Merck to Acquire Terns Pharmaceuticals in $6.7 Billion Deal

Summary

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Bloomberg Intelligence Podcast

Episode: Merck to Acquire Terns Pharmaceuticals in $6.7 Billion Deal
Date: March 25, 2026
Hosts: Paul Sweeney and Scarlet Fu

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Episode Overview

This episode dives into Merck’s headline-grabbing acquisition of Terns Pharmaceuticals in a $6.7 billion deal, spotlighting the strategic implications for Merck as it navigates patent expirations and future growth in the blood cancer market. The podcast also covers notable M&A trends in pharma, provides updates on media sector shakeups (Disney & Netflix), reviews Chewy’s strong earnings and competitive strategy, and explores emerging trends in food and restaurant industries amid rising costs.

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Key Segment Summaries & Insights

1. Merck Acquires Terns Pharmaceuticals ($6.7 Billion)

[02:07 – 06:02]

Main Discussion Points

• Strategic Rationale:

  • Merck is acquiring Terns as a move to reinforce its drug pipeline, especially as its blockbuster Keytruda (representing $31 billion, or half, of its sales) is nearing patent expiration.
  • The Terns acquisition is a bet on a late-stage, not-yet-approved drug that could potentially have “peak sales of several billion dollars,” positioning Merck for continued growth post-Keytruda.

• Market Reactions:

  • Merck's stock rose on the news, an atypical reaction for a buyer in M&A — investors are signaling support for this deal and potentially more like it.
  • The premium paid is 6% above Terns’ last close ($53/share), leading some analysts to speculate whether this leaves room for rival bids.

• M&A Appetite:

  • Merck’s CEO, Rob Davis, expressed interest earlier in the year at the J.P. Morgan Health Care Conference in executing “several deals in the tens of billion dollar range,” indicating ongoing acquisition activity.

• Deal Advisors:

  • Terns was advised by Centerview Partners and Jefferies, both now significant players in the M&A space.

• Regulatory Risk:

  • Minimal risk anticipated due to Terns not having an approved drug, and its leading competitor being Novartis. Recent regulatory scrutiny (e.g., Amgen/Horizon) is unlikely to apply here.

Notable Quotes

• “For Merck, it’s a bet that at the end of the decade, around the same time that [Keytruda] is going off patent, they will have this drug coming in to help fill some of that hole.” – Merck Analyst [02:29]
• “Shares are up…investors are applauding this and they want Merck to keep doing stuff like this.” – Merck Analyst [03:28]
• "There could be an argument that maybe there is some built-in M&A speculation already baked into the price. But you never know." – Merck Analyst [04:17]

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2. Media & Tech: Disney's AI Deal Unravels, Netflix Doubles Down on Live

Disney and OpenAI Sora Deal Falls Apart

[08:24 – 10:21]

• Disney’s new CEO, Josh D’Amaro, was blindsided as a $1 billion deal with OpenAI (to develop AI-generated shows featuring 200 Disney characters) collapsed only days into his tenure.
• The failure poses challenges to Disney’s bid to maintain “franchise fandom” amid rising competition and digital engagement demands.

Quote:

• “This falling apart definitely kind of leaves Disney… they were blindsided. They’ve been trying to do different things in terms of really monetizing their IP; creating this franchise fandom.” – Geetha Ranganathan (Media Analyst) [08:54]

Netflix’s Foray into Live Events & Sports

[10:21 – 14:53]

• Netflix scored a major hit with the live BTS comeback show (18M+ viewers), highlighting engagement as a crucial metric.
• The company is increasing its content spending by $2 billion (up to ~$20B) to chase event-driven and sports content.
• Netflix is pivoting into sports cautiously—big wins in WWE, NFL Christmas games, and the World Baseball Classic (31M global viewers).
• Sports rights in the US are skyrocketing ($40B+ annually); Netflix eyes international opportunities and incremental forays, with speculation that they may eventually secure a major NFL Sunday package.

