Morning Brew Daily - Canada Pulls US Liquor From Shelves & Can Fries Save Sweetgreen?

Episode Date: March 7, 2025

Episode 534: Neal and Toby chat about the jobs report set to come out Friday morning that should be able to paint a clearer picture of how the labor market is faring amid news of federal layoffs, government spending, and of course, tariffs. Then, the trade wars have spilled over in the alcohol section as Canada pulls American liquor off its shelves as Trump tariffs go into effect. Also, Intuitive Machines is attempting another moon landing but a toppled moon lander has put a damper on its mission. Meanwhile, Sweetgreen is adding fries to their menu and consulting firms are having to justify their work to the federal government. Finally, a roundup of the biggest headlines for the weekend!  Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow There are risks involved with investing in ETFs, including possible loss of money. ETFs are subject to risks similar to those of stocks. Investments focus in a particular sector, such as technology, are subject to greater risks and are more greatly impacted by market volatility, than more diversified investments. Invesco Distributors, Inc. Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash US slash brew AI. That's pwc.com slash us slash brew AI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. Today, the first jobs report is being released since Doge began its drive to slash the federal workforce. Then a jack and coke in Canada is now just a Coke after Jack Daniels got caught in trade war crossfire. It's Friday, March 7th.

Let's ride. It's going to be the last Friday you try to beat the darkness when leaving work because daylight saving time. starts this weekend at 2 a.m. on Sunday, clocks will spring forward, which means you will lose an hour of sleep, but also gained an extra hour of daylight in the evenings. For instance, here in New York City, the sun will set tonight at 5.55 p.m., but on Sunday, it'll set at 6.57 p.m. This is absolutely huge for lazy people like me who held out strong on changing their microwave clock since daylight saving time ended in November. I've been living an hour ahead of you all for months, but soon will be synced up again. Living in the future. I was making a little pros and

cons list to figure out how I felt about daylight savings time, because I always get confused. For the pros, it's good for golf, great for evening picnics, great for people who never changed their clocks. For cons, it's very bad for parents taking their kids to school in the morning. Also tough for morning people in general, so if your job is hosting a morning business news podcast, maybe not so great. So after weighing all that, I realize I have no strong feelings, and thank goodness for auto-updating clocks. Now, word from our sponsor, Invesco-QQQ. Neil, I've been thinking about efficiency lately.

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With Invesco QQQQ, you can rethink what's possible. Before investing, consider the funds, investment objectives, risks, charges, and expenses. Visit investco.com for a prospectus with this information. Read it carefully before investing, full disclosures and podcast description. Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the unreal college deal, everything you need to study and play with select Windows.

11 PCs. Eligible students get a year of Microsoft 365 premium and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer. While supplies last ends June 30th, terms at AKA.m.m. PC. It's finally here at long last, the next Game of Thrones book. No, just kidding. It's the monthly jobs report due out this morning at 8.30 a.m. Eastern, giving us a key snapshot of America's employment situation in February. And while all jobs reports are big deals, this one feels like a big freaking deal for a few reasons. First, it is the first jobs report since President Trump and Doge have taken a chainsaw to the federal workforce in a bid to slash the size of the federal

government. Second, a slew of recent surveys have raised alarms over slowing economic growth, prompting investors and analysts to up their bets on an upcoming recession and sell-off stocks. The jobs report is one of the first pieces of hard data that could calm those fears or jack them up even more. The hints we've been getting have not been pretty. In February, U.S. job cuts hit their highest level in almost five years, according to an analysis released yesterday, from Challenger Great and Christmas. Layoffs were up 245 percent from January and marked the highest total for the month of February since 2009. The firm said that more than one-third of the total layoffs were attributed to the headcount reduction. efforts of Doge, totaling 62,000 job cuts across 17 agencies.

But Dobe, the government jobs report due out in a couple of hours is the gold standard for providing the most detailed picture of the labor market in America. What should we be expecting? Well, unfortunately, will these cuts show up in this jobs report? The answer is probably not. February's official jobs report will not fully reflect these Doge cuts that are coming through just due to timing. March and April are probably going to be the rest.

real tests as these layoffs continue to filter in and these federal cutbacks do ripple throughout the economy. They really haven't shown up in any official government data yet. The labor department said yesterday that the number of Americans filing for jobless benefits actually fell 21,000 to 221,000 for the week ending March 1st. So these are just lagging a little bit. You'll probably see that unemployment rate stay pretty low, pretty solid at 4%. But that could change very fast because we just need to dive into this Challenger Great Christmas Report a little bit. Some of the percent increases in layoffs when it comes to government jobs are astounding. That 62,000 government job cut number represents a 41,311% increase from last year.

