Summer Outdoor Retailer (“OR”) Wrap Up
Denver hosted its first summer, and only second overall, OR the last full week of July. The OR show moved to the Mile High City last year after a long run in Salt Lake City given its growth and some of the key participants not seeing eye-to-eye with the State of Utah and its approach to the use of public lands. Denver was a great host, and attendance robust. Thousands of companies, from large to small, came to show off their wares and point the way forward for the outdoor industry. From my consumer investment banker point of view, interest and participation by corporate development teams and private equity firms was high, demonstrating the continued enthusiasm institutional investors have for this highly attractive space. Here are a few takeaways from my time on the floor:
The Growth of Pet Services (Part 2) . . . a continuance from last week’s #shoptalk blog
Returning to our discussion of the rapidly expanding pet services’ industry, the location-based pet care/pet hosting business is also evolving. Camp Bow Wow, a large franchisor of dog day and overnight care, was acquired by VCA in mid-2014, and since then numerous models have sprouted up in dense urban and suburban areas. Cities such as Boston, New York, Chicago, Dallas and Toronto, among others, have businesses that largely operate a hub and spoke model with the spokes being doggy daycare, and the hub being a hosting facility (oftentimes near the city’s large airport). While the model holds promise, few companies have achieved significant multi-market scale. Challenges include the cost of real estate, finding the right type of workers to service a highly demanding clientele (pet parents), and brand names that, while sporting strong local recognition, mean little in adjacent markets. Several players have also attempted to partner with large multi-family, residential real estate players and contract for the entire property where the service is part of renters’ lease agreements, akin to the cable industry’s model.
The Growth of Pet Services, Part 1
While it’s no secret that the pet products’ space has been viewed as attractive for quite a while (look no further than Nestlé’s reported pending acquisition of Champion Petfoods for approximately $2 billion), pet services have increasingly garnered attention and affection from sophisticated players due to its attractive macro dynamics, and in part as a means to “Amazon proof” a business model. Consistent with the humanization of pets, a host of services stands ready to serve these four-legged friends and their human parents. Offer a human service, wait a few years, and voilà, you’ll likely find the equivalent service for pets.
Seeking High (Growth) From Hemp
From raw seeds, to milks, oils, and protein powders, hemp has been making its way onto store shelves and into consumers’ homes at higher rates than ever before. Hemp is increasingly praised for its numerous health benefits and is becoming one of the new ‘it’ products.
What is Hemp?
Let’s start off with what hemp is not—marijuana. Often confused with its shagadelic cousin, hemp is derived from the same plant family as marijuana, but has less than 0.3% of THC, the psychoactive chemical compound in marijuana.
Can Increased Shipping Costs Put the Brakes On The Economy?
Consumer packaged-goods’ (CPG) companies nationwide are experiencing shrinking margins as the cost of shipping their products has increased substantially over the last year. Coca-Cola reported that their first quarter freight costs were up 20% in their North American division over the same period last year. This burden is being felt across the industry, with consumer goods’ companies Procter & Gamble and Hasbro, as well as food companies Danone and Nestle, citing rising freight costs as negatively impacting their 2018 financial performance.
Is the Keg of Craft Beer M&A Tapped?
Over the last several years, large and already-consolidated breweries have gone on a craft beer shopping spree – scooping up smaller, trendier brands to help offset sagging sales and diminishing market share. Large strategic buyers that include AB InBev, Sapporo, Constellation Brands, and MillerCoors have acquired over 20 craft breweries since 2014, representing a play by the stalwarts of the industry to freshen up their brand portfolios and tap into craft, the fastest growing segment of the $100B+ U.S. beer market. Lagunitas (acquired by Heineken), Ballast Point (acquired by Constellation), Goose Island (acquired by AB InBev), Anchor Steam (acquired by Sapporo), and Terrapin (acquired by MillerCoors), represent a few of the marquee acquisitions by the mass producers aimed at diversifying their beer offerings, expanding local presence, and integrating inventive brew masters.
JAB Holding Company’s Long-term Love Affair with the American Consumer
One name has dominated the headlines over the last few years in global food, beverage, and casual dining M&A: JAB Holding Company. It seems like every month a billion dollar deal is announced involving JAB, including the May 29th Pret a Manger acquisition for a reported £1.5 billion. Outside financial circles, however, few people know much about JAB. Is it a private equity firm? Family office? What is its source of capital, and why all of the sudden does JAB seem like the largest coffee company in the world?
While fairly established in some arenas already (e.g., the military, entertainment industry) brands and retailers are increasingly adopting augmented reality (“AR”) as a means of engaging with their customers. AR is a technology through which a view of a real-time, physical environment is “augmented” by digital information (typically visual or auditory, but other senses can be engaged too). In layman’s terms, a consumer directs his/her smart phone at a product on the shelf, and through an app, certain images trigger the AR presentation on the smart phone. The AR content can range from presenting a product tutorial, to allowing one to “see” inside the box, to communicating information on product options or upgrades, to simply conveying an entertaining brand “story” (regarding the latter point, check out 19 Crimes – an Aussie wine company).
Wine in a Can
You’ve probably never had a sommelier ask you if you’d like them to “crack one” for you….that could be changing.
Striving for the Top of the Food Chain in the Smart Home’s Explosion
The past two Consumer Electronics Shows have been defined by smart speakers—the Amazon Echo in 2017 and the Google Assistant in 2018, and those are just the tip of the smart home iceberg. Apple’s recent entry into the market makes it the final hardware-producing FAANG (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google) member to join the competition, and the countless consequent devices designed to interact with the budding universe of smart speakers means that there is no shortage of gadgets for eager consumers to integrate into their home ecosystems. This explosion of smart devices brings the Internet of Things (“IoT”) one step closer to household ubiquity. That is, we are accelerating towards a future where the interconnectedness of each part of the home—from our speakers to our locks—is so commonplace that we don’t even think about it, just like we no longer think about the number of electric appliances in our homes.