WEBVTT - The Bottom Line Is California Won't Allow PG&E To Fail 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.600 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.800 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg P and L 0:00:20.840 --> 0:00:27.800 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Let's 0:00:27.800 --> 0:00:32.240 talk about pg n E, the California utility. The shares, 0:00:32.280 --> 0:00:35.280 as Greg Jarrett just mentioned, higher right now by more 0:00:35.320 --> 0:00:38.760 than thirty nine percent. Joining us here in the Bloomberg 0:00:38.840 --> 0:00:43.080 Interact of Brokers Studios to lend his expertise is Kit Kneale. 0:00:43.320 --> 0:00:48.760 He is our senior industry analyst for the world of Utilities. Kit, 0:00:48.880 --> 0:00:52.800 thank you very much for being here. Total liabilities for 0:00:52.960 --> 0:00:55.200 p G and E. What kind of number are we 0:00:55.320 --> 0:00:58.800 talking about? Thirty billion? And I think that's the right 0:00:58.920 --> 0:01:01.920 range from last year plus this year. That's a lot 0:01:01.960 --> 0:01:05.880 of money. That's more money, twice as much money as 0:01:06.040 --> 0:01:10.000 the invested equity in p G n E, twice as 0:01:10.120 --> 0:01:13.039 much as the annual revenues for pg n E. So 0:01:13.680 --> 0:01:15.760 it you know, when you look at it that way, 0:01:16.040 --> 0:01:20.800 you get a sense of just you know how you're 0:01:20.840 --> 0:01:22.800 between a rock and a hard place when you're saying 0:01:22.880 --> 0:01:25.680 they have to pay all of this if they did well. 0:01:25.760 --> 0:01:28.520 So let's just take a step back. What is p 0:01:28.720 --> 0:01:31.760 G n e S responsibility in the fires that are 0:01:31.800 --> 0:01:36.679 currently ravage in California. In California, they have this rule 0:01:36.720 --> 0:01:41.280 called inverse condemnation, and the courts have held that if 0:01:41.720 --> 0:01:46.440 a utility equipment is in any way involved in a fire, 0:01:46.560 --> 0:01:49.960 that the utility is totally responsible for all the damages 0:01:50.000 --> 0:01:52.720 in the fire. They can't argue that somebody else had 0:01:52.720 --> 0:01:56.120 partial responsibility, or some homeowners should have done this, or 0:01:56.240 --> 0:01:59.360 some highway department should have done that. They just have 0:01:59.480 --> 0:02:02.480 to pay it all. So that's been the real crunch 0:02:02.680 --> 0:02:06.800 that makes the California situation UH different than a hurricane 0:02:06.800 --> 0:02:10.080 in Florida, for example, where there's a long history of 0:02:10.160 --> 0:02:15.400 people saying, obviously the utility didn't cause this, so you know, 0:02:15.440 --> 0:02:19.560 we have to help them pay it back. The California 0:02:19.760 --> 0:02:24.120 legislature has a voice in all of this, right, that's right. 0:02:24.160 --> 0:02:29.720 The California legislature, the governor, UH, the regulatory Commission. So 0:02:30.120 --> 0:02:34.360 all those are really kind of the three major UH 0:02:34.800 --> 0:02:39.120 state folks that are going to decide how this works out. 0:02:39.120 --> 0:02:43.480 And the legislature has already done something where they've indicated 0:02:43.560 --> 0:02:49.200 that the regulators are supposed to consider whether, basically whether 0:02:49.280 --> 0:02:51.239 utility is going to go bankrupt if it pays all 0:02:51.320 --> 0:02:54.720 of the liabilities that might be assigned to it. So 0:02:54.840 --> 0:02:59.840 the legislature has said, hey, regulators, uh, you know, don't 0:03:00.360 --> 0:03:04.440 you have to pass off some of the of the 0:03:04.520 --> 0:03:10.079 liabilities or these guys can't survive financially. And yesterday we 0:03:10.200 --> 0:03:14.440 saw the head regulator in California re emphasizing that point, 0:03:14.760 --> 0:03:18.120 and that gave stockholders a kind of new lease on 0:03:18.200 --> 0:03:21.520 life and and bond holders as well from Penny. With 0:03:21.520 --> 0:03:24.480 the bonds surging and price, I have to wonder pg 0:03:24.600 --> 0:03:27.240 NY knows that it has California hostage here. It is 0:03:27.280 --> 