Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision and global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs and harness the engine of capitalism right here, right now at the NYSE and at ICE Exchanges and clearing houses around the world. And now welcome Inside the ICE House. Here's your host, Josh King, of Intercontinental Exchange.
Josh King:
A little more than 150 years ago, the Great Chicago Fire ravaged the Windy City. The story goes that in the barn of Catherine and Patrick O'Leary, a cow kicked over a lamp that started the blaze that would destroy tens of thousands of buildings and killing 300 people and causing about 200 million in damage, which is about four billion in today's dollars. The legend behind the fire may be apocryphal, but the damage and havoc it wrought were very real. Chicago did more than just rebuild though. It reinvented itself, rising from the ashes like a Phoenix with massive economic development projects, huge population growth and architects laying the groundwork for some of the world's first skyscrapers. The city doubled in size in nine years and soon was a major American metropolis. The story of the fire is tragic, but the story of Chicago's rebuild is one of hope. Architects and engineers came together nearly immediately to reinvent their home and make it less prone to risk.
Josh King:
Reconstruction, re-imagination and redesign, however, don't need to be a part of the aftermath of a catastrophic event. As life circumstances change, you need more room and more features and upgrade to the fixtures, cabinetry, ambiance and livability of a place. There are a few things that are more important than your home. It's where you house your family, host your friends, a source of pride. Fortune Brands Home & Security is in the business of making the things that make our homes beautiful, operational and safe. 25 miles outside out of Chicago sits Deerfield, Illinois. This suburb between Evanston and Kenosha on the road to Milwaukee is home to Fortune Brands, that's NYSE ticker symbol, FBHS, a company built on innovative products for kitchen, bathrooms, entry ways and outdoor living spaces. At the helm of the firm is Nicholas Fink, CEO of Fortune Brands Home & Security.
Josh King:
With the market leading positions across its business segments, the company's 27,500 associates work with a purpose to fulfill the dreams of home. Our conversation with Nick Fink is coming up right after this.
Speaker 3:
Whether it's markets, exchanges or networks, connection makes everything possible. The connection between data and technology, innovation and expertise, and most of all between people and opportunity. For over 20 years, ICE has transformed markets, products and processes to make things work better, faster, smarter from modernizing energy and commodity trading to revolutionizing the bond markets. Whether it's the world's largest stock exchange or the dream of home ownership, we do more than see the big picture. We create it. You may not know our name, but we bet you know our network. ICE, make the connection.
Josh King:
Our guest today, Nicholas Fink, is CEO of Fortune Brands Home & Security, a Fortune 500 company and a leader in the home products industry. Previously served as president and chief operating officer until his promotion to CEO in January of 2020. Nick also oversaw the Global Plumbing Group and grew the business from a single brand to its highest margin business. A wild cat from Northwestern, Nick joined the company in 2015 and previously worked at Beam Global Spirits & Wine and as a partner at Bell, Boyd & Lloyd. Welcome, Nick, Inside the ICE House.
Nicholas Fink:
Thanks, Josh. Pleasure to be here.
Josh King:
So Nick, I've been a fan of Fortune Brands for a long time through my old friendship with Clarkson Hein, mostly for that spirit's business that really hasn't been a part of it for 10 years. My bar cabinet is filled with makers mark and the small batch family of Bookers, Basil Hayden & Knob Creek. You got to focus on your core business now, but do you miss that cache?
Nicholas Fink:
I'd say there's an age and stage. And so I started at what we call old Fortune Brands back in '06 on the spirit side of the business, and was really part of integrating very large acquisition we'd done at the time, which brought makers and some of those other brands into the fold. It was a great time to be in booze and it was a lot of fun, but I would say being on the housing side of the business now couldn't be more exciting. Home is kind of where it happens. And to dive into that stage of my life, four kids, we interact around our house, we live around our house, our friends have built homes, redecorated homes, it's just a very cool space to be in.
Josh King:
And we're going to get so deep into the weeds on that, Nick, in just a second. But before we dive deep into the component parts of a new or remodeled home, let's take a look at a little bit of some of the headlines that are driving the industry. I've done some remodeling work of my own upstate after a frost dam did a number on my kitchen. My builder, Jim Miltenberger, told me where lumber prices are and I winced. Now prices have come down a bit from their peak, but what's the state of play in raw materials right now?
Nicholas Fink:
Look, I mean, we've gone through a really tough inflationary period really since COVID struck. February, March of last year, it actually struck our business in China a little bit before that. And for a very short time, I think like most businesses, things kind of slowed down or seized up. But very early on, we were looking at credit card data going, there's something different here. We saw categories down 20%, 40%, some down 105%, right? Which meant those companies were sending out more money than they were taking in literally. And we saw housing flat and then start to tick up and start to tick up and start to tick up. It was the only category across every consumer category. And so what you experienced with the lumber was simply as people shut down to stave off COVID and yet consumers really leaned into their homes at the same time, it caused a huge strain on the supply chain. We're still working through it. We'll be working through it for a while.
