Kindred Group on how slow and steady could win the race in the US

Kindred Group CEO Henrik Tjärnström is adamant the group’s steady and selective approach to US expansion will pay off in the long run.

The Stockholm-listed operator is currently live in New Jersey and Pennsylvania with its flagship Unibet brand, while launches in Iowa and Indiana are imminent.

Kindred’s US business progressed well during Q2 despite the loss of offline revenue and the disruption to sport as revenue reached $7.7m to mark an uptick of 131% from Q1 2020.

Most global gambling firms are banking on the US as their key growth driver, and while Tjärnström is eager to capitalise, he suggests gung-ho might not be the right way to go.

“We have very clear internal aims for the US market and we are executing in that direction,” Tjärnström tells EGR.

“Externally, long term we are looking to have high single-digit market share in the states we are present in.

“Our strategy remains to be selective and not just go across as many states as possible. It remains to be seen how many that will be of the 30 or 40 states that could end up as the total opportunity.

“Obviously we want to be in many more states than we are in today and the team are working to secure additional access opportunities for us,” he adds.

Kindred Group’s US offering, powered by teams in Cherry Hill, New Jersey and New York City, accounted for a touch more than 2.5% of Q2 group revenue.

Operating and marketing expenses for the US business came in at $10.4m during the quarter, up $2.6m from Q4 of last year.

So why has Kindred opted for this cautious approach in a market described as “the key catalyst for share price movement” by several of its online gambling competitors?

“Because that is what we have seen happen in Europe as well. In our opinion, this is not a fight to be won or lost in one quarter,” Tjärnström tells EGR.

“If you go for real Pan-American multistate partnerships, it is a risk that you spread yourself too thin, get stuck in the middle and don’t really execute to the optimum in any of those states.

“It will also cost a lot of money and effort. We are humble and realise we come to the US with good European knowledge, but we also appreciate that business is local and needs to be adapted.

“We are much more confident with our approach. We have seen it work well in Europe and we don’t have any reason to believe it will be different in the US.”

The US gambling market is awash with cash following a series of public listings and funding rounds kickstarted by DraftKings’ April tie-up with SBTech and Diamond Eagle Acquisition Corp.

GVC has pledged to spend “whatever it takes” on its Roar Digital joint venture as operators battle to entice customers and increase market share.

US gambling marketing looks set to go through the roof, particularly as US sports return, with firms desperate to make up for Covid-19-enduced revenue shortfalls.

But could that lead to regulatory headaches further along the line? We have seen in more mature European markets like the UK and Sweden what happens when gambling ads oversaturate.

Public opinion of the sector diminishes and restrictive legislation is inevitably introduced. Could that happen in America?

“I think it’s too early to tell,” says Tjärnström. “But on the level of investment, if we look across states we are in with our budget and ambitions, we are not that far off, but we are in much fewer, which means that we have a more controlled opportunity.

“That gives me confidence that we are not being left behind. In my opinion, it’s not always the one who spends the most that will be the most successful.

“We’ve seen that across Europe, when we were up against competitors in the early days that were reinvesting more than their revenues.

“When they needed to deliver the bottom line, that approach also impacted growth because the important thing is to have the best offering for customers.

“It is best to be smartest in the long term and not necessarily the loudest in the short term,” he adds.