00:00100% true. Yes. Consumer over time has just decided to, you know, take convenience and kind of take cost effectiveness over natural trees.
00:10Again, we at National Tree, we support consumers using all trees, whether it be natural, artificial.
00:16But, you know, the consumer has voted and, you know, we continue to see a kind of heavy uptick in the artificial market.
00:22Is that share growing, Chris? Because there has been this conversation.
00:25It feels like, you know, every day I read some article that's like, oh, your spatula has forever plastics in it and it's killing you.
00:32And there does seem to be this real kind of turning away from some of the concerns about the plastification.
00:37That's definitely not a word, but concerns about this in this economy.
00:40How has that kind of changed your business and how people view this as a sustainable option versus just having more plastics in the home?
00:49Yeah, I think, look, you know, when I first got this job, a couple of people came to me and said,
00:54we need to attack the natural tree business because, you know, it's it's unsustainable, et cetera, et cetera.
00:59I'm like, well, you know, the business in general is is not the world's most sustainable business.
01:04Right. Because our trees are made from PVC, from polyethylene.
01:07And so, you know, again, our trees last 10 plus years.
01:12If you treat them well, you store them well in things.
01:15And so, you know, we think that, again, our trees are a good way of helping the environment from a from a standpoint of not cutting down trees.
01:24But also it's not kind of our main message.
01:26We are looking at different materials, you know, recycled PVC, recycled plastic bottles.
01:31So we have multiple items now where we're looking into recycled materials.
01:35And so that is something that we continue to do to to push forward and to ensure that we give all consumers what they're looking for.
01:41You are seeking an exemption or an exclusion on tariffs as the leader of the Christmas trade group.
01:47We teased it. You've got 10 members, over a thousand employees in your organization bringing in a billion dollars of revenue each year.
01:54How's that going?
01:56We've had great conversations.
01:58We've had great conversations with Senate Finance Committee members.
02:01We've had great conversations with U.S. trade.
02:04We've had great conversations with some of the faith based officers of the White House.
02:07So, look, I think the bigger picture is, you know, when the tariffs went into play.
02:12Again, tariffs can be a good tool to, you know, from a defense perspective, from IP perspective.
02:18But I don't think anyone in the administration or anyone in government was planning on increasing the cost of Christmas.
02:23Right. I mean, that's just something that wasn't on people's radar.
02:26So, you know, we've got caught up in that.
02:27I think, as you've seen over the last few weeks, months, there have been items where tariffs are being rolled back.
02:33So whether it be coffee, bananas, mangoes, typically if it's not grown in the U.S., I think we're starting to see rollbacks on these tariffs.
02:41And so what we're, you know, what we had the conversation with U.S. trade a few weeks ago is, look, we can't get the raw materials necessary to make our trees in this country.
02:51And so, you know, until that happens, until that's readily available, you know, we believe we should be treated the same way as coffee, bananas, et cetera, et cetera.
03:00So that's really kind of the angle we're coming from.
03:03Again, we've had great open conversations, and we hope those conversations and dialogue will continue.
03:08You say the administration didn't want to increase the cost of tariffs, but Trump early on did say maybe you just buy one doll for Christmas instead of two.
03:14Chris, how have tariffs affected you?
03:17How much has it increased costs?
03:19How much have you had to rethink your supply chain?
03:23Yeah, so a couple of things.
03:24So, you know, at the beginning of this year, you know, it was all about supply.
03:27It was all about supply.
03:28Where do we get our product from?
03:29How much is that product going to cost?
03:31And can we bring it in at time?
03:33And, you know, the back half of the year is all about demand.
03:35I'll get into that in a minute.
03:36But, you know, the tariffs had a massive impact.
03:3993% or 95% of this industry is made in China.
03:44And so when the industry, when the, you know, Chinese tariffs came into play at 56%, obviously that was a huge shock.
03:51When they went into 145%, you know, all factories just stopped.
03:55There was no more factory production for about 30 days.
03:59As a company, National Tree had moved our production, or at least a good portion of it, into other countries just to diversify our production.
04:07You know, we like to be diverse.
04:08We like to have a flexible supply chain.
04:10We think we have one of the best diverse supply chains in the world.
04:12But many of the other members in the Christmas trade group were stuck in China.
04:17And so a lot of people started to try and get out of China very quickly, which then slowed down supply chain of oil because a lot of the oil materials still are sourced out of China.
04:26So a long way of saying there was a lot of chaos at the beginning from a supply chain perspective.
04:31After Liberation Day tariffs kind of rolled back a little bit and we got to more sustainable levels of 10% at some countries, 30% in China, you know, production ramped up back up again.
04:42And, you know, production started up and started to ship products across.
04:46But there was definitely a gap.
04:47So we believed there was going to be a supply shortage, not to mention, obviously, the cost increases.
04:53So, you know, we as a company at the Christmas trade group, you know, prices are going up anywhere between 10% and, you know, 10% and 15%.
05:00And, again, that is to kind of cover some of these cost increases.
05:05You know, we've had some of our manufacturing partners try and eat some of that.
05:09You know, we've tried to eat some of that.
05:10And then, obviously, we've passed a little bit on to the consumer.
05:13So that's what's happened.
05:15And, look, right now I can tell you many, many members of the Christmas trade group, many, many people who make things in China, as I'm sure you guys are well aware, are looking to get out of China, looking to diversify into other countries.
05:29You know, we're still on that road.
05:31You know, we believe we could be 100% or we will believe we will be 100% out of China in 26 if we choose to be.
05:39Chris, I want to ask about the demand side for your business.
05:42And you do not just Christmas trees but Halloween and Easter and Valentine's Day.
05:48And I don't know if it's because now I'm having to do it myself, but I've noticed a hell of a lot more homes decorated for Halloween.
05:55And these things are not cheap, right?
05:58Buying a giant zombie or whatever for your front yard is a significant outlay.
06:03Has demand just in general exploded for these kinds of seasonal home decorations?
06:10Yeah, I think you've got a couple of things.
06:11It's a great question.
06:12So Halloween in particular is something now that definitely more and more people are putting money into and decorating their home.
06:18So you're just seeing a general increase in the number of families that are decorating their home.
06:23You know, from an other, from a Christmas perspective, you know, people, it's the show me generation.
06:29Whether it be on Instagram, Facebook, TikTok, et cetera, people now love showing off their home decor and love showing off their homes.
06:36And so decorating more is a big part of that.
06:38Having family and friends over post-COVID is a big part of that.
06:41But, you know, I can tell you this year, you know, Christmas trees, reeds, garlands are discretionary items.
06:47And, you know, we've definitely seen quite a lot of softness.
06:50We've seen some of our major accounts see significant softness across the board here.
06:55So, you know, the consumer's just not spending on discretionary right now.
06:58You know, they're spending it on eggs.
06:59They're spending it on other household essentials.
07:03You know, I think they're spending money on themselves, whether it be for gifts or for gifts for themselves.
07:07But, you know, right now we're not seeing them spending on discretionary items such as such as decor.
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