(cheerful jingle) - [Narrator] Major support for "Carolina Business Review" provided by Colonial Life, providing benefits to employees to help them protect their family, their finances, and their futures.

High Point University, the premier life skills university focused on preparing students for the world as it going to be.

And Sonoco, a global manufacturer of consumer and industrial packaging products and provider of packaging services with more than 300 operations in 35 countries.

- What's that old Chinese proverb?

"May you live in interesting times."

We certainly have an abundance of that.

Hello, I am Chris William and welcome again to the most widely watched and the longest running program on Carolina business policy and public affairs seen each and every week across North and South Carolina.

In a moment, we will begin to unpack things like rising inflation heading into tourist season, the cost of funds, geopolitical issues and how it all comes to bear on our lives here in North and South Carolina.

And later on, our special guest this week is chairman and chief executive officer of Winston-Salem based Inmar intelligence, a $1 billion data company.

His name is David Mounts, and we start right now.

(mellow music) - [Narrator] Gratefully acknowledging support by Martin Marietta, a leading provider of natural resource based building materials, providing the foundation upon which our communities improve and grow.

Blue Cross Blue Shield of South Carolina, an independent licensee of the Blue Cross and Blue Shield Association.

Visit us at southcarolinablues.com.

The Duke Endowment, a private foundation enriching communities in the Carolinas through higher education, healthcare, rural churches, and children's services.

On this addition of "Carolina Business Review", Peter Gwaltney of the NC Banker's Association, Ted Pitts from Wilson Kibler Commercial Real Estate, and special guest David Mounts, chairman and CEO of Inmar Intelligence.

(dramatic music) - Well, we certainly can say happy spring, and the summer season is rapidly approaching.

Peter, Ted, good to see you both and welcome back.

Peter, I'm gonna start with you.

You know, not just a big headline, but the thing that looms large, inflation, but not just inflation, but rising interest rates.

Now, Peter, have we already gone past a tipping point in how this is gonna affect personal balance sheets and people?

- I think we're just beginning to see it.

They just announced yesterday that the consumer price index has increased 10% year over year.

Inflation is approaching 8%.

And the Federal Reserve just raised the fed funds rate a quarter of a point, 25 basis points, first time since 2018.

And so that will raise the cost of short term debt.

And we've seen mortgage rates rising.

So the cost of funds, the cost of capital is definitely going to increase.

And I don't think we've seen the end of it.

I think the war in Ukraine has changed the landscape a little bit.

We initially, before the invasion, we were expecting a 50 basis point increase.

And so the Federal Reserve has moderated its approach to combating inflation by only increasing the fed funds rate by 25 basis points.

But I think we have a few more steps to go through this calendar year.

- Ted is, you know, this as well Ted, when we watch inflationary numbers or any type of economic indicator, it tends to be either leading or lagging.

When we're talking about inflation, we're talking about a lagging indicator.

So are we already in a situation where it could become an issue for people when we look back and to say, yeah, that's where the slowdown happened.

And I know I'm being a little hyperbolic here, but is this gonna end up looking back on a moment in time when we said, that's where it started?

- You know, when you look at the current situation, it's really just so different than anything we've ever seen with supply chain issues, a lot of times brought on by COVID, construction prices have continued to escalate, lead times on materials continues to grow.

So when you bake inflation into the situation, you know, I do think that there are some things we need to be aware of or cognizant of, but I would tell you this.

In the Southeast, if you're buying something, you want it to be in the Sunbelt, you want it to be in the Southeast.

So both North Carolina and South Carolina are somewhat insulated for maybe some of the fears that may be out there.

So I continue to be positive on our region of the country, even with all the stuff that has already happened with COVID, supply chain issues, and the stuff that is now, we're seeing taking place in Ukraine.

Which again, energy prices are gonna come into play.

So there are other things we have to worry about.

But North Carolina and South Carolina, we're in a good position to not only get through this in a better position than others do, but also benefit from folks realizing that if you want to do business, there's no better place than the Carolinas to come do business.

- Peter, when you talk to your members and when you have internal dialogue with not just the association, but people you know in the business, in finance, can you look through mortgages and lending activity and tell what's going on with residential prices or commercial prices?

- Well, certainly.

And I agree 100% with what Ted said in terms of our insulation from what might be happening in the larger economy nationwide.

We've got low unemployment.

We have rising housing costs because there's so much demand.

People are moving here, companies are moving here, which just creates, demand creates increases in prices.

There's so much opportunity here.

It's just an incredible place to be.

So I forgot your question, Chris.

(laughs) - That happens to me.

- It happens to me all the time.

But as our members talk to us about commercial lending, demand is high.

And credit quality is strong, you know, so we can look into that and say past dues and those measures that we use to measure the credit quality are all good.

