Rundown: 'Liberation Day' brings a week of tariffs chaos, a TikTok check-in, and LesserEvil sells to Hershey

0:01Want to launch a promotion, but instead you're launching another IT ticket? Does expanding into a new market feel like building a tech startup? Sounds painful. Enterprise commerce shouldn't hurt. And with Scale, it doesn't. Scale is the flexible, scalable e-commerce platform built to grow enterprise brands. Pain-free. Don't just take our word for it. Brands like Harrods, Manchester United, and Snipes trust Scale to power their business. So why are you still suffering? So visit scale.com today. That's S-C-A-Y-L-E. Yes, the Y is silent because you never have to ask why scale isn't performing.

0:50Hi, everyone. Welcome to this week's episode of the Modern Retail Rundown. I am senior reporter Gabby Barco. I'm here today with executive editor Ana Hansel. Good morning, Ana. How are you? I'm okay, Gabby. This week has felt like a month, I feel like because of the news cycle, which I think some listeners will be able to relate to. Yeah, if I sound a little horse morning is because I was up very late reading tweets and LinkedIn posts about tariffs, which, of course, you know, we have to talk about that's going to be the very top of the episode Wednesday being hashtag liberation day, you know, brought in all of these announcements about all the different countries, percentages of the tariffs that we're going to be that are going to be implementing.

1:42So yeah, we'll get into that. And then afterwards, we'll also check in on TikTok. Another very not confusing situation over there. And the potential sale where, you know, if you're listening to this on Saturday, this is supposed to be the deadline of an announcement of what US company is going to buy TikTok. But I have a feeling we won't, we probably won't know. I don't know about you, Ada. up. Yeah, I think that's been the story of this week is nobody knows anything. Yeah, it's great. It's great. It's a great time to be a reporter. We're fine. We're fine. Yeah. And then we're gonna end on like a little bit of a more of an upbeat note, which is we have some more acquisition news.

2:24So this week, Hershey's purchase of lesser evil was also a pretty exciting announcement, pretty big one 750 million is the deal total so yeah we'll get into that later but first let's talk about liberation day and president trump issued the sweeping new set of tariffs that caught a lot of companies off guard and you know leading up to this last couple of months we've been interviewing a lot of brands and retailers about this and the one caveat i would always hear is like well but we source from this country and it's not actually impacted and the back of my head I was always like, do we know that for sure?

3:03So now we know there's going to be a lot more countries that are impacted than we thought. Yeah. So to get into what was announced on Wednesday, it's confusing. That's the first thing I have in my notes. And I think it's also worth noting that this was worse than the worst case scenario than many brands expected. So there's been a lot of conflicting messaging on tariffs over the past couple months. As we know, tariffs issued on Canada and Mexico then postponed. There's been a lot of last minute changes. And in the weeks leading up to the announcement, the Trump administration said tariffs would be reciprocal, meaning they would be issued against countries who had also issued tariffs against the US.

3:51I think that's what a lot of CEOs were expecting. Although, again, I would note that this messaging has been conflicting. There was also, you know, President Donald Trump was talking to reporters on Air Force One or around Air Force One a few days before this announcement, and he said, it's going to be on all countries. So I was personally kind of planning for a variety of things related to this announcement. But again, I don't think I still even expected what was announced. When the fullest was unveiled on Wednesday, the math was very questionable. So it appears that the administration calculated these tariffs with some formula that involved taking a country's trade deficit divided by its exports to the U.S.

4:43and then dividing that by two. And so, again, that's not based on tariffs. That's not reciprocal tariffs. So the numbers are eye-popping. Imports from Vietnam will now face a 46 % tariff. Imports from the EU will face a 20 % tariff. Imports from China will face a new 34 % tariff on top of the 20 % tariff already issued earlier by the administration for a 54 % tariff in total. The one thing that a lot of people found funny in this announcement is that the administration also issued a 10 % tariff on the herd and McDonald Islands, which it's worth noting is home to penguins, not people. So poor pig was I know I saw some tick tock that was like a video of penguins.

5:36And it's like when you're minding your own business, you get slapped with tariffs. These reciprocal tariffs are supposed to go into effect April 9th. A 10 % tariff on all countries will take effect April 5th, which is today if you're listening to this episode on Saturday. So yeah, this is a lot. This is major. And a lot of people are freaking out about this right now. Yeah, this is a good time to move into just how the retail industry is reacting. So you have here not well. Yeah. Exclamation. Yeah. Obviously, we saw if you're following, I mean, really any news outlet like the trade is the markets are down.

