WEBVTT - Lots More on What Earnings Are Telling Us About Prices Now 0:00:03.120 --> 0:00:07.480 Bloomberg Audio Studios, podcasts, radio news. 0:00:10.480 --> 0:00:15.520 I will say BUCkies is maybe the most confusingly amazing 0:00:15.560 --> 0:00:16.800 place on the planet. 0:00:17.120 --> 0:00:20.720 Right it is. It is a mind boggling experience. 0:00:21.400 --> 0:00:23.200 Sam is telling us a story about BUCkies. 0:00:23.320 --> 0:00:23.760 I heard. 0:00:23.920 --> 0:00:27.479 Why was it? Hey, Sam? Why was it? Insane? I 0:00:27.520 --> 0:00:29.520 gotta know? Wait are we recording? 0:00:30.120 --> 0:00:31.000 We're recording right. 0:00:30.920 --> 0:00:34.479 But wait, you guys started without me. Well yeah, okay, 0:00:34.680 --> 0:00:35.760 so this is off the record. 0:00:38.880 --> 0:00:41.800 I did a deadlift one, Jimmy. 0:00:41.880 --> 0:00:45.919 Okay, uh barges. 0:00:46.080 --> 0:00:48.239 This isn't After School Special, except. 0:00:47.840 --> 0:00:50.400 I've decided I'm going to base my entire personality going 0:00:50.400 --> 0:00:53.640 forward on campaigning for a strategic pork reserve in the US. 0:00:53.760 --> 0:00:55.480 Where's the best with imposta? 0:00:55.640 --> 0:00:58.240 These are the important question? Is it robots taking over 0:00:58.240 --> 0:00:58.840 the world? No. 0:00:58.920 --> 0:01:01.800 I think that like in a couple of years, the 0:01:01.880 --> 0:01:04.080 AI will do a really good job of making the 0:01:04.080 --> 0:01:07.320 Odd Lots podcast and people to say, I don't really 0:01:07.400 --> 0:01:09.240 need to listen to Joe and Tracy anymore. 0:01:09.440 --> 0:01:10.360 We do have. 0:01:11.760 --> 0:01:15.640 The perfect welcome to lots More where we catch up 0:01:15.680 --> 0:01:17.960 with friends about what's going on right now. 0:01:18.120 --> 0:01:22.520 Because even when Odd Lots is over, there's always lots More, And. 0:01:22.440 --> 0:01:24.679 We really do have the perfect guest. 0:01:26.920 --> 0:01:30.120 Oh, Joe, did you see did you see PEPSI results 0:01:30.120 --> 0:01:30.839 from last week? 0:01:31.160 --> 0:01:33.759 You know what, Okay, I'm gonna admit something. I haven't 0:01:33.800 --> 0:01:35.880 been paying that close attention to earnings. 0:01:35.520 --> 0:01:39.119 This season, which I actually had that feeling that you weren't. 0:01:39.200 --> 0:01:39.920 But why is that? 0:01:40.520 --> 0:01:40.679 Uh? 0:01:42.600 --> 0:01:45.440 I don't know, like I think I'm like like paying attention. 0:01:45.560 --> 0:01:48.640 I don't know, like looking I have no justification. Maybe 0:01:48.680 --> 0:01:50.720 I just think you like too much about the FED 0:01:51.000 --> 0:01:54.680 and trying to read monetary policy stuff. And you're right, 0:01:54.720 --> 0:01:57.880 I have no I have no defense. You know, wait, 0:01:58.000 --> 0:01:59.800 how did you know I had a How did you 0:01:59.840 --> 0:02:02.000 have this feeling that I've been slacking at the job? 0:02:02.120 --> 0:02:07.360 Because I was about to say something sarcastic. No, because 0:02:07.440 --> 0:02:10.120 I can, I can tell I think. You know, it's 0:02:10.160 --> 0:02:13.320 funny after we've done the Odd Lots podcast for I mean, 0:02:13.440 --> 0:02:16.679 it's actually coming up for ten years in twenty twenty five. Yeah, 0:02:16.760 --> 0:02:19.640 it is actually disturbing that we tend to think of 0:02:19.680 --> 0:02:23.200 the same questions. We tend to be on the same page. 0:02:23.280 --> 0:02:26.280 We tend to not actually have to like tell each 0:02:26.280 --> 0:02:28.880 other that many things. That's right, Like we can just 0:02:28.919 --> 0:02:32.280 say one sentence and we both immediately know like what 0:02:32.320 --> 0:02:32.800 we want to do. 0:02:32.960 --> 0:02:33.880 Yeah, jeez, but. 0:02:33.960 --> 0:02:35.880 Yes, I could tell you weren't paying attention to earnings. 