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- [00:00]
Peter V. S. B.
Retail media is rapidly becoming the go to channel for brands, aiming to engage consumers with measurable performance along the path to purchase. Retailers are increasingly empowering brands to accurately target meaningful audiences based on their longitudinal purchasing behaviors and execute media impressions across on site, off site and in store channels throughout the entire marketing funnel. For brand marketers, effectively incorporating retail media into their marketing budgets is essential for growth in today's omnichannel landscape. To address this critical need, Cornell University has partnered with the CPG guys, along with leading industry executives and visionaries from around the world to launch the first ever Retail Media Strategy Executive Education program. This immersive four day program at Cornell Tech May 5th to the 8th, 2025 brings together industry thought leaders and renowned faculty to share best practices for building compelling retail media platforms. You'll discover how to collaborate on creating best in class tech stacks, measure performance to ensure brands Access the necessary KPIs based on Campaign objectives and establish strong partnerships between brands and retailers. In addition, the program covers optimizing brand strategies using AI driven campaign design at scale to achieve marketing goals. By the end of the Retail Media Strategy program, you'll have gained a deep understanding of the retail media ecosystem and how both brands and retailers can accelerate organizational transformation to thrive in the future of performance marketing. See the link in the digital liner note to this episode to learn more about the Retail Media Strategy Executive Education Program at Cornell Tech May 5th through the 8th, 2025.
- [01:41]
Sri Raj
At the time of recording of this episode at CES January 2025, Diana was the Chief Growth Officer at Sam's Club and her role has evolved since then to being the first ever Chief Experience Officer for Sam's Club.
- [01:54]
Peter V. S. B.
Hello and welcome to the CPG Guys Podcast. I'm your co host PVSB and I'm not in front of the microphone crooning to our wonderful audience. I serve as Head of Industry and Client Engagement at Flywheel, the E Commerce Accelerator division of Omnicom. Joining me as always, my co founder and co host. He is the patriarch of the Raj Family media empire. His daughters Laura and Ria are certified pop stars. His wife Kavita has her own podcast, Lights Camera Conversation. And when he's not doing all of those things, he is the Chief Revenue Officer at Think Blue Consulting. He is of course my bff Sri Sri, how are you man? Welcome. What's going on?
- [02:40]
Sri Raj
It's been awesome busy week for you and me this past week, but some great outcomes. I love that we were with Cornell University on a different engagement, different discussion, lots going on, lots of new things Will be announced soon on the cpg guys. I look forward to it. And then at the time of this recording, off to Commerce Media Brand Summit in Atlanta tomorrow morning. So I can't wait for that. So, looking forward to engaging with industry associates. How you doing, man? I know you're headed to Halifax.
- [03:10]
Peter V. S. B.
Yeah, going up to see Mom. Bringing my daughter Nadia with me. We're going to have about five days. She's on spring break. Zara doesn't have the time off. Her high school that she works at doesn't have a comparable spring break schedule. So it's just. Dad, we're off to. We're off to Halifax for five days, back for a couple, and then down to Orlando to see a couple of mice. Sri. What's this? Did I, did I, Did I see some social media about you being the pizza king of the world? What was going on there, man?
- [03:46]
Sri Raj
So I lived in Connecticut for eight long years in Stamford and Norwalk. I've traveled up and down I95 and the Merritt Parkway all the way to Mass as I worked Waltham, Massachusetts for a bit for Sarkana. At that time, back in the mid-90s, Connecticut was not known for pizza other than there would be a lot of buzz about New Haven pizza that has existed forever. I don't think we can debate that. All of a sudden, I'm with you. We're traveling on the Connecticut Turnpike. Yesterday, there's a welcome sign that says, welcome to the pizza capital of the usa. And then pizza, pizza, pizza, pizza. Discussion everywhere. So I got to sit on the pizza throne yesterday up in New Haven. Too bad we couldn't get to taste any of the pizzas and indulge in some pizza.
- [04:30]
Peter V. S. B.
We had the plan.
- [04:32]
Sri Raj
But wait, man. It's clear. Connecticut is trying to claim that it is the home of the best pizza in the usa.
- [04:41]
Peter V. S. B.
They've abandoned basketball as their primary reason for existence and they've moved right to pizza.
- [04:48]
Sri Raj
Which is absurd because Connecticut men's and women's NCAA basketball has been elite for I don't know how long, as long as I can remember. Three decades, four decade kids, whatever the case might be. But wait, Peter, I'll be the first one to tell you. New Haven does have some unique pizza pies. There's no debate about it. Some really very good quality pizza and unique in its own way. But then Chicago will argue it's got its own. Brooklyn will argue it's got its own. Manhattan will argue it's got its own. The one thing we won't argue in la, we're the pizza capital of anybody.
- [05:19]
Peter V. S. B.
All right, there. There you go. So, Sri, thanks as always for joining me. We're doing a little interlude in the middle of Women's Month. We're doing our monthly rank punditry recap. We got a couple of topics we want to tick off from all the events that we've been to over the last month. What we're what people are talking to us about. So we want to hit all those things. We'll just remind you before we get into that, make sure that you subscribe to us on your favorite podcast platform, Apple, Spotify, whatever. And when you're there, just give us a rating. That helps feed the algorithm, makes us more findable. I'm serious. Just like go in. Can you do us just that one favor? That one little favor. Open up, open up the app. Scroll down to where they have the, the, the rating section. Give us, give us a number. Sheree and I like the number five, but you get to decide what you want to rate us. But we would really appreciate it. It mean a lot to us. So anyhow. All right. So Sree, Wow, we've got a bunch of good topics here. The one that just keeps smacking us in the face as we're talking to CPG leaders and frankly, what we're seeing in the earnings release, I think just yesterday or the day before, we saw Campbell's lower their forecast by three whole points across the board. And they're not the only one. There are a lot going on. So what are your thoughts on on volume decline? It seems to it it started to percolate at Cagny and it seems like it's really steamrolling right now. What's going on?
