May 16, 2022 – On today’s podcast we have Blackstone Products CEO Roger Dahle. Blackstone Products is a design-driven company that is redefining the outdoor cooking experience with griddle cooking appliances and accessories.
On the show, Roger discusses:
- How he invented the home griddle and created Blackstone Products
- Why griddling is becoming so popular
- How they utilize social media and original content to drive brand awareness
- His favorite thing to cook on the griddle
- And more
Transcript:
Welcome investors to The Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies, your hosts, Julian Klymochko, and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate because performance matters. Find out more at accelerateshares.com.
Julian Klymochko: Welcoming Roger to the show all the way from cold Utah. How are you doing today, Roger?
Roger Dahle: Doing great. Thank you
Julian Klymochko: Really excited to get into the Blackstone Product story today. I have never actually tried griddle, you know, I’m more of a standard barbecue guy and so admittedly not a great cook, but I have aspirations. So, I’m looking for some tips from you today. First off, grilling is out. Griddling is in. Tell us what’s so great about griddling?
Roger Dahle: That’s an exciting question and many, many things. So, I’ll try to calm myself down and answer your question. So griddling is different from traditional barbecue grilling because we’re cooking on a flat surface. Our standard size is 36 inches by 20 inches deep and it has four burners on it. So, you have four heat zones, and you can have high, medium, low, across the griddle surface. So that’s number one, number two. And so, there’s no open flames. There’re no fires to put out and it’s just really super simple and easy, but really the biggest difference is, the food that you can cook on a Griddle compared to a traditional gas grill. Typically, when people think of barbecuing outside, they think of a steak or hamburgers, hot dogs or chicken.
Julian Klymochko: Yeah.
Roger Dahle: And that that’s been kind of the main dishes that you cook outside with a traditional gas grill or charcoal grill, but with the Griddle, all of a sudden, street tacos, fajitas, stir fry, smash burgers and breakfast, right. Pancakes, scrambled eggs, fried eggs, french toast, hash browns, a griddle completely unlocks hundreds and hundreds of meals that you couldn’t traditionally cook outside. So, you know, we like to say breakfast, lunch, and dinner, because you can cook every meal every single day of the year on your griddle, as opposed to a regular gas or charcoal grill.
Julian Klymochko: That makes a lot of sense to me. And I don’t understand why, you know, this hasn’t been around for longer than it has. You guys basically created the category from what I read online, you’re quite the inventor. Can you tell us where this idea came from and why did no one do it before you?
Roger Dahle: Well, yeah, interesting. So, I didn’t invent the griddle to your point. They’ve been around forever, but they’ve only been in commercial kitchens.
Julian Klymochko: Mm-Hmm
Roger Dahle: And that’s really the only place you could go buy a griddle if you wanted to. And you couldn’t find one to use on the patio or the backyard, and I was inspired by that. And I had cooked on a Griddle, and I had seen them being used at different things. And the first ones that I saw that really, really intrigued me were ones that were basically handmade in some guy’s welding shop. And they just got a big flat piece steel and put some burners underneath it and called it a griddle. And I thought, I want one of those, but I couldn’t find one for sale anywhere. And I knew instantly that is a home run item that needs to be put in a box so I can ship it to retail customers and people can enjoy it.
That’s back in, you know, as late as 98-2000, I kind of got inspired by the idea that I just kept working on it. And I had other projects that I was doing at the time. So, it was kind of a back burner thing for me, no pun intended. But I just kept working on and finally, one day I thought, you know, I need to get that done. And so, it’s kind of a funny story. I actually took out a yellow notepad with a pen and a ruler and drew it on a piece of paper. And at the time the company I was operating, I had a guy that worked for me that spoke Chinese and could travel and source for us. And I sent him overseas with that drawing, took us about a year to really get it where we liked it with prototypes, going back and forth and samples. And so, you know, in the early two thousand, late two thousand, we really started coming out with the griddle where we could actually produce it, manufacture it, get it at a really nice affordable price point, put it in the box and ship it to retail customers.