0:02:35.919 --> 0:02:38.919 I kind of feel like earnings are there. I've said 0:02:38.919 --> 0:02:41.040 this before, but I swear to god they come up 0:02:41.200 --> 0:02:43.079 more often than four times a year. 0:02:43.280 --> 0:02:46.040 We were recording this, by the way, on February fourteenth, 0:02:46.040 --> 0:02:48.680 twenty twenty four, four h six pm, and I'm looking 0:02:48.760 --> 0:02:51.679 at a TV right behind you, Tracy, and there is 0:02:51.720 --> 0:02:54.600 a headline Cisco to cut five percent of its global 0:02:54.600 --> 0:02:55.560 work force. Yeah. 0:02:55.639 --> 0:02:58.120 So this is a big theme of earnings right now, 0:02:58.639 --> 0:03:02.480 which is Layoffs was aware of. Yes, in part because 0:03:02.480 --> 0:03:06.000 they're also hitting our own industry media, but predominantly they've 0:03:06.000 --> 0:03:08.240 been in tech so far. And it kind of raises 0:03:08.240 --> 0:03:12.560 the question about what levers companies actually have to pull 0:03:12.800 --> 0:03:16.079 to boost earnings and profit margins right now? Do you 0:03:16.120 --> 0:03:19.600 remember we spoke to Samuel Ryans absolutely last year. So 0:03:19.680 --> 0:03:24.720 Sam nailed the earnings trade last year and he kind 0:03:24.720 --> 0:03:26.840 of has like a new thesis now. Sam. It's good 0:03:26.840 --> 0:03:27.959 to talk to you on lots more. 0:03:28.400 --> 0:03:30.880 Oh, it's fantastic to be here. And at least Joe 0:03:30.919 --> 0:03:34.320 didn't make up an excuse to not be paying attention. 0:03:34.600 --> 0:03:37.120 I just admitted it, just admitted Joe is very good 0:03:37.160 --> 0:03:42.120 at taking ownership for his faults. Is faltisfying, Yeah, faults? 0:03:42.760 --> 0:03:45.200 I mean I was just riffing off excuse flation. 0:03:45.520 --> 0:03:48.000 Oh yeah, oh thanks, I got I picked that up. 0:03:48.000 --> 0:03:49.160 I picked that up, Thank you. 0:03:49.200 --> 0:03:51.720 So this is one reason I wanted to talk to you, Sam. 0:03:51.760 --> 0:03:54.640 So last year we had this episode where we talked 0:03:54.640 --> 0:03:58.640 about how companies were basically pushing price, so raising their 0:03:58.680 --> 0:04:02.920 prices to offset lower volumes, and arguably they've been doing 0:04:02.920 --> 0:04:05.600 that in the post pandemic environment for a while now, 0:04:05.960 --> 0:04:09.360 and I think like it kind of went viral after that. 0:04:09.440 --> 0:04:11.960 I don't know if that was your experience, it was. 0:04:11.880 --> 0:04:12.960 Certainly my experience. 0:04:13.040 --> 0:04:15.560 If I'd known that it was going to go quite 0:04:15.600 --> 0:04:20.320 that viral, I probably would have discontinued my Twitter account 0:04:21.080 --> 0:04:23.320 for a week or two. 0:04:23.360 --> 0:04:25.320 But yeah, no, that definitely went viral. 0:04:25.839 --> 0:04:28.159 Yeah, we should talk to Sam more often, because I 0:04:28.200 --> 0:04:31.679 do know and I do read some of your notes. 0:04:31.720 --> 0:04:34.320 I don't read everyone because leave is short, but I 0:04:34.400 --> 0:04:36.400 like click on them. And during earning season, you do 0:04:36.720 --> 0:04:41.919 track earnings and you derive the macro signals from what 0:04:42.000 --> 0:04:43.880 companies are setting out their conference calls you to a 0:04:43.880 --> 0:04:46.800 close reading. So talk to us about layoffs because they're 0:04:46.839 --> 0:04:49.680 not really showing up in the macro data yet. Like, 0:04:50.400 --> 0:04:53.120 by and large, the labor market data is good, but 0:04:53.160 --> 0:04:55.800 we do have a lot of earnings headlined, So what 0:04:55.920 --> 0:04:56.640 is going on there? 0:04:57.520 --> 0:04:59.840 Yeah, so let's start with the layoffs. 0:05:00.000 --> 0:05:02.120 It's a strange world, right, because the layoffs get a 0:05:02.120 --> 0:05:04.680 lot of attention, they get a lot of the headlines. 