Whether you're a business leader navigating market uncertainty, an investor seeking strategic insights, or simply curious about the forces reshaping consumer behavior, this episode offers a master class in thinking beyond conventional boundaries to prepare for a rapidly changing future.
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Episode Transcript
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Nik (00:05):
So all this obsession over innovation, maybe the company
should go back to basics andthink about how they actually do
business versus the businessthat they're actually doing.
Caroline (00:15):
Hello friends, old and new, and welcome to Drinks with
Caroline.
I'm so happy you've joined mefor what I believe will be
another stimulating conversationwith an industry expert,
founder or otherwise fabulousperson in the consumer industry.
Nik Modi, I am so happy to haveyou on Drinks with Caroline.
(00:38):
Really, truly, it's an honor.
I think back to the days whenwe were on the same team at UBS
and you came into my office oneday and said I need to go to
London for tea, and it was avery enigmatic comment.
But what then happened was youmet your now wife for tea in
London.
It was a setup by your parentsand it worked, and Disha is the
(00:58):
most amazing wife and mother.
You're an amazing husband andfather and it's just been
gorgeous to see you grow as ahuman being and in your career,
which is really wonderful.
And I haven't got to know yourboys yet, but I know I will over
time.
They're getting quite bigalready.
So, Nik, I wanted to just askyou a little bit about your
approach to life and yourapproach to career and how those
(01:22):
two things converge.
Nik (01:24):
Absolutely.
But, caroline, before we getinto that, don't?
We have to share our drink?
Oh sorry, this is Drinks withCaroline.
That's right, this is.
Caroline (01:32):
Drinks with Caroline.
Needless to say, being aCelsius board member, I've
chosen to drink that in themorning here.
What?
Nik (01:40):
are you?
Caroline (01:40):
drinking Nik.
Nik (01:41):
I'm drinking the viral TikTok sensation known as
proteinin Coke, which isbasically Coke Zero in my case
and a Core Power vanilla proteindrink, and I'm drinking it for
my post-workout drink.
Actually, I just went weighttraining before this podcast.
You know I need to get a littlebit of protein in me.
Caroline (02:01):
That's excellent.
Nik (02:02):
Yeah, it's delicious.
It's like a vanilla float, butnot really.
Caroline (02:11):
Oh yum, talk to us a little bit about your approach
to life and how you balance lifeand work, and a little bit
about strategy, because I thinkyou're a very strategic thinker.
Nik (02:15):
Well, first of all, I would say this kind of comes back to
when I started working for you.
Actually, you know, prior tojoining your team, it was 20
hours a day nonstop, you know,with all my prior gigs in the
same job actually.
And when I joined you Irealized that you can do both.
You can enjoy your life, youcan be really relevant in your
(02:37):
job and work hard.
And at the time you had afamily I didn't, but you did
that as well and it made me kindof rethink and reevaluate how I
thought about everything andyou know, as you kind of get
through equity research andcovering stocks and companies
and talking to CEOs, you startrealizing that everyone has a
strategy right.
And so I said, well, why don't Ijust act like a corporation and
(02:58):
put together a strategic planof where I want to be, what I
want to do?
And it took time to think aboutand then I planned it out and
honestly I got to say it's a bigreason why I am where I am.
I think, like you know, there'sadvice I can give to anyone,
whether you're young or old,it's, it's hey, think about your
own life as a corporation andthink about where you want to be
and how you can get there.
Caroline (03:25):
So thank you for the opportunity to actually
introduce you properly.
Nik Modi, my guest, is theco-head of consumer and retail,
I believe, at RBC, and Nikcovers an astounding number of
stocks officially and an evenmore astounding number
unofficially, and has reallycarved out a place for himself
where boards invite him to comeand present to them on his ideas
for how they could do better,maybe what they're even doing
wrong and he is not afraid tospeak up, which he has done
(03:48):
recently about a need to resetearnings expectations.
But I don't think we're done onthe personal yet.
We're going to go back to thatfirst, I think.
Just really well respected.
One of my favorite images is ofyou talking to the CEO of
Procter, who is probably twiceyour height, and John treats you
with great respect, which isvery well earned, and it's just
a lovely picture.
So, Nik again, let's just talka little bit more about how your
(04:12):
career has gone through thedecades and the period of being
solo, then married with kids,and now where you are and how
it's shifted.
Nik (04:21):
I have two people to really thank for kind of why I am
where I am.
First was Carlos Laboy, who isnow a competitor, but at the
time was a Rutgers alum and Ireached out to him, cold called.
I said hey, I'd love to meetwith you.
And I went up to New York whileI was still in college and he
got me in the door at BearStearns where I first started my
career.
Before consumer goods I coveredinternet, wireless telecom, I
covered for-profit education, Icovered Latin American telecom
(04:44):
companies.
So I had a lot of kind ofexposure.
And then, after jumping arounda little bit, I met this most
wonderful woman.
Her name was Caroline Levy.
You might've heard of her.
Caroline (04:52):
I paid Nik to say this .
You should all know I did, Ipaid him.
Nik (04:56):
Well, do you remember when you asked me for letters of
recommendation and I gave you arecommendation or a letter from
my mother?
Caroline (05:02):
Well, the amazing thing is, I called the formal
ones and I called his mother andI said hello, Mrs Modi, I'm
calling because I might hireyour son, Nik, and I just need
to know what kind of person heis.
And she said oh, he's such agood boy.
Now, if there's any descriptorthat I would not necessarily use
, it was good boy because hetold me afterwards afterwards,
(05:22):
you were a total rascal.
Nik (05:24):
I was a rascal.
Caroline (05:25):
There are no regrets.
Thank you, Mrs Modi.
Nik (05:28):
Yeah, and you know, caroline, I always love to take
public forums to thank you,because you never forget where
you come from At least that's myphilosophy and you really gave
me a lot of confidence.
You let me kind of do things myway, but helped me build my own
fence.
So I was a wild animal at thetime and a lot of what I do is
because of how you train me.
So I just can't thank youenough for giving me the
opportunity and giving me thatconfidence.
Caroline (05:50):
Thank you so much, Nik .
So again, let's talk about thepath to being a beverage analyst
was working on the team, andwhile you were on that team my
team you came up with such agreat idea about a futures
conference.
It was an enormous amount ofwork, but together we published
something about what the futureof consumer would look like, and
it was ideas that were reallyhard to sell at the time.
(06:13):
Passion brands are what countsand now we're really seeing
socially driven brands.
I know you're going to talkabout that, but the consumer,
the passionate consumer, canbuild a brand.
It happened on Liquid Death.
It happened on Celsius.
We talked about the big gettingbig and the small getting small
in the middle getting pushedout.
We talked about health andwellness.
There were other themes and itwas a massive undertaking.
(06:34):
We hired outside people, but,Nik, you really pushed that
through.
So let's talk about how you'vetaken that approach in your own
career.
Nik (06:40):
Part of our job is to forecast and you know, if you
think about any company or anyorganization listening, everyone
wants to kind of get a handleon how they should manage the
future right, or what they needto spend in today to build a
capability to thrive in thefuture.
And so the best way to do thatis to think laterally right, and
to think about what's going onaround the world, not
necessarily what's happening inyour industry, but what's
happening in the world thatcould have an ultimate effect on
(07:03):
your industry.
And I think oftentimes, becauseeveryone in every industry gets
so specialized, they kind oflose that lateral perspective.
And so part of the futuresprocess which, again, I've done
it now four times, twice at RBCand twice at UBS it is just such
an illuminating process right,where you are sourcing ideas and
concepts from people that youwould have no business talking
(07:24):
to, like carbon credit tradersand farmers and nurse
practitioners and neurologists,on understanding how the
consumer is going to act andshape over the next five years.
And so I think, taking alateral approach and you're
right, it was a really hardthing to do, but just like
anyone that's trying to innovate, you have to have courage right
, and I felt so convicted thatthis would help us and give us
(07:46):
another tool to help us do ourjobs better, that I just
wouldn't give up.
And I didn't give up, and I'mglad I didn't give up.
Caroline (07:51):
I'm glad you didn't either.
One of the more fascinatingthings was we went to Boulder,
colorado, and toured a highschool and not to date myself,
but I'd never heard of friendswith benefits and the head of
the school was describing howthat was an issue.
And there were also cops in theschool, which I was like why
are there cops in the school?
And it's like, oh, it'sdangerous, dangerous.
(08:12):
This was all new and this was20 years ago.
So you know, you do see things.
You've got to get away fromManhattan and LA.
You've got to get into thefield and talk to people and
understand people, and I thinkyou actually talk to managements
about that, about thisincredible network they have
within their own four walls.
So let's segue a little bitinto that.
Nik (08:33):
When you speak to a consumer company, you know, at
the end of the day, everyonewants to be consumer centric,
and so they say, you know,consumers at the center of
everything we do.
But the reality is, over time,the consumers become less
important and stakeholders havebecome more important Analysts,
investors, the government, ESG,et cetera, et cetera and in
often cases like you have inbeverage alcohol, the actual
customer is not even the endconsumer.
