McCormick-Reckitt Could Be Kraft-Heinz's Worst Nightmare, Flickinger Says

L Podcast on Apple Podcasts, SoundCloud and Bloomberg dot Com. Well, we want to talk about one of the biggest deals in the food service and the food industry because there's distribution that may be involved, and to help us understand what's going on, We've got Bert Flickinger. And Bert, of course is an expert when it comes to retail. He's

the managing director at Strategic Resource Group. Bert tell us about the companies involved, admonished me for how poorly I pronounced their names, and uh tell us about who the protagonists are Uhi. This this will be If McCormick is able to buy Record Record ben Kaiser Food division, which the crown jewels are French As Mustard and Frank's Hot Sauce, there will be one of the great acquisitions in the

last fifteen years. Fast footnote. I've worked with mccormicks CEO Frank Curzy is since I started at zat Iran sleepy little New Orleans brand for years with Steve's eighties Millenn

Pollock and colleagues at IPG. Lawrence and his team takes at Iran's from multi regional to national to international, and McCormick has done a lot of great things with with mayonnaise obviously spices, but with what they can do with Frank's hot sauce and UH taking French as mustard from UH distant almost non entity in major markets to a powerhouse. It's gonna be Kraft Heinz's worst nightmare. And it's people

say it's overpaying, their underpaying that that's that's bold. And you say the people say that they're overpaying, I want to home in on that because they are paying four point two billion dollars for record UH Right now, McCormick shares down about five and a half percent, So indeed, shareholders do not think UH that they're going to UH compete with Kraft Heinz perhaps in the same level that you do. What gives you faith that you're right in

the market's wrong. Because Laurence Lawrence Curzy has has been a brilliant brand builder and marketers his whole life. Lisa, see you look at French as um, you know, good good brand in Rochester where Wegmans is, but really hasn't achieved size and scale anywhere else. Lawrence Uh and other than the northeast, and Lawrence Curzy is will will make French as a power brand. All right, hang on, hang

on Bird, hang on, that's all in the future. Can you just explain to me a little bit about the stock because at one time, I mean, this was just you know, a hundred and five bucks of share and the McCormick I mean, and unless I'm reading it wrong, I mean it has not been a pretty ride down to nine. Full disclosure, Pim. I've I've been a McCormick shareholder halfway to forever and I'm ecstatic about the deal. I've seen the stock drop in recent years as low

as sixty eight. But mc McCormick needs more size and scale record Ben Kaiser never had. At the combination of the two companies gives it. Uh provides that size and scale, and they'll help the retailers profitably grow the sales in the departments and with the consumers, particularly millennials there in the sweet spot of categories that will take it from a routine category to a growth what the f Stein calls expandable consumption that the more people buy, they'll quickly

consume it and and buy more. So you're you're portraying a world where just a wash in mustard and hot sauce, as well as perhaps some allspice. You know, I have to wonder given the fact that grocery chains have had quite a bit of trouble, given the depressed pricing on commodities on different food staples, as well as distribution challenges, right because we have Amazon buying whole foods, you know, how does this play into that and what challenges do they face that may uh you know, be a little

bit more complicated than past challenges. Lisa, to your present points, let the key retailers in Texas or the fastest growing selling the Latino, African, American and Caucasian and Asian communities answer your question. McCormick's Mayonnaise is one of the fastest growing mayonnaisees uh craft both for miracle whip and craft mayonnaisees uh cut quality and being able to do a combination of mayo in In addition to spice product all the way across salet, snacks, condiments, uh, pickles, a lot

of other things that McCormick can move quickly on. Retailers want this, They're excited about it. Consumer consumers will be very all right, hang on, hang on, hang on, let me ask, let me just let let let's just get your your detail. On another topic, I happen to do with Lawrence Curtis, right, he is the chief executive of McCormick. But he hasn't been in that role for very long, or has he. He's he's been for a few fist goals, and but Lawrence was in charge of marketing, uh, president

and CEO for a long time. Okay, So this is something that that that a veteran because if he is a veteran of McCormick, I mean he's spent many many years there. Uh yeah, PIM and LI. So you could, you could, You can take any CpG company nationally internationally. Lawrence is one of the best marketers, executive leaders, and business builders anywhere any country. He can make this work.

