WEBVTT - Krispy Kreme CEO: U.S. Top-Line Up Double Digits Thru Pandemic 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.560 along with essential market moving news. Kind the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.160 and on Bloomberg dot Com. Our next guest has the 0:00:21.200 --> 0:00:24.520 philosophy when everything else is closing, Let's open up. It 0:00:24.720 --> 0:00:27.800 is the president and CEO of Crispy Cream Donuts at 0:00:27.800 --> 0:00:30.400 Mike tatters Field. And I say that because he's coming 0:00:30.440 --> 0:00:34.479 to us from the first ever global flagships shop in 0:00:34.640 --> 0:00:37.519 Times Square, and Mike, thanks for joining. I have to 0:00:37.520 --> 0:00:39.840 tell you a story. I walked to work these days 0:00:39.960 --> 0:00:42.839 and I turned a corner the other day and I 0:00:42.960 --> 0:00:45.680 literally stopped in my tracks. And I think you know why. 0:00:45.800 --> 0:00:48.600 I It was because for the first time I saw 0:00:48.680 --> 0:00:51.320 the storefront and I did not realize that Krispy Kream 0:00:51.400 --> 0:00:54.440 was coming to Time Square, and it literally made me stop. 0:00:54.480 --> 0:00:55.720 It was the best thing that I had seen in 0:00:55.720 --> 0:00:58.920 a long time. There's something about donuts, and particularly Krispy 0:00:58.960 --> 0:01:02.360 Cream Donuts that just puts in a good mood. Yeah. Oh, 0:01:02.400 --> 0:01:05.479 it's amazing. I'm in the shop right now. I'm looking 0:01:05.520 --> 0:01:09.880 at our world's largest hot light, which is just you 0:01:09.920 --> 0:01:11.920 know about Christie Kreme when the hot lights on the 0:01:11.959 --> 0:01:18.440 donuts are hot, right. So it's probably the coolest shop 0:01:19.040 --> 0:01:21.640 on the shop I've ever been into. Uh. And the 0:01:21.640 --> 0:01:24.240 team has just done an incredible job. Paul, if you 0:01:24.280 --> 0:01:26.080 don't mind, I'll just set it up a little bit more. 0:01:26.120 --> 0:01:28.080 It's in the Old Colony Building, which is a very 0:01:28.200 --> 0:01:30.960 very famous landmark building in New York and housed you know, 0:01:31.160 --> 0:01:36.000 musicians and groups of songwriters for decades, and it then 0:01:36.000 --> 0:01:39.199 it became other things, but now it's Krispy Kreme. Mike 0:01:39.319 --> 0:01:42.520 talked us about why you would be opening a flagship 0:01:42.560 --> 0:01:45.080 store in Times Square at a time when I don't 0:01:45.080 --> 0:01:47.560 know when tourists are returning, We don't know when Broadway 0:01:47.600 --> 0:01:51.000 is going to reopen. Yeah. Well, we've been working on 0:01:51.040 --> 0:01:54.280 this for three years. We're in for New York for 0:01:54.320 --> 0:01:58.120 the long term. Uh. This location is and you know, 0:01:58.160 --> 0:02:00.360 the only thing that we've done during the pen mimic 0:02:00.480 --> 0:02:03.880 is a little bit of a delay from May when 0:02:03.880 --> 0:02:07.120 we were originally supposed to open up till September. We 0:02:07.200 --> 0:02:09.520 did open up four more shops in New York at 0:02:09.520 --> 0:02:12.240 the time, and we learned a lot about the safety 0:02:12.280 --> 0:02:15.880 procedures that needed to happen in the pandemic. That's where 0:02:15.880 --> 0:02:17.720 I spent a lot of my time and making sure 0:02:17.760 --> 0:02:20.680 all Christy Creamers are safe. But at the end of 0:02:20.680 --> 0:02:24.040 the day, we're gonna be We're ready now. We've understood 0:02:24.080 --> 0:02:26.840 how the operating platform is, particularly in New York City, 0:02:27.639 --> 0:02:30.480 and we see the potential of UH starting to open 0:02:30.560 --> 0:02:32.880 up now and it's not just for you know, the 0:02:32.880 --> 0:02:36.239 retail experience is unbelievable. You know, you've got the world 0:02:36.880 --> 0:02:41.880 uh largest waterfall glazer, right, You've got some really interesting things. 