Hi, good afternoon. I'm Jeff Solomon, I analyze chemicals here at J.P. Morgan. It's my pleasure this afternoon to introduce the management of Avery Dennison. Representing Avery Dennison is Deon Stander, who is the Chief Executive Officer, and he's been CEO since 2022. Prior to becoming CEO, Deon ran the solutions business for Avery, which is where their RFID business is nestled, or their Intelligent Labels business is nestled. His history is that he came to Avery through the Paxar acquisition way back in 2007, which I know some of you remember. Also, accompanying Deon is John Eble, who is in the second row, who's the head of Avery's investor relations effort. The form of our discussion will be a fireside chat, and we will begin. Welcome.
Thank you very much, Jeff. Good to be here with everybody.
Good, thank you. You know, I think the first question that's probably on people's minds these days are tariffs, in that there seem to be tariffs on the Canadians, on people from Mexico, on China. Avery is a global manufacturing organization. How do you begin to think about some of these issues?
You know, we've been doing a lot of work around understanding how tariffs may play out. I say that with a caveat, I don't think anybody has a clear view yet as to what the finality of policy will be. As a business globally, because we're denominated in most regions around the world, we make, buy, and sell in country. To that extent, tariffs don't really apply to us. There are three vectors where we see some tariff potential, tariff impact, but it's on the very small side of things for us. One is if we're having to source materials from one country to another that may be tariff bound.
One of the experiences we had in 2023, when we had the supply chain crisis, the significant stocking and destocking that happened in 2020, also 2023 into 2024, was a real focus from us on ensuring that we had supply chain resilience across a number of sources. To that extent, if we do see certain countries or certain commodities being tariff orientated, we have an ability to switch sourcing. We see a de minimis impact in that regard. I think if you think about the two areas where there is likely to be some degree of impact, it's firstly in China. I'll talk about that. China for us is about 15%-17% of our revenue, of which half of which is bought, made, and sold in China domestically for domestic China consumption. It is not subject to tariffs as we understand them at the moment.
The other half is actually resident in our apparel business. We make a lot of tags, labels, and packaging for the apparel industry that go into garments manufactured in China, which are then exported predominantly to the United States and Europe, roughly about half in each proportion. We actually see in that regard tariffs and implication of tariffs to China to be an advantage for us. We've been the largest provider to the apparel industry around the world, and we've been helping brands in both North America and Europe and retailers for many years move sourcing around the world. This is as they move from China to Bangladesh or from India to Honduras. We have footprint in each one of those places. When that typically happens, we tend to disproportionately benefit because we have the largest scale and footprint.
We have been doing that with our brands and retailers for many years. In some ways, a higher tariff policy on China has an opportunity for us to help those brands move further their volume into one of the other sourcing countries. The only area I see some direct potential impact is probably what we see overall if tariffs become to such a point, for example, apparel, that the price point for apparel goes up fairly dramatically in any end market, then you are likely to see some degree of volume decline or consumption decline. It is a discretionary purchase at the end of the day. Switching to the other side of the hemispheres, in Mexico and in Canada, most of our business in Mexico is again largely denominated, bought, sold, and made on our materials business in Mexico.
We have a very large and recently built intelligent labels facility in Mexico itself. We use that to service this hemisphere, both north and south. Knowing or thinking that there may be some tariff implication, we know that we have enough resilience in our network in other manufacturing facilities to move volume around. We actually have footprint in the U.S., which is largely a research center with some production capability. If we needed to, we could ramp that up. We see maybe a transitory impact if those came to bear for Mexico. In Canada, we are largely supplying the industry out of the United States should tariffs really take hold in that regard. We just see that as part of our normal process of managing our customers, passing on those tariffs as they were as we roll them out as well.
Overall, I'd say my bigger concern for us is not so much the direct impact of tariffs. I think we planned enough work around scenarios, the strength of our business in doing that, so we can address them over time. More likely is there going to be a broader consumption impact in certain markets that may drive volumes. At the end of the day, Jeff, I think you know our business is very anchored in consumer staples across most of our business, largely non-durable consumer staples. They tend to be more resilient, but they can be at times impact if tariffs drive further inflationary pressure as well.
