The Pudgy Penguin’s (PP) big announcement this week is that its penguin toys will now be sold across 2,000 Walmarts. IMO this is probably the most impactful NFT announcement of the year.

Why so? PP is the first PFP team to actually build a sizeable business that does not involve selling NFTs as the main revenue driver.

Some key takeaways:

• The Pudgy Penguin IP was purchased by Luca for $2,500,000 just 18 months ago. The thesis was that “cute” IP is the most consumed type of IP globally (think Hello Kitty), and has the opportunity to capture mass market attention.
• The toy aisle in Walmart is very competitive and hard to get into. PP is on Walmart’s Pallet Program, granting it the most prestigious real estate in Walmarts.
• Walmart sees 180M visitors on a daily basis. Q4 is the season of buying/gifting so we can expect toy sales to be quite good. Luca is projecting >$10M in revenue for 2023. Since each toy is around $10 – $30, $10M in revenue would translate to about 500,000 toy sales.
• Toy buyers get a QR code that they can scan to unlock NFTs and play in their Pudgy World metaverse. PP believes that many other brands will follow this physical+digital model in the years to come.

Walmart is the biggest retail company in the world, with a total revenue of $611 billion in 2022 and a 8.37% increase year-over-year U.S. retail sales of toys generated $29.2 billion in 2022. Plush toys were $2.3B of the $29.2B. Walmart has approx 20-25% of retail toy sales.

PP is definitely going for the mass market target audience and looks set to be a profitable business. But two questions remain in my head:

1. What is the plan for the brand in the mid-term? Being heavily associated with Walmart (think “cheap”, “budget”) is not the best thing for a young & growing character brand, even though it can bring it revenue in the near term.
2. How does PP’s business success accrue back to NFT holders? While people are talking about licensing and revenue sharing, I share a different take. I think the main demand drivers are going to be identity and community at the end of the day: if Pudgy Penguin becomes the NFT brand that’s able to achieve mainstream success, and lots of smart people start sporting penguin PFPs, there will be a coolness factor to have penguin PFP and be part of the “Pengu” club.