6:16Just everything's sort of pummeled. CNBC had a roundup of how much a lot of the stocks dipped. Nike, which manufactures a lot of its products in Vietnam, saw shares drop about 12 percent in the afternoon on Thursday. And then we have Deckers, their shares dropped more than 15 % during the same period, and Wayfair by 28%. That's a big one. Yeah. Yeah. And then we obviously we have a lot of execs and CEOs that hit up LinkedIn to voice their concerns. Do you want to talk about that? Yeah. So what I found was interesting, because we've been talking to CEOs about tariffs now for two months. And I was personally surprised at, even up until Monday, how a lot of people viewed tariffs as a bargaining chip.

7:10And I still think some people do view these as a bargaining chip. But also, again, you have to listen to what President Trump has actually said. He has said over and over again that he basically thinks the U.S. was a richer country when we relied on tariffs. And so I don't know if there's any indication that these will be going away soon. But anyways, in the past two months, I've definitely talked to people who are concerned about it, but other people who are like, you know, we're not impacted or this is a bargaining chip. I feel like I saw a lot more social media posts, especially on LinkedIn, on Wednesday, Thursday, Friday than I had seen related to any of the other tariffs announcements.

7:55Some CEOs just like imploring people to think about how this could impact small businesses. Small businesses need certainty to operate. And they're not wrong. I mean, this is going to impact a lot, a lot of companies. And we'll see how long these last. But I feel like at this point, you kind of have to work under the assumption that tariffs are the new normal. Right. Which I think that's also, you know, we won't go too much down that rabbit hole. But like, I just did a story on US-based manufacturing. featuring and now we're seeing a lot of brands considering that and kind of trying to weigh whether the costs make sense whether the math makes sense obviously now we have a new set of numbers so maybe they're back to the drawing board about that but yeah I think from there where do we think the companies are gonna go it seems like everyone's kind of scrambling to figure out do you move factories do you try to source from other countries I'm not really sure where Yeah, I feel like the consensus was I talked to a handful of CEOs on Monday.

9:09So this was two days before the announcement. Things could have changed since then. But the feeling that I got is that people were done trying to play the game of like, all right, there are tariffs on this country. So now I'm going to move manufacturing to this country. There's a lot of footwear and apparel manufacturing in Vietnam that migrated over there because during the first Trump administration, there were more tariffs issued on China. So a lot of companies responded by moving manufacturing from China to Vietnam. Now we're operating in a world where every country is at risk of being tariffed, basically.

9:49And so a lot of CEOs I talked to saw it as just kind of a foolish game because moving manufacturing takes years sometimes. And so they thought it was kind of a foolish endeavor to try to move manufacturing when tariffs could change overnight. And I don't think, you know, there's talk that like, oh, this could encourage more domestic manufacturing. But I don't think that's the case, especially when companies don't know what tariffs there will be four years from now or even a month from now, given this environment we're operating under. So there was one CEO I talked to, Eunice Bayoun, who runs a company called Material, which sells like cutting boards, knives, other kitchen accessories.

10:42And I thought she made a great point. She basically was like, I feel like the guiding light for my company still has to be, we want to find the best materials and the best manufacturing partners, no matter where they are. And especially because, you know, her company is more of a small business. If you're a small business CEO, a lot of times, the ways you can improve margins is by like, negotiating with your manufacturing partner, right? And so you have to find a partner that's willing to negotiate with you. I think that almost might be more helpful to your business than trying to move manufacturing in the hopes that you'll get to a country that won't be tariffed.

11:23But Gabby, any other any other final thoughts based on like what you've heard from CEOs? Yeah, in the last about 48 hours, I was just kind of talking to some brands who literally are having like emergency meetings with, yeah, co-packers or manufacturers and trying to figure out how they can better negotiate based on these new percentages and the tariffs and where their factories are. so it sounds I think maybe in the next few weeks we'll get a better idea of what everybody decided on but yeah right now I wonder how many people are also competing for for the same partners or yeah trying to maybe move over I'm not really sure obviously this is all just on background people kind of letting me know like we'll get back to you when we figure it out yeah who knows when they'll figure it out um but yeah it's gonna be another wild week next week I feel like Yeah.

12:18Well, I guess speaking of wild, we can now talk about TikTok because that's also something we're sort of just has been simmering and we've been watching since January, since pretty much inauguration week, right? It was like the first deadline of that supposed shutdown where, yeah, the app kind of went dark for a little bit. And then I think Trump personally actually announced that he's trying to figure out a way to save TikTok, basically. And, you know, he did sign that executive order, which brought us to April 5th. As somebody who deals with deadlines, I wouldn't have picked the same week as tariffs personally.

