Nathan Ali Barber (28:11):
How did I know you were going to say that?
Rupert Gatty (28:12):
Well, it was pioneered in 1902 by a man called Willis Carrier, who was actually trying to treat some air in a factory where they were having difficulty printing, but there was too much humidity. And he found that if you pass the air over some cooling things, you actually remove a lot of the moisture from it at the same time. So air conditioning was born, and the refrigerating systems that we use today are very much derived from that invention that's more than 100 years old. So that's probably my answer. Although apart from that, you got to ask yourself, Nathan, who could live in the 21st century without a smartphone?
Nathan Ali Barber (28:51):
No one. Not the kids. I can't. We tried to do this phone on an iPhone, which didn't work out. But yeah, that's probably a good one. Refrigeration and the iPhone.
Rupert Gatty (29:05):
Nathan Ali Barber (29:05):
Rupert Gatty (29:06):
Yeah. We need them both. Yeah.
Nathan Ali Barber (29:07):
Well, all it leads me to say is thank you to today's guest, Rupert Gatty. Thank you very much for being on the show.
Rupert Gatty (29:14):
Do you know, Nathan, it's been a great pleasure talking to you. I found it remarkably refreshing and stimulating having to address some of your questions, so thank you.
Nathan Ali Barber (29:24):
Really enjoyed it. Thank you very much. Please subscribe to this podcast in all the usual places, Apple Podcasts, Spotify, Amazon, and Google Music. Thank you for listening to this edition of ReMake Manufacturing. I'm your host, Nathan Ali Barber. See you next time.