The Campbell's Company

This week markets rebounded a bit with the pending interest rate cut coming next week.  Is this going to be a case of buying the rumor and selling the news?  It wouldn’t surprise me given that the markets have been clamoring for this rate cut since June and in the interim have appreciated 5-7%.  However, these are not normal times, and we could see momentum build based on the Federal Reserve's statement given the expectation for further rate cuts this year.  It is now clear that the Fed is playing catch-up to prevent the economy from cooling down faster than anticipated.  The Fed is in an unenviable position of moving too slowly, raising fears of an impending recession, or moving too fast and appearing politically motivated.

Let’s talk a little bit about the rest of the world.  We often hear that things are better abroad and in some cases that may be true.  Healthcare, employee protections, pace of life, and cost of living seem to be the main talking points.  However, more and more we see the rest of the world slowly change to mirror the United States.  This week Volkswagen announced it is ending job protections for its 120,000 domestic autoworkers as Germany’s largest industrial employer struggles with competition abroad.  According to Bloomberg, Volkswagen will let a 30-year job security agreement run out by the middle of next year, raising the likelihood that job cuts and plant closures will follow.  Equally surprising is that China announced it will gradually raise the statutory retirement age for the first time since 1978 as the country’s workforce shrinks.  The policy change will be carried out over 15 years, with the retirement age for men raised from 60 to 63 years, and for women from 50 to 55 or 58 years depending on their jobs.  The existing retirement age was set in the 1950’s when the average life expectancy in China was less than 50 years.  It has now reached 78.6 years, with experts expecting it to top 80 years before 2030.

In company news, Apple announced some updated products at its latest event including iPods that can act as hearing aids and its newest Apple Watch which will be able to detect sleep apnea.  The big new feature was supposed to be artificial intelligence (AI) baked into the new iPhone 16, but that feature looks like it will not be available at the product launch.  While talking about AI, Audible announced that it will begin using AI-generated speech technology to lower publication costs and speed up the release of new books.  Narrators will create replicas of their voice and will be compensated for any audiobooks that use their AI-generated voice.  Starbucks's new CEO, Brian Niccol, announced on his second official day on the job that he wants to bring the community coffeehouse vibe back to Starbucks.  While I applaud his intuition, I wonder what will become of all the hard furniture that currently fosters an uncomfortable give-us-your-money-and-get-out atmosphere they’ve built?

The most interesting idea floated this week by both President Biden and Trump was that of a U.S. sovereign wealth fund.  Other countries, most notably Saudi Arabia, have these funds which invest money on behalf of the government.  Saudi Arabia’s fund is believed to be the largest at $925 billion.  The thinking is that funds would be allocated to national development projects, like infrastructure and manufacturing hubs.  It could also be used to help in areas that are seen as critical for national security, like supply chains, defense capabilities, or nuclear fusion projects.  Unlike the current situation, where the U.S. government simply gives money to companies or subsidizes projects it deems important, it would essentially become an investor in these companies and projects.  The idea is that there would be a return on investment (ROI) above and beyond just the national interest.  The biggest question remains where the money would come from given the current level of deficit spending.

In closing, I turn to a company that dates back to 1869 when two partners came together to form a wholesale fruit and vegetable company.  The company developed its first can of tomato soup in 1895 and has since become known as the Campbell’s Soup Company.  So, it came as a surprise this week when I read that the company plans to drop ‘soup’ from its name as Rao’s brand takes center stage.  It now sees growth outside the soup category as critical and believes the name change will send a strong signal for the next chapter of the company’s future.  You heard it here first.  Campbell's Soup is transforming into the next phase of its life.  Now you know. 

Bruce J. Mason, MBA