Fiberglass Versus Concrete in Pools

**Carol Massar** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**SPEAKER_2** (0:08)
You're listening to Bloomberg Businessweek with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Carol Massar** (0:14)
Retail sales data for May that showed that US consumers increased spending in the month across a broad range of retailers despite higher energy gasoline prices, 11 of 13 categories, and posted increases with motor vehicle sales rebounding by 1.2% and spending in online retailers rising for a fifth straight month.

**Tim Stenovec** (0:32)
Yeah, 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.

**Carol Massar** (0:48)
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. He joins us here in studio.

**Sean Gadd** (1:05)
Welcome, welcome.

**Carol Massar** (1:05)
Nice to have you here.

**Sean Gadd** (1:06)
Great to be here. Thank you for having me.

**Carol Massar** (1:08)
Pools, they sound so simplistic. We get what they are. But tell us about your business and the different product lines.

**Sean Gadd** (1:13)
Yeah, absolutely. 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.

**Tim Stenovec** (1:33)
Biggest area of growth for the company right now, what is it? Not geographically, I mean, segment wise.

**Sean Gadd** (1:38)
Segment wise, we essentially play, there's two parts in which a pool gets in. If 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.

**Tim Stenovec** (2:01)
So higher rates.

**Sean Gadd** (2:02)
Yeah, so what they say is they'll come in and they'll say, the standard mortgage is at six and a half, seven percent, they'll buy it down to five, say five percent, and then they'll put upgrades in. And one of the upgrades they'll put in is the pool.

**Carol Massar** (2:15)
All right, got it.
Talk to us about the types of pools. You guys have something called the Sand State Strategy, which in your earnings call 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.

**Sean Gadd** (2:41)
It is tough stuff. So fiberglass makes up 25% of the US market.
It is the growing substrate that goes into pools, so it's been taking share every year.

**Carol Massar** (2:52)
So it's like a formed entity and you just drop it in?

**Sean Gadd** (2:55)
Yes, basically you dig a hole and drop it straight in. The advantages over cement, which is the 50% of the market in which we're going after, and that happens to be in the sand states, 50% share, but it takes 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.

**Carol Massar** (3:19)
Six days.

**Sean Gadd** (3:20)
Yes.

**Carol Massar** (3:21)
Six days.

**Sean Gadd** (3:21)
Six days, so tremendous advantage and then obviously.

**Carol Massar** (3:24)
Tim's like, wait a minute, how big is my backyard?

**Sean Gadd** (3:27)
No, no, it's not gonna work. I understand, 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. When 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.

**Tim Stenovec** (3:52)
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?