In some of the industries that we cover, what we saw, especially in commodity plastics, is that in November and December of 2024, it turns out that there was very sharp upward trajectory in shipments of materials because people were worried about tariffs that might be imposed early in the new administration. When you look at the retail area, have you seen that? That is, when you look at the shipments or the production around the world, have you seen sort of more rather than less because people have been preparing for tariffs? When you look at current demand conditions, you know what we've seen in some of the industries that we cover is maybe a slight softening. How do things look a little bit in retrospect, and how do they look now for you?
I'd say in retrospect, you know I'll use the example of when we went through the 2023 significant inventory build and then the destocking in 2024. I think collectively industries like ourselves and businesses like ourselves took a lot of learnings out of that, mostly around do we have a good enough handle on what's handling at end consumption, end CPG, for example, into retail and building resilience both from a data science perspective to understand outlook and then also just more insights from our customers. I think that's going to be helpful, and that's what we'll be leaning into as we move forward. I don't at the moment see any significant industry-wide build or downside at the moment. There's always going to be pockets at the edges, a couple of customers here or there.
Because we spread across almost all staples, we do not necessarily see anything at the aggregate that would suggest there has been dramatic inventory builds in advance. That includes even in apparel as well. Now, as it relates to demand at the moment, I still think it is a very dynamic environment and probably made more dynamic by some more of the discussions that are happening around policy, but also the geopolitical stage. I will say from our perspective, March in the first quarter for us is such a big part of our earnings. It is very difficult to call where it will be at the moment. I will say based on everything I know now, we still will reiterate our full year guidance of $980-$1,020. I think there may be pockets of some softness, but we are also seeing some offsets as well.
I think as and when we have better clarity of what the true policy implications are going to be and how they manifest themselves, that'll give us greater insight. If there are significant dislocations in the market, we're going to be subject to those as well, Jeff.
You said you most likely will reiterate your guide.
We do reiterate.
The first quarter for you seems more or less within your parameters of what you expected when you.
Again, March is such a determining month.
It's such a larger month.
All things would suggest that it's going to be within those parameters. Remember what we said from a guidance perspective was the first quarter would be very similar to the first quarter last year. As we rolled our programs and new programs, earnings would sort of grow as we went throughout the year. We also got some price hangover that came into the first quarter from the back end of last year. Those factors combined, I think as we see the March play out, we'll have a much deeper sense of where the true business is going to be at.
Okay. From our point of view, we haven't really seen any material inflation, at least on the chemical side going into Avery. Have you seen any? Would you agree with that? How about the paper side?
I agree with you on the chemical side. I mean, there are always pockets of small price tactical buys and so forth that tend to go. We're not also seeing anything really on the paper side. We saw a little degree of inflation at the back end of last year, and that's tied to unwind, just a small amount. We didn't necessarily take any action on that. There was some noise in the market, particularly as it relates to paper in Finland again, but that has been resolved now, at least at a macro level. It's more of a broader economic strike that has been, I think, now averted. We'd made a lot of plans around managing inventory ourselves and sourcing.
At the moment, I don't necessarily see the outlook that we started the year, which is relatively a neutral inflationary year, not significantly high, not significantly low, was probably still going to be the case based on where I stand right now.
You went through a period of time where your materials business really experienced very difficult volume comparisons, and then volumes came back. Do you have a sense of where industry inventories are? Are we now at some more normal condition of growth in materials?
I'd say as normal as I've seen it for the last probably three or four years overall, Jeff. That includes inventory as well. There are always going to be elements, given the breadth of our portfolio, where some of the specialty products may be a little more held in inventory for customers or a little less. Typically across all of them, I think we're probably in a more normal environment. I see two elements. In our materials business, as you know, 70% of our business is what we call in our Base Business. This kind of really is nominated by what we call GDP overall. It's a unit volume driven staple business overall. As GDP goes, typically we go. Now we have two accelerants that we then layer onto our materials business. One is we have what we call our High Value Categories.