Banks are in the process of reducing their loan loss provisions, because what they thought might happen during the pandemic didn't happen.

And so that's in both commercial lending and in housing.

- Ted, quick one-off for our South Carolina viewers and all of us is the idea of, there is no surprise out of the state house in Columbia that there is going to be some type of tax reform.

That seems to be universally accepted.

What do you think in May, at the end of the session, that real tax reform will look like when it's voted?

- Yeah, so I think, you know, the governor's taking the lead.

And obviously the South Carolina chamber's been advocating for years.

When you look at the map of the United States, South Carolina's income tax number, the top bracket is an outlier.

So I do think, you know, under the leadership of Speaker Lucas in the House and Senator Peeler in the Senate, you know, I think there is a need or a want to gravitate around lowering the personal income tax.

And I think that'll happen this year.

And it's been a long time coming and I think it helps again, position South Carolina amongst its peers as a better place to come live, work and do business.

So I know the business community is excited about that, individuals ought to be excited about that.

But, you know, with some of the extra money that they're gonna have, they're gonna be able to reduce that top personal marginal income tax rate, so exciting news.

- This is a quick one off in about 30 seconds.

There seemed to be a surprise announcement how Speaker Lucas has announced a retirement of sorts and not going to run.

Was that a surprise to people, and what will the effect be?

- No, so he actually term limited himself when he took the job as Speaker, he term limited himself as Speaker.

So we knew that that that would transition would happen at some point.

Speaker Lucas did a great job leading the House.

And it's a tough job and he's done a great job and the state owes him a debt of gratitude for his service.

And we'll look forward to the next Speaker and, you know, continued movement towards prosperity, as the governor would say.

- Peter, for North Carolina, not surprising to you, tremendous amount of budget money.

It's a huge amount of extra budget money.

What do you think can be done with all of that surplus that's not already been outlined?

Is there something else we can do for the balance of the year?

- That's a great question, Chris.

I think our focus needs to be primarily on education from primary, secondary, and beyond.

And then infrastructure, because there is so much growth taking place in the state.

We have to have the capacity for it.

And so my urging to policy makers would be to focus on education.

We have to improve our education system and we have to improve our infrastructure.

- Do you think that they will relent and lean more into an educational funding more than they have already talked about?

- Well, there's a great deal of corporate private sector leadership in that area, and the business community is aligned, and that's what we're asking for.

When you look at childhood reading, we've got to improve the proficiency of our children in their reading scores and their ability to learn.

You know, Kelly King, formerly with BB&T and Truist talks about how children in the early stages, they learn to read and then they read to learn.

And we have to teach them to read and our focus needs to be primarily on that.

- Our guest's business has a legacy in North Carolina and the Carolinas' tobacco business.

It was a coupon clipping business started in the '80s out of Winston-Salem, and now is a multi-billion dollar, almost 6,000 employee, data driven, I'll call them consultant tech business.

Joining us now is chairman and CEO of Inmar, David Mounts.

David, welcome to the program.

- Thank you for having me today.

We're grateful to be here and look forward to the discussion.

- David, I'm gonna start with something that's very top of mind for all of us, of course, Russia, Ukraine, and the hostilities going on.

Does this exacerbate what cybersecurity and cyberattacks we've already had before all of this?

Do you expect a 2X or 10X now around that type of attack?

- Yeah, early on in the conflict the signals were going off that there was gonna be an increase in attacks.

You know, Inmar is a data platform company with a very rich amount of cloud application layers that are integrated into data platforms that perform marketing and financial and supply chain functions on behalf of our customers.

And so we're very sensitive to what's happening in the cyber environment at all times.

We were probably among some of the first companies to begin to see some of these activities increase.

We're also very much linked in with all of the different government agencies, and we not only track and stay connected with them on information, but we share information on what we're seeing with them and others.

And so there has been a noticeable uptick since the conflict began.

And it's been part of the Russian strategy, we think, to try to enhance that.

Everybody should have their guard on highest alert right now.

And we believe it's very critical that everybody be operating in that mode.

- Ted?

- Yeah, question, you know, related to obviously your business.

And when you look at workforce and the workforce that's needed to be able to do the types of jobs that you do and the education system that feeds that workforce, I mean, what do you see that we need to do different as a region, the Carolinas, North Carolina and South Carolina, to prepare a workforce that will ultimately be able to do the jobs that you need to fill?

- Yeah, that's a great question.

Look, Ted, there's no reason why the Carolinas can't be the most educated region in the entire country, right?

We have wonderful education institutions, we have great infrastructure, we have business environments that collaborate well.

The big problem we've had is that we allowed our demand and supply to get mismatched, that's been the biggest issue.