0:02:41.919 --> 0:02:45.480 There's two production lines going, there's one production lined. Um, 0:02:45.720 --> 0:02:48.200 we have a side door where you can actually get 0:02:48.240 --> 0:02:51.280 your donuts on the streets. I'm h So that's pretty 0:02:51.280 --> 0:02:54.160 interesting for folks that might not want to walk indoors 0:02:54.880 --> 0:02:57.320 if you think about in today's world. But it's also 0:02:57.440 --> 0:03:01.280 one of our responsibilities. That's how you continue to evolve 0:03:01.360 --> 0:03:04.560 your business model. And Chrismy Kreen starts with a hot light. 0:03:04.680 --> 0:03:07.160 It can deliver to a fresh shop, that can deliver 0:03:07.280 --> 0:03:10.840 to a wholesale shop date fresh don its daily and 0:03:10.880 --> 0:03:13.560 then they can continue with a potential another channel that 0:03:13.600 --> 0:03:17.639 we just launched um Um in Walmart, which is an 0:03:17.639 --> 0:03:20.440 extended shelf line, and we opened up that plant in 0:03:20.639 --> 0:03:24.720 Iowa in April and May and launched in Walmart last 0:03:24.720 --> 0:03:27.480 week or three weeks ago. And can't keep up the 0:03:27.560 --> 0:03:31.440 Domand now we're a global brand, so you know the 0:03:31.480 --> 0:03:34.760 flagship you know for New York City, that is a 0:03:34.760 --> 0:03:37.400 global site for the rest of the how everybody and 0:03:37.480 --> 0:03:39.680 Chrispy Kreeen looks at it. So we you know, we 0:03:39.760 --> 0:03:42.800 believe in New York we're really comfortable and we think 0:03:42.880 --> 0:03:45.240 operating is how you're gonna learn a lot of new 0:03:45.240 --> 0:03:49.080 ways of uh actually going to market and what consumers 0:03:49.080 --> 0:03:51.160 are actually asking for all the time, whether that be 0:03:51.280 --> 0:03:54.760 delivery or access right. We just did a new deal 0:03:54.840 --> 0:03:58.640 with Doyne Reed for example. So Mike, just overall, how 0:03:58.720 --> 0:04:01.720 has your business been impacted by the pandemic and what 0:04:01.880 --> 0:04:05.960 changes they've been forced to make. Yeah, So, so you know, 0:04:06.080 --> 0:04:09.480 clearly in February when we fell a pandemic coming, I 0:04:09.560 --> 0:04:12.000 spend a lot of time in my shop. A lot 0:04:12.000 --> 0:04:15.480 of that would be to be safe oriented. Could we operate? 0:04:16.040 --> 0:04:18.440 We needed to see if there was a consumer demand 0:04:18.560 --> 0:04:21.800 since there was such a crevable product and there was 0:04:22.240 --> 0:04:24.760 you know, and it was the pretty evident to us 0:04:24.800 --> 0:04:28.279 early on that our customers wanted us and we could 0:04:28.360 --> 0:04:30.960 operate under this environment even when our doors were closed 0:04:31.000 --> 0:04:34.960 were masked if we could operate our drives, and you know, 0:04:35.000 --> 0:04:37.520 we shifted our marketing plans to be much more in 0:04:37.560 --> 0:04:40.760 the act of joy was reserved the community. Examples of us, 0:04:41.320 --> 0:04:44.600 the hospitals or the health care. I'm a business for 0:04:44.680 --> 0:04:47.120 anybody in the health care. If you showed a badge, 0:04:47.120 --> 0:04:49.280 you get donuts for free on money as many as 0:04:49.279 --> 0:04:52.360 you wanted. Let's gives you an example. We did neighbors 0:04:52.360 --> 0:04:55.240 when you were constrained for another idea where you could 0:04:55.320 --> 0:04:58.400 drop off an extra dozen that you got for free 0:04:58.440 --> 0:05:00.080 if you bought a dozen and dropped it up in 0:05:00.120 --> 0:05:03.320 your neighbor's states. And we started to do ideas like 0:05:03.400 --> 0:05:08.839 that which really really generated and I'm connected with our guest. 0:05:09.920 --> 0:05:12.880 I'll tell you the US businesses. That's where we're really 0:05:12.920 --> 0:05:17.359 relevant right now in this conversation. As we did active 0:05:17.440 --> 0:05:20.200 joys what we call them, and we complimented that with 0:05:20.440 --> 0:05:24.799 really great donut innovation. Our top line in the US 0:05:24.880 --> 0:05:30.360 has been up double digits since the pandemic continues. Our 0:05:30.400 --> 0:05:33.839 bottom line is also up double digits. So when we're 0:05:33.839 --> 0:05:36.120 talking about how are you still expanding what we have, 0:05:36.880 --> 0:05:40.560 we've been able to do this in an environment that's 0:05:40.720 --> 0:05:44.120 very challenging. Mike, thanks so much for joining us. We 0:05:44.160 --> 0:05:47.679 really appreciate it. Mike tatters Field, president CEO of Krispy 0:05:47.920 --> 0:05:51.400 Krispy Cream Donuts, calling in from their flagship store, which 0:05:51.440 --> 0:05:54.320 they are just opening in Times Square, New York. So 0:05:54.360 --> 0:05:56.800 it's nice to see Vanni somebody making a you know, 0:05:56.920 --> 0:05:59.960 a retail commitment in the heart of New York City 0:06:00.080 --> 0:06:03.039 during this pandemic. Absolutely, and it really does stand out 0:06:03.040 --> 0:06:05.000 of me, I guess, particularly at a time when there 0:06:05.040 --> 0:06:08.000 weren't too many tours around, but it has you know, 0:06:08.040 --> 0:06:11.080 the byde Green and read and again, it is nice 0:06:11.120 --> 0:06:15.520 to see somebody, you know, trying to make something good 0:06:15.520 --> 0:06:18.480 out of a bad situation. And definitely it's interesting to 0:06:18.520 --> 0:06:20.240 hear might talk about the finances, you know, kind of 0:06:20.240 --> 0:06:22.560 top and bottom line up pretty strongly. So I guess 0:06:22.560 --> 0:06:24.240 it's a it's a little bit of a comfort food. 0:06:24.240 --> 0:06:26.200 It's similar to maybe what we're seeing in you know, 0:06:26.240 --> 0:06:30.400 pizza that the pizza shops have seen sales up pretty dramatically, 0:06:30.440 --> 0:06:33.919 both local pizza shops and the national chain, so everybody's adapting, 0:06:33.960 --> 0:06:41.400 including their diet. Political election season is kicking into high gear. 0:06:41.480 --> 0:06:44.440 We have the Democratic National Convention taking place this week. 0:06:44.560 --> 0:06:49.560 Virtually they get the latest on this upcoming election season. 0:06:49.560 --> 0:06:52.680 We walk up Wendy Schiller, Professor of Political science and 0:06:52.760 --> 0:06:56.200 Public Policy at Brown University. Professor Schiller, thanks so much 0:06:56.240 --> 0:06:58.599 for joining us. I love to get your thoughts on 0:06:59.200 --> 0:07:04.560 the first virtual convention that we've experienced in this country. Uh, 0:07:04.640 --> 0:07:07.760 what are your takeaways? You know, I think I veer 0:07:07.920 --> 0:07:10.520 between being someone who's older and it is sort of 0:07:10.600 --> 0:07:13.040 used to these sort of big party type, you know, 0:07:13.120 --> 0:07:18.000 celebratory conventions with lots of long speeches and thinking about 0:07:18.040 --> 0:07:20.560 you know, the digital age, and also thinking about voters 0:07:20.560 --> 0:07:23.760 between the ages of basically eighteen and thirty five, and 0:07:23.800 --> 0:07:27.160 that voting rate is typically about of all registered voters. 0:07:27.200 --> 0:07:29.120 You know, the Democrats have to get that up, but 0:07:29.240 --> 0:07:32.960 in general that block has to vote more. Um So 0:07:33.040 --> 0:07:36.000 when you think about communications to that block of voters, 0:07:36.120 --> 0:07:39.480 digital is actually really appropriate. Digital makes sense. This is 0:07:39.520 --> 0:07:41.400 the way, even as a teacher, this is the way 0:07:41.480 --> 0:07:45.640 students learn and so it's a pretty it's it's an experiment, 0:07:45.920 --> 0:07:48.040 and there are some glitches, but I think it's a 0:07:48.080 --> 0:07:52.080 smart move. There's been an effort to put on a 0:07:52.120 --> 0:07:55.560 show of unity at the Democratic National Convention this year, Wendy. 0:07:55.600 --> 0:07:58.240 I mean, obviously there always is, but in particular this year, 0:07:58.280 --> 0:08:01.320 as opposed to talking about some of the scandals or 0:08:01.360 --> 0:08:05.560 maybe the the US mail service for example, is that 0:08:05.600 --> 0:08:08.880 the right strategy. Well, you know, Vonnie, you're pointing out 0:08:08.920 --> 0:08:11.440 something really important. And I thought there was maybe a 0:08:11.480 --> 0:08:14.280 too subtle a shift from Night one to night too, 0:08:14.360 --> 0:08:17.000 but Night one was clearly. The two most important voting 0:08:17.000 --> 0:08:20.240 blocks for Joe Biden are certainly African American voters. We 0:08:20.280 --> 0:08:22.320 know that the turnout was anywhere from fifty eight to 0:08:22.400 --> 0:08:28.680 six in well below eight. That Joe Biden can't win 0:08:28.760 --> 0:08:32.520 unless that turnout gets basically above. The second group, of course, 0:08:32.520 --> 0:08:35.840 they're the Bernie voters, the Bernie supporters who sat out Steen. 