Loading summary
Transcript9 lines
- [00:02]
A
July 14, 2026 and this is the Commerce Rift brought to you by the CPG guys. 10 minutes of the news stories that matter in commerce this week. I'm your co host PVSB and I'm joined as always by Papa Entourage, the father of pop stars, co founder of Think Blue Consulting, sri. We're just a couple weeks away from upstate New York. How you doing?
- [00:26]
B
It almost feels like we went back to back on this one between all activation at Cannes. All those episodes should be coming shortly in the next few weeks and then here we go heading to Ithaca and more before that Fun for Peter and me Bucket list. Check for me. Baseball hall of Fame Induction Cooperstown, New York.
- [00:46]
A
Sree, I got your hall of Fame leather varsity jacket. It's hanging in my closet. It will be in the car when I pick you up on Sunday morning the 26th of July.
- [00:58]
B
Looking you know the downside of the jacket. I'm going to allow you to wear it on stage in summer when we go to possible.
- [01:04]
A
All right, four stories this week that cut right to the heart of what every CPG brand and retailer is navigating right now. A macro warning from one of the industry's biggest CEOs. Cautionary merger and acquisition tale that's still being written in real time. Pricing offensive from the world's largest retailer just in time for summer. And a cooperative grocery model getting its moment in the spotlight. Let's get into it. Let's start with PepsiCo because Ramon Lagarada has a consequential week and what he said publicly is the kind of thing that should be required reading for anyone managing a food or beverage brand in North America right now. PepsiCo posted Q2 2026 revenue of $24.2 billion, up 6.4% year over year and way ahead of analyst expectations. Organic revenue grew in the 2 to 4% range, consistent with full year guidance. Global food volumes grew 3% and beverage volume grew 2% with the international business carrying significant weight. So the headline number looks solid, but the texture underneath is more complicated. North America Snacks saw organic growth momentum weaken after super bowl promotional activity faded. Beverage volumes in North America dropped 4% in CEO Ramon Lagarada issued a forward looking warning that was unusually direct for an earnings call. US Inflation on input costs will intensify in the second half of the year compared to the first half. Consumer budgets will remain under pressure and overall category performance in food and beverage will slow down. The CFO flagged tariff refund claims from the prior year and productivity savings as offsets. But acknowledged the North America recovery would be more gradual than originally expected. Now let's talk about the two structural forces Lagarada named explicitly. First, GLP1 Sri. You and I have talked about that very consistently this year. He said the company assumed consumers will sequentially adopt more GLP1 medications, both for medical and lifestyle reasons, and that PepsiCo is leaning into action. Portion control packaging, healthier reformulations, functional ingredients. They've been building out a pipeline of what they call permissible indulgence. Cheetos, Naked Smart Food, Fiber Pop, Doritos Protein. The portfolio of today, Lagarada said bluntly, will not be the portfolio of the future. Sri. Second pricing PepsiCo cut prices on Lay's Tostitos, Doritos and Cheetos by as much as 15% in North America earlier this year under pressure from activist investor Elliott Management, which took a $4 billion stake in late 2025. Hold on to that name. Elliott Management. Sri's going to cover it in the next story. It appears to be working at the margin. Q1 showed the first North America food volume increase in two years, but the sustainability of that volume recovery is a rising input cost environment is the real question. Heading into the back half, the CPG lens, La Grotte is navigating three simultaneous forces. A consumer is stretched, a cost structure that is reinflating and a product portfolio that needs to evolve for a GLP one world. What makes PepsiCo's situation a leading indicator for the whole industry is that they have scaled the data and the distribution to see the market earlier than most. When they say North America will be harder in H2, believe them. Now is the time to be stress testing your own promotional architecture, your price pack strategy and your portfolio positioning for a consumer who is counting every calorie and every dollar. Over to you, sri.
