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Anna Fletcher and Jenny Marc, CNN Business

2019-08-23 10:21:04

business

business

https://www.cnn.com/2019/08/23/business/tribe-wearable-tech/index.html

These smart shorts tell you how to improve your workout - CNN

Greek startup Tribe Wearables wants to use high-tech clothing to make your workouts more effective.

business, These smart shorts tell you how to improve your workout - CNN

These smart shorts tell you how to improve your workout

Komotini, Greece (CNN Business)Wearable technology has made big strides in recent years, from fitness trackers and smartwatches to shoes that vibrate to give you directions, tops that soak up air pollution, and a jacket that doubles as a solar-powered phone charger. Levi's and Tommy Hilfiger are among the brands getting in on the act.Now Greek startup Tribe Wearables wants to use high-tech clothing to make your workouts more effective.The company is developing gym shorts that sense your every move, tell you how to improve your workouts and help prevent injuries.A laboratory in your shortsOnce a keen basketball player, Tribe Wearables founder Demetres Stordopoulos suffered a knee injury in 2010 during his studies at university. The computer science student was frustrated by weeks of physiotherapy exercises, unable to check whether he was healing in between check-ups with his doctor. Read MoreA trip to a biomechanics lab in 2013 inspired Stordopoulos. He wanted to take the lab's monitoring technology and put it into gym clothes. He hoped these smart garments could track the wearer's progress and health outside the lab -- at a fraction of the cost.But making a complex technology suitable for everyday use was not an easy task. The prototype was "like a pair of shorts, a computer and an octopus had a child," says Stordopoulos. Tribe Wearables clothes analyze your body's performance during exercise, using artificial intelligenceNikos Aggelousis, Tribe Wearables' lead bioengineer, admits he was skeptical at first and felt the project was too ambitious. "The idea was to develop a wearable by putting an entire biomechanics lab on a pair of shorts, using an embedded technology that itself was under research and development," he said.Now, paper-thin sensors make the smart technology in the clothes almost unnoticeable.The 'living laboratory': Inside a neighborhood of smart homesEach pair of Tribe Wearables shorts contains sensors that collect data and send it to an app, which then suggests which exercises would best suit the user. It also provides virtual coaching, offering feedback and making sure that a workout is at the right level of intensity.Stordopoulos believes this technology will prevent sports injuries and give people more control over their own fitness. A smart T-shirt is also under development. Smart watches lead the way"It's early days for smart clothing," says Ed Thompson, of data analytics company GlobalData. "Only a few products are seeing the commercial light of day." Thompson says recent progress in areas such as smart fabrics, motion capture technology and artificial intelligence allow wearable tech companies to develop clothing for specific tasks."Smart clothes also have uses in the healthcare and defense sectors, where continuous monitoring of body activities is of the utmost importance," he adds.Would you trust an algorithm to diagnose an illness? The industry is dominated by the smart watch, which makes up 60% of the wearables market, according to GlobalData. Biochemical sensors, fall detection and heart rate monitors are becoming standard in these devices, which can also carry out smartphone functions like playing music and tracking location.Meanwhile, fitness trackers are losing popularity because they have fewer features than smart watches, GlobalData states. Aggelousis believes there is a unique opportunity for fitness technology in the multi-billion-dollar wearables market. The task is to make that technology "unobtrusive and invisible to the user," he says. So the most important challenge for future fitness technology may be to make you forget you're wearing it.

Nell Lewis, CNN Business

2019-08-07 10:58:47

business

business

https://www.cnn.com/2019/08/07/business/alabama-power-smart-neighborhood/index.html

Why smart homes are the future of housing - CNN

Inside the 'living laboratory,' a neighborhood of smart homes in Alabama, that imagines what houses will be like in 2040

business, Why smart homes are the future of housing - CNN

The 'living laboratory': Inside a neighborhood of smart homes

(CNN Business)Hannah Kennedy wakes up in the morning, turns to Alexa — a smart speaker — and asks, "What's the weather like today? What are the traffic conditions?" She leaves for work, checking an app on her phone that warns her if any doors or windows have been left open at home. She looks at the app two or three more times during the day to monitor the thermostat or let a delivery in. At the grocery store, she checks to see if she has enough milk, via the refrigerator's in-built camera. Kennedy is living in Reynolds Landing, a neighborhood of 62 smart homes developed by Alabama Power on the outskirts of Birmingham, Alabama. It is part of an experiment by the utility company to imagine how homes will look in 2040. With North America's smart home market expected to grow from $12 billion to $36 billion in yearly revenues between 2017 and 2022, according to market research firm Berg Insight, this experiment could foretell the future of home design. By 2022, the report estimates that 63 million households in North America will have adopted smart home systems."What we've done here is create some very efficient homes, connect them up, and we're trying to understand how we're serving those customers...and how they're using that energy and interacting with those devices in their homes," Todd Rath, Alabama Power's marketing director, tells CNN Business. Homes are powered by a microgrid located about a mile down the roadRead MoreEnergy-efficient technologyHomes at Reynolds Landing are 35% more efficient than standard newly built homes in the area, earning Alabama Power the Alliance to Save Energy's 2019 Stars of Energy Efficiency Award. The electricity that powers them is generated locally, by a microgrid made up of solar panels, battery storage and a backup natural gas generator. The biggest energy savers are the temperature control systems, which are particularly important in Alabama's extreme climate. "Here in the southeast United States, we have hot summers but also really cold snaps in the winter," says Rath. "The biggest energy user in an individual home is the heating and air-con system."Homeowners can control temperature ranges in multiple zones in their home to prevent wasting energy heating or cooling unused rooms. The microgrid helps to maximize these energy savings — if it's a mild day and homes don't need as much energy, it turns on the heat pump and water heater to store excess energy for later.Each home is equipped with smart features and technology that give the residents more control Outsmarted?The houses are kitted out with a smart home system that includes thermostats, voice-activated security and interconnected kitchen appliances. This means that the homeowner can control almost everything remotely: from room temperature to opening the door and turning on the oven.Such smart devices use less energy than heating and air conditioning units, and consumers love remote control and tactile interaction, says Nick Lange, a consultant at sustainable energy company VEIC."The little things do add up" he says. "Smart thermostats are a good example of a relatively pain-free way to have a big impact."For some, advanced technology can be an obstacle. "There are always moments when I feel like it's a step ahead," says Kennedy, especially with older people like her parents who might not have had access to technology at a younger age. "But when they hear about the impact that we're seeing financially ... how we're using less energy and living more efficiently, I would say they are both open and interested," she says. The houses look like any other in the area, but the tech stands them apartLiving laboratoryHouses in the smart neighborhood came onto the market in the usual fashion, costing around $400,000 each — about average for a home in the area, says Rath. When buying a home, residents agreed to share anonymized data on energy usage with Alabama Power and meet researchers monthly to discuss their experience and likes and dislikes. "Each of the homeowners is part of this research project, we call it the living laboratory," says Rath.But smart products could make homeowners less secure. A 2019 report by Avast, a cybersecurity software company, found that 40% of digital homes worldwide contained at least one device vulnerable to cyber attacks — citing printers as the most common entry point. The study suggests that the rapid growth of the Internet of Things — a system of devices and objects connected to the internet, which is predicted to more than triple by 2025 to over 75 billion devices — puts manufacturers under pressure to deliver affordable smart devices and security features can be neglected. "A low cost smart thermostat is very open to the world, and if that's the one that is present in the market it becomes a juicy target for someone to exact ransom software," says Lange."But I think the benefits outweigh the risk," he adds. By 2040, both smart home technologies and the security software available will be far more sophisticated. "What [Alabama Power] put together is a realistic example of what future homes communities are likely to have, but I can say almost certainly that those future homes will be better versions of them," he says.

Charles Riley, CNN Business

2020-09-02 10:43:55

business

business

https://www.cnn.com/2020/09/02/business/unilever-fossil-fuels-cleaning-products/index.html

Unilever will stop using oil and gas to make cleaning products by 2030 - CNN

Unilever is spending €1 billion ($1.2 billion) to end the use of fossil fuels in the production of its cleaning and laundry brands.

business, Unilever will stop using oil and gas to make cleaning products by 2030 - CNN

Unilever will stop using oil and gas to make cleaning products by 2030

London (CNN Business)Unilever is spending €1 billion ($1.2 billion) to end the use of fossil fuels in the production of its cleaning and laundry brands.The consumer products company said Wednesday that by the end of the decade, household products such as Omo, Sunlight, Cif and Domestos will be made using only renewable or recycled carbon.That means swapping petrochemicals for materials sourced from plants and marine algae, as well as materials recovered from plastic waste and CO2 captured during production processes.Ice cream sales are up with more people at home but deodorant sales are down"As an industry, we must break our dependence on fossil fuels, including as a raw material for our products," said Peter ter Kulve, president of the conglomerate's home care division. "We must stop pumping carbon from under the ground when there is ample carbon on and above the ground — if we can learn to utilize it at scale." To help reach the goal, Unilever is working with a company in southern India on technology that will allow captured CO2 to be used as a raw material in the production of soda ash, a key ingredient in laundry detergents that is currently made with energy from fossil fuels. Read MoreIt's also partnering with a biotech company in Slovakia to develop a renewable and biodegradable ingredient for use in dishwashing liquid. The ingredient is already being used in Sunlight dishwashing liquid sold by Unilever in Chile and Vietnam.2 billion people use these products. By 2030 they'll be biodegradableUnilever (UL) says its products are used by 2.5 billion people each day in 190 countries around the world. According to the company, seven out of 10 households around the world own at least one product from its 400 brands. The company pledged earlier this year to reach net zero emissions from its products by 2039, more than a decade ahead of the deadline laid out in the Paris Climate Agreement. It's also promised to make all 70,000 of its products biodegradable over the next 10 years and use less plastic packaging.Unilever has been recognized by CDP, which runs a global carbon disclosure system, as a corporate leader in environmental transparency and performance. It is one of only a handful of companies to receive the nonprofit's top rating for climate change, forests and water security.

Story by Sara Ashley O'Brien, CNN Business Video by Sean Clark, Frank Fenimore & Matt Gannon, CNN Business

2021-10-21 12:42:57

business

tech

https://www.cnn.com/2021/10/21/tech/amazon-jennifer-bates-risk-takers/index.html

This warehouse worker became the face of a union push at Amazon. She's still bracing for the fallout - CNN

When Amazon opened a sprawling warehouse in her community in March 2020, Jennifer Bates never guessed she'd find herself testifying before members of Congress one year later about the "grueling" conditions she experienced working inside it.

tech, This warehouse worker became the face of a union push at Amazon. She's still bracing for the fallout - CNN

This warehouse worker became the face of a union push at Amazon. She's still bracing for the fallout

New York (CNN Business)When Amazon opened a sprawling warehouse in her community in March 2020, Jennifer Bates never guessed she'd find herself testifying before members of Congress one year later about the "grueling" conditions she experienced working inside it. Bates, grandmother of seven, had been excited Amazon was coming to Bessemer, Alabama, because of the economic growth she thought it would bring to the area — and the possibility that a job there would allow her to spend more time with family.What she found at Amazon instead was a job with 10-hour shifts that she felt were "more strenuous" than the 12-hour days she pulled at a previous company. The amount of walking required to get around a warehouse the size of 14 football fields, including going up and down flights of stairs, hurt her knees and caused her legs to swell, she said. Jennifer Bates was thrust into the national spotlight after her efforts to help organize a union at the Amazon facility in Bessemer, Alabama."Working 10 hours at the pace that they push you to go, the time off is either going to the doctor for something, soaking, resting, taking it easy on your days off," Bates, an Amazon associate, said in a CNN Business interview this month.She considered quitting. But Bates determined there was a better response: fighting to improve it. "Why couldn't I stand still and have an opportunity to fix something that was broken?"Read MoreThat decision would ultimately thrust Bates into the national spotlight thanks to her role as part of a high-profile union push inside the Bessemer facility. The face of the fightThe workers and organizers behind the effort were fighting to create what would have been the first US-based union in Amazon's 27-year history. In the process, they rattled one of America's largest employers, which put on full display its aggressive tactics to combat unionization. More than any other Amazon worker, it was Bates who became the face of this effort, potentially risking her livelihood in the process.At the invitation of Sen. Bernie Sanders, Bates testified before the Senate Budget Committee on March 17. Speaking via Zoom, Bates appeared read damning prepared remarks. "Amazon brags it pays workers above the minimum wage. What they don't tell you is what those jobs are really like," she said. "From the onset, I learned that if I worked too slow or had too much time-off-task I could be disciplined or even fired." Her testimony sparked a flurry of press coverage about Amazon's warehouse conditions, with Bates' name at the center.Bates testified before a Senate Budget Committee, detailing the working conditions she said she experienced at the Bessemer warehouse.In a statement at the time, an Amazon spokesperson pushed back on her characterizations: "We take employee feedback seriously, including Ms. Bates', but we don't believe her comments represent the more than 90% of her fulfillment center colleagues who say they'd recommend Amazon as a great place to work to friends and family."The risks of speaking out so publicly were substantial. "Anytime a worker gets involved in organizing with their coworkers, they're taking a risk and Jennifer Bates has been willing to take that risk on behalf of the people she works with," said Rebecca Givan, an associate professor of labor studies and employment relations at Rutgers University. "She's been willing to talk to the media, to talk to Congress, to really fight very, very publicly." Bates knew this from the start. "I had to be very careful [of] how I moved, how I spoke and what I did," she recalled. "What good is it if I lose my job and the work that I started is not complete?" The election to unionize, which took place by mail due to the pandemic over a nearly two-month period ending in April, resulted in workers largely voting against a union. But whether that vote will be upheld is still an open question. The Retail, Wholesale and Department Store Union (RWDSU) appealed the election, alleging that Amazon — which vigorously fought the effort — wrongfully interfered. In August, a National Labor Relations Board official recommended the results of the election be scrapped and that a new election be held due to alleged illegal misconduct by Amazon. The NLRB has yet to make its determination on the matter and Amazon has indicated it may appeal the NLRB's findings.For now the union effort continues at Bessemer — and so does Bates' sense that she might lose her job at the warehouse, where she still works, before that work is done. A long road to taking on AmazonFor a decade before she joined Amazon, Bates worked in a unionized job at a US Pipe plant. She described her colleagues there as "more like family" and said workers "didn't get any disrespect" because they had the union. That experience informed her action after she joined Amazon. It moved quickly: One day, she and a group of Amazon coworkers were secretly meeting with the RWDSU at the local Cracker Barrel about possibly organizing a union. Before long they had garnered enough interest from other Amazon employees to hold a union election at the facility, which would draw attention from prominent figures including President Joe Biden and Stacey Abrams. Amazon had long faced criticism over workplace conditions inside its warehouses, including around the rates of serious injuries. But the scrutiny grew during the pandemic as households leaned even more on its delivery services. Workers, advocacy groups and politicians sounded the alarm on everything from the backbreaking pace of work to the lack of transparency around confirmed Covid-19 cases. The union vote in Bessemer drew attention from prominent figures including President Joe Biden, Stacey Abrams and Sen. Bernie Sanders. Bates is pictured on the left.Several employees-turned-activists had pushed for Amazon to improve working conditions during the pandemic and later accused the company of retaliating against them — allegations that the company has denied. Just last month, Amazon settled with two corporate workers who claimed they were illegally fired. As part of the settlement, Amazon is required to post a notice to workers nationwide acknowledging that it cannot fire workers for organizing."Companies have devalued employees into thinking that [they're] not valuable ... people have begun to stand up and say, you know what? They're nothing without us." Jennifer BatesThere were a host of issues Bessemer workers like Bates believed could be improved with the help of union representation, including adequate break time, better procedures for filing and receiving responses to grievances, higher wages and protection against Amazon allegedly wrongfully applying policies to discipline workers who express concerns. (Amazon has repeatedly said safety is a priority and it has a "zero tolerance for retaliation against employees who raise concerns.")To combat the union organizing, Amazon sent numerous text messages to workers, pulled them into one-on-one meetings on the warehouse floor and, in the kickoff to the election, required them to attend group meetings every few shifts. It launched an anti-union website that warned against paying dues, and posted signage in bathroom stalls.Union supporters gathered outside of the Bessemer facility on March 29, 2021.In a statement to CNN Business earlier this year about the union effort, Amazon spokesperson Heather Knox said: "We opened this site in March [2020] and since that time have created more than 5,000 full-time jobs in Bessemer, with average pay of $15.30 per hour, including full healthcare, vision and dental insurance, 50% 401(K) match from the first day on the job; in safe, innovative, inclusive environments, with training, continuing education, and long-term career growth."The aftermathAhead of her decision to be more front-and-center with the union push, Bates' mother expressed some discomfort. "She was the only one who felt kind of, you know, leery about me pushing," said Bates, who added that her mom came around. "She knows that I have that fire." But Bates felt the impact of her Senate testimony almost immediately. The day after, a manager informed her that she was being stripped of her ambassadorship — a role she'd enjoyed that allowed her to help train new employees in the facility. (According to recommendations from the NLRB hearing officer, "the evidence was insufficient to establish that Bates was denied ambassador work ... because of her Union sympathies.") "Our employees have the choice of whether or not to join a union. They always have," Barbara Agrait, a spokesperson for Amazon, said in a statement in response to questions about Bates' experience, including why she lost her ambassadorship. "As a company, we don't think unions are the best answer for our employees."She also felt a shift in how many colleagues viewed her: Some appeared "frightened" to talk to her; others said they had been informed by her speech. Even now, when she walks into the Amazon warehouse, there are times her badge temporarily doesn't scan and she thinks: "Well, today's the day they got me."According to Givan, the risk associated with being a vocal workplace organizer, can also extend beyond one's current place of employment to other potential employers.The Bessemer facility where Bates continues to work.RWDSU president Stuart Appelbaum called it "a very, very scary thing" to speak out as Bates has done. "You're putting yourself out there to the whole world. You're facing all the wealth and power in the universe."Bates, he said, "understood the civil rights dimension of what it was that was happening in Bessemer." Roughly 85% of the workforce at the facility is Black and the majority are women, he said."For her, it is a calling," Appelbaum said. Bates frequently talks about her decision to speak out, and even the results of the election, on spiritual terms: "I believe in destiny. I believe that God [does] things in His own timing and if it's part of the journey, then I'm here for it."The outcome of that journey so far may not be quite what Bates had in mind, but Givan said the effort has successfully drawn mainstream attention to what workers are up against when organizing.Bates, too, is hopeful about the broader effects her voice may have. "I believe for so many years that companies have devalued employees into thinking that [they're] not valuable ... people have begun to stand up and say, you know what? They're nothing without us." "We're not pushovers. There needs to be a change in this country and we're not stopping until there's a change," she added. "We're still moving. We're still on fire and we're not going to stop."

Allison Morrow, CNN Business

2021-11-15 13:30:03

business

business

https://www.cnn.com/2021/11/15/business/jane-fraser-citigroup-risk-takers/index.html

Risk Takers: Citigroup's Jane Fraser is doing the unthinkable on Wall Street - CNN

Less than a month into her role as the chief executive of Citigroup, Jane Fraser made a decision that shook Wall Street.

business, Risk Takers: Citigroup's Jane Fraser is doing the unthinkable on Wall Street - CNN