0:08:36.040 --> 0:08:39.240 Bernie Sanders was enthusiastic. He popped right through that screen 0:08:39.559 --> 0:08:41.679 and he was much much stronger for Joe Biden than 0:08:41.679 --> 0:08:44.000 he was Hillary Clinton. These are the two groups of 0:08:44.080 --> 0:08:46.720 voters that if Joe Biden can get to turn out 0:08:46.920 --> 0:08:49.240 he can be much more competitive in the Midwest. Probably 0:08:49.400 --> 0:08:52.200 flipped one or two of those states, uh, and then 0:08:52.400 --> 0:08:54.959 maybe win. So that was really smart on night one. 0:08:55.080 --> 0:08:57.480 Night two was a little bit flatter. It seemed like 0:08:57.520 --> 0:08:59.400 they were a little confused about what the message was, 0:08:59.640 --> 0:09:02.840 but they honed in in the second hour for older voters. 0:09:02.840 --> 0:09:05.600 Maybe a mistake, but certainly on the economy and healthcare, 0:09:05.760 --> 0:09:09.200 in particular healthcare. So Vanni, I think that's the question mark. 0:09:09.240 --> 0:09:11.520 Can they really come out of the convention with a 0:09:11.679 --> 0:09:15.559 very simplified campaign team. It cannot be just anti Trump 0:09:16.040 --> 0:09:18.839 because the levels will doesn't four Trump are greater than 0:09:18.880 --> 0:09:21.600 the level of these thousand four Biden and people are 0:09:21.640 --> 0:09:24.400 more likely to vote for somebody than against. They need 0:09:24.440 --> 0:09:26.800 to have a platform, and the platform has to be healthcare, 0:09:27.000 --> 0:09:29.559 the economy, and COVID. So we'll see if they can 0:09:29.559 --> 0:09:32.000 hone in on that message and the remaining two nights. 0:09:32.640 --> 0:09:36.640 In terms of the COVID, COVID pandemic, President Trump, the administration, 0:09:36.720 --> 0:09:39.840 the strategy, I'm not sure if it's just ignoring the 0:09:39.880 --> 0:09:43.640 pandemic but certainly underplaying it. Is that still a winning 0:09:43.679 --> 0:09:47.840 strategy for him and for his base? I think that's 0:09:47.840 --> 0:09:51.079 the big question mark. I think people are exhausted from 0:09:51.400 --> 0:09:55.280 the hardships of COVID, not just unemployment and UM and 0:09:55.480 --> 0:09:58.680 sort of the economy, but also just the way we 0:09:58.760 --> 0:10:01.040 live our lives and all and now with children at 0:10:01.040 --> 0:10:03.720 home because of delayed school and then of course college students. 0:10:03.920 --> 0:10:06.520 We know that fewer than people go to college, but 0:10:06.640 --> 0:10:09.240 still a chunk of people, and those students are now 0:10:09.280 --> 0:10:12.680 home with their parents as opposed to UM at school. 0:10:12.920 --> 0:10:15.400 So a lot of people are feeling COVID in all 0:10:15.400 --> 0:10:18.120 sorts of ways every day. And so that's the question 0:10:18.200 --> 0:10:20.600 mark for Trump. Is that feeling a good feeling the 0:10:20.640 --> 0:10:22.360 next couple of months, No, it's not. Is it a 0:10:22.360 --> 0:10:25.560 feeling that will never end? Yes? So that's a big question, 0:10:25.559 --> 0:10:28.400 more particularly amongst suburban voters and independence you know, have 0:10:28.559 --> 0:10:30.920 you done enough? And why are we in this position, 0:10:31.280 --> 0:10:34.880 you know, so much longer after the beginning of the pandemic, 0:10:35.160 --> 0:10:37.440 and what is there an end in sight? So Trump 0:10:37.480 --> 0:10:41.000 will emphasize vaccines, He'll emphasize that he's working on it, 0:10:41.040 --> 0:10:43.920 which they have been working on it, and clearly he'll 0:10:43.960 --> 0:10:46.240 try to ride a campaign of optimism that things will 0:10:46.280 --> 0:10:49.040 get better. He's done it. Once before on the economy. 