Podcast Summary: The CPG Guys – Episode: Talking Today's Leadership, Earnings Releases and M&A with Britton Ladd

Release Date: December 11, 2024

Hosts Peter V.S. Bond and Sri Rajagopalan engage in an insightful conversation with third-time guest Britton Ladd, an esteemed independent consultant in the Consumer Packaged Goods (CPG) and Fast-Moving Consumer Goods (FMCG) sectors. This episode delves deeply into contemporary leadership challenges, mergers and acquisitions (M&A), earnings releases, and transformative trends shaping the industry.

1. The Struggling Soup Category and Campbell’s Leadership Changes

Key Discussion Points:

• Dominance of Campbell’s and a few private labels in the soup market.
• Seasonal limitations and declining shelf space for soups.
• Recent leadership changes at Campbell’s and their potential impact.

Notable Quotes:

• Britton Ladd [07:23]: “The challenge with Campbell’s is that they continue to believe that they're a soup company. I think you're making a big mistake.”
• Sri Rajagopalan [09:28]: “Being elite in a shrinking category is just winning by basis, on the basis of competition that doesn't exist.”

Insights: Britton criticizes Campbell’s narrow focus on soups, advocating for diversification into complete meal solutions. He suggests strategic acquisitions, such as merging with meal-prep companies like Factor 75 or Hello Fresh, to broaden Campbell’s market presence and mitigate the seasonal decline of the soup category.

2. Innovations in Space Planning: Moving Beyond Legacy Systems

Key Discussion Points:

• The stagnation of space planning software over the past decades.
• Necessity for dynamic, AI-driven tools to handle frequent store resets and inflation impacts.
• Introduction of 345 Global’s digital twin tool as a superior alternative.

Notable Quotes:

• Britton Ladd [10:42]: “The number one space planning tool out there, the digital digital twin tool, is from the company 345 Global.”
• Sri Rajagopalan [13:52]: “If you're going to rebuild shelves, you're going to be a trusted category advisor. You need software that can back you up.”

Insights: Both hosts and Britton emphasize the urgent need for modernizing space planning software. Britton highlights 345 Global’s innovative approach, built on a gaming platform with modern architecture, as a game-changer that can replace outdated systems like Blue Yonder’s, enabling strategic and dynamic shelf management.

3. Kroger and Albertsons Merger: Leadership Exodus and FTC Implications

Key Discussion Points:

• The potential merger between Kroger and Albertsons and its challenges.
• Departure of Kroger’s Stuart Aiken to Circana as a significant setback.
• Impact of the new administration on the Federal Trade Commission’s (FTC) stance.

Notable Quotes:

• Britton Ladd [15:27]: “Stuart leaving tells me that he, among many other executives at Kroger, don’t believe the merger is going to be approved.”
• Britton Ladd [17:56]: “The odds are low [that the new FTC head will support the merger].”

Insights: Britton views Stuart Aiken’s departure as an indicator of internal skepticism regarding the merger’s approval. He critiques Kroger’s politicized approach to advocating for the merger, suggesting it hinders the strategic business case. Britton remains doubtful about the merger’s success but posits that an alternative merger between Albertsons and Ahold Delhaize might be more feasible.

4. Walmart’s Dominance and the Future Competitive Landscape with Amazon

Key Discussion Points:

• Walmart’s strategic investments in supply chain and high-end consumer targeting.
• Amazon’s evolving grocery strategy through acquisitions and innovative fulfillment methods.
• Predictions on Walmart maintaining its lead and the competitive maneuvers necessary.

Notable Quotes:

• Britton Ladd [23:29]: “Walmart is ahead of everybody else right now. And I anticipate that Walmart will remain ahead of everyone else for the next few years.”
• Britton Ladd [29:30]: “By 2030, Amazon is going to be a much bigger company.”

Insights: Walmart’s multifaceted strategy, including catering to high-income consumers and enhancing supply chain efficiency, positions it strongly in the retail landscape. However, Britton foresees Amazon challenging this dominance by redefining the concept of a “store” through automated micro-fulfillment centers and mobile retail solutions, potentially leveling the playing field.

5. Britton Ladd’s Newsletter: “No Retreat, No Surrender”

Key Discussion Points:

• The origin and philosophy behind Britton’s newsletter.
• Target audience and the value proposition of strategic recommendations over predictions.