We didn't give the academy and all of the people involved in the education ecosystem good visibility in business to the demand that was coming so that they could set up and be ready for that.

And then in the academy, we maybe weren't curious enough about the changes that were happening and the digital transformation impact.

You know, we spent a lot of time thinking about digital transformation, not only because it's the business that we bring to our clients, but we think about it in how we run our own business as well.

And we believe that this combination of digital transformation, humans plus machines, is the real opportunity for our country going forward.

And certainly for the Carolinas.

If we could do a better job at giving visibility to all of those in, from literally 3K to workforce, as to the demand that is present today and that's coming in the future, and if we could do a better job in the academy of aligning our curriculum and our programs around meeting that demand, we could solve this problem in a couple of years.

It's really about collaboration, it's about data, it's about visibility and transparency and communication.

And I'm really grateful to be a part of myFutureNC, which is one of the bodies we've formed recently in the state of North Carolina to try to drive that discussion.

And those discussions are happening, but there's much work to be done.

The main things that need to be done is we need to free the data.

We need to allow people to see this information through data.

And we've got issues like territorialism or regulation that are making it tough to get that data visible so that people can begin to act on it and change what they're doing so that supply and demand can come into balance.

And I just leave one last point.

Super important that we do this.

What does it say about our generation, where we've created some of the greatest opportunity, the highest paying jobs, the most skilled jobs in the history of the world, that we did not prepare the next generation to take those and instead had to rely on other countries' education institutions fill that because we didn't prepare the next generation for those?

I think a lot about that.

It's one of the things that causes me to lose sleep.

And I'm trying to do everything I can personally to try to change that outcome.

- Peter?

- Well, David, thank you so much for your leadership in this area.

And I'm excited about the private sector's involvement in these public policy matters related to education and workforce development.

I'm gonna change subjects just a little bit on you.

And learning about your company, you have considerable visibility into customer behavior and your technology allows you to do that.

Given the uncertainty in the world, what's happening in Ukraine and with inflation and the supply chain issues that we've all experienced, how is customer behavior changing as a result of all this?

And where do you think it's going?

- Well, you hit at the core of what we do.

We actually help, whether it's retailers or health systems, we help differentiate them through personalization with their shoppers and patients.

We show them how to engage in a thoughtful way on everything around what's relevant to them and what their needs are to price points to things that even on their shopping list, that our AI programs will let them know that they forgot to include in their orders.

Because we know from past history that they're gonna want those items.

We're able to see in real time what's going on in the purchases of these consumers, prices of the items.

And we're seeing about right now about a 9% inflation in the price of items that people are putting in their everyday baskets as they buy-- - Sorry, David, did you say 90% or 9%?

- 9%, 9% increase year over year in the basket on the item prices.

Now, that's a mean increase.

As you begin to look at it, at least in some areas like salty snacks being as high as 14% or 15% increase.

So it depends on the products you're looking at.

But the thing that I think is most interesting to get back to the behavior is yes, these price increases are showing up at the item level.

But the consumers are not spending any more on the total basket purchase.

In other words, it's very clear they have budgetary limitations to that.

About 1/3 of the country will only buy product on deal.

Many of them can only afford to do that.

And so what they start to do is they start to make trade off decisions.

And these trade off decisions are going into alternate products that may be less expensive, which is a real risk for CPG companies that are trying to build loyalty in their products and brands and spending money trying to do that.

Or they'll do without.

And sometimes the do without can be really, really harsh.

We see sometimes people making choices between whether to get the medicines that they need or to get the food that they want.

And those can be very tough things to see in the data.

Some of that activity we've seen in past recessions and in past cycles like this, where there was inflation.

We've been around long enough to have that data and we can go back and look at it.

So one of the things we've been doing is preparing all of our customers by telling them what to expect and trying to get them ready.

In fact, just this past week we just sent out a notice to many of the C level executives at our top clients saying, these are the most important things to do right now given the behavioral changes we're seeing with consumers.

- David, I don't wanna put words in your mouth and I don't want this to be leading, but as you've just described it, and also as the rapid historic rise in prices that we've all seen in the broader media, would you go as far to say that we've already gone over the tipping point when it comes to a slowing economy?

Would you say, and I don't want to use the recession word, but we look at leading indicators and we try to figure out where we're headed.

Would you say that we're already in the place where it could start to slow down?

- I think there are some signals that that is a real potential right now.

When you start thinking about, you know, 9% to 14% increases in the prices of items, when you start to see energy prices increasing like they have, you guys discussed that earlier.

You know, we know that food and energy, because of corn and because of ethanol, became correlated when we started to use corn in the energy cycle.

Corn is the base item of the food chain.

It's the most important, probably the most single important crop that impacts the entire food chain, whether it's proteins or any other crops that are out there.

