1 00:00:00,960 --> 00:00:03,320 Ladies and gentlemen, welcome to the business Brew. 2 00:00:03,320 --> 00:00:07,200 I am your host, Bill Brewster. As always, this episode features 3 00:00:07,200 --> 00:00:09,120 Spencer Sabelli. It's a good one. 4 00:00:09,480 --> 00:00:12,200 They're all good ones. I know they're the best. 5 00:00:12,360 --> 00:00:16,400 Anyway, Spencer stops by to discuss HAPE Group. 6 00:00:16,400 --> 00:00:19,640 HAPE is they operate an online distributorship. 7 00:00:19,800 --> 00:00:23,920 They distribute mainly tobacco free nicotine pouches and snooze 8 00:00:23,920 --> 00:00:27,080 products in Sweden, Norway and the rest of Europe and the 9 00:00:27,080 --> 00:00:30,040 United States. If you did not know that, you 10 00:00:30,040 --> 00:00:33,000 might know it by looking at your screen, which features the 11 00:00:33,080 --> 00:00:37,040 interface of Fiscal AIA, new sponsor of the show, but not 12 00:00:37,040 --> 00:00:40,560 really so new because going back in the day, my man Braden 13 00:00:41,000 --> 00:00:43,960 sponsored me when it was stratosphere dot IO. 14 00:00:44,280 --> 00:00:49,200 So anyway, Fiscal AI, you can see if you're on YouTube or if 15 00:00:49,200 --> 00:00:52,040 you're looking at the Spotify machine. 16 00:00:52,800 --> 00:00:56,600 It's got a very, very slick interface here. 17 00:00:57,360 --> 00:01:01,680 And you know, I've, I've dealt with Braden for a long time. 18 00:01:01,680 --> 00:01:05,600 Fiscal AI is the complete modern data terminal for global 19 00:01:05,600 --> 00:01:09,000 equities. 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So if you use my affiliate link 37 00:02:04,560 --> 00:02:08,080 fiscal dot AI forward slash brew, you will automatically get 38 00:02:08,080 --> 00:02:10,280 2 weeks off of fiscal Pro for free. 39 00:02:10,280 --> 00:02:12,280 And if you find that you want to upgrade, my link will get you 40 00:02:12,280 --> 00:02:15,840 15% off paid plans. Again, that's fiscal dot AI 41 00:02:15,840 --> 00:02:18,240 brew. Only use that if you want to 42 00:02:18,240 --> 00:02:19,760 become the best analyst in the world. 43 00:02:20,200 --> 00:02:23,600 If you're fine being mediocre, then don't use it again, fiscal 44 00:02:23,600 --> 00:02:28,840 dot AI forward slash brew. Anyway, as I said, this episode 45 00:02:28,840 --> 00:02:32,360 features Spencer Sabelli. We're talking HAPE group I think 46 00:02:32,360 --> 00:02:34,600 Spencer Sharp. I like the idea. 47 00:02:34,600 --> 00:02:39,360 I don't own it but I am inclined to like it, so apologies if I go 48 00:02:39,360 --> 00:02:41,480 all confirmation bias on this idea. 49 00:02:41,920 --> 00:02:45,840 Anyway, nothing in this podcast is investment advice. 50 00:02:46,200 --> 00:02:48,200 Everything is for entertainment purposes only. 51 00:02:48,560 --> 00:02:50,880 Please consult your financial advisor before making investment 52 00:02:50,880 --> 00:02:53,000 decisions and do your own due diligence. 53 00:02:53,000 --> 00:03:17,680 All right, enjoy the episode. All right, ladies and gentlemen, 54 00:03:17,680 --> 00:03:21,600 thrilled to be joined by Spencer Sabelli, son of Mario, disciple 55 00:03:21,600 --> 00:03:24,200 of Bob Rabadi. I don't, I don't know if 56 00:03:24,200 --> 00:03:28,800 disciples a little bit too too emphatic of a term, but works 57 00:03:28,800 --> 00:03:33,240 for Rabadi. So Spencer, thank you for 58 00:03:33,240 --> 00:03:34,560 joining. And we could have done it in a 59 00:03:34,560 --> 00:03:37,960 more timely fashion if I had listened to you and you said, 60 00:03:37,960 --> 00:03:39,440 why don't you look at this right now? 61 00:03:39,440 --> 00:03:42,360 But alas, I am. I am slow. 62 00:03:42,840 --> 00:03:45,440 But eventually I learned. It happens. 63 00:03:45,440 --> 00:03:46,920 Yeah. Well, if I'm right, we'll, we'll 64 00:03:46,920 --> 00:03:49,280 have a long runway left. So we'll, we'll, we'll see. 65 00:03:50,000 --> 00:03:53,920 Yeah. Well, we dabbled a little bit in 66 00:03:53,920 --> 00:03:56,960 the products at A at a event that we attended. 67 00:03:56,960 --> 00:04:00,320 So that was that was Funnish. I think I gave you that, that 68 00:04:00,320 --> 00:04:05,000 hot cherry flavor that. Yes, which I liked, though these 69 00:04:05,000 --> 00:04:08,640 things set my my head spinning. It's I have enough vices in my 70 00:04:08,640 --> 00:04:11,640 life so I tend to avoid them, but I did like that flavour that 71 00:04:11,640 --> 00:04:13,200 was. Decent just once a year. 72 00:04:13,200 --> 00:04:15,560 Mark Kelly, you can do them. That's right. 73 00:04:15,680 --> 00:04:17,760 Yeah. All right. 74 00:04:17,760 --> 00:04:23,600 So anyway, we are going to going to chat about HAPE today and 75 00:04:23,960 --> 00:04:28,800 it's it's one of the more interesting companies that I 76 00:04:29,240 --> 00:04:31,640 I've heard pitched. When did you first pitch this 77 00:04:31,640 --> 00:04:37,000 2023? I think fall of 20, no. 78 00:04:37,000 --> 00:04:40,080 So we first met them spring at 23 and I, you know, I think we 79 00:04:40,080 --> 00:04:43,000 started buying early fall. Like when I did my first write 80 00:04:43,000 --> 00:04:45,160 up and stuff I sent around that was 2023. 81 00:04:46,760 --> 00:04:50,320 So, yeah, coming up. On for those that don't know, 82 00:04:50,320 --> 00:04:53,160 they're a distributor of nicotine patch pouches. 83 00:04:53,680 --> 00:04:57,400 And I don't know, when you first ping me, I was kind of like, 84 00:04:57,400 --> 00:05:01,080 well, you got the, you know, why not just lay it through the, the 85 00:05:01,080 --> 00:05:03,400 nicotine companies and we'll, we'll see into that. 86 00:05:03,400 --> 00:05:07,440 But do you want to, you know, set the stage for what HAPE is 87 00:05:07,440 --> 00:05:09,880 and and exactly what they do and why they're unique? 88 00:05:10,880 --> 00:05:12,960 Yeah. So, so through the the world's 89 00:05:12,960 --> 00:05:16,440 largest online retailer of of nicotine pouches and then 90 00:05:16,440 --> 00:05:19,640 traditional snooze products. So those are the tobacco pouches 91 00:05:19,640 --> 00:05:21,440 that are, that are in Scandinavia and are popular 92 00:05:21,440 --> 00:05:24,920 there, but but they're in seven different markets, you know, at 93 00:05:24,920 --> 00:05:28,480 about 1.1 million active customers and 24. 94 00:05:29,120 --> 00:05:32,960 So they're currently in Sweden, Norway, UK, Germany, Austria, 95 00:05:32,960 --> 00:05:36,880 Switzerland and in the US. And I, I'd really describe it as 96 00:05:36,880 --> 00:05:40,480 like an Amazon like equivalent in the space, you know, so 97 00:05:40,600 --> 00:05:43,080 family and nicotine pouches that they have a small vaping and 98 00:05:43,080 --> 00:05:46,240 heat not burn business as well, but they exclusively retail 99 00:05:46,240 --> 00:05:48,520 third party products. They don't manufacture anything 100 00:05:48,520 --> 00:05:50,800 themselves, but they're ordering in bulk. 101 00:05:50,800 --> 00:05:52,800 They order directly from the manufacturers. 102 00:05:53,000 --> 00:05:55,120 Most of their warehouses are in house where they'll, you know, 103 00:05:55,120 --> 00:05:57,120 pack them and ship them to the end consumer. 104 00:05:57,680 --> 00:06:00,120 And that's under appreciated. Part of the business is the 105 00:06:00,120 --> 00:06:03,240 median insights business. So that's about 10% of revenue 106 00:06:03,240 --> 00:06:05,960 today and and a larger contributor to to profit. 107 00:06:06,840 --> 00:06:10,120 But, but that's basically tailored data insights, 108 00:06:10,120 --> 00:06:13,440 predictive analytic service catered towards the 109 00:06:13,440 --> 00:06:16,080 manufacturers, you know, mainly like tobacco companies, but also 110 00:06:16,160 --> 00:06:18,840 brands as well. And that's very unique service 111 00:06:18,840 --> 00:06:21,000 that they've spent a lot of money on and and now I've gotten 112 00:06:21,000 --> 00:06:25,080 it to scale. So when when you say that you 113 00:06:25,080 --> 00:06:28,720 know what's what Unique I or potentially unique about 114 00:06:28,720 --> 00:06:32,640 pouches, I'm not even sure the market is mature enough to make 115 00:06:32,800 --> 00:06:36,640 definitive statements right. But at least historically, the 116 00:06:37,160 --> 00:06:43,960 traditional cigarette brands are very consumer loyal and it seems 117 00:06:44,600 --> 00:06:49,840 that there is more willingness to switch among pouch users. 118 00:06:50,880 --> 00:06:56,400 Now if I look at like some of the some of the European 119 00:06:56,400 --> 00:07:00,320 countries, I, I'm going off memory, I should have it in 120 00:07:00,320 --> 00:07:01,760 front of me. But anyway, I think I'm pretty 121 00:07:01,760 --> 00:07:04,360 sure Sweden is dominated by Vilo. 122 00:07:04,800 --> 00:07:09,160 The market shares are reasonably simple stable at the top, are 123 00:07:09,160 --> 00:07:11,520 they not? At the high end, I'd say, so I'd 124 00:07:11,520 --> 00:07:15,200 say that the top five brands have a have a decent chunk of 125 00:07:15,200 --> 00:07:18,040 the market. I think, you know, Vilo probably 126 00:07:18,040 --> 00:07:20,080 is half the the European market as a whole. 127 00:07:20,480 --> 00:07:23,560 I think sort of within that they're very competitive. 128 00:07:23,560 --> 00:07:27,440 So per skew, you know, sort of HAPE released a market report on 129 00:07:27,440 --> 00:07:29,160 their on their sweetest websites news blog. 130 00:07:29,160 --> 00:07:33,000 Anyone could view it and it sort of shows how the top five brands 131 00:07:33,000 --> 00:07:36,720 are sort of the same, but the the skews are sort of changing 132 00:07:36,720 --> 00:07:40,280 marketer positions all the time. And then, you know, yeah, the 133 00:07:40,280 --> 00:07:43,240 tail end is very competitive. Too, So HAPE can go to British 134 00:07:43,240 --> 00:07:47,800 American and say, hey, this Velo flavour is really pop it off in 135 00:07:47,800 --> 00:07:50,680 like this jurisdiction. You may want to lean into that 136 00:07:50,680 --> 00:07:53,120 or or something. Is that kind of what they do on 137 00:07:53,120 --> 00:07:56,120 the data analytic side of the business? 138 00:07:56,240 --> 00:07:58,240 Yeah, so it, it's actually very interesting. 139 00:07:58,240 --> 00:08:01,000 I I viewed the product at the Capital Markets Day, they're 140 00:08:01,000 --> 00:08:03,080 sort of demoing it while people were there. 141 00:08:03,080 --> 00:08:07,080 But you, you can track like 4000 data points per customer. 142 00:08:07,560 --> 00:08:10,000 You can track and you know, every individual SKU you could 143 00:08:10,000 --> 00:08:12,920 see it's market share on any given day, any time frame, you 144 00:08:12,920 --> 00:08:14,800 know, down to the zip code or region. 145 00:08:15,160 --> 00:08:18,240 You could filter by, you know, consumer demographic. 146 00:08:18,240 --> 00:08:21,280 You could look at women in, in northern Sweden in the past 30 147 00:08:21,280 --> 00:08:23,960 days and you know, see all the, the top brands there, what's 148 00:08:23,960 --> 00:08:26,320 moving, what's changing. And so it's, it's a really 149 00:08:26,320 --> 00:08:30,080 extensive product portfolio that they can view. 150 00:08:30,080 --> 00:08:33,159 You know, I, I think there's a very predictive element to it 151 00:08:33,159 --> 00:08:35,600 too. So HAPE has the most mature, I'd 152 00:08:35,600 --> 00:08:39,360 say knowledgeable consumers. And so HAPE generally says that 153 00:08:39,360 --> 00:08:43,880 trends online on their website to develop, you know, 18 months 154 00:08:43,880 --> 00:08:46,520 before they happen in store. So I think a lot of the big 155 00:08:46,520 --> 00:08:49,480 companies are are predicting to or you know, trying to see where 156 00:08:49,480 --> 00:08:53,080 the market's going on on Hape's websites and you know, I guess 157 00:08:53,080 --> 00:08:55,680 tailor their their product innovation or sort of marketing 158 00:08:55,680 --> 00:08:58,640 efforts to that as well. But it's a very extensive 159 00:08:58,640 --> 00:09:01,440 product. Did they talk about why they 160 00:09:01,440 --> 00:09:04,640 think that they lead sort or kind of see trends before they 161 00:09:04,640 --> 00:09:08,200 occur at retail? Yeah, I, I think it's just an, a 162 00:09:08,200 --> 00:09:11,360 very experienced consumer. They like trying new products. 163 00:09:11,360 --> 00:09:14,960 So I know on, on HAPE sort of Swedish websites like they, they 164 00:09:14,960 --> 00:09:17,840 average close to three brands on an average order. 165 00:09:17,840 --> 00:09:21,400 The average consumer will try 7 into 9 different skews per year 166 00:09:21,760 --> 00:09:23,920 often between like 3 to 5 different brands. 167 00:09:24,320 --> 00:09:28,000 So I think they just have a very experienced consumer like trying 168 00:09:28,000 --> 00:09:30,560 new things. And I think a, a, a big part of 169 00:09:30,560 --> 00:09:34,240 it too is HAPE has become the go to player for product trials 170 00:09:34,240 --> 00:09:36,840 because the median insights piece and then product launches. 171 00:09:37,280 --> 00:09:40,880 So they're responsible, I think for 2/3 of all product trials in 172 00:09:40,880 --> 00:09:43,240 Sweden. And then you know of any product 173 00:09:43,240 --> 00:09:45,560 launched within the past year, I think they're responsible for 174 00:09:45,560 --> 00:09:48,440 2/3 of sales of those products, including Tel as well. 175 00:09:48,440 --> 00:09:51,720 So a lot of companies will will test out products on on Hapes 176 00:09:51,720 --> 00:09:54,120 website. See early feedback from this 177 00:09:54,120 --> 00:09:56,640 experience consumer. This consumer likes trying new 178 00:09:56,640 --> 00:09:58,960 products and there's new innovations being brought to 179 00:09:58,960 --> 00:10:01,800 market all the time, new flavorings like there's now 180 00:10:01,800 --> 00:10:04,800 nicotine release patterns, new textures and different things 181 00:10:04,800 --> 00:10:06,960 like that. So products are constantly 182 00:10:06,960 --> 00:10:09,840 getting better and I think it's they've created this flywheel 183 00:10:09,840 --> 00:10:12,320 where they have this experience consumer like trying new 184 00:10:12,320 --> 00:10:15,320 products, you know, in turn they become product trial service as 185 00:10:15,320 --> 00:10:17,280 well. And I think for that reason, the 186 00:10:17,280 --> 00:10:19,960 big companies kind of really pay attention to to what's going on 187 00:10:19,960 --> 00:10:22,920 there. Yeah, I mean, that makes sense. 