Citigroup's Jane Fraser is doing the unthinkable on Wall Street

New York (CNN Business)Less than a month into her role as the chief executive of Citigroup, Jane Fraser made a decision that shook Wall Street. It was late March, and signs of burnout were everywhere after more than a year of remote work in the pandemic. Deal volume was at record highs and showed no signs of letting up. Over at investment banking rival Goldman Sachs, young analysts made headlines with workplace horror stories that went beyond the typical long hours and cutthroat competition that Wall Street's known for. They were falling apart, mentally and emotionally. Fraser saw an opportunity. And the memo she sent to Citi's 210,000 global staff would set the tone for how she would try to overhaul Citigroup — long languishing in third place and mired in bad press."The blurring of lines between home and work and the relentlessness of the pandemic workday have taken a toll on our well-being," she wrote. "It's simply not sustainable."Jane Fraser, pictured at the Milken Institute Global Conference in California in 2019, inherited a difficult job when she took over at Citi. She also became the first woman to lead a top American bank.What followed was a reset plan that included the kinds of work-life balance measures you don't often see on Wall Street. Fraser implemented "Zoom-free Fridays" and urged staff to avoid scheduling calls outside traditional work hours. Take your vacations, she pleaded. Veteran bankers must have thought they were in the Twilight Zone. Read MoreThen came the real shock: When Citi ultimately returns to the office, most roles will be designated as "hybrid" — with three days in office and up to two at home. Among American banks, that kind of flexibility was unheard of. It was both a humane reaction to a mass trauma and a calculated strategic decision. By branding itself the "bank with a soul," as Fraser calls it, Citi would have an edge in scooping up and retaining talent that might otherwise eschew Wall Street for the less-frenzied, or at least less formal, world of tech. Fraser readily admits the decision wasn't purely about empathy — "I want to crush the competition," she told Bloomberg News last month. But by not cracking the whip, she's also staking out a somewhat radical position on Wall Street: that ruthlessness doesn't have to define a bank's culture. By branding itself the "bank with a soul," as Fraser calls it, Citi would have an edge in scooping up talent that might otherwise eschew Wall Street for the world of tech.Banking analysts and investors will be closely watching Fraser in March, when she plans to unveil Citigroup's cultural and structural rehabilitation plan for the next several years. It'll also mark her first full year as CEO — a timely check-in to see how her strategy is playing out. No one expects her to wave a magic wand and undo decades' worth of mismanagement overnight. But the March investor day will be a crucial early test. Shareholders are hungry for bold action. The biggest risk, says longtime banking analyst Mike Mayo, is not that the plan will be too aggressive — it's that it won't be aggressive enough. Turnaround jobIt's hard to overstate what a difficult job Fraser, the first woman to lead a top American bank, has inherited. Citigroup's (C) stock is wildly underperforming. Its shares are up about 13% this year — dismal compared with the broader stock market, which has gained 24% in 2021. Citi's rivals are outpacing it by even more: Bank of America (BAC) is up 60%, and JPMorgan Chase (JPM) is up 35%. It's also under intense pressure from regulators, who for years have been cajoling the bank to overhaul its hodgepodge of internal risk-management and data systems. Regulators' concerns aren't unfounded. In August 2020, Citi committed one of the biggest blunders in the history of Wall Street when it erroneously wired nearly $1 billion of its own money to creditors of Revlon. The fat-finger error ultimately cost Citi more than $500 million when several of those creditors refused to return the funds. Just two months later, regulators slapped Citigroup with a $400 million fine for failing to address "long-standing deficiencies." As Citi employees return to their offices, including the bank's Long Island City, New York, location, most roles have been designated as "hybrid." That kind of flexibility is unheard of among big American banks.Fraser's shakeup of office culture is a relatively easy win — necessary, perhaps, but far from sufficient, analysts say."Every day she gets a grade from shareholders, and that's the stock price," Mayo said in an interview with CNN Business. "And every day that she's been in the role, the verdict is Citigroup is worth more dead than alive."It's not enough to change the tone at the top, Mayo said. Fraser, who declined to comment for this article, has to address the sort governance lapses that have gotten the bank in trouble. In a recent note to clients, Mayo and other analysts criticized Citi's decision to identify potential cash bonuses for top managers before their performance targets are even announced. "That's like charging us for dinner before we know if we're getting hot dogs or caviar," the note said. "Moreover, the awards are in cash vs. stock and seem like extra pay to execs for just doing their job."That's terrible governance, Mayo says. "And that's the terrible governance Citigroup has had for the last 10, 20, 50 or 100 years."Better Call JaneThankfully for Citigroup, Fraser's no stranger to cleanup jobs. During the 2008 financial crisis, the bank very nearly collapsed because of its exposure to toxic mortgage-backed securities. As Citigroup hobbled along on life support in the form of a massive government bailout, Fraser — who joined the bank in 2004 —ran its strategy division, overseeing sales of risky assets to streamline the bank's sprawling operations.She later ran Citigroup's battered mortgage business and its Latin America operations, both decidedly thorny assignments in the fallout of the financial crisis. Fraser, pictured at Citi's Brazil headquarters in 2018, was formerly CEO of the company's Latin America operations. She steered the bank through the devastation of Hurricane Maria.In a 2018 interview with CNN, Fraser recalled people telling her she was "crazy" for taking over CitiMortgage just a few years after the housing market imploded. In hindsight, she said, it was the "best decision I've ever made."The lesson: You don't have to know everything."You learn from those situations... Because it was a crisis and because I didn't know anything," she said. "You have to hire people that are better than you and more knowledgeable than you."Fraser is widely credited for cleaning up Citi's Mexican subsidiary, which was emerging from a money-laundering scandal when she became CEO of Citigroup's Latin America operations in 2015. In that role, she also steered the bank through the devastation of Hurricane Maria. When the storm forced Citi's San Juan, Puerto Rico, branch to close, she oversaw efforts to bring in generators and other necessities to get the bank back up and running a week later. "We don't leave a country when it's in really bad shape," Fraser told the New York Times in an interview in February. "We can really make a difference." Fraser, 54, comes to the role of CEO armed with a resume straight out of Wall Street central casting. She worked as a Goldman Sachs analyst after receiving her degree in economics at Cambridge. Then came the Harvard MBA, followed by a decade of work at consulting giant McKinsey before joining Citigroup in 2004.A 'glass cliff' moment?Fraser regularly downplays the gender question in interviews. The fact that she's a woman running a major bank is historic, but it should hardly matter as long she does the job well. And that's true. But it's also impossible to ignore Corporate America's track record of sticking a woman in the driver's seat when the wheels are about to come off. Research shows that women are more likely to be promoted to senior leadership positions when institutions are in trouble — a trend known as the glass cliff. Mary Barra, famously, made history as the first woman to run General Motors in 2014. But the automaker was a mess, still crawling out of bankruptcy and, two weeks into Barra's tenure, issuing a massive recall linked to 13 deaths that the company had known about for years. There was a similar sense of crisis at Citi that accelerated Fraser's ascension. Fraser, shown at the White House in October, took over for Michael Corbat — who wasn't supposed to retire for another year.In the fall of 2020, her predecessor Michael Corbat wasn't supposed to retire for another year. But with regulators breathing down the bank's neck over long-overdue systems upgrades, plus a flurry of bad press over the fat-finger flub, Corbat decided to bounce early, according to the Wall Street Journal. An expensive, time-consuming overhaul needed to begin right away, and Corbat — who himself was elevated to CEO in 2012 to be Mr. Fix-It — believed that process should be handled by his successor. Analysts agree Fraser's got her work cut out for her. Her 17 years at the bank, across multiple divisions, means she knows where the bodies are buried, where Citi thrives and where it lags. But, notably, says Mayo, Fraser so far hasn't brought in a heavy-hitting outsider to shake up the upper echelons of management. Allegiances to "old" Citigroup could be a huge liability, he says. "The old managers, the board of directors... these are not her friends or her family, she doesn't owe anything to them. She owes something, if anything, to the shareholders that have been left woefully behind."

Clare Duffy and Rishi Iyengar, CNN Business

2021-10-27 12:29:16

business

tech

https://www.cnn.com/2021/10/27/tech/vijaya-gadde-twitter-risk-takers/index.html

This Twitter exec helped decide to ban Trump. Now she must confront Twitter getting banned abroad - CNN

Two months after former US President Donald Trump was inaugurated in 2017, Twitter executive Vijaya Gadde was asked how she felt about his proposition that he might not have won the White House without the social media platform.

tech, This Twitter exec helped decide to ban Trump. Now she must confront Twitter getting banned abroad - CNN

This exec was central to banning Trump on Twitter. Now she's facing thorny issues in democracies abroad

New York (CNN Business)Two months after former US President Donald Trump was inaugurated in 2017, Twitter (TWTR) executive Vijaya Gadde was asked how she felt about his proposition that he might not have won the White House without the social media platform. "To me, there's nothing better than having a political discourse in plain and open view and having access to your elected officials, and being able to hold them accountable," Gadde, then Twitter's general counsel, told the audience at a New York University School of Law event. "In that sense, I think it's a great thing because this wasn't always possible before.""Now," she added, "the consequences of that direct dialogue are unfolding in front of us and not something we could've quite predicted." Less than three years later, the United States faced the most troubling consequence yet: A group of rioters attacked Capitol Hill on January 6 after Trump spent weeks using social media platforms to agitate his base and spread a lie that the 2020 election had been stolen. Gadde, who by then had become head of legal, policy and trust at Twitter, found herself at the center of deciding whether to take the unprecedented step of banning Trump from Twitter. Read MoreTwitter's head of legal, policy and trust Vijaya Gadde has been at the center of many of the company's major decisions, including banning Donald Trump.Two days later, Twitter permanently banned Trump, citing a "risk of further incitement of violence." The move was praised by civil rights advocates who called on Facebook and YouTube to follow Twitter's lead — while others said the move should have come much sooner. Facebook (FB) had blocked Trump's accounts "indefinitely" a day earlier, a suspension that was upheld in May by the company's court-like Oversight Board and is up for review again in November. Google-owned YouTube announced a suspension of Trump's channel a week later but has left the door open for him to return to the platform. Twitter's decision to remove Trump didn't happen immediately. The platform initially banned Trump for 12 hours on January 6. Twitter took heat when it let him back on and he quickly tweeted again, calling his followers who stormed the Capitol "patriots." The Washington Post detailed a January 8 meeting in which Gadde made an "impassioned appeal" for staffers to have patience as her team deliberated what to do. Hours later, Twitter banned Trump permanently. Multiple outlets reported that Gadde played a central role in the Trump ban decision. Twitter CEO Jack Dorsey was reportedly vacationing on a private island at the time. (Twitter has said Dorsey was closely involved in the decision.) Asked this month about her role in banning Trump, a Twitter spokesperson told CNN Business: "Policy enforcement decisions are made by our Trust and Safety team, which report to Vijaya Gadde." The spokesperson also said Twitter has "no plans to reinstate" Trump's account."Vijaya is at the crossroads of some of the most important policy decisions the company is making and how it interacts with governments around the world." Former Twitter COO Adam BainThe Trump ban marked the boldest — and riskiest — decision in the tech firm's 15-year history: cutting off a sitting world leader and its most high-profile user who had amassed nearly 89 million followers and driven massive attention to the platform. Not only did the ban risk pushback from Trump and regulators, it set a tough new standard for the company to live by in other countries. It also kicked off a larger debate about whether "deplatforming" actually works to prevent potential harms from social media platforms. But the decision also highlighted the disproportionate impact that Twitter, and Gadde, can have within the tech industry despite its comparatively small audience and resources."It forced the hand of competitors like Facebook and like Google's YouTube, which are much bigger companies in scale," said Katie Paul, director of the nonprofit research organization Tech Transparency Project. "[Banning Trump] was an important moment for the company's really setting a line and showing that they do have the power to shut down these things." Now Twitter is facing similarly thorny questions in other major democracies around the world, including conflicts with governments in India and Nigeria. Gadde will likely be heavily involved in resolving these issues, too."Vijaya is at the crossroads of some of the most important policy decisions the company is making and how it interacts with governments around the world ... and how Twitter is thinking through the trust and safety of its platform," Adam Bain, Twitter's former COO who worked closely with Gadde before leaving the company in 2016, told CNN Business. "It's an extremely important job at the company." Twitter announced the pernament ban of then-US President Donald Trump on January 8, 2021. A 'steady hand' at TwitterGadde immigrated to the United States from India with her parents in the 1970s and grew up on the Gulf Coast of Texas. After attending Cornell University for industrial and labor relations and then NYU School of Law, she spent a decade working in corporate law. She was inspired by her aunt, one of India's first female lawyers, she told the NYU audience.She joined Twitter in 2009, three years after it launched, motivated in part by her father-in-law in Egypt who had begun using Twitter as the country's pro-democracy movement started to brew. Gadde first helped run the corporate legal department, playing a role in Twitter's acquisitions and its 2013 IPO. That year, she became general counsel. Twitter is known for some volatility, with three CEOs during Gadde's tenure. But inside Twitter, she has been "an extremely steady hand" and "the type of leader that people love working for and with," according to Bain. "What she's focused on is making the right decisions based on facts and the right process. She doesn't predicate the outcome."Beyond that, Bain said, she believes Twitter should be "as open" as possible with the world to "build trust," as evidenced by her pushing for the company's biannual transparency reports. Twitter declined to make Gadde available for this story.Inside Twitter, Gadde is "an extremely steady hand," according to a former executive who worked closely with her. While Twitter is much bigger now than when Gadde joined, its audience and market cap remain less than a tenth the size of Facebook. Yet the two companies are often mentioned in the same breath given Twitter's outsized importance shaping media and politics. And as Twitter's influence has grown, so has Gadde's. She's met with lawmakers and regulators around the globe, including Trump in 2019. Gadde and her team may also be more empowered to make big moves at Twitter than she would be at other tech firms because of its smaller size."It means they have smaller teams and fewer lobbying dollars to work with," said Marietje Schaake, international policy director at Stanford University's Cyber Policy Center and a former European Parliament member focused on trade and technology policies. "From my experience, the company has been more open to taking proactive steps in their own policies."Gadde's next battles Within six months, Twitter went from banning one president to being banned after taking action on another. The company was forced offline in Nigeria in June after taking down a controversial tweet by President Muhammadu Buhari, a ban that remains in place. Twitter has said it will "continue to engage" with the Nigerian government, but the company's relatively muted stance has puzzled activists in the country."They've been surprisingly quiet," said Gbenga Sesan, executive director of the pan-African digital rights group Paradigm Initiative. "This would have been a good time to, you know, take a categorical stand." Meanwhile, taking a stand has put Twitter on a knife edge between its principles and its business in one of its most important global markets: India.Twitter is a mess in India. Here's how it got thereThe company sparked a conflict there in February by taking down hundreds of accounts at the government's behest but refusing to take action against journalists, activists and politicians, resulting in an uneasy stalemate that has now dragged on for months. India passed new technology rules making social media companies liable for what users post on their platforms and requiring each company to appoint designated compliance officials in the country. Twitter has sent mixed signals, initially pushing back and expressing concerns about a "potential threat to freedom of speech" but subsequently pledging to meet the new requirements. Some Indian tech advocates have described it as baffling and said this makes it harder to defend Twitter against what many see as overreach by the Indian government. Twitter is fully compliant with India's rules and "remains committed to safeguarding the voices and privacy of those using our service," the company spokesperson said. "Twitter leadership, including Vijaya, are continuing to engage in productive dialogue around these issues — and similar issues around the world."Gadde has cautioned against suing the government, as Facebook-owned WhatsApp has done. She referred to litigation as a "blunt tool" at a virtual digital rights conference in June. "It's a very delicate balance to draw when you want to actually be in court, versus when you want to negotiate and try to make sure that the government understands the perspective that you're bringing," Gadde said. "Because I do think you can lose a lot of control when you end up in litigation." Among Gadde's next battles are challenges by foreign governments who want to exert control over the platform. Twitter's position in India remains precarious. Its presence there is much smaller than rivals like YouTube, Facebook and its subsidiary WhatsApp, which have hundreds of millions of Indian users, often making Twitter a convenient scapegoat. "If the [Indian government] were to go out and shut down WhatsApp, that would cause a significant backlash from the general public," said Bhaskar Chakravorti, dean of global business at The Fletcher School at Tufts University. "But shut down Twitter? Not as much."There's also more at stake for Twitter. Both India and Nigeria are among the world's largest and fastest-growing internet user bases. The way Gadde's team and Twitter resolve its challenges in those countries could have big implications for the company's growth and the future of the internet, according to Paul of the Tech Transparency Project. "This is something that's certainly going to be watched globally and [will be] the model for how companies deal with it moving forward," she said.

Story by Leah Asmelash, CNN Video by Sean Clark, CNN Business

2021-10-14 12:39:27

business

business

https://www.cnn.com/2021/10/14/business/eleven-madison-park-daniel-humm-risk-takers/index.html

Daniel Humm's Eleven Madison Park went meatless, but it's still charging $335 a person. Will people pay? - CNN

There was a moment last year, as Covid-19 brought the entire planet to a standstill, when the chef and owner of one of the world's most renowned and expensive restaurants thought he might lose everything.

business, Daniel Humm's Eleven Madison Park went meatless, but it's still charging $335 a person. Will people pay? - CNN

This world-famous restaurant ditched meat, but it's still charging $335 a person. Will people pay?

New York (CNN Business)There was a moment last year, as Covid-19 brought the entire planet to a standstill, when the chef and owner of one of the world's most renowned and expensive restaurants thought he might lose everything.Daniel Humm's restaurant, Eleven Madison Park, has three Michelin stars and had recently topped the World's 50 Best Restaurants list. But like so many other less famous restaurants during the pandemic, it had to lay off all its employees, was struggling to pay its vendors and was facing the once-unthinkable prospect of filing for bankruptcy."At times I thought, well, if we're going bankrupt with Eleven Madison Park, maybe that's the end of a chapter," Humm told CNN in an interview in August. "I actually got to the place where I was comfortable with that idea. I mean, you have to."Humm came to find the idea liberating, he said. Like many others before him he had previously concluded the food system required less meat consumption to be sustainable long-term. So if he might lose the restaurant anyway, why not take a chance?That thinking laid the groundwork for a decision that shocked the food world: In early May, Humm announced that when Eleven Madison park reopened the following month it would go completely plant-based. (The only exception, he said at the time, would be cow's milk as an add-on for coffee or tea.)Read MoreThe menu -— which includes items like a vegan caviar service made from tonburi, roasted eggplant with coriander and sesame tofu with squash — is all served with the signature flair and detail that Eleven Madison Park is known for. Like others before him, Daniel Humm had concluded the food system required less meat in order to be sustainable.But the move comes with significant risks. By going meatless, Humm is potentially shrinking his customer base to a smaller niche of diners. And those diners currently have cheaper options among other vegan or vegan-friendly fine-dining establishments in New York.Amanda Cohen of Dirt Candy, for example, has been creating plant-based fine dining since 2008, with a tasting menu that runs for $130 per person including wine. Daniel Boulud opened his "vegetable-forward and seafood centric" restaurant Le Pavillon earlier this year, and a six-course vegetarian tasting menu is $155. Humm, however, didn't cut the price when cutting the meat. EMP's prix-fixe menu is still $335 per person — more if you add wine to the tab.Reputation matters a lot for a restaurant like EMP, which is in a tier that relies on staying buzzy. In a pre-Covid-19 world, it was the kind of restaurant people traveled thousands of miles for after working hard to cinch a notoriously difficult reservation. Since the reopening diners have largely been New Yorkers, but that is unlikely to be the case long-term once travel picks up again. The question is whether the new menu can keep up the appeal and the hype that's critical to EMP's survival.The reviews so far — including a scathing piece from the New York Times' Pete WellsThe early reviews of the new EMP have largely not been positive. Some have even been downright scathing. "This $1,000 dinner for two is not going to change the world. It is not a redefining of luxury, or anything close to it," Eater's Ryan Sutton wrote in September. "Omnivores have long been seeking out accessible yet ambitious vegetarian and vegan fare, and Humm, based on a mid-August meal, doesn't yet appear to fully possess the palate, acumen, or cultural awareness to successfully manipulate vegetables or, when necessary, to let them speak for themselves."One of the items on the new vegan Eleven Madison Park menu: tonburi with pea cream and baby lettuce.New York Times critic Pete Wells' review last month went viral for its withering lines, including one about an EMP beet tasting like "a cross between lemon Pledge and a burning joint." Beyond his problems with the food itself, Wells also pointed out that people who have environmental concerns about meat may not have much reason to celebrate EMP's move. "People tend to think of factory farms and feedlots when they hear about meat and sustainability. But Eleven Madison Park didn't buy industrial pork for its compressed brick of suckling pig. As the servers were always reminding you in the old days, the pork, eggs, cheese and other animal products came from small, independent regional farms...If every restaurant that supports sustainable local agriculture followed Mr. Humm's new path, those small farms would be in deep trouble," he wrote. At times I thought, well, if we're going bankrupt with Eleven Madison Park, maybe that's the end of a chapter. I actually got to the place where I was comfortable with that idea." Daniel HummAnd, importantly, he noted that through the end of this year, EMP still offers a meat option for customers who book a private dining room, a "metaphor for Manhattan, where there's always a higher level of luxury, a secret room where the rich eat roasted tenderloin while everybody else gets an eggplant canoe."Wells did note that EMP has a history of correcting itself, however: "Each time the restaurant has overhauled itself — the cryptic grid menu, the magic tricks at the table, the themed New York City menu — it has gone overboard, then pulled back to a less extreme place," he said, adding that "its talent for overcoming its own missteps was one reason I gave it four stars in its last review in The New York Times, in 2015."A spokesperson for EMP would not comment on Wells' and Sutton's critiques, noting it is restaurant policy to not comment on reviews. The spokesperson confirmed the restaurant's decision to offer meat in the private room in a statement. Humm and his staff have faced some scathing reviews of the new Eleven Madison Park."It is an incredible undertaking to reopen a restaurant, especially in the midst of a rapidly evolving pandemic, and it took the entirety of our staff's focus and efforts to execute this at the level Eleven Madison Park operates," the statement said. "Our intention was always to transition the private dining room to be fully plant-based as well. In early September, we made the decision to remove the last remaining animal products from the private dining room menus by January 1, 2022."Taking a cue from TeslaOthers say Humm deserves some credit for his decision to go meatless. "The problem is [Humm's] going plant-based creates a narrative of novelty and freshness and vision on his part when there have already been chefs going in this direction who haven't gotten this attention," Alicia Kennedy, a writer who has written extensively about vegan and vegetarian food, told CNN. Still, Humm's move has significance because of his place in the industry — similar to how a top luxury fashion designer refusing to use leather or fur still has meaning even now, Kennedy said."If Daniel Humm making this choice has influence on chefs who look up to him ... then it is serving a really good purpose," Kennedy said. If it trickles down even further, to neighborhood suburban spots, that's even better, she said.As for Humm, he said he felt EMP could do with food what Tesla accomplished with cars. The dining room at Eleven Madison Park on the night it reopened, June 10, 2021. "It was only really until Tesla created an electric luxury car that they made it sexy," he said. "They made it luxurious. They made it beautiful. And so it took that for the whole world to change. And I thought of having this similar responsibility of this restaurant that we actually were in a very unique position. Most restaurants don't have the luxury to make that kind of risky move."That doesn't address the question of whether a meatless menu will keep people coming through EMP's doors in the long run. But Humm said in August that the wait list was massive, with "15,000 table requests at one time."Reservations for Eleven Madison Park have continued to sell out the morning they are released, a spokesperson said. Since it reopened, the restaurant has been serving roughly the same number of tables as it did prior to the pandemic, but in total, it's serving far fewer people: It's now open for dinner only six nights a week, and before, it served dinner nightly and lunch three times a week. When asked to elaborate on other metrics like sales and profitability, the spokesperson said EMP does not share financial information.Humm, as ever, is focused on the food. And he has remained optimistic that a vegan EMP can be successful."I think it's the best cooking we've ever done," Humm said. "By a long shot."

