Family making barbecue in dinner party camping at night
gettyIt’s been little over a year since the pandemic unleashed a flurry of spending on consumers’ outdoor living spaces. A new survey conducted by Houzz among 70,000 U.S. consumers found that some 57% of consumers who undertook home projects last year focused on their yards, patios, decks and porches.
That heady pace is expected to continue in 2021. The Freedonia Group predicts the outdoor living market will grow from $29.3 billion 2019 to $33.4 billion this year, including spending on plants, landscaping and gardening equipment, outdoor furniture and outdoor cooking and heating products.
Besides patio chairs and table, the essential outdoor living essential is a barbecue grill. And after a patio improvement, that old cooker doesn’t cut it anymore. It’s time for an upgrade.
That is what Weber, the grill-market share leader and Traeger, the inventor of wood pellet grills, are counting on with their recent IPO filings.
And it is reported that BBQGuys, a leading multi-brand online retailer of grills, outdoor kitchens and furniture, and Solo Stove, a maker of self-contained fire pits that also double as a grill, also have IPOs in their plans.
The battle for the barbecue is heating up.
The iconic Weber charcoal kettle grill was first introduced in 1952, after sheet-metal shop owner George Stephen Sr. hammered out a model to improve his backyard barbecues. A steady-stream of grill innovations followed, including the introduction of a line of gas, electric, wood-pellet grills, smokers and in 2020 a technology-enabled smart grill. The company, then called Weber Stephen Products, was family-owned until 2010 when a majority stake was sold to BDT Capital Partners.
Today Weber is a multi-national company selling grills in 78 countries and boasting 24% global market share and 23% in the U.S. Some 58% of its $1.5 billion revenues in fiscal year 2020 ending September 30 were generated in the Americas. Europe, Middle East and Africa (EMEA) followed with 35% and Asia-Pacific (APAC) with 7%, a market with strong potential for the brand.
If fiscal 2020 was a good year for Weber, with revenues up 18% and net income rising 77%, then the first half of 2021 has been great. Year-to-date sales have reached $963.3 million, up 62% from previous year. By year-end, the company is projecting $1.9 billion in sales.
Weber grills are carried by nearly 5,000 retailers in over 31,000 locations. The company also has a robust e-commerce business, as well as 170 branded Weber stores globally. In 2020, DTC sales generated 20% of revenues and it has been going gangbusters since 2018, garnering 135% CAGR from 2018 through 2020.
In addition, Weber reports strong sales growth among its largest e-commerce wholesale partners, including Amazon.com, where it is the number one outdoor-cooking brand, HomeDepot.com and Lowes.com. Overall the company claims 29% market share in online sales of outdoor cookers.
Whether the pandemic-fueled spike in sales will continue past 2021 is still in question. Most recently, the company stumbled in 2019 when sales dipped 3%, which the company attributed primarily to fluctuations in exchange rates. The Americas, however, continued to grow, up 2% from 2018.
Nonetheless, the company believes it’s got the right stuff to continue going strong. It is given preferential display space at leading retailers, like Ace Hardware, The Home Depot and Lowe’s, where is holds 52%, 39% and 32% share of grilling category sales respectively. It’s also banking on continued strength in its DTC channel, along with growth through its e-commerce distribution partners.
And it sees extremely strong potential in Asia, Europe and Latin America. “Historically, the growth in our developing markets has been nearly two times the growth of our mature markets and we believe this pattern can be repeated as we expand in these emerging geographies,” the prospectus states.
Bloomberg reports its public valuation could rise to $6 billion.
Whereas Weber offers a full range of grilling options, Traeger specializes in one niche: wood-pellet grills. As such, the company estimates it has penetrated only 3% of its addressable market.
A Traeger grill doesn’t come cheap, ranging from about $500 to $2,000, with a reported $839 average price in 2020. However, given consumers’ need to replenish wood pellets and other accessories, the brand has a built-in, on-going revenue stream, which amounted to 22% of its $545.8 million in revenues in 2020.
It started off fiscal 2021 strong, generating $235.6 million in sales in the first three months. That resulted in net income of $38.9 million, which bettered that of the whole of 2020 with net income of $31.6 million. However, Trager came off an income loss of nearly the same amount in 2019 ($28.6 million) on $363.3 million in sales.
Traeger grills are carried by many of the same retailers as Weber in the U.S. and it also supports DTC sales online, though only 7% of revenues came through its website in 2020. It also has yet to expand globally, a company goal.
