Fascinating back story reveals how Yeti chartered choppy waters to become premium brand
Yeti’s third quarter figures make impressive reading – revenues up by 29% to $295m – 13% more than analysts predicted – and gross profit soaring by 45% to £174m.
The towering performance takes the company’s net sales for the first nine months racing past last year’s equivalent by 16%, with gross profit up almost 30%
But it’s in the back-story of how this14-year-old company founded by two fishing brothers and known for its $200 roadie coolers and insulated tumblers, has come to define its category that the real interest lies.
Yeti has chartered the choppy waters of a private equity takeover, overcome supply issues, taken the risky step into retail and ridden inconceivable COVID-19 tailwinds to surpass $1 billion in sales. En route, the Austin, Texas, business has persuaded consumers to routinely pay $300 for a utilitarian product – turning Yeti into a full-blown premium brand.
“Yeti has become a cooler the way Dyson is a vacuum cleaner or Canada Goose is a warm coat,” observed marker.medium.com. Yeti was founded by Ryan and Roy Seiders in 2006, the plan being to target anglers and hunters with a product that would keep ice solid and coffee hot. The proposition was well received and everything was cool.
However, within five years the company was finding it hard to make coolers fast enough and private equity investor, Cortec Group, excited by the potential for high growth, bought a two-thirds share of the business for a reported $67m. To drive rapid expansion, further remodeling was necessary. Yeti had created a niche where its cheapest product was an eye-watering $200. That changed in 2014 when it began producing drinkware, the company’s first products priced below $50 and today’s biggest revenue earner.
A year later Cortec named Matt Reintes – formerly head of Vista Outdoors’ $900m outdoor products division – as CEO. Growth continued and with sales up from $30m to $469 million since the takeover, Cortec opened a product development centre in Austin to keep pace with demand, accelerate new product ideas and guard against imitation.
It also decided to take Yeti public. However when wholesalers ended up with too much inventory after a booming 2015 and the brand impacted by me-too products, sales dropped more than 20% and plans for the initial public offering were shelved. Yeti finally went public in 2018, triggering a charge that saw the launch of new products and the opening of new outlets. With some 130 contracted brand ambassadors contributing to product development and amplifying the message, the brand was at full throttle.
Then along came COVID-19. Supply stalled, inventory was cut and new products put on hold. The share price dropped by more than half. Yeti’s six stores – its first steps into retail – were closed, along with its retail partners. Sales fell 25% in just a few weeks and the share price bombed.
With premium-priced products and profitable tumblers used by travellers no longer travelling, the company was poorly positioned to negotiate the recession. But then no-one could have predicted what happened next. As outdoor activities escaped the most rigid COVID restrictions, participation in Yeti’s key markets like fishing boomed as cabin-fevered consumers went wild. Within three months revenue was on the rise again.
A favourable shift in the channel mix towards direct-to-consumer saw online sales for the third quarter reach a weighty 54% of all revenue compared to 35% the previous year, the stock price rebounded and a comeback that Elvis would have been proud of was in the making. “Yeti’s improbable comeback reveals just how bizarre the state of our seemingly irrational and unpredictable economy is right now,” reported Marker.medium.com.
Cortec sold its shares in June, giving investors 20 times their initial investment, to let the company “fly free.” And, despite the onset of winter and the inevitable drop-off of new outdoor enthusiasts, Reintjes is confident the turnaround will endure. “We are focused on continuing the momentum through the 2020 holidays and into 2021as we build supply to meet demand across our omni-channel business and invest in the long term, sustainable growth of the brand,” he said.