188 00:10:23,320 --> 00:10:28,000 Now for for the uninitiated in this, in this idea, do I just go 189 00:10:28,000 --> 00:10:29,840 to hape.com? How does this work? 190 00:10:30,960 --> 00:10:34,320 So there's it's interesting, they have I think 11 different 191 00:10:34,400 --> 00:10:38,440 domains across their markets. So hape.com is actually one of 192 00:10:38,440 --> 00:10:41,200 their European sites. Their US websites are are 193 00:10:41,200 --> 00:10:44,000 nicokick.com and then the northerner.com. 194 00:10:44,000 --> 00:10:47,320 But it's pretty interesting. So they'll have multiple, I mean 195 00:10:47,320 --> 00:10:50,480 they list them all on heaps IR websites, you get the full list 196 00:10:50,480 --> 00:10:53,960 of websites, but they choose to have multiple websites with 197 00:10:53,960 --> 00:10:59,200 different URLs per market. And the reason for that is 7% of 198 00:10:59,200 --> 00:11:02,000 traffic comes from organic search results basically. 199 00:11:02,360 --> 00:11:05,000 And so they try to dominate the the top three in any 200 00:11:05,000 --> 00:11:06,680 jurisdiction. And so they'll have multiple 201 00:11:06,680 --> 00:11:09,640 different websites all feeding into the to the same back end 202 00:11:10,120 --> 00:11:12,320 and distribution network. But they really, because I think 203 00:11:12,320 --> 00:11:14,360 the top three get like 90 something percent of all the 204 00:11:14,360 --> 00:11:15,960 traffic. So they have a smart, you know, 205 00:11:15,960 --> 00:11:19,000 system where that's, it's basically a rescan website 206 00:11:19,480 --> 00:11:22,160 feeding into the same back end, but they're just capturing smart 207 00:11:22,160 --> 00:11:23,680 traffic. But yeah, it's simply you just 208 00:11:23,680 --> 00:11:25,400 go on. Appearance of competition. 209 00:11:25,880 --> 00:11:29,840 Right, right, yeah, I think like 5 Hour Energy or or one of those 210 00:11:29,840 --> 00:11:32,320 kind of companies did that where they they bought the other 211 00:11:32,320 --> 00:11:34,160 brands. And so you know, they sort of 212 00:11:34,160 --> 00:11:35,960 dominated all the the shelf space. 213 00:11:36,440 --> 00:11:38,120 So I think that's where strategy as well. 214 00:11:38,800 --> 00:11:41,480 But I mean, there that's why their, their market shares are 215 00:11:41,480 --> 00:11:45,800 extremely high. I think like I have the numbers 216 00:11:45,800 --> 00:11:49,360 here in, in Sweden, they have about 85% in the online market, 217 00:11:49,360 --> 00:11:55,760 Norway 80%, UK about 65%, US 85% and then the dock region about 218 00:11:55,760 --> 00:11:58,640 40%. And so it's, it's very hard to, 219 00:11:58,760 --> 00:12:00,480 to acquire customers. I mean, you can't acquire 220 00:12:00,480 --> 00:12:02,880 customers, but it's very hard to get customer traffic and and 221 00:12:02,880 --> 00:12:07,160 compete with them. So ignoring the scale 222 00:12:07,160 --> 00:12:13,120 advantages, let's say I, let's say I buy a bunch of of of the 223 00:12:13,120 --> 00:12:15,960 of Velos or whatever and I want to sell them online. 224 00:12:16,200 --> 00:12:20,880 Why can't I just go and and get Google Adwords and go and 225 00:12:20,880 --> 00:12:24,480 compete with these guys? So that I mean that's the the 226 00:12:24,480 --> 00:12:26,400 most interesting thing of the business. 227 00:12:26,400 --> 00:12:29,920 You technically can't. You can get in some paid AdWords 228 00:12:29,920 --> 00:12:33,120 on Google. So paid is about 3% of all 229 00:12:33,120 --> 00:12:35,480 customer traffic. It it's technically a loophole. 230 00:12:35,480 --> 00:12:38,240 So, you know, basically every major search engine, social 231 00:12:38,240 --> 00:12:41,400 media site has a ban on paid advertisement for, you know, 232 00:12:41,400 --> 00:12:43,600 addictive products. So nicotine and tobacco fall 233 00:12:43,600 --> 00:12:46,520 under that. So you can get in some pay is. 234 00:12:46,640 --> 00:12:49,000 OK, which makes no sense, but I digress. 235 00:12:49,080 --> 00:12:50,320 Yeah, yeah. That's a whole. 236 00:12:50,320 --> 00:12:54,040 That's a whole another topic. The worst ones, OK, but yeah, 237 00:12:54,200 --> 00:12:55,680 yeah, the other ones are not all right. 238 00:12:56,640 --> 00:12:59,360 But you, you basically can't pay to acquire customers. 239 00:12:59,920 --> 00:13:04,000 So, you know, nicotine pouches aren't fully shut down from an 240 00:13:04,000 --> 00:13:06,600 AdWords perspective. But if you type in any search 241 00:13:06,600 --> 00:13:10,000 term for vaping, like buy vapes online, there's absolutely no 242 00:13:10,000 --> 00:13:12,440 sponsored ads at all. So that's where the, the 243 00:13:12,440 --> 00:13:15,560 market's going to go. But beyond committed adword 244 00:13:15,560 --> 00:13:18,760 opportunities for, for keywords in certain markets, like there's 245 00:13:18,760 --> 00:13:20,760 no paid advertisement opportunities. 246 00:13:20,760 --> 00:13:24,280 So you can't do any Instagram, Facebook, TikTok ads and Google. 247 00:13:24,280 --> 00:13:26,400 So as the market gets big enough, we'll we'll shut down 248 00:13:26,400 --> 00:13:31,440 all paid keyword opportunities. And so for that reason, it's, 249 00:13:31,440 --> 00:13:33,400 you know, very difficult to acquire customers. 250 00:13:33,400 --> 00:13:36,560 And I don't think they'd be able to sustain their current market 251 00:13:36,560 --> 00:13:40,200 shares, like 85% of the US market, 85% of Sweden could just 252 00:13:40,200 --> 00:13:43,480 pay and swell customer traffic. So it, it's very difficult. 253 00:13:43,480 --> 00:13:47,640 And yeah, and, and they estimate that like, so it's 97% is or 254 00:13:47,840 --> 00:13:51,280 organic search, but it's hard to parse out because some people 255 00:13:51,280 --> 00:13:53,880 are. So they estimate that 40% of all 256 00:13:53,880 --> 00:13:56,680 customer traffic are, are people who are referred by a friend or 257 00:13:56,680 --> 00:13:59,280 family member and then maybe they'll type it in on Google. 258 00:13:59,280 --> 00:14:02,400 So it comes in as an organic search result, but it's really 259 00:14:02,400 --> 00:14:03,880 not. So there's a a very strong sort 260 00:14:03,880 --> 00:14:10,720 of network effect as well. Yeah, how, how do you what when, 261 00:14:10,720 --> 00:14:13,600 when you're thinking about key risks, just the business's long 262 00:14:13,600 --> 00:14:18,200 term potential to grow, how much attention are you paying to sort 263 00:14:18,200 --> 00:14:21,040 of Google's policy changes on that, if any? 264 00:14:21,960 --> 00:14:26,400 Yeah, I mean there's two different ways that I mean it. 265 00:14:26,400 --> 00:14:29,680 It's just risky, I guess being so relying on on one company or 266 00:14:29,680 --> 00:14:31,760 source for traffic, which they are. 267 00:14:31,760 --> 00:14:34,800 So they're susceptible to to algorithm changes that happened 268 00:14:34,800 --> 00:14:37,720 with vaping. So, you know, Google, you know, 269 00:14:37,840 --> 00:14:40,640 basically took a sledgehammer to the online vaping business and 270 00:14:40,640 --> 00:14:43,480 you know, they'll put all these like.org and informational pages 271 00:14:43,480 --> 00:14:46,680 and then maybe the 4th or 5th result is a place where you can 272 00:14:46,680 --> 00:14:49,840 buy vapes online. So they, they could really start 273 00:14:49,840 --> 00:14:52,400 the organic search part of the business. 274 00:14:52,880 --> 00:14:55,640 Ape's absolute position would be worse off, but I guess their 275 00:14:55,640 --> 00:14:58,120 relative position would be better because it, you know, 276 00:14:58,120 --> 00:15:00,440 it'll, it'll hurt competition a lot more. 277 00:15:01,040 --> 00:15:03,040 Some of the, some of the smaller sites, right? 278 00:15:03,200 --> 00:15:06,320 I mean, they, they, their organic search rankings are sort 279 00:15:06,320 --> 00:15:08,200 of impenetrable, right? They, they have the oldest 280 00:15:08,200 --> 00:15:11,440 website, so they very high existing conversion rates, a lot 281 00:15:11,440 --> 00:15:14,120 of history. They're fully MI is kind of UI 282 00:15:14,120 --> 00:15:16,760 wise and very easily like navigable. 283 00:15:17,840 --> 00:15:20,040 And then they have highest existing traffic as well. 284 00:15:20,080 --> 00:15:22,160 And they've, you know, been operating for, for over a 285 00:15:22,160 --> 00:15:23,840 decade. And then on the flip side, you 286 00:15:23,840 --> 00:15:26,320 could say that like there's changing perceptions in nicotine 287 00:15:26,320 --> 00:15:29,440 and that causes Google to allow sponsored ads and allowed 288 00:15:29,440 --> 00:15:32,760 customers to, to do AdWords and pay for traffic. 289 00:15:33,120 --> 00:15:35,160 Is that another risk? I, I think that's, you know, 290 00:15:35,160 --> 00:15:37,640 pretty unlikely. I think it's more likely they 291 00:15:37,640 --> 00:15:40,440 they go the route of vaping those sort of diminish online 292 00:15:40,440 --> 00:15:44,840 retailers put more informational pages up top, which you know 293 00:15:44,840 --> 00:15:48,120 will hurt customer traffic, but I think kind of their relative 294 00:15:48,120 --> 00:15:51,760 position will will improve. At least as it pertains to 295 00:15:51,760 --> 00:15:55,600 vaping. The irony of making the the 296 00:15:55,600 --> 00:16:03,480 decision to push someone like Hape down the page and 297 00:16:03,480 --> 00:16:08,960 potentially drive people to bodegas, at least over the last 298 00:16:08,960 --> 00:16:10,400 five years. We'll see how the next five 299 00:16:10,400 --> 00:16:12,400 years go. I mean, all of a sudden people 300 00:16:12,400 --> 00:16:15,200 are sucking in illegal Chinese vapes into their lungs as 301 00:16:15,200 --> 00:16:18,360 opposed to having like a real product that's been vetted, 302 00:16:18,600 --> 00:16:21,440 right? Which is a unintended 303 00:16:21,440 --> 00:16:24,160 consequence, right? Yeah, I, I think they're, 304 00:16:24,160 --> 00:16:26,360 they're starting, well, I know they're starting to go after the 305 00:16:26,480 --> 00:16:30,080 the illegal vape category, but you know, online is just a, a 306 00:16:30,080 --> 00:16:34,240 more clean, like better process. There's multiple steps for age 307 00:16:34,240 --> 00:16:36,800 verification. You know, you have to hold a 308 00:16:36,800 --> 00:16:39,480 picture of you with your ID and they cross reference that with 309 00:16:39,480 --> 00:16:41,520 the DMV. And then, you know, most states 310 00:16:41,520 --> 00:16:43,680 are a lot of states really. Yeah. 311 00:16:43,680 --> 00:16:46,160 Yeah, that's so I don't. Just like say, hey, I was born 312 00:16:46,160 --> 00:16:49,640 here, I'm this age, you actually have to show. 313 00:16:50,240 --> 00:16:51,200 Yep. Yeah. 314 00:16:51,200 --> 00:16:54,240 And then in a lot of states, you have to throw age verification 315 00:16:54,240 --> 00:16:56,720 at point of delivery as well, not just point of sale. 316 00:16:57,120 --> 00:17:02,600 And so I mean, they claim it's about 100% age guarantee versus 317 00:17:02,600 --> 00:17:05,560 going to a convenience store and showing a fake ID or not being 318 00:17:05,560 --> 00:17:08,560 Ided at all. And so they have a lot of data 319 00:17:08,560 --> 00:17:10,319 showing that. And I know they're, you know, 320 00:17:10,319 --> 00:17:13,800 working with manufacturers and regulators to just to prove how 321 00:17:13,800 --> 00:17:17,440 online is is viable kind of shit way to buy pouches. 322 00:17:18,319 --> 00:17:20,119 That's pretty smart. Yeah. 323 00:17:20,920 --> 00:17:25,280 They they cross reference to the DMV, that's intelligent. 324 00:17:26,079 --> 00:17:28,600 And even if you can somehow manage to get pouches delivered 325 00:17:28,600 --> 00:17:30,840 like you got parents at home, there's there's that. 326 00:17:30,840 --> 00:17:33,240 It's just very difficult for an underage or. 327 00:17:33,320 --> 00:17:36,640 Yeah, you ask your teenager, Why are you getting so many Yeah, 328 00:17:36,640 --> 00:17:38,240 packages from? Yeah, what's what's 329 00:17:38,240 --> 00:17:41,240 nicokick.com? That's right, it'd be. 330 00:17:41,360 --> 00:17:42,240 Tough. Interesting to see. 331 00:17:42,280 --> 00:17:44,120 Them try to weasel the way out of that one. 332 00:17:44,120 --> 00:17:47,720 Yeah, yeah, it's dad. It's a new shoe company. 333 00:17:47,720 --> 00:17:52,360 Oh, OK, OK yeah, it's all right. Anyway, that that's, that's sort 334 00:17:52,360 --> 00:17:54,920 of the setup. Let's get back into the let's 335 00:17:54,920 --> 00:17:57,760 get back into the, the outline that you had because I don't 336 00:17:57,760 --> 00:18:00,480 want to get too sort of outside the weeds. 337 00:18:00,480 --> 00:18:03,680 But one thing that I find really interesting about this idea and 338 00:18:03,680 --> 00:18:07,480 I, I'd be curious how you, like got there. 339 00:18:07,880 --> 00:18:13,920 I had friends back where I lived and they came back from a guy's 340 00:18:13,920 --> 00:18:18,200 trip, a golf trip and they were like, dude, we were ripping Zens 341 00:18:18,200 --> 00:18:23,240 all week and gave them to some of our friends in the military 342 00:18:23,240 --> 00:18:24,920 and like, they were totally into it. 343 00:18:24,920 --> 00:18:28,800 And that led me to Swedish Match, which actually I'd read 344 00:18:28,800 --> 00:18:32,160 about like 2 years prior Gabelli pitched it in Barons and I paid 345 00:18:32,160 --> 00:18:33,760 no attention to it like an idiot. 346 00:18:33,760 --> 00:18:38,240 But anyway, that like, that's where I went. 347 00:18:38,240 --> 00:18:42,360 How did you get to the distributor in your research 348 00:18:42,360 --> 00:18:45,200 process? Well, I, I sort of found it by 349 00:18:45,200 --> 00:18:47,440 chance. So I was just going through a 350 00:18:47,440 --> 00:18:50,240 list of kind of post COVID IP OS in Europe. 351 00:18:50,880 --> 00:18:53,080 You know, there's about 400 names. 352 00:18:53,080 --> 00:18:56,120 Hape was on there and as a as a Zen user, I saw, you know, 353 00:18:56,120 --> 00:18:59,840 online distributor of nicotine pouches and I was like like 354 00:18:59,840 --> 00:19:02,360 shit, this is great. Yeah, I I can get this. 355 00:19:02,440 --> 00:19:04,680 Yeah, so I I found it sort of by chance. 356 00:19:04,680 --> 00:19:06,680 I really liked I was pureplay, right. 357 00:19:06,680 --> 00:19:11,240 Swedish match was the only one out there, you know, BTI and 358 00:19:11,240 --> 00:19:12,800 Phil Morris, you're still not getting it. 359 00:19:12,800 --> 00:19:14,720 You're getting to be combustibles exposure. 