What’s Red, Green, Spicy, and Growing like a Weed? HOT SAUCE!
My family and I recently visited a beautiful, historic New England resort where I worked during two college summers. Exactly 20 years after my first summer as a tuxedo-clad server in the main dining room, I was excited to see the subtle changes at the family-owned and -operated resort known for preserving its dining room traditions dating back to 1910. While the same fine china, beautiful views, celebrated cuisine, and international wait staff were still present… the most noticeable change in the dining room was a respectable assortment of hot sauce bottles at each waiter’s station! Back in 1999, ketchup, the primary condiment, was only allowed to be served in a ramekin on a doily-clad side plate. In my mind, if the global hot sauce craze could reach the hallowed grounds of this main dining room, I wouldn’t be surprised if Queen Elizabeth herself kept a bottle of Cholula or Sriracha next to her marmalade at breakfast in Buckingham Palace.
It seems everyone wants to be viewed as a premium direct-to-consumer (“DTC”) model these days. But what exactly does that mean in today’s rapidly evolving landscape.
What passed for “premium” DTC in the past doesn’t necessarily hold up today, as sophisticated investors have refined the lens through which they view opportunities. With the passage of time, investors have come to appreciate what works (and what commands a higher price) and what doesn’t work.
Outdoor Retailer Summer Market Summary
I spent last week at the Outdoor Retailer Summer Market show (“OR”) in Denver. As usual, it was a good opportunity to connect with many folks and to stay abreast of developments and trends in the space. My perception was that traffic was slightly down from last year. The timing of the show was a bit unusual this year in that Grassroots Outdoor Alliance (“GOA”) was held the week of June 9th (GOA is a less “sexy,” yet highly efficient show; no fancy booths-just pipes and drapes) and several regional trade shows (including the California Outdoor Sports Show in Sacramento, 360 Adventure Collectives in NJ and SC, Western Winter Sports Representatives Association shows in CO and OR (Oregon, not the show) and the Outdoor Reps Association Summer Show in WI) all taking place the week of June 23. While the press and media tend to congregate at OR, specialty retailers likely pick a show or two – but not all. Another strong, but not always verbalized undercurrent, continues to be the dwindling number of retailers themselves.
Content to Commerce
The content-to-commerce revolution has begun. A new breed of enterprising businesspeople have started to “crack the code” on a powerful alternative to both the traditional media content model and the traditional wholesale/retail model. Content to commerce (c2c) is a hybrid model that recognizes the flaws and challenges of the traditional content model (relatively large upfront creative costs, reliant on creating or obtaining distribution) and of the traditional wholesale/retail model (crowded product spaces, concentrated power with certain large brick & mortar players, and the unrelenting inertia of Amazon’s online dominance), and through combination accelerates growth of both “content” and “commerce.”
What’s for Dinner? Meal Kit Fatigue!
The American diner is continually searching for ways to get dinner on the table quickly, as evidenced by the meal kit phenomenon of the last several years. The plethora of meal kit choices is almost overwhelming for the consumer. Need a paleo box? Options abound. You want to eat all organic? No problem. Vegan? There’s a box for that. While the optionality for the consumer is appealing, it highlights the challenges of the meal kit market – it is a crowded space with high customer acquisition costs and significant customer churn (not to mention the difficulty of managing perishable ingredients and challenging distribution dynamics). With numerous competitors in the space competing for consumers’ attention, such as Blue Apron, Hello Fresh, Sun Basket, Gobble, Home Chef, and Plated, just to name a few, it is no wonder that many of these companies are struggling to retain customers and turn a profit. As one data point on the challenges in the meal kit market and investors’ view of the space, Blue Apron’s (NYSE: APRN) stock is currently down more than 90% from its IPO pricing of $10 a share.
Public Investors are Hungry for Beyond Meat
Beyond Meat, Inc. (NASDAQGS: BYND) went public on May 2nd, raising over $240 million, and its shares received a rousing investor reception to the tune of a 163% pop by the closing bell. Should market valuations remain in the ballpark of $3-4 billion, or even half that range, the ten-year-old alternative protein company’s IPO will be seen as a smashing success for the founders and early investors.
Growing Diversity Amongst Outdoor Enthusiasts
If you’ve spent much time in the outdoors over the past twenty-plus years, you’ve certainly seen trends emerge and fade, fads take hold and then dissipate. One of the changes that has taken hold (and is here to stay) is the increase in diversity seen amongst participants in outdoor activities. There are a host of reasons as to why outdoor enthusiasts have tended to be predominantly white over the past several decades, but the most pronounced is simply demographics, and those are rapidly shifting. In 2010, 64% of the population was white, 17% Latino, 13% black, and 5% Asian. In 1970, those numbers were 84% white, 4% Latino, 11% black, and less than 1% Asian, according to analysis of U.S. Census data. Those trends are projected to continue, such that by 2060, the U.S.’s population will be 42% white, 31% Latino, 13% black, and 8% Asian.
Where There’s Smoke There’s Fire – a CBD update
I recently attended Global Pet Expo, and over the prior two and half months we also attended ICR, Fancy Food, OR and Expo West. To say CBD has dominated the conversation would be an understatement. In general, here’s a few seeds to chew on – I promise I’m not just blowing smoke . . .
Global Pet Expo Trade Show Review
I recently attended the Global Pet Expo trade show in Orlando and came away with the following impressions:
In what one would deem a highly unique marketing campaign (which should perhaps be dubbed Snack Wars), Clif Bar’s co-CEOs, Gary Erickson and Clif Crawford, have recently challenged competitor Kind Snacks to start utilizing organic ingredients in the Company’s snack lineup, which includes a variety of bars made from whole nuts, fruit, and natural flavorings. In an open letter to Kind founder Daniel Lubetzky published in The New York Times this week, the Clif team even offered to donate up to ten tons of organic ingredients to Kind to kick start the process, as well as lend expertise to Kind should they wish to reformulate their products to incorporate organic components.