00:00:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news, The.
00:00:08
Speaker 2: Stock Movers podcast, your roundup of companies making moves in the stock market, harnessing the power of Bloomberg Data.
00:00:17
Speaker 1: I'm Karl Masser along with Tim Stenovic. So let's get to some stocks on the move. First up, we want to talk about Coca Cola, which said it plans to launch a new coke product for American consumers. Tim made with US cane.
00:00:28
Speaker 3: Sugar this fall. It's something the administration kind of wanted them to do.
00:00:31
Speaker 4: Bloomberg Intelligence Senior analysts for Consumer Products, Ken sche joins us from New Jersey on Coca Cola. Can we spoke to you last week July seventeenth, you joined us. You also had a no doubt that said Coca Cola was unlikely to move completely to cane sugar. I should say you were absolutely right about that. They are not getting rid of hypertoast corn syrup. It sounds like what they're doing is coming out with a new cane sugar version of Coca Cola. What can you tell us?
00:00:56
Speaker 5: Yeah, Hi, Tim, Well, as we expected and fully with what Coca Cola has been saying all along, and that is it wants to be a full beverage company. So if there's a demand for you know, a niche or a segment of the market that it feels they can play in their economically, it's going to do it. And so the keen sugar product extension really of the brand Coca Cola is no exception. We already know there's a demand for it, you know, lots of consumers like the Mexican coke they call it gets imported into the US and some selected markets. There's actually some small competitors that use it. Only small competitors because it's more expensive version of a sugary drank. High fructose corns chaper is much less expensive. But I think Coke is really smart in bringing this out, not only because it appeas to the president, but also because it is a niche product. COC likes to play in different niches to see what, you know, can work and what might not. But it's willing to take a chance, and it's one of a few innovations that has the store for the second half that I think investors are embracing.
00:01:57
Speaker 3: Here.
00:01:58
Speaker 1: Wait forget me, this is an innovation just switching the sugar, and it already makes it as I know it's something Tim likes and my husband loves because he'll order it like the Mexican.
00:02:11
Speaker 3: Coke comes in glass too, which is aweso exactly.
00:02:14
Speaker 4: That's why it tastes good.
00:02:15
Speaker 1: Help me understand, because innovation to me is something new and different.
00:02:20
Speaker 5: Okay, so maybe it is not a full blown innovation, but it's certainly a product that isn't mainstreamly put it that way. In the US, you know, high fructose corn syrup versions of sugar free drinks Coca Cola have been really the mainstay, primary version since the nineteen eighties, just because it's less expensive. Most consumers don't know the difference. Some affects cionados or soft drinks certainly do. And so it's I think it's going to be more of a niche product, maybe not an innovation. Maybe that's itt'll stretch, but we'll see how they brand it in terms of it's certainly going to be a premium priced product for an other reason to cover the cost. But I think it's going to be sold you know, in some markets at like I said, at a premium price, not not all their channels, most of the channels, though.
00:03:05
Speaker 4: How much more expensive is cane sugar from the US versus high for toast corn syrup.
00:03:10
Speaker 5: I want to submit about twice the cost on a per unit basis. That's a rough rule of thumb, but that's generally generally the way analysts look at it. And so you know, like I said, they've shied away from it. There hasn't been a high clamoring for it until recently. And so look and have some fun with it too. You know, they're gonna come out with this and they're going to see where it takes them. It's one of a few innovations though maybe not an innovation, but a trend, I should say of the protein drinks, again, not a new innovation, but it's certainly taken off because of consumers are recognizing that it's a it's a great way to have a post recovery for the GLP one drug users. It's a great way to replenish maybe lost protein with the way it loss. There's been a recovery and sports drinks. So these are all areas where Coke's going to invest heavily in the second half to try to keep the growth engine going the business.
00:04:09
Speaker 1: Just to tie it up here, the business that Coke doing, I mean they're massive still, right, they are a big player in the global beverage market.
00:04:17
Speaker 3: But their business overall, how would you describe it.