Notable Quotes:

• Britton Ladd [30:03]: “I always point out things that are viewed differently by most people. People say to me all the time, you think in a really unique way.”
• Sri Rajagopalan [32:05]: “Anyone can subscribe to it. I have people in Silicon Valley who have nothing to do with retail, but they read it.”

Insights: Drawing from his military background, Britton’s newsletter embodies resilience and strategic foresight. It serves a diverse readership, including industry executives and analysts, offering unconventional insights and forward-thinking recommendations that have historically anticipated key industry moves, such as Amazon’s acquisition of Whole Foods.

6. Walgreens’ Decline and Potential Private Equity Acquisition

Key Discussion Points:

• Walgreens’ significant store closures and stock decline.
• Britton’s analysis attributing Walgreens’ struggles to internal missteps.
• Speculation on Sycamore Partners potentially acquiring and restructuring Walgreens.

Notable Quotes:

• Britton Ladd [34:16]: “Walgreens is in a world of hurt and it's their own fault.”
• Britton Ladd [37:46]: “I believe a private equity firm will come in and acquire them. Sycamore would acquire Walgreens, shut down a majority of the stores, and divest the rest.”

Insights: Britton asserts that Walgreens’ deteriorating performance stems from strategic errors and an inability to adapt. He predicts that Sycamore Partners, recognizing the dire state of Walgreens, will likely initiate a buyout, leading to significant store closures and a fragmented restructure, further diminishing Walgreens’ market presence.

7. Mondelez’s Pursuit of Hershey Amid Industry Consolidation

Key Discussion Points:

• Mondelez’s intent to acquire Hershey as a defensive maneuver against Mars’ acquisition of Kelanova.
• Strategic recommendations for the merger process to ensure successful integration.
• Potential alternative acquisition interest from Nestlé.

Notable Quotes:

• Britton Ladd [38:04]: “Mondelez is looking, sitting back and saying, we have to do something. And they look at Hershey and they say, let's acquire Hershey.”
• Britton Ladd [41:56]: “Introducing Hershey into India would be a fabulous move to make.”

Insights: Britton views Mondelez’s move to acquire Hershey as a strategic response to competitive pressures from Mars. He advises that for the merger to succeed, leadership should be restructured to include key Hershey executives, and the combined entity should prioritize supply chain optimization. Additionally, Britton suggests that Nestlé could be a viable alternative acquirer, particularly leveraging Hershey’s expansion into the burgeoning Indian market.

8. Artificial Intelligence in Supply Chain: Beyond Additive Applications

Key Discussion Points:

• Current limitations of AI integration in supply chain management due to reliance on outdated software.
• The potential of AI-native platforms like Augur to revolutionize supply chain operations.
• The necessity of redefining supply chains from linear chains to interconnected webs.

Notable Quotes:

• Britton Ladd [44:55]: “Most companies are still relying on software made, developed 25, 30, even 50 years ago. That’s how they’re running their supply chains.”
• Britton Ladd [48:17]: “The entire view of what a supply chain is has to change. I believe to use the phrase supply web, just like a spider web, is really the best way to view what takes place globally.”

Insights: Britton emphasizes that merely adding AI to legacy supply chain systems yields minimal transformative benefits. He advocates for adopting AI-centric platforms designed from the ground up to leverage artificial intelligence, thereby enabling strategic growth rather than just transactional efficiencies. Companies like Augur, founded by former Amazon executive Dave Clark, exemplify this innovative approach by reimagining supply chain management through advanced, interconnected AI systems.

Conclusion

The episode concludes with heartfelt thanks to Britton Ladd for his valuable insights and a reminder for listeners to engage with The CPG Guys through ratings, reviews, and social media. Hosts Peter and Sri express their anticipation for future discussions, highlighting Britton’s critical analysis and forward-thinking perspectives as instrumental for industry professionals navigating the evolving CPG landscape.

Notable Quotes:

• Sri Rajagopalan [48:17]: “We got exactly what we expected, which is hot topics, M and A results, earnings divestitures and everything taking place in our industry, including trends.”
• Britton Ladd [49:32]: “Always love being here. You can have me back as many times as you wish.”

This comprehensive discussion offers CPG and FMCG professionals a deep dive into the strategic maneuvers, technological advancements, and market dynamics currently influencing the industry, guided by Britton Ladd’s expertise and pragmatic recommendations.