These are labeling declaration technologies that have utility beyond just the label. Think about industrial tapes used to replace mechanical fastening for noise vibration. Some durable labels that go in shipping and oil containers, specialty labels, a good example of which would be if you go into your supermarket and that clamshell that you used to buy with your lettuce or produce in now has one of those peelable films that you can peel back and then reseal. We patent and develop that technology. It's a different way of providing another application beyond just the value of the self-adhesive piece. Those categories tend to be sort of mid single digit growth for us.
When you put the two things together, and then you also have for us, because a large part of our business is in emerging markets, you naturally have got a higher GDP growth in some of those emerging markets. So overall, that business tends to be GDP plus. I do not see any significant change as we sort of where we are from now and then as we move forward in that as well.
One of the questions that our investors have is when they think about label demand for Avery, they wonder, you know, is there more demand at physical locations for Avery labels, or is it better that products are shipped through the mails? You know, that is, you know, is it the e-retailers that you would prefer or the physical retailers that you would prefer?
That's a great question. We're going to have a whole long projected discussion about the future of physical retail and whether it's important or not. That is a separate topic, I think. Overall, what I would say is at the end of the day, all physical products have to show up having two elements to them, to the consumer. One is it has to carry some form of brand equity. How else will you know if it's a Tide bottle relative to any other? I'm using it as an example. There is one element of branding and brand equity. The second element is information, where it's come from, how it's made, the content, and so forth.
For us, the way we think about it is whether an item goes into a retail environment or gets shipped directly to a consumer, it still carries roughly the same amount of label content materials. They may be slightly bigger and smaller. There is no real difference between private brand and national brands as well. There is some label content. The additional piece in this, the more actually the greater e-commerce, the more packaging you are sending, the more package labels or variable information labels we have. You have this other piece that comes into play on that side as well. For me, the biggest part of this is the future of where those are going. They are currently what I would call analog labels in that sense. They are static. They only give you what you see and what you read.
We know, and I have a very firm belief that in the future, every physical item, no matter what it is, perhaps not in all my lifetime, as I shared with you, is going to have a digital identity and digital life because it's going to enable supply chain transparency from the moment it was born all the way through to retail, to consumption, and to end of use disposal. I think we then also bring that RFID technology to bear in those labels that we provide to all of the industries. That is a unique position that we hold. We are the world leader in what I think is the best sensing technology, UHF RFID. We're the world leaders enabling decoration and information on physical items.
Maybe we can turn a little bit to RFID. What people have noticed over time is that chip technology changes, and there seem to be newer generations of chips that are being used. Do they improve the performance of your RFID inlays?
There's no doubt that improved chip performance matters at some point. Now, there's two things that are happening actually in the chip industry. If you think about the device that you use, those are very, very complex chips. What we'd call in the semiconductor industry, the highest nodes are being able to build capability to hold information, really. The older nodes have less capability. UHF RFID actually requires less capability. What you're really trying to carry is effectively a unique item number, and then you associate or serialize that with the physical item that you're doing, whichever it is at the same time. Increasingly, the future is going to put that information in the cloud. It's the reason we built, I think, the world's largest digital identity base as a software piece so that we could house all this information in there.
As chip development continues, I think we're going to see slightly improved performance at the end of the day. What actually makes a difference when it comes to the use of RFID is the antenna that we put with it. Think of the RFID supply chain being first semiconductor manufacturing, the chip. It's not us. We're not going to build a fab. The second piece is you then take that chip and you put it onto an antenna. You design an antenna that is fit for purpose. It'll either work in loosely hanged garments, tightly packed garments, protein, on shelf shipping. Each one of them has to be uniquely designed to read the most effectively that it can. We are the world leaders in both the design and our IP portfolio in that regard, as well as the world's low-cost leader in manufacturing of those.