00:04:19
Speaker 5: I would say today reinforced. It's right on track. You know, they pretty much reiterated their growth expectations for the year. Their long term growth algorithm, as they call it, is for four to six percent organic revenue growth annually, and they still see five to six for the year. So it's right on track. With that and a little earnings leverage, they can try to get to big to high single digit EPs growth over the longer term. I think investors are pretty much ashured, reassured. I would say solid result, yes, all.
00:04:48
Speaker 3: Right, really appreciate it.
00:04:49
Speaker 1: And shares of Coca collar we should point out they're up around twelve percent year to date.
00:04:53
Speaker 3: Hey, Ken, thank you so much.
00:04:54
Speaker 1: Ken. Shay Bloomberg Intelligence senior analyst for consumer products joining.
00:04:57
Speaker 3: Us in New Jersey.
00:04:58
Speaker 4: Does it actually taste better?
00:05:00
Speaker 3: I'm not a soda drinker except for ginger ale.
00:05:02
Speaker 4: When only good figure it out blind taste tests, we'll do it.
00:05:06
Speaker 3: Let's do it.
00:05:07
Speaker 1: Yeah, all right, So let's go from one iconic brand to another.
00:05:10
Speaker 4: Yeah, let's talk a little bit about what happened with a General Motors profit fell as. The company said had suffered one point one billion dollar profit hit from President Trump's tariffs. It revealed no plan for a near term fix to return to pre tariff profit levels. David Welsh is in our Detroit News bureau. He joins US from Detroit. He's been covering this company for years. So headline we're all talking about is that one point one billion dollar hit. Break it down for us, How exactly did this end up hitting GM so hard.
00:05:38
Speaker 6: They have a lot of exposure because close to half of the vehicles that they sell in the US are important, so they're paying a lot in tariffs. There are things that they're going to do to try to mitigate those costs, but they're in the early days of doing that, so you didn't see the impact of that stuff in the second quarter. And even if all of it had come to fruition in the current quarter or in the previous quarter, it would only off set a third of that. So there's a long walk to get to the pre tax profitability that the company had, and to do that, they're going to have to relocate production of some vehicles some parts in the US. They announced a four billion dollar investment which will do some of that, particularly vehicles in Mexico, but they still import vehicles from Korea. They're waiting on a trade deal there. It's one of their top sellers, the Chevy Tracks, they sell two hundred thousand of them a year, and it's getting hit with a big tariff on South Korea. So you know, these are not easy things to deal with. There is no quick fix for it. You can't just pass the cost on to consumers because they're already paying very high monthly payments because car prices are very high and so our interest rates. So there's no real way out of that. And they had some other operational issues that had nothing to do with tariffs that also hurt their profits in the quarter. So you know, all in it was like it was a terrible quarter without the tariffs, but it wasn't a great one either, And there's no easy way around that.
00:06:53
Speaker 3: A billion dollars on its own sounds like a lot. A billion dollar hit. It's not something a company wants.
00:06:58
Speaker 1: Is it big in the the grand scheme of General Motors?
00:07:02
Speaker 5: No, it is.
00:07:03
Speaker 6: I mean they're going to see exposure this year from tariffs at forty four to five billion dollars, and like I said, they'll offset some of that, but that's a lot here, and so put it in perspective, you know, they're EBIT. The operating profit for the North American Business loan was four point four billion last year two point four billion this year. So and that's their big profit generator, is that North American business. So half of that hit was tariffs, and there were other things like warranty costs, like building up inventory for electric vehicles, which they're selling more of and trying to really grow as a business, but those vehicles lose money. That's another area that actually hurt profits for them. But that took their EBIT down by twenty five percent in the quarter alone, the teriff hit. So it is a very big deal and it's it's something that they just can't easily rectify.
00:07:52
Speaker 4: Well on the rectifying this, David, somebody from the Trump administration, if they were sitting here, might push back and say, this is ex exactly why we have this policy and effect so the work that is done outside of the US by workers who are not American will be moved to the United States and will then in turn be done by American workers. Is that realistic.
