1 00:00:02,520 --> 00:00:08,840 Speaker 1: Bloomberg Audio Studios, podcasts, radio news, The. 2 00:00:08,880 --> 00:00:13,160 Speaker 2: Stock Movers podcast, your roundup of companies making moves in 3 00:00:13,200 --> 00:00:17,400 Speaker 2: the stock market, harnessing the power of Bloomberg Data. 4 00:00:17,560 --> 00:00:20,040 Speaker 1: I'm Karl Masser along with Tim Stenovic. So let's get 5 00:00:20,120 --> 00:00:22,239 Speaker 1: to some stocks on the move. First up, we want 6 00:00:22,239 --> 00:00:24,600 Speaker 1: to talk about Coca Cola, which said it plans to 7 00:00:24,760 --> 00:00:27,600 Speaker 1: launch a new coke product for American consumers. Tim made 8 00:00:27,680 --> 00:00:28,560 Speaker 1: with US cane. 9 00:00:28,440 --> 00:00:31,040 Speaker 3: Sugar this fall. It's something the administration kind of wanted 10 00:00:31,080 --> 00:00:31,480 Speaker 3: them to do. 11 00:00:31,560 --> 00:00:34,960 Speaker 4: Bloomberg Intelligence Senior analysts for Consumer Products, Ken sche joins 12 00:00:35,040 --> 00:00:38,400 Speaker 4: us from New Jersey on Coca Cola. Can we spoke 13 00:00:38,440 --> 00:00:40,839 Speaker 4: to you last week July seventeenth, you joined us. You 14 00:00:40,880 --> 00:00:42,720 Speaker 4: also had a no doubt that said Coca Cola was 15 00:00:42,800 --> 00:00:46,840 Speaker 4: unlikely to move completely to cane sugar. I should say 16 00:00:46,840 --> 00:00:48,800 Speaker 4: you were absolutely right about that. They are not getting 17 00:00:48,880 --> 00:00:51,560 Speaker 4: rid of hypertoast corn syrup. It sounds like what they're 18 00:00:51,600 --> 00:00:54,600 Speaker 4: doing is coming out with a new cane sugar version 19 00:00:54,640 --> 00:00:56,400 Speaker 4: of Coca Cola. What can you tell us? 20 00:00:56,720 --> 00:01:00,240 Speaker 5: Yeah, Hi, Tim, Well, as we expected and fully with 21 00:01:00,280 --> 00:01:02,920 Speaker 5: what Coca Cola has been saying all along, and that 22 00:01:03,040 --> 00:01:05,600 Speaker 5: is it wants to be a full beverage company. So 23 00:01:05,720 --> 00:01:08,640 Speaker 5: if there's a demand for you know, a niche or 24 00:01:08,840 --> 00:01:11,039 Speaker 5: a segment of the market that it feels they can 25 00:01:11,160 --> 00:01:14,119 Speaker 5: play in their economically, it's going to do it. And 26 00:01:14,160 --> 00:01:18,960 Speaker 5: so the keen sugar product extension really of the brand 27 00:01:19,000 --> 00:01:22,400 Speaker 5: Coca Cola is no exception. We already know there's a 28 00:01:22,440 --> 00:01:24,959 Speaker 5: demand for it, you know, lots of consumers like the 29 00:01:25,080 --> 00:01:28,399 Speaker 5: Mexican coke they call it gets imported into the US 30 00:01:28,400 --> 00:01:31,760 Speaker 5: and some selected markets. There's actually some small competitors that 31 00:01:31,880 --> 00:01:35,199 Speaker 5: use it. Only small competitors because it's more expensive version 32 00:01:35,880 --> 00:01:38,480 Speaker 5: of a sugary drank. High fructose corns chaper is much 33 00:01:38,560 --> 00:01:42,000 Speaker 5: less expensive. But I think Coke is really smart in 34 00:01:42,000 --> 00:01:44,160 Speaker 5: bringing this out, not only because it appeas to the president, 35 00:01:44,480 --> 00:01:47,600 Speaker 5: but also because it is a niche product. COC likes 36 00:01:47,680 --> 00:01:49,960 Speaker 5: to play in different niches to see what, you know, 37 00:01:50,080 --> 00:01:52,120 Speaker 5: can work and what might not. But it's willing to 38 00:01:52,120 --> 00:01:54,880 Speaker 5: take a chance, and it's one of a few innovations 39 00:01:54,880 --> 00:01:56,520 Speaker 5: that has the store for the second half that I 40 00:01:56,560 --> 00:01:57,880 Speaker 5: think investors are embracing. 