George Stephen was frustrated. Every time he tried to cook a nice piece of meat on his backyard grill, he got angry. Not only did smoke go everywhere, an inevitability in Mount Prospect, a windy suburb northwest of Chicago. The heat was distributed so unevenly that every steak was an adventure.

Stephen worked at a small sheet metal shop called Weber Brothers. That's where he came up with a new idea. He put together two hemispheres made of sheet metal, usually used to make buoys. This gave him a closable, wind-resistant grill. A short time later, in 1952, he began selling his invention nationwide. George's Barbecue Kettle was the world's first kettle grill.

Almost 70 years later, the company, now called Weber-Stephen Products, is going public. Weber shares caught fire in their market debut
Thursday (August 5), closing their first day of trading up almost 18%. The Palatine, Illinois-based company sold about 17.9 million shares at $14 per share before its stock started trading. That was below what company officials and selling shareholders had been looking for.
They had wanted to sell nearly 47 million shares between $15 and $17
a share.

The company plans to use proceeds to pay down debt and for general
corporate purposes.

Weber trying to grab a hot opportunity

Despite that change in tack, Weber is nonetheless forging ahead with its quest to gather fresh money on capital markets. Weber's optimism has been buoyed by the enormous demand for home products that grew out of the coronavirus pandemic, when the company's business blossomed. In the first half of 2021, which ended May 31, Weber sold grills, smokers and accessories worth $963 million — 62% more than the same period in 2020. Profits for the first half of 2021 came in at $74 million, only 7% less than for the entire previous year.

Weber is a heavyweight on the grill market, which California-based market researchers Frost & Sullivan put at $49 billion globally. That is also especially true in the US, where Weber is the undisputed industry leader, generating some 58% percent of its overall sales. But Weber is not as popular in the US as one might think. It currently maintains a market share of 23% in its home country, where competition is particularly fierce.

Weber in Germany

The situation is quite different in Germany, where almost half of all grills sold are from Weber. The German market research company GfK says grill equipment manufacturers had their "biggest sales year ever" in 2020. GfK says that was the result of a major shift in the market. It says inexpensive coal grills from Weber, which can be had for as little as $28, were less in demand, while high-priced gas grills, which can cost up to $3,800 depending on size and performance, were best-sellers.

Still, North America's sheer market size makes it Weber's primary focus. Valued at around $9 billion, the US — where the Hearth, Patio & Barbecue Association says two-out-of-three people own a grill or smoker — dominates globally. From March to May this year alone, American barbecue enthusiasts spent more than $1.8 billion on equipment and accessories.

The massive demand could, however, soon be coming to an end for grill manufacturers, especially Weber. The market is saturated and the industry is mature according to global market research company IBISWorld. A glance at the period before the pandemic does not bode well for Weber's future development — quite the opposite. In 2019, revenues were down slightly to $1.3 billion for the full year. At the same time, Weber had a 56% drop in earnings.

More slow grilling in the future?

Observers say the industry could be slow for years, "This phase is characterized by slowing growth rates and low technological innovation," warned IBISWorld analyst Nick Masters. By 2025, sales are only expected to increase at an annual rate of 1.4%. This is yet another reason why there are hardly any new entrants to the market.

There is, nevertheless, a lot of competition in the US. Companies such as Coleman, Char-Broil, Middleby and Broil King have recently taken increasing market share from the company. Driven by pandemic-induced sales, no fewer than four grill manufacturers are going public this year. Traeger, a manufacturer that specializes in wood-pellet grills, was able to raise $423 million with its stock market debut at the end of July. Since then, its shares have gained 20%.

Yet the lack of raw materials and faltering supply chains call into question how sustainable such growth is. Because Traeger now manufactures almost exclusively in China, and Weber is at least partially dependent on products from Asia, slow deliveries are hampering business. "Furthermore, even if growth in demand continues, we may not be able to meet that demand due to production and capacity challenges," Weber's stock exchange prospectus says. At the same time, it is clear that when more people can go out to restaurants and enjoy other leisure activities again, the need for barbecues is likely to decrease significantly.

The price of a good name

Meanwhile, Weber at least can hope to benefit from a strong brand name in the future. Years of growth at the top of the industry have given the company a loyal and wealthy clientele. "The Weber name and premium brand image are integral to the growth of our business," said the prospectus. The document mentions the word "fire" 221 times.

Weber's greatest strength, however, is also it's greatest weakness. If its image suffers, the company is in trouble. "We have spent decades building brand affinity and awareness by teaching people how to grill the 'Weber Way,'" wrote company management. "Any harm to our brand could result in a significant reduction in such demand, which could materially adversely affect our results of operations."

The article has been translated from German.