Quotes:

• “Their sports strategy has been very, very calculated, very, very measured… making really calculated bets, again, you can build that buzz and for them, really build that critical engagement metric.” – Geetha Ranganathan [12:28]
• “If you’re just looking this year at sports rights, companies are spending over $40 billion just this year across the board for US sports rights. And we’re only looking at that going up further.” – Geetha Ranganathan [13:40]

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3. Chewy Earnings: Subscription Power & Competitive Edge

[17:20 – 22:40]

Highlights

• Chewy posted forecast-beating results; stock jumped 10–12% on the news, despite being down ~20% YTD.
• Their business model relies heavily on “auto ship” subscriptions: 80–84% of revenue is recurring, sticking customers in the Chewy ecosystem.
• Chewy claims about ⅓ of the US e-commerce pet market, matching up well even against Amazon and Walmart.
• Diversifying: Now offering pet pharmacy and vet locations (18 so far), aiming for deeper customer engagement.
• Growth levers: Most sales growth going forward is expected from increasing active users more than price hikes.
• Excellent free cash flow ($700M in 2026, projected $850M in 2027); reinvestment priorities are business expansion and some share repurchase.
• Margin improvement strategies include automation in distribution centers, pushing premium brands, private-label expansion, and growing non-merchandise revenue.

Quotes:

• “Once you enter the Chewy environment, it’s difficult for you to leave. They have about 80, 84% of their revenue comes from auto ship. So…it’s subscription-based.” – Ana Rosarito Pena [18:04]
• “There are not many companies out there that can say they have a third of a market where you compete against an Amazon and a Walmart.” – Paul Sweeney [18:50]
• “We actually expect that most of the growth in sales is probably going to come from active consumers rather than pricing.” – Ana Rosarito Pena [20:17]

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4. Food, Restaurants & Consumer Trends

[25:02 – 29:52]
Guest: Justin Pride, VP at Revenue Management Solutions

Conference Insights & Menu Trends

• Rising input costs (especially fertilizer and proteins) are being closely monitored; operators are adjusting menus and pricing.
• “Protein” has become a retail buzzword, influenced significantly by millennial preferences and dietary trends pushing protein-rich options.
• Health, satisfaction, and active lifestyle are the three most cited reasons diners seek protein in menus.
• Restaurants increasingly feature global and trendy ingredients (matcha, ube, Dubai chocolate) to drive social buzz, create “Instagram-able” moments, and lure customers—often as short-term promotions to balance excitement with core menu reliability.

Quotes:

• “About 85% of menu items are just the core chicken, beef, pork type of items…these are becoming more important to consumers.” – Justin Pride [26:58]
• “Affordability is a total thing for guest visits and transactions being more of a fight for share…social media aspects, the photographing, let the camera eat first type of principle.” – Justin Pride [28:44]

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Timestamps for Key Segments

• Merck Acquisition Analysis: [02:07 – 06:02]
• Disney Media Deal Fallout / Netflix Event Strategy: [08:24 – 14:53]
• Chewy Financials and Strategy: [17:20 – 22:40]
• Food & Restaurant Trends Panel: [25:02 – 29:52]

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Memorable Moments

• M&A Win for Merck: Merck’s stock boost post-announcement was celebrated:
  “Shares are up…investors are applauding this and they want Merck to, to keep doing stuff like this.” [03:28]
• Netflix & Sports Rights: Anticipation brewing on when (not if) Netflix will land a major NFL deal:
  “To me, the defining moment will be when Netflix takes a Sunday package from the NFL. The NFL. And Geetha, I think that's. That day is coming. What do you think?” – Paul Sweeney [14:06]
• Chewy’s E-Commerce Dominance:
  “There are not many companies out there that can say they have a third of a market where you compete against an Amazon and a Walmart…” [18:50]

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Tone and Style

• Analytical and Informal: The dialogue is brisk, keenly analytic, and often peppered with wry humor (“we should call it M&A Wednesday now…”).
• Direct and Engaged: Complex industry trends are broken down in plain terms with insider perspectives and candid observations from experienced guests.

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For those seeking a snapshot of major stories moving markets—from pharma M&A to content strategies and consumer shifts in retail and food—this episode delivers lively, in-depth analysis straight from Bloomberg’s top sector experts.

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Transcript

[IBM Representative]

So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Lets create smarter business.

