WEBVTT - Bloomberg Businessweek Weekend - December 20th, 2024 0:00:00.120 --> 0:00:07.400 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.320 --> 0:00:12.719 This is Bloomberg Business Week inside from the reporters and 0:00:12.880 --> 0:00:16.440 editors who bring you America's most trusted business magazine, plus 0:00:16.520 --> 0:00:20.680 global business, finance and tech news. The Bloomberg Business Week 0:00:20.720 --> 0:00:25.840 Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio. 0:00:27.120 --> 0:00:30.880 Hi, everyone, Welcome to the Bloomberg Business Wee Weekend Podcast. Well, yeah, 0:00:30.920 --> 0:00:33.960 safe to say, pretty big week for investors. We got 0:00:33.960 --> 0:00:37.000 the Fed decision, the last one of twenty twenty four, 0:00:37.400 --> 0:00:39.560 the Fed lowering the benchmark interest rate by a quarter 0:00:39.600 --> 0:00:42.760 of a percentage point as expected, lowering it for a 0:00:42.800 --> 0:00:46.479 third consecutive time. Members also rating in the number of 0:00:46.479 --> 0:00:49.479 cuts they expect in twenty twenty five. That was a 0:00:49.520 --> 0:00:52.479 surprise to investors and brought about an immediate market reaction, 0:00:52.840 --> 0:00:55.800 with US Treasury yields shooting up and US stock selling off. 0:00:55.920 --> 0:00:58.720 The SMP five hundred had its worst FED day since 0:00:58.760 --> 0:01:01.600 two thousand and one. Vetcha and J. Powell signaled greater 0:01:01.680 --> 0:01:04.360 caution over how quickly the Federal Reserve can continue to 0:01:04.400 --> 0:01:05.920 reduce borrowing costs. 0:01:06.319 --> 0:01:08.559 But as for additional cuts, we're going to be looking 0:01:08.600 --> 0:01:12.039 for further progress on inflation as well as continued strength 0:01:12.040 --> 0:01:13.880 in the labor market. And as long as the economy 0:01:13.880 --> 0:01:16.679 in the labor market are solid, we can be cautious 0:01:16.959 --> 0:01:19.520 about as we consider further cuts. 0:01:19.760 --> 0:01:22.600 And so this hour we talked to one bank CEO 0:01:22.680 --> 0:01:24.759 who joined us right after the FED decision to get 0:01:24.760 --> 0:01:27.479 his read on the strength of the economy and another 0:01:27.560 --> 0:01:30.800 check on the US economy and the consumer That came 0:01:30.840 --> 0:01:34.000 thanks to the CEOs of two very different companies who 0:01:34.000 --> 0:01:37.120 both happen to be cutting prices. One certainly a household 0:01:37.200 --> 0:01:40.280 name and the other may be, especially if you recently 0:01:40.319 --> 0:01:40.920 had a baby. 0:01:41.080 --> 0:01:44.280 Also on our radar this week sustainable energy solutions and 0:01:44.319 --> 0:01:49.400 how geopolitics are impacting investments in sustainable energy infrastructure with 0:01:49.440 --> 0:01:52.040 an investor who has billions invested in the space. 0:01:52.440 --> 0:01:54.200 All of that to come, we start with this week's 0:01:54.200 --> 0:01:57.760 FED decision. The expected hawkish rate cut still cut investors 0:01:57.760 --> 0:02:01.280 by surprise, sparking a sell off inequities and bonds, US 0:02:01.320 --> 0:02:04.880 Treasury rates moving up. Bank stock sensitive to monetary policy 0:02:04.880 --> 0:02:08.200 moves dropped the most in months right after the FED decision. 0:02:08.200 --> 0:02:10.760 That included shares of the publicly held New Jersey based 0:02:10.760 --> 0:02:13.160 connect One Bank Corp. Which is the parent company of 0:02:13.160 --> 0:02:16.360 Connect One Bank. The bank has nearly ten billion dollars 0:02:16.360 --> 0:02:20.239 in assets and count small businesses and construction companies among 0:02:20.240 --> 0:02:21.000 its customers. 0:02:21.280 --> 0:02:24.120 Frank Sorrentino is chairman and CEO at the bank, which 0:02:24.200 --> 0:02:26.600 as a nine hundred and eleven million dollar market cap. 0:02:26.800 --> 0:02:28.760 He began by telling us what stood out to him 0:02:28.880 --> 0:02:30.120 following the Fed's decision. 