Josh King:
You mentioned your business in China, Nick. We've seen these news reports that show the traffic jam of container ships outside the port of LA that make rush hour over O'Hare look like a drive in the park. You talked about supply chain and your investor presentation back in April. Do we have enough dock workers and truck drivers to get your product to market?
Nicholas Fink:
It's a challenge. And I think any business leader you have on your show right now would tell you, it's an unbelievable challenge. Containers are short, boats are short, stuff's getting rerouted around the world. And to your point, even if you had more containers and boats, do you have enough workers to get it through the ports and there's a ton of congestion? And so it's a challenge. Now at Fortune Brands, we have something we call the Fortune Brands Advantage, which is our business system across all of our business units. It's the few things we choose to really excel at and those are complexity reduction, global supply chain management and category management. And I'd say, thank goodness global supply chain management is one because it's allowed us to outperform. And so while we've been challenged like everyone else, we've been able to outperform, we've been able to get more containers on more boats at better pricing, still hugely inflationary versus where it was, but because we've really dedicated ourselves to building out a capability to manage that and so it's helped.
Nicholas Fink:
It continues to be a challenge and I think first and foremost, our consumers and our customers who need product, that is our job and we are serious about our purpose of fulfilling dreams of home. And so if we can't get it to you, you can't finish your home. And so we press on it. It will get better, but it's no doubt been a tough journey.
Josh King:
Let's sort of take a step back in time, Nick. I keyed into Chicago in my intro, this key city of the Western hemisphere, but your career, listening to your accent, strangely began in Europe with an undergraduate degree focused on law and economics at one of the premier foreign affairs schools in Paris. What brought you there?
Nicholas Fink:
Well, I'm a bit of a mut. So I was originally born in South Africa, lived there until my early teens then my family left. I grew up in Paris middle school, high school, two years of university, one year in DC at Georgetown, and then really moved to Chicago for grad school, which was Northwestern Law. And so I've lived a few places, hence the accent is almost incomprehensible so thank you for noting it. Of all the places I've lived, including since then Canada, Australia and some time in Cleveland, Chicago is actually the place I've lived the longest, funnily enough. I did love your intro. I was thinking about what my O'Leary cow is that kicked off rebirth in my life and my career. But it is a great city, fortunate to be here, fortunate to have companies like Fortune Brands and the community we have around it and most of all, the talent that we have access to in a place like Chicago.
Josh King:
For guys so focused on the ins and outs of building, maintaining, rebuilding, remodeling a home, Nick, strangely, your background is in law. You went from Paris to Northwestern School of Law, got your JD focusing on banking, corporate finance, securities law. How did the work and training of becoming a lawyer shape how you look at problems today?
Nicholas Fink:
It was hugely helpful. I mean, I think some of my strengths are, I'm hopefully a good leader, hopefully a good strategic thinker. I think what the law gave me was really first thing, understanding of the fundamentals of working in business. Easy enough to apply that, although it probably drives my law department of crazy when I have an opinion. But more importantly, it does lend one a discipline and an analytical framework for pulling things apart. And I think that was a perfect compliment to the way I was otherwise disposed, which was big picture thinking coupled with what they really put you through, three years of lawful and then I practiced for about another 10 years. It kind of forces a discipline and forces a way of just breaking down problems and then putting them back together and finding a path forward. And so I think it was very complimentary. Wouldn't change it for anything in the world.
Josh King:
We mentioned Deerfield in the introduction where Fortune has its headquarters, the small town just north of Chicago, home to about 20,000 people. The motto of the town, Nick, is the community that lives and works together, which seems to have permeated into the culture of your company. How did you find Fortune Brands originally as a place to work and what attracted you to it?
Nicholas Fink:
It's interesting you mentioned Deerfield. I mean, it is a fascinating community and it is kind live and work. It's a residential community and yet across the street, there is Caterpillar down the street, Discovery, you got Baxter, you got Walgreens. So just a slew of a Fortune 500, S&P 500 up and down the street here. And part of it is the proximity to great schools, a great city and a great infrastructure. That is a lot of the basis. I was working downtown Chicago, got this role kind of mid 2000s up at Fortune Brands and started to discover the company. And I'll tell you what I found exceptional and continues to be true today is obviously, it's a pretty amazing place, I'm biased, but it's also a very humble place. It's sort of very grounded in its Midwestern roots. Now, we don't spend a lot of time crying about what we do. We really kind of think forward about what the next problem is that's coming at us or how we could have done better about something and just get on with it.
