Loading summary
Transcript130 lines
- [00:00]
A
Hey, it's PVSB with the CPG Guys. You know, we talk a lot about this on the show. For CPG marketers today, it's not just about reaching consumers. It's about connecting with them meaningfully at every touch point. Here's the reality. Shopping isn't just an event anymore. It's woven into daily life. And with consumers spending over 90 minutes streaming content, daily entertainment has become central to the shopping journey. Amazon ads unifies commerce, entertainment and open Internet to reach 86% of US households, turning trillions of consumer signals into powerful results both on and beyond Amazon. So visit advertising.Amazon.com to learn more.
- [00:49]
B
I'm Nick Modi from RBC Capital Markets, managing director and head of the consumer team. You're listening to the CPG Guys.
- [00:59]
A
Hello and welcome to the CPG Guys podcast. Set at the intersection of commerce and tech. Your hosts, Sree Rajagopelan and Peter V. S Bond explore how brands and retailers engage consumers in a digitally driven world. And now, here are the CPG Guys. Hello and welcome to the CPG Guys podcast. I am your jolly host, pvsb. And when I'm not doing that, I lead industry and client engagement at Flywheel, the commerce acceleration division of Omnicom, which is now the world's largest advertising holding company. Wow, that's a lot to say. It is our year end special and I can't do this without my ride or die. Who's my best friend? Patriarch of the Raj family media empire, parent to Rhea and Lara Raj, a husband to Kavita, who runs the Lights Camera conversation podcast, and the only male resident of a household with seven other females. Of course, I'm talking about Paparaj himself. The man known as Sri Sri. How you doing, man? You ready for your trip over to India and to the Maldives?
- [02:08]
B
What's going on?
- [02:08]
C
Leaving in less than 24 hours. I don't have a bag packed. I got too much going on between CPG Guys. Think blue Year end stuff. You know, everyone wants to pay us early now. Suddenly everybody decided they want to pay us with this year's budget.
- [02:21]
A
Yeah, I know, I know. Money's coming our way. It's a high grade problem, right?
- [02:24]
C
I have 12 hours to get a lot accomplished in between. I decided that today is the day to service the three ACs in the house. Don't ask me why.
- [02:32]
A
What are you thinking, Sree? And don't forget, now you have to pack your CPG Guys branded suitcase for Las Vegas because you're literally coming off the plane and going to another gate in lax. On your trip back and heading right.
- [02:46]
C
Out to cesar, I have 2 hours, 47 minutes.
- [02:49]
A
I am going to change terminals. I'm going to when I land in LA on Friday for my vacation, I'm going to stop by your house, pick up the suitcase. If the torrential flooding has caused a backup in your drain, I'm going to snake your outdoor drains and then I'm going to bring your luggage back with me to Connecticut and take it to Las Vegas. So you want to know the inner workings of the CPG guys. That's the glamorous lifestyle we live. That's right. Staking each other's drains and carrying luggage for each other. That's how we roll.
- [03:18]
C
Lifestyles of the rich and famous indeed. But I want to use Paparaj and I want to call out our guest today for being gracious enough to come see my older daughter live in New York City. We'll ask him about how that experience was. He bought his entire family, which was pretty awesome.
- [03:33]
A
I was there and it was great to see them. It was so much fun to see Rhea in concert after having seen Lara and Cat's Eye. But Rhea, it's our year end summary and who better to look at what happened in 2025. One of our favorite guests who we met with at the beginning of the year at Cagney and had a lot of predictions about where this industry was going. So it'll be great to check in with him.
- [04:00]
C
We've met him a long time ago.
- [04:02]
A
Well, no, no, I meant we met with, we met with him at Seattle. Oh, yes.
- [04:05]
C
Yeah, we're hoping with him again in 2026.
- [04:08]
A
But before, before I get to him, I'll just say to everybody, if you're not following us on your favorite podcast platform, please do Apple, Spotify, whatever. And if you're, while you're there, make sure you give us a rating. It helps make our podcast more findable by industry contemporaries. And we look forward to seeing you. We've got a heck of a first quarter. We're at ces, nrf, fmi, every acronym we can come up with. We're there. We're probably there. We'll be at Shop Talk this year. We're going out to socom Live in Venice Beach. We're going to be at E Tail Palm Springs. I mean, I don't know where we are. I was looking at my Calendar street and I was xing out the dates that I'm away. Do you know there are more X'd out dates in January, in February than there are Non exed out dates. We are traveling bandits.
- [04:54]
C
All I'm trying to do is pack a bag and get out in the next 15, 18 hours. I can't even think.
- [04:59]
B
Good luck.
- [05:00]
A
All right, so let's get to it. Our guest today, familiar to this podcast, he, he leads capital markets analysts, analysts at, at RBC Capital. Why I'm wearing my, my Team Canada hockey jersey today. Those of you who don't know, RBC stands for Royal bank of Canada. It's one of the largest banks in the world. And he is one of the foremost analysts in the consumer staples area. He needs no introduction, but I'll still do it. Anyhow, please join SRI and me in welcoming our dear friend Nick Modi. Nick, how you doing, man?
- [05:34]
B
I am excellent. I am excellent. It was a tough year. You know, we, we try to stay on top of things and you know, 20, 26, it's going to be, I think, equally as tough. But I think there's a lot going on, so a lot to talk about.
- [05:47]
A
Well, I know that we're the only thing standing between you and visiting your parents down in Florida, so we're going to make efficient use of your time. So thank you for joining us.
