Krispy Kreme CEO: U.S. Top-Line Up Double Digits Thru Pandemic

Mike tatters Field. And I say that because he's coming to us from the first ever global flagships shop in Times Square, and Mike, thanks for joining. I have to tell you a story. I walked to work these days and I turned a corner the other day and I literally stopped in my tracks. And I think you know why. I It was because for the first time I saw the storefront and I did not realize that Krispy Kream was coming to Time Square, and it literally made me stop.

It was the best thing that I had seen in a long time. There's something about donuts, and particularly Krispy Cream Donuts that just puts in a good mood. Yeah. Oh, it's amazing. I'm in the shop right now. I'm looking at our world's largest hot light, which is just you know about Christie Kreme when the hot lights on the donuts are hot, right. So it's probably the coolest shop on the shop I've ever been into. Uh. And the

team has just done an incredible job. Paul, if you don't mind, I'll just set it up a little bit more. It's in the Old Colony Building, which is a very very famous landmark building in New York and housed you know, musicians and groups of songwriters for decades, and it then it became other things, but now it's Krispy Kreme. Mike talked us about why you would be opening a flagship store in Times Square at a time when I don't know when tourists are returning, We don't know when Broadway

is going to reopen. Yeah. Well, we've been working on this for three years. We're in for New York for the long term. Uh. This location is and you know, the only thing that we've done during the pen mimic is a little bit of a delay from May when we were originally supposed to open up till September. We did open up four more shops in New York at the time, and we learned a lot about the safety procedures that needed to happen in the pandemic. That's where I spent a lot of my time and making sure

all Christy Creamers are safe. But at the end of the day, we're gonna be We're ready now. We've understood how the operating platform is, particularly in New York City, and we see the potential of UH starting to open up now and it's not just for you know, the retail experience is unbelievable. You know, you've got the world uh largest waterfall glazer, right, You've got some really interesting things.

There's two production lines going, there's one production lined. Um, we have a side door where you can actually get your donuts on the streets. I'm h So that's pretty interesting for folks that might not want to walk indoors if you think about in today's world. But it's also one of our responsibilities. That's how you continue to evolve your business model. And Chrismy Kreen starts with a hot light.

It can deliver to a fresh shop, that can deliver to a wholesale shop date fresh don its daily and then they can continue with a potential another channel that we just launched um Um in Walmart, which is an extended shelf line, and we opened up that plant in Iowa in April and May and launched in Walmart last

week or three weeks ago. And can't keep up the Domand now we're a global brand, so you know the flagship you know for New York City, that is a global site for the rest of the how everybody and Chrispy Kreeen looks at it. So we you know, we believe in New York we're really comfortable and we think operating is how you're gonna learn a lot of new ways of uh actually going to market and what consumers are actually asking for all the time, whether that be

delivery or access right. We just did a new deal with Doyne Reed for example. So Mike, just overall, how has your business been impacted by the pandemic and what changes they've been forced to make. Yeah, So, so you know, clearly in February when we fell a pandemic coming, I spend a lot of time in my shop. A lot of that would be to be safe oriented. Could we operate?

We needed to see if there was a consumer demand since there was such a crevable product and there was you know, and it was the pretty evident to us early on that our customers wanted us and we could operate under this environment even when our doors were closed were masked if we could operate our drives, and you know, we shifted our marketing plans to be much more in the act of joy was reserved the community. Examples of us, the hospitals or the health care. I'm a business for

anybody in the health care. If you showed a badge, you get donuts for free on money as many as you wanted. Let's gives you an example. We did neighbors when you were constrained for another idea where you could drop off an extra dozen that you got for free if you bought a dozen and dropped it up in your neighbor's states. And we started to do ideas like that which really really generated and I'm connected with our guest. I'll tell you the US businesses. That's where we're really

relevant right now in this conversation. As we did active joys what we call them, and we complimented that with really great donut innovation. Our top line in the US has been up double digits since the pandemic continues. Our bottom line is also up double digits. So when we're talking about how are you still expanding what we have, we've been able to do this in an environment that's very challenging. Mike, thanks so much for joining us. We

really appreciate it. Mike tatters Field, president CEO of Krispy Krispy Cream Donuts, calling in from their flagship store, which they are just opening in Times Square, New York. So it's nice to see Vanni somebody making a you know, a retail commitment in the heart of New York City

during this pandemic. Absolutely, and it really does stand out of me, I guess, particularly at a time when there weren't too many tours around, but it has you know, the byde Green and read and again, it is nice to see somebody, you know, trying to make something good out of a bad situation. And definitely it's interesting to hear might talk about the finances, you know, kind of top and bottom line up pretty strongly. So I guess it's a it's a little bit of a comfort food.