41 00:01:57,920 --> 00:01:58,200 Speaker 3: Here. 42 00:01:58,440 --> 00:02:04,120 Speaker 1: Wait forget me, this is an innovation just switching the sugar, 43 00:02:04,800 --> 00:02:07,720 Speaker 1: and it already makes it as I know it's something 44 00:02:07,840 --> 00:02:11,040 Speaker 1: Tim likes and my husband loves because he'll order it 45 00:02:11,080 --> 00:02:12,400 Speaker 1: like the Mexican. 46 00:02:11,960 --> 00:02:14,160 Speaker 3: Coke comes in glass too, which is aweso exactly. 47 00:02:14,639 --> 00:02:15,519 Speaker 4: That's why it tastes good. 48 00:02:15,639 --> 00:02:18,640 Speaker 1: Help me understand, because innovation to me is something new 49 00:02:18,800 --> 00:02:19,360 Speaker 1: and different. 50 00:02:20,280 --> 00:02:23,440 Speaker 5: Okay, so maybe it is not a full blown innovation, 51 00:02:23,560 --> 00:02:26,280 Speaker 5: but it's certainly a product that isn't mainstreamly put it 52 00:02:26,280 --> 00:02:29,239 Speaker 5: that way. In the US, you know, high fructose corn 53 00:02:29,320 --> 00:02:33,160 Speaker 5: syrup versions of sugar free drinks Coca Cola have been 54 00:02:33,200 --> 00:02:38,160 Speaker 5: really the mainstay, primary version since the nineteen eighties, just 55 00:02:38,160 --> 00:02:41,000 Speaker 5: because it's less expensive. Most consumers don't know the difference. 56 00:02:41,400 --> 00:02:44,480 Speaker 5: Some affects cionados or soft drinks certainly do. And so 57 00:02:45,040 --> 00:02:46,480 Speaker 5: it's I think it's going to be more of a 58 00:02:46,560 --> 00:02:49,160 Speaker 5: niche product, maybe not an innovation. Maybe that's itt'll stretch, 59 00:02:49,400 --> 00:02:52,680 Speaker 5: but we'll see how they brand it in terms of 60 00:02:52,800 --> 00:02:55,200 Speaker 5: it's certainly going to be a premium priced product for 61 00:02:55,200 --> 00:02:58,600 Speaker 5: an other reason to cover the cost. But I think 62 00:02:58,639 --> 00:03:01,200 Speaker 5: it's going to be sold you know, in some markets 63 00:03:01,240 --> 00:03:03,240 Speaker 5: at like I said, at a premium price, not not 64 00:03:03,320 --> 00:03:05,680 Speaker 5: all their channels, most of the channels, though. 65 00:03:05,720 --> 00:03:08,760 Speaker 4: How much more expensive is cane sugar from the US 66 00:03:08,880 --> 00:03:10,280 Speaker 4: versus high for toast corn syrup. 67 00:03:10,639 --> 00:03:13,560 Speaker 5: I want to submit about twice the cost on a 68 00:03:13,639 --> 00:03:17,240 Speaker 5: per unit basis. That's a rough rule of thumb, but 69 00:03:17,600 --> 00:03:21,600 Speaker 5: that's generally generally the way analysts look at it. And 70 00:03:21,680 --> 00:03:24,760 Speaker 5: so you know, like I said, they've shied away from it. 71 00:03:25,919 --> 00:03:28,400 Speaker 5: There hasn't been a high clamoring for it until recently. 