0:02:30.400 --> 0:02:36.079 I find it always fascinating that good news brings negative markets, right, 0:02:36.200 --> 0:02:39.440 So a stronger economy and a place where people are 0:02:39.440 --> 0:02:42.560 doing well and strong employment and you know all the 0:02:42.600 --> 0:02:46.200 other things that define a more robust economy, and the 0:02:46.240 --> 0:02:49.440 market sells off. So certainly, I don't think there was 0:02:49.440 --> 0:02:54.040 any surprise that today's ed action interest rates being lowered 0:02:54.080 --> 0:02:58.800 by twenty five basis points some rhetoric around future cuts 0:02:58.840 --> 0:03:00.959 not being as much as the market wanted, and I 0:03:01.040 --> 0:03:04.680 think that's what really drove a lot of the sell offs. 0:03:04.760 --> 0:03:08.560 So there was a lot of enthusiasm and optimism, certainly 0:03:08.600 --> 0:03:11.880 in the banking system about much lower interest rates. Well, 0:03:12.000 --> 0:03:14.519 that's not really going to happen. On the flip side, 0:03:14.600 --> 0:03:17.440 I think we're going to start to see potentially a 0:03:17.440 --> 0:03:20.239 steepening yield curve for banks, and so ultimately, I think 0:03:20.240 --> 0:03:21.120 it will be a good thing. 0:03:21.320 --> 0:03:23.640 One reason we love talking to you. And if people 0:03:23.639 --> 0:03:25.800 were paying attention to you anytime in the last two 0:03:25.880 --> 0:03:28.000 years when you've been on our program, then they wouldn't 0:03:28.040 --> 0:03:30.040 be surprised at how good the economy has been over 0:03:30.040 --> 0:03:33.120 the last couple of years, because you repeatedly were beating 0:03:33.120 --> 0:03:36.760 that drum, saying the companies that are lending with us, 0:03:37.120 --> 0:03:39.720 the companies that are our customers, the small businesses, the 0:03:39.720 --> 0:03:43.200 construction companies, they are doing well right now. How are 0:03:43.200 --> 0:03:45.440 they doing compared to over the last two years? 0:03:45.440 --> 0:03:45.640 For you? 0:03:45.960 --> 0:03:49.880 I think I've said this before. What we are seeing today, 0:03:49.880 --> 0:03:53.440 we are still in quite a robust economy. The vast 0:03:53.480 --> 0:03:57.040 majority of our clients are reporting good news. Is there 0:03:57.120 --> 0:04:00.880 some normalization going on within the economy today? You know 0:04:01.000 --> 0:04:05.880 from all the post COVID, the monetary policy, the expansion 0:04:05.880 --> 0:04:08.800 of the FED balance sheet, liquidity in the system. Sure, 0:04:09.360 --> 0:04:11.720 is that all beginning to normalize and we're getting to 0:04:11.920 --> 0:04:16.720 a more consistent with historical norms relative to interest rates 0:04:16.800 --> 0:04:20.120 and growth rates and everything else. Yes, that's happening. Is 0:04:20.160 --> 0:04:23.800 anyone really saying that the economy is weak today? I 0:04:23.920 --> 0:04:27.120 don't see it. People are still our clients are still 0:04:27.160 --> 0:04:30.600 saying it is difficult to hire staff today. People are 0:04:30.640 --> 0:04:34.280 demanding more money, Supplies cost more. There is a little 0:04:34.279 --> 0:04:38.240 bit of inflation still within the economy, but certain things 0:04:38.240 --> 0:04:40.920 are beginning to level off. Rents are beginning to level 0:04:40.960 --> 0:04:44.800 off a bit. Potentially, Housing prices are reaching a point 0:04:44.800 --> 0:04:47.839 where they're becoming I don't want to say unaffordable, but 0:04:47.920 --> 0:04:52.839 they're certainly reaching that the edge of people's affordability spectrum. 