- [05:56]
C
You make efficient use of the time. I'm going to dig my heels in. He started with, it's been a tough year. And you think we can just walk away from that?
- [06:03]
A
No, no, no. We're going to get, I want to get to that. So sure. So we spoke back in February. We were down in Orlando at Cagney, the Consumer Analyst Group in New York conference. And you had some pretty blunt words. You wrote some statements. You were talking about the fact that so many of the staple companies had not done a reset. They were facing incredible volume pressures. They'd taken price dramatically over the pandemic and they were still chasing the quarterly short term EBITDA and dividend numbers. And the dividend, the damage that they were doing, according to you in terms of their ability to invest in advertising innovation was not sustainable. So I guess my first question is looking back at what you recommended that they do at Cagny, how's that going for most of the companies you're tracking?
- [06:50]
B
More, I think started to follow that line of thinking. Right. Numbers did come down since Cagny quite dramatically for some, not all. Like I'll, I'll just mention General Mills was one, one of the companies that did do that and we're actually starting to see now a recovery in their volume as a result. Right. Look, this is not rocket science. This is just about making, I think, the right decision for the long term. And sometimes I think that obviously there's a lot of pressure on many of these management teams to deliver consistently. But when we're in these kind of volatile times, you kind of have to change the playbook a little bit. And that requires courage, right? That requires taking bold steps and actions. And some companies have done it, others have not. They're going to have to pay the Piper in 2026. And so, you know, we'll just have to see. But I think what we've seen so far is that those that have made those tough choices are starting to see the benefits from a demand standpoint.
- [07:40]
A
Yeah, Nick, I would agree with you. I would say that you mentioned General Mills. I think they made the change. There's also some indication that their stock price may be still a little overvalued. I saw one of your, the other analysts give them a sell rating of recent. Is it. Why would you see that if they made that decision that they're going to take a step back, they're going to reset what their expectations are and they can invest in things if they're still not completely able to turn around, convince the analyst community that, that, that they're on a trajectory for growth. What, what, what's the alternative? I mean, are some of these companies, I guess, ripe for the things that we're seeing in the industry, Kraft Heinz splitting up, Are they going to be. Are they going to. You know, I look at General Mills, right, as an example because they've been, they've been selling off some brands over the last couple of years. They sold Hamburger Helper to, to Eagle Family. They divested their yogurt business to Lactalis. I mean, are, are, are there, are some of them just big enough and challenged enough that they're pretty much just waiting for someone to buy them out and break them up? What's going on here?
- [08:48]
B
Yeah, I don't think that, like, General Mills has basically been doing it to themselves. When you think about some of these divestitures you just mentioned, Peter, and then acquiring, you know, things in the pet space, right? So, like, they've kind of portfolio reshaped themselves. So I don't think they need someone externally to come in and do that. Look, I, I think this whole, like, separating and like, all this, all this stuff, like, I don't know, you know, I think these, these businesses can grow without that happening. But you, again, you need the funds to do it, right? And so what they did is they said, we're cutting our Earnings, they cut price, which is exactly what they needed to do. It's what the entire packaged food industry needs to do. Okay. We're seeing the volume benefits. I mean, when you see the Pillsbury business start growing, you know, you got to take, take a step back and start questioning the prevailing logic that you can't grow some of these brands. What do they do? They got the price points, right? Under price cliffs, they improve the product quality and efficacy. Right. Bakes higher. And they turned the Pillsbury Doughboy into an influencer. That's the trifecta right there. Right. And so there's a formula here, but these companies just have to go find it and they have to find the talent to go execute it. And so that's at least the way I see it. Right.
- [09:54]
C
Nick, I gotta ask you a question. Since you actually referred to the Piper back there. Was that a reference to the famous Led Zeppelin song? And it's whispered that soon if we all call the tune, then the Piper will lead us to reason and a new day will down for those who stand long. So I do want to ask you, when you kind of put out that statement earlier in the year about bravery and courage and that report that you'd put out to CEOs, how many, how many do you think? I'm not asking for an exact number here, but order of magnitude, do you think the industry understood what you were emphasizing in terms of resetting?
- [10:26]
B
I do, I do. I think it took, took maybe 12 months longer than it should have. Right. Because you know, we were seeing pockets of weakness emerge, you know, going back actually 18 months to two years. And the thing is like, we're living in two economies, right? We're living in this very bifurcated K shaped world where if you look at all the economic data, everything is like fine. But it's a very small percentage of, of consumers and individuals that are driving that growth. Whereas you have the CPG industry which is over indexed to lower and middle income consumers. And because you're buying these products so frequently, the price sensitivities are higher. So the affordability issue is a lot greater than you would find in other parts of the economy. Like taking a vacation. Right. And so I do think that, you know, they all understand the situation. Numbers have come down pretty broadly. I don't think they've come down enough for certain companies that I think will happen over the next six to 12 months. But the world is changing around them. So like these are moving targets. And so even though if you reset, you might be resetting to the realities of 2025, not the realities of 2026, where now all of a sudden, if you're defaulting on your student loan, you're going to have money taken out of your PayCheck as of January 7, or healthcare premiums are gonna go up if we don't get some Obamacare, whatever, Affordable act extended subsidies, the ICE situation is gonna continue to rage on in different parts of the country. And so we have all this stuff going on. And so the goalposts are moving. And so then you're gonna have to ask yourself the question, in 2026, did we cut enough?
- [11:58]
A
So, Nick.