360 00:19:15,920 --> 00:19:18,240 And then I I sort of got comfortable with the distributor 361 00:19:18,240 --> 00:19:22,000 idea, just that I think consumers are a lot more loyal 362 00:19:22,000 --> 00:19:24,280 to the experience in the space. And, and we mentioned this a 363 00:19:24,280 --> 00:19:27,880 little bit, but you know, like I know on and Zen and Sweden were 364 00:19:27,880 --> 00:19:30,720 first movers, you know, so they're, they're first movers 365 00:19:30,720 --> 00:19:32,840 with their dry pouches. What are the pouches we have of 366 00:19:32,840 --> 00:19:36,000 theirs in the US today? And on is like less than 1% of 367 00:19:36,000 --> 00:19:36,480 the market. Now. 368 00:19:36,480 --> 00:19:39,400 I think Zen is, you know, maybe the fourth or third largest, you 369 00:19:39,400 --> 00:19:43,760 know, still big, but things, you know, I, I think brands are very 370 00:19:43,760 --> 00:19:45,720 competitive in the space. Products are getting better. 371 00:19:45,720 --> 00:19:50,040 Like if you try the dry sort of Zens versus European V3 Zens or 372 00:19:50,040 --> 00:19:53,200 you know, the, the US Velos versus sort of the the European 373 00:19:53,200 --> 00:19:55,480 Velos, this remarkable difference. 374 00:19:55,480 --> 00:19:58,600 And so I think that got me comfortable as well-being a 375 00:19:58,600 --> 00:20:01,080 distributor and then learning about the median insights 376 00:20:01,080 --> 00:20:03,440 business and this is kind of real flywheel that they've 377 00:20:03,440 --> 00:20:05,480 created. And then I mean, there's tons of 378 00:20:05,480 --> 00:20:07,600 benefits for for being an online players. 379 00:20:07,720 --> 00:20:10,040 And I think, you know, for that, like online penetration in 380 00:20:10,040 --> 00:20:12,880 Sweden is like 36% or something like that. 381 00:20:13,120 --> 00:20:18,840 And so hey, by itself has like 30 to 33%, a little less of the 382 00:20:18,840 --> 00:20:22,840 entire offline online market. Which just when I first heard 383 00:20:22,840 --> 00:20:24,440 that sad, I was like, wow, that's remarkable. 384 00:20:24,440 --> 00:20:26,560 Like why? Why is all my penetration so 385 00:20:26,560 --> 00:20:28,280 high there? This company must be providing a 386 00:20:28,280 --> 00:20:30,800 ton of benefit and so kind of learning like, all right, 387 00:20:30,800 --> 00:20:33,640 everything else is we order online and you know, we order 388 00:20:33,640 --> 00:20:36,360 everything off of them, but we're starting to order grocery, 389 00:20:36,360 --> 00:20:38,960 you know, online and why can't we order nicotine online? 390 00:20:38,960 --> 00:20:41,360 So I, I do think it's one of the areas where, where online 391 00:20:41,360 --> 00:20:44,640 penetration is quite low and we really haven't migrated. 392 00:20:44,640 --> 00:20:47,360 And I think, you know, 10-15 years from now, I don't think 393 00:20:47,360 --> 00:20:49,920 the US will get to Sweden, sell Obama online penetration. 394 00:20:49,920 --> 00:20:54,360 But could we be ordering, you know, 15 to 2015 to 20% of the 395 00:20:54,360 --> 00:20:57,960 market be ordered online. So I really like that aspect as 396 00:20:57,960 --> 00:20:59,920 well. And yeah, and then just, you 397 00:20:59,920 --> 00:21:02,040 know, we met with the company several times and really got 398 00:21:02,040 --> 00:21:04,000 comfortable with management and and their vision. 399 00:21:04,240 --> 00:21:06,320 And then yeah, the the pureplay factor as well. 400 00:21:06,960 --> 00:21:14,480 I, I was stunned by a part of your note. 401 00:21:15,480 --> 00:21:18,880 You showed the primary, well, a primary benefit, I guess you 402 00:21:18,880 --> 00:21:22,560 only have one primary benefit, but a real benefit to consumers 403 00:21:22,920 --> 00:21:27,080 from ordering online and specifically through HAPE is 404 00:21:27,080 --> 00:21:31,880 what prices are on average 40 to 50% lower than if you were to go 405 00:21:31,880 --> 00:21:34,600 into a convenience store. And then you said in New York 406 00:21:34,600 --> 00:21:37,960 City at Canas Inns now retails for $11.00, which I almost fell 407 00:21:37,960 --> 00:21:39,640 off my chair reading. You. 408 00:21:40,440 --> 00:21:44,920 Need to I if you need me to send you some I can do a Florida NY 409 00:21:44,920 --> 00:21:47,960 arbitrage for you. But anyway you get them for 410 00:21:47,960 --> 00:21:50,560 under 6 bucks online in the same state. 411 00:21:51,960 --> 00:21:54,840 So what are we talking about? You got rent savings, Where does 412 00:21:54,840 --> 00:21:57,120 where does the rest of the savings come from? 413 00:21:57,560 --> 00:22:01,360 I mean, there's a ton of small things, but the big thing or the 414 00:22:01,360 --> 00:22:04,560 two big things is you know that they're bypassing wholesalers 415 00:22:04,560 --> 00:22:06,880 and distributors. So there's no middleman, no mark 416 00:22:06,880 --> 00:22:08,160 UPS. They're buying directly from the 417 00:22:08,160 --> 00:22:10,840 manufacturers. Then the second thing is they 418 00:22:10,840 --> 00:22:12,760 have, well, I guess three things. 419 00:22:12,760 --> 00:22:14,480 The second thing is major scale, right? 420 00:22:14,480 --> 00:22:15,840 So they're ordering in large bulbs. 421 00:22:15,840 --> 00:22:17,920 I think they're the largest buyers ends globally. 422 00:22:17,920 --> 00:22:20,000 That's that's including Europe as well. 423 00:22:20,120 --> 00:22:22,640 And then third, I think the median insights business, that's 424 00:22:22,640 --> 00:22:26,040 about 10% revenue wise, you know, larger contributor to 425 00:22:26,040 --> 00:22:28,000 profit. And so that's really, I think of 426 00:22:28,000 --> 00:22:30,480 it as supplemental revenue that allows them to be more 427 00:22:30,480 --> 00:22:33,760 aggressive on pricing discounts And they can make, they can 428 00:22:33,760 --> 00:22:36,520 afford to make a much lower product margin than maybe other 429 00:22:36,520 --> 00:22:38,960 online competitors or, or retail because they have this 430 00:22:38,960 --> 00:22:40,920 supplemental revenue coming in as well. 431 00:22:41,560 --> 00:22:43,880 But it it's really, yeah, it's a remarkable difference. 432 00:22:43,880 --> 00:22:46,320 And you know, I, I think consumers are really price 433 00:22:46,320 --> 00:22:48,040 sensitive. As a market gets more mature 434 00:22:48,040 --> 00:22:50,840 there, you know, they'll be increasingly sensitive and you 435 00:22:50,840 --> 00:22:53,760 know, $11.00 for a can of, of Zen in New York is, is pretty 436 00:22:53,760 --> 00:22:56,040 crazy. Yeah, that's high to quite high. 437 00:22:56,280 --> 00:22:59,360 Yeah, yeah. I mean, down here, it's not that 438 00:22:59,360 --> 00:23:02,640 we're not too far off from like, I don't know, 2 for the price of 439 00:23:02,640 --> 00:23:06,040 5 bucks or something like that. I know you guys did taxes. 440 00:23:06,040 --> 00:23:08,200 They're nuts. Yeah, taxes. 441 00:23:08,200 --> 00:23:10,560 I think the bodega guys too, they, you know, they charge a 442 00:23:10,680 --> 00:23:13,080 very healthy markup as well. It's very. 443 00:23:13,080 --> 00:23:14,640 Especially. People are willing to pay. 444 00:23:14,760 --> 00:23:18,120 Yeah, right. Yeah, there's dynamic pricing at 445 00:23:18,120 --> 00:23:21,960 the at the bodegas. That's fair. 446 00:23:23,080 --> 00:23:28,880 What, what do you sense like is this the type of management team 447 00:23:29,360 --> 00:23:35,480 that is going to attempt to close that pricing gap or are 448 00:23:35,480 --> 00:23:41,080 they going to exploit it in favor of market share growth as 449 00:23:41,080 --> 00:23:43,800 long as possible? Sort of said differently, like 450 00:23:44,760 --> 00:23:48,160 obviously current cash flow matters, but it doesn't like 451 00:23:48,200 --> 00:23:50,400 really, really matter if you're growing, right? 452 00:23:50,400 --> 00:23:52,920 Like how? How's this playbook going to 453 00:23:53,040 --> 00:23:54,480 going to play out in your opinion? 454 00:23:54,960 --> 00:23:57,000 Yeah. I think it's a lever they can 455 00:23:57,000 --> 00:23:59,560 pull at some point and it's in their toolbox. 456 00:23:59,560 --> 00:24:00,680 I think. I think they're going to be very 457 00:24:00,680 --> 00:24:03,000 cautious in doing so. You know, when speaking to 458 00:24:03,000 --> 00:24:05,720 management, they're very adamant on like we're at the first 459 00:24:05,720 --> 00:24:08,880 inning and we want to soak up as much market share as possible. 460 00:24:09,320 --> 00:24:11,840 And especially because online penetration like in the US, for 461 00:24:11,840 --> 00:24:15,360 example, is, is so low. I mean, I think it's 2 to 3% 462 00:24:15,360 --> 00:24:19,640 are, are sold online. And so they, they really want to 463 00:24:19,640 --> 00:24:22,160 just sort of like Amazon in the early days, just soak up as much 464 00:24:22,160 --> 00:24:25,320 of the market as possible and, and just keep product margin 465 00:24:25,320 --> 00:24:28,240 extremely low and, and price varies high discounts to, to 466 00:24:28,240 --> 00:24:31,520 retail. However, I know in Scandinavia 467 00:24:31,520 --> 00:24:35,240 and Sweden, for example, they price at a 20 to 30% discount to 468 00:24:35,240 --> 00:24:38,120 convenience. So they sank in and know that 469 00:24:38,120 --> 00:24:40,920 like if they were to have an equivalently priced discount in 470 00:24:40,920 --> 00:24:44,280 the US, for example, 20 to 30% instead of 40 to 50%, they 471 00:24:44,280 --> 00:24:46,480 wouldn't lose any volume. And yeah, it would make a lot 472 00:24:46,480 --> 00:24:49,240 more margin. But I I think that's something 473 00:24:49,240 --> 00:24:51,120 that they won't do for for a long time. 474 00:24:51,720 --> 00:24:55,480 At the risk of asking a really stupid question, if they pull 475 00:24:55,480 --> 00:24:58,920 that pricing lever, how much of that drops to the bottom line? 476 00:25:00,120 --> 00:25:01,800 Pretty much all of it. Yeah, right. 477 00:25:01,920 --> 00:25:05,680 Yeah, Yeah. So that's that's interesting. 478 00:25:06,160 --> 00:25:08,920 Yeah. And it's it's interesting too. 479 00:25:08,920 --> 00:25:12,160 The product margins in the core markets of Scandinavia and 480 00:25:12,160 --> 00:25:14,080 Norway are, are very low at retail. 481 00:25:14,440 --> 00:25:17,400 So I think they're mid teens sort of level and their margin 482 00:25:17,400 --> 00:25:19,800 and what they could price is really function of retail in a 483 00:25:19,800 --> 00:25:22,480 sense. So if retail's margins really 484 00:25:22,480 --> 00:25:24,840 low, you know their their margins will also be somewhat 485 00:25:24,840 --> 00:25:27,040 low. So retail margins in the growth 486 00:25:27,040 --> 00:25:29,360 market. So mainly the US and UK are are 487 00:25:29,360 --> 00:25:32,840 closer to 50%. So and obviously pricing will 488 00:25:32,840 --> 00:25:34,520 will have to come in for them to achieve this. 489 00:25:34,520 --> 00:25:37,360 But one of the interesting things that that we're thinking 490 00:25:37,360 --> 00:25:40,440 about is like what's the long term margin potential, potential 491 00:25:40,440 --> 00:25:43,200 to growth markets business And there's a reason to believe that 492 00:25:43,200 --> 00:25:45,680 I'll be substantially higher than the core markets of the the 493 00:25:45,680 --> 00:25:49,080 core markets did like, I think a 10% trailing EBITDA margin, 494 00:25:49,080 --> 00:25:51,760 they've guided to 1213% in the medium term. 495 00:25:52,120 --> 00:25:55,680 Like could the growth markets do high teens, you know, low 20% 496 00:25:55,680 --> 00:25:58,160 rate, I don't know, 10 plus years from now. 497 00:25:58,160 --> 00:25:59,800 I think it's, it's quite possible. 498 00:26:00,360 --> 00:26:02,200 You're talking margins? Yeah, yeah. 499 00:26:02,360 --> 00:26:07,440 Yeah, yeah, on top of what they guided to mid teens revenue 500 00:26:07,440 --> 00:26:10,160 growth over the midterm, midterm, right? 501 00:26:10,360 --> 00:26:13,000 Right. Yeah, there's a lot of margin in 502 00:26:13,000 --> 00:26:14,760 this business. When I was looking at, I mean, 503 00:26:14,760 --> 00:26:17,560 Swedish Match, I was like, Oh my God, this is a software company. 504 00:26:17,680 --> 00:26:20,400 I mean, it obviously wasn't, but I was like, these financials are 505 00:26:20,400 --> 00:26:22,760 insane. Yeah, it's a good business. 506 00:26:23,360 --> 00:26:25,240 Yeah. Not too often you see a consumer 507 00:26:25,240 --> 00:26:29,000 products business growing like that, throwing off cash. 508 00:26:29,320 --> 00:26:31,920 Right. Like that's, that's nice. 509 00:26:32,080 --> 00:26:35,360 Yeah, until that. That was stolen by the Morris. 510 00:26:35,880 --> 00:26:37,240 No doubt. Yeah. 511 00:26:38,680 --> 00:26:40,400 What? What? 512 00:26:40,800 --> 00:26:44,680 So I mean, we brought up Amazon. Walmart is crushing it in 513 00:26:44,680 --> 00:26:49,360 e-commerce. How worried are you about some's 514 00:26:49,360 --> 00:26:53,400 competitive threat from one or both of them over the long term? 515 00:26:54,480 --> 00:26:57,320 I'm not really worried at all. You know, you could think in a 516 00:26:57,560 --> 00:27:00,960 very optimistic scenario, maybe it would be half a percent of 517 00:27:00,960 --> 00:27:04,000 Amazon's business at scale and would put them in the hotspot 518 00:27:04,000 --> 00:27:06,680 with regulators and and just would increase regulatory 519 00:27:06,680 --> 00:27:08,920 scrutiny. I just don't think they they 520 00:27:08,920 --> 00:27:11,600 think it's worth it. Yeah, you could say that like 521 00:27:11,600 --> 00:27:14,960 perceptions are changing and people feel, you know, nicotine 522 00:27:14,960 --> 00:27:18,840 is itself is is less harm, harmful than it used to be, but 523 00:27:18,840 --> 00:27:20,800 I just don't think it's worth it for them at all. 524 00:27:21,280 --> 00:27:22,560 Yeah. It might be better to buy them 525 00:27:22,560 --> 00:27:26,960 than mess with doing any like trying to stand your own up. 526 00:27:27,320 --> 00:27:31,000 You want to talk a little bit about the licensing and and the 527 00:27:31,160 --> 00:27:33,520 jurisdictional issues that go along with that? 528 00:27:34,200 --> 00:27:36,640 Yeah, So it, it's different in different markets. 529 00:27:37,200 --> 00:27:40,400 You know, in most states you need a license to sell direct to 530 00:27:40,400 --> 00:27:42,880 consumer. You know, in, in Sweden, like 531 00:27:42,880 --> 00:27:46,320 you, you need a license and I think the municipality where 532 00:27:46,320 --> 00:27:48,240 you're incorporated. So there's, there's different 533 00:27:48,240 --> 00:27:49,720 things. It's it's interesting. 