1 00:00:11,200 --> 00:00:15,040 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:15,080 --> 00:00:20,040 Speaker 1: I'm Joe Wisenthal and I'm Tracy all Away. So, Tracy, 3 00:00:20,200 --> 00:00:23,360 Speaker 1: you know, back in the spring when the pandemic hit, 4 00:00:23,960 --> 00:00:26,400 Speaker 1: I did something I had never done before. Do you 5 00:00:26,440 --> 00:00:29,440 Speaker 1: know what that is? Well, I think you're going to 6 00:00:29,520 --> 00:00:31,240 Speaker 1: have to narrow it down because I think a lot 7 00:00:31,280 --> 00:00:34,640 Speaker 1: of people did stuff they never did before. But go on, 8 00:00:34,680 --> 00:00:36,680 Speaker 1: what was it? That's true? You know, I didn't know 9 00:00:36,680 --> 00:00:39,200 Speaker 1: what to do. I was like panicking like everyone else. 10 00:00:39,280 --> 00:00:41,760 Speaker 1: I didn't know what the risks would be. I needed 11 00:00:41,800 --> 00:00:45,800 Speaker 1: to do something tangible to make myself feel like I 12 00:00:45,840 --> 00:00:48,640 Speaker 1: had some control over my life. And I went out 13 00:00:48,720 --> 00:00:54,120 Speaker 1: and bought, um, a few kinds of sardines. What like 14 00:00:54,880 --> 00:00:58,080 Speaker 1: like a prepper where you worried about the food supply 15 00:00:58,400 --> 00:01:02,840 Speaker 1: or so you got kind of piling. He started stockpiling 16 00:01:02,880 --> 00:01:06,520 Speaker 1: canned goods. Yeah, basically, I went to the grocery store 17 00:01:06,640 --> 00:01:09,280 Speaker 1: like sometime in the middle of Marge and I knew that, 18 00:01:09,360 --> 00:01:11,400 Speaker 1: you know. I was like, I don't know what's gonna happen. 19 00:01:12,080 --> 00:01:13,720 Speaker 1: I don't know if there's gonna be the structions to 20 00:01:13,800 --> 00:01:16,880 Speaker 1: the food supply. I don't know anything, But I know 21 00:01:17,000 --> 00:01:20,440 Speaker 1: that you know, can sardines have a lot of protein, 22 00:01:21,319 --> 00:01:23,840 Speaker 1: and their shelves stable the last for a long time, 23 00:01:23,920 --> 00:01:25,640 Speaker 1: so if everything goes bad, I can at least stay 24 00:01:25,640 --> 00:01:29,200 Speaker 1: in my apartment and eat can't fish. I have this 25 00:01:29,280 --> 00:01:33,880 Speaker 1: image now of a post apocalypse Joe sitting in your 26 00:01:34,080 --> 00:01:38,080 Speaker 1: East Village apartment eating sardines directly out of the tin. 27 00:01:38,360 --> 00:01:40,520 Speaker 1: But I gotta say you, actually, I don't think you 28 00:01:40,560 --> 00:01:44,959 Speaker 1: were alone, because certainly in Hong Kong there was a 29 00:01:45,000 --> 00:01:48,680 Speaker 1: lot of panic buying when the coronavirus crisis started, and 30 00:01:48,960 --> 00:01:52,560 Speaker 1: the shelves were empty for a long time. Yeah. Incidentally, 31 00:01:52,600 --> 00:01:55,160 Speaker 1: I never actually opened any of the sardines, but they 32 00:01:55,200 --> 00:01:57,560 Speaker 1: did bring me some comfort knowing that they were there. 33 00:01:58,360 --> 00:02:00,440 Speaker 1: And you know, of course about toilet paper, her and 34 00:02:00,480 --> 00:02:02,200 Speaker 1: just all that other stuff. It was like, you know, 35 00:02:02,280 --> 00:02:05,960 Speaker 1: just anything that was like on the grocery store shelves, stable, 36 00:02:06,320 --> 00:02:08,920 Speaker 1: reasonably edible, I thought I should have buy a little 37 00:02:08,919 --> 00:02:14,160 Speaker 1: bit of it. The year that household products found new 38 00:02:14,240 --> 00:02:18,399 Speaker 1: found appreciation, I'd say, yeah, exactly right. So a lot 39 00:02:18,440 --> 00:02:21,360 Speaker 1: of companies that hadn't done that well, or that maybe 40 00:02:21,400 --> 00:02:23,840 Speaker 1: people hadn't thought about in a while, really did see 41 00:02:23,840 --> 00:02:26,720 Speaker 1: a surge. Because I wasn't alone. In fact, I think 42 00:02:26,760 --> 00:02:29,079 Speaker 1: the New Is even an article a few months later 43 00:02:29,120 --> 00:02:31,320 Speaker 1: and the Journal about all these people buying canned fish. 44 00:02:31,600 --> 00:02:35,560 Speaker 1: But the point is, lots of people were buying stuff 45 00:02:35,560 --> 00:02:39,880 Speaker 1: on the grocery store shelves, consumer products, consumer staples that 46 00:02:39,880 --> 00:02:42,440 Speaker 1: would last a long time, that would be safe, that 47 00:02:42,480 --> 00:02:45,480 Speaker 1: would be predictable, and the sort of big food and 48 00:02:45,760 --> 00:02:50,480 Speaker 1: consumer consumer conglomerates. They were among the winners, especially early 49 00:02:50,560 --> 00:02:55,560 Speaker 1: on during the during the pandemic. Yeah, I think that's right, 50 00:02:55,600 --> 00:02:58,680 Speaker 1: and it's also I would say, different to what a 51 00:02:58,760 --> 00:03:02,640 Speaker 1: lot of people were expecting, at least early on in 52 00:03:02,680 --> 00:03:06,200 Speaker 1: the crisis. I don't think a lot of people expected 53 00:03:06,240 --> 00:03:10,720 Speaker 1: it to manifest itself in a consumption boom. But we 54 00:03:10,800 --> 00:03:13,160 Speaker 1: did see people going out and snapping up a lot 55 00:03:13,160 --> 00:03:16,400 Speaker 1: of staples, and uh, I know we're focusing on on 56 00:03:16,560 --> 00:03:19,840 Speaker 1: food and household goods and things like that, but even 57 00:03:19,880 --> 00:03:23,000 Speaker 1: extended to consumer discretionaries. Since so many people were stuck 58 00:03:23,000 --> 00:03:26,359 Speaker 1: at home, they were buying lots of stuff online. And 59 00:03:26,919 --> 00:03:31,000 Speaker 1: so I guess we saw a pretty counter intuitive reaction 60 00:03:31,080 --> 00:03:36,480 Speaker 1: to a pandemic and economic crisis. Yeah, absolutely right, But 61 00:03:36,560 --> 00:03:38,840 Speaker 1: of course the question is always like can that last? 62 00:03:38,880 --> 00:03:43,200 Speaker 1: I mean, some companies were winners during the pandemic, we 63 00:03:43,280 --> 00:03:47,880 Speaker 1: expect them to have like cemented their position. So for example, Zoom, 64 00:03:47,920 --> 00:03:51,080 Speaker 1: which we're recording this actually over Zoom right now. They 65 00:03:51,080 --> 00:03:53,920 Speaker 1: were one of the big stock market winners. Everyone conducting 66 00:03:53,960 --> 00:03:58,200 Speaker 1: meetings and there is this expectation the Zoom will now 67 00:03:58,240 --> 00:04:00,320 Speaker 1: be with us for a long time as we sort 68 00:04:00,360 --> 00:04:03,040 Speaker 1: of do business and you know, So the question is 69 00:04:03,760 --> 00:04:07,119 Speaker 1: what is the future of these big consumer goods companies 70 00:04:07,160 --> 00:04:11,800 Speaker 1: because pandemic buying aside, there's been a lot of questions 71 00:04:11,800 --> 00:04:14,960 Speaker 1: about whether consumers are looking for something new, whether people 72 00:04:15,000 --> 00:04:17,520 Speaker 1: are going to buy food based on direct to consumer 73 00:04:17,600 --> 00:04:20,680 Speaker 1: brands that advertise to them on Instagram, in which case 74 00:04:21,000 --> 00:04:23,839 Speaker 1: shelves space at the grocery stores and not as important 75 00:04:24,120 --> 00:04:28,800 Speaker 1: grocery stores themselves are changing business, all kinds of changes 76 00:04:28,839 --> 00:04:32,040 Speaker 1: to the sort of consumer products business. So we don't 77 00:04:32,040 --> 00:04:34,800 Speaker 1: really know for sure if those early winners, like whether 78 00:04:35,120 --> 00:04:38,080 Speaker 1: they'll be able to consolidate those games, or whether that 79 00:04:38,160 --> 00:04:40,880 Speaker 1: was sort of a one time blip, uh for a 80 00:04:40,880 --> 00:04:44,800 Speaker 1: bunch of companies whose fortunes don't look as great in 81 00:04:44,839 --> 00:04:49,400 Speaker 1: the future. Right, Can consumer goods companies keep up the 82 00:04:49,480 --> 00:04:52,800 Speaker 1: momentum both in the short term as uh, you know, 83 00:04:52,960 --> 00:04:56,000 Speaker 1: the pandemic sort of normalizes, or the situation around the 84 00:04:56,040 --> 00:04:59,080 Speaker 1: pandemic normalizes, as vaccines get rolled out and we all 85 00:04:59,120 --> 00:05:02,520 Speaker 1: go back to work hopefully and start doing stuff. And 86 00:05:02,600 --> 00:05:06,320 Speaker 1: can I keep up momentum in the long term as 87 00:05:06,520 --> 00:05:10,479 Speaker 1: they face new forms of unexpected disruption. So we're gonna 88 00:05:10,520 --> 00:05:15,160 Speaker 1: be talking about that question today, um. And a key fact, 89 00:05:15,240 --> 00:05:17,240 Speaker 1: and we'll get into this with our guest, which is 90 00:05:17,240 --> 00:05:19,760 Speaker 1: that if you go back to nineteen seventy two, if 91 00:05:19,760 --> 00:05:22,960 Speaker 1: you look at the basket of big global staples companies, 92 00:05:23,360 --> 00:05:27,320 Speaker 1: they've never had a negative five year period of returns 93 00:05:27,360 --> 00:05:30,560 Speaker 1: in the stock market. So as a sector they've done 94 00:05:30,600 --> 00:05:34,359 Speaker 1: phenomenally well, way better than most other sectors over time. 95 00:05:34,440 --> 00:05:37,240 Speaker 1: And so the question is can that continue? So I'm 96 00:05:37,360 --> 00:05:40,480 Speaker 1: very excited pleased to be speaking with our guest today. 