September 20, 2021 – On today’s podcast we welcome special guest, BBQGuys CEO Russ Wheeler. BBQGuys is a leading specialty e-commerce platform for higher-end BBQ grills, grilling accessories and outdoor living products for both homeowners and professional builders.
On the show, Russ discusses:
- How the business evolved from a single brick-and-mortar store back in 1998
- BBQGuys’ competitive advantage and omnichannel strategy
- How the legendary football family, the Mannings, are involved in the company
- Key growth initiatives to drive a forecast 26% revenue CAGR
- And more
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 www.Accelerateshares.Com.
Julian Klymochko: Super excited to have Russ Wheeler, the CEO of BBQGuys on the podcast today, talking about online retail, the tremendous transformation that BBQGuys has gone through as a humble brick and mortar store back in 1998 to now leading online retailer, not just barbecues and just a whole host of outdoor products, which really resonates to me. Someone who follows, I’d say a low-carb diet. I’m always using the barbecue. It’s pretty much the only way I know how to cook, rain, snow, or sunshine. So, Russ excited to have you on the show. If we can kick things off. Can you describe to us exactly what BBQGuys is today?
Russ Wheeler: Sure, hey guys, nice to meet y’all, thanks for having me, you know, BBQGuys is the leading specialty platform for hiring grills, outdoor kitchens, and outdoor living in general. And the reason we’re excited about the business is because it’s at the intersection of two really strong categories, outdoor living and eCommerce, and our business is driven by this growing portfolio of owned brands and then a strong penetration in the business with the opportunity to really just be this one stop shop for outdoor living lifestyle brand. And as you mentioned, you know, we’re a a twenty plus year old company that was built on a record of profitable growth driven by what we call this key and owned brand strategy.
Julian Klymochko: Okay, and you’re fairly new to the company. Joining last year, what was the opportunity that you saw in joining BBQGuys and what it excites you about the future?
Russ Wheeler: Well, it’s a really fun category, as you mentioned, you know, doing grilling and outdoor living and cooking and learning ways to continue to up your grill abilities is just a lot of fun things to do. You know, over the last 20 years I’ve been in the, call it the decorative home improvement business. My company was acquired by Home Depot. We were kind of the backbone for homedepot.com back in the early two thousand. And then most recently I was part of a team at build.com, running build.com, which we grew from a couple hundred million to north of a billion dollars. And so, we knew Mike Hackley, who’s a founder of BBQGuys. We had looked at it as a portfolio acquisition about three or four years ago.
Mike and the team were building at BBQGuys for the outdoor space, what we had been focusing on for the indoor space. And when we decided not to do the acquisition, which by the way, I’m thrilled about because now I’ve got a, you know, equity ownership in it and its’s a whole another opportunity.
Julian Klymochko: Right.
Russ Wheeler: But we loved the business. We loved everything they were doing, but build.com really was focused on that indoor space much more. And we had a lot more runway in the indoor space than pivoting to the outdoor. And so, you know, when I was approached, you know, probably a year and a half now to look at the opportunity, I knew the business. The founder of Build, Chris Friedland, was actually doing some consulting for him. And he said, hey, you know, Mike is looking to take the business and sell it again. Would you be interested in taking a look?
And they were talking mainly to private equity and you know, I’d been approached by private equity for many years, and you guys know how private equity works. They look for operators to come run these portfolio businesses, but the core values didn’t really align with what I like and what I believe in. And so, when I was approached, I was kind of like, yeah, private equity, not really, you know, interested. He goes, these guys are different, BVP is really different. I think it’d be great for you to meet him. And when I met, you know, Steve Lebowitz and Austin Ramos and Drew Sheinman who are the partners of BVP, they’re really doing it differently. And it was something that got me very excited. It wasn’t about just enriching the senior executives of the company, but really trying to make it where everybody in the company will be benefit and, you know, and build real wealth. So again, the opportunity to go public happened a lot quicker than we were thinking, but again, that whole strategy of, and I’ll give you some more details on that, but what BVP feels and thinks is, you know, doing the right thing, but also being very successful.
