Daybreak Holiday: Bank Earnings, Taxes and Candy

Hi everybody, and thanks so much for joining us for
the special edition of Bloomberg Daybreak. I'm John Tucker at
the US stock market close for the good Friday holiday
coming up this hour. It's April. Have you done your
taxes yet? Well, the deadline less than two weeks away,
and we're gonna explore a few interesting tax related stories.
We'll see how DOGE cuts may impact the IRS this
tax season. Plus we're gonna tell you why some of
the nation's wealthiest corporations oh far less to the government
as a result of President Trump's overhauled tax code. And attention,
chocolate lovers, candy sales they're on the decline this Easter holiday.
But first, this is right around the corner the next
batch of earnings. Big banks will help kick it all off.
And joining us for this preview Bloomberg Intelligence Senior US
bank analysts Herman Chan and Bloomberg Intelligence financials analysts Neo Sipes. Hey, guys,
this should be a pretty simple model. I'm a bank.
I take in deposits, give the depositors one rate, then
I loan their money out at another rate, and I
make up the difference. And that's how I make money.
As a bank. That's right. Is it that simple?
That's right. You're talking about that's the metauders margin, which
is like a big bank metric that everybody focuses on,
and that is, in essence, the core of banking. You
make loans, you take in deposits, and you generate fees
from areas like wealth and capital markets.
Neil, It's not that simple, is it, Because they have
all these other different lines of businesses that they've added
over the years, investment banking, etc. So forth, consumer and
all sorts of other business divisions. Right, that's right.
And when you look at some of the largest banks
that we're expecting reports from in the next couple of weeks,
like a Goldman Sachs or Morgan Stanley, these are much
more fee oriented type banks. Businesses like you mentioned investment banking, trading,
asset and wealth management, many of which can be steadier
type of fee based income streams. And when we look
at things like capital markets, which are key inputs economic growth,
which are key inputs to the investment banking type business.
I mean, that's one where're expecting a rebound going forward.
We had the FED that was easing. Of course, there's
questions around where we're going from here with recent volatility,
but the broad expectation is there's still an investment banking
rebound on the horizon. We'll have to sort of reassess
and listen in on how those businesses are performing, particularly
in the month of March and into early April when
we get these results, as that's sort of a key
tailwind for a lot of these names, particularly a Goldman
and Morgan Stanley as we roll through twenty twenty six.
Yeah, and Hermit Chan who stands out in one particular
area as opposed the other banks, whether it be investment banking,
the fees generated there, or what are the business they're in.
Yeah.
Sure, So for my banks, they're more fixed income oriented.
So given their large balance sheets, they're trillion dollar balance
sheets on the asset side, they have.
Much remind us of the banks that you've covered.
So that's right. That would be JP, Morgan, Bank of America, City,
Wells Fargo on the larger side. So typically those banks
have more fixed income focus, whereas Neil's banks, which have
a smaller balancee like a Goldman and Morgan Stanley, are
more equity focused. That being said, Goldman and Morgan Stay
and also have more m and A feed generation capabilities
just because of their historical strength in that particular business.
Yeah, you mentioned that. And on the Bloomberg terminal that
everybody looks at, one of the most popular pages is
something called the league tables most leading whom in terms
of mergers and acquisitions and the fees they collect. Who's
on the top of that league table? Neil.
Yeah, So for quite a while you've seen Goldman at
the top, and you know Morgan Stanley and JP Morgan
join them as as long long standing times.
More it's more important like brackets for the NCAA Ya.
Yeah, it's it's very closely fall and so we're always
monitoring those trends. And you know, again when you think
about MNA fees, which is small in the in the
world of Herman's much more diversified banks, for Goldman and
Morgan Stanley, it's much more impactful. And that's one of
the businesses that are you know, within the capital markets
universe is really expected to see the big step up
in twenty twenty six. And so you know, we actually
got a nice early read from one of the smaller piers, Jeffries,
whose quarter all note ends at the end of February,
So it's going to exclude most of the volatility and
the sort of trends that we've seen so far in March,
which are going to be most pertinent with one Q
results in the next couple of weeks. But what Jeffries
showed us was at least the first two months of
twenty twenty six were pretty strong across trading, particularly inequities
as well as M and A and ECM, fueled by IPOs.