97 00:05:40,520 --> 00:05:43,680 Speaker 1: We'll be talking to Jonathan Fell. He's a fund manager 98 00:05:43,720 --> 00:05:47,120 Speaker 1: and founder of ash Park Financial, which was founded in 99 00:05:48,320 --> 00:05:52,680 Speaker 1: and it invests in the consumer staples category. So Jonathan 100 00:05:52,680 --> 00:05:55,159 Speaker 1: will be talking to us about the sector and why 101 00:05:55,240 --> 00:05:57,520 Speaker 1: he believes in it so much and why the returns 102 00:05:57,839 --> 00:06:00,599 Speaker 1: have been so strong. So Jonathan, you so much for 103 00:06:00,680 --> 00:06:03,440 Speaker 1: joining us. Hi Joe and Tracy, thank you very much 104 00:06:03,480 --> 00:06:06,960 Speaker 1: for having me on. So where to begin? I mean, 105 00:06:08,360 --> 00:06:10,400 Speaker 1: what what what what Tracy and I are I guess 106 00:06:10,440 --> 00:06:14,600 Speaker 1: what I did in the spring. Lots of people rediscovered 107 00:06:15,000 --> 00:06:18,080 Speaker 1: big consumer staples brands this year or in the last year, 108 00:06:18,880 --> 00:06:21,919 Speaker 1: that's right, And these brands have been around for a 109 00:06:22,040 --> 00:06:25,840 Speaker 1: very very long time. Whatever new trends that are around 110 00:06:26,120 --> 00:06:29,960 Speaker 1: in different industries, different sectors, people always need to eat 111 00:06:30,640 --> 00:06:33,640 Speaker 1: and drink and wash themselves, and some people even need 112 00:06:33,680 --> 00:06:38,000 Speaker 1: to use nicotine, and so you find there's a base 113 00:06:38,040 --> 00:06:41,760 Speaker 1: of companies in the world that have a very very 114 00:06:41,800 --> 00:06:44,839 Speaker 1: resilient base of consumption. And I think what happened in 115 00:06:45,680 --> 00:06:50,680 Speaker 1: with COVID just just highlighted that. So I have a 116 00:06:50,720 --> 00:06:54,840 Speaker 1: really basic question at the outside of our conversation, but 117 00:06:55,040 --> 00:06:59,440 Speaker 1: how do you distinguish between a consumer staple and a 118 00:06:59,520 --> 00:07:06,320 Speaker 1: consumer discretionary Because I feel like as trends change that 119 00:07:06,600 --> 00:07:12,440 Speaker 1: sometimes the distinction becomes a little bit modeled. So, for instance, 120 00:07:12,480 --> 00:07:16,320 Speaker 1: I think Amazon is still classified as consumer discretionary, but 121 00:07:17,000 --> 00:07:20,240 Speaker 1: certainly in a lot of people would have been relying 122 00:07:20,320 --> 00:07:24,840 Speaker 1: on that service to get basic goods. So what's what's 123 00:07:24,840 --> 00:07:28,480 Speaker 1: the difference there? Well, we we define consumer staples as 124 00:07:28,600 --> 00:07:35,680 Speaker 1: branded food, drink, household and personal care, and tobacco businesses. 125 00:07:35,720 --> 00:07:38,800 Speaker 1: Amazon for US is a is a retailer, so it's 126 00:07:38,920 --> 00:07:41,720 Speaker 1: a in a very related area. Obviously, in some areas 127 00:07:41,760 --> 00:07:46,640 Speaker 1: it's selling private label brands that compete with consumer staples companies, 128 00:07:46,680 --> 00:07:50,760 Speaker 1: but it's not in our definition of the sector. I 129 00:07:50,800 --> 00:07:54,680 Speaker 1: think you're right, though, Tracy, that the line between staples 130 00:07:54,720 --> 00:07:59,600 Speaker 1: and discretionary is not completely completely bright. It's a it's 131 00:07:59,600 --> 00:08:03,160 Speaker 1: a great area in some portions of the portfolios. So 132 00:08:03,240 --> 00:08:08,480 Speaker 1: for instance, we own things that sell makeup and to 133 00:08:08,600 --> 00:08:10,880 Speaker 1: some makeup which is low cost and everyday purchase, but 134 00:08:10,960 --> 00:08:14,080 Speaker 1: some of that is is is almost like a luxury good. 135 00:08:14,480 --> 00:08:16,080 Speaker 1: And you could say the same about some of the 136 00:08:16,080 --> 00:08:20,720 Speaker 1: spirits companies. There are every day bottles of spirits, but 137 00:08:20,760 --> 00:08:22,360 Speaker 1: then there are things you can pay a couple of 138 00:08:22,480 --> 00:08:25,200 Speaker 1: hundred dollars for and that that is more at the 139 00:08:25,240 --> 00:08:28,320 Speaker 1: discretionary in But the bulk of what we own in 140 00:08:28,400 --> 00:08:35,600 Speaker 1: stables is everyday products that people are buying weekly or monthly. 141 00:08:35,920 --> 00:08:38,839 Speaker 1: And as I mentioned at the start, you have to 142 00:08:38,920 --> 00:08:42,800 Speaker 1: buy a chunk of these products just to stay and afe, 143 00:08:43,000 --> 00:08:46,960 Speaker 1: to eat and drink and feed yourself. So just just 144 00:08:47,000 --> 00:08:50,720 Speaker 1: so clear for people listening at harm everyone's heard of 145 00:08:50,720 --> 00:08:56,200 Speaker 1: these companies, whether it's Laurel, Coca Cola, Chloros which had 146 00:08:56,240 --> 00:08:58,440 Speaker 1: a really great area because of people are buying bleach 147 00:08:58,559 --> 00:09:03,280 Speaker 1: to clean things, smuckers Heineken. I mean, these are names 148 00:09:03,320 --> 00:09:06,080 Speaker 1: that have global footprints all over the world. Everybody is 149 00:09:06,200 --> 00:09:09,600 Speaker 1: more or less familiar with these type of brands. That's 150 00:09:09,640 --> 00:09:14,199 Speaker 1: exactly right. Many of them are really quite international businesses now, 151 00:09:15,000 --> 00:09:17,959 Speaker 1: and you know, as well as the US and developed markets, 152 00:09:18,000 --> 00:09:21,600 Speaker 1: they also have a growing footprint in emerging and developing 153 00:09:21,640 --> 00:09:24,440 Speaker 1: markets as well. So people around the world are using 154 00:09:24,440 --> 00:09:28,520 Speaker 1: these products. So Joe mentioned this in the intro, but 155 00:09:28,760 --> 00:09:32,520 Speaker 1: you've pointed out that over a period of time, a 156 00:09:32,520 --> 00:09:36,160 Speaker 1: long period of time, these consumer staple companies have actually 157 00:09:36,200 --> 00:09:42,040 Speaker 1: been tremendously good at generating consistent cash flow. Can you 158 00:09:42,960 --> 00:09:46,880 Speaker 1: dive into that a little bit more and explain why 159 00:09:46,920 --> 00:09:50,200 Speaker 1: that's happened, Because I think I think a lot of 160 00:09:50,200 --> 00:09:53,000 Speaker 1: people when they hear consumer staple, you know, they think 161 00:09:53,800 --> 00:09:58,200 Speaker 1: probably boring, um, not that exciting, and maybe not even 162 00:09:58,240 --> 00:10:01,800 Speaker 1: that that good at performance. So what is it that 163 00:10:01,840 --> 00:10:05,000 Speaker 1: the market is missing here? I think you've hit on 164 00:10:05,080 --> 00:10:07,880 Speaker 1: something there. Tracy they are boring, but we regard that 165 00:10:07,960 --> 00:10:10,880 Speaker 1: as as a good kind of boring. I think it's 166 00:10:10,920 --> 00:10:12,599 Speaker 1: easiest to think about this, or it helps if you 167 00:10:12,600 --> 00:10:16,160 Speaker 1: think about it in terms of the tortoise and the 168 00:10:16,240 --> 00:10:20,679 Speaker 1: hair fable. So at any point in time, there's always 169 00:10:20,679 --> 00:10:23,000 Speaker 1: going to be something miles more exciting in the stock 170 00:10:23,040 --> 00:10:27,280 Speaker 1: market to invest in than consumer staples businesses. They will 171 00:10:27,320 --> 00:10:30,160 Speaker 1: hardly ever be the fastest growing things in the market, 172 00:10:30,480 --> 00:10:33,920 Speaker 1: unless the market's going through a disaster and we're in 173 00:10:33,960 --> 00:10:38,000 Speaker 1: some sort of terrible economic situation. But their secret is 174 00:10:38,760 --> 00:10:42,440 Speaker 1: it's the same companies that tend to win year after 175 00:10:42,559 --> 00:10:46,280 Speaker 1: year after year and decade after decade. They're quite good 176 00:10:46,280 --> 00:10:51,320 Speaker 1: at adapting, gradually shifting their portfolio to modern tastes. But 177 00:10:51,360 --> 00:10:55,200 Speaker 1: if you look at the large staples companies now, they're 178 00:10:54,960 --> 00:10:58,520 Speaker 1: they're the same things that were large fifty years ago. 179 00:10:59,280 --> 00:11:02,360 Speaker 1: And you can't actually say that about many other industries. 