Liberator designs, manufactures, and markets a paradigm-shattering line of specially branded products which have already captured massive territory in the rapidly emerging sexual wellness space. Starting with a simple but profound concept back in early 2001-2002, inspired by an article that Louis Friedman, Founder of LUVU, read on the benefits of using pillows/cushions during sex, the Liberator® brand has grown from inauspicious beginnings to encompass a whole range of sexual health and wellness products.
The wholesale business is run through wholly owned subsidiary, OneUp Innovations, which also enables exclusive resale distributor capability for TENGA Co., Ltd. and Booty Parlor brands (14% of consolidated net sales for FY11) via the company’s channel/network architecture. The company also sells a range of contemporary beanbag furniture items under the Jaxx brand because of the positive environmental/economic metrics of repurposing the trimmings from the Liberator and other furniture/positioning items’ polyurethane foam for beanbag filler (www.StudioOneUp.com 10% of consolidated net sales for FY11).
With several key patents covering the design of these precisely calibrated pillows (full computer-aided design and precision fabric/foam cutting hardware on the company’s conveyor unit production sewing systems) and a team of designers, artists, and media production personnel at the onsite idea lab, able to drive organic development of new concepts in-house, LUVU is well-positioned to capitalize on an already established brand identity which has helped propel the entire segment into the mainstream. The flagship product, designed as the ultimate comfortable, yet firm shape and positioning system, has already been featured in top grossing films like Meet the Fockers and Burn after Reading (combined gross $680M globally), even garnering wider daytime exposure via acclaimed health expert Dr. Oz, who has spoken on the product as per the vital necessity of sexual health and intimacy to overall well-being.
The company is headquartered just outside Atlanta where they have a state-of-the-art, 140k square foot manufacturing facility (over 140 employees) that has given the company a regional presence and even helped secure the Liberator’s spot on popular reality TV show, The Real Housewives of Atlanta. The company also has a 2.5k square foot Liberator Lovestyle exhibition store at the manufacturing facility where people can browse the full gallery of products that celebrate intimacy and romantic imagination. This product segment is gaining more and more ground in recent years with companies like Trojan® showing their Vibrations brand of personal massagers at the most recent International Consumer Electronics Shows, and it is a potential bonanza for investors thanks to LUVU.
The Liberator Bedroom Adventure Gear® lineup includes everything from the Liberator Shape pillows, to the Home Collection series designed for a more contemporary look and feel, as well as other furniture and even a complete range of clothing (from lingerie to role-play), toys, and sensual accessories. With a huge product mix and exceptional marketing/advertising muscle, LUVU has managed to broaden the overall category itself, engaging consumers directly via on-line affiliates (Amazon.com, CVS.com, Overstock.com, Soap.com, Walgreens.com, and Vitaminshoppe.com) and international licensees, as well as the company’s own highly visible, highly trafficked ecommerce site (www.Liberator.com).
Solid fundamentals here with the company adding huge cache value to the raw materials, executing with a vertically integrated model, and offering Made in the USA products. The timing couldn’t be better either, as both here in the U.S. and globally the market segment is booming, with products once only sold in specialty shops now being sold at over 1,500 domestic retailers. The company has pushed some $60M in products since inception and rolled over another $9M into print advertising, continuing to innovate in the packaging and branding area, with high confidence that such efforts will see yet broader acceptance at a variety of brick and mortar end points.
This product category is moving from behind the counter to up front and featured across grocery, drugstore, and big box store venues. The profit dynamics should be clear to even a casual investor, and it is noteworthy that the company essentially invented the positioning furniture category. Moreover, they have managed to become the first and only brand to successfully get adult style ads to breakthrough into the broad market print space, with ads running in mainstream publications like Rolling Stone and Forbes, based largely on the brand’s successful market penetration and growing acceptance as mainstream. This is a true testament to the marketing savvy wielded by LUVU.
Recently the company broke new ground in its global marketing campaign with the announcement that they have entered Asian markets via a partnership with Cupido Sensual International Ltd., deriving substantial value from the veteran management who collectively have a vast wealth of knowledge and experience in Hong Kong and Guangzhou. Access to the Hong Kong, Macau, and mainland China markets will spell continued success for LUVU as there is already a well-established philosophical attitude towards harmonizing sexual wellness and quality of life in Asian markets. This move lends itself to the local partner strategy developed back in 2008 whereby the brand can be aggressively/rapidly jump started anywhere across global markets through a co-manufacturing agreement that allows partners to manufacture locally and market direct-to-consumer. The company has already issued six international license agreements in 11 major countries and intends to have fully localized ecommerce presence in each, with Liberator Lovestyle store locations also being considered for development (each region thus will become a distribution pipeline).
That philosophy of how vital sexual intimacy is for quality of life is big at LUVU, where the belief also exists that sexual intimacy and performance shouldn’t be inhibited by age or physical limitations. This perspective has evolved into both a design vector and market vector for the company, with clear resonance in established markets and obvious resonance capability in Asian/EU markets. The overall volume for sex products is difficult to quantify but Chaired Professor of Management Science for INSEAD, Professor Philip M. Parker, Ph.D., pegged the value around upwards of $880M, with projections for 2012 in the neighborhood of $1.1B. Now that’s a nice neighborhood to live in for a spry branding performer like LUVU which has already nailed down brand presence. It doesn’t take a genius to see that things like the Aug 26 spot on TLC’s Strange Sex (currently in its third season) and recent retention of popular artist and activist Keith Haring’s designs in the release of TENGA-created male pleasure items are carefully timed and targeted sales drivers, catalyzed by LUVU to boost results while further cementing brand identity.
For more information on Liberator, please visit their investor relations Web site located at: www.invest-in-LUVU-Liberator.com
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