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Speaker 1: Let's get to our guests, Kenneth Say, Bloomberg Intelligent, Senior

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Speaker 1: Analysts for Global Beverages, Tobacco and Cannabis. Kenneth, thanks very

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Speaker 1: much for taking out the time to be with us

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Speaker 1: during the holidays. So pretty cautious environment out there right now.

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Speaker 1: Consumer staples probably pretty much in favor for investors. But

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Speaker 1: what area of consumer staples looks the most solid? Yeah,

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Speaker 1: thanks for invited me on today. Um, So I look

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Speaker 1: at consumer staples. You know, you talk about a sector

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Speaker 1: that people know from household products and packaged foods and beverages,

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Speaker 1: and you would think that this would be a sector

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Speaker 1: that would hold up really well during you know, economic

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Speaker 1: uncertainties and pandemic and so on. But what really happened

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Speaker 1: if you look back over the past three years, that

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Speaker 1: sector is really underperformed, as not performed well. And so

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Speaker 1: our report that we did, we looked at that that sector,

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Speaker 1: and we looked at the individual components, the beverages, the

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Speaker 1: package foods, personal products, and basically all of the industries performed.

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Speaker 1: And we're making the case here that in three this

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Speaker 1: appears to be a sector that's poised to pursue a

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Speaker 1: wider range of actions aimed at improving operating performance UM.

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Speaker 1: And so we think not only from a from a

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Speaker 1: perspective of share on the performance, but also shareholder activists

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Speaker 1: have become more involved here pursuing change. The market is

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Speaker 1: still receptive to spinoffs. There's a lot of activities these

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Speaker 1: companies can pursue to add shareholder value. In our opinion,

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Speaker 1: the thing is Kenneth's I mean, if we look at

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Speaker 1: the SMP five hunder name, look at analysts cools within

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Speaker 1: the industry groups that in fact analysts are the most

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Speaker 1: pessimistic on the consumer staple side of things. In fact,

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Speaker 1: I believe it has the lowest percentage of bio ratings

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Speaker 1: and the highest percentage of holding cell ratings. So this

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Speaker 1: is clearly something which perhaps is not being factored in

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Speaker 1: that they've got ways to go given their under performance.

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Speaker 1: You know, I totally agree, and there's a lot of

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Speaker 1: reasons to not like the sector UM. You know, in

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Speaker 1: terms of a fundamental point of view, you know, high

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Speaker 1: cost inflation, a lot of these companies have faced a

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Speaker 1: high commodities you know, package prices, labor, freight costs and

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Speaker 1: so on, like a lot of other sectors. But then

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Speaker 1: you think about you know, the on premise was so

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Speaker 1: hurt by that pandemic that hurts food service and hers

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Speaker 1: alcoholic beverages. A lot of US companies like Procter and Gamma,

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Speaker 1: Coca Cola has had really bad currency translations. But that's

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Speaker 1: a lot of things companies can do about it, you

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Speaker 1: know that. You know, well, although that all notwithstanding, these

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Speaker 1: companies have been slow to innovate, they've been slow to

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Speaker 1: divest underperforming assets, they've been slow to streamline. And we

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Speaker 1: think that's all gonna come to a head in three

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Speaker 1: when activists are going to turn up the pressure and

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Speaker 1: force companies to affect change. And does that mean you'll

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Speaker 1: see a lot of M and A in this area?

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Speaker 1: I really do, yes, they do. UM companies, for example,

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Speaker 1: Unilever comes to mind, a company that is the ultimate conglomerate.

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Speaker 1: It's those things from Dove soaps to you know, acts

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Speaker 1: um personal hygiene products, to Mayonnaise ice cream. You know,

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Speaker 1: this is the company that activists have been pushing to

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Speaker 1: sell some of these underperformers become more focused investors like

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Speaker 1: Focus and so that's that's an obvious one. But there's

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Speaker 1: other companies that are less obvious, hand called fems Koge,

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Speaker 1: palm Olive. There's a number of that we cite in

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Speaker 1: our report that are just um, you know, begging to

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Speaker 1: become more streamlined. The thing here is, Kenneth, that you know,

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Speaker 1: the boards of these companies that actually being quite loathed

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Speaker 1: to actually shrink the size of their companies. And you

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Speaker 1: know the point is that that well, ultimately, I think

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Speaker 1: what you're getting at is these some of its parts

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Speaker 1: are actually far less than the actual individual companies. If

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Speaker 1: they were spun off, there could be the case. You know,

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Speaker 1: that's one evidence spin offs. I agree that in many

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Speaker 1: cases that is the case. But spen also not the

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Speaker 1: only thing these companies can do. Uh. Activists appointed, for example,

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Speaker 1: to Comportable Fresh pet that's a company that makes you know,

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Speaker 1: high end, high price, appoint premium price pet food. And

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Speaker 1: you know, part of their niche is that they very

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Speaker 1: capital intensive. They bring to the market their own refrigerators

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Speaker 1: that refrigerated these things are very capital intensive. And activists said,

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Speaker 1: why don't you change your way to go to market

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Speaker 1: a little bit? There's some things you can do beyond

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Speaker 1: spinoffs and so on an acquisition, Kenneth, very interesting. I

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Speaker 1: think people learned a lot Kenneth Ship, Bloomberg Intelligence senior

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Speaker 1: analysts for a little beverage, tobacco and cannabis with us

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Speaker 1: live here on Bloomberg Daybreak Acasia