Oh well, so you CM you're doing jargon now, neil.
Equity capital markets. So when you think about companies going
public or issuing stock, that's the business that we're looking at.
And you know, typically what drives that is robust equity markets.
And so prior to again the past month, we've really
seen you know, equities near all time highs. The IPO
calendar was starting to funnel through. So again it's really
going to be the incremental change of what we've seen
over the past month. That's going to be you know,
of biggest focus for the capital markets world with one
key results.
All right, Hermer, let's start with your bank, JP Morgan Chase,
give us the overview.
Yeah, so we're expecting a really strong quarterer. JP Morgan
had just mentioned in February they had a company updates
where they brought in a bunch of analysts and investors
coming in to hear management speak, and they talked about
mid teen growth in capital markets and in investment banking,
so really strong results there. On the lending side, we're
from industry data, we're seeing really robust growth across commercial
lending is really the standouts, and that's not only your
typical smaller middle market, but also large corporate and then
something called lending to non big financial institutions, which has
been a big focus for the for the industry these days.
All three areas from a commercial lending standpoint have been
really strong. That being said, there'll be some slow down
in credit cards given seasonalite in the first quarter, but
overall we're expecting a really solid result for them.
You're listening to Bloomberg Day Breaks a special edition. I'm
John Tucker and we're talking banks with Bloomberg Intelligence Senior
US bank analyst Herman Chan Bloomberg Intelligence Financials analyst Neil Sipes. Neil,
you mentioned of volatility, and certainly we've seen a great
deal of volatility. Is volatility good or bad from for
the banks. Yeah, so I think I guess it depends
on which particular business you're talking about.
It It certainly does, and so you know, Hermann mentioned
the guidance from some of the biggest piers like JP
Morgan calling from team's revenue growth in the capital market
side of the business. That bodes well, particularly for Goldman
who earns about half of revenue from trading, the remainder
from investment banking and asset and wealth management. So when
you think about volatility, volatility tends to be positive for
the trading businesses. You've seen that across equities and fixed
income products in the first quarter. When you have that volatility, though,
it's typically associated with uncertainty, right, and so there's been
sort of a darker cloud cast over twenty twenty six
in terms of economic growth where the FED is heading.
When you have a wide dispersion of potential outcomes and scenarios,
that tends to bode well for institutional clients repositioning and
driving that trading business. When you think about the capital
market side, the issuance, the capital raising, the m and A,
the mergers and acquisitions, the uncertainty can sort of drive
clients to perhaps take a pause reassess their business operations
whether or not they want to pursue those types of transactions.
So in a period like this you could see a
potential slow down and we've actually seen a bit of
a divergence in terms of expectations for twenty twenty six,
where again trading's getting the boost from volatility and that's
more than offsetting the potential headwinds that could come down
the road for investment banking.
Fees Herman with your JP Morgan Chase, the CEO there,
Jamie Diamond has referred to cockroaches. That's her Well, what
does he mean, first of all, explain it to everybody.
Sure, so cockroaches. That comment was in relation to some
fraud related activity that happened in the third quarter of
last year. You think of certain companies like First Brands,
an automotive parts company, Tricolor, which was a company that
lent to subprime auto borrowers. So those are the issues
that popped up in the third quarter that related the fraud.
There was another one that popped up here in the
first quarter in the UK MFS that is related to
residential ending.
But Jamie was worried about these loans going sour and
that it could spread through the industry. Do I have
that right now?
He's saying that these were fraud rent loans and there
might be more lurking in private credit and banking.
So does a bank like do the other banks have
to worry about this, you know, spreading?
The lesson learned in the third quarter was that banks
really scrubbed their balances to see what they really had
if there were any similar type exposures, and so far
we haven't seen any other than this MFS issue that
it popped up in the first quarter. So that being
said that there's much more scrutiny surrounding private credit. So
that's one of the main focuses of concern within the
markets these days is what are sort of the connections
between private credit and potential problems there within the broader
banking industry.