0:05:05.360 --> 0:05:07.839 But at the same time, if you look back at 0:05:07.920 --> 0:05:12.719 what was happening January, February March of last year, it 0:05:12.839 --> 0:05:15.359 was far worse. It was far more of a massacre 0:05:15.680 --> 0:05:16.520 on the text lage. 0:05:16.600 --> 0:05:19.679 Yeah, if you look at the Challenger layoffs, you can see, 0:05:19.720 --> 0:05:22.080 like the spike last year was a lot more than 0:05:22.080 --> 0:05:24.800 it is currently, even though it feels like these announcements 0:05:24.839 --> 0:05:26.159 are in the headlines constantly. 0:05:27.000 --> 0:05:31.080 Yeah, And when you look at what you call it, 0:05:31.360 --> 0:05:34.279 a company like Meta, what they did last year in 0:05:34.360 --> 0:05:38.680 terms of headcount reduction, like Cisco, it was five times 0:05:38.880 --> 0:05:40.480 what Cisco did today. 0:05:40.839 --> 0:05:42.039 Right, So Cisco. 0:05:41.800 --> 0:05:45.560 Lays off five thousand people. Meta did twenty five in 0:05:45.600 --> 0:05:47.000 a single month last year. 0:05:47.160 --> 0:05:49.000 So to me, there's a. 0:05:49.000 --> 0:05:52.560 Lot of headlines about the layoffs, but it's not necessarily 0:05:52.600 --> 0:05:56.600 going to translate into the overall jobs pictures simply because 0:05:56.640 --> 0:06:01.560 you have a pretty tight labor market and it's not 0:06:01.839 --> 0:06:05.719 really as bad as the headlines which would suggest. 0:06:05.760 --> 0:06:09.520 So we did an episode recently with Jason Cummins at Brevin. 0:06:09.720 --> 0:06:13.760 He's negative on the economy, but one of the things 0:06:13.800 --> 0:06:16.919 that he says is that, Okay, his basic thesis is 0:06:16.960 --> 0:06:21.000 that pricing power growth is not like it used to be. 0:06:21.040 --> 0:06:23.440 Companies can't push price like they could a year ago 0:06:23.600 --> 0:06:26.680 or two years ago. So in order to flatter margins, 0:06:27.040 --> 0:06:29.120 they're going to be cutting jobs because at least of 0:06:29.160 --> 0:06:31.279 the short term, you can get a profit margin boost 0:06:31.279 --> 0:06:33.880 by having few workers. How does that square with what 0:06:33.920 --> 0:06:35.080 you're actually seeing right now? 0:06:35.440 --> 0:06:39.160 I would say Tech really did take their medicine last year. 0:06:40.040 --> 0:06:43.200 You can look at Alphabet, you can look at Meta, 0:06:43.400 --> 0:06:46.279 you can look at Amazon. Right the head counts are 0:06:46.320 --> 0:06:49.920 all down pretty significantly on a year a year basis. 0:06:50.720 --> 0:06:57.640 The really interesting thing with the consumer products group companies, 0:06:58.080 --> 0:07:00.320 you know, you're Procter and Gambles, your Unilely. 0:07:00.800 --> 0:07:04.040 Your Coca Colas, they really. 0:07:03.680 --> 0:07:07.719 Haven't had the hiring binge over the past two or 0:07:07.760 --> 0:07:11.800 three years that would allow for a lever on that front, 0:07:11.920 --> 0:07:15.200 particularly when they're running out of pricing power. So if 0:07:15.200 --> 0:07:18.160 you're running out of pricing power and your primary way 0:07:18.280 --> 0:07:23.720 of getting additional revenue in the door is volume, you're 0:07:23.880 --> 0:07:28.080 probably going to find it pretty difficult to lay a 0:07:28.120 --> 0:07:32.160 significant number of people off right. You're looking for that 0:07:32.400 --> 0:07:38.920 incremental freedom lay being sold. That takes a manufacturing facility, 0:07:38.920 --> 0:07:41.679 that takes somebody to make it right. It's a much 0:07:42.440 --> 0:07:47.160 it's a much less interesting way of making margin. But 0:07:47.200 --> 0:07:51.160 it's really important from the perspective of can they really 0:07:51.240 --> 0:07:53.280 lay a lot of people off And I really don't 0:07:53.320 --> 0:07:56.400 know that they can, particularly if they don't want to 0:07:56.400 --> 0:07:59.880 get dragged in front of Congress and be a qu 0:08:00.080 --> 0:08:02.440 used to price gouging and then laying people off right. 