(08:55):
It's the distributor, and thenthe retailer and then the
consumer.
And so one of the things thatI've been talking to a lot of
companies about is how do youtake the periphery of your
organization, the people thatare closest to the actual people
that are consuming your productthe merchandisers, the
salespeople, the route driversand how do you make them part of
your decision-making process?
Right, and with AI, there's alltypes of ways to garner
(09:19):
information, but you have toreally kind of leverage that
part of the organization to giveyou those ideas and concepts.
I mean, when I spend time inthe market with bottlers, with
distributors, whoever and we'rein these local markets I'm
learning about competitors andtrends that no one ever talks
about, but then six months later, all of a sudden they're a big
deal, and so it's very clear tome that there is so much
information that resides in theperiphery of the organization,
(09:39):
and I think companies need totap into that a lot more.
Caroline (09:41):
I've got a couple of examples of that myself.
I remember going on a tour,actually with Hal Kravitz, who
is now the independent leaddirector at Celsius, but at the
time he was working with someorganization that did some
business with food trucks andthere was this energy drink
called Bang and it was flyingoff the shelves and out of the
warehouses that serviced foodtrucks and that was a real
(10:05):
important data point on a brandthat became very big.
So I really hear what you'resaying.
I think it's exactly right, andthe one other example that
strikes me is Procter Gamble wasstruggling in China, but they
missed the trend because thepeople were being paid on
scanner data throughsupermarkets, but the market for
diapers had shifted to mommystores, which was an unmeasured
(10:28):
channel, and so the locals onthe ground knew they were losing
share, but they weren't aboutto report it back to head office
.
So I really second what you'resaying.
Nik, what other avenues do youtake to think about your
research and maybe talk a littlebit about your recent report
asking companies to be brave,step up, lower the bar and get
yourself into position to bewhat a consumer stock supposed
(10:51):
to be, which is defensive?
Nik (10:52):
Again, because I'm in the market so much and I'm spending
so much time in the industry,it's becoming very clear to me
that a lot of the consumercompanies a big chunk of them
are not prepared for the future.
Right, I think the reality is alot has shifted.
The market's more volatile, theenvironment's more volatile,
more flex needs to be created inthe earnings statement in order
to deliver while stillinvesting.
(11:13):
They're not hiring certaintalent that might be more costly
, like in AI.
Right, it's very expensive, aswe know, and in terms of AI
capabilities, I think they'revery behind and we're not in a.
You know, caroline, back in thegood old days, when we worked
together, being a fast followerwas okay and you could actually
make a business out of it, right?
I don't know if you can do thattoday.
The reality is, if you're notfirst, you're last.
(11:34):
I really believe that, and Ithink AI is going to only
accentuate that over time, andwe can talk about why I believe
that if you want to get intodetails.
That's why I'm urging all thecompanies to lower the bar, and
we're starting to see that.
Procter did it, pepsi did it,kimberly-clark did it,
constellation Brands did it, sowe're seeing it happen Now.
We need to make sure thatthey're investing to make sure
that they're future ready.
Right, and when I think aboutthe future and I think about AI
(11:57):
and I think about agent-basedshopping, it is pretty scary.
I might just put a promptsaying I'm having a party Super
Bowl party.
Please provide me all theproducts that I need, all the
snacks.
We're going to have a barbecue.
I'm going to have 20 people, 10will be kids, 10 adults, kids
aged 5 to 11.
And we have three vegetariansand two people with celiac Enter
(12:17):
.
And all of a sudden, I'm goingto have an agent go shopping for
me and I'm going to haveproducts at my doorstep.
I didn't mention a singlecategory or brand in that
statement, and so how are all ofthese companies going to
survive and thrive in that kindof shopping environment?
That's where we're headed.
Caroline (12:32):
And it's very possible to prepare if you anticipate it
was.
You know, this disruption ofe-commerce was terrifying and
people thought you'll just buywhat you first planned to buy
online and move on.
But now you get suggestiveselling and ads and there is a
way to get this right.
But to your point, you have toinvest.
And the other big thing about abrand I think Mike Cesario of
Liquid Death said it a brand isnot a set of attributes.
(12:55):
A brand is something thatpeople specifically want and ask
for.
And how do you then market toconsumers today?
Nik (13:04):
And who's doing a good job In this world of agent-based
selling?
No one is at this point, but Iknow there are certain companies
that have capabilities and arespending in those areas.
I feel very good.
I just upgraded Procter Gamblebecause the stock came down.
They reset their earnings.
This is a really well-managedcompany that has very advanced
capabilities and they're stillinvesting and I think that they
have a pretty big headstartversus their peers, even in the
(13:25):
world of retail.
I think Walmart, who I justpresented to a bunch of their
digital folks not too long agoin Bentonville they're also very
advanced relative to otherretailers, right.
So the reality is we'restarting to already see players
that I think are already on thecutting edge of some of this
stuff.
But it's going to be real and Idon't think people are talking
about this because they don'tsee it.
But again, this is why we dothe futures work.
Right Is what we have tounderstand what's happening
(13:48):
outside of the industry andwhat's happening in the startup
world to really help inform usof what we're going to be facing
in the future.
Caroline (13:52):
So it sounds very scary for small companies.
That's getting more and moreexpensive just the cost of entry
.
Is there still place for thestartups and the innovators, or
is it in fact an opportunity forthem, because they can bring
unique capabilities and uniqueinnovation?
Nik (14:09):
For me, the way brands will be built in the future is
really going to be productefficacy.
That's going to be the key.
Okay, why do I say that?
It's because we're in a worldof social selling, right?
We're in the world where oursocial networks are basically
informing us what to buy.
It's not the advertisement ontelevision anymore, and
sometimes it might be people wedon't even know, but we follow
online and in that environment,the only way you can get a
(14:30):
recommendation is if yourproduct works so well that
someone's willing to recommendit.
Right, because we could seethrough paid advertisements
online and things like that.
So product efficacy is going tobecome really, really important
, because if a product is betterit tastes better, smells better
, makes you feel better it isbasically going to be something
that you're going to tellsomeone else to buy and that's
how it's going to work.
And so I think productsuperiority, I think blind wins,
(14:51):
I think things like that, likewhat Procter Clorox are doing,
are absolutely the rightstrategies for most consumer
companies to take advantage of,whether you're large or small.
Caroline (15:04):
What role do you think M&A is going to play now?
Does this make it morenecessary, less necessary?
And I think we probably shouldhave started with a tariff
discussion.
But just given the uncertaintyin the world today, do you see
M&A stepping up or people takinga step back and saying let's
just get our house in orderfirst?
Nik (15:19):
Coming into the year, I thought M&A was going to be a
real big theme for this year,but the market is so volatile I
think that has taken a step back, probably put on the back
burner for now.
As things settle hopefully theywill I would expect M&A to
become resurface as an importantstrategy for many companies and
it may not just be two bigcompanies combining or whatever
it might be, a bolt on, it mightbe a capability, but in the
(15:42):
beverage industry, I absolutelybelieve in the next three to
five years we will have completebeverage companies.
I don't think you're going tohave a beer company separated
from a spirits company,separated from a carbonated soft
drink company or anon-alcoholic company.
It's all going to be the samebecause the supply chains are
already starting to consolidateand as that happens, I think the
suppliers will eventuallyfollow, almost like what we see
in the international markets.
(16:02):
Now.
There's obviously certain rulesand regulations you have to be
mindful of, but ultimately Ithink that's where we're headed.
Caroline (16:08):
On the point of distributors carrying both
alcohol and soft drinks, it'slegal for alcohol distributors
to carry soft drinks, but notthe other way around, and that's
part of what's called thethree-tier system.
For those people who aren'tclose followers of the industry,
you're not allowed, as amanufacturer, to sell alcohol
directly to a retailer orcustomer.
In most places.
Reyes, I think, the largestbeer distributor in the country,
(16:30):
probably one of the largest inthe world, if not the largest.
They're also a very large Cokebottler, but they do not put the
Coke products on their beertrucks, is my understanding.
Why is that and when could thatchange?
Or would that change?
Nik (16:43):
They just want to keep the regulatory barriers pretty
finite.
You don't want to have amistake of someone merchandising
a non-ALC product with an ALCproduct as an example,
especially as certain trademarksare starting to be used across
both businesses.
Right, because one mistake canbe pretty costly.
I think they're approaching itthe right way.
Over time, though, regulationswill likely get relaxed.
There'll be more infrastructureand systems in place to make
(17:06):
sure that doesn't happen.
So I think, over time, there'llbe opportunities for this to be
more of the norm, but I thinkthat's probably why they keep it
separate at this point.
Caroline (17:14):
Right.
Do you see the big beercompanies and spirits companies
actually making significantmoves in soft drinks and have
there been examples of successes?
Nik (17:25):
I think BevAlk distributors are looking for non-alk
products to bolster theirrevenue.