Clare Duffy, CNN Business

2021-09-27 12:29:50

business

business

https://www.cnn.com/2021/09/27/business/kim-ng-miami-marlins-risk-takers/index.html

Kim Ng broke baseball's glass ceiling. Now she has to fix one of the league's worst teams - CNN

Miami Marlins GM Kim Ng faces not only trying to turn a team with a long history of struggles into a winning franchise, but also working under a different kind of scrutiny than her male peers.

business, Kim Ng broke baseball's glass ceiling. Now she has to fix one of the league's worst teams - CNN

She broke baseball's glass ceiling. Now she has to fix one of the league's worst teams

New York (CNN Business)Derek Jeter had a problem. In 2020, his third year as chief executive and part-owner of the Miami Marlins, the team broke their long streak of missing the playoffs. But after the team had traded away nearly every big-name player on its roster in recent years, he was looking at rebuilding the Marlins from the bottom up — with a limited budget. The Marlins had also recently parted ways with its head of baseball operations. When it came time to hire a new general manager, however, Jeter knew exactly whom to call: Kim Ng. As the Yankees' assistant GM from 1998 to 2001, she worked with Jeter during three straight World Series-winning seasons."When we decided to make a change, Kim was the first person I called," Jeter told the Today Show. "She was the only person I called." Ng had been waiting for that call for a decade. She had 30 years of experience in Major League Baseball, including with two of the winningest teams in the league: the Yankees and the Los Angeles Dodgers. She had also interviewed for other GM roles at least five times, but hadn't yet been offered the job. When she was hired by the Marlins in an announcement made last November, Ng became the first-ever woman GM — not only in professional baseball, but in the four major American men's sports — and the second person of Asian descent to become an MLB GM. Read MoreMiami Marlins hire Kim Ng as general manager. She's the first woman and first Asian American GM in MLB historyNg faces not only trying to turn a team with a long history of struggles into a winning franchise, but also working under a different kind of scrutiny than her male peers."She's really going to be under the microscope more than a first-time male GM," said Bob Dorfman, sports business expert and creative director at Pinnacle Advertising. What's more, the Marlins are "budgetarily challenged — they have the lowest payroll in baseball or close to it. They have about the lowest attendance in baseball and they have a team of mostly no-names."Taking over during the Covid-19 pandemic, which has hurt attendance revenues across the league and occasionally forced players off the field, adds yet another complicating factor. "When Derek told me I got the job, there was a 10,000 pound weight lifted off of [one] shoulder — and then about a half an hour later, I realized that it had just been transferred to [the other] shoulder," Ng said during the first press conference following her hiring. "You're bearing the torch for so many and that is a big responsibility."But, she added: "I take it on."Miami Marlins CEO Derek Jeter says Kim Ng was his first and only call when his team needed a new general manager. Three decades of experienceNg's interest in baseball began while playing stickball in the street as a child growing up in Queens, New York. She later played college softball at the University of Chicago, where she majored in public policy and wrote her senior thesis on Title IX, the 1972 law that gave more women access to college sports, according to the university. After graduating in 1990, Ng took an internship with the Chicago White Sox and ascended to assistant director of baseball operations. In 1997, she went briefly to the American League Office before becoming assistant GM for the Yankees and later worked as the Dodgers' assistant GM from 2002 to 2011.Working for two top teams, Ng said, gave her the experience needed to transform a consistently low-performing franchise."I got to see what winning at a high, high level for an extended period of time looked like, and what that took," Ng said in last November's press conference. The Marlins declined to make Ng and Jeter available for this story. During her time at the Dodgers, she interviewed for the team's GM role and later for the same position with four other teams. Sometimes when she got calls about interviewing for these roles, Ng felt she was there more to fill a diversity quota than for a genuine shot at the job, she told Sports Illustrated earlier this year. She also told the Today Show she suspects she was sometimes passed over because she's a woman. In 2011, she joined MLB's central office as SVP of baseball operations — until she got the call from Jeter."This has been too long in coming," Michael Brady, Florida State University marketing professor and former pitcher in the Dodgers' minor league system, said of Ng's hiring. Critics' often argue women don't play pro baseball. But Brady said with many current GMs having no experience beyond high school baseball, "I think she has better experience being a college softball player than roughly half of the guys who are general managers now."Kim Ng's first assistant general manager job was with the New York Yankees where, she says, she learned what 'winning at a high, high level' took. Ng's next challengeAt less than a year as GM, Ng is experiencing the challenges of reviving the Marlins: This season, the team is ranked second-to-last in its division and will again miss playoffs after finally making it back last year. After a series of injuries contributed to a decline in the team's performance in June, Ng told reporters: "Our depth is being challenged."The Marlins are also plagued by legacy issues that have shrunk its fanbase and made it an unappealing destination for top players. After joining the league in 1993 as an expansion team, it won World Series championships in 1997 and 2003, but following both wins, it traded away players key to clinching those titles."After they do well, they don't reinvest in their top players, and really try to approach their roster with a small budget," Brady said. Although those decisions weren't made by the team's current ownership, the reputation has stuck. It's made players wary of joining the team only to have their careers cut short even if they achieve success, Brady said. And it burned fans who invested in tickets to watch a winning hometown team, only to see its performance nosedive. Jeter, who took over as part of a new ownership group in 2017, has said he hopes to build a more sustainable Marlins.There's little room to make errors that many other men make as a normal part of the learning process, and at the same time, you have to be friendly and you've got a responsibility as a role model."Justine Siegal, the MLB's first woman coach, on being a female pioneer in baseballThe Marlins' disappointing record compounds another challenge for maintaining its fanbase: Florida is a famously difficult market for MLB teams, partly because many residents are transplants from other states, Brady said. So the Marlins have struggled to bring in fan-based revenue, including ticket, merchandise and parking sales, plus potentially lucrative television contracts. While GMs typically focus on baseball operations, Ng has already indicated that her turnaround plan will involve working closely with the business side of the franchise, something experts say is essential for growing the team's payroll and attracting top talent. "From a business perspective, I want to be out there more in the community," Ng said. "I want the Marlins to be seen as a pillar of the community, so I will be out there at different functions, to make sure that people understand who we are and where we're going."Attracting promising young players is also crucial to building a championship-caliber team, baseball experts say. And there's some hope: The team has one of the top-rated minor league systems and a roster of talented young players. Ng has made it clear player development is a top priority.As the first woman general manager in the MLB, Kim Ng has said she hopes to show other women that they can pursue successful careers in pro baseball. Making history as the first woman GMIn that first press conference following her hiring, it took 45 minutes for reporters to ask Ng about her strategy for the Marlins. In between queries about her perseverance through her long career, her mentors and her upbringing, she fielded a variety of questions about children, especially young girls. Specifically, she was asked how she feels about inspiring them, how they inspire her, what she would say to them and so on. While Ng — who has spent countless hours advocating for women and working to expand opportunities for girls in baseball — answered all of the questions graciously, it was a reminder that women who reach the top of male-dominated fields don't get to just be good at their jobs. Justine Siegal, who in 2015 was hired as the first woman to coach in the MLB for the Oakland Athletics, said she experienced as much when pursuing coaching jobs. "I would do an interview, and they would never ask me a question about pitching," Siegal, who also founded girls baseball nonprofit Baseball for All, told CNN Business. "It was always: 'How do you think the players will react to you?' ... 'Where will you change [your clothes]?'"She added: "Being a woman, being a pioneer, is exhausting. Not only do you have to be excellent all the time, there's little room to make errors that many other men make as a normal part of the learning process. At the same time you have to be friendly and you've got a responsibility as a role model." Ng has a legion of other trailblazing women rooting her on. Among the people who sent notes of congratulations following her hiring were tennis legend Billie Jean King, former first lady Michelle Obama and Facebook COO Sheryl Sandberg. She also has the support of her four sisters and mother Virginia Cagar, who told the New York Times last year: "You go, girl. Show them boys how it's done."The tides in baseball appear to be turning, too. A record 23 women are coaching in the MLB this season, with many others represented in front offices and other key roles. In addition to Ng, Caroline O'Connor, the Marlins' chief operating officer, is among the highest-ranking women in the MLB. Ng plans to make good use of the diversity that Jeter has built into the Marlins organization, she said: "It's with that diversity of experience and background that we're looking to build a championship-caliber club here in Miami."

Laura He, CNN Business

2021-09-20 12:38:10

business

tech

https://www.cnn.com/2021/09/20/tech/cheng-wei-risk-takers/index.html

Cheng Wei: This risk taker pushed Uber out of China. Now he might be too big for Beijing - CNN

Cheng Wei built a world-class ride-hailing app that not even Uber could keep up with in China.

tech, Cheng Wei: This risk taker pushed Uber out of China. Now he might be too big for Beijing - CNN

He pushed Uber out of China. Then he got too big for Beijing

Hong Kong (CNN Business)Cheng Wei built a world-class ride-hailing app that not even Uber could keep up with in China. But Didi's risky play for expansion and dominance — culminating in a disastrous IPO this summer — has caused it to run afoul of Beijing. And now, the company's top executive faces a difficult balancing act: placating regulators at home and investors abroad, while fending off fierce competition.Cheng, 38, who also goes by Will Cheng, is the youngest entrepreneur heading one of China's biggest tech firms. He's been busy in the nine years since Didi was founded: Cheng has knocked out a flurry of powerful opponents and amassed nearly 160 million monthly active users by the first quarter of this year in China alone, nearly double the amount of users that Uber has worldwide.Cheng pushed forward with a US IPO despite indications that Beijing was unhappy.But the ride-hailing behemoth is now in a precarious spot. It's one of the most prominent targets of China's sweeping crackdown on tech and private enterprise that has no end in sight. Its stock has fallen more than 40% since regulators began probing the company, erasing $34 billion in market value.Earlier this summer, Chinese regulators banned Didi from app stores as part of an investigation into its data privacy and collection practices, threatening its future growth. The pressure could dismantle Didi's stranglehold on the Chinese market unless the company can appease the ruling Chinese Communist Party.Read MoreDidi declined to make Cheng available for an interview, and the company did not respond to questions about Cheng or its business.JUST WATCHEDBeijing's master plan behind China's tech crackdownReplayMore Videos ...MUST WATCHBeijing's master plan behind China's tech crackdown 03:10A swift and explosive riseBefore he founded Didi in 2012, Cheng was a sales manager at Alibaba. Starting as an entry-level salesperson making the equivalent of about $200 a month, he rose quickly and in seven years became the company's youngest regional manager. Cheng said he created Didi because he was fed up with being unable to get a taxi during a business trip, according to a profile published in June in the Business Times, a Chinese financial news outlet. The "pain" led him to think about how to fix the problem."I was thinking, how about creating a ride-hailing app, so there can be fewer poor losers that get soaked in the rain?" Cheng said, recalling a depressing experience in Beijing when he couldn't hail a cab for hours during a storm, according to the media outlet.Cheng founded Didi with just 100,000 yuan (roughly $15,000) of his own money, and another 700,000 yuan (roughly $110,000) from Wang Gang, an angel investor who supervised Cheng during his tenure at Alibaba. Wang's initial investment was worth a billion dollars when Didi went public.Didi learned to navigate the regulatory gray zone for ride-hailing services in China.Like its tech peers Baidu (BIDU), Alibaba (BABA) and Tencent (TCEHY), Didi's rise has been swift. When Cheng founded Didi, ride-hailing was still a regulatory gray area in China and taxis controlled the market. Cab shortages were common, as government-approved taxi operators lobbied to limit the supply of licenses. That fueled a boom in ride-hailing apps like Didi. Unlike traditional taxis, ride-hailing companies don't require expensive and difficult-to-obtain licenses for cars or drivers. Before the industry was regulated five years ago, many cities accused ride-hailing apps like Didi of running illegal taxi businesses. Didi argued that it was only providing a platform to connect passengers with cars owned by rental agencies or other third parties.Didi had learned to navigate this gray zone. It even reimbursed drivers for the penalties authorities imposed on them for breaking local laws, to keep Didi drivers on the road and retain customers."Reform and innovation always come with a cost," Cheng and company president Jean Liu wrote in a letter to employees. China's central government at the time encouraged rapid innovation, and ride-hailing was never explicitly banned in China. And on July 28, 2016, ride-hailing was finally legalized in China. Days later, Didi acquired Uber China.In a letter to employees after buying his "great rival," Cheng and company president Jean Liu hailed the legalization as a "milestone." They said the company's service had been suspended more than 30 times in various places, and that "countless drivers" had their cars detained and were fined — but added that the country had finally embraced the "dawn of reform.""Reform and innovation always come with a cost," they wrote. "The revolution of smart travel has just begun... [We want to] create a world-class tech company!"After 2016, Didi continued to cement its command over Chinese ride-hailing, and by 2018 controlled 90% of the Chinese market. That year, the company expanded to Australia, Brazil and Mexico as it set its sights on customers outside of its home country.Its rapid ascent included controversy, however. In 2018, two women passengers were killed by drivers working for Hitch, forcing Didi to suspend operations at its car-pooling offshoot. The killings led to government pressure on Didi to share real-time data with authorities about its vehicles and drivers, an arrangement the company had long resisted. In late 2018, it finally made concessions.Trouble with regulatorsThat pressure foreshadowed Didi's troubles this year. Beijing has taken a sharp turn against internet firms that it fears have grown too big and powerful, resulting in a massive clampdown that has affected tech, education, entertainment and other industries. Under President Xi Jinping, the Communist Party is moving aggressively to rein in unfettered private enterprise and send a clear signal that Chinese organizations must work in lockstep with the government. Companies that have grown too big too quickly will be kept in check to ensure they are aligned with the government's priorities.Didi ran into trouble as it pushed ahead with a $4.4 billion initial public offering in New York, apparently despite evidence Beijing was unhappy. Regulators had expressed concerns about data security and suggested Didi delay its listing, according to Bloomberg.Cheng went ahead, but like other Didi executives he kept a low profile during the IPO that fell on the eve of the 100th anniversary of China's Communist Party. He didn't ring the opening bell or broadcast the news on the company's Chinese social media accounts.Cheng and DIdi's other executives kept a low profile during the company's US IPO, skipping the bell-ringing fanfare altogether.Just days later, the Cyberspace Administration of China banned Didi from app stores, preventing the company from signing up any new users. The internet watchdog accused the company of illegally collecting and mishandling user data — a trove of locations and routes containing sensitive information about Chinese traffic, roads and citizens."From the government's perspective, Didi has become too big to control. Obviously it wants to limit Didi's growth in China," said Tu Le, founder and managing director for Beijing-based consultancy Sino Auto Insights. "The government also wants to make an example of Didi that no one can be out of the step with the Party."Didi also faces anger and suspicion from investors abroad. American lawmakers and investors have called on the US Securities and Exchange Commission to investigate Didi's IPO fiasco. Eurasia Group analysts said such demands "will at the very least intensify political pressure" on the regulator to enforce a recent law that prevents companies that refuse to open their books to US accounting officials from trading on US stock exchanges.To many analysts, Cheng's decision to press on with the IPO appeared confusing or reckless. "No Chinese company can openly challenge the Chinese Communist Party and expect leniency," said Alex Capri, a research fellow at the Hinrich Foundation. "[Didi] is too big and too powerful for its own good and its has already crossed a threshold with China's leadership."The company may have had some justification in the form of investor pressure to list the company, as it had raised billions of dollars from venture capitalists. Another reason for urgency was a new data security law taking effect in September that requires all Chinese entities to obtain government approval before providing China-based data to foreign judicial or law enforcement agencies, according to Winston Ma, an adjunct professor at the New York University School of Law.A 'cutthroat market'Didi still operates in China, since users who downloaded the app before July's ban have access, and the company insists that it maintains "normal operations globally." But hundreds of apps are racing to take advantage of Didi's struggles and chip away at its market lead by aggressively expanding, advertising and offering steep discounts.Old Didi rival Meituan, for example, revived its standalone ride-hailing app after Didi was removed from stores, offered coupons to new users and exempted new drivers from commission fees for a week. Other services backed by Alibaba and Geely Auto also advertised cash incentives or coupons. "This is a cutthroat market," said Tu of Sino Auto Insights. "Everyone wants to get into this multi-billion industry, including traditional car manufacturers." Hundreds of rivals are trying to grab market share away from Didi offering major discounts and spending lots of money on advertising.Still, Tu said, rivals are unlikely to threaten Didi's dominance entirely. He pointed out Didi has spent tens of billions to acquire customers, and that ride-hailing a tough business to tackle without a lot of financing since customers aren't typically loyal to a brand if someone else can undercut their prices. Initial government data suggested that Didi's existing business didn't take a hit after the ban, even if it couldn't register new users. The company processed 13% more orders in July than it did in June, according to China's Ministry of Transport."The government just wants a healthier market, not killing Didi," Tu said, adding that he expected Didi to survive, albeit with a "less bold" expansion plan.Capri, the Hinrich Foundation research fellow, was less optimistic about Didi's future — particularly for as long as it keeps trading in the United States. "Parts of could be nationalized," he said. "Beijing will also actively fund smaller competitors to even out the market and more easily exert control over the main players.""The longer it stays listed on the US market," he added, "the more ire it will draw from Beijing."

Paul R. La Monica, CNN Business

2021-09-07 10:44:23

business

investing

https://www.cnn.com/2021/09/07/investing/cathie-wood-risk-takers/index.html

Risk Taker Cathie Wood: Wall Street's hottest investor is betting big on a handful of stocks. Critics say she's playing with fire - CNN

At a time when many investors are content to follow the crowd and buy top techs like Apple, Amazon and Microsoft, Cathie Wood is looking for the next big innovators in buzzy fields like robotics, fintech and space exploration.

investing, Risk Taker Cathie Wood: Wall Street's hottest investor is betting big on a handful of stocks. Critics say she's playing with fire - CNN

Wall Street's hottest investor is betting big on a handful of stocks. Critics say she's playing with fire

New York (CNN Business)At a time when many investors are content to follow the crowd and buy top techs like Apple, Amazon and Microsoft, Cathie Wood is looking for the next big innovators in buzzy fields like robotics, fintech and space exploration. It's a high-flying, high-risk, high-reward tier of investing. And it's put Wood's fans on a white-knuckle ride in 2021.Last year, Wood's strategy paid huge dividends for investors in her flagship Ark Innovation (ARKK) exchange-traded fund. It surged nearly 150% in 2020 and helped turn her into a Wall Street superstar — sort of the Warren Buffett of momentum investing.Cathie Wood, CEO of Ark Investment Management, has become the face of the growth stock movement on Wall Street.But this year hasn't been nearly as kind to Wood as the last. The Innovation ETF was down 2.5% through late August, despite a red-hot market for tech with the Nasdaq up more than 18% so far in 2021. Wood wasn't available to comment for this story, but she doubled down in an interview with CNBC in August. She's not worried that the Ark strategy of looking for new tech leaders will end badly, and she maintains that this current rally will not be a repeat of the epic 2000 dot-com implosion.Read More"I don't think we're in a bubble, which is what I think many bears think we are," Wood told CNBC. "We have nothing like that right now. In fact, you see a lot of IPOs or SPACs coming out and falling to Earth. We couldn't be further away from a bubble." How Wood developed her strategyWood speaks from experience. She's no millennial or Gen Z investor for whom the 2000 tech implosion is merely a war story told by older traders. The 65-year-old Wood lived through the last major tech crash, as well as the infamous Black Monday of 1987. She worked for Prudential-owned money manager Jennison Associates for 18 years in the 1980s and 1990s and then spent a dozen years at AllianceBernstein before leaving in 2013. "I have been watching disruptive innovation for my entire career — why don't I help my own sector along?" But then, AllianceBernstein passed on her idea to launch a suite of actively managed exchange-traded funds. So she struck out on her own and started Ark in 2014."I have been watching disruptive innovation for my entire career — why don't I help my own sector along?" she told Forbes in a 2014 interview. That focus on disruption means Wood ties her ETF's fortunes to visionary but mercurial leaders. In the most prominent example, Wood remains an unabashed fan of Tesla (TSLA) and CEO Elon Musk. The EV maker is the top stock, by far, in Ark's Innovation ETF, accounting for more than 10% of the fund's holdings. It's also the biggest position in Ark's Autonomous Technology & Robotics (ARKQ) and Next Generation Internet (ARKW) ETFs. Wood is a vocal fan of Tesla, which is a top holding in several of Ark's funds.Wood is also OK with companies like Tesla issuing more stock to raise money to fund futuristic projects like autonomous vehicles. Some investors are wary of that strategy because the new shares lower the value of existing investors' holdings, but she thinks that's a short-sighted argument, particularly from Tesla bears."We're not afraid of dilution ... if we think they're doing it for the right reason," she told CNBC. "We wanted them to scale as quickly as possible because we think if we're right on autonomous ...Tesla could get the lion's share of that market, certainly in the United States."You don't have to be rich to cash in on the space raceArk's big investment in Tesla is a bet on Musk continuing to innovate beyond the business of electric cars, Wood explained in an interview with Bloomberg Radio in August. She raved about Tesla's plans to build a humanoid robot, for example. "Every passing day, especially the more we learn about their AI expertise and how they're really driving the space ... we believe they have the pole position," she said, noting that Ark analysts were "blown away" by Musk's presentation. Growth at all costsWood recognizes her growth-at-all-costs way of investing is not for everyone. Tesla has lagged the broader market this year. Shares of Teladoc (TDOC), a telehealth company that is the second-largest holding in the Ark Innovation ETF and was a big winner at the start of the pandemic, are down more than 25% in 2021. "We've seen higher-valuation stocks hit hard this year. But the growth for these innovative companies will still be treated well over time," Wood said during a webcast hosted by Cboe Global Markets in March.Wood added that she thinks investors also should put a small percentage of their money in bitcoin, another risky bet. And she stressed that investors have to overlook the inevitable short-term bumps that come with any asset. It's essential to maintain longer-term convictions and invest for future growth, Wood believes. JUST WATCHEDInvestment manager: Worries about China are overdoneReplayMore Videos ...MUST WATCHInvestment manager: Worries about China are overdone 02:31"A lot of companies catering to short-term investors who wanted profits now [have] invested more in stock buybacks and dividends over innovation," she said. "That puts them in harm's way."A colleague describes Wood's go-big-or-go-home approach as a model for the new way of investing. Too many fund managers are afraid to look far into the future when judging a company's merits, instead focusing myopically on the prior and next quarterly earnings reports.  "Cathie has been focusing on Tesla for a long time. She looks at it not just as an automobile manufacturer. You can't compare it to traditional car companies," Ark Invest's Ren Leggi, who works closely with Wood on investment decisions as the company's client portfolio manager, told CNN Business in March. Wood's criticsBut a growing chorus of skeptics think Wood's funds could eventually collapse. Michael Burry, one of the super-bearish investors made famous in "The Big Short," recently established a short position on the Ark Innovation ETF — essentially betting that it will fall sharply.Some tech stock veterans also wonder if Wood is just an investing flavor of the month, comparing her to once-popular portfolio managers like Kevin Landis of Firsthand Funds, Alberto Vilar of Amerindo and Garrett Van Wagoner, who ran a popular emerging-growth fund in the late 1990s.Many of those tech funds imploded following the 2000 bubble. The Wall Street Journal wrote a catch-up piece about Van Wagoner and other late 1990s tech gurus in 2010 with the headline "From Fame, Fortune to Flamed-Out Stars. Post-Bust Fates of Tech-Fund Mavens."Is Wood destined for similar ignominy?Rivals take issue with Wood making such big bets on only a handful of stocks. The Ark Innovation ETF, for example, has nearly half its assets concentrated in its top 10 holdings. Beyond Tesla, that fund also owns sizable stakes in Roku (ROKU), Coinbase, Zoom (ZM) and Square (SQ). Roku is another example of a high-risk/high-reward stock that Wood loves."Our investment approach is similar to Ark in that we are focusing on tech. But we're different in that we avoid concentration,"Jeremie Capron, head of research at ROBO Global, told CNN Business in March. The top 10 holdings in the ROBO Global Robotics and Automation Index (ROBO) ETF account for less than 20% of the fund's total assets, and the fund owns about 80 stocks. Ark funds typically own shares in only about 30 to 50 companies.For the time being, Wood is having the last laugh. Yes, her fund's returns may be volatile year-to-year — the Ark Innovation ETF fell nearly 25% in 2018 before rebounding 30% in 2019 — but it has tended to smooth out. The five-year average annualized return for the Ark Innovation ETF through mid-2021 was 48.6%, compared to 17.7% for the S&P 500. As long as that long-term trend continues, Ark acolytes may forgive a down year every now and then as Wood continues to swing for the fences.