0:03:31.120 the biggest utility, biggest energy providers, so you know they're 0:03:31.200 --> 0:03:33.440 not going to be allowed to fail. The fact that 0:03:33.480 --> 0:03:37.360 they drew down their entire credit line and basically said 0:03:37.560 --> 0:03:41.680 all right, we're at risk of bankruptcy now forced their hands. No. Well, 0:03:41.720 --> 0:03:47.160 I think, uh, it's a good question whether they're they're 0:03:47.200 --> 0:03:50.200 that tough and cynical to be playing it that way. 0:03:50.240 --> 0:03:52.960 You know, they're they're not. They're not hedge fun guys, right, 0:03:53.080 --> 0:03:56.720 you know, they're not necessarily uh, they're kind of hopefully 0:03:56.800 --> 0:04:00.800 running it for the long term. And also the reality is, 0:04:00.920 --> 0:04:04.720 you know there's an example, Well, if if they're running 0:04:04.720 --> 0:04:06.360 it is for the long term, I want to come 0:04:06.400 --> 0:04:09.000 in there, because if they are, they're not doing a 0:04:09.120 --> 0:04:12.640 very good job. And it's mean in terms of what 0:04:12.760 --> 0:04:14.880 sort of taxpayers are on the hook for in California, 0:04:14.960 --> 0:04:18.120 they're not gonna be allowed to fail. They're they're struggling 0:04:18.279 --> 0:04:21.080 for sure, But look at the end of the day, 0:04:21.920 --> 0:04:24.240 even if it's the utility's fault, I mean, even if 0:04:24.279 --> 0:04:28.039 they did something drastically wrong. There's a couple of realities 0:04:28.080 --> 0:04:31.119 that California has to do with. One is the people 0:04:31.200 --> 0:04:34.320 got burned out have to get compensated in some way, 0:04:34.560 --> 0:04:37.159 so that could be in the multiple billions of dollars. 0:04:37.360 --> 0:04:40.400 The other is you have to sooner or later have 0:04:40.480 --> 0:04:45.359 a financially viable utility. So to say, even if you 0:04:45.440 --> 0:04:48.440 say it's their fault, to say, well, they have to 0:04:48.480 --> 0:04:52.560 pay twenty or thirty billion dollars doesn't compute because then 0:04:52.600 --> 0:04:55.599 you don't have a utility that can continue to operate. 0:04:56.520 --> 0:05:00.839 Kit if you just for the sake of argument, put 0:05:00.880 --> 0:05:08.120 aside all of the inverse condemnation liabilities, the potential fifteen 0:05:08.640 --> 0:05:13.040 billion whatever it is, what's the financial operation of p 0:05:13.240 --> 0:05:17.560 g N like Well, aside from that, the financial operation 0:05:17.680 --> 0:05:21.880 is fine. But you know, keep in mind, regulated utilities 0:05:22.000 --> 0:05:29.240 are entirely the creatures of the regulators, So their profitability, 0:05:29.400 --> 0:05:32.800 their cash flow is completely dependent on what the regulators say. 0:05:32.800 --> 0:05:35.520 It is. So if the regulators raise rates, then their 0:05:35.560 --> 0:05:38.280 earnings and cash flow go up. If they cut rates, 0:05:38.320 --> 0:05:41.120 they go down. If the regulators say, you don't have 0:05:41.240 --> 0:05:45.320 to pay these apparent liabilities, then you don't if you 0:05:45.440 --> 0:05:49.000 do so. So when people say, well, what's the company 0:05:49.040 --> 0:05:53.000 really worth? Aside from all of this, it completely you know, 0:05:53.279 --> 0:05:57.919 it completely depends on what happens with the regulators and 0:05:57.920 --> 0:06:00.560 whether they want to let it go bank rupted or not. 0:06:00.800 --> 0:06:03.120 That's that's the end of the the end of the 0:06:03.200 --> 0:06:06.200 day what you have, and right now regulators are saying, 0:06:06.440 --> 0:06:08.680 we don't want you to go bankrupt. Kit Connolledge, thank 0:06:08.720 --> 0:06:10.600 you so much for being with us. Kit Connolledge's senior 0:06:10.640 --> 0:06:15.120 Industrials and Utilities analyst with Bloomberg Intelligence PG and E 0:06:15.520 --> 0:06:18.640 has more than twenty two billion dollars of debt. Their 0:06:18.680 --> 0:06:21.919 prices on those bonds are rising today, although PAM I 0:06:21.960 --> 0:06:25.240 do have to wonder going forward if perhaps bond investors 0:06:25.279 --> 0:06:26.640 are not going to be as forgiving with some of 0:06:26.680 --> 0:06:30.360 these companies that can whip them around with different proclamations, 0:06:30.839 --> 0:06:36.000 if there is a situation like this that occurs. Brexit 0:06:36.160 --> 0:06:38.479 has been on the brink for a long time, but 0:06:38.560 --> 0:06:42.720 things seem to be heating up with the potential deal collapsing. 