I sorry, can he make this deal work? Because I mean, right now you have a situation where their stock is down five and a McCormick stock is down five and a half percent. The record stock is up about one uh. And you know, you look at that chart of McCormick, it's not good by one. Courtys should make it. Make it work too. This will be this will be a stock even in an overvalued market. Uh. There will be up in two years. And it's an individual investor, I'd

be buying more. And I don't say that lightly because there are very few stocks that that I'd recommend at this point. All right, Bert Flickinger is absolutely bullish on McCormack after this acquisition. Shareholders not so much right now, but we'll see if they joined Burnt in his enthusiasm for hot sauce and Mannise. Bert flickinjer managing director at Strategic Resource Group, coming to us on the phone. This is the era of data that just is more and

more of it being churned out by huge companies. You're talking from Amazon to Google to IBM uh and it's getting more tricky to stored. All enter company called Looker, which is trying to assemble data from the variety of different places that companies have stored uh stored it without having to extract it from those platforms to give us more of a sense of what really this means, because

I'm sure I butchered it. Frank b. N He is chief executive officer of Looker, which is based in Santa Cruz, California, and also joining us as man Deep Singh industry analysts at Bloomberg Intelligence, who's based Who's in Chicago today? Frank, did I totally butcher that? Can you explain a little bit better what it is that Looker is seeking to accomplish? Sure?

Thanks a lot, I appreciate you having me on this morning. Um. Yeah, you know, look, there's a software product, I mean where a software as a service cloud product that helps companies. Think of it as putting data into the hands of everyone to make better decisions. You know, in the past, I think we served the c suite, or we we gave data to the CFO, or we gave data to

the important people. And now what we're seeing is we're seeing companies who are who are disrupting their industries really put data into the hands of everyone so they can make better decisions. And and I mean we're doing like you said, we're doing it at interesting companies, you know, places like Amazon or the Economist or Sony Gaming, you know,

Blue Apron, Twilio. So so it's the companies who are disrupting on data or finding if they if they give, if they give better information to the people in their organizations to make better decisions that they can they can actually you know, work more on on you know, fact rather than just intuition. Man Deep maybe just explained to us exactly where this fits in and what kind of

growth the industry is seeing. We think bi analytics is about a fifteen to twenty billion dollar market growing at ten percent, and part of the growth, like Frank said, is coming from this wave around a self service analytics where companies are now letting their line of business users to leverage analytics and really do it on their own raw than giving it to an I T. Department to

crank out reports. So that has really driven the market and I think it's it's there's a lot of upside to you know, just the growth Outlook, Frank, I'm trying to wrap my head around what exactly it means to give the consumer, the little guy, uh, the access to leverage data. Does that mean when somebody is looking up their Twitter statistics to find out how many of their users are fake or does it mean, uh, they can use Amazon data that they've accumulated to give them a

personality profile of themselves. Yeah. It. You know, it doesn't even have to be that complex. You know, companies you know are operating, you know, with lots of systems. You know, they have customer support systems, and they have finance systems, and they have all of these things. But think think if I'm just a customer support person on the phone and I'm helping I'm helping people every day, I want to have access to exactly what's happening. I want to

have access is the person I'm talking to? Are they not paying their bills? Are they behind? Are they you know, have they filed a lot of customer support tickets? What's their overall health? How should I be you know, kind of thinking about it when I'm talking to them in

real time, you know, at that moment. And I think, you know, data has done well to serve the big science projects that you mentioned, you know, like what's happening on Twitter things like that, but it hasn't really been democratized, right, It hasn't really been put into the hands of everybody, and what we're trying to do a looker is put it into the hands of everybody, like those customer support people or or people on the warehouse floor taking pictures

of merchandise. How are those pictures, you know, performing on the web really put it in the hands of everyone so they can they can you know, make better decisions every day. Frank, there's a tension here because on one level, it's important to have a certain democratization of information, and on the other hand there's some pretty big privacy concerns that this race is as well. How do you address that? Yeah,

that's an interesting question. So data has been really decentralized, and there's been this proliferation of lots of like spreadsheet tools and workbook tools and and things that people carry around on their on their laptops. And that's a big security problem because you know, people go around with patient, private, private information on their laptops or things like that because

they're downloading these spreadsheets. And what we're trying to do and look or is sort of bring control over all of that so that there's this single source of truth, but it's also managed and governed in their security around and I think that is a huge issue because we've really been suffering over the last ten years of a proliferation of small tools that let people walk around with

stuff on on their desktops and laptops. Tell us about this language that you've developed, and why people should now go and have to learn another computer language, not more middleware please. Yeah, no, we're not. We're not, you know, saying that that business users would learn any kind of data language. But but you know, people coming out of school today who want to get into tech are often looking at data as a career. And you know, you have a lot of people are majoring in economics or

business and and they're doing data stuff. It's one of the fastest growing career paths. Yeah, you end up taking that sequel server course right exactly. And what we want to do is we want to give those people interesting tools so they can better serve their companies. So the people in the company and the support team or the you know, the warehouse, they're not you know, learning a