Story by Jon Sarlin, CNN Business Illustrations by Max Pepper and Will Mullery, CNN

2021-01-29 14:34:22

business

investing

https://www.cnn.com/2021/01/29/investing/wallstreetbets-reddit-culture/index.html

Inside WallStreetBets, the Reddit army that's rocking Wall Street - CNN

Millions are now discovering the Reddit forum WallStreetBets for the first time, but this chaotic, meme-filled forum has been building momentum throughout the pandemic. Here's how WallStreetBets grew into an unprecedented force, capable of beating Wall Street at its own game.

investing, Inside WallStreetBets, the Reddit army that's rocking Wall Street - CNN

Inside the Reddit army that's crushing Wall Street

Omar couldn't believe what was happening. He should have been concentrating on the student he was tutoring in physics — a job he did during his free time while enrolled in a post-baccalaureate pre-med program — but Omar's eyes kept darting back to the Robinhood app open on his phone.  Omar had invested $6,000 in Beyond Meat options; in the days before that tutoring session he'd seen the value of that investment rocket up to almost $15,000. What he was witnessing now, though, felt like torture.  Down $2,000.  Down $3,000. Read More By lunchtime, the stock options Omar had bought were down around $7,000 from their peak.  Omar knew he should probably sell the options before they became worthless. But he followed the mantra of the place where he'd first learned about options trading, the subreddit r/wallstreetbets, and held on. "It was diamond hands," said Omar, using the site's term for holding an option even after incurring extreme losses or gains. "It was like, all or nothing."  Within two days Omar had lost not only his gains but his entire initial investment.   Desperate to earn it back, Omar, 23 years old and the child of working-class immigrant parents, took the rest of the money he could scrounge up — cash from his tutoring gig, his stimulus check, a chunk of his freshly-deposited student loans that was supposed to pay for his living expenses (which were basically non-existent after he had moved home during the Covid-19 outbreak) — and poured all of it, $22,000, into his Robinhood account. Then he opened up WallStreetBets.  I would not have traded options if I had not found WallStreetBets.""Omar," WallStreetBets user "I was really scared," Omar told CNN Business in an interview in August. "All I wanted to do was just make my initial money back and pay it off."  By the end of the week, he had lost it all again.  Omar, who spoke on the condition that he be referred to using a pseudonym out of concern over the legality of trading with money from his student loans, said that he blames himself for his losses but regrets ever stumbling upon one of Reddit's most active communities.  "I would not have traded options," Omar admitted, "if I had not found WallStreetBets." This January, with WallStreetBets now an inescapable presence, Omar was back on the board. Back to trading.Stock market meets internet fringe culture This past week has been a banner one for Reddit's island of misfit investors. WallStreetBets exploded into the mainstream, moving from the front page of Reddit to the front page of the New York Times and nearly every other major news site. The subreddit's short-squeeze of GameStop helped shoot up the price of the video game retailer's stock a mind-boggling 1,700% from the beginning of January to Wednesday (before it fell again Thursday), captivating the minds and wallets of investors — both casual and institutional — and financial regulators. But while millions are now discovering WallStreetBets for the first time, it has been building momentum throughout the pandemic. One can trace its epic rise to a perfect storm of favorable conditions: the exponential growth of the app Robinhood and its no-fee options trading, the extreme volatility Covid-19 brought to the markets, the stimulus checks mailed to millions of Americans, the lack of televised sports for much of the year, and the unwanted free time stuck at home the pandemic has forced on many people.Describing itself as if "4chan found a Bloomberg terminal," the forum's giddy nihilism, inscrutable language and memes fueled a war on a perceived corrupted mainstream.And it's led WallStreetBets' evolution into an unprecedented force of retail-investing financial radicalism, offering the allure of get-rich-quick gains to a rapidly expanding audience of millions. (5, at last count). Many celebrated WallStreetBets' war on GameStop short-sellers as a populist campaign against hedge-fund raiders looking to profit off the destruction of a well-known retail brand like GameStop. But unlike many other similar online communities, there is also a clear financial goal for the people in it. "It's a means to an end," explained one of them, AJ Vanover. At his retail job in a battery store in Missouri, Vanover makes around $35,000 a year. But on Wednesday, he found himself a paper millionaire. (His Robinhood account exceeded $1 million, according to screenshots he provided, but he hadn't cashed out yet). For months, Vanover had been following GameStop as a "value play," posting his thoughts on WallStreetBets along the way. JUST WATCHEDThis Missouri dad makes $35k. Now his GameStop shares are worth over a millionReplayMore Videos ...MUST WATCHThis Missouri dad makes $35k. Now his GameStop shares are worth over a million 02:22This week, Vanover was off from work, quarantining after a coworker contracted Covid-19, but now thinks he won't return to his old job. "I know I'm going to do two-weeks' notice," he said with a nervous laugh. "So, I'll be nice about it.' Vanover said he plans help his parents with their mortgage, and he intends to keep investing in options.  'These guys can move markets' Enter WallStreetBets for the first time and you'll almost certainly be a bit lost. The forum's language can be difficult to understand, even for someone who knows typical Wall Street jargon. The vocabulary specific to the subreddit is extensive, and it will almost never be explained to a newbie earnestly asking for a term's definition. Posters revel in their crudeness; homophobic epithets are tossed around as terms of affection.The site is a chaotic mix of memes, screengrabs of wild losses and gains, the occasional "deep dive" into a stock, all unified under the guiding principle of betting as much money as you possibly can on the highest possible risks, generally short-term options trading. Trading individual stocks, as opposed to options, is generally taboo. There's r/investing for you right down the corner, thank you very much. But fringe online movements have shown that internet culture can lead to extreme behaviors, making radical ideas palatable for people raised on memes and 4chan in a way that they likely wouldn't be, at least at first, if presented in a straightforward manner. In the case of WallStreetBets that extremism has a real financial impact."These guys can move markets," said Jeremy Blackburn, an assistant professor of computer science at Binghamton University who studies extremist communities on the web. "That's a huge deal." Lana Swartz, assistant professor of media studies at the University of Virginia, describes the subreddit's financial spin on the kind of nihilism seen on 4chan as the idea that its users should have a "relaxed" relationship with their money. She characterized the spirit this way: "Let it come. Let it go. Because the kind of secret that the elites know is that money is. B.S., and only by knowing that money is B.S. can you accumulate a lot of it, which should be your goal." It's not even the ends that matter. It's the means. It's the fact that you're placing this bet, that's where the value in all this is. Sure, you may get money, or you may end up broke, but you played the game, and you did it in some crazy way."Jeremy Blackburn, assistant professor of computer science, Binghamton UniversityThat ethos on WallStreetBets not only encourages risky trades, but also trading the entirety of your net worth or portfolio in a single risky trade — a financial move that would be sure to make any certified financial advisor bleed from their ears.   "It's not even the ends that matter. It's the means. It's the fact that you're placing this bet, that's where the value in all this is. Sure, you may get money, or you may end up broke, but you played the game, and you did it in some crazy way," Blackburn said. "It is a little bit scary, though, right? Because this is real money. And any time you are more interested in the game than the outcome, that can be incredibly dangerous." 4Chan meets a Bloomberg terminal WallStreetBets has long described itself as "4chan with a Bloomberg terminal." Look closer at communities like 4chan or 8kun, and WallStreetBets, and it's not just a shared use of memes that link them. One key element to 4chan is its opposition to mainstream "normie" culture, an idea that has broad applicability. For many on 4chan, normie culture is the popular kids in your high school. For WallStreetBets, the normie culture it stands in opposition to is one of "safe" mainstream investing: focusing on long-term gains, maxing out your 401(k)s, buying index funds; Suze Orman 101. "Boomer" advice, as users say. On WallStreetBets, that's all depicted as a sucker's game. "They don't want to wait 20 years for their bets to pay off," Blackburn said. Swartz sees the cynicism surrounding long-term investment advice on WallStreetBets as an understandable reaction for a young generation that has witnessed two economic crises, the chaos of the Trump years, ever-growing inequality and the looming threat of catastrophic climate change. "We're living in a time of absolutely unprecedented uncertainty," she said. "There really is no reason for anyone in their twenties to imagine that their 401(k) is going to pay off in 50, 60 years the way it did for their parents. And I'm not saying they shouldn't believe it. I'm just saying they have good reason not to." The specter of the 2008 financial crisis, in particular, looms large over the community. "I was in my early teens during the '08 crisis," wrote one user going by the handle ssauronn in a recent post celebrating the site's apparent (albeit potentially fleeting) victory over hedge fund Melvin Capital, which, according to CNBC, closed out its position in GameStop this week after taking a huge loss. "When that crisis hit our family, we were able to keep our little house, but we lived off of pancake mix, and powdered milk, and beans and rice for a year." "Stop listening to the media that's making us out to be market destroyers, and start rooting for us, because we have a once in a lifetime opportunity to punish the sort of people who caused so much pain and stress a decade ago, and we're taking that opportunity." You can also spot a shared nihilism between 4chan and WallStreetBets in their casual and ironic references to suicide. On WallStreetBets, longing "$ROPE" is an inside joke for suicide, one that is almost always posted under a disastrous loss. 4chan, 8kun and WallStreetBets exalt a cartoonish version of autism both ironically and sincerely — "autists" is a term of pride on both sites — as a superpower of persistence that allows one to fully commit to a worldview leagues apart from the stifling conventional wisdom of the mainstream.Stop listening to the media that's making us out to be market destroyers, and start rooting for us, because we have a once in a lifetime opportunity to punish the sort of people who caused so much pain and stress a decade ago, and we're taking that opportunity."WallStreetBets userFor political extremists a so-called "autist's" powers can be a weapon to be deployed against enemies in destructive doxxing and harassment campaigns. At WallStreetBets, an "autist's" power is displayed by committing to a trade with "diamond hands," holding on and refusing to sell even after incurring extreme losses or gains with the goal of attaining ultimate profit. However, there are key differences between WallStreetBets and sites like 4chan. Unlike other fringe groups, WallStreetBets generally hasn't doxxed its enemies, or brigaded others (when one subreddit aggressively posts on a rival subreddit), and while it has a long-standing rivalry with the staid r/investing — a subreddit so committed to its ideals of modesty and risk avoidance that it shuns individual stock picks — StockJock-e, a moderator for r/investing, politely downplayed the beef, calling it "facetious and exaggerated" in a message to CNN Business. To Blackburn, who has focused his studies on toxic internet behaviors ("a**holes are my expertise," he said), WallStreetBets is — by the low standards set by others — a relatively well-behaved online community. "It's kind of not a bad behaving sub," said Blackburn."Minus the fact that people are getting wrecked money-wise."  Making the big kill To understand how risky the trading strategies employed on WallStreetBets are, it's key to understand just how options trading works. Instead of buying a stock, an options contract allows an investor to purchase the option of buying 100 shares of a stock at a set price in the future. As the expiration date of the contact draws closer, the valuation of the contract can swing rapidly, as it will become worthless to the buyer if it doesn't hit its target price. While options trading is risky — if you bet wrong you can be stuck with a literally worthless asset — it also allows for leveraged bets. The shorter the expiration date of an options contact, the riskier and more volatile it becomes. "The nature of stock options convinces people to take a thousand dollars and turn it into a hundred thousand or in some cases, one million dollars," said Jaime Rogozinski, who founded WallStreetBets in 2012 but was removed from the site by Reddit in April 2020. (Reddit says he was removed for profiting off the WallStreetBets brand, a claim he denies.) "You don't feel bad for the person when they lose the thousand dollars." WallStreetBets rise hasn't happened in a vacuum; it coincides with a broader boom in retail options trading. "Retail option volumes are completely off the charts," said hedge funder Benn Eifert of QVR Advisors, who described the volume as being "multiples of any prior record that we've ever seen." Aided by Robinhood, which revolutionized the ease and cost of trading options — and which reportedly profits more from them than regular stock trades — retail investors only have to answer a few short questions to gain access to a volatile world. (Although Robinhood makes this process easy, it cautions that options trading "entails significant risk and is not appropriate for all investors.") But if options trading is risky, and short-term options ("F.D's," short for "F****ts Delight" in WallStreetBets' casually-flung homophobic lingo) are the single riskiest type of options, putting your entire life savings ("YOLOing") into a short-term option is, from any "rational" financial perspective, complete madness. It's also so common on WallStreetBets that YOLOing has its own flair or tag, allowing you to search through the many, many people posting their life-savings-and-all trades. "Generally, this kind of behavior tends to result in a loss of most or all of the money of the people involved," said Eifert. But of course, high-risk trades come with the tantalizing possibility of high rewards — rewards that inevitably find themselves on the front page of WallStreetBets. Minhajul, 22, is a college student and part-time pharmacist, born in Bangladesh and raised in Queens, New York, who decided to put his stimulus check into Robinhood after seeing what he described as "insane" and "crazy" gains posted on WallStreetBets. Buying weekly options trades and reinvesting the entirety of his gains with each successful trade, Minhajul managed to spin his initial $1,200 investment into $280,000 in a delirious two-week period towards the end of July. "I'm like, 'Holy sh**... I'm rich,'" Minhajul, who did not want his full name printed, recalled in an interview. On the night of July 30th, Minhajul couldn't sleep — the possibilities now afforded to him by his newfound riches kept swimming his head: a new car, even a new house. But the next morning Minhajul found himself exhausted and passed out for a mid-morning nap. When he woke up, his portfolio had bled $220,000. By the end of the week, he was down to $8,000. Minhajul said he was unfazed by the loss of his unrealized potential gains — to him he was playing with house money anyway — but others aren't so lucky. Loss porn and other rituals Click on WallStreetBets' extensive (and always expanding) "loss" section, and you'll witness each of the five stages of grief warped through a funhouse mirror of online ironic detachment. "Loss porn" is a staple on the site, one with its own rituals. One is expected to post their losses (or gains) with their positions and then face the peanut gallery.  Rubbing salt in the wounds is common ("Does your sell button not work?"), as are crude comments about one's "wife's boyfriend." Less prevalent, but still notable, are the genuine words of encouragement when one's despair appears profound enough.  "Lot of people asking if I'm okay. Honestly, not really. It's going to take a long time to recover financially, and maybe even longer emotionally, knowing how much damage I've done to my own life in more ways than just the money," said one Reddit user who claimed to have lost $28,000.  "Your d*** still works...You'll feel like s**t for a while, rightfully so, but set yourself a small goal and go achieve it," counseled another.  Scroll around Wallstreetbets long enough and you'll inevitably find those in the throes of what can only be seen as a possible gambling addiction.  One Reddit user posted a screenshot of a $134,000 loss titled "YOLO is a hell of a drug! Farewell boys," describing themselves as a healthcare worker who had gambled away years of savings on YOLO trades. In the comments on their farewell post, they described the mindset that led them from being a "rational investor" to gambling their life savings on options trades.  I went from a rational investor to some sick irrational desperate gambler."WallStreetBets user"I just [wanted to] break even. If I break even I'll stop. And you never do. Overly aggressive, over margined YOLO plays after that. I study and stared at the charts every trading day in day trading grandeur, thinking my probability has increased that much more from my first big win... Desperate option plays at the end." "I went from a rational investor to some sick irrational desperate gambler."Weeks after their "farewell," they were back on the site.  "No emergency fund. No retirement," they wrote. "And lost my last check on a credit spread."A massive new audience WallStreetBets' burst into the mainstream has left it in uncharted territory. There are the legal questions surrounding the site's collective push to boost GameStop's shares, with the SEC announcing in a statement that it is "aware of and actively monitoring" the volatility of the markets. The White House and newly sworn-in Treasury Secretary Janet Yellen are "monitoring" GameStop's stock bonanza and WallStreetBets briefly went private on Wednesday, as the moderators made the site private to "ensure Reddit's content policy and the WSB rules are enforceable." On Thursday, Robinhood, the trading platform of choice on WallStreetBets, made a controversial move to limit trading on GameStop, AMC, Nokia and other stocks promoted on the subreddit. Reddit said in a statement to CNN Business that its "site-wide policies prohibit posting illegal content or soliciting or facilitating illegal transactions. We will review and cooperate with valid law enforcement investigations or actions as needed."  And even if the forum survives scrutiny — whether regulatory, legal or from Reddit — it will have another issue to contend with. When part of the draw of a place online is the community, the shared language and jokes and memes, what happens when new people unfamiliar with any of that come suddenly flooding in?  With WallStreetBets' campaign against Melvin Capital now gracing the front pages of newspapers, those who have been burned by WallStreetBets' advice in the past are finding the allure of striking it rich on weekly options trades hasn't fully disappeared. Omar, the pre-med student who lost tens of thousands of dollars on weekly options trades, told CNN Business that he is back on WallStreetBets, trying to recoup what he lost trading money from his student loans last year. He'd bought one GameStop option which shot up to $10,000 from $7,000 amid Wednesday's rally. "There is a pandemic. There is nothing to do. I can't party. I can't go outside, and the prospect of making a little money sounds really good,"Omar reasoned. "What's not to like?"

Michelle Toh, CNN Business

2021-01-15 23:01:53

business

business

https://www.cnn.com/2021/01/15/business/kweichow-moutai-chinese-liquor-intl-hnk/index.html

How liquor brand Kweichow Moutai took over China and became the world's largest beverage maker - CNN

Kweichow Moutai is China's most valuable firm outside of the tech industry, and it just had a banner year. Valued at 2.7 trillion yuan, or $421 billion, it's worth more than Coca-Cola, Toyota, Nike and Disney.

business, How liquor brand Kweichow Moutai took over China and became the world's largest beverage maker - CNN

It's 53% alcohol and tastes like fire. Here's how this liquor brand took over China