- [04:50]
B
Thank you, Peter. The backdrop for our next story is I have to kind of put this out there. It used to be on the back cover of every Archie's Digest comic book. As a young kid in India being raised, I would see that on all the Way, if I remember correctly, from the comic book number one, and always wanted to taste a Hostess Twinkie. I mean, who doesn't want to taste the Hostess Twinkie? So that's what this story is about. Let's talk about one of the most instructive, frankly cautionary M and A stories in CPG that we've seen in years. Because the Wall Street Journal published a deep dive this week on James Mucker's $5 billion acquisition of Hostess, and it's A masterclass on how a deal that looked all right on paper can go wrong when executed. When Mark Spocker closed the hostess deal in November 23, he bit into a Twinkie on stage at an industry conference and he said, tastes like growth. Three years later the Twinkies giving Smuckers heartburn Snack division sales have declined for six consecutive quarters. The company has nearly taken 3 billion in impairment charges, including a $962 million write down in the fiscal third quarter that ended Jan. 2026. The stock is unfortunately down 14% since the deal was announced, and analysts have been openly floating divestitures. The cleanest path forward so what went wrong? The Wall Street Journal identifies two root causes that are worth internalizing to the CPG industry. The first operational mismatch Smucker's core business jams coffee Pet food runs on shelf stable products with a 12 month plus shelf life or more Twinkies is less than 3 months 65 days average. That gap broke the distribution model. Retailers pushed back on large shipments. Stale return rates ran higher than projected. Smuckers had also separated grocery and convenience store sales teams at acquisition, Even though roughly 40% of hostess runs through convenience, a channel Smuckers barely understood or participated in. The machine that made hostess worth 5 billion was a speed to shop convenience, channel machine and Smuckers folded into a system built for slow moving shelf, stable goods and grocery. The second root cause is structural demand shift. The deal was underwritten. Hostesses 14% compound annual sales growth over the prior three years. A pandemic era snacking boom. But that tide turned fast. Consumers pulled back in discretionary snacking GLP1 adoption began suppressing sweet snack demand and the make America Healthy Again movement created cultural tailwinds for clean label and low sugar alternatives. The category assumptions baked into the acquisition price had long evaporated. Sweet baked snacks margins have fallen to roughly 5%, the weakest segment in the Smuckers portfolio. Elliott Management Peter just mentioned them in the previous article on PepsiCo now holds two board seats. President CEO John Brass Depardant Fab and the company faces a binary choice. Fix it or sell it and either path will be expensive. Given how far the business has drifted from the acquisition thesis. The broader lesson for the industry Acquisition premiums built on volume assumptions in a convenience channel. Fresh rotation categories are a fundamentally different risk set than shelf stable bolt ons speed spoilage channel expertise are not synergies you can import from a different operating model. When you buy someone else's distribution machine, you have to be willing to run it that way or rebuild it from scratch. The Twinkies deal is the reminder that brand equity and category size are necessary, but not the only criteria for a successful CPG acquisition. Operational compatibility is the third leg of the stool, and it's the one that gets underweighted in the deal room. Over to you, Peter.
- [08:42]
A
Let's shift gear to the retail floor because Walmart made a very deliberate move this week. And for CPG suppliers, it carries implications that go well beyond the summer grilling season. On July 6, Walmart and Sam's Club announced thousands of lower prices across grocery, household essentials, outdoor living and seasonal favorites. Time to summer cookouts, road trip and family gatherings. The rollbacks are real and the specifics are worth noting. Ground beef down $5.94 a pound from $6.74. Fresh sweet corn dropping to 25 cents a year from 68 cents. Wow. What a drop. Red cherries cut nearly in half. Great value. Ice cream, lay's chips and Frito Lay variety packs all rolled back. On the beverage side, this is the one that will get CPG attention. Coca Cola and Pepsi 24 packs went from 13 to $15. Range down to ready for this free $9.97. Wow. Over at Sam's Club, more than 250 items got price reductions with a focus on proteins and grilling essentials. Chicken wings, hot dogs, ground beef and pork ribs all seeing meaningful per pound cuts for members. Now let's put this in context, shall we? Because this is not just a seasonal PR exercise. Walmart is the price signal for the entire grocery industry. When they cut on beef, produce and beverage simultaneously, they are sending a message to consumers that summer affordability is real and they are sending a message to competitors that they are going to compete hard for the holiday and summer occasions. EVP in chief merchant Julie Barber was direct about it. This summer Walmart is making even more investments in price across the products consumers are shopping for most for CPG brands. This creates a nuanced dynamic. On the one hand, rollbacks drive volume and velocity. In a world where Walmart is cutting the price of Pepsi 24 packs to 997, the promoted display opportunity for complementary brands is real. On the other hand, supplier funded promotional depth at Walmart is a rising input cost environment requires very disciplined trade investment analysis. You need to know your breakeven volume lift cold because Walmart scale means the math moves F in both directions. The retail media angle When Walmart goes on a rollback offensive of this magnitude, the digital shelf and the in store media inventory around those rollback items becomes premium real estate. Brands not in the rollback program should be thinking about sponsored product and display placement against the shoppers who come in looking for the promoted items in trade up or across the basket. The basket adjacency play is where retail media earns its stripes in a high velocity promotional window. Sri, Close it out, will you?