0:04:53.040 --> 0:04:55.640 Interest rates are playing a role there. There's been a 0:04:55.680 --> 0:04:58.320 lot of desire to see interest rates come down a bit. 0:04:58.720 --> 0:05:00.840 I don't think it's going to happen. I think we 0:05:00.960 --> 0:05:04.200 are in a very strong cycle and I think it's 0:05:04.240 --> 0:05:06.960 going to continue certainly. If you if you think about 0:05:06.960 --> 0:05:09.720 everything that we're talking about doing in this next uh uh, 0:05:10.120 --> 0:05:14.360 you know, next administration, these things all have some inflationary components. 0:05:14.360 --> 0:05:17.960 So we are going to see a strong economy first 0:05:18.000 --> 0:05:20.080 so in my opinion as far as I can see. 0:05:20.200 --> 0:05:22.040 So, Frank, then why do the Fed cut rates? Which 0:05:22.080 --> 0:05:23.920 is the kind of the question I think are Mike mckeeask, 0:05:24.520 --> 0:05:26.000 I feel like this is the five year old to 0:05:26.080 --> 0:05:29.320 j pout, why so, why so? Why why cut rates? 0:05:29.400 --> 0:05:30.760 If the economy is robust. 0:05:30.880 --> 0:05:33.520 Like you say, I think the data that the FED 0:05:33.839 --> 0:05:37.320 was looking at, they're looking in longer term, you know, 0:05:37.440 --> 0:05:40.440 segments of time, and they have a what they want 0:05:40.480 --> 0:05:42.600 to get to, which is a neutral rate, and I 0:05:42.640 --> 0:05:45.440 think this is part of their program to get there. 0:05:45.600 --> 0:05:47.279 I don't serve on the FED, so I don't know 0:05:47.360 --> 0:05:49.880 for sure. I don't know exactly what data they're looking at, 0:05:50.279 --> 0:05:53.520 but clearly they're seeing signs that they can get to 0:05:53.560 --> 0:05:56.039 a certain point in the interest rate curve on the 0:05:56.080 --> 0:05:59.520 short end that meets with the program that they believe 0:05:59.600 --> 0:06:05.039 brings a full employment, low inflation, and gets the economy 0:06:05.120 --> 0:06:06.600 to continue to move on. 0:06:06.600 --> 0:06:08.000 One thing we wanted you to weigh on on is 0:06:08.080 --> 0:06:11.200 the political environment, which we know that CEOs don't love 0:06:11.240 --> 0:06:13.719 to do. But this is the world we live in. 0:06:14.000 --> 0:06:16.599 What does you know another four years of of Donald 0:06:16.640 --> 0:06:19.400 Trump mean to you? Given what we learned about him 0:06:19.400 --> 0:06:21.680 twenty seventeen to twenty twenty one, how are you preparing 0:06:21.720 --> 0:06:22.000 for it. 0:06:22.320 --> 0:06:24.080 I try to look at the economy. I try to 0:06:24.120 --> 0:06:25.960 look at our clients. I try to look at how 0:06:26.000 --> 0:06:28.520 these things are going to impact them. And the only 0:06:28.600 --> 0:06:32.920 thing that concerns me is creating a level of uncertainty. 0:06:33.560 --> 0:06:36.000 And you know, the one thing that business and the 0:06:36.040 --> 0:06:39.520 economy really wants is certainty. They want to understand where 0:06:39.520 --> 0:06:42.000 things are headed. How can they make plans, and how 0:06:42.040 --> 0:06:45.040 can they run go about running their lives, running their businesses. 0:06:45.480 --> 0:06:48.680 And whenever there's any level of uncertainty, and you know, 0:06:48.800 --> 0:06:50.719 talking about the federal budget and whether we're going to 0:06:50.720 --> 0:06:52.480 fund it or not, and whether people are going to 0:06:52.520 --> 0:06:56.039 get paid you know, government employees, that creates uncertainty and 0:06:56.080 --> 0:06:57.800 that's generally just not good. 0:06:57.960 --> 0:06:59.960 So how frustrating is that for you? You've got to 0:07:00.160 --> 0:07:03.279 make decisions? How hesitant are you to do things because 0:07:03.279 --> 0:07:05.200 you're not quite sure the policy that's going to come 0:07:05.200 --> 0:07:06.000 from this White House? 0:07:06.279 --> 0:07:09.920 You know what, whether it's this administration or any other administration. 0:07:10.480 --> 0:07:12.640 I look at, you know, what's going on on the ground, 0:07:12.720 --> 0:07:15.320 and I am very bullish about what I see, certainly 0:07:15.400 --> 0:07:18.760 in our market area, certainly around what we're doing here 0:07:18.800 --> 0:07:21.960 as a nation. We are the greatest nation on the planet. 