12:57Yeah, poor planning. Yeah, but, you know, here we are. So as of this weekend, we can talk about, you know, who are sort of the latest bidders and the whole, you know, Congress's law dictated that a US based company or investors have to take over for TikTok to continue to operate in the US. So, yeah, do you do you want to talk about I mean, I guess we could start with Amazon, which was an interesting one. So there's been a string of news reports this week about companies that have reportedly submitted bids for TikTok. So Amazon is one of them. It reportedly sent its 11th hour proposal to Vice President J.D.

13:39Vance and Commerce Secretary Howard Lutnick. And this, according to the Times, the bid is not being taken seriously. Ouch. But I mean, that would be fascinating because, of course, Amazon is a huge e-commerce juggernaut in the US. It's also tried some attempts at kind of investing more in social and video over the years. um amazon had its own version of short shoppable videos through its inspire program for a while but it shut down that program i feel like with amazon they're a kind of company that i don't know they ride different waves in terms of what more social or content efforts they want to invest in to try to drive more sales now they're all about ai and they're like chatbot Rufus.

14:35Digital ad platform Apple 11 was another company that supposedly placed a bid for TikTok. And so Trump could announce a decision on TikTok's fate at any minute as of this recording, which is, again, Friday morning. That hasn't happened. Trump met with White House officials this week to discuss the issue. Reports say there was a potential solution proposed that would involve bringing on a number of US investors like Oracle and PE Blackstone. I believe the new venture would be called TikTok America, if I'm remembering correctly. And there would basically be some US ownership and also maybe potentially ByteDance licensing the algorithm.

15:21But the original legislation that was signed basically dictated that TikTok had to sell itself. So I I don't know how any of this could work. Yeah. And I mean, now we can talk about it. This is probably very obvious if you're a brand, but how is this going to potentially impact businesses? I think, you know, the last few months, almost a year now, we've been talking to creators and brands who really benefited from TikTok and TikTok shop even more recently to just, you know, generate sales and create awareness because so many people discover products via TikTok now. I mean, that's how, you know, part of the reason it became so big for e-com.

16:05And yeah, now they're sort of in the dark about what's going to happen, whether they have accounts, obviously advertising was a big one too. You know, TikTok has been building out this business. But I think you had written a story last, maybe around January around, you know, who really heavily used TikTok and how disappointed they were. Yeah, a lot of it. And I think back then, it's crazy how this has all played out. You know, there was, I think TikTok had a year or maybe even more than that between when this legislation was first signed and when they needed to find a buyer. And I will maintain the issue this whole time has been that TikTok does not want to sell.

16:52I mean, they went to the Supreme Court to try to get this struck down. And so I've taken all of these reports of new bidders coming into the mix with a grain of salt because, again, the issue is TikTok does not want to sell. I don't know how Amazon throwing its hat into the ring changes any of that. But yeah, to go back to what happened in January, I think even though this was something that businesses knew could happen for a while. I think literally up until the moment it happened when TikTok went dark for like less than a day, no one thought it was actually going to happen. I think businesses are more prepared now.

17:31But basically what I had heard at that time is, you know, you just, it's all about diversification. And if you worked with influencers on, that you found on TikTok, like developing creative for them for Instagram now or, you know, shifting spend to different channels. One of our reporters, Allison Smith, also did a story this week about how brands and agencies are directing more resources to some of the international versions of TikTok shop like TikTok in Mexico. I don't know. To be honest, now I feel like tariffs is the bigger issue. I feel like no one's freaking out about the TikTok ban as much.

18:11But we'll we'll see what happens. Anything else you're hearing, Gabby? No, pretty much just that. Yeah, I think people are just sort of maybe just hoping that this will continue to, you know, stick on the back burner for a while until they figure out this other stuff. But there's obviously a big theme here, which, you know, China being sort of the big elephant in the room as far as its, yeah, impact on U.S. commerce. And so we'll see. We'll see how this goes. And yeah, we'll see maybe by Saturday or this weekend whether anything gets announced. I'm not holding my breath personally. Yeah. I mean, more clarity would be nice, but we'll see.

