A lot has changed in the hot tub industry over the last 15 years especially a steady trend of hot tub manufacturer mergers and acquisitions. This consolidation has been due to various factors such as market demand, competition, and economic conditions.
Consolidation in industries tends to occur when larger companies acquire smaller or distressed ones to expand their market share, diversify their product offerings, or gain a competitive advantage. The hot tub industry has been no stranger to this phenomenon.
Here are 5 strategic reasons why we’ve seen a rapid increase in consolidation of hot tub brands;
- Economies of Scale: By merging with or acquiring other companies, hot tub manufacturers can often achieve economies of scale. This means that their average costs decrease as they produce more goods or services, leading to improved efficiency and profitability.
- Increased Market Share: Consolidation allows hot tub companies to expand their market share by integrating complementary products. For example, if a large hot tub manufacturer doesn’t currently offer swim spas then they can go purchase an existing swim spa manufacturer rather than developing a swim spa line from scratch. This can help them gain a larger portion of the market and potentially reduce competition. Another example might be that a large hot tub manufacturer may have saturated a particular market like Los Angeles with hot tub dealers. For them to grow their footprint any larger in that market then they might go buy a competing brand and acquire that competitors portion of that market. This also allows the acquirer to control prices in that particular market making them more profitable as they would be competing against themselves. Essentially the acquirer wouldn’t care which of the dealers sold which brand since all sales would go to the parent company.
- Diversification: Companies may consolidate to diversify their product offerings or enter new markets. This strategy can help reduce risk by spreading operations across different industries or geographic regions. For a example, a large hot tub manufacturer may want to infiltrate an international market like Canada so instead of expanding their current operations into that market they might be an existing Canadian hot tub manufacturer.
- Access to New Technologies or Expertise: Acquiring or merging with another company can provide access to valuable technologies, patents, or expertise that can enhance innovation and competitiveness. For example, Coast Spas builds a unique hot tub design with a negative edge which they have patented. They could be an acquisition target for that reason.
- Cost Reduction and Synergy: Consolidation often involves streamlining operations, eliminating duplicate functions, and reducing overhead costs. This can lead to significant cost savings for the merged entity. Companies may consolidate to leverage synergies between their operations. By combining resources, capabilities, and expertise, companies can create value that wouldn’t be achievable independently.
In the chart below it may surprise you to see that although there are over 60 brands listed, they are owned by only 7 parent companies.
You can refer to our other Hot Tub Comparision Chart and Top 10 Hot Tub Brands list for further reference.
Also, for more information visit our hot tub buyer’s guide pages. Also, click on the pink boxes and complete our free local quote form to get competitive prices from local dealers in your area. You can also click our “Spa Buyer’s Consult” link above to get one on one expert advice on the cold plunges available in your area.