- [11:59]
C
So hold on, hold on, Peter, I want to jump into, did we cut enough? Is it purely eps, cut the eps, cut the forecast, or are you talking more in term of div. Of don't hold on to parts of the portfolio that don't make sense in today's day and age?
- [12:14]
B
Yeah, I think there's a little bit of that. I would argue that the global economy is becoming much more local, right? So think about it. All these small brands that these companies are selling, is there, is there a role for them to play in this more what I call economy, right? This global local, where people want to buy local, right? Just like this is the embodiment of craft beer, but then the craft brewers mistook zip code loyalty for brand equity, right? But the reality is people want to buy things that are local all over the world. And these companies have a lot of brands that they're not focused on that if they maybe take different business models, maybe partnering with more influencers, with some of these brands at the local level, there might be a place for them, right? So this whole, like, simplification of the portfolio may actually be counterproductive if you really think about where the world is going to, right? So answer on the portfolio construction. I do think more needs to be done on bifurcating price points. I don't think that the industry is well positioned from that standpoint because the rich are getting richer, the poor are getting poorer, and I think portfolio choices are going to have to be bifurcated, right? Really premium stuff with good margins, with a lot of functional benefits. And at the very low end, you know, your bare basic stuff that you can just because you don't want to lose household penetration. We saw what happened during post Covid when you start losing household penetration after you gained it. Boy, that's painful, right? So, and then the last piece of this sree about earnings, right? Like, why am I saying cut these stocks and this is kind of. This is the angle I'm coming from. Value creation is built off of consistency, not the magnitude of growth. No investor, big institutional investor is looking to buy any of these CPG stocks for growth. If they want growth, they can buy Tesla or Nvidia or something other than some other industry. What they really want is consistency, insurance, solid dividend growth, and not have to worry they can go to bed at night knowing grandma's money is safe. And I think that the problem with this industry, the last, I would call it five plus years, has been the lack of consistency because they're not investing in the capabilities and because they're not keeping their price points sharp. That's why I keep on hearkening back to you must bring your numbers down so you can create that consistency. Right. Because the whole value creation formula has changed, I believe. Right. You got to chase consistency. And allocating capital for consistency is very different than allocating capital for growth.
- [14:37]
A
Brilliant. So, Nick, the reason people listen to this podcast is they love when we spill the tea. Let. Let's. Let's get it.
- [14:44]
C
Whoa, whoa, whoa, whoa. The reason they listen to this podcast is because we have the perfect podcast faces.
- [14:50]
A
Well, that is true. That is true. We, we have faces built for podcasting. But let's, let's talk hookups and breakups, because that's what, that's what we're all interested in. So a couple of years ago, we had Kellogg's broke in, broke up. They went and turned to W.K. kellogg and then Kellanova, and then lo and behold, this year, they're hooking up with no people. Suddenly you got Mars acquiring Kellanova and Ferrero buys W.K. kellogg. At the same time, Kraft, Heinz, they got together, they're breaking up. But the one I want to hear from you on is Kimberly Clark's announcement that they're looking to acquire. They're looking to acquire a Ken view. Right. That's a really interesting one. I have my thoughts on why they're doing it. I would love to hear from you thoughts on why a paper manufacturer would start buying, you know, OTC and personal care products.
- [15:42]
B
Yeah.
- [15:42]
A
What's the deal there?
- [15:43]
B
Yeah, so this is. We actually wrote that this would be a potential combination earlier this year, I think, around May. And the reason why we. We felt like this would be a probability is because if you think about where the world is going, and I got to give Mike, Mike sue credit. I mean, he, you know, the CEO of Kimberly Clark, I think he's, he's, he's got vision like I will, I will, you know, I will give him that, that do. I mean, he's got some real vision. And the vision is the population is aging. We're all looking to be more proactive about our health care. We might look at Kimberly Clark and they say they sell paper products, but really they are part of the health care ecosystem. Right. When you think about diapers or when you think about feminine care products, or when you think about even incontinence products. Right. And so to bring in, can you skin care. Well, guess what, last time I checked, diapers touch the skin quite a bit. Right. So do incontinence products. Right. And so, you know, the reality for me is I think they're creating a consumer health platform of the future. Right. And you know, when you think about innovation, like guys, think about, think about the disruptive innovation. If you can take science and turn a tampon into a uterine diagnostic device for women that they can test their uterine health every month around their period. This is game changing stuff and this is not stuff that these guys are not aware of. Right. And so I just think that there's a lot of interesting disruptive innovation that can solve problems and that's really what innovation is meant to be. It's not a new flavor, it's solving problems. And we got a lot of problems when we come to personal care and health.
- [17:14]
C
Right.
- [17:15]
A
Nick, does this, does this make a combination?
- [17:18]
C
The CPG guys ain't one.
- [17:20]
A
Yeah. Does this make them more of a formidable competitor to a certain Cincinnati, Ohio based company that has a closer match in terms of portfolio coverage now?