0:10:49.080 --> 0:10:52.360 He'll do it again. Wendy, what happens with the US 0:10:52.440 --> 0:10:56.560 Postal Service? Well, this is fascinating, and I think this 0:10:56.640 --> 0:10:59.640 is a misread by the Republicans of their own voting base. 0:11:00.040 --> 0:11:03.760 We know in the last twenty years presidential cycles, senior 0:11:03.800 --> 0:11:06.880 citizens of people over the age of ten Republicans between 0:11:06.960 --> 0:11:09.959 eight and twelve points towards Republicans got Democrats, and the 0:11:10.040 --> 0:11:12.680 largest percentage people who vote by mail or seniors people 0:11:12.679 --> 0:11:15.680 over the age of sixty five. So the Republicans underestimated 0:11:15.679 --> 0:11:17.839 the extent to which they were cutting off the notes 0:11:17.880 --> 0:11:20.560 despite their face. Right, you you mass with the post office. 0:11:20.679 --> 0:11:23.199 Older people like their mail, they like hard copy, like 0:11:23.240 --> 0:11:25.480 to know where their post office boxes, and you take 0:11:25.480 --> 0:11:27.400 it away and they get angry. So I think that's 0:11:27.440 --> 0:11:29.679 what happened. There was a backlash. The second important thing 0:11:29.760 --> 0:11:32.160 is that so many people will vote by mail, that 0:11:32.280 --> 0:11:34.839 members of Congress, state legislators, governors, they all want to 0:11:34.840 --> 0:11:36.920 know if they got elected on election night. They don't 0:11:36.920 --> 0:11:38.720 want to wait, they don't want there to be delays, 0:11:38.760 --> 0:11:41.080 they don't want any hassles, so they want to know. 0:11:41.240 --> 0:11:44.200 So they want those ballots returned as badly, I think 0:11:44.280 --> 0:11:47.840 as Joe Biden wants the ballots returned. So let's just 0:11:47.840 --> 0:11:51.000 go real quickly, Professor to polling. I I, for one, 0:11:51.160 --> 0:11:54.840 after Brexit and after the election, I have no our 0:11:55.040 --> 0:11:57.640 very little faith in polling. Yet polling seems to be 0:11:57.720 --> 0:12:00.480 very strongly in the favor of former Vice president and Biden. 0:12:00.520 --> 0:12:02.480 How should we think about the polling here going into 0:12:02.480 --> 0:12:06.080 this selection. I always think of polling as consistency, you know, 0:12:06.120 --> 0:12:08.880 so are you looking at a consistent edge that doesn't 0:12:08.920 --> 0:12:12.840 seem to shake among particular groups of voters? And in 0:12:12.880 --> 0:12:14.640 that case I just mentioned senior So for the first 0:12:14.640 --> 0:12:18.120 time in twenty years, Biden is tied essentially um in 0:12:18.200 --> 0:12:20.559 some polls with Trump among people over the age of 0:12:20.559 --> 0:12:23.880 sixty five of those people vote. So that's the number 0:12:23.920 --> 0:12:26.520 I'm watching really closely. And that's a number I'm trusting 0:12:26.559 --> 0:12:28.800 because it's been pretty accurate for a very long time. 0:12:29.080 --> 0:12:31.800 So if that number holes and Biden can keep that advantage, 0:12:31.800 --> 0:12:33.720 you're looking at a much tighter contest in Florida and 0:12:33.720 --> 0:12:38.079 Arizona than anybody expects. As far as in Michigan, Ohio, Pennsylvania, Wisconsin. Polls, 0:12:38.240 --> 0:12:40.520 I don't believe them at all because they were wrong 0:12:40.640 --> 0:12:42.760 last time. And even though the Poulters tell us they 0:12:42.800 --> 0:12:44.920 fixed it, I don't think they have fixed it. And 0:12:44.960 --> 0:12:47.520 I think it's better for the Democrats honestly, strategically, if 0:12:47.559 --> 0:12:51.160 Joe Biden is either tied or a little bit behind Trump, 0:12:51.200 --> 0:12:54.160 Republicans vote, they get out the door. They're very reliable 0:12:54.400 --> 0:12:57.720 Democrats as we've seen fall off and they don't always vote. 0:12:57.720 --> 0:12:59.559 So if there is a lead for Biden, I think 0:12:59.559 --> 0:13:03.160 that's that situation going into the election for um, for 0:13:03.240 --> 0:13:06.200 the Democrats. But this is a different dynamic um, you know, 0:13:06.280 --> 0:13:09.480 male and voting changes everything. When they thank you. Wendy Schiller, 0:13:09.559 --> 0:13:12.400 Chair of Political Science at Brown University, always loves speaking 0:13:12.400 --> 0:13:17.439 with you. It is time now for Bloomberg Opinion, a 0:13:17.520 --> 0:13:23.000 very fascinating opinion piece out today talking about vaccine supply chains. 