Julian Klymochko: Yeah, and we will get into the whole BVP, Brand Velocity Partners involvement in a bit. But prior to getting into that, you mentioned really a reiteration of the playbook you used at build.com in a very familiar setting now focused on the outdoor space, barbecuing et cetera. So, say customers in the market for new barbecue, what is the value proposition? Why should they go through you guys?
Russ Wheeler: You kind of stole some of my thunder there, because we are following the build.com playbook and, you know, having run a business and grown it from, you know, X to Y certainly was beneficial. And it was also beneficial because our great team at BBQGuys was always benchmarking what we were doing at build.
Julian Klymochko: Right.
Russ Wheeler: So again, we had a lot of credibility there. And so, coming in, I tell the team, we have a playbook. We understand, you know, some things we should do, but what’s almost more important is what not to do. When we say, oh, well we should look at this, oh, we did that. That was a big failure, you know? So hopefully we step on less of those landmines because of my experience. And again, when we kind of rolled into the business, it was a great opportunity to go after those customers again, that are focusing on the outdoor space and what we’ve seen with customers. COVID and all that kind of stuff is, you know, 2020 people were building inside the house, they were upgrading the house. We’re all in our home offices. We’re looking at our fans and everything and it’s getting tired, you’re like, I need to kind of upgrade my hand side. 2021 we’re seeing them, wanting to bring those indoor living spaces outside. So, when we approach a customer and, you know, we acquired them through the normal traditional channels, you know, Google, you know, Facebook, SEM, SEO. And then we’ve also started a new national brand campaign with the Manning amilies targeting, you know, football primarily, but also doing some stuff on HGTV and DIY, were bring them into our ecosystem, this platform, and then we try to engage them on the phone or chat. Because when we do that, you know, we go from an AOV of about a thousand to an AOV of more than two thousand. And then we also have a pro customer segment that we’re going into that’s it’s even more than that. So, the value proposition is, the destination for all things outdoor living, whether you’re looking for recipes, how to guides or designing an outdoor kitchen, you know, we do online outdoor kitchen design and again that drive a very high AOV and a very high customer satisfaction rate.
Michael Kesslering: Along with that. Can you talk a little bit more about how your digital flywheel works as you are able to realize some pretty good return metrics for your advertising spend in customer acquisition costs?
Russ Wheeler: Absolutely, so again, we’re using those traditional channels and you know, I would say I would put our digital performance marketing team up against anybody in the industry. You know, we certainly spent a lot of money with Google and Facebook at build and seeing what Jason and our team here at BBQGuys was doing was really impressive. Obviously, it’s a moving target and it’s an auction and you have to do that. But there was a huge opportunity to do what you said, create that flywheel. We want the customers coming in. We want it to acquire new customers. And then one of the things that really helps the flywheel accelerate is we have this pro-business; we’re focusing on driving the pro. And when we talk about the pro. We’re talking about small builders, small custom builder’s, remodelers, interior designers, hardscape architects, basically anybody who’s doing a project in the backyard. And so just by putting a focus on this, and again, this was back to that build playbook. We knew the pro was a large segment to go after. These pros come in, acting like consumers. So, by just mining the data for business names or allowing them to opt in, you can see on the top of our banner, it says, hey, are you a pro? We give them a dedicated resource. So, we get that pro into our network, we give them a dedicated account manager handling their business, and they start repeat purchasing with us, obviously high AOV which is great. But also, they get outside of what I call the Google text. So, once we get them into our network, we can start to bypass that Google text, get a flywheel going. And then it allows us to spend more on marketing to again, create acceleration in that flywheel,
Julian Klymochko: That makes a lot of sense. And I’m going through the investor presentation. One thing that really stuck out to me was your financial performance in 2020, obviously COVID affected businesses completely differently. For the most part, negatively for most companies, but for BBQGuys, 2020, clearly a banner year, a huge growth in revenue, gross profit, EBITDA and free cash flow. So how was COVID for BBQGuys and kind of what were the lessons learned from that?