00:08:13
Speaker 6: Well, they are going to get some of it back with GM announced a big investment in the US and it's worth three or four thousand jobs making pickup trucks and small Chevy Equinox SUVs that are made in Mexico. They'll still make some there, but they're going to make a lot of them here in the US too, and also probably will take some production away from a pickup truck plant in Canada as well. So it is bringing jobs back. And the other argument that Trump administration would probably make is GM's not raising prices because it's not really clear that they can get a lot of pricing out of consumers. So really the Trump administration is taxing GM, not taxpayers, not consumers with these tariffs. So they would say, hey, it's not been going to be this inflation everything that the critics said, and it's going to raise money for the federal government, and it's going to hurt somebody's profits and disappoint some Wall Street analysts and investors. So that's the other side of this, and I think that's going to be the case with all the automakers going forward for the next couple of years.
00:09:13
Speaker 1: Hey, listen to anything on the call, or any questions that are still you feel like not completely answered in your mind or in the minds of investors.
00:09:20
Speaker 3: As you reported this story out.
00:09:23
Speaker 6: There is an open question about raising prices on vehicles. There's no way they could recoup all of the tariffs by passing those costs on to consumers. It's just too much money. But we have seen other car companies sneak in the little price hikes here and there. Does GM start to do that at some point? Right now they're saying they're holding the line and they're not going to do it. But that is what we're really watching with GM and all its competitors in the next six months is what happens as we get trade deals, there will still be higher tariffs. What happens with pricing going forward?
00:09:55
Speaker 2: The Stock Movers podcast from Bloomberg Radio. Check back with us throughout the day for the latest roundup of companies making news on Wall Street and for the latest market moving headlines. Listen to Bloomberg Radio Live, catch us on YouTube, Bloomberg dot com, and on Applecarplay and Android Auto with the Bloomberg Business app.
Speaker 1: Bloomberg Audio Studios, podcasts, radio news, The.
00:00:08
Speaker 2: Stock Movers podcast, your roundup of companies making moves in the stock market, harnessing the power of Bloomberg Data.
00:00:17
Speaker 1: I'm Karl Masser along with Tim Stenovic. So let's get to some stocks on the move. First up, we want to talk about Coca Cola, which said it plans to launch a new coke product for American consumers. Tim made with US cane.
00:00:28
Speaker 3: Sugar this fall. It's something the administration kind of wanted them to do.
00:00:31
Speaker 4: Bloomberg Intelligence Senior analysts for Consumer Products, Ken sche joins us from New Jersey on Coca Cola. Can we spoke to you last week July seventeenth, you joined us. You also had a no doubt that said Coca Cola was unlikely to move completely to cane sugar. I should say you were absolutely right about that. They are not getting rid of hypertoast corn syrup. It sounds like what they're doing is coming out with a new cane sugar version of Coca Cola. What can you tell us?
00:00:56
Speaker 5: Yeah, Hi, Tim, Well, as we expected and fully with what Coca Cola has been saying all along, and that is it wants to be a full beverage company. So if there's a demand for you know, a niche or a segment of the market that it feels they can play in their economically, it's going to do it. And so the keen sugar product extension really of the brand Coca Cola is no exception. We already know there's a demand for it, you know, lots of consumers like the Mexican coke they call it gets imported into the US and some selected markets. There's actually some small competitors that use it. Only small competitors because it's more expensive version of a sugary drank. High fructose corns chaper is much less expensive. But I think Coke is really smart in bringing this out, not only because it appeas to the president, but also because it is a niche product. COC likes to play in different niches to see what, you know, can work and what might not. But it's willing to take a chance, and it's one of a few innovations that has the store for the second half that I think investors are embracing.
00:01:57
Speaker 3: Here.
00:01:58
Speaker 1: Wait forget me, this is an innovation just switching the sugar, and it already makes it as I know it's something Tim likes and my husband loves because he'll order it like the Mexican.