0:13:23.280 --> 0:13:25.160 We're going to need to talk a lot about them 0:13:25.200 --> 0:13:28.160 and plan for a vaccine supply chain. Let's bring in 0:13:28.240 --> 0:13:29.920 one of the people who wrote about it now, Professor 0:13:29.920 --> 0:13:34.040 of economics at the Marcadis Center, Sorry, professor of economics, 0:13:34.760 --> 0:13:37.680 Let's start again. Scott Duke Commoners is Associate Professor of 0:13:37.720 --> 0:13:42.240 Business Administration at Harvard Business School. Cambridge, Massachusetts. You had 0:13:42.320 --> 0:13:44.040 been going to be joined by your colleague. That's why 0:13:44.080 --> 0:13:46.680 I was getting that mixed up. Talk to us about 0:13:46.720 --> 0:13:49.839 the supply chains. Capitalism should be able to solve these 0:13:49.880 --> 0:13:52.480 problems very readily, very quickly, and yet we saw with 0:13:52.520 --> 0:13:56.400 the likes of PPE that it didn't watch it give 0:13:56.440 --> 0:14:01.439 us confidence that for supply chains capitalism will work well. So, 0:14:01.640 --> 0:14:04.080 first of all, there's a question of what you need 0:14:04.200 --> 0:14:08.240 for capitalism to actually make supply chains work. Um. And 0:14:08.559 --> 0:14:10.920 the problem is we you know, as with PPE and 0:14:10.920 --> 0:14:13.880 and now to some degree also with vaccines, we're asking 0:14:13.920 --> 0:14:16.800 to contradictory things of companies at the same time, right, 0:14:16.800 --> 0:14:20.280 we're asking for substantial investment and scaling up of their 0:14:20.320 --> 0:14:25.720 their production processes and technologies, which again remember takes time normally, right, 0:14:25.760 --> 0:14:28.440 you know, it's not possible to just immediately, you know, 0:14:28.560 --> 0:14:31.520 double all the number of factories you have. But at 0:14:31.520 --> 0:14:33.960 the same time, remember we're doing that in an environment 0:14:34.320 --> 0:14:37.920 where we want the companies to be providing goods at 0:14:37.960 --> 0:14:41.040 low prices. Right, we wanted the price of PPE to 0:14:41.040 --> 0:14:44.760 to stay down. And similarly, you know, both for you know, 0:14:45.200 --> 0:14:47.960 you know, for political and social reasons. Uh, you know, 0:14:48.040 --> 0:14:51.000 companies that are investing in these vaccine production processes are 0:14:51.040 --> 0:14:53.800 also promising sort of lower prices, selling more at cost 0:14:54.280 --> 0:14:56.840 and so or closer to it cost. And so when 0:14:56.840 --> 0:14:58.880 we do that, there's not as much of an incentive 0:14:58.960 --> 0:15:01.200 for them to you know, build up capacity because the 0:15:01.200 --> 0:15:03.680 market sort of isn't giving that signal that you need, 0:15:03.720 --> 0:15:05.880 you know, the additional price to to subsidize the addition 0:15:06.000 --> 0:15:09.280 or pay for the additional cost. All right, let's go there, professor, 0:15:09.400 --> 0:15:13.400 because I am very confused about the whole pricing aspect 0:15:13.520 --> 0:15:16.160 of this vaccine is and and and you say that's 0:15:16.160 --> 0:15:19.520 important because it goes to incentives for you know, ensuring 0:15:19.520 --> 0:15:22.440 that production in the supply chain. Is there. What is 0:15:22.480 --> 0:15:24.480 your sense of kind of how this likely will play 0:15:24.480 --> 0:15:29.080 out in terms of pricing this thing, Well, it's it's 0:15:29.120 --> 0:15:31.160 hard to know in the long run, but at least 0:15:31.160 --> 0:15:34.600 at the moment um, companies are many of the companies, 0:15:34.880 --> 0:15:38.800 including a number of the leading vaccine producers, Johnson and Johnson, 0:15:39.000 --> 0:15:41.960 Zenica a Fighter, have been announcing commitments that their plan 0:15:42.080 --> 0:15:44.960 is to sell vaccines at or just barely a book 0:15:45.560 --> 0:15:47.520 sort of not trying to profit over the you know, 0:15:47.720 --> 0:15:50.760 over the initial