So obviously we're in unprecedented territory when it comes to shedding jobs. Also, the nonprofits and the companies that rely on those federal contracts are shedding jobs now too. So you do start to see just how big the ripple effects could be from these doves. cost-cutting efforts. So how big those rebel effects will be is still an open question. Federal employment while it employs a lot of people, millions of people, it still accounts for less than 2% of U.S. employment. So even when the job cuts from the federal government are factored in in future jobs reports

in March and April and all those months after that, it will be unclear just how big the size of the impact will be. If it's just limited to the federal workforce, then it probably won't be a huge impact on the jobs market, if it ripples beyond that into the private sector, say people aren't going into their jobs in D.C. anymore. So the people who, all the people who work in servicing them from the lunch counters or transportation, things like that, we'll see how big those ripple effects will be going forward. Some forecasts are suggesting over 500,000 job losses by the end of the year, which would actually erase a quarter of all job growth from 2024. So that obviously

is a pretty solidly large number right there. I mean, a quarter of all job gains from the previous year. Also, one interesting effect of this is as federal workers are kind of getting laid off, states are stepping in and trying to recruit them because they actually have open positions they want to fill. New York launched a Doge said you're fired. We say you're hired campaign trying to lure some of those federal workers to 7,000 open state jobs.

They have Maryland is offering job assistance programs. But their officials are. admitting there's not enough, you know, one-to-one replacements in the, you know, state roles to replace all these federal workers. But it is interesting to see them, just like any other, you know, like tech companies sometimes sneaking in and saying like, hey, you're not working for the federal government anymore. Come work for the state government. We have a lot of open positions here. So jobs report due out 8.30 a.m. Eastern. We're expecting strong job gains 160,000 low unemployment. So perhaps this will be sort of the baseline or snapshot of what the job.

jobs picture it looks like before sort of the shakeup that's been happening in Washington. And like I said, there's been other indicators indicating an economic slowdown. So the jobs report will be very closely watched at a time when the stock market is teetering. Canada is weaning itself off America's booze. It's not an intervention, but a countermove in the trade war between North American frenemies. Canadian provinces are yanking Jack Daniels, Kentucky bourbon and California wine off store shelves and retaliation to Trump's 25% tariffs on Canadian imports. It's prohibition, but just for Made in America drinks.

Naturally, U.S. liquor execs are losing their minds. The CEO of Jack Daniels maker Brown Foreman called it, quote, worse than a tariff, because while tariffs make things more expensive, this just straight up delete their sales. Ontario loan carries 3,600 American alcohol products before Premier Doug Ford declared them, quote, done, gone. This is not great news for Kentucky. where bourbon is a $9 billion industry supporting over 23,000 jobs.

And while Brown Foreman insists, it can shrug off the Canadian losses, since they only make up about 1% of its total sales. Things get dicey when you factor in the post-pandemic sales lump the industry was already going through. Turns out that international beef, Neil, does not mix very well with the spirits industry. No, spirits and alcohol has long been a political football in trade wars, even if it doesn't account for a huge amount of sales. And, you know, Jack Daniels only does 1% of its total revenue in Canada. It's not going to make a huge impact.

But it is more symbolic and is one of the levers that governments can pull to show their displeasure with what's going on in terms of tariffs and trade wars. Because Canada government can't tell a random retailer to say take that product off your shelf. But it does control the liquor stores. And so it's using that particular tool, that particular control that it does have, it has leverage there. And that's what it's using to kind of send a message saying you should buy Canadian and don't buy anything from America because we have the power to take it off the shelves. Yeah. And even though Brown Farm is trying to strug it off a little bit, Canada is the U.S.'s largest export market for alcohol. Over $763 million worth of American wine, beer spirits, end up there, get sold there.

And this is a very interconnected industry. So something that happens in Canada, too, will result in, you know, potentially job losses in the U.S. The Distilled Spirits Council of the United States, which has the acronym Discus, which is a very cool, estimates these tariffs could result in the loss of over 31,000 U.S. jobs. Obviously, that's coming from a perspective of someone advocating for the industry. But, yeah, I mean, Kentucky governor has also spoken out against these tariffs, calling them incredibly difficult and challenging for his state. So it is interesting how decisions made by the Premier. of Ontario, filter all the way down to Kentucky's bourbon industry.