00:02:11
Speaker 3: Coke comes in glass too, which is aweso exactly.
00:02:14
Speaker 4: That's why it tastes good.
00:02:15
Speaker 1: Help me understand, because innovation to me is something new and different.
00:02:20
Speaker 5: Okay, so maybe it is not a full blown innovation, but it's certainly a product that isn't mainstreamly put it that way. In the US, you know, high fructose corn syrup versions of sugar free drinks Coca Cola have been really the mainstay, primary version since the nineteen eighties, just because it's less expensive. Most consumers don't know the difference. Some affects cionados or soft drinks certainly do. And so it's I think it's going to be more of a niche product, maybe not an innovation. Maybe that's itt'll stretch, but we'll see how they brand it in terms of it's certainly going to be a premium priced product for an other reason to cover the cost. But I think it's going to be sold you know, in some markets at like I said, at a premium price, not not all their channels, most of the channels, though.
00:03:05
Speaker 4: How much more expensive is cane sugar from the US versus high for toast corn syrup.
00:03:10
Speaker 5: I want to submit about twice the cost on a per unit basis. That's a rough rule of thumb, but that's generally generally the way analysts look at it. And so you know, like I said, they've shied away from it. There hasn't been a high clamoring for it until recently. And so look and have some fun with it too. You know, they're gonna come out with this and they're going to see where it takes them. It's one of a few innovations though maybe not an innovation, but a trend, I should say of the protein drinks, again, not a new innovation, but it's certainly taken off because of consumers are recognizing that it's a it's a great way to have a post recovery for the GLP one drug users. It's a great way to replenish maybe lost protein with the way it loss. There's been a recovery and sports drinks. So these are all areas where Coke's going to invest heavily in the second half to try to keep the growth engine going the business.
00:04:09
Speaker 1: Just to tie it up here, the business that Coke doing, I mean they're massive still, right, they are a big player in the global beverage market.
00:04:17
Speaker 3: But their business overall, how would you describe it.
00:04:19
Speaker 5: I would say today reinforced. It's right on track. You know, they pretty much reiterated their growth expectations for the year. Their long term growth algorithm, as they call it, is for four to six percent organic revenue growth annually, and they still see five to six for the year. So it's right on track. With that and a little earnings leverage, they can try to get to big to high single digit EPs growth over the longer term. I think investors are pretty much ashured, reassured. I would say solid result, yes, all.
00:04:48
Speaker 3: Right, really appreciate it.
00:04:49
Speaker 1: And shares of Coca collar we should point out they're up around twelve percent year to date.
00:04:53
Speaker 3: Hey, Ken, thank you so much.
00:04:54
Speaker 1: Ken. Shay Bloomberg Intelligence senior analyst for consumer products joining.
00:04:57
Speaker 3: Us in New Jersey.
00:04:58
Speaker 4: Does it actually taste better?
00:05:00
Speaker 3: I'm not a soda drinker except for ginger ale.
00:05:02
Speaker 4: When only good figure it out blind taste tests, we'll do it.
00:05:06
Speaker 3: Let's do it.
00:05:07
Speaker 1: Yeah, all right, So let's go from one iconic brand to another.
00:05:10
Speaker 4: Yeah, let's talk a little bit about what happened with a General Motors profit fell as. The company said had suffered one point one billion dollar profit hit from President Trump's tariffs. It revealed no plan for a near term fix to return to pre tariff profit levels. David Welsh is in our Detroit News bureau. He joins US from Detroit. He's been covering this company for years. So headline we're all talking about is that one point one billion dollar hit. Break it down for us, How exactly did this end up hitting GM so hard.
