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Speaker 1: Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.
Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
Speaker 2: business stories impacting Wall Street and the global markets. Each
Speaker 2: and every week we provide in depth research and data
Speaker 2: on some of the two thousand companies and one hundred
Speaker 2: and thirty industries our analysts cover worldwide. Today, we'll discuss
Speaker 2: how Google is reshaping search around AI is at racist
Speaker 2: rivals like chat GP, plus a look at how Chinese
Speaker 2: evmaker byd is crushing competitors with a five minute charging system.
Speaker 2: But first we begin with news on the discount variety
Speaker 2: chain dollar Tree. This week, dollar Tree announced it's offloading
Speaker 2: its Family Dollar Chain for about one billion dollars to
Speaker 2: Brigade Capital Management and masseell them Capital Management. And this
Speaker 2: comes a decade after Dollar Tree brought the business for
Speaker 2: nearly nine billion dollars. For more. Co host Alex Steele
Speaker 2: and I were joined by Jennifer bartashis Bloomberg Intelligence Senior
Speaker 2: analyst Retail Stables and packaged Food. We first asked gen
Speaker 2: to break down Dollar Trees purchase and now discount and
Speaker 2: sale of its Family Dollar Chain.
Speaker 5: You are reading that right. They bought it for eight
Speaker 5: point nine billion in twenty fifteen. At that time, they
Speaker 5: had about seventy seven hundred stores and they were generating
Speaker 5: about sixteen billion dollars and they were generating about ten
Speaker 5: point five billion dollars in revenue. And you fast forward
Speaker 5: ten years of multi year investment to try to improve that,
Speaker 5: and they sold it for one billion dollars. Wow, with
Speaker 5: seventy seven hundred stores, so I only three hundred fewer
Speaker 5: stores and sixteen billion dollars in revenue. Wow, it's well.
Speaker 6: Well.
Speaker 5: One of the things I'll say is back in twenty fifteen,
Speaker 5: they way overpaid for this deal and they were in
Speaker 5: a bidding war for it with Dollar General. And I've
Speaker 5: long said that Dollar General was the winner in that
Speaker 5: because they didn't get Family Dollar, and you know Family Dollar.
Speaker 5: It came with a very worn down, tired asset base,
Speaker 5: more locations for their stores, unmotivated staff, and it's taking
Speaker 5: years of investment to try to get it to return
Speaker 5: to some some some revenue growth. And they've been successful
Speaker 5: in doing that, but there just aren't synergies with the
Speaker 5: core Dollar Tree chain.
Speaker 2: Hey, Jen, can you Dollar General Dollar Tree? Can you
Speaker 2: kind of lay out what market they serve and is
Speaker 2: there any difference between those two.
Speaker 5: There actually is a difference between the two. Both of
Speaker 5: them tend to serve slightly lower income households, but the
Speaker 5: main difference is that Dollar General is very focused on
Speaker 5: the rural communities and actually on their left earnings call,
Speaker 5: they talked about closing some more of their underperforming urban
Speaker 5: locations because they just haven't been successful expanding into that space.
Speaker 5: In contrast, more Family Dollar stores are in the more
Speaker 5: urbanized areas, so there is overlap between the two store bases,
Speaker 5: but they're very different actual consumers, even though their core
Speaker 5: customer household income is fairly similar, intends to be in
Speaker 5: those households that earn under fifty thousand dollars a year.
Speaker 3: Tell me how these companies make money.
Speaker 4: Is it based on volume and how many people are
Speaker 4: coming in? Because I mean, I know they don't sell
Speaker 4: stuff for a dollar, but still the whole proposition is
Speaker 4: on the cheap.
Speaker 5: Yeah, it's about convenience and it's about value. And so
Speaker 5: you know what people like about these kinds of stores
Speaker 5: is that they're quick to get in and out of.
Speaker 5: They're located in very close proximity to where people live.
Speaker 5: And so when you think about people who are in
Speaker 5: that income bracket of under fifty thousand dollars a year,
Speaker 5: transportation is an issue. So having something that's in the
Speaker 5: local neighborhood that's quick to get to for fill in
Speaker 5: trips is really how they drive traffic and they make
Speaker 5: their money.
Speaker 2: What are these dollar stores saying these days jen about
Speaker 2: their customer base. We've seen, you know a lot of
Speaker 2: uncertainty com into the economic data just over the past
Speaker 2: couple of months. Here is that being reflected on what
Speaker 2: you're hearing from those dollar store management teams.
Speaker 5: It is with regards to their core customer. Obviously that
Speaker 5: customer is very strapped so when we're hearing news about
Speaker 5: potential cuts to snap benefits, which are you know, old
Speaker 5: term for that as food stamps, that impacts their core customers.
Speaker 5: People are worried about job security and potential layoffs. So
Speaker 5: for those those their core customers, there's a lot of stress.
Speaker 5: But where they are benefiting is they're getting more trade
Speaker 5: down customers. So they're getting hired income household that are
Speaker 5: in sort of middle income households and hire income households
Speaker 5: who are also a little bit worried about the current
Speaker 5: economic environment and are trading down into these stores looking
Speaker 5: for value. So there's a little bit of an offset
Speaker 5: that they can take advantage of. The question is as
Speaker 5: things improve, are they going to be able to hold
Speaker 5: on to those more valuable customers because the hiirre income
Speaker 5: customers are the ones who are buying more than just food.
Speaker 5: They're buying the more discretionary items in the store, and
Speaker 5: that's how you make your margin in this type of
Speaker 5: retail format.