Russ Wheeler: Well, you had to learn fast and you had to, you know, absolutely pivot your business. We were very fortunate being a digital business. You know, a lot of companies, it was fees, famine, either were wildly successful, or it was catastrophically bad to your business. And fortunately, we were on the positive side of that because, you know, like I said, everybody was stuck at home. They started spending more time. They like you, were grilling out more rather than going out. But you know, so we absolutely took advantage of that. We saw the freestanding business grow much faster in 2020, which are core businesses, the outdoor kitchens. So, when you look at our outdoor kitchen business, so half our sales, so outdoor kitchens was our sweet spot and people did do that. But again, through COVID, the brands getting introduced to more people looking for that low funnel. Hey, I want to upgrade my Weber grill, or I want to add a [Inaudible 00:09:52] to my grilling abilities, as well as that outdoor kitchen business continue to grow and accelerate.
Michael Kesslering: And so, you touched on it a little bit prior, but can you go into a little bit more detail on how Brand Velocity Partners and the Manning family are involved?
Russ Wheeler: Absolutely, so BVP, they’re the private equity company that bought the company that brought me in to lead this next phase of our growth and, you know, opportunity. As I said, they’re different private equity company. Obviously, they have the financial acumen, which is critical for any business, but, you know, obviously with private equity, it’s very important. They were also bringing in this opportunity of partnerships. So, one of the partners Drew Sheinman came from the sports marketing side of the business, you know, working with agents and doing that. And that’s how Steve and him actually met on another portfolio company where he was representing Kobe Bryant. And, you know, was looking at doing a deal with Steve for this company, PlayMonster of doing a licensing deal with him. So, they became friends.
They started really saying, hey, we could do something different. And it evolved into what is BVP today. So, Drew with his resources brought in a lot of strategic investors and the Mannings were one of those strategic investors. The thing that was really cool about the Mannings was they have Louisiana roots, from New Orleans, you know, they’re really great genuine people, there about family. Again, all things align with our core values. And so as being investors in the company was really exciting. And again, I want to go out and say, hey, I had joined before I even knew that. It happened after I’d already agreed to come to the company. So it was, you know, it wasn’t like, oh, I’m going to get to work with the Mannings. So, it was really cool to get that kind of as a bonus when we came on with all this opportunity, but it was really this, hey, should we use them as brand ambassadors, not just as investors, you put their name in any kind of a release and you’re going to get a lot of clicks, but because of their values, because of their Louisiana roots, we thought they’d be great brand ambassadors.
And so, what we did is we originally started with Eli and Archie and we did that campaign, our first national brand building campaign on HGTV and DIY. Then we just launched our second campaign, which included all the brothers, you know, Peyton, Eli Cooper, as well as Archie. We filmed that down in New Orleans a few weeks ago or probably about a month ago. And we just launched that campaign on ESPN and SEC network. So, if you’re watching any of the football last weekend, you can see that campaign starting to run as well.
Julian Klymochko: And those two activities go hand in hand, football and barbecuing, one huge event that you guys just announced is the $963 million merger with Velocity Acquisition during public transaction. Why now? What’s the strategy for going public?
Russ Wheeler: So, the why now is obviously the market is incredibly positive with regard to outdoor living and-Commerce because, so we’re at the cross road of these two great categories, which makes it a lot of sense. Then the other opportunity is we have the opportunity with Velocity who’s an operator-led SPAC. That’s another thing, just like with private equity, you can kind of be turned off too SPAC in certain cases, but these guys are all operators. They’ve run businesses and they have a lot of digital acumen. So again, partnering with Velocity, they brought a lot of resources to the table that could help us with brand building, help us with additional digital acceleration. So, we’ve already had a lot of great, you know, off sites with them and really kind of building it up and the opportunities to really accelerate our brand building, which will make our lower funnel digital marketing, you know, more efficient, but also the opportunity to do more M&A. We’ve already done one acquisition since I joined the company it’s called PCM.
It allowed us to bring in one of our suppliers and vertically integrate for stainless steel metal fabrication. So, when you think about an outdoor kitchen, the grill is the hero. All of the stainless-steel accessories, the appliances, whether it’s the, you know, the fridge or the freezer or the kegerator or the stainless-steel doors and drawers, we own that. It’s domestically manufactured in Chino California. So, we vertically integrated and we also brought some back to domestic manufacturing, which we’re going to continue to expand. And there’s a huge opportunity for us to expand via M&A both horizontally with, you know, adjacent categories and vertically expanding our own brand portfolio. And that’s what we’re looking to do, you know, in a much more accelerated opportunity because access to those public market funds, additional cash are on the balance sheet will allows do that and go faster.