Nicholas Fink:
And so you mentioned 27 and a half thousand employees. We only have 130 at corporate, which means we run very lean. So we roll up our sleeves, we do the work and that's been true since the day I joined. And so you ask the question, well, what did I learn? I came through the door, on day one I had impact in this business and that was over 15 years ago. And so because of the way we're structured, you get the combination of being able to have impact, but really having resources of a pretty large company. And I think that's fairly unique. And so we've continued that culture and it's kind of very deep in our ethos. And so we look for people that think big and really prioritize and work on the things that matter most, but aren't afraid to kind of get in there and do it themselves with their teams and kind of we all lead in it together.
Josh King:
I mean, talking about rolling up your sleeves and doing the work, Nick, back in September 2019, Fortune Brands announced that you were going to succeed Christopher Klein as CEO after this multi-year succession plan. I want to focus a little bit on that trajectory. You came into the company as president of the newly formed Global Plumbing Group. What were your initial goals there and how did you go about building one of the strongest segments of the firm? Let's geek out for a minute on the glories of Moen faucet.
Nicholas Fink:
It's hard not to so don't tempt me because I will get really excited about Moen faucet. It's actually a pretty special thing. Look, beyond law, I mean, my time really was around consumer brands, right? I'd spent a decade at Beam. We built that company to now be the number three Global Spirits firm and as Beam Suntory. And spirits is about the brand and it's about the consumer and it's about the occasion. And so that was really the mindset that I brought in as I came into this business and went into the Moen business, very vulnerable business. Market leader, been around for, I think it was 75 years at the time, 80 years now, based in innovation, but I kind of took a step back from that category. And I looked at it and in my feeling, it could really go one of a couple ways. It could either become a truly branded relevant category driven by innovation and phenomenal marketing or it could risk being commoditized, and that's not an option for us.
Nicholas Fink:
I mean, we are first and foremost, a branded consumer company, right? We happen to be involved in products, but it's really about the consumer and it's about having brands. And so looking at that, the opportunity was clear to me. It was really to take that business, which had an unbelievable legacy brand position and an unbelievable route to my and completely rejuvenate it. So we actually formed kind of an Uber company around it, which we referred to as a Global Plumbing Group, did a series of acquisitions in the luxury space and so bought five beautiful luxury brands and stitched together what we call the house of roll, which is kind of the highest and most curated thing you can do with a bathroom or some of your kitchen. And brought those together and really moved from a business that was a branded house to a house of brands. Infused it with marketing, hired innovation people, invested in the brand, invested in the team and the talent and took it on this journey.
Nicholas Fink:
And so if you start to look around the way Moen was five years ago, I'd say very story, but not that distinctive to where it is today and what that team has done and continued to do in the time since I've been running the business, it's pretty phenomenal. It really hits on... We do a lot of consumer research. I mean, it's love for innovation, it's love for style, it's love for design, it's modern and it's exciting. And then our luxury brands, the house world brands really stand for something too. And so it's pretty phenomenal stuff. And to me, it's a bit of a case study between you could sort of just rest on the laurels and let the category be commoditized or you could really kind of double down and invest, try to do something different. And now we're really on the cusp of taking everything I just talked about and moving it into the next year, which will be to digitize water, and that's going to be a whole new chapter in the story. So very exciting history, but even more excited about what's ahead.
Josh King:
I did look at the investor presentation and I saw that picture of the app in the iPhone in someone's hands and it was all about water management. Tell us a little bit about that.
Nicholas Fink:
The idea is really whole home water management, right? And so if you think about water, for a long time, the way it's come into your house and the way it's been used has been the same, right? Product designs have changed, finishes changes, but really the function of plumbing in the house has not changed and that is about to be radically different. A number of years ago, we launched the digital shower. We were the first to really digitize the valve. I mean, people had digital controls, but we digitized the control of the water, the valve that went on the wall, and that really set the platform and groundwork for what we've done since and we've now evolved that into faucets you can speak to. But really what you're referring to, investor presentation is our Flo by Moen product, which is a product that sits on your water main.
Nicholas Fink:
It uses algorithmic learning to learn about the way water flows through your house and will either tell you if you have a drip leak, which is going to conserve an enormous amount of water for homes in the future, or in the event of a catastrophic leak will actually shut your water main off. And the thing about catastrophic water leaks, there are more dollars spent on insurance claims for water damage than there are for fire and burglary combined. Now, do you have a fire alarm? Yes. Do you have a burglary alarm? Yes. Do you have a water alarm? No. So it's not too far ahead, right? To get to where this is going when people are going to really be able to avoid massive damage, as well as there's a big environmental play there by controlling the water experience in their house.
