The news came out a couple weeks ago that the largest Hot Tub maker purchased one of the smaller Hot Tub makers in the industry.
Why? A couple of reasons; Freeflow Spas are roto-molded and thus, they are less expensive to make. Therefore, Hot Spring now can offer their dealers an entry level price point spa.
Rumors have it that many Hot Spring dealers were starting to sell the Freeflow product over the last two years, so in a sense, they bought the company that was starting to give them competition for floor space.
The second reason is Costco. In 2011, the major portion of the Freeflow volume was sold to Costco.
The type of product Freeflow makes is perfect for mass merchants, light, durable, and lower priced. By buying Freeflow, Hot Spring now has a product that is well suited to the channel and has the best mass merchant for hot tubs, Costco. The mass merchant channel is important in a time where traditional brick and mortar spa dealers are shrinking.
Time will tell if Hot Spring is really committed to the mass channel as they might be just waiting for the new product to grow with their current dealer channel and then pull out of Costco when they no longer need the sales to justify the purchase.
What is logical to assume is they (Hot Spring) will be in Costco for 2012 for they need the revenue in the short term to justify the big money they paid for Freeflow. Rumors have Hot Spring/Watkins paying about $6+ million for the company, based on $10M in sales.
The bottom line is this is good for everyone, Hot Spring will increase the volume, Costco will enjoy having a bigger supplier with better marketing support. The dealers will enjoy having a entry level product from the mother ship. Consumers will enjoy the confidence they are buying a product from the biggest and the best in the industry.