When Costco opened its first store in China in 2019, it wasn't just the hot rotisserie chickens and discounted Birkin bags that lured frenzied crowds. A fiery, throat-tingling liquor called Kweichow Moutai also flew off shelves. At 1,498 yuan, or $209 for a half-liter bottle, it might not sound like the kind of bargain Costco shoppers usually go for — but in this case, it absolutely was. That price represented a steep discount over Moutai sold elsewhere — that is, if you could get your hands on it. The luxury spirit is so beloved in China, it sold out quickly. Even amid a global pandemic, Kweichow Moutai, the company that makes the eponymous liquor, had a banner year: its stock surged around 70% on the Shanghai Stock Exchange in 2020. The company, which is part state-owned and part publicly-traded, is China's most valuable firm outside of technology — worth more than the country's four biggest banks. Globally, its market cap has not only surpassed all other alcohol distillers like Diageo and Constellation Brands, but also Coca-Cola, which had long held the crown as the world's largest beverage maker by market cap. Valued at 2.7 trillion yuan, or $421 billion, Kweichow Moutai is worth more than Toyota, Nike and Disney, too. "Anytime they have any stock [of the product] available, it's going to be gone almost instantly," said Ben Cavender, the Shanghai-based managing director of China Market Research Group. "You'll see people clamoring [for it]." Apart from the Chinese diaspora, however, Moutai is still virtually unknown overseas. Almost all — about 97% — of its sales come from China alone, according to its financial reports. Read MoreSo how is a company that sells its products primarily in just one country now worth more than some longstanding global behemoths? And can Kweichow Moutai, which is described by some Westerners as "drinking liquid razor blades," succeed in appealing to non-Chinese consumers?An employee displays China's leading liquor maker Kweichow Moutai at a supermarket in Nantong city, in China's Jiangsu province in 2018.From historic icon to status symbol Moutai has one unmistakable advantage: the drink is China's national spirit. Moutai baijiu — the type of liquor the company makes — is a clear, potent spirit that's been dubbed "firewater," thanks to the fact that it's 53% alcohol. The red-and-white bottles of its flagship product, "Feitian," or "Flying Fairy," are a staple at Chinese state banquets and business events.I think if we drink enough Moutai, we can solve anything."Henry Kissinger, US Secretary of State, speaking in 1974 Known as the favorite tipple of Mao Zedong, founder of Communist China, and as the "drink of diplomacy," it was famously used to welcome former US President Richard Nixon on his historic trip to China in 1972, and again in 2013 when Chinese President Xi Jinping met with his US counterpart, Barack Obama, in California.Once, at a state dinner in 1974, US Secretary of State Henry Kissinger told Deng Xiaoping, the future Chinese leader: "I think if we drink enough Moutai, we can solve anything." "Then, when I go back to China, we must take steps to increase our production of it," Deng responded, according to an archived US government transcript.President Richard Nixon toasting Chinese Premier Zhou Enlai at banquet in China in 1972.Being part of so many major public events in China "really set the brand in the national consciousness," said Cavender, who likened it to another giant beverage maker, Coca-Cola, in that regard. "That's the same reason why Coke has actually done so well from a marketing perspective. If you look at the way they've done their advertising over the past 50 years, they're at pretty much every big event. You see Coke at when the Berlin Wall comes down. You see Coke commercials at Christmas. I think Moutai is that brand for China, and so I think that part explains why it's so popular." A Moutai representative declined requests to be interviewed for this story.Some say the story goes back even further in Communist Party lore. During the Red Army's "Long March" in China in the 1930s, soldiers used to pour Moutai on their feet to help disinfect wounds, Chinese state media has reported, citing a former army lieutenant general. Legend has it that members of the Red Army even used to turn to the drink to knock themselves out before surgery, said Hao Hong, head of research at BOCOM International, the securities arm of China's Bank of Communications. "It's a story [that goes around]," he said. "They didn't have anesthesia. So they had to use Moutai as a drug to numb [people] from surgery." Today, the brand is seen more as a luxury status symbol than for its "Red" roots. Some customers buy it not to drink, but to keep as investments. Limited-edition cases are collected and showcased by international auction houses, like Christie's, which says that some bottles can fetch more than $40,000 each. Moutai products being placed in a liquor store in the town of Maotai in Guizhou province, China, last June.Moutai has found a way to be "approachable for a lot of regular consumers, at least for special occasions," while at the same time also offering collectors' items that reach the ultra-rich, said Cavender. "That's something that makes Moutai, I think, different, from a lot of the international beverage brands," he said. It's also been a tremendous advantage during an economically tough year: wealthy consumers who are spending less on travel may splurge more on liquor, Cavender added.A meteoric rise Moutai has long been seen as one of China's blue-chip stocks. In 2017, it became the world's biggest liquor maker by market value, surpassing Diageo (DEO), the British owner of Johnnie Walker, Guinness and Tanqueray. In 2019, Moutai also became the first Chinese company since 2005 to see its share price hit 1,000 yuan (about $145), notching another market record. And last year, it became the most valuable non-tech company in China. (Alibaba and Tencent, the country's top two tech giants, are valued higher, with their shares listed in New York and Hong Kong respectively.)In 2020, Moutai's shares soared 69% to record highs. Hong said that he believed there was no major impetus for the rally last year; just that "most people are gradually realizing the ability of this company to be able to generate strong cash flow and no debt." "It's like a badge of honor for value investing," he added. "People love the stock — because year after year, it just continues to deliver."Xian Li, a 66-year-old retiree in Shanghai, is one of those people. He's invested in Moutai since 2004, just three years after it went public. China's 5 largest publicly-traded companies by market capTencent: $737BAlibaba: $637BKweichow Moutai: $421BIndustrial and Commercial Bank of China: $268BPing An Insurance Group: $244BSource: RefinitivLi said he was excited to buy in because it was clear from the beginning that the company was "financially healthy," and able to reward shareholders with a generous dividend. Since then, he's invested more than 136,000 yuan (about $21,000) into the stock. The payoff has been huge: a few years ago, he made enough to put his son through university. "The dividend [alone] each year could cover my daily expenses," said Li, who plans to hold onto the stock indefinitely. "It's also going to help me to afford medical bills and nursing home expenses." Not everyone is so bullish. Allen Cheng, an equity analyst at Morningstar, made headlines in 2019 when he downgraded his rating on Moutai's stock to sell. Cheng, who has since maintained that position, argues that the company's prospects are overblown, and that "the market has already reflected all the positives of the past 10 years." "Being the only hater is really difficult for me," he said with a laugh. "I think it's a bubble here."It's like a badge of honor for value investing. People love the stock — because year after year, it just continues to deliver."Hao Hong, head of research at BOCOM International, the securities arm of China's Bank of Communications Authorities, too, have warned investors of a potential stock bubble. In 2017, Moutai suffered a huge selloff — wiping $7.8 billion off its market cap in one day — after state-run news agency Xinhua, which often conveys the Communist leadership's sentiment, urged investors to take a more "rational view" of the company."It's important for Kweichow Moutai ... to stick to its slow pace," Xinhua said in an editorial. "Pulling up a plant to make it grow inevitably leads to unbearable pain. Short-sighted speculation will cause tremendous damage to the value of investment." The move was not uncommon. Beijing frequently tries to sway investors through state media, such as last summer, when a government-run publication encouraged people to buy into stocks. That could have a domino effect, particularly because mainland Chinese stock markets are dominated by retail investors. According to a 2020 survey by the China Securities Depository and Clearing Corporation, almost all investors there — 99% — were individuals.The making of Moutai One of Moutai's biggest advantages is its ability to keep the price of its product high. It claims to have limited capacity since it can only produce its drinks in one place. Similar to champagne — which comes from the eponymous region in France — Kweichow Moutai is named after Maotai, a picturesque small town in the southwestern Chinese province of Guizhou. (The company's name is based on an old romanization of the town's Chinese name.) Like champagne, the drink can only be called Moutai if it's produced in that specific location.This is where the company says its baijiu — distilled from fermented sorghum and rice — gets the magic touch. A worker at a Moutai distillery in November 2020. Environmental factors, such as the town's climate and seasonal changes in the water of the local river, help give the liquor its unique taste and is "beneficial to the production process," according to the Moutai Museum.Inside the town, Moutai's impact on the economy is deeply felt. As of 2019, Maotai was the richest town in western China, according to disposable income statistics from the municipal government of Renhuai, in Guizhou province. (Guizhou is among the country's poorest regions.) That would never have happened if it weren't for the beverage giant, said Qi Wang, a local resident. "Kweichow Moutai is the leader of Maotai," he said, adding that the company's boom helped encourage him to open his own liquor factory. "It influences all aspects of the town's development." Its close ties with the government don't always guarantee protection, though. In 2013, sales slumped when President Xi embarked on an anti-corruption drive, leading the government to stamp out any sign of "extravagance" among officials, including of expensive liquor. The campaign led to "unprecedented pressure" on the alcohol industry, Moutai noted in an earnings report. Sales still grew that year, but only around 17%, compared to 44% the previous year. In 2014, that number plunged to about 2%. The firm has since bounced back — though it now faces other problems. In recent years, it's been dogged by numerous corruption scandals, which has led to the ouster of several top executives, according to state media. Other major firms have faced similar pressure. China regularly investigates powerful executives for corruption — while using the findings to send a warning to others. This month, a Chinese court sentenced Lai Xiaomin, the former chief of a top, state-owned financial firm, to death for bribery. Is China enough? Moutai has an outsize reliance on the Chinese market. To be sure, the company has tried to push overseas, notably by starting a "fan club" in the United States, traveling to Africa to woo new business partners and teaming up with foreign players, such as Italy's Inter Milan soccer club. But for the most part, it's had little to show for it. In 2019, almost 97% of sales still came from China. Last March, the company launched a social media campaign called "stay at home with Moutai," which encouraged users around the world to try new recipes during lockdown. One Instagram and Twitter post, for instance, suggested mixing the drink into a "sunset cocktail," while another offered instructions for a noodle dish that could pair with the liquor. The campaign demonstrated an effort to stay connected with international consumers, even during the pandemic. But analysts have pointed to other challenges ahead.Moutai needs to do more to diversify, according to Spiros Malandrakis, industry manager of alcoholic drinks at Euromonitor International. "It needs to have started yesterday," he said. "International spirits always start local, like baijiu, but they become international. That's the key. That's how you take over the world. That's how you become sustainably big." A customer shops for Kweichow Moutai at a supermarket in Nantong city, east China's Jiangsu province in December 2018.Malandrakis pointed to Mexican tequila, Russian vodka and American bourbon as examples. None of those "would have survived" if they didn't go global, he added. The process, of course, doesn't happen overnight. William Dong, managing director of Evershine Australia, which distributes Moutai in Australia, New Zealand and Italy, said that many people still need to be educated about what baijiu even is. "We have distributed the product into basically everywhere that we could," he said in an interview from Sydney. At the end of the day, most customers are still Chinese, he added. "I would say probably 80%." It doesn't help that the drink is an acquired taste. Some people eschew Moutai's strong kick, while others label it "firewater." "[Some] Westerners find it, and I quote, 'kind of like drinking liquid razor blades,'" said Malandrakis. An even bigger threat, however, may be generational and gender gaps within China. Currently, the core demographic for baijiu is 40 to 60-year-old men, according to Malandrakis. 800 drones perform in teams in the night sky to form a "Moutai wine bottle" pattern in Renhuai, Guizhou, China in June 2020."The next generation of drinkers does not particularly want to do exactly what their father's generation did," he explained. "It's not great for the future, if you don't start having new people coming in." Malandrakis compared it to sherry, which was loved for centuries but later fell out of popularity as it "became synonymous with consumption of older populations." The next generation of drinkers does not particularly want to do exactly what their father's generation did. It's not great for the future, if you don't start having new people coming in."SPIROS MALANDRAKIS, INDUSTRY MANAGER OF ALCOHOLIC DRINKS AT EUROMONITOR INTERNATIONALNot everyone is so worried. Even with its weak international position, Moutai's baijiu was the world's best-selling liquor in 2019, according to Euromonitor. "The Chinese market is so big, and it's continuing to become more wealthy," said Cavender. He also noted a recent swell in local pride, which could draw more domestic consumers in. For all its challenges, even critics admit the company's dominance is nowhere near diminishing. "The brand — and the heritage that the brand has — it's really impossible to replicate that," Cavender said. "Somebody can't set up a new venture tomorrow and do what they can do. It's not sort of possible to go back in time and get Mao Zedong to be interested in your drink. It's not possible to sort of be located in the town where they make their products. So I think they have a strong built-in story that allows them to flourish." CNN's Beijing bureau and Serenitie Wang contributed to this report.

Story by Jazmin Goodwin, CNN Business Video by Jon Sarlin and Janelle Gonzalez, CNN Business Visuals by Marie Barbier, Denis Bouquet, Sarah-Grace Mankarious and Tal Yellin

2020-12-02 17:59:45

business

business

https://www.cnn.com/2020/12/02/business/black-women-startup-business-funding/index.html

Black women don't get much startup business funding. These founders are trying to change that - CNN

The number of Black women who have raised over $1 million in funding has more than doubled since 2018, according to ProjectDiane — an impressive upswing that could signal a shift in a startup landscape dominated by White men.

business, Black women don't get much startup business funding. These founders are trying to change that - CNN

Black women don't get much startup funding. These founders are trying to change that

Two years ago, Shani Dowell gave up a stable career and much of her bank account to take a chance on a business idea. As a mother and a former math teacher, she knew not all parents felt comfortable raising important feedback to teachers and school administrators. Instead, she found, they'd often chat amongst themselves about issues that came up at school.There had to be a better way, she thought, so she founded Possip. Short for "positive gossip," the startup, which schools subscribe to annually, uses text messages to get quick surveys and reactions from parents ranging from praise for teachers to feedback on bullying and school culture. Despite early success getting parents and administrators interested, however, initially attracting investors to scale up the small company was an uphill battle. Shani Dowell is the founder of Possip, a platform connecting schools with real-time feedback from parents. Read More"When I originally would go out and pitch Possip to people, especially to typically wealthier men, they sometimes didn't understand the problem, and part of why they potentially didn't see the problem is because they may not have ever had the experience of not feeling entitled and empowered to share their voice or share their opinions," Dowell said. "Some investors in the education technology space had a jarring disconnect from what was happening at schools and what parents might actually need," she said. Luckily, after running the company for almost three years, Dowell had insights from roughly 100 schools to back her up, and finally, she found an institutional investor, too: LaunchTN, a public-private partnership led by a female CEO and funded in part by the State of Tennessee.Today, Possip has a presence in 700 schools across 24 states. And Dowell is one of the few Black women in the US who have raised $1 million or more in funding for their businesses.  Although Black women are the fastest-growing group of female entrepreneurs in the United States, they've long been slighted by startup investors and significantly under-funded. But in spite of the obstacles they face, these founders are forging ahead and continuing to thrive in their businesses. In fact, the number of Black women who have raised over $1 million in funding has more than doubled since 2018, according to ProjectDiane, a biennial report released Wednesday. The report, which tracks publicly-announced funding of Black and Latinx women-founded businesses, is compiled by digitalundivided, a nonprofit focused on supporting entrepreneurial women of color. It uses data from Crunchbase and Pitchbook to track crowdfunding, angel, seed and venture round investments. It's possible the data doesn't include some founders who are not listed in those databases or didn't disclose funding publicly. According to ProjectDiane, at the start of 2018, just 34 Black women had raised $1 million or more in outside investments for their businesses. But now, in data tracked through August 2020, more than 90 Black women have hit or exceeded that level. The numbers of Latinx women who've reached that milestone also grew quickly, although they remain incredibly underrepresented in VC circles, too. Still, it's an impressive upswing that could signal a shift in a startup landscape largely dominated by White men. This milestone comes amid a backdrop of protests against systemic racism and an unprecedented push to support and buy from Black-owned businesses. Founders and advocates are hoping to build upon that momentum, but also wonder if the support being shown to Black-owned businesses, let alone those founded by Black women, is here to stay.  "Businesses founded by women of color are in focus now, and specifically those founded by Black women because of the racial reckoning," said Lauren Maillian, CEO of digitalundivided. "But we want and we need to make sure that they continue to gain great investment moving forward." Bridging the funding gap is long overdue  The number of businesses owned by Black women grew 50% from 2014 to 2019, the fastest growth among all female entrepreneurs, according to American Express projections based on Census data. Black women make up nearly 14% of the female population in the US, but 42% of all new women-owned businesses during that time. Many of these companies are small, local businesses and not necessarily seeking outside investors. That said, for those founders who are focused on scaling up quickly, there's a huge gap between their entrepreneurial ambitions and the funding they're able to secure: Black women have received less than 1% of venture capital funding, analyzed by ProjectDiane since it started tracking the data. Perhaps not coincidentally, few Black women are in a position to make decisions on how capital is invested in startups. Only 4% of the VC workforce is Black, and only 3% of the people actually leading investments are Black, according to data from the National Venture Capital Association. "You have this huge deficit within the ecosystem for Black women," said Dell Gines, senior community development advisor at the Federal Reserve Bank of Kansas City who conducted a year-long study on startups owned by Black women released in 2018. Venture capitalists still aren't investing in women or minorities, and they're leaving trillions on the table "Venture capital is by and large a network-based industry, where you have a series of gatekeepers and other hurdles to get in front of because there's greater demand for capital than there's usually supply. You also have these filtering mechanisms that traditionally don't include people of color and women, because that's how the networks originated." There's been improvement in the last couple years, but not enough to close the gaps. Collectively, Black women founders raised $700 million in 2018 and 2019, up from $289 million raised in 2009 to 2017, according to ProjectDiane. Despite the major increase, however, Black women founders accounted for just 0.27% of the $276.7 billion in startup funding raised by all companies in those years, as tracked by Pitchbook.The dearth in numbers stems back to a number of well-documented reasons including unconscious bias, systemic barriers and gender and racial stereotyping. The missed opportunity and economic cost of not investing in Black women is huge, Gines said. If you improve the rate of Black women entrepreneurship — their ability to grow and scale — then you improve the entire community," Dell Gines, senior community development advisor, Kansas City Fed"If you improve the rate of Black women entrepreneurship — their ability to grow and scale — then you improve the entire community," he said, pointing to research that connects entrepreneurship growth rates with economic growth. Black women aren't newcomers to entrepreneurship. Even before women could vote, they owned businesses.  "We've been entrepreneurs. As soon as we could actually control our own destinies, create our own and monetize our own ideas we've been doing it," said Kathryn Finney, founder of digitalundivided and The Doonie Fund, which makes microinvestments in Black-women-owned businesses. "It's just been times throughout our history where that desire, that force has been artificially depressed by outside forces."  Raising funds is not a one-size-fits-all Black women may now be starting businesses at a record pace, but they're still having to overcome massive obstacles in doing so. Among Black women business owners, 66% describe access to credit and funds for expansion as one of their greatest financial challenges. Only 39% of their nonminority peers say the same, according to the Federal Reserve System's 2016 Small Business Credit Survey, which is based on a convenience sample of businesses. Black women also reported being less likely to receive some or all of the financing they requested and are significantly more likely to not apply for financing because they felt discouraged by a lack of credit opportunities.     Rather than turn to debt or equity financing to fund their businesses, many rely on financial reserves like their savings as the main source of startup capital.  According to the Fed survey, 31% of Black women business owners rely on personal funds to finance their businesses, whereas only 16% of nonminority women business owners say the same. Much of those reserves, Finney says, come from "our own personal funds, maybe refinancing our mortgages, or taking loans from our 401(k), all things that impact our long-term wealth."  That was the case for Denise Woodard, a former Coca-Cola executive. She was spurred to create Partake Foods, an allergy-friendly snack company, nearly four years ago in response to her daughter's food allergies. Woodard started off with a Kickstarter campaign before raising capital from family and friends. In spite of the growing traction her products were getting and local placement in Whole Foods and Wegmans, Woodard was forced to empty her 401(k) and sell her engagement ring to keep the company going. "It was definitely difficult," she said. "It was coming in dribs and drabs of like $5,000 and $10,000 checks and not fast enough." But a breakthrough finally did come. After being turned down by nearly 100 investors, Woodard received the 'yes' she needed from Jay-Z's Marcy Venture Partners, which led a seed round of $1 million for the company last summer that also included her former Coca-Cola boss, Chuck Muth, now chief growth officer of Beyond Meat and The Factory.Denise Woodard founded Partake after her daughter's struggle with food allergies and the lack of allergen-free food options on grocery aisles. She's since raised new investment from Grammy award-winning singer H.E.R. along with additional funding from Marcy Venture Partners. And the company's footprint has expanded to nearly 3,000 stores including retailers such as Target, Whole Foods, Sprouts and Wegmans. Woodard is also trying to boost Black and brown representation in the food and beverage industry, with the launch of a fellowship program for students at historically Black colleges and universities to explore career pathways at consumer-packaged goods companies. She hopes the program can make the journey smoother and more seamless for others. "As I've grown the company, I'm realizing that Partake has the opportunity to stand for something much larger than people with food allergies being able to partake, and just this bigger feeling of inclusivity and everyone having a seat at the table, regardless of their gender, race, socioeconomic class or food restrictions, this idea that everyone is welcome," Woodard said. "I started Partake with a tiny picture, and it's really broadened a lot since we've been in business." Changing the ecosystem The country's racial reckoning may have sparked some new efforts to rectify years of gross underfunding of Black women founders, but there were a number of positive forces that emerged even prior to 2020. New funds, online communities, programs and alternative sources of funding are focusing on diversifying who receives startup capital. One significant example, the New Voices Fund was launched in 2017 when Unilever acquired Sundial Brands, the maker of SheaMoisture and other skin care and hair care lines. Richelieu Dennis, Sundial's founder and then-CEO, created the New Voices Fund to invest in companies run by women of color, and Unilever became an anchor investor as part of the partnership. To date, the fund has invested more than $60 million. Companies like The Honey Pot, The Lip Bar and Mielle Organics, all of which are now available in Target stores, were able to expand in part due to those investments.JUST WATCHEDThe Honey Pot Company is changing the feminine hygiene aisleReplayMore Videos ...MUST WATCHThe Honey Pot Company is changing the feminine hygiene aisle 02:46Another effort, Founder Gym, founded by Mandela SH Dixon, is an online training program for underrepresented founders including Black women, which teaches them how to raise money to scale their startups. Several of the more than 90 Black women who have raised millions for their startups have been a part of the program, including Shani Dowell of Possip, as well as Olamide Olowe, who founded Topicals, a skincare brand for people with chronic skin conditions and Jasmine Shells, who cofounded Five To Nine, an event management platform. Another such example, Black Girl Ventures, a nonprofit organization launched by Shelly Bell in 2016, has helped to scale more than 100 Black and brown women-owned businesses across 12 cities through its pitch competitions. Many Black women founders have also found success by tapping into alternative sources of capital such as crowdfunding. Dawn Dickson-Akpoghene raised over $1 million in an equity crowdfunding campaign in 2019 for her company PopCom, which makes touchless vending machines for regulated products like alcohol, tobacco and cannabis. The founder of Ethel's Club, Naj Austin, raised $25,000 by using crowdfunding to establish her company, a social and wellness club for people of color. She went on to raise more than $1 million from institutional and angel investors.We have a culture of embracing entrepreneurship as Black women and seeing other Black women continue to do it is what really makes the difference," Lauren Maillian, CEO of digitalundividedThese efforts haven't come just on the founder side. There have also been a number of initiatives pushing for more diversity among the investors who make decisions on who gets funded and why in the startup landscape. Organizations such as All Raise, BLK VC and HBCUvc have focused on accelerating representation of Black and women investors to build a more equitable ecosystem in venture capital. With these efforts combined, advocates like Maillian from digitalundivided hold hope that even beyond the moment of racial reckoning in 2020, Black women founders will still continue to thrive. "We have a culture of embracing entrepreneurship as Black women and seeing other Black women continue to do it is what really makes the difference," she said. "And signals to our peers and to future generations, what is truly possible."— An earlier version of this story included the wrong title for Queen Chinyere Quinn in a photo caption. She is the cofounder of Fraym and Kupanda Capital.PHOTO CREDITS: Incredible Health, Adrian Atwood/Connected Commerce Council 2020, Civic Eagle, Alex Newman, Cityblock Health, Mixtroz, Lennox Armstrong, Nicholas Peter Wilson, Dmitri Oleynik, Richard Smith, Melissa Bradley/1863 Ventures, Rich Gilligan, Phillip Faraone/Getty Images for Wired25, Bre'Ann White, ShearShare, Felicia Kieselhorst Photography, Lori Wilson Photography, Vanessa Lenz, Karen Hernadez, Planet FWD, Cheryl Contee, Noemie Tshinanga, Tony Cash/Park Hill Multimedia, Annette Patko, Robin L Marshall/Getty Images for BET, Jehan LLC, Paras Griffin/Getty Images for ESSENCE, Fiveable, Itzel Gonzalez, Jenny Groza, Ashley Edwards, Sasha Craig Photography, Courtesy of NaturAll, Madi King Erger, Panty Prop Incorporated, Kenn Stearns, Hearst, Robin L Marshall/Getty Images for BET, Aaron Ricketts, David Land, Jenna Schonfeld, John Phillips/Getty Images, Kira Voss Photography, Lauren Crew, Kellee James, Daniel Vasquez, Ashleigh Bing, James Jones Jr., Matthew Suyetsugu/BlackLine Media Group, Sergio Garcia, J. Lauryn Photography, Nicola Harger, Yumi Matsuo, Alain Ngann, Tony Bowen Photography, Chi-Chi Ari/PoweredByCue, Yolanda Richards, Elizabeth Defreest, Uncharted Power, Nick F. Nelson/Brandpreneur, Gro Intelligence, Naza Beauty, Joseph Ford, Breyona Holt, Keith Munyan, Claire Harvey, Neriah McNair, Eclipse Corp, H. Bernard Rogers, 1871 Chicago, Nadine Priestley, Amy Robertson, Fiona Aboud, Steve Reddell/Eskalera, Amy Bolger Photography, Jack Lindholm/Conde Nast, Colleen Bies, Michael Benabib, @thebrosfresh, Partake