- [06:55]
Sri Raj
Look, first of all, for our listeners, if you haven't caught up on all our Cagney report back, we did daily updates. We did individual company updates based on what we heard and saw from presentations from the CEO, CFO, CMOs, head of research, etc. So please go back and look through a LinkedIn feed. We have individual summaries and we have full day summaries as well as a full CAGNI podcast episode. We also had the managing director for the CPG side from Royal bank of Canada, Nick Modi, join us for another episode on Cagney. So please do your own research. Listen in. But Peter, I think this Cagney was a little bit of a resetter in my head in terms of overall CPT performance. You're in my role here as media and reporters and research analysts in the industry is to Report back what we see, what we hear and sentiments. But I have to be honest and tell you we've had volume challenges in this industry in the center store a long time ago the price inflation related growth artificially masked the underlying volume challenges that existed Pre Covid in 2020. It's been there for five, six, seven years since I would argue since 2014, 2015. And so the reality is caught up on now and it's being seen and a lot of attention is coming from Wall street and from analysts and research folks because there is no pricing related growth left in the ecosystem. Now you can say Einstein, we already knew that. Well, it's time if you knew it, it's time to acknowledge the fact. And so what does one do in this scenario? That's the question of the day and we're going to hit upon it later in this episode. What does one do if you're a large market cap brand? Because you have told us you are going to chase it as one of your ways to grow. So we'll get to that bottom line. Peter, There were underlying volume growth issues and all that's happening is they're surfacing to the top as the number one challenge in the industry. Large brand after large brand.
- [08:51]
Peter V. S. B.
So Sree, let me flip the question then. The question you said is what do large market cap brands do? What do large privately owned companies have the ability to do in this that their competitors may not necessarily be afforded the ones that are publicly traded? Where are they positioned and where is their opportunity for them?
- [09:14]
Sri Raj
Three things Peter. They're able to invest because they're not publicly discussing a P and L until they're up for an exit event or a sale or something of them. M and A or something of that nature. Right? So but they're also choosing to invest in spaces that match today's consumer. Whereas a large publicly traded brand may not have the ability on the P and L to make that investment even though they know they need to because they have to deliver a quarterly eps. There's nothing wrong. This is just the formula, the way it's worked historically. So that's number one, they're able to invest. Two, when they make those investment choices, they have clearly, clearly outsized in the investment and the muscle in digital and the entire shopper journey. Now people should not misinterpret when I say digital as E commerce. They're not the same thing. I'm clarifying again and again on the show when I say digital I mean follow the shopper, follow the consumer. It's the journey at this point is nearly 100% digital. You cannot tell Peter and me and the CPG guys there is even 1% of consumers in America which don't use a smartphone or some sort of Internet research before they buy. And that includes stock up trips. So please, please, that's number two. They follow the shopper. That's 100% digital. That is not the same as E commerce. Remember in the food and bed business or center store we're still averaging 25 points or less, 25% or less of the overall paradigm. But the shopper is nearly 100% digital. So they're clearly understanding that. Third is that absolute die hard passion to engage with the consumer directly in whatever mechanism they can, which is not a strength of large market cap brands. Again, nothing wrong with it. Most of them are warehouse, most of them are dst. And the number one goal based on the model that's existed for decades, again, nothing wrong with it, is stocking the shelf of the retailer, a dependence on the retailer to engage with the consumer. The smaller private brands know how to engage directly. They make use of data, they take advantage of all forms of data assets and they have data lakes that are legendary. Yep, yeah, I use the word legendary. Those are the three things in my mind.
- [11:29]
Peter V. S. B.
Thank you. I couldn't agree more, sri. I think that it's an interesting time to be a privately owned CPG manufacturer. To that point it appears to me from the presentations we saw at Cagny that they're still chasing the quarter, much more so than they are chasing the decade, to quote our friend Carrie Sander at Kellanova. The challenge though is in an economy where volume is declining and you're trying to hit an EBITDA number, the only way to do that is to reduce costs. And the most effective way to do that, particularly where there's still inflation on raw materials and what have you, is to reduce headcount. And I know that you and I have been speaking with quite a number of different consultants and others in the area and I think it's our prediction that the big blue chip consulting companies will be doing a brisk business this year doing corporate reorganization to reduce costs of of human capital. What do you think sri?
- [12:42]
Sri Raj
So first, Peter, I'll say this. This is a cyclical phenomenon in any large ecosystem where you have to trim the fat cyclically every three to five years. Right. I do remember 2020 when covet hit P L's had to be restructured to accommodate the supply chain capital needs and then the over reliance on E Commerce For a short period of about a year, year and a half, and then to reset following the 100% or nearly 100% digital shopper. So cyclically, 2025 would be the year. I'd be surprised if there aren't restructures. Also, I think responsibility to deliver that dividend, that quarterly EPS requires large companies to fine tune their P and L cyclically. And I think when you can't really expand your top line organically, you have to focus on reducing costs to deliver the quarterly eps. And then what's the most low hanging fruit? Number one, cut media every quarter, please travel for most of the associates every quarter and I'm sure most large brands are doing that. Third, and the heavier line item is look at your SGNA and pull out line items from your sgna. And the biggest one you have is employee costs. So it's quite normal this is going to happen this year. Do I wish it? Absolutely not. I do not want to see a bunch of layoffs. Very painful for the individuals who left to go through it. But unfortunately it's a reality when you don't have top line growth, you have to trim costs. And this is the one line item which is about one of the easiest to chase in terms of identifying it. One of the most difficult to execute because it impacts people, people's lives. You come from a smaller service provider. I'd love to hear your opinion on corporate restructurings and layoffs.
