Is Yeti justified in their cost of their coolers? A review.

To start off, I’m not an employee of Yeti, have never been in contact with anyone that has ever worked at Yeti, and was not given this Yeti Roadie. Nope, in fact I paid $199 retail plus tax to have a cooler that has roughly an average price tag of $50 for similar sizes.

I’ll fully admit that the millions of dollars year-over-year that Yeti dumps into their branding and advertising got me to shell out over four times the amount of money one would traditionally have for this overbuilt, high-priced, premium quality cooler. So a little backstory and this purchase decision…

I live in Miami, where in September 2017 we were dealing with the scare that was Hurricane Irma. During that time, I had to be in St. Louis for a wedding, but flights were all cancelled. To make the wedding, I loaded my old Jeep and drove what was normally a 17 hour drive, that took 32 hours. Since I thought of the possibility of getting stuck somewhere, I wanted to have a bunch of food and drinks with me. I used my old igloo cooler, and borrowed my brother-in-law’s Yeti. The igloo performed like crap and everything was nearly ruined in the melted ice. The Yeti performed like a fucking champ. From that point forward I was sold.

I without a doubt do not question my purchase, and don’t even care to defend the Yeti price tag. And there are numerous reviews out there that show that the performance and durability of these coolers is undeniable. The question I want to answer, “is Yeti charging a reasonable price based on their margin and operating costs?”

So let’s get one thing out of the way, and that’s Yeti does, without a doubt, need to make money to dump back into their advertising efforts. They need to continually remind people that their product is associated with the gritty and rugged outdoorsman. That this cooler, which is the first ever to be certified as ‘bear resistant,’ is an essential asset to living that outdoor life. Chris Janson’s country hit Buy Me a Boat helped propel Yeti into the zeitgeist with the line, “It could buy me a Yeti 110 iced down with some silver bullets.” Personally, I’ll take Budweiser over the silver, but that’s besides the point.

Probably unbeknownst to you as consumer, it’s working. Companies in general spend a ton of money working on their brand association and keeping up their image. Not to get too sidetracked from the analysis at-hand, but in an episode of The World According to Jeff Goldblum¸ Jeff Goldblum went to an Adidas R&D facility to check out new potential prototypes. They hooked him up to a machine that was able to gauge his emotional reaction to their products. Why? Because regardless of the quality of a product, a customer will always want to feel that excitement and thrill when they look and eventually purchase their product. This translates to word-of-mouth marketing, which is the best marketing any company can get.

Now back to the cooler — I, admittedly, felt that when I went to Dick’s Sporting Goods to purchase this cooler. You pick it up, you hold it and it’s without a doubt premium, heavy, and well-made. I’ve seen friends and family with the cooler, and was finally excited to add one to my collection. To no longer repeatedly purchase cheaper coolers, which I’m sure has totaled over $200 over the years. The cheaper coolers just tend to get beat to death, and eventually hit the graveyard.

So let’s finally take a look at the touted “technology” of the Yeti cooler. The body of the cooler is comprised of a seamless rotomolded shell, that is pressure injected with commercial-grade polyurethane foam to create two-inches of insulation around the entirety of the cooler, including the lid. The lid is tough enough to hold your body weight, and contains a high quality freezer-grade gasket to seal the lid. Premium, premium, premium.

In a popular What’s Inside? episode, they take a saw to a Yeti cooler and are unimpressed with their findings. I think perhaps this was an unfair visual representation to the value and performance of their products. I’m no expert int his realm of cooler technology, but I do know, based on my background studying Biochemistry and engineer, not all materials are created equal. It is not easy to judge quality visually.

Further, Yeti likes to point out their NeverFail ™ hinge system and their patented T-Rex Lid latches (US Patent No. US 9,187,232 B2). The goal of this latch was to remove the old breakable latches, and replace it with one with less moving parts. Per their patent, you have opposing first and second portions, with a latch attached to the first portion, the lid, and a latch keeper integrally molded into the second portion. Creates a tight seal, and a durable latch system.

So now that we’re familiar with the product, let’s revisit that $200 price tag. I spent quite a bit of time trying to figure out the best way to determine the cost to manufacturer a product like this, with no luck. The goal is to find objective evidence for my calculation and the only thing that I could reference are those documents provided in their investor relations material.

Yeti went public in 2018, which requires them to disclose certain information to the market. This includes their net sales, operating costs, and most important of all — their gross margin. Now, the problem is that only their overall gross-margin is provided, which was reported at 48% over the last twelve months from December 2019, which is healthy, but not ridiculous. Based on the research, this is heavily carried by their drinkware line where Yeti has seen incredible growth, likely due to the lower MSRP. Further, in an INC Magazine article discussing the beginnings of Yeti, the founders disclose that when looking into building out a premium cooler line, the list price would have to be in the neighborhood of $300.

There’s also a difficulty in extrapolating margins in their direct-to-consumer (42%) channel versus wholesale to third party retailers, like Dick’s (58%). Their increase to their direct-to-consumer reach also plays a role in the uptick in their margin since no profit sharing is needed. So in the end, based on the increase product line, and DTC line in relation to their growth in the basis points of their margin, I’m going to reference only the lowest number I have — 48%. This number may not specifically pertain to the cooler, but it is a margin, on average, they’re seeing for their entire product line.

To ensure I’m using their numbers correctly, I’m going to reference their published 10K, which is the annual report publicly traded companies are required to file with the SEC. The last one was filed on March 20, 2019, and defines gross margin as, “gross profit divided by net sales.” Therefore:

Gross Margin = Gross Profit / Net Sales

52% = Gross Profit / $199.99

52 * $199.99 = $96.00 in Gross Profit

Meaning, the cost to get it into your hands would be $199.99 — $96.00 = $103.99

That $104 needs to account for such things as:

• Cost of materials
• Manufacturing costs, such as labor, tooling, machinery
• Shipment from overseas, I believe this are made in the Philippines
• Payment of import fees
• Inspection costs
• Payment of shipment to stores
• And into your hands

Also, as mentioned before, Yeti spends a ton of money in their marketing, which needs to come out of that $104 profit margin. Yeti reported an increase of SG&A expenses over the last 12 months, which included their increased marketing expenses. Looking at their latest report, their net income only came down to 5.5% of their sales. Meaning, of the $199.99 I contributed to Yeti, only $11 translated to actual income.

Yeti is going to have to continually pour money into their marketing channels to capture new customers and justify their premium pricing to skeptical eyes. I fully understand that $200 is a high price for “just a cooler,” but if you beat the hell and use your equipment like I do, it’s worth the cost. And based on my research, the price is justified.