Now, I wanted to ask you how is just a
very broad question, how is technology today changing the banking industry?
Yeah, I think you're seeing it particularly pervasive in headlines
and headline risk that's been associated with the banks and
wealth managers alike, particularly in the first quarters as new
AI products are rolled out. From a broad lens, threatened
to at least disrupt, if not disintermediate, at least in
the more draconian scenario. Some of the traditional processes that
we see across banks and things like wealth management have
really been in the crosshairs here, which is a huge
business for Morgan Stanley driving.
So bankers could be replaced by robots.
Yeah, no, And and frankly, our view is much more
of a human plus AI end state, a human that's
empowered by AI. And I think that's what you're already
seeing at the investment banks today is you know, the
bankers and the employees, are you using AI tools, whether
third party or in house to help boost their productivity,
to serve more clients, to generate more revenue, and ultimately
boost the fundamental business that we know is traditional to banks.
So ultimately we think it's going to be a net positive.
But I think right now it's a lot of digestion
of how this is going to shake out, what we're
going to allow AI to actually disrupt, and where it's
actually going to come into these businesses. So staying tuned
to what's being rolled out, But from the broad strokes,
it feels positive to business production.
Herman, what's the landscape today that's driving banks to consolidate.
We've got about a minute.
Left, sure, So it's all about scale. We have banks
like JP Morgan Bank of America with trillion dollar balance sheets,
and we have about four thousand banks in the United States.
So how do you compete with the likes of JP Morgan,
How do you compete with the likes of fintech companies
and others that are encroaching in the traditional bank space.
You need scale to compete to invest in technology and
compliance issues. So that's what we're seeing today, increase in
M and A and just the smaller industry overall.
Guys, thanks very much, appreciate it, our thanks to Bloomberg Intelligences.
Herman Chan and Neil SIPs add up. Next, we'll tell
you why Amazon and Walmart are paying less taxes because
of President Trump's overhauled tax code. It's twenty minutes past
the hour. This is Bloomberg. Welcome back to the special
edition of Bloomberg Tape Break. I'm John Tucker. The US
stock market close for the Good Friday holiday. You have
less than two weeks to get those taxes in, so
we thought it would be a good time to explore
a couple of tax related stories. A year after Elon
Moss set up to slash jobs of the IRS, the
agency is struggling to meet demands amid a busy filing season.
For more, we are pleased to welcome Bloomberg Law reporter
Aaron Slowly so erin if I got a question for
the IRS. I haven't filed yet. Maybe I'm a small
business owner. Can I get in touch with them?
You should be able to get in touch with them,
But I try and get in touch with them as
soon as possible, and not wait till that April fifteen
deadline when everyone's rushing to file because they are low
in staff. After kind of the DOGE cuts from this
last year.
Well, what kind of shape is the iroisci? And first
of all, explain to me why DOGE targeted the IRS, which,
if I'm not mistaken, collects revenue for the.
Government, and it wasn't even an IRS hurting, It was
just a federal government abroad targeting. They offered a resignation
offer and more people at the IRS. About twenty five
percent of the RS took it, so it was a
lot more than people expected, and there were huge holes
that were left and now the IRS they also had
to deal with the US government shutdown, longest one in history,
so they had a lot to recover from at the
start of the season, and some of the people they
tried to hire they couldn't and training wasn't up to
date up until that point, and people are getting moved
from other divisions to kind of help out with this season.
So how much of a backlog are they facing right
now because of this? There's certainly not. It doesn't sound
like they're up to full staff at.
This point right They're not up to the staff that
they were in earlier in twenty twenty five. The perfect
level of staffing is kind of a debatable thing. I
think the IRS CEO will say that they're at the
perfect level right now. But a big thing that we're
thinking about is kind of the moving of employees two
different sectors and what kind of impact that we'll have
on the backlog, which is in the millions with the
accounts management, which basically that means any question that you
have for the IRS, it get's kind of put in
that bucket. And before the government shutdown that was projected
to be past pandemic levels and so I imagine with the
government shutdown, it's going to be potentially even worse.