What's also interesting isnon-alk distributors, like
bottlers, are interested ingetting into alcohol, and so you
have this really interestingdynamic where everyone is going
to start playing in everyoneelse's backyard or sandbox, and
that's why I'm so convinced thatwe're going to see this
ultimate consolidation over thenext several years.
(17:47):
I don't know when it's going tohappen, but I feel like there's
enough ingredients in the potfor making it happen over the
next few years.
Caroline (17:54):
Yeah, it makes sense to me.
We're definitely shifting inthat direction.
I didn't mention ConstellationBrands, but for the first time,
their beer business has reallysoftened, and so I think they
have to be thinking moreseriously than ever about
alternative products.
Would you agree with that?
Nik (18:10):
Absolutely, look.
I still think there's a lot ofupside for Constellation.
What's happening right now ismore of an air pocket than kind
of a structural change in theircategory or their brand dynamics
.
But absolutely, I think they'rethinking about things like that
and the way we have to thinkabout the beverage industry and
I think Brandy, when you had heron your podcast, made a good
point all about mood management.
We're really in the moodmanagement business.
(18:30):
Everyone listening to this, andyou and I today, will have an
average of eight drinks amongstus.
It could be water, it could bethis protein Coke, it could be
maybe wine at dinner, whateverit is, and it's upon all the
beverage companies to figure outhow to get as many of those
occasions as possible, becausewe drink for certain reasons and
there's relevancy for why we'rehaving a certain beverage, and
(18:51):
so that's why I think it'sreally important for these
companies to think of moreholistically.
Caroline (18:54):
Totally agree with you .
So what do you think the restof the year looks like?
How do you see tariffs shakingout?
I know that you don't have acrystal ball, but I'm just
wondering how you're thinkingabout them and how you're
integrating them into your stockrecommendations.
Nik (19:09):
The way we're thinking about it is look, we think
what's happening right now is alot of public negotiating.
I'm not sure it's beingexecuted as well as I think the
administration was hoping for,but it's going to take some time
to kind of get through this.
Maybe by June, july, we finallyget to a point where we know
exactly what the tariff ratesare going to look like.
That's the main thing is theclarity, so you can manage
(19:30):
around the clarity and so youknow, is it 145% with China or
not?
You know like, what's the real,what's the real number.
I think once we get clarity onthat, then companies will be
able to provide us a betterfoundation of how they're
thinking about the rest of 2025and 2026.
But let's not kid ourselves.
Regardless of this tariff news,the consumer was under pressure
before Trump even took office.
(19:50):
We've been talking about it forthe last 18 months, again being
in the market as much as we are.
That's going to take some timeto shake out.
We have a credit issue withmany consumers, particularly
low-income consumers.
I don't know if you saw some ofthe latest metrics, but buy now
, pay later, which is basicallylayaway, one of the fastest
growing categories on buy nowpay later is groceries.
That is terrible, that isterrifying Right exactly, and
(20:14):
the delinquency rate is rising,and so, at the end of the day,
higher income consumers.
I have three rules of thumb forthe consumer.
Higher income consumers aregoverned by the stock market.
Well, that's not been going sohot right now, and so maybe
there's some weakened sentimentthere, which was not the case a
year ago.
Middle income consumers aregoverned by the housing market.
Well, we're seeing someweakness there, especially
(20:35):
around housing prices, and sothat's going to obviously weigh
on those consumers.
And then lower income consumersare impacted by gas and food,
inflation and food inflation isvery high and wages Right, but
the reality is we're not in agreat place right now for the
consumer.
So I do think this is going tobe a tough year.
I think things are going to gettough before they get better.
And one of my talk tracks whenI go speak to companies and
(20:56):
boards is like we have to reallyface the facts and think about
how can we grow in a no lowgrowth environment.
And so, if they really becreative and take advantage of a
lot of low hanging fruit,what's the low hanging fruit?
There are a couple of areasright.
One is taking advantage of moremerchandising events.
I mean, if you think about,especially for the beverage
industry, labor Day, memorialDay, july 4th, the holiday four
(21:17):
major events and that's whereall the activation occurs.
Well, what about Diwali?
What about Chinese New Year?
What about more broad-basedCinco de Mayo?
I mean, I'm not Hispanic.
I celebrate Hispanic Cinco deMayo.
I'm drinking a lot ofmargaritas in May.
So the reality is, I thinkthere's a lot of opportunity to
activate around these keyholidays, especially if you're a
distributor, bottler and youcan be locally relevant, and you
(21:38):
don't need to sell ethnicproducts to take advantage of
these opportunities.
You just need to be activatedin the market.
So that's point number one.
The second is how do we takeadvantage of virality?
What is happening online islike you don't have to launch a
new product.
This Coke protein Coke thing isa TikTok trend.
It's not a new product.
I just bought a Coke and a corepower protein drink and I mix
them together that could easilybe merchandised at retail.
(22:00):
Together, that could actuallybe a strategy you can take
advantage of to leverage some ofthese viral trends.
And then the last thing isespecially for the C-store
industry and for on-premisevenues.
There are people that ownsingle bodegas that have massive
followings online because theydo something unique in their
store, like cook or make customsandwiches in Brooklyn.
And this one bodega his name,is General Ock.
(22:21):
He's got 5 million TikTokfollowers.
He's got lines forming outsideof his bodega just one box
because people want to getfilmed on making a custom
sandwich Brilliant.
And he ends every video withdon't forget your beverage,
never, ever, ever.
It's like an incredible trafficthroughput strategy that so
many other boxes can takeadvantage of, whether you're a
(22:42):
Walmart or you're a bar orrestaurant or you're a single
bodega in the middle of Brooklyn.
So I think that is.
Caroline (23:03):
It certainly happens already, but I think that's
going to grow in importance.
And you've seen Liquid Death dosome very unexpected ones with
an ice cream company, with elfmakeup, and they make it work
and it stands out.
So I totally agree with youthat creativity and let that
bubble up from the field to theextent that you can.
(23:24):
And there's the dilemma because, on the one hand, you really
need to run centralized ITsystems and big marketing, but
you also need to give leeway topeople in the field, without
leading to an Anheuser-Buschtype blow up where somebody got
it horribly wrong, although Ibelieve the person who got it
horribly wrong was actually athead office, so maybe it
wouldn't have happened if it hadbeen in the field.
Nik (23:45):
It definitely wouldn't have , and this is why I had a sense
of urgency.
In writing.
This reset your earnings.
Note.
In order to equip and organizeyour company to take advantage
of these things that we'retalking about, a lot of work
needs to be done, and thatrequires investment, and that's
why I feel such a sense ofurgency with this message.
Caroline (24:00):
Who do you think are the most important senior people
in an organization today, anddo you think that's going to be
a slightly different in fiveyears?
Nik (24:09):
Oh, that's a great question .
You cannot discount a goodleader.
So, ceo to me I mean, as clicheas it sounds, if you have a
good leader that understands howto play all the players, you
could have a basketball teamsame 12 people and you can have
one coach basically not win anygames, and you can put another
coach in and all of a sudden youhave a completely different
outcome.
I've seen it over and overagain in professional sports,
(24:32):
but also in high school andmiddle school sports coaching my
kids.
I've seen it over and overagain, and so I think a CEO that
knows how to leverage histalent is the most critical.
But I think the boards, caroline, I think I mean and you'll have
a good understanding of thisbecause you're on boards Like I
feel like the boards can play abigger role than they are right
now.
I'm not sure all boards,especially in the world of
(24:53):
consumer, have the right peopleon their board.
There's just a very, very smallpercentage of marketing people
on boards that have marketingexpertise, and I think that's
one of the areas that has really, really been deficient for many
of these companies and they'remarketing companies right, and
that's a problem in my opinion.
I think the statistic I saw islike 3% of all consumer company
board members have a marketingbackground.
(25:14):
That's too low in my opinion.
Caroline (25:16):
I couldn't agree more no-transcript, but I think
(26:10):
there's room to shake things up,is what you're saying, right?
Nik (26:13):
Absolutely, and here's another thing to think about.
One of the models for manycompanies is to take their best
talent and shift them around theorganization, to give them
exposures to different parts ofthe business and to group them
for bigger and better things.
But I would argue that we're insuch a volatile environment and
we have been and it's onlygoing to get more volatile that
you need people that havesubject matter expertise and
(26:33):
domain expertise.
So I would argue, don't moveyour best talent around.
Pay them well, keep them wherethey are, because, at the end of
the day, the best thing to dealwith all the craziness that's
going on is to have intuition.
I've been covering this industryfor 25 years.
I can see things.
Maybe others don't, justbecause I've been looking at it
for so long.
I have intuition on certaindynamics, absolutely, and so I
(26:56):
think Church and Dwight does agreat job about this.
Their brand managers are intheir roles for a really long
time, and that allows them tounderstand the category so well
that they can make betterchoices than maybe their
competitors, and that alsoallows those brand managers to
take on additional M&A and stilldo their core business really
well, right, so there's so manyadvantages to consistency.
Caroline (27:17):
I totally agree.
In fact I do recall a companyyears ago used to move their
people around a lot and thenthey found that because they
were paid on last year'sperformance, they would do
things that weren't in thelonger term interests of the
division because they knew itwouldn't affect their comp and
then they shifted it.
