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Speaker 1: Because you're a subscriber to this Bloomberg podcast, we thought

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Speaker 1: you'd be interested in a sponsored podcast called The CEO Radar,

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Speaker 1: produced by BCG and Bloomberg Media Studios. It analyzes more

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Speaker 1: than forty five hundred Q two earnings calls worldwide to

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Speaker 1: assess what topics merit a CEO's time and attention. Here's

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Speaker 1: a recent episode. Discussions about tariffs have masked growing Concerned

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Speaker 1: by both CEOs and analysts about a possible economic downturn,

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Speaker 1: The CEO Radar has found The Radar is a tool

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Speaker 1: for chief executives to compare their own agendas to those

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Speaker 1: of their peers, as well as the market as a whole.

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Speaker 1: To do so, it took a look at the topics

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Speaker 1: that were discussed on more than forty five hundred earnings

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Speaker 1: calls in the second quarter of twenty twenty five. I'm

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Speaker 1: Edward Adams of Bloomberg Media Studios. On this episode, I'm

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Speaker 1: joined by BCG Global Chair Rich Lesser and Migret Poulson,

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Speaker 1: Global leader of BCG's Consumer and Retail practice. Rich and

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Speaker 1: my brit Welcome to the podcast.

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Speaker 2: Thanks, it's great to be with you again.

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Speaker 1: So to no One's surprised. This quarter, the topic of

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Speaker 1: tariffs dominated the conversations during earnings calls. The number of

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Speaker 1: mentions of it by both CEOs and by analysts, which

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Speaker 1: is our proxy for the market, rose by triple digits.

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Speaker 1: But we also saw this interesting other trend occurring, which

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Speaker 1: was CEOs were mentioning uncertainty and synonyms for that at

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Speaker 1: an all time high over the past decade, higher even

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Speaker 1: than they did during COVID. And when we saw the

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Speaker 1: mentions by analysts of things like economic slowdown, those rose

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Speaker 1: by four hundred and fifty percent quarter on quarter this year. Rich,

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Speaker 1: I'm curious whether the CEOs that you're speaking to are

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Speaker 1: saying to you that they think tariffs may tip us

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Speaker 1: over into a recession.

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Speaker 2: Well, so, first I have to say the uncertainty that

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Speaker 2: came up in the analyst calls is completely aligned with

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Speaker 2: what I hear in private discussions. The focus on uncertainty

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Speaker 2: when you talk to CEOs. Of course, the tariffs themselves

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Speaker 2: have a challenge, but just trying to navigate what is

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Speaker 2: going to happen, what does it mean, and what does

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Speaker 2: it mean for their business? It comes up all the time,

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Speaker 2: and I do think that CEOs are more anxious about

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Speaker 2: the economy. Honestly, I do think it's moderated a bit

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Speaker 2: in the last month or two, particularly as things with

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Speaker 2: China are not to the levels they were before, but

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Speaker 2: are now on a level that I think people can

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Speaker 2: plan and navigate around. But the level of economic uncertainty

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Speaker 2: is higher. Our own chief economists would say the odds

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Speaker 2: of a recession still remain well below fifty percent, but

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Speaker 2: the odds of a slowdown I think are quite likely,

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Speaker 2: assuming that the tariffs remain in force to some degree,

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Speaker 2: you know, in a way that's meaningfully higher than.

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Speaker 1: For migrant What does BCG's recent survey of consumer sentiment

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Speaker 1: tell us about which direction the economis had.

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Speaker 3: So recently we have looked into the US consumers and

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Speaker 3: also we have surveyed consumers in nine different European markets.

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Speaker 3: Let me start with the European sentiment compared to last year.

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Speaker 3: At the same time last year, consumers are turning more

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Speaker 3: cautious and they're worried about economic uncertainty. And you see

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Speaker 3: they are hunting much more. For Bardians, they want a

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Speaker 3: good deal, so they are trading down in the market

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Speaker 3: across many categories. Of course, there are some variants between

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Speaker 3: the European markets. The UK consumers are worried, France the same,

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Speaker 3: whereas the Scandinavian consumer are more optimistic or we have

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Speaker 3: less consumers that are worried. In the US. We also

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Speaker 3: had recently a survey. We also looked at actual spent data,

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Speaker 3: so we looked at whether what consumers are telling us

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Speaker 3: mirrors how they spent their money. What we can see

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Speaker 3: is the US consumers also worried. They talk about job certainty,

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Speaker 3: economic certainty, They quote inflation as a key reason for

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Speaker 3: more cautious spending, and they are trading down. They are

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Speaker 3: looking into private label, their own label from the retailers,

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Speaker 3: and also looking into two bargins. They still spend on

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Speaker 3: travel and technology that it has not changed, but on

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Speaker 3: other household purchases there is a tendency to trade down.

