00:00 Speaker a
Well, the new administration is working to make the United States healthy agenda again. Minister of Health and Human Services RFK Jr. advocates the ban on several food additives. Bernstein Senior Research Analyst Alexia Howard and Yahoo Finance's Brooke Dipalma have more information about the U.S. food system transformation here, joining our conversation. Welcome to both. Alexia, I will start with you. So, Jr., our new director, is our investors have been trying to think about all the different ripple effects, Alexia and its meaning. You asked in a recent research report, how did RFK Jr. work on the crusades of food additives? This is a big problem, Alexia. I'm curious, how do you answer? What are you telling the client?
01:44 Alexia Howard
Of course, I know this is a good question. I think what's really interesting here is that, well, little RFK Jr. arrives at the scene all of a sudden. At this time last year, we may not have imagined that he was originally the head of HHS today. Well, 15 years ago, when we had slow health and wellness issues, we were very similar. Well, this time, it suddenly happened. And I think what we're seeing is that at the state level, you really make the states really work hard and push some legislation quickly, uh, that's the pressure, I think, on the federal government, uh, uh, uh, trying to push some of that legislation to the national level, because these companies themselves don't want a piece of different legislation to the individual state legislation, UH, 2. So I think it would be very dramatic and, in fact, really have a real impact on the components in this space.
03:09 Brooke Dipalma
Alexia, in the past, we have seen consumers return to changes within the ingredients. What convinces you that this time might be different, and that these CPG brands can win consumers with these alternative ingredients?
03:49 Alexia Howard
certainly. Yes, I think last time around, well, I think the most famous examples are Trix, UH and General Mills taking away a lot of artificial bright colors, uh, Trix's neon colors, and surely, kids don't particularly like the change, we're back to the artificial flavor uh, and once again artificial colors. II I think this time, interestingly, we seem to have more media coverage, with a better understanding of the link between UH, diet and long-term chronic health conditions among consumers. Well, people are more interested in lifespan because of Dr. Peter Attia's performance or um, well, well, good energy. So I'm not saying it's going to be a grand slam dunk, which is really easy for all brands, but I think, well, well, basic work can actually make a meaningful impact faster and to some extent more acceptable.
05:20 Brooke Dipalma
The upcoming ban on Red Dye 3 is happening, and what you have pointed out is that the legislation is being proposed to ban other bans other additives. How can companies prepare for such things? What is the cost of switching these ingredients in R&D?
06:01 Alexia Howard
Of course, I think, well, before we had the GMO label, many of their companies had the GMO organism labeling bill in California in 2012. There was some competition at that time. Also covers UH, UH, The Dye, artificial dyes of things, as well as preservatives. Therefore, many companies, especially those exposed overseas, have already had a lot of experience in reimaging. For example, we had to get rid of trans fat not long ago. Well, this is usually not a matter of time and is about implementing the re-engineering process. It does not necessarily add a lot of incremental costs. Well, maybe there are some upfront, um, some of them, uh, these, um, color changes may have some incremental costs. Well, but I think the more potential consumer reactions a packaged food company really focuses on. Well, either way, I think we'll take a step back and say, you know, thousands of ingredients don't have to be properly scrutinized, all of them, um, that's a worrying issue, so moving towards a cleaner label, simpler ingredients might be the right thing to do.
08:37 Speaker a
Alexia, do you think there is a food company that can do the right thing that can be used as some example, uh, right for others?
08:56 Alexia Howard
Well, I think a lot of the challenger brands I've talked about have been bubbled over the past ten, 15 years, uh, that's the example. Uh, I mean, for example, there is a company called Simple Mill that was recently bought by flower foods that I don't cover, but a lot of those thin popcorn, Dave's killer bread, um, those brands that really start, um, um, that's certain, but it may be more expensive in cost, but it's actually those very clean stuff, those guys are really a very clean stuff. And, we've seen, um, some of the big food companies are actually going in this direction, um, um, obviously not you, uh, uh, you'll think of it, you'll think of it, but 15 years ago, they actually experienced a lot of artificial ingredients, and there's actually a reason, so, it's actually a very obvious product, so it's actually a competent thing, so it's actually a very obvious thing, so it's actually a very obvious thing. Basically, the bar cares a lot.
10:40 Brooke Dipalma
Alexia, I want to hit McCormick very quickly. I mean, their CEO said they saw tips for refinancing activities here. Have you seen McCormick gets improved? Then, on the other hand, how many tariffs will a company like McCormick imported from over 80 countries affect companies like McCormick?
11:16 Alexia Howard
Of course, yes, yes, there are two aspects here. At this point, I do like McCormick because I think the re-formatization of the super loop that reproduces by RFK Jr.’s “Agenda for Make America Healthy Again” will really benefit McCormick’s flavor business. Well, again, if we go back to the parallel situation of 15 years, well, we see a lot of Flavors, um, IFF, Shivadan, Kerry Group, and all did a great job during this period. And I think if we do see a sudden start to a re-engineering cycle, companies like McCormick may benefit from it because they have indeed developed taste capabilities over the past 10 years that should really work. Now, obviously, as far as the tariffs are concerned, as you rightly say, they are well, McCormick imports 80 UH from 80 different countries around the world. Uh, they have 14,000 ingredients that they are introduced from different places. So, yes, well, tariffs are what happens. Well, obviously, Mexico should be fairly safe. That's where we get the debris and a lot of chili, but to rest, the rest of the ingredients around the world, at least for the time being, we're talking about a 10% tariff, so, well, I think, in many cases, we might see their expected shift in the single number of this year on this year, and in fact the basis of the cost, actually being accomplished, actually being certain, actually being certain. Now, interestingly, I think it will affect smaller players like private label store brands, well, because they have lower margins, because they have lower margins, so I think the entire industry will take up a few percentage points priced, which fundamentally accommodates a few percentage points, so the good news is that we do cook from scratch at the beginning in the early stages. So the demand for spices and seasonings is still very strong, uh, the category itself, hot seasonings, related to heat, uh, surely seems to be doing well now.
14:48 Speaker a
Alexia, Brooke, thank you very much today. Thanks for it.