So I think where you put thecarrot is incredibly important
and I think rolling through yourresults is probably a really
(27:39):
good way to give incentivecompensation obviously a base of
cash to live on, to live wellon if they're a busy executive,
but also pay over time forperformance that doesn't just
arrive in a year and disappearthe next year.
Nik (27:55):
I mean, I think what we're talking about in this whole
discussion is there needs to bea lot of innovation in areas
outside of innovation Innovationamongst boards, amongst
organizational design, amongstincentive structures.
So all this obsession overinnovation, maybe the company
should go back to basics andthink about how they actually do
business versus the businessthat they're actually doing.
Caroline (28:15):
I love that comment, Nik.
It's fantastic.
I remember being at a Cokemeeting and they used to sell
the product in what they callthe straight line plastic.
So gone was that wonderfulcontour glass bottle and they
put a great cartoon up with thegraphic and it said the CEO of
Coke has a very, very difficultjob.
(28:36):
And it gave the option of Icould have a straight wall
plastic two liter, or I couldhave a contour two liter and you
tick which one you want.
And it gave the option of Icould have a straight wall
plastic two liter, or I couldhave a contour two liter and you
, you know, you take which oneyou want and he goes, tick on
the contour.
And it was game changingbecause it was such branding, it
was visual branding, you didn'thave to say a word, you just
make the plastic iconic andsometimes it is so simple.
(28:58):
But it's a package innovation.
It's, as you know, beverage.
People know the right packageat the right time in the right
place for the right consumer.
So again, if we look through 25, 26, 27, what do you imagine
the future is going to hold?
You said you've done someinteresting futures work.
Any other conclusions that areinteresting to you to talk about
(29:20):
?
Nik (29:20):
We talked about this agent-based buying right and
shopping.
I think that's going to be abig one.
I think wearables, Caroline, Imean, I hear a lot about the
GLP-1s and don't get me wrong, Ithink they're definitely having
an impact.
I just think it's a lot lessthan people think, because I
think the market is so shallowand narrow.
It's 10% of the population andthey're not even taking it
long-term right.
(29:40):
It's like they lose their 15pounds and then they're off and
it's creating a whole host ofissues muscle density and bone
density and issues that I thinka lot of older populations are
going to have to deal with inthe future.
Caroline (29:50):
So do you think that this is literally big as it's
going to get?
And then it's actuallyshrinking from here because
people understand the sideeffects?
Nik (30:01):
We'll see.
I'm just not as concerned aboutit as I am about wearables, and
I'll get to that in a second.
I covered tobacco for a longtime and I remember Pfizer came
out with Chantix, which wasbasically a drug that you can
take.
It wasn't a patch you can takeit to quit smoking and everyone
thought that was the end of thetobacco industry.
But it wasn't, because whatended up happening is that all
these side effects, the FDA puta black box warning on it and
then people stopped using theproduct.
I'm not saying that's going tohappen to GLP-1, but I just
(30:21):
think that we're thinking aboutthis in a vacuum.
First, one of the greatest newproduct launches in the history
of the consumer productsindustry is Coke Zero Sugar.
It came out of a risk.
So there's going to be a lot ofopportunity for companies to
innovate around GLP-1s.
But the reason why I'm moreconcerned about wearables is
because it actually changes ourbehavior.
It's not a one-time adjustment,but it actually changes our
(30:43):
behavior.
So you have a continuousglucose monitor on and you have
that second glass of beveragealcohol, wine, beer, whatever it
is and all of a sudden yourphone starts going crazy.
You're probably not going tohave the third.
Caroline (30:54):
Either that or you take the wearable off.
Nik (30:57):
Yeah, that is also an option, but there's such an
going to be an advancement.
Like whoop you know, I'm sureyou've heard of the whoop tells
you how you're sleeping.
It's a device you keep on andtells you how you're sleeping.
And I have some young guys onmy team and they tell me like
when they go out for an allnight binger they just don't
sleep and they see the readingon their, on their.
So they're like it helps themcut down.
(31:17):
Because they're like like ithelps them cut down, because
they're like I want to sleeptonight I got to take it easy.
Wearables, ultimately, willstart governing our behavior.
The thing about wearables isthat the advancements are
happening so fast that in thenext few years, we're all going
to have some kind of device thatwill literally tell us in real
time what is happening in ourbody.
There are patents being filedby all types of scientists on
this stuff, and so if that isthe case, then we're going to
(31:38):
start making decisions not basedon what we want.
We're going to be startingmaking decisions based on what
our body wants, and that isgoing to be a really big change
that I'm not sure a lot ofcompanies are ready to handle.
Caroline (31:49):
Nik, I actually think it's the most important thing
you've said.
I think it is so accurate.
You can pretend to yourselfthat that extra sugar drink or
bar of chocolate or bag ofcookies it's just a one-off,
it's not going to do any harm.
Nik (32:07):
But if your phone starts blowing up, you're going to be
worried Absolutely.
And we have to think about thiswithin the context of an aging
population.
Our entire population is aging,the world's population is aging
.
So as we age we're going tohave different requirements,
which is going to give birth toan entire new industry of
ailment-based solutions sayingoh, I need to sleep, boom, I
have my little thing.
Oh, you know, I'm reallystressed, I need to calm down
Boom, I have my little thing.
(32:28):
And so I think there's justgoing to be so much robust
opportunity, especially in thebeverage industry, that I think
is going to pop up as a result.
Caroline (32:34):
Yeah, I love turning this on its head and saying out
of challenge comes opportunity,because I do think that people
are looking for higher qualityingredients.
So if you're going to have toraise prices because of tariffs
or any other reason, give peoplemore of what they need protein,
fiber, whatever.
It is something that helps yousleep and they'll be more than
happy to pay that price.
(32:55):
And you don't have to give themenormous servings.
The serving sizes have got outof control in some parts of the
food chain.
So I do think we can consumeless, consume better and
everybody can win.
We just got to change ourmindset.
As you say, rebase and goforward from there, absolutely.
So, Nik, talk about the kind ofadvice you give to your kids as
(33:17):
they grow up and into the world.
They're how old now.
Sean is 18.
He's going to be going to.
They grow up and into the world.
They're how old now?
Nik (33:21):
Sean is 18.
He's going to be going tocollege next year, to Pace
University, and so he'll beclose by and looking to network
with a lot of finance people.
And Shiv is 15 and he's afreshman in high school.
And what I've been focused onand it took me a while to get
here so for all you new parents,I figured out probably my
oldest was 15-ish that I neededto make them fail as much as
possible.
(33:42):
I think that's one thing oursociety has gotten away from is
failure and dealing with failure, and so I've gotten my kids
into so many situations where Iknow that they're going to mess
up and fail, but I'm around tohelp navigate them through,
Because when I'm not around, Iwant them to understand how to
deal with failure.
And so that is my number onething in parenting is that we
must have controlled failure,while we can still influence how
(34:06):
they respond to that failure.
And so that's been it, but ittook me a while to get there, to
tell you the truth.
So that's number one.
The second thing I tell them isbe organized and, again, plan
your life like a company.
I had Sean and I had Shiv.
Both map out their next fouryears.
They're like well, how do I dothat?
I'm like just figure out whatclasses people of your different
(34:26):
grades take.
Put into a spreadsheet.
You got to study for the SATs atsome point in your life.
When are you going to do that?
What kind of job do you want?
Do research on that?
You know, prepare yourself,because if we're prepared, we'll
make better choices.
It's that simple.
And a company can do the samething right.
If you're prepared and youunderstand what's coming around
the corner, you're going to beable to respond much more
effectively with agility.
And so that's I got to tell you.
(34:47):
I mean, like I've learned somuch from the companies I cover.
I've been so fortunate to Ahave great training in the very
early stage of my career Thankyou, Caroline but B to interact
with so many amazing CEOs thatare just so brilliant, and I've
really learned a lot from themin terms of how to manage my own
life.
Caroline (35:04):
Do you want to share any examples, without
necessarily naming names?
Some things you've learned.
Nik (35:08):
When I make a call, I know exactly the second, third and
fourth call.
I'm going to make off of thatfirst call.
So before I make any stockrecommendation, I know exactly
what I'm going to say.
A week from now, two weeks fromnow, three weeks from now, on
that same company and I learnedthat from R&D executive at P&G
saying when we put out a productand we start thinking about our
pipeline, we are moving youinto a certain direction that we
want you to go.
(35:29):
I will never forget thatdiscussion.
I think that's a valid advice.
Caroline (35:33):
It is.
It's wonderful, Nik.
This has been such a joy andI'm just proud to count you as a
friend, you, Disha, and yourfamily as friends, and if I miss
one thing about being on WallStreet anymore, it's just the
incredible camaraderie thatcomes with having a team.
But we get to see each otheranyway, which is the best.
Nik (35:52):
Yes, it is.
Caroline (35:53):
So happy day, and we'll speak soon.
Nik (35:55):
Okay, thanks, Caroline.