Story by Bronte Lord and Richa Naik, CNN Business Video by Richa Naik and Sofia Barrett, CNN Business

2020-10-16 20:07:57

business

tech

https://www.cnn.com/2020/10/16/tech/qanon-believer-how-he-got-out/index.html

He went down the QAnon rabbit hole for two years. Here's how he got out - CNN

This man was sucked into QAnon for two years. Here's how he escaped the virtual cult.

tech, He went down the QAnon rabbit hole for two years. Here's how he got out - CNN

He went down the QAnon rabbit hole for almost two years. Here's how he got out

One day in June 2019, Jitarth Jadeja went outside to smoke a cigarette. For two years he'd been in the virtual cult of QAnon. But now he'd watched a YouTube video that picked apart the last element of the theory he believed in. Standing there smoking, he would say later, he felt "shattered." He had gone down the QAnon rabbit hole; now, having emerged from it, he had no idea what to do next. 'QAnon only hurts people. It has helped nobody.'QAnon is a virtual cult that began in late 2017.The most basic QAnon belief casts President Trump as the hero in a fight against the "deep state" and a sinister cabal of Democratic politicians and celebrities who abuse children. And it features an anonymous government insider called "Q" who purportedly shares secret information about that fight via cryptic online posts. Travis View is a conspiracy theory researcher who co-hosts the podcast "QAnon Anonymous."Read MoreThe theory's believers "always fantasize that they are saving children and they're bringing criminals to justice," View says. "But QAnon only hurts people. It has helped nobody."There aren't solid estimates for the number of QAnon followers worldwide, but it's clear their ranks are growing. A CNN investigation reviewed QAnon-related Facebook pages and groups based only outside the US and found a total of at least 12.8 million interactions between the beginning of the year and the last week of September.An attendee at a Trump rally holds up a QAnon sign on August 4, 2018. (Bloomberg via Getty Images)Lisa Kaplan and Cindy Otis lead Alethea Group, a company that tracks disinformation to protect its clients' brands. They followed false claims that Wayfair was complicit in a child exploitation plot as they spread from havens for QAnon to the mainstream in the summer of 2020."There's not sort of, one sort of set doctrine or belief system," Otis said. "But a lot of it goes down to what goes viral and what doesn't." 'It's like a parasite." How a dangerous virtual cult is going globalLike many previous conspiracy theory groups, QAnon has become as much about community as its actual theory. The result is a convoluted and ever-changing web of beliefs which branch off from the central worldview. In this case, that includes things like members of the supposed cabal also worshipping Satan, and JFK Jr. having faked his 1999 death in a plane crash to escape the deep state plotters. QAnon has also started assimilating unrelated conspiracy theories, including false ideas about the supposedly dangerous nature of 5G infrastructure and the false, dangerous notion that the Covid-19 pandemic is a ploy to monitor private citizens.Since there's no leadership or structure to QAnon, its supporters incorporate existing conspiracy theories and develop new ones. QAnon "really does take on a life of its own, which can, in fact make it a more significant threat," Kaplan said. 'A car crash you can't look away from'Jadeja, the former QAnon believer, is Australian. But he said he's always been interested in American politics. He spent time studying in the US, living in Queens, New York. His nationality is a testament to the fact that QAnon has spread well beyond the United States. "If you'd look in Australian politics, it's boring by comparison," Jadeja said. "American politics, it's like, it's like a car crash you can't look away from."During the 2016 US presidential election, Jadeja said, he was drawn to then-candidate Bernie Sanders. He liked what Sanders had to say about inequality and his "anti-establishment sentiment." But then Trump won. "That kind of really kicked it all off for me," Jadeja said. Jitarth Jadeja, 32, found QAnon in 2017. He spent two years entrenched in the virtual cult. His biggest regret? Sharing the conspiracy theory with his father. (Bill Code for CNN Business)It felt to him like the world was shocked by Trump's win. How had seemingly no one seen it coming? And most importantly, who had? "I kind of switched off from all mainstream media," Jadeja said. That's when he began listening to conspiracy theorist Alex Jones and reading Infowars, which exposed him to QAnon theories for the first time. By December 2017, he identified as a Q follower. Around this period, Jadeja said he was in the midst of a 15 year struggle to finish his degree. He'd pulled away from friends and become socially isolated. "I just felt completely overwhelmed... I was probably in a deep depression I think when I found Q," he says. Once Jadeja found QAnon he was quickly sucked in. He would spend time on websites that aggregated posts supposedly from Q, which often first appear on darker corners of the internet like 8kun. Then he'd move on to read the interpretations of those posts from other believers. These interpretations are popular among the QAnon community because posts from "Q" are often so vague that they can be read in any number of ways. The tactic tends to lure in supporters the way fraudulent psychics can — there's little solid information given, so almost anything can be taken as confirmation of a pronouncement by "Q.""There'd be a lot of Youtube and Reddit mini-celebrities within the community that would be like the anointed decrypter for that point in time," Jadeja noted.I was probably in a deep depression I think when I found Q." Jitarth Jadeja, former QAnon followerQAnon was all he wanted to talk about. That made life offline increasingly difficult for him, and he pulled away from friends. "No one believes you. No one wants to talk to you about it. ... You get all angsty and crabby and whatnot. [S]uch shouting, irrational, you sound like the homeless guy on the street yelling about Judgment Day," Jadeja said. One of the few people in his regular life with whom he was able to talk with about his newfound interest with was his father. "We used to talk about it a lot. We used to only talk about it with each other. We show each other things like, did you see that? Did you see that?" Jadeja said."I think superficially it did seem like [QAnon] gave me comfort," Jadeja said. "I didn't realize the nefarious kind of impact it was having on me because it was very insidious how it slowly disconnected me from reality."Finding 'answers'Experts say that people often seek out conspiracy theories in times of crisis. "I think we tend to underestimate the extent to which these sorts of narratives are appealing," Alethea Group's Otis said, "especially when we're in a time of great stress and emotions are high."Otis noted that the 2016 US presidential election was one of those times for many people. Now the coronavirus pandemic means uncertainty and anxiety are once again at a high point."It's a very compelling narrative to say all of this is orchestrated," Otis said. "There's a cabal coming after you. They're trying to make your life miserable. You want an answer for why bad things are happening? Here they are."Protestors hold QAnon-related signs during an anti-lockdown demonstration in Melbourne, Australia on September 5th. Some QAnon followers falsely believe the Covid-19 pandemic is an elaborate hoax. (Darrian Traynor/Getty Images AsiaPac)View, the conspiracy theory researcher, said QAnon preys on vulnerable people who in some cases might be suffering from mental health issues."I think it's a mistake to say that QAnon is a conspiracy theory, because this kind of makes it sound like Area 51 or Big Foot," he said. "It's a community of people that radicalizes them into a world view, that just essentially detaches them from reality."For Jadeja, the impulses he developed while he believed in QAnon are a source of shame. "I would have been so happy to see Hillary Clinton dragged in front of a military tribunal, even though she's a civilian," he said."That still bothers me to this day, how willing and happy and joyfully I would have reacted to something that I would normally want no part in... This is how you get good people to do bad things."In a May 2019 bulletin, the FBI warned that conspiracy theories like QAnon could "very likely" motivate criminal and sometimes violent activity in the US especially because of the reach and volume of conspiratorial content available online. The platform problemQAnon theories often start out on fringe internet forums like 8kun and 4chan, according to Alethea Group's Kaplan. But once a claim gains popularity there it can quickly catapult onto mainstream social media networks. "It becomes especially dangerous once these conspiracies go on to platforms like Twitter and Facebook, because it increases the breadth of the reach that these false conspiracies have," she said. Reddit banned a popular QAnon subreddit in 2018. In July 2020, Twitter said it had removed more than 7,000 QAnon-associated accounts. Last week, Facebook announced it would ban any pages, groups or Instagram accounts representing QAnon. And on Wednesday, YouTube joined the other platforms, saying it would prohibit conspiracy theory content that threatens or harasses an individual or group. It stopped short of banning QAnon and other dangerous theories completely. But the task of identifying and policing these kinds of accounts is massive. Facebook, for one, has previously made promises to ban certain groups or types of content in the past but enforcement has sometimes been slow or inconsistent."This isn't something that there's one solution that will, you know, remove this group from their platform for all eternity," Otis said. "It's going to be an ongoing and dynamic problem."View believes these actions may be too late. "This is a group who are very highly motivated, and they believe that they are fighting essentially an information war."Leaving QAfter two years in the world of QAnon, Jadeja said, cracks began to form in his conviction. He believed Wikileaks founder Julian Assange had been instrumental in "exposing" Hillary Clinton and had helped win Trump the election. If Trump was trying to bring down the cabal, Jadeja wondered, how could he let Assange face extradition to the US for charges related to publishing secret military and diplomatic documents? On top of that, Jadeja said, he was noticing more logical inconsistencies in QAnon's theories.How QAnon uses religion to lure unsuspecting Christians But there was one particular piece of "proof" he was still holding on to. It went like this: A QAnon follower had supposedly asked Q to tell President Trump to use the phrase "tip top" in a speech. Then Trump did. To Jadeja, that had been proof that Q existed and had the ear of the president. But then, as his doubts mounted, he decided to research it further and came across a YouTube video that showed other times Trump had previously said the phrase or something similar. Suddenly "tip top" was no longer irrefutable proof, it was probably just coincidence.For others, that might have easily been glossed over, a blip easily dismissed in their belief. But for Jadeja, who was nearing a break with QAnon, it was a turning point."It was the worst feeling I had in my life," Jadeja said. That's when he went outside for a smoke. 'It starts with empathy and understanding'r/Qult_Headquarters is a forum on Reddit "dedicated to documenting, critiquing, and debunking the chan poster known as 'Q' and his devotees." Its 30,000 members pick apart QAnon theories and point out inconsistencies.It's where Jadeja turned when he stopped believing. He wrote a 659-word post that began with the words "Q fooled me."He thought the group would ridicule him for believing in the conspiracy theory. "I expected to be torn apart," he said.Instead, the opposite happened. According to Jadeja, he got over a hundred responses to his post — and nearly all of them were supportive. "These guys put me back together again."Three years later, Facebook says it will ban QAnonHe now thinks one of the toughest challenges in trying to deradicalize a QAnon believer is that they view the opposition as "pure evil.""This is a big problem, not just because people are being taken in and their families are like being ripped apart," he said. "This is an existential battle between good and evil that these people think they're fighting." He says he used to think the same thing.This is an existential battle between good and evil that these people think they're fighting."Jitarth JadejaAnother Reddit community called QAnonCasualties functions as a support group for friends and family members of QAnon believers. It has more than 28,000 members. There are hundreds of stories of loved ones "lost" to QAnon. Friendships ruined. Relationships ended. Families suffering. Looking back, Jadeja said, he doesn't think there is a single relationship in his life that wasn't affected by his time believing in QAnon. "It's destroyed some of them to this day. It's strained a lot of them to this day."But there's one thing in particular that he regrets the most: sharing QAnon with his father. CNN reached out to Jadeja's father multiple times for a comment but he did not respond. Jitarth Jadeja looks at a photo of himself as a child next to his father. (Bill Code for CNN Business)Jadeja thinks it's possible more QAnon believers can follow his path out."It has to start with empathy and understanding," Jadeja said. That's what the QultHeadquarters community on Reddit gave him.In View's opinion, confronting QAnon believers with facts isn't the best way to deradicalize them. He said the best way to help believers is to remind them of their life before Q. Believers need to be encouraged to ask themselves "if this new life that they built for themselves is actually productive, if it's actually building towards something good or if it's just a waste of time and it's filling some kind of emotional void." Potentially being known as "the QAnon guy" among his friends is the last thing Jadeja wants. But he fears the community will continue to grow. That's why, he said, he decided to share his story — in the hope that other believers might see that there is life after QAnon and reevaluate their choice to support it.Ultimately, he said, he's glad he went down the QAnon rabbit hole. It taught him a lot about hubris, he believes. And, he said, "It allowed me to really confront, like, the own darkness that's in my own heart." — Additional reporting by Sofia Barrett

Story by Hanna Ziady, CNN Business Video by Joseph Ataman and Sofia Couceiro, CNN Business Graphics by Tal Yellin, CNN Business

2020-11-14 06:51:33

business

business

https://www.cnn.com/2020/11/14/business/unilever-ice-cream/index.html

Unilever conquered the ice cream market. Home delivery is the final frontier - CNN

Unilever, the undisputed king of ice cream, is taking inspiration from the delivery tricycles of days gone by to push into one final frontier: on-demand ice cream delivered straight to your freezer.

business, Unilever conquered the ice cream market. Home delivery is the final frontier - CNN

This company conquered the ice cream market. Home delivery is the final frontier

Thomas Wall had a problem. It was the summer of 1913 and business was flagging at T. Wall & Sons, his family butcher shop in London.Overheated shoppers just weren't buying the company's specialty sausages. Then, Wall had an epiphany: Selling ice cream could help counteract the seasonal sales slump.The idea was set aside when World War I started a year later. But the arrival of a commercial freezer from the United States in 1922 catalyzed his ambitions. From a factory in west London, Wall's ice cream was soon being hawked to Londoners via horse and cart, and then by salespeople on tricycles. By 1939, there were 8,500 of the company's tricycles on Britain's roads.Wall's ice cream salesmen in Britain in 1922 (left) and 1938 (right).Meanwhile, a consumer goods juggernaut was being created. Wall's was bought by Lever Brothers, then selling Sunlight soap, which merged with Dutch company Margarine Unie in 1930 to create Unilever (UL). The Anglo-Dutch firm has gone on to acquire some two dozen other major ice cream brands, including Klondike and Ben & Jerry's, while pioneering its own Magnum line. It sells ice cream in 63 countries around the world and commands almost a fifth of global ice cream sales, a bigger share than its next four competitors combined, according to market research firm Euromonitor.Read MoreUnilever is now the undisputed king of ice cream. But as the coronavirus pandemic rages on, and lockdowns persist, the company is taking inspiration from the delivery tricycles of its early years to conquer one final frontier: ice cream delivered to your home, on demand.Ice cream around every cornerIt won't have far to travel. Chances are, while reading this article you're no more than a few hundred yards away from a Unilever ice cream.The company owns five of the world's 10 most valuable ice cream brands, including Breyers, Cornetto, Carte d'Or and Ben & Jerry's. But its empire extends far beyond these familiar names. There's Frigo in Spain, Adityaa in India, Holanda in Mexico, Langnese in Germany, Selecta in the Philippines, Ola in South Africa and Pingüino in Ecuador. In recent years, Unilever has also built out its premium offering to fend off a growing number of innovative rivals, snapping up gelato and sorbet brands such as America's Talenti, Italy's Grom and Australia's Weis.Many of these may be unfamiliar, but you've probably come across the brand that more than any other heralded Unilever's ice cream ambitions: Magnum. The world's best-selling ice cream brand, Magnum's sales to consumers are expected to reach $3.8 billion this year, ahead of sister brand Cornetto ($2.4 billion) and General Mills' (GIS) Häagen-Dazs ($3.2 billion), said Euromonitor. Unilever "got serious" about ice cream when it launched Magnum in 1989, said Matt Close, the company's executive vice president for global ice cream. Vanilla ice cream bars on sticks, dipped in chocolate that cracks on the first bite and then dissolves in your mouth, were a decadent new taste sensation."That really revolutionized the ice cream industry, but also our ice cream business," Close told CNN Business. "Suddenly we moved from being a kind of kids seaside treat to something that people were eating in many more locations."The realization that ice cream could be a treat for grownups changed the business. It ushered in a wave of ever more indulgent, upmarket brands, which have in turn given way to healthier, plant-based alternatives as consumer preferences evolve. Unilever's approach has been to go after the whole market, rather than target any particular segment. Its 35 ice cream brands come at every price point, for all occasions and in just about every size, shape and packaging. There's Breyers Natural Vanilla to eat with apple pie; cheap and cheerful Popsicles on sticks for youngsters; Magnum Bites in small portions to satisfy late-night cravings; and pints of Ben & Jerry's or Talenti for something more extravagant. Sales have soared during the coronavirus pandemic, as families forced to eat at home turn to ice cream to indulge themselves. Sales of Unilever ice cream eaten at home increased by 26% between April and June, and by 16% in the following quarter, compared to the previous year, offsetting a collapse in treats consumed on the go.Lockdowns have also driven millions more people to buy groceries online, ice cream included. That's delivered a shot in the arm to Unilever's e-commerce business and paved the way for its newest market: ice cream on demand.How to make the good stuffMaking ice cream is tricky enough, without adding the logistics of getting it to people whenever they want before it melts.The ice cream business has changed since Wall's started factory production nearly 100 years ago. Now, companies have nearly limitless ways in which to combine milk, cream and sugar with other ingredients to come up with new flavors and formats. Unilever sells 431 different varieties of ice cream just in the United Kingdom and Ireland, while Magnum alone comes in about 35 flavors a year in standard sticks, mini sticks, pints and truffles.Andrew Sztehlo, Unilever's global vice president for ice cream research and development, likens the manufacturing process to a vehicle assembly line. Take the Cornetto, which combines Vanilla ice cream with chocolate coating and hazelnut pieces in a wafer cone.Cornetto ice cream cones in a freezer in Bangkok, Thailand in December 2019."Making a Cornetto is the food equivalent of making a motor car," he told CNN Business. "You've got hot things, cold things, things that are at funny angles, things that like water, things that hate water. And they've all got to come together to make this cone. It's very complex and it goes at high speed."Even with all this precision and years of experience, technical challenges persist. According to Chris Veitch, a former senior process engineer at Unilever, there are projects every year to try and fix the problem of Cornetto cones occasionally going soggy within their use-by dates."Ice cream is an incredibly complex material that's very difficult to model and work with, and there are several highly sensitive processing steps that affect quality," Veitch said in a briefing earlier this year hosted by the London-based Institution of Chemical Engineers.That means that whenever Unilever wants to launch a new ice cream or even tweak an existing product by, for example, injecting sauce a little differently, it more often than not has to come up with a new piece of equipment. Hence why there's "a lot of stainless steel" and a lot of engineers in Unilever's ice cream factories, according to Sztehlo, who described them as "Willy Wonka territory.""There's lots of whirling things going up and down, in and out, and so on," he added. "We make billions and billions of ice cream products every year in this way through our factories around the world."Twister ice cream lollipops on an assembly line in a Unilever factory in Konya, Turkey.On a missionUnilever executives say they haven't strayed from Wall's strategy of making ice cream as ubiquitous as possible. Beyond getting a Wall's display case into every possible grocery store, that extends to eliminating the need for people to go out and find ice cream in the first place. "I suppose as an ice cream gang we're a bit messianic," said Close. "We believe that people want it, we've just got to find a way to get it to them."Making ice cream available on demand is a key part of Unilever's efforts to reduce its reliance on summer sales, which leaves it vulnerable to changing weather conditions and with a narrow window to earn the bulk of its revenue. "For Unilever, this has meant repositioning ice cream as an any time snack," Euromonitor said in a report earlier this year. A century after Wall's tricycles first hit the roads, the need to make ice cream available at all times means Unilever is once again using workers on wheels to distribute its wares.Ice Cream Now, the company's home delivery business, has boomed during the pandemic. What began as a pilot program in 2016 at Deliveroo's London headquarters with a single freezer and virtual store, is now available in more than 100 cities across 36 markets through partnerships with the likes of Uber Eats, DoorDash, Grubhub (GRUB), Just Eat (JSTTY) and Domino's Pizza (DMPZF).Magnum ice cream boxes in a hypermarket in Kuala Lumpur, Malaysia in June 2019. Customers can get ice cream delivered within 30 minutes from any number of retail partners, restaurants or cloud kitchens. "It's about getting ice cream out of [one of those freezers and] into somebody's house," Sztehlo said. And it's not stopping at bicycles. The company has teamed up with Terra Drone Europe to explore delivery by air. It helps that Unilever's ice creams are already in several million freezers around the globe as part of its traditional business. It's grown pickup points for on-demand ice cream to 11,000 globally, an almost four-fold increase since before the pandemic hit. And it's adding more pickup points all the time to get ice cream to people as fast as possible — crucial for a product that starts to melt at anything above zero degrees Fahrenheit (-18 Celsius).As an ice cream gang, we're a bit messianic. We believe people want it, we've just got to find a way to get it to them."Matt Close, UnileverGlobal e-commerce sales of ice cream and frozen desserts were already growing strongly before the coronavirus. But the pandemic is accelerating the shift towards online grocery shopping, benefiting Unilever and rivals with e-commerce businesses, including Halo Top and Häagen-Dazs.There's room to grow. Euromonitor estimates that online sales of ice cream, including frozen yogurt, will reach around $1.7 billion this year — a small fraction of the $76.4 billion in overall ice cream sales to consumers. For Unilever, the growth of ice cream at home, led by brands including Ben & Jerry's and Magnum, is on track to more than offset the collapse in its out of home ice cream revenue this year, which includes sales to restaurants and catering companies.The company has also benefited from some good luck. About two months before much of the world was thrust into coronavirus lockdowns, Ben & Jerry's launched Netflix & Chilll'd, a new peanut butter ice cream flavor with near-perfect messaging for 2020.Ben & Jerry's Netflix & Chilll'd is a peanut butter ice cream with sweet and salty pretzel swirls and fudge brownies.With the path of the pandemic still highly uncertain and some major economies going back into lockdown, Unilever now faces the daunting task of deciding what approach to take next year. Should it make more tubs of Carte d'Or for home consumption or Magnum singles to be eaten on the go? Plans for 2021 are "a work in progress," according to Sztehlo, who joined the ice cream business as an apprentice 35 years ago. He admits that it's been more difficult to come up with the next big idea over video calls, particularly without afternoon office tastings. Those casual gatherings ordinarily take place around a table in New York where 20 kilograms (44 pounds) of different sorts of ice cream are passed around, but they're on hold until further notice. "We've been missing the social, creativity, interactive moment. That's a bit more sterile," he said. The good news, he added, "is that people want to be happy," and they are looking for ways "to increase their moments of happiness at home." Netflix & Chilll'd anyone?

