Zero to $500 Million: Lessons from Yeti
In the past week, I’ve seen Yeti stickers on at least four vehicles. In all my years prior to this, I’ve seen zero stickers on cars for any other cooler brand. Coolers are cool and all but who could’ve imagined that such a functional product could become an aspirational brand that entices people to put stickers on their cars? From zero to nearly $500 million in sales in less than 10 years in an old, stagnant category, Yeti is a remarkable success story and a real credit to those who pulled it off.
To be sure, Yeti products keep things cold far longer than most others…an important performance attribute in the cooler category after all. And they are tough enough to withstand a bear attack. Still, Yeti products had other attributes that maybe weren’t so advantageous from the outside looking in. Portability is often a meaningful benefit to consumers using coolers. Yeti’s sizes typically weigh five times that of a similar size competitive cooler. And they carried a retail price of 5-10 times the existing market.
Yeti’s recent growth trajectory has been astonishing: from sales of $90 million in 2013 to nearly $500 million in 2015. The brand affinity they’ve created has facilitated sales of Yeti-branded hats, shirts, and accessories. When was the last time you saw someone buying a cooler brand shirt? They’ve broken new ground in other ways as well. Gone are the days when coolers were stolen just for the contents inside. Yeti coolers have proven to be a serious bait for thieves.
Admittedly, I admire their brand and love their backstory. The founders, Ryan and Roy Seiders, grew up in an outdoorsy Texas family. Their father had a fishing rod sealant business. The brothers started their own fishing product businesses after college. Roy was focused on making aluminum fishing boats and his design allowed for the placement of coolers. As a large flat spot, a cooler could be a good standing platform to get a better view of the water. The brothers felt like the common coolers on the market weren’t up to the task. At a trade show, they found a Thai company with a heavy-duty cooler design and set about to market the product in the US. Ultimately, they had to adapt and design their own. More on their story here.
The cooler category at the time of Yeti’s entry was dominated by long-established brands like Igloo and Coleman along with other widely distributed multi-category brands like Rubbermaid and Suncast as well as the cheap Styrofoam versions. They all had two things in common: wide availability and low price. It’s pretty bold to see those characteristics and decide to move forward with something so radically different and wildly more expensive. Then again, it’s almost always far better to compete via differentiation than to try to outmaneuver entrenched low price competition with similar product and pricing.
Since Yeti has already been done, we’re probably not going to rush out to try to replicate their success in the same category. In hindsight, there are lessons to be learned from Yeti’s story that are transferable to other categories and businesses.
- Start with an outstanding product that delivers demonstrably superior performance benefits to consumers. Further, those benefits must be meaningful to your target consumer…in their eyes, not your own. If your 10 second pitch about your product is along the lines of “Our product is just like brand X, only better,” then you’re drinking your own Kool-Aid. As renowned marketing expert Mark Ritson is fond of saying, “If you’re in the business, your opinion doesn’t matter. You aren’t the consumer anymore and you don’t represent them.” Instead you should be hunting for products that allow you to say something like “Our product delivers this benefit that addresses a need unmet by competitors and we know from testing that consumers are willing to pay for it.” Sure, personal experience can help build insight but it’s important that insiders verify their opinions by talking with target consumers.
- Map the market, define the consumer segments currently using competitive or similar products, and determine your target consumers. These are all familiar, basic marketing steps, right? In my experience, I come across many businesses that don’t take the time to fully understand their own market. The typical litany of reasons almost always come up: they’re busy, they already know the market, they don’t have the money, doing that work won’t change anything. In my opinion, this time upfront is essential because it ensures a shared understanding of your market, agreement on target segments, and clarity in whatever strategy you decide to pursue. In Yeti’s case, they could easily see the market for the typical $20 Igloo cooler: nearly everyone, everywhere. Big market? Yes. Useful to Yeti? No. Their product concept came from identifying an existing and unmet need: durable coolers that people could stand on. And then they went after a specific segment where their product was most relevant.
- Find your niche and start there. Aim first at the consumer segment with the highest interest and greatest need. So what would you do to launch a product that is far different in performance from its competitive set and far higher in price? Well, if you’re the Yeti brothers, you’d go after the enthusiast. People who really, really need a product that performs like that and are highly likely to be willing to pay for it. Yeti identified that fellow anglers shared their need for cool stuff for a long time. They launched into that niche market which accomplished several things:
- Testability in a more attainable consumer and customer base.
- Focused resources in sales, marketing, and supply chain.
- Enabled word of mouth recommendations within their segment.
- Created consumer evangelists who believed in the product, talked about it, and carried the product to other market segments.
- Once your product is firmly established in your niche, build out from there. In a prior blog post, I wrote about Gorilla Glue and their success in building out from a niche. Think in consumer terms first and then distribution channel. Consumers who like fishing also tend to index high in other outdoor pursuits like hunting, camping, and off-road. As such, Yeti’s start with fishing enabled the product and the word-of-mouth endorsement to spill over into other categories. Success in the niche market allows you to build from a consumer base and it also demonstrates success in the channel that serves them. Prior success is a good sign to potential distributors, retailers, and investors as you look to scale up. Yeti was able to expand distribution from fishing/hunting retailers like Bass Pro and Cabela’s and across specialty retail, introduce new items into a welcoming market, and even attract substantial investment when they needed it.
- Look to bridge the brand to solidify long term growth. Success brings competition and imitation and those bring price pressure. Yeti is facing all three of those now. Igloo has launched their own heavy-duty series, retailers like Bass Pro have their own store brands, and even their cup offerings face competition from long-standing players like Stanley and newer innovators like Hydro-Flask. At this stage, the classic choices are usually broadening distribution by channel, by country, or evolving the product line up or down. Yeti chose an innovation route in sizes of their initial coolers and new entries in cups and soft-sided coolers.
As Yeti prepares for their widely anticipated IPO this year, it’ll be interesting to watch how investors react. Their past success will generate a great deal of attention. Investor interests though are in looking ahead and trying to assess how the company can sustain its growth. Yeti might be well-served to revisit the path that enabled their success: looking at product gaps and building from niche segments. Either way, Yeti’s success offers a useful blueprint for businesses in other categories.
Mike Irwin is an advisor, mentor, operator, and strategist. Drawing from his past as a startup co-founder/President, executive officer of a $1+ billion market cap company (WD-40), public company CFO, VP Marketing, global chief strategy officer, head of sales, and board member, Mike uses his diverse background to help companies grow sales, improve profitability, and scale up. He serves as an advisor, consultant, fractional or interim CEO/GM/MD, and on boards of directors. He’s also a community volunteer, youth sports coach, author, cyclist, and marathoner. Follow him at BottleRocketAdvisors.com, get in touch at email@example.com or connect on LinkedIn.
#ScalingUp #GrowthCompanies #GrowthStrategy #BusinessStrategy #StartUp #BusinessPlan #Yeti