Josh King:
So Nick, I go to Lowe's and Home Depot a lot. And like everyone else, you walk into one of them, you go down through the aisles. You don't think about Fortune Brands when you're in those big box stores. Tell us about some of the other names that listeners are going to instantly recognize when they think about a sink, a deck, a door or a padlock.
Nicholas Fink:
Sure. So Fortune Brands is not a consumer brand. Fortune Brands is an investor brand, it's an employee brand, it's an ESG brand increasingly, but we have no intention of building it as a consumer brand. We build the brand that sit within our house. And so you mentioned Moen, number one brand in plumbing. We have Monster Lock, every middle school kid in America touches a Monster Lock padlock, has a huge share of the portable security. SentrySafe, the leader in safes. Recently bought a company in 2018 called Fiberon. Fiberon is a big player in the composite decking space. So you've heard of Trex. AZEK is also in that space. We're going to build the Fiberon brand to be a clear leader in the composite decking space. We have a number of brands inside of our cabinets business. Those I'd say to consumers, I mean, they're brands like Omega that have consumer recognition, but mostly they're well known to the trade. There's a lot of reliability, service quality that's built into a whole suite of brands over there.
Nicholas Fink:
Therma-Tru doors, the leader in exterior doors. We recently bought a company called LARSON, also the leader in screen and storm doors, so very complimentary business there. And I could go on and on. I mean, there's a big, big stable of consumer brands. I would say, as a rule, we tend to build on market leading positions. It's not to say that challenger businesses aren't great. I worked in one. I had a ton of fun, but what we do is really build market leading positions. So most of the brands I mentioned are really the leaders in their space, and if they're not, they will be. And so that's really how we think about it. And it really starts with understanding the consumer, working back from there.
Josh King:
Talking about using your phrase, well known to the trade, often the contractor shows up in their truck, bring in the materials they're installing to the job site, and the homeowner might not think a lot about what is in that box. What differentiates when you and your management team think about either the quality fit, finish, production, approach, what differentiates the Fortune Brands products from other companies whose products are going to end up in our home for decades?
Nicholas Fink:
So we think equally, and we may talk about innovation, we think equally of the consumer and the contractor, and we innovate about 50/50 for both. And so our aim is to obviously create more and more value for consumers, but it's to make the contractor's life easier. And so we spend a lot of time thinking about the pro. They are the gatekeeper to the business. I mean, no consumer's going to argue if their pro says, do not put this in your house. They're not going to argue. And so we have very, very strong ties, whether it be with plumbers or kitchen installers or people in the door side of the business, and we constantly are seeking to make their lives easier. Usually if you look at demographics, population, number of people available, if we can save time for them, that's a huge value. And so by investing time there, I think we've been able to maintain our position. It's also service and quality, right?
Nicholas Fink:
They know they can rely on us. We're always at the end of a phone line. We have customer service centers. They're well staffed. We'll get you what you need if it's missing. And that's decades and decades of building that kind of position and that sort of reputation.
Josh King:
So switching gears, I mean, there's been no shortage of stories about the red hot housing market over the past 18 months. Wall Street Journal recently reported that the pace of home sales is exceeding where it was even before the pandemic. That's a lot of facelifting needed when the for sale sign comes down on these properties. What trends have you seen in the housing market and how's it impacted your approach and your work with both those contractors you're talking about and also the end homeowners?
Nicholas Fink:
Well, I'll just start with what's going on. We can talk a little bit about the trends. If you think about what's going on, I mean, it's almost like a perfect storm in the making. You have a massive demographic called millennials, right? Which delayed home purchasing almost 10 years vis-a-vis Gen X, right? And so this big population group come through, but eventually as people get married, have kids, the loft with your three roommates doesn't work out so well anymore. And so you had that sort of tsunami of demographic come. You've got a big population called boomers that are living longer in their homes and seeking to redo their homes to make them fit for the next stage of life. And you've got this massive home under-build, which really coming out of the great financial crisis, just never got to the pace it needed to be at to make up for the demographics. And so all of that came together at the same time where I think people really realized, boy, there are not a lot of homes out there.
Nicholas Fink:
There are not a lot of new homes coming up to the market and that housing stock is older than it's ever been and needs to be renovated. And so as that all came together and COVID only shun a huge light on it because, by the way, you had to go shelter at home and work from home and entertain at home and educate at home, that really kind of caused this huge surge, which is going to take years. It's going to take years to sort of address it. Some of the trends that we've seen, consumers really want to be able to use their homes from multiple different things. As I said, want to be able to certainly sleep there, eat there, but work there, entertain there, huge trends around outdoor living. And so a lot of entertaining outside and that's why we continue to build our outdoor living business around decking, access doors, railing. A lot of trends around understanding kind of the purpose in products, the purpose of the companies that make them, the commitments that those companies are making to sustainability. We're seeing more and more interest around that.