distribution um you know, at least for 0:15:50.760 --> 0:15:54.600 the duration of the pandemic. So where do you see 0:15:54.720 --> 0:15:59.080 the most fragilities in the system. So there are many 0:15:59.360 --> 0:16:02.320 Um of the problem is the vaccine supply chains have 0:16:02.440 --> 0:16:06.440 many different links, um and there are sort of there's 0:16:06.480 --> 0:16:08.160 a lot of links at the you know, sort of 0:16:08.640 --> 0:16:10.880 in the middle, you know, sort of when we're that 0:16:10.920 --> 0:16:13.600 we're that we're thinking about very actively. So um there's 0:16:13.640 --> 0:16:15.920 been a big investment, for example, in producing the types 0:16:15.960 --> 0:16:19.040 of glass vials that we use to actually just contribute 0:16:19.120 --> 0:16:21.600 vaccine doses. Right, you think when you're you know, in syringes. Also, 0:16:21.640 --> 0:16:23.240 you know, when someone you know sticks a vaccine in 0:16:23.280 --> 0:16:24.960 your arm, they pull it out of you know, a 0:16:24.960 --> 0:16:28.840 sanitary glass vile using a syringe. And those we need, 0:16:28.920 --> 0:16:30.720 you know, sort of roughly in proportion to the number 0:16:30.720 --> 0:16:32.720 of people who are receiving the vaccines. Of course, you 0:16:32.760 --> 0:16:35.760 need a lot of individual glass vials and syringes, even 0:16:35.760 --> 0:16:38.320 if you can put a few doses per vile um. 0:16:38.440 --> 0:16:40.480 Those we've actually seen a lot of scale up already, 0:16:40.520 --> 0:16:43.040 you know, sort of it's very salient. We've had problems 0:16:43.080 --> 0:16:45.680 within the past. Sort of nobody wants vaccines to not 0:16:45.760 --> 0:16:49.440 be distributed because of lack of glass and syringes. UM. 0:16:49.480 --> 0:16:51.560 But at the top of the chain there are still 0:16:51.600 --> 0:16:56.400 real challenges. So vaccine production processes are very complicated, UM, 0:16:56.440 --> 0:16:59.400 and they rely often on uh, you know, sort of 0:16:59.520 --> 0:17:03.280 very rare error. Uh, you know, molecules and inputs. UM. 0:17:03.480 --> 0:17:08.400 So you know, for example, there's a there's a molecule 0:17:08.440 --> 0:17:11.520 called L A L that's used to detect toxins that 0:17:11.560 --> 0:17:13.920 are sort of released in the vaccine production process, and 0:17:13.960 --> 0:17:15.520 you have to you have to not have those toxins. 0:17:15.560 --> 0:17:18.560 You have to test every vaccine and also the vitals 0:17:18.560 --> 0:17:20.239 and their stoppers and so forth to make sure that 0:17:20.280 --> 0:17:23.480 you didn't pick up any of these toxins. UM. And this, 0:17:23.680 --> 0:17:26.560 you know, the only natural source of L A L 0:17:26.960 --> 0:17:31.520 comes from horseshoe crabs, and pharmaceutical industry already uh you know, 0:17:31.560 --> 0:17:34.520 harvests about half a million crabs and it's in their blood. 0:17:34.520 --> 0:17:38.040 So you basically, you know, draw blood from horseshoe crabs 0:17:38.040 --> 0:17:42.280 and then release them back into the ocean. UM. Yeah, 0:17:42.280 --> 0:17:46.040 I know, right, there's no offense to thee no exactly, 0:17:46.080 --> 0:17:49.040 and they're doing they're doing an incredible service. Right. Could 0:17:49.040 --> 0:17:51.240 you imagine if like your blood had a molecule that 0:17:51.320 --> 0:17:55.560 was needed to save lives. Um and Uh, you know, 0:17:55.600 --> 0:17:58.479 but horseshoe crab populations you know, of course, you know, 0:17:58.800 --> 0:18:02.000 fluctuate across years. And if you have to suddenly draw 0:18:02.080 --> 0:18:04.680 a lotton or horseshoe crab blood, that means harvesting many 0:18:04.680 --> 0:18:09.000 more crabs and and you know it affects ecosystems as well. Uh. Similarly, 0:18:09.040 --> 0:18:11.399 there's a there's a key component that's used in some 0:18:11.480 --> 0:18:15.000 vaccines to help stimulate the body's immune response that comes 0:18:15.000 --> 0:18:19.080 out of sharp liver oil. It's called squaling. And both 0:18:19.160 --> 0:18:21.920 L A L and squaling. You know, there are um 0:18:22.200 --> 0:18:24.680 ways of synthesizing them, but this hasn't been done at scale. 