00:05:38
Speaker 6: They have a lot of exposure because close to half of the vehicles that they sell in the US are important, so they're paying a lot in tariffs. There are things that they're going to do to try to mitigate those costs, but they're in the early days of doing that, so you didn't see the impact of that stuff in the second quarter. And even if all of it had come to fruition in the current quarter or in the previous quarter, it would only off set a third of that. So there's a long walk to get to the pre tax profitability that the company had, and to do that, they're going to have to relocate production of some vehicles some parts in the US. They announced a four billion dollar investment which will do some of that, particularly vehicles in Mexico, but they still import vehicles from Korea. They're waiting on a trade deal there. It's one of their top sellers, the Chevy Tracks, they sell two hundred thousand of them a year, and it's getting hit with a big tariff on South Korea. So you know, these are not easy things to deal with. There is no quick fix for it. You can't just pass the cost on to consumers because they're already paying very high monthly payments because car prices are very high and so our interest rates. So there's no real way out of that. And they had some other operational issues that had nothing to do with tariffs that also hurt their profits in the quarter. So you know, all in it was like it was a terrible quarter without the tariffs, but it wasn't a great one either, And there's no easy way around that.
00:06:53
Speaker 3: A billion dollars on its own sounds like a lot. A billion dollar hit. It's not something a company wants.
00:06:58
Speaker 1: Is it big in the the grand scheme of General Motors?
00:07:02
Speaker 5: No, it is.
00:07:03
Speaker 6: I mean they're going to see exposure this year from tariffs at forty four to five billion dollars, and like I said, they'll offset some of that, but that's a lot here, and so put it in perspective, you know, they're EBIT. The operating profit for the North American Business loan was four point four billion last year two point four billion this year. So and that's their big profit generator, is that North American business. So half of that hit was tariffs, and there were other things like warranty costs, like building up inventory for electric vehicles, which they're selling more of and trying to really grow as a business, but those vehicles lose money. That's another area that actually hurt profits for them. But that took their EBIT down by twenty five percent in the quarter alone, the teriff hit. So it is a very big deal and it's it's something that they just can't easily rectify.
00:07:52
Speaker 4: Well on the rectifying this, David, somebody from the Trump administration, if they were sitting here, might push back and say, this is ex exactly why we have this policy and effect so the work that is done outside of the US by workers who are not American will be moved to the United States and will then in turn be done by American workers. Is that realistic.
00:08:13
Speaker 6: Well, they are going to get some of it back with GM announced a big investment in the US and it's worth three or four thousand jobs making pickup trucks and small Chevy Equinox SUVs that are made in Mexico. They'll still make some there, but they're going to make a lot of them here in the US too, and also probably will take some production away from a pickup truck plant in Canada as well. So it is bringing jobs back. And the other argument that Trump administration would probably make is GM's not raising prices because it's not really clear that they can get a lot of pricing out of consumers. So really the Trump administration is taxing GM, not taxpayers, not consumers with these tariffs. So they would say, hey, it's not been going to be this inflation everything that the critics said, and it's going to raise money for the federal government, and it's going to hurt somebody's profits and disappoint some Wall Street analysts and investors. So that's the other side of this, and I think that's going to be the case with all the automakers going forward for the next couple of years.
00:09:13
Speaker 1: Hey, listen to anything on the call, or any questions that are still you feel like not completely answered in your mind or in the minds of investors.
00:09:20
Speaker 3: As you reported this story out.
00:09:23
Speaker 6: There is an open question about raising prices on vehicles. There's no way they could recoup all of the tariffs by passing those costs on to consumers. It's just too much money. But we have seen other car companies sneak in the little price hikes here and there. Does GM start to do that at some point? Right now they're saying they're holding the line and they're not going to do it. But that is what we're really watching with GM and all its competitors in the next six months is what happens as we get trade deals, there will still be higher tariffs. What happens with pricing going forward?
00:09:55
Speaker 2: The Stock Movers podcast from Bloomberg Radio. Check back with us throughout the day for the latest roundup of companies making news on Wall Street and for the latest market moving headlines. Listen to Bloomberg Radio Live, catch us on YouTube, Bloomberg dot com, and on Applecarplay and Android Auto with the Bloomberg Business app.
