Yep. And with interest rates rising, there’s a lot of pressure on debt-laden companies. Expect to see more bankruptcies over the next couple years.
The banks have the same combination of risk-taking optimism and short-term greed as the companies they lend to. And those same rising interest rates are taking down poorly managed banks as well.
The other Instant Pot branded products are good products, though. I actually have an Instant brand air fryer. I picked it specifically because it was rated highly by the folks at America’s Test Kitchen, and it works very well. They also rated the Instant Pot brand sous vide machine highly – it’s on my Amazon wish list.
But that isn’t enough to be successful, I guess. Air fryers very likely have the same sort of ceiling the article mentions – by the time Instant Pot came out with theirs, most people who wanted an air fryer probably already had one, so no matter how good the Instant Pot branded version is there’s not much of a market there. And sous vide machines are probably a pretty niche market overall.
I’m just imagining pitching the Instant Pot on “Shark Tank”:
“You have a product, not a company. I’m out.”
mmm
Last year their sales plunged 50% (from previous highs) to $344 million. That’s not nuthin’.
The problem isn’t quality, but that they have a very thin product selection.
There are lots of high quality products out there that last forever, and the companies that make them are very successful. For example, Le Cruiset pots will last you a lifetime. If you drop one, it’s like to break whatever you drop it on. They are cast iron, ceramic coated. I bought one of those for my wife over 20 years ago, and it still looks new. It cost $300, though.
Le Cruiset does well because they have many different products. Not just pots, but griddles, pans, decorative objects, etc.
The same can be said for Denby china, which can be passed down through generations, Henckel kmices, etc. If you make products that last decades or longer, you just have to have a large, diverse selection of products.
Is that the problem though? It is true these companies you mention have some modest extension of their product lines and their quality products last for many years. However, I suspect a good cutler sells many, many more knives than forks. Looking at the price of pots, maybe InstantPot simply should have charged more. I don’t know their margins, though sales volume was obviously impressive. Maybe the problem was intentional debt, as some imply.
so far it’s the sous vide (our old one had Yogurt, and this is the closest substitute - the old one literally saved us probably thousands of dollars over its lifetime, because we go through a LOT of yogurt around here). But we got one with an air fryer lid and really need to check that out more.
Pricing could have been an issue for sure. They may have saturated the market at low margins, which is bad for them. But that’s hindsight. Maybe they thought if they priced it too high they would be quickly undercut by knockoffs. Or they misjudged demand and figured it wouldn’t sell at all at much higher prices.
But product diversity has to be a big part of it. If you are building a brand rep for high quality and value, not having other products that can take advantage of that seems like a big mistake. They should make small ‘ramen pots’, or KD pots or other special sizes for apartments, or commercial kitchen products or something. They need to leverage the brand.
Or they should have sold out to a major kitchen appliance brand, and retired.
There’s nothing wrong with running a company serving a small niche, like Le Creuset or Henckels. And having a run of success, growing by 10% or 15% for a couple years is a good thing. Seems to me that the problem starts when you assume that the good times will continue forever, you borrow a couple hundred mil to build new factories (or whatever companies spend their millions on) and your business settles into a steady state but you’re stuck with a lot of debt.
Those would be my questions about Instant Pot. Did they project high growth rates for years to come, what did they borrow money for and what did they spend it on, and how would they be doing now without having to service that debt?
Yup to both messages above.
I get companies want to appeal to shareholders, who obviously prefer to see ever increasing profits. And obviously it makes sense for a founder to sell when value is close to maximal. But even with logical product line extensions, the idea every company can and should grow every quarter in perpetuity is kind of wildly unrealistic.
There’s something missing here - probably dubious debt, but maybe low pricing as a market maker and leader or some of the other things mentioned. Instant Pot was already a unicorn, now people insist they should also have multiple horns and speak centaur.
Reminds me of the Hula Hoop story- despite being a huge fad, it lost the company money, because by the time they had tooled up to meet demand, the craze was over and they suddenly had way too much production capacity.
Does Instant Pot own it’s own factories, or is everything contracted out to third party manufacturers?
Insta-pot came up with a special lid that converts the pot into an air fryer. Said lid cost almost as much as the pot itself. Insta-pots are too small to really work as an air fryer, so we no longer use the lid. Instead we bought a dedicated Insta-pot air fryer because we trusted the quality of the name.
So, they are branching out somewhat, it’s just going slow because it is hard to do perfection twice.
Excellent point.
My new wife is fond of saying that “collecting all the equipment for a hobby is a separate hobby from doing the hobby itself.” She loves collecting one of everything that comes in sets. She is big in cooking, but for whatever reason never developed the Le Cruiset bug. If she did/does, I’ll have $10K of their stuff before she moves on to collect something else instead.
There are a lot of people who think like that. And Le Cruiset has certainly tried hard to accommodate that “collect the whole set” desire by ensuring “the set” will never be complete. Oh, and since they come in several colors, and the “in” color for kitchens changes every few years, you could get halfway through collecting the red set when it’s time to switch to green and start over.
Coming back to Instant Pot, I think that the collecting bug is much harder to stimulate for electric appliances. Especially for one that is a do-all right out of the box.
To the degree your machine takees accessories needs accessories to be useful, you can ply that trade for quite awhile. e.g. I was bemused to learn there’s an ice cream making attachment for a KitchenAid stand mixer.
Punchline being, I think Instant Pot hadn’t figured out how to create enough distinct accessories to trigger the lucrative repeat sales of an ever-expanding accessory line.
Nitpick: Creuset, not Cruiset
Seems to me the lessons we can learn are
A) Don’t sell to private equity
B) Don’t go public, because you won’t be able to prevent A
Appliance makers can stay in business because more people are always aging into their market. This might not be enough to grow as aggressively as they want, but there are always new consumers being born and aging into needing things like stoves and washers and dryers. My daughter is 16; she doesn’t need any of that stuff. She might in a few years. Or not, since kids don’t move out anymore. And I guess no one gets married - gotta have something to give as wedding gifts. Mixers were mentioned. Same thing - people move out for the first time, move homes, buy homes, get married, lose stuff in the move/storage, need to replace things. I doubt that most people are born and live in the same home forever and never move or need their own appliances.
As far as actual market penetration, I don’t have one. That doesn’t mean I would never buy one, but I haven’t been moved to. I don’t buy based on trends, and there’s nothing that this appliance offers a solution for in my life. When my last microwave died, I just declined to replace it. Decided I would see if I would miss it and I didn’t. I have almost zero practical need for a microwave at home. It makes sense in a workplace break room. I just replaced the counter space with a nicer toaster oven that does more things. My wife got an air fryer. She uses it here and there but it’s mostly in the way.
Aging into the market doesn’t produce demand for new products, since the kids can just inherit grandma’s Instant pot after she dies. The company needs population growth, not just population turnover.
Instant Pots aren’t cast iron pans. They’re electronic devices with a heating element, sensors, seals and circuit boards, that are intended to be portable. They’ve only been in existence since 2010!