Jeff, thank you very much for the time.
Let's get in. You know, I was saying offstage you may be the most bullish CEO I have met in the past week. You were just super excited. Tell me, you have this really excited vision for the future of protein in particular. I'm going to sort of
Press you on that. Sure.
But I'll let you make the case first, and then I have some, you know, I'm a bit skeptical, but go on.
Yeah. So, we're in the animal business. We have two P trends driving protein and pets. The humanization of pets is growing. Eight out of 10 homes in America have pets. The willingness, the expectation of care, and the willingness to spend continues to climb on pets, and globally it's averaging two to three out of 10 homes. But I think the biggest one is I sat in places like this five years ago, and on the protein side, we're number one in the health of cattle, poultry, and swine. Five years ago, people were saying beyond burgers, Impossible, meatless Mondays, we won't be eating meat. And we have seen the biggest shift in a trend that I've ever seen, shifting back to animal protein. Dietary guidelines have changed. That's double today. If you survey anyone, 60% of people are saying I'm going to increase my protein, and I bet this room would agree. And then the real challenge is taste, cost, and nutrition. The plant-based proteins didn't deliver. You've seen Beyond two weeks ago took meat out of their name. Unilever, center of the store company, put their business up for sale. People want health and wellness like never before. And it's Gen Z's. 62% of Gen Z's want more. And baby boomers, muscle retention is the new disease. One out of five people on a GLP, 30 to 50% more protein being consumed. Only 20 million are using it. They're going to be a billion out of eight billion using GLPs, and the chicken companies, the pork and cattle companies are going to win in that. So I guess a lot of those trends do seem pretty durable, but I guess the one I'm most skeptical of is the climate one, because I'll tell you I was telling you off stage you know
If we were to look back in 20 years from now, our kids who are five or six, looking back at what is it we do today that is perhaps most anachronistic in a world of climate change, increasing energy transition awareness, all this kind of thing. Eating meat is a huge contributor to carbon emissions, and the 5-year-old of today when they're 25 might look back and say, 'I cannot believe you ate that much meat.'
Right. So, I would just say if you look at Gen Z's and you talk to the Nestle's and the Danons, which we have a major partnership with right now, we just launched a product two years ago, only two environmentally claimed products out of the FDA came with us, one in beef cattle and now one in dairy. And the dairy one actually stops cows from burping about 50%. We have a methane, not a carbon challenge. I can tell you, I could take you to a farm in Kansas right now with 10,000 dairy cows that will be climate neutral by the end of the decade. They're capturing their emissions. They're measuring those. Nestle is actually on an inset basis and other companies are actually paying up to $20 per cow for the reduction. Elanco's put analytics in the farm to actually reduce it. It's everything from manure capture to reducing enteric, you know, burping and other things coming out of the cow. So everyone has a clear mind and focus on a climate-neutral farm. For your daughter, that matters a lot. Two things matter in Gen Z when they eat meat or they say they won't until: one is the welfare of that animal. Take care of that animal. There's a reason why layer chickens, eggs, and dairy cows, because you know, those are actually booming a little faster. And the second is making sure that it's climate neutral. And I think those things can be a reality in the next 10 years. That's part of the animal health solution we're in the middle of.
I guess the other thing that would be a challenge to your vision of a strong Elanco, strong protein world, is growing cost of living concerns, which do force people to have to trade down on products. Yeah. In a lot of the developing countries where you operate, meat is expensive, a huge portion of their national income, and then also worsening demographics, right? Just the populations in key countries, Western Europe, China, Japan, even here, either population growth is slowing or in places like Japan actually actively declining. I mean, that's just a smaller market.
Right. So, I think there's never been a stronger, and I'm sure you hear it from a lot of the pharmaceutical and animal health CEOs, the fine line of innovation's never been greater. As I look forward, what concerns me is we've been in a supply side, not a demand side economy for too long. Most of the growth is coming from either price growth or AI growth. So even globally that's a concern. Population, 70% of the planet is not repopulating to the level it needs to. And we have an aging population that doesn't have retirement. So as you look ahead, you have to innovate to drive volume. When I look at a company, is the volume growing or is it price growing? And you have to be relevant. So whether it's solving climate neutral farm issues or being able to get into a dollar store for a parasiticide for $8 for a low-income family, you've got to bring innovation that people are willing to spend for, that's relevant to their needs. That's why I like the pet boom and the protein boom, but I serve protein, you know, farmers that have single-digit margins. You have to innovate really well and you have to deliver to them in a supply chain that is very sustainable as well.
And this takes us nicely to one of the big topics of this week, which is resilient supply chains. This new world of volatility, right? We're dealing with a strait of Hormuz that is shut. We're dealing with the president going to China next week, and this time last year we were thinking entirely about trade and tariffs. I mean, how much in the past year, the past five years since COVID, what have you been doing on your supply chain to really get prepared for this kind of new world?
Yeah, it did westernize some. Coming out of COVID, I think there was a lot of active ingredients in our pharmaceutical and animal health industry that were in Asia for Asia, and I think Europe, US, and Latin America have become a market. You see that quite often. And I think the unknowns around tariffs, it's important to get more known facts around that. I think that's really important. But look, in the end, it's all about economics. So when we look at where do we produce, I was in a plant Monday in western Indiana that we moved a lot over here because we just thought it's more economical, but tech transfers take time. So it's got to be practical, it's got to be economical, and we still are going to have trade that's absolutely critical. And then look over on my farmer side, for our customers, we learned with COVID on supply chains: let's not chase crazy trends. I always use the no antibiotic ever in beef. Sounds good, consumer customers never asked for it, but we tried to market for a niche. Be really careful, because you'd be better to take some cattle out that are sick, to raise a cow for four years with no antibiotic ever. When it gets sick, it fragments a supply chain in a very bad way, versus put it in the hospital, cure it, bring it back with no residues. That's better. So I think it's got to be practical, it's got to be economical. And I do think the westernization of supply chains was probably a good thing, but I don't see it doing any more than it has.
And you talked about Asia for Asia. China, I think you said, is top three market for you.
