40: Why Summer Has Just Gone on Sale

give the people what they want exactly right. Um. You know, obviously summer is characterized by pools, hanging out by the pool, barbecuing, grilling, stuff like that. And of course there's always a market and economic angle to every story. And so today we're going to talk about these things that we take for granted in the summer, and uh, talk about some of the underlying fundamentals behind them. So this is essentially the Markets edition of the Pool Party, or the Pool Party

edition of the Markets podcast. I should say we're here with Polly Masson's who wrote a great story, um for Bloomberg recently about pool toys. And before we get into it, I think pretty much anyone who goes on Instagram regularly sees lots of pictures of people floating in pools in these gigantic inflatable doughnuts or inflatable swans or inflatable Floomer goes. You certainly see him if you follow Taylor Swift on Instagram.

And of course there is a huge business behind that, a lot of money, and we're going to talk to Polly about that business. So, Polly Mawson's of Bloomberg, thank you very much for joining us. Thanks for having me, guys, I would love to talk about pool toys. Great, let's get right into to it. So why why is this? How did this become such a huge thing? How big is this? Business? Is huge? When I was at the New York Toy Fair earlier this year, which was the

dead of winter, it was snowing outside. Inside the Jabbitts Center, they had a huge pool toy display. It was the first thing you saw when you walked into toy Fair. There was a flamingo that was ten ft high. It was beautiful and cost I believe, four hundred dollars, which is quite the investment for an inflatable pool toy that can pop at any moment. Okay, what think of all the likes on Instagram if you have a ten foot inflatable flamingo, that's exactly right. So about two summers ago

you started seeing them come up on Instagram. But it really became the thing to have. When Taylor Swift, when she was still with Calvin Harris r I p that relationship, she posted a picture of her on a really beautiful gigantic swan slash Pegasus. It was very regal looking, it had golden wings. People were obsessed with it. And that's really where a lot of these things took off, and you had a couple of company that really became like

the main go to companies. The biggest one among them is Big Mouth Inc. They make about twenty thousand dollars a day on Amazon just off their inflatable donut one style, twenty dollars a day. Wait, this is the pink doughnut. It looks kind of like the ones that Homer Simpson used to eat in the TV series, right, and everyone's probably seen it at one point or another. That is the exact donut. Twenty thousand a day. That's a lot

of money. Yeah, and that's just off the donut. They have some other really popular items their Giant Pineapple has been huge for them this year. They have a flamingo whose design they've actually copyrighted. It's different from other flamingo floaties. So you can imagine how much money they're pulling in

off of these floaties during the summer. Okay, so with large amounts of money often comes controversy and conflict and competition is other people try to get in on the act, and the donut in particular seems to have attracted some degree of conflict. Walk us through that. Yeah, so big Math think which is the big Uno floaties. They have found people infringing on their copyright, specifically on the donut,

and they found this on Amazon. They started ordering competitors donuts that they were trying to sell off as big mouth products, and when they arrived, they were flimsier material and perhaps most offensively, instead of having twelve colors of sprinkles, they only had four. Oh my god, that's terrible, terrific it is to instagram myself with a donut without twelve colors of sprinkles and the sprinkles weren't even shaded in so they didn't look three d oh my god. Yeah,

So what did they do? When they discovered this, well, this was part of two lawsuits that they filed, one against an Amazon seller called Floating Panda and another against Amazon seller Solo Fleet. They didn't have their real identities, so they just filed two suits in Connecticut against these Amazon identities, and the lawsuits that big Mouth brought basically

focused on copyright infringement and a version of fraud. They were claiming that these Amazon sellers were selling big Mouth counterfeit products under the big Mouth cereal code on Amazon, so they were trying to just slip them in as real products after they actually infringed on their copyrighted designs. Now does Amazon have any responsibility here? I mean, it's one thing if the donut looks like another donut, but if a if a competitor, as big Mouth claims, is

using their cereal code, is Amazon a totally neutral party here? Well, Amazon does have fraud protection in place, but they have to have really student fried protections that kind of are a process, because otherwise you'd have a bunch of people that are just filing complaints against their competitors because they don't want them selling a legitimate product that was vaguely similar.

So they have to have the product ordered, they have to prove that it's counterfeit and then they can file a valid complaint with Amazon and Amazon can take away those products, and big Mouth did do that, but they finally were very fed up after these two competitors had taken their by box on Amazon, the buy boxes, when you go to check out on Amazon, you press by now, and there's always a default seller, So there can be you know, ten different companies that sell the same floaty

that's vaguely similar, but whoever has that buy box is the one who's getting all the sales. And if Floating Panda started undercutting big Mouth by just one penny on the price instead of the twenty float, they would take over that buy box. And that's what happened, and that's when big Mouth started losing twenty dollars a day on

the donut. So this is where I think it gets really interesting because we talk a lot about the importance of Amazon right now, the dominance of Amazon in markets and in business, and the idea that people's business is built around what goes into the bye box and they can win or lose so much money just based on one Amazon algorithm is pretty significant. Is cost the only thing that Amazon looks at when it comes to the