You take that thing in the next node and you associate it into form factor, typically a tag, a label, maybe on clothing. You move to the next step, which is data management. You manage the two pieces of information together. We're again the world leader in that. Then software, which we play a role in, and hardware, and finally services. For me, I think what's going to matter is when we get to some of these increasingly complex categories, the design of the antenna or the whole chip and antenna together is going to be more and more important.
We know that because there are categories now in food right now that we are innovating around where we will be bringing more proprietary innovation to the market in this next year that will enable some of the categories that have not been possible to adopt because of that very limitation, irrespective of how good the chip is.
There is a lot in what you said. You'll be able to innovate in food. When I think of food, I think of cold meat.
Yes.
The innovation would have to do with temperature and wetness?
No. We see food being adopted largely in what we would call the perishable categories. Think about the rim of the store, bakery, proteins, leafy greens, really. Anything that is highly perishable and involves an enormous amount of labor to identify what's best before date, what's close, that's where we're seeing a lot of traction. That's where, for example, with the bakery pilot or the bakery roll that we have with Kroger right now. Some of those categories are very, very challenging to read using UHF RFID. I don't want to go into the technical detail, but you require a backscatter approach. You need to be able to activate the device because it's a passive device, doesn't have a battery, using the energy from a radio wave on a reader. It wakes up, it tells you something to do with an item, and it sends it back.
Depending on the complexity of what you put that label or tag onto, it can significantly interfere with that radio wave performance. If you have things that are very high, I'll use an example, dielectric components. Meat is very water intensive, very dense. Be able to try and read something off something that has a lot of water and very dense is very difficult from a physics perspective. Some of our innovation is in solving how we do that and enable that. I'll give you another example. We knew probably five years ago we had a conviction that food at some stage would go, and protein is the biggest part of food, is the most valuable part. Sure.
60% of protein probably when it gets home to the home is put into the freezer, and then it gets dethawed or thawed through a microwave typically to be used. You can't have something, can't have a semiconductor device that goes into microwave that'll explode because it overheats. We, three years ago, launched the world's first RFID safe microwavable tag, knowing at some point that protein would come along as well. Those are examples of how we bring innovation to bear to help activate and amplify a new category.
The innovation is around.
The inlets. There's innovation around meats. There's innovation around density of items on a shelf. There's innovation around ability to read very quickly from a distance. That's another piece of that. You know this is a core strength of ours, but we're also continuing to learn. We've invested quite a lot in artificial intelligence in how we design these. Typically, I'll give an example. Typically, to make an inlay for a specific purpose, it takes six to eight weeks. You have to design it, then you have to test it, then you have to physically replicate it, and you have to test it again. We're using an AI tool that we built now to be able to shorten that cycle dramatically by 80% so we can actually get to market quicker with a testing process.
There are so many things we can touch on. Some people conceptualize the RFID industry as really a commodity industry. What they do is they worry that maybe there will be too much capacity. If I understand what you're saying, the different RFID categories may have their own dynamics, and there may be proprietary features of one kind or another that different providers have that make the industry a little bit more complex.
I think your last point is right, Jeff, that the industry will be complex. Like any technology over time, I think at some point in time, there'll be an element of it which will have more of a commoditized feel, but a large part of it is still for at least for the next decade, it's going to be more differentiated than that. That is going to vary by individual product type and by segment type. I will give an example. If you're, as I described, that supply chain, that node of RFID, most programs work because you're needing to do two things. You're needing to have something that's designed for its end use, specifically, let's say, on hanging garments or protein. You're also needing to manage and associate the data through the supply chain. You capture every event.
In its best expression, people like ourselves can put tags and labels at the source of an item, whether it's apparel or food. We can manage the data around that, which we hold in the cloud. As retailers or brands and consumers use it, they can interact and write updates to that unique item, where it was in the port of shipping, how it was used, et cetera. You have a sort of a, you're both a suite of, I'm bringing a physical product and I'm having digital solutions added on top. That's at the upper end of what I call the complexity spectrum. At the lower end, it might just be, I'm going to have a simple, relatively simple RFID label.