Speaker 4: In terms of tariffs, do these guys have exposure to
Speaker 4: imports overseas and when you have a strategy yet.
Speaker 5: They definitely do have an exposure to tariffs, But for
Speaker 5: family dollar and for Dollar General. Most of their mix
Speaker 5: right now, or the bulk of their sales, is coming
Speaker 5: from consumable so it's food, it's household cleaning supplies. Most
Speaker 5: of that is produced domestically. For Dollar Tree itself, they
Speaker 5: have much higher exposure to to tariffs and to import.
Speaker 5: It's because they have a much bigger amount of discretionary categories,
Speaker 5: so they think about holiday decor, kitchen, you know, choch Key's,
Speaker 5: things like that, and up to now, you know, we've
Speaker 5: got a ten percent tariffy on imports from China. They
Speaker 5: say they've been able to offset about ninety percent of
Speaker 5: that cost so far, but as additional tariffs come, it's
Speaker 5: going to become a bigger challenge for Dollar Tree to manage.
Speaker 2: Our Thanks to Jennifer Bartashi's Bloomberg Intelligence Senior Analyst Retail,
Speaker 2: Staples and package Food, this week we focused on a
Speaker 2: couple of Bloomberg Big Take stories. The story focuses on
Speaker 2: Jay Clayton, President Donald Trump's pick to lead the Southern
Speaker 2: District of New York, and in this position, Clayton will
Speaker 2: have to balance the President's legal priorities with the need
Speaker 2: to stay independent. For more, co hosts Alex Steel and
Speaker 2: I were joined by Ava Bennie Marson, Bloomberg News legal reporter.
Speaker 2: We first asked Ava to paint a picture of Jay
Speaker 2: Clayton and his career.
Speaker 7: So he has a pretty impressive resume. He has been
Speaker 7: a long time senior council at Sullivan and from Well,
Speaker 7: a white shoe firm primarily based.
Speaker 8: In New York.
Speaker 7: He was the Chair of the Securities and Exchange Commission
Speaker 7: under the first Trump administration, and most recently he has
Speaker 7: been the chair of Apollo. He was brought into that
Speaker 7: position at the investing house to help clean up and
Speaker 7: get things back in order after the Jeffrey Epstein scandal,
Speaker 7: and now he is going into one of the most
Speaker 7: premiere seats in American law, which is the US Attorney
Speaker 7: for the Southern District of New York, also known as
Speaker 7: the Sheriff of Wall Street.
Speaker 2: So Eva talked us about this. The Southern District of
Speaker 2: New York historically a very powerful office here, fiercely defending
Speaker 2: its independence, but arguably it's come under some pressure recently,
Speaker 2: most recently with the Mayor Adams case here. What's that
Speaker 2: angle to the story?
Speaker 7: Absolutely, So, the Southern District of New York has a
Speaker 7: nickname of the Sovereign District because it really prizes its
Speaker 7: autonomy from Washington and see itself as a kind of
Speaker 7: independent institution. It chases really big headline grabbing cases on
Speaker 7: Wall Street, in politics, in terrorism, so it's really prized
Speaker 7: itself as being independent. But that came under threat recently
Speaker 7: when after the inauguration day Washington DC, some of the
Speaker 7: senior officials at the Department of Justice there asked the
Speaker 7: Southern District to drop the charges against New York Mayor
Speaker 7: Eric Adams, and that was quite controversial. It led to
Speaker 7: a string of resignations, including by the acting boss at
Speaker 7: the time, a seasoned prosecutor named Daniel Sassoon. She refused
Speaker 7: to comply with that order to drop the case and
Speaker 7: resigned and staid that set off a number of other departures.
Speaker 7: So the office has been in a bit of a
Speaker 7: tenuous situation. There has been some terminal there, and Joe
Speaker 7: Clayton is really coming in at an interesting time. One
Speaker 7: of the big questions is how will he managed that
Speaker 7: relationship with the Trump administration.
Speaker 4: Aside from that relationship, like what will be on his
Speaker 4: docket regardless, and you know, you mentioned the Eric Adams case,
Speaker 4: but like what would we expect him to do as
Speaker 4: head of this area.
Speaker 7: So we've gotten a bit of an insight into the
Speaker 7: kind of priorities he has going into the role. From
Speaker 7: interviewing more than thirty people who know Clayton and who
Speaker 7: have had conversations with other SDMY prosecutors, we know that
Speaker 7: he's particularly interested in focusing on human trafficking, on college
Speaker 7: campus protests, on anti semitism, and also targeting how bad
Speaker 7: people finance themselves, so money laundering. That's kind of in
Speaker 7: line with what SDM Y has done traditionally. You know
Speaker 7: here at Bloomberg, we know them as the office that
Speaker 7: prosecutes big white collar cases like FTX and Archagos. But
Speaker 7: some of these priorities certainly echo the kind of priorities
Speaker 7: that President Donald Trump has spoken about since an inauguration
Speaker 7: day too.
Speaker 2: Do we know anything about his relationship with President Trump,
Speaker 2: because oftentimes that ends up being a critical, critical issue.
Speaker 7: Yes, he has quite a close relationship with Donald Trump.
Speaker 7: From the people that we've spoken to, It's not something
Speaker 7: that he boasts about, but the tour close golfing buddies.
Speaker 7: They're both very good golfers. He was in line for
Speaker 7: the SDNY role actually during the first Trump administration after
Speaker 7: he was Chair of the SEC, but that didn't work out.
