Middleby acquired Masterbuilt, Char-Griller and Kamado Joe at the end of last year. In their earnings call last week, they said that they’re working on consolidating the brands to drive up margin. At an investor presentation this week, they revealed more details on what that will look like.
It’s clear that Middleby is focusing on tech and innovation across their grill lines. All three brands have those themes running through them. Char-Griller will be their entry level grill brand, kind of how it’s positioned today. The brand mission “to be the global leader in affordable grilling innovation” may hint at that technology will roll out on the Masterbuilt line first, then trickle down. That’s the philosophy that Traeger is using with their new Timberline.
Masterbuilt is focused on being digitally connected. Middleby’s idea for this likely stems from their Gravity Fed charcoal grills. It’s a unique and patented technology that they’ve frequently mentioned on earnings calls. It’s a great platform to build on.
Kamado Joe’s mission is more experientially focused and it’s interesting that they specify “out of the box”. Perhaps that’s a nod to the innovation they want to bring so that customers don’t have to use aftermarket add-ons like with other Kamado style grills.
Betting on Charcoal
It’s apparent from Middleby’s presentation that they believe in charcoal as a fuel source. All three brands are mainly charcoal first, so it’s not surprising. One slide from their full deck says that they’re “positioned to capture charcoal resurgence”.
Their data on gas grills is largely inline with previous data that we’ve reported on. Where there’s a divergence is other data sets show a decline in charcoal fueled grills, while they’re showing an increase. They’re lumping all “alternative fuels” in one category, so we can’t see historical data trends on charcoal versus pellet. As an outlier, we’ll see what happens with electric grills as companies are pushing more into electricity as a fuel source.
Middleby showed a slide on how they segment their customers. It’s the normal beginner to expert and enthusiast, but marketing departments seem love naming those segments.
Outdated Market Data
Our biggest problem with Middleby’s presentation is that the market data they used to show growth all ends in 2020 and 2021. As we all know at this point, times weren’t normal for the outdoor cooking industry during the pandemic. It’s bad data to use years that include artificial demand. It makes it seems like they’re just trying to sell their strategy, or they’re clueless about the market. We’d like to think it’s the former.
To be completely clear, despite the headline on the slide, none of these are valid growth trends. It completely ignores the 2022 meltdown of the industry.
Middleby showed on the presentation how their going to unlock 10%+ in margin on the outdoor brand consolidation. Much of it is what you’d expect from acquisitions, they’re going to consolidate operations and use economies of scale.
The biggest news from the slide is on the sales side. They announced on their earnings call last week and show it here that they’re going to sell at specialty retailers. They even said previously that they’re planning a new Kamado Joe product launch for Q1 2023 at specialty retailers. They also plan on expanding their digital sales reach and into more global markets.