- [17:33]
B
Yeah, I mean, I think obviously there's going to be some disruptive disruption in the interim. Right. I don't think we can be naive and not acknowledge that. But yes, I think long term. Right. Again, guys, this is the whole thing, this industry, CPG in general. I think we calculated there are like four companies that have actually created consistent returns over a 20, 25 year period above their cost of capital. That's about 7% ex dividends. Okay. Four companies, that's 10% of my coverage, effectively. Right. And so this is where bold and courageous decisions need to be made. And I think Kimberly Clark and 10 View is one of those bold, courageous decisions. Long term. I think, yes, I think they will be a much more formidable competitor to P and G. And quite frankly, I think it'll be a great thing for both because they're both very innovation minded. And so I think it's going to be able to create a lot of markets together. I Mean, there's a massive high end diaper market in China, but there's not one here in the us. Why? Proctor has a technology, but they're like, why would we invest and put all these high price point products into the market? If our competition is not going to follow, then we have these massive price gaps. Right. And so now you have a very innovation minded Kimberly, and they're going to play ball in that market and all of a sudden we're going to start seeing this market develop and it's going to create a lot of new revenue.
- [18:47]
C
So I want to go to the top of this episode when you started by saying it's been a tough year. Tell us why it's been a tough year.
- [18:54]
B
Well, I think first of all, there's like 40% of my coverage that's down over 30%. I call it the 30% club.
- [19:02]
C
And when you say down, you're purely referring to the end of day stock price today, Yesterday.
- [19:07]
B
Yeah, year to date. Right, Exactly. So I've covered this industry 25 years. I mean that's, that's a long time. I've never seen it this bad. Like we've, we've had tough times in this industry, right? Nothing has been this bad, right, from a stock price point.
- [19:21]
A
Not.
- [19:22]
C
Nick, what are we not asking you that we shared on this podcast. I mean these are two practitioners here in front of you that come from deep in retail and cpg, which makes this podcast very unique compared to two interviewers having a conversation with you. What are we missing here? The number you gave is no joke. Like you said. You said decades. You haven't seen this.
- [19:40]
B
Yeah, listen, the. We need to change the way business models operate. Processes work. I mean this industry needs to change. And this is why like I keep on going back to the earnings, right? Stop chasing the numbers until you are future fit. That's the issue here, is that these are, I call it hamster on a wheel, right? They're just running around trying to hit these quarterly numbers and then the issues that are presented to them they can't really address in a structural, sustainable way. And so like, let me just take a few examples, right? Supply chain, okay? We still have, you know, legacy supply chains, right? Some companies have overcapacity, others in faster growing markets might have, you know, not enough capacity. Well, there's gotta be an opportunity to co op capacity across the industry, right? I know, I know there's certain retailers that are, that are thinking about a lot of that, right? And so like again, business models are changing and adjusting And I don't know if these companies are keeping up at that pace. Right. AI, another great thing. It's very basic what's being used. Like we were talking about agentic AI at the beginning of the year, right? I was calling the digital butler. Now we're starting to hear about it because all of a sudden all the retailers are starting to implement agentic AI into their processes. Now everyone is scrambling. This is my point, is let's stop scrambling. Let's start being ahead, Right? If I can see it, of course the companies I follow are much smarter than me. They must see it. I'm just an analyst, right? So that's my point, is that if you're aware that things are shifting, then you need to free up the resources to shift accordingly. But that's not what's happening and that's what's causing this problem. This problem, by the way, that we're having this year on the worst year I've seen in stock price performance didn't start this year, it started 10 years ago.
- [21:27]
A
Nick, you talk about the introduction of magenta commerce and I look at the retail marketplaces that are out there, they're trying to get a handle on it. Of course, they're all to a large degree constrained by their typical margins. It's been said for years that grocery operates on a net 2% margin. I know from Sri, knows from his time that if you were going to put in new fixtures in a physical shelf, you would allocate the cost of that to all your vendors and that's how you would pay for it. So the question becomes, if you're a manufacturer and you know that your product sells through these marketplaces, what's the recommendation for manufacturers to invest to make sure that their marketplaces have an opportunity to succeed? What do they need to bring to the table to better collaborate with Amazon, better collaborate with Kroger, better collaborate with Walmart, that's going to ensure that their brands succeed because at the same time they're also facing a world where these collaboration partners are also their competitors as they continue to launch more and more premium private label brands that are eating away at their share. What are brands to do in the in this world of big digital commerce and competitive threats from the retailers creating brands?
- [22:42]
B
I'm a simple minded person. Most of the CEOs listening to this podcast will probably agree with you. Okay, product efficacy. It's that simple. It's what these companies do anyway. Innovation. If you have the product that tastes better, smells better, makes you feel better, whatever works better Then you are going to get recommended online and that's going to drive a lot of these engines. Right? Because what's, that's the secret.
- [23:07]
A
That's the secret power, right?
- [23:08]
B
That's the secret power.
- [23:09]
A
It's what drives Amazon. They never talk about it in their analyst calls, but everybody knows that they have one of the richest assets possible in user generated content. There's a lot of trust that's generated when you pull up a product and you see it's got an average 4, 5 star rating and there are 10,000 reviews behind it that like gets you to say I'm good with that.
- [23:30]
C
I want to dive into that comment a little bit more. In the past world Pre Covid 20 years ago, whatever companies were getting rewarded for the partnership with Walmart and the growth, they're bringing vanilla across the US how important is E commerce and Amazon in your equation when you look at a company's potential these days?