- [14:30]
Peter V. S. B.
Well, I come from a small. A small entity that it's part of a very large entity. Remember Flywheel was a corporate.
- [14:38]
Sri Raj
I know. I purposely said that to get you to speak though.
- [14:42]
Peter V. S. B.
Yeah. The reality is that when you're in a very large organization, when you get to a particular level in the company, you start to understand how the annual plan is built. It is not built by Flywheel building its plan and then Omnicom Commerce Group building its plan that builds up to Flywheel Commerce Network. And then the same thing happens over at omg and the same thing doesn't work like that. The way big companies do that is they decide what they're going to achieve, be it a dividend, be it an EBITDA number. And they determine that and then they tell their organization below them, here's the number I'm hitting, here's what each of you have to do to help me hit that number. And it's a top down approach. Right. So you're kind of forced into hitting that number and you've got to find a way to hit that number and you kind of talked about the different mechanisms of advertising is an interesting one. Shree. And here's my question back to you. Realistically, don't good marketers already build into their annual marketing plan the fact that they're going to have to give back some of their dollars to situations like this. And so that's already built into the equation. The reality is the next two levers that you talked about are more likely going to be the ones that are going to help them achieve that EBITDA number. What do you say around that when.
- [16:12]
Sri Raj
It comes to your marketing budget, Peter? A certain percent and I'm not going to reveal what because it's different based on every brand that I have worked for touched. Right. You hold back a certain percent for this very reason. Right. But you actually the first reason you hold it back is you, you want to make sure you can bend and twist to the need of the full funnel marketing. You want to hold back a certain percent. So if you have to shift from lower funnel to upper funnel, you have to activate a new innovation. You have to campaign against some new competitive threat that came out. That's what you hold it back for. But you tend to hold tip and the behavior hasn't changed over decades. You tend to hold on to it towards the end of the quarter and then that's a bonus you can give back towards the EPS. Remember Peter, in the last three, four years prior to mid March, late March, April 2023 for four years, three and a half years in a row, marketers haven't had to do that because of the inflation related growth. So it's a behavior we're going to have to relearn all over again. Again, I won't question the wrong and the right. That's for an individual brand to determine. But one thing I'll tell you Peter, when we are in the middle of this sort of a volume crisis, old behaviors, old ways of doing things alone are not going to cut it. There are some very good things in the old ways that drives scale for large brands. And there are some behaviors which in today's direct engagement with consumers do not work. It's not the way. You can't save your way to fame to the hall of fame. You must grow the top line. You have to spend money to earn money profitably.
- [17:46]
Peter V. S. B.
Yep, I think you said it there Sri. So let's move to our next topic which is around private label. Obviously when national brand volume declined, it means one of two things. Either consumers are just consuming less and that's really not the case. It's much more that the volume is shifting to more affordable options and that tends to be day in and day out private label, corporate brands, call it what you will, and it's one thing to offer up brands that have a price appeal to it. It's another to direct consumers to private label very aggressively. And I bring this up because there's a lot of talk about how retailers are choosing to favor their private label brands in search on site. And, and that begs the question, who are brands that invest in retail media under those conditions? What are they doing? Are they growing their brands or are they actually paying the retailer to fight against the retailer's own brands? What's going on here, SRI So first.
- [19:09]
Sri Raj
Peter, you're talking to a guy who called on chief merchants for the last three and a half odd years, right? So I have a very polarized opinion on that. And before we get into that, I'd love to hear. You are so close to search, the optimization of search. You are in the best position as a service provider. That too coming from one of the most industrial greatest brands that actually focuses on search and knows the inside out of it. Tell our audience, Peter, what are you guys observing and whether this behavior is even sensible? And then I can talk about the economics of why private label is here to grow now in a big, huge way. But first tell us about search, Peter. Is this the right behavior if you're a brand?
- [19:51]
Peter V. S. B.
So the problem occurs when on the retail side, the merchant and the retail media ad exec are not communicating and not building a plan in unison. Right. So the retail media ad exec is trying to sell full funnel marketing capabilities. The merchant, the buyer, whatever term you want, they're trying to grow their category and so they may be predisposed to provide advantage to their own brands, particularly in categories that they think are more commoditized than others. The challenge becomes for a brand, why am I going to invest in a retail media platform where I'm basically just paying protection money to the very entity that is threatening me? I don't mean physically threatening, I mean threatening my business. So it becomes I'm going to go invest where private label plays a specific role at, at the retailer and addresses the needs of particular consumers. But if I can't grow my brand, if all I'm doing is trying to fend off private label, then I have to make a, a judicious decision about where I, where I put my money. And increasingly I see brands having the chutzpah, for lack of a better term, charit, to have Those honest conversations with retailers. And I think the reason they're able to do that in this day and age is because the retailer's not the only economic buyer. The brands are now economic buyers. They write checks for retail media. And so they're not going to write checks if what they're buying isn't actually growing their brand. It's just keeping them from losing more and more share to a very powerful private label entity where the merchant controls the decisions that are made on the digital shelf.