0:06:42.760 --> 0:06:45.719 Theresa May now Prime Minister of the United Kingdom, trying 0:06:45.760 --> 0:06:50.320 to retain her control over Parliament and get this sort 0:06:50.360 --> 0:06:53.440 of deal through before the deadline. Joining us now, Brandon Brown, 0:06:53.720 --> 0:06:57.640 chief economist and head of economic research at Mitsubishi UFJ Securities, 0:06:57.920 --> 0:06:59.960 joining us here in our eleven three oh Studios Brunday, 0:07:00.480 --> 0:07:03.240 Can we just talk about what the pound is currently 0:07:03.360 --> 0:07:07.679 pricing in what scenario our markets saying seems most likely 0:07:07.800 --> 0:07:10.320 right now? There are two scenarios, and I think the 0:07:10.400 --> 0:07:14.120 main scenario it's being priced in is that somehow this 0:07:14.640 --> 0:07:18.920 appeasement deal is going to get through, and most likely 0:07:19.000 --> 0:07:21.560 it'll get through because there will be some cross of 0:07:21.840 --> 0:07:25.040 crossing of our support from the Labor Party um to 0:07:25.160 --> 0:07:29.240 support the deal despite for Brexit opposition, with Brexiteer opposition 0:07:29.280 --> 0:07:31.520 within the Conservative Party, and why Labor would support the 0:07:31.600 --> 0:07:34.320 deal is that if the Conservatives go along with this, 0:07:35.080 --> 0:07:38.000 they are a major risk of losing a lot of 0:07:38.080 --> 0:07:42.160 our nationalists working class support and this will probably sink 0:07:42.200 --> 0:07:44.800 for Conservative Party for the next generation. So Labor would 0:07:44.800 --> 0:07:47.080 really do well out of it. And in many ways 0:07:47.120 --> 0:07:49.160 I think what the pound is pricing in it is 0:07:49.160 --> 0:07:52.920 suspecter of a far left government under Mr Corbin. Now 0:07:52.960 --> 0:07:56.440 there is a there is a better scenario, scenario number two, 0:07:57.160 --> 0:08:01.800 where Churchillian type figure maybe that an exaggeration emerges in 0:08:02.320 --> 0:08:04.800 in some sort of leadership challenge in the next few weeks, 0:08:05.400 --> 0:08:10.000 says that enough is enough. The Europeans have treated us terribly. 0:08:10.200 --> 0:08:13.160 They haven't ready sat down in good faith and negotiated, 0:08:13.520 --> 0:08:15.880 and the best we can do is reach some interim 0:08:15.920 --> 0:08:17.880 and deal for the next year and then we're away, 0:08:17.960 --> 0:08:21.400 out out and under w t O rules, and that 0:08:21.880 --> 0:08:25.760 would salvage a Conservative party possibly or rarely a lot 0:08:25.840 --> 0:08:28.240 of nationalists support, and they may even win a general 0:08:28.320 --> 0:08:32.120 election one year down the road. Well, the French Finance 0:08:32.240 --> 0:08:37.160 minister said earlier today that well, he said that British 0:08:37.280 --> 0:08:42.920 politicians who campaigned for Brexit, he described them quote as liars. 0:08:44.320 --> 0:08:49.559 Does that help May actually reach an agreement with her 0:08:49.679 --> 0:08:53.199 own party as well as with Parliament. Absolutely not. But 0:08:53.520 --> 0:08:55.880 if you ask me what the main failure in the 0:08:56.000 --> 0:08:59.320 homemade strategy has been, it has been right from a start, 0:08:59.520 --> 0:09:03.960 not doing everything possible to get a US deal, because 0:09:04.040 --> 0:09:06.319 once they realize that the Europeans were going to be 0:09:06.440 --> 0:09:09.319 totally obdurate, as they have been in Germany and France, 0:09:09.760 --> 0:09:13.480 the obvious strategy was to take the advantage of an 0:09:13.600 --> 0:09:17.800 anti German president of the United States, anti EU, pro 0:09:17.960 --> 0:09:21.920 British to do a deal and fundamentally aligned Britain with 0:09:22.080 --> 0:09:24.360 all American interests and policies in the Middle East and 0:09:24.400 --> 0:09:27.679 