Julian Klymochko: Yeah. So, I love the innovation and you didn’t come out with the first commercial product until 2008. So, it seems like this idea, you know, it was kind of slow forming, but you really nailed it in terms of product market fit. Now from a customer’s perspective, one thing you did mention in terms of, you know, why would a gas, barbecue guy, or why would a pellet grill guy convert to a Griddle? You know, the assortment of food that you can cook on it. Are there any other competitive advantages over the traditional, you know, what people use?
Roger Dahle: Well, if I break down the industry right now and I’ll keep it really simple, you really have gas grills, charcoal grills and then pellet grills are really kind of in the smoker category.
Julian Klymochko: Right.
Roger Dahle: Because there’s Big Green Egg. And then there’s also Offset Smokers that use wood or charcoal chunks. But basically, that whole category is cooking your protein or your food at a low temperature over a long period of time. So those are smokers in general and then Griddles. And what we’re seeing in the industry is that pellet grills and or smokers are somewhat disruptive to the traditional gas grill industry as are griddles. And between those two, they definitely have the highest sales increases year over year or gaining market share where traditional gas grills are probably losing some market share, to me, here’s the really cool thing.
Griddles we’re actually helping to make the pie bigger. So, while we’re disruptive, we’re still getting the whole outdoor cooking arena bigger. And we do that by bringing more users to outdoor cooking who never would have gone there before. For example, we’re really proud of the fact that I believe we have the highest percentage of female cooks in the industry. Now there’s no statistic that I can show you that shows that, but our product is so easy to cook on. It’s not intimidating, there’s no flare ups, there’s no fires to worry about. You don’t have to go out and figure out how to start charcoal or you know, pellet grilling can be challenging. And there’s a learning curve to that. Cooking on a griddle is simple. We get pictures every day of moms and kids and, you know, from all ages using our griddles because they’re fast, they’re fun and they’re easy. And they just unlock food variety, like none other.
Julian Klymochko: Yeah, to me, it seems like it’s not mutually exclusive one or the other. I wouldn’t be surprised to go to someone’s backyard and see the gas, barbecue grill, the pellet grill, and then the griddle as a new addition. So, you guys carved out this cool new niche, clearly, it’s catching on in the market. And in terms of product development over time, you launched the initial griddle in 2008, but you’ve had pretty significant growth, their revenue in the hundreds of millions of dollars annually. So how has Blackstone Products line up in terms of your product suite? How’s that developed over time?
Roger Dahle: Well, it’s interesting. When we first came out, we had one size, it was the big 36-inch griddle, which is still my number one selling size, but we have, I kind of call them cooking platforms. Over time we’ve developed a range of sizes of Griddle plate that we cook on. We’ve developed some units that are completely portable and tabletop versions. We actually have an outdoor electric Griddle in the tabletop version in two different sizes. And then we also have gridles now that include hoods and cabinets with doors and drawers. So, it kind of hides the propane tank and we’re moving up in retail price point as we develop those bigger cart units that hide the tank and look a little bit prettier on the patio. So, we’ve got a wide range of product. And then we break that down into different portfolios of series, if you will. And we do that mainly to help with the retail distribution strategy. So, we can give Walmart a class of goods that’s mostly exclusive to them, same with Lowe’s, same with ACE Hardware and all the other retailers that we do business with. So, they each can go out and really concentrate on their demographics as far as customers and retail price point ranges. And that helps us too, because we have a huge variety of customers. Some people want our small portable units. Some people want the big 36-inch Griddle. Some people want something in the middle. So, it’s really developed into a wide range of product that we can offer the customer.
Michael Kesslering: Switching gears a bit here. Can you talk a little bit about the unit economics of your business?
Roger Dahle: As far as?
Michael Kesslering: Just overall profitability? I do know that you’re one of the few SPACs that’s coming to market that has EBITDA and things of that nature. So just overall what your profitability like? What it costs to build the product as well as the price point and overall margins and things of that nature?