- [21:58]
Sri Raj
So we need to come back, Peter, and discuss if you are an RM and in this sort of ecosystem, what are you supposed to do? But let me talk and let's do that immediately following what I'm going to mention here about private label. So two phenomenons on private label that are very strong. I can't say for the first time there's been periods in history where this has appeared. The challenge that CPG brands, again large market cap brands, have with private label is they've occupied a certain percent of the category and they haven't really changed over the years. They've been pretty steady. And you know, the numbers vary based on category, but somewhere between 10, 15, 18, 25, the average is in that 18 plus percent range. What's happened in the last two years is those numbers have grown couple hundred basis points again depend on the category. They can vary by category. Some can be 1002-003004-00500. Just depends on the category. But here are the two phenomenons that are actually driving that. The first phenomenon is the opening price point. Private label has very conscientiously created a skew in many subcategories. That is a very friendly opening price point to large brands and recognized brands price opening price point. This is not true through the entire portfolio. And even to now you notice when you walk inside a store or you compare it online, the opening price point of private label is much more attractive than maybe even multi packs etc of a private label compared to a large brand. So in an economically challenged ecosystem, post Covid, where government assistance is completely changed, that's a winning phenomenon for private label and it will continue to grow. The second one that pops up is feeding that beast of opening price point is commodities. When there is a volume challenge automatically due to Covid, most commodity supply chains beefed up production and kind of created industrial productions and up and down the supply chain all the way to delivery containers, ships. I can go on and on because post Covid I feel like I Now have a PhD in supply chain and go to market in that sort of ecosystem for the first time in history in a very long time, private label has unprecedented access to the ability to source commodities at price points that are favorable to them. So, so look at the situation, Peter. The, the double effect over here. One, you've got a fabulous opening price point and you've realized that and you somewhat have given up on large brands to create attractive opening price points because it's been two years and you haven't seen price architecture do that across the board. I'd say Coca Cola and McCormick are exceptions as we heard in Cagney, who actually talked about the opening price point. Maybe there are other brands, but we certainly didn't hear it at Cagney. And the second one is now you can take advantage of that opening price point because you can actually source and stock up your days of inventory because of the ability you have to source commodities which erstwhile you have to complete exclusively which large brands. So it's a phenomenon at this point that feeds to the third and last item I'll speak about on private label. Please don't call it private label anymore. I don't want to give names here, but they are store brands, their brands retail is feeding into household penetration via brand equity development that ranges from packaging loyalty, price point. As we've discussed availability on the shelf, we're seeing more and more presence whether it be on end caps, whether it be on i95, the, the walkthrough aisles of certain retailers perimeter. So it's an effect that all comes together as a 360. You already discussed the marketing via search. It's your moment. Private label. Enjoy it. Just wrap it up that way.
- [26:07]
Peter V. S. B.
Yeah, I think you hit it on the head there, Sree. All right, so another thing that you and I are hearing from a lot of our friends and I don't think it's surprising when the pandemic hit, Suddenly all these CPGs scrambled to find e commerce talent. They created centers of excellence, they elevated people to the VP level and they had large organizations focused on that. In a post pandemic world, that center of excellence is starting to disappear. They're being deconstructed. They're getting rid of the highest levels and they're feeding the talent back into the marketing organizations. Is this what we should be expecting from most, if not all CPGs that the ERA of having an e commerce center of excellence has, has, has passed its time and now it should be a discipline of most brand and shopper organizations?
- [27:14]
Sri Raj
So first I'll raise my right hand and acknowledge that's what I did in my previous role. I kind of moved E Commerce skill sets steadily and slowly into customer teams with the acute reason being I really wanted to spread digital skill sets again. Peter, remember there's a difference between E Commerce and digital. Individual customer teams need to now be able to have these discussions with their merchants and RMNs. It should not be done through a central team and for the most part it worked through Covid. But I do sense an ugly truth that I did not take head on, which is because the numbers were good. I never questioned whether my decision was right or wrong. I will now say I don't think my decision was that great. And I'll tell you why Peter. In customer teams across large brands across the United States, it doesn't matter what brand you are or what company you represent. There are two things on the one on the retail side, one on the brand side, when your business is 80% brick and mortar and your incentive is to deliver truckloads to brick and mortar so that it makes its way to the shelf, that's where you're going to muscle up and you're going to when you need to take productivity or restructure your teams, the area that you're not going to focus much on and the area which is still a mystery to customer team leads across the board. Again, doesn't matter what brand you are. It's 30 years you've been trained to feed the beast of display and end cap. All of a sudden analysts in the industry is telling you that's where the action is. It's back in stores, back to basics. The last thing you're going to do is feed the beast of digital. The reality of the situation though, Peter, is digital is one of the only channels where there's still organic growth category growth you can drive, which is what the retailer is really looking for for you. Then then I wear retail shoes, right? How many merchants in America up and down the buying chain, procurement, chain leadership. There are exceptions. Walmart is a complete exception to the rule where most merchants we talk to understand the digital game inside out that it's not just about E commerce, it's about the full spectrum of the shopper journey. The best in class, right? Walmart. But with the exception of some of the best in class, most merchants one must remember acquisition of product for the store shelf starts with a physical planogram. And for the most part I got to tell you that physical planogram, the tools are completely outdated. Now for those of you that don't know and go through this process. Peter, did you know that to truly build a planogram of meaningful value it takes weeks and months and the reset is a whole activity on the category management team on the retail side for this reason, Peter, if you're a brand, right? If you're a brand, that's what you've learned to feed. Are you really going to 30 years into your career, 25 years into your career, try to muscle up somewhere else when you're really good at that.
- [30:29]
Peter V. S. B.
