Food52 Makes an Intelligent Buy With Dansk

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Food52, one of the best examples of content and commerce being inextricably linked, announced on Monday that it had acquired Dansk, a housewares brand, from Lenox Corporation. According to the announcement:

I reached out to learn more about acquisition price, but they were unable to share.

This deal makes perfect sense for Food52 and it completely supports the narrative I started discussing last week regarding building an audience before expanding into a product. By starting with the audience, you learn more about what they care about and what their needs are. You're then able to identify areas down the funnel to monetize more fully.

This is a good example of that. Food52 is no stranger to being in the product business. For years now, it has run its own line of kitchenware. These goods aren't just white-labeled versions of another company's products. Instead, Food52, through its Five Two brand, handles the entire operation.

It starts with product development, where the audience is an active participant in commenting on product features. An example is this cutting board. The audience talked about a problem with juices when cutting meat, so they designed the cutting board with an easy spout to drain the liquid. Revolutionary? No. But no one else was doing it. The only way Food52 knew to do it was because they talked to the audience.

This puts it in a different playing field than most media companies that have a commerce business. By having a tight link between the audience and product development, it is in a good position to create the right thing from the beginning. When it finalizes the acquisition for Dansk, it will be able to do the exact same thing. The company says right in the press release that it'll be "relaunching gems from the extensive archives and developing new Dansk designs." I would be surprised if the community wasn't part of both those steps.

What I also like about this acquisition is it is an example of a methodical deal. Food52 didn't just wake up one morning, look at this brand, and acquire. It had all the data it would ever need to determine whether an acquisition would make sense.

Why?

It already sells Dansk. If you go to Food52's shop, there are 17 items from Dansk including dinnerware, some baking dishes, flatware, etc. Additionally, there are a couple of co-branded collaborations where Food52 and Dansk created items together. Because it was already selling Dansk, it knew how well that line of products performed.

It's likely that only after analyzing that data and seeing what sales trends looked like did Food52 finally decide to make the acquisition.

This is obviously a risky business. As we've seen with the Suez canal blockage and how commodity prices have skyrocketed, supply chain management is a very difficult business. There are new costs associated with being in this business. While I believe this fits within Food52's DNA, I don't know if it does for other media companies.

But we can take lessons from this and apply it to our commerce businesses. Here's how...

As with any commerce business, most participants started with affiliate marketing. This is an easy way of testing what types of products people want. You start creating content, experimenting with various promotions of the different products, and then start tracking. The most important part at this stage is not how much money you're making, but collecting good analytics so you can understand how much product you're moving.

To get started quickly, just use Amazon. However, do not use Amazon for long. This creates significant risk because all revenue is coming through a single partner. Amazon has historically cut commissions (it did so just as Covid was getting started last year). But it'll give you the data you need.

Once you understand what types of products are being sold, you start bypassing Amazon. Reach out to the companies whose products you sell the most and offer to do more integrated affiliate deals with them. If the deal is done correctly, both parties should make more money.

When there are three companies that want to make profit—publisher, Amazon, and product company—the amount for each participant is lower. By cutting Amazon out and driving audience directly to the product company, Amazon's not taking a piece. That means you could ask for a greater percentage than if you were going through Amazon.

Publishers don't even have to take the next step and move into the same field that Food52 did with product development and distribution. Most media companies simply stop at the affiliate relationships and monetize there. The primary lesson to take from this is that it is important to understand what your audience is buying. That can inform content and product decisions down the line.

In the case of Food52, it already had the data on hand that said, "our audience wants Dansk." Therefore, when the possibility of an acquisition presented itself, the company wasn't operating from a position of blindness. Rather, it had much of the data you'd want. It'll be fun to see how this plays out over the coming years.

Before we continue... I recently reached an agreement with Collin Morrison at Flashes & Flames to test out a cross-promotion. I'll run one piece of his content each week on A Media Operator (see below) and he'll do the same on his site. Let me know your thoughts.

Here's the first piece.

What Next for Immediate Media?

Ten years ago, the BBC and KPMG were organising an auction for the UK state-owned broadcaster’s magazine publishing. Within three months, Exponent private equity had outbid Bauer to acquire the magazines for a published price of £121m, which became £113m during due diligence – 6 x operating profit and 60% of revenue. The deal gave ownership of six magazines outright and licensing rights to more than 20 others. Six years later, Exponent sold what had become Immediate Media to Hubert Burda, of Munich, for £270m having also made more than £100m in trading profit.

In a decade when the magazine industry everywhere has been shredded by lost advertising and readership, this one company has notched up nine consecutive increases in EBITDA, and overall revenue growth of 65%. The company’s headcount has grown by almost 40%.

The transformation of the former BBC Magazines is made all the more remarkable by the fact that its flagship brand is the 98-year-old programme listings magazine called Radio Times. The world’s oldest broadcast listings magazine was launched by the BBC in 1923, and kept its name when it moved into TV 13 years later. It had once generated 25% of the BBC’s total revenue, was Europe’s largest circulation magazine, and has long been the UK’s most profitable. Weekly circulation peaked at 8.8m copies in the 1960s, and 11.2m copy sales of its Christmas issue in 1988.

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