[Adobe Representative / Bloomberg Host]

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[Scarlett]

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[Adobe Representative / Bloomberg Host]

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[Scarlett]

We need to talk about the M and A deal that has come out in New York this morning. Merck to buy turns pharmaceuticals for $6.7 billion to grow in the blood cancer space. Michelle Davis is our senior deals reporter here in New York and is covering this story for us. Feel like we should call it M and A Wednesday now because the deals no longer happen on Monday anymore.

[Merck Analyst]

You know it's because we have a deal show now. So of course that's why they're happening on Wednesday. But yeah, big deal for Merck today. It makes a lot of sense that they're doing this because they their best selling drug Keytruda, which contributed Half of their sales last year, $31 billion is also the world's best selling drug is going off patent. So they really need to do M and A to replenish their pipeline. Turns is not. Its drug is not yet approved. But analysts are saying that it's in a few years, assuming it does get approval, it could have peak sales of several billion dollars. And so Merck for, for Merck, it's a bet that at the end of the decade, around the same time that is going off patent, they will have this drug, you know, coming in to kind of help fill some of that hole.

[Paul]

Merck, what are they saying about their M and A appetite? I guess because you know we joke that the pharmaceutical industry is such a deal. Heavy industry, pharma, biotech, that kind of thing. What's Merck saying if. Because they do have that key. True to risk.

[Merck Analyst]

Exactly. So Merck has been one of the most aggressive when it comes to M and A. Earlier this year at the J.P. morgan Health Care Conference the CEO Rob Davis said that he wants to do several deals in the tens of billion dollar range. And so that means we'll probably see more from them. Also interesting to note that Merck's stock is up today on the news. And normally in M and A the buyer stock tends to go down on an announcement. But the fact that you know, shares are up means investors are applauding this and they want Merck to, to keep doing stuff like this.

[Scarlett]

So the deal is worth $6.7 billion. It's a $53 a share in cash which is a 6% premium to turns. Last close. There are some analysts out there who say that maybe Merck is not spending enough here and this invites other companies to come in and make their own bid for Turn Pharmaceuticals as well.

[Merck Analyst]

You know, we will see if that happens. There were some bidding wars in pharma last year with the meds there a deal being one of the ones that said the stock turns. The stock has increased like 50% since January on basically no news. So there could be an argument that maybe there is some built in, you know, M and A speculation already into the already built baked into the price. But you know, you never know. There are other pharma companies out there who are also trying to replenish their pipeline. So it wouldn't be unprecedented.

[Paul]

You know, of course which bankers were on this deal they don't have. They didn't list the acquirer advisor but the financial target, Centerview Partners and Jefferies. So a couple unusual or not unusual but Just more boutique, more boutique.

[Merck Analyst]

Centerview has, I mean, they're generally on most of these on the sell side. And Jefferies has, has been doing a lot more on the sell side too.

[Paul]

In the boutiques or like we used to call them boutiques, but in M and A, they're not really boutiques anymore, are they?

[Merck Analyst]

Exactly.

[Paul]

They think they've really made a commitment during real PJT and all those guys. Is there any regulatory risk when these health care deals get done? Or is it just a big Merc buying a little biotech thing and nobody really cares? How's that work?

[Merck Analyst]

Not as much. I mean, the last time we saw something kind of splashy get attention was when Amgen tried to buy Horizon and the FTC tried to block that deal. They ended up settling and the deal went through anyway. But in, in something like this where, you know, turns, this drug isn't even approved and its biggest competitor is owned by Novartis. You know, the competing a kind of compound, it seems unlikely.

[Scarlett]

So given what Merck has done and the fact that investors like the deals that it's made so far, I'm guessing we're going to expect to see more acquisitions from Merck in the coming weeks and months.

[Merck Analyst]

That's probably. Yeah, definitely.

[Scarlett]

Stay with us. More from Bloomberg Intelligence coming up after this.

[IBM Representative]

So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off. Deep in the work that moves the business. Let's create smarter business.

[Adobe Representative / Bloomberg Host]

IBM, you need to make a huge presentation in an hour. Adobe Acrobat uses AI to take all your documents and generate a presentation with a single click. Build slides quickly and streamline the process. Need a last minute pitch deck? Do that with Acrobat. Need to level up your presentation design. Do that with acrobat. You have 30 plus documents that need to be simplified into a proposal. Do that. Do that. Do that with Acrobat. Learn [e-mail] do that with Acrobat.

[Paul]

Support for the show comes from public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades. And others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto wealth without all the bugs or the confetti. Retirement accounts. Yep. High yield cash. Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market and paid for by Public Holdings Brokerage Services by Public Investing Member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor Crypto Services by ZeroHash. All investing involves risk of loss. See complete disclosures at public.com/disclosures.

[Adobe Representative / Bloomberg Host]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Paul]

Let's talk a little media here. Interesting story on the Bloomberg Terminal. Walt Disney Chief executive officer Josh D' Amaro has seen $2 billion technology bets falter, one of them unraveling entirely just days into his new job. Let's see what this means for the Walt Disney company. We got some other media stuff to talk about and we turn to Geetha Ranganathan. She is the media analyst for Bloomberg Intelligence. Hey Geetha, there's news out regarding Disney. Can you talk to us about a couple of these deals that seemingly are falling apart here?

[Geetha Ranganathan]

Yeah, this is a big deal, Paul. I mean, you know, Josh tomorrow obviously took the helm at Disney just a week ago and we are seeing this OpenAI Sora that Disney had kind of inked about three months ago. And basically the deal here was that this would be a three year licensing agreement where Disney would make a $1 billion equity investment into OpenAI and Sora would be allowed to use about 200 of Disney's characters to kind of create all of these short form videos which users could basically engage with on the Disney platform. This was kind of, I think Disney's way of playing offense defense with the whole rise in AI and kind of if you beat them, join them. Kind of really joining the bandwagon and saying, yes, we have a stake here with AI. So this falling apart definitely kind of leaves Disney definitely they were blindsided. They've been kind of trying to do different things in terms of really monetizing their ip, creating like this really this, this franchise fandom, if you will. Right. Really digging deep into it. That's what Josh D' Amaro has spoken both with this OpenAI deal as well as the Epic Games deal. That was a deal that actually Josh d' Amaro had of brokered. And just over the past few days, we've kind of seen, you know, a lot of news with Epic Games too. And so this really kind of now raises the stakes for them to kind of find out, you know, who else they can partner with to kind of deepen that. That fan engagement.

[Scarlett]

Okay, so he's got his work cut out for him. Certainly makes for a busy first week on the job. Geeta, we also want to talk to you about what's going on with Netflix. It's bolstering its live streaming. Live streaming, mega events. There was the BTS Comeback show, which I guess the live show didn't attract as many people as I thought, you know, actually attending the event. But the actual streaming of it was a monster hit. Wasn't.

[Geetha Ranganathan]

Was a monster hit. Scarlet, you're absolutely right. Over 18 million viewers worldwide. And this is again, we come back to the basic buzzword in media right now, which is engagement. What are all the different ways that you can build engagement? And you know, again, the OpenAI Sora deal with Disney was again, a way for Disney to build that engagement with their fans. Netflix kind of chasing all of types of content, you know, whether it is sports, whether it is this live event, the BTS Comeback Tour, again trying to deepen that engagement, trying to deepen their connection with fans as you have more and more sources of, you know, video basically competing for time spent. Again, huge. You're absolutely right. Huge event for Netflix. Really shows how they can kind of go after all of these different genres and build that, that scale, build that appointment television kind of buz and, you know, really get a good ROI on their investment there. By the way, they're increasing their content spending for events like this this year by $2 billion. That's a pretty sizable step up. So we're looking at them, you know, spending about $20 billion, Scarlett, this year on content.

[Paul]

Wow. All right, Geetha, it's opening day for my New York Yankees. They'll be opening up out in San Francisco this evening, 8:00pm Eastern. First pitch. I'm not going.

[Scarlett]

That'll be a good game.

[Paul]

Yep. I'm not going to to ESPN to watch this. I'm not even going to the Yankees own network. Yes. I'm going to Netflix to watch this game tonight.

[Scarlett]

Where are we in this world?

[Paul]

Where are we in this world? Talk to us about. You know, Netflix has said we're never getting into sports. Well, that's gone by the wayside. What do you think their sports strategy is?

[Geetha Ranganathan]

So. Their sports strategy, Paul? I mean, this is a really important point. Their sports strategy has been very, very calculated, very, very measured. At a time when we've seen other media companies like, you know, Disney and Amazon and YouTube kind of spend billion billions of dollars on sports rights, Netflix has taken a far more cautious approach, but an approach that has really served them well. So they started out with this $500 million deal for, you know, WWE content. They went after some NFL Christmas Day games, but this World Baseball Classic was actually their first big foray into world live sports, you know, an event in Japan. And it has really served them well. So you just look at the ROI on that event. They spent about $100 million for, you know, 47 games, and they got something like 31 million global viewers. Huge, huge viewing record for them. And again, just shows how, you know, by making really calculated bets, again, you can kind of build that buzz and for them, really build that critical engagement metric.

[Scarlett]

Yeah, that is pretty incredible. And I guess part of it is also to build up the Netflix brand outside of the US where sports rights have gotten to the point where it's prohibitive, but you look at the rest of the world and it's a little bit more doable.

[Geetha Ranganathan]

Absolutely. So if you're just looking this year at sports rights, Scarlet companies are spending about over $40 billion just this year across the board for US sports rights. And we're only looking at that going up further and further. As you know, the NFL looks to hike its fees. The NBA looks to hike its fees. So, yes, they do. They are making this really smart move by diversifying, going across the board, and it's paying off. That's what's so great about it.

[Paul]

To me, the defining moment will be when Netflix takes a Sunday package from the NFL. The NFL. And Geetha, I think that's. That day is coming. What do you think?

[Geetha Ranganathan]

I also think it is coming. So they've already kind of dabbled with that, Paul. You know, they've done the Christmas Day games again. They had some of the highest viewerships ever for the Christmas Day games. Something like 45 million viewers.

[Paul]

Yeah.

[Geetha Ranganathan]

Yeah. Anyway, so I also think that they are definitely, you know, probably going to go for a digital package. I mean, I mean, the NFL wants to go there. They know that majority of the viewership is migrating to streaming, and it would be stupid for them not to kind of sell a digital package. So I definitely think it's going to happen sooner, rather than later.

[Scarlett]

Stay with us. More from Bloomberg Intelligence coming up after this.

[IBM Representative]

So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions. Not noise proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Lets create smarter business.

[Adobe Representative / Bloomberg Host]

IBM Everyone has been there. Your team's feedback is scattered across emails, chats and sticky notes. It's a mess, but PDF spaces in Adobe Acrobat gives you one collaborative workspace to streamline every file and comment. So if you need six departments to finally agree on a proposal, do that with Acrobat. Need to turn a mountain of feedback into one plan of action. Do that with Acrobat. Want to stop searching for files and finally get everyone on the same page. Do that, do that, do that with Acrobat. Learn [e-mail] do that with Acrobat Support

[Paul]

for the show comes from Public Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep. High yield cash? Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing member Finra SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash all investing involves risk of loss. See complete [e-mail] disclosures

[Adobe Representative / Bloomberg Host]

you're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Paul]

Chewy forecasted sales for the year that beat analysts expectations. Stocks are pretty big, up 10 12% here today. That's good news here. Let's break it down with the Ana Rosarito Pena, Consumer Staples Analyst at Bloomberg Intelligence. She joins us live here in our Bloomberg Interactive Broker Studio. So Chewy, what did you learn on the earnings call?

[Ana Rosarito Pena]

Yeah, they have been doing pretty well both on the top line and profitability. There's no complaints from investors or at least they shouldn't be for this quarter.

[Paul]

I'm just looking at the stock here. The stock's up again about 12% today, but it is down 20% year to date and down about 20% over the trailing 12 months. What's the investment call here for Chewy? What are the growth drivers top line for this company?

[Ana Rosarito Pena]

Yes, it's their ability to grab consumers. Once you enter, I guess the Chewy environment, it's difficult for you to leave. They have about 80, 84% of their revenue comes from auto ship. So it's pretty much you set it up, it's subscription based pretty much. So you set it up and every so often you get your goodies at your doorstep.

[Paul]

Did they compete against the Amazons of the world, the Walmarts of the world, the pets.com?

[Ana Rosarito Pena]

they do, yes. So you know, they have about a third of the E Commerce, you know, market share in the United States. They compete with Amazon. It has around the same.

[Paul]

Well, there are not many companies out there that can say they have a third of a market where you compete against an Amazon and a Walmart and things like that.

[Ana Rosarito Pena]

Exactly. And the thing with Chewy is that they have expanded beyond merchandise, beyond food. Now you can get your, you know, your pharmacy, you can get, you know, your vet needs. They actually have vet locations. 18 vet locations. They're starting to do that. They see that that engages customers more. So that is, you know, an upside for them.

[Paul]

So how is that business? I have no idea because it's all kinds of pet food in general, then stuff like toys and all that kind of stuff. What's the tariff situation for those, that kind of stuff.

[Ana Rosarito Pena]

So it seems that they have been able to navigate that. Obviously, you know, some of the pressure they pass that through consumers. They're seeing a net sales per active consumer which is kind of like, you know, their pricing grow in the low single digits. So they are comfortable with that. You know, the scale and the price and the product mix that they have allows them to kind of like get the hit on the margin without, you know, showing it to us.

[Paul]

This was a obviously a Covid stock that just like, like a peloton a little bit. But this has obviously done much better post. How do people view this? Is this a kind of a consumer staple kind of name? How do you think about that?

[Ana Rosarito Pena]

I would say it's It's a, it's a, you know, it's a retailer. You know, the way that I will see it, you know, going back to the, you know, pandemic and Covid, they actually had, obviously this was a very favorite stock because everybody was at home. And then, you know, the cohorts that were acquired during the pandemic, they kind of reduced and that was kind of like a story of 2024. It was difficult for them to grow consumers because, you know, the cohort was so massive that it was pretty much the, you know, they couldn't keep up with, you know, they couldn't keep a lot of those consumers. But that has turned around and they seeing significant growth. We actually expect that most of the growth in sales is probably going to come from active consumers rather than pricing.

[Paul]

I mean I look at, you know, I know nothing about this business, but I look at the first place I look for it when I look at a pnl. Is that free cash flow? Great free cash flow here. I mean got $700 million in for calendar year 26, maybe 850 projected for calendar year 27. What do they do with the free cash flow?

[Ana Rosarito Pena]

They invested in the business. They're growing scale. Obviously they're opening vets debts. That is something that they haven't pretty much experienced. They're actually investing outside of the United States. They're trying to get into Canada. They're giving some of that back in share repurchases. But we don't necessarily expect it to be significant in 2026.

[Paul]

What's the margin analysis you guys do as analysts and investors? Where's the leverage in the income statement to maybe improve margins? Because as a retailer, tight margins, what can they do really?

[Ana Rosarito Pena]

I mean there are actually it seems that, you know, they're working a lot with leverage, operating leverage, you know, in their distribution centers. They seem to be, you know, they are automated. So that has been building scale, you know, trying to get consumers to buy in more premium brands. They have private label which they wanted to grow it to like the mid teens. That is going to add about 500 basis points to gross margin and you know, other non merchandise revenue. So that is usually higher profit than merchandise.

[Paul]

Stay with us. More from Bloomberg Intelligence coming up after this.

[IBM Representative]

So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions. Not noise proof of how we can help companies get smarter by putting AI where it actually pays off. Deep in the work that moves the business. Let's create smarter business.

[Adobe Representative / Bloomberg Host]

IBM you need to make a huge presentation in an hour. Adobe Acrobat uses AI to take all your documents and generate a presentation with a single click. Build slides quickly and streamline the process. Need a last minute pitch deck? Do that with Acrobat. Need to level up your presentation design? Do that with acrobat. You have 30 plus documents that need to be simplified into a proposal. Do that, do that, do that with Acrobat. Learn [e-mail] Dothatwith Acrobat support for the

[Paul]

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[Adobe Representative / Bloomberg Host]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Scarlett]

All right, let's check in with Justin Pride in right now. He's Vice President and Consulting Services at Revenue Management Solutions and he's also an attendee at the Bloomberg Intelligence Farm, Food and Fuel conference where they are talking about rising costs, especially fertilizer costs, what that means for agriculture and what that means down the line for food operators, restaurant trends. Justin, thank you so much for joining us. Tell me about what you've discussed at this conference and how you think about what that that means for restaurant menus and the restaurant industry.

