From Your Fridge to the Pharmacy, how Tariffs Could Disrupt It All

Bloomberg

Watch From Your Fridge to the Pharmacy, how Tariffs Could Disrupt It All - Bloomberg on Dailymotion

Transcript

00:00Stefan, as I understand it, you make things like pumps or syringes, everything from creams and

00:07lotions to injecting medicines. Where is the most of your manufacturing? Because I want to gauge

00:14how much tariff risk you have. Yeah, for us, tariff risk is actually quite low. And thanks,

00:21by the way, for having me, Matt. The 50 percent plus of our manufacturing is in Europe, and that's

00:28about in sync with our sales there. In the U.S., we have nine plants, and they supply what we need

00:34in the U.S., and then the balance is in Asia and Latin America. And as you said, we are in a broad

00:40range of end-users dealing with most of the drug companies, everything from asthma inhalers to

00:46Narcan to GLP-1. And about 20 percent of our business is more exposed to beauty. And while we are not

00:56exposed to tariff, our customers are. So if you think about the high-end fragrance or new skincare

01:05line, you're not going to launch that if you don't know what the duty is going to be, where the

01:10consumer is at. So that 20 percent of our business is probably the most exposed. Well, speaking of the

01:16consumer, you did just this morning see a jump in a gauge of consumer confidence. You actually saw

01:21it jump by the most in four years, given the calming down of the trade talks with the administration and

01:27trading partners. Are you seeing that yet when it comes to consumer behavior? A jump back?

01:33Well, the biggest, again, the biggest applications for us are in treating everyday chronic conditions from

01:42allergic rhinitis to diabetes. Those are not that impacted by consumer sentiment. But again,

01:49our customers in the beauty space are rethinking their orders, given the uncertainty. And travel

01:57retail is quite a big portion of that. And as you've seen, travel, international travel for U.S.

02:03consumers has been really reduced. So we expect that to be impacted. And luckily, the 80 percent of our

02:11business that are not exposed to that are doing very well.

02:13So I guess if you see a drop in travel, that means fewer of us are going to be going through duty-free

02:21and buying whatever perfume for whom you make dispensers, right? So you also do packaging for

02:31Gatorade, for Heinz ketchup, for Lysol air fresheners, these sort of regular everyday grocery goods that we

02:39all buy. What kind of demand are you seeing there? Is it unaffected as well?

02:43That is unaffected, and it continues to go very strong. We are lucky that we're, one, making in-region,

02:50for regions. So all this tariff stuff doesn't impact us there. And then people have breakfast,

02:56lunch, and dinner. In good times and bad times, they need their drugs. So we're quite resilient,

03:00and you're quite right. Whether it's beverages, whether it's condiments, not just in the U.S.,

03:06but also in Europe and Asia, that continues to be very strong. Actually, we see the re-acceleration

03:11in Europe and Asia. The Chinese consumer is coming back. So overall, we're quite bullish

03:17for the second quarter. Again, save the beauty business. But do you see, Stefan, these, you know,

03:23big household names that are also global vendors, do they buy your products where they sell them? So,

03:30for example, if Gatorade is buying something from you, do they buy the U.S. sale from your U.S.

03:40manufacturer and then the European sale from your European manufacturer?

03:44Yeah, you're absolutely right. So for things like food, condiments, beverages, personal care items,

03:51those are really bought in-region, for-region. There are some companies that buy from our Mexican

03:59facilities and then ship the finished product to the U.S., but all covered under the U.S. MCA.

04:04It's more of these high-end products, luxury products that, you know, for the brand interest,

04:10need to come from France or places like that where they cross-ship. Also, some of our pharma customers

04:16cross-ship to some extent, but of course, there's a lot more space in the P&L for that.

04:21Stephen, I appreciate that much more of your business is tied to pharma than, say,

04:26beauty products. But when you look at the administration's strategy here, tariffs have

04:33really taken up a lot of the air in the room for investors. But there are also sweeping changes

04:38being made on an industry-by-industry level, particularly pharmaceuticals. What does it

04:43mean for your clients and how much are they holding back until the air becomes much more clear?

04:49Yeah. So there's a lot of uncertainty. And for us, we see both puts and takes, take for tariffs,

04:58for example. Some of clients who stopped buying from us in the U.S. and rather bought products

05:06from China are coming back and buy products from us. So that's a positive. For our clients,

05:13shifting manufacturing locations, that's a long-term proposition. So we really don't know the

05:19secondary and tertiary effects until all of this has settled out. So you will see some supply chain

05:25whiplashers based on the latest announcement or where the negotiations go, but nobody's going to

05:30move factory based on that. Once the picture is clear, hopefully in the second half, we will have

05:35some time to figure out the secondary and tertiary effects. But again, for us, it's quite simple.

05:41If the former customer doesn't want to buy in Europe, but wants to buy in the U.S., we ship them

05:46from the U.S. factory. If they want to move something from Asia to Europe, we ship them from

05:52the European factory. So having this robust and resilient supply chain set up, making in-region,

05:58for-region has served us really well. Let me ask finally about sort of the baseline demand for GLP-1s,

06:04because in terms of the pharmaceutical products you sell, if you have diabetes, you're going to have

06:10to buy the product. Or obviously, if you overdose on something, hopefully you're going to be able

06:14to get some Narcan. But the demand for GLP-1 should be a little bit more elastic. Do you continue to see

06:22strong demand for those weight loss drugs? Absolutely. We're still in the ramp up of capacity in the

06:29supply chain. We ourselves are not capacity constrained, but there is a lot of need for

06:36additional product. Clearly, the pharma companies are reducing prices somewhat to kind of catch that

06:43next layer of consumer spending. So I think there's a lot of growth left in GLP-1.

Category

Transcript

Be the first to comment

Recommended