Nicholas Fink:
For example, we just launched something called Mission moan in 2020 that's to save a trillion gallons through our efforts in product innovation by 2030. By the way, trillion gallons, what is that? That's equivalent to what New York City uses in three years, right? We will offset that. That really resonates. Firstly, it's the right thing to do, but it really resonates with consumers. Our decking, 94% recycled content. It's recycled plastic and sawdust instead of gorgeous trees that you're chopping down to make this stuff. That really resonates. And so those are things that could go on. I mean, sustainable procurement in wood. It matters to consumers and we're finding them really gravitate to that. So the more we can speak to it, I think we've got a long history in it, but the more we can speak to it, that's really hitting the right note.
Josh King:
I mean, talking about New York City where I live and those three years worth of water that come through our pipes all the way from the Catskills down through the aqueduct system, the New York Times reported that more apartments were sold in Manhattan during the past quarter of this year than at any time in the past 32 years. And that stands in stark contrast to this time last year when sellers and agents stopped counting days on the market because of such dim prospects. With the caveat that nobody knows the future, what do you expect the housing market to look like over the next couple years and how is Fortune Brands preparing for it?
Nicholas Fink:
I fundamentally believe that the housing market is going to be very strong for the next five to 10 years. And that's not just Nick's opinion, right? I mean, we have a department of people that are a lot better than I am at looking at the data and really pulling it apart and understanding it. And so that is a fundamental. It's really based in demographics. And so therefore you position your portfolio to benefit from that base and then think about what trends. We talked about some trends. What trends, what secular trends sit on top of that, that are going to give at extra tailwind to the portfolio? And so that's how you position the company long term strategically. Now with that as a backdrop, what I'll tell you is housing is not discretionary. Sometimes the timing around housing is discretionary. And so if there's an interest rate shock, or if there's a pandemic, as you referred, consumers may pull back. In COVID, it was a matter of weeks.
Nicholas Fink:
But whether it's weeks or a couple quarters, or even we've seen it sometimes be three quarters, it's our job as a management team to manage this business to smooth out any of that and so we can deliver consistently for our share. And so that's how we think about it. It's position for the growth and then manage the business very well so you're delivering it consistently, not withstanding the fact that sometimes you might see a pull back in the market, then people come right back in. And actually you'd never hope for a pandemic, but allow this business to demonstrate what it could do. And we actually grew margin in Q2 of last year remarkably, as we just saw this coming and we said, look, we're going to make the right decisions. We're going to prioritize. And not only did we grow margin, we ended up investing more incremental dollars in 2020 than we had anytime in the lost five to 10 years.
Nicholas Fink:
And so it's a pretty simple formula if you really believe in the growth and you position for it and you're there to meet the consumer where they are, but then you manage your business highly, you can really do well in this environment.
Josh King:
Delivering consistently, that's what we do Inside the ICE House, and we're doing it with Nick Fink right now. After the break, we're going to dive into some of the new products that Fortune Brands Home & Security are bringing to market, the 10 year listing anniversary of the company and what's happening in the future. That is all coming up right after this.
Speaker 5:
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Josh King:
Welcome back. Before the break, Nick Fink, the CEO of Fortune Brands Home & Security and I were talking about his career, the company's mission and purpose and trends in the housing market. We talked a little bit about millennials before the break, Nick. ICE Mortgage Technology tracks millennials entering the housing market through our millennial tracker, which tracks closed loan applications for younger US home buyers. Most recent report shows that millennials across the US are taking advantage of the environment as you talked about before the break, buying homes with an average loan of about $230,000. Take us into the mind of the millennial homeowner. I know the way I think about it when I talk to my contractor and think about the products fit, finish, the things that I want to get to the home. How are they approaching some of the products in areas that you have? And are they as discriminating as I am or how are they different than me?
Nicholas Fink:
I think there is an open mindedness there. A lot of the brands that we grew up with are sort of like, these are the brands. These are the brands you'll buy and they're going to be... I think there is an openness to understanding what's out there. The wonderful thing actually about the generational interactions is that millennials, Gen X, they actually like each other. And so the parents will say to the kids what's trendy and the kids will say to the parents what's reliable, and this is based on real consumer research we do, as opposed if you think sixties, seventies, I mean, the generations wanted nothing to do with each other. And so it's a very different dynamic and so it allows for brand continuity, but there is an open mindedness to learn about the brands and to understand, as I said earlier, what are their purpose? Are they making a positive impact on communities, on society, and are they innovative?