Meanwhile, we got some more updates on the trade war yesterday. President Trump delayed tariffs on Canada and Mexico for goods covered by USMCA, which is the free trade agreement. He brokered in 2020 with those countries. So many goods are now being pushed back till April, along with the automakers delay, which we got earlier this week. still a White House official said about 50% of U.S. imports from Mexico and 62% from Canada may still face tariffs under the new regime. And Justin Trudeau, Prime Minister of Canada, had a call with Trump and said that he can confirm after that what he called a colorful call.

There will continue to be a trade war for the foreseeable future. So you saw stock sell off in a big way yesterday after these tariff moves, the NASDAQ closed at a correction, which is 10% down from its recent peak. Let's move on. Yesterday, intuitive machines made one small step for man and one giant leap for private companies landing spacecrafts on the moon. Maybe. Intuitive machines, Athena lander, was supposed to touch down near the moon's south pole, making

it the second private company this week to pull off a lunar landing. But as the clock hit landing time, mission control was met with. a confusing situation. The craft didn't crash. Mission control was receiving data from the spacecraft as it touched down, but it was clear that the spacecraft was not working quite as expected.

NASA and intuitive machines cut their live chain without confirming whether the lander was fully operational and a later press conference did nothing to clear things up. If this all sounds familiar, it's because Athena's twin craft, Odysseus, did the same thing last year,

landing successfully, but then tipping over like a lunar janga tower. Engineers are, now scrambling to figure out if Athena stayed upright or if history just repeated itself. NASA is footing the bill for this mission as part of its commercial lunar payload services program, which hires private companies to deliver science experiments to the moon. Athena is carrying a drill to search for frozen water, a tiny rover to test a Nokia cell phone network, and a rocket-powered hopper designed to explore tricky terrain.

But it's also carrying the hopes and dreams of the Texas-based private company who stuck cratered as a result of the craft's struggles to land near a lunar crater. It's really hard to land on the moon. When you're trying to land back on Earth from going to space, Earth has an atmosphere which serves as a natural breaking system. Apollo 11 re-entered Earth's atmosphere at almost 24,000 miles per hour and splash down at about 15 miles per hour. It was helped by parachutes and that drag of the atmosphere. That does not exist on the moon. So intuitive machines had to slow down this lunar lander from 25,000 miles per hour to six miles per hour using no humans and just jet engines. That is hard. Firefly pulled it

off. It has not exactly pulled it off. It hasn't really stuck the landing like Simone Biles in two different attempts, but it just shows how hard it is to land on the moon with a robotic lunar lander in the absence of atmosphere. It's not like it's rocket science, Neil. In this case, it actually is. But you did mention the Firefly spacecraft. They have this little rivalry going. They're both Texas-based companies. They're both private companies pursuing moon landing missions.

And it just so happened that they did them within the same calendar week. Fireflies landing on Sunday was deemed successful. Intuitive machines, Athena lander, that fate is unclear. Part of it is due to the design of each spacecraft. The design of Athena is very tall and narrow while the blue ghost lands. from Firefly is short and squat. So it's literally because intuitive is taller that it's more likely to tip over. And the craft that it's sent up this time is pretty much an identical copy of the one it's

sent last time. So what's the sign of insanity doing the same thing over again, expecting different results? Maybe they just need to go, you know, the Saquan-Barkley route, make this thing shorter, make it squatter, make the center of gravity lower because it keeps tipping over. Although we'll see what actually happened in this case because we still don't really quite. now. Up next, it is Stock of the Week, dog of the week time. It's time to refresh your yard

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Price line. It's Friday, and you know what that means, pushing off emails and stock of the week, dog of the week, the segment where Toby and I pick one stock that landed on the moon and another that can't stay on its legs. Toby, you won the pre-show burping the ABC's competition, so you get to go first. Very gassy over here. For my stock of the week, it built its brand on kale in quinoa, but now it's making a play

in the French fry game. Sweet Green, the fast casual salad chain, just in the... introduce ripple fries, an air-fried, avocado oil-coated, take-on French fries that are supposed to taste great and not weigh you down with a metric ton of grease. And Wall Street is digging it so far. Shares popped 5% this week after the company unveiled the fries, making a rare win for a stock that's been on a 34% slide since early February. On paper, this move makes sense. Sweet green has been trying to break out of the $18 salad box for years now, rolling out dinner-friendly protein plates in 2023 and adding steak permanently to the menu in 2024. To them, fries for the

