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Hearth & Home March 2014

Food for Thought

By Richard Wright

Hearth & Home talks with barbecue folks about the past year, the coming year and trends they have noticed.

If you were trying to score the soundtrack for barbecue season 2014, the Beatles’ “Here Comes the Sun” might be a good choice. The positive lyrics might be perfect to describe a housing market that’s improving, consumer confidence that’s up, and interest in grilling, barbecuing and smoking that seems stronger than ever.

According to the Hearth, Patio & Barbecue Association (HPBA), grill ownership now tops 86 percent — up four percentage points since 2009. The HPBA also reports that nearly a quarter of all Americans say they are grilling “more often,” and year-round. Research by the American Association of Retired Persons (AARP) found that 77 percent of Americans ages 18 – 49 (and 64% of those 50 and over) plan to host or attend a barbecue this summer, the second most popular activity after visiting family and friends.

For manufacturers, the post-2008, “long, cold, lonely winter” has been thawing for a few years now. But individual retailers didn’t always share the same sentiment or success. While manufacturers increased sales by expanding their dealer base, seeking out new retail channels such as landscapers and pool dealers, and even building European distribution, gains at individual retail stores were more difficult to come by. Not so today, as many retailers are reporting a significant rebound.

Hearth & Home spoke with barbecue retailers and manufacturers and found there is a universal sense of optimism heading into the 2014 key selling season. Here’s what some of them had to say.

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Frank Mello Gina Lathrum Bob Dischner
Jeff Straubel John DiFiore Henrik Stepanyan
Rey Quesada II
Frank Mello.

For more than 20 years, Bull Outdoor Products has designed, engineered and manufactured high-quality, value-priced grills, islands, fire tables, water features and other outdoor kitchen components as a one-stop source for the Outdoor Room. Based in Rialto, California, the company also has a Tennessee production and distribution facility, and a European distribution partner, both of which have helped it grow to over 900 dealers and distributors throughout the U.S., Canada and Europe.

Hearth & Home: How were sales in 2013 compared with five years ago?

Frank Mello: “Our business has tripled since 2008. In the past few years we’ve had increases of 25 percent or more annually. Actually, 2013 saw a slightly smaller increase than in 2012, but that is only because we opened fewer new dealer customers and distributors.”

What do you expect in 2014?

Mello: “Overall, I think the business is strong and growing. We have regrouped and refocused for 2014 and expect we’ll be on track for similar solid growth.”

What trends are you seeing?

Mello: “A cheap price point is not as important to consumers; they are more interested in value, quality, durability and longevity, particularly for grills and equipment they’ll be building into an outdoor kitchen. It becomes really important that it lasts. The price point ‘sweet spot’ seems to be between $999 and $2,000.”

What products are most – and least – popular with consumers today?

Mello: “Sales of the searing burning are falling off; consumers realize it’s not as important when you have a quality grill that reaches high temperatures anyway. Accessories – particularly pizza-related – are becoming huge and we now have over 90 items in our accessories line. Grilled pizza is very hot and we are introducing a new pizza oven this year.”

You’ve tried pizza ovens before and got out of the category. Why now, and how is this different?

Mello: “We had a lot of requests to get back into pizza ovens. Now we are working with an Italian company and will be importing ovens in two sizes, offered on a cart or built into a special island. Previously, we had tried to make a pizza oven ourselves in our factory, but these units were too small and I think we introduced it too early the first time. There wasn’t as much awareness and people weren’t ready.”

What’s happening with outdoor kitchens?

Mello: “Outdoor kitchens remain popular, and we will offer people new and exciting components to build into them, including new double doors, power sideburners, and an upgraded outdoor-rated refrigerator. We are developing a completely new line of outdoor kitchen components, grills and islands that will be offered exclusively to select, larger specialty retailers who are willing and able to display a full line of product and are fully committed to the Outdoor Room.”

What challenges are you facing as a company?

Mello: “We’re seeing a real influx of new, small companies getting into the outdoor kitchen and grill business. They see the economy improving so they jump in, but it’s creating confusion for dealers and consumers. These companies are offering grills with a lot of features, priced at $999 or less. Initially it seems like a great value, but in reality these products won’t last more than a few years.