180 00:11:03,160 --> 00:11:06,359 Speaker 1: We'll probably talk about this in more detail. And disruption 181 00:11:06,520 --> 00:11:10,000 Speaker 1: something that people talk about a lot in the world, 182 00:11:10,120 --> 00:11:13,959 Speaker 1: and and sure staples are open to disruption as well, 183 00:11:14,040 --> 00:11:19,760 Speaker 1: but compared to the destruction you see in most other industries, 184 00:11:19,960 --> 00:11:23,840 Speaker 1: the disruption in staples is is really quite tame and 185 00:11:23,920 --> 00:11:27,600 Speaker 1: manageable for most businesses. So why is that? I mean, 186 00:11:27,840 --> 00:11:32,880 Speaker 1: let's talk about how they adapt to disruption. Obviously we 187 00:11:33,240 --> 00:11:37,440 Speaker 1: see the proliferation of director consumer brands. Anyone can come 188 00:11:37,520 --> 00:11:40,960 Speaker 1: up with a package good or a new form of seltzer, 189 00:11:41,720 --> 00:11:45,280 Speaker 1: quickly marketed on Instagram, get a lot of attention, or 190 00:11:45,360 --> 00:11:50,120 Speaker 1: bombarded with new things. Intuitively, it would feel like this 191 00:11:50,200 --> 00:11:52,920 Speaker 1: is a really big problem for these companies. Many of 192 00:11:52,920 --> 00:11:56,960 Speaker 1: these companies are popular, but they're not exactly cool per se. 193 00:11:57,000 --> 00:11:59,640 Speaker 1: They're not exactly hip. They're not trendy. You know. You 194 00:11:59,679 --> 00:12:02,960 Speaker 1: can think of say, like a traditional seltzer like schwebs 195 00:12:02,960 --> 00:12:08,079 Speaker 1: are sold for a long time versus whatever, Lacroix, Lacroix, 196 00:12:08,120 --> 00:12:11,080 Speaker 1: they got really popular for a few years. How do 197 00:12:11,520 --> 00:12:15,920 Speaker 1: these companies adapt and stay stay ahead of these types 198 00:12:15,960 --> 00:12:19,960 Speaker 1: of threats. The way they adapt is typically to to 199 00:12:20,160 --> 00:12:23,840 Speaker 1: copy or buy. And I think there's a perception that 200 00:12:23,880 --> 00:12:27,600 Speaker 1: this is a recent phenomenon, this right of the right 201 00:12:27,679 --> 00:12:30,160 Speaker 1: of growth or challenger brands, but it's not really. It's 202 00:12:30,160 --> 00:12:34,760 Speaker 1: been around forever. I was reading something about the old 203 00:12:34,840 --> 00:12:38,359 Speaker 1: Hines see turning around It the other day from the seventies, 204 00:12:38,400 --> 00:12:40,320 Speaker 1: and it was a great quote we said, the best 205 00:12:40,320 --> 00:12:43,040 Speaker 1: way to get into new product development is to steal 206 00:12:43,080 --> 00:12:46,400 Speaker 1: the other guy's ideas. You buy the company, and that's 207 00:12:46,440 --> 00:12:49,920 Speaker 1: what you find. Your big businesses typically are not greater 208 00:12:49,920 --> 00:12:54,040 Speaker 1: at innovation. It's not what they're specializing. They're very good 209 00:12:54,600 --> 00:12:59,640 Speaker 1: at scaling and growing things which someone else has discovered. 210 00:13:00,240 --> 00:13:03,160 Speaker 1: It's not really their job necessarily to innovate. I mean, 211 00:13:03,200 --> 00:13:06,640 Speaker 1: we like to see companies come up with new concepts 212 00:13:06,640 --> 00:13:10,319 Speaker 1: and innovate, but it doesn't have to be their idea. 213 00:13:10,400 --> 00:13:13,120 Speaker 1: It can be someone else's if you think about it. 214 00:13:13,200 --> 00:13:18,640 Speaker 1: Then going and buying a startup business that's proved itself 215 00:13:19,840 --> 00:13:23,200 Speaker 1: is essentially a kind of outsourced star and deem, and 216 00:13:23,200 --> 00:13:27,160 Speaker 1: they could do it themselves, and they could tip a 217 00:13:27,200 --> 00:13:28,840 Speaker 1: big pile of money into a hole in the floor 218 00:13:28,920 --> 00:13:32,400 Speaker 1: and nothing might come out of it. The alternative is 219 00:13:32,400 --> 00:13:34,560 Speaker 1: to is to wait for lots of other people to 220 00:13:34,600 --> 00:13:37,440 Speaker 1: destroy their own piles of money and see who's left 221 00:13:37,440 --> 00:13:40,160 Speaker 1: at the end by that business. Because it's proved itself 222 00:13:40,200 --> 00:13:43,400 Speaker 1: in the market, it's proved itself in terms of being 223 00:13:43,480 --> 00:13:47,679 Speaker 1: something that consumers want to buy. And then rather than 224 00:13:47,720 --> 00:13:50,320 Speaker 1: just sell it in the channels or markets it's in, 225 00:13:50,800 --> 00:13:54,320 Speaker 1: you take it into new markets, new channels, and turn 226 00:13:54,400 --> 00:13:57,120 Speaker 1: twenty thirty years on, it's a much bigger business that 227 00:13:57,240 --> 00:14:00,640 Speaker 1: when you bought it. And that's that's the way that 228 00:14:02,040 --> 00:14:07,920 Speaker 1: the disruption innovation dynamic tends to work for successful large 229 00:14:07,920 --> 00:14:12,040 Speaker 1: stables businesses. So you mentioned this idea that the big 230 00:14:12,120 --> 00:14:15,840 Speaker 1: consumer stables companies of today tend to be the same ones, 231 00:14:16,040 --> 00:14:21,320 Speaker 1: uh that dominated, you know, decades ago. How important is 232 00:14:21,600 --> 00:14:26,520 Speaker 1: first mover advantage when it comes to the dynamic that 233 00:14:26,560 --> 00:14:29,520 Speaker 1: you just described. So I imagine if if you're a 234 00:14:29,560 --> 00:14:33,840 Speaker 1: big company and suddenly a disruptor comes along, one of 235 00:14:33,880 --> 00:14:35,680 Speaker 1: the reasons you might be able to buy them is 236 00:14:35,760 --> 00:14:38,560 Speaker 1: because you have a lot of sales, you have profit, 237 00:14:38,720 --> 00:14:41,840 Speaker 1: you are able to tap the market for additional financing, 238 00:14:42,080 --> 00:14:46,720 Speaker 1: you have a good starting position to build on. So 239 00:14:47,040 --> 00:14:49,160 Speaker 1: I guess, I guess what I'm trying to get at 240 00:14:49,320 --> 00:14:51,720 Speaker 1: is how important is it for you to be an 241 00:14:51,760 --> 00:14:55,600 Speaker 1: incumbent in the consumer stable space. I think incumbentsing in 242 00:14:55,680 --> 00:14:59,800 Speaker 1: stables gives you a really typical, a really important advantage 243 00:15:00,000 --> 00:15:05,239 Speaker 1: because you've got the production scale, you've got the relationship 244 00:15:05,280 --> 00:15:09,560 Speaker 1: with retailers, you've got the relationships with consumers that allows 245 00:15:09,600 --> 00:15:13,280 Speaker 1: you to maximize the benefits of a a new brand 246 00:15:13,320 --> 00:15:17,600 Speaker 1: in your portfolio. And I think when we're talking about 247 00:15:18,320 --> 00:15:22,600 Speaker 1: you know, first movers in staples categories, I think you 248 00:15:22,640 --> 00:15:27,880 Speaker 1: have to ask yourself, how new is this product really? So, 249 00:15:27,960 --> 00:15:32,680 Speaker 1: if if I think about director consumer brands, dollar shaped 250 00:15:32,680 --> 00:15:35,720 Speaker 1: Club will be the classic that made a lot of headlines. 251 00:15:36,840 --> 00:15:40,160 Speaker 1: What's what's new about it is the price and and 252 00:15:40,280 --> 00:15:43,000 Speaker 1: the way it's sold. It's not it's not a new product. 253 00:15:43,800 --> 00:15:47,520 Speaker 1: In fact, it's a fairly standard raiser that's probably a 254 00:15:47,520 --> 00:15:50,920 Speaker 1: little bit technologically behind that the thing that was the 255 00:15:51,000 --> 00:15:53,840 Speaker 1: leader at the time, Gillette. And you find that with 256 00:15:53,920 --> 00:15:57,960 Speaker 1: a lot of stables disruptions, you're not actually inventing a 257 00:15:58,000 --> 00:16:01,480 Speaker 1: completely new product in the way that you are in 258 00:16:01,720 --> 00:16:04,880 Speaker 1: many other many other industries. If you know, if I 259 00:16:04,880 --> 00:16:08,760 Speaker 1: think about what's happening in autos or in you know, 260 00:16:08,800 --> 00:16:12,760 Speaker 1: in retail with the internet, or with with with finance 261 00:16:12,800 --> 00:16:16,800 Speaker 1: and banking, then you know you've really got utterly different 262 00:16:16,840 --> 00:16:21,560 Speaker 1: offerings to what the incumbents had or have. But in 263 00:16:21,640 --> 00:16:26,000 Speaker 1: staples it tends to be more a more subtle wrinkle, 264 00:16:26,760 --> 00:16:29,960 Speaker 1: and it's easier for the incumbents to colapch onto and 265 00:16:30,000 --> 00:16:31,920 Speaker 1: copy if they if they if they want to and 266 00:16:31,960 --> 00:16:51,160 Speaker 1: decide that's a trend that is going to continue. So 267 00:16:51,280 --> 00:16:56,160 Speaker 1: one way I imagine that the Staples incumbent um hold 268 00:16:56,280 --> 00:16:59,800 Speaker 1: onto their dominant position is through shelf space at grocery store. 