data language by any means. But we're sort of leveraging these people who are coming out of school with a bit of data background and allowing them to curate an experience, right, curate you know, a better application for those for those end business users, Man Deep, what's the barrier to entry here? Why aren't some of the behemoth tech companies coming up with their own analytics systems and UH and using them

to democratize their offerings. I think right now, this is coming up bottom up, So you're you're seeing a lot of the startups, I mean a Tableau and Click are not startups anymore. But they really came up with a new way to think outside of the data warehouse realm. So a lot of this kind of functionality was done in a dataware housing platform. What these guys did was came up with this self service analytics platform where, like Frank said, you you can have the users crankout reports,

analyzed the data. And this whole proliferation of cloud and AI is actually a tail wind for for this analytics wave. So the large behemoths are still catching up, you know, just integrating the new technologies, and they haven't really focused on the analytics aspect that much. Man Deep, can you just give us a little more detail about artificial intelligence?

Give you about thirty seconds here, sure, So AI is really coming together in the sense that the basis of performing AI analytics is data and once you have data aggregated and you can process it in real time through cloud, it enables a lot of things in terms of doing things real time, which can drive our o I for a lot of industries. So that's really the genesis of this wave of self service analytics. Frank, I'm only going

to give you ten seconds. Ai. Yeah, No, I think that you know, we're finally starting to see, you know, out of the benefit of the cloud platforms at Amazon and Google and whatnot, the ability for everyone to be like those organizations. And I think you'll see those kind of technologies go into the hands of smaller you know, or smaller companies. Thank you very much, Frank Bien. He is the chief executive of Looker. They are based in Santa Cruz and our thanks to man Deep Singh, industry

analysts for Bloomberg Intelligence. One of the biggest movers today in the stock market is Scripts Networks Interactive, with a gain in its shares of about fourteen and a half percent. This comes after Discovery and via commercead to be talking about combining with this network and just for anyone who doesn't know, we're talking HDTV and food network. People want uh, some some food throwdowns and some renovations of their homes.

Here to give us a little bit more of a sense of how realistic a deal is is Alex Sherman, Technology Media and Telecom Mergers and Acquisitions reporter for bloom Brick News. Alex, do you think, first of all, who do you think has the upper hand? Discovery or Viacom. So this is a tricky one because I think there are problems with both buyers um and that, and therefore, while the market seems to be pretty confident that a deal is going to happen here, I am less confident.

I can look, I reported this story, so I can say that there is a sales process going on. But Scripts has been perennially for sale. Three years ago. Discovery almost bought Scripts and that deal fell apart. So there is some logic there that Discovery is at least interested. And Discovery has a lot of programming that is geared towards men in general, and Scripts has a lot of programming that is geared toward women in general. So there

there is sort of a natural fit there. But that deal didn't get done for a reason, in part because there was a bid ask difference. And now if if Scripts is running a sales process, you'd imagine again Discovery would have to pay up. And Discovery is controlled or at least not quite controlled. But let's say thirty of the votes are controlled by John Malone, who is not known to bid up in auctions, So that is a

problem with Discovery. Viacom's problem is if you take a look at Viacom shares, you don't You only have to go back until about March or so when Viacom was trading out about forty six dollars a share. They're now trading at thirty six dollars a share. So any deal with Viacom would probably be at least some component of it would be stock, and they sort of missed their chance to use their currency. Well uh, and now their company is about fourteen fourteen and a half billion dollar

market cap company. Scripts is about let's say a nine point eight nine point nine is almost ten billion dollar market cap company. It would be a huge deal for Viacom, and they wouldn't be using their stock at its high price, So that's probably the problem with Viacom. They're just from a financial standpoint, this would be an enormous bet. Viacom almost merged with CBS. Is Scripts really the right bet?

I don't know. Doesn't this also lead to Sherry Redstone, So there's control issues on both front to your point, because say you need a genealogical assistant here, because there are a lot of tangled right. So Summer Redstone is still alive, but not the only family, right. But ya, exactly, They're all run by families, which is, by the way, a bigger reason, even beyond Viacom, why any of these media deals haven't happened yet. So let me take a

step back here. All of these media companies probably should consolidate with each other, and by all I mean a MC, Scripts, Discovery, Viacom. They're all challenged right now because cable providers are offering skinnier bundles where they for years and years and years, these companies have done phenomenally well because when it came time to negotiating contracts with the PayTV providers I mean the Comcast, Direct TV, Dish Network, etcetera of the world,

how you get your TV. When it came down to negotiating contracts with them, the deal was you either take all of our channels or none. That is starting to happen less and less these days because the leverage has moved towards the PayTV providers who have basically said, we'll take none and then what are you gonna do about it? Uh? And the reason they're being that you can get a lot of these programming, the taped programming in other ways. You can get some on Netflix, you can get some

on Hulu. Uh. You know, I want to just go a little bit broader. And when we're talking about h g TV, we're talking reality television shows, and I'm wondering how much their business model is being challenged by YouTube and the fact that the barrier to entry has just gone down so dramatically, So a lot of the programming has been challenged. The programming that has not been challenged is live programming because you can't get that on YouTube.