next logical step as they search for a craveable item that are designed to keep customers coming back. Now, the company is still losing money $90 million last year, so it's not like ripple fries can save everything, but it's a bet that the salty snack can boost margins and drive foot traffic to continue its evolution beyond those pricey green bowls. I mean, it's International Women's Day tomorrow, and I think this launch was timed for that because this is Sweet Greens attempt to complete the girl dinner, which has gone viral on social media. It includes Caesar salad, fries, and a Diet Coke. It has a Caesar salad. It has the Coke. And it needed fries. It's just another instance of a company noticing a trend on social

media and hopping on it with a product introduction. I think you're definitely right on that, but also this term cravable is a term that industry execs use in the fast food industry, which is something like McDonald's fries, that you just go in, you're probably add them to order because they're good, they're salty, like you know what you're going to get. And so they've been, Sweet Green's been looking for a craveable menu item like that. They want to drive these repeat purchases. They also want to differentiate themselves a little bit, too, that say, hey, we're not just salads.

Like, we can offer that comfort that fast food provides, but with a much healthier take on it. They're trying to trademark this name, a ripple fries. Apparently, they're pretty good, too. I was reading some reviews of it. And they said the biggest thing that you take away is, like, one, It tastes pretty much like a French fry, but two, you can use your phone afterwards because there's not this layer of grease on it, and that comes from the air frying of it. So I do think that it will be relatively popular because of the fact that you don't feel like

I said you're weighed down with a metric ton of grease. That is kind of the feeling they're trying to avoid with these fries. My dog of the week is management consulting firms, which are currently getting a taste of their own medicine by the federal government. Firms like Booz Allen Hamilton and EY that are hired to streamline operations are the themselves at risk of being streamlined away as Doge reviews government contracts with consultants and aims to rip up the ones that aren't providing value. It sent a chill through the sector on Wall Street, shares of Booz Allen Hamilton, which

relies on the public sector for 98% of its $11 billion in revenue, virtually all of its business, have plunged more than 40% since the election of Donald Trump in November. Accenture, which gets about 8% of its total sales from the U.S. government, is down about 14% over the past month. Whether they can stop the bleeding may depend on high-stakes reports due today. The General Services Administration, the group that oversees procurement for the U.S. government, asked all federal agencies to justify contracts from the 10 highest-paid consulting firms with a deadline of Friday, March 7th. Dub, defend the spend, they're being asked to identify which projects are mission-critical and others that could be canceled with minimal collateral

damage. Toby, it is a bit ironic for consultants to be asked. what would you say you do here? I mean, they are biting their nails, and the nerves are definitely filtering through this industry right now because the scale and the speed of these cuts have been pretty unprecedented so far. More than 30 contracts are already been canceled in just six weeks. That is more than in any full year in recent history. So what's being targeted to, while some of these modernization contracts will definitely survive, like projects where you're updating IT infrastructure, things like DIY initiatives,

are on the chopping block. You have seen already explicitly linked diversity initiatives have been asked as well. So what does it mean for the consulting industry? It is just a scary time for it. Industry analysts are expecting zero growth in 2025 with potential revenue to clients in 2026 because as these contracts phase out, the next logical step, too, is that you might have to reduce your bids for them in the future because if there's just, they're not as much demand from it from the government,

then how are you going to, you know, bid if you're Deloitte, how do you win out over Accenture? You might have to lower your bids for some of these contracts, and we're already seeing that happen. So just a major shakeup of an industry that has been kind of steady and stable, you know, you can say, like piggybacking off the government for years and decades. There is perhaps a bull case to be made, though, because the federal government is trying to streamline systems, trying to update its technology. And as they cut workers, they might look for contractors to fill the void. So some of these consulting firms say, hey, this is literally our bread and butter. So they're weathering the damage right now. And hopefully, not hopefully for them,

they will come back stronger. Let's sprint to the finish with some final headlines. Walgreens, nearly 100-year run as a public company, is winding down. The pharmacy chain agreed to be taken private by Sycamore partners in one of the biggest leverage buyouts in recent memory, according to the Wall Street Journal. The last decade has not been kind for the you buy everything from cold medicine to candy, valued at more than $100 billion in 2015, this deal gives Walgreens an equity value of around $10 billion, which highlights the challenges the company is faced as it's been squeezed by Amazon on the retail side and pharmacy benefit managers on the pharmacy side.