everywhere else. And May has totally failed to do that instead, 0:09:28.200 --> 0:09:31.080 in fact, she's gone for the opposite. She's been backing 0:09:31.840 --> 0:09:34.599 m mercle on Iran and all these other issues that 0:09:34.880 --> 0:09:37.840 purposely to annoy President Trump. So I want to shift 0:09:37.920 --> 0:09:41.520 focus from Europe to the United States because what's moving 0:09:41.600 --> 0:09:45.280 markets today in in large part is FED Vice chair 0:09:45.360 --> 0:09:49.559 Rich Clarida his comments about getting to neutral and the 0:09:49.679 --> 0:09:54.760 possibility of perhaps raising rates less frequently than previously thought 0:09:54.880 --> 0:09:56.880 because of some of the head winds to growth and 0:09:56.960 --> 0:09:58.439 the fact that you are seeing a little bit of 0:09:58.559 --> 0:10:01.280 slowing given that you just wrote this book, the Case 0:10:01.360 --> 0:10:05.320 against two percent inflation, Do you think that the FED 0:10:05.480 --> 0:10:08.800 needs to slow down now and not hike very much 0:10:08.960 --> 0:10:11.440 at all to get to neutral in order to sort 0:10:11.480 --> 0:10:14.040 of normalize, or do you think that there's still room 0:10:14.120 --> 0:10:16.120 to run. We'll let me say one or two things. 0:10:16.320 --> 0:10:20.160 Nobody knows what neutral interest rates, let alone Federal Reserve officials. 0:10:20.720 --> 0:10:24.360 And secondly, nobody knows where we are in the business cycle. 0:10:24.559 --> 0:10:26.800 If you study any fifty or hundred year period or 0:10:26.840 --> 0:10:29.960 twenty year period, the record of Federal Reserve fine tuning 0:10:30.000 --> 0:10:32.120 and knowing exactly where we are in the business cycle 0:10:32.240 --> 0:10:35.840 is appalling, and probably at the moment, with a cheerlead 0:10:36.040 --> 0:10:38.480 leader for Trump Economics as the chief of the FED, 0:10:38.800 --> 0:10:41.760 he's probably tending to exaggerate the strength of the economy. 0:10:42.200 --> 0:10:45.439 I mean, my view is that the growth cycle upturn, 0:10:45.640 --> 0:10:49.400 which started in the early two thousand and sixteen in 0:10:49.440 --> 0:10:53.559 the US and globally under the influence of radically easy 0:10:53.640 --> 0:10:58.840 monetary policy, has become tired, and most likely the global 0:10:58.920 --> 0:11:01.360 growth slow down out iv United States has now been 0:11:01.440 --> 0:11:04.560 joined by the United States. That is a dangerous period 0:11:04.920 --> 0:11:08.439 because growth cycle slowdowns do sometimes go into recessions and 0:11:08.520 --> 0:11:11.040 sometimes do bring about asset inflation. So we are at 0:11:11.040 --> 0:11:13.880 a dangerous moment. I just want to note that your 0:11:13.920 --> 0:11:17.920 new book is entitled The Case Against two percent Inflation 0:11:18.760 --> 0:11:23.840 From negative Interest Rates to a twenty one century gold Standard. 0:11:24.600 --> 0:11:27.599 Do you see that happening? Well, A century is a 0:11:27.640 --> 0:11:31.520 long time in twenty one century? What what I what 0:11:31.640 --> 0:11:35.800 I do think is that the two percent inflation standard 0:11:36.200 --> 0:11:39.480 is going to blow apart sooner than most people think, 0:11:39.600 --> 0:11:42.559 even although there's not any effective political opposition to it. 0:11:42.800 --> 0:11:45.360 And it's probably going to blow apart because in risk 0:11:45.400 --> 0:11:49.959 global slow that global slow slow down, inflation everywhere is 0:11:49.960 --> 0:11:52.280 going to be well below target, including in the United States. 