But Discovery and and viacommon scripts they don't have live programming. So they are really in the crosshairs of how people watch TV changing and and and it's it's not it's it's not good for these companies, which is why theoretically they could merge and then they could sort of have a little bit more leverage because they could be like, well, we have these three channels that are still good, like HDTV, A lot of people still watch that. And you know,

Discovery has a few channels that people still watch. And yeah, we have a bunch of these channels that nobody still watches. But if we put our combined forces together, we come up with a company that at least still has some average. Of course, you end up then with a huge company that has a lot of channels that nobody still watches too, So this runs both ways, where yeah, they get a little bit more leverage, But then what are you gonna

do with the fourteen channels that no one's watching anymore? Wow? I don't know what I know. That is the challenge, I guess. But but Alex, can you just do a little family feud for us? I was on a family feud by the way, like literally on family. But we got to talk about that, all right, family, I love it, alright. So did you get to meet Richard Dawson. It was not Richard Dawson. It was Louis Anderson. I was not kissed on the cheek by Richard Dawson. All right, So

who are the families involved here? So the families are the Redstone family, runs Viacom. Sumner Redstone is still alive. He's very ill. Sherry Redstone has basically been running the company and in his stead for years now. Scripts is also owned by a family, and it's the idea behind whether or not Scripts would sell has always been like, well, the family is on board if the price is right. Discovery is owned by John Malone. A MC is owned by the Dolan family. There are you know. CBS is

sort of a free radical. That's the Deaths John Malone's term out there, but but only in the sense that the Redstones of course controls CBS two. They're only a free radical in the sense that less Moonvez maybe has more control than than most CEOs with that company. So some people think that CBS might be able to do something on the pure force of less Moonvez, the CEO of that company, even though he doesn't own it. So

each of these families is owned. Each of these companies is owned by family, and yes they're publicly traded companies, but whether or not they actually trade depends really on whether or not the families want to keep owning the company or whether they're game to do a deal. As always, thank you very much, Alex Sherman. He is our mergers

and acquisitions reporter for Bloomberg. Well, I want to turn to Ksey Matthews, an economist and the chief investment officer for U m B Bank with the responsibility for over eight billion dollars. They're based in Kansas City, and Casey Matthews, thanks very much for coming into our Bloombrook studio. Good morning, Good to see you. I'm wondering if you could. First of all, I'm outgunned here because I understand that there are two people in the studio who have connections to Wisconsin.

That's right, grew up just outside Milwaukee, Wisconsin, all right, and Lisa Abrahmwitz. Come on. My mother's family is from Wiscon, Okay. So that reason I ask is what is the view of what is going on, not only with the politics and song, but with money and people's relationship. What do they think to feel confident that the stock market is going to stay moving higher? Well, yeah, let me let

me start with maybe confidence in the business sector. I'm more of a mackerel stage, and we'll get into the micro. But it's interesting that when you look at some of the surveys the n F I b small business optimism. Clearly, business owners and executives feel good about things, but when you ask them, what are you gonna do about it, they're sitting on their hands because they're saying, tell me what my tax rate is going to be, tell me

what my regulatory environment is going to be. So they feel good that there's a light at the end of the tunnel, but until they get some concrete evidence that confidence the lack of uncertainty, they're not going to take

any action. And that's why you see a mediocre economy. Well, you know, I'm interested in in the fact that you start on this note because we were just talking about frankly, how the bump that we've seen in stocks has been less due to President Trump's election and the expected changes politically, but more due to the earnings growth that we've seen and the boom there. So it's sort of trusts with this sitting on the hands wondering what's going to happen.