So, as an individual taxpayer filer, am I going to
have to wait before I get my refund?
I think it's going to depend on the type of
filer that you are. If you're relatively a simple filer,
you file before the April fifteen deadline, I think you
should probably be in the clear. For the people who
have more complicated returns that usually file for extension or
there's any errors on the returns that you do file,
we'll start to see those impacts in the summer and
as people start to get phased out that we're seasonal workers,
like I think, we'll really start to see the impact.
Then too, Is the IRS up to speed in terms
of adopting technology that will help the process along?
No, the IRS is not up to day. It's been
historically underfunded, and that something With Doge coming in, I
think a lot of people had hoped that they bring
in their private sector experience, which I think they are
still doing in some respects. It just takes time, and
so a big thing of what Doge talked about was
cutting the workforce and that tech would replace it. But
they cut the workforce before the tech was in place.
So the IRS has a lot of work to do,
but they know it and they really need the funding
to help do it.
Are they getting it?
They are not getting it. They had about eighty billion
in funding extra funding to help modernize from a couple
of years ago, and each year that has been clawed
back bit by bit, so now they have a lot less.
It was eighty billion, now it's about under twenty five billion,
I think at this point. And annual funding is also
getting cut as well, which I think we should know
more about this next year's funding shortly too.
The IRIS has something called the Zero Paper Initiative. Can
you tell us more about that? And how's it? How
is that going?
So the IRS wants to get rid of as much
paper as possible. I saw I went to an IRS
facility in Austin a couple of years ago, and like
the amount of people are and they hand type in
each return, so it takes a lot of time and
effort and people to get those paper returns. And so
they're trying to digitize across the board. And that's been
a bipartisan theme. Now the Trump administration has its own
spin on it, and they're heavily on government contractors to
do that too, and so when a new administration comes in,
they kind of start from scratch sometimes in some cases,
so that was kind of something that hindered this zero
paper initiative. When the Bid administration had made some progress,
they're kind of starting over a little bit now that
the Trump administration is in the IRS.
Have you been able to sort of take the temperature
of the employees there? What does morale like at the
IRS these days?
Morale is low, especially at the lower levels, especially for
the people that were involuntarily moved to work help process
tax returns. Some of those people are very highly paid
in terms of government salaries and they're doing entry level work,
and so those people there's low morale. This past year
was I think really tough, and they're having to manage
multiple workloads. I think at the top levels, I think
people are feeling really good about the IRS CEO and
his competency. I think they wish they had him full
time because he's also the Social Security Administration Commissioner. So
it's a little bit mixed depending on where you fall
in the hierarchy. But for the people at the lowest
helves of the RS which make up most of it.
I think it's pretty low morale.
Does this necessarily mean that less likely to be audited?
The IRIS would like to think, would like to tell
you that that is not the case. But I think
something we talked a lot about last year was are
people going to play the lottery this year knowing that
there's less people to audit you potentially? And so I
think the IRS is going to They say they're going
to rely a lot more on tech, but I think
only time will tell, and I think it'll be a
couple of years before we know how much people are
actually avoiding paying their taxes.
Great thanks a lot, I appreciate it, our thanks to
Bloomberg Law reporter Aaron Slowly. While some may be struggling
with higher tax it's a different story for some of
the country's wealthiest companies. For more, we are pleased to
welcome Bloomberg reporter Caitlin Riley. Caitlin, thanks for being with
us this morning. How has the President Trump's One Big,
Beautiful Bill changed the tax landscape, especially for the big guys,
the big companies.
Well, we saw corporate revenues drop last year by about
sixty five billion dollars following passage of the Big Beautiful
Bill over the summer, A lot of the business tax
breaks were retroactive to the start or earlier in the year,
and so we saw the corporate tax revenues Treasury brought
in drop quite a bit. If you compare that to
what they were expected to collect in twenty twenty five,
it's likely that tax cut is even greater than the
sixty five billion we saw revenue drop from twenty twenty four.