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Speaker 1: That's interesting because in the radar this quarter we found

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Speaker 1: that mentions of consumer sentiment and topics like oil prices

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Speaker 1: and margin rate were increasing. So that gives me an

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Speaker 1: indication that at least in the C suite and on

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Speaker 1: Wall Street, there's concern at least about whether or not

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Speaker 1: things are moving in the wrong direction economically. Rich I'm

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Speaker 1: curious what are some specific moves that CEOs can take,

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Speaker 1: say three things that they can do to try and

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Speaker 1: insulate themselves to a degree from the uncertainty that we're facing.

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Speaker 2: I think you need to think short, medium, and some

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Speaker 2: longer term. In the short term, this idea of a

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Speaker 2: tariff command center to build a muscle in an area

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Speaker 2: that historically you didn't think you needed muscle, I think

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Speaker 2: is now not just a no regret move. It's sort

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Speaker 2: of a requirement to be able to navigate a world

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Speaker 2: of heightened uncertainty and a new part of a cost

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Speaker 2: structure that historically didn't exist before, and one that we

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Speaker 2: don't know if it'll stabilize or it won't. So that's

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Speaker 2: almost immediate and most and it is both looking for

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Speaker 2: scenario planning and no regret actions, but it's also looking

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Speaker 2: deeply at supply chain and deeply at go to market.

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Speaker 2: I think the second thing that's more medium, but medium

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Speaker 2: meaning one to two years, is what can we do

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Speaker 2: to drive as much productivity as we can and to

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Speaker 2: develop the deepest customer relationships that we can The tools

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Speaker 2: with AI and analytics to build deeper customer relationships, to

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Speaker 2: build stickiness, to build trust, to bring new value to customers.

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Speaker 2: And then I think slightly longer term, but two to

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Speaker 2: five years, not ten years plus, is how do we

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Speaker 2: embrace AI, How do we think about where it's going

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Speaker 2: to add the most value. How do we take on

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Speaker 2: a couple really big things and really make them happen

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Speaker 2: and show that we can drive business value with it

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Speaker 2: and build a confidence and a muscle and an understanding

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Speaker 2: so that then we can take on more and more

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Speaker 2: areas over time, rather than saying we're going to do

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Speaker 2: everything at once, or we're just going to throw the

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Speaker 2: tech out there and see if it works. And I

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Speaker 2: think companies are going think in those three timeframes. I

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Speaker 2: think they're going to be in the best position and

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Speaker 2: navigate a challenging period. It's not a guarantee. There are

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Speaker 2: no guarantees, my Brad.

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Speaker 1: This is particularly important for consumer products company. I was

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Speaker 1: going to say, what are you seeing there?

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Speaker 3: Yeah, And I would argue, building on Rich's point in

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Speaker 3: in the pandemic, supply chain diversification already started. I think

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Speaker 3: there was a big wake up call to many companies,

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Speaker 3: whether it's a consumer products company or across sectors. Right, So,

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Speaker 3: already then we saw a lot of work by C

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Speaker 3: putting this on the agenda, optimizing the footprint dual sourcing

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Speaker 3: as a minimum and not only optimizing a global supply

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Speaker 3: chain for cost. So it has been on the way

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Speaker 3: for a long time. If you look at both the

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Speaker 3: retail segment and also consumer goods companies, there's a lot

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Speaker 3: of dual sourcing diversification of sourcing strategies taking place.