Are you sure? You may remember that my very first job out of business school was working for Hart's Pet Care where I was responsible for space management. So I was hands on keyboard doing spaceman and Apollo precursors to some of the tools we have now. And boy, you're not kidding when you say how much time it took to actually planograms at at retail. It's not, it's not, it's not for the faint of heart, I'll tell you that much.
- [31:01]
Sri Raj
Because the retail tech footprint hasn't evolved in. That's in the planogramming space management space in decade and a half, two decades. The tools haven't evolved as well because it's a convenient marriage and so do brands. Now I will mention Peter, those things are changing based on AI. For those listening, check out 345 Global AI based. You can actually do your space planogramming minutes and hours versus days, weeks and months. But that said Peter, that's a major, major reason why I do not believe putting it in customer teams alone will work. Unfortunately Peter, I have to admit I made a mistake. And having a central team with this specialized body of knowledge in digital penetration, I'm so sorry to say, is an absolute must have. I want to hear your thoughts. You. You work with some of the largest brands in the world, right? I've represented maybe three or four. But you work with who's who. When you watch this from the outside in, what do you guys feel?
- [32:03]
Peter V. S. B.
I still question whether brand marketers really have the understanding of the digital components. They understand building really great TV ads and then putting them into an MP4 and showcasing it on YouTube and things like that. But I don't know that they really have a fundamental understanding of what it takes to win on the digital shelf and are really that focused on anything other than the very fundamental copy and imagery. They don't understand the versioning that needs to take place, the ecosystem for players like Salsify and Syndico and the value that they bring or the iterations that need to take place, to make sure at scale that your content can simultaneously appear on 100 different marketplaces. There's a lot of work there. SRI and brands, even today I see them starting to do things in house they don't understand.
- [33:11]
Sri Raj
How many brand VPs can articulate the importance of content to you? I've had enough conversations across the board, multiple brands across the, they've come on the show and had this discussion with us. Senior leaders do not understand that your first step in engaging with the consumer is brand content. AI today allows you to do personalized. But the moment I use the word personalized, people will misinterpret it. As he's talking about one on one content for every consumer on my loyalty platform. No, absolutely not. But is it their fault, Peter? Because in MBA school until maybe eight years, 10 years, less than that, maybe five, seven years, we weren't teaching the importance of the 360, 247 digitally influenced shopper journey. So those that are leading brands today have not had that priority reinforced to them as they grow, as they went through the growing years of building the marketing. But they're the one with the pocketbooks, writing the checkbooks. They're always going to rely on third parties for that.
- [34:11]
Peter V. S. B.
Well, that's why you and I are working with Cornell University to create the very first retail media strategy course to try and get some of these very senior level marketers completely conversant in, in this important and growing media channel that provides full funnel marketing. It provides better measurement and frankly, something is going to have to replace the reach that linear television and print media are no longer providing. So it's very important that I agree with you. It's got to be a separate entity until such time as CMOs are conversant in it. And a lot of them, you know, honestly are still kind of afraid to even ask a junior level person, get some, you know, reverse mentoring from the most junior level people to say how do I use TikTok? What does Instagram do that they don't? And they don't ask the questions because I don't know, they've conditioned themselves to believe that they, they should not do that. Never show that level of, you know, weakness or if they consider it, that I don't, I think I just consider it unwilling to be a lifelong learner. I think you kind of have to do that.
- [35:28]
Sri Raj
Let me just remind our audience that in the digital liner notes for the Sparkcast, you'll find links to be able to try and understand what the Cornell first ever industries, retail media Program course will cover for you whether you're a brand, retailer or service provider. Please do look at it. Consider joining. We are trying to change the discussion in the ecosystem of CPG and retail in terms of where RMNs are headed. So in a very safe space setting we can decompose what this phenomenon is, what it does to your mmm and how you need to plan for it. And conversely, if you're an rmn, how you talk to the right people at brands so that this can be a harmony because we're all serving at the end of the day the same person. Now Peter, I have a question for you. Speaking on the RMN lines and digital advertising, Walmart now has a API for display advertising. Tell us more about it and why you think this is a good idea.
- [36:27]
Peter V. S. B.
So this allows both its agency partners and frankly brands that really have the wherewithal to do the work themselves to actually execute a broader set of advertising. Not just product searches, right, product listing searches, but off site display advertising and other capabilities. And what this means is they can build more comprehensive full funnel campaigns and they can really plan something out instead of just targeting the mid lower funnel on site conversion. This is a game changer for for brands that have the resources or work with agencies that have built really powerful tech stacks, it means they're able to do that kind of activity. And let's be Honest, Sree, these RMNs built managed services not because they want to be doing it, they built it because they understood that if they didn't offer it, people wouldn't buy their advertising inventory, right? So they're publishing inventory. So this gets them further along the stage of making it more accessible to lots of players so that they can more easily sell the big RMNs. If you were to ask them would you like to get out of the managed service business universally, they would say yes, universally. They don't want to be in that business. This is just one step to help them in that direction. Get out of managed services. Let agencies do it. They have better capabilities. We've talked about some of those in the past. They invest in their tech stack. That's not what the retail media networks want to do. They want to make inventory available. They don't want to build all of these sophisticated managed service capabilities. That's very low margin business for them. Very low margin business for them.
- [38:25]
Sri Raj
So speaking of managed services content capability, you and I headed to Cannes Lions later this year in June. I think you and I are anticipating a significant presence of artificial intelligence. You are in the content business and an expert at it. Peter, what are you expecting to see in Cannes Lions? And is this the year content pivots to be AI? And does it threaten managed services or does it enhance managed services?
- [38:53]
Peter V. S. B.
All right, sri, My. My big reveal of late here was my prediction that within the next five years, Amazon would be out of the 1P or warehouse acquisition of. Of pallet quantities and. And them breaking it down and them controlling all elements of the. The marketing of pro of those products. Right. And they would move to a 3Pmechanism where it's through the packages get packed by the manufacturer and they get shipped to a central location and then Walmart, pardon me. Amazon just wants to be in three areas and three areas only. They want to be in advertising, they want to be in web services, and they want to be in logistics and fulfillment. That's where they make their money. So that was my first one. Right. Here's my prediction about King. We are seeing such a rapid evolution of AI and content that it's my prediction that one or more of the awards that are given out at Cannes Lions for creativity, it will be announced probably even up on stage when they stand up to get their award, it will be announced that the entirety of that creative was done through AI. There is nothing real about it. That's how close we are to having. Some people call it deep fake, some people call it very creative, generative AI. But I'm telling you, we're there. Sri, it's going to happen this June. You're going to see it at Cannes Lions. It's going to be a very big deal.
- [40:37]
Sri Raj
There's no doubt in my mind, Peter, that AI is here and AI is here for the long haul, long run. And so the. The world right now has been talking about deep fakes and all the negatives coming from AI. But Peter, I'll add. I'll agree, Peter, 100%. I think Cannes Lions is going to be a major pivot point for those in the creative space to try and understand. One of the most important uses, positive uses of AI is to actually produce personalized content at scale. Those that will embrace it will emerge as winners. A lot of that could also be dynamic as you engage with the shopper. Those that don't embrace it, you get left behind. We started at the top of the show discussing an advantage of small brands. Guess who is going to leverage it? Small brands. So if you're a large brand, you will be at Cannes Line. We look forward to seeing you continuing this dialogue. We want to continue this dialogue on the show, but most of all when you're at Cannes lines this year, look out, look out to see and let's see if our prediction of an award based on AI truly does indeed come true whatsoever. So I'll roll us into a couple other topics over here, Peter, which is leadership talent at CPGs and retailers. We've been having this discussion lately with Wall street thoughts. What are we learning?
- [41:56]
Peter V. S. B.
We're learning that most of the analysts think that the buzzwords that CEOs threw up on stage at Cagny, they really can't forget double click. They can't even single click down on like there were people that clearly understood. We called out some of those in our Cagney recap, but most of them use terms like price pack architecture, or they talk about retail media and there's no level of confidence that they fundamentally understand any of that, that most of their focus is on EBITDA hitting their numbers and they are not conversant enough. And if they're not conversant enough, they cannot guide the board to make educated decisions about investing in these capabilities. There is a huge lack of qualified talent on both sides of the table, on the retail side and on the brand side to really understand how these technologies are going to fundamentally change the manufacturing of products and the retailing of those products in the future. I think that is a very concerning reality. What do you think, Sri?
- [43:05]
Sri Raj
So let's discuss this truth, right? We don't want to come across as harsh over here and take home this word of is the talent good enough? But let's talk about why it has been good enough. The expectation Wall street has had and the industry has had of CEOs, whether they're brands or retailers and leadership teams is we want you to be a good P and L manager. A good leader surrounds themselves with people who are smarter than them and people with, I would say cross functional knowledge where you are an expert in the function that you represent, whether it be child, whether it be supply chain, marketing, sales, leadership, finance leadership. And and so a good leader as a CEO is to do exactly that. And it has worked for the most part. That's how large brands have become. Large, large retailers become large retailers. There's been one change in the industry, a marked change in the industry that we kind of hidden alluded to maybe 15 minutes ago on this episode in the last 5, 7, 10 years. The ability to influence the consumer to like your product, be loyal to your brand, whether you're a retailer or whether you're a brand is one on one. Yes, one on one. Not Many to one, not one too many. Which is how conversations happen. Today. Individual consumers are engaging with brands and retailers on TikTok, on Instagram Reels, on YouTube Reels. This is not a skill set that was taught 25 years ago in MBA because guess what? None of these platforms were scaled at that point. It's that one on one engagement on a shopper journey. 360. That really is the reason why we feel the industry is moving 800 miles an hour. And simply being a budget manager with skill sets of yesteryears is very difficult to respond to today's challenges. And so what can one do about this? Right. Does it mean you go draconian and you try to replace C suites? No, absolutely not. Our advocacy is take the time to get reverse mentored. Take the time to understand what this one on one phenomenon is. I've said it multiple times as a functional marketer in 2025, if you are not on TikTok, if you're not on Instagram, you're not on YouTube, you don't understand what reels is. No one's asking you to post because your PR and communications don't create nightmares by owning and posting. Follow and learn. And I'm not convinced commercial leaders cross functionally do that today.
- [45:50]
Peter V. S. B.
All right, sri, I want to talk about some current events, some very current events. Like hot off the press current events. There were some big changes in Boise and Cincinnati. The CEOs of Kroger and Albertsons both deposed. One resigned, according to the press release. The other. Well, they both resigned. One was specifically related to an ethics investigation. So we're talking about Rodney McMullen.
- [46:15]
Sri Raj
One retired, didn't resign.
- [46:16]
Peter V. S. B.
Yes. So what's going on there, sri? What's kind of happening here? I mean, in the absence of. It's not like SRI and I have the direction story on what happened. We know just as much as you do. But we can.
- [46:33]
Sri Raj
Even if we did, I wouldn't be discussing it here.
- [46:34]
Peter V. S. B.