269 00:17:00,560 --> 00:17:03,520 Speaker 1: And I presume, but maybe you feel me in about 270 00:17:03,560 --> 00:17:07,480 Speaker 1: those Uh, those relationships are very powerful and they dominate space, 271 00:17:07,600 --> 00:17:09,720 Speaker 1: and that continues to be a place where they sell. 272 00:17:10,520 --> 00:17:13,159 Speaker 1: How does that change and how much of a threat 273 00:17:13,280 --> 00:17:16,919 Speaker 1: is that to that source of incumbancy that mode in 274 00:17:16,960 --> 00:17:21,720 Speaker 1: a world of online grocery store, online grocery shopping where 275 00:17:21,760 --> 00:17:25,040 Speaker 1: presumably shelf space is just not nearly as much of 276 00:17:25,080 --> 00:17:29,760 Speaker 1: a thing. Well, if you've had on another really important 277 00:17:30,160 --> 00:17:33,359 Speaker 1: point there, Joe, which is that if you're going to 278 00:17:33,400 --> 00:17:36,800 Speaker 1: be a successful big stables company, you've got to adapt 279 00:17:36,960 --> 00:17:41,800 Speaker 1: to changing changing channel dynamics. And you've seen through history 280 00:17:41,840 --> 00:17:45,159 Speaker 1: that the successful guys have have done that. When I 281 00:17:45,200 --> 00:17:49,600 Speaker 1: think about the the the Internet in particular, there's a 282 00:17:49,640 --> 00:17:52,520 Speaker 1: lot of chat about infinite shelf space and how you know, 283 00:17:52,600 --> 00:17:56,199 Speaker 1: suddenly the advantage of incumbents might not be what it 284 00:17:56,320 --> 00:17:59,159 Speaker 1: was in in a wal Mart or a Target or 285 00:17:59,200 --> 00:18:02,560 Speaker 1: whatever or escope. I'm not convinced that's true. I mean, 286 00:18:02,560 --> 00:18:04,840 Speaker 1: in some ways you could argue it's it's it's even 287 00:18:05,480 --> 00:18:08,199 Speaker 1: more of an advantage to be a big player in 288 00:18:08,200 --> 00:18:11,440 Speaker 1: that environment because if you think about how many times 289 00:18:11,480 --> 00:18:14,560 Speaker 1: you search for a product on the Internet and go 290 00:18:14,680 --> 00:18:18,760 Speaker 1: to the second, third, or fourth search pages, it's pretty rare. 291 00:18:18,800 --> 00:18:21,480 Speaker 1: I mean, most people buy the thing that comes up first. 292 00:18:22,280 --> 00:18:25,960 Speaker 1: What comes up first, it's the stuff that sells or 293 00:18:26,040 --> 00:18:29,600 Speaker 1: the stuff that has more money to pay you all 294 00:18:29,680 --> 00:18:32,840 Speaker 1: that that it comes up first in searches, right, So 295 00:18:33,680 --> 00:18:37,280 Speaker 1: I think the difference is maybe not as not as 296 00:18:37,359 --> 00:18:42,760 Speaker 1: big as you might imagine. Incumbencies and advantage in the 297 00:18:42,840 --> 00:18:46,760 Speaker 1: new retail world as well as the old. So you 298 00:18:46,800 --> 00:18:52,160 Speaker 1: are a long time consumer stables sell side analyst before 299 00:18:52,480 --> 00:18:56,720 Speaker 1: you founded ash Park, I'm curious did you ever come 300 00:18:56,760 --> 00:19:01,720 Speaker 1: across an example of a major consumer staple being disrupted 301 00:19:02,000 --> 00:19:07,040 Speaker 1: in that period? Well, I mean, actually I started my 302 00:19:07,200 --> 00:19:11,399 Speaker 1: career in the early nineties and pretty much the first 303 00:19:11,440 --> 00:19:17,360 Speaker 1: thing that happened was Marlbora Friday. That was April ninety three, 304 00:19:18,080 --> 00:19:21,280 Speaker 1: when Philip Morrison was a cut the price of Marlbora 305 00:19:21,520 --> 00:19:25,000 Speaker 1: due to the growth of newer, smaller brands, and in 306 00:19:25,400 --> 00:19:28,119 Speaker 1: those days it was private label and there was an 307 00:19:28,200 --> 00:19:32,240 Speaker 1: enormous amount of talk then about big brands being under 308 00:19:32,280 --> 00:19:34,320 Speaker 1: siege and you know they're about to perish or they 309 00:19:34,320 --> 00:19:37,720 Speaker 1: will never be as profitable again. So this, this this 310 00:19:37,880 --> 00:19:43,879 Speaker 1: story comes and goes in in cycles. And you know, 311 00:19:43,920 --> 00:19:47,520 Speaker 1: for all I've talked about Staples being resilient over the 312 00:19:47,520 --> 00:19:50,359 Speaker 1: long run, you know that that can sound complacent maybe, 313 00:19:50,359 --> 00:19:53,880 Speaker 1: And of course there are examples of companies who get 314 00:19:53,880 --> 00:19:57,040 Speaker 1: it wrong and and do get disrupted. And you know, 315 00:19:57,119 --> 00:20:01,159 Speaker 1: normally you can, you can, you can and see the 316 00:20:01,320 --> 00:20:06,159 Speaker 1: seeds of their own disruption in the in that company 317 00:20:06,240 --> 00:20:10,120 Speaker 1: or that brand's behavior. So to come back to Dollar 318 00:20:10,160 --> 00:20:14,119 Speaker 1: Shaved Club, one of the reasons why that found a 319 00:20:14,200 --> 00:20:18,560 Speaker 1: really good market niche was because the leader, Gillette, had 320 00:20:18,600 --> 00:20:20,399 Speaker 1: really taken its eye off the ball for quite a 321 00:20:20,400 --> 00:20:24,160 Speaker 1: long time. You know, they added another blade and another 322 00:20:24,200 --> 00:20:27,080 Speaker 1: blade onto the razor until you probably couldn't do much more, 323 00:20:27,119 --> 00:20:29,960 Speaker 1: and then they kept taking the price up, and in 324 00:20:30,040 --> 00:20:31,760 Speaker 1: the end consumers got fed up and said, you know, 325 00:20:31,800 --> 00:20:33,520 Speaker 1: why why am I paying all this money for a 326 00:20:33,520 --> 00:20:37,399 Speaker 1: product which doesn't really do that much of a greater 327 00:20:37,520 --> 00:20:42,160 Speaker 1: job than something a bit more basic. And Gilette created 328 00:20:42,320 --> 00:20:46,720 Speaker 1: for itself that vulnerability. There's another example I was looking 329 00:20:46,720 --> 00:20:49,960 Speaker 1: at this morning, slightly be more before my time, but 330 00:20:51,000 --> 00:20:54,000 Speaker 1: in the seventies there was a big U. S brewer 331 00:20:54,000 --> 00:20:57,960 Speaker 1: called Slits which was going neck and neck with and 332 00:20:58,080 --> 00:21:02,040 Speaker 1: noiser Bus for ages in mark leadership, and the family 333 00:21:02,040 --> 00:21:06,199 Speaker 1: that owned it wanted to get that leadership back. But 334 00:21:06,240 --> 00:21:09,640 Speaker 1: they try to do that by cutting corners. So they 335 00:21:09,680 --> 00:21:14,080 Speaker 1: try to shorten the production process, made it cheaper, and 336 00:21:14,440 --> 00:21:19,520 Speaker 1: that had the unfortunate results of people spotting quite obvious 337 00:21:20,160 --> 00:21:24,120 Speaker 1: product deficiencies, and they lost further market share and eventually 338 00:21:24,160 --> 00:21:28,200 Speaker 1: kind of disappeared from the market. Yeah. That that's why 339 00:21:28,240 --> 00:21:32,439 Speaker 1: I say it's normally a company's own behavior that causes 340 00:21:32,480 --> 00:21:36,120 Speaker 1: their downfall, and and the businesses that continue to market 341 00:21:37,520 --> 00:21:41,720 Speaker 1: and innovate and excite their consumers, don't try and grow 342 00:21:41,720 --> 00:21:44,720 Speaker 1: too fast, don't try and cut corners, are the ones 343 00:21:44,760 --> 00:21:48,520 Speaker 1: which tend to survive and prosper Tracy, I feel like 344 00:21:48,560 --> 00:21:52,760 Speaker 1: we need to do a crossover razor semiconductor episode and 345 00:21:52,800 --> 00:21:57,840 Speaker 1: compare squeezing more blades onto a cartridge to shrinking nanometer size. 346 00:21:58,040 --> 00:22:00,679 Speaker 1: But I actually want to go back to something what 347 00:22:00,760 --> 00:22:03,360 Speaker 1: you said about how they sort of took their eye 348 00:22:03,400 --> 00:22:05,480 Speaker 1: off the ball, and they kept putting all these extra 349 00:22:05,520 --> 00:22:09,440 Speaker 1: blades in the cartridge even though even no nobody needed it. 350 00:22:09,440 --> 00:22:12,679 Speaker 1: It's easy to say now or in retrospect or with 351 00:22:12,720 --> 00:22:15,760 Speaker 1: the rise of Dollar Shave Club, you're like, Okay, Gillette 352 00:22:15,760 --> 00:22:18,360 Speaker 1: took their eye off the ball. Could one have known 353 00:22:18,520 --> 00:22:22,639 Speaker 1: prior to the rise of Dollar Shaved Club and identified 354 00:22:22,840 --> 00:22:26,360 Speaker 1: that flaw that this doesn't they're on a strategy or 355 00:22:26,400 --> 00:22:28,200 Speaker 1: is it one of those things where it's really hard 356 00:22:28,240 --> 00:22:32,200 Speaker 1: to say, Okay, this company is making some strategic errors 357 00:22:32,240 --> 00:22:35,119 Speaker 1: before it's too late. Do you know what I'm saying? Like, 358 00:22:35,160 --> 00:22:37,480 Speaker 1: it's easy to say in retrospect, oh, they created this 359 00:22:37,520 --> 00:22:40,040 Speaker 1: space for the incumbent. That