Roger Dahle: Sure. I’ll talk kind of generally, because I don’t want to give my competitors exact unit cost, but generally when we sell our griddles, we’re selling those to our wholesale customers, our retail customers, we’re generating margins in the, you know, low 20-25% margin range. When we sell our accessories. We’re a little bit higher than that. The mid-twenties to the upper the lower thirties, upper thirties, in some cases. Last year, for example, we ended the year at 484 million in revenue and had 81 million of adjusted EBITDA. So that’s a good range for us. We operate very, very conservatively. We don’t have a big operating expense and we really, where we live and how we operate and the culture that we have at Blackstone. We’re a very conservative company, as far as operational expense is concerned. So, we have a really nice bottom line. We make money, we continue to make money. That’s our goal. We’re not trying to drive revenue and someday make money. We make money right now. And we plan to continue to do that.
Julian Klymochko: It’s nice when you don’t have a big head office in San Francisco or New York [laugh]. So, you got the operating expenses in line. Now, switching gears to the marketing side, you guys are really killing it. Just with respect to social media. Went a bit viral on TikTok and YouTube with respect to users, cooking videos, like, was this a plan marketing strategy? How did that develop?
Roger Dahle: Well, it’s definitely planned, but nobody can plan and say, hey, let’s go get a billion views on TikTok.
Julian Klymochko: [Laugh] yeah, no doubt.
Roger Dahle: You just can’t do that. Even if you try really hard and you got a lot of smart guys doing it for you, but it is absolutely planned. And what really benefits us is the fact that our appliances to cook on are so fun and so easy. And they’re all so fast, that completely lends itself to TikTok. You’re not going to go on TikTok with a 14-hour video cooking a pork shoulder, right. It just doesn’t quite work.
Julian Klymochko: Right.
Roger Dahle: But what you will do is go on there and show how you make smash burgers or how you do a street taco or how you make hash browns with the golden crisp on the outside. And that’s fast and easy and fun. We have an incredible in-house development team, social media development team. We produce content every single day. We post content almost on a daily basis, on a weekly basis. We’re posting content to all of our platforms, Facebook, TikTok, Instagram, Pinterest, YouTube, and then it’s just exploded. And it’s so cool because it’s all been organic. We haven’t paid for those searches. We’re not pulling them from one site to the other. This is organic use. And so, the influencers out there are our customers, and they love to cook something new, and they love to share it with family and friends. And from there, it’s just gone viral.
Julian Klymochko: And in terms of the social media and marketing that you guys do, so you have the influencers and the users of the product basically advertising it for you. But from what I understand, you also produce a good amount of original content that you put out there.
Roger Dahle: Yeah, we do. We have a really unique team in house. And one of them is a trained culinary chef and he posts every day. One of our in-house influencers is a guy named Bruce Mitchell. He was on the discovery channel. He was on swamp people. He’d go out and catch alligators. He was using a Blackstone online and we connected over time. And now Bruce is producing content for us. In fact, with Bruce, we’ve actually filmed 30-minute mini documentary style shows with what you would, might call soft advertising in the middle of it. But we just go and interview Bruce and go on his boat and go out in the swamps. And he catches fish and cooks them and talks about live. So, it’s phenomenal. Those are streaming right now on Roku and Amazon Fire Stick. So, they’re really fun to watch.
We have a lady who’s gone by the name of Blackstone, Betty and she cooks Italian style, food and seafood on a griddle, which you wouldn’t necessarily think you could do that. But the food she produces, and cooks is phenomenal. And she produces content on a weekly basis as well. So, the other thing we do, that’s really interesting is, we have a thing called the Griddle Moore Tour, and we support that every year. And we have a live demonstrator who goes out, he’ll visit key stores in key marketplaces, Walmart’s, Lows, ACEs, whatever we line up. And he’ll be somewhere over the summer at a store someplace demonstrating. And we post his tour online and he has such a large following now. He actually has people fans that will drive over a hundred miles to come and see him cook and get his picture and autograph. So, it’s just a phenomenal experience to be able to go out and watch him live at one of those events.