Yeah, we probably wouldn't be discussing it here. But I'm talking about it at a 50, you know, 30,000 foot level. What's going on here, Sri? Is this the app? Is the, is this the fallout from the failed merger? Is it more than that? Like what's going on?
- [46:48]
Sri Raj
First of all, Peter, let's go up 50,000ft and discuss. Was this a good idea to begin with in the first place? If you're a consumer, Right. And having again come represented multiple brands, Right. When these sort of large ecosystems merge their buying power, brands actually go up, which means they're able to procure product at a much lower cost, which means in return, I actually think this was a very good idea of Kroger and Albertsons trying to merge because sitting on the other side of the fence in a brand, my biggest fear was, oh my gosh, what kind of asks are they going to hit me up with? And that volume challenge we just discussed 40 minutes, 35 minutes ago on the show, that would have given this merged entity the power to do both frequency and depth of discounting or put promos and also make available to brands unprecedented scale in display activity. That is a win for brands. Now, the display activity, what is not would not have been a win for brands is the change in cost structure that would have come by. But I put the consumer at the center of everything. The consumer won because they would have gotten much more depth and frequency of promo offers. Unfortunately, I don't think the governmental agencies understand that because they think it's a monopoly and they'll actually raise prices. That's not how our industry has historically worked. So that said, Peter, the question, the question you asked me was not whether it's a good idea or bad idea what is going on, right? Of course the merger didn't work out. You know, over the course of the next few weeks and months, a lot of detail will probably be revealed on what didn't work out. There's a lot of talk about whether the stores that were going to be acquired by CNS make sense or not, whether this would have existed, been closed down, things of that nature. Number one thing, I'll tell you, I actually think it would have been fabulous for the industry and this falling apart in a volume challenged environment may not be the best thing for the industry. There were some great outcomes I was certainly looking forward to and especially from a store shelf perspective, a chance to actually be dynamic about assortment changes in the category. And that unfortunately will now not happen. I am actually disappointed by it.
- [49:04]
Peter V. S. B.
Yeah, I think it would have given them more of a fighting chance to compete against Walmart, which is clearly the predominant omnichannel retailer in the industry.
- [49:13]
Sri Raj
So all about scale. Peter.
- [49:14]
Peter V. S. B.
All right, the last, the last topic I want to talk about Sree is global food production and tariffs. Sri, you and I both like Italian, right? We were, we were in Jersey recently. We got ourselves some Sunday sauce. We got some good pasta and you know, certainly tomatoes are at the heart of those recipes. But garlic, garlic is big in Italian cooking. Sri, where, where is almost all the garlic that we consume produced in this world? Where's it come from? Is it like from Kentucky? Is it. Maybe it's from Missouri. Where's the garlic from Shrey?
- [49:49]
Sri Raj
You know Peter, we were recently giving a class and tariffs was one of the topics to a very large company. I was cringing to give the class and but I had to because this is not a fun topic to discuss. The economics of this are not. Oh boy, what do I say. So garlic comes from China. When tariffs are imposed it impacts the downstream supply chain in ways that I can't even describe to you. Tariffs is an issue. It's going to economically change PNLs in the short run. Until adjustments are made to adjust to tariffs, you got to pull more out of the P and L costs we've discussed upfront. What are your low hanging items? Media is one of them. In a world where small brands and challenger brands are already one up. Can't really pull back on media when large bands have lost a certain percent of households to the opening price points. Major, major, major issue. The second one is teams and talent restructuring. Same problem. Your volume challenge. You pull out human capital. How do you attack volume challenges? So tariffs are a problem and then I'll talk for a second about the beauty industry. I just did a video that's already out on the CPG guys with Anna Mayo, the beauty expert from Nielsen iq. She did a little bit of coaching over to me that I learned that some of the largest beauty brands in the world which account for most of our volume in the United States or sales in the United States 93 a whopping 93% of that volume is entirely sourced overseas and in the balance 7% that is only assembled in the US so a majority of ingredients are also for that coming overseas. Which means Peter, in the beauty category we are close to 100% of commodities coming overseas when you got tariffs slapped. That is a major structure change in economics that we cannot deny and it I am Anticipating in 2026 it is a major change to the PNL which again there isn't volume growth to offset. In the beauty categories enjoying volume growth to the day because consumer behaviors changed over Covid it was a return to a use of cosmetics in some huge ways and so the beauty category may be able to offset some of these tariffs with top line growth. But for food you talked about garlic. Peter and I went through lists and lists of commodities and where most of them are procured in for some of the greatest brands in the United that are sold to drive volume in the US it's overseas.
- [52:29]
Peter V. S. B.
Sree you know we may have to turn off the video camera when we record these podcasts because if the foundation costs increase, I don't think we're going to have the beautiful complexion that most people have come to expect of us on these conversations.
- [52:43]
Sri Raj
We had radio faces to begin with. So what are you talking about? So Peter, I got one other topic here which we hit upon, which is strategic M and A. Oh yeah. How many times did we hear it at Cagny that most brands are going to lean on that for inorganic growth?
- [52:58]
Peter V. S. B.
It's not going to come from organic growth, right?