Caroline (35:56):
Bye.
If you enjoyed this session,please do comment, rate and
follow us on Apple Podcasts,spotify or wherever you listen,
and please share this with yourfriends and colleagues.
So all this obsession over innovation, maybe the company
should go back to basics andthink about how they actually do
business versus the businessthat they're actually doing.
Caroline (00:15):
Hello friends, old and new, and welcome to Drinks with
Caroline.
I'm so happy you've joined mefor what I believe will be
another stimulating conversationwith an industry expert,
founder or otherwise fabulousperson in the consumer industry.
Nik Modi, I am so happy to haveyou on Drinks with Caroline.
(00:38):
Really, truly, it's an honor.
I think back to the days whenwe were on the same team at UBS
and you came into my office oneday and said I need to go to
London for tea, and it was avery enigmatic comment.
But what then happened was youmet your now wife for tea in
London.
It was a setup by your parentsand it worked, and Disha is the
(00:58):
most amazing wife and mother.
You're an amazing husband andfather and it's just been
gorgeous to see you grow as ahuman being and in your career,
which is really wonderful.
And I haven't got to know yourboys yet, but I know I will over
time.
They're getting quite bigalready.
So, Nik, I wanted to just askyou a little bit about your
approach to life and yourapproach to career and how those
(01:22):
two things converge.
Nik (01:24):
Absolutely.
But, caroline, before we getinto that, don't?
We have to share our drink?
Oh sorry, this is Drinks withCaroline.
That's right, this is.
Caroline (01:32):
Drinks with Caroline.
Needless to say, being aCelsius board member, I've
chosen to drink that in themorning here.
What?
Nik (01:40):
are you?
Caroline (01:40):
drinking Nik.
Nik (01:41):
I'm drinking the viral TikTok sensation known as
proteinin Coke, which isbasically Coke Zero in my case
and a Core Power vanilla proteindrink, and I'm drinking it for
my post-workout drink.
Actually, I just went weighttraining before this podcast.
You know I need to get a littlebit of protein in me.
Caroline (02:01):
That's excellent.
Nik (02:02):
Yeah, it's delicious.
It's like a vanilla float, butnot really.
Caroline (02:11):
Oh yum, talk to us a little bit about your approach
to life and how you balance lifeand work, and a little bit
about strategy, because I thinkyou're a very strategic thinker.
Nik (02:15):
Well, first of all, I would say this kind of comes back to
when I started working for you.
Actually, you know, prior tojoining your team, it was 20
hours a day nonstop, you know,with all my prior gigs in the
same job actually.
And when I joined you Irealized that you can do both.
You can enjoy your life, youcan be really relevant in your
(02:37):
job and work hard.
And at the time you had afamily I didn't, but you did
that as well and it made me kindof rethink and reevaluate how I
thought about everything andyou know, as you kind of get
through equity research andcovering stocks and companies
and talking to CEOs, you startrealizing that everyone has a
strategy right.
And so I said, well, why don't Ijust act like a corporation and
(02:58):
put together a strategic planof where I want to be, what I
want to do?
And it took time to think aboutand then I planned it out and
honestly I got to say it's a bigreason why I am where I am.
I think, like you know, there'sadvice I can give to anyone,
whether you're young or old,it's, it's hey, think about your
own life as a corporation andthink about where you want to be
and how you can get there.
Caroline (03:25):
So thank you for the opportunity to actually
introduce you properly.
Nik Modi, my guest, is theco-head of consumer and retail,
I believe, at RBC, and Nikcovers an astounding number of
stocks officially and an evenmore astounding number
unofficially, and has reallycarved out a place for himself
where boards invite him to comeand present to them on his ideas
for how they could do better,maybe what they're even doing
wrong and he is not afraid tospeak up, which he has done
(03:48):
recently about a need to resetearnings expectations.
But I don't think we're done onthe personal yet.
We're going to go back to thatfirst, I think.
Just really well respected.
One of my favorite images is ofyou talking to the CEO of
Procter, who is probably twiceyour height, and John treats you
with great respect, which isvery well earned, and it's just
a lovely picture.
So, Nik again, let's just talka little bit more about how your
(04:12):
career has gone through thedecades and the period of being
solo, then married with kids,and now where you are and how
it's shifted.
Nik (04:21):
I have two people to really thank for kind of why I am
where I am.
First was Carlos Laboy, who isnow a competitor, but at the
time was a Rutgers alum and Ireached out to him, cold called.
I said hey, I'd love to meetwith you.
And I went up to New York whileI was still in college and he
got me in the door at BearStearns where I first started my
career.
Before consumer goods I coveredinternet, wireless telecom, I
covered for-profit education, Icovered Latin American telecom
(04:44):
companies.
So I had a lot of kind ofexposure.
And then, after jumping arounda little bit, I met this most
wonderful woman.
Her name was Caroline Levy.
You might've heard of her.
Caroline (04:52):
I paid Nik to say this .
You should all know I did, Ipaid him.
Nik (04:56):
Well, do you remember when you asked me for letters of
recommendation and I gave you arecommendation or a letter from
my mother?
Caroline (05:02):
Well, the amazing thing is, I called the formal
ones and I called his mother andI said hello, Mrs Modi, I'm
calling because I might hireyour son, Nik, and I just need
to know what kind of person heis.
And she said oh, he's such agood boy.
Now, if there's any descriptorthat I would not necessarily use
, it was good boy because hetold me afterwards afterwards,
(05:22):
you were a total rascal.
Nik (05:24):
I was a rascal.
Caroline (05:25):
There are no regrets.
Thank you, Mrs Modi.
Nik (05:28):
Yeah, and you know, caroline, I always love to take
public forums to thank you,because you never forget where
you come from At least that's myphilosophy and you really gave
me a lot of confidence.
You let me kind of do things myway, but helped me build my own
fence.
So I was a wild animal at thetime and a lot of what I do is
because of how you train me.
So I just can't thank youenough for giving me the
opportunity and giving me thatconfidence.
Caroline (05:50):
Thank you so much, Nik .
So again, let's talk about thepath to being a beverage analyst
was working on the team, andwhile you were on that team my
team you came up with such agreat idea about a futures
conference.
It was an enormous amount ofwork, but together we published
something about what the futureof consumer would look like, and
it was ideas that were reallyhard to sell at the time.
(06:13):
Passion brands are what countsand now we're really seeing
socially driven brands.
I know you're going to talkabout that, but the consumer,
the passionate consumer, canbuild a brand.
It happened on Liquid Death.
It happened on Celsius.
We talked about the big gettingbig and the small getting small
in the middle getting pushedout.
We talked about health andwellness.
There were other themes and itwas a massive undertaking.
(06:34):
We hired outside people, but,Nik, you really pushed that
through.
So let's talk about how you'vetaken that approach in your own
career.
Nik (06:40):
Part of our job is to forecast and you know, if you
think about any company or anyorganization listening, everyone
wants to kind of get a handleon how they should manage the
future right, or what they needto spend in today to build a
capability to thrive in thefuture.
And so the best way to do thatis to think laterally right, and
to think about what's going onaround the world, not
necessarily what's happening inyour industry, but what's
happening in the world thatcould have an ultimate effect on
(07:03):
your industry.
And I think oftentimes, becauseeveryone in every industry gets
so specialized, they kind oflose that lateral perspective.
And so part of the futuresprocess which, again, I've done
it now four times, twice at RBCand twice at UBS it is just such
an illuminating process right,where you are sourcing ideas and
concepts from people that youwould have no business talking
(07:24):
to, like carbon credit tradersand farmers and nurse
practitioners and neurologists,on understanding how the
consumer is going to act andshape over the next five years.
And so I think, taking alateral approach and you're
right, it was a really hardthing to do, but just like
anyone that's trying to innovate, you have to have courage right
, and I felt so convicted thatthis would help us and give us
(07:46):
another tool to help us do ourjobs better, that I just
wouldn't give up.
And I didn't give up, and I'mglad I didn't give up.
Caroline (07:51):
I'm glad you didn't either.
One of the more fascinatingthings was we went to Boulder,
colorado, and toured a highschool and not to date myself,
but I'd never heard of friendswith benefits and the head of
the school was describing howthat was an issue.
And there were also cops in theschool, which I was like why
are there cops in the school?
And it's like, oh, it'sdangerous, dangerous.
(08:12):
This was all new and this was20 years ago.
So you know, you do see things.
You've got to get away fromManhattan and LA.
You've got to get into thefield and talk to people and
understand people, and I thinkyou actually talk to managements
about that, about thisincredible network they have
within their own four walls.
So let's segue a little bitinto that.
Nik (08:33):
When you speak to a consumer company, you know, at
the end of the day, everyonewants to be consumer centric,
and so they say, you know,consumers at the center of
everything we do.
But the reality is, over time,the consumers become less
important and stakeholders havebecome more important Analysts,
investors, the government, ESG,et cetera, et cetera and in
often cases like you have inbeverage alcohol, the actual
customer is not even the endconsumer.