Nicholas Fink:
There's a really, really strong interest in whether brands are innovative or not. And so increasingly, we've positioned our brands around the innovation that we bring to the market, not just because innovation, new products, new sales, but really because it resonates a halo on the whole brand family that's been really effective. And so I think those are some of the things that are very top of mind for a millennial buyer.
Josh King:
I mean, talking about innovation, Nick, and we were mentioning water a little bit in the first half of the show. Water scarcity is a huge issue, particularly in the West and Southwest. A product that's captured the attention of social media seems to be Nebia by Moen. You joined forces with this company, Nebia. It was a San Francisco based startup and created a shower that provides more pressure using about half of the water. Can you tell us a little bit about how this partnership between a company launched on Kickstarter and you're a 60 year old Cleveland based faucet and fixture manufacturer, how did this marriage come about?
Nicholas Fink:
Yeah. Well, it really speaks to the mindset of both businesses, by the way. The Nebia folks are wonderful, kind of near and dear to my heart, really an amazing team out there. But you take a business like Moen, I think it's easy for people to become a little bit complacent and that's not the case at all. I mean, our team will look outside and say, who's doing what we haven't figured out how to do? And saw what Nebia was doing and reached out and started a conversation with them. And on one hand, we got brand and route to market really powerful and they'd really nailed this atomization of water technology, which is very hard to do. I mean, it's not just having a shower that has lower flow to create that pressure. I mean, think of what almost like a power washer could do on a much more gentle scale, right? It's not a ton of water coming through, but it's very powerful.
Nicholas Fink:
And so started a conversation. At one point, I went out, I arrived at their offices. Just as you'd imagine, textbook startup offices in San Francisco, very cool. And the thing they did was they threw me a towel and told me to get in the shower and they sat immediately outside the shower in a conference room and waited for me to get out. And then they said, "What do you think?" And I said, "Let's do something together." And that was kind of the birth of it. And what's most amazing is they knew their technology. We know water. And so by putting our forces together, we were really able to engineer some phenomenal products and have continued. I think we're on Nebia 4.0 now.
Josh King:
Describe what's actually happening in one of these faucets.
Nicholas Fink:
So it's called atomization. So it's the way that you take a water droplet, if you think, and you break it up into a gazillion smaller droplets. And so it's much smaller droplets that are hitting you with some force so it's using a lot less water. The hard part is the hydro fluid dynamics. And so as that smaller droplet travels through the air, it loses heat. And so why people weren't able to do this is by the time it hit your skin, we're talking about the seconds, right? It wasn't warm anymore. And these guys nailed figuring out how to break it up, but retain the heat and bring it to the consumer. At that meeting, I thought it would be the sort of misty kind of sensation because you see videos online, and it really isn't. It's got some real force to it. And so that was kind of the breakthrough technology. And I'll tell you a quick story about this team just because they're remarkable.
Nicholas Fink:
Tim Cook is an investor in the business along with Eric Schmidt, and you sort of go, oh, well, how did that happen? Do you guys just get together in San Francisco and you start up things? And no, the founders actually tracked him down into the shower, tracked down Tim Cook into the shower at Equinox Gym in Palo Alto until he finally conceded to trying this thing and tried out like a beta version and remarkably leaned in with them, helped them with their business plan and then invested in the business. So it just speaks to the kind of people they are.
Josh King:
You mentioned the decking made of saw dust and recycled material. Across your portfolio, just give us a flavor of some of the other innovations that you're really excited about.
Nicholas Fink:
Yeah. I mean, look, certainly digital is going to play a huge role in connecting the portfolio. And so we talked a bit about digitization of water. I think that's going to have a huge impact on people's homes and lives. We're digitizing the security space, right? And so through Monster Lock, through our safes, the ability to really control, to have audit trail to know who's touched it. You take Monster Lock, I mean, certainly every middle school locker, but we also have a large commercial business where we help companies manage safety inside of their facilities. You want to control who has access to what to keep people safe. And we see a big future in digitizing that. We've been investing behind that and I think that is clearly coming. And then just some of the product engineering that we put into how to make things, how to make them perform at higher levels and how to do it in an evermore sustainable way.