It has to still be designed for a purpose, and you're likely to see more what I would, what you'd term commoditization in those areas. I'll give you a real example of even how that'll evolve. With UPS, we launched that program with them to resolve missorts and labor efficiency in their last mile fulfillment centers. The point at which all these packages come in and they go onto the right truck, they were having missorts in one in 400, which doesn't sound like a great problem, but you ship 20 plus million packages a day. Each package costs more than $20 to bring back and resend that. It's an enormous amount of money. We moved that from help with them from one in 400 to one in 800.
It is a relatively simplified product in that regard, designed for specific purpose, but we're not managing any of the data, as an example. They are moving in their journey, and this is public knowledge, to the smart van. They use it on the van as well, and into the smart driver, the person gets out, makes better sense of it. Ultimately, their destination is to go to what they call Smart Customer, which is the source again. Not only their stores where people walk in to hand in the package, but corporate customers. The analogy I would use is it's like tagging that apparel item at where it was made or the food item in the farm. When you go back to source, you need to start managing the data.
What might seem like a more simplified product now for UPS at some point will become a much more complex solution that we can again step into. I think it's going to wax and wane across times. Certain elements of segments are going to be more complex and others are going to be more simple. Our great strength has been able to do that across all of these spectrums. I hasten to say, across all of them, above average segment margins.
Okay. To go back to the food application for a moment. What Kroger began with were baked goods. You know, I think the Avery shareholder base sighed and thought, okay, that's it. It sounds like there's technology development that's going on. As that technology development accelerates and becomes more of a reality, the opportunities at Kroger or at other food applications become greater. Maybe one of the limiting factors is the state of the technology as it was over the past six months.
No, I don't think the technology is a limiting factor. We've been very clear, even Kroger's been very clear on this. Bakery is just the first step for them. They want to do, ultimately our journey and roadmap with them is to do all perishable items, whether it's proteins or ultimately at the end stage, leafy greens as well. It was important for us to make sure that Kroger were visible in the first, because at the end of the day, it's not a customer success that drives an industry to adopt. It is a ubiquitous business case that applies across the industry, which is what we saw in UPS and we're now going to see in Kroger. As a consequence of that, I can tell you now we have a lot of inbound and ongoing pilots and trials with other grocers wanting to take the same approach.
Now you're into, okay, can you, what's the rollout schedule look like? That's no different to any other. Is it store by store? Is it geography? Is it product? As we've seen the history, I've seen at least in apparel and general merchandise, you start in one area and ultimately you work your way through the whole store. That's typically what we've seen across, at least on the apparel side and starting to see in the general merchandise side as well. The technology is not a limitation. There are unique pieces that we, people like ourselves, have to innovate around. At the price point where it is and the scale of the opportunity, I think there is an enormous growth industry ahead of us. I think I've consistently said, you know, apparel is an addressable market of about 40 billion units, so we're only 40% penetrated.
Logistics, just the five or six logistic players, is 65-70 billion units. We have a ubiquitous use case now, and we're in discussions of pilots with every one of the others as well. Food is 200 billion units plus, and that's just in perishable items. There is a long runway ahead of this.
The investor in Avery is sometimes fretful because the investor will look at the price dynamic in RFID. The price dynamic is difficult for an outside observer to make out because the retail tags have higher price points than, for example, the logistics tags. When you look at the EBIT per tag per category, as the chip prices fall, does the EBIT per tag per category rise or fall or stay the same?
I would characterize.
If you understand what.
No, I absolutely. I know what you're trying to drive towards, Jeff. Let me maybe answer it in this way. If it doesn't address your question, then please push back. What we see is on the spectrum, we see price points all the way from kind of two, three cents all the way up to 10 plus cents, depending on complexity and use. What we do know for ourselves is across those broadly, we have very similar margin profiles across all of them. The more simplified a product is, the more scale volume is, the less other supporting infrastructure we put into it, and we have scale adoption of our assets as well. You are able to generate very consistent margins across all of them. The per unit EBIT number may be slightly different clearly, given the retail price.