buye Box. It's more elaborate than just cost. There's ratings that go in there, and there's kind of a secret Amazon formula they're never going to disclose in full. But it is also based on what kind of seller you are. You know, if you had all one star but you're selling products, you're probably not going to make it into

the buye box. But if you look like a fairly legitimate seller and you're selling a less expensive product that Amazon believes to be the exact same thing, you might find yourself in the buy box and then you're getting a ton of sales all at once. So what's happening now? They filed these complaints, They filed these suits. Has Amazon done anything yet? Or can? I are the competitors to

big Mouth still right there? Well, in this particular suit, they didn't file it against Amazon, so Amazon did definitely help them with taking down pictures that they thought were being used to sell products that more in actually big mouth products. Amazon has replied to the complaints, but legally

they don't have to do anything here. What did happen is that one of these Amazon sellers came back to big Mouth after receiving the lawsuit and said, give me a week to sell through my product and you'll never hear from me again. And big Mouth said, you know, that's not a bad deal. They because their whole goal here is to make this problem go away. They don't want to fight every single person who's selling floaties on Amazon, and they understand that competition is out there, and they

certainly don't want to bring these lawsuits. I mean, they've had to actually put two people on staff out of a person office just to police Amazon. So for them, they just want this to go away, and that's really the next legal step here. So what happened with the other company. They have not replied to the lawsuit, which isn't surprising. They don't believe that these sellers are in

the United States. It's a little harder to track them down, and from there a judge can make a ruling on the case, but you never know if there's actually gonna be any money collected, especially when this is a four million dollar collection of lawsuits. I kind of love that response from the one company, which is basically like, yeah, you're right, we're kind of ripping you off. But let us just be in business one more week so we can clear out our inventory and make back our costs,

and we'll leave. It's like a very sort of free market cocy in response to dealing with a legal problem, and it is kind of win wind seems much better than a long protracted legal fight. Absolutely, and you don't really want to be left with a warehouse full of float ees, right. I can't blame them, but think of the Instagram potential. That's true warehouse full of flamingos and donuts. Before we go, there's a fascinating story. What's the big what's the big floaty this year? I think the big

floaty is the Swan. This one is a really big deal. It's beautiful. I personally enjoy laying on my Swan. I have like five floaties. I feel somewhat biased writing this story because I'm really into floaties. Are they all the big mouth brand float is? They're not. They're They're a variety of floaties, including I bought one an Amazon that was kind of crappy, but it was like seven dollars, so you know you have to have a weird one in there. Polly must Ends from Bloomberg. Thank you, very much.

That's fascinating. I don't think I'm ever going to be able to look at an Instagram pool floating picture ever again in the same way. Thank you guys for having me well, Tracy. So that was half the summer. Half the summer is about spending time in pools, and as we said in the beginning, the other half of the summer is about grilling and barbecuing. Of course, of course it is uh so what's essential to grilling obviously meat. And the good news is that at least in the

US this year, there is a meat mountain. There is so much meat out there that the price of ribs and beef and pork and everything else has plunged, making it really cheap to uh to do barbecue this summer. Okay, so summer has essentially gone on sale because we have inflatable pool toy makers trying to undercut each other, and then we have super cheap meat prices. I love it, the summer on sale. It's like, I think that should

be the time in this episode. Alright, So with us now to discuss the meat mountain and super cheap meat products is Lydia mulvaney. She's a reporter here at Bloomberg who covers agriculture. Lydia, thank you very much for joining us. Hi thanks uh so, Lydia. Why is there a mountain of meat? Oh, there's so much meat. Um, it's because there's been a kind of a perfect storm where like chicken producers and hog producers and cattle producers, they're all

expanding their herds at the same time. And uh, there were some record prices for those um for meat a couple of years ago, even last year for beef, and those high prices just made everyone, um go crazy and and expand there and expand their flocks and herds and so um, now we have um, like all three important meats, you know, a lot of it at the same time, aime. And so they're all kind of competing with each other at the store and and the result is really um

big discounts compared to previous years. And actually a lot of them are at like multi year lows with the prices. I love it. I mean, you know, it's the cliche and commodities right that high prices are the cure for high prices. We saw it obviously with the multi year oil boom, and then there was so much expansion of drilling and exploration, and then the price of oil crashed. So it sounds like the essentially the same thing happened here,

except with the meat. Yeah, but I don't think that they necessarily all happen at the same time, where it's like chicken, pork and meat doing this at chicken pork and beef doing this the same time a bit. At this point, you know, it's all three markets, and so the total meat supplies are going to be a record for sure this year. And then um so, there is really cheap grain prices right now too, so so it's

even cheaper for producers to produce meat. Um So, there's a lot of people out there saying that this isn't going to stop. It's just gonna it's gonna go for a couple of years. There's going to be this expansion, and so should have pretty good barbecue prices next summer too,

and maybe even the next one. I remember, you know, just a couple of years ago, we were talking about global demand for meat really taking off, especially in places like China, and it's kind of surprising to see that supply has been raised so much that it's offsetting what was supposed to be a big increase in demand. Yeah. So um because of the prices in the US, uh, meat consumption grew the most in forty years or some some very large number. Uh. In so Americans are pretty

close to like keek meat eating. So we can't actually eat all the meat that's going to be produced in this country. UM. So it really needs to go to these other countries. Um. And yes there is like rising meat consumption, but you know there's other producers that work that you are competing with the U s so um uh.