Speaker 7: He is JA Clayton is well regarded in the New
Speaker 7: York circles that Trump seeks out and seeks advice from
Speaker 7: as well, So he's going in there with that particularly
Speaker 7: close relationship, and from the conversations that we've had with
Speaker 7: people around Clayton, he certainly thinks that the President will
Speaker 7: and the President's allies and people around him will listen
Speaker 7: to him and will let him get on with the
Speaker 7: job that he has to do there. Whether that turns
Speaker 7: out to be the case is something that we'll have
Speaker 7: to watch and see.
Speaker 3: What are the criticisms surrounding Jake Clayton.
Speaker 7: One of the big criticisms is that he has never
Speaker 7: been a federal prosecutor before, which is extremely unusual for
Speaker 7: someone going in as the boss of SDMY. Most of
Speaker 7: the people who have occupied that position have in fact
Speaker 7: been federal prosecutors, specifically in that office, So that was
Speaker 7: a big criticism the first time around in twenty twenty.
Speaker 7: It has been brought up again, but to a lesser degree.
Speaker 7: When he was first nominated by President Donald Trump late
Speaker 7: last year. There was a sense of relief, certainly within
Speaker 7: the office that this was someone who has a good
Speaker 7: reputation in legal circles in New York, and he's worked
Speaker 7: in government before, he's worked at the SEC. He's a
Speaker 7: known quantity, and there was a sense of comfort with
Speaker 7: his nomination.
Speaker 2: Does you have an agenda right here? At an agenda
Speaker 2: just meaning a to do list here that's front and center.
Speaker 3: He does.
Speaker 8: He does.
Speaker 7: As I was saying before, We've got a bit of
Speaker 7: a sense of what he's going in with and what
Speaker 7: he wants to focus on, and that involves human trafficking,
Speaker 7: a crackdown on college campus protests, and anti semitism. He's
Speaker 7: been vocal about some of these things in the past
Speaker 7: and has expressed disappointment that the government hasn't done a
Speaker 7: whole lot in his view, to crack down.
Speaker 3: On college campus protests.
Speaker 7: So we expect to see those areas focused on. But
Speaker 7: also why call work. This is the kind of work
Speaker 7: that makes that office so famous, and there is a
Speaker 7: sense he doesn't really need to encourage people to go
Speaker 7: and chase those big cases. They will just happen regardless.
Speaker 7: Given that the office is essentially in charge of policing.
Speaker 2: Law Street our thanks to Ava, Benny Marris and Bloomberg
Speaker 2: News Legal Reporter. Coming up will break down how Novo
Speaker 2: Nordesk is looking to refill its pipepoint of experimental drug treatments.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
Speaker 2: b I go on the terminal. I'm Paul Sweeney. This
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Speaker 2: We moved to the health and pharmaceutical space this week.
Speaker 2: Novo Nordis agreed to pay Hong Kong based United Laboratories
Speaker 2: as much as two billion dollars for a next generation
Speaker 2: obesity drug. It's a Danish ozembic maker's latest move to
Speaker 2: refill its pipeline of experimental treatments. For more on this
Speaker 2: and the latest news in the biotech space, co host
Speaker 2: Alex Steel and I were joined by Sam Fazzelli, Bloomberg Intelligence,
Speaker 2: Director of Research for Global Industries and a senior pharmaceuticals analyst.
Speaker 2: I first asked Sam about how much money is going
Speaker 2: into the ob city market.
Speaker 6: As you know, obesity is hot and there's been quite
Speaker 6: a few deals in there. We talked about the deal
Speaker 6: between Russian Zealand Pharmaceuticals, and this week, as you run,
Speaker 6: he said, we have the one between over Notice and
Speaker 6: this time a Chinese biotech company and it's an asset
Speaker 6: that continues to broaden their portfolio of X number of
Speaker 6: mechanisms of action to try and hit this big issue.
Speaker 8: And it's an interesting deal.
Speaker 6: I mean, you know, it's China for a start, and
Speaker 6: it's interesting because I've seen others asters an Ix said
Speaker 6: they're putting two and a half billion dollars investment into
Speaker 6: a research center in China, two hundred million dollars up front,
Speaker 6: one point eight billion dollars what we call bio dollars.
Speaker 6: To come BUYO dollars, very very dollar bio dollars. But
Speaker 6: bio dollars are the sorts of dollars that you and
Speaker 6: I would like to have for real, except they're not real.
Speaker 6: I you know, if this works, and that works, and
Speaker 6: that works, you get another hundred, and then that and
Speaker 6: then landing out of the two hundred. So when far
Speaker 6: biotech companies love it, they added all up and say,
Speaker 6: look how big our deal is actually upfront? Only two
Speaker 6: hundred although I wouldn't mind two hundred million dollars either.
Speaker 3: I mean wouldn't turn you away exactly.
Speaker 2: So what's the big question or big discussion have with
Speaker 2: your clients these days? Sam?
Speaker 6: So, as you know, Paul, we have these anonymous chats
Speaker 6: with different industry investors, and we have one for the
Speaker 6: drug sector, and of course there is a huge amount
Speaker 6: of Can I call it depression, Yes, I think we can.
Speaker 6: As regards to public biotech markets, it's been five years.
Speaker 6: If you look at the XBI, which is an ETF
Speaker 6: that tracks the biotechs that are listed on the SIMP
Speaker 6: five hundred, it's gone nowhere pretty much for five years.