0:18:24.680 --> 0:18:27.840 They're relatively new um um and and sort of you know, 0:18:27.880 --> 0:18:30.080 recently approved, and so we have to like really figure out, 0:18:30.119 --> 0:18:32.240 you know, how do you produce these at the scale 0:18:32.280 --> 0:18:36.640 that we're gonna need. Now you put all of these 0:18:36.640 --> 0:18:41.040 things together, do you think the supply chain will be 0:18:41.160 --> 0:18:45.359 ready for some level of mental production call it first 0:18:45.400 --> 0:18:50.199 half of one. Uh, The answer is it will be 0:18:50.280 --> 0:18:53.680 if we invest very heavily. Right. Um, you know this 0:18:53.760 --> 0:18:57.280 is this is a real case for public investment in 0:18:57.320 --> 0:19:00.560 supply chain and supply chain integration. We have to invest 0:19:00.600 --> 0:19:03.520 in lots of different chains for different types of vaccines 0:19:03.560 --> 0:19:05.000 at once. Right, So there are a bunch of different 0:19:05.080 --> 0:19:09.200 vaccine platforms that are all being sort of pursued simultaneously 0:19:09.240 --> 0:19:12.000 because we don't know which vaccines are gonna work first. Uh. 0:19:12.040 --> 0:19:15.159 And we need to be scaling all of that now, right, 0:19:15.200 --> 0:19:18.919 we have to be ready to distribute. That is that 0:19:19.000 --> 0:19:21.520 the World Health Organization or who coordinates all of that? 0:19:22.880 --> 0:19:26.680 A great question? So some amount of this is being 0:19:27.000 --> 0:19:30.800 coordinated by the World Health Organization jointly with SEPPI, the 0:19:30.800 --> 0:19:35.280 Coalition for Epidemic Preparedness Innovations and GABBY, which is a 0:19:35.480 --> 0:19:37.920 you know, a vaccine alliance for um, you know, distributing 0:19:38.000 --> 0:19:41.679 vaccines to lower income and developing countries. UM. You know. 0:19:41.680 --> 0:19:44.719 There there is sort of like an international collaboration effort 0:19:44.800 --> 0:19:47.960 going on. UM that's you know, both responsible for the 0:19:48.160 --> 0:19:50.120 sort of coordinating and investment in a lot of different 0:19:50.200 --> 0:19:54.160 vaccine portfolio sorry, vaccine candidates sort of like a diversified 0:19:54.160 --> 0:19:56.720 portfolio to raise the probability we have one that works, 0:19:56.920 --> 0:19:59.359 and also sort of investing in that capacity to make 0:19:59.400 --> 0:20:02.040 sure that we can she produced them. Uh, I should say, 0:20:02.040 --> 0:20:04.879 though the US hasn't joined in on these collaborative agreements yet. 0:20:05.080 --> 0:20:06.760 Still a lot of countries have, but but not the 0:20:06.800 --> 0:20:09.360 US as yet. I mean, does there somebody out there 0:20:09.359 --> 0:20:12.520 actually collecting horseshoe crabs? We're out of time, but I'm 0:20:12.520 --> 0:20:17.240 just so curious about this. They are. There are people 0:20:17.280 --> 0:20:19.199 out there collecting horseshoe crabs. There are people out there 0:20:19.240 --> 0:20:21.399 building bioreactors or trying to figure out how you can 0:20:21.440 --> 0:20:25.320 repurpose them from other applications. Um, and uh, you know, 0:20:26.040 --> 0:20:27.760 lots of people are working really hard on this in 0:20:27.880 --> 0:20:31.200 hopes of getting the vaccines ready to be distributed on time. Yeah, 0:20:31.240 --> 0:20:35.240 I mean, gosh, fascinating. I didn't the horseshoe crabs that. 0:20:35.240 --> 0:20:38.720 That's a new one for me. Hopefully, uh we shoulder 0:20:38.840 --> 0:20:40.639 into the little Creature Hall of Fame or something. I mean, 0:20:40.680 --> 0:20:44.560 if the Scott Do Commoners, thank you so much for 0:20:44.640 --> 0:20:48.040 joining as Scott's an associate professor of Business Administration at 0:20:48.040 --> 0:20:51.000 the Harvard but the Business School maybe perhaps sometime a 0:20:51.119 --> 0:20:55.439 one time or sometime horseshoe crab corral or catcher, but 0:20:55.520 --> 0:20:59.760 we learned something new that a the supply chain logistics 0:21:00.040 --> 0:21:05.320 of getting a vaccines produced distributed is just mind boggling 0:21:05.480 --> 0:21:09.080