Nicholas Fink:
And so I'll give you a simple example, but I mentioned Therma-Tru doors, right? It's the market leader in exterior doors. It's not the market leader just because we got a big position. It's because it's actually an innovative product. They're fiber gloss doors. They look like wood. We put them in front of consumers, they cannot tell the difference. The performance is night and day. We actually have an innovation center near Toledo, Ohio, and you go in and they'll have literally a plexiglas room with a Therma-Tru door and they fill it to the top with water and not a drop comes out. And it doesn't warp. And so that's really innovation driven. We continue to invest it to make it better and better all the time. That allows energy efficiency, longer lifespan. And I'll tell you what, builders love it and it costs them more than a regular door. They love it because they never have to go back on site and repair this door because it doesn't get dinged and it performs at a much higher level.
Nicholas Fink:
And so that's another example. The decking, I think we're just at the early innings of what that will do over time in terms of product performance and greater sustainability. And so you sort of look across the patch, I mean, even our cabinets business, the way we've been able to innovate organization systems inside our cabinets to make a kitchen more functional for people and then take that all the way through to digitization. We pioneered the first visualization of a kitchen that you could build online and then push it to cart. We did that with one of our major retailer partners. So instead of going and having a very challenging experience with measuring tapes, trying to figure out how to do this, you could actually just create your floor plan online, go online, sit there with a glass of wine or a beer or whatever, put the whole thing together, push it to cart, see what it will cost, order the things.
Nicholas Fink:
And I think that's probably a little bit of clue about where we can see that business going over time as well. And so it's really across the patch and the nice thing about it is wherever we invest and do well, we're well rewarded for it.
Josh King:
Nick, companies are paying a lot closer attention, as you've mentioned earlier, to environmental social governance factors using these considerations to attract some of your 27,000 people, meet regulatory disclosure requirements, meet the needs of investors. I mean, one of the first slides on your investor deck focuses on your commitment to ESG. Can you walk us through how you and the management team think about ESG and driving long term shareholder value?
Nicholas Fink:
Yeah, absolutely. And I just start by saying it's very deeply embedded in our DNA and it's kind of been there for a long time. I think what we learned more recently was it wasn't just good enough to do it. You actually had to explain to people what you were doing and why you were doing it. And so we've been doing human rights audits and all of our suppliers going back, I don't know, 15, 20 years, right? It was just what you do. It's the right thing to do. If we were going to buy from you, we had to be sure that you were treating people correctly. But as I alluded to being somewhat of a humble Midwestern company, we didn't shout this stuff a lot. And as the investor lens and the employee lens and the consumer lens has changed, we've started to collate our activities and talk about it more. And so I'd say it's part of our DNA. We've done a lot, but by no means are we or anybody else done.
Nicholas Fink:
And so what we're now working on is what is the next frontier and how do we push further into this? What are already our competitive advantages that we can build on and what are potential opportunity areas where we should be doing more? And it's from our board down. Early last year, we renamed our nom and gov committee the NESG committee. And so we specifically asked the board to have board oversight over our activities. It's embedded into my personal objectives for each year and into my team's personal objectives. And so whether it be diversity angle where it's been wonderful, it's been wonderful to see the progress that's being made. So much more work to do, but progress being made, whether it's some of the environmental initiatives I've touched on or whether it's our safety record, we take it really seriously and we really work on it. The last thing I'll say is we do a lot of acquisitions. We a very inquisitive company.
Nicholas Fink:
We talk a lot about synergies and building business cases, but one of the synergies we bring to every acquisition we do is that ESG lens. There isn't a company that we buy where we haven't improved the safety record. So that means people actually go home safer because we're the owner of that business and we take huge pride in that.
Josh King:
Earlier this week, Fortune Brands and Home Security celebrated the 10th anniversary of becoming a publicly listed company. In those 10 years as an independent company, what sense do you get sort of week in week out of being public, making the disclosures you need to make, putting it all out there for your investors? How does it make you a better or a stronger company being open to public ownership?
Nicholas Fink:
I'm a huge believer in it, I really am. I've worked both sides of that equation. You mentioned when I joined 2015 back on this side of the business, which at that point it was a freestanding public company, I mean, that was a choice. It was a choice to come back into the US publicly held world. And I really believe that that transparency and accountability drives higher performance. Now we're incredibly fortunate. Our combination of our track record and the incredible investor base that we have allows us to make long-term decisions, right? And so we will favor the right decisions for all of our stakeholders over the long run and try to deliver consistent performance quarter and quarter out, but we're making long term decisions. And I think if you get that combination of being able to be long term focused, but doing it with the transparency and accountability and scrutiny of a public company, I think it's a very, very powerful combination.
Josh King:
As part of commemorating that 10 year anniversary of your public listing, Nick, you announced two key affordable housing initiatives. Can you tell us first about the dreams of home community revitalization project?