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Speaker 2: And the other supply chain topic that I do here

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Speaker 2: talked about in private that doesn't get as much discussion

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Speaker 2: in the public domain is the challenge of navigating the

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Speaker 2: US workforce environment because we focus a lot on what's

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Speaker 2: happening on the tariff and trade side, But the other

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Speaker 2: big change that's happening has been, you know, the President

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Speaker 2: coming through on his commitment to both stop illegal immigration

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Speaker 2: and to put people out of the country who were

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Speaker 2: here in an undocumented way. And I think that there

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Speaker 2: was already a pressured US workforce situation. This is not

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Speaker 2: a new issue. But I think many companies who know,

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Speaker 2: based on tariffs they want to put new production capacity

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Speaker 2: in the US that that's almost a no regret move.

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Speaker 2: Even if we don't know exactly where tariffs land, it

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Speaker 2: is hard to feel confident you're going to be able

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Speaker 2: to source the workforce quality you need, that you'll get

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Speaker 2: the workforce productivity you need when there's so much uncertainty

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Speaker 2: on the workforce side as well. So when I talk

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Speaker 2: in private to CEOs that issue around workforce challenges, they've

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Speaker 2: already experienced them tell really passionate stories about how hard

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Speaker 2: it's been to get a workforce that they need, particularly

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Speaker 2: for more classic blue collar jobs or infrastructure jobs, and

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Speaker 2: how they're worried about that going forward, and how that

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Speaker 2: adds complexity to an investment decision that might otherwise seem

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Speaker 2: pretty straightforward.

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Speaker 1: Rich I wonder whether there's anything positive that can come

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Speaker 1: out of this era of uncertainty.

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Speaker 2: So I continue to believe one of the biggest opportunities

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Speaker 2: in the business world is personalization. And I mean that

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Speaker 2: in a business to consumer relationship and in a business

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Speaker 2: to business relationship, the tools to do that have never

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Speaker 2: been more powerful. And actually, in an uncertainty we all

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Speaker 2: value relationships more, not less so not the main driver,

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Speaker 2: but the technologies that exist. I'm really excited about what

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Speaker 2: we can do on that front.

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Speaker 1: Is there any way in which you can use these

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Speaker 1: uncertain times perhaps to grow market share?

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Speaker 3: For instance, there's also a lot of opportunity pricing strategies.

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Speaker 3: AI and GENAI powered gives an enormous competitive advantage if

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Speaker 3: you get it right. So the insight from having enormous

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Speaker 3: amounts of data analyzed real time allows companies to price

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Speaker 3: in a very different way than before.

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Speaker 1: There were some regional differences in the radar when it

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Speaker 1: comes to trade and tear IFFs. We saw that mentions

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Speaker 1: increase three times as fast in Asia this quarter as

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Speaker 1: they did anywhere else in the world. Some people lay

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Speaker 1: that off to the idea that Asia will be more

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Speaker 1: negatively affected by US terraff regime than other places will.

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Speaker 1: There is a Bloomberg US tariff Impact Matrix which found

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Speaker 1: that the average Asian company will see its profits cut

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Speaker 1: by about ten percent under what at the beginning of

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Speaker 1: June was the US teriff regime in that region. My

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Speaker 1: brit I'm wondering whether or not you're seeing anything regionally

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Speaker 1: different about tariffs when it comes to Asia versus the

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Speaker 1: rest of the world.

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Speaker 3: I think we need to diaverage the Asia question. It

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Speaker 3: is true if you look at consumer goods companies, there

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Speaker 3: is who has a high exposure to raw materials and

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Speaker 3: packaging from China. They are looking into diversifying sourcing, but

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Speaker 3: not necessarily away from Asia. India is being mentioned, Vietnam

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Speaker 3: is being mentioned, So there are many other opportunities in

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Speaker 3: Asia to source where you're not necessarily hit by the

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Speaker 3: current thinking on the tariff regime. So I think we

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Speaker 3: need to de average the impact.

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Speaker 1: All three of us are old enough to have lived

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Speaker 1: through some business cycles and periods of uncertainty. I'm curious

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Speaker 1: for both of you, what are periods in the past

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Speaker 1: that remind you of what we're going through today.

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Speaker 3: So I think what makes this situation different than before

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Speaker 3: if you look at the dot com bubble, if you

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Speaker 3: look at the financial crisis in two thousand and eight,

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Speaker 3: is that there are so many factors at play. So

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Speaker 3: we look at energy prices, inflation, climate change, do you

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Speaker 3: political uncertainty, economic uncertainty. So there are many variables that

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Speaker 3: you need to navigate in as a CEO, and that

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Speaker 3: makes the situation complex, that's for sure.