0:08:02.440 --> 0:08:04.480 That is a really bad political look. 0:08:05.160 --> 0:08:09.920 And so I mean, if I were Mark Zuckerberger Jeff Bezos, 0:08:10.120 --> 0:08:15.200 I would really root for a significant layoff on the 0:08:15.200 --> 0:08:18.119 CpG side, simply because you're going to have them dragged 0:08:18.120 --> 0:08:21.520 in front of Congress instead of zucking Bezos. 0:08:21.880 --> 0:08:23.720 I wanted to ask you about this actually because we're 0:08:23.760 --> 0:08:27.600 recording this, like Joe said on Valentine's Day, and we 0:08:27.680 --> 0:08:29.760 just saw the Super Bowl and one of the ads 0:08:29.760 --> 0:08:32.280 that ran during the Super Bowl was from the Biden 0:08:32.320 --> 0:08:36.240 administration about shrink flation, and they have also made noises 0:08:36.280 --> 0:08:40.680 about price gouging and basically been saying that companies need 0:08:40.720 --> 0:08:45.040 to start bringing down their prices as overall inflation and 0:08:45.200 --> 0:08:49.199 supply chain pressures start to dissipate. And I always wonder 0:08:49.800 --> 0:08:53.280 how scary is that type of jaw owning actually for 0:08:53.400 --> 0:08:56.600 companies and CEOs, because it feels like, Okay, you know, 0:08:56.880 --> 0:09:00.400 the President can say stuff about prices, but ultimately it's 0:09:00.400 --> 0:09:04.760 a free market economy and unless you're engaging in monopolistic 0:09:04.920 --> 0:09:09.400 practices or doing something illegal, you're allowed to raise your 0:09:09.440 --> 0:09:12.440 prices again, as long as you're not colluding or something 0:09:12.480 --> 0:09:12.800 like that. 0:09:14.240 --> 0:09:15.040 It's really not. 0:09:14.960 --> 0:09:20.000 That scary until the you know, the FTC gets involved. 0:09:20.280 --> 0:09:20.439 Right. 0:09:20.480 --> 0:09:23.920 It's something where you're like, eh, we have to tread lightly, 0:09:24.280 --> 0:09:28.959 but you're not going to lower prices because you get 0:09:29.040 --> 0:09:32.720 yelled at from Washington, right, You're going You're only going 0:09:32.720 --> 0:09:36.120 to lower prices if it's advantageous for you in some way, 0:09:36.360 --> 0:09:40.960 and that is just the way it works. It's a 0:09:41.120 --> 0:09:45.360 very I would say it was politically advantageous from the 0:09:45.360 --> 0:09:49.040 Biden administration, but it's not all that nerve wracking, you know, 0:09:49.080 --> 0:09:52.800 if you're a corporate CEO that has raised prices over 0:09:52.800 --> 0:09:56.240 the last few years, because frankly, you're really not raising 0:09:56.280 --> 0:10:01.280 prices that much going forward, and you basically told everybody 0:10:01.400 --> 0:10:02.160 you're not going to. 0:10:02.520 --> 0:10:04.800 So just sorry to be clear on the staying on 0:10:04.840 --> 0:10:08.079 the layoffs real quickly. A tech company, I mean, one 0:10:08.120 --> 0:10:11.760 of the amazing things about software modern tech companies. But 0:10:11.800 --> 0:10:14.319 why software is this amazing business model that people love 0:10:14.400 --> 0:10:17.720 is you build it and then it just in theory, 0:10:17.880 --> 0:10:20.600 is a money making machine forever, and then the code 0:10:20.679 --> 0:10:23.800 lives on when and so at least in the short term, 0:10:23.840 --> 0:10:25.400 if you're not too worried about R and D or 0:10:25.440 --> 0:10:29.199 product development, you could cut workers expand margin very clearly 0:10:29.240 --> 0:10:32.240 without necessarily take your revenue hit in areas like tech 0:10:32.280 --> 0:10:36.360 and software. But basically your contention is that in areas 0:10:36.400 --> 0:10:40.360 like consumer package goods, et cetera, there is just not 0:10:40.640 --> 0:10:43.920 much levers you could pull to cut workers without also 0:10:44.000 --> 0:10:45.320 affecting your ability. 