Mediocrity that you're describing when you're talking about the expected eight percent growth that you are looking for in the second quarter earnings and earnings growth in the second quarter, that's right. Well, if you go you have to go back to end of two thousand and fourteen, where we saw an earnings recession. In corporate America, we had seven

quarters of earnings contraction. It's interesting the timing. It wasn't until the third quarter of two thousand and sixteen when we got the data, was middle of October through November. The election, right, all of a sudden, we saw this ray of sunshine. Earnings turned positive at whopping two percent in the fourth quarter they were eight or nine the first quarter of this year eighteen percent, and all of a sudden, stocks moved and a lot of people label

at the Trump rally. Well, I call it an earnings rally. So do you think that people are conflating the election with the earnings growth that we saw really accelerate at the beginning of the year. So just translate this into market positioning. Does this mean that you are bullish on US stocks? And if so, which sectors in particular? And how much longer can this rally continue? Yeah, we are bullish on stocks. Were overweight risk based assets for a

number of reasons. The macro data points to an improving economy. One thing I look at is the I s M new orders, very leading indicator when business owners and executives tell me they're placing orders, it tells me their business is good. Um, so we're at you know, two year highs on those numbers. The bond market gives us clues when you look at the shape of the yield curve. We have at a ninety basis point a slope between twos and tens. And typically when you start to see

the yield curve flatten, which we started to see. Even when it gets flat, you still have twelve to twenty four months before the stock market reacts. So I believe that earnings will continue to support stock prices. That's not to say we won't see a correction. We haven't seen a correction a long time. They're normal and healthy. But longer term, I think stocks will outperform fixed income. In cash sectors, we like you know, you've seen some weakness

in the dollar that will help exports those industrials. We do like finance finances sitting here waiting for a steep yield curve, higher interest rates, and regulation reform. So we're pretty broad based as far as our sector allocation. I want to ask you turned back to something you said about the business feels right that was the macro picture. Um, what if the macro picture is about ever increasing uncertainty.

In other words, you're waiting for the dust to settle, and the companies that are making new strides and whatever it is, they're not waiting for the dust to settle because they realize that it doesn't settle anymore. You have too many market participants. You have too many uh companies that can come in with a laptop and you know, genius mind and disrupt the entire transportation industry like Uber

or hotels like Airbnb. Well, I think what happens is if you don't get clarity on some of these issues, you're stuck in the mud at that two percent GDP growth. So yeah, but they're not going to do it for the health of the GDP grow They're going to do it because they know that they can make more money. That it's good for their business. Right. But so if the competition comes in, you know the guy down the street says, well, no, I'm gonna offer it better, faster, cheaper. Well,

those are disruptors that are in the marketplace today. Amazon. Does that need to happen more? I mean, so I'm wondering why you would you be investing in, you know, like healthcare and biotechnology and technology. Is that not an area of where you want to put some of your chicks. Sure? Absolutely. Like I said, we're pretty much diversified across broad sectors because of that situation. But I think that's that healthy competition makes us better, makes corporations better, more efficient. It

will increase earnings and of course revenue growth. But you've got the disruptors like Amazon, and you've got some of these other companies that um like Nelson Pelts to try in a blue apron. You know, some of these things show up and almost disappear. Well you know, uh not yet. It hasn't disappeared yet, but but it definitely is track. Yeah, it's on that track, you know. Casey. I want to just talk about how you're saying that the fundamentals look

good and so the rally will continue. One problem that people raises that the markets have become broadly public markets anyway, have become broadly detached from fundamentals due to central banks stimulus. And now that the economy is improving, as central banks withdraw the stimulus, it doesn't matter that fundamentals are improving. It's going to cause a sell off that could potentially be more sustained or at least cap any future gains. I mean, are you concerned about that? Does that matter

to you? I'm not. It's interesting some things we think about is does the FED really matter? And when you think about it, well, I would assume most CFOs have termed out their debt if they have access to either capital more keats, or if there's a lot of pressure on banks to term out their debt. Same thing with the consumer now today, something like ninety plus percent of mortgages are a fixed rate. Mortgages are not veritable rate like the housing crisis, So I think you're in a

different environment. So I'm not sure the FED today with this, with seven years of monetary stimulus, really matters if rates, you know, move up slightly, I don't know if it really matters dramatically to corporate runnings. Really interesting, especially because for so long there was is there is no alternative trade where basically people weren't getting an yield in bonds,

you might as well go to stocks. You know, there's a concern that people are going to rotate out of stocks and go back into bonds if yields get high enough. Especially because I mean realistically, if if yields can remain this low, that means that growth will not pick up that much. But you've got a long ways to go before people go out of stocks and into bonds because of the yield. Kasey Matthews, thank you so much for joining us. Truly a pleasure having you in the studio here.

Casey Matthews is economist and chief investment officer. You m B Bank, which is based in Kansas City, Missouri, UH and manages over eight billion dollars need joins us here in our Bloomberg eleven three oh studios. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa abramoids one.

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