- [23:48]
B
Yeah, it's, it's incredibly important because a lot of consumers are migrating there and as we age, right, we're going to be looking for more convenient solutions. And guess what, buying stuff online is pretty convenient, especially if they can get it to you in 30 minutes. Right? I mean think about what's happening now with delivery times. Right? There's like a time elasticity equation now as well, right? Like, oh, I can get it like right away. Right. So it's incredibly important. Now here's the thing. We wrote our Imagine piece which really, you know, what the whole Imagine initiative is really thinking about the next five years. Because we know that a lot of these boards are so busy trying to put out the fires of today that maybe they don't think about what's coming around the corner. So we did the work for them. That's the whole point of the Imagine initiative. And so when you think about the way the world is moving, there's going to be a lot of synthetic things, synthetic shoppers, agentic AI, synthetic materials that go into cost of goods. Right. Synthetic influencers and marketers, which is going to put a real premium on authenticity. Authenticity and real. Right. So the brick and mortar environment we might think is losing luster, but the reality is because of the rise of synthetic, the brick and mortar environment is actually going to become even more important because it's going to be the only place where you can find authenticity and real. Right. And so it's kind of an interesting thing to think about again today versus five years from now. Right? So I think the E commerce and digital lens is incredibly important. But you can't forget about the brick and mortar piece.
- [25:17]
C
You refer to a word imagine. Can you tell us more about what Imagine was about?
- [25:22]
B
Yeah, Imagine. We started the initiative in 2018 and basically it's a six month program that I spearhead at RBC where we use all of our analysts across every industry. The problem with just being in consumer is that we just talk about what's in consumer. But what about what's happening in biotech and what's happening in financial services and what's happening in the industrial world? There's so much lateral perspective that we miss because we're not experts in those areas. So the whole Imagine initiative is meant to have this lateral framework so we can all think off of the same prongs. Right. And so we have a bunch of themes. Right. And so it's a very, it's a holistic framework to understand what the world is going to basically look like in the year 2030 and what kind of capabilities and core competencies companies will need to thrive and survive. So that's the whole kind of picture of Imagine. So we're going on a roadshow in 2026. We'll be presenting to a lot of boards, a lot of management teams in terms of our specific takes on that framework put on the lens of that particular company or that particular category.
- [26:22]
A
Nick, my question is around alignment of goals. And all too often the CEO, the cfo, they're all rewarded based upon the stock price, the earnings per share, the dividend, and too often the rest of the leadership organization is not. They're on a bonus plan. And do you think that that has caused some problems in terms of driving growth? That, that, that, that the entire leadership organization isn't essentially incentivized as directly as, as, as it should, as I guess in a, in a unified way that sometimes they run counter to each other and that causes some disharmony. Like where, where do we stand right now from your perspective in terms of alignment of rewarding systems that ensures that the outcomes you're seeking actually occur.
- [27:14]
C
Yeah, and Nick, I want to piggyback on that one. Right. So the incentive system was created to grow the company. The numbers numeric function. We're in a little bit of a formula now where growth has dried up in the last two and a half odd years. Is there a room or window in your mind as an analyst to reset some of these metrics to include consumer penetration category reshaping focus on share versus the top line and things of that nature, and pure volume versus purely profit? I'm just curious, what's on your mind?
- [27:46]
B
Yeah, I think the answer is to Peter. Yes, I do think that there's some lack of harmony in the incentive structures across the entire organizational structure, right? From the new hires all the way up to the CEO. But then also when you think about the agency partners, the retailers, right? Like there's a bigger ecosystem here that we have to think about. And so, yeah, I do think that there's probably some innovation that can be done in this area, right? To kind of align, realign, reassess the metrics and what success really means. Now, to your point, sree, about like getting back to volume, focus and market share, there were times where that, that was the focus and that led to bad behaviors, right? It led to price cuts and it led to. Because if you're just focused on market share and volume growth, you can get that really easily if you just drop, drop the price, right? So we have to be careful in terms of what metrics we need to craft. But I think household penetration is a, is a great thing. Here's. Here's the other thing, and I think this is part. A bigger part of why I think these companies have struggled. Brand equity is literally getting redefined while we're speaking on this podcast, right? And what I mean by that is cultural relevance is now probably the single biggest thing for brand equity. Cultural relevance. And I think online and digital and TikTok, I mean, Sri, you're. You're sitting in the perfect spot with cat's eye, right? You can see the cultural relevance K pop and what that meant for this group, right? And their popularity and how, you know, being artists of the year on TikTok, I mean, that's massive, right? And so I think, I think that's something that these companies are maybe missing because the old ways of marketing are still being used, right? Whereas the new ways of marketing are actually now driving this cultural relevance, right? I just gave a spoken another podcast for the beer industry and I said, you know, everyone focuses on premise, right? Brands are built on premise. In the bars I go, yes, that's true. But On Premise has now been split into two pieces. The bar, the club. But online, you don't have split the G without both, right? And for those that you don't view, that don't know, split the G is basically what consumers are doing with Guinness in the Guinness glass. They're trying to sip their first sip to get the G, the line of the beer, right in the middle of the G. And Guinness is driving really strong growth in a market that's not growing at all. In fact, a market that is having its worst year in a long time. So you need these both halves to work, right? And I think that's what these companies have to start figuring out. And listen, maybe there needs to be a 24 year old deputy CMO that's part of the management team. Maybe that's a solution, right?
- [30:29]
A
Nick, are you telling me that the CPG guys are best served by having their logo put on, on, on beer glasses in bars and getting people to level up to. Is that, is that what you're telling us?
- [30:40]
B
I'm. I'm thinking maybe split the cpg.
- [30:42]
A
Yeah, split. Split the cpg. Sheree, what do you, what do you think about that? Right, right down the cpg.
- [30:49]
C
Don't split the guys.
- [30:50]
B
No, no guys, just a cpg.
- [30:52]
C
But Nick, Nick, wait, wait, wait, wait, wait.