I think as the industry evolves, we're going to continue to see products move up and down that scale. For example, during this last year, we brought in apparel for Zara, a loss prevention tag to replace their previous tag, which is largely focused on imagery accuracy. The significant benefit to them, unique IP, and we're able to command a much greater value capture of that particular product. We see that as another entry route into expanding apparel further. At a unit level, all I will say is we tend to see very similar margin profiles. Across all of them, they are actually above our segment average overall. That includes us consistently continuing to lean forward and invest both in capacity, in people, and in innovation.
Our objective at the end of the day as a company is to deliver GDP plus growth and top quartile returns. If you look at our Intelligent Labels platform, our objective is to say that as we move forward, we want to maintain our greater than market average share overall. We continue to be 50% plus of every market and every customer we're participating in. That is important to us because as we activate and drive these new segments, that food, 200 million logistics, we're going to disproportionately benefit from that, given the largest player in the market as well.
Is the conclusion that we should draw that while chip prices go down and while the prices of individual RFID tags in the individual categories go down?
Up and down, depending on what the application is.
Yeah, up and down. That in general, that's not something that penalizes Avery It's something that perhaps enhances the growth rate and the margins stay relatively good.
That's the takeout that I would have. I would say as well that two things are going to happen. One of the reasons why we have this drive and one of our core strategic pillars is to sort of expand what we call our high value categories. Intelligent labels is just one of those because they're categories that have higher growth, higher margin, and greater differentiation. By definition, if we grow those at a much higher rate as a part of our portfolio, we're going to get natural mix margin accretion. We see that. That's where intelligent labels will play into that as well. I think on the individual intelligent label piece, we have seen, this is not immune to any other technology, we've seen kind of low to mid single digit price reductions over time.
Our ability to generate productivity, which is one of our great strengths, more than offsets that. We are able to drive. I'll give you a real example of that. In the last five or seven, last six or so years, we have, through our engineering capability and our productivity, been able to half the rate of capital intensity per billion units of RFID that we produce because we're able to bring from our materials business the ability and the capability to do large scale roll- to- roll manufacturing. Think about self-adhesive paper and film. We brought that same capability into manufacturing billions and billions of inlays as well.
You make 23 billion units?
It's in that ballpark.
Thank you for that. When we think about the UPS experience that you've had, it seems to be the case that you had all of the UPS business. And then at a point in time, other people had UPS business. Now, I'm not trying to pry into exactly that particular customer, but to the general structure where Avery goes and captures a piece of business, and then there's a certain amount of time, is it a year, is it two years, that a certain amount leaks out. How do we think about how much leaks out and why it happens and what the general commercial arrangements are?
I would say, you know, because we've been doing this for quite some time, particularly in apparel, now in logistics and starting in food, our assumption is always that when we start a program, because we are, if you thought about those nodes that are described, we're kind of the one throat to choke and really do that at scale globally with efficacy. We tend to be the people, I can't think of a customer that started a program where we haven't been the person to start it exclusively with them. They want to start something. Bear in mind, the use of this is not just another label. It's a piece of technology that gets deployed. It has cultural implications, cultural adoption implications in store in the supply chain, which we help the customers with. Typically we started, we're typically exclusive.
For a period, and it varies by customer than by segment, we remain an exclusive provider. We always assume at some point that there's going to be what we would just call share normalization. Customers may decide they want a secondary supplier, a third supplier for a small proportion for risk amelioration, a normal procurement approach in a company. We knew with that particular customer mentioned that at some point in that kind of second year, we'd also see that as well and brought to bear. I go back to my standpoint. My aim, our company aim is to make sure that we maintain our majority share no matter what happens. I'll give you examples. In our apparel industry, we've had customers that have been with us for more than 10 years, RFID customers.