The wood pellets for its grills are made from 100% hardwood, so it provides authentic wood-fired flavor, which is one of its key selling points. Another is its instant, matchless start, powered by an electric coil. That gets you cooking as fast as with gas and much faster than with charcoal.
And because the fire is kept going by a fan to a specified temperature, a Traeger grill cooks via convection, so that it is able to do it all: grill, smoke, bake, roast, braise and barbecue.
The company is also heavily invested in technology to build a connected-grilling platform. Its flagship model comes equipped with the Traeger app that allows WIFI cooking control. To keep the tech-innovations going, it recently acquired Apption Labs, which specializes in hardware and software related to kitchen appliances, including a wireless, smart thermometer.
Traeger is bullish about its future prospects, most especially through its commitment to cloud-connected outdoor cooking. It estimates there are about 100 million grill-owning households in the U.S. and approximately one-third of them own multiple grills.
With its unique offering that combines age-old, wood-fire flavor with new-age, high-tech innovations, it hopes to be the next outdoor cooker for the next generation. All the same, consumer awareness of wood-pellet grilling in general and Traeger, in particular, is fairly low.
The company has an uphill battle to become the lifestyle brand it aspires to: “People talk about owning a Traeger, not a wood pellet grill, the same way people talk about owning a Peloton or a Harley-Davidson, not a connected spin bike or a motorcycle,” the prospectus states.
The New York Times reported the company is seeking a $3 billion valuation.
Following the filings by Weber and Traeger, retailer BBQGuys and fire-pit maker Solo Stove want to keep the IPO fire blazing.
BBQGuys, the online retailer of all things outdoor living and most especially grills, was acquired by Brand Velocity Partners (BVP) in September 2020. At the same time, it also acquired Blaze Outdoor Products, which have now been folded into the retailers’ offerings.
The Manning family of Eli and Peyton fame, who have become official spokesmen for the company, along with other NFL Hall of Famers, joined BVP as strategic investors. At that time, BBQGuys was said to have tracked a 27% annual growth over its 15 years of operation.
Now under SPAC Velocity Acquisition (NASDAQ:VELO), it plans to take the retailer public with a combined value of $900 million.
BBQGuys has reportedly built a strong following not just among consumers but with professionals responsible for designing and installing outdoor living spaces for high-end homeowners, including outdoor kitchens, televisions and lighting.
Newly-installed CEO Russ Wheeler joined the company right after the BVP acquisition. He hailed from Build.com, a leading e-commerce platform serving the interior home design community, which grew from a $250 million company to $1+ billion under his leadership.
Details about fire-pit company Solo Stove’s IPO plans remain sketchy. But it only makes sense after private equity Bertram Capital made an undisclosed investment in the company in September 2019.
Solo Stove started out in 2011 making small-portable stoves for backwoods campers that are fired by twigs found on the ground. But as interest in backyard fire-pitting grew across the country, it developed a full line of free-standing, stainless-steel and low-smoking fire-pits that can be used in the yard or on patios for both heat and grilling. Plus the company offers specialty wood and accessories to enhance people’s fire-pit experiences.
Fire-pits range from the mini Ranger at about $200 to the maxi Yukon for about $500. It also sells fire-pit bundles to add-on grilling capability.
Bloomberg reports Solo Stove is seeking a $1 billion valuation.
All four companies – Weber, Traeger, BBQGuys and Solo Stove – are banking on consumers continued embrace of the outdoor living lifestyle, which includes outdoor cooking as central to the experience.
Weber reports that in a survey of global grill owners, 85% of grillers expect to grill as often or more often after the pandemic than they did before. It also cites a Frost & Sullivan study that finds the total addressable market for grills is $49 billion globally and $9 billion in the U.S.
The question remains how often, after buying so many new grills in 2020 and into 2021, people will need to buy another one. Weber, trusted by an established base of 50 million grill owners, is the brand to beat. Traeger is counting on technological innovation as the motivation for existing owners to trade up, along with its expanded cooking options.
Solo Stove wants to be that add-on, fire-burning accessory that can sit alongside a traditional grill on the patio and do double-duty when it comes to grilling.
BBQGuys aims to be the first place people think of when making their next purchase, which may be a stretch given Weber’s entrenched DTC lead and Amazon and the leading home improvement retailers’ dominance in that space. But with Eli and Peyton Manning on their team, BBQGuys has running room.
Nonetheless, the logical time to make a new grill purchase is after a major outdoor renovation project or a move. All these companies can count on that given the investment homeowners have made and continue to make on the outdoor living spaces in their homes.
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