“Another challenge is staying connected with our customers. We’ll be implementing an online ordering portal, and we’ve hired a respected marketing company to help step up our media and messaging. We’re spending a lot of money on how-to videos, use-and-care videos and more. In 2014 we’re trying very hard to be a one-stop source for the Outdoor Room.”

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Gina Lathrum.

DCS by Fisher & Paykel brings its expertise in indoor appliances outdoors as a premiere manufacturer and distributor of all the grills, appliances and storage components needed to outfit a complete outdoor kitchen. The products are available as built-ins or modular components.

Hearth & Home: How did 2013 shape up for DCS?

Gina Lathrum: “The growth in our DCS outdoor line was substantial. We don’t disclose figures, but the growth was in the double-digits and far exceeded our expectations.”

Have you identified the reasons behind it?

Lathrum: “In years past we had individual ‘hero products,’ but in 2013 we focused on promoting DCS outdoor products as a complete outdoor kitchen solution. We began putting together global branding displays at our top retail dealers, showcasing an outdoor kitchen outfitted with DCS grills, storage and entertainment components. The islands are designed with stations for cooking, cooling and prepping food to show the breadth of our line. These displays create an experience a consumer can envision in their backyard and drive home the message that DCS is about more than just a grill on a cart, but a complete outdoor kitchen. This has had a major impact on sales.

“Another significant factor in our growth is that in 2012 we began to expand our retail channels beyond traditional appliance dealers to retailers who are outdoor cooking specialists. We have learned a lot about this subculture and we have made an effort to prospect and develop partner relationships with the right accounts. Once we started to understand these channels and use their feedback to improve our products, it made a huge difference in our business and that of our retail partners.”

Are you responding to any trends you see in the marketplace?

Lathrum: “Dealers are saying consumers are really excited about pizza ovens. DCS does not have a conventional pizza oven at this point, but when our double-sided cooking grates are flipped to the soft-radius side, you can cook a pizza right on the grate. Just shut the hood and bake; there’s no need for an extra piece of equipment. We are trying to educate dealers and consumers about all you can do with our products.”

What do you anticipate for 2014?

Lathrum: “We expect it will be one of the best years for DCS outdoor products. We are launching seven new built-in components for outdoor kitchens at the HPBExpo, including storage drawers, a dry pantry and a beverage center. We’re trying to offer the same conveniences outdoors as indoors.

“We will work more with landscape architects, architects and other designers, educating them about our line so they’ll specify our products in the outdoor living spaces they design. We will also continue to create outdoor kitchen displays in our brick-and-mortar dealers that will hopefully inspire designers and consumers about the outdoor lifestyle.”

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Bob Dischner.

In business for over 50 years, California-based RH Peterson Co. is a leader in premium gas grills, charcoal grills, smokers, outdoor kitchen components, fireplaces, firepits and other products for the Outdoor Room. While Fire Magic is its premiere brand, its less expensive AOG grill line offers a value-priced, quality alternative. The majority of the products in these lines, as well as the company’s Real Fyre gas logs, are made in the United States.

Hearth & Home: Please tell us how 2013 went for you and your dealers?

Bob Dischner: “We enjoyed strong grill sales in 2013 with double-digit growth over 2012. The dealers we talk to are not all sure about the economy, but their orders indicate things have certainly gotten better.”

What about this year?

Dischner: “All indications are for this upward trend to continue into 2014.”

What other trends are you seeing?

Dischner: “Our premium Fire Magic grills are leading the way for us. Our customers want the most fully-featured models. Though we are primarily a premium gas grill manufacturer, we did see double-digit growth in our built-in charcoal models as well. For us I feel it is a case of the ‘rising (economic) tide lifting all boats,’ versus any shift in mix in our offering.”

Please describe some of the challenges you see the industry facing today.

Dischner: “I think there is a continuing marketing challenge for U.S.-based grill manufacturers to differentiate themselves from the increasing number of offshore grills coming into the market. Also, the recently announced DOE rulemaking could have a variety of consequences for outdoor gas products, including even grills. We plan to work closely with HPBA as this process unfolds.”

You’ve been at the forefront of built-in grills and outdoor kitchens for years; what are some of the newest trends in that arena?

Dischner: “We see continued consumer and builder interest in the outdoor kitchen and room. Sales of our new line of glass-fiber-reinforced concrete fireplaces, fire tables and firepits were also robust. Much of our marketing efforts in 2014 will be to establish RH Peterson as a full-line supplier of not only premium gas logs and grills, but outdoor living products, as well.”

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Jeff Straubel.

Quality, affordability and service are the hallmarks of Summerset Professional Grills. The company offers reasonably priced grills, outdoor appliances and barbecue island components and accessories, making the Outdoor Room accessible to a broader audience.

Hearth & Home: In terms of sales, how was 2013? What percentage were you up or down over 2012? And what do you expect for 2014?

Jeff Straubel: “Last year we were up about 25 percent over 2012. We think we will see about 30 percent growth in 2014. We have broader distribution and the economy is stronger. I think, in general, we are seeing a steady climb back to normal.”

What are some of the industry trends you’ve identified? What products are doing particularly well and what are consumers looking for?

Straubel: “I do see some trends. I think consumers are becoming more sophisticated and are looking for higher-end grills with a lot of features and ‘gismos.’ I don’t want to give away my hand on this, but pizza ovens are getting bigger, firepits are really growing, and the outdoor kitchen, in general, is becoming mainstream.”

Please explain more about what you see happening in the Outdoor Room area?

Straubel: “It’s getting more and more popular. There are greater opportunities to sell consumers a more complete package with multiple elements – the grill, the island, the firepit, the island components. The outdoor kitchen business is finally expanding into the colder states.”

Any challenges facing manufacturers and/or retailers today?

Straubel: “Too many ‘non-players’ are entering the market. A lot of these manufacturers are under-financed and will be gone within a year or two, but they cause havoc along the way. There seems to be more and more competition, maybe too much in our little dealer-based venue. We’ll just keep working with our network of fine people with a good strong strategy. It’s working.”

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John DiFiore.

Founded in 2004, Fun Outdoor Living now has two locations dedicated to providing everything its Charlotte-area customers need for their backyard living spaces. This past fall, the retailer added high-end patio furniture to its product mix, which includes grills from Bull, DCS, Lynx, Kamado Joe, Smokin Tex and others, along with hot tubs and spas, firepits, fireplaces and fire tables, and a vast selection of other outdoor living products.

On-staff professionals offer design-build services, and a manufacturing division prefabricates islands and counters, which the company retails through its two locations and wholesales to other retailers along the East Coast.

Hearth & Home: Please tell us about your sales in 2013 and how they compared to 2012.

John DiFiore: “In 2013 we were up 20 percent over 2012. Actually, since 2008 when everything came to a screeching halt, we have probably been inching up about 20 percent every year starting in 2009.”

What are you expecting for 2014?

DiFiore: “I expect similar growth for 2014. I feel great about the industry – we are experiencing good, steady growth in our retail store, and we’re finding the dealers who sell our Fun Outdoor Living islands are gaining momentum again.”

Are there any particular product areas that are doing exceptionally well? What are consumers interested in today?

DiFiore: “Accessories are on the rise. We just started selling patio furniture this fall and that has brought in new customers. Customers are looking to build in both a gas grill and a charcoal grill or pizza oven in their outdoor kitchen. Actually, our last client wanted all three – it was an incredible cooking center. But in 80 percent of the cases, they choose a gas grill and a charcoal ceramic cooker for the versatility it offers.

“Power burners are also growing in popularity. People are improving their outdoor cooking skills and want to try new things like shrimp boils or wok cooking on the power burner. Flat top grills are catching on for hibachi-style cooking. It’s a commitment dollar-wise, but if there’s room, and budget allows, they want it built into their outdoor kitchen.”

What is happening with the Outdoor Room concept in your area?

DiFiore: “When we first opened in 2004 and even during the recession, people didn’t think an outdoor kitchen was worth the investment. But today people are very interested and believe it’s a good home improvement. There is much greater awareness of what’s possible in an outdoor living space thanks to shows like HGTV and pictures shared online through sites like Pinterest. Exposure like that has increased demand.

“Also, many more manufacturers offer outdoor kitchen components, so the products are more accessible and available now. The Outdoor Room is here to stay.”

You mentioned your island manufacturing company. Tell us about that.

DiFiore: “We have a small fabrication company and manufacture different islands and counters. We sell them through our retail stores in the Charlotte area, but wholesale and ship them to other retailers along the East Coast under the ‘Fun Outdoor Living’ brand.”

Are there any particular challenges that make it harder to do business today?

DiFiore: “It’s a very price-driven market. Customers are definitely looking for the best value and will haggle some on price, but most are willing to pay for quality and for service after the sale. Online retailers are becoming a hindrance to brick-and-mortar retailers. Sometimes someone will do the research and investigate the product at our store, but then they’ll order it online. When they have problems, they’ll come back and expect us to service it. In that case we’ll talk to the manufacturer to try to find a solution for the customer, and hopefully build a long-term relationship. Finally, dealing with zoning regulations and codes can be a challenge!”

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Henrik Stepanyan.

Barbeques Galore is the nation’s largest specialty retailer of grills, outdoor kitchens and other outdoor living products with 20 stores in California, Arizona and Texas. Last year the company started wholesaling to authorized dealers across the country and also launched a franchise program. Barbeques Galore sells its own private label grills under the Turbo, Grand Turbo and Capt’n Cook brands, and also carries Weber, Lynx, Twin Eagles, Fire Magic, Big Green Egg and other brands.

Hearth & Home: How were 2013 sales compared to 2012?

Henrik Stepanyan: “In 2013, same-store sales improved 10 percent over 2012. Sales of our branded lines were up 30 percent, largely because we introduced new models that offered great quality for the price. It was hard to keep up with demand. Sales of products from other vendors like Twin Eagles and Lynx did well, too.”

Do you expect this trajectory to continue in 2014?

Stepanyan: “Yes! This January alone we were already up 30 percent over last year.”

To what do you attribute this?

Stepanyan: “We made a major effort last year and again this year to consistently keep product in stock. For instance, we now always stock our private-label FireGlass for fireplaces and firepits in multiple colors so it’s a cash-and-carry product.

“We also tried to keep the majority of the Big Green Egg line in stock this past year, and it had a big impact. In November alone our Big Green Egg sales were up $100,000 in our California and Arizona stores. The difference is we’ve got the product in stock. Previously, when a customer was told it wasn’t in stock they often would go elsewhere to buy because they didn’t want to wait a week for it to come in. Having it in stock has increased sales.

“Once we make the sale, the customer almost always adds on the Nest, Plate Setter, three-tier rack, firestarters and other accessories. We have learned that it’s essential to have the product in stock. The customer doesn’t want to wait.”

How is your wholesaling venture going?

Stepanyan: “We have signed up dealers in Florida and Georgia, where we used to have stores and people are familiar with the brand. We are also expanding into other channels such as builders, landscapers and pool contractors who are new to the outdoor kitchen business and like having one supplier for everything related to the outdoor kitchen. They like that they can buy the unfinished island boxes from us and finish them on site, which enables them to take on more projects.”

Have you signed on any franchisees?

Stepanyan: “We have had a lot of interest from all over the country, but we have not finalized anything yet. Most people who have inquired wanted to open one store, but one store will not amortize logistics and distribution costs sufficiently to maximize profits, so it would be hard to make money. Our target minimum for a franchisee is three stores. We are taking our time to get the right fit.”

What trends are you seeing in the marketplace?

Stepanyan: “We have had a lot of requests for charcoal grills, so we took our best-selling, 32-in. Turbo gas grill and made a charcoal version of it with the same heavy-duty, stainless-steel hood and body. It will be out end of April and retail for $799. It fills a gap for a quality charcoal grill at a value price.

“Actually, value lines are a very important trend. With that in mind, we are redesigning and relaunching our Capt’n Cook line. We’ll have a three-burner grill with a sideburner for $399 and a five-burner grill with a sideburner for $599, both fully assembled; we identified through customer feedback that people don’t want to deal with assembly. This line will offer dealers 45-percent margins. You have to offer value to the dealer, too.”

What about the Outdoor Room? Is that still a growing category?

Stepanyan: “Yes, the Outdoor Room is stronger than ever. We just partnered with Summerset Outdoor Living to supply outdoor furniture and fire tables – again emphasizing quality at value pricing.”

How optimistic are you about 2014?

Stepanyan: “This is going to be our best year yet. In 2013, we closed 13 under-performing stores, most of which were located too close to other Barbeques Galore stores – in one case only nine miles apart. We are lean, mean and efficient. We had two employees in two separate stores last year that each had over $1 million in sales. One employee had $900,000 in sales and nine had over $750,000 in sales. On the wholesale side we will continue to grow our business through new dealers. The potential of this industry is tremendous.”

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Rey Quesada II.

After working at Greenforest Fireplace & Patio for over 30 years, Reynaldo Quesada, Sr. purchased the business, located near Wrigley Field and the tony Lakewood and Belmont areas of Chicago, after its previous owner experienced financial difficulties. Five years later, Quesada and his four sons run the hearth and outdoor living retail store, selling and servicing fireplaces, firepits, grills and patio furniture to a loyal following of customers.

Hearth & Home: Tell us how sales have been trending since you opened the store.

Reynaldo Quesada: “For the past five years we have been up three to five percent each year, except for 2013 when sales were down by three percent.”

Why do you think you were off last year?

Quesada: “It was partly weather-related. We had terrible weather in the early spring, which hurt patio and barbecue sales. Then in the late spring and summer we had remodeling going on in front of our store. We looked like a construction site and that hurt business too.”

Barring the weather, do you anticipate being back on track in 2014?

Quesada: “Yes. Since taking over from the previous owner we have implemented many changes that have helped us grow. We pay for the merchandise we bring in rather than buy on credit. We have a very sharp accountant who has helped us put systems in place to keep track of inventory better. We have much smaller warehouse space than the previous company; they overspent tremendously on warehousing.

“The previous owner tried to do a lot of work with builders, but we work more with individual street-traffic customers. And probably the biggest thing is that, since last fall, we’ve been working on revamping our website to prepare for selling online.”

Tell us about that. Why do you plan to sell online?

Quesada: “We are at about $650,000 to $700,000 in annual sales now. We’ve seen from other retailers who started Internet sales that they have really grown their business to million-dollar-plus levels. Right now we’re investigating our vendors’ Internet policies, but we anticipate this will have a very positive impact on our 2014 sales.”

What outdoor product categories are selling well in your store?

Quesada: “Our best-selling grill is the Lion Grill. We started carrying that brand since it was introduced about three years ago. It sells well because it is a quality grill at a good price point. When we saw the success of kamado cookers like Big Green Egg, we started carrying the Kamado Joe about three years ago. We sold 12 the first year, but then nine the second year and six or eight last year. I’m not sure why sales have declined, but lately we have been cooking on it outside the store to attract attention and build sales back up.

“Charcoal is pretty hip now and we sell a lot of charcoal fuel. Charcoal and rubs generate a lot of repeat customers who often end up buying patio furniture or fireplaces from us, so these items help with sales of other products all year long.”

What about outdoor kitchens? Are they popular with your customers?

Quesada: “Chicago is not a big outdoor kitchen market. We are in a wealthy area, but our customers have small balconies and backyards so their space is very limited. We have sold some built-in grills to condominium associations for residents to use poolside, but we don’t see the outdoor kitchen happening a lot here. Firepits are pretty big for garage-rooftop decks. Most popular are the coffee table-height firepits that can be covered with a solid top and converted to a table.”

Do you plan any changes to your outdoor living product mix for this year?

Quesada: “Right now grills account for about 10 percent of sales, patio furniture about 30 percent and the rest is hearth related. Every year we add more and more outdoor cooking products like grills, rubs, charcoal and accessories. We’re going to Expo to look for new products we think would do well in our store and are always looking to grow our barbecue business.”

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