0:10:45.000 --> 0:10:47.360 To do business exactly. 0:10:47.720 --> 0:10:53.520 I really do think it's somewhat problematic when you look 0:10:53.600 --> 0:10:58.280 back over the past oh decade or so, you know 0:10:58.320 --> 0:11:05.400 a lot of these CpG companies really haven't added employees 0:11:05.559 --> 0:11:09.920 on net in any meaningful way, so it's it's not 0:11:10.040 --> 0:11:13.600 as though the employee leverage is really where they want 0:11:13.640 --> 0:11:17.680 to reach. What I would say is that, you know, 0:11:18.040 --> 0:11:20.960 we called it price over volume when I was on 0:11:21.040 --> 0:11:23.960 about a year ago. What I would say now is 0:11:24.200 --> 0:11:29.920 you're beginning to see that price that companies put in 0:11:30.720 --> 0:11:34.120 begin to show up in margin in a very meaningful way, 0:11:34.320 --> 0:11:38.640 particularly gross margin, and those gross margin dollars are flowing 0:11:38.679 --> 0:11:43.840 into the quote unquote brand building that they need to 0:11:43.880 --> 0:11:46.640 do in order to try to get volumes back. And 0:11:46.880 --> 0:11:49.840 you look at the you know, the metas and the 0:11:49.840 --> 0:11:54.000 alphabets of the world, they're kind of telling you that 0:11:54.000 --> 0:11:58.120 that's exactly what's happening. These companies are taking the incremental 0:11:58.120 --> 0:12:00.640 dollars that they're making on the gross margin line and 0:12:00.679 --> 0:12:04.280 they're putting them into advertising and marketing in a meaningful 0:12:04.320 --> 0:12:06.920 and significant way to compete for those volumes. 0:12:07.440 --> 0:12:09.880 I was going to ask you exactly about this, like 0:12:10.040 --> 0:12:15.640 how companies actually push through volume increase in the current environment, 0:12:15.720 --> 0:12:20.040 and so you think that it's ad spending and basically, 0:12:20.120 --> 0:12:23.560 you know, increasing brand awareness. One of the reasons I 0:12:23.640 --> 0:12:25.800 really like talking to you sam is because you do, 0:12:25.880 --> 0:12:29.840 unlike Joe, you do look at the earnings and like 0:12:29.880 --> 0:12:33.520 specifically what companies are saying on their calls with analysts, 0:12:33.880 --> 0:12:37.280 what CEOs are saying, Like what are some interesting things 0:12:37.320 --> 0:12:40.600 that you've picked out from the current quarter. And you know, 0:12:40.640 --> 0:12:44.240 for instance, I mentioned pepsi earlier, but like, are they 0:12:44.320 --> 0:12:50.160 saying things specifically about either pricing, power diminishing or volumes increasing. 0:12:51.520 --> 0:12:52.960 So one of the. 0:12:52.679 --> 0:12:56.760 Most interesting companies this past quarter was Unilever, and they 0:12:56.800 --> 0:13:02.480 do everything from skincare to ice cream, and they when 0:13:02.520 --> 0:13:05.000 they put out their earnings in their presentation, they have 0:13:05.120 --> 0:13:09.120 this great chart and it's thirteen point three percent pricing 0:13:09.160 --> 0:13:12.920 in Q four of twenty twenty two and a decline 0:13:12.920 --> 0:13:16.640 of I believe it was three point eight percent in 0:13:16.960 --> 0:13:22.360 volume in Q four twenty twenty two. That evolved into 0:13:22.400 --> 0:13:27.079 two point eight percent pricing in Q four of twenty 0:13:27.080 --> 0:13:32.720 twenty three with slightly positive volume about one point eight 0:13:33.280 --> 0:13:40.439 percent volume. That is a really interesting kind of mentality. 0:13:39.920 --> 0:13:42.280 To take forward that if you're a. 0:13:42.240 --> 0:13:46.240 Successful CpG company that raised prices, and you raised them 0:13:46.440 --> 0:13:49.120 at the right time, and you began the process of 0:13:49.280 --> 0:13:52.760 slowly allowing that price to flow through the system. You 0:13:52.800 --> 0:13:56.120 didn't get too greedy. You simply allowed it to work 0:13:56.120 --> 0:13:59.439 through the system. You're beginning to have those volumes come back, 0:14:00.640 --> 0:14:03.840 and then you go, I think it's five or six 0:14:03.880 --> 0:14:06.360 slides later, and you look at what happened with their 0:14:06.360 --> 0:14:09.840 gross margin. Gross margins were up two hundred basis points. 