72 00:03:29,080 --> 00:03:31,160 Speaker 5: And so look and have some fun with it too. 73 00:03:31,280 --> 00:03:33,320 Speaker 5: You know, they're gonna come out with this and they're 74 00:03:33,320 --> 00:03:35,800 Speaker 5: going to see where it takes them. It's one of 75 00:03:35,960 --> 00:03:39,920 Speaker 5: a few innovations though maybe not an innovation, but a trend, 76 00:03:39,920 --> 00:03:42,080 Speaker 5: I should say of the protein drinks, again, not a 77 00:03:42,280 --> 00:03:45,920 Speaker 5: new innovation, but it's certainly taken off because of consumers 78 00:03:45,920 --> 00:03:48,640 Speaker 5: are recognizing that it's a it's a great way to 79 00:03:48,920 --> 00:03:52,120 Speaker 5: have a post recovery for the GLP one drug users. 80 00:03:52,120 --> 00:03:55,640 Speaker 5: It's a great way to replenish maybe lost protein with 81 00:03:55,680 --> 00:04:01,560 Speaker 5: the way it loss. There's been a recovery and sports drinks. 82 00:04:02,320 --> 00:04:04,800 Speaker 5: So these are all areas where Coke's going to invest 83 00:04:04,840 --> 00:04:06,920 Speaker 5: heavily in the second half to try to keep the 84 00:04:06,920 --> 00:04:09,360 Speaker 5: growth engine going the business. 85 00:04:09,440 --> 00:04:12,920 Speaker 1: Just to tie it up here, the business that Coke doing, 86 00:04:13,040 --> 00:04:15,400 Speaker 1: I mean they're massive still, right, they are a big 87 00:04:15,440 --> 00:04:17,080 Speaker 1: player in the global beverage market. 88 00:04:17,160 --> 00:04:19,200 Speaker 3: But their business overall, how would you describe it. 89 00:04:19,680 --> 00:04:22,680 Speaker 5: I would say today reinforced. It's right on track. You know, 90 00:04:22,680 --> 00:04:26,440 Speaker 5: they pretty much reiterated their growth expectations for the year. 91 00:04:26,600 --> 00:04:29,640 Speaker 5: Their long term growth algorithm, as they call it, is 92 00:04:29,680 --> 00:04:32,920 Speaker 5: for four to six percent organic revenue growth annually, and 93 00:04:33,480 --> 00:04:36,160 Speaker 5: they still see five to six for the year. So 94 00:04:36,200 --> 00:04:39,080 Speaker 5: it's right on track. With that and a little earnings leverage, 95 00:04:39,120 --> 00:04:41,080 Speaker 5: they can try to get to big to high single 96 00:04:41,120 --> 00:04:44,240 Speaker 5: digit EPs growth over the longer term. I think investors 97 00:04:44,279 --> 00:04:48,800 Speaker 5: are pretty much ashured, reassured. I would say solid result, yes, all. 98 00:04:48,720 --> 00:04:49,839 Speaker 3: Right, really appreciate it. 99 00:04:49,839 --> 00:04:51,560 Speaker 1: And shares of Coca collar we should point out they're 100 00:04:51,640 --> 00:04:53,039 Speaker 1: up around twelve percent year to date. 101 00:04:53,279 --> 00:04:54,320 Speaker 3: Hey, Ken, thank you so much. 102 00:04:54,400 --> 00:04:57,960 Speaker 1: Ken. Shay Bloomberg Intelligence senior analyst for consumer products joining. 103 00:04:57,800 --> 00:04:58,600 Speaker 3: Us in New Jersey. 104 00:04:58,680 --> 00:04:59,760 Speaker 4: Does it actually taste better? 105 00:05:00,040 --> 00:05:02,960 Speaker 3: I'm not a soda drinker except for ginger ale. 106 00:05:02,960 --> 00:05:06,320 Speaker 4: When only good figure it out blind taste tests, we'll 107 00:05:06,320 --> 00:05:06,520 Speaker 4: do it. 108 00:05:06,600 --> 00:05:07,039 Speaker 3: Let's do it. 109 00:05:07,120 --> 00:05:09,880 Speaker 1: Yeah, all right, So let's go from one iconic brand 110 00:05:09,880 --> 00:05:10,360 Speaker 1: to another. 