Solo Brands 'deep dive' & Media Impact Value in the outdoors industry

Derek’s Deep Dive into The Outdoor Industry: Chapter 4.

Welcome, and thanks for reading. It’d really help if you could forward this email to anyone or any group you think might be interested. And if the email was forwarded to you, you can sign up for our free weekly Deep Dive here. Also, there is a poll three quarters way down - I’d sincerely appreciate you completing it. It’ll take 5 seconds! Your input is important.

In this week’s Chapter:

1. CRUA’s investment round is closing this week - the inside line and what’s next

2. Deep Dive - Solo Stoves, becoming an aggregator - Solo Brands, and …Snoop Dogg..!

3. Media Impact Value™ - is it a good barometer? And here is the list of the most powerful brands in outdoor wear worldwide in 2022 according to MIV.

4. Our brand new crowdfunding newsletter - what it’s about and why

5. New Product Development for outdoors brands - Don’t miss the wood from the trees - Step 1

Solo Brands - from an idea to major outdoor aggregator to….Snoop Dogg?!

Upon researching the Solo story, I’m baffled by the bullshit. Marketing jargon such as “Solo Brands exists to create good moments and lasting memories through outdoor activities”, a backstory on the website that mentions ‘two brothers’ but no founder names. A company that looks a lot older than its fourteen years.

Well, I can now say that the founders were Spencer and Jeff Jan. They grew up in the Canadian outdoors and saw the camping stove as an opportunity to innovate. Spencer mentions that they are ‘thinkers’ and not engineers, which I suspect helped them think about benefits rather than features.

Until 2016 the two brothers were still the only employees. They had no office & used 3PL and other vendors for what they needed. Astounding considering that five years later there was an IPO.

Spencer says that they decided to take some chips off the table in 2019 and exited the company, while staying on the board. The sod further in 2020 and left the board, which was then run by the PE firms. And the company went to IPO in October 2021. I’ve read the S-1 paperwork for the offering. By then Solo brands comprised of 4 D2C lifestyle brands:

• Solo stoves - the original

• Chubbies - the shorts

• ISLE - paddle boards

• Oru - the foldable Kayaks

Becoming this type of a niche aggregator in the D2C space wasn’t unusual at the time. Think complimentary brands helping each other with community and marketing, and the Opex economy of scale. But, the failures of Thrasio and Bentiago led a number of others that didn’t survive. So worth taking note.

Anyhow, back to Solo - from their S-1:

Really impressive stuff, to be fair. Of course, Solo brands timed their IPO on the back of inflated covid figures, but so did many others as 2021 had the highest ever number of offerings for one year. They went public on Oct 29th, 2021, at a share price of $18.36. And like many other of these companies that went public around the, Solo’s share price has plummeted, trading at $1.92 at the time of writing.

But, it must be said that Solo is fighting the fight. While sales have dropped, it’s not as dramatic a drop as some others in similar spaces, such as Weber and Traeger. Let’s take a look.

Full Year 2023 Highlights Compared to Full Year 2022 (from their full year guidance)

• Net sales of $494.8 million, down $22.9 million or 4.4%

• Net loss of $195.3 million, down $187.7 million

• Net loss per Class A common stock - basic and diluted of $1.84, down $1.76

• Net cash provided by operating activities of $62.4 million, up $30.0 million or 92.7%

• Free cash flow(1) of $53.3 million, up $30.2 million or 130.3%

• Adjusted net income(1)(2) of $54.8 million, down $10.2 million or 15.7%

• Adjusted EBITDA(1) of $70.2 million, down $17.4 million or 19.9%

• Adjusted net income per Class A common stock(1)(2) of $0.58, down $0.03

Some other notable plusses - 50% of their business is repeat. And this is key, in my opinion. While still loss making, innovation has been key in its evolution. It now has a host of new and related products - products that work, and are on brand. Patio heaters and tabletop pizza ovens for instance. But the key piece is they work. They add value to the users in a practical way. And that’s really important. When all the marketing crap dissipates, the product must work. And must have a USP - in this case it’s ‘smokelessness’. You can build the marketing, once the product works and solves a big enough problem. I love the smell from an old fashioned campfire but suspect I may be in the minority!

This is where Solo itself has excelled. While it has bought the other 3 brands, they are much smaller and niche. The Solo business still accounts for the majority of the business.

I mentioned Snoop Dogg in the title. Solo did a paid collab with Snoopy at the end of last year, when he decried he was giving up smoking!

“After much consideration & conversation with my family, I've decided to give up smoke. Please respect my privacy at this time.”

Genius. And Solo gained a huge amount of PR from the campaign. However, they didn’t gain the direct sales increase that the market would have expected. Exit one CEO - John Merris, who has since joined Flooret, and enter Chris Metz of Vista Outdoor fame, who the board obviously decided may be more in tune with market expectations. More on that in a later chapter.

Conclusion:

Despite the headwinds, the stove range has the key element on its side - USP. And they’re doubling down on increasing lifetime value, hence reducing blended customer acquisition costs. This makes sense, along with expansion into other more traditional routes to market. Whether they have hit a growth natural ceiling, and aggregation is their route to the next growth phase remains to be seen. I suspect that it is and that Met’s appointment is key here. Vista ran 41 outdoors brands at the end of his time as CEO, so it’s not his first rodeo. Watch this space.

Next week’s deep-dive is into Emerald X, the Expo company behind Outdoor Retailer and lots of Outdoor Media brands.

The Token Crowd

This is another brand new newsletter. As you may know, CRUA has its foundations in the CROWD, with Equity CF and Rewards based CF being in our DNA. I’m also enthralled by tokenization, and how it can add real value. I think that a lot of the use cases are, no pun intended, token. But I see a place where the democratized and decentralized digital crowd use Tokens as a proper utility and investment. Not just for the ICO rug pulls we witnessed a few years ago. We shouldn’t throw the baby out with the bathwater.

Anyway, you can sign up here to become part of the conversation - it’s free.