0:14:11.160 --> 0:14:14.520 Two hundred basis points or twenty basis points. 0:14:15.160 --> 0:14:20.320 I was on lift, Yeah, two hundred basis points, So 0:14:20.400 --> 0:14:22.520 gross margin was up tow hundred basis points. One hundred 0:14:22.520 --> 0:14:26.400 and thirty basis points were spent on BMI brand market 0:14:26.760 --> 0:14:31.240 brand marketing investment. So what they're doing is they're pouring 0:14:31.480 --> 0:14:35.400 these gross margin dollars back into marketing in order to 0:14:35.440 --> 0:14:39.960 get the volumes that they want. And that is indicative 0:14:39.960 --> 0:14:44.040 of what's happening across the space. You can look at Kimberly. 0:14:44.080 --> 0:14:50.880 Clark had a very similar type of not necessarily you 0:14:50.920 --> 0:14:53.560 know numbers, but they had a very similar type of 0:14:53.600 --> 0:14:57.280 message in that we are going to spend on brand marketing, 0:14:57.720 --> 0:14:59.720 and we're going to do it in a very significant 0:14:59.720 --> 0:15:03.240 way because we want those volumes back. Right, we push 0:15:03.320 --> 0:15:05.760 price to the extent that we think we can. Now 0:15:05.760 --> 0:15:08.640 it's all about getting those volumes back. And those AD 0:15:08.680 --> 0:15:12.760 dollars are beginning to flow back into Meta and Alphabet 0:15:12.800 --> 0:15:16.800 and you saw it in you know, in Meta's numbers. 0:15:17.280 --> 0:15:21.080 I would suggest this is not a short term trend right. 0:15:21.160 --> 0:15:25.360 It is very much something where they do not want 0:15:25.360 --> 0:15:27.440 to be in the headlines for laying people off after 0:15:27.520 --> 0:15:29.720 raising prices so much. What they want to do is 0:15:29.720 --> 0:15:32.880 they want to get volumes back while spending on ad dollars, 0:15:32.960 --> 0:15:38.120 and AD dollars don't get you in the headlines. One 0:15:38.320 --> 0:15:43.360 really interesting point on that is when mulsen Core's it 0:15:43.400 --> 0:15:46.080 was earlier this week came out with earnings, they spent 0:15:46.160 --> 0:15:51.560 more money on advertising to kick their competition while they 0:15:51.560 --> 0:15:56.760 were down. It was an amazing, amazing conference call that 0:15:56.800 --> 0:16:00.720 everyone should listen to. That when your competition's down, you 0:16:00.720 --> 0:16:03.600 you don't just sit back and take the volume that 0:16:03.640 --> 0:16:09.000 you're getting. You spend more. You really cement those gains 0:16:09.000 --> 0:16:13.080 that you're getting. And it was it was amazing. 0:16:14.800 --> 0:16:31.560 I have to read that. So the basic mechanism is 0:16:32.320 --> 0:16:36.280 for twenty twenty, to tolerate some market share loss in 0:16:36.400 --> 0:16:42.760 exchange for increased significantly increased prices. Then over time those 0:16:42.840 --> 0:16:45.680 increased prices you don't have to keep increasing them. Over time, 0:16:45.760 --> 0:16:48.440 they become a little more competitive as the inflation process 0:16:48.480 --> 0:16:51.120 generally rolls on, and so now it's about getting that 0:16:51.200 --> 0:16:53.600 market share back and sort of a little more stability 0:16:53.600 --> 0:16:56.600 on price. When you sit there increasing AD spending, I 0:16:56.680 --> 0:16:58.440 was like, oh, good, this will be the this will 0:16:58.440 --> 0:17:00.520 be the savior of media. But then you said, no, 0:17:00.560 --> 0:17:02.440 it's all going to Meta anyway, So I guess not. 0:17:04.320 --> 0:17:06.840 I mean, yes, that is the exact flow. 0:17:07.000 --> 0:17:11.240 And it's really intriguing when you think of it as 0:17:11.640 --> 0:17:14.840 price all volume shifted to what I call PAM, which 0:17:14.920 --> 0:17:19.919 is price and margin but also price and marketing dollars 0:17:19.960 --> 0:17:24.680 shifted to that that really benefits the major platforms. 