0:11:52.760 --> 0:11:56.319 I think the next phase of monetary development is going 0:11:56.440 --> 0:12:00.040 to be currency war. It's going to be monetary a 0:12:00.120 --> 0:12:02.280 new period of monetary chaos in the way of the 0:12:02.440 --> 0:12:06.280 US will react to a global slowed down global slow 0:12:06.320 --> 0:12:11.319 down is going to be stepping up quite justifiably action 0:12:11.440 --> 0:12:14.880 against current its manipulators in Europe, Japan, and China. We 0:12:15.000 --> 0:12:17.640 look forward to you in the future guiding US through 0:12:17.679 --> 0:12:20.679 those issues. Thank you very much. Dr Brendan Brown. He 0:12:20.960 --> 0:12:23.679 is the chief economist and head of economic research for 0:12:23.840 --> 0:12:27.840 Mitsubishi UFJ Securities. He's also the author of the case 0:12:27.920 --> 0:12:31.439 against two percent inflation from negative interest rates to a 0:12:31.840 --> 0:12:38.319 one century gold standard. We have an expert in the 0:12:38.440 --> 0:12:41.920 world of food, Adnan Durrani. He is the founder and 0:12:42.040 --> 0:12:45.400 the chief executive of Saffron Road and he has a 0:12:45.559 --> 0:12:50.760 diverse and storied list of experiences in the food industry. 0:12:50.880 --> 0:12:54.599 For example, he managed to sell what was at the 0:12:54.880 --> 0:12:58.679 time the second largest bottled water company in the Northeast. 0:12:58.720 --> 0:13:01.679 It was acquired by cot Averages. I'm speaking about Vermont 0:13:01.800 --> 0:13:05.040 Pure and Crystal Rock. And he joins us here in studio. 0:13:05.320 --> 0:13:07.280 Thank you very much for being here. Thank you very 0:13:07.360 --> 0:13:08.880 much for having me. It's honor to be on your show. 0:13:09.120 --> 0:13:14.600 Tell us a little bit about halal food and Saffron 0:13:15.040 --> 0:13:17.839 foods and how this all came together. Give us a 0:13:17.880 --> 0:13:21.199 little of your history. Sure so, uh, I'm kind of, 0:13:21.559 --> 0:13:24.200 I guess, both a serial immigrant and a serial entrepreneur. 0:13:25.200 --> 0:13:27.600 And this started with the idea of the Silk Road, 0:13:27.720 --> 0:13:29.959 which was you know, went all the way from Italy 0:13:30.160 --> 0:13:33.880 to Asia and celebrated a hundred different cultures on that road, 0:13:34.240 --> 0:13:36.200 and so we thought, let's create a journey. Let's create 0:13:36.200 --> 0:13:38.800 a brand around Royal cuisines where they can be used 0:13:38.920 --> 0:13:42.280 as an enlightenment tool to bring together people of different faiths, 0:13:42.559 --> 0:13:46.480 different ethnicities, different cultures and celebrate their cuisines. And so 0:13:46.559 --> 0:13:49.839 the zafron was the main spice used on the Fron Road. 0:13:49.920 --> 0:13:51.559 So that's how it really came together as kind of 0:13:51.600 --> 0:13:54.640 a social model. And halal food, you know, is is 0:13:54.840 --> 0:13:57.480 a huge business outside US. It's a two trillion dollar 0:13:57.600 --> 0:14:00.520 industry outside US. And halal has to do with not 0:14:00.640 --> 0:14:03.440 only how was it harvested, but how the animals treated 0:14:03.720 --> 0:14:06.199 while they were living. It's very similar to kosher. But 0:14:06.400 --> 0:14:08.400 we knew that there was a very strong demographic in 0:14:08.520 --> 0:14:10.559 US for that, and that's why we launched that. That's 0:14:10.559 --> 0:14:13.000 not our core consumer necessarily, it's one of the elements 0:14:13.040 --> 0:14:14.839 of our brand. Well, yeah, that's what I was gonna say. 0:14:14.880 --> 0:14:18.160 When I think of Saffron Road, I think of major supermarkets, 0:14:18.200 --> 0:14:20.280 I think of whole foods, I think of you know, 0:14:20.400 --> 0:14:23.040 aisles where it's not just people who are looking for 0:14:23.120 --> 0:14:27.120 halal food, but they're looking for Middle Eastern food. They're 0:14:27.120 --> 0:14:29.520 looking for Indian food. So can you talk a little 0:14:29.560 --> 0:14:33.000 bit about your distribution, your expansion, especially now as there's 0:14:33.000 --> 0:14:37.200 a more nationalistic tone in the United States. Very good question, Lisa. Yes, 0:14:37.280 --> 0:14:40.160 we started out obviously serving the Helala community, which is 0:14:40.560 --> 0:14:43.800 around six or eight million American Muslims. Very educated. It's 0:14:43.840 --> 0:14:46.560 not like you have in Europe sent higher education than 0:14:46.560 --> 0:14:49.480 the average American as well as very high income. So 0:14:49.600 --> 0:14:52.360 it's it's really when you think about your technology engineers 0:14:52.640 --> 0:14:55.200 and all of that, that's really the demographic that's here. 0:14:55.520 --> 0:14:59.440 So that's a marketer's