Instant Brands, the parent company behind the Instant Pot, has filed for Chapter 11 bankruptcy today, as first reported by Bloomberg. The company, which also owns the Pyrex glassware brand, announced they’d reached a deal for a new $132.5 million financing line of credit to support the company as it navigates the bankruptcy process and figures out a new path forward.
Signs of trouble first surfaced for Instant Brands earlier this year when the Wall Street Journal reported the company had hired advisors to help it restructure. At the time, the company had a $400 million line of credit trading at a severe discount due to rising interest rates. According to Bloomberg, the combination of high-interest rates, waning access to new lines of credit, and a dwindling cash position forced the company to finally file for Chapter 11.
So what happened? How did Instant Brands, the company behind what was once the fastest-growing countertop appliance in the US, go from high flyer to Chapter 11 in just a few short years?
Below are some of the reasons I believe led to the company’s current predicament:
The Pressure Cooker Category Reached Saturation Very Quickly
Part of the reason for the success of the Instant Pot was the fantastic value for the consumer. In one multifunction appliance, the consumer had a rice cooker, steamer, bean maker, yogurt machine, sauté pan – you name it – all for $100 or less. It was hard to beat, which is why Instant went from zero brand recognition a decade ago to becoming eponymous with the category it created (or, in a sense, reinvented) in just a few short years.
The problem with exponential growth is you can get to market saturation very quickly. The product (and its clones) was affordable to almost anyone, and before long, anyone who wanted one had one. But unlike high-margin tech products like the iPhone, the Instant Pot isn’t something most consumers want to replace every few years.
Clones, Ninjas, and Narrow Competitive Moats
While the Instant Pot’s reinvention of the pressure cooker was an innovative take on an older category, it was easy to knock off. Because of this, it wasn’t long before a slew of low-cost copycats flooded Amazon and other online retailers.
At the same time, fast-moving brands like SharkNinja kept on innovating. They jumped on new cooking appliance categories (like air fryers) more quickly than Instant Brands, which has admitted to being late to the category. Instant’s CEO has stated the company is continuing to look for its next hit, even as it enters into financial reorganization.
In some ways, the ease with which low-cost copycats and brand-savvy bigger companies like SharkNinja were able to create similar products that were instantly competitive with Instant Brand’s showed just how small, in retrospect, Instant’s competitive moat was. In other words, there was no significant technology, manufacturing or brand differentiators that companies entering the market had to overcome.
Non-Premium Pricing and Low Customer Loyalty
While Instant became synonymous with the smart multicooker category, the brand didn’t necessarily build significant brand loyalty. Customers, who often bought their Instant Pot or clone for end cap fire sale pricing, didn’t necessarily view the Instant Pot brand as something unique or irreplaceable. Other categories like built-in ovens, refrigerators, or coffee makers usually have bigger price tags and connotations of premium user experiences. At the same time, the Instant Pot often seemed cheap in price and quality. Much of the damage around the brand’s low-rent image was self-inflicted.
Buy High, Sell Low
When Corelle and Instant Pot announced the merger of the two companies, the combined value of the new entity was estimated at around $2 billion. Much of that market value was attributable to the white-hot Instant Pot, which meant Corelle would pay out the nose to bring the company and its fast-growing product lineup into the fold.
While I don’t have the projections that Corelle put together to rationalize the debt load they would take on to finance the acquisition, it’s probably not too big a leap to say they didn’t forecast sales of Instant Pot cooling off as fast as they did. And, as detailed in the Journal in March, the company hasn’t come close to finding a successor hit to help the company get on the right path again. At the same time, the lean operating model of the Instant Pot’s early days (which had four employees in 2013) is long gone, making way for the layered corporate bureaucracy of Corelle (the combined company had 1,900 employees earlier this year).
The bottom line is Instant Brands became highly leveraged right as the product started to reach market saturation. In the following years, Instant has moved slower than its competitors like SharkNinja and Dash, who have come out with often better-looking products in new categories at equal or lower prices. The result is this week’s announcement.
It’s really too soon to tell how the company will far going forward. Post-bankruptcy, Instant will have a clean balance sheet but a much smaller innovation team, and without the company founder Robert Wang (who left the company’s operation in late 2021), it’s not clear where the next big company-changing idea will come from.
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