534 00:27:49,720 --> 00:27:53,040 So a big part of the business, especially in the US is a legal 535 00:27:53,040 --> 00:27:55,800 and compliance aspect. So they'll, they'll have to 536 00:27:55,800 --> 00:27:59,280 track every single jurisdiction down to like the municipality or 537 00:27:59,280 --> 00:28:01,520 zip code and, and check for local restrictions. 538 00:28:01,880 --> 00:28:04,400 And then if you're in a zip code that has a flavour ban, like it 539 00:28:04,400 --> 00:28:06,720 might be a town in like Massachusetts, they would 540 00:28:06,720 --> 00:28:09,080 recognize that and they won't ship the product to you. 541 00:28:09,200 --> 00:28:12,640 It's actually a complex thing in addition to the license also 542 00:28:12,640 --> 00:28:15,560 just staying top of, on top of regular restrictions and, and 543 00:28:15,560 --> 00:28:17,960 different things like that. And I think that, so basically 544 00:28:17,960 --> 00:28:20,680 what happened with was zen.com as they got in trouble. 545 00:28:21,600 --> 00:28:25,480 And I guess this goes in a bit into the, you know, I guess why 546 00:28:25,480 --> 00:28:29,440 the DTC platforms haven't really worked and, you know, aren't as 547 00:28:29,440 --> 00:28:31,440 big as a threat as people might think. 548 00:28:32,560 --> 00:28:36,240 But basically, you know, Washington, DC had a flavor ban 549 00:28:36,240 --> 00:28:39,720 on, on nicotine pouches for whatever reason. zen.com was 550 00:28:39,720 --> 00:28:42,400 legally selling flavored pouches into DC. 551 00:28:42,760 --> 00:28:45,400 So they're, they're put under investigation by the attorney 552 00:28:45,400 --> 00:28:48,120 general and they, you know, they immediately shut it down. 553 00:28:48,120 --> 00:28:49,920 It's been shut down since indefinitely. 554 00:28:50,640 --> 00:28:53,360 So they they ended up sort of settling that the case for a 555 00:28:53,360 --> 00:28:55,960 minuscule fee. But it really showed that like, 556 00:28:55,960 --> 00:28:59,520 you know, that was less than 1% of their US businessand.com. 557 00:28:59,520 --> 00:29:01,720 And they're like, this is going to put us in the, you know, the 558 00:29:01,720 --> 00:29:05,280 hot seat with regulators that we have 99% of the other business 559 00:29:05,280 --> 00:29:07,040 that that's at risk. And they're like, this is just 560 00:29:07,040 --> 00:29:08,880 not worth it. And I mean, you would think a 561 00:29:08,880 --> 00:29:11,440 major company like Phillip Morris would be on top of that, 562 00:29:11,440 --> 00:29:14,080 but I think it's a lot easier for for things to fall through 563 00:29:14,080 --> 00:29:16,120 the cracks. So, you know, they were, yeah, I 564 00:29:16,120 --> 00:29:18,120 guess breaking the law. Yeah. 565 00:29:18,120 --> 00:29:24,720 Well, it it almost seemed in that instance that I if I recall 566 00:29:24,720 --> 00:29:27,720 correctly, they had outsourced the fulfillment or something 567 00:29:27,720 --> 00:29:29,800 like that, right? Yeah, it says Scandinavian 568 00:29:29,800 --> 00:29:31,360 tobacco. Yeah. 569 00:29:31,360 --> 00:29:35,840 So it's like not a big enough part of their business to really 570 00:29:35,840 --> 00:29:39,120 have the eye on the ball. And then it created like a real 571 00:29:39,120 --> 00:29:42,800 headache. Yeah, yeah. 572 00:29:42,800 --> 00:29:46,200 I just think it, it show that it was not worth it, you know, at 573 00:29:46,200 --> 00:29:48,320 all. Anything like VL +2. 574 00:29:48,320 --> 00:29:51,000 They don't have a direct to consumer website in the USI 575 00:29:51,000 --> 00:29:54,040 think ever since the jewel scandal, you know, with Altria, 576 00:29:54,040 --> 00:29:57,280 the the major manufacturers don't want to be seen being too 577 00:29:57,280 --> 00:29:59,760 aggressive with, with consumers and marketing. 578 00:29:59,760 --> 00:30:02,240 And and so they've really been cautious on on building up the, 579 00:30:02,240 --> 00:30:05,960 the DTC part of the business. And I think that's, that's been 580 00:30:05,960 --> 00:30:07,440 one of the bigger questions I've gotten. 581 00:30:07,440 --> 00:30:11,040 Like why isn't like DTCA bigger thing or why is that not a huge 582 00:30:11,040 --> 00:30:14,400 threat to to Hapes business? I really think that's a major 583 00:30:14,400 --> 00:30:16,080 part of it that that could change one day. 584 00:30:16,080 --> 00:30:20,480 So you know that Sam got the 20 marketing grand orders and you 585 00:30:20,480 --> 00:30:22,680 know, maybe, you know, a couple years down the line that they 586 00:30:22,680 --> 00:30:26,960 feel more comfortable again to take a swing at it, but I think 587 00:30:26,960 --> 00:30:28,080 it's really not worth it for them. 588 00:30:29,200 --> 00:30:33,840 Do you know when they're when they're purchasing, when HAPE is 589 00:30:33,840 --> 00:30:36,360 purchasing from the big manufacturers? 590 00:30:37,000 --> 00:30:42,160 Do you know, do they have like volume guarantees or do they 591 00:30:42,240 --> 00:30:48,360 more have a, you know, if you buy whatever 10,000 boxes, you 592 00:30:48,360 --> 00:30:51,720 get a discount. Like how, how does the, I guess 593 00:30:51,720 --> 00:30:56,760 what's the incentive for the manufacturers to give them like 594 00:30:56,760 --> 00:30:59,720 a, a discount relative to what retail pays? 595 00:30:59,720 --> 00:31:02,720 And how does that relationship between the two work? 596 00:31:03,640 --> 00:31:05,760 Yeah, so I think there's sort of annual agreement. 597 00:31:05,760 --> 00:31:07,600 So I think there's volume discounts. 598 00:31:07,600 --> 00:31:10,040 So if they hit a a certain level, you know, they'll they'll 599 00:31:10,040 --> 00:31:11,840 get the product for a lower price. 600 00:31:12,440 --> 00:31:16,120 I still think, you know, so, so HAPE says that the manufacturers 601 00:31:16,120 --> 00:31:20,440 make a 15% higher product margin selling through HAPE rather than 602 00:31:20,440 --> 00:31:23,640 wholesalers or distributors. You know, there's a single point 603 00:31:23,640 --> 00:31:26,720 of delivery, no returns, no sales force. 604 00:31:26,720 --> 00:31:29,040 Oh man. So it's just a clean hate buys 605 00:31:29,040 --> 00:31:31,280 from them, you know, ships it to a hate facility. 606 00:31:31,560 --> 00:31:34,120 So they do end up sort of making higher margins as well. 607 00:31:35,440 --> 00:31:36,880 Be that that's simply how it works. 608 00:31:36,880 --> 00:31:39,360 There's there's annual agreements to step up in volumes 609 00:31:39,360 --> 00:31:42,120 will will cause sort of a a lower price for for hate. 610 00:31:42,240 --> 00:31:44,800 And I view, you know, there HAPE is the largest sort of online 611 00:31:44,800 --> 00:31:47,680 marketplace and like a, a space that is growing rapidly. 612 00:31:48,160 --> 00:31:50,840 And so if you equate it to Amazon and your consumer 613 00:31:50,840 --> 00:31:53,800 products company, like you could have ADT site where, where you 614 00:31:53,800 --> 00:31:56,520 make all the margin, but are you really not going to be listed on 615 00:31:56,520 --> 00:31:59,120 the, on the largest online marketplace, especially as the 616 00:31:59,120 --> 00:32:02,440 space explodes? So I, I think the companies want 617 00:32:02,440 --> 00:32:04,320 to work with HAPE. They, they want to be on there. 618 00:32:04,320 --> 00:32:06,880 HAPE is a, it's a good compliant buyer. 619 00:32:06,880 --> 00:32:10,840 You know, they have 100% age verification, they can track all 620 00:32:10,840 --> 00:32:13,040 this, all this data. And I think they view them as a, 621 00:32:13,200 --> 00:32:14,800 you know, symbiotic kind of partner. 622 00:32:16,080 --> 00:32:21,560 There's a few examples of where to steal Simeon Siegel's saying 623 00:32:21,560 --> 00:32:25,840 DTC isn't all it's cracked up to be, so letting somebody else 624 00:32:25,840 --> 00:32:29,200 deal with the customer acquisition can be a a pretty 625 00:32:29,200 --> 00:32:33,080 beneficial and symbiotic relationship, right? 626 00:32:33,520 --> 00:32:35,920 Something I think it's kind of funny, funny because it's 627 00:32:35,920 --> 00:32:38,760 nicotine that we're talking about, but at least as it 628 00:32:38,760 --> 00:32:44,480 pertains to pouches, you've got far lower incidences of cancer 629 00:32:44,520 --> 00:32:49,840 related from nicotine. Online is cheaper for consumers. 630 00:32:50,880 --> 00:32:55,760 The relationship with the manufacturers is arguably better 631 00:32:55,760 --> 00:32:59,120 through HAPE. It's like kind of a win win, win 632 00:32:59,840 --> 00:33:03,800 business here, huh? Thank you all for listening. 633 00:33:03,800 --> 00:33:06,640 I'm interrupting this program to remind you this episode is 634 00:33:06,640 --> 00:33:10,960 sponsored by Fiscal dot AI. Fiscal dot AI is the complete 635 00:33:10,960 --> 00:33:13,200 modern data terminal for global equities. 636 00:33:13,560 --> 00:33:16,400 The Fiscal dot AI platform combines a powerful user 637 00:33:16,400 --> 00:33:19,720 experience with all the financial data capabilities that 638 00:33:19,720 --> 00:33:22,560 professional investors need. Users get up to 20 years of 639 00:33:22,560 --> 00:33:25,280 historical financials for all stocks globally that they can 640 00:33:25,280 --> 00:33:28,400 easily chart, compare, or export into their own models. 641 00:33:28,680 --> 00:33:31,760 And unlike legacy data terminals where it can take hours or even 642 00:33:31,760 --> 00:33:35,280 days, Fiscal dot AI data is updated within minutes of 643 00:33:35,280 --> 00:33:39,120 earnings reports. Fiscal dot AI also tracks all 644 00:33:39,120 --> 00:33:42,200 companies specific segment and KPI data, so you don't have to. 645 00:33:42,840 --> 00:33:45,400 You want to look at Amazon's cloud revenue, They got it. 646 00:33:45,600 --> 00:33:47,400 How about Spotify's premium Subs? 647 00:33:47,480 --> 00:33:49,920 They got that. Google's paid quarterly clicks. 648 00:33:49,920 --> 00:33:53,400 They got that bang. This is all you need to become 649 00:33:53,760 --> 00:33:57,360 your full self as an analyst. If you have this and you don't 650 00:33:57,360 --> 00:33:59,120 become your full self, that's on you. 651 00:33:59,160 --> 00:34:03,080 That's not on them anyway. If you use my affiliate link 652 00:34:03,120 --> 00:34:06,840 fiscal dot AI forward slash brew, you will automatically get 653 00:34:06,840 --> 00:34:09,920 2 weeks of Fiscal Pro for free. And if you find that you want to 654 00:34:09,920 --> 00:34:13,159 upgrade, my link will get you 15% off any paid plans. 655 00:34:13,159 --> 00:34:16,000 Again, that's fiscal dot AI forward slash brew. 656 00:34:17,400 --> 00:34:18,880 Yeah, that's, that's what I was saying. 657 00:34:18,880 --> 00:34:22,120 It's I haven't seen a business, you know, in my long career 658 00:34:22,120 --> 00:34:24,920 where everyone's benefits so greatly from their existence. 659 00:34:24,920 --> 00:34:26,360 Are your dad this? Are you like dad? 660 00:34:26,360 --> 00:34:28,560 This is like the ultimate win, win, win. 661 00:34:29,000 --> 00:34:31,760 I I've tried to get him to to buy we're still working on him 662 00:34:31,760 --> 00:34:32,320 but. Yeah. 663 00:34:32,320 --> 00:34:34,320 What's his objections? Well, I don't know that you need 664 00:34:34,320 --> 00:34:37,440 to speak for him, but he no, I think he'd let you. 665 00:34:37,800 --> 00:34:40,159 Yeah, it's small, you know, it's foreign listed. 666 00:34:40,400 --> 00:34:42,360 I think there's, you know, he has some other ideas he's really 667 00:34:42,360 --> 00:34:44,719 excited about. As Bob always says, I I like 668 00:34:44,719 --> 00:34:46,800 your kids, but I like mine a lot better, you know? 669 00:34:49,719 --> 00:34:51,800 Well, I thought, I thought it was a very nice compliment that 670 00:34:51,800 --> 00:34:54,719 Bob paid you when we were hanging out and he said. 671 00:34:54,719 --> 00:34:56,880 Yeah, that was nice. And that's where we came up with 672 00:34:56,880 --> 00:34:59,040 the the phrase. It's the the Nat gas and 673 00:34:59,040 --> 00:35:01,040 nicotine. So that's exactly right. 674 00:35:01,040 --> 00:35:05,400 The Nat gas and nicotine indeed. Yeah, that was bring that back 675 00:35:05,400 --> 00:35:07,920 up. Yeah, I forgot about that one. 676 00:35:08,720 --> 00:35:10,280 That's your podcast title right there. 677 00:35:10,680 --> 00:35:12,920 That's yeah, that's right. That was yeah, that is how. 678 00:35:12,920 --> 00:35:15,360 Yeah. Nat gas. 679 00:35:15,360 --> 00:35:16,800 That's great. All right. 680 00:35:16,800 --> 00:35:18,920 Where were we? Regulatory fears? 681 00:35:18,920 --> 00:35:22,520 OK, why does this? Why? 682 00:35:22,520 --> 00:35:26,160 Why are we not going to get regulated out of existence here? 683 00:35:27,360 --> 00:35:30,680 Yeah. So I I would say the US business 684 00:35:30,680 --> 00:35:33,000 looks good. You had the new administration 685 00:35:33,000 --> 00:35:34,480 right there versus the menthol ban. 686 00:35:34,480 --> 00:35:36,640 There's, you know, things like the overturning of the Chevron 687 00:35:36,640 --> 00:35:40,080 Act, the sort of signalling very positive approach to the space 688 00:35:40,080 --> 00:35:43,440 if the FDA approves excuses in two major things. 689 00:35:43,440 --> 00:35:46,120 They said that Zen was fully getting people off other more 690 00:35:46,120 --> 00:35:48,800 harmful and the tobacco and nicotine and they were staying 691 00:35:48,800 --> 00:35:51,680 on Zen as a single use product. And then youth uptake. 692 00:35:51,680 --> 00:35:56,640 So I think there's a survey in 24 where I think it was under 2% 693 00:35:56,640 --> 00:36:00,040 of high schoolers in the past 30 days and try to pouch where is 694 00:36:00,040 --> 00:36:02,960 the height of the vaping epidemic in 2019 it was close to 695 00:36:02,960 --> 00:36:05,320 like 30%. So you're really not getting 696 00:36:05,320 --> 00:36:06,960 that. And then if you, if you go in 697 00:36:06,960 --> 00:36:11,240 the MGO itself, it actually does mention digital or online sales 698 00:36:11,240 --> 00:36:15,080 as well as digital advertising. So it sets a precedent and sort 699 00:36:15,080 --> 00:36:18,680 of allows the online business to exist, which I which I thought 700 00:36:18,680 --> 00:36:21,200 was which huge, they've set a precedent for the, for the 701 00:36:21,200 --> 00:36:23,480 industry at large. I don't think you'll see any 702 00:36:23,480 --> 00:36:26,240 federal ban or anything like that on online. 