Julian Klymochko: It’s quite the rock star. Now touching on the business side of things. Exciting times at Blackstone Products. Announced a merger with Ackrell SPAC partners to bring the company from the private markets to the public markets and it’s happening at what could be viewed as an opportune time. I mean, the pandemic was pretty phenomenal for your category, outdoor cooking, because people were stuck at home. They’re buying more stuff for their home, because they’re not traveling. They’re not going out. And I’m sure Griddles were a beneficiary of that. So, you had this, you know, tremendous growth over the past couple years. How do you talk to investors with respect to look, we’re a sustainable growth story? We’re going to continue to grow in the future and have them not be too concerned that you know, it wasn’t just like a onetime bump?
Roger Dahle: Yeah. That’s a great question. And the pandemic absolutely benefited a lot of categories, the outdoor category being one of those and anything outside, whether you were grilling at home or improving the backyard with furniture or swimming pools or whatever the case may be, landscaping. A lot of that happened over the last couple of years. For Blackstone, it felt kind of normal because we’ve been growing at 65% a year since 15. So, we didn’t really feel the COVID bump. It felt like a normal bump to us. As funny as that sounds. The other thing that’s interesting is, we couldn’t really, even though there was increased demand, we couldn’t really take advantage of it because, you know, we have to plan our production cycles. We work on them on a yearly basis and then fine tune them as we get closer. But with the supply chain being extended and challenging as it’s been, it’s not like I could flip a switch and get another 2 million Griddles in stock in 30 days, you just can’t do it. So, for us, we didn’t really feel a normal pump. Going forward, the way we look at it, Blackstone is still a very young company. There’s still over 65% of the United States that have never heard of our brand. And so, our household penetration is still relatively low. And as we continue to do all of our social media outreach, marketing and advertising, as we increase viewership, and as we have more and more people come in contact with our product, that’s our growth cycle moving forward. So, we’re just in a different phase than some of my competitors in our company’s lifestyle. We’re still the new guy on the block and still up and coming and really on a product life cycle. We’re just starting to go up the bell curve. We’ve just passed the early adapters and innovators in products. And now we’re starting our way up the curve of the bell, but we still have millions and millions and millions of people who’ve never heard of our product. And as soon as they do, you guys will both want one by the time we’re finished today.
Julian Klymochko: I already do [laugh].
Roger Dahle: Yeah. And so, by the time we’re finished, that’s what happens. It’s funnier too, because earlier on we were talking about people having multiple cooking units on their patio, and that’s very true today.
Julian Klymochko: Mm-Hmm
Roger Dahle: But what we see happen all the time is somebody buys a Griddle. And after a very short timeframe, the gas grill or the charcoal grill either gets really dusty, or it gets a for sale sign put on it because they just quit using it and they just use the Griddle. So that just is going to continue as a trend. We might be bought as the second item, but when we get to that tipping point, when people go into the store to replace what’s burnt out or rusted out and you know what, let’s get a griddle this time as our main cooking device, because our friends, they say that’s all they cook on. We’re just getting to that stage. And so, we still have a huge amount of white space in front of us for growth.
Michael Kesslering: Absolutely. And I don’t think there’s any doubt that being a public company will really help with that brand outreach campaign. And so, I guess along with that going public, you chose a SPAC structure to go public. What stood out to you with the Ackrell team? As SPAC partner, what made it a good fit?
Roger Dahle: Yeah, so it goes back a little bit further than that in understanding what we were trying to do and really, you know, there’s myself. And my main Chinese factory is my other partner. And actually, the majority shareholder of the company, we recognize two or three years ago that we really needed to have a long-term goal in place and plan in place where we had the working capital, we need to support the growth of our business. And so, we started exploring options and we looked at everything. Refinancing, taking on personal debt, talking to VC groups about buying some of the ownership of the company. Everything you can think of except going public, which is kind of funny. We never really considered that as part of the plant, about a18 month process of investigating and talking to people and actually receiving written offers from some groups, we decided that none of those really fit and didn’t really meet the long-term goals that I had, and my partners had.
In the meantime, our financial advisor was Mike Ackrell and coincidentally, he had started a SPAC and Blackstone was not a target of the original SPAC partners when they put that together. They went out and the targets that they had fell through and didn’t work out and didn’t line up for them. And then what happened in our industry is some of my competitors were going public.
Julian Klymochko: Yep.