111 00:05:10,520 --> 00:05:12,400 Speaker 4: Yeah, let's talk a little bit about what happened with 112 00:05:12,480 --> 00:05:15,680 Speaker 4: a General Motors profit fell as. The company said had 113 00:05:15,680 --> 00:05:18,520 Speaker 4: suffered one point one billion dollar profit hit from President 114 00:05:18,520 --> 00:05:21,800 Speaker 4: Trump's tariffs. It revealed no plan for a near term 115 00:05:21,839 --> 00:05:25,039 Speaker 4: fix to return to pre tariff profit levels. David Welsh 116 00:05:25,360 --> 00:05:28,839 Speaker 4: is in our Detroit News bureau. He joins US from Detroit. 117 00:05:28,839 --> 00:05:31,440 Speaker 4: He's been covering this company for years. So headline we're 118 00:05:31,440 --> 00:05:33,560 Speaker 4: all talking about is that one point one billion dollar hit. 119 00:05:33,600 --> 00:05:36,440 Speaker 4: Break it down for us, How exactly did this end 120 00:05:36,520 --> 00:05:37,600 Speaker 4: up hitting GM so hard. 121 00:05:38,520 --> 00:05:40,560 Speaker 6: They have a lot of exposure because close to half 122 00:05:40,560 --> 00:05:43,000 Speaker 6: of the vehicles that they sell in the US are important, 123 00:05:43,000 --> 00:05:45,120 Speaker 6: so they're paying a lot in tariffs. There are things 124 00:05:45,120 --> 00:05:47,719 Speaker 6: that they're going to do to try to mitigate those costs, 125 00:05:47,800 --> 00:05:49,680 Speaker 6: but they're in the early days of doing that, so 126 00:05:49,760 --> 00:05:51,599 Speaker 6: you didn't see the impact of that stuff in the 127 00:05:51,640 --> 00:05:54,120 Speaker 6: second quarter. And even if all of it had come 128 00:05:54,120 --> 00:05:57,000 Speaker 6: to fruition in the current quarter or in the previous quarter, 129 00:05:57,600 --> 00:05:59,279 Speaker 6: it would only off set a third of that. So 130 00:05:59,440 --> 00:06:01,760 Speaker 6: there's a long walk to get to the pre tax 131 00:06:01,800 --> 00:06:05,360 Speaker 6: profitability that the company had, and to do that, they're 132 00:06:05,360 --> 00:06:07,599 Speaker 6: going to have to relocate production of some vehicles some 133 00:06:07,680 --> 00:06:10,160 Speaker 6: parts in the US. They announced a four billion dollar 134 00:06:10,200 --> 00:06:13,640 Speaker 6: investment which will do some of that, particularly vehicles in Mexico, 135 00:06:13,920 --> 00:06:16,279 Speaker 6: but they still import vehicles from Korea. They're waiting on 136 00:06:16,320 --> 00:06:19,160 Speaker 6: a trade deal there. It's one of their top sellers, 137 00:06:19,160 --> 00:06:21,360 Speaker 6: the Chevy Tracks, they sell two hundred thousand of them 138 00:06:21,360 --> 00:06:23,000 Speaker 6: a year, and it's getting hit with a big tariff 139 00:06:23,040 --> 00:06:25,360 Speaker 6: on South Korea. So you know, these are not easy 140 00:06:25,400 --> 00:06:28,800 Speaker 6: things to deal with. There is no quick fix for it. 141 00:06:28,960 --> 00:06:31,560 Speaker 6: You can't just pass the cost on to consumers because 142 00:06:31,560 --> 00:06:34,560 Speaker 6: they're already paying very high monthly payments because car prices 143 00:06:34,560 --> 00:06:37,279 Speaker 6: are very high and so our interest rates. So there's 144 00:06:37,600 --> 00:06:39,400 