703 00:36:26,240 --> 00:36:29,040 I think there will be different state level restrictions. 704 00:36:29,440 --> 00:36:31,960 I think that is a risk if you know, a bunch of states kind of 705 00:36:31,960 --> 00:36:35,040 ban online or, or make it difficult, you know, and the big 706 00:36:35,040 --> 00:36:38,160 part of the US market is is non accessible to to hate. 707 00:36:38,280 --> 00:36:42,040 But I think in in the US at least the regulatory business 708 00:36:42,040 --> 00:36:43,600 looks good. And, and I know they have tons 709 00:36:43,600 --> 00:36:46,440 of data on showing like, you know, with the age verification 710 00:36:46,440 --> 00:36:49,320 process, you know how it's much cleaner, you know, easier to 711 00:36:49,320 --> 00:36:52,520 track better system for preventing underage use. 712 00:36:52,520 --> 00:36:55,240 And so I think, you know, the, the regulators are, are starting 713 00:36:55,240 --> 00:36:58,440 to understand that the other big thing is the EU, which makes me 714 00:36:58,440 --> 00:37:00,840 a little more nervous, you know, because we, we know the, the, 715 00:37:00,880 --> 00:37:05,040 you can, can sometimes not be entirely rational. 716 00:37:05,040 --> 00:37:08,200 They have this thing called TPD 3 coming up to buy tobacco 717 00:37:08,200 --> 00:37:11,000 product directive. So they, every few years they, 718 00:37:11,000 --> 00:37:14,240 they go through this and kind of regulate a, you know, a bunch of 719 00:37:14,240 --> 00:37:17,040 new tobacco products, change excise taxes, different things 720 00:37:17,040 --> 00:37:19,520 like that. So Hape thinks they'll end up 721 00:37:19,520 --> 00:37:22,080 leaving the decision to individual countries. 722 00:37:22,560 --> 00:37:25,720 And so they'll implement in a form standards like caps on 723 00:37:25,720 --> 00:37:28,320 strengths and marketing restrictions, but they'll leave 724 00:37:28,320 --> 00:37:30,880 it up to each member state, which is good. 725 00:37:31,080 --> 00:37:33,400 I think only two countries so far have successfully banned 726 00:37:33,400 --> 00:37:35,920 them and those are in the courts and a whole host of them if 727 00:37:35,920 --> 00:37:38,160 legalize and tax nicotine pouches. 728 00:37:38,160 --> 00:37:41,160 So I do think the regulatory situation, if you asked me a 729 00:37:41,160 --> 00:37:43,760 year ago, I'd say it's a lot more unclear than it is now. 730 00:37:43,760 --> 00:37:45,560 So yeah, that's, I think it looks pretty good. 731 00:37:45,560 --> 00:37:47,320 We won't get movement in the EU for a while. 732 00:37:47,320 --> 00:37:49,040 The big Gray area there is Germany. 733 00:37:49,040 --> 00:37:51,760 So Germany has a ban on brick and mortar sales, but allows 734 00:37:51,760 --> 00:37:54,600 online sales. And so something to look forward 735 00:37:54,600 --> 00:37:57,560 to with, you know, the new, more Conservative government there. 736 00:37:57,560 --> 00:38:00,000 They, they think they'll legalize and, and tax the the 737 00:38:00,000 --> 00:38:02,240 product eventually. And if they can do that before 738 00:38:02,240 --> 00:38:05,200 this TPD three, you know, that will create a lot more political 739 00:38:05,200 --> 00:38:07,240 weight. But, but I, I think it looks 740 00:38:07,240 --> 00:38:08,440 good. And I think that's part of the 741 00:38:08,440 --> 00:38:11,760 reason HAPE is starting to go all out on the US opportunity. 742 00:38:12,120 --> 00:38:14,800 So they've had a major expansion to hiring right there. 743 00:38:14,880 --> 00:38:17,280 You know, they fully automated their their Houston warehouse 744 00:38:17,280 --> 00:38:21,120 that they're spending a lot of money and I think they're seeing 745 00:38:21,120 --> 00:38:22,800 a sea change on the regulatory front. 746 00:38:22,840 --> 00:38:25,120 You know, there's sort of increasing product 747 00:38:25,120 --> 00:38:27,800 fragmentation, which they're hoping for and they cease 748 00:38:27,800 --> 00:38:30,040 product category just, you know, doing really well. 749 00:38:31,200 --> 00:38:34,640 And so I think that was the, the regulatory sea changes, the last 750 00:38:35,080 --> 00:38:38,760 catalyst that they needed. But I think across the board it 751 00:38:38,760 --> 00:38:41,000 looks pretty good. I think there'll be some wins, 752 00:38:41,000 --> 00:38:43,560 there'll be some losses, but in the end, you know, it'll be 753 00:38:43,920 --> 00:38:47,000 legal for, you know, most of the US and then most of the EU for, 754 00:38:47,040 --> 00:38:50,480 for, you know, 5 to 10 years. It's interesting that Germany 755 00:38:51,320 --> 00:38:55,080 allowed online sales but not brick and mortar. 756 00:38:56,120 --> 00:38:59,320 Yeah, it's a de facto ban. It's I know it's in the court 757 00:38:59,320 --> 00:39:00,280 system. It's this weird. 758 00:39:00,280 --> 00:39:02,160 It's, I think it's regulated as a food product. 759 00:39:02,160 --> 00:39:03,840 It's, it's a weird middle ground. 760 00:39:04,200 --> 00:39:07,160 But that's like a €30 billion nicotine market. 761 00:39:07,240 --> 00:39:11,200 And you know, our peas are still maybe mid single digits and 762 00:39:11,200 --> 00:39:14,200 pouches are a tiny fraction of that, so almost non existent. 763 00:39:14,920 --> 00:39:17,800 So they they, they really big opportunities in Europe and 764 00:39:17,800 --> 00:39:20,400 there's countries like, you know, France, Spain, Italy that 765 00:39:20,400 --> 00:39:24,320 are heavy cigarette countries with with no pouch markets and 766 00:39:24,320 --> 00:39:27,240 and very small RP markets. So yeah, I think the opportunity 767 00:39:27,240 --> 00:39:30,120 there should be big. Doesn't make any sense how you 768 00:39:30,120 --> 00:39:34,160 would have nicotine users and say you can't have pouches like 769 00:39:34,160 --> 00:39:36,280 that. Flies in the face of anything 770 00:39:36,280 --> 00:39:39,040 rational. I know France tried to ban them 771 00:39:39,320 --> 00:39:43,080 and they have the high smoking 20 high 20% of the adult 772 00:39:43,080 --> 00:39:45,880 population smokes and they're like trying to ban nicotine 773 00:39:45,880 --> 00:39:47,080 pouches. It's sort of insane. 774 00:39:47,600 --> 00:39:51,560 Yeah, I mean, I I get that you don't want kids to OK, So if 775 00:39:51,560 --> 00:39:55,600 your kids, you have kids, Fast forward, they are chewing on a 776 00:39:55,600 --> 00:39:57,960 pouch. Are you upset with them, or are 777 00:39:57,960 --> 00:40:01,520 you moderately OK with it, given the fact that somebody's bound 778 00:40:01,520 --> 00:40:04,160 to have a vice at some point, at least some people are. 779 00:40:04,640 --> 00:40:06,320 I guess depends how old they are. 780 00:40:06,800 --> 00:40:08,480 Yeah, you don't want them to be 11. 781 00:40:08,720 --> 00:40:11,640 Yeah, but I mean, if they're in high school, you know, I think, 782 00:40:11,960 --> 00:40:14,360 I don't know, I, I think you could try to ban away the, the 783 00:40:14,360 --> 00:40:17,840 category, but kids will always, you know, look for stimulants 784 00:40:17,840 --> 00:40:20,480 and, you know, different things and, you know, making sure that 785 00:40:20,480 --> 00:40:21,840 we have the, the healthiest options. 786 00:40:21,880 --> 00:40:24,320 I I'd be a little upset. But if they're 1718, I'd be 787 00:40:24,320 --> 00:40:26,400 like, yeah, whatever. They'll, they'll learn. 788 00:40:26,400 --> 00:40:30,960 I wonder, I mean, look, I don't, I don't want sometimes my kids 789 00:40:30,960 --> 00:40:33,360 listen to this podcast. I doubt they'd make it whatever 790 00:40:33,360 --> 00:40:38,240 39 minutes in, but if they do hear this, but wait until you're 791 00:40:38,240 --> 00:40:41,080 in college. That said, I see these kids 792 00:40:41,080 --> 00:40:43,640 sucking down Celsius. I don't think that's 793 00:40:43,640 --> 00:40:47,200 particularly great for a child. I don't know which is worse. 794 00:40:47,200 --> 00:40:50,720 Like I have no idea. I I I bet Celsius is much worse. 795 00:40:50,880 --> 00:40:53,560 Right. Yeah, I kind of think so too. 796 00:40:54,280 --> 00:40:56,600 It's like nicotine fully isolated, right? 797 00:40:56,600 --> 00:41:00,200 Without any, you know, whatever byproducts Is it, is it just 798 00:41:00,200 --> 00:41:02,120 like a natural stimulant like caffeine? 799 00:41:02,640 --> 00:41:05,520 So, you know, that could, I guess getting more clarity on 800 00:41:05,520 --> 00:41:07,880 that could, can really change how we think about the, the 801 00:41:07,880 --> 00:41:10,000 product space. And I, you know, I think people, 802 00:41:10,160 --> 00:41:12,080 you know, are starting to think that way, too. 803 00:41:12,600 --> 00:41:14,680 Yeah, well, Huberman's doing his best. 804 00:41:14,880 --> 00:41:18,000 Yeah, yeah. There's that whole, yeah, that 805 00:41:18,000 --> 00:41:21,480 whole sphere of, of people. But yeah, it is, you know, it's, 806 00:41:21,480 --> 00:41:23,040 it's nature's Adderall in a sense. 807 00:41:23,640 --> 00:41:26,560 Yeah. Now, when you pull up a stock 808 00:41:26,560 --> 00:41:30,520 chart of this thing, it it's, it's, it's quite up and down, 809 00:41:31,400 --> 00:41:34,000 largely up for the record, especially long term. 810 00:41:34,000 --> 00:41:38,680 But what has been some of the roller coaster that that maybe? 811 00:41:39,560 --> 00:41:41,600 Why have people gotten shaken out at times? 812 00:41:41,920 --> 00:41:43,880 Yeah, it's sort of been a wild ride. 813 00:41:44,320 --> 00:41:47,640 So basically in March of last year, you had Zinch. 814 00:41:47,640 --> 00:41:51,040 In 2024, you had big Zin shortages in the market. 815 00:41:51,600 --> 00:41:54,760 They'd actually preemptively bulked up on Zinch Supply, so 816 00:41:54,760 --> 00:41:57,560 they're able to to sell while retailers were fully out of 817 00:41:57,560 --> 00:41:58,960 stock. So they had a rush of new 818 00:41:58,960 --> 00:42:01,200 customers. Business is doing well, but then 819 00:42:01,200 --> 00:42:04,040 when he gets to the end of Q3 they they fully ran out as ends 820 00:42:04,040 --> 00:42:06,480 and and basically have been out of stock since. 821 00:42:07,160 --> 00:42:10,280 So reported numbers kind of don't look great right now. 822 00:42:10,280 --> 00:42:13,720 I think at its peak, you know US and accounted for like 3/4 of 823 00:42:13,720 --> 00:42:16,520 the US business. At the same time, there's an 824 00:42:16,520 --> 00:42:18,640 ongoing lawsuit in San Francisco that HAPE and other 825 00:42:18,640 --> 00:42:22,240 manufacturers are involved in. That's what happened last year. 826 00:42:23,000 --> 00:42:25,360 You know, we, we think they'll settle and the, the, this week 827 00:42:25,360 --> 00:42:27,600 grounds for the case to begin with. 828 00:42:27,600 --> 00:42:30,080 But that was headache at the same time due to that and 829 00:42:30,080 --> 00:42:32,640 different kind of state level restrictions and just 830 00:42:32,640 --> 00:42:35,720 unregularities that they stopped sales in a bunch of states, So 831 00:42:36,440 --> 00:42:41,640 California, Alabama, Washington, DC, Minnesota, Massachusetts and 832 00:42:41,640 --> 00:42:43,840 I think a few others. And then they also stopped 833 00:42:43,840 --> 00:42:45,840 selling all legacy tobacco products. 834 00:42:46,280 --> 00:42:49,320 So you had a large chunk of the business go away and I, you 835 00:42:49,320 --> 00:42:52,640 know, I think that was a much bigger concern a year ago, but I 836 00:42:52,640 --> 00:42:54,960 think now we have some more clarity regarding what's going 837 00:42:54,960 --> 00:42:57,960 to happen there. Last year you also had, you 838 00:42:57,960 --> 00:43:01,960 know, they, they lost their snooze license in Sweden to sell 839 00:43:01,960 --> 00:43:05,520 the legacy tobacco products by the municipality that granted it 840 00:43:05,520 --> 00:43:07,680 to them. They actually lowered that. 841 00:43:07,680 --> 00:43:10,760 So I think like a month or two ago they they undid that 842 00:43:10,760 --> 00:43:12,600 revoking and now it's just a warning. 843 00:43:12,840 --> 00:43:16,560 Why they lose it? They cited incomplete age 844 00:43:16,560 --> 00:43:18,360 verification at point of delivery. 845 00:43:18,920 --> 00:43:22,080 Since then HAPE has implemented that, but it's it's hard because 846 00:43:22,080 --> 00:43:24,680 if you're in northern Sweden and you have to rely on a third 847 00:43:24,680 --> 00:43:27,600 party logistics company to age check someone at point of 848 00:43:27,600 --> 00:43:29,800 delivery, it could be difficult. So I think that was some of the. 849 00:43:29,800 --> 00:43:31,960 Reason their ass off while they're delivering it and they 850 00:43:31,960 --> 00:43:33,280 got. Yeah, right. 851 00:43:33,360 --> 00:43:36,160 So I think that was some of the some of the gap there, but they 852 00:43:36,160 --> 00:43:37,680 they lowered that to a warning status. 853 00:43:37,680 --> 00:43:43,120 So that's no longer a concern. And yeah, I think that's what's 854 00:43:43,120 --> 00:43:45,840 been going on. Purported numbers don't don't 855 00:43:45,840 --> 00:43:50,600 look great, but they've singled this and you know, I think the 856 00:43:50,600 --> 00:43:54,360 big thing to look forward to and you know is, is USN coming back. 857 00:43:54,360 --> 00:43:56,640 So they guided they expect that to happen in the in the 858 00:43:56,640 --> 00:43:59,760 second-half of this year. I think they're still working on 859 00:43:59,760 --> 00:44:02,400 some of the kinks with that as it falls under the MGO for 860 00:44:02,400 --> 00:44:05,320 requirements what not. But if that happens, you should 861 00:44:05,320 --> 00:44:07,360 see a large chunk of the business come back. 862 00:44:07,560 --> 00:44:12,120 I think at the end of Q3, USN is about 6% of group volume at its 863 00:44:12,120 --> 00:44:13,640 peak. I think it was closer to like a 864 00:44:13,640 --> 00:44:16,040 mid teens percent of the business revenue wise. 865 00:44:16,920 --> 00:44:18,680 So that's obviously a major thing. 