- [11:35]
B
I got big news on who won the Supermarket News Retailer of the Year, so let's close this week on a recognition story that we think deserves more attention than it's getting. Because the choice of WakeFun Food Corporation as supermarket news is 2026 retailer of the Year is just not an award. It's a statement about what kind of retail model the industry is believing in for the future. Supermarket News and its panel of evaluators from next chapter assessed WakeFun across four dimensions omnichannel capabilities, loyalty and personalization, the physical customer experience and the community brand impact. WakeFun scored consistently well across all four parameters. The recognition will be formally presented at Grocery next 2026 and late August in the Chicagoland area for those less familiar. Wakefun, of course is the cooperative wholesaler behind shoprite, the Fresh Grocer Gourmet Garage Fairway market in the recently acquired Morton Williams in New York City, as well as other banners operating more than 350 locations across the Northeast primarily through member owned independent operators. It is the largest retailer owned cooperative in the United States and that cooperative structure is central to why this award actually matters. The evaluation panel made a notable observation. The grocery industry is becoming fragmented and no single retailer leads every dimension of the business anymore. The retailers best positioned for long term success are those effectively combining omnichannel ops, customer data and compelling in store experiences while making disciplined strategic decisions rather than trying to win everywhere at once. That is a precise description of what wakefront has been building. Indeed, regional e commerce fulfillment capabilities tailored to the dense Northeast markets, loyalty and personalization programs built on deep member store data, fresh departments and in store merchandising that reflect the hyperlocal identity of each member store and community engagement. Should I say more genuine? Indeed, because each shoprite is independently owned by someone who actually lives in and around the community that they have the store in. Abby Lewis at Informa put it well wakefone represents the both of both worlds. The scale and sophistication of major retail powerhouses combined with the personal touch and community commitment of independent family owned ones. Previous retailers of the year therefore were Publix, H E B Kroger Target, Albertsons and Walmart. Being in that company is not a small thing. The CPG Lens quick takeaway from us. WakeFund's recognition is signal that the co op and independent grocery model is not a legacy structure that's about to go away. It is a differentiated operating model with genuine advantages and community trust, assortment, flexibility and shopper loyalty. Indeed, for CPG brands that have historically under indexed their trade investment, retail media spend against the independent co op channel, this is a moment to pause for thought and maybe reconsider. The shoprite Shopper is not interchangeable with the national chain shopper and the brands winning at wakefun are the ones that typically treat it as the MVP for the day.
- [14:33]
A
That's a wrap of this week's Commerce Riff. A quick reminder to catch up on our recent episodes. Christine Gambino from Omnicom, Chris Reedy from ibotta. Both are essential listening for anyone thinking about how commerce, media and technology are convergin links in the show notes. If anything we covered today sparks a thought. Drop it in the comments we read every one. And if you're not following us on LinkedIn, Instagram, TikTok, Facebook and YouTube yet, now's the time. We'll see you next week. 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 CPG Guys, 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. CPT Guys 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.