0:17:24.960 --> 0:17:25.680 Right, it is. 0:17:27.080 --> 0:17:33.120 Meta in Amazon's boondoggle. However, if you think about what 0:17:33.520 --> 0:17:36.840 the boom really means for Meta and Amazon, it means 0:17:36.920 --> 0:17:40.200 they basically get a free right or a free option 0:17:40.800 --> 0:17:45.640 on investing in AI because their revenues are ripping as 0:17:45.760 --> 0:17:49.000 everybody really wants to compete for those volumes. So you're 0:17:49.040 --> 0:17:53.240 getting a tremendous uptick in AD dollars. You're getting everyone 0:17:53.800 --> 0:18:01.040 throwing money at the incremental dollar of coming in the 0:18:01.040 --> 0:18:05.400 door for revenue, and that is a really interesting kind 0:18:05.400 --> 0:18:10.560 of dynamic that POV basically built the AI world. Huh. 0:18:10.640 --> 0:18:13.040 I want to ask you more about AI, But just 0:18:13.119 --> 0:18:18.119 before that, what would be the proximate trigger for consumer 0:18:18.160 --> 0:18:22.560 package good companies specifically, I guess, to bring prices down. 0:18:22.720 --> 0:18:25.600 Would it be if like the ad spending doesn't pay 0:18:25.600 --> 0:18:28.359 off and translate into higher volumes than they have to 0:18:28.400 --> 0:18:32.320 start discounting. It just seems like there's a general reluctance 0:18:32.400 --> 0:18:34.960 to go down that route at the moment. So, yes, 0:18:35.040 --> 0:18:38.520 they're not raising prices as much, but most of them 0:18:38.640 --> 0:18:40.800 definitely aren't actually cutting them either. 0:18:41.240 --> 0:18:44.600 Oooh, what would be the impetus for a price cut? 0:18:45.520 --> 0:18:48.600 I don't know that there is one that is. 0:18:49.920 --> 0:18:52.560 I would say that's kind of the conundrum of anyone 0:18:52.840 --> 0:18:55.320 who's looking at it and saying, I really want to 0:18:55.359 --> 0:18:59.480 see prices at the grocery store go back to twenty twenty. 0:19:00.320 --> 0:19:07.120 That's simply going to not happen. That's that's really that's 0:19:07.119 --> 0:19:11.760 a really tough one. You know, you could maybe see 0:19:11.800 --> 0:19:16.439 some price competition, but at the same time, you know, 0:19:16.440 --> 0:19:20.120 there's a pretty high industry concentration on the shelves. And 0:19:20.160 --> 0:19:26.199 if one person begins to hold price and do it 0:19:26.240 --> 0:19:30.280 successfully and have volumes begin to pick up slightly, it's 0:19:30.400 --> 0:19:34.439 unlikely that you get price cuts. The one way I 0:19:34.480 --> 0:19:39.000 think you could see significant price cuts would be if 0:19:39.000 --> 0:19:46.720 you have the gpl ones or something really actually reduce 0:19:46.880 --> 0:19:52.560 the overall consumption of food, that that could have an 0:19:52.600 --> 0:19:56.320 overall effect on price. But we haven't seen that yet, 0:19:56.640 --> 0:19:59.080 and I'm highly. 0:19:58.720 --> 0:19:59.520 Skeptical of it. 0:20:00.080 --> 0:20:03.080 I've I told Joe this. I've stopped eating lunch, not 0:20:03.119 --> 0:20:06.479 because I'm on ozempic, but because I just don't want 0:20:06.520 --> 0:20:09.639 to pay twenty dollars for a sad salad anymore. It 0:20:09.720 --> 0:20:14.920 is funny listening to this conversation how little competition comes up. 0:20:15.000 --> 0:20:16.919 And I think this is something we talked to you 0:20:16.960 --> 0:20:19.840 before about, Sam, and I think we definitely mentioned it 0:20:19.920 --> 0:20:22.600 in that excuselation article we did. But just the idea 0:20:22.680 --> 0:20:26.440 that no one's incentivized really to do price wars because 0:20:26.440 --> 0:20:28.640 it's just a race to the