Roger Dahle: We were able now to really get a view of the financials and the evaluations that they were getting. And when we saw that, and of course I’m a little bit biased, but I’m like, we’re better than all of that. Maybe we should do the SPAC with you. And so, Mike talked with his group and one thing led to another and that’s really how we got to where we are. So just really over time fell into place.
Julian Klymochko: Now, in terms of this long-term plan and the growing public transaction, reading through the investor presentation, you discuss two major initiatives for the future of the company. One is international expansion and the second is margin expansion. What are some of the main drivers of success in terms of completing those initiatives?
Roger Dahle: Well, with international sales, quite frankly, it’s just getting dedicated resources. Our brand is already beating us to international markets. It’s interesting when a consumer product in the U.S. gets really popular, it starts finding its way around the world and we’re going into countries and there’s Ace dealers, for example, that are international dealers. And they come to the Ace Hardware shows and they see Blackstone and they start importing a couple of containers here and there. We don’t even know about it and it’s fine, but we go to some countries and they’re like, oh cool, Blackstone’s kind of here. And so international customers are already hearing about our brand. So, what I need is dedicated resources to get me there faster. And this year I’ve hired some folks internally, international sales manager, and then he’s building up a team. We’ve hired an independent sales rep in Mexico City, and we’re already having success.
We’ve got commitments for retail placement in Mexico City. We’ve got retail placement in Australia with two key retailers there. We have a very, I’m really happy about this. I’m not going to say the name, but we’ve got a great retailer in Canada. Who’s committed to carry our product going forward. We’re really excited about that. And then we also have a distributor that we signed on with, for the middle east countries and he’s taking orders. And I didn’t know that in Saudi Arabia that people went camping but they love it. And Blackstone has already made inroads there. So, it’s really exciting. The other thing we’ll do is attend a trade show in Germany, this coming June, it’s kind of the international outdoor cooking show over there. And we’re excited to attend that, but for really big international expansion. Part of the use of proceeds, I’m going to dedicate to hiring local folks in local countries, setting up some distribution facilities and centers so they can have great customer service and parts replacement on hand locally. So that’s my international plan. I just need to go there and show it to people and sell it. It’s not going to be that difficult. What was the other question you had along those lines?
Julian Klymochko: Margin expansion.
Roger Dahle: Margin expansion is kind of a multiple step process for us. You know, Blackstone, originally, I positioned Blackstone is a very value driven brand. We’re not a high-end premium brand. We love the fact that when someone takes our product home and they’ve paid well under a thousand dollars, they’re delighted with the quality that they get. It’s a great value. In addition to that, when they cook on the product and it performs so well, then they’re even more delighted. And I absolutely want to continue to drive the value that we give our end user customers. However, I need to improve my margins. So, there’s a couple of ways we’re going to do that.
First off, we’re expanding our manufacturing base and that gets me more competitive in Asia. We’re expanding into Vietnam, which will help mitigate a 25% tariff that comes out of China on our product line. And we’ll also be expanding to manufacturing here in the United States. So that’s a big part of it right there. Second part of it is driving more of our sales to our D2C business. Right now, our D2C is, well less than 5% of my total revenue. A lot of reasons why. Mainly is because I just haven’t had enough inventory to support a D2C business. And second off, I have to merchandise the product differently on online. So, if I sell Amazon a Griddle by itself, a 36-inch Griddle by itself, they have a much lower operating expense. As far as freight goes out to the customer.
I can’t compete with them. So, if I sell it to Amazon, or if I sell it online at the same price as Amazon and pay the freight out to the customer, it’s the same margin for me. But when I take a Griddle, make it a little bit unique, not available at retail, and then add a bundle with it, with some of my tools and spices and create an awesome value for the customer. Then I can take that same Griddle where I’m in the 20 to 25% margin and get it all the way up to 30 to 35% margin when I sell it D2C. So that’s a big initiative for us right there. And then, one of the other things we’re doing is just product mix as I mentioned. We’re introducing a high-end premium line of product, but it will still be very value driven and we will have drop in appliances for people’s outdoor kitchens.