dream, right, But our consumers are 0:14:59.440 --> 0:15:02.000 not even ha consumers. There are consumers that are part 0:15:02.080 --> 0:15:04.720 of the natural organic movement or what we call NASH 0:15:04.880 --> 0:15:09.880 natural Organic, sustainable, healthy living lifestyle today. Food in our opinion, 0:15:10.040 --> 0:15:13.000 especially millennials who are about sixty or seventy pc of 0:15:13.040 --> 0:15:16.160 our demographic, look at food tribes and so we're part 0:15:16.200 --> 0:15:17.920 of this natural organic food tribe. And this is my 0:15:18.040 --> 0:15:20.840 fourth food company in the natural organic sector. One of 0:15:20.880 --> 0:15:23.320 them was Stony Field Farms yogurt I mean I for 0:15:23.400 --> 0:15:26.360 thirty years have been devoted to businesses that are social 0:15:26.440 --> 0:15:29.600 responsible to the environment, and so we say journey to 0:15:29.680 --> 0:15:31.760 better and what we mean by that is journey to 0:15:31.880 --> 0:15:35.200 better ethical values around food. Journey that's a better for 0:15:35.280 --> 0:15:38.760 the farmer's journey that's better for the the animals of livestock, 0:15:38.960 --> 0:15:41.320 and journey that's better for the food system that brings 0:15:41.360 --> 0:15:44.120 you really healthy food. So since that's our starting point, 0:15:44.520 --> 0:15:47.120 we were able to distribute nationally. We're in twenty thousand 0:15:47.200 --> 0:15:49.920 stores all over the country, all fifty states. We're the 0:15:49.960 --> 0:15:52.720 only national hall band as well. But that's because of 0:15:52.760 --> 0:15:55.520 our standards. Uh. You know, Whole Foods was our initial partner. 0:15:55.880 --> 0:15:58.360 We were the first uh non JEMO verified TROS and 0:15:58.400 --> 0:16:00.960 nottre in the world. We're the first certified humane entree 0:16:01.000 --> 0:16:02.800 in the world. So what we were doing was really 0:16:02.840 --> 0:16:06.120 trying to lift and elevate the ethical values around food 0:16:06.160 --> 0:16:09.840 that's offered in the supermarkets today. There are many legacy 0:16:10.000 --> 0:16:13.080 brands that are having trouble in the food aisle and 0:16:13.440 --> 0:16:16.200 in the what I would call the frozen case, the 0:16:16.320 --> 0:16:20.600 frozen aisle, because frozen food it doesn't it gets a 0:16:20.680 --> 0:16:24.440 bad rap. But you've been very successful in that line 0:16:24.480 --> 0:16:26.920 with your entrees, with your balls, you make it very 0:16:27.000 --> 0:16:31.400 clear no antibiotics. Ever, how is that business doing and 0:16:31.520 --> 0:16:34.000 tell us how yours is different than many of the 0:16:34.080 --> 0:16:38.200 well known legacy brands. Sure, that's a very good point, Biman. 0:16:38.240 --> 0:16:40.400 What's happened in the food industry, And having been in 0:16:40.480 --> 0:16:43.200 this industry thirty years, I never thought I'd see this 0:16:43.320 --> 0:16:47.240 happen in my entire lifetime. But last year, Boston Consulting 0:16:47.240 --> 0:16:49.200 Group in IRI but out of study that said that 0:16:49.320 --> 0:16:52.600 forty of the growth of the eight hundred billion dollar 0:16:52.640 --> 0:16:55.640 food and beverage industry is coming from small brands. That 0:16:55.840 --> 0:16:58.000 was a shocker. That was a wake up call. It 0:16:58.080 --> 0:17:00.320 was a wow moment. I think for the big CP Geese, 0:17:00.840 --> 0:17:04.720 they're not succeeding because they haven't pivoted into this category 0:17:05.119 --> 0:17:08.560 in a mindful, authentic way. What we do is we 0:17:08.600 --> 0:17:10.800 don't just you know, we don't just come up with 0:17:10.840 --> 0:17:14.480 these certifications as a marketing element, although it's a smart 0:17:14.560 --> 0:17:17.080 marketing element if you're authentic to it, it's because that's 0:17:17.240 --> 0:17:21.000 that's our value system. And so millennials today are very viral. 