Consumers are finally waking up (pun intended) to the fact that sleep has a huge impact on their overall health and wellness. In recent years, we have seen an outpouring of studies detailing how poor sleep can be linked to both physical and mental health, including:
- Weight gain
- Higher risks for medical conditions such as heart disease, stroke and diabetes
- Decreased concentration and productivity
- Decreased athletic performance and coordination
According to a study by RAND Europe, the U.S. loses approximately 3% of its total GDP, or $411 billion of lost productivity, due to sleep deprivation. With an increasingly large audience of educated consumers, individuals and companies alike are continuing to explore the impacts of sleep quality through data collection and product innovation to find solutions that ensure a good nights sleep.
The traditionally staid mattress industry has been undergoing a revolution of sorts, ignited in 2014 by the launch of Casper, an e-commerce mattress company. By 2017 the company garnered a pre-money valuation of $750 million during its $170 million Series C, led by the Target Corporation. Casper has since announced plans to go public in 2019. While Casper may have begun the e-commerce mattress model, several competitors have also emerged as market leaders in the mattress space including brands like Leesa, Purple and Tuft & Needle.
With such minimal innovation in the mattress space, it’s no wonder that upstarts have tried to revolutionize the space. As of 2015, Simmons, Serta and Sealy held over 50% of the global mattress market. With consumers’ growing interest in quality sleep, the global mattress industry is expected to reach $43 billion by 2024, a CAGR of 6.5% from 2017.
Although we are seeing a surge of innovation and growth in the space, there’s certainly a history of private equity investments in the mattress industry. Back in 2002, TA Associates and Friedman, Fleischer & Lowe acquired Tempur World, maker of the Tempur-Pedic foam mattresses, which at the time had $250 million in revenue. Tempur-Pedic went public the next year and by 2012, Tempur-Pedic had acquired Sealy, bringing the combined company valuation to $2.7 billion. Sealy’s own brush with PE began in 1997 with its acquisition by Bain Capital, followed by a buyout by KKR in 2003, before going public in 2004.
Given historic and recent trends, we expect to see continued movement in the space for years to come. Following the success of the e-commerce startups, we are beginning to see a movement towards establishing a brick-and-mortar presence. In order to fuel continued growth, Casper plans to open 200 retail stores where consumers can try out their products first…
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