FlameDisk Manufacturer Plans to Turn Up the Heat
The 2009 summer grilling season has confirmed the hunch of Sologear co-founder Chad Sorenson, and it may not be too long before shareholders are rewarded for their faith in the Madison-based company.
Sologear, which is applying alternative fuel technology to backyard cooking, is placing a heavy bet on its sole proprietary product, the FlameDisk, but help may be on the way in the form of counter-seasonal products that enable year-round use of its new facility in Middleton.
That would allow Sologear to ramp up hiring, but judging by the measured way its four owners have built the business, they will take that step only when it's warranted.
As Sorenson explained, the easiest way for people understand how FlameDisk works is to think about bringing the convenience and performance of a propane grill to your charcoal grill, without having to change your charcoal grill. Outdoor chefs can get instant heat and about 45 minutes of burn duration; one of the biggest advantages is that the fire goes out immediately, and the disk can be thrown away — eliminating the need for charcoal clean up.
FlameDisk is placed at the bottom of an outdoor grill, and is activated by removing a peel-away label that exposes a series of holes that control the combustion rate of the ethanol-based fuel inside. A match that comes with the FlameDisk is struck and then placed on any one of the holes, igniting the product immediately without the use of lighter fluid. Grillers then place the grate back on the grill and can start grilling within a minute.
In addition to convenience, Sorenson said the product, which is made of recyclable material, is bio-friendly. Charcoal, especially when it's ignited with charcoal lighter, emits coal and petroleum distillates, a fair amount of carbon dioxide and carbon monoxide, and a number of volatile organic compounds, or VOCs. Sorenson said all bags of charcoal sold in the U.S. have to carry a warning label because of the high amounts of carbon monoxide, a known air pollutant.
Results from a 2008 test market, when the product was test marketed in about 100 stores in the upper Midwest and generated about $72,000 in sales, gave founders the confidence scale things up considerably in 2009. While the 2009 season is not yet completed, Sorenson noted the company has produced several hundred thousand of the disposable FlameDisk units, which sell for about $5.
"I would say we're pretty much on track with our projections," Sorenson said. "The really good news is all the new accounts coming on for 2010, so we anticipate a significant inflection point next year as national chains start coming on."
Igniting the Flame
Sorenson is joined in ownership by co-founders Tom Bush and Mark Schweiger, by Dave Franchino, president of Design Concepts, a product development company located on Madison's east side, and by outside investors. Collectively, the four original owners pooled $160,000 to launch Sologear; since the company's founding, it has raised a combined $4.8 million in capital in two fund-raising rounds.
The original motivation to develop the FlameDisk and the fuel that goes into was to provide an alternative for the U.S. based grilling market. It's marketed as a more convenient, safe, and eco-friendly way to grill.
Sologear measured success in the test phase by its ability to sustain distribution and to hit a business plan objective of selling five units per store, per week. That goal was exceeded by a considerable amount, and Sorenson acknowledged that sales were helped by the fact it was more of a local introduction, which brought word-of-mouth benefits.
"It's been a steady build," he said. "I think we have battled some headwinds with regard to the economy, not so much for the consumer standpoint but rather the retailers who have an aversion to new product introductions at this time."
Even with that headwind, Sologear has gained new distribution outside of Wisconsin.
The aim is to offer FlashDisk wherever charcoal is sold. Sologear has launched a program with some of the KOA Campgrounds, a well-received but minor portion of the distribution channel. The more coveted sales channels are the big grocery and Big Box home improvement stores, including Home Depot. At the moment, FlameDisk is sold in more than 1,000 outlets — at least one in every state — thanks in part to its hardware accounts with Ace, True Value, Do It Best, and United, plus Dick's Sporting Goods.
A West Coast environmental testing company hired by Sologear studied FlameDisk, and the results showed that it emits anywhere from 92% to 99% fewer known air pollutants than charcoal, Sorenson claimed.
Sologear gets its ethanol from plants in Iowa because it uses a beverage grade ethanol, and none of Wisconsin's ethanol plants manufacture ethanol at that level of purity.
Sorenson said comparing his product to charcoal and lighter fluid is much different than comparing gasoline to corn-based ethanol fuel, whose environmental benefits have been called into question. "It's a different comparison and in this case, it's significantly more eco-friendly," he said.
When Sorenson talks to people about the FlameDisk, the bigger selling point — eco-friendly versus fast and convenient — depends on who he's talking to. He hopes the product appeals to tailgaters, who have disposal issues to worry about, but the surprise demographic is women — especially meal-preparing moms that are pressed for time. "They really value the simplicity and the no-mess aspect of the product the most," he noted. "That's one of the key things we're learning this year, as the product gets out there a little bit more. Most of our testimonials are coming from women who really like the simplicity and the time savings."
Thus far, the product has been used safely by consumers. In fact, Sologear's product liability insurance costs actually have gone down as a result of its safety record, Sorenson said.
While the U.S. grilling market is a primary consideration, the FlameDisk's fuel may have some secondary benefits internationally by substituting for wood and charcoal in developing nations, a resource that is becoming scarce in some regions. Women in Africa, for example, are being sexually assaulted while looking for wood with which to cook and heat. Sologear was contacted by an international organization that advocates on behalf of women, and when Franchino traveled to India to present Sologear's fuel technology, it was well received.
As a result of Franchino's trip, Sologear has an ongoing dialogue with a man in Ethiopia who is involved with humanitarian aid and is intrigued by the technology behind FlameDisk. Sorenson said the company is investigating ways to donate units as part of a different aid program, but there are import-export and shipping issues that must be worked through.
FlameDisk is not yet sold internationally, but the company has a representative in the UK that is working to set up European distribution in 2010. When the European distribution is established, the company hopes to overcome all of the aforementioned barriers to donating units where needed.
To gear up for production increases, Sologear moved to a 40,000-square-foot facility in Middleton in April, and invested in a 15,000 gallon outdoor ethanol tank, which allows the company to accept ethanol delivery by the semi-load. In addition, Sologear has increased the speed of its assembly line — it can assemble one FlameDisk every four seconds — and has added another line. Sologear projects that the facility is scalable to $50 million a year in product sales.
As a result, Sologear's employee count has gradually grown, but remains on an as-needed basis. On some days, the company may have 12 people working; other days, it may have zero. "It depends on how many units we need to produce, and that's really helpful to us as a start up," Sorenson stated. "Day-to-day demand can be quite variable."
One hundred percent of Sologear's sales are linked to the FlameDisk, limiting its staff needs for manufacturing, but year-round production will depend on the development of complementary, counter-seasonal product lines. Several products are in development, and they would use the ethanol fuel outside the context of grilling.
"We just want to make sure that we hold off on production labor, in terms of permanent hires, until we've got sustained demand throughout the year," Sorenson explained. "Once we have that and more distribution throughout the U.S., we'll be able to make more significant commitments to our production labor."
One possible exit would require Sologear to make the charcoal or gas grill makers so concerned about losing market share, one of them would acquire the Madison-based company. "We don't have any active conversations with any of the charcoal manufacturers currently," Sorenson said. "It's a possibility, but nothing worth talking about yet.
"We have outside shareholders, so our game plan is to have an exit, but that's probably three to five years down the road."