[Justin Pride]

Paul Scarlett, thank you so much for having me. And again, this conference has been wonderful about talking about some of those input pieces that's really fundamental to restaurants and what their costs they're seeing on that bottom line, when it comes to the products on their menu. At Revenue Management Solutions, we're always working to keep our clients ahead of the curve and be proactive when it comes to those cost inputs that they can meet the guest where they're at when it comes to what items are on the menu, their prices, and all these pieces. And a lot of the topics that have been really important at this conference is what these, what the downstream effects are going to or what the initial effects here are going to cause for those menus when it comes to costs and when it comes to operators are going to be reacting to in that food and beverage industry.

[Paul]

All right, here's the term I dislike, slash, hate the most in the food business over the last six months, and that is protein. When did they start using protein? As opposed to just saying, hey, do you want chicken on your salad?

[Scarlett]

It sounds better.

[Paul]

I don't know. So talk to us about that. I mean, Justin, protein. Tell us why it's become an issue or a topic within the restaurant and food industry and how we should think about it.

[Justin Pride]

Paul, I hear you there and it's so fun. As a restaurateur originally myself, just calling it protein and going there just doesn't sound as good. Right. It's not something that you, you think about when you're on the menu and think about, hey, I really feel like a protein section today.

[Paul]

Yes.

[Justin Pride]

But really it's become a major piece and it's always been a major piece of menus. I mean, we see right now roughly about 85% just of menu items making up that, just the core chicken, beef, pork type of items. So it's always been there. But the real focus on it right now is as you're starting to see a lot of trends focus on protein rich or a lot of protein within the diet. These are becoming even more important to consumers. Some of the generational shift, too, you're starting to see is that it's even more important to the millennials who are in the market now and really becoming some of the chief spenders from now and moving forward, really looking for protein as a deciding factor in how they're choosing restaurants and how they're choosing their items. Also just some trends with GOP1. And what you're seeing in dietary trends is really focused back on protein being a core of that decision process for guests on menus. I think a recent survey we saw again three top reasons. It's good for my health, it's satisfying, and it's something that I need as part of my active lifestyle. And that just keeps increasing as we ask guests out there for menus and just what we're seeing as items come to menus.

[Scarlett]

Justin, I want to ask you about some trendy food that has become like kind of the thing that everyone wants. It's certainly showing up all over social media, whether it's Matcha out of Japan or Asia overall. UBE out of the Philippines, Dubai chocolate. That's a big thing.

[Paul]

You're way ahead of me on this.

[Scarlett]

Well, I mean this is what's all over Instagram and these things photograph really well and they also lead to increased demand from consumers. And restaurants are kind of meeting this demand by incorporating it into their menus. Is this something that restaurants do with an eye to like just do it for a couple of weeks before going back to their normal menu, or is it something that they incorporate permanently?

[Justin Pride]

Well, I think you're seeing more and more of those trendy types of pieces to maybe if you want to call them trendy, but they're also following a lot of that global taste and that unique taste piece to cause buzz around items and buzz around the menu to be able to bring folks in again. Right now as you're starting to see, affordability is a total thing for guest visits and transactions being more of a fight for share as guests are coming in, not necessarily maybe new occasions utilizing what's there, the what's really current, what's good, those short term promotions, the social media aspects and the photographing let the camera eat first type of principle of being able to take seafood that's really exciting. You're seeing that get leveraged a lot as global cuisine is. Some of those trends are really there and again resonating with millennials. But again across all folks as whether it's mainstay menus, there's a real balance. I think you're seeing more of that short term type of menu options come in promotions and then whether that has staying power or how that balances with what you might consider the core of the menu, the things that you're known for, what you come in for. So it's that balance of getting the folks coming in for excitement and for the things that they know and always love.

[Adobe Representative / Bloomberg Host]

This is the Bloomberg Intelligence podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 10am to noon Eastern on Bloomberg, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.

[Paul]

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