(08:55):
It's the distributor, and thenthe retailer and then the
consumer.
And so one of the things thatI've been talking to a lot of
companies about is how do youtake the periphery of your
organization, the people thatare closest to the actual people
that are consuming your productthe merchandisers, the
salespeople, the route driversand how do you make them part of
your decision-making process?
Right, and with AI, there's alltypes of ways to garner
(09:19):
information, but you have toreally kind of leverage that
part of the organization to giveyou those ideas and concepts.
I mean, when I spend time inthe market with bottlers, with
distributors, whoever and we'rein these local markets I'm
learning about competitors andtrends that no one ever talks
about, but then six months later, all of a sudden they're a big
deal, and so it's very clear tome that there is so much
information that resides in theperiphery of the organization,
(09:39):
and I think companies need totap into that a lot more.
Caroline (09:41):
I've got a couple of examples of that myself.
I remember going on a tour,actually with Hal Kravitz, who
is now the independent leaddirector at Celsius, but at the
time he was working with someorganization that did some
business with food trucks andthere was this energy drink
called Bang and it was flyingoff the shelves and out of the
warehouses that serviced foodtrucks and that was a real
(10:05):
important data point on a brandthat became very big.
So I really hear what you'resaying.
I think it's exactly right, andthe one other example that
strikes me is Procter Gamble wasstruggling in China, but they
missed the trend because thepeople were being paid on
scanner data throughsupermarkets, but the market for
diapers had shifted to mommystores, which was an unmeasured
(10:28):
channel, and so the locals onthe ground knew they were losing
share, but they weren't aboutto report it back to head office
.
So I really second what you'resaying.
Nik, what other avenues do youtake to think about your
research and maybe talk a littlebit about your recent report
asking companies to be brave,step up, lower the bar and get
yourself into position to bewhat a consumer stock supposed
(10:51):
to be, which is defensive?
Nik (10:52):
Again, because I'm in the market so much and I'm spending
so much time in the industry,it's becoming very clear to me
that a lot of the consumercompanies a big chunk of them
are not prepared for the future.
Right, I think the reality is alot has shifted.
The market's more volatile, theenvironment's more volatile,
more flex needs to be created inthe earnings statement in order
to deliver while stillinvesting.
(11:13):
They're not hiring certaintalent that might be more costly
, like in AI.
Right, it's very expensive, aswe know, and in terms of AI
capabilities, I think they'revery behind and we're not in a.
You know, caroline, back in thegood old days, when we worked
together, being a fast followerwas okay and you could actually
make a business out of it, right?
I don't know if you can do thattoday.
The reality is, if you're notfirst, you're last.
(11:34):
I really believe that, and Ithink AI is going to only
accentuate that over time, andwe can talk about why I believe
that if you want to get intodetails.
That's why I'm urging all thecompanies to lower the bar, and
we're starting to see that.
Procter did it, pepsi did it,kimberly-clark did it,
constellation Brands did it, sowe're seeing it happen Now.
We need to make sure thatthey're investing to make sure
that they're future ready.
Right, and when I think aboutthe future and I think about AI
(11:57):
and I think about agent-basedshopping, it is pretty scary.
I might just put a promptsaying I'm having a party Super
Bowl party.
Please provide me all theproducts that I need, all the
snacks.
We're going to have a barbecue.
I'm going to have 20 people, 10will be kids, 10 adults, kids
aged 5 to 11.
And we have three vegetariansand two people with celiac Enter
(12:17):
.
And all of a sudden, I'm goingto have an agent go shopping for
me and I'm going to haveproducts at my doorstep.
I didn't mention a singlecategory or brand in that
statement, and so how are all ofthese companies going to
survive and thrive in that kindof shopping environment?
That's where we're headed.
Caroline (12:32):
And it's very possible to prepare if you anticipate it
was.
You know, this disruption ofe-commerce was terrifying and
people thought you'll just buywhat you first planned to buy
online and move on.
But now you get suggestiveselling and ads and there is a
way to get this right.
But to your point, you have toinvest.
And the other big thing about abrand I think Mike Cesario of
Liquid Death said it a brand isnot a set of attributes.
(12:55):
A brand is something thatpeople specifically want and ask
for.
And how do you then market toconsumers today?
Nik (13:04):
And who's doing a good job In this world of agent-based
selling?
No one is at this point, but Iknow there are certain companies
that have capabilities and arespending in those areas.
I feel very good.
I just upgraded Procter Gamblebecause the stock came down.
They reset their earnings.
This is a really well-managedcompany that has very advanced
capabilities and they're stillinvesting and I think that they
have a pretty big headstartversus their peers, even in the
(13:25):
world of retail.
I think Walmart, who I justpresented to a bunch of their
digital folks not too long agoin Bentonville they're also very
advanced relative to otherretailers, right.
So the reality is we'restarting to already see players
that I think are already on thecutting edge of some of this
stuff.
But it's going to be real and Idon't think people are talking
about this because they don'tsee it.
But again, this is why we dothe futures work.
Right Is what we have tounderstand what's happening
(13:48):
outside of the industry andwhat's happening in the startup
world to really help inform usof what we're going to be facing
in the future.
Caroline (13:52):
So it sounds very scary for small companies.
That's getting more and moreexpensive just the cost of entry
.
Is there still place for thestartups and the innovators, or
is it in fact an opportunity forthem, because they can bring
unique capabilities and uniqueinnovation?
Nik (14:09):
For me, the way brands will be built in the future is
really going to be productefficacy.
That's going to be the key.
Okay, why do I say that?
It's because we're in a worldof social selling, right?
We're in the world where oursocial networks are basically
informing us what to buy.
It's not the advertisement ontelevision anymore, and
sometimes it might be people wedon't even know, but we follow
online and in that environment,the only way you can get a
(14:30):
recommendation is if yourproduct works so well that
someone's willing to recommendit.
Right, because we could seethrough paid advertisements
online and things like that.
So product efficacy is going tobecome really, really important
, because if a product is betterit tastes better, smells better
, makes you feel better it isbasically going to be something
that you're going to tellsomeone else to buy and that's
how it's going to work.
And so I think productsuperiority, I think blind wins,
(14:51):
I think things like that, likewhat Procter Clorox are doing,
are absolutely the rightstrategies for most consumer
companies to take advantage of,whether you're large or small.
Caroline (15:04):
What role do you think M&A is going to play now?
Does this make it morenecessary, less necessary?
And I think we probably shouldhave started with a tariff
discussion.
But just given the uncertaintyin the world today, do you see
M&A stepping up or people takinga step back and saying let's
just get our house in orderfirst?
Nik (15:19):
Coming into the year, I thought M&A was going to be a
real big theme for this year,but the market is so volatile I
think that has taken a step back, probably put on the back
burner for now.
As things settle hopefully theywill I would expect M&A to
become resurface as an importantstrategy for many companies and
it may not just be two bigcompanies combining or whatever
it might be, a bolt on, it mightbe a capability, but in the
(15:42):
beverage industry, I absolutelybelieve in the next three to
five years we will have completebeverage companies.
I don't think you're going tohave a beer company separated
from a spirits company,separated from a carbonated soft
drink company or anon-alcoholic company.
It's all going to be the samebecause the supply chains are
already starting to consolidateand as that happens, I think the
suppliers will eventuallyfollow, almost like what we see
in the international markets.
(16:02):
Now.
There's obviously certain rulesand regulations you have to be
mindful of, but ultimately Ithink that's where we're headed.
Caroline (16:08):
On the point of distributors carrying both
alcohol and soft drinks, it'slegal for alcohol distributors
to carry soft drinks, but notthe other way around, and that's
part of what's called thethree-tier system.
For those people who aren'tclose followers of the industry,
you're not allowed, as amanufacturer, to sell alcohol
directly to a retailer orcustomer.
In most places.
Reyes, I think, the largestbeer distributor in the country,
(16:30):
probably one of the largest inthe world, if not the largest.
They're also a very large Cokebottler, but they do not put the
Coke products on their beertrucks, is my understanding.
Why is that and when could thatchange?
Or would that change?
Nik (16:43):
They just want to keep the regulatory barriers pretty
finite.
You don't want to have amistake of someone merchandising
a non-ALC product with an ALCproduct as an example,
especially as certain trademarksare starting to be used across
both businesses.
Right, because one mistake canbe pretty costly.
I think they're approaching itthe right way.
Over time, though, regulationswill likely get relaxed.
There'll be more infrastructureand systems in place to make
(17:06):
sure that doesn't happen.
So I think, over time, there'llbe opportunities for this to be
more of the norm, but I thinkthat's probably why they keep it
separate at this point.
Caroline (17:14):
Right.
Do you see the big beercompanies and spirits companies
actually making significantmoves in soft drinks and have
there been examples of successes?
Nik (17:25):
I think BevAlk distributors are looking for non-alk
products to bolster theirrevenue.
What's also interesting isnon-alk distributors, like
bottlers, are interested ingetting into alcohol, and so you
have this really interestingdynamic where everyone is going
to start playing in everyoneelse's backyard or sandbox, and
that's why I'm so convinced thatwe're going to see this
ultimate consolidation over thenext several years.