866 00:44:18,960 --> 00:44:22,080 But now that the supply situation is fixed, you know, I 867 00:44:22,080 --> 00:44:24,120 think we should expect that to to come back. 868 00:44:24,120 --> 00:44:26,600 And so the, the markets knows that, but you know, obviously it 869 00:44:26,600 --> 00:44:29,480 coming back is a is a definite thing and you know the 870 00:44:29,480 --> 00:44:31,720 uncertainties sort of longer there, you know. 871 00:44:31,720 --> 00:44:34,600 What, 6 to 10 months ago it didn't know it, now it does. 872 00:44:34,840 --> 00:44:37,600 Yeah, this is when I should have listened to you. 873 00:44:38,200 --> 00:44:42,320 Yeah, so we'll we'll, we'll see. It'll it'll be a major, major 874 00:44:42,320 --> 00:44:44,560 event for them. Yeah. 875 00:44:44,560 --> 00:44:49,760 Huh. So how do you think, I mean this 876 00:44:49,760 --> 00:44:56,360 is the stock has had such a good run, you are a value investing 877 00:44:56,360 --> 00:44:59,280 shop. This I would not classify as a 878 00:44:59,280 --> 00:45:02,280 traditional value investment though I I will not argue that 879 00:45:02,280 --> 00:45:04,840 it is a value investment. I just don't think it fits a 880 00:45:04,840 --> 00:45:09,960 style box that a value firm would would typically hold it. 881 00:45:09,960 --> 00:45:11,760 So how do you think about the valuation? 882 00:45:12,280 --> 00:45:16,360 Yeah, I mean, to be fair, I, I bug, you know the crap out of 883 00:45:16,360 --> 00:45:18,840 Bob for for a long time. He's like, all right, I'll just 884 00:45:18,840 --> 00:45:23,200 buy it, make you happy. But I mean, when we did find it, 885 00:45:23,200 --> 00:45:25,440 the the valuation was very cheap. 886 00:45:25,440 --> 00:45:28,360 So I think it was if you'd sort of zeroed out losses from the 887 00:45:28,360 --> 00:45:31,480 growth markets business, a core Scandinavian business was 7-8 888 00:45:31,480 --> 00:45:34,640 times EBITDA and then you had this growth markets inflecting. 889 00:45:35,280 --> 00:45:38,960 So I, I'd argue it was a deep value kind of, you know, price 890 00:45:38,960 --> 00:45:42,160 there it's a bit more expensive now on trailing numbers. 891 00:45:42,280 --> 00:45:45,120 So you know, last 12 months ending June 30th, they did about 892 00:45:45,120 --> 00:45:50,040 3.7 billion kroners in revenue, 640 million in, in gross profit, 893 00:45:50,040 --> 00:45:54,080 about 236 in Adjusted EBITDA and about 100 million normalized 894 00:45:54,080 --> 00:45:57,040 earnings. So you got like a 4.4 billion 895 00:45:57,040 --> 00:45:59,160 kroner enterprise value market cap. 896 00:45:59,200 --> 00:46:02,360 You know, they're, they're about 18 1/2 trailing EBITDA and 40 897 00:46:02,360 --> 00:46:06,000 times gap earnings. They have this emerging segment, 898 00:46:06,000 --> 00:46:09,600 so that's vaping and heat not burn in existing geographies. 899 00:46:09,600 --> 00:46:13,560 If you add back the losses from that, you know, hate generated 900 00:46:13,560 --> 00:46:18,040 roughly 280 million kroners in EBITDA on their core nicotine 901 00:46:18,040 --> 00:46:21,000 pouch business. So you know, it's about 16 times 902 00:46:21,280 --> 00:46:23,480 trailing EBITDA of the of the core business. 903 00:46:25,520 --> 00:46:29,920 You know, it's, you obviously want to look at a few years on, 904 00:46:29,920 --> 00:46:32,720 on trailing numbers. It's, it's, it's not that cheap. 905 00:46:34,080 --> 00:46:36,040 There's anyways to to think about it. 906 00:46:36,200 --> 00:46:39,040 It did release guidance. So, they guided towards the net 907 00:46:39,040 --> 00:46:44,120 sales CAGR of 18 to 25% through 2028, adjusted. 908 00:46:44,120 --> 00:46:47,080 Why does that make sense? Because, you know, you hear that 909 00:46:47,080 --> 00:46:49,320 and you say, well, what about the base rates of businesses 910 00:46:49,320 --> 00:46:51,720 this size and how can they possibly get there? 911 00:46:52,480 --> 00:46:54,760 Yeah. So I mean the the market as a 912 00:46:54,760 --> 00:46:57,560 whole in their existing geographies is, you know, slated 913 00:46:57,560 --> 00:47:00,200 to grow about 20%. Now that's including 914 00:47:00,200 --> 00:47:02,360 Scandinavia. So in Scandinavia, it's a much 915 00:47:02,360 --> 00:47:05,000 more mature market. I think they actually broke it 916 00:47:05,000 --> 00:47:07,920 down in their, in their capital markets day that like, you know, 917 00:47:07,920 --> 00:47:12,200 the, the Scandinavian business was going to grow 5 to 9% and 918 00:47:12,200 --> 00:47:15,600 then I think the growth markets business was going to grow like 919 00:47:15,640 --> 00:47:19,320 35 to 45%. And so in, in the growth 920 00:47:19,320 --> 00:47:22,840 markets, you know, kind of the, the category as a whole is 921 00:47:22,840 --> 00:47:24,240 slated to grow. I mean there's different 922 00:47:24,240 --> 00:47:27,400 studies, but you know, mid 20% to mid 30%. 923 00:47:27,680 --> 00:47:30,720 And so they've sort of guided to the high end of the predictions 924 00:47:30,720 --> 00:47:33,160 on the category as a whole to 45%. 925 00:47:34,120 --> 00:47:37,240 So they they should grow at a minimum with the category. 926 00:47:37,240 --> 00:47:40,440 And because online penetration sort of increases over time, 927 00:47:40,680 --> 00:47:44,440 they should most likely grow in excess of that exception of of 928 00:47:44,440 --> 00:47:47,360 Scandinavia because that's much more of a mature market. 929 00:47:47,360 --> 00:47:51,080 So I think they guided 5 to 9% top top line growth in that 930 00:47:51,800 --> 00:47:54,880 through through 2028. But you take that blinded 931 00:47:55,120 --> 00:48:00,120 approach 5 to 9% core, you know 35 to 45% growth markets, which 932 00:48:00,120 --> 00:48:03,440 is USUK, Germany, Austria, Switzerland and I think like 30 933 00:48:03,440 --> 00:48:06,920 to 50% in their emerging kind of vape and HMB segment. 934 00:48:07,320 --> 00:48:09,120 That's sort of how they arrived there. 935 00:48:09,840 --> 00:48:12,840 That would put them in, you know revenue range is 7 to 9 billion 936 00:48:12,840 --> 00:48:16,800 kroners with an EBITDA margin range of 6 to 8%. 937 00:48:16,920 --> 00:48:19,680 So if he takes at the middle point of of that range, you know 938 00:48:19,680 --> 00:48:23,240 they would generate about 560 million kroners in, in EBITDA 939 00:48:23,600 --> 00:48:27,320 and trade roughly 8 * 2028 EBITDA taking the high end of 940 00:48:27,320 --> 00:48:31,640 that revenue range and margin margin target, you get 6 1/2 * 941 00:48:31,640 --> 00:48:34,320 28 numbers and then the low end about 11 times. 942 00:48:35,200 --> 00:48:39,280 They've also guided to 1% of sales being the emerging 943 00:48:39,280 --> 00:48:42,840 segments EBITDA loss. So adding that back and using 944 00:48:42,840 --> 00:48:46,320 the, the midpoint of, of revenue and margin targets, you can get 945 00:48:46,320 --> 00:48:49,840 sort of core nicotine pouch business for about 7 * 2028 946 00:48:49,840 --> 00:48:53,480 EBITDA numbers. And you roughly think that's a 947 00:48:53,560 --> 00:48:57,000 very attractive we're a few years out most of that so as to, 948 00:48:57,040 --> 00:48:59,480 to free cash in a, in a mature state. 949 00:48:59,480 --> 00:49:01,640 So they are, you know, spending a lot on quote, UN quote growth 950 00:49:01,800 --> 00:49:03,760 CapEx. But looking at true normalized 951 00:49:03,800 --> 00:49:07,400 owners earnings, I'd say that's a, it's a relatively good proxy 952 00:49:07,400 --> 00:49:10,360 for, for free cash flow. CapEx typically runs around 1 953 00:49:10,360 --> 00:49:13,080 1/2 to 2% of sales. This past year it was well over 954 00:49:13,080 --> 00:49:15,400 3%, I think close to 3 1/2 because, you know, they're, 955 00:49:15,400 --> 00:49:17,600 they're automating the Houston warehouse and, and sort of 956 00:49:17,600 --> 00:49:19,520 overhauling their, their back end systems. 957 00:49:20,360 --> 00:49:22,880 You, you could do some top down calculations too. 958 00:49:23,360 --> 00:49:26,520 So their, their market nicotine powers, total value in their 959 00:49:26,520 --> 00:49:30,640 current geographies is about 7.7 billion in, in 2024. 960 00:49:30,640 --> 00:49:34,920 That grows 20% through 2028. So that gets about 16 billion. 961 00:49:35,240 --> 00:49:39,280 You know, online penetration goes from 5% to 7 1/2% and you 962 00:49:39,280 --> 00:49:42,280 assume HAPE is like 2/3 of the online market, which you know, 963 00:49:42,280 --> 00:49:44,080 they have more. So you'd be a little 964 00:49:44,080 --> 00:49:45,880 conservative. And that gets you to, you know, 965 00:49:45,960 --> 00:49:50,320 8 billion kroners in revenue in 2028, so kind of the midpoint of 966 00:49:50,360 --> 00:49:54,280 of their guidance. And then another thing is that 967 00:49:54,280 --> 00:49:56,680 it's, you know, and I really like how it's kind of levered 968 00:49:56,680 --> 00:49:59,680 bet on the US market at this point. 969 00:49:59,680 --> 00:50:02,840 So in their base case assumption, they think the US 970 00:50:02,840 --> 00:50:06,480 will be responsible for 65% of incremental revenue growth 971 00:50:06,480 --> 00:50:09,200 through 2028. And they, they put out a great 972 00:50:09,200 --> 00:50:11,480 slide in the capital market state where their revenue will 973 00:50:11,480 --> 00:50:15,160 be in 28 based on different scenarios with the US business. 974 00:50:15,640 --> 00:50:18,400 So in the US they they have 2 1/2% of the total market. 975 00:50:18,440 --> 00:50:21,160 So including both offline and off online. 976 00:50:21,800 --> 00:50:26,000 But by 2028, if the US market were to grow to 26% kegger and 977 00:50:26,000 --> 00:50:29,200 they could get 5% of the total market, that would put them at 9 978 00:50:29,200 --> 00:50:31,480 billion kroners in revenues. So at the high end of that 979 00:50:31,480 --> 00:50:34,240 range. And I mean I I not a. 980 00:50:34,320 --> 00:50:38,280 Huge market share, man. No, no, I like 5. 981 00:50:38,280 --> 00:50:41,800 Percent is not crazy at all. The total market that's of a 982 00:50:42,240 --> 00:50:45,080 yeah, 6 something billion market today, but yeah, it's. 983 00:50:45,080 --> 00:50:47,360 Like one of those setups where there could be actually like a 984 00:50:47,360 --> 00:50:51,400 truly long duration for growth here if e-commerce penetration 985 00:50:51,400 --> 00:50:54,560 in this market follows other types of markets, right? 986 00:50:55,320 --> 00:50:57,880 Yeah. I mean, it won't get to like 30 987 00:50:57,880 --> 00:51:01,120 something percent like Sweden. I just think we're so big, the 988 00:51:01,120 --> 00:51:05,840 big driving car, gas station culture, which is a part of it. 989 00:51:06,120 --> 00:51:08,160 But at the same time they they've done studies. 990 00:51:08,160 --> 00:51:12,560 There's extremely low brand awareness in the US, so people 991 00:51:12,560 --> 00:51:14,320 really don't know the online market exists. 992 00:51:14,320 --> 00:51:17,720 And so I think now that the regulatory situation is more 993 00:51:17,720 --> 00:51:20,640 clear, they're going to be a lot more aggressive on marketing 994 00:51:20,960 --> 00:51:23,000 let. Inflation run like it has been. 995 00:51:23,080 --> 00:51:24,800 People might be looking for savings. 996 00:51:25,160 --> 00:51:28,440 Right, Yeah, it's a counter cyclical business, so maybe a 997 00:51:28,520 --> 00:51:30,520 light recession would help them. They're going my. 998 00:51:30,520 --> 00:51:34,400 Mom, my mom smoked her whole life, and I was like, look, this 999 00:51:34,400 --> 00:51:36,800 is ridiculous. Like, you need to get on Zen. 1000 00:51:37,120 --> 00:51:40,160 Yeah, she doesn't love having a pouch in her mouth, but I'm 1001 00:51:40,160 --> 00:51:43,200 like, well, you're not going to love getting your gums cut out 1002 00:51:43,200 --> 00:51:46,760 or dying of lung cancer either. Damned if you if you don't that. 1003 00:51:46,840 --> 00:51:49,920 That I'm certain of, right? Yeah, well, it's, it's 1004 00:51:49,920 --> 00:51:52,800 interesting even in in Scandinavia they have for they 1005 00:51:52,800 --> 00:51:56,320 use the tobacco base pouches. They have the lowest cancel rate 1006 00:51:56,320 --> 00:51:59,120 cancer rates in Europe too. Yeah, yeah. 1007 00:51:59,120 --> 00:52:03,200 So just across the board kind of all smoking related illness and 1008 00:52:03,240 --> 00:52:06,000 there's a lot of, you know, studies on on that traditional 1009 00:52:06,000 --> 00:52:07,520 snooze. And like, I think it's generally 1010 00:52:07,520 --> 00:52:09,400 accepted. It's like less than 5% of the 1011 00:52:09,400 --> 00:52:13,120 harm of a cigarette in terms like all 'cause mortality over, 1012 00:52:13,200 --> 00:52:16,200 you know, I don't know how many years, but so I'd imagine the 1013 00:52:16,200 --> 00:52:18,920 white pouch stuff is, is miles better than even that. 1014 00:52:19,520 --> 00:52:22,560 So what's the beef? The beef is, it's flavored and 1015 00:52:22,560 --> 00:52:26,520 therefore you're arguably selling to children and 1016 00:52:26,520 --> 00:52:31,040 therefore we should try to come down on it and not allow that to 1017 00:52:31,040 --> 00:52:33,800 happen, right? Yeah, the beef is that like, for 1018 00:52:33,800 --> 00:52:35,720 whatever reason, I guess the government really doesn't like 1019 00:52:35,720 --> 00:52:38,520 nicotine and especially young kids getting hooked on it. 1020 00:52:39,240 --> 00:52:42,240 I mean, marijuana is OK and we can legalize that and all that. 1021 00:52:42,240 --> 00:52:44,520 Some states, some states. So it's not federal? 1022 00:52:44,600 --> 00:52:48,120 Yeah, yeah, yeah, I'm, I'm, I'm just teasing, but. 1023 00:52:48,840 --> 00:52:51,920 Booze is OK. This is the one that's the head 1024 00:52:51,920 --> 00:52:53,960 scratcher. That's a whole another podcast, 1025 00:52:53,960 --> 00:52:55,880 yeah. Why is alcohol so ingrained and 1026 00:52:55,880 --> 00:53:00,520 OK but but I think people always associated nicotine with cancer 1027 00:53:00,520 --> 00:53:02,680 because of cigarettes and that's just not the case. 1028 00:53:02,680 --> 00:53:04,680 It's not what's causing cancer at all. 1029 00:53:04,840 --> 00:53:07,760 It's not known as a carcinogen. It's on the FDA website. 1030 00:53:08,600 --> 00:53:11,480 Yeah, it turns out that when you burn something and smoke it, 1031 00:53:11,480 --> 00:53:12,880 that's when it's not good for you. 1032 00:53:13,160 --> 00:53:15,760 Yeah, tends tends not to be. Yeah. 1033 00:53:18,200 --> 00:53:20,320 Well, I don't know. I think it's, I think it's 1034 00:53:20,320 --> 00:53:22,920 interesting. I mean the, the what are the 1035 00:53:22,920 --> 00:53:25,680 what are the push backs that you get obviously the DTC one. 1036 00:53:26,200 --> 00:53:29,400 Do you get why can't Amazon integrate into this ever? 1037 00:53:29,800 --> 00:53:32,280 Yeah. OK what are the other big ones? 1038 00:53:32,280 --> 00:53:35,000 Like how did how did? If you were to pre mortem it, 1039 00:53:36,120 --> 00:53:40,920 how would you kill this idea? I mean, I've thought a lot about 1040 00:53:40,920 --> 00:53:43,880 it and one of the big reasons why I like it so much is I think 1041 00:53:43,880 --> 00:53:46,480 it's very hard to kill. And I think they're right. 