Speaker 6: And if you want to really depress yourself, plot that
Speaker 6: against the SMP five hundred and we all know where
Speaker 6: that's gone, irrespective of the latest little little down. So
Speaker 6: that's where biotech investors are a bit sad. On the
Speaker 6: other hand, we're seeing some deals with private biotechs, there
Speaker 6: are nowhere near the sort of valuations that would get
Speaker 6: in the public markets, So it actually starts to question
Speaker 6: why would they want to go public if they can
Speaker 6: get these sort of returns by doing a deal with Astroseneca,
Speaker 6: a deal with Sanofi to get four hundred million dollars
Speaker 6: up front for a very early stage asset.
Speaker 3: Where are we with measles?
Speaker 8: Oh?
Speaker 6: Yeah, Well, the cases are continuing to rise. The disease
Speaker 6: is still there. I think a lot of people that
Speaker 6: I speak to are convinced that we're only looking at
Speaker 6: the tip of the iceberg when you look at the count.
Speaker 6: But we are slowly going through the respiratory season. COVID's
Speaker 6: on this way down, flu is on its way down
Speaker 6: RSV and its way down. Hopefully measles will be the
Speaker 6: same case and that will come out of this without
Speaker 6: too much collateral damage, which is a horrible thing to
Speaker 6: call it, without too much misery for people who suffer
Speaker 6: from it.
Speaker 2: Same as you well know, there's been a growing skepticism
Speaker 2: and regarding vaccinations in general here in the United States.
Speaker 2: How is it in the rest of the world, the
Speaker 2: rest of the Western world, I'd say, I.
Speaker 6: Mean, Paul Remember the author of the paper that has
Speaker 6: now been disgraced and disqualified of whatever the right phrase
Speaker 6: is removed from the scientific conscience for linking MMR vaccines
Speaker 6: to autism was a British scientist or medic But whether
Speaker 6: you want to qualify them as scientists or not, it's
Speaker 6: a different matter. And so there's been you know, the
Speaker 6: story of vaccine skepticism has been here too. It's just
Speaker 6: a little bit different because it's very easy. It's all free,
Speaker 6: it's available to anybody who wants it is available, and
Speaker 6: the energies you walk into a doctor and you get it,
Speaker 6: so you don't have to pay anything. And therefore vaccination compliance,
Speaker 6: particularly in the older cohort of folks is better here.
Speaker 4: Okay, that's interesting, But then when you take a look
Speaker 4: at that, at the broader landscape and just the victriol
Speaker 4: still into the m n R vaccines in general, like
Speaker 4: not just for measles, but just in general. Does this
Speaker 4: really hurt innovation? Does it hurt the private sector's willingness
Speaker 4: to like pump money into all these things?
Speaker 6: Well, I mean, the United States is one of the
Speaker 6: biggest pharmaceutical markets, but they're not the only one. And
Speaker 6: at the end of the day, one has to assume
Speaker 6: that good data and good science will prevail, whether it's
Speaker 6: an MR and A vaccine or not. Maybe it's necessary
Speaker 6: to do some studies to prove that MR and A
Speaker 6: vaccines are not changing your genome. That's not very difficult
Speaker 6: to do. If it's the intent is there, maybe the
Speaker 6: CDC should do that. But in general, MR and A vaccines,
Speaker 6: normal vaccines, style or standard type vaccines, They're all here
Speaker 6: to stay as far as I'm concerned.
Speaker 2: Our thanks to Sam Fazelli, Bloomberg Intelligence, Director of Research
Speaker 2: for Global Industries and senior pharmaceuticals analysts. We move next
Speaker 2: to earnings from the pet food retailer Chewy. Chewy reported
Speaker 2: earnings for the fourth quarter that beat analysts expectations. The
Speaker 2: results were supported by strong customer growth as a company
Speaker 2: attracted pet owners with its assortment and reliable automated shipments.
Speaker 2: For more co hosts, Alex Steel and I were joined
Speaker 2: by Deanna or rossetto Painya, Bloomberg Intelligence consumer staples analyst.
Speaker 2: We first asked Diana how the Chewy business is going.
Speaker 3: So far, so.
Speaker 9: Good, it seems, and one of the things that I
Speaker 9: find very interesting is that insters seem to wait for
Speaker 9: the next shoe to drop. These companies have experienced good
Speaker 9: growth regardless of how the economic situation is going, because
Speaker 9: it seems to be resilient. The category as a whole
Speaker 9: seems to be very resilient.
Speaker 2: Because what's up at the style one hundred and twenty
Speaker 2: percent of the last year.
Speaker 9: Well, it is because a few things. During four Q
Speaker 9: they experienced the first growth in active consumers. For the
Speaker 9: past couple of years, sales growth has been mainly been
Speaker 9: because of net sales per active consumers, which is pretty
Speaker 9: much pricing. So now that there seems to be growth,
Speaker 9: but at the same time, the forecasts, the guidance for
Speaker 9: twenty twenty five, it seems to be on the lower
Speaker 9: end of long term goals, so that seems to worry investors.
Speaker 3: I think what were the competitors to Chewy?
Speaker 9: I would say Amazon is is you know, significant, Yes,
Speaker 9: on the merchandise side. Obviously one of the things that
Speaker 9: Chewy is doing, and I think it's it's a very
Speaker 9: smart smart play is to be able to differentiate themselves
Speaker 9: besides merchandise, which Amazon does that very well. We have
Speaker 9: conducted a couple of pricing studies Amazon versus Chewy, and
Speaker 9: they are pretty comparable. So one of the things that
Speaker 9: Chewy will differentiate itself is by doing other things such
Speaker 9: as healthcare, such as sponsor ads. That has been very
Speaker 9: profitable for Chewy.