Julian Klymochko: So, you guys do have a long-term forecast. You’re looking for a 26% revenue CAGR in terms of growing the business on a go forward basis. What are some key growth initiatives and how are you going to drive this forecast growth?
Russ Wheeler: Sure, well first there’s no M&A in the forecast.
Julian Klymochko: Okay.
Russ Wheeler: So again, that’s all upside potential for us, but we wanted to put out there a conservative forecast that we can fit with just our organic, you know, greenfield category expansions, you know, as I mentioned, where we play primarily is, over half our business is in the outdoor kitchen. So, it’s in that higher end space. And then we’ve started to accelerate more into that free standing. But even the free standing, we’re talking about, you know, over a thousand dollars AOV, when you look at Weber or Traeger, what they sell at Home Depot or Lowe’s or Amazon, the AOV’s going to be called it, you know, between four and six hundred dollars. With us, our AOB for Weber is a thousand. With Traeger our AOV is over four hundred. And with Blaze, which is our own brand, it’s over twenty-two hundred. So, the space that we built the business on was in that mid to upper, we recently launched another own brand for us called Victory, which will allow us to go after that mass premium market. So, we’re going to a huge section of Tam that we’ve never even played in before. So, we feel like we have a lot of expansion in the grilling category. And, and so that’s very exciting to us because at the end of the day, those customers are on our site looking for those products today and we just don’t offer them. And the reason we didn’t offer them is because primarily of the margin profile. So, with that, we have a huge runway in the grilling category, but then we also have this huge runway when we ex expand to other areas of outdoor living, whether it’s patio furniture, heating, weatherized TVS, you know, anything that you can do in your backyard space to improve your outdoor living experience.
Julian Klymochko: Now, you guys came off a banner year in 2020, just in the right spot. E-Commerce, outdoor living, led to explosive results for BBQGuys. One potential concern of investors is, on one hand you have a good problem to face in terms of tough comps, but from a macro perspective, what is really going to power the business going forward from a tailwind’s perspective? Is this more of a case of demand still migrating online in your segment?
Russ Wheeler: The demand is for sure, still migrating online. You know, we certainly saw a COVID bump, you know, for all the reasons we talked about and that was beneficial, but honestly, we probably could have done twenty to forty million more in 20. Because of the supply chain challenges. We couldn’t even handle all of the traffic that was coming in. We certainly are seeing, you know, competitive comps going against COVID for the season this year. And we had good strong, you know, growth coming through there. We didn’t, you know, massively over year, but we looked at the comp over nineteen and that’s continued to be very positive. And again, as we’re heading with the back half of the year, we had a really strong Labor Day, which was exciting. And again, the core business was playing in that, you know, that upper premium luxury Tam, we have all this additional runway, even with headwinds to continue to grow and expand in these adjacent categories, you know, for outdoor living.
Julian Klymochko: What I find super interesting is you’re not the only ones in this segment going public. In fact, some of your suppliers. Traeger, Weber, they both file the S-1 to do their own going public transactions. So, it looks like everyone in the space is kind of looking to capitalize on the recent growth. I was wondering, where are you seeing customer demand? You know, every day it seems like more and more people are getting these Traeger. They’re it seems fairly attractive these days.
Russ Wheeler: So, Weber and Traeger, when I say we have this key brand strategy. So, we have a key brand strategy and a own brand strategy and Weber and Traeger are certainly two of our key brands. So, they’re great partners to have, and we’re drafting off the excitement of them announcing that they were going public. And now they’re both out there and doing really well. So, we complement our own brand strategy with these key brands and one of the first things that we did over a year ago when I got there. We’ll never try to out Amazon, Amazon, or Home Depot, Home Depot.