0:07:22.080 --> 0:07:23.960 We live in one of the greatest parts of the nation. 0:07:24.280 --> 0:07:27.760 I'm very bullish about our economy, and so I make 0:07:27.800 --> 0:07:30.680 those decisions, and you know, we all here connect one 0:07:30.760 --> 0:07:33.440 make those decisions based on what our clients are telling 0:07:33.520 --> 0:07:36.040 us and what their needs are, and so we feel 0:07:36.080 --> 0:07:38.720 pretty good about where things where things have been. As 0:07:38.760 --> 0:07:40.360 you said, I've been saying the same thing for the 0:07:40.400 --> 0:07:43.680 last couple of years, and where things are going. 0:07:43.640 --> 0:07:46.560 Our Thanks to Frank Sorrentino, Chairman and CEO at connect 0:07:46.560 --> 0:07:47.200 One Bank Corp. 0:07:47.440 --> 0:07:50.240 Another read on the US economy came courtesy of the 0:07:50.240 --> 0:07:53.760 Swedish home furnishing giant Akia. Last month. You might recall 0:07:53.840 --> 0:07:57.200 Bloomberg News reporting on how Akia shoppers will continue to 0:07:57.200 --> 0:07:59.880 see lower prices at its stores in twenty twenty five, 0:08:00.360 --> 0:08:03.160 but the company warned not to expect anything like this 0:08:03.200 --> 0:08:04.080 past year. 0:08:04.160 --> 0:08:07.280 After slashing prices for retailers by fifteen percent and twenty 0:08:07.320 --> 0:08:09.960 twenty four, which enabled Ikea stores to cut price to 0:08:10.000 --> 0:08:14.240 consumers by ten percent and was quote exceptional, more normal 0:08:14.320 --> 0:08:17.520 levels are in the cards, according to Henrik Elm, chief 0:08:17.520 --> 0:08:21.040 financial officer of inter Ikea Group, it's the worldwide franchiser 0:08:21.120 --> 0:08:21.760 for the brand. 0:08:22.000 --> 0:08:24.680 With the take on the US consumer and how IKEA's 0:08:24.720 --> 0:08:28.160 stores are doing in the United States, Bloomberg's Emily Graffeo 0:08:28.160 --> 0:08:30.240 and I checked in with the US CEO of Akia, 0:08:30.520 --> 0:08:34.280 Javier Kenyonis, who is also chief sustainability Officer. 0:08:34.640 --> 0:08:37.520 Yeah, twenty four, it's been a challenging gr I will say, 0:08:37.720 --> 0:08:41.000 from of course inflation and interest rates, and we've seen 0:08:41.080 --> 0:08:46.280 this in retail, especially in the home fournishing industry. That's why, 0:08:46.320 --> 0:08:48.880 as you said, a big part of our commitment was 0:08:48.920 --> 0:08:53.560 to bring back lower prices as we have ever been 0:08:53.800 --> 0:08:56.920 because due to inflation, we of course had during twenty 0:08:56.960 --> 0:09:01.400 three especially some increase surprises that we had to do, 0:09:02.000 --> 0:09:04.720 and by doing that, what we have seen during twenty 0:09:04.760 --> 0:09:07.959 four is that we have actually managed to sell more 0:09:07.960 --> 0:09:12.480 pieces than previous year, which is a fantastic achievement in 0:09:12.520 --> 0:09:16.040 an economy where it's not been on all the time. 0:09:16.080 --> 0:09:17.360 On our site, I would say. 0:09:17.720 --> 0:09:20.800 So cutting prices actually moved the needle and brought consumers 0:09:20.800 --> 0:09:21.559 to spend more. 0:09:21.840 --> 0:09:22.199 It did. 0:09:22.280 --> 0:09:24.720 Indeed, I wouldn't say to spend more, but I would 0:09:24.760 --> 0:09:28.200 say that this strategy was actually to be closer to 0:09:28.320 --> 0:09:31.400 many more people. And we like to say Ikia is 0:09:31.440 --> 0:09:34.240 for the many people, right, and we understand that the 0:09:34.280 --> 0:09:38.800 many has limited resources or means right. So for us, 0:09:38.880 --> 0:09:43.160 it's not about probably spending more, but it's actually to 0:09:43.320 --> 0:09:47.239 make sure that the care products are available and affordable 0:09:47.440 --> 0:09:51.560 for many more people. That's why I like to measure 0:09:51.600 --> 0:09:55.360 more number of customers during twenty four Because of the 0:09:55.360 --> 0:09:59.240 top language, you reduce prices, you can expect a drop 0:09:59.440 --> 0:10:02.680 or slightly, right, But what tells you that you're doing 0:10:02.679 --> 0:10:06.520 the right thing is when more people can afford ikea. 0:10:06.240 --> 0:10:09.360 Products successibility right, lowering the prices and really opening it 0:10:09.440 --> 0:10:10.040 up to more people. 