Are some companies better off than others in terms of
the treatment that they get with the new tax regulations.
Yeah, so the law left the twenty one percent corporate
rate in place, but it sped up some crucial deductions
for that particularly benefit companies that either spend a lot
of on research and development or on capital, and so
we saw big companies in particular benefit, as well as
companies in tech and pharma manufacturing, all of these industries
where you're seeing a lot invested in machinery and equipment
or research. Some of the companies we saw that paid
a lot less in cash taxes last year compared to
twenty twenty four included Amazon and Meta, Walmart, Home Depot, Eli, Lilly,
the list goes on.
Timing has a lot to do with this. Can you
talk about that for us?
So, the two biggest changes we saw are the most
lucrative changes we saw that took effects last year were
to allow companies to speed up deductions for investments they're
making into research and development here in the US. Before
this law was past, they had to spread those out
over five years. Now they can take those that full
deduction in the year they make those investments. Likewise, the
bill also sped up the deductions for purchases like equipment, machinery,
office furniture, computers, some software, it's that sort of thing.
Otherwise those purchase the cost of those purchases would have
had to have been deducted over many years. And so
what we are seeing is a big increase in the
tax breaks companies are able to take this year or
this past year, this year and forward. But as those
companies move those deductions up rather than spreading them out
over several years, we would expect some of these tax
cuts to kind of lessen and level out as you
get farther away from the laws passage. As a lot
of this tax cut is front loaded.
Suffice to say, it's really going to impact the bottom
lines for these companies.
Right, yeah, and we're seeing that a lot this past year.
Amazon is paying billions less, paid billions less in cash
taxes last year, same with Meta. When you talk to
economists and supporters of the bill, the case they make
is that these breaks allow companies to reinvest that money
in their business, and the hope is that you see
economic growth increase as a result. The Tax Foundation, i
think estimates that this increases GDP by about zero point
seven percent thanks to these deductions, and so that is
the case Republicans will be making for the bill as
they head into this year's midterms.
Well, Caitlin, is there some degree of difficulty tracking this
and maybe some questions about the methodology behind all this.
M So, we started from a point of knowing by
how much revenue collected by the government went down. From there,
it gets kind of tricky and you're really reliant on
what companies themselves choose to disclose or not. And so
what we did was we went through SEC filings and
earnings calls to see what companies had chosen to share
about the impact of the big beautiful bill on their
tax burden. What we still don't have is, you know,
any direct attribution from these companies to like, how much
of their decreased cash tax payments are due to the
Big Beautiful veil versus you know, any number of other
variables that go into determining how much they owe in
corporate income tax each year. And so there is that
kind of methodology challenge where we're very reliant on what
companies choose to share, and by going through all these filings,
we were able to piece a picture together, but there
are still big questions and specifics, especially when it comes
to total numbers, that are just difficult to find. And
one thing we definitely ran into was there were additional
companies where we did see a drop in the cash
tax as they paid last year, but without the companies
themselves specifically attributing that to the Big beautiful bill. We
just didn't have enough to sort of include them in
the story and lump them in with this group because
we're so dependent on what they decide to share.
Okay, Caitlin, we'll leave it there. Great reporting, by the way,
our thanks to Bloomberg reporter Caitlin Riley. Up next, candy
sales on the decline This Easter Holiday. Thirty seven minutes
passed the hour. This is Bloomberg. Thank you so much
for joining us for the special edition of Bloomberg day
Break on John Tucker the US Doock Market clause for
the Good Friday holiday. We're continuing our look at tax
stories as the IRS deadline approaches, some wealthy Americans considering
tax shelters to reduce their overall liability. But what are
tax shelters? How do they work? Who benefits for more?
Or?
We're police to welcome Michael Bologne, a senior tax correspondent
with Bloomberg Tax. Have you done your taxes yet?
I had done my taxes and I did one of.
My That's what I would expect from you, the tax
expert explain to us, give me the dummies explanation, me
being the dummy of a tax shelter. What is it?