- [53:01]
Sri Raj
Yeah, so that's pretty clear. Right. There was an article I was reading on LinkedIn from a consultant today and I started digging in pretty deeply into the rabbit hole of small brands. Your Expo west was this week in California where small brands display. But one of the major reasons brands and retailers come out is not just to understand trends, but look for inorganic M and A. And so the challenge even in the inorganic situation is most of these brands that come in displayed Expo Vesta 10 million $20 million in sales with the way volume is right now, brands and retailers need brands that are at least $100 million in sales with a decent enough margin that then the marketing machines of brands and retailers can use to scale either private label through loyalty and opening price points and price points or brands through incredible marketing. Right. And I think at this stage, Peter, I'm inclined to say that brands have to readjust a little bit of the thinking that $100 million brands are not the way to go because a lot of them don't exist. And if they do, they're going to be rare and they're going to want premiums on the exit. They're going to be far beyond what history has seen. So here's the, here's the complexity it causes to get that 100 million brand now you have to acquire three or four 20, 30 million dollar brands at different margin structures across multiple subcategories you're doing business in all causing much more havoc to your P and L as well as talent structure, your ability to operationalize. So I'm not even confident in an inorganic M and A ecosystem. There's enough of brands sitting out there that you can simply add to your P and L and fix this volume challenge that Wall street is challenging you on to hit your EBITDA numbers. So one, from a talent standpoint, you have the ability to acquire three or four smaller nimble brands that are 365, 247 on the consumer which can change your P and L. And then how do you do that without causing internal havoc in your own brand? And I wanted to put that as a headwind, but also say it could be a tailwind for the ones that choose to adopt that strategy instead of chasing oversized brands as the only way to go.
- [55:17]
Peter V. S. B.
Well, thank you, sri. Appreciate that. And for all the conversation today, let's talk for a second about where people, people can see the CPG guys over the coming weeks. I mentioned I'm going up to Halifax on a little PTO to see Mom. You're going to be down in Atlanta at a, at a new event called the Commerce Media Brand Summit. Tell us what you got going on there, sri.
- [55:39]
Sri Raj
It's hosted by WBR Research. They invited us to come join us. Of course. Peter will be recording a few podcasts. I'm looking forward to that. Looking forward to see our friends on the show, Michael Luckier from iga, who I hope to have a good conversation on the state of the industry. You know, he deals with independence. And then our friend John Mount from Q Mixers in terms of as a smaller brand, how they're scaling in the, they're not bevak, but how they're mixers for bevak. You know, what's going on in the BEVAK category and how they're, they're planning for a scale. They were recently at Expo west. So I hope to learn a lot from John Mount. Hoping to talk to Chelsea Alexander from Bayer Healthcare. Chelsea is one of the experts on Amazon over the years has publicly been known for her expertise on E. Com and she's a vice president there of emerging digital channels as well as she's a brand general manager for the Marty's brand. So I'm hoping to chat with her. And of course, as always, CPG guys go. There'll be a private dinner. You know who you are. If you're listening to the show, you're joining. I look forward to seeing you live and chatting with you and learning from you as well. And then, Peter, we're off to Las Vegas. What are we doing in Las Vegas? It's not gambling on a slot machine.
- [56:50]
Peter V. S. B.
Viva Las Vegas. Yeah, we're going to go to, we're going to go to the Shop Talk conference sree and as always, we're going to kick off Shop Talk with our kickoff party. So we'll have, you know, 200 or so of our closest friends, a lot of brands and retailers, and we're just going to start off the event by reconnecting, talking, catching up on what everybody's doing and set the stage for what I expect will be a wonderful experience of sharing of knowledge, learning and building out our network. So Shop Talk is going to be great. We'll probably have a couple of hosted dinners there too. But you and I are particularly interested. We have kind of decided we're gonna, we're not gonna do the meetups. We're gonna, we're gonna stay away from a lot of the sessions. We're gonna walk the show floor and just get a feel for what, what are the capabilities that are out there that will drive growth. So particularly around AI, particularly around digital shelf category management, all of that. We expect it to be a really creative and exciting event. What are you hoping to do there? SRI yeah.
- [58:02]
Sri Raj
Peter so usually we are slammed with all kinds of fireside chats, hosted dinners. It's like I barely get a moment to breathe outside back to back to back. We have intentionally said no this time, other than maybe a couple mandatory fireside, mandatory hosted dinners. We always do. Of course, Ben Miller himself had said, hey, we are the party talk of the town and it's a, it's now if you're coming to Shop Talk and grocery shop and you're missing out our party, you're missing out and you're going to have FOMO in terms of one of the most fun things to do as you come to this event, other than, of course, the educational learning you get from the show itself. If you're a brand or retailer and want to join us, Peter, how do they, how do they tell us they want to come to the party?
- [58:44]
Peter V. S. B.
What do they have to do? Drop us an email contact@cpguys.com let us know you're going to be at Shop Talk. It's, it's going to be on Monday, 5 to 7pm, Mandalay Bay. Just let us know. Well, yeah, we'll get you registered and you'll get all the, all the official details. You know, we're a little mysterious where it's gonna, exactly where it's going to happen and what have you. But you know, we're trying to create a really curated group. It should be a lot of fun. We'll see a lot of our friends there.
- [59:13]
Sri Raj
And for service providers, Peter, I do want to mention we're going to be walking the entire show floor. We're going to come chat with you. We'd love to know what you do, what's changed in the industry. We want to thank you for your loyalty of listening to us week over week. But we also want to engage with you. We want to know what's new and you know, let's again have it joint discussion in the industry to provide for the brands and retailers and the most important person, the consumer.
- [59:39]
Peter V. S. B.
All right, Sree, well, that's going to have to be it for this episode. Sree, as always, thank you for joining me on this journey. Looking forward to seeing you in Las Vegas in a couple of weeks. And to our audience, don't forget to follow us on your favorite platform, give us a rating, and we look forward to speaking with you on the next episode of the CPG Guys Podcast.
- [60:00]
Sri Raj
Goodbye.
- [60:11]
C
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