0:10:10.120 --> 0:10:13.640 Right, And maybe that receipt is not as big as 0:10:13.679 --> 0:10:16.160 it would have been a few years ago. What are 0:10:16.200 --> 0:10:19.199 you seeing in terms of what shoppers are actually buying. 0:10:19.240 --> 0:10:22.640 Are they still going for those big ticket items or 0:10:22.679 --> 0:10:25.199 is it more a shopping cart that just has some 0:10:25.320 --> 0:10:26.920 smaller goods in there. 0:10:27.520 --> 0:10:30.000 You know, the homephouris in market goes hand in hand 0:10:30.040 --> 0:10:31.560 with the house market. 0:10:31.720 --> 0:10:31.880 Right. 0:10:31.920 --> 0:10:34.800 What we see right now is the house in market 0:10:35.080 --> 0:10:38.040 at some of the lowest we've ever seen right when 0:10:38.040 --> 0:10:41.720 it comes to the month. So we see we see 0:10:41.720 --> 0:10:46.360 both sites. We see small changes through more on the 0:10:46.400 --> 0:10:50.880 accessory site that's a big demand. We see some people 0:10:50.920 --> 0:10:55.000 that are not moving selling or buying new houses that 0:10:55.040 --> 0:10:59.120 go into rebuilding or refurbishing of the existing ones. So 0:10:59.160 --> 0:11:01.520 we see a little bit of both. We don't see 0:11:01.600 --> 0:11:04.839 one taking over on the other. But as I said, 0:11:05.280 --> 0:11:10.719 I think it's been more on the price sensitivity than 0:11:10.760 --> 0:11:13.680 anything else. What we see though, is an increase on 0:11:13.720 --> 0:11:17.560 the demand for sustainable products, right, products that actually help 0:11:17.600 --> 0:11:21.800 you to save costs in your bills, like the energy 0:11:21.800 --> 0:11:26.160 bill right when you move to LED. Or food is 0:11:26.200 --> 0:11:28.960 an interesting one, right, many people ask what can I 0:11:29.000 --> 0:11:32.560 start doing well, you know, on the energy changing by 0:11:32.800 --> 0:11:37.440 LED's appliances that are efficient. Food is an important one, 0:11:37.520 --> 0:11:40.280 especially in the US when one third of what we 0:11:40.360 --> 0:11:45.680 buy those two waste food containers is I would say, 0:11:45.679 --> 0:11:48.439 one of the best friends to actually help people to 0:11:48.559 --> 0:11:54.560 save money. Or water dispensers that reduce the flow. So 0:11:54.600 --> 0:11:57.000 these are some tips and we see more and more 0:11:57.160 --> 0:11:59.559 also demand on these products, which is fantastic. 0:12:00.520 --> 0:12:04.000 Just very quickly, how is the digital business looking for Ikea? 0:12:04.040 --> 0:12:06.040 Because you guys are known for your in store experience, 0:12:06.360 --> 0:12:08.120 are you continuing to focus on that or are you 0:12:08.120 --> 0:12:10.199 seeing more people come to your website? 0:12:10.400 --> 0:12:13.160 Yeah, well, we see more people coming to the website. 0:12:13.160 --> 0:12:16.559 We see more people starting on the website and then 0:12:16.600 --> 0:12:20.880 where they finish. It's uh, I would say, not even 0:12:20.920 --> 0:12:21.920 relevant or important. 0:12:22.040 --> 0:12:22.199 Right. 0:12:22.920 --> 0:12:26.240 The stores the way I see them are the I 0:12:26.280 --> 0:12:29.680 cannot imagine a most beautiful place in the world to 0:12:29.760 --> 0:12:33.400 actually get inspired about home furnishings than an AKA store. 0:12:33.520 --> 0:12:37.400 So there will be a super key in our business 0:12:37.720 --> 0:12:40.160 and we will keep investing in digital because it's where 0:12:40.160 --> 0:12:42.640 the growth or most of the growth is happening. 