Laura He, CNN Business

2020-08-27 08:15:02

business

business

https://www.cnn.com/2020/08/27/business/costco-china-intl-hnk/index.html

Sea cucumbers are helping Costco clean up in China - CNN

When Costco opened its first store in mainland China last August, absolute chaos ensued.

business, Sea cucumbers are helping Costco clean up in China - CNN

Sea cucumbers are helping Costco clean up in China

When Costco opened its first store in mainland China last August, absolute chaos ensued. Shoppers lined up for hours and crawled inside before the gates were fully lifted. They wrestled for Birkin bags and rotisserie chickens. Traffic was paralyzed on the surrounding roads, with vehicles clogging up the streets to get into the parking lot. The Shanghai store, unable to handle the rush, closed early and apologized to customers on social media. One year later, the crowds are not quite as frenzied. But Costco (COST) is still flourishing in China — even during the coronavirus pandemic. The first Costco in China was packed on opening day in Shanghai last year.The company said in March that its Chinese store was one of the best performers globally. While the average Costco counts 68,000 households as members, the Shanghai store had nearly five times that amount, Costco said at the time. The retailer is doing so well, in fact, that it plans to open at least three more stores in the country over the next couple of years.Costco has good reason to expand in China, where a growing middle class is flocking to higher quality products and premium brands. Retail sales in China are expected to grow to more than $6 trillion by 2024, up 16% from 2019, according to estimates published by eMarketer in June. The research firm predicted China could overtake the United States as the world's largest retail market this year.Read MoreCostco's first China store was so popular it shut down traffic. But can it keep the buzz going?But Costco also faces risks. The pandemic has put a damper on consumer spending as unemployment rises and people grow more budget conscious. For the first seven months of the year, retail sales in China fell nearly 10% from a year earlier, government statistics showed, and eMarketer is expecting a 4% decline for the year. Competition from well-established players is also stiff. Sam's Club, a US warehouse chain owned by Walmart (WMT), has been operating in China for more than two decades and is accelerating its expansion in Shanghai, Zhejiang and Jiangsu provinces — the same regions Costco is eying for expansion.Some US firms that do business in China are also wary as tensions between the two countries escalate and Washington threatens to ban the use of Chinese tech by American companies. Still, Costco is optimistic about its chances."We have been successful in other countries, and believe our business will work well in China," Costco's chief financial officer Richard Galanti told CNN Business via email. "We typically open 2-3 locations in a country, and see how they operate over the first couple of years," he added. "We are off to a good start with our first opening last year."Hot items for 'foodaholics'Like in the United States, Costco has lured customers with big discounts and jumbo-sized products. Rotisserie chicken, boxes of croissants, muffins and Tiramisu cakes are all big hits.It's only $4.99. But Costco's rotisserie chicken comes at a huge price"To get a rotisserie chicken, one has to wait at least half an hour," a Weibo user wrote last December on the Chinese social media platform. "The three places at Costco you need to line up: cakes, pizzas and rotisserie chicken. But foodaholics think it's so worth it!"Xinmin Evening News, a government-owned newspaper in Shanghai, described the scramble for the chicken last August like this: "Everyone who snatched a rotisserie chicken is a winner at life!"People try to get a roast chicken at the first Costco outlet in China on opening day last August. Products unique to Chinese customers are enormously popular, too. On a call with investors in December, Galanti highlighted one top seller: sea cucumbers, which are considered to be a prized delicacy in China. In traditional Chinese medicine, the animal is said to have healing properties and can treat joint pain and arthritis. The cucumbers are usually sold dried and packaged, and can be eaten after being soaked in hot water for hours. A pack of 10 sold for 549.90 yuan ($80) at the Costco Shanghai store, though the retailer told CNN Business this week that it has stopped carrying the cucumbers right now. It intends to bring them back in October for the Mid-Autumn Festival, a major holiday in Asia when revelers admire what's believed to be the fullest moon of the year.Edible sea cucumbers, like these at a seafood store in Hong Kong, are considered to be a prized delicacy in China.The store also sparked a buying frenzy last September when it launched Moutai Flying Fairy, the flagship brand of baijiu sold by Chinese liquor maker Kweichow Moutai. Baijiu is a drink distilled from sorghum and rice that is immensely popular in China. Shoppers scrambled to pay 1,499 yuan ($217) for a half liter bottle of the spirit, its standard retail price. The cost of the liquor is typically much more elsewhere because of hoarding and speculation.Crowd controlThe popularity of some of its products also created an unexpected problem for Costco during the pandemic: the need to fend off crowds.The company, for example, suspended the sale of rotisserie chicken in February citing anti-virus considerations."This is to prevent customers from flocking together and lining up," the store said in a May statement. Costco has yet to start selling them again.Crowds were massive at Costco's opening in Shanghai last year.The store paused sales of croissants in late February, too, for similar reasons, Xinmin Evening News reported. Costco started selling croissants again in June. The huge crowds during the pandemic also raised concerns among government authorities. In late February, Shanghai regulators visited Costco for an inspection and warned the store to control its foot traffic. They told the store that fewer than 1,000 people could be inside at any given time, according to a government statement.Galanti admitted Costco felt "a little bit" of an impact from those limitations.But overall, "Covid did not impact our business in China in a meaningful way," he told CNN Business.Expansion is on the horizon, but there are challengesAfter the success of the Shanghai store, Costco is already working on plans to branch out in China. Galanti said the company wants to open another store in Shanghai and two more in the nearby cities of Suzhou and Hangzhou. The Shanghai and Suzhou stores are expected to open next year. Retail analysts say Costco has several factors working in its favor as it grows in China."Costco is appealing to China's middle class consumers, because they have a strong demand for high-quality products at competitive prices," said Michelle Huang, a Shanghai-based consumer food analyst at Rabobank. She added that Costco's in-house brands, such as Kirkland Signature, are trusted by customers because of their quality.And the price of the membership program is attractive to middle-class households. Costco's annual membership program, which accounts for the bulk of its profit, is cheaper in China — it costs 299 yuan ($42) per year compared to $60 in the United States. Costco is a warehouse club, which requires consumers to pay an annual fee to shop in its stores.How Kirkland Signature powers Costco's successCostco is also good at adapting to local customers in China, said Charles Chan, senior Asia retail analyst at IGD, a UK-based research firm focused on the food and grocery industry.Before the brick-and-mortar store opened in Shanghai, Costco sold goods for five years on Alibaba's e-commerce website, Tmall. The online sales helped Costco gain a better understanding of the Chinese market, Chan said.But as Costco expands, it could face more direct competition from long-established rivals.Sam's Club, for example, recently announced plans to open a flagship store in Shanghai next year. The US chain already has 26 stores in China and could have as many as 45 by the end of 2022. Sam's Club already has 26 stores in China, including this one Nantong. The company could have as many as 45 in the country by the end of 2022.The battle over physical stores is only part of the equation, too. Chan noted the need for Costco to beef up its presence online.Sam's Club parent Walmart has an alliance with JD.com. The Chinese company's delivery network helps Sam's Club fulfill online orders quickly in the markets its stores are in, Chan said. In Shanghai, for example, Sam's Club promises one-hour delivery to local customers who order online. Costco has yet to offer such delivery services through its Shanghai store. And while it still offers online sales and delivery through Tmall, the product selection is limited compared to what is available in the brick-and-mortar store.Chan said he would not be surprised if Costco spends more time bolstering its presence on WeChat, the Chinese super-app where Costco offers product recommendations and promotions. The company also has its own Costco China app. (WeChat, notably, has been threatened with a US ban that some worry could make it harder for American companies to do business in China.)"Adding new features such as home delivery would enable the retailer to be more aligned with its competitors," Chan said, adding that it would help Costco retain existing members and find new ones.

Alicia Wallace, CNN Business

2020-10-06 16:04:23

business

business

https://www.cnn.com/2020/10/06/business/wildfires-ravaging-cannabis/index.html

Wildfires are ravaging the West Coast cannabis industry - CNN

For cannabis operators who lost everything to the wildfires raging in the US West, there's little recourse and scant safety nets. Insurance companies, like banks, are reluctant to serve cannabis businesses because marijuana remains a federally illegal substance. And because of that federal illegality, cannabis enterprises don't qualify for federal disaster aid.

business, Wildfires are ravaging the West Coast cannabis industry - CNN

'No more tears left:' How wildfires are ravaging the West Coast cannabis industry

San Francisco (CNN Business)To an outsider's eye, Canyon Cannabis might've appeared like a small-town, rinky-dink pot shop. Housed in an unassuming building off a scenic highway, it was the lone dispensary in the 500-person city of Gates, Oregon. Inside, though, visitors were greeted with an explosion of color and sound. A vintage Pioneer sound system bathed the room in music — Jimi Hendrix, Stevie Wonder, old ska and blues — from owner Thorin Thacker's personal collection of 3,000 vinyl records he kept on site. Sometimes the soundtrack was provided by Thacker himself, a musician and Latin dance instructor, who would pick on an 1882 Fairbanks & Cole banjo or tinker away at the century-old piano placed in the lobby.Thorin Thacker, owner of Canyon Cannabis, sings and picks at a banjo on April 11, 2018, at the Gates, Oregon, dispensary. Canyon Cannabis was destroyed by the Beachie Creek Fire on Sept. 8, 2020.Beyond the experience, the dispensary's curated selection of craft cannabis and hand-blown glass pipes from local artists helped attract a loyal clientele that included Portlanders from 80 miles away. Read MoreNow it's all gone. On Sept. 8, the Beachie Creek Fire tore through the canyon, devastating Gates and leveling Canyon Cannabis. The fire burned so hot, it turned the safe to Swiss cheese, disintegrating the money left inside. The locally made glass pipes and bongs melted into a clump of art. Metal scraps were all that remained of the banjo and piano."I'm just all cried out," Thacker said. "I've got no more tears left."Canyon Cannabis is one of thousands of pioneers that got in on a fast-growing, multibillion-dollar industry on the West Coast. The recent wildfires underscore the unique hurdles that cannabis businesses encounter in trying to survive.For operators who lost everything to the deadly wildfires, there's little recourse and only the shakiest of safety nets. Insurance companies, like banks, are reluctant to serve cannabis businesses because marijuana remains a federally illegal substance. And because of that illicit status, the enterprises don't qualify for federal disaster aid. Thacker estimates his losses at more than $250,000. His inventory could not be insured. After pouring his heart and soul into his enterprise, and paying almost $500,000 in local, state and federal taxes in nearly three-and-a-half years of business, Thacker's back to square one. "It just doesn't seem to be fair that after we provide so much tax income that we don't get to participate in any of the reasons you rely on the government to help you out," Thacker said. And even for operators whose cannabis businesses and plants were spared, the wildfires still present a mess of potential issues such as smoke damage, contamination, smaller buds, stressed out plants and end products that might not pass regulatory or consumer muster. The burnt remains of Canyon Cannabis' sign. The Gates, Oregon, dispensary was destroyed Sept. 8 by the Beachie Creek Fire."We work all year for this period of time, when we're working around the clock to bring in a successful harvest," said Nathan Howard, co-founder and president of East Fork Cultivars, which specializes in breeding and growing CBD-rich, adult-use cannabis and hemp. "Most of our success in 2021 is determined by how successful we are during these six weeks, the end of September and October."For several weeks now, the situation has been touch-and-go, he said. The 155,000-acre Slater Fire has surrounded much of Takilma, the small Oregon community home to East Fork Cultivars' 33 acres. Flames have come within a mile. Howard and a small crew have stayed back to tend to the plants as ash and charred leaves rained down from above. They put out spot fires that cropped up nearby, and they scraped and dug down to the mineral soil to create strips of fire lines to serve as barriers. "The fire burnt right up to the fire line and no further," he said. Still, Howard said, "It's hard to celebrate or feel good because our neighboring towns, Phoenix, Talent, Ashland, Detroit, they're either all gone or mostly gone."The remains of Canyon Cannabis, a Gates, Oregon, dispensary that was destroyed Sept. 8 by the Beachie Creek Fire.East Fork Cultivars has been through fire seasons before, so Howard remains optimistic that the product the farm has been growing won't suffer ill effects.However, the farm lost two weeks of full operations and is now behind the ball on the all-too-critical harvest season. One bad year might not break most farmers, but it could spell ruin for East Fork Cultivars and other cannabis cultivators that don't have access to crop insurance or federal aid, he said. 'Stillness in the air'On Sept. 9, as a red glow filled the sky and ash fell like a light snow, Tina Gordon feared the worst.The historically massive August Complex Fire shredding its way across Northern California was heading toward Gordon's Moon Made Farms, a 40-acre cannabis cultivation site in Humboldt County, California."There was a stillness in the air that was absolutely terrifying," Gordon said. "No birds. No wildlife. Everything had taken cover."East Fork Cultivars, an adult-use cannabis and hemp cultivation business in Takilma, Oregon. The Slater Fire surrounded Takilma, but hasn't caused fire damage.Growing cannabis, especially outdoors, is an incredibly costly and risky affair, especially when those operations can't easily be insured, but Gordon said her primary goal was to protect human and animal life while also preserving the possibility for recovery. Gordon opted to follow the mandatory evacuations and grabbed some cannabis seeds as she left. "The stuff doesn't matter, the vehicles don't matter, the infrastructure really doesn't matter," she said. "It's the land and the genetics." Gordon returned nine days later, after the evacuation orders had lifted, to find the farm had been mostly spared. They lost some of the vegetables that weren't on automatic irrigation, but the cannabis plants remained.The focus now has been on cleaning the plants, preparing them for harvesting and testing to ensure the products are safe and free from impurities, she said. Concern has risen among some cultivators in California about the potential damage caused by the heat, ash and smoke, said Jill Ellsworth, founder and chief executive officer of Willow Industries, which specializes in decontamination and remediation for cannabis flower and harvested plant material.She said some clients reported instances of smoke damage, premature flowering and other factors that can lower the quality and potency of cannabis or even ruin entire crops.If the environmental stress results in smaller buds and lower yields, that could lead to losses up and down the supply chain, Ellsworth said. Complete lossesIn Oregon, 20 licensed cannabis businesses had operations in wildfire burn zones and 12 were complete losses, according to the Oregon Liquor Control Commission, which oversees the state's cannabis industry. "But we suspect the impact is greater than what we can find on a [Geographic Information System] map," said Mark Pettinger, spokesman for the OLCC's recreational marijuana program.A cast iron plate and piano wire are the remnants of a century old piano once located in the Canyon Cannabis dispensary in Gates, Oregon. Canyon Cannabis was destroyed by the Beachie Creek Fire on Sept. 8, 2020.In addition to the destroyed operations, other cannabis businesses have reported partial crop loss and damages to infrastructure and irrigation systems, according to OLCC.The placement of the Oregon wildfires has been particularly challenging for hemp growers as the fires have eaten into one of the nation's most productive regions for the crop.As of Sept. 16, about 17% of the state's hemp cultivation sites were facing imminent danger from wildfires, according to an analysis from Hemp Benchmarks, a provider of data and research for the industry.The smoke, ash and other fire-generated debris pose a significant contamination risk to hemp crops, especially those that will supply the smokable hemp market, according to the report. Some crops were damaged by the high winds that accelerated the deadly blazes and others suffered water loss as power outages interrupted irrigation systems, Hemp Benchmarks found. "Hemp [grown for CBD] is a pretty high-cost crop to farm; people are putting a decent amount of money in per acre relative to growing corn or soybeans," Adam Koh, Hemp Benchmarks' editorial director, told CNN Business. "That's sort of an extra kick in the pants right there."Melted clumps of what were locally made glass pipes and bongs sold at Canyon Cannabis dispensary in Gates, Oregon. Canyon Cannabis was destroyed by the Beachie Creek Fire on Sept. 8, 2020.Last month, Oregon Senator Ron Wyden and other Oregon Congress members introduced a bill that would allow state-legal cannabis businesses to qualify for disaster recovery programs. Like most cannabis-centric legislation, the bill is expected to face stiff opposition in the Republican-led Senate.Canyon Cannabis' Thacker said he's hopeful for legislation of that nature, but "I'm certainly not going to hold my breath."For now, he's relying on a GoFundMe campaign to help generate funds to rebuild Canyon Cannabis either in Gates or the nearby Mill City, where he once served as mayor. "That's a lot of magic to recreate," Thacker said. "I know we can do it, but it's not going to be easy."

Emiko Jozuka, CNN Business

2020-08-02 00:02:20

business

business

https://www.cnn.com/2020/08/01/business/japan-pocari-sweat-branding-hnk-intl-dst/index.html

Pocari Sweat: Inside the meteoric rise of Asia's answer to Gatorade - CNN

Launched in 1980, Pocari Sweat is a force in the sports beverage market across Asia and the Middle East. But while the beverage turns 40 this year, it's virtually unheard of in the West.

business, Pocari Sweat: Inside the meteoric rise of Asia's answer to Gatorade - CNN