1042 00:53:46,480 --> 00:53:49,000 They're they're providing great benefit to the, the consumer and 1043 00:53:49,000 --> 00:53:52,040 the manufacturers. And I've got like, why won't the 1044 00:53:52,240 --> 00:53:54,880 big manufacturers go DTC and kill the business? 1045 00:53:54,880 --> 00:53:57,000 And I just don't think it's realistic. 1046 00:53:57,080 --> 00:53:59,120 Hate us. Also, they do under 400 million 1047 00:53:59,120 --> 00:54:01,800 in revenue trailing and Philip Morris is 40 billion. 1048 00:54:01,840 --> 00:54:04,760 They really don't view them as some big sort of true global 1049 00:54:04,760 --> 00:54:07,160 competitor. Yeah, they're like the fish that 1050 00:54:07,160 --> 00:54:08,960 sucks on the shark. Yeah. 1051 00:54:08,960 --> 00:54:11,760 And I, I think the median insights piece is so important 1052 00:54:11,760 --> 00:54:15,040 because it's, it's really been data that's been impossible to 1053 00:54:15,040 --> 00:54:16,800 track. Like, you know, you can get, 1054 00:54:16,960 --> 00:54:20,600 it's like at retail, you know, you can get scanned data from 1055 00:54:20,600 --> 00:54:24,480 Reuters and stuff, but you can't get like specific data down to 1056 00:54:24,480 --> 00:54:26,760 the individual customer and demographic. 1057 00:54:26,760 --> 00:54:29,760 And I, I think it's really creating service business or 1058 00:54:29,760 --> 00:54:33,000 company for the big, you know, manufacturers where they've 1059 00:54:33,000 --> 00:54:36,640 never been able to, to capture this data at such a granular, 1060 00:54:36,640 --> 00:54:39,640 like specific level. So I, I really think that's a 1061 00:54:39,840 --> 00:54:42,960 revolutionary product. So they like hate, they have 1062 00:54:42,960 --> 00:54:45,160 great relationships with hate. They're constantly working with 1063 00:54:45,160 --> 00:54:47,800 them, you know, the, the new product and trials and, and all 1064 00:54:47,800 --> 00:54:50,200 that. So they have a great symbiotic 1065 00:54:50,200 --> 00:54:52,360 relationship. The consumer loves hate because 1066 00:54:52,360 --> 00:54:55,960 of, you know, the price, the assortment, the convenience and 1067 00:54:55,960 --> 00:54:59,280 all that. I think a big push back I get 1068 00:54:59,280 --> 00:55:02,160 is, oh, this is just a normal regular e-commerce business. 1069 00:55:02,160 --> 00:55:04,600 Like can anyone come in? It's nothing seems that 1070 00:55:04,600 --> 00:55:07,880 proprietary or special about it. But like I always say, I try to 1071 00:55:07,880 --> 00:55:10,080 get a call with management, try to really understand the 1072 00:55:10,080 --> 00:55:13,160 dynamics of this business and why it's so hard to replicate. 1073 00:55:13,160 --> 00:55:16,280 The basic fact is you can't acquire customers like across 1074 00:55:16,280 --> 00:55:20,880 the board, you know, 97% is organic and like they would not 1075 00:55:20,880 --> 00:55:23,440 be able to have those market shares that they do if like it 1076 00:55:23,440 --> 00:55:25,400 was so easy to, to acquire customers. 1077 00:55:25,720 --> 00:55:28,400 And HAPE is very smart about having multiple different 1078 00:55:28,400 --> 00:55:30,800 websites and URLs and, and trying to get the bulk of that 1079 00:55:30,800 --> 00:55:33,320 traffic. You know, like, even with LMS, 1080 00:55:33,320 --> 00:55:35,880 like they're very on top of it. They have a whole team dedicated 1081 00:55:35,880 --> 00:55:37,720 to LMS. And basically what they're doing 1082 00:55:37,720 --> 00:55:42,080 now is like sending as much research as they can to academia 1083 00:55:42,080 --> 00:55:44,720 and like legit media institutions and try to get like 1084 00:55:44,840 --> 00:55:47,160 mentioned in articles and academic papers. 1085 00:55:47,160 --> 00:55:50,400 So the LMS pick that up and like you, HAPE is a credible source. 1086 00:55:50,720 --> 00:55:52,480 So they're, they're very on top of this stuff. 1087 00:55:52,880 --> 00:55:54,960 The, the thing that could kill it is regulatory. 1088 00:55:55,480 --> 00:55:57,000 You know, I don't think it'll kill, kill it. 1089 00:55:57,080 --> 00:55:59,920 You know, I don't think the US federally can do anything. 1090 00:56:00,280 --> 00:56:02,960 I think the EU doesn't have the political power anymore to ban 1091 00:56:02,960 --> 00:56:04,520 the space even if they wanted to. 1092 00:56:05,000 --> 00:56:09,560 So I think similar in the EU and the USI think certain countries 1093 00:56:09,560 --> 00:56:13,880 in certain states will ban it, but you won't get any widespread 1094 00:56:13,880 --> 00:56:18,280 sort of ban at all. And so I it, it really is very 1095 00:56:18,280 --> 00:56:20,440 defensible business. And, and they've done an 1096 00:56:20,440 --> 00:56:23,280 extremely great job. And it's really hard to know how 1097 00:56:23,280 --> 00:56:26,200 long the the runway is, is one of my favorite parts of the 1098 00:56:26,200 --> 00:56:28,440 story. I mean, they're starting of, of, 1099 00:56:28,600 --> 00:56:31,360 of such a good base. Like online penetration is so 1100 00:56:31,360 --> 00:56:33,400 low. Nicotine pouch penetration is so 1101 00:56:33,400 --> 00:56:35,920 low. RP penetration is, is so low. 1102 00:56:36,840 --> 00:56:39,840 The RP market in the USI think pouches are like quarter of it. 1103 00:56:40,200 --> 00:56:43,240 Like in EU and the UK, they're low single digits in Germany, 1104 00:56:43,240 --> 00:56:46,160 they're small fraction of it. They're they're 10 times the 1105 00:56:46,160 --> 00:56:49,800 amount of smokers in the US then pouch users, right? 1106 00:56:50,080 --> 00:56:53,200 Countries like Germany is a $30 billion annual nicotine market 1107 00:56:53,200 --> 00:56:55,640 with with no pouch or RP penetration. 1108 00:56:56,560 --> 00:56:59,800 Another interesting thing too is in the USI think the average 1109 00:57:00,160 --> 00:57:02,240 consumer has two to three pouches a day. 1110 00:57:02,600 --> 00:57:04,920 In Sweden it's 10:50 pouches per day. 1111 00:57:05,280 --> 00:57:08,640 It's like even with the existing customer base or for not grow it 1112 00:57:08,640 --> 00:57:11,720 at all and we can get to surge rates of consumption in Sweden 1113 00:57:11,720 --> 00:57:14,280 like the market could triple. So I really. 1114 00:57:14,280 --> 00:57:16,680 Don't know anyone that only does 2 pouches a day. 1115 00:57:17,280 --> 00:57:21,760 Exactly. Maybe the numbers are are are 1116 00:57:21,760 --> 00:57:23,640 not accurate but or maybe we just can. 1117 00:57:24,200 --> 00:57:26,800 Do 2 pouches an hour. We hang with a bunch of 1118 00:57:26,800 --> 00:57:28,040 degenerates. That's probably when. 1119 00:57:28,040 --> 00:57:28,840 It is. It's possible? 1120 00:57:28,840 --> 00:57:31,160 It's possible. Most normal people are are doing 1121 00:57:31,160 --> 00:57:32,560 two to three. Yeah. 1122 00:57:33,200 --> 00:57:36,160 But it's it I think, I think we're in the the first ending of 1123 00:57:36,160 --> 00:57:38,680 this stuff. And yeah, you think 20-30 years 1124 00:57:38,680 --> 00:57:41,160 out, like, what percent of the population is still smoking at 1125 00:57:41,160 --> 00:57:42,760 least? And, you know, sort of developed 1126 00:57:42,760 --> 00:57:44,840 Western. Well I hope none right? 1127 00:57:45,560 --> 00:57:47,800 I mean that's the thing that I think is so crazy about trying 1128 00:57:47,800 --> 00:57:49,120 to ban. I know I've said it now like 1129 00:57:49,120 --> 00:57:52,200 twice but or maybe 3 times but I just think it's insane to try to 1130 00:57:52,440 --> 00:57:54,760 to ban it. Yeah, yeah. 1131 00:57:54,760 --> 00:57:56,480 And I mean, a bunch of data is coming out. 1132 00:57:57,040 --> 00:58:00,360 You know, I think, I think it's going to be really hard to to 1133 00:58:00,360 --> 00:58:03,840 successfully do that. I know France, I tried to ban it 1134 00:58:03,840 --> 00:58:07,280 and then Sweden blocked it under like some EU sort of, you know, 1135 00:58:07,400 --> 00:58:09,600 free market law or something like that. 1136 00:58:09,600 --> 00:58:11,720 So there's this whole sort of stand off going on. 1137 00:58:13,400 --> 00:58:15,680 So it'll it'll be interesting. I think it'll be very difficult 1138 00:58:15,680 --> 00:58:18,800 for for countries to to end up doing that, especially as kind 1139 00:58:18,800 --> 00:58:22,360 of more data comes out. Yeah, I mean, look, I get like 1140 00:58:22,360 --> 00:58:27,240 wanting some utopia where people don't use vices, but that utopia 1141 00:58:27,240 --> 00:58:30,280 doesn't exist. And I kind of think this, I 1142 00:58:30,280 --> 00:58:33,640 don't actually equate this to subprime lending at all, but I I 1143 00:58:33,640 --> 00:58:37,640 kind of think it's got something that rhymes and that like, yeah, 1144 00:58:37,640 --> 00:58:39,000 it'd be great if it didn't exist. 1145 00:58:39,000 --> 00:58:42,880 But given that it exists, what's the best way to do it, right? 1146 00:58:42,920 --> 00:58:47,920 And and how How can we provide people with what they want and 1147 00:58:47,920 --> 00:58:51,320 have the least amount of harm while doing so is a a more 1148 00:58:51,320 --> 00:58:53,480 appropriate question to ask in my opinion. 1149 00:58:53,760 --> 00:58:58,080 Yeah, and I, I mean, I, I think, and I hope it'll, it'll be 1150 00:58:58,080 --> 00:59:00,840 viewed more like caffeine, just like a, a normal stimulant. 1151 00:59:00,840 --> 00:59:04,520 You know, I think molecularly they're like relatively similar. 1152 00:59:05,600 --> 00:59:07,920 And you know, we, we sell caffeine everywhere. 1153 00:59:07,920 --> 00:59:11,280 There's all these, you know, drug stores that sell caffeine 1154 00:59:11,280 --> 00:59:13,080 and liquid form and no one bats an eye. 1155 00:59:13,080 --> 00:59:15,760 So, you know, I think they're, they're not too dissimilar. 1156 00:59:15,760 --> 00:59:18,440 And dissociating nicotine with cigarette smoking. 1157 00:59:19,120 --> 00:59:21,640 Nicotine hits me different, man. Every time I've done one of 1158 00:59:21,640 --> 00:59:23,560 those things, my knees get a little wobbly. 1159 00:59:23,760 --> 00:59:25,440 Yeah. What we we gave you the Swedish 1160 00:59:25,440 --> 00:59:27,240 products and and Marcal. That was sort of, Yeah. 1161 00:59:27,240 --> 00:59:29,200 No, I know. Yeah. 1162 00:59:29,200 --> 00:59:31,360 Well, but it's more, it's more than just you guys. 1163 00:59:31,360 --> 00:59:33,720 I mean, I've tried it a decent amount of times. 1164 00:59:33,720 --> 00:59:36,080 It's just, it's not really my thing, but yeah. 1165 00:59:37,760 --> 00:59:40,120 Yeah. Well, the bar, yeah, that was 1166 00:59:40,120 --> 00:59:43,840 also we were enjoying ourselves after hours, so it was probably 1167 00:59:43,840 --> 00:59:46,680 not the combination was not the smartest thing in the world, but 1168 00:59:46,880 --> 00:59:51,160 yeah, got to, got to let, let go sometimes, I think. 1169 00:59:51,560 --> 00:59:54,720 Yeah, so. I I got a question for you, not 1170 00:59:54,720 --> 01:00:02,960 hate related. So I have I, I don't, I don't 1171 01:00:02,960 --> 01:00:05,000 want to represent that I talk to your dad a lot. 1172 01:00:05,000 --> 01:00:10,920 But when we do chat, I really. Like that I feel as though he's 1173 01:00:10,920 --> 01:00:13,560 pushing me to think longer on businesses. 1174 01:00:14,200 --> 01:00:21,000 And as I've gotten to know Bob better, I like how I don't. 1175 01:00:21,000 --> 01:00:22,280 I don't think it's just marketing. 1176 01:00:22,280 --> 01:00:26,520 I I believe that it is truth that he looks for growth assets 1177 01:00:26,520 --> 01:00:29,320 in that their cyclicals coming out of bottoms. 1178 01:00:29,840 --> 01:00:33,280 And I'm kind of curious how having those two people in your 1179 01:00:33,280 --> 01:00:35,080 life has shaped you as an investor. 1180 01:00:36,120 --> 01:00:39,280 Yeah. Well, for the record, I always 1181 01:00:39,400 --> 01:00:42,520 tell Bob, he's a growth investor and he just so happens to 1182 01:00:42,520 --> 01:00:46,000 traffic and so. He so he stole your thing. 1183 01:00:46,880 --> 01:00:48,680 Because that's. What he started to say about 1184 01:00:48,680 --> 01:00:51,960 himself in the past two years. Well, it's It's unclear who came 1185 01:00:51,960 --> 01:00:54,640 up with the term first, but. OK, well, we'll give it to you. 1186 01:00:54,840 --> 01:00:57,160 And this particular podcast, we'll say it's you. 1187 01:00:57,560 --> 01:01:00,440 Yeah. So that's, yeah, that's a good 1188 01:01:00,440 --> 01:01:02,280 question. So my my dad actually worked for 1189 01:01:02,280 --> 01:01:04,040 Bob. So I think part of, you know, 1190 01:01:04,040 --> 01:01:07,800 his upbringing was influenced by Bob, you know, although we, we 1191 01:01:07,800 --> 01:01:11,240 traffic in different industries, Bob and I, he really, I, I think 1192 01:01:11,240 --> 01:01:13,320 being on calls with him and, and seeing the way he asked 1193 01:01:13,320 --> 01:01:16,880 questions really helps. And, and regardless evaluation 1194 01:01:16,880 --> 01:01:20,040 or what business is in a, he's trying to get to really know 1195 01:01:20,040 --> 01:01:21,680 management and understand the team and all that. 1196 01:01:21,680 --> 01:01:24,320 That's big. And then BI think, you know, how 1197 01:01:24,320 --> 01:01:26,960 the business works, How defensible is their position? 1198 01:01:26,960 --> 01:01:29,720 I, I think one of the things that got him around on HAPE is 1199 01:01:29,720 --> 01:01:32,280 that like, if you want to get in this business, like you can't, 1200 01:01:32,280 --> 01:01:35,400 it's very difficult. So, you know, something that's 1201 01:01:35,400 --> 01:01:37,840 very hard to replicate and really thinking of that. 1202 01:01:37,840 --> 01:01:41,400 And I think understanding all the qualitative aspects, you 1203 01:01:41,400 --> 01:01:44,400 know, we, we don't have a Porter's five horses list, but 1204 01:01:44,400 --> 01:01:46,800 understanding who they're dealing with, the customers, the 1205 01:01:46,800 --> 01:01:51,120 suppliers, the relationships with both power dynamics and 1206 01:01:51,120 --> 01:01:53,680 it's really coming up with a fundamental thesis. 