It's similar to maybe what we're seeing in you know, pizza that the pizza shops have seen sales up pretty dramatically, both local pizza shops and the national chain, so everybody's adapting, including their diet. Political election season is kicking into high gear. We have the Democratic National Convention taking place this week. Virtually they get the latest on this upcoming election season. We walk up Wendy Schiller, Professor of Political science and

Public Policy at Brown University. Professor Schiller, thanks so much for joining us. I love to get your thoughts on the first virtual convention that we've experienced in this country. Uh,

what are your takeaways? You know, I think I veer between being someone who's older and it is sort of used to these sort of big party type, you know, celebratory conventions with lots of long speeches and thinking about you know, the digital age, and also thinking about voters between the ages of basically eighteen and thirty five, and that voting rate is typically about of all registered voters. You know, the Democrats have to get that up, but

in general that block has to vote more. Um So when you think about communications to that block of voters, digital is actually really appropriate. Digital makes sense. This is the way, even as a teacher, this is the way students learn and so it's a pretty it's it's an experiment, and there are some glitches, but I think it's a smart move. There's been an effort to put on a show of unity at the Democratic National Convention this year, Wendy.

I mean, obviously there always is, but in particular this year, as opposed to talking about some of the scandals or maybe the the US mail service for example, is that the right strategy. Well, you know, Vonnie, you're pointing out something really important. And I thought there was maybe a too subtle a shift from Night one to night too, but Night one was clearly. The two most important voting

blocks for Joe Biden are certainly African American voters. We know that the turnout was anywhere from fifty eight to six in well below eight. That Joe Biden can't win unless that turnout gets basically above. The second group, of course, they're the Bernie voters, the Bernie supporters who sat out Steen. Bernie Sanders was enthusiastic. He popped right through that screen and he was much much stronger for Joe Biden than

he was Hillary Clinton. These are the two groups of voters that if Joe Biden can get to turn out he can be much more competitive in the Midwest. Probably flipped one or two of those states, uh, and then maybe win. So that was really smart on night one. Night two was a little bit flatter. It seemed like they were a little confused about what the message was, but they honed in in the second hour for older voters. Maybe a mistake, but certainly on the economy and healthcare,

in particular healthcare. So Vanni, I think that's the question mark. Can they really come out of the convention with a very simplified campaign team. It cannot be just anti Trump because the levels will doesn't four Trump are greater than the level of these thousand four Biden and people are more likely to vote for somebody than against. They need to have a platform, and the platform has to be healthcare,

the economy, and COVID. So we'll see if they can hone in on that message and the remaining two nights. In terms of the COVID, COVID pandemic, President Trump, the administration, the strategy, I'm not sure if it's just ignoring the pandemic but certainly underplaying it. Is that still a winning strategy for him and for his base? I think that's

the big question mark. I think people are exhausted from the hardships of COVID, not just unemployment and UM and sort of the economy, but also just the way we live our lives and all and now with children at home because of delayed school and then of course college students. We know that fewer than people go to college, but still a chunk of people, and those students are now home with their parents as opposed to UM at school. So a lot of people are feeling COVID in all

sorts of ways every day. And so that's the question mark for Trump. Is that feeling a good feeling the next couple of months, No, it's not. Is it a feeling that will never end? Yes? So that's a big question, more particularly amongst suburban voters and independence you know, have you done enough? And why are we in this position, you know, so much longer after the beginning of the pandemic,

and what is there an end in sight? So Trump will emphasize vaccines, He'll emphasize that he's working on it, which they have been working on it, and clearly he'll try to ride a campaign of optimism that things will get better. He's done it. Once before on the economy. He'll do it again. Wendy, what happens with the US Postal Service? Well, this is fascinating, and I think this is a misread by the Republicans of their own voting base.

We know in the last twenty years presidential cycles, senior citizens of people over the age of ten Republicans between eight and twelve points towards Republicans got Democrats, and the largest percentage people who vote by mail or seniors people over the age of sixty five. So the Republicans underestimated the extent to which they were cutting off the notes despite their face. Right, you you mass with the post office.