Speaker 2: I'm full disclosure, I have never been a pet owner.
Speaker 2: I know that's a character flaw. But these people are
Speaker 2: passionate about their pets. Does that get reflected into the
Speaker 2: business model that like, is it kind of who cares
Speaker 2: what the economy is doing. I'm buying my fluffy, whatever
Speaker 2: toy it is, or whatever great food it is.
Speaker 9: Yes, I think it is a couple of things. One,
Speaker 9: sometimes you tend to be a little bit more resilient
Speaker 9: in terms of pet spenditure because they don't tend to talk,
Speaker 9: so you.
Speaker 3: Know, so they talk well, you know, talk differently, and
Speaker 3: that is true. But wow, now it's something you're saying
Speaker 3: real words. Okay, go ahead, no.
Speaker 9: But in terms of if they like something, you tend
Speaker 9: to stick with that. And that has been the fuel
Speaker 9: for the premium sation of food and that is why
Speaker 9: you have you know, a companies such as Fresh Pet
Speaker 9: growing twenty percent sales every quarter.
Speaker 2: Our thanks to Diana Rossero pin Yeah, Bloomberg Intelligence Consumer
Speaker 2: Staples analyst. One Bloomberg Big Takes story we focused on
Speaker 2: this week was entitled Google reshaped Search around AI as
Speaker 2: a racist rivals like chat GPT. You can find it
Speaker 2: on Bloomberg dot Com and The Terminal. The story focuses
Speaker 2: on how big change is centered around artificial intelligence are
Speaker 2: underway for the Internet's most popular product, Google. For our
Speaker 2: co hosts Alex Steele and I were joined by Davey Albat,
Speaker 2: Bloomberg Technology reporter. You first asked Davey how Google is
Speaker 2: currently looking at chat GPT.
Speaker 10: You know, it's it's been a few years at this
Speaker 10: point since chat gpt kind of burst out into the scene,
Speaker 10: and that was in late twenty twenty two. I believe
Speaker 10: when that moment happened, there was a lot of panic,
Speaker 10: i would say, within Google, as we've heard from sources,
Speaker 10: and it was really sort of an existential threat to
Speaker 10: them because even though chat GBT wasn't, you know, exactly
Speaker 10: a search product, people were using it like search, so
Speaker 10: they were asking it questions and getting the answers delivered
Speaker 10: to them written by AI, and in a lot of cases,
Speaker 10: you know, it just delivered the information that people were
Speaker 10: looking for, which is kind of the essential function of search,
Speaker 10: and so Google for the past several years has just
Speaker 10: been trying to figure out how to answer you know,
Speaker 10: this threat from open AI and their plan, it appears,
Speaker 10: is to stuff traditional search with generative AI as well.
Speaker 4: So when I go on and I search for, like,
Speaker 4: I don't know swim class for my hid in park slope,
Speaker 4: Now what comes up is that AI generated that pulls
Speaker 4: from broad search.
Speaker 3: Is that what that is?
Speaker 10: Yeah, that's right. So that's a fairly new product called
Speaker 10: AI overviews. So that's where the search results page seeds
Speaker 10: the top portion to results that are written by AI.
Speaker 10: And this you know, Google has come out with a
Speaker 10: search centric AI model that pulls from results and sort
Speaker 10: of summarizes and tries to give you the information right
Speaker 10: on that first page.
Speaker 3: So it gives the.
Speaker 10: User the information faster, but there are problems with it.
Speaker 10: There's the possibility of hallucinating in those responses. And the
Speaker 10: other big problem, and one that we explore in this
Speaker 10: story is you know, what does this mean for the
Speaker 10: open web if people don't need to click through to
Speaker 10: websites anymore and can just get their answers right on
Speaker 10: the search page. Then why would the open Internet still exist?
Speaker 10: Why would it be a good business model to advertise
Speaker 10: on websites. So that's been fascinating to look at.
Speaker 2: So again, one could paint the argument that this is
Speaker 2: a existential threat to the entire Google business model, Yet
Speaker 2: the stock doesn't really reflect that. You know.
Speaker 10: I think that Google has rolled out a lot of
Speaker 10: these changes around generative AI slowly and experimentally, and for
Speaker 10: the most part, what it's doing is trying to show
Speaker 10: the public that it matches the capabilities of open AI
Speaker 10: and chat GPT, and for the most part it actually
Speaker 10: really does. You know, Google is a company with a
Speaker 10: lot of deep AI history even before the you know,
Speaker 10: generative AI was extremely popular. But I think the issue
Speaker 10: is also that the there's this sense of like a
Speaker 10: slow degradation of search and the open Internet that just
Speaker 10: won't really be reflected in the day to day stock
Speaker 10: market because it's so slow. But I think people are
Speaker 10: starting to really get that. Sent who's in charge of
Speaker 10: the AI strategy at Google? So Liz Reid is the
Speaker 10: head of Google Search. She's the person that we profile
Speaker 10: in this story. She's a relative newcomer to search. She
Speaker 10: used to be an executive on the Google Maps division,
Speaker 10: and then when Generative Ai exploded onto the scene, she
Speaker 10: moved over slightly into main search, and she was the
Speaker 10: one behind Search Labs, which hosted a lot of the
Speaker 10: experimental features that I was talking about. So AI overviews,
Speaker 10: for instance, started as an experiment within Search Labs before
Speaker 10: it rolled out to the public more widely.
