Last week saw the End of Financial Year for most small businesses in New Zealand and on the day this occurred, I reflected upon the year past for my own business in light of some announcements that have hit in the same week. I don’t particularly enjoy looking over my shoulder at what competitors do, for our 33-year history at Cactus Outdoor, we have been firmly focused on our own business. But the demise and rocky road being currently navigated by two companies made me think for a minute.
For most of our history, we’ve kept our heads down. There’s a certain comfort in focusing on your own knitting, as the saying goes. But sometimes the broader landscape forces its way into your field of vision, whether you like it or not. This week, two particular stories made that impossible to ignore, and they’ve been rattling around in my head ever since.
The first is the rather sobering tale of Allbirds. Not that long ago, it was the darling of the sustainable business world. A New Zealand success story that managed to capture global attention, list on the US stock exchange, and convince a lot of very smart people that it was onto something special. And to be fair, it was. The product resonated, the brand story was compelling, and for a while, there it seemed like the sky was the limit. But fast forward to now and the narrative feels very different. The company was sold last week for around $70 million. Contrast that to its multi-billion market cap soon after listing. For many investors, including a fair few everyday “mum and dad” types who bought into the story, the result has been a significant incineration of wealth.
Hot on its heels comes the situation with KMD Brands. Here we have a long-established player, a business with real heritage in this part of the world, finding itself needing to raise capital at a substantial discount. Capital raises are not unusual, of course, but the optics of doing so at a price this low is hard to ignore. Again, it’s not just institutional investors who feel the sting. There’s a broad base of retail shareholders who have backed the company over the years, many of whom will be looking at their portfolios with a growing sense of unease.
Now, it’s easy to point fingers or to chalk this all up to bad luck, changing market conditions, or the general economic malaise that seems to be hanging over everything at the moment. And certainly, those factors play a part. But I think there’s something more fundamental at play here, something that goes beyond any single company or sector.
For a long time now, there’s been an almost unquestioned belief in growth at all costs. Scale has been the holy grail, with the assumption that if you can just get big enough, quickly enough, everything else will sort itself out. Profitability becomes a secondary concern, something to worry about later once market share has been secured and competitors have been seen off. Alongside that comes a reliance on what I’d politely call “vanity metrics”. Customer acquisition numbers, website traffic, brand awareness, all important in their own way, but often presented in isolation from the harder, less glamorous realities of actually making money.
The trouble is, gravity has a way of reasserting itself. Businesses that are structurally unprofitable don’t suddenly become profitable just because they’ve grown larger. In fact, in many cases, the opposite is true. Losses scale along with revenue, and the gap between perception and reality widens. When capital is cheap and plentiful, that gap can be papered over for quite some time. Investors are willing to fund the dream, to buy into the narrative, to believe that profitability is just around the corner. But when conditions tighten, as they inevitably do, the questions become harder, the tolerance for ongoing losses diminishes, and the cracks start to show.
What’s particularly concerning is who ends up carrying the can. It’s not just venture capitalists or large institutions with diversified portfolios. Increasingly, it’s everyday investors who have been encouraged to participate in these stories. People who see a well-known brand, a compelling mission, and a rising share price, and decide to put some of their hard-earned savings on the line. When things go well, that feels like democratisation of investment opportunities. When they don’t, it can feel like something else entirely.
All of which brings me, somewhat sheepishly, back to Cactus. We are, by most measures, not a particularly sexy business. We make gear. It’s robust, it’s functional, and it’s built to last. We’re not setting the world alight with exponential growth curves or headline-grabbing valuations. Our numbers don’t make for flashy investor presentations. But sitting there last week, looking at another year of steady, measured growth and, crucially, consistent profitability, I couldn’t help but feel a quiet sense of reassurance.
There’s something to be said for a business model that prioritises making more than it spends. For growing at a pace that the underlying economics can support. For focusing on customers, product quality, and operational discipline rather than chasing the next big narrative. It might not get you on the front page of international business magazines, but in times like these, it starts to look a lot more attractive.