The 'Sweat' you drink: Inside the meteoric rise of Asia's answer to Gatorade

In the 1989 US blockbuster "Back to the Future II," time traveler Marty McFly orders a Pepsi Perfect at Hill Valley's futuristic Cafe 80s. It was an iconic moment of product placement. But if you look very closely at a different scene showing future McFly as he video-conferences a co-worker in 2015, another brand makes a cameo appearance.That drink was called Pocari Sweat. And despite its name — unappetizing to native English speakers — it's a well-known Japanese sports drink across Asia and the Middle East. If you look very closely, you'll see a small blue and white Pocari Sweat can in the center of this frame.Though the film's creators didn't have a product placement deal with Pocari Sweat, they had given their art department a general directive to include Japanese elements in the scenes depicting 2015, says Bob Gale, the producer and writer of "Back to the Future II.""In the late '80s, Japanese companies were buying a lot of American companies, notably Sony purchasing Columbia Pictures and Panasonic buying Universal. Japanese video games were the market leaders, Japanese cars were outselling American cars, and we thought this trend would continue well into the future," says Gale.Read MoreThe Japanese powerhouse of the '80s didn't last, but Pocari went on to become a force in the sports beverage market.Last year, 270 million bottles were distributed across more than 20 countries and regions. Around the same number were distributed in Japan, according to Otsuka Pharmaceutical, the Japanese company that makes it. Amid the pandemic, the company donated more than 1.2 million bottles to hospitals and governments across its markets. Launched in 1980, Pocari Sweat was inspired by the rehydrating effects of an IV solution. The ingredients include water, sugar, citric acid, magnesium, calcium and sodium. Pocari replenishes water and electrolytes — a set of minerals your body needs to function — lost through sweat. The beverage is to many Asians what Gatorade is to Americans, and Lucozade is to the British.But, the brand, which turns 40 this year, is virtually unheard of in the West. A drink that mimics sweat Four Pocari Sweat facts 1980 Pocari Sweat is launched in Japan. 1982 Otsuka starts exporting Pocari Sweat to its first overseas markets in Hong Kong and Taiwan. 1990s Pocari Sweat becomes the first non-alcoholic drink in Japan to hit a cumulative shipment value of over $1 billion. 2020 Otsuka establishes a health beverage subsidiary in Mexico, the country that sparked the idea for Pocari Sweat. Source: Otsuka Pharmaceutical Pocari's story starts with Rokuro Harima, an Otsuka employee who got food poisoning during a business trip to Mexico in the 1970s. At hospital, doctors told Harima to replenish his energy with fizzy soda drinks. But when Harima spotted a doctor drinking from a pouch of IV solution to rehydrate himself after performing surgery, he had an idea.Otsuka had also been producing IV solutions for hospitals since 1946. Harima put two and two together: He wanted to create a tasty, drinkable IV. In the 1960s, he had helped fine-tune the flavor of Otsuka's "Oronamin C," a carbonated nutritional drink targeted at weary businessmen needing a midday pick-me-up. Now the "king of taste," as his peers called him, had set his sights on creating a new market in Japan.Gatorade had been sold in the US since the 1960s. But in Japan in the 1970s, sports drinks were uncharted territory. Non-alcoholic carbonated beverages, such as Coca-Cola and Mitsuya Cider, and orange and apple juices dominated the domestic market, according to the Japan Soft Drink Association (JSDA). But as Japanese white-collar workers powered Japan's economic boom, households gained spending power. People became more health-conscious and Coke sales waned, according to Mark Pendergrast, the author of "God, Country and Coca-Cola." Harima got to work. Back in the laboratory, he and a team of researchers had discovered that the concentration of sweat was different for people doing sport compared to those just going about their day. They wanted a drink — with properties similar to sweat — that could hydrate people whatever they were doing. Researchers developed dozens of prototypes, but they all tasted too bitter. The breakthrough came when they added a dash of citrus powder juice to their translucent solution, eventually refining the formula to two samples with differing sugar levels. Researchers put those solutions to the test by climbing a mountain in Tokushima prefecture in southern Japan, says Jeffrey Gilbert, a spokesman at Otsuka. They concluded that the less sugary version went better with exercise.The formula for Pocari Sweat was born. All they needed was a name and a logo. What's in a name?With its literal nod to perspiration, Pocari Sweat's name has bemused many native English speakers. The first part of its name was chosen for its sound. "Pocari" comes off as vaguely European and is easy to pronounce but has no meaning, Gilbert says. As Japan absorbed Western influences in the post-World War II years, European languages were seen as chic and exotic. English slogans adorned everything from billboards to T-shirts, lunch boxes and pencil cases. A poster for the first Pocari Sweat can launched in Japan in 1980.The word "sweat," on the other hand, conveys the drink's practical purpose. Back in the 1980s, most carbonated and soft drinks were sold in bold red, orange and white containers, according to the JSDA. Yet given the high turnover rate in the Japanese beverage market, Akihiko Otsuka — then president of Otsuka Pharmaceutical — knew he had to make a statement. Reminiscent of breaking ocean waves, Pocari's cool blue and white cover was an outlier in terms of design. It was a risk engineered to catch the eye of curious consumers.Creating a new marketPocari Sweat was not a smash hit when it landed in Japanese stores in 1980. "Because this drink category didn't exist in Japan, people didn't know what to make of it," says Gilbert. It didn't have Coke's dark coloring and signature sweet fizz. Nor was it like Suntory's energy drink Regain, which appealed to businessmen prepared to work 24-hour shifts. Instead, Pocari Sweat promised to keep people hydrated.Early marketing campaigns focused on the dangers of dehydration. Television commercials and posters targeted everyone from people with hangovers to sports enthusiasts. For several years, the company handed out free samples at saunas and sporting events. Salespeople went door-to-door to promote it."Back then, Japan didn't have as many supermarkets or vending machines as it does today. Shoppers bought drinks at mom and pop stores, so Otsuka made an effort to reach out to people and familiarize them with Pocari's taste and function," says Kiyomi Kai, a spokeswoman at the JSDA.When Pocari Sweat first launched in Japan, it struggled to win over consumers.Despite the struggle to launch, Gilbert says giving up wasn't an option. "Otsuka is very, very sticky and persistent in what it does on both the drug and consumer side — it goes in deep and stays there," he says.Eventually, its efforts paid off. In the mid-1990s, Pocari Sweat became Japan's first domestically produced non-alcoholic drink to hit a cumulative shipment value of over $1 billion.Sold primarily in hot countries across Asia and the Middle East, Gilbert says the hydrating message behind Pocari products — which now include powder and jelly — speak to those markets. Private vendors are selling the drink in Western nations, too. But Otsuka never dreamed of dominating the West.Looking to Asia By 1983, Gatorade held 86.5% of the sports beverage market in the United States. In Otsuka's eyes, Western markets were saturated, says Gilbert.Otsuka had exported its IV solutions to Japan's neighbors since the 1960s, so it made sense to ship them to locations near Japan rather than to send them via air freight to America. Besides, the company didn't want to pay for expensive supermarket shelf space in the US. Pocari Sweat was launched in Japan as the economy boomed. Otsuka predicted that the level of economic growth would spread across Asia. By the 1980s, anti-WWII sentiments toward Japan, which had colonized many parts of Asia, had gradually waned in the region. Japan was now seen as a viable business partner.The drink hit shelves in Hong Kong and Taiwan in 1982 and in Singapore, Bahrain, Oman and Saudi Arabia the following year, along with a slew of other markets over the next decades. The strategy of investing in Asian and Gulf markets for the long haul bore dividends. Before the coronavirus pandemic hit, the Asian economic zone — spanning the Arabian Peninsula to Australia — represented 50% of global GDP and two-thirds of global economic growth, according to Parag Khanna, the author of "The future is Asian."The region's spending power was growing, and Pocari Sweat was well-placed to ride the wave.Overcoming cultural hurdlesOtsuka saw huge potential in Indonesia, a country of 273 million people, which is now the company's biggest market outside Japan. But Otsuka knew it had to rethink its marketing strategy for the predominantly Muslim nation. For example, it didn't make sense to advertise Pocari Sweat to Indonesians as a means to rehydrate after a bath or when they had a hangover, as they did in Japan and the Philippines. In Indonesia, people take showers instead of baths. And, as Islam forbids alcohol, there's no Indonesian word for "hangover," says Yoshihiro Bando, the president director of Otsuka's Indonesian branch, in a 2015 YouTube video.Otsuka focused on carving out a niche in the healthcare and sporting community. But even then, the drink only took off after medics started using it as an emergency tonic. #PocariSweat for HANGOVER. Aim for #BetterHealth. Choose POCARI SWEAT. Available in stores nationwide. pic.twitter.com/jW5o8MMHRF— Pocari Sweat PH (@PocariSweatPH) September 5, 2013 In 2010, a dengue outbreak swept Indonesia. That year, the incidence rate spiked to over 80 people per 100,000 compared to 60 the year before.Symptoms for dengue include vomiting, high fever and internal bleeding, in severe cases. Patients need to stay hydrated, as that allows platelets — tiny blood cells that help your body form clots to stop bleeding — to mature. Spotting an opportunity in the market, Otsuka partnered with healthcare experts and government officials to promote Pocari Sweat's hydrating powers. Healthcare workers started recommending it to their patients to prevent dehydration, according to researchers from Telkom University in Indonesia. As a vital hydration booster, Pocari became known as a "form of first aid" — deployed in the fight against everything from dengue fever to diarrhea. But it didn't take long for Pocari's image to shapeshift. Pop culture meets ion supplyFrom 2016, running became a popular activity among Indonesians, according to Jakarta-based advertising agency Olrange. It partnered with Otsuka between 2015 and 2018 to produce a series of campaigns to expand Pocari Sweat's appeal. Along with sports campaigns dubbed #SafeRunning and Born to Sweat, Olrange leveraged Japan's pop culture to attract younger consumers.In 2018, Olrange launched a series of online videos — dubbed "the most kawaii (cute) web series in Indonesia" — featuring Haruka Nakagawa and Yukari Sasou, two Japanese Pocari Sweat ambassadors and celebrities popular in Indonesia.It "captivated" Indonesian youngsters, says Stephanie Putri Fajar, an account director at Olrange. "We gave them (Nakagawa and Sasou) a platform to portray the active life of the youth who lose ions (sweat) through a lighthearted six-part friendship and adventure series on YouTube called 'Onigiri The Series,'" says Putri Fajar. The videos shows the young friends sharing rice balls, going to school, hanging out and experiencing teenage life as peppy tunes play in the background. That call to youngsters is driving Otsuka's strategy as it fosters markets at home and abroad, according to Tomomi Fujikawa, an analyst at Euromonitor International.Moonshot drinkFour decades ago, there were only five types of soft drinks — a category that JSDA says includes carbonated beverages as well as teas and mineral water — competing for space in Japan's beverage market. But the category has expanded a lot since then. In 2019 alone, there were 6,491 types of soft drinks on sale in Japan, and companies introduced 1,074 new products, according to the JSDA. All of them vie for coveted space in the nation's convenience stores and roughly 5 million vending machines, says Kai, the JSDA spokeswoman.＼#初音ミク が #ポカリスエット アンバサダーに就任！／日本の暑い夏を乗り切るための情報を全世界の皆さんに発信するため、初音ミクが #ポカリスエットアンバサダー に就任！スポーツで一層アツくなる2020年の夏を、#ポカリ と一緒に元気に楽しみましょう！#MEIKO #ミライアカリ #富士葵 #YuNi pic.twitter.com/Xksk3G1ocV— ポカリスエット【公式】 (@pocarisweat_jp) December 20, 2019 In Japan, Pocari Sweat is stocked in convenience stores, vending machines, supermarkets and drug stores. While ubiquity helps, Otsuka has worked hard to make the brand relevant, says Roy Larke, a marketing professor at the Waikato University in New Zealand.For instance, in 2020, Otsuka recruited virtual pop star Hatsune Miku as a brand ambassador ahead of the now-postponed Summer Olympics, to appeal to a new generation of young people.A Pocari Sweat store in Hong Kong. That cycle of refreshing Pocari Sweat but sticking by its signature blue-and-white look and message of hydration, has allowed the brand to outlast its competitors and thrive."Some brands are designed specifically for the convenience store market, so they have a three-to-six month lifespan for a particular recipe, but Pocari Sweat isn't like that," says Larke, who is also the editor of intelligence website JapanConsuming. "It's an enduring long-term brand that Otsuka has really developed over the last 50 years, and today it's that endurance and long history in Japan that has kept it going."CNN's Yoko Wakatsuki contributed to this report from Tokyo.

Julie Zaugg, CNN Business

2020-09-11 23:53:40

business

business

https://www.cnn.com/2020/09/11/business/malaysia-top-glove-forced-labor-dst-intl-hnk/index.html

The world's top suppliers of disposable gloves are thriving because of the Covid-19 pandemic. Their workers aren't - CNN

Malaysia's biggest glove maker, Top Glove, is racing to address allegations of forced labor in its factories. Labor rights activists say the problems blighting the industry aren't easily fixed.

business, The world's top suppliers of disposable gloves are thriving because of the Covid-19 pandemic. Their workers aren't - CNN

The world's top suppliers of disposable gloves are thriving because of the pandemic. Their workers aren't

White molds wearing disposable gloves whizz by on a conveyor belt in a promotional video for the world's biggest glove maker, Top Glove. "Gloves can keep us out of harm's way, wherever we may be and whatever we may be doing," the narrator says, his voice booming over the company's logo and its motto, "Top quality, top efficiency." Demand for disposable gloves — the kind often associated with sterile hospital rooms — has surged during the coronavirus pandemic as health care workers rush to secure the supplies they need to treat the disease and protect themselves. The Malaysia-based Top Glove and its local rivals have benefited enormously from that need: Some 60% of the world's glove supply comes from Malaysia, according to the Malaysian Rubber Glove Manufacturers Association (MARGMA). More than a third are exported to the United States, which for months has led the world in coronavirus cases and deaths. But with extra demand comes renewed scrutiny of how these Malaysian companies treat their workers, particularly foreign staff recruited from neighboring countries. Read MoreLabor rights activists who spoke to CNN Business said that practices reported by former workers contain elements of forced labor. Some authorities have taken note of such concerns, putting pressure on Top Glove and other manufacturers to ensure their workers are treated well. In July, for example, the US Customs and Border Protection (CBP) agency barred products made by Top Glove and one of its subsidiaries, TG Medical, from being distributed in the country after finding "reasonable evidence" that the companies were using forced labor, according to an emailed statement. It said the evidence revealed alleged instances of "debt bondage, excessive overtime, retention of identification documents, and abusive working and living conditions."Top Glove said in August that it was making good progress with authorities to resolve the issues. In a statement, the company said it had started reimbursing the recruitment fees foreign workers paid to agents who the offered them the job. Top Glove says it expects to repay a total of 53 million Malaysian ringgit ($12.7 million). A spokeswoman told CNN Friday that upgrades to foreign workers' accommodation, as requested by US authorities, had been completed. But labor rights activists say the problems blighting Malaysia's glove industry aren't easily fixed. Concerns remain about the treatment of foreign workers in a rapidly growing industry, some of whom are enticed with the promise of high-paying jobs but are left saddled with debt. Gloves on the production line at Top Glove's factory in Shah Alam on the outskirts of Kuala Lumpur, August 26, 2020.World's glove factory In recent decades Malaysia has emerged as a leading supplier of disposable gloves, due to its vast rubber plantations and government support for an industry that generates billions of dollars in sales each year. Revenue from glove exports is expected to reach 21.8 billion Malaysian ringgit ($5.2 billion) in 2020, according to MARGMA, as Covid-19 drives demand for Malaysian-made gloves up around 30%, from 170 billion to 220 billion pieces. Market leader Top Glove says it produces around a quarter of the gloves used worldwide in its 46 factories, mostly in Malaysia. On June 11, the company recorded its best-ever quarterly net profit of 350 million Malaysian ringgit ($84 million), more than four times the figure it brought in during the same quarter last year. The firm said monthly sales orders surged 180% due to the rise in demand for rubber gloves during the coronavirus pandemic. Since the beginning of the year, Top Glove's share price has rocketed fivefold on the Bursa Malaysia. Top Glove founder Lim Wee Chai was worth $2.5 billion in June, according to Bloomberg calculations that excluded the value of his pledged shares in the company. Behind Top Glove, other large Malaysian players include Hartalega and Kossan. Together, the three companies employ nearly 34,000 workers. Most of them have been hired from abroad, with a majority coming from Indonesia, Bangladesh, Nepal and Myanmar, according to several experts interviewed by CNN Business. "Most Malaysian workers don't want to do the poorly paid, hard and dangerous work offered in these factories," said Bent Gehrt, from the Workers' Rights Consortium, a labor rights NGO based in Washington D.C. An employee monitors latex gloves on an automated production line at a Top Glove factory, February 18, 2020.To hire foreign laborers, Malaysian rubber glove companies rely on recruitment agencies and subagents in the workers' home countries, with whom they sign contracts containing hiring targets, sometimes through another layer of intermediary agencies located in Malaysia, according to Andy Hall, a labor rights activist. These intermediaries get paid little or nothing by employers for their services and so they charge the workers large sums to secure them passports, work visas, security clearance, medical exams and flights, he said. Bangladeshis bear the highest costs (between $2,000 and $5,000), followed by Nepalis ($800 to $2,000) and workers from Myanmar ($800 to $1,200), according to company audits and interviews with workers from Top Glove, Hartalega and Kossan. Former Top Glove employee Taha, whose name has been changed to protect his identity, said he was charged 165,000 Nepali rupees ($1,390) by an agent who came looking for workers in his Nepali village in 2013. "I had to take out a loan with a very high interest rate to pay for this fee," said the 27-year-old worker.Seven years later he still hasn't repaid all of it, he said. His recruitment agency, Trust Nepal, told CNN Business that prior to January 2015 workers had to pay for their flights and passport-related costs. But the company said it had never collected such a large sum from a single worker. Taha says he paid some of the money to the subagent who came to recruit him in his village.Experts interviewed by CNN Business said these practices contain elements of forced labor as defined by the International Labour Organization such as abuse of vulnerability, deception in recruitment, payment of recruitment fees and abusive working conditions. Top Glove, Hartalega and Kossan say they've taken measures to prevent the exploitation of workers by recruiters. In recent years, all three companies have introduced "zero-cost recruitment" policies, meaning the agencies in the workers' home countries are not allowed to charge them fees related to their employment — the companies cover all their costs. Top Glove records statements from workers in their home country and upon arrival in Malaysia to make sure they are not asked to pay fees, said a spokeswoman. Hartalega workers are briefed about the company's zero-cost recruitment policy before they leave home and are asked upon arrival if they've had to pay anything. The same question is asked three months into the job, the company said. In its annual report, Kossan also said that it interviews employees multiple times before and after their arrival in Malaysia to determine if they've paid recruitment fees. If they have, they're refunded. "[We] will not hesitate to sever ties with unscrupulous agencies that exploit our workers," the report added.Foreign recruiters In practice, zero-cost recruitment policies can be poorly enforced, and some workers are still paying fees, especially to subagents, according to experts and industry insiders interviewed by CNN Business. A Nepali auditor, who wishes to stay anonymous for fear of reprisal, told CNN Business he had interviewed several workers hired by Top Glove through recruitment company Trust Nepal, who had paid in excess of 100,000 Nepali rupees ($843) in recruitment fees, as recently as March of this year. "The money was handed over in cash to a subagent, so as to leave no paper trail," he said. Recruitment fees coupled with low wages effectively put the workers in a situation of debt bondage, where they can't make enough money to repay their debts and leave their jobs, according to Hall, the rights activist. When an agent came to a village in a remote part of Nepal in 2014, offering work for young men willing to move to Malaysia, Daarul immediately signed up. "I was told I would be working in a supermarket and earning a good salary," said Daarul, who is using an alias because he fears losing his job. "There is often a single bathroom and toilet for up to 25 workers, so they have to get up 2 or 3 hours before work to queue up for these facilities"Andy Hall, a labor rights activist Daarul, a former subsistence farmer, says he was asked to pay 120,000 Nepalese rupees ($1,011) in agency fees to take the job. But when he landed in Kuala Lumpur, he was told he'd be working in a Kossan glove factory for a lower wage than promised. "I felt tricked," he said. Six years later, he's still working in the factory and dreams of going home but can't afford to. "I work very hard every month, but my salary is still not enough to support my family, let alone pay for a return flight," he said. Daarul says every month his employer, Kossan, provides him with a 150 Malaysian ringgit ($36) advance on the following month's salary, as he has run out of money. "I feel trapped in this job," he sighs. CNN Business contacted Daarul's agency in Nepal but did not receive a reply. Kossan did not respond to requests for comment.Workers like Taha and Daarul are paid Malaysia's monthly minimum wage, which is now 1,200 Malaysian ringgit ($287) in 57 major towns after an increase of 100 ringgit in 2020. They can earn more with overtime, according to pay slips seen by CNN Business. But workers at all three of the major glove companies said in some instances their wages are deducted.Reasons could include being caught smoking, not meeting daily quotas, or failing to wear protective equipment, according to an auditor who requested to remain anonymous for fear of reprisals, and who has interviewed dozens of workers. When asked if they deduct fines from workers' salaries, Top Glove and Hartalega said they do not withhold employees' wages or impose penalties. Kossan did not reply. Injuries and deaths The work itself is strenuous and dangerous, say some observers. Temperatures near the ovens used to heat the glove-shaped molds once they have been dipped into rubber can reach 60 degrees Celsius (140 Fahrenheit), according to several experts. At Kossan, auditors observed a lack of fans or ventilation in extremely hot areas, according to an unredacted audit of a Kossan factory conducted in June 2019. The noise levels were also excessive, with several workers suffering from hearing impairment, according to the audit. Workers are also exposed to dangerous chemicals, said K. Veeriah, from the Malaysian Trades Union Congress. As part of the production process, the gloves need to be dipped into tanks containing hazardous acids and chlorine, he said. Activists are urging big brands to eradicate traces of human rights abuse in Xinjiang from their supply chainsIn the past, several Top Glove workers have suffered from chemical burns, according to photos purportedly taken in 2019 and seen by CNN Business. "The workers often don't have any protective equipment, or they can't bear to wear it because it is too hot in the factory," said Hall, the labor rights activist.In October 2018, a Top Glove Bangladeshi worker lost an arm after falling into a stone crushing machine, according to a video of the accident seen by CNN Business. He told CNN Business he had started working at the factory nine months earlier, after paying 330,000 Bangladeshi takas (around $3,900) to a recruitment agency in Bangladesh. After the accident, he was awarded 52,000 Malaysian ringgit ($12,477) in compensation. Around half of that was donated by former co-workers, according to a letter of acknowledgment seen by CNN Business. Due to the accident, he is no longer able to work and make a living, he said. The Top Glove spokeswoman said the company "regretted the unfortunate accident where our worker lost an arm." But she said he had not followed safety protocols. The worker said he was trying to free an object stuck in the stone crushing machine at the time of the incident. The spokeswoman said chemical burns can occur when there is "improper handling of chemicals or if workers do not wear the protective equipment provided." The spokeswoman acknowledged that temperatures can reach 60 degrees Celsius (140 Fahrenheit) in certain parts of the factories, but she said the workers are not stationed in the immediate vicinity of ovens and are provided with cool air blowers. From this month, Malaysian companies can be fined for not providing adequate accommodation for foreign workers.Workers from all three companies described abusive behavior by supervisors. "We were treated like dogs," said former Top Glove worker Taha. "Supervisors would shout at us and call us names if we made a mistake or didn't meet the targets." One incident, captured on closed circuit television in August 2019, shows a Top Glove supervisor swatting a worker's face with paper and then grabbing him by the collar. Top Glove admitted the incident took place but called it "an isolated case" and said the supervisor involved was dismissed. Auditors also found evidence of physical abuse at Kossan and Hartalega factories. Workers at Hartalega reported multiple instances of beatings, including some delivered away from CCTV cameras, according to the unredacted 2019 audit. The Hartalega spokeswoman said the company does not tolerate any form of abuse, whether verbal, physical or mental and has a code of conduct which prohibits this. A handful of abuse cases did occur, she said, adding that strict disciplinary action was promptly taken. In its 2019 annual report, Kossan says workers have easy access to grievance channels to report alleged abuses. For workers, life can be just as hard off the factory floor. Auditors who visited a Kossan hostel described rooms accommodating 48 people with piles of rubbish, razor blades and broken furniture strewn everywhere. "There is often a single bathroom and toilet for up to 25 workers, so they have to get up 2 or 3 hours before work to queue up for these facilities," said Hall, who visited numerous dorms last year, in the course of his own research. "I was told I would be working in a supermarket and earning a good salary ... I feel trapped in this job."Daarul, a former subsistence farmer At one Kossan factory, workers are housed in stacked containers and the heat gets unbearable, according to a source with knowledge of the company's housing arrangements. Kossan did not reply to requests for comment, but its annual report states that the welfare of its workers "remains a foremost priority." Top Glove and Hartalega both said they go beyond Malaysian government guidelines. In its 2020 annual report, Hartalega said it provides free leisure and sporting activities and daily shuttle buses to town. It has recently invested $21.5 million to build a new accommodation complex for its workers, the spokeswoman added. In a statement in late August, Top Glove said it "continues to enhance its migrant workers' working and living environment and facilities."Malaysia has recently updated its laws to set minimum standards for accommodation provided to foreign workers. Under the rules, each worker should have a sleeping area of at least three square meters. And, at least one toilet and bathroom should be provided for every 15 employees. From September, employers who don't meet basic standards can be fined 50,000 Malaysian ringgit or around $12,000. Supplies to the US The Malaysian rubber glove industry relies heavily on the US market, which absorbs 36% of its products, according to MARGMA.Between May and November 2019, Top Glove, Kossan and Hartalega sent supplies to more than 60 American buyers, according to US customs data. The three companies sent a total of 629 shipments representing 10,175 metric tons of goods to the United States during the six-month period.Among the buyers were large medical suppliers like Owens & Minor, Dyad Medical Sourcing, Medline Industries and Cardinal Health, which between them provide disposable gloves to hospitals, medical practices, hospices, labs and pharmacies.The industry also deals with large dental suppliers, such as Benco Dental, Henry Schein and PureLife Dental, and providers of industrial safety equipment such as Honeywell and MSC Industrial Supply. Other buyers catered to the packing and shipping, janitorial or food industry. A handful of Top Glove buyers supplied beauty salons. CNN Business reached out to Top Glove, Kossan and Hartalega's 24 largest buyers over the six-month period examined but only received four replies. Honeywell has done a limited amount of business with Kossan and the primary market for these gloves is outside of the US, a spokesman told CNN Business. The company launched an investigation into its Malaysian supplier following CNN's questions last November and confirmed last month that it was still ongoing.Owens & Minor, which buys gloves from Hartalega and Kossan, makes great effort to ensure its suppliers operate in an ethical manner and regularly works with auditors to monitor them, a spokeswoman said. Henry Schein and Medline said their supplier codes of conduct prohibit the use of forced labor and they take all allegations seriously.Industry attentionTop Glove isn't the only Malaysian glove maker whose work practices have been recently scrutinized by US authorities. For several months from the end of last September, the CBP banned imports from WRP Asia Pