Solo Brands' acquisition of TerraFlame presents a 'year-round flame opportunity': CEO
Solo Brands CEO John Merris discusses the company's new acquisition of TerraFlame and breaks down how inflation has impacted consumer sales.
Video Transcript
- Solar Brands is lighting up the direct to consumer space with its acquisition of TerraFlame as it looks to build out its relationship with retailers. Solar Brands CEO John Merris joins us now.
John, you just heard my tirade on my building not keeping the grills open for long enough. So I'm just not allowed to purchase one of these and have it just propped up on the ceiling or the balcony or anything like that in its absence. So anyway, take us into this latest deal that you've struck because you've got a host of companies within your portfolio. Why did this one make sense?
JOHN MERRIS: Listen, we're solving that problem for you, and that's actually-- that was a perfect segue because this TerraFlame acquisition actually allows solar stove to go inside. So imagine being able to do s'mores in your kitchen. That's exactly what it's designed for. Whether it's just for a year round flame opportunity, it doesn't matter how hot or how cold it is.
But also in urban areas like New York, or Chicago, where you can take this clean burning fuel source inside. You can have s'more night with your friends and family members, make those great memories around the fire even indoors. So we're super excited about the opportunity to bring TerraFlame into the Solar Brands family.
- I love that, a year round flame opportunity. So talk to me more broadly, right, because what we are seeing in this business that-- aside from TerraFlame, your business is mostly catered to outdoor activities, right? Whether it be running around in your shorts, whether it be kayaking, whether it be sitting in your backyard around a solar stove, or now maybe inside around TerraFlame.
Most of it is geared towards outdoor leisure, right? Which we have seen people buy a lot of those during the pandemic, and then not as much more recently. So where are we cadence wise right now?
JOHN MERRIS: Yes. I think two things. One is, just remember that nobody's interested in going back to the pandemic and being pent up inside. So this Renaissance towards the outdoors has not slowed down. What happened during the pandemic as a pull forward. So people that maybe were interested and had been on the fence pulled forward during COVID. And so the demand doesn't look as high, but it's really just that there's a slowdown because of this pull forward.
So we see things leveling out right now and getting right back to a normal growth rate. You've seen the growth last year that we put up in 2022 in spite of a pretty interesting environment. We still grew over 20% last year, and then in Q1 delivering growth again. So we think we're at a stabilized place now. And we are seeing consumers-- and you guys are talking about it just a few minutes ago.
But the state of the consumer right now is not one that says, we don't want to have experiences. We're going to stay inside. We're not willing to invest in experiences. It's actually the latter, and nobody really wants to go back to staring at screens all the time.
And so in this environment, it's interesting because travel saw-- somebody said yesterday-- I love this term, but somebody said there's a period post-COVID where there was revenge travel happening. It was like, I don't care how much it costs, I'm going to travel because I haven't been able to. And I think revenge travel has slowed down and now people are looking for ways that they can prudently spend and invest in experiences, and Solar Brands becomes an obvious choice to be able to do those things.
- Yeah, amen not going back just in front of the screen, John. I want to ask you a similar question what I asked the Traeger CEO, even though, obviously, you have a more diversified business across the various outdoor leisure activities. What does that more normalized pace of growth look like? You said last year it was in double digits, 20%. First quarter, net sales up 7.3%. Is the 7.3% what a more normal long-term growth trajectory looks like?
JOHN MERRIS: So we have some cyclicality quarter to quarter because of seasonality. So Q2 and Q4 for us are bigger quarters, Q1 and Q3 are a little bit slower. It's right around the middle of that. So what we've guided towards is a long-term growth rate of around 10%, and that's what we think is a good normalized growth rate to expect to move from in this post COVID environment. So 10% long-term growth is, I think, where we're going to see things settle out.
- Take us into some of the other brands as well here I mean, I remember when chubbies were really popping off. I think it was about 2012, 2013. It was getting a lot of fanfare. Everybody was like, all right, the short shorts, the hoochie daddy shorts, as some of them might call it out there. It's having a moment, I guess, here. So so what does that look like? What are the future prospects now look like for chubbies? What kind of demand are you seeing there?
JOHN MERRIS: It's exciting, you know. And you're spot on, it started off as a younger customer demographic. Obviously, if we go back to 2012, 2013, 2014, and beyond, that younger customer base is now growing up a little bit, they're maybe having children. So we've launched family swim, which is the ability to match your trunks to your kids, which is a pretty big trend right now.
But also, last year and the year and a half, you've seen chubbies do a lot of innovation around athleisure wear. So golf shirts, longs, I like to call them pants-- we launched pants. But I say we have shorts and we have longs. I'm wearing a pair right now, beautiful stretchy pant that you can dress up or dress down. You can tuck in or tuck out with outerwear, so getting into warmer weather months.
But we're showing the ability to keep that customer engaged that was younger back in the mid teens and getting them back and continuing to be able to offer products in apparel that they're excited to wear. So we've still got that loyal customer base. We're continuing to innovate around that, what that customer wants, and seeing really, really nice growth and then the chubbies brand.
- Let's round this conversation out. Just a lot of fanfare within our own internal Slack channel about the kayak business too. Everybody wants a kayak in New York. We're not sure where we're going to take it. It's pretty hard to get on a subway too to ultimately get to your destination. So all of those challenges considered, where are the hot markets right now? Where, among the consumer demographic, are you seeing the most pickup too?
JOHN MERRIS: Believe it or not, it's actually in urban areas. Oru Kayak was founded in the Bay Area in San Francisco by an architect who loved to kayak but couldn't get his kayak in his Bay Area apartment. He wanted to be out on the water. So he figured out how to fold a rigid material that would unfold and basically, create a rigid kayak, but a small enough weight that you can make it portable.
You can take this kayak, you fold it into a box, the box is the kayak. It weighs 20 pounds, it fits in the back of a Prius, a taxi cab, whatever it might be, and allows you to enjoy water recreation, even if you live in the city. Chicago, obviously, has tons of waterways. There's plenty of water in and around New York, San Francisco. And so those are areas that are hottest.
The innovation around that brand right now is super exciting. They actually, just yesterday, launched Oru Outdoor. So Oru Kayak has shifted to Oru Outdoors. And they launched a series of outdoor camping furniture that uses that same origami technology so that you can unfold chairs, you can unfold tables that are super lightweight and portable.
- I think you've sold Brad and I, John.
- Yeah, we're into it, John.
- The folding kayak. Should we go in on this together?
- Maybe we still can't take it out in the Hudson River, John. I mean, it's just not safe. We'd have to like flex sail it afterwards.
- We'll take it to Coney Island
- I'm sure it's great. Coney Island, yeah, yeah, that might work. That might work. John Merris, Solar Brands CEO, thanks so much for joining us today. Really exciting to talk about the business.