bottom, and why even 0:20:28.640 --> 0:20:31.080 try to compete on price when you could just hold 0:20:31.080 --> 0:20:34.720 the line and boost margins that way. 0:20:34.760 --> 0:20:39.720 Sam, you mentioned AI, and I have this theory that, Okay, like, 0:20:39.760 --> 0:20:43.200 if Nvidia is talking about AI, I believe it. If 0:20:43.520 --> 0:20:45.680 Meta is talking about AI, believe it. If Google is 0:20:45.680 --> 0:20:49.120 talk about AI. I believe it. If some random other 0:20:49.160 --> 0:20:52.000 companies talking about AI, my assumption is, Oh, this company 0:20:52.040 --> 0:20:54.480 is doing badly and they're just trying to drop in 0:20:54.520 --> 0:20:57.359 some buzzwords on the conference call to get analysts and 0:20:57.480 --> 0:21:02.159 investors excited. I have no evidence for this theory, but 0:21:02.280 --> 0:21:04.320 what is what is your What are the patterns of 0:21:04.359 --> 0:21:05.760 who's talking about AI and what? 0:21:07.280 --> 0:21:07.359 Like? 0:21:07.440 --> 0:21:10.400 Actually I do more levitted, Like UPS cut a bunch 0:21:10.400 --> 0:21:12.639 of workers recently and then their CEO came out and 0:21:12.680 --> 0:21:14.680 said like, oh, we're not you know, these are jobs 0:21:14.680 --> 0:21:17.440 that could be done by AI, and like, I'm like skeptical, 0:21:17.480 --> 0:21:19.800 but you know whatever. So but it sort of feeds 0:21:19.840 --> 0:21:22.120 into this thing that AI is what people talk about 0:21:22.160 --> 0:21:23.080 when they're having trouble. 0:21:24.160 --> 0:21:24.680 Yeah. 0:21:24.960 --> 0:21:28.440 So on the UPS front, one, they're getting absolutely destroyed 0:21:28.440 --> 0:21:34.600 by Amazon. Right instead of Amazon shipping through UPS and FedEx, 0:21:34.720 --> 0:21:39.160 what are they doing? They're shipping through themselves. So UPS 0:21:39.280 --> 0:21:43.320 is using AI and blah blah blah to mass the 0:21:43.400 --> 0:21:47.760 fact that they got their lunch eaten by Amazon and 0:21:48.600 --> 0:21:51.480 never saw it coming. I mean, Amazon went from basically 0:21:51.520 --> 0:21:55.399 having no market share a decade ago to being the 0:21:55.440 --> 0:21:59.960 size of UPS. On the shipping front, it's an under report, 0:22:00.440 --> 0:22:05.159 under talked about the story that they just destroyed. 0:22:05.080 --> 0:22:07.640 Everyone in their path. I mean, that's what Amazon does. 0:22:09.000 --> 0:22:12.760 When it comes to companies talking about AI, there are 0:22:12.800 --> 0:22:14.240 some ones that I think. 0:22:15.600 --> 0:22:17.400 Do it to cover up it, but there's also some. 0:22:17.440 --> 0:22:23.440 That do it because they actually have something and it's 0:22:23.520 --> 0:22:26.959 probably underrated. So one of the examples that I'd use 0:22:27.080 --> 0:22:32.280 is Kroger, So they talk about AI in their earnings 0:22:32.600 --> 0:22:36.040 and on their conference call. If you think about how 0:22:36.200 --> 0:22:41.000 much they have in terms of data on consumers, that 0:22:41.200 --> 0:22:45.520 is a pretty big database with which you toss in 0:22:45.800 --> 0:22:47.560 AI on top of it, and all of a sudden 0:22:47.600 --> 0:22:52.880 they actually have something suit the right the large language 0:22:52.880 --> 0:22:55.879 models that everybody likes to talk about. There are companies 0:22:55.880 --> 0:22:57.840 who have been collecting data for a long time that 0:22:58.080 --> 0:23:00.479 didn't really know what to do with it, that all 0:23:00.520 --> 0:23:03.879 of a sudden are probably sitting on gold mines in 0:23:03.960 --> 0:23:07.440 terms of how to run their business, how to let 0:23:07.440 --> 0:23:10.159 me have a coupon at the right time, how to 0:23:11.240 --> 0:23:13.720 not have me have a coupon at the right time, 0:23:14.200 --> 0:23:17.760 incentivize me to go buy XYZ product. 0:23:17.359 --> 0:23:17.960 Off the shelf. 0:23:18.400 --> 0:23:23.160