Well, I mean, the thing you understand about tax shelters
is that there's a basic thing would be just you know,
a roth ira I guess, but that's certainly an indication
of a legal tax shelter, something that the that the
IRS and the federal government blesses. But what I've really
done a lot of reporting on our tax shelters which
are considered perhaps abusive on the fringes of legality and
something that might require the I r S to intervene
and do some enforcement on.
So maybe stretching the law as much as you can
to avoid paying taxes.
Right right, And and getting to that the point where
we would say this is something is abusive or not
might take years for the IRS to investigate and examine.
It's it's a process. But currently the DIRS is probably
investigating forty abusive tax schemes at least according to some
reports by the GAO, and and there's probably even more
of them out there at any one moment.
It sounds like it takes a lot of time the
part of the I r S, which has been hampered
by you know, doge layoffs, to come to the determination
whether a tax shelter is legal or not legal, right right.
It's it's a process.
You would have had to have a number of people
take a particular tax position that would have to go
into audit.
Auditor might and then auditor.
Might you know, see some real red flags in there
and decide, hey, let's kick this over to the Civil
Enforcement Division or the Criminal Enforcement Division and then you
would have to have some litigation around that that and
then there'd have to be some adjudication by a court.
So it's it's a process that can take, you know, years,
unless the IRS decides to sort of intervene immediately or
the or or perhaps Congress might intervene more quickly to say, hey,
this is this is something that that's just not tenable
or not within our.
View of the law. So if I were going to
play the tax shelter game, it sounds like now's the
time to do it.
Well, I mean, the truth of the matter is it's
a very difficult tax enforcement environment at the moment. Like
you said, the head count at IRS is roughly down
twenty five percent since President Trump returned to the White House.
In addition to that, the eighty billion dollars that was
set aside by Congress during the Biden years for improving
IRS enforcement has been clawed back, or a lot of
it's been clawed back. And in addition to that, the
Justice Department recently just completely dissolved it's specialized tax division
responsible for civil and criminal tax enforcement. So yeah, I
mean the federal government is thing into uh this tax
enforcement season for sure.
Well, let's talk about who's selling tax shelters. Is this
a lucrative business?
It is so far as we can tell.
I mean, there's I talked to a certain number of
wealth advisors out in the marketplace and and several of
them have told me that they are frequently pitched on
different tax schemes uh by by tax promoters, people who
spend really almost all their time just looking at gaps
in the federal tax code and figuring out structures that
can fit between those those gaps, and then and then
to begin to sell them to wealthy.
Individuals, and then and then really bulke up those sales
over over a period of time.
Are they on the up and up?
Well, some of the schemes are completely legitimate until the
IRS steps in and says, now, we don't think this
is a valid tax position. But some of them are
are are clearly well I don't know clearly, but are
probably illegal and would have to be stopped at some point.
So how do the promoters make money?
They usually take a percentage of whatever tax savings that
they've peddled to a wealthy individual, and their take can
be somewhere between five and thirty percent of whatever those
tax savings might be.
That's great. We appreciate it. Our thanks to Mike Bologna,
senior tax correspondent with Bloomberg Tax, who.
Can take us on.
The connect with you.
Con recalled to the candy Man, who the Candyman.
Can the nineteen seventies hit Candyman by Simney Davis Junior,
who remembers that, well, you may be seeing a little
less of the Candyman this year. That's because sales are
projected to drop. For more, we're pleased to bring in
Diana Roseria Penya candy sales declining why well.
Easter sales. Easter candy sales are set to decline around
five percent. People are just not buying them. You know,
we actually had scanning data showing the first four weeks
of the season. Justly with scanning data is that's just
it's it's basically what you go to the cash register
and whatever you scan and that's the data that they collect.
Readily available data to people like for people like you, for.
People like us. Yes, so I mean obviously it's aggregated,
so we're not necessarily going to see you like what
a specific person, but but definitely it's something that you know,
people track. We get that information every month, and yeah,
we're seeing, you know, in the season it's pretty soft
and we don't necessarily think it's going to you know, recuperate.