So now we've created correlated inflation between energy and between food.

That makes it really tough on a consumer.

And I think also makes the cycles of slowing down and speeding up a little bit more of a whipsaw at times.

- Ted?

- Yeah, so let's talk about the supply chain a little bit when it comes to food.

You know, so you go to the grocery store and you there's no cream cheese because of supply chain issues, there's no chicken wings when you go out to a restaurant.

When we kinda look at kind of the globalization of supply chains, do you have any concern that, you know, we need to be food dependent here in the US?

Like we're, you know, maybe we should be energy dependent here, or we're independent here in the US.

I guess when you look at supply chain issues around the products, the retailers that you work with, what concerns do you have?

What changes do you think we'll see that come out of where we are today?

- Yeah, we're really lucky in this country.

We have some of the world's best, most efficient producers of food really that has ever existed in humanity, right?

So we're very lucky in that regard.

I think the things that are really important in supply chain and we operate a very big supply tech, for example, we keep track of the security of the drugs, provenance of drugs moving through the drug supply chain.

We keep track of, provenance of food now is becoming a more important thing.

I think the best thing we can do to make sure that we don't have these supply chain disruptions in the future is to get the understanding of using data platforms in more of an ecosystem and a collaborative endeavor, so that whoever you are interacting with in the food supply chain, you're able to do so with visibility and transparency.

And that we're over overlaying that with AI and machine learning to notify us all when there is a potential for risk in the supply chain.

Sometimes there are disruptions in the supply chain and they don't end up in your cream cheese not being on the shelf.

And you know what, that's probably okay.

We can manage around that and do something about it.

But having the ability to alert and to make sure that, hey, this food is not only safe, but it's on time, it's getting where it needs to be.

Here's a disruption that occurred.

It's gonna be impactful or it's not going to be impactful.

What are we gonna go do about that?

I think those are the steps that we need to take moving forward.

We've spent a lot of money on supply chain technology, but it's been too myopic.

People have been focusing on their own cost reductions, their own internal supply chains.

And not that those endeavors aren't important, but the bigger benefit to all of us is to take an ecosystem approach to that.

That's one of the problems we're trying to tackle at Inmar these days.

- Peter, we have about two minutes left, Peter.

- Okay.

I'm curious about, I wanna talk about cybersecurity just briefly.

You know, in banking industry, the industry I represent, cybersecurity is job one.

It's the most important thing that we do because while we hold money and we conduct transactions, we secure people's data and their information.

I know your company is an information based company.

What are you doing to protect the data that's entrusted with you and that you work with on a day to day basis?

- Yeah, so first of all, as someone who uses banking services and relies on you protecting my identity and my data and security, so I just wanna say thank you for what the industry does.

We watch carefully what industries like banking do to make sure that we are best in class and at the levels of security that we need to be.

You know, first of all, we hire great talent to make sure that we have the very best security leaders leading the strategy around our cybersecurity.

And I think that's always the most important thing is, are you starting with the right intellectual capital?

Secondly, we stay abreast of the evolution of tools and the techniques that cyber hackers are trying to utilize.

We do stress testing of our own system constantly with friendly tests against it, to see if there's any vulnerabilities there.

We also involve our customers and their security teams in our planning, because keep in mind that most of the things we do are connected to them in some way.

And I think that, you know, you really have to embrace this idea of kind of zero trust, right?

And you also have to train your people and your team to be very, very aware of how they can be used as a way in.

Constantly testing your team on a regular basis, making sure that they are, their mind is sharp every day.

And not just when they got up in the morning and had their cup of coffee, but when it's been a long day and they might be a little more vulnerable.

Look, we're humans, we're not always gonna perform at the same level.

Testing them with rigor at the most vulnerable times where they might be susceptible, I think all of those are part of the toolbox that keep us successful.

And we take this, like you do, very, very seriously, and it's something that our customers count on us to do as well.

- And David that's, your timing is impeccable.

We're gonna have to end it on that last word, but thank you for joining us.

And I wish we had more time to unpack this digital transformational world that you're leading, clearly, at Inmar.

But please come back, we hope you'll join us again.

- I would be happy to do that.

I think it's one of the most important things that leaders need to be focused on right now is the digital transformation plan and hybrid work.

- Thank you.

- The quick thing we did at the last-- - I wish, I'm sorry, I wish we could.

We're literally out of time.

Ted, thank you.

Peter, good to see you again.

Until next week, good night.

- [Narrator] Major funding for "Carolina Business Review" provided by High Point University, Martin Marietta, Colonial Life, The Duke Endowment, Sonoco, Blue Cross Blue Shield of South Carolina, and by viewers like you, thank you.

(dramatic flourish)