(17:47):
I don't know when it's going tohappen, but I feel like there's
enough ingredients in the potfor making it happen over the
next few years.
Caroline (17:54):
Yeah, it makes sense to me.
We're definitely shifting inthat direction.
I didn't mention ConstellationBrands, but for the first time,
their beer business has reallysoftened, and so I think they
have to be thinking moreseriously than ever about
alternative products.
Would you agree with that?
Nik (18:10):
Absolutely, look.
I still think there's a lot ofupside for Constellation.
What's happening right now ismore of an air pocket than kind
of a structural change in theircategory or their brand dynamics
.
But absolutely, I think they'rethinking about things like that
and the way we have to thinkabout the beverage industry and
I think Brandy, when you had heron your podcast, made a good
point all about mood management.
We're really in the moodmanagement business.
(18:30):
Everyone listening to this, andyou and I today, will have an
average of eight drinks amongstus.
It could be water, it could bethis protein Coke, it could be
maybe wine at dinner, whateverit is, and it's upon all the
beverage companies to figure outhow to get as many of those
occasions as possible, becausewe drink for certain reasons and
there's relevancy for why we'rehaving a certain beverage, and
(18:51):
so that's why I think it'sreally important for these
companies to think of moreholistically.
Caroline (18:54):
Totally agree with you .
So what do you think the restof the year looks like?
How do you see tariffs shakingout?
I know that you don't have acrystal ball, but I'm just
wondering how you're thinkingabout them and how you're
integrating them into your stockrecommendations.
Nik (19:09):
The way we're thinking about it is look, we think
what's happening right now is alot of public negotiating.
I'm not sure it's beingexecuted as well as I think the
administration was hoping for,but it's going to take some time
to kind of get through this.
Maybe by June, july, we finallyget to a point where we know
exactly what the tariff ratesare going to look like.
That's the main thing is theclarity, so you can manage
(19:30):
around the clarity and so youknow, is it 145% with China or
not?
You know like, what's the real,what's the real number.
I think once we get clarity onthat, then companies will be
able to provide us a betterfoundation of how they're
thinking about the rest of 2025and 2026.
But let's not kid ourselves.
Regardless of this tariff news,the consumer was under pressure
before Trump even took office.
(19:50):
We've been talking about it forthe last 18 months, again being
in the market as much as we are.
That's going to take some timeto shake out.
We have a credit issue withmany consumers, particularly
low-income consumers.
I don't know if you saw some ofthe latest metrics, but buy now
, pay later, which is basicallylayaway, one of the fastest
growing categories on buy nowpay later is groceries.
That is terrible, that isterrifying Right exactly, and
(20:14):
the delinquency rate is rising,and so, at the end of the day,
higher income consumers.
I have three rules of thumb forthe consumer.
Higher income consumers aregoverned by the stock market.
Well, that's not been going sohot right now, and so maybe
there's some weakened sentimentthere, which was not the case a
year ago.
Middle income consumers aregoverned by the housing market.
Well, we're seeing someweakness there, especially
(20:35):
around housing prices, and sothat's going to obviously weigh
on those consumers.
And then lower income consumersare impacted by gas and food,
inflation and food inflation isvery high and wages Right, but
the reality is we're not in agreat place right now for the
consumer.
So I do think this is going tobe a tough year.
I think things are going to gettough before they get better.
And one of my talk tracks whenI go speak to companies and
(20:56):
boards is like we have to reallyface the facts and think about
how can we grow in a no lowgrowth environment.
And so, if they really becreative and take advantage of a
lot of low hanging fruit,what's the low hanging fruit?
There are a couple of areasright.
One is taking advantage of moremerchandising events.
I mean, if you think about,especially for the beverage
industry, labor Day, memorialDay, july 4th, the holiday four
(21:17):
major events and that's whereall the activation occurs.
Well, what about Diwali?
What about Chinese New Year?
What about more broad-basedCinco de Mayo?
I mean, I'm not Hispanic.
I celebrate Hispanic Cinco deMayo.
I'm drinking a lot ofmargaritas in May.
So the reality is, I thinkthere's a lot of opportunity to
activate around these keyholidays, especially if you're a
distributor, bottler and youcan be locally relevant, and you
(21:38):
don't need to sell ethnicproducts to take advantage of
these opportunities.
You just need to be activatedin the market.
So that's point number one.
The second is how do we takeadvantage of virality?
What is happening online islike you don't have to launch a
new product.
This Coke protein Coke thing isa TikTok trend.
It's not a new product.
I just bought a Coke and a corepower protein drink and I mix
them together that could easilybe merchandised at retail.
(22:00):
Together, that could actuallybe a strategy you can take
advantage of to leverage some ofthese viral trends.
And then the last thing isespecially for the C-store
industry and for on-premisevenues.
There are people that ownsingle bodegas that have massive
followings online because theydo something unique in their
store, like cook or make customsandwiches in Brooklyn.
And this one bodega his name,is General Ock.
(22:21):
He's got 5 million TikTokfollowers.
He's got lines forming outsideof his bodega just one box
because people want to getfilmed on making a custom
sandwich Brilliant.
And he ends every video withdon't forget your beverage,
never, ever, ever.
It's like an incredible trafficthroughput strategy that so
many other boxes can takeadvantage of, whether you're a
(22:42):
Walmart or you're a bar orrestaurant or you're a single
bodega in the middle of Brooklyn.
So I think that is.
Caroline (23:03):
It certainly happens already, but I think that's
going to grow in importance.
And you've seen Liquid Death dosome very unexpected ones with
an ice cream company, with elfmakeup, and they make it work
and it stands out.
So I totally agree with youthat creativity and let that
bubble up from the field to theextent that you can.
(23:24):
And there's the dilemma because, on the one hand, you really
need to run centralized ITsystems and big marketing, but
you also need to give leeway topeople in the field, without
leading to an Anheuser-Buschtype blow up where somebody got
it horribly wrong, although Ibelieve the person who got it
horribly wrong was actually athead office, so maybe it
wouldn't have happened if it hadbeen in the field.
Nik (23:45):
It definitely wouldn't have , and this is why I had a sense
of urgency.
In writing.
This reset your earnings.
Note.
In order to equip and organizeyour company to take advantage
of these things that we'retalking about, a lot of work
needs to be done, and thatrequires investment, and that's
why I feel such a sense ofurgency with this message.
Caroline (24:00):
Who do you think are the most important senior people
in an organization today, anddo you think that's going to be
a slightly different in fiveyears?
Nik (24:09):
Oh, that's a great question .
You cannot discount a goodleader.
So, ceo to me I mean, as clicheas it sounds, if you have a
good leader that understands howto play all the players, you
could have a basketball teamsame 12 people and you can have
one coach basically not win anygames, and you can put another
coach in and all of a sudden youhave a completely different
outcome.
I've seen it over and overagain in professional sports,
(24:32):
but also in high school andmiddle school sports coaching my
kids.
I've seen it over and overagain, and so I think a CEO that
knows how to leverage histalent is the most critical.
But I think the boards, caroline, I think I mean and you'll have
a good understanding of thisbecause you're on boards Like I
feel like the boards can play abigger role than they are right
now.
I'm not sure all boards,especially in the world of
(24:53):
consumer, have the right peopleon their board.
There's just a very, very smallpercentage of marketing people
on boards that have marketingexpertise, and I think that's
one of the areas that has really, really been deficient for many
of these companies and they'remarketing companies right, and
that's a problem in my opinion.
I think the statistic I saw islike 3% of all consumer company
board members have a marketingbackground.
(25:14):
That's too low in my opinion.
Caroline (25:16):
I couldn't agree more no-transcript, but I think
(26:10):
there's room to shake things up,is what you're saying, right?
Nik (26:13):
Absolutely, and here's another thing to think about.
One of the models for manycompanies is to take their best
talent and shift them around theorganization, to give them
exposures to different parts ofthe business and to group them
for bigger and better things.
But I would argue that we're insuch a volatile environment and
we have been and it's onlygoing to get more volatile that
you need people that havesubject matter expertise and
(26:33):
domain expertise.
So I would argue, don't moveyour best talent around.
Pay them well, keep them wherethey are, because, at the end of
the day, the best thing to dealwith all the craziness that's
going on is to have intuition.
I've been covering this industryfor 25 years.
I can see things.
Maybe others don't, justbecause I've been looking at it
for so long.
I have intuition on certaindynamics, absolutely, and so I
(26:56):
think Church and Dwight does agreat job about this.
Their brand managers are intheir roles for a really long
time, and that allows them tounderstand the category so well
that they can make betterchoices than maybe their
competitors, and that alsoallows those brand managers to
take on additional M&A and stilldo their core business really
well, right, so there's so manyadvantages to consistency.
Caroline (27:17):
I totally agree.
In fact I do recall a companyyears ago used to move their
people around a lot and thenthey found that because they
were paid on last year'sperformance, they would do
things that weren't in thelonger term interests of the
division because they knew itwouldn't affect their comp and
then they shifted it.