0:12:42.960 --> 0:12:44.840 Our thanks to Jabi er Kenyon s c U as 0:12:44.880 --> 0:12:48.079 CEO by Kia and Chief Sustainability Officer Our. Thanks to 0:12:48.120 --> 0:12:50.480 Emily Graffeo for co hosting while I was out. 0:12:50.480 --> 0:12:53.280 Coming up another CEO cutting prices thanks to a recent 0:12:53.320 --> 0:12:56.800 strategy move and acquisition. The CEO of the Baby Formula Company, 0:12:56.800 --> 0:12:58.079 Bobby is next. 0:12:58.480 --> 0:13:01.559 You're listening to Bloomberg Business. This is Bloomberg. 0:13:06.240 --> 0:13:09.760 You're listening to the Bloomberg Business Week podcast. Catch us 0:13:09.800 --> 0:13:13.040 live weekday afternoons from two to five pm Easter Listen 0:13:13.080 --> 0:13:15.280 on Apple car Play and then brought Auto with a 0:13:15.280 --> 0:13:18.960 Bloomberg Business act or watch us live on YouTube. 0:13:19.720 --> 0:13:23.040 Baby Formula Company Bobby recently announced to sweeping fifteen percent 0:13:23.080 --> 0:13:26.920 price reduction for its classic organic infant formula. Price reductions are, 0:13:27.040 --> 0:13:30.040 in the company's own words, an active step on behalf 0:13:30.040 --> 0:13:32.560 of the mom led company to support families who are 0:13:32.600 --> 0:13:35.040 experiencing rising costs of living, and as we heard from 0:13:35.040 --> 0:13:37.800 the FED this week, inflation still a little bit of 0:13:37.800 --> 0:13:38.240 a problem. 0:13:38.320 --> 0:13:41.560 Tim a major factor for this price reduction opening a 0:13:41.679 --> 0:13:46.400 ninety thousand square foot infant formula manufacturing facility in Ohio 0:13:46.960 --> 0:13:50.240 to produce this formula. So while many companies raise prices 0:13:50.280 --> 0:13:53.280 due to inflationary pressures, Bobby's one of those companies that's 0:13:53.280 --> 0:13:54.120 actually cutting them. 0:13:54.200 --> 0:13:57.120 Yeah, they are. Lura Mody is co founder and CEO Bobby, 0:13:57.240 --> 0:14:00.240 and she kicked off our conversation with why the price 0:14:00.280 --> 0:14:02.599 cuts and how they got there. She talked with Bloomberg's 0:14:02.600 --> 0:14:04.880 Emily Grifael In me it was very intentional. 0:14:05.360 --> 0:14:07.800 I'll bring you back your I mean, everyone remembers the 0:14:07.800 --> 0:14:09.240 infant formula shortage. 0:14:08.840 --> 0:14:09.760 Of twenty twenty two. 0:14:10.559 --> 0:14:13.680 We made very intentional decision to buy manufacturing at the 0:14:13.720 --> 0:14:16.360 time and to invest in the heartland of the country 0:14:16.400 --> 0:14:19.280 and really own our own production. I mean, the initial 0:14:19.320 --> 0:14:23.160 goal was really to own our own quality control, production control. 0:14:23.480 --> 0:14:25.640 Also to be in a place where we had resilient supply. 0:14:26.000 --> 0:14:27.880 God forbid, there was another shortage. We were in a 0:14:27.920 --> 0:14:32.520 position you have sub sky right here in the US market. Correct, 0:14:33.240 --> 0:14:36.400 The industry wasn't resilient enough America wasn't resilient enough. We 0:14:36.400 --> 0:14:39.640 were at a point where America wasn't able to feed babies. Now, 0:14:39.680 --> 0:14:42.520 through that investment, which has taken an entire two years, 0:14:42.680 --> 0:14:45.000 a lot of capital and a lot of time, we 0:14:45.120 --> 0:14:46.920 knew that if we did it right, we could also 0:14:47.000 --> 0:14:50.640 reduce the costs as well. And I rewind to that 0:14:50.760 --> 0:14:53.080 moment and being in a position of saying, if we 0:14:53.120 --> 0:14:55.080 got to that place, we would pass the savings over 0:14:55.120 --> 0:14:55.840 to our customers. 