Fiberglass Versus Concrete in Pools

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1:26Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevec on Bloomberg Radio. Retail sales data for May that showed that U.S. consumers increased spending in the month across a broad range of retailers despite higher energy gasoline prices. 11 of 13 categories, Tim, posted increases with motor vehicle sales rebounding by 1.2 % and spending at online retailers rising for a fifth straight month.

2:10Yeah, safe to say pools are not in their own category. But I think if Mike McKee were here, he would have some sort of statistic that he could rattle off all about the indicator when it comes to pools. There's certainly something that some consumers spend on. an indicator, too, of supply chains, materials, and, of course, labor costs. We've got a great guest to talk about this industry. We welcome Sean Gadd. He's president and CEO of the$688 million market cap company, Latham Group. The company's biggest market by revenues by far is the United States, but also sells in Canada, Australia, New Zealand, and elsewhere.

2:41He joins us here in studio. Welcome, welcome. Nice to have you here. Great to be here. Thank you for having me. Pools, they sound so simplistic. We get what they are. But tell us about your business and the different product lines. Yeah, absolutely. So Latham is essentially the number one pool manufacturer in the world. We've got scale in both fiberglass and vinyl pools. And we also sell auto covers, which is a safety device that goes over your pool, protects your investment, and also protects the people around the pool and your family. Biggest area of growth for the company right now, what is it?

3:14Not geographically, I mean segment-wise. Segment-wise, we essentially play, there's two parts in which a pool gets in. Someone moves into a home, empty lot, empty space, they want to put a pool in for recreation. That's the number one market. And then there's a secondary market, which is single family, new construction, home builders who are using the pool to help offset the interest rates that they're buying down. So higher rates. Yeah. So what they say is they'll come in and they'll say the standard mortgage is at 6.5%, 7%. They'll buy it down to, say, 5%. and then they'll put upgrades in. And one of the upgrades they'll put in is a pool.

3:52All right, got it. Talk to us about the types of pools. You guys have something called the Sand State Strategy, which in your earnings calls show double-digit sales gains in fiberglass pools in your priority Florida market. I got to tell you, those of us who grew up near pools, with pools, whatever, I remember mostly either cement or liner pools. Tell us about fiberglass. I'm a boater, and fiberglass, man, that is tough stuff. It is tough stuff. So fiberglass makes up 25 % of the U.S. market. It is the growing substrate that goes into pools. So it's been taking share every year. So it's like a formed entity and you just drop it in.

4:33Yes, basically you dig a hole and drop it straight in. The advantages over cement, which is 50 % of the market, which we're going after, and that happens to be in the sand states, 50 % share, but it takes sort of 90 days to 120 days to put in. For us, once a consumer decides, I want to be in a pool, within six days we're in and out. Six days. Yes. Six days. Six days. So tremendous advantage. And then obviously… Tim's like, wait a minute, how big is my backyard? No, 100%. And so the opportunity for Latham the Pool Company is a couple of things. One, we've done very well in the Midwest, Northeastern Canada where vinyl is a standard vinyl line of pools and fiberglass.

5:20When you think about the southern states, the majority of the pools that go in are cement. And really it's because they haven't seen an alternative. But do consumers think about the actual material or do they say, I want a pool, they call a builder, the builder has the relationship with you and that's how they get that type of material? A consumer engages, a dealer or a builder comes into their kitchen table, sells a product. Because we're the incumbent, we're still the unknown. So essentially, we're a new product in the South. And I say a new product. We've been there for a couple of years, but we are in the new end.

5:53We're spending and investing a significant amount of marketing in the Southern markets on our San State strategies. And when you think San State strategies, it's basically Florida to Southern California. But we're taking a very targeted approach on how we get there. So we're looking at neighborhoods. So right now in Florida, we're looking at neighborhoods that have a higher propensity for pools. That is price of pool, price of house, household income, age of home, and size of the lot. Once we get the right neighborhoods, we're working with dealers to go in there and position fiberglass. Sean, I want to ask you, I mean, weather, I think you guys talked about this too on the call.

6:32And I think you talked a little bit about some weather, maybe I'm looking for my notes here, but maybe had a little bit of an impact. But I'm just curious, talk to me about weather in general. Cold seasons are the start of like spring cold. Can it kill a quarter or a year for you? And at the same time, climate change where it's getting hotter, you know, perversely, is that kind of a good thing for your business? Yeah, so one, obviously, we're a cyclical business. Most of the pool building occurs during the spring, summer, autumn months. So it is a cyclical business. Generally, where it's cold is generally our smaller quarter, so it's not going to kill the year.

7:09Yeah. And when you think about that first quarter, we basically missed equivalent to one day of shipping. Okay. So it wasn't by any stretch going to impact us to that degree. What I love about going into the southern states is their season's much longer. And so when you think about where it's freezing cold in Connecticut in March, Florida and Texas and Atlanta are ready to go. So as we penetrate further into the southern markets, we'll be able to balance our business in a much more effective way. What's the typical cost from soup to nuts for a pool? Yeah, so the basic pool, when you think about that, the average in North America, across North America is$95 ,000.

7:50But you can get into a pool anything from$70 ,000. And, of course, it can go away up to$200, depending the pool you want and what else you do when you put in the pool, if you do landscaping, kitchens, et cetera. Why is it so expensive? It's basically dig a hole. Hey, if it's that easy, Carol, do it yourself. No, I'm just, is it the material cost? Is it labor? It's all of the above. I mean, I think in reality, during COVID, material costs went up. obviously and hasn't corrected. Labor definitely went up and hasn't corrected. We do a lot of the labor in our factories. It's an advantage of being a fiberglass pool.

8:28Is everything done in the U.S.? Everything that's supplied to the U.S. is done in the U.S. So fiberglass, because it's quite hard to freight to a house, you need to be close to your market, which is one of our advantages. And so when you think about that, we have control of the cost, we have control of the product, and we have control of the quality. So it gives us a great pool. Before we leave, just got 40 seconds. We're monitoring the president who is on the ground in Pennsylvania. You seem like the right person to ask, but the Washington Monument Reflecting Pool. Why the heck is there algae?

8:57Because anybody who's been around a pool, you throw chlorine, you measure things, you can fix this. Yeah, 100%. So it is a water chemistry thing. I kind of wish we were asked to put it in the pool because fiberglass, again, one of the advantages, it's non-porous. So algae doesn't grow in it. But is it just they need chemicals? Predominantly, it needs chemicals. It's not scratches or things. It should not be that. So it should be pretty easy to do. It's relatively easy, yeah. Yeah, you just get the chemicals and test the water, right? Yeah, you definitely got to work on water chemistry. All right, good stuff.

9:26Come back soon. Will do, love to. Thank you. Really enjoyed this. Sean Gadd, he's president and CEO of Latham Group, joining us right here in studio.

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