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Supply chain difficulty ‘really isn’t hitting’ Marucci’s baseball bat production: Compass Diversified CEO

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Elias Sobo, whose company Compass Diversified owns Marucci Sports, discusses how supply chain issues have impacted the production of wood bats.

Video Transcript

DAVE BRIGGS: Wow. Better late than never, Major League Baseball has finally returned today as Opening Day-- seven games on tap today. The Red Sox and Yankees was the big one, but it was moved to tomorrow due to our wonderful weather here out East. So you'll be seeing plenty of these at Major League Baseball parks across the country.

What is this? Is a Marucci bat. Yeah, that one's custom made with my name on it. I'm going to need a new one. Compass Diversified Holdings acquired Marucci bats two years ago. They also own the number two bat brand in Major League Baseball, Victus.

We are joined by Compass Diversified CEO Elias Sabo this afternoon. Elias, nice to see you, sir, out there in sunny California. We appreciate that. We'll get into the economics of the moment in just a minute. Just how pleased are you to see the bats back at Major League parks-- the owners and players put aside all their differences?

ELIAS SABO: Yeah, thanks, Dave, for having me on this afternoon. It's really great to have baseball back. I mean, America's pastime, seeing our bats-- Marucci, Invictus-- in the hands of our players and you know how they're performing out there, it's a great day for Cody. It's a great day for Marucci. And it's a great day for America with baseball back.

DAVE BRIGGS: You've had plenty of issues. The last thing you needed was a prolonged lockout. Thankfully, they resolved that. Let's talk about those issues the last couple of years-- the supply chain, namely, and inflation. How much did that impact your business?

ELIAS SABO: Yeah, so, you know, Marucci is unique, especially on the wood bats that we produce for all of our Major League athletes. We are vertically integrated all the way down to the wood mills where we produce the pellets and produce the bat from up through final distribution. And so we control the complete supply chain.

It's all produced in the United States, final production done in our Louisiana facilities. So the supply chain issues that are plaguing so many companies really is not hitting Marucci on the wood bat side. And we feel very confident we'll be able to supply all of the needs of all of our athletes over the course of the season.

So we're in a really good position. Now, when we talk about supply chain and the aluminum bats, which is where we do the vast majority of our business, and that, there has been both inflation and supply chain issues. We've taken the approach that we're going to make an investment in the brand. We've done a lot of air shipping and expediting. Clearly, that is margin negative to do that.

But we think having product on the shelves for our retail partners has long-term payback associated with it. And it helps us as we expand into some categories that are adjacent to our core bat category.

DAVE BRIGGS: A lot of people just look at these bats and just figure they're all the same. How do your products, Marucci, Invictus, differentiate themselves from others on the market?

ELIAS SABO: Yeah, so, you know, it's a great question. And I think you realize being a big sports fan that there are a lot of Marucci Invictus bats in the Major Leagues. And that first bat that you showed was a very beautiful bat. And I'm glad it was custom made for you. We do need to get you another one here.

But more than 50% of Major League players swing our bats. And so the reason for that is really the quality. It is the consistency of the bat. We have our performance baseball league that a lot of our athletes use, where they come down and evaluate the swing.

We use a lot of technology to make sure that the dimensions of the bat are fit properly to them, the weight of the bat, the size-- there's a number of different characteristics that go into it. But ultimately, the reason that athletes choose our bats is because they perform better.

And they perform better because we own our own wood supply, we have a better quality wood that we're able to integrate in, and the yield that we have of quality bats that our athletes swing is higher than what our competitors have. And that leads to more confidence for our athletes, which is why they choose to swing both Marucci Invictus bats.

DAVE BRIGGS: And this company Marucci Invictus, how well do those represent the other brands, middle market, that you guys do own?

ELIAS SABO: Yeah. So we own a number of consumer middle market brands, companies like Boa, 511 Tactical, Ergo Baby-- so a really broad swath of end markets. But what you would find that is consistent across all of our companies is that we like brands that have enthusiastic followers. And so Marucci Invictus clearly have aspiration that's driven by such a large penetration in the Major Leagues.

We then go to a Boa, where the top athletes are using our lace replacement systems, whether it's snowboard riders or trail runners, to get better performance, 511 Tactical where the top operators are using our product-- first responders, whether it be CIA or FBI in the field. And all of that drives authenticity when the top users are using that product of their choice, and it creates an aspirational pull down through to the larger parts of the market.

And so we like companies that have that authenticity, that have that aspirational brand. And if you look across the six consumer businesses that we own, each of them kind of occupy an aspirational nature to their products.

DAVE BRIGGS: And a shocking part of my homework is Marucci bats are actually part of a new whiskey from David Ortiz, Big Papi and Whistle Pig. We don't have time to get into it, but that is a brilliant collaboration you guys have put together there. Elias Sabo, Compass Diversified CEO, appreciate your time today, sir. Thank you.