0:14:56.200 --> 0:14:57.200 Heather, how did you. 0:14:57.120 --> 0:15:00.840 Reduce the costs? I mean, it's its owned per so 0:15:00.880 --> 0:15:03.040 you bring it in house, you have your supply chain 0:15:03.080 --> 0:15:06.640 from a more local perspective, you know, so just not 0:15:06.840 --> 0:15:12.200 importing product has been reducing imports. And you know, but 0:15:12.280 --> 0:15:16.360 also we were manufacturing a lot through using comen through 0:15:16.440 --> 0:15:19.240 now our owned facility and opening up our own manufacturing 0:15:19.240 --> 0:15:21.880 and making those investments they're starting to pay off, just scale. 0:15:22.040 --> 0:15:24.760 And why do that instead of like using that extra 0:15:24.920 --> 0:15:27.880 money to I don't know, reinvest in the business, especially 0:15:27.880 --> 0:15:30.760 in an environment where all of your other competitors are 0:15:30.840 --> 0:15:32.600 still raising prices. 0:15:33.160 --> 0:15:33.960 Yeah. 0:15:34.080 --> 0:15:37.040 I've had this debate now a few times. And you know, 0:15:37.080 --> 0:15:39.920 I'll first say, even as a mother of four, I 0:15:40.640 --> 0:15:41.520 feel the inflation. 0:15:41.880 --> 0:15:42.240 Feel it. 0:15:42.280 --> 0:15:44.440 I feel it in grocery stores you see a basic 0:15:44.480 --> 0:15:47.520 pantry products. And I think the election was a big 0:15:47.560 --> 0:15:50.200 wake up call that people were voting with their pockets. 0:15:50.480 --> 0:15:51.040 You saw it. 0:15:51.080 --> 0:15:53.840 Inflation is an issue. And I'm not making any product. 0:15:53.880 --> 0:15:56.720 We're feeding babies. We are making one of the most 0:15:56.760 --> 0:16:00.120 important products out there, and it should also be if 0:16:00.120 --> 0:16:04.640 you're able to, while not compromising on quality, also accessible. 0:16:04.920 --> 0:16:07.520 Laura, you know, based on what you are doing, and 0:16:07.560 --> 0:16:12.119 we've talked to various global architectural firms who talk about 0:16:12.440 --> 0:16:17.920 designing building in Mexico or like closer or even here 0:16:17.920 --> 0:16:22.280 in the US, like closer to Home, I'm curious. You 0:16:22.320 --> 0:16:25.320 know that you show that you can kind of do 0:16:25.400 --> 0:16:27.880 it and it does impact the cost equation. What about 0:16:27.960 --> 0:16:30.800 labor though, what about like I'm just curious about that 0:16:30.960 --> 0:16:34.320 argument which has often been against moving things back here 0:16:34.360 --> 0:16:36.200 in the United States because labor costs are so high. 0:16:36.760 --> 0:16:42.239 I mean, look, it takes having to take several steps back. Initially, 0:16:42.280 --> 0:16:45.800 the costs are high, investment needs are big, but over 0:16:45.920 --> 0:16:51.480 time you see that returned and we have I mean, yes, 0:16:51.560 --> 0:16:55.920 our investments have been substantial, but over time, being able 0:16:55.960 --> 0:16:59.560 to centralize it, keep it close to home, have fewer 0:16:59.600 --> 0:17:03.360 steps in the process. You should be able to see 0:17:03.400 --> 0:17:04.280 costs go down. 0:17:04.480 --> 0:17:06.719 Is it all automated? Forgive me, because I did talk 0:17:06.720 --> 0:17:08.280 about the cost of labor, but it's how much of 0:17:08.280 --> 0:17:09.400 the process is automated. 0:17:09.640 --> 0:17:09.840 No. 0:17:09.960 --> 0:17:12.359 I mean, we have a lot of fabulous staff at 0:17:12.359 --> 0:17:16.040 our manufacturing facility, and you know, I will say, nothing 0:17:16.160 --> 0:17:21.080 makes you feel more patriotic than seeing the manufacturing labor 0:17:21.080 --> 0:17:23.679 who is making this product one by one. It's incredible. 0:17:23.880 --> 0:17:28.120 So this fifteen percent price reduction on your classic organic 0:17:28.520 --> 0:17:32.119 infant formula. This came recently, but I'm wondering how has 0:17:32.160 --> 0:17:34.640 business been in response to that move so far. 0:17:35.480 --> 0:17:39.400 I'll first start just with the sentiment. It's the most rewarding. 0:17:39.880 --> 0:17:41.960 You know, we didn't just roll this out for new customers. 