The Pokémon Company International (TPCi) continues to dominate the collectibles business.
Following the acquisition of the TCG printing company, Millennium Print Group, announced in April 2022, TPCi have continued to expand their operations by announcing the acquisition of their largest U.S. distributor, Excell Brands.
According to their website, Excell Brands distributes TCG products (including Pokémon) to major big-box retailers like Target, Walmart, and Amazon.
With this acquisition, TPCi seems determined to own as much of the Pokémon supply chain as possible, allowing them to control the design, production, and distribution of their product.
But, why?
The traditional answer would be control and profitability. Every business within the supply chain needs to make a profit, and therefore takes a cut of the profit margin (the difference between the manufacturing cost and the final sale price). The more businesses within the supply chain a business owns, the more they can optimize their operations to maximize the profits that accrue to the parent company.
In short: this acquisition allows TPCi to make more money per sale.
Especially when we consider that, during this boom, we've seen distributors start raising their prices on Pokémon profit, and therefore earning more profit themselves.
Here's what I've heard:
For new releases, the distributor agreement with TPCi forces them to sell products at the usual price, which is set to allow retailers to make a profit selling at MSRP. This means the distributor can't earn additional profit on new releases, even during a booming market.
But, with re-prints and re-stocks, this rule doesn't apply. Instead, distributors can increase their prices, and force retailers to increase their prices too. This strategy has resulted in significantly higher profit to the distributors, but not necessarily higher profit to the retailers they sell to, because the distributor is capturing more and more of the market value of the products.
Perhaps TPCi thinks they should capture more of the profit during scenario #2?
But, #2 is not how Excell Brands operates. The big box retailers who are their customers, Target, Walmart, etc, always sell product in-store for MSRP, regardless of the market. This is only possible if Excell continues to sell all product at consistent prices as well.
So, if TPCi isn't chasing profitability through exploitive pricing, what's their motivation?
In my opinion, I think they want to drive better standards across their distributors, and a better experience for collectors.
Practices like #2 during a booming market are damaging to the Pokémon brand. By adding a distributor to the core Pokémon business, TPCi can influence more of the market, and can try manage the glaring brand issues that occur during booming markets.
Pokémon tends to follow long-term strategies, not short-term profit optimizations.
Consolidating more of the supply chain is a long-term strategy.
After the acquisition, Excell Brands will continue to operate as an independent, competitive business. It's unlikely there will be any apparent market impacts in the short-term.
This is exactly how TPCi handled the acquisition of Millennium Print Group and, looking at the market today where there's clearly not enough product being printed, and it's not clear that acquisition has done anything...
Except for the announcement of the massive expansion to their space that will be coming online over the next year.
Integrating and improving these businesses take time. With Millennium Print Group, we're only just starting to see the impact TPCi can have on the business: a massive investment in infrastructure that will enable the company to finally produce enough product to meet demand again.
With the purchase of Excell Brands, it might similarly take 5-10 years to see the impact.
But, I have faith that TPCi understands the business they are in and intends to serve their market for decades to come. In the end, I think this is only good news for collectors and investors.
It's just gonna take a while...
As usual,
Thank you so much for reading the TCG Buyers Club newsletter. My name's Grey, I buy cardboard, and I'm on a mission to make collecting and investing in Pokémon simple.
Cheers 🍻
P.S. Yes, this newsletter is late again. Yes, I still try to get these out on Tuesdays 😅 But, don’t worry about that because this Friday is Pokémon Day! The Pokémon Company has announced a Pokémon Presents on Friday, February 27th to celebrate the 30th anniversary of the Pokémon games, and fans (myself included) are expecting a lot of news. Specifically: the announcement of the Gen 10 mainline video games which should release towards the end of this year. I’ll be sharing my thoughts on the announcements in next week’s newsletter so stay tuned!