I think it needs to be seen what happens. I mean basically, if if if you know, China and other emerging countries aren't going to absorb you know, the overflow from the US, that's just gonna mean it's going to back up here and be even cheaper. So Joe mentioned a potential parallel with the US shale boom in terms of supply rising really quickly to take advantage of higher prices a couple of years ago. Was there any technology

involved in the supply growth in meat? I don't think it's a specific technology, but producers are always working on you know, breeding more efficiently and getting the genetics right. Um. I think for for pigs, like, pigs have way more piglets today than they used to. So Joe is a very keen barbecuer. Can you recommend one specific meat that's the best bargain at the moment that you could be

grilling next weekend? That's a great question. Best bargain? Well, so in terms of things that were expensive last year but cheap this year, right, Like what's really I should take? Could be beef? Beef is really what are we talking about? Like still expensive compared to like pork, but it's way cheaper than it was last year. So if you're looking for that discount, that would be it. But I guess, you know, chicken and pork are just really they're really

down there. Maybe maybe ribs, Yeah, I've been I've been smoking a lot of ribs this summer. I need to actually take a ribbs break. Actually, you know, like pulled pork, because everything that's not a barbecue, I'd never mind. No, no, no, no, no no, definitely maybe you can put like pulled pork on your burger. I don't know, I don't know what people do before we go. How much of just I realize we haven't hit it, how much of a disc a price crash are we talking about specifically from the

wholesale perspective? How much have prices gone down? Okay, so so for for beef, it's about from last year, and pork is about the same. Chickens about cheaper on the wholesale like chicken breasts, um, so you know, and that's from last year. And there's you know, for for pork and chicken, like they've been going down for like a couple of years. So this is actually after some pretty significant um discounts. So those and those are like multi

year lows, they're like five six year lows for the price. Well, it seems pretty clear that this is a good summer to have gotten into doing barbecuing, and with any luck, perhaps not for the farmers. Uh, the summers ahead will be inexpensive as well. Yeah. Well, Lydia Mulvannia, Bloomberg News, thank you very much for joining us and telling us

the good news about meat price. So, Tracy, you know, obviously the theme of that episode was summer, but as you pointed out, another one of the themes was falling prices, and we sort of explored multiple ways in which the FED is being challenged and trying to hit its inflation target.

One is about technology and how new market to make price competition extremely easy and liquid, and the other is just about falling core commodity prices and these gluts that we're seeing all over the world that don't seem to be going away anytime soon. Well, you're taking this episode very serious. I didn't expect to. I thought I'm going to talk about the floats and which one I was going to buy. You can talk about that, No, no, no, Well,

the thing I was very interested in was um. Well, the inflation aspect of it is a big, big question, especially in light of technology. And actually here we go, okay, just to link the two. I wonder a lot about the role of a company like Amazon in inflation, because it seems in some respects like Amazon is really a benevolent um monopoly for consumers. Right, it's super cheap, it's very efficient. We can buy cheap inflatable pool toys. We can even buy groceries and meats now days off of Amazon.

And that's great for consumers. But it means low prices obviously low inflation. And I wonder about the I suppose challenges for businesses in that environment. Totally. I mean, if you could theoretically gain a quasi monopoly by dominating the buybox. Uh,

if the one cent decrease in price. Now, obviously, as Pouli pointed out, it's not quite that simple, but if just this minor price cut can create this radical competition dynamic the likes of which you would you know, if, if you're talking about physical retail, one cent price cut isn't enough to make you go to a different store, it's hardly never would have existed years ago. So it

is really fascinating, Um, the dynamics there. And I'm also fascinated by the extent to which something like Instagram can have a whole new category of industry which people would have never I mentioned. Um, absolutely I would. I would go long Instagram process at this moment in I'm right, yeah, I'll keep I'll keep watching out on Taylor Swift's Instagram to see what the next big thing that she posted with. Okay,

all right, are you barbecuing this weekend? I am, And I don't know what I'm gonna do yet, but I'm thinking pulled pork actually, so uh, next episode I'll talk about how that goes. Excellent, all right, well, this has been another edition of the Odd Lots Podcast. Thanks everyone for listening. I'm Joe wi Isn't There. You can follow me on Twitter at the Stalwart and I'm Tracy Alloway. I'm on Twitter at Tracy Alloway. Thanks you listening.