18:49Yeah. So with that, let's now we'll wrap up by talking about some fresh M &A this week with lesser evils the popcorn brand for those not familiar uh it sold to uh hershey or you know i guess a deal has been struck the wall street journal first reported about it and uh said that i think it's valued at about 750 million but it can increase based on lesser evils you know milestone performances all of that down the road so yeah what are your thoughts i mean we'll talk about probably no coincidence that we're seeing all of these sales during this climate. But yeah, this is something Lesser Evil has been sort of shopping around to sell the business, it sounds like for a while.

19:35Yeah, I still am just kind of blown away at how much M &A there's been in food and beverage in particular. So far this year. Yeah, busy time for you, Gabby, since you cover this space more. But yeah, I think that it's really interesting. I think that lesser evil, you know, they play in the better for you space, which is very hot right now. I think a lot of their products use like coconut oil, for example. And so not surprised. I had kind of forgotten that, you know, a lot of people associate Hershey, of course, with candy and chocolate, but they've also been diversifying their portfolio away from chocolate for quite a bit.

20:18And so to back up a little bit, this is a very big deal for Lesser Evil. Their CEO bought out the struggling brand in 2011 for about$250 ,000. So this would be a great outcome for the brand. And Gabby, you actually spoke to them last year when I think the company was rolling out a new marketing campaign and they were diversifying into other snack products. But like what what was going on with that brand at the time? What did their priorities seem to be? Yeah. So last fall, it was basically a really big push into adjacent categories other than popcorn like puffs and these like onion rings, which I think is like their play on Funyuns are all rolling out.

21:03And so, So yeah, they're really trying to actually, you know, they didn't really do a lot of advertising over the years. So a lot of their growth just came from natural retail channels, pretty much. And so yeah, I talked to the CEO, Charles Karstein, who did buy the struggling brand for$250 ,000. One of my favorite facts about lesser evil is that it was founded in 2004 by the late actor Gene Hackman and CNBC host Jim Cramer very random but obviously yeah the concept didn't really work and yeah Charles actually talked a lot about that on during our meeting you know how they really had to go back to the drawing board and then they invested in a factory they're made in Connecticut it's like vertically integrated that really helped them out with like when COVID hit for example and a lot of brands couldn't deliver to retailers and so they experiment with all of these like limited edition flavors.

21:59And that's really helped them, yeah, kind of stand out in the better for you popcorn space. And yeah, like you said, it's obviously the return on investment has been huge. But I think at the same time, you know, I saw a lot of question marks about why is a chocolate company buying lesser evil? I think, you know, but as somebody who just learned a lot about cocoa prices, I kind of made sense in my head because a lot of the big chocolate companies have been sort of diversifying their portfolios recently to include, you know, like pretzels and just non-confectionary. Yeah. So some M &A that you recently highlighted as we were prepping for this.

22:41But so Hershey bought sour candy brand Sour Stripes in 2024 and also Dots Pretzels in 2021. So Hershey is no longer a company focused just on chocolate. But again, I think it's a really interesting time for food and beverage M &A. What have you seen the past few months, Gabby? Yeah, I mean, we're coming off of a really hot streak with Pepsi, for example, having bought Siete Foods a few months ago and Poppy just recently. That was a big one everybody was talking about. In January, the Flowers Foods, which is the owner of Wonder Bread, they bought Simple Mills, which is like this healthy cracker brand for$800 million.

23:24So these are some big numbers in the Better For You space. And, you know, I was just watching some, yeah, Instagram videos, and some of the investors seem really excited because they're like, this is why I invest in CPG. You just never know. You know, so of course, the big headlines are always gonna grab that attention. But yeah, this is also a really interesting time for companies like Hershey. and, you know, Mondalee is sort of like these legacy CPGs that are really going after, you know, instead of developing products in-house, they're like, well, we should just go buy the brands that already have the affinity and the innovation in place to kind of diversify there.

24:06So I don't know, I think it sounds like we're going to probably see more of this this year. I don't know. What are your thoughts? Yeah, I think we will. I'm also just kind of interested to see like, what happens five years from now. I think we're already seeing this, but of course now this is going to encourage a lot more startup activity in food and beverage. And I think it will maybe encourage some founders that they too can get this size of exits. I don't know if that will be the case, but we'll see. It's going to be just a very few interesting years for food and average generally as we see like how all these conglomerates try to change their portfolio.

24:48I mean, you also have like the GLP one effect. We'll see how that plays out. So a lot going on there. Okay, well, that is it from us this week. Thank you so much for listening. As always, please follow us. We are modernretail.co and same on social media for more of this coverage. We'll have more on tariffs next week and we'll see you back here. Thank you.

25:14Thank you.