Older people like their mail, they like hard copy, like to know where their post office boxes, and you take it away and they get angry. So I think that's what happened. There was a backlash. The second important thing is that so many people will vote by mail, that members of Congress, state legislators, governors, they all want to know if they got elected on election night. They don't want to wait, they don't want there to be delays, they don't want any hassles, so they want to know.

So they want those ballots returned as badly, I think as Joe Biden wants the ballots returned. So let's just go real quickly, Professor to polling. I I, for one, after Brexit and after the election, I have no our very little faith in polling. Yet polling seems to be very strongly in the favor of former Vice president and Biden. How should we think about the polling here going into

this selection. I always think of polling as consistency, you know, so are you looking at a consistent edge that doesn't seem to shake among particular groups of voters? And in that case I just mentioned senior So for the first time in twenty years, Biden is tied essentially um in some polls with Trump among people over the age of sixty five of those people vote. So that's the number

I'm watching really closely. And that's a number I'm trusting because it's been pretty accurate for a very long time. So if that number holes and Biden can keep that advantage, you're looking at a much tighter contest in Florida and Arizona than anybody expects. As far as in Michigan, Ohio, Pennsylvania, Wisconsin. Polls, I don't believe them at all because they were wrong last time. And even though the Poulters tell us they

fixed it, I don't think they have fixed it. And I think it's better for the Democrats honestly, strategically, if Joe Biden is either tied or a little bit behind Trump, Republicans vote, they get out the door. They're very reliable Democrats as we've seen fall off and they don't always vote. So if there is a lead for Biden, I think that's that situation going into the election for um, for the Democrats. But this is a different dynamic um, you know,

male and voting changes everything. When they thank you. Wendy Schiller, Chair of Political Science at Brown University, always loves speaking with you. It is time now for Bloomberg Opinion, a very fascinating opinion piece out today talking about vaccine supply chains. We're going to need to talk a lot about them and plan for a vaccine supply chain. Let's bring in one of the people who wrote about it now, Professor of economics at the Marcadis Center, Sorry, professor of economics,

Let's start again. Scott Duke Commoners is Associate Professor of Business Administration at Harvard Business School. Cambridge, Massachusetts. You had been going to be joined by your colleague. That's why I was getting that mixed up. Talk to us about the supply chains. Capitalism should be able to solve these problems very readily, very quickly, and yet we saw with the likes of PPE that it didn't watch it give

us confidence that for supply chains capitalism will work well. So, first of all, there's a question of what you need

for capitalism to actually make supply chains work. Um. And the problem is we you know, as with PPE and and now to some degree also with vaccines, we're asking to contradictory things of companies at the same time, right, we're asking for substantial investment and scaling up of their their production processes and technologies, which again remember takes time normally, right, you know, it's not possible to just immediately, you know,

double all the number of factories you have. But at the same time, remember we're doing that in an environment where we want the companies to be providing goods at low prices. Right, we wanted the price of PPE to to stay down. And similarly, you know, both for you know, you know, for political and social reasons. Uh, you know, companies that are investing in these vaccine production processes are also promising sort of lower prices, selling more at cost

and so or closer to it cost. And so when we do that, there's not as much of an incentive for them to you know, build up capacity because the market sort of isn't giving that signal that you need, you know, the additional price to to subsidize the addition or pay for the additional cost. All right, let's go there, professor, because I am very confused about the whole pricing aspect of this vaccine is and and and you say that's important because it goes to incentives for you know, ensuring

that production in the supply chain. Is there. What is your sense of kind of how this likely will play out in terms of pricing this thing, Well, it's it's hard to know in the long run, but at least at the moment um, companies are many of the companies, including a number of the leading vaccine producers, Johnson and Johnson, Zenica a Fighter, have been announcing commitments that their plan is to sell vaccines at or just barely a book sort of not trying to profit over the you know,

over the initial distribution um you know, at least for the duration of the pandemic. So where do you see the most fragilities in the system. So there are many Um of the problem is the vaccine supply chains have many different links, um and there are sort of there's a lot of links at the you know, sort of in the middle, you know, sort of when we're that

we're that we're thinking about very actively. So um there's been a big investment, for example, in producing the types of glass vials that we use to actually just contribute vaccine doses. Right, you think when you're you know, in syringes. Also, you know, when someone you know sticks a vaccine in your arm, they pull it out of you know, a sanitary glass vile using a syringe. And those we need, you know, sort of roughly in proportion to the number

of people who are receiving the vaccines. Of course, you need a lot of individual glass vials and syringes, even if you can put a few doses per vile um. Those we've actually seen a lot of scale up already, you know, sort of it's very salient. We've had problems within the past. Sort of nobody wants vaccines to not be distributed because of lack of glass and syringes. UM. But at the top of the chain there are still