Speaker 2: Our thanks to davey Abbot, Bloomberg Technology Reporter, coming up
Speaker 2: a conversation with International Papers CEO Andrew Silvernail. You're listening
Speaker 2: to Bloomberg Intelligence on Bloomberg Radio, providing in depth research
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Speaker 2: We move next to the International Paper Company, which trades
Speaker 2: on the New York Stock Extrange under the ticker IP.
Speaker 2: The company is one of the leading producers of sustainable packaging,
Speaker 2: container board, and pulp products. This week, co hosts Alex
Speaker 2: Steele and I had the pleasure speaking with the International
Speaker 2: Paper CEO Andrew Silvernail. We discussed what the company does,
Speaker 2: Andrew's economic outlook, and the potential impact of tariffs. We
Speaker 2: began by asking Andrew what the theme was for the
Speaker 2: company's most recent investor day Transformation.
Speaker 11: Okay, it's really about the transformation. It heard in the
Speaker 11: opening talking about International Paper. Of course it's in our name,
Speaker 11: and so people think Global Paper. And the reality is
Speaker 11: we're a packaging company now, so almost one hundred percent
Speaker 11: sustainable packaging. With the acquisition of Dia Smith North America
Speaker 11: and Europe, we're number one in both places, and we're
Speaker 11: all focused on the customer and their packaging needs. You
Speaker 11: mentioned Chewy, great customer for us and a wonderful opportunity
Speaker 11: to build their branding to help them be successful. That's
Speaker 11: what we're all about, is transforming into a packaging company.
Speaker 4: So something that definitely came up is value over volume.
Speaker 4: You want to get the most out of what you're
Speaker 4: doing rather than just the numbers ups is doing something
Speaker 4: very similar and the short term there's a lot of
Speaker 4: angst and pain kind of around that before you get
Speaker 4: to that volume off to that value growth.
Speaker 3: Talk me through the cycle.
Speaker 11: Yeah, So if you think about we were our own
Speaker 11: worst enemy. So for years and years and years, we
Speaker 11: would chase volume at the most inopportune time. And so
Speaker 11: what we've effectively had to do is go back to
Speaker 11: the marketplace and say we need to be paid for
Speaker 11: the value that we're bringing. And that's what we do.
Speaker 11: We come into the marketplace. We're trying to help you
Speaker 11: get your goods to the place you want them to be,
Speaker 11: whether it's fast moving consumer goods or it's industrial goods.
Speaker 11: That's what we're trying to help. But we've got to
Speaker 11: make sure that we're taking care of all of our constituents,
Speaker 11: and frankly, we weren't, and so we've got to get
Speaker 11: that value proposition right. I think we've made that switch
Speaker 11: over the last couple of years. We're seeing that start
Speaker 11: to play out appropriately and we're getting paid for the
Speaker 11: value that we bring.
Speaker 2: You're building a state of the art box plant in Waterloo, Iowa,
Speaker 2: So talk about onshore. That's big time twohundred and sixty
Speaker 2: million dollars. Talk to us about that investment. What are
Speaker 2: you trying to do there?
Speaker 11: So what a lot of people don't understand about the
Speaker 11: packaging business, certainly the paper based packaging business is all
Speaker 11: of the business is done within two hundred miles. Two
Speaker 11: hundred mile radius of a plant. Air is expensive to
Speaker 11: ship and so you've got to be close. So we
Speaker 11: want to be close to our best customers. That's protein alley.
Speaker 11: So that area there's protein a protein alley, Protein alley.
Speaker 3: Really heard, Yeah, I think of the.
Speaker 8: Beef and the chickens.
Speaker 3: I heard that before.
Speaker 11: And so if you think about kind of kind of
Speaker 11: where protein happens in the United States from if you
Speaker 11: think of the South all the way through the Midwest
Speaker 11: through there. We want to be close to our customers.
Speaker 11: We have a great customer relationships. We need a modern facility.
Speaker 11: We're going to have them. I think it's going to
Speaker 11: be the largest facility in the US that does paper
Speaker 11: based packaging. And we want to make sure, because we're
Speaker 11: shipping in from other parts of the country now, service
Speaker 11: those customers very ineffective, very inefficient. We want to be local,
Speaker 11: we want to be close. We want to drive customer
Speaker 11: service and innovation as close to the customer as we can.
Speaker 4: Internationals in your name, So how are you affected by
Speaker 4: potential tariffs? And everyone sort of every country shift to
Speaker 4: nationalism whenever that way that is energy nationalism, goods nationalism,
Speaker 4: supply to nationalism.
Speaker 3: Where do you play and that has affect you?
Speaker 2: Yeah, so we are.
Speaker 11: We're definitely international company, principally North America and Europe. We're
Speaker 11: about two thirds North America and a third Europe. We
Speaker 11: don't ship actually a lot across borders, believe it or not,
Speaker 11: so that doesn't happen. So we're not being impacted directly
Speaker 11: by tariffs with cross border trade, but we're impacted by
Speaker 11: the economy and so as tariffs impact the econ to me,
Speaker 11: that will have an impact of us. So we're watching
Speaker 11: what's going on and we see it in our numbers.
Speaker 11: We've seen the volatility in the last month or so,
Speaker 11: so we're keeping a close eye on that. But that's
Speaker 11: really how it impacts us.
Speaker 2: What are your customers saying about their outlook for the economy?
Speaker 2: I would think that you would have a finger on.
Speaker 8: The pulse of that.
Speaker 11: Yeah, I think we do have a pretty good pulse.