Nicholas Fink:
Yeah. I mean, what better way to celebrate 10 years of success, both for our team and our shareholders than to give back. And I was immensely proud of my team when I said, how do you want to celebrate this? And that's how they wanted to celebrate it. And so really two big initiatives there, the first being Habitat for Humanity. We've long time been partners of Habitat for Humanity. Some of my colleagues on our exec team are board members of some of the habitat arms. And so what that is, building homes, doing it in our neighborhoods, rebuilding together. The other partner is a really fascinating organization and because they're really about rehabbing homes. And as I mentioned to you, housing stock is really aged and nothing will bring a neighborhood down faster than when somebody abandons a home. I mean, it's not months, it's weeks.
Nicholas Fink:
After a home is abandoned in the neighborhood, that whole neighborhood can start to go on a decline within weeks because you can have squatters move in, bad things happen, people start to leave the street or the neighborhood. And so by going in and helping revitalize and invest in these homes, we can get back to the people in those homes. We can really get back to that whole community. And so we're going to start by focusing on communities where we operate. We have plants, frankly, all around the world, but a lot of facilities in the US. So we're going to reinvest in those communities to help them stay safe and strong.
Josh King:
Fortune also has been a long time supporter of the Nature Conservancy, one of the world's most effective global conservation groups. So much of your work together has been focused on the Great Lakes' urban water working group initiative, which seeks to conserve, restore, protect fresh water around the Great Lakes region. Why did you adopt this cause? And why is water conservation outside of the home ecosystem so critical to the work that you're involved in?
Nicholas Fink:
Well, we live, breathe and bleed water, for lack of a better term. It's near and dear to what we do. And so we think about water conservation in every facet. I mean, it's certainly inside of the residence and what does that mean. But we'll take Moen engineers and take them out to all of our facilities and look at how we're using water and get them to help us improve, and they've done that very, very effectively. And so it just seemed like a very natural partnership. A lot of our businesses are based around the Great Lakes. I mean, obviously we're here just five miles away in Deerfield, Moen's based in Cleveland, Master Lock is based in Milwaukee, our outdoors business is based in Toledo. And so we've got a number of businesses really kind of clustered around the Great Lakes and we're so grateful for them. So they're kind of near and dear to our heart and it's one of the world's greatest resources.
Nicholas Fink:
My brother-in-law is actually one of the EPA leaders in charge of the Great Lakes. And so I've spent a lot of time I'm talking to him about it. It's not just a great resource for us here in the Midwest. I mean, it's the world's greatest fresh water store and it needs to be conserved and protected.
Josh King:
As we wrap up, Nick, I think in January 2020, you joined the board of directors of another great New York Stock Exchange listed company, Constellation Brands, ticker symbol STZ, one of the foremost producers of beer, wine and spirits. It brings us barely back to that first question I asked you about Jim Beam. Constellation has more than a hundred brands in its portfolio, including Corona, Mondavi and High West whiskey. Now almost two years into your service, how's it been stepping back into that world of liquor, wine and beer?
Nicholas Fink:
It's a lot of fun. I mean, obviously spent a lot of time in that space and it's a wonderful space and the brands really matter to people and how people connect. They're a wonderful team. And a lot of the themes that I have talked about on this, really leadership in community giving and driving diversity. Some of the initiatives around investing in minority and female owned businesses are just remarkable. Their commitment to their consumers, I think, is second to none. I mean, frankly, I've been blown away by the way they talk about consumers and the level of commitment they have to authenticity. It's been a lot of fun to be in that space, but I'd say it's also been hugely beneficial just to see the overlap, frankly, between our businesses and some of what I've been able to learn and hopefully been able to share.
Josh King:
Fortune Brands and all residential focused companies have been through a whirlwind two years. What do you think is next for Fortune Brands?
Nicholas Fink:
Well, I think we're really on the cusp of the next big area on housing expansion, but it's going to be different, right? This is not same old, same old. I think it's going to be driven by some really exciting [inaudible 00:45:41] winds on top of the demographics I talked about. And so we're going to lean into that. It is going to mean we're going to have to continue to disrupt ourselves. We're going to have to transform ourselves. We're going to invest heavily in digital to do it. It's going to be a very exciting time to be at this business.
Josh King:
Well, a very exciting time to be in the business and great talking to you, Nick. Thanks so much for joining us Inside the ICE House.
Nicholas Fink:
Thanks, Josh. It was a pleasure being here.
Josh King:
And that's our conversation for this week. Our guest was Nicholas Fink, CEO of Fortune Brands Home & Security Incorporated. If you like what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question you'd like one of our experts to tackle on a future show, email us at [email protected], or tweet at us @ICEHousePodcast. Our show is produced by Stephan Capriles with production assistance from Pete Asch and Ian Wolf. I'm Josh king, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. We'll talk to you next week.
Speaker 1:
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