seems harder to do in 360 00:22:40,080 --> 00:22:43,600 Speaker 1: real time. It's hard, but but but not impossible. And 361 00:22:44,080 --> 00:22:47,760 Speaker 1: we have a we have a sort of houristic that 362 00:22:47,800 --> 00:22:50,800 Speaker 1: we use, which is that companies have to be growing 363 00:22:51,800 --> 00:22:56,080 Speaker 1: volume and market share. If you're rely on pricing is 364 00:22:56,119 --> 00:22:59,840 Speaker 1: the thing which grows your top line, then you're going 365 00:22:59,880 --> 00:23:03,119 Speaker 1: to cause trouble for yourself at some point because if 366 00:23:03,119 --> 00:23:04,919 Speaker 1: you think about it, as I keep saying, these are 367 00:23:04,960 --> 00:23:09,200 Speaker 1: everyday products, and the great thing about them, the reason 368 00:23:09,240 --> 00:23:12,439 Speaker 1: they make big margins and big returns on invested capital 369 00:23:12,560 --> 00:23:15,919 Speaker 1: is because the branding they have allows them to charge 370 00:23:16,600 --> 00:23:18,840 Speaker 1: a few more pennies or a few more dollars per 371 00:23:18,880 --> 00:23:22,760 Speaker 1: pack then you'd pay for a generic product. But you 372 00:23:22,800 --> 00:23:27,520 Speaker 1: can't stretch that elastic forever. So if you if you 373 00:23:27,640 --> 00:23:31,760 Speaker 1: keep pushing the gap to generics higher and higher and higher, 374 00:23:31,840 --> 00:23:35,200 Speaker 1: then sooner or later, you're creating an umbrella that somebody 375 00:23:35,200 --> 00:23:38,400 Speaker 1: will come in and exploit. You never know quite when 376 00:23:38,480 --> 00:23:41,359 Speaker 1: that's going to happen, but we try very very hard 377 00:23:41,400 --> 00:23:45,080 Speaker 1: to avoid those situations because we know that they do 378 00:23:45,240 --> 00:23:47,280 Speaker 1: have a habit of going wrong. In the end. You 379 00:23:47,320 --> 00:23:50,000 Speaker 1: can be a year or two early and look slightly silly, 380 00:23:50,040 --> 00:23:53,760 Speaker 1: but in the end that almost always happens. And you 381 00:23:53,760 --> 00:23:56,360 Speaker 1: you know, USB would be a good example. Actually, some 382 00:23:56,440 --> 00:24:00,359 Speaker 1: fantastic successful companies and whose bush for ages and ages, 383 00:24:01,600 --> 00:24:07,720 Speaker 1: but their own behavior kind of created I think the 384 00:24:07,720 --> 00:24:11,199 Speaker 1: the room for all that explosion of craft brewers. And 385 00:24:11,240 --> 00:24:13,840 Speaker 1: I'm not just saying that as a as a brit 386 00:24:14,040 --> 00:24:16,840 Speaker 1: Who's well, what is there a specific thing that they 387 00:24:16,880 --> 00:24:20,520 Speaker 1: did that allowed that allowed that to happen? Well, I 388 00:24:21,680 --> 00:24:25,359 Speaker 1: think they didn't pay enough attention to the fact that 389 00:24:25,440 --> 00:24:31,359 Speaker 1: people's tastes might change and become more sophisticated. They focus 390 00:24:31,440 --> 00:24:36,119 Speaker 1: for too long on selling the same quite basic product 391 00:24:36,200 --> 00:24:39,359 Speaker 1: to people, and in the end people wanted more variety, 392 00:24:39,760 --> 00:24:43,240 Speaker 1: and when they wanted that, the leaders didn't really have 393 00:24:43,480 --> 00:24:46,199 Speaker 1: the products to offer, so that gap was filled by 394 00:24:46,240 --> 00:24:50,480 Speaker 1: somebody else instead. Actually, again because of the pricing strategy, 395 00:24:51,160 --> 00:24:54,680 Speaker 1: other other companies could could could maxim and actually sell 396 00:24:54,720 --> 00:24:59,399 Speaker 1: a better product. So this is a related question. But 397 00:25:00,560 --> 00:25:04,639 Speaker 1: when it comes to consumer stable companies, what are the 398 00:25:04,760 --> 00:25:07,239 Speaker 1: signs of a good one? What is it that you 399 00:25:07,560 --> 00:25:11,840 Speaker 1: look out for? So you mentioned growing volume and market share, 400 00:25:12,440 --> 00:25:15,840 Speaker 1: not at the expense of pricing. What else are you 401 00:25:15,840 --> 00:25:18,800 Speaker 1: looking for, because again we're talking about sort of intangible 402 00:25:18,920 --> 00:25:23,320 Speaker 1: things like strength of brand, being able to recognize shifting 403 00:25:23,359 --> 00:25:27,399 Speaker 1: consumer taste, things like that. Are there any markers of 404 00:25:27,640 --> 00:25:32,119 Speaker 1: a company that might be doing that well or examining 405 00:25:32,119 --> 00:25:37,560 Speaker 1: those things quite carefully? Well, I mean, it's it's something 406 00:25:37,560 --> 00:25:41,080 Speaker 1: of an art as as an art as much as 407 00:25:41,080 --> 00:25:44,440 Speaker 1: a science, and it's difficult to have really hard and 408 00:25:44,520 --> 00:25:48,719 Speaker 1: fast rules. But in addition to that volume and market 409 00:25:48,720 --> 00:25:52,000 Speaker 1: share point, we pay a lot of attention to to culture. 410 00:25:52,720 --> 00:25:54,359 Speaker 1: You know, we watch what's going on in the world 411 00:25:54,400 --> 00:25:58,520 Speaker 1: and in the industry. Some companies get a reputation for 412 00:25:58,640 --> 00:26:01,280 Speaker 1: being very good place is to hire people from and 413 00:26:01,320 --> 00:26:04,919 Speaker 1: those people do well in businesses they they join, and 414 00:26:04,920 --> 00:26:08,360 Speaker 1: that gives you signals about which companies have good cultures. 415 00:26:08,359 --> 00:26:11,480 Speaker 1: And you can spot the less good ones by seeing 416 00:26:11,480 --> 00:26:17,439 Speaker 1: where this high high management churn and and we like 417 00:26:17,640 --> 00:26:20,800 Speaker 1: to see as well companies behaving the right way in 418 00:26:20,920 --> 00:26:23,840 Speaker 1: terms of innovation and marketing spend, which is like a 419 00:26:23,920 --> 00:26:28,720 Speaker 1: leading indicator for volume and market share. We know that 420 00:26:28,760 --> 00:26:32,359 Speaker 1: not all innovation and not all marketing will work. But 421 00:26:33,000 --> 00:26:35,000 Speaker 1: if you're trying hard, if you're coming up with new 422 00:26:35,040 --> 00:26:39,680 Speaker 1: ideas every year and spending a decent amount of money, 423 00:26:39,800 --> 00:26:44,800 Speaker 1: then that gives you a good margin of safety, and 424 00:26:44,840 --> 00:26:48,440 Speaker 1: it also helps protect your profit and loss and the 425 00:26:48,480 --> 00:26:52,240 Speaker 1: earnings that can drop to the bottom line. Well, that's interesting, 426 00:26:52,280 --> 00:26:55,439 Speaker 1: So what does that look like innovation in marketing? What 427 00:26:55,520 --> 00:26:58,040 Speaker 1: are some things that you have seen in your career 428 00:26:58,240 --> 00:27:01,360 Speaker 1: recently that struck you as a this is a company 429 00:27:01,520 --> 00:27:08,320 Speaker 1: investing innovatively and smartly in marketing. Well, it might be 430 00:27:09,200 --> 00:27:12,240 Speaker 1: a little bit counterintuitive to bring up the tobacco sector 431 00:27:12,280 --> 00:27:16,159 Speaker 1: at this point, but if you look at what Philip 432 00:27:16,160 --> 00:27:20,119 Speaker 1: Morris International was done with its tobacco heating product icons 433 00:27:21,000 --> 00:27:26,159 Speaker 1: disrupting themselves. They have done a brilliant job. They've managed 434 00:27:26,200 --> 00:27:31,280 Speaker 1: to create a multi billion dollar selling brand in just 435 00:27:31,359 --> 00:27:35,160 Speaker 1: a few years of being in the market. And they 436 00:27:35,160 --> 00:27:39,520 Speaker 1: took a very bold bet by spending a very last 437 00:27:39,520 --> 00:27:47,119 Speaker 1: sums of money on both research and development, clinical trials, marketing, 438 00:27:47,960 --> 00:27:51,560 Speaker 1: and they've used that as an opportunity almost to try 439 00:27:51,600 --> 00:27:54,720 Speaker 1: and reinvent the whole company, and they're in that do 440 00:27:54,880 --> 00:27:56,680 Speaker 1: in the early days of that. But they have done 441 00:27:56,680 --> 00:28:02,399 Speaker 1: a tremendous job and the opposite really of a milking 442 00:28:02,400 --> 00:28:06,880 Speaker 1: strategy where they could have sat back and just watched 443 00:28:07,160 --> 00:28:11,119 Speaker 1: the cash count business that they have churn out the 444 00:28:11,160 --> 00:28:14,720 Speaker 1: dollars year after you. I have a weird question, but 445 00:28:14,880 --> 00:28:18,000 Speaker 1: since you mentioned this idea of churning out dollars year 446 00:28:18,080 --> 00:28:24,560 Speaker 1: after your can staples grow indefinitely or is there a 447 00:28:24,640 --> 00:28:27,720 Speaker 1: saturation point? And what I mean by that is there's 448 00:28:27,760 --> 00:28:30,680 Speaker 1: probably a limit to how much food we're going to 449 00:28:30,760 --> 00:28:32,919 Speaker 1: eat or you know, how much beer we're going to 450 00:28:33,000 --> 00:28:37,280 Speaker 1: consume in any given day. Is there a limit on 451 00:28:37,560 --> 00:28:41,240 Speaker 1: staples growth? There is a limit, I think in that 452 00:28:42,360 --> 00:28:46,040 Speaker 1: you don't really see the overall category growing faster than GDP. 453 00:28:46,600 --> 00:28:48,920 Speaker 1: I mean, it can't for the reasons you said, Racy. 454 00:28:50,640 --> 00:28:53,800 Speaker 1: You can't just shove every more food and drink down 455 00:28:53,840 --> 00:28:57,360 Speaker 1: your your galet, although you can pay for better experiences 456 00:28:57,480 --> 00:29:02,880 Speaker 1: and pay for a more premium type of products. So 457 00:29:03,200 --> 00:29:05,120 Speaker 1: I mean this this is, if you like, one of 458 00:29:05,160 --> 00:29:10,280 Speaker 1: the paradoxes of the sector. It doesn't grow faster than GDP. 459 00:29:11,360 --> 00:29:15,600 Speaker 1: Yet the sector tends to out before in the market. 