Speaker 6: no real way out of that. And they had some 145 00:06:39,440 --> 00:06:41,800 Speaker 6: other operational issues that had nothing to do with tariffs 146 00:06:41,800 --> 00:06:44,960 Speaker 6: that also hurt their profits in the quarter. So you know, 147 00:06:45,160 --> 00:06:47,600 Speaker 6: all in it was like it was a terrible quarter 148 00:06:47,640 --> 00:06:51,040 Speaker 6: without the tariffs, but it wasn't a great one either, 149 00:06:51,080 --> 00:06:52,919 Speaker 6: And there's no easy way around that. 150 00:06:53,600 --> 00:06:55,680 Speaker 3: A billion dollars on its own sounds like a lot. 151 00:06:56,320 --> 00:06:58,559 Speaker 3: A billion dollar hit. It's not something a company wants. 152 00:06:58,720 --> 00:07:01,760 Speaker 1: Is it big in the the grand scheme of General Motors? 153 00:07:02,560 --> 00:07:03,000 Speaker 5: No, it is. 154 00:07:03,080 --> 00:07:05,960 Speaker 6: I mean they're going to see exposure this year from 155 00:07:06,000 --> 00:07:09,600 Speaker 6: tariffs at forty four to five billion dollars, and like 156 00:07:09,640 --> 00:07:12,240 Speaker 6: I said, they'll offset some of that, but that's a 157 00:07:12,280 --> 00:07:15,880 Speaker 6: lot here, and so put it in perspective, you know, 158 00:07:15,920 --> 00:07:19,280 Speaker 6: they're EBIT. The operating profit for the North American Business 159 00:07:19,320 --> 00:07:21,800 Speaker 6: loan was four point four billion last year two point 160 00:07:21,800 --> 00:07:26,000 Speaker 6: four billion this year. So and that's their big profit generator, 161 00:07:26,040 --> 00:07:29,280 Speaker 6: is that North American business. So half of that hit 162 00:07:29,400 --> 00:07:31,880 Speaker 6: was tariffs, and there were other things like warranty costs, 163 00:07:31,920 --> 00:07:35,040 Speaker 6: like building up inventory for electric vehicles, which they're selling 164 00:07:35,040 --> 00:07:37,720 Speaker 6: more of and trying to really grow as a business, 165 00:07:38,160 --> 00:07:41,239 Speaker 6: but those vehicles lose money. That's another area that actually 166 00:07:41,320 --> 00:07:44,800 Speaker 6: hurt profits for them. But that took their EBIT down 167 00:07:44,840 --> 00:07:47,760 Speaker 6: by twenty five percent in the quarter alone, the teriff hit. 168 00:07:47,920 --> 00:07:50,640 Speaker 6: So it is a very big deal and it's it's 169 00:07:50,680 --> 00:07:52,760 Speaker 6: something that they just can't easily rectify. 170 00:07:52,960 --> 00:07:56,840 Speaker 4: Well on the rectifying this, David, somebody from the Trump administration, 171 00:07:57,160 --> 00:07:59,560 Speaker 4: if they were sitting here, might push back and say, 172 00:07:59,560 --> 00:08:02,000 Speaker 4: this is ex exactly why we have this policy and 173 00:08:02,040 --> 00:08:04,720 Speaker 4: effect so the work that is done outside of the 174 00:08:04,840 --> 00:08:08,160 Speaker 4: US by workers who are not American will be moved 175 00:08:08,160 --> 00:08:10,200 Speaker 4: to the United States and will then in turn be 176 00:08:10,320 --> 00:08:13,120 Speaker 4: done by American workers. Is that realistic. 177 00:08:13,800 --> 00:08:16,080 Speaker 6: Well, they are going to get some of it back 178 00:08:16,120 --> 00:08:18,440 Speaker 6: with GM announced a big investment in the US and 179 00:08:18,480 --> 00:08:21,840 Speaker 6: it's worth three or four thousand jobs making pickup trucks 180 00:08:21,880 --> 00:08:25,760 Speaker 6: and small Chevy Equinox SUVs that are made in Mexico. 