Speaker 11: I think there's uncertainty, if we're fair about that. The
Speaker 11: last month or two or so, there's been some real uncertainty,
Speaker 11: and I think, well, nothing's really happened yet. It's caused
Speaker 11: people to retrench a little bit and ask, hey, do
Speaker 11: I want to make that investment right now? Can I
Speaker 11: hold off on spending money right now?
Speaker 6: And let's see.
Speaker 11: Look, my belief is these things wash out over time,
Speaker 11: and we make investments for decades. We don't make investments
Speaker 11: for quarters or even years. And so we're thinking about
Speaker 11: investments for the.
Speaker 4: Long term in terms of say, hiring labor, how you're
Speaker 4: managing the business. Is it a retrenchman time? Is it expansion?
Speaker 4: How would you define it for you guys?
Speaker 11: Actually, interestingly, it's a little bit of both, right, And
Speaker 11: what I mean by that you yeah, you can actually,
Speaker 11: So when you think about that, you have certain parts
Speaker 11: of your business that aren't as strong or aren't as healthy,
Speaker 11: and you have other parts that are very healthy. So,
Speaker 11: as an example, protein alley very healthy for us, Let's
Speaker 11: make investments in water, rely on it. Let's move the
Speaker 11: the let's move people and this investment. There things that
Speaker 11: are weaker, things that are struggling or markets you're not
Speaker 11: as strong in. You have to reach trend, so you have.
Speaker 3: To do blaking areas. Are those well you've.
Speaker 11: Got you've got softness in parts of the economy kind
Speaker 11: of broad base. You've got to be concerned about things
Speaker 11: that are going to shrink over time and things, you know,
Speaker 11: things like e commerce that are strong. Things like protein
Speaker 11: and fresh vegetables, those are strong. You want to move
Speaker 11: towards those things. And uh and so you know, we
Speaker 11: want to move our investment towards the parts of the
Speaker 11: economy that we think are going to expand over time,
Speaker 11: location and industry and and really you know, grow on
Speaker 11: those strengths.
Speaker 2: So to the extent, if I think about your company,
Speaker 2: I think about a GDP top line growth story, is
Speaker 2: there anything different than that? I mean, that's it?
Speaker 8: And is it?
Speaker 6: So?
Speaker 2: Is your business really about managing the cost of managing margin?
Speaker 3: No, it's not.
Speaker 11: Okay, Yes, you always have to manage your costs, right,
Speaker 11: but the key thing is you want to align yourself
Speaker 11: with where growth is. I think that's the biggest thing.
Speaker 11: In our investor day, we talked about a volume growth
Speaker 11: that's kind of one to two percent that follows underlying
Speaker 11: volume growth and pricing power over time, it's also about
Speaker 11: one to two percent, so we think we're three to
Speaker 11: four percent grower over time the core market. And then
Speaker 11: that question is can you align with better growing industries
Speaker 11: and can you win markets?
Speaker 2: Here our thanks to the International Paper CEO Andrew Sillerno.
Speaker 2: Each week we look at research from Bloomberg n EF
Speaker 2: previously known as New Energy Finance. They're the team at
Speaker 2: Bloomberg that tracks and analyzes the energy transition from commodities
Speaker 2: to power, transport, industries, buildings, and agricultural sectors. This week
Speaker 2: we looked at how Chinese electric vehicle maker BYD is
Speaker 2: crushing competitors with a five minute charging system. For more,
Speaker 2: co hosts Alex Stale and I were joined by Ryan Fisher,
Speaker 2: Bloomberg b n EF EV charging team leader. We first
Speaker 2: asked Ryan to describe BID's new charging system.
Speaker 8: Yeah, I mean this just come out of nowhere. In
Speaker 8: some ways.
Speaker 12: We had the Porsches of this world doing charging three
Speaker 12: fifty killer? What this is a thousand killer? What we
Speaker 12: got three to four times the kind of other best
Speaker 12: in class that people were expecting when we talk about
Speaker 12: five minutes. Obviously that's similar to gasoline for four hundred
Speaker 12: kilometers of charge. Some of the others are more like
Speaker 12: the best in class. Lucid obviously is quite famous. They're
Speaker 12: doing it in like one hundred maybe one hundred and
Speaker 12: eighty kilometers in that time. So this is a real
Speaker 12: step change. And not only is it that, what you've
Speaker 12: got is an announcement and they're going to do it,
Speaker 12: going to make the vehicles available a month later. So
Speaker 12: typically you might hear an announcement from a Western automaker
Speaker 12: and maybe a couple of years later that tech you've
Speaker 12: heard about will be there. Whereas they're saying these vehicles
Speaker 12: in China, you'll be able to buy them soon.
Speaker 8: But yeah, that is only in China.
Speaker 3: How how did they get it down to five minutes?
Speaker 12: So it seems like they've improved the fast charging technology
Speaker 12: through both the voltage so you have higher voltage on
Speaker 12: the vehicles, you could lower the current or the current
Speaker 12: accept this power, and then changing the battery chemistry as well.
Speaker 8: So the interesting thing is.
Speaker 12: That they've added different types of cooling because if you
Speaker 12: have really high currents going through the battery, then you
Speaker 12: have a lot of heat being created. So they've changed
Speaker 12: their cooling technology. They've improved some of the other intricacies
Speaker 12: of the cells as well. And on a bigger market point,
Speaker 12: you've got a lot of companies saying we're going to
Speaker 12: build solid state batteries, So like next generation battery technologies
Speaker 12: for the car, Well, is that even needed anymore? If
Speaker 12: BYD can do this with an evolution of the current tech, So.