- [30:53]
A
You go ahead, Peter, you go shree, you do a follow up because I'm taking it in a. I've got a pretty profound.
- [31:00]
C
That put the 35 year old, 25 year old, whatever, you know, cultural CMO. How's that message resonating with leadership? Because you hang out with the CEOs and CFOs when you tell them that, do they even understand what you're saying? Leave alone, take action?
- [31:13]
B
I think, let me tell you why.
- [31:15]
C
I ask you this question. The blueprint for CPG leadership, especially warehouse businesses, which is 80% of everything that's sold in retail, is get an Ivy League MBA. And you stick to the blueprint of the 4Ps from Philip Cutler 5104 in MBA class, 1985 book. Right? So, and then it's really falling into the script. And I've experienced this at some of the world's largest market cap companies. PepsiCo, J&J, Revlon, General Mills, et cetera. When you say this, it's gotta be a little bit of a get under the skin and gotta annoy them because even though they may understand what you're saying, they're probably incapacitated to act and do it for a variety of reasons including the HR policies and what. I'm just curious what happens.
- [31:57]
B
You know, it's. I don't get a lot of pushback. You know, they're like, oh, interesting. You know, obviously we don't see it happen. But you know, the problem is they're like, well why do we need, why do we need, you know, a younger person when we could just do consumer insights, right? And that's the problem, is that the consumer insights are also built off of old legacy systems. I mean, here's an interesting thing, right? Like I'm going to be keynoting the, the cma, the Category Management Association's convention in February. And I think about this, this whole notion of category management, right, which is important, right? But that's also evolving because consumers aren't buying based on categories anymore. They're buying based on occasion and micro occasion. And so the entire kind of operating model of how we make choices on where to allocate capital and where to focus our attention is not the way it's, it's not harmonized with the way consumers actually wake up and behave, right? And so again, this gets down to consumer centricity, right? The companies say they're consumer centric, but really they're stakeholder centric and they need to get consumer centric again. And maybe that requires a really bold rethink of the organizational structure. And I have ideas that we can talk about, but I think if you reorganize the corporate infrastructure to be more consumer centric and that means those frontline people that have very little say in how choices and capital are allocated, maybe they need to become a more important part of the decision making matrix.
- [33:25]
A
Nick, we're as we record this, we're less than 60 days out from Cagney, the Consumer Analyst Group of New York event that happens down in Orlando. If they haven't already started, they're probably going to do it right after the holidays, putting their teams together to figure out what exactly they're going to present in front of this community of analysts and financial professionals. If you're going to give them advice, what should they do? What should they be talking about this year? What should be the theme, what should be the approach? And what should they not do? Like what, what are the yes, and what are the nos in prepping for this big industry event that's coming up?
- [34:02]
B
Okay, here are the nos. I'll start there. Don't get up there and try to put on a good show like everything is great because we know it's not right now. Some companies, you know, they're anomalies like monster, right? Like that's an anomaly, right? But most companies are challenged. I personally, what I would encourage all these companies to think about is getting up in front of all those investors, say, guys, the world has changed, okay? And some of our legacy processes doesn't fit anymore. And so we're making these changes because we recognize that we have to get back to a path of consistency. Like if, and then, and then you can get into the capabilities that you're building to do that. Right. Whether it be, hey, we actually have some breakthrough innovation. These are not just flavor extensions, these are real disruptive innovations. Or hey, we're, we're thinking about portfolio reshaping not only from a brand and category standpoint, but also from a price point standpoint. We recognize we can't just premiumize everything. Right. Like, again, to me, the messages are pretty simple. The question is, will they do it? Because in order to do those, make those messages, you're going to have to acknowledge that you have challenges. And, you know, the whole thing about Cagney is everyone gets up there and like, hey, look, look what we're doing. And you know, like, I just have to be honest. Like, I speak to the audience, I see what they're seeing, I talk to them after. And the messages don't hit Nick, when.
- [35:22]
A
It comes to AI. Hold on. Sri. When it comes to AI specifically, what should they and should they not do at Cagney?
- [35:29]
B
Well, I mean, AI is such a, like a, a weird thing, right? Because now we talk about it like it's some separate thing, but really it's part of the organizational structure and every capability. Right. And so what I would do is, you know, like, how are they using AI to personalize messaging? Or how are they using AI on R& D and creating new molecules, or using synthetic focus groups to get early reads so they can launch products at 1/10 the cost at what they're doing now. Like what we see in Korea, right? Korea. They. In Korea, they can launch a product with $10,000 and it could be successful, right? So, like, what. How are they using these? And also from an agentic commerce standpoint, you know, how are they going to make sure that their brand is in the decision tree? Right. Or the basket?
- [36:22]
C
Peter, should I be moving to Korea and just get sucked into the K pop world? And that's where I belong. $10,000, you can land launch a brand.
- [36:30]
A
You're already paparazzi. They'll embrace you. Sri you, you are you. I'm not. So I'm surprised they haven't already given you a Korean, a South Korean passport.
- [36:40]
C
But. Nick Kim.
- [36:41]
B
Yeah.
- [36:42]
C
60 days away.
- [36:43]
B
Yep.
- [36:43]
C
Tell me just one thing that excites you and you're looking forward to other than, of course, the networking and meeting people.
- [36:50]
B
Well, I always get a kick. I always get a kick out of people fighting over the Hershey and the Mondelez table.
- [36:56]
A
It's the monologue.
- [36:57]
B
These are all the same people that say obesity is a risk. For these companies yet they're fighting. They're fighting to get their okay.