460 00:29:15,680 --> 00:29:20,480 Speaker 1: And it goes back to that consistent winners point that 461 00:29:21,120 --> 00:29:24,360 Speaker 1: the companies that that do well tend to continue doing well, 462 00:29:24,960 --> 00:29:28,640 Speaker 1: whereas in other industries and sectors, you know, the whole 463 00:29:28,640 --> 00:29:31,400 Speaker 1: business could be gone into twenty years time and there 464 00:29:31,440 --> 00:29:36,120 Speaker 1: could be a completely new winner that does something totally different. 465 00:29:39,920 --> 00:29:56,680 Speaker 1: M So, Jonathan actually came across your work because you 466 00:29:56,720 --> 00:30:00,960 Speaker 1: did an interview with Lawrence Hamptle, who was previously on 467 00:30:01,120 --> 00:30:06,200 Speaker 1: the podcast talking about tobacco specifically. Obviously you broaden it 468 00:30:06,280 --> 00:30:10,280 Speaker 1: out but include um tobacco. So I and one of 469 00:30:10,320 --> 00:30:13,240 Speaker 1: the things that I took away from that conversation our 470 00:30:13,280 --> 00:30:16,080 Speaker 1: conversation with Lawrence is part of the part of the 471 00:30:16,120 --> 00:30:21,160 Speaker 1: reason these companies do well historically as stocks. It seems 472 00:30:21,160 --> 00:30:23,880 Speaker 1: to me part because they're never sexy, so they never 473 00:30:23,920 --> 00:30:26,800 Speaker 1: really get too overvalued, so that if you buy them today, 474 00:30:27,320 --> 00:30:28,920 Speaker 1: or if you buy them five years from now or 475 00:30:28,920 --> 00:30:31,520 Speaker 1: by the five years ago, there's a good chance that 476 00:30:31,560 --> 00:30:35,200 Speaker 1: you're never really buying a bubble. There's never euphoria and 477 00:30:35,600 --> 00:30:40,080 Speaker 1: tobacco stock stocks. There's never euphoria and chlorox or pepsi 478 00:30:40,200 --> 00:30:44,440 Speaker 1: or haneken. How much of these strong forward returns that 479 00:30:44,480 --> 00:30:47,200 Speaker 1: this company has seen year after year after year, going 480 00:30:47,240 --> 00:30:51,160 Speaker 1: back decades can be explained in part by the fact 481 00:30:51,160 --> 00:30:56,640 Speaker 1: that the starting point is rarely in a period of euphoria. Well, 482 00:30:56,680 --> 00:31:00,280 Speaker 1: I think it's it's helpful because it means that at 483 00:31:00,320 --> 00:31:05,360 Speaker 1: whatever point you have invested in these stocks, you tend 484 00:31:05,400 --> 00:31:08,280 Speaker 1: not to have had a big head wind from from 485 00:31:08,280 --> 00:31:11,880 Speaker 1: from multiple compression. You know, actually, if you if you 486 00:31:11,960 --> 00:31:14,560 Speaker 1: if you get to the bottom of what has driven 487 00:31:14,720 --> 00:31:17,640 Speaker 1: the superior turns versus the market over the long run. 488 00:31:17,920 --> 00:31:21,880 Speaker 1: Not surprisingly, it's because their earnings growth has been better 489 00:31:22,160 --> 00:31:25,080 Speaker 1: and and the dividend and dividend growth has been better 490 00:31:25,120 --> 00:31:28,640 Speaker 1: than the average. But one of the big risks, of 491 00:31:28,640 --> 00:31:32,120 Speaker 1: course in investing in any stock that is growing better 492 00:31:32,120 --> 00:31:34,120 Speaker 1: than the market is that you just pay the wrong 493 00:31:34,200 --> 00:31:38,240 Speaker 1: multiple for it in the first place, and other than 494 00:31:38,480 --> 00:31:42,160 Speaker 1: perhaps arguably the very early seventies, that has never really 495 00:31:42,200 --> 00:31:46,600 Speaker 1: been the case for the group as a whole, which 496 00:31:46,640 --> 00:31:50,560 Speaker 1: is not to say it's never happened to individual stocks 497 00:31:50,560 --> 00:31:52,560 Speaker 1: from time to time. So for instance, if you look 498 00:31:52,600 --> 00:31:55,680 Speaker 1: at Coke in the late nineties, it got to again 499 00:31:55,720 --> 00:31:59,600 Speaker 1: a very stretched multiple and that really held its returns 500 00:31:59,720 --> 00:32:04,600 Speaker 1: back over the next ten or fifteen years. But you're 501 00:32:04,680 --> 00:32:08,440 Speaker 1: you're correct that as a as a group overall, these 502 00:32:08,560 --> 00:32:12,600 Speaker 1: things have very rarely been in bubble territory, and that 503 00:32:12,640 --> 00:32:16,000 Speaker 1: makes investing in the mesia as well. And it's you know, 504 00:32:16,000 --> 00:32:18,800 Speaker 1: I think, for what it's worth, it's still the case today. 505 00:32:19,400 --> 00:32:24,120 Speaker 1: You said, very rarely in bubble territory. Has there ever 506 00:32:24,240 --> 00:32:27,400 Speaker 1: been a moment when when they were overvalued or maybe 507 00:32:27,400 --> 00:32:32,600 Speaker 1: when they came close to it? Well, outside that example 508 00:32:32,640 --> 00:32:36,680 Speaker 1: of Coke that I just went through, Um, if you 509 00:32:36,880 --> 00:32:39,280 Speaker 1: go back to the to the early seventies, at the 510 00:32:39,320 --> 00:32:43,200 Speaker 1: time of the nifty fifty, some of these stocks were 511 00:32:43,280 --> 00:32:49,120 Speaker 1: on pretty punchy multiples fifty times. But actually you know, 512 00:32:49,200 --> 00:32:51,840 Speaker 1: even then, if you held them for long enough that 513 00:32:51,960 --> 00:32:55,840 Speaker 1: still didn't then your returns too badly. Have you held 514 00:32:55,840 --> 00:33:00,600 Speaker 1: those stocks for the next forty years. You still did. Okay, 515 00:33:01,240 --> 00:33:04,080 Speaker 1: you know we're talking. We've been talking about disruption from 516 00:33:04,120 --> 00:33:08,480 Speaker 1: direct to consumer companies. The other sort of like one 517 00:33:08,480 --> 00:33:12,680 Speaker 1: of the big phenomenons in retailing these days is just 518 00:33:12,760 --> 00:33:16,560 Speaker 1: how powerful the house brands at uh, you know, the 519 00:33:16,600 --> 00:33:21,200 Speaker 1: generic brands at some major retailers. Are lots of stories 520 00:33:21,280 --> 00:33:25,040 Speaker 1: out there about Amazon Basics and the speed with which 521 00:33:25,160 --> 00:33:29,560 Speaker 1: they can come up with a with a competitive product 522 00:33:29,600 --> 00:33:31,840 Speaker 1: based on when they see that something is popular. Also, 523 00:33:31,960 --> 00:33:35,920 Speaker 1: like at Costco, the Kirkland brand that has a cult 524 00:33:35,960 --> 00:33:37,959 Speaker 1: following in its own right, and in fact, there are 525 00:33:37,960 --> 00:33:41,480 Speaker 1: all kinds of stories about how often the Kirkland brand is, say, 526 00:33:41,560 --> 00:33:45,000 Speaker 1: like better than the incumbent chocolate company, and that it 527 00:33:45,080 --> 00:33:48,240 Speaker 1: might even come from the same plant and might be better. 