And that whole product line just lends itself to higher margins, much higher margins, because some cases, it might be two step distribution, but that product category has a huge opportunity for Blackstone. And then eventually we’ll get into other product lines in the outdoor kitchen area that again have just higher margins as part of the business. So, when you combine all three of those, we’re able to take where we are today and start adding a couple of points here, a couple of points there to the bottom line and improve the whole margin structure of the company over time.
Julian Klymochko: Revenue growth combined with margin growth is a wonderful thing for investors. Now, another investment that factor that you highlight in your investor presentation is you, Roger. I mean, you’re the inventor, founder, CEO, and I should note you own a significant portion of the stock. Why do you feel that that’s important? Most investors know that typically are on average, founder led companies do better in the stock market. Maybe just care more, but besides that, is there any other highlights that investors should know about?
Roger Dahle: Yeah. well, I certainly care about as much as you can, right. This is, you know, you almost get very sentimental about that conversation if you’re me, this is the culmination of a lifetime of work in what I call retail distribution and selling consumer products through mass market retailers, which I’ve done for almost 30 years now. And, you know, you just don’t get this ride very often where a product comes along. That’s disruptive, that resonates with the customer, that is a great value to the customer and disrupts a whole category, creates a whole new category. Those chances are very, very rare. And so, you know, to come on and get it started and then exit with a big check to me would just be the worst thing you could possibly do. I have no motivation to do that. This is just way too much fun. And there’s so much, there’s so much cool product we have coming out. I can’t wait to expand our categories and our offerings and just see where this thing goes. So, yeah, there’s no way I’m slowing down. This is just way too much fun.
Julian Klymochko: [Laugh] that’s great to hear. Now Roger, prior to letting you go, one last question, it’s a fun one. What’s your favorite thing to cook on the Griddle? Any good recipes for us?
Roger Dahle: Well, I’ll tell you what, you got to make smash burgers on the Griddle. I don’t know what it is, but you get your hamburger. And I use 80-20. I know some people like, you know, 95-15 or 90-10, but you get some good 80-20 hamburger, and you make a ball, bigger than a golf ball, a little bit smaller than a racket ball. And then you get a white onion, don’t do yellow or red, get a white onion. And if you have a mandolin or a slicer, you slice that onion, just paper thin and get a huge pile of it and then get, believe it or not, American cheese and regular buns. And so, you take your balls of meat and you put them on the Griddle and then you use one of our smashers or just a big spatula. And you put a big pile of white onions on top of it and smash it down.
And when that meat smashes out, it’s not going to be around patty. It’s going to go all over the place in irregular shape and have little pockets where it actually smashed clean through. And that’s what gives it all the flavor. And it cooks really fast. And so, you put the onions on top and when you flip the hamburger and only with two to three minutes, you have to flip the hamburger and then you put the cheese on top of that and a bun on top of that. And then the hill of the bun on top of that, just let it rest. Some people like to put their buns on the Griddle and toast them, but I just put them on top of each other. And then within just a few minutes that thing’s ready to take off and you lift the bottom bun off, put the spectacular under it and put the hamburger on top of the bottom bun.
And then I just add a couple of pickles. I don’t use ketchup, mustard, but you can, right. You can use all those things, but that hamburger, you just can’t believe how good that thing tastes. It’s unbelievable. And then I like a few variations. I’ll put some jalapenos in it sometimes. And you know, there’s lots of iterations you can do off that, but that basic formula. Oh my gosh. And your kids who never eat onions, don’t even tell them you’re cooking them. And they just pound them like there’s no tomorrow. They’ll eat three or four of them easy.
Julian Klymochko: Well, there you have it folks, a nice new recipe for summer, as I’m sure many of our listeners will be picking up a Griddle here. With that pitch, it’s hard to deny, but Roger, thank you for coming on the show today. Now, if investors are interested, Ackrell SPAC partners, trades under the symbol, A-C-K-I-T, and once the mergers complete Blackstone Products will trade under the symbol, B-L-K-S. So, wishing you the best of luck and thank you for sharing with us, the story, and most importantly, your favorite recipe.
Roger Dahle: Thank you. That was fun guys. Enjoyed it.
Julian Klymochko: All right. Bye everybody.
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