1207 01:01:54,600 --> 01:01:59,640 And then my dad is he, he, he views similar, you know, he, he, 1208 01:01:59,640 --> 01:02:02,040 I guess, right. He, he grew up with Bob and, and 1209 01:02:02,040 --> 01:02:03,240 you know, kind of learned from him. 1210 01:02:03,240 --> 01:02:05,600 So he's a similar approach. I'd agree with you. 1211 01:02:05,600 --> 01:02:09,920 I think he thinks very long term and, and you know, 10/15/20 1212 01:02:09,920 --> 01:02:12,880 years out and in sort of you know, like with this Remitly 1213 01:02:12,880 --> 01:02:15,400 like, you know, kind of looking at remittances and you know, 1214 01:02:15,400 --> 01:02:19,080 digital or online penetration there is so low and looking way, 1215 01:02:19,080 --> 01:02:22,520 way out into the future. And I think they, they both sort 1216 01:02:22,520 --> 01:02:26,200 of helped me kind of really take a long term perspective. 1217 01:02:26,200 --> 01:02:27,720 And I think that that helped a lot. 1218 01:02:27,720 --> 01:02:30,280 And, you know, helps you filter out the, the noise and, and 1219 01:02:30,280 --> 01:02:33,640 day-to-day movements of things and, and really focusing on five 1220 01:02:33,640 --> 01:02:36,080 to 10 years out. So I got our holding period is, 1221 01:02:36,080 --> 01:02:39,000 you know, probably one of the, the, the longest in the, in the 1222 01:02:39,000 --> 01:02:41,400 industry, everybody. So he he holds things forever 1223 01:02:41,400 --> 01:02:43,200 and it takes a very long term approach. 1224 01:02:43,680 --> 01:02:47,200 Yeah, yeah, Your dad on the Uber call, he called that. 1225 01:02:47,200 --> 01:02:49,960 I mean, I don't know exactly when he got loud about it and 1226 01:02:49,960 --> 01:02:53,800 whatever, but that, that was a cyclical long term, sort of like 1227 01:02:53,800 --> 01:02:56,640 winner and a sickler or a cyclical downturn. 1228 01:02:56,640 --> 01:02:58,680 And that was, that was very smart. 1229 01:02:58,680 --> 01:03:01,680 I I think he pitched that at Markel in like 21 or 22, 1230 01:03:01,680 --> 01:03:07,600 probably 22, but yeah, 22. But yeah, I there, there are 1231 01:03:07,600 --> 01:03:09,800 two. I, I love, I don't know, I love 1232 01:03:09,800 --> 01:03:14,560 listening to both of them talk because I think it's interesting 1233 01:03:14,560 --> 01:03:18,640 when you get like, like I, I feel like the pushback from the 1234 01:03:18,640 --> 01:03:22,440 value investor community at large on something like hate 1235 01:03:22,960 --> 01:03:27,800 would be how can you spend that on a like on a distribution 1236 01:03:27,800 --> 01:03:30,320 business? Don't you understand the 1237 01:03:30,320 --> 01:03:32,040 valuation matters, yadda, yadda, yadda. 1238 01:03:32,600 --> 01:03:37,120 But the ability to believe in the growth and to see 5, three 1239 01:03:37,120 --> 01:03:42,080 to five years out. I mean, if, if it is true that 1240 01:03:42,080 --> 01:03:48,800 the and market grows at 3025 to 30% and if it is true that 1241 01:03:48,800 --> 01:03:53,400 margins have uplift here, it's not too hard to see that this is 1242 01:03:53,400 --> 01:03:57,040 not an expensive stock, right? Yeah. 1243 01:03:57,040 --> 01:03:59,760 And they should, you know, in theory grow in excess of of the 1244 01:03:59,760 --> 01:04:01,560 market and the in the growth market. 1245 01:04:02,240 --> 01:04:03,840 And that's. Something we talked about have 1246 01:04:03,840 --> 01:04:07,200 they been in the past? Because that's. 1247 01:04:07,760 --> 01:04:10,760 That was hard for me to verify and I had and I had written you, 1248 01:04:10,760 --> 01:04:13,320 so maybe do you mind talking about that a little bit? 1249 01:04:13,760 --> 01:04:17,480 Yeah, they have. So I, I told you in this last 1250 01:04:17,480 --> 01:04:20,880 quarter, right, they had that, you know, they had the tough 1251 01:04:20,880 --> 01:04:23,400 comparables, right, because they lost the the Zen business in a 1252 01:04:23,400 --> 01:04:26,040 bunch of those states. So like reported growth in the 1253 01:04:26,040 --> 01:04:30,440 growth markets saw 26% decrease, but can't the like for like 1254 01:04:30,440 --> 01:04:35,840 business not including US Zen and States and US tobacco 1255 01:04:35,840 --> 01:04:39,160 products that growth markets business so that the rest of the 1256 01:04:39,160 --> 01:04:41,960 US business, UK, Germany, Austria, Switzerland grew like 1257 01:04:41,960 --> 01:04:44,920 49%. And that's been, you know, 1258 01:04:44,920 --> 01:04:47,440 growing like that for a while. I mean, when I first found it, 1259 01:04:47,440 --> 01:04:50,880 the growth markets business grew I think 70% year on year, maybe 1260 01:04:50,880 --> 01:04:54,200 in 2022 or 2023. The core markets has always been 1261 01:04:54,200 --> 01:04:56,640 slower because the business has just been, you know, around in 1262 01:04:56,640 --> 01:04:59,720 Scandinavia for a while. The growth markets has slowed. 1263 01:04:59,720 --> 01:05:04,040 So it's gone from like 60 to 70%, you know, to high 40s, kind 1264 01:05:04,040 --> 01:05:07,280 of low 50s, but you know, they have they're they're growing 1265 01:05:07,280 --> 01:05:09,840 with the the category and that in excess of that is reliance 1266 01:05:09,840 --> 01:05:12,960 thataly take share. There you have it. 1267 01:05:13,520 --> 01:05:16,440 Yeah, because I was trying to, I was trying to verify that just 1268 01:05:16,440 --> 01:05:18,880 like based on the data and I was like, I don't know. 1269 01:05:18,880 --> 01:05:21,360 So that's that's the answer behind the data. 1270 01:05:21,920 --> 01:05:23,200 Yeah. But I mean they're, they're 1271 01:05:23,200 --> 01:05:24,680 getting huge surgeon improvement. 1272 01:05:24,680 --> 01:05:28,680 So I mean, even though you know, revenue kind of total was down I 1273 01:05:28,680 --> 01:05:34,560 think 2.3% last quarter, I think EBITDA grew 20 something 1274 01:05:34,560 --> 01:05:36,560 percent. They're really getting the 1275 01:05:36,560 --> 01:05:38,800 benefits of scale on their, in their core markets. 1276 01:05:38,960 --> 01:05:41,720 The median insights piece helps and then a better product mix 1277 01:05:41,720 --> 01:05:43,920 because they make a higher margin on on white pouches for 1278 01:05:43,920 --> 01:05:47,320 Succeed tobacco products. And then I think there's a 500% 1279 01:05:47,320 --> 01:05:49,760 uplift in gross margin year over year as well. 1280 01:05:49,880 --> 01:05:54,600 You know, looking at Q225 versus Q224, part of that is USN going 1281 01:05:54,600 --> 01:05:57,040 away where they, you know, they made a much lower product margin 1282 01:05:57,040 --> 01:05:59,320 on that. But I mean they're really 1283 01:05:59,320 --> 01:06:02,520 stepping out margin wise. And if you can, you know, double 1284 01:06:02,520 --> 01:06:05,360 or triple the revenue base in a couple of years in addition to 1285 01:06:05,440 --> 01:06:10,400 the margin uplift, you know it'll, it'll, it'll likely turn 1286 01:06:10,400 --> 01:06:13,720 out to be very cheap today. How closely do you watch asset 1287 01:06:13,720 --> 01:06:17,600 turns? Not, not too closely. 1288 01:06:18,720 --> 01:06:21,920 They turn, you know, it's a, it's a, it's a very good 1289 01:06:21,920 --> 01:06:23,160 business. So I think they, they turn the 1290 01:06:23,160 --> 01:06:25,600 warehouse fully, you know, every two to three weeks. 1291 01:06:26,120 --> 01:06:29,520 So I think they're another inventory turn is like 1213 1292 01:06:29,520 --> 01:06:33,280 times. Yeah, that's wild. 1293 01:06:33,600 --> 01:06:35,920 Yeah. So there's, there's not, you 1294 01:06:35,920 --> 01:06:38,760 know, sometimes they'll preemptively bulk up on, on 1295 01:06:38,760 --> 01:06:42,600 inventory if there's expected inbound price increases. 1296 01:06:44,320 --> 01:06:47,560 But beyond that, right, they're pretty consistent in buying, you 1297 01:06:47,560 --> 01:06:50,120 know, their, their products kind of every two to three weeks. 1298 01:06:51,360 --> 01:06:55,560 The the business came about as a series of mergers, right? 1299 01:06:55,640 --> 01:06:59,360 Like it's a roll up. Yeah, so the IT was, it was 1300 01:06:59,360 --> 01:07:02,640 started in in 2008 like out of a garage in Stockholm. 1301 01:07:03,920 --> 01:07:08,880 You know, in in 2017, the CEO, current CEO join 2018, they 1302 01:07:08,880 --> 01:07:12,560 bought the biggest player in Norway. 2019 is the big merger 1303 01:07:12,560 --> 01:07:14,120 with his company called the Northerner. 1304 01:07:14,120 --> 01:07:16,680 So they own the two big US websites. 1305 01:07:17,840 --> 01:07:20,840 And then they had some legacy sites in Europe. 1306 01:07:21,400 --> 01:07:25,200 In 2021, they bought the number two and three players in Sweden. 1307 01:07:26,000 --> 01:07:29,440 And so you know that it's a culmination of, you know, kind. 1308 01:07:29,440 --> 01:07:31,600 Of and that's why they went public, right, was to get that. 1309 01:07:32,080 --> 01:07:35,320 Part of the financing, yeah, Yeah. 1310 01:07:36,280 --> 01:07:38,680 And I do think that it could be part of the strategy at some 1311 01:07:38,680 --> 01:07:42,200 point, like let's say that you get to a more more mature state. 1312 01:07:42,200 --> 01:07:44,400 There are tons of websites that have like these little niche 1313 01:07:44,400 --> 01:07:46,640 positions. Maybe it's a vaping website in 1314 01:07:46,640 --> 01:07:50,480 Germany or the UK, you know, they could bolt it on and, you 1315 01:07:50,480 --> 01:07:54,280 know, get rid of good employees and overlay distribution and, 1316 01:07:54,280 --> 01:07:57,840 you know, double earnings power. So I do think that's a, you 1317 01:07:57,840 --> 01:08:00,000 know, potential part of the strategy at one point. 1318 01:08:01,280 --> 01:08:06,000 I was also intrigued by the the slide in the capital markets 1319 01:08:06,000 --> 01:08:08,760 day. I'd I'd think I'm probably over 1320 01:08:08,760 --> 01:08:11,840 indexing on AI stuff like the whole world is right now. 1321 01:08:11,840 --> 01:08:14,240 But I thought it was interesting how they seem to have a chat bot 1322 01:08:14,240 --> 01:08:22,399 that like creates the copy for numerous websites via AI and 1323 01:08:22,399 --> 01:08:26,120 what not, which you would think presumably like that's the type 1324 01:08:26,120 --> 01:08:32,319 of thing that could help is sort of solidify an advantage, right? 1325 01:08:32,319 --> 01:08:35,120 I mean, I don't think it's like some really, really hard thing 1326 01:08:35,120 --> 01:08:39,160 to replicate, but if you have some proprietary data combined 1327 01:08:39,160 --> 01:08:42,319 with that, it's like solid. Yeah. 1328 01:08:42,319 --> 01:08:45,120 And I know they're, they're really trying to spend a lot of 1329 01:08:45,120 --> 01:08:49,439 time and effort on optimizing everything and, you know, using 1330 01:08:49,479 --> 01:08:52,520 AI for their, you know, website landing pages. 1331 01:08:52,520 --> 01:08:54,840 And you know, now they're, they're going to use AI to have 1332 01:08:54,840 --> 01:08:57,840 tailored recommendations per individual customer. 1333 01:08:57,840 --> 01:09:00,279 Because like if you, if you log in, they have all this data on 1334 01:09:00,279 --> 01:09:03,160 you, they know who you are. And so they're getting into the 1335 01:09:03,160 --> 01:09:04,880 advance with that. And then I know they're doing 1336 01:09:04,880 --> 01:09:06,560 that with the media and insights as well. 1337 01:09:09,240 --> 01:09:12,120 Oops they ever need to re rate. They can be hape dot AI and then 1338 01:09:12,120 --> 01:09:15,920 do like an etherium treasury strategy and then the moon goes 1339 01:09:15,920 --> 01:09:19,760 straight to the moon. Yeah, yeah, I would be upset at 1340 01:09:19,760 --> 01:09:21,760 that. That's going to be It's an 1341 01:09:21,760 --> 01:09:24,640 interesting world we live in, my friend, An interesting world. 1342 01:09:24,880 --> 01:09:30,200 Yeah, I do think it's an AI beneficiary with, you know, if 1343 01:09:30,200 --> 01:09:33,560 everything goes to LLMS, you know that they they think it'll 1344 01:09:33,560 --> 01:09:36,319 be a winner takes all model and just the largest player. 1345 01:09:36,319 --> 01:09:38,680 You know, they'll yeah, maybe it'll spit out two to three 1346 01:09:38,680 --> 01:09:41,560 websites and, you know, maybe all three are hey for two to 1347 01:09:41,560 --> 01:09:44,160 three of them. So they think they're as well 1348 01:09:44,319 --> 01:09:46,080 positioned. Some people view it as a risk, 1349 01:09:46,080 --> 01:09:48,160 but I I think they stand to benefit. 1350 01:09:49,399 --> 01:09:53,439 Yeah. Well, you would think that to 1351 01:09:53,439 --> 01:09:58,840 the extent that it gets harder to discover things, the current 1352 01:09:59,680 --> 01:10:03,280 winners may may have their, you know, become more entrenched, 1353 01:10:03,280 --> 01:10:06,600 right? Yeah, yes, that's there. 1354 01:10:06,600 --> 01:10:09,800 We can throw it in an AI like winners factor. 1355 01:10:10,200 --> 01:10:11,840 There you go. I deserves to be there. 1356 01:10:12,160 --> 01:10:13,360 There you go. That's huge. 1357 01:10:13,360 --> 01:10:16,200 That's sort of like, yeah, that's two turns right there. 1358 01:10:16,520 --> 01:10:20,240 Yeah, exactly. All right, well, thank you very 1359 01:10:20,240 --> 01:10:23,400 much for popping by and and discussing the idea. 1360 01:10:23,400 --> 01:10:26,920 I appreciate it. Not too many single stock ideas 1361 01:10:26,920 --> 01:10:31,080 on this pod, but this one I. No, thank you so much for having 1362 01:10:31,080 --> 01:10:32,840 me. It's it's been really fun. 1363 01:10:32,840 --> 01:10:36,200 And you know, I'd implore everyone to try really 1364 01:10:36,200 --> 01:10:40,080 understand why, why Hape's position is very defensible and 1365 01:10:40,200 --> 01:10:42,000 you know why the market shares are so high. 1366 01:10:42,600 --> 01:10:44,400 And I will say, I think management is great. 1367 01:10:44,400 --> 01:10:46,360 You know, they own stock, everyone has history in the 1368 01:10:46,360 --> 01:10:49,520 pouch base and I think they, this really got us comfortable 1369 01:10:50,040 --> 01:10:52,400 owning HAPE as well. So, you know, if you if you can 1370 01:10:52,400 --> 01:10:54,320 talk to them, I definitely recommend that too. 1371 01:10:54,920 --> 01:10:57,320 And if you can kill the idea, reach out to Spencer, tell him 1372 01:10:57,320 --> 01:10:57,840 why he's. Wrong. 1373 01:10:58,120 --> 01:11:00,240 Please do, yeah. Yeah, there you go. 1374 01:11:00,800 --> 01:11:02,080 All right, man. Well, take care of yourself. 1375 01:11:02,080 --> 01:11:04,120 Thanks for stopping by. Thanks so much, I owe you a 1376 01:11:04,120 --> 01:11:08,520 pouch next time I see you. There, all right, have a good 1377 01:11:08,520 --> 01:11:09,320 one. See you. 1378 01:11:50,040 --> 01:12:19,800 None. The.