We're talking about a specific type of candy, chocolate or peeps.
We're talking about Eastern dedicated candy like peeps, you know,
the eggs those guys pretty much.
And what's the reason behind this.
People are being more strategic with their consumption. And you know,
while Eastern is pretty is getting pretty famous for adults,
and there seems to be a more appetite to celebrate
the season. It seems that people are just not buying
as much candy as as they used to. It's not
it's a.
Bit is it an economic thing or because a gasp
that everybody wants to be healthy these days, or a
combination of all these things or what I.
Think they're both. You know, I think there's people that
are starting to get tired of the price increases. We've
seen significant price increases in the package food, you know,
industry overall, Like you know, usually low single digit increases
is fine, but we're seeing sometimes in the low teen increase.
So people are definitely being a little bit more conscious
about what they put in put in their basket.
Who are the leading candy manufacturers and what do they say?
How are they responding to what you just said. Appears
to be a trend.
Yes, so Hershey has sixty seven percent of the dollar
share for chocolate and lint and Mars follow that at
a high single digit share. And what they're saying is
they're trying to be more competitive. They're trying not to
be as price competitive because they don't want to race
to the bottom, but that might be the lever that
they have to pull to get volume to grow.
Again, what is the biggest input costs for these companies.
So it's obviously chocolate. Chocolate has been you know, on
a tear in the past year.
They've increased talking about cocoa price.
Cocoa prices, Yes, cocoa prices have been, you know, increasing
significantly the past year. It has reduce us a little
bit chocolate tears. Thinking that they might be able to
see lower prices going forward. We'll see with what happens
with with you know, the conflict and everything and tariffs
and stuff like that. But it seems that they are
expecting lower costs and that the hope is that they
can able to pass that through the consumer.
Oh, you mentioned tariffs. How have tariffs impacted the candy business?
So wrapping, you know, like those steel, aluminum, like those
kind of things derivative of the supply chain. Obviously, gas
prices are starting to affect that, so you know, those
are the kind of things that might have to you know,
they have to pass through to the consumer.
Oh.
I have to answer you chocolate expert parenthetically my trivia questions.
You know how cocoa plants are pollinated?
I actually don't. Maybe I should have.
I thought I've told you this though wild boars running
through the cocoa fields. It's the fleas on the back
of the wild bores that actually pollinate the corbo plants.
So the next time you're biting into a chocolate bunny,
just think think of those poor fleas that pollinated the
cocoa plants.
Well, I don't necessarily want to age myself, but I
have tried chocolate with insects on it.
The chocolate covered insects.
Yes to increase the protein. So that was like the
first wave of the protein craze.
Okay, well, what's next? The Eastern candy sales data point
to softer season. But you point out this is probably
a trend that's going to continue right Well.
The way that I see it is that there's a lot,
like I said, there's a lot more appetite to celebrate
the season, but people are actually planning to buy more
on the day after Eastern because there's there's.
A we call that stale candy.
Yes, happy fifty percent off, you know, candy season. So
you know, the Ferrero surve survey earlier this month indicated
that sixty four percent planned to buy candy on sale
the day after Easter. So obviously that is going to
affect sales going forward, and.
We're going to see deeper discounting, I.
Would imagine, exactly exactly.
And that will press your sales and the margins as well.
For the big companies that you mentioned like.
Hershey, yes, for sure, it's something that they are going
to have to be conscious about. It's very difficult. You know,
it's a very difficult trend for packaged food companies at
the moment because you know, they have higher costs. They're
trying to appeal to a consumer that is being a
little bit more strategic with their spending. So they're going
to have to discount, so it's it's both on the
top and bottom line.
Okay, at some point we'll do a deeper dive into
the fleas that pollinate the cocoa plants, all right. Thanks
to Bloomberg's Diana Rossero Penya. We'd also like to thank
Bloomberg Intelligences Herman Chan and Neil SIPs, Bloomberg's Kaitlin Riley,
and Bloomberg Laws Aaron Slowey and Michael Bologna. I'm John Tucker.
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