Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Well, from coffee to cattle to cocoa, it feels like
Speaker 2: the price of everything is getting higher right now, and
Speaker 2: that's a real problem for large food manufacturers, including for
Speaker 2: Kevin Hurricane. He is the CEO of Cisco. He is
Speaker 2: a food distribution company that services restaurants, educational facilities, and
Speaker 2: hospitals around the world. So, Kevin, you have a really
Speaker 2: unique view into some of these supply constraints that are
Speaker 2: impacting different parts of the commodity world. And I'm curious
Speaker 2: about how you at Cisco are handling a market and
Speaker 2: different parts of that market, from cattle.
Speaker 3: All the way to coffee.
Speaker 2: What does that mean for Cisco?
Speaker 1: Yady, good morning.
Speaker 3: It's a pleasure to be with you on the show
Speaker 3: and with your audience today to understand inflation and where
Speaker 3: we are at the spot moment.
Speaker 4: I think it's helple to just take a quick step
Speaker 4: back over the past a couple of years, as you decid,
Speaker 4: we're what's called the food away from home business, so
Speaker 4: everything outside of the grocery store, restaurants, hostibles, education facilities, sports.
Speaker 1: Venues in the life coming out of COVID, demand.
Speaker 3: Was far outpacing supply. We saw significantly increased inflation. In fact,
Speaker 3: it peaked at about eighteen percent a couple of years ago,
Speaker 3: again with demand far out pacing the ability of producers
Speaker 3: to supply a product. We follow that with deflation actually
Speaker 3: where the costs were coming down, and we've settled at
Speaker 3: about two percent. So at the spot moment today, inflation
Speaker 3: cogs increase inbound to CISCO is at about two percent,
Speaker 3: which is in a reasonably normal status.
Speaker 1: And that's across all categories.
Speaker 3: But that doesn't mean that our individual categories like chicken
Speaker 3: as an example, where we're seeing elevated inflation because of
Speaker 3: again the lack of supply versus demand. So we're seeing
Speaker 3: a bit of a normal environment at the current moment.
Speaker 1: The challenge that consumers are facing is the following.
Speaker 3: If you look about cumulatively over the past two to
Speaker 3: three years, menu prices where we go to a restaurant
Speaker 3: are up about thirty to forty percent versus twenty nineteen.
Speaker 3: So I think that's the pain that we're all feeling
Speaker 3: when we go to a restaurant. We SISCO are taking
Speaker 3: actions with our supplier community and within our own book
Speaker 3: of business to.
Speaker 1: Help bring those prices.
Speaker 3: Down, so we can help restaurants lower menu prices will
Speaker 3: still hit the profitability targets that those individual business owners
Speaker 3: are hoping to achieve.
Speaker 5: Right, it seems like consumers who are looking forward to
Speaker 5: a spate of deflation are looking at a December even
Speaker 5: alone where cocoa coffee up almost forty percent more than
Speaker 5: ten percent, respectively. And if there is something you could
Speaker 5: do to bring those prices lower, what exactly is it
Speaker 5: at the end of the day, or do you simply
Speaker 5: just see consumers shifting their preferences to goods that are cheaper.
Speaker 3: Sure, that's a great question, I appreciated, and we view
Speaker 3: ourselves as a part of the solution, not the problem,
Speaker 3: and have a four part plan if you will, to
Speaker 3: help decrease the pain that that consumers feeling when they
Speaker 3: go out. The first and foremost is to work with
Speaker 3: our supplier community to bring down costs.
Speaker 1: We are the largest purchaser of food and the food
Speaker 1: away from home segment, so leaning in hard with our
Speaker 1: suppliers to help them be more efficient.
Speaker 3: Be that how we buy, the frequency that we buy,
Speaker 3: creating competitive environments to have suppliers of like product compete
Speaker 3: for our business so we can get to a lower
Speaker 3: netline and price and again pass that value and savings
Speaker 3: on to our end customers so they can lower menu price.
Speaker 1: Step two is Cisco brand.
Speaker 3: We offer a private label product under the Cisco banner,
Speaker 3: and that product is very high quality and it enables
Speaker 3: our customers.
Speaker 1: To save money. We say, save them time, save them money.
Speaker 3: It may surprise you that fifty percent five zero fifty
Speaker 3: percent of what we sell to a mom and pop
Speaker 3: independent restaurant is a Cisco branded product and we can
Speaker 3: lean in harder there. We call them swap and save opportunities.