0:17:21.320 --> 0:17:23.960 They go online, they check out everything about the brand, 0:17:24.000 --> 0:17:26.119 they check out everything about the products. So you have 0:17:26.240 --> 0:17:28.520 to be bulletproof in terms of transparency, which a lot 0:17:28.520 --> 0:17:31.560 of big CPGs aren't. We've been able to disrupt and 0:17:31.640 --> 0:17:34.840 become a modern challenger brand. We single handedly lifted whole 0:17:34.880 --> 0:17:37.880 food sales in frozen National Organic for the last four 0:17:37.960 --> 0:17:41.200 years about a year um and most of the other 0:17:41.240 --> 0:17:43.679 brands were suffering terribly. Now a lot of the big brands, 0:17:44.160 --> 0:17:46.399 the CPGs have started to pivot into this category and 0:17:46.440 --> 0:17:49.960 they're getting zoomer. Package goods companies have started to really 0:17:50.000 --> 0:17:52.600 pivot into this category in a in a good way, 0:17:52.720 --> 0:17:55.040 and they are cleaning up their products. That's part of 0:17:55.200 --> 0:17:58.080 our mission right is to really it's also to bring 0:17:58.160 --> 0:18:00.320 them along, you know, to really change the foods system 0:18:00.440 --> 0:18:02.439 because a lot of what they're looking at us through 0:18:02.440 --> 0:18:04.720 the river view mirror. We keep looking forward how to 0:18:04.800 --> 0:18:07.520 completely lift our standards every year. You know, when you 0:18:07.600 --> 0:18:10.520 talk about being sustainable, I think about some of the 0:18:10.880 --> 0:18:13.840 effects of climate change that we've seen recently. Has there 0:18:13.920 --> 0:18:16.800 been anything yet that has forced you to change your 0:18:16.840 --> 0:18:20.000 supply chains as a result to UH as a result 0:18:20.119 --> 0:18:25.000 of change in weather. Absolutely, we're always looking for partners, 0:18:25.480 --> 0:18:28.320 whether it's the farms resourced from or whether it's a 0:18:28.359 --> 0:18:31.000 particular vendors that we choose that are dedicated to the 0:18:31.040 --> 0:18:33.800 same values that we're dedicated to so for example, UH, 0:18:33.920 --> 0:18:36.520 we we have a line of very successful organic snacks, 0:18:36.600 --> 0:18:40.160 chickpie snacks. We're the only ones that are fair trade certified. 0:18:40.320 --> 0:18:42.520 We have a dark chocolate and dark chocolate chai. I 0:18:42.600 --> 0:18:46.520 brought them for you and him to try to sample. UH. 0:18:46.680 --> 0:18:49.760 We also look very carefully at what are their standards 0:18:49.800 --> 0:18:53.159 around UH labor, what are their standards and their facilities, 0:18:53.359 --> 0:18:55.800 and we do audits on them. So we're very careful 0:18:55.840 --> 0:18:58.160 with that. We also think that you know, we we've 0:18:58.200 --> 0:19:00.520 been changing our packaging and there's a big movement towards 0:19:00.560 --> 0:19:05.000 more environmental packaging as well. Is the is the halal 0:19:05.160 --> 0:19:09.000 food more expensive? Because we talk about organic food being 0:19:09.400 --> 0:19:12.240 more expensive than non organic food. Is there a real 0:19:12.359 --> 0:19:16.119 price point difference? Halal is not quite there yet because 0:19:16.520 --> 0:19:19.920 kosher is um because when the Kosher certifiers and the 0:19:20.200 --> 0:19:23.399 Ruth scholars came here, they did a wise thing for 0:19:23.960 --> 0:19:26.200 years ago, they set some standards. Right now, there's a 0:19:26.240 --> 0:19:29.560 lot of different standards. I think halala still in early stages, 0:19:29.920 --> 0:19:32.280 even though it's a pretty huge market. UM. So I 0:19:32.320 --> 0:19:34.720 think once they set those standards will start to see 0:19:35.000 --> 0:19:37.600 the price movement upward. But right now there's a slight premium. 0:19:37.880 --> 0:19:40.600 It's not really that significant. The more significant is really 0:19:40.920 --> 0:19:44.640 the natural organic sustainability. Thank you so much for being 0:19:44.720 --> 0:19:47.800 with us. Really a pleasure having you at Non Drani, 0:19:48.080 --> 0:19:52.440 founder in chief executive of Saffron Road, long time entrepreneur 0:19:52.960 --> 0:19:55.920 and uh and traveler, and and really the flavor is 0:19:55.960 --> 0:19:59.359 getting into stores around the country and around the world. 