Strix is a world leader in design and manufacture of kettle safety controls with a 38% global market share. The original technology was developed by 2 brothers in 1892 and whilst it’s been modified, the technology used today is essentially the same. Strix only make the control unit, and then work collaboratively with brands to make products. They offer a ‘Good, Better, Best' portfolio of products across a wide range of price points without compromising on quality, to customers around the world. The market is very competitive and many peers make lower quality products, but they tackle this by fiercely defending their Intellectual Property (IP) by taking copyists to court. They have a reputation for doing this and winning, this supports the revenue generating capability of its innovations for years post patent expiry.
Strix has very well established relationships with their customers. They have a 37 year track record of quality production at high margins that reflect service level. They are highly regarded in the industry, have the highest safety accreditations and are the trusted advisor to brands. They are the solutions provider to the supply chain. They have strong direct relationships with the major small appliance brands and (OEM’s), and provide components and integrate them into whatever customers look to make. Strix consult with their customers to drive innovation, to create new products and provide a valuable service. The sales team also advise brands on market demand and how they should place the products in markets. Their market positioning, significant IP and their position embedded with customers all serve as a strong barrier to entry.
The core business is high margin and cash generative, the dividend policy is progressive and dividends will grow in line with earnings. In recent years, they have begun to develop new products into adjacent markets, such as water filtration, coffee applications and chilling & heating technologies where they can use existing technologies to develop products with their brand partners who shoulder most of the development costs. Growth in the wider product portfolio will bring increased content value per appliance sold, supporting future profitable growth.
Growing regulatory requirements, population growth, changing drinking habits and the roll out of new products should drive volumes up. We will continue to see organic growth from further penetration in existing markets, product development & innovations in adjacent markets, and from their growing portfolio of complementary technologies. Acquisitions are possible too. Strix has consistently delivered steady growth over the past decade despite the evolution of regulations & low cost competitors. Although not immune from deteriorating macro, Strix's products remain in demand since on average a kettle is replaced every 3 years, providing a degree of visibility in demand. Although deteriorating consumer sentiment may result in trading down to lower price point kettles, the overall impact on profitability is limited.
We like the market positioning, the strong IP, and the track record of delivery for shareholders. We are excited by the growth prospects from the new product portfolio, and their ability to leverage their customer network.
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In which year did we first invest?
Where is their head office?
Isle of Man