- [37:03]
A
Don't realize they can buy all that stuff on Instacart. Right. They don't need to bring it home on the corporate jet.
- [37:09]
C
Do you know to do, you know, two adults, six feet, two inches or taller who will be standing at that table and making a beeline 20 minutes before the presentation ends?
- [37:20]
A
I want that Toblerone Egg Sri. I want the Tobleroneg.
- [37:24]
C
And this year I'm going to help him make sure he has enough for Nadia.
- [37:27]
B
Nice. But.
- [37:28]
C
But yeah, seriously, what am I looking for thing you're really looking forward to or expecting from the industry?
- [37:34]
B
I really would like to hear a message of get it. We understand. Here's what we're doing. That's it. That's all I want. That's all I've. That's all I've ever wanted is for these amazing companies with these amazing brands to just say, hey, the world is moving and we gotta move. And this is what we're doing, you know, and we're getting ahead of it. We're trying to get ahead of it, right? Because I feel like there's just a lot of reactionary stuff going on.
- [38:00]
A
And what's your advice to the CEOs that are tempted to use fancy industry buzzwords but don't have any ability to actually articulate what that means beyond pronouncing it saw a couple of those last year and it. I don't know about you, I just thought it was so disingenuous and I lost respect for them because they clearly were trying to show off to an audience that I don't think was buying what they were selling.
- [38:30]
B
Well, and again, that gets back to my comment. This exactly what I would tell you. The feedback is, generally speaking, right? Case studies. Just give us case studies. Right? Like the, the, the. The Pillsbury Doe business is a good case study embodying everything that General Mills is trying to do. Right. They're trying to get their value proposition right with the price points. They are modernizing their marketing and they're improving the product quality. Great. That's measurable. We can see it, we can track it. Right. That's what they need to do. They need to provide specific case studies.
- [38:59]
A
We saw a bunch of legacy television ads shown at Cagney last year. Is that what you would recommend that that CEOs showcase in terms of their marketing prowess or do they need to do things that are more contemporary with TikTok shop and social commerce and other things like that or are we going to just see more and more of the traditional. Here's a 30 second ad spot that our al, our agency of record created for us.
- [39:27]
B
Listen, I've been going academy a long time, right? There was a time where like, you know, watching the commercials was like, you know, like the entertainment of Cagney, not so much anymore, right? But here's the thing, there's still a place for that. But what I'd like to understand is what is the insight, the societal insight, the consumer behavior insight that is driving this particular ad? Because then that can be more broadly applied to the rest of the company and the rest of the industry, right? Like I'll give you an example. The reason why having too many SKUs in a particular category is now debilitating versus historically, like you go back 20 years, the choice was great. Right now it's not, it actually, it actually limits 80 jams or whatever the, whatever the category is. And they don't make a decision because they short circuit because of the anxiety, right? So like there's real things going on in the world that I think can be acted upon and then be illustrated through these ads that you're talking about. So I don't think the ads themselves, they don't really bother me. It's like. But you can make it much more of a productive narrative if you provide the insight that's going on behind it. But I would like to see more on the TikTok shop and the social commerce and the reviews and the clinical research and how that's showing up on the FAQ pages and how that's feeding into agentic commerce. Like those are the types of things I think they should talk about.
- [40:47]
C
So Nick, We've spent about 45 minutes now looking at 20, 25 in the past and the actions that have existed in place in this calendar year. Let's look now, go spend the rest of this time on the sp on the future. Right? You guys are the deepest in the numbers as Wall street analysts. If you look at long term patterns and trends here, are you excited? Are you concerned? Do you have advice? What are three or one or two pieces of insights you would give leadership in CPG today? Looking at the, purely at the numbers.
- [41:15]
B
When I look at and this is going to sound crazy because you know, I've been very negative on the space but when I think about the imagine work that we did and I think about the future, I just think there's just so much upside. Honestly, I really like, I just think there's just so much Upside, because think about the fact that in an aging population, right? And so much wealth transfer that's going to happen between generations and the focus on health and wellness and longevity and optimizing as we get older, not managing the decline. Like, I'm just using one little piece. Just think about the new business models and revenue opportunities that are going to emerge from that. Right? Especially as science and technology evolves and we have wearables and we can track and this. And we're going to be able to live better lives. And we're going to pay for it. We're going to pay. We're willing to pay up for it. Right? I mean, I can't tell you how many people are paying 300 bucks a month to be on a GLP1. So they can lose weight and it's not covered by their insurance, but they're just fine doing it, me included. So the thing here is there's just so much opportunity now. Do you have an organization that is equipped to go get it? That's the question.
- [42:18]
C
So let's stay there for a second. Peter tells me he's feeling the greatest wealth transfer coming to him. He's been saying that for a while. He feels rich.
- [42:25]
A
But sree, we need to talk about issues that meme coin because I think that's the way we're going to transfer wealth to our next generation.
- [42:32]
C
Absolutely. It's got to be crypto.
- [42:34]
A
It's a crypto meme coin.
- [42:35]
C
Yeah, we're just kidding here, guys. But, Nick. So greatest transfer of wealth. Definitely. It's been noted now for six months with the big beautiful bill. A lot of that was already put into play. Right. We're all beneficiaries of it. Give me one big insight in the numbers in consumption that either excites you or concerns you.
- [42:53]
B
Well, what excites me is categories that you never thought would ever grow again are growing.
- [42:59]
C
Can you give us some examples?