real challenges. So vaccine production processes are very complicated, UM, and they rely often on uh, you know, sort of very rare error. Uh, you know, molecules and inputs. UM. So you know, for example, there's a there's a molecule called L A L that's used to detect toxins that are sort of released in the vaccine production process, and you have to you have to not have those toxins. You have to test every vaccine and also the vitals and their stoppers and so forth to make sure that

you didn't pick up any of these toxins. UM. And this, you know, the only natural source of L A L comes from horseshoe crabs, and pharmaceutical industry already uh you know, harvests about half a million crabs and it's in their blood. So you basically, you know, draw blood from horseshoe crabs and then release them back into the ocean. UM. Yeah, I know, right, there's no offense to thee no exactly,

and they're doing they're doing an incredible service. Right. Could you imagine if like your blood had a molecule that was needed to save lives. Um and Uh, you know, but horseshoe crab populations you know, of course, you know, fluctuate across years. And if you have to suddenly draw a lotton or horseshoe crab blood, that means harvesting many

more crabs and and you know it affects ecosystems as well. Uh. Similarly, there's a there's a key component that's used in some vaccines to help stimulate the body's immune response that comes out of sharp liver oil. It's called squaling. And both L A L and squaling. You know, there are um ways of synthesizing them, but this hasn't been done at scale.

They're relatively new um um and and sort of you know, recently approved, and so we have to like really figure out, you know, how do you produce these at the scale that we're gonna need. Now you put all of these things together, do you think the supply chain will be ready for some level of mental production call it first half of one. Uh, The answer is it will be if we invest very heavily. Right. Um, you know this is this is a real case for public investment in

supply chain and supply chain integration. We have to invest in lots of different chains for different types of vaccines at once. Right, So there are a bunch of different vaccine platforms that are all being sort of pursued simultaneously because we don't know which vaccines are gonna work first. Uh. And we need to be scaling all of that now, right, we have to be ready to distribute. That is that the World Health Organization or who coordinates all of that?

A great question? So some amount of this is being coordinated by the World Health Organization jointly with SEPPI, the Coalition for Epidemic Preparedness Innovations and GABBY, which is a you know, a vaccine alliance for um, you know, distributing vaccines to lower income and developing countries. UM. You know. There there is sort of like an international collaboration effort

going on. UM that's you know, both responsible for the sort of coordinating and investment in a lot of different vaccine portfolio sorry, vaccine candidates sort of like a diversified portfolio to raise the probability we have one that works, and also sort of investing in that capacity to make sure that we can she produced them. Uh, I should say, though the US hasn't joined in on these collaborative agreements yet. Still a lot of countries have, but but not the

US as yet. I mean, does there somebody out there actually collecting horseshoe crabs? We're out of time, but I'm just so curious about this. They are. There are people out there collecting horseshoe crabs. There are people out there building bioreactors or trying to figure out how you can repurpose them from other applications. Um, and uh, you know, lots of people are working really hard on this in hopes of getting the vaccines ready to be distributed on time. Yeah,

I mean, gosh, fascinating. I didn't the horseshoe crabs that. That's a new one for me. Hopefully, uh we shoulder

into the little Creature Hall of Fame or something. I mean, if the Scott Do Commoners, thank you so much for joining as Scott's an associate professor of Business Administration at the Harvard but the Business School maybe perhaps sometime a one time or sometime horseshoe crab corral or catcher, but we learned something new that a the supply chain logistics of getting a vaccines produced distributed is just mind boggling in its complexity, but as a professor Kamon has said,

lots of smart people working on it. Well, this has been the week for the retail eLearning to get a real sense of where the consumer is. And as we saw from a lot of the numbers Walmart and Target today, the consumer and the most recent quarter was pretty pretty good shape, spending money, a lot of that p p P money. But the real focus and the four is the forecast going forward, and we had some divergent views

on that. To kind of break it all down, we welcome Bert Flickinger, Managing director, Strategic Resource Group, and Bert, I want to go to the forecast. I want to compare Walmart, which said, boy, the lack of p p P and the upcoming quarters is going to really be a headwind for our business, whereas our good friends at Target today said, no, that's not so much. We're looking

pretty good in July and into August. How do you think this is going to play out for a lot of these retailers, Oh, Walmart, to your point, is being conservative, and Target, Walmart and Lowe's are are all hitting on all cylinders. They're investing in advertising, they're investing in inventory.