528 00:33:48,920 --> 00:33:52,160 Speaker 1: To what extent is that a new thing in competition 529 00:33:52,440 --> 00:33:55,960 Speaker 1: that's worrisome or is it just yes, there's always been 530 00:33:56,000 --> 00:34:01,000 Speaker 1: generic brands and these companies know how to deal with them. 531 00:34:01,040 --> 00:34:04,800 Speaker 1: I think I think there always has been generic competition, Joe, 532 00:34:06,120 --> 00:34:09,040 Speaker 1: although in the US maybe it's a newer phenomenon. In Europe, 533 00:34:09,120 --> 00:34:11,720 Speaker 1: I think if you if you look at some food 534 00:34:11,760 --> 00:34:15,839 Speaker 1: retailer data, you can see that private labels typically been 535 00:34:15,960 --> 00:34:21,600 Speaker 1: a larger portion of the sales of big European growsers 536 00:34:21,680 --> 00:34:25,600 Speaker 1: for for quite a lot longer. It's always been there 537 00:34:25,719 --> 00:34:28,080 Speaker 1: and it always will and yes, it's a threat, and 538 00:34:28,120 --> 00:34:32,960 Speaker 1: it helps keep the branded companies honest and helps keep 539 00:34:33,000 --> 00:34:37,040 Speaker 1: them on their toes. But you know, I think what's 540 00:34:37,080 --> 00:34:42,560 Speaker 1: what's important about consumer behavior is that, yes, there's are 541 00:34:43,360 --> 00:34:46,520 Speaker 1: some people some of the time will want to pay 542 00:34:47,600 --> 00:34:52,000 Speaker 1: a good value price for fairly basic products. But people 543 00:34:52,080 --> 00:34:56,040 Speaker 1: want variety, and they like the the little bit of 544 00:34:56,080 --> 00:35:02,480 Speaker 1: interest and excitement that brands and new product lines that 545 00:35:02,560 --> 00:35:05,800 Speaker 1: the big companies launch, and also that that the smaller 546 00:35:05,840 --> 00:35:09,239 Speaker 1: disruptive companies launched as well bring to their lines and 547 00:35:09,280 --> 00:35:12,960 Speaker 1: their and their shopping baskets. So I think if you 548 00:35:13,000 --> 00:35:17,319 Speaker 1: saw a retailer switch, you know, nearly all of its 549 00:35:17,320 --> 00:35:21,000 Speaker 1: business to its own private label brand, that might go 550 00:35:21,120 --> 00:35:23,759 Speaker 1: down very well with a certain portion of its consumers, 551 00:35:24,440 --> 00:35:28,800 Speaker 1: but there might be a larger, more important part of 552 00:35:28,840 --> 00:35:31,440 Speaker 1: the consumer base that didn't come through the door anymore 553 00:35:31,480 --> 00:35:34,479 Speaker 1: because they weren't finding that the brands that they loved 554 00:35:34,480 --> 00:35:38,759 Speaker 1: in that shop, and they go somewhere else. You talked 555 00:35:38,760 --> 00:35:44,120 Speaker 1: about this idea that by definition consumption of consumer stables 556 00:35:44,160 --> 00:35:50,920 Speaker 1: can't really outpace GDP. What does one look like for 557 00:35:51,120 --> 00:35:54,920 Speaker 1: you in that case? So we still have GDP growth, 558 00:35:55,120 --> 00:35:59,040 Speaker 1: I mean pretty stagnant, and a lot of major economies 559 00:35:59,040 --> 00:36:03,239 Speaker 1: are probably contract contracting in a few of them as well. 560 00:36:04,520 --> 00:36:07,320 Speaker 1: And at the same time, we might have people returning 561 00:36:07,360 --> 00:36:09,360 Speaker 1: to work, maybe getting out of their houses as the 562 00:36:09,440 --> 00:36:12,080 Speaker 1: vaccine gets rolled out. So you have these sort of 563 00:36:12,120 --> 00:36:15,480 Speaker 1: push pull factors. How do you see that playing out 564 00:36:15,680 --> 00:36:19,480 Speaker 1: for consumer staples this year? I mean that it's going 565 00:36:19,520 --> 00:36:24,160 Speaker 1: to be complicated dynamics in one and you know what 566 00:36:24,200 --> 00:36:26,600 Speaker 1: we try to do as a businesses look through them 567 00:36:27,080 --> 00:36:30,680 Speaker 1: mid long term and try and look through the short 568 00:36:30,800 --> 00:36:34,520 Speaker 1: term disruption to consumption trends that's happening because of COVID. 569 00:36:34,560 --> 00:36:37,520 Speaker 1: But you know, I think you'll see some businesses that 570 00:36:37,560 --> 00:36:43,120 Speaker 1: were big beneficiaries last year, like the cleaning product companies 571 00:36:43,760 --> 00:36:48,120 Speaker 1: and and and the food companies, see their sales settle 572 00:36:48,239 --> 00:36:52,160 Speaker 1: down because you had a a big spike and consumption 573 00:36:52,160 --> 00:36:54,879 Speaker 1: of those products with people staying at home washing more. 574 00:36:55,920 --> 00:36:59,360 Speaker 1: As people start to go out again, um, you know, 575 00:36:59,440 --> 00:37:02,040 Speaker 1: they weren't need to eat so much food in their house, 576 00:37:02,160 --> 00:37:07,480 Speaker 1: and that consumption will shift to restaurants and cafes, and 577 00:37:07,480 --> 00:37:09,520 Speaker 1: then you'll see, you know, other bits of our business 578 00:37:09,640 --> 00:37:12,600 Speaker 1: have suffered well, Other bits of stables businesses have suffered 579 00:37:12,680 --> 00:37:15,640 Speaker 1: quite a lot because people aren't going out. So coke, 580 00:37:15,880 --> 00:37:18,560 Speaker 1: for instance, as a soft drink companies have lost a 581 00:37:18,560 --> 00:37:21,560 Speaker 1: lot of sales in the entrade in bars and cafes. 582 00:37:22,280 --> 00:37:26,080 Speaker 1: People have almost the same amount of volume at home, 583 00:37:26,160 --> 00:37:31,640 Speaker 1: but that typically is lower margin. So those guys, the 584 00:37:31,719 --> 00:37:35,360 Speaker 1: brewers ought to see something of a recovery as we 585 00:37:35,440 --> 00:37:40,840 Speaker 1: go through one. And then you've got the beauty companies 586 00:37:40,880 --> 00:37:45,840 Speaker 1: as well, suffered in developed markets again because they weren't 587 00:37:45,840 --> 00:37:47,400 Speaker 1: going out as much. You don't need to wear as 588 00:37:47,480 --> 00:37:49,120 Speaker 1: much make up if you've got a mask on, there's 589 00:37:49,160 --> 00:37:51,440 Speaker 1: not much point if you're viewing your house as well. 590 00:37:52,120 --> 00:37:55,480 Speaker 1: So that consumption should come back in developed markets through 591 00:37:55,520 --> 00:38:01,080 Speaker 1: this year, although in China and Asia through the second 592 00:38:01,080 --> 00:38:05,200 Speaker 1: half of last year certainly you've already seen quite a 593 00:38:05,320 --> 00:38:12,160 Speaker 1: strong resumption of growth trends in those product lines. We 594 00:38:12,600 --> 00:38:16,279 Speaker 1: talked a lot about food and beverages, what about how 595 00:38:16,320 --> 00:38:18,920 Speaker 1: does that compare to say the makeup industry, I mean, 596 00:38:19,160 --> 00:38:21,360 Speaker 1: I forget, what was it there? Like a Kardashian or 597 00:38:21,360 --> 00:38:23,440 Speaker 1: a general who like, out of nowhere, in a few 598 00:38:23,560 --> 00:38:28,400 Speaker 1: years they saw Instagram account created a billion dollar, multibillion 599 00:38:28,440 --> 00:38:31,960 Speaker 1: dollar makeup company, Like how much of you know? How 600 00:38:32,000 --> 00:38:34,560 Speaker 1: many of how many more of those mega brands could 601 00:38:34,920 --> 00:38:37,480 Speaker 1: bubble up? And how do the incumbents deal with that threat? 602 00:38:39,000 --> 00:38:41,719 Speaker 1: If you look at a category like makeup, novelty has 603 00:38:41,760 --> 00:38:45,000 Speaker 1: always been a very big part of that business. And 604 00:38:45,120 --> 00:38:48,400 Speaker 1: we always point to Lorreal, which started ages and ages 605 00:38:48,440 --> 00:38:53,120 Speaker 1: ago with the Loreal of Paris brand. But they have 606 00:38:53,200 --> 00:38:55,840 Speaker 1: brought absolutely masses of things over the last thirty or 607 00:38:55,840 --> 00:39:00,319 Speaker 1: forty years. They haven't all worked, but they have very 608 00:39:00,400 --> 00:39:04,520 Speaker 1: very big staple of brands, most of which they've bought 609 00:39:04,920 --> 00:39:07,040 Speaker 1: and are now much bigger than when they when they 610 00:39:07,040 --> 00:39:10,440 Speaker 1: acquired them, exactly the same as their day Lorder and 611 00:39:10,719 --> 00:39:14,400 Speaker 1: the other large beauty companies. So I think you're you, 612 00:39:14,920 --> 00:39:20,279 Speaker 1: you won't see that trend die. But obviously, what what 613 00:39:20,440 --> 00:39:23,520 Speaker 1: is quite likely is that the brands that are novelties 614 00:39:23,840 --> 00:39:26,839 Speaker 1: last year and this year and next year, they might 615 00:39:26,880 --> 00:39:29,960 Speaker 1: not be the same things that are around in ten 616 00:39:30,040 --> 00:39:33,120 Speaker 1: fifteen years time. There might be a different influencer that's 617 00:39:33,160 --> 00:39:36,200 Speaker 1: famous and has has made their brand and and and 618 00:39:36,600 --> 00:39:41,400 Speaker 1: seen that rocket like growth. Before we conclude so big picture, 619 00:39:41,400 --> 00:39:43,720 Speaker 1: I mean, we talk about and you know, the stats 620 00:39:44,719 --> 00:39:49,080 Speaker 1: talk about consumer staples in general that as a basket 621 00:39:49,160 --> 00:39:52,480 Speaker 1: going back for decades. Actually, before we get to the 622 00:39:52,480 --> 00:39:54,040 Speaker 1: big picture, I want to just ask, you know, there's 623 00:39:54,040 --> 00:39:56,640 Speaker 1: a lot of people your stats go back to the seventies, 624 00:39:57,280 --> 00:39:59,719 Speaker 1: and there's a lot of people these days who think 625 00:39:59,719 --> 00:40:03,880 Speaker 1: that are the inflation is coming about. You know, well, 626 00:40:03,920 --> 00:40:05,759 Speaker 1: it's finally going to come maybe because of all this 627 00:40:05,880 --> 00:40:09,279 Speaker 1: like fiscal stimulus and so forth. How much do you 628 00:40:09,360 --> 00:40:15,560 Speaker 1: see consumer staples specifically poised in the event of inflationary 629 00:40:15,560 --> 00:40:17,919 Speaker 1: episode or in the event that we reversed this four 630 00:40:17,960 --> 00:40:22,959 Speaker 1: decade trend of lower inflation as being companies particularly well 631 00:40:23,360 --> 00:40:26,560 Speaker 1: positioned to handle such an environment. Yeah, if we get 632 00:40:26,560 --> 00:40:28,560 Speaker 1: a return to inflation, and I think that will be 633 00:40:28,600 --> 00:40:31,959 Speaker 1: that's going to be probably tough for for for for 634 00:40:31,960 --> 00:40:33,799 Speaker 1: for a lot of things in the stock market. But 635 00:40:34,640 --> 00:40:38,279 Speaker 1: staples companies should be okay. I mean, the fact that 636 00:40:38,320 --> 00:40:42,920 Speaker 1: they make good margins, high returns on invested capital, that 637 00:40:43,000 --> 00:40:46,759 Speaker 1: a lot of their real capital is intangible, that's where 638 00:40:46,760 --> 00:40:52,359 Speaker 1: the real value comes from, should insulate them somewhat from 639 00:40:52,520 --> 00:40:56,960 Speaker 1: the worst inflationary pressures. When I looked at this for 640 00:40:57,000 --> 00:40:59,359 Speaker 1: the seventies and the eighties, which is the last time, 641 00:41:00,000 --> 00:41:04,080 Speaker 1: you know, we we we had a more inflationary period, 642 00:41:05,080 --> 00:41:10,239 Speaker 1: Staples earnings growth did beat the broader market quite handsomely, 643 00:41:10,719 --> 00:41:13,040 Speaker 1: and I don't see any reason that that should be 644 00:41:13,719 --> 00:41:17,000 Speaker 1: different that this time around. If if that happens, so 645 00:41:18,080 --> 00:41:21,000 Speaker 1: you know, I'd rather inflation didn't rear its ugly head, 646 00:41:21,000 --> 00:41:23,120 Speaker 1: but if it does, I think in terms of the 647 00:41:23,160 --> 00:41:30,320 Speaker 1: overall stock market performance, Staples should be fine. Well, Jonathan, 648 00:41:30,440 --> 00:41:33,400 Speaker 1: is a fascinating topic, and I really appreciate you coming up. 649 00:41:34,000 --> 00:41:36,560 Speaker 1: Thank you very much, Jones Tracing. That was Yeah, there 650 00:41:36,600 --> 00:41:38,960 Speaker 1: was a great discussion. Thanks for your questions and interest. 651 00:41:39,880 --> 00:42:02,040 Speaker 1: That was great. Thank you, Thanks Jonathan. Cheers Tracy. I'm 652 00:42:02,040 --> 00:42:04,560 Speaker 1: really like sort of fascinated by this idea that like 653 00:42:04,760 --> 00:42:10,120 Speaker 1: these unsexy industries just historically are like are just such 654 00:42:10,160 --> 00:42:13,120 Speaker 1: a workhorses of the market for year after year because 655 00:42:13,160 --> 00:42:15,000 Speaker 1: we never like talk about them the way we talk 656 00:42:15,080 --> 00:42:20,319 Speaker 1: about zoom or software as a service companies or you know, 657 00:42:20,400 --> 00:42:23,640 Speaker 1: exercise bikes or anything like that. But this idea that 658 00:42:23,719 --> 00:42:27,000 Speaker 1: because no one really thinks they're sexy, they just performed 659 00:42:27,080 --> 00:42:31,200 Speaker 1: year after year. Right. I think in the market we 660 00:42:31,239 --> 00:42:34,360 Speaker 1: tend to talk a lot more about stocks or companies 661 00:42:34,400 --> 00:42:37,680 Speaker 1: with a really compelling story or a narrative around them. 662 00:42:37,800 --> 00:42:40,759 Speaker 1: And the thing about all these companies is that they 663 00:42:40,800 --> 00:42:43,320 Speaker 1: don't have a story. They don't really have a narrative. 664 00:42:43,400 --> 00:42:47,759 Speaker 1: They're just things that people need and steadily buy in 665 00:42:47,800 --> 00:42:51,840 Speaker 1: their day to day lives, and that's actually the enticing 666 00:42:51,880 --> 00:42:56,840 Speaker 1: thing about them. Yeah. I also think it's sort of interesting, 667 00:42:56,920 --> 00:42:58,920 Speaker 1: Like the flip side is like you look at these 668 00:42:58,960 --> 00:43:02,319 Speaker 1: companies like, oh, they and innovate um or they don't 669 00:43:02,320 --> 00:43:04,600 Speaker 1: really they're not sexy, they're not cool. None of the 670 00:43:04,600 --> 00:43:08,880 Speaker 1: brands are really there trendy. They have to buy competitors 671 00:43:08,960 --> 00:43:11,399 Speaker 1: or buy upstarts when they take off. But I guess 672 00:43:11,440 --> 00:43:13,279 Speaker 1: the question and the way he put is like it's 673 00:43:13,320 --> 00:43:15,680 Speaker 1: not clear that that's really a problem. Like if you 674 00:43:15,760 --> 00:43:19,160 Speaker 1: have the infrastructure to market and distribute and then you 675 00:43:19,200 --> 00:43:22,680 Speaker 1: could sort of like wait and opportunistically buy brands when 676 00:43:22,719 --> 00:43:25,200 Speaker 1: you see that they have traction and then plug them 677 00:43:25,200 --> 00:43:28,279 Speaker 1: into your infrastructure, maybe it's not a problem that they 678 00:43:28,320 --> 00:43:32,560 Speaker 1: can't really that they're not very good at innovative. Yeah, exactly, 679 00:43:32,600 --> 00:43:36,520 Speaker 1: I think this is really where the difference with tech 680 00:43:36,800 --> 00:43:39,759 Speaker 1: stands out. So tech you think, like, well, you you 681 00:43:39,800 --> 00:43:43,000 Speaker 1: can't necessarily just replicate a product that's out in the 682 00:43:43,000 --> 00:43:45,520 Speaker 1: market because you need to develop your own expertise and 683 00:43:45,560 --> 00:43:48,759 Speaker 1: there's probably intellectual property rights and things like that that 684 00:43:48,880 --> 00:43:53,920 Speaker 1: go with it. But in consumer staples, I think imitation 685 00:43:54,120 --> 00:43:56,760 Speaker 1: and the sort of barriers to launching a new product 686 00:43:56,760 --> 00:44:01,680 Speaker 1: are probably much much lower, so it becomes easier, especially 687 00:44:01,680 --> 00:44:05,080 Speaker 1: if you're an incumbent, as we mentioned. So, Joe, are 688 00:44:05,160 --> 00:44:08,080 Speaker 1: you going to be building up your your store of 689 00:44:08,120 --> 00:44:12,279 Speaker 1: canned goods in or is that behind you? I think 690 00:44:12,320 --> 00:44:16,120 Speaker 1: I'm good. I'm gonna I'm gonna draw down my inventory 691 00:44:16,400 --> 00:44:19,759 Speaker 1: um over the uh over the coming months and years, 692 00:44:19,800 --> 00:44:22,000 Speaker 1: I think. I don't. I don't see any big canned 693 00:44:22,040 --> 00:44:26,520 Speaker 1: good shopping binges in my in my future, So maybe 694 00:44:26,760 --> 00:44:28,400 Speaker 1: sales will be a little bit down for some of 695 00:44:28,400 --> 00:44:31,640 Speaker 1: these companies. Yeah, I guess we'll wait and see. That 696 00:44:31,719 --> 00:44:33,839 Speaker 1: reminds me. Do think there used to be like a 697 00:44:33,880 --> 00:44:37,680 Speaker 1: can soup economic indicator? Or am I making that up? 698 00:44:37,760 --> 00:44:40,200 Speaker 1: Maybe I imagined it? The probably is I mean there 699 00:44:40,280 --> 00:44:43,920 Speaker 1: is the lipstick indicator, right, Yeah, Yeah, that's a good one. 700 00:44:43,960 --> 00:44:48,560 Speaker 1: Although isn't that a thing? It is? It's supposed to um, 701 00:44:48,719 --> 00:44:51,960 Speaker 1: when lipstick sales go up, it's supposed to indicate a 702 00:44:52,040 --> 00:44:55,680 Speaker 1: recession or that consumer spending is down because people are 703 00:44:55,719 --> 00:44:59,600 Speaker 1: spending on like a little product that makes them feel 704 00:45:00,120 --> 00:45:05,120 Speaker 1: slightly better in uncertain times. However, I would say that 705 00:45:05,160 --> 00:45:08,760 Speaker 1: indicator is probably out of whack in the COVID era 706 00:45:08,880 --> 00:45:13,719 Speaker 1: when we're all wearing face masks and probably not wearing lipstick. Yeah, 707 00:45:13,840 --> 00:45:18,360 Speaker 1: I think it's it's definitely busted. Okay, on on the 708 00:45:18,880 --> 00:45:21,879 Speaker 1: note of the busted lipstick indicator, shall we leave it there? 709 00:45:22,920 --> 00:45:26,080 Speaker 1: That's even there? All right? This has been another episode 710 00:45:26,120 --> 00:45:28,879 Speaker 1: of the All Thoughts podcast. I'm Tracy Alloway. You can 711 00:45:28,920 --> 00:45:32,000 Speaker 1: find me on Twitter at Tracy Alloway and I'm Joe 712 00:45:32,000 --> 00:45:34,239 Speaker 1: Why Isn't Though? You can follow me on Twitter at 713 00:45:34,280 --> 00:45:39,240 Speaker 1: the Stalwart. Follow our producer Laura Carlson. She's at Laura M. Carlson. 714 00:45:39,560 --> 00:45:43,640 Speaker 1: Follow the Bloomberg head of podcast, Francesca Levi at Francesca Today, 715 00:45:44,040 --> 00:45:46,879 Speaker 1: and check out all of our podcasts at Bloomberg under 716 00:45:46,880 --> 00:46:06,200 Speaker 1: the handle at podcasts. Thanks for listening to