So I think where you put thecarrot is incredibly important
and I think rolling through yourresults is probably a really
(27:39):
good way to give incentivecompensation obviously a base of
cash to live on, to live wellon if they're a busy executive,
but also pay over time forperformance that doesn't just
arrive in a year and disappearthe next year.
Nik (27:55):
I mean, I think what we're talking about in this whole
discussion is there needs to bea lot of innovation in areas
outside of innovation Innovationamongst boards, amongst
organizational design, amongstincentive structures.
So all this obsession overinnovation, maybe the company
should go back to basics andthink about how they actually do
business versus the businessthat they're actually doing.
Caroline (28:15):
I love that comment, Nik.
It's fantastic.
I remember being at a Cokemeeting and they used to sell
the product in what they callthe straight line plastic.
So gone was that wonderfulcontour glass bottle and they
put a great cartoon up with thegraphic and it said the CEO of
Coke has a very, very difficultjob.
(28:36):
And it gave the option of Icould have a straight wall
plastic two liter, or I couldhave a contour two liter and you
tick which one you want.
And it gave the option of Icould have a straight wall
plastic two liter, or I couldhave a contour two liter and you
, you know, you take which oneyou want and he goes, tick on
the contour.
And it was game changingbecause it was such branding, it
was visual branding, you didn'thave to say a word, you just
make the plastic iconic andsometimes it is so simple.
(28:58):
But it's a package innovation.
It's, as you know, beverage.
People know the right packageat the right time in the right
place for the right consumer.
So again, if we look through 25, 26, 27, what do you imagine
the future is going to hold?
You said you've done someinteresting futures work.
Any other conclusions that areinteresting to you to talk about
(29:20):
?
Nik (29:20):
We talked about this agent-based buying right and
shopping.
I think that's going to be abig one.
I think wearables, Caroline, Imean, I hear a lot about the
GLP-1s and don't get me wrong, Ithink they're definitely having
an impact.
I just think it's a lot lessthan people think, because I
think the market is so shallowand narrow.
It's 10% of the population andthey're not even taking it
long-term right.
(29:40):
It's like they lose their 15pounds and then they're off and
it's creating a whole host ofissues muscle density and bone
density and issues that I thinka lot of older populations are
going to have to deal with inthe future.
Caroline (29:50):
So do you think that this is literally big as it's
going to get?
And then it's actuallyshrinking from here because
people understand the sideeffects?
Nik (30:01):
We'll see.
I'm just not as concerned aboutit as I am about wearables, and
I'll get to that in a second.
I covered tobacco for a longtime and I remember Pfizer came
out with Chantix, which wasbasically a drug that you can
take.
It wasn't a patch you can takeit to quit smoking and everyone
thought that was the end of thetobacco industry.
But it wasn't, because whatended up happening is that all
these side effects, the FDA puta black box warning on it and
then people stopped using theproduct.
I'm not saying that's going tohappen to GLP-1, but I just
(30:21):
think that we're thinking aboutthis in a vacuum.
First, one of the greatest newproduct launches in the history
of the consumer productsindustry is Coke Zero Sugar.
It came out of a risk.
So there's going to be a lot ofopportunity for companies to
innovate around GLP-1s.
But the reason why I'm moreconcerned about wearables is
because it actually changes ourbehavior.
It's not a one-time adjustment,but it actually changes our
(30:43):
behavior.
So you have a continuousglucose monitor on and you have
that second glass of beveragealcohol, wine, beer, whatever it
is and all of a sudden yourphone starts going crazy.
You're probably not going tohave the third.
Caroline (30:54):
Either that or you take the wearable off.
Nik (30:57):
Yeah, that is also an option, but there's such an
going to be an advancement.
Like whoop you know, I'm sureyou've heard of the whoop tells
you how you're sleeping.
It's a device you keep on andtells you how you're sleeping.
And I have some young guys onmy team and they tell me like
when they go out for an allnight binger they just don't
sleep and they see the readingon their, on their.
So they're like it helps themcut down.
(31:17):
Because they're like like ithelps them cut down, because
they're like I want to sleeptonight I got to take it easy.
Wearables, ultimately, willstart governing our behavior.
The thing about wearables isthat the advancements are
happening so fast that in thenext few years, we're all going
to have some kind of device thatwill literally tell us in real
time what is happening in ourbody.
There are patents being filedby all types of scientists on
this stuff, and so if that isthe case, then we're going to
(31:38):
start making decisions not basedon what we want.
We're going to be startingmaking decisions based on what
our body wants, and that isgoing to be a really big change
that I'm not sure a lot ofcompanies are ready to handle.
Caroline (31:49):
Nik, I actually think it's the most important thing
you've said.
I think it is so accurate.
You can pretend to yourselfthat that extra sugar drink or
bar of chocolate or bag ofcookies it's just a one-off,
it's not going to do any harm.
Nik (32:07):
But if your phone starts blowing up, you're going to be
worried Absolutely.
And we have to think about thiswithin the context of an aging
population.
Our entire population is aging,the world's population is aging
.
So as we age we're going tohave different requirements,
which is going to give birth toan entire new industry of
ailment-based solutions sayingoh, I need to sleep, boom, I
have my little thing.
Oh, you know, I'm reallystressed, I need to calm down
Boom, I have my little thing.
(32:28):
And so I think there's justgoing to be so much robust
opportunity, especially in thebeverage industry, that I think
is going to pop up as a result.
Caroline (32:34):
Yeah, I love turning this on its head and saying out
of challenge comes opportunity,because I do think that people
are looking for higher qualityingredients.
So if you're going to have toraise prices because of tariffs
or any other reason, give peoplemore of what they need protein,
fiber, whatever.
It is something that helps yousleep and they'll be more than
happy to pay that price.
(32:55):
And you don't have to give themenormous servings.
The serving sizes have got outof control in some parts of the
food chain.
So I do think we can consumeless, consume better and
everybody can win.
We just got to change ourmindset.
As you say, rebase and goforward from there, absolutely.
So, Nik, talk about the kind ofadvice you give to your kids as
(33:17):
they grow up and into the world.
They're how old now.
Sean is 18.
He's going to be going to.
They grow up and into the world.
They're how old now?
Nik (33:21):
Sean is 18.
He's going to be going tocollege next year, to Pace
University, and so he'll beclose by and looking to network
with a lot of finance people.
And Shiv is 15 and he's afreshman in high school.
And what I've been focused onand it took me a while to get
here so for all you new parents,I figured out probably my
oldest was 15-ish that I neededto make them fail as much as
possible.
(33:42):
I think that's one thing oursociety has gotten away from is
failure and dealing with failure, and so I've gotten my kids
into so many situations where Iknow that they're going to mess
up and fail, but I'm around tohelp navigate them through,
Because when I'm not around, Iwant them to understand how to
deal with failure.
And so that is my number onething in parenting is that we
must have controlled failure,while we can still influence how
(34:06):
they respond to that failure.
And so that's been it, but ittook me a while to get there, to
tell you the truth.
So that's number one.
The second thing I tell them isbe organized and, again, plan
your life like a company.
I had Sean and I had Shiv.
Both map out their next fouryears.
They're like well, how do I dothat?
I'm like just figure out whatclasses people of your different
(34:26):
grades take.
Put into a spreadsheet.
You got to study for the SATs atsome point in your life.
When are you going to do that?
What kind of job do you want?
Do research on that?
You know, prepare yourself,because if we're prepared, we'll
make better choices.
It's that simple.
And a company can do the samething right.
If you're prepared and youunderstand what's coming around
the corner, you're going to beable to respond much more
effectively with agility.
And so that's I got to tell you.
(34:47):
I mean, like I've learned somuch from the companies I cover.
I've been so fortunate to Ahave great training in the very
early stage of my career Thankyou, Caroline but B to interact
with so many amazing CEOs thatare just so brilliant, and I've
really learned a lot from themin terms of how to manage my own
life.
Caroline (35:04):
Do you want to share any examples, without
necessarily naming names?
Some things you've learned.
Nik (35:08):
When I make a call, I know exactly the second, third and
fourth call.
I'm going to make off of thatfirst call.
So before I make any stockrecommendation, I know exactly
what I'm going to say.
A week from now, two weeks fromnow, three weeks from now, on
that same company and I learnedthat from R&D executive at P&G
saying when we put out a productand we start thinking about our
pipeline, we are moving youinto a certain direction that we
want you to go.
(35:29):
I will never forget thatdiscussion.
I think that's a valid advice.
Caroline (35:33):
It is.
It's wonderful, Nik.
This has been such a joy andI'm just proud to count you as a
friend, you, Disha, and yourfamily as friends, and if I miss
one thing about being on WallStreet anymore, it's just the
incredible camaraderie thatcomes with having a team.
But we get to see each otheranyway, which is the best.
Nik (35:52):
Yes, it is.
Caroline (35:53):
So happy day, and we'll speak soon.
Nik (35:55):
Okay, thanks, Caroline.
Caroline (35:56):
Bye.
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Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.