They're interesting in people to take care of the customer, keep the shelves stock, and they're investing in societal good with Target and Walmart and Pj's and Amazon World Leader and Solar and from our surveys, UH leading in renewables shifts a lot of shoppers from non environmentally responsible retailers

to the environmentally responsible retailers. So, all being conservative, Walmart stock is going to be two hundred dollars by the end of the fiscal year in January, and Low stock is going to be over two hundred dollars at the same time, and Target is going to be close to two hundred by the same time, all with conservative guidance, that's pretty amazing. Target in particular, is you know, talking of a great game today, but are you saying that this will last, that this will last even if there

isn't an immediate you round usness even without stimulus. Fannie um Our Strategic Resource Group research shows that um less than fifty percent of food spending pre COVID was away from home, and now nearly nine percent of food spending is at home. So as people are learning at home, working at home, living at home, and realizing that food Target and Walmart, UH cost cents on the dollar versus

going to Burger King or Dairy Queen or someplace else. Um, people are even without the stimulus, are using the tremendous savings they're they're getting on food and tremendous savings by living, working, educating at home. And that's creating a retail requiem and a renaissance for Target, Target, Walmart, and Lowe's for the foreseeable future. All right, Target, Walmart, Lowe's. How about this small retailer? Will there be any small retailers left? Mom

and pop retailers main street? I mean, is this trend? Where's this going to lead us? Uh? Paul full disclosure. Our our family co founded I G A and and Red and White worldwide and and the independent small food retailers will continue to do well nationally and internationally. Restaurants, as you and Vanni have reported well, will struggle. And the home improvement small retailers do it do it best.

Hardware ACE hardware will do well. And UH. What's really creating a renaissance for retail too is the landlords are being much more constructive in terms of helping the better small business retailers open in prime locations and city centers and urban areas, and in our work with International Council Shopping Centers where recommending that food focus retailers take on abandoned sears and department store sites, as Costco is doing in Naperville, Illinois, b J's is doing in Long Island,

uh Targets doing in Manocello. And even though internet sales have doubled for a lot of these retailers, bricks and mortars over and there's a real renaissance even for the department stores focusing on home and table top, and that carries over to the small businesses too. What happens if you decide to not pay a rent? Who? Who? Who gets you know, rent reliefs at this point? Birds, I mean, is it the landlords that will have to take the

the his or is it the retailers? And you know, we're literally just talking to a Crispy Cream ceo they're opening in Towns Square. You know that these rents were you know, something like five million dollars a month for those types of buildings before the pandemic. Who knows what they are now, but surely rent has to be a big factor in all of this Vanni. It's it's like the Chinese character, which is the same for dangerous it

is for opportunity. And that's what we're seeing is by not paying rent, landlords can can replace the non rent payers UH with better retailers. The other side that's really gone unreported is many of the retailers, even if they're paying UH their bills to suppliers, they're not paying on time. They're not paying in full. So Walmart, Target and Lows pay their all their bills on net in full in twenty to thirty days, where the department stores have been

paying instead of thirty days out days. So for a branded supplier, UH, they're shifting to who's paying, and the landlords are shifting to who's paying, and that's changing the

balance to power and retail quite so. The other thing that's changing the balance of power and retail that's been unreported is there's been pervasive price gouging by many of the brands apply, especially the serial Miller's charging twice is more UH per equivalent pound for sereal than people charge for many cases UM sizes of steak, So Target, Walmart, Lows with great private label portfolios will shift people from brands and also from a supply chain and logistics standpoint,

in addition to financial standpoint, raised consumers standards of living so they'll have more to spend online with those retailers. With Mike Common running running lows dot com very well in his counterparts at Walmart and Target too, and at the same time shopping within within the four walls. And it's leadership to Vonnie and Paul. You have the dynamic team of at low of Marvin and Sharon Ellison doing

more for societal good than anyone. They've committed fifty five million to minority and small business owners to Paul's point, over a hundred million to COVID and doing societal good is really paying off with Lowe's same store comparison sales being UH ten ten percent high, higher than um Home Depot and doing societal good for I think. I think most companies in this day and age need to be doing something at the very least, and if not a

lot of Birds thank you. It's always such a pleasure to seek to you know, what a person to say to you about retail. He's been in it for so long. Birds looking to his managing director UH Strategic Resource Group joining us there. Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever a podcast platform you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn, and I'm Paul Sweeney.

I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio m