At Compass Diversified’s (CODI) Investor Day, Mike Joyce, president and CEO of Primaloft, talked up the potential of the maker of synthetic insulation products to expand across the synthetic marketplace as well as how a number of consumer tailwinds are working in Primaloft’s favor.
CODI acquired Primaloft for $520 million in July 2022.
“We’re seeing more emphasis on health and wellness across the board,” said Joyce. “Health and wellness for our apparel customers is getting outdoors, enjoying nature, and lowering your stress level by being in nature. It’s really moving in that direction. In the bedding business, wellness is about quality of sleep. We’re seeing an increasing expansion of that focus.”
A related consumer tailwind is increased outdoors participation. Joyce said, “If there is a silver lining coming out of 2020/2021, it’s that people got outdoors. And most recreation, by the way, happens within 10 miles of one’s home. So, you need goods, you need products, and you need technology and equipment to go and do that. And so, we’re seeing a larger commitment to the outdoors, and this is the next generation. Many believe that this is the new norm and that’s good for our industry.”
Finally, he cited an “increasing intensity” in interest in sustainable solutions. Said Joyce, “Consumers want sustainable solutions. They want performance. They want quality and performance styling. And the next generation is looking for sustainable products and they’re willing to pay more for that.”
Currently, Primaloft competes in the “very large insulation market” across apparel, accessories and bedding, according to Joyce. The overall market is estimated to have reached $31.6 million globally in 2022 and climb to $39.5 billion by 2025. Of that, the size of the synthetic alternatives market is expected to have reached $20.4 billion in 2022 and projected to expand to $24.9 billion in 2025. The size of the down market is expected to have reached $11.3 million in 2022 and predicted to grow to $14.5 billion by 2025.
Joyce noted that that Primaloft has grown much faster than the total market. From 2016 to 2022, Primaloft’s growth was 12.4 percent compared to 5.1 percent for synthetic alternatives, 3.6 percent for down, and 4.1 percent for the overall lifestyle and bedding insulation market.
“We do not look at synthetic versus down,” said Joyce. “We look at both together because we have products that can compete head-to-head with both, and we’ve been winning share of market against both. So, it’s a tremendously large addressable market. We’re gaining share. Over the last several years we’ve gained share almost three times that of the industry average. We’ve gained it against down. We’ve gained it against synthetics. So, we continue to eat away at share based upon our focus on innovation, performance and sustainability.”
A newer opportunity Primaloft is exploring is extending its technologies into adjacent space, marked by a recent move into the non-woven hygiene market. Joyce said, “We just launched into this and we’re making tremendous progress. But we believe that using this technology as a licensing opportunity to create revenue flow is in the best interest of the company. Again, it’s very early in the process but we’re making some very strong progress.”
Joyce spent much of his presentation highlighting Primaloft’s innovation which he said has been the primary factor behind the brand’s success.
“There’s nothing wrong with ‘fast to follow,’ but that’s never been what we were about. We’re always trying to be the first to market,” said Joyce.
The brand started in 1983 when the Department of Defense approached Albany International, Primaloft’s former parent, looking for a solution to eliminate down from their cold-weather fighting uniforms.
“Up until that point, the military was using duck down and goose down in their cold weather fighting uniforms,” said Joyce. “And it’s a wonderful material. It has very high warmth. It’s very lightweight and compressible so you can pack it away. The problem with it is when it gets wet, down collapses and it loses its thermal performance. And so, our project was to create a product that had the loft and the warmth and the weight and the compressibility of down but maintained warmth when wet.”
L.L.Bean developed the first commercially available product with Primaloft in its Mountainlight Jacket that debuted in 1990. Joyce remarked, “They used that in an expedition over to Everest right at the end of the Cold War.”
At about the same time, Ralph Lauren started using Primaloft in its products to bring Primaloft insulation to the fashion space and both L.L. Bean and Ralph Lauren remain top Primaloft customers today.
Other firsts for Primaloft include the introduction of the first recycled content product used footwear in 1997. In 2018. Primaloft debuted Primaloft Bio, the first biodegradable synthetic insulation and fiber developed from recycled materials.
In 2020, Primaloft Pure, renewable manufacturing technology that now achieves up to 70 percent reduction in carbon emissions, was introduced in a one-year exclusive with Patagonia and has since expanded across brands.
Another theme of Joyce’s presentation is the stability of the Primaloft business model. Primaloft works with over 950 brands around the world with no one customer accounting for more than 6 percent of Primaloft’s revenue.
“We have a diverse list of customers globally and by segment,” he adds. “So, we do business with Patagonia, which is a technical apparel brand, all the way to more of a street brand like Vans, or a lifestyle brand like Land’s End to a high fashion brand like Montclair, ski brand like Spyder or hiking/climbing brand like Black Diamond. We have large retail customers like Adidas and Nike, and we have the small regional player like a Schöffel in Germany. So, we play in a lot of places and that again provides stability to our business.”
The stability has supported a strong track record of results. Sales have grown at a 14.3 percent rate on a CAGR (compound annual growth rate) average from 2017 to 2022. EBITDA has expanded at a faster clip, 25 percent on CAGR basis over the time period as new premium product introductions have elevated margins and due to cost controls. Gross margins are expected to reach 61 percent in 2022, up from 59 percent in the pre-COVID 2019 year.
Joyce said Primaloft further stands out because it’s both a “advanced material technology” coming up with disruptive technologies such as its temperature-blocking aerogel material or biodegrading additives, but also a premium brand. He said Primaloft’s brand positioning increasingly works in the same way as Intel Inside does in the technology space or Gore-Tex in the outdoor space.
“Not only do we have expertise in advanced materials, but we’re also known as a premier brand within our industry. And that’s a pretty powerful combination,” said Joyce. “Our products can’t be seen. They’re inside garment. They’re inside shoes or inside apparel however we wrap the body. And we directly impact experience.”
He also said over 200 million Primaloft tags were placed in garments over the last several years with the name being played up more and more. Lululemon has a Primaloft hangtag attached to its outerwear that makes no mention of Lululemon and highlights Primaloft’s military history. L.L. Bean outright used the Primaloft name on one of its products, the Primaloft Packaway Jacket.
Many are increasingly placing Primaloft branding on the outside of the jacket, including Nike adding a six-inch embroidered Primaloft logo on the sleeve of its Nike ACG Lunar jacket. Said Joyce, “Why would someone like Nike, who protects their brand as much as they do, want and encourage and come to us and ask if they could put a six-inch embroidered logo on the outside of the jacket? It’s because we’re delivering value to them. We are attracting new consumers and we’re raising their position in terms of performance.”
In 2022, Primaloft pivoted by running consumer campaigns to complement its B2B efforts. Joyce said, “We started this program where we’re starting to talk to consumers about Primaloft. We want to tell our story. We want them to understand who we are and what we stand for and create demand consumer demand. So, they’ll walk into the store and say, ‘Do you have a Primaloft jacket?’ similar to what they do now with Gore-Tex.”
In the Q&A section of the presentation, Joyce admitted that Primaloft’s business model closely aligns with Gore-Tex’s model.
“I think directionally that’s the model I want to move towards,” said Joyce. “They’ve historically have done a great job branding themselves into the minds of the consumer.”
Logo courtesy Primaloft