0:17:42.200 --> 0:17:44.800 We have tens and thousands of subscribers who were receiving 0:17:44.800 --> 0:17:47.760 their product every month. They signed up for a particular price, 0:17:48.240 --> 0:17:50.040 and when we made the decision, we said, well, we're 0:17:50.040 --> 0:17:51.560 not just going to do this for new customers. We're 0:17:51.600 --> 0:17:54.760 going to retroactively change the price for our existing subscribers too, 0:17:55.320 --> 0:18:00.000 and it builds loyalty love. We received, you know, ame 0:18:00.160 --> 0:18:02.280 of emails and responsing they've never seen a company do 0:18:02.320 --> 0:18:02.919 anything like this. 0:18:03.400 --> 0:18:06.360 Tell us about subscribers and subscribtion like that is your model, right, 0:18:06.400 --> 0:18:08.359 it is a model. So what have you seen in 0:18:08.359 --> 0:18:11.200 general in that kind of growth prior to the price cuts. 0:18:11.240 --> 0:18:13.200 I'm just curious since this is relatively new. 0:18:13.840 --> 0:18:18.480 Infant formula is it's repeatable, it's predictable. But because of 0:18:18.520 --> 0:18:22.160 the infant formula shortage, there's been this PTSD in fear 0:18:22.280 --> 0:18:24.520 over not being able to get totally get that and 0:18:24.560 --> 0:18:27.119 supply and you're feeding your baby. You want to know 0:18:27.160 --> 0:18:29.160 that your product is arriving to you when you need 0:18:29.200 --> 0:18:30.880 it and that there's never going to be a gap. 0:18:30.920 --> 0:18:34.719 So one of the things we implemented was guaranteed supply 0:18:35.320 --> 0:18:37.600 when you sign up for us, So as a subscriber, 0:18:37.800 --> 0:18:40.560 even if there's ups and downs in supply chain, even 0:18:40.600 --> 0:18:43.120 if you're not able to find it at Target, as 0:18:43.600 --> 0:18:46.200 a subscriber, you will always get a guarantee in your supply. 0:18:46.800 --> 0:18:47.720 We also rolled. 0:18:47.560 --> 0:18:48.520 Up right to do that. 0:18:48.840 --> 0:18:50.639 How did you do that? Because that means you had 0:18:50.640 --> 0:18:53.320 to make sure you either had stuff in a warehouse 0:18:53.440 --> 0:18:53.960 or something. 0:18:54.600 --> 0:18:57.640 It's modeling. It's almost okay, And I mean to put 0:18:57.760 --> 0:19:00.520 very simply, it's making sure that we're not bringing on 0:19:00.640 --> 0:19:02.879 subscribers at a race that we can for replen it. 0:19:02.920 --> 0:19:05.399 So you would have said, maybe note subscription if it 0:19:05.440 --> 0:19:06.359 meant that you couldn't keep that. 0:19:06.359 --> 0:19:08.480 Prom correct And do you know months ago we were 0:19:08.480 --> 0:19:10.479 finding that you weren't able to sign up because we 0:19:10.480 --> 0:19:12.560 were trying to catch up with supply. But if you 0:19:12.640 --> 0:19:14.840 do sign up, we will guarantee that we will. 0:19:14.680 --> 0:19:16.879 Have that supply for you for how for how long? 0:19:17.280 --> 0:19:21.240 For your entire journey? Yes, And we also implemented inflation 0:19:21.400 --> 0:19:25.520 proof pricing as well, which threw this rollout of reducing prices. 0:19:25.600 --> 0:19:28.080 Has been a promise that even if inflation goes up, 0:19:28.119 --> 0:19:29.960 and hey, we might go in another direction where the 0:19:30.000 --> 0:19:31.880 cost of or product will go up, but we will 0:19:31.920 --> 0:19:33.000 never change it on subscribe. 0:19:33.000 --> 0:19:35.800 How do you do that though? What if your price 0:19:35.840 --> 0:19:36.359 is double? 0:19:36.800 --> 0:19:38.400 Well, look, our prices may go up. 0:19:38.600 --> 0:19:39.000 They may. 0:19:39.359 --> 0:19:42.680 But for our existing subscribers who signed up one day 0:19:42.920 --> 0:19:44.800 and they said I'm signing up for a certain price 0:19:44.800 --> 0:19:46.520 and I expect it not to go up, we're going 0:19:46.560 --> 0:19:49.000 to promise them it won't. But for new customers they 0:19:49.000 --> 0:19:49.840