SharkNinja: Disruption with chips

"Disruption spans across all industries," says Paul Markham, Investment Director, Global Equities, citing SharkNinja's case study to illustrate his strategy.

14 August 2024

Disruption is indeed not confined to just technology companies. It spans across all industries, including financial services, healthcare and more. While technology will likely remain an enabler for most companies, being disruptive today often requires effective use of technology, but not necessarily as the primary focus of a business. True disruption may stem from secondary technology applications, supported by visionary management teams with strong execution capabilities and a deep understanding of evolving consumer needs.

Thematic ideas

Disruption is a universal phenomenon that transcends industry boundaries, impacting sectors as varied as financial services and healthcare. Blockchain technology harbours the potential to revolutionise the banking system by streamlining transactions and removing the need for intermediaries and traditional centralised ledgers. In the healthcare sector, recent advancements in treatments for diabetes and weight loss hold promise for reducing healthcare costs, easing government financial burdens, and enhancing individual health outcomes. While disruption is often linked with smaller, emerging companies, it is important to recognise that large-cap entities can also be agents of change by capitalising on their technological prowess, adept management and deep data-driven consumer insights. Wearable technologies like smartwatches and sensors are at the forefront of collecting and analysing data on human activity and health, paving the way for personalised healthcare solutions that cater to individual preferences, thereby improving healthcare delivery and research.

SharkNinja: pioneering growth through continual innovation

SharkNinja is a good illustration of industrial diversification in disruption. My recent visit to their research and development (R&D) hub at Battersea Power Station was a real experience and quite exciting. Although an American company, their global presence is marked by three R&D hubs that ensure 24-hour innovation across Boston, China and London. The company's name is formed by combining its two primary brands: Shark and Ninja. Impressively, Shark has become the top-selling vacuum cleaner brand in the US, Canada and the UK, challenging the dominance of brands like Dyson and Hoover.

The global home appliances market size has experienced a robust growth of 10.0% between 2022¹ to 2023². SharkNinja, a key player in this sector, has outpaced the market with an impressive Adjusted Net Sales increase of over 15% during the same time frame³. In the fiscal year ending 31 December 2023, Cooking and Beverage Appliances saw a net sales increase of 33.7%. This remarkable growth, particularly in Europe and more so in the UK with air fryers, where the company has solidified the leading market position.⁴ Their upcoming store-in-store concept in 100 Currys stores across the UK underscores the high demand for their products, and their willingness to leverage existing distribution channels to meet it.

Revolutionising smaller kitchens

SharkNinja's R&D excellence is showcased in their swift response to consumer insights, leading to the creation of a compact, stacked air fryer that became the UK's top seller. Their commitment to innovation is further highlighted by their latest design, perfect for smaller kitchens with limited worktop space, which features a minimal footprint and a unique stacked drawer system. This space-saving solution also offers versatility with a model that combines two drawers into one for larger meals.

Apart from R&D, SharkNinja's success can be partly attributed to effective use of their website for segmentation work and promotions. This strategy has allowed them to gain considerable traction, disrupting the market in a way that has not been seen since the microwave oven's introduction. Air fryers, like those from Ninja, have become increasingly popular due to their energy efficiency, speed, convenience and versatility, allowing users to bake, fry, grill and roast with ease. This is especially relevant in a society with more single-person households and later family formations. Ninja's air fryers, starting as inexpensively as USD 59, offer an affordable and versatile cooking solution, making them an attractive option for students, pensioners and others living alone. The air fryer market is a prime example of disruption, where innovative products meet changing consumer lifestyles and needs.

SharkNinja beats first-quarter goals

Projections indicate that the revenue in the Household Appliances market worldwide will continue to grow at a compound annual growth rate (CAGR) of 4.9% from 2024 to 2029.⁵ However, SharkNinja is setting a remarkable precedent with a growth rate of more than 20% In the first quarter of 2024 alone, reporting Net sales that have soared by 24.7% to USD 1,066.2 million, compared to USD 855.3 million in the first quarter last year.⁶⁷ This indicates that the company is outperforming the market average by a substantial margin, likely due to their innovative products, strategic pricing, and refusal to grant exclusivity, which allows them to sell through all channels. Their growth rate is a clear indicator of their disruptive presence in the market.

Robust second-quarter results prompt upward revisions of full-year outlook

On 8 August 2024, SharkNinja delivered strong second-quarter results that outperformed Wall Street's predictions, leading to an upgraded full-year outlook. Net sales rose by 31.4% to USD1,248.7 million, compared to USD 950.3 million in the same quarter of the previous year. Adjusted EBITDA grew by 47.6% to USD 167.7 million.⁸ These very solid figures demonstrate SharkNinja's ongoing operational momentum; and the company raised sales and profit forecasts, reinforcing our optimism in its strategic direction.

Why has this suddenly happened? SharkNinja's disruption in the domestic appliance market can be attributed to their identification of complacency among legacy brands, a commitment to constant product development, and a clever pricing strategy that positions them just above mid-range, enticing consumers to trade up for quality. Their refusal to grant exclusivity to retailers, even in the face of potential loss of stockists, further demonstrates their confidence and strategic market positioning.⁹

Disruption

Disruption has been a constant in the appliance space, with companies like Dyson pioneering the market 20 years ago. Today, the consumer appliance landscape is crowded with brands competing across a spectrum from low-end to high-end, including Miele and Dyson. SharkNinja, in particular, has made significant strides, becoming a leading brand in a remarkably short period across many markets. This rapid rise exemplifies the transformative power of technology in traditional industries.

The rise of SharkNinja is a powerful endorsement of the strategy of using technology as a tool for disruption, rather than being a disruptor within the technology industry itself. This approach is increasingly prevalent as more companies leverage technology to establish their niche and redefine their industries. This shift represents a broader trend of evolution and innovation, where the application of technology is not confined to technology companies but is a strategic advantage for any player with the foresight to utilise it effectively.

SharkNinja's ascent in the appliance industry is not an isolated incident but part of a larger narrative where technology is the catalyst for change. It is a compelling reminder that in the modern business landscape, disruption is not just about creating new tech but about how technology is employed to create a competitive edge and deliver value to consumers. This is just one of many examples I am seeing unfold, signalling a shift in how industries evolve and thrive in an increasingly digital world.