We are still the vast majority share provider, 70%-80%, that type of thing. Because for two reasons, one of which is when things are more challenging, they need somebody they can rely on to really move the velocity of the supply chain, move the innovation platform, bring them innovation. The second piece is that we've been able to actually continually refresh the value creation we can provide to them. The Inditex example is just a good one of that. That was a very program where we had more than the majority share, but being able to bring a new technology for loss prevention enabled us to capture, again, a very, very, very high percentage of their share. I suspect in across all these industries here, we're going to see that.
Our outcome with our logistics customers, we are still the vast majority share as we go through this year.
For the decision that's being made by the customer, how do they make that decision? That is, do they go to 60% or 80% or 40%? Do they give everybody alternatives? They say, you know, if you want to hold on to the business, like these are the price points. Is it very much a negotiated?
Typically we try to have arrangements with our customers that are multi-year, three to five years depending. We factor some of that share normalization into it. The reasons they go through them, I think are more to do with risk amelioration than anything else. I think very few organizations always feel comfortable just having one single supplier. We are not dissimilar ourselves when we think about our own supply base. What you try and rely on, at least I can only speak for ourselves, is we are looking for strategic partners that can drive the vast majority of our business. That is typically where we end up as well with our customers in that regard.
Maybe as a last question, there's an Arkansas retailer of above average size. And it seems they have an initiative to use more RFID tags across their footprint. Is this a larger dynamic that's important to Avery in 2025?
I earlier spoke about, Jeff, what we're seeing in apparel, general merchandise is this trend to the whole store, ultimately the whole store. There's a very good reason why. For some of you who are in the United States over here, if you go to a Uniqlo store, if you happen to have a Uniqlo store, you go to the.
We do. We all do. It doesn't work perfectly in the cloud. They're always scanning at the end with the duplicate items. Oh God.
All Uniqlo is tagged every item. If you happen to be in Europe, go to a Decathlon store. That's one of our customers. They are a sporting retailer. They tag every item, even a protein bar or chocolate bar. Even though that bar may cost EUR 0.50, the tag relative to the price doesn't seem like it makes economic sense. The reality is, and we're going to see this, and this is what you're seeing for that retailer you talked about, general retailers as well. If you're able to leverage your technology to take inventory much quicker, to provide a higher level of associate or store labor productivity, but this part of the store doesn't have that. Now you're running effectively two operating systems for your store labor.
You're running one that's highly efficient where people like what they do, and you're running one where I'm still using an old clipboard to go and check things. At some point, retailers have got to the point of saying, okay, if I get enough of my store tagged where I can get the efficiency and the ROI on the actual item, then I don't want to run a second approach in my store, and I just want to go. That's what Uniqlo have done. That's what Decathlon do. I strongly believe in general merchandise, we will get there as well.
Okay.
It also allows for the final thing, which is complete self-checkout, should you choose to do that.
All right. Thank you. Sure. Go ahead.
You know, it seems so much that you are driven by innovation. Get that deal off the UPS thing.
No, it's both, actually. I mean, I will tell you, we're celebrating our 90th year this year. Just to show you, you don't get to survive 90 years unless you're really focused on innovation. We do both. We go out in the market and we listen to customers, but we also look at inherently our capabilities and what we can deliver out of that. The protein tag was a good one. We knew no customer was asking for it. No market adoption was required. We sensed at a point that being able to do so would happen.
You know, those people who've been a thing.
Yes.
Develop it, self-develop it, or they're coming out of some school, where are they coming?
Most of it comes out of either technology or universities or colleges at the high end. We have a lot of PhDs. We're in the material science business at heart and the digital identification solutions business on the other side. One of the things we also do is when we do M&A, and we only do that as an executioner strategy, to be clear, when we do an M&A, one of the key factors we look at is the talent in the organization. What are we going to get, and particularly around, can we help get transformative talent in gaps that we already have as well?
Okay, good. Thank you very much for your attention. Thank you for coming.
Thank you very much, Jeff. Appreciate it. Thank you, everybody.