- [43:00]
B
I'll go back to Pillsbury. Right.
- [43:02]
C
So dough.
- [43:03]
B
Yeah, it's growing.
- [43:04]
C
Baking. Everyday baking.
- [43:05]
B
Yeah. The industry leader decided to lead, got the price points where they needed to be improved the product and modernize the marketing. Okay.
- [43:13]
C
You said something important about Pillsbury, though. Was it all of that or was it all of that with the cultural influencer thing about Pillsbury becoming a person?
- [43:22]
B
I think it was all three that had. All three had to happen at the same time. It's like. Like a perfect storm. Take bush, Bush light or, you know, from an bush. Right. They had a value proposition. It was a cheaper beer relative to the Rest of the category, they launched Bud Light Apple. I'm sorry, Bush Light Apple, right? That went viral. They leaned into it. Or social influencers leaned into it. Boom. We know what the formula is, right? And so what excites me is when I see it work when executed, right? That's what excites me. What worries me is, are the companies willing to have the courage to do make some of these tough choices that General Mills made. Cutting numbers is never easy. To go to your board and say, guys, we got to cut price on 65% of our portfolio or whatever, you know, probably higher than that. These are not easy things to do, right?
- [44:11]
C
And then tell me one thing that scares you or concerns you. Scare is not the right word here.
- [44:16]
B
What concerns me is the income bifurcation. I've said this for the last 10 years because it's been going on for 40 years. I am really worried about the rich getting richer, the poor getting poor. Because what ends up happening is society starts becoming unsafe, right? Because you get some. You get some very desperate individuals. And so you see that people build.
- [44:37]
A
Walls to protect their community and what they've amassed. And that doesn't help create harmony in a society.
- [44:44]
B
Correct. Like, look at Johannesburg. It's one of the most dangerous places to be in the world. But the Gini coefficient or the income bifurcation is one of the most severe in the world. Right? And I can just tell you, like, in the area I live, there's a Short Hills mall, which is one of the highest per capita malls in the, in the US and their carjackings now during Christmas, it's not like that. Never. That never was the case a couple of years ago. Right. And so, like, this is what I worry. I know this is not maybe that directly applied to cpg, but this is really what I, I worry about, like for my kids is this income bifurcation. You know, it's tough on society.
- [45:18]
A
We're so grateful for that and we look forward to seeing you at no fewer than about 12 industry events in the first quarter of next year, first half of next year, starting with ces, going to nrf, FMI and Shop Talk and SOCOM Live E Tail West. There are a couple others I'm sure I'm forgetting, but it's going to be pretty busy. Nick, we are one. We're very grateful that you took time out of your vacation prep to sit down and talk to us about the coming year. We're also looking forward to getting together with you at Cagney. I hope you'll Give us some time while we're there to sit down and give us your initial thoughts of what. What you hear on the dais coming out of the. The CEOs. And they'll be. They will. I will say that they would be. They would be wise to listen to this episode to help ensure that they have a successful appearance at Cagney. So, Nick, thank you for joining us. We really appreciate it.
- [46:11]
B
Thank you for having me. Guys. I'll be at fmi. I'll be speaking there as well, so maybe I'll see you. See you there.
- [46:16]
A
Nick, we're looking forward to seeing you at fmi. Sree and I will both be there out in Chula Vista at the new Gaylord Resort. It should be fun. I'm going to be just up the road in La Jolla over Christmas, so I'll have to scope the neighborhood out and see what we got there. Sri's already been there. He was at an event this year, so thank you for joining us.
- [46:36]
B
You bet. Thanks for having me.
- [46:37]
A
Guys, barrage as always. We're rounding up 2025. 2025. Our fifth year in the industry. Sri doing this podcast.
- [46:45]
C
550 episodes plus. No.
- [46:47]
A
Should we do it another year? Should we up this another? Do one more?
- [46:50]
C
No greater way to wrap the year than talk to Nick and get a summary of the year and what's exciting Cagney on the horizon. You know, we'll be together at FMI. I'm really looking forward to it. 150 plus episodes. This is not what you and I started it for, but I can't believe that we've gotten this far and we've got the following that we have. Let's thank everybody over 20 for joining our followership, sending us DMs, sponsoring our episodes, sponsoring parties of ours, sponsoring dinners with us and Peter. Let's ask Nick the magic question. Are Peter and Sree, the CPG guys, legitimate corporate influencers at this point?
- [47:24]
B
I think so, guys. Think. I think so.
- [47:27]
A
You know, there you had. There you have it. Sri. It's. It's.
- [47:29]
C
A man said it himself with that. We need to wrap it up before there's another word.
- [47:33]
B
Soldier.
- [47:35]
A
All right, everybody, Happy holidays. Merry Christmas, everyone, and we look forward to seeing you in 2026 on, wait for it, the CPG guys podcast. Goodbye. The content in this podcast episode is provided for general informational purposes only. By listening to our episode, you understand that no information contained in this episode should be construed as advice from CPGuys, LLC or the individual author, hosts or guests nor is it intended to be a substitute for research on any subject matter. Reference to any specific product or entity does not constitute an endorsement or recommendation by CPGuys LLC. The views expressed by guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. The views expressed by CPTGuys LLC do not represent the views of their employers or the entity they represent. CPTGuys LLC expressly disclaims any and all liability or responsibility for any direct, indirect, incidental, special, consequential, or other damages arising out of any individual's use of, reference to, or inability to use this podcast or the information we present in this podcast.