You know, our goal is to focus on what makes us different. And that’s just the value-added services, the outdoor design, being a destination platform for anything you’re looking for and outdoor living, and really focusing on that. So, it’s not even the conflict when we talk to Weber or Traeger. They want to grow our business because, you know, we’re one their most profitable customers. Because we’re selling typically one to two price tiers up. And so that’s something that we want to continue to accelerate and grow over time. And we love the excitement around the category.
Julian Klymochko: So, your own brands competed different price point than the third-party brands. Is that what you’re saying?
Russ Wheeler: A little bit, yeah. So, there’s always going to be a little bit of overlap, but the way we built The Blaze Brand, which is, you know, over eight years old now was identifying gaps in the market. You know, we’ve got twenty years of proprietary, not just customer data, but product data of what the customers are looking for. And so, we identified gaps in the market and that’s kind of the way we started to build The Blaze Brand. And then with Victory, same thing, we built a great grill that’s in a category we don’t play today because like I said, with the margin profile where we can go in and monetize traffic, that’s coming to our site already, that’s more driving them in, [Inaudible 00:20:26], you know, best gas grill or something like that. So, there’s an opportunity to expand there.
So, we really come complement our own brands. And, you know, we have a saying, and this was back to my visibilities. We’re going to let the customer shop however they want. If they want to buy online, will be a great destination. If they want to be a one stop shop online, we can do that. If you want to buy from the factory store, whether that’s, you know, Trager or Weber or whoever, again, some customers want to buy from apple.com or from Nike. And then again, a large percentage are still going to go into the brick-and-mortar channel, which again, we win when it goes there as well, because The Blaze Brand is not just sold online. And that’s certainly how we built the brand and built the demand for the brand. But we’re driving a tremendous amount of traffic into our dealer, which we have, you know, two thousand dealers across the country, that’s driven by a distribution strategy. So again, we’ll let the customer shop how they want, and we’ll try to give them the best experience, whether it’s online or offline.
Julian Klymochko: Okay, great. And Russ, prior to wrapping things up today, got a fun question for you.
Russ Wheeler: Sure.
Julian Klymochko: What’s your personal favorite food to barbecue. And do you have any recommended recipes that you’d like to share?
Russ Wheeler: Well, so my favorite thing to do is wings on the traeger.
Julian Klymochko: Okay.
Russ Wheeler: I’m not a grill master by any means, but you know, Julian, you know, this. Everybody likes to up their grill abilities and Jason who leads our marketing and commerce. He says, everybody wants to be backyard famous. And so again, you know, you want to, you know, first you’re doing it, you know, because you had to do it because of COVID. Now it’s bringing the family and friends together and doing more things like that. So, it’s that experience. And the thing about traeger that’s really great is, it’s really idiot proof.
Julian Klymochko: Right.
Russ Wheeler: I mean, I would much rather watch football on Saturday, have a drink, you know, have friends. And then you set the grill at where it’s going, use your app to drive it. And the only thing you need to do is watch the temperature and add pellets. So again, that kind of my way, I like to do it, but we have everything for anyone. I will send you the link to our master grill abilities. So, we have grill abilities, fantastic YouTube channel with hundreds of how use recipes. We also started bringing in some of these influencers as well, like Rashid Phillips and Danielle Deveau that are doing recipes on there as well. So, there’s lots of fun. And as we said, it’s something for anybody, whether you’re a beginner or whether you’re in this, what we call master grill ability where we’re actually doing some pretty cool complex stuff through some of these influencers that are out there doing things for whether its Netflix, barbecue show like Rashid or Danielle who’s, you know, an influencer for Traeger. So, something for everybody. But again, it’s a lot of fun and it’s a great category to be in.
Julian Klymochko: So, grill masters and anyone wanting to be back yard, famous take note and investors, if you are interested in following the story currently trading under VELO, which is Velocity Acquisition. Once this deal closes, BBQGuys will be trading under the ticker symbol BBQG, fairly easy to remember. So, Russ, thank you so much for coming on the podcast today. Really enjoyed it.
Russ Wheeler: You got it. It’s nice to meet you guys. And again, I appreciate y’all having me on.
Julian Klymochko: We wish you the best of luck.
Russ Wheeler: Thanks.
Julian Klymochko: Take care.
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