Speaker 2: What can be what likely will be the competitive response
Speaker 2: from the Western battery infrastructure people. They got to up
Speaker 2: their game like now, don't they.
Speaker 8: Yeah, it's just such a race.
Speaker 12: Like you look at these evs and you think about
Speaker 12: buying one, and there's just something new coming that's more advanced,
Speaker 12: one after the other. So like as a consumer, maybe
Speaker 12: you don't want to buy because you think, well, I'm
Speaker 12: going to buy something and that'll be absollete pretty quick.
Speaker 12: From the Western automakers, they going to find it hard.
Speaker 12: You look at BYD, they've just got so many engineers,
Speaker 12: they're vertically integrated. They're doing much of this by themselves,
Speaker 12: all the way down to now buying the ships to
Speaker 12: distribute these cars they've built around the world and getting
Speaker 12: involved in the metals and mining game and things like that.
Speaker 12: So it's hard to imagine how everybody is going to compete. Obviously,
Speaker 12: we've got tariffs in different regions to try and block
Speaker 12: the Chinese out. And then when you think about this tech,
Speaker 12: there is an element of do you actually need it?
Speaker 12: So when you look on the Chinese articles, they were
Speaker 12: looking at the Jaumi Su seven, which is the vehicle
Speaker 12: made by the Jammi, which is the smartphone maker. So
Speaker 12: they've entered the market and they're selling electric vehicles and
Speaker 12: the hundreds of thousands of volume, they've outsold loads of cars.
Speaker 12: It's kind of an amazing story and people comparing saying, well,
Speaker 12: actually this one b Wyde is talking about it is
Speaker 12: ten thousand dollars more expensive. So like the tech is
Speaker 12: not necessarily everything on fast charging when there's people who
Speaker 12: are doing I don't know, fast cars, fancy cars. They
Speaker 12: got a lot of other features as well, like whilst
Speaker 12: this is a step change, do we necessarily need five
Speaker 12: minutes over ten minutes?
Speaker 8: Does everybody care? It's debatable, I mean depends how.
Speaker 4: Long your bathroom break is, which you know, you got
Speaker 4: a shot, you get some concessions. So bid is out
Speaker 4: selling a Tesla's in China in particular, you can't get
Speaker 4: a bid car in the US, I should point that out.
Speaker 4: And the BYD sales for this year about five to
Speaker 4: six million cars, So is this five minute battery like
Speaker 4: a big selling point for this in comparison to say
Speaker 4: a Tesla or.
Speaker 8: No, Yeah, I think so.
Speaker 12: And then in China what you've got is I think
Speaker 12: last year BID saw something like one point six million
Speaker 12: pure battery electric because it just the battery powers the car,
Speaker 12: and I think Tesla was somewhere around six hundred thousand
Speaker 12: to seven hundred thousand. So it gives you and they
Speaker 12: were seconds, so it gives you an idea teslare doing well.
Speaker 12: But obviously just how well BYD are doing one of
Speaker 12: the things BYD had been leaning into previously with these plug.
Speaker 8: In hybrid models. So you have an engine and you
Speaker 8: have a battery.
Speaker 12: The engine might only be small and the car itself
Speaker 12: might be mainly running off the battery. So they've done
Speaker 12: quite well with those, and it might just show a
Speaker 12: little bit of a pivot from them to say, actually
Speaker 12: we can maybe do without the engine.
Speaker 8: Now, look we've got this.
Speaker 12: Huge range, fast charging power vehicles like you don't necessarily
Speaker 12: need to worry about that all so it might be
Speaker 12: a pivot from them in terms of Tesla versus BID
Speaker 12: when you said that they're not available in the US,
Speaker 12: but they are available in other regions. So they've done
Speaker 12: very well in places like Brazil and Thailand. There's something
Speaker 12: like eighty to ninety percent share of the EV market there,
Speaker 12: and like eighty ninety percent share is obviously huge for
Speaker 12: the that's just that's Chinese manufacturers, with which Bwide is
Speaker 12: pretty major one.
Speaker 8: They've got a plant out.
Speaker 12: In Brazil as well, so they're making moves to kind
Speaker 12: of dominate those The charging tech could be part of
Speaker 12: that too. So the interesting thing is, like we've had
Speaker 12: these like charging connector wards. Do you have the Tesla connector?
Speaker 12: Do you have the connector that all the other manufacturers
Speaker 12: are using? And in Europe all the other manufacturers won out.
Speaker 12: In America, Tesla went out well. Arguably in some of
Speaker 12: these kind of smaller merging markets that you could end
Speaker 12: up with the Chinese connector becoming an interesting proposition, and
Speaker 12: maybe the Chinese automotive industry will.
Speaker 8: Think about that.
Speaker 12: And it doesn't mean that they've got it so far,
Speaker 12: but if they're selling the most cars and they've got
Speaker 12: the most advanced charging tech.
Speaker 8: Then maybe that's the way that they can exert more
Speaker 8: influence over the rest of the world.
Speaker 2: Our thanks to Ryan Fisher, Bloomberg b n ef EV
Speaker 2: Charging team leader. That's this week's edition of Bloomberg Intelligence
Speaker 2: on Bloomberg Radio, providing in depth research and data on
Speaker 2: two thousand companies and one hundred and thirty industries. And
Speaker 2: remember you can access Bloomberg Intelligence via b I go
Speaker 2: on the terminal. I'm Paul Sweeney.
Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
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