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Speaker 2: I would say for me, this latest challenge is really

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Speaker 2: reflective of the decade we're living in. I mean the teens.

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Speaker 2: You know, we got through the Great Financial Crisis more

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Speaker 2: or less by twenty ten, or whatever. When that decade started,

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Speaker 2: it was a relatively stable period. It wasn't a particularly

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Speaker 2: exciting economic period. Growth wasn't great. We had challenges, but

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Speaker 2: the amount of shocks or uncertainty in that system more

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Speaker 2: relatively low. And this decade that literally started in January

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Speaker 2: twenty twenty when COVID first started expanding around the world,

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Speaker 2: has been one challenge for resilience after another after another.

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Speaker 2: COVID is supply chain shocks, inflation wars we hadn't seen

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Speaker 2: happening in a very long period of time. That created

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Speaker 2: other uncertainties, and of course now all the challenges of

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Speaker 2: tariffs and trade that we also hadn't seen for decades.

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Speaker 2: What I observe in CEOs is building a resilience muscle

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Speaker 2: that I think, frankly, people were ready to run their

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Speaker 2: businesses in a very brittle way at the end of

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Speaker 2: the teens, meaning push for performance, performance, performance, the risk

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Speaker 2: of activist investors coming in. Everybody was on the gas

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Speaker 2: pedal as much as they could to drive performance, and

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Speaker 2: the threat felt like if you didn't optimize for performance,

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Speaker 2: your company could be really pressured. This whole decade, I

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Speaker 2: think has taught CEOs and leaders and boards that yes,

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Speaker 2: you need performance. Of course, everybody's watching you. Guys are

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Speaker 2: monitoring everything. But if you're not also building for resilience,

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Speaker 2: and you are actually taking more risk than you realize.

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Speaker 2: And I think whether we talked supply chain earlier, I

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Speaker 2: think we're going to see it in other ways playing

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Speaker 2: out about how you think about your investment footprint, your

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Speaker 2: business footprint to create a broader base of revenues. I

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Speaker 2: just think companies are thinking about resilience and leaders to

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Speaker 2: a much higher degree. And so this is new in

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Speaker 2: many ways, and we've talked about that, but it also

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Speaker 2: builds on a trend that is very unique to this

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Speaker 2: decade versus the decades that came before.

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Speaker 3: Yeah, what I also think is different rich that I

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Speaker 3: thought about is the speed of change driven by technology.

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Speaker 3: So if we look at just the last eighteen months

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Speaker 3: and what has happened with open Ai Jinnai. Now we

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Speaker 3: talk a lot with CEOs around agents and how to

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Speaker 3: build agents, and how agents is going to change vertical

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Speaker 3: workflows across the organization, which roles will be obsolete. It's

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Speaker 3: a big struggle both to perform in the current environment,

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Speaker 3: as you say, with all the variables and continue to

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Speaker 3: win market share and transform the business. And the speed

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Speaker 3: of change is enormous because of technology. How do you

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Speaker 3: make sure you change fast enough entire functions as we

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Speaker 3: talked about before in multinational companies spanning many, many different

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Speaker 3: countries from around the world. The level of disruption also

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Speaker 3: from startups, especially driven by new technology, is It's an

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Speaker 3: enormous opportunity, but it's also a thread for an established player.

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Speaker 1: It seems like the only thing that was certain in

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Speaker 1: this last quarter was uncertainty, and it's going to be

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Speaker 1: interesting to see whether or not that changes in the

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Speaker 1: quarter upcoming with yet new terror decisions on the horizon.

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Speaker 1: So Rich and my Brett thank you very much for

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Speaker 1: your insights today.

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Speaker 2: It was a pleasure to be with you.

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Speaker 3: Great to be here with you today.

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Speaker 1: Those of you who'd like to learn more about the

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Speaker 1: CEO Radar, you can read the full report at Bloomberg

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Speaker 1: dot com slash CEO Radar. If you've liked what you've

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Speaker 1: heard today, you can subscribe to the podcast on YouTube

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Speaker 1: or any of the podcast platforms you use. Our next

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Speaker 1: episode will drop an early e Q four with a

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Speaker 1: whole new batch of data. I'm Edward Adams of Bloomberg

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Speaker 1: Media Studios. Thanks for listening,