Speaker 3: They can clear on our ordering website. Make it clear
Speaker 3: with you our set one thousand person plus salesforce to
Speaker 3: share that value with our customers, to educate them if
Speaker 3: they swap.
Speaker 1: They can say. Thing number three is to take time
Speaker 1: out of the kitchen.
Speaker 3: Help them with the opportunity to take labor costs out.
Speaker 1: So we have prepared foods in the light that we
Speaker 1: can lean in by cutting.
Speaker 3: The meat in advance of it arriving in the kitchen,
Speaker 3: cutting the vegetables in advance of it reviving in the kitchen,
Speaker 3: and those prepared foods are a good opportunity for our
Speaker 3: customers to.
Speaker 1: Take labor costs because those are the two things that
Speaker 1: have increased the most for a restaurant.
Speaker 3: Their food costs are up, their labor costs are up.
Speaker 3: We can help with providing both of those opportunities. The last,
Speaker 3: but not least, is lower cost alternatives. If the one
Speaker 3: protein category is spiking, we can help that customer understand
Speaker 3: make the following changes through your menu. You can shift
Speaker 3: your consumer purchasing to a lower cost of food. Helps
Speaker 3: the end consumer save money, helps that restaurant lower their
Speaker 3: food costs.
Speaker 2: Interesting perspective there, especially when it comes to switching out
Speaker 2: proteins to maybe save on cost a little bit. We're
Speaker 2: talking about input costs, of course, the actual cost of chicken, cattle,
Speaker 2: et cetera. But I want to talk about tariffs and
Speaker 2: the potential there. You think about food packaging, for example,
Speaker 2: you think about produce coming from Mexico and other places.
Speaker 2: A lot of unknowns right now. Of course, Donald Trump
Speaker 2: isn't even in office yet. How do you possibly plan
Speaker 2: ahead for some of the potentials that are being talked
Speaker 2: about right now?
Speaker 3: Though this is a very important topic and appreciate the question,
Speaker 3: I think the main point of what you said is accurate,
Speaker 3: which is it's not actually certain what will happen. It
Speaker 3: is uncertain what specifically will occur. But if I take
Speaker 3: again a giant step back and start with them at
Speaker 3: some facts, the vast majority of food that is consumed
Speaker 3: within the United States is purchased within the United States.
Speaker 3: And we're a global company. We do business in over
Speaker 3: ninety countries around the world. In each country that we
Speaker 3: operate in, the majority of the food is actually purchased
Speaker 3: within that country. So the impact our space, the industrer
Speaker 3: and is less than select other spaces.
Speaker 1: But you mentioned one, which is produce.
Speaker 3: Of course, during the winter months, a lot of produce
Speaker 3: that's consumed in the United States comes from Mexico.
Speaker 1: Yes, we're paying.
Speaker 3: Attention to what incoming President Trump has said about tariffs
Speaker 3: from China to specifically most recently Canada and Mexico, and
Speaker 3: we're taking prepared measures and actions to put ourselves in
Speaker 3: a position to succeed in helping our customers if those tariffs.
Speaker 1: Come to realization.
Speaker 3: There's some fundits saying that it's a bit negotiating strategy.
Speaker 3: We don't know is the honest truth. So here are
Speaker 3: the things that we need to deliver for our end customers.
Speaker 3: Thing one assurances and continuity of supply. Regardless of what
Speaker 3: happens with tariffs. We need to ensure that we Cisco
Speaker 3: can ship on time and in full to our end
Speaker 3: customers so that they can keep their doors open and
Speaker 3: satisfy their end consumers.
Speaker 1: So that's thing number one, assurance of supply.
Speaker 3: Because we've purchased more food than anyone in our space,
Speaker 3: we can provide our customers with that confidence that we.
Speaker 1: Will have what they need when they needed. Thing two
Speaker 1: is affordable at a cost.
Speaker 3: And if a select individual country sees a spike in tariffs,
Speaker 3: let's just say we're China.
Speaker 1: Can we source that product from somewhere else.
Speaker 3: We're working aggressively with our global supplier community in exactly
Speaker 3: that regard, and we will pivot. We will take actions,
Speaker 3: the charge and comment on the specifics at this time
Speaker 3: when none of us know exactly what those terras will be.
Speaker 5: Kevin, we thank you so much for joining us today.
Speaker 5: Of course, a balanced view here on what's going on
Speaker 5: in the world of food and restaurants, that is Kevin
Speaker 5: Harkin of Cisco