The hope is that by staying out of the limelight of the public markets, Walgreens can better execute a much-needed turnaround. Yeah, drug search chains have just been getting hammered left and right. You are right. They've been struggling for years with lower reimbursement. reimbursement rates for prescription drugs, but then you also have this new competition from Amazon. There are also, the front ends of drug stores just compete with everyone. When I say everyone, I mean Amazon, but you also, you've seen pressure from larger competitors like Target,

even Dollar General stores when they're opened near these pharmacies hurt chains in rural areas. So that's just even, you know, the front of, front ends of drug stores. We're not even talking about the back ends here who, you know, dole out prescription. So it's just been very, very tough. and it has been this long and winding road from a $100 billion company to, you know, getting bought out for around $10 billion today. Hope you're not planning on taking a train today from Paris to London because all Eurostar services between the two cities and others across Europe have been canceled for the remainder of Friday.

Why? Because overnight, workers discovered an unexploded bomb from World War II near a major station in Paris. According to the BBC, it's not a particularly shocking discovery since British and American bombers frequently targeted rail yards in Paris and other major cities to disrupt the Germans in the fight over France. But it is pure chaos out there on the French rail lines today until they dismantle it. Yeah, this is a big transportation nexus that was halted. I mean, they're canceling Euro star chains from France to Britain, Belgium, Netherlands. That served over

226 million travelers in 2023. So it is definitely not the place that you want to find a bomb obviously. Speaking of places not to find one, you said that this was a relatively common thing that happened last month. More than 175 practice bombs that were used for training in the Second World War were found under a children's playground in Northern England. So of the two places you do not want to find, you know, an unexploded World War II bomb, I think a train station and a children's playground are pretty high up that list. Speaking of Paris, a lot of Americans are heading that way, but only if their 401ks have more than 401Ks in it. The CEO of Air France, Ben Smith, said the airline had been seeing amazing demand for its business in first-class seats,

primarily coming from wealthy American travelers. It's unbelievable what Americans are paying to come over here, he told the financial times. As such, Air France has shifted its business model to focus on wealthy Yanks and the premium end of the market. It is charging $24,000 for one leg of a first-class ticket between New York and Paris and April, and is also launching a new updated first class cabin this month. Neil, it looks like people going on holiday are actually replacing corporate travelers as airlines' chief money makers who take up those seats in the front of the cabin. Yeah, pretty remarkable turn of events for airlines.

They lost a ton of business and corporate travelers who made up the vast majority of their profits pre-pandemic. They were like, what are we going to do now? And then all of a sudden, these rich Americans come along and saying, hey, those first class seats, I want those. Screw economy. and so they've found a really remarkable revenue and profit source in rich Americans. Denmark is officially breaking up with snail mail.

After 400 years, the company's state-run Postal Service, PostNord, is shutting down letter deliveries for good. PostNord says that the move comes after a 90% drop in letter volume since 2000 and the increasing digitalization of society. It's cutting 1,500 jobs and ditching 1,500 post boxes as it focuses on package delivery going forward. 95% of Danes already used digital mail, so most of the country won't lose sleep over it, but the 271,000 people who still rely on physical letters, many of them elderly, are left with a lot of stamps and nothing to send. Neal 400 years of mail delivery, poof, gone, all because

the use aren't writing their thank you notes. This is the most anti-Huga thing I could think. It is not cozy to send mail electronically, but it's just the state of the world that we live in letter numbers in Denmark have fallen since 2000 from 1.4 billion to 110 million last year, and then they've declined at 30% since then. So people aren't sending mail, and you just have to wonder around the world when these state-operated postal services are going to stop sending mail after Denmark. Yeah, it is not just Denmark. Germany's Deutsche Post is slashing 8,000 jobs.

UK's Royal May is cutting services to save costs. And then Trump has floated the idea of privatizing the U.S. Postal Office as well. So you are right. This is not just a Denmark issue. No one's sending letters anymore. Let's wrap it up there. Thanks so much for starting your morning with us and have a wonderful Friday.

For any questions, comments, or feedback, send an email to Morningbrewdaily at Morningbrew.com. And if you're enjoying the show, share it with a friend, family member, or coworker. Toby, who should everyone listening share it with today? You can pick whoever you want to share it with, but I want you to share the pod with someone via a letter. Together, we can all save snail mail.

Let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Olivia Graham is our associate producer. Eugenwa Ogu is our technical director. Scoopsterderis is on audio. Hair and makeup is listening to the new Lady Gaga album on repeat. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. I wish you all well. All pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly Big Board Buckslot Machine by Aristocrat Gaming, Yamava Resort and Casino at San Manuel. giving one person a $1.6 million dream package. The biggest prize in Yamava's history.

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