0:19:59.640 --> 0:20:03.320 Paym Definitely interesting to sort of see how even if 0:20:03.400 --> 0:20:06.479 there is sort of more protectionist rhetoric, there is an 0:20:06.480 --> 0:20:10.560 ex more expansive taste for different cultural foods. So that's 0:20:10.600 --> 0:20:16.760 something that is sort of a uniting factor topic Brexit. 0:20:17.280 --> 0:20:20.359 UK Prime Minister Theresa May has just named the pro 0:20:20.680 --> 0:20:25.639 Brexit Stephen Barkley as her new Brexit secretary. He his 0:20:25.840 --> 0:20:30.120 remit will be to concentrate on preparing legislation, while talks 0:20:30.640 --> 0:20:33.159 between the European Union and the United Kingdom will be 0:20:33.320 --> 0:20:37.719 handled by May's team in her Downing Street office. Now, 0:20:37.800 --> 0:20:42.399 this basically strips the Brexit Department of a key part 0:20:42.600 --> 0:20:44.760 of its job. Here to tell us more about what's 0:20:44.760 --> 0:20:50.639 going on with Brexit is Terres Raphael Bloomberg Opinion editor. Terres, 0:20:50.880 --> 0:20:52.760 a pleasure to have you with us. Coming to us 0:20:52.840 --> 0:20:56.639 from London. Your most recent column about Brexit says, the 0:20:56.720 --> 0:21:01.560 problem isn't Theresa May, it's Brexit. What do you mean, Well, 0:21:01.600 --> 0:21:04.600 it's not to say that Theresa May hasn't made a 0:21:04.720 --> 0:21:07.879 whole lot of mistakes in the last two years since 0:21:08.400 --> 0:21:11.440 triggering uh, well year and a half since since triggering 0:21:12.520 --> 0:21:16.719 Article fifty. But you know, the the key problem here 0:21:16.800 --> 0:21:19.240 is that Britain has to make some pretty big compromises 0:21:19.600 --> 0:21:24.040 if it wants both access to EU markets and the 0:21:24.600 --> 0:21:28.080 um you know, freedom from EU rules and institutions. It 0:21:28.160 --> 0:21:31.119 really can't have both. Now, May's mistake was sort of 0:21:31.240 --> 0:21:34.520 telling both remainders and levers that they could have mostly 0:21:34.600 --> 0:21:37.280 what they wanted, and not quite being clear with them 0:21:37.359 --> 0:21:40.080 that that there would be some tough decisions to be made. 0:21:40.119 --> 0:21:42.480 And now you know that time has run out. She's 0:21:42.480 --> 0:21:45.960 got a deal back from Brussels. Everyone is upset about it. Yes, 0:21:46.080 --> 0:21:48.840 everybody is upset about it. Does that mean it's a 0:21:48.920 --> 0:21:52.159 good deal? Um, I don't think. I don't think anyone 0:21:52.560 --> 0:21:54.680 can really call it a good deal. What what we 0:21:54.760 --> 0:21:56.919 could say about is it's probably the best she's going 0:21:57.000 --> 0:22:00.600 to get and it is far preferable UH to have 0:22:00.760 --> 0:22:02.840 this deal than to have no deal at all, because 0:22:02.920 --> 0:22:05.480 no deal at all, um is you know, it's a 0:22:05.520 --> 0:22:08.879 disaster for the UK economy. It literally means, you know, 0:22:09.080 --> 0:22:12.439 planes don't take off unless um, there are some very 0:22:12.600 --> 0:22:16.240 last you know, minute agreement's made. It means you know, 0:22:16.440 --> 0:22:20.560 stockpiling medicines. Um. It's a whole lot of uncertainty and 0:22:20.640 --> 0:22:22.800 a and a whole lot of grief. So you know, 0:22:22.920 --> 0:22:25.520 this is this is a deal that you use offering. Uh, 0:22:25.600 --> 0:22:27.439 they don't want to talk any further about it. There 0:22:27.480 --> 0:22:30.880 may be some very marginal concessions left to be wrung out. 0:22:31.040 --> 0:22:33.760 Some in May's cabinet are now working to see if 0:22:33.800 --> 0:22:36.280 they can go and try to salvage this in a 0:22:36.320 --> 0:22:38.320 way they could sell it to Parliament. But this is 0:22:38.440 --> 0:22:40.440 pretty much as good as it gets for her now. 0:22:40.800 --> 0:22:43.040 And the question is can she sell it to her parliament. 0:22:43.840 --> 0:22:47.920 Based on your reporting and your conversations with people close 0:22:48.000 --> 0:22:51.440 to the whole Brexit negotiations, do you believe that Brexit 0:22:51.600 --> 0:22:55.560 is being used as a political weapon against the Prime 0:22:55.640 --> 0:22:59.320 minister and that, as you said earlier, this is as 0:22:59.359 --> 0:23:02.399