181 00:08:25,760 --> 00:08:27,440 Speaker 6: They'll still make some there, but they're going to make 182 00:08:28,200 --> 00:08:29,560 Speaker 6: a lot of them here in the US too, and 183 00:08:29,640 --> 00:08:32,360 Speaker 6: also probably will take some production away from a pickup 184 00:08:32,400 --> 00:08:34,880 Speaker 6: truck plant in Canada as well. So it is bringing 185 00:08:34,960 --> 00:08:37,240 Speaker 6: jobs back. And the other argument that Trump administration would 186 00:08:37,240 --> 00:08:41,120 Speaker 6: probably make is GM's not raising prices because it's not 187 00:08:41,160 --> 00:08:43,000 Speaker 6: really clear that they can get a lot of pricing 188 00:08:43,000 --> 00:08:47,720 Speaker 6: out of consumers. So really the Trump administration is taxing GM, 189 00:08:48,160 --> 00:08:52,360 Speaker 6: not taxpayers, not consumers with these tariffs. So they would say, hey, 190 00:08:52,480 --> 00:08:55,319 Speaker 6: it's not been going to be this inflation everything that 191 00:08:55,360 --> 00:08:58,160 Speaker 6: the critics said, and it's going to raise money for 192 00:08:58,240 --> 00:09:01,480 Speaker 6: the federal government, and it's going to hurt somebody's profits 193 00:09:01,920 --> 00:09:06,520 Speaker 6: and disappoint some Wall Street analysts and investors. So that's 194 00:09:06,559 --> 00:09:10,320 Speaker 6: the other side of this, and I think that's going 195 00:09:10,360 --> 00:09:12,319 Speaker 6: to be the case with all the automakers going forward 196 00:09:12,320 --> 00:09:13,319 Speaker 6: for the next couple of years. 197 00:09:13,800 --> 00:09:15,959 Speaker 1: Hey, listen to anything on the call, or any questions 198 00:09:15,960 --> 00:09:18,240 Speaker 1: that are still you feel like not completely answered in 199 00:09:18,320 --> 00:09:20,120 Speaker 1: your mind or in the minds of investors. 200 00:09:20,720 --> 00:09:22,360 Speaker 3: As you reported this story out. 201 00:09:23,040 --> 00:09:26,640 Speaker 6: There is an open question about raising prices on vehicles. 202 00:09:26,679 --> 00:09:28,600 Speaker 6: There's no way they could recoup all of the tariffs 203 00:09:28,600 --> 00:09:31,160 Speaker 6: by passing those costs on to consumers. It's just too 204 00:09:31,200 --> 00:09:34,160 Speaker 6: much money. But we have seen other car companies sneak 205 00:09:34,200 --> 00:09:36,880 Speaker 6: in the little price hikes here and there. Does GM 206 00:09:36,960 --> 00:09:39,240 Speaker 6: start to do that at some point? Right now they're 207 00:09:39,240 --> 00:09:40,960 Speaker 6: saying they're holding the line and they're not going to 208 00:09:40,960 --> 00:09:44,200 Speaker 6: do it. But that is what we're really watching with 209 00:09:44,320 --> 00:09:48,800 Speaker 6: GM and all its competitors in the next six months 210 00:09:49,040 --> 00:09:51,280 Speaker 6: is what happens as we get trade deals, there will 211 00:09:51,320 --> 00:09:54,000 Speaker 6: still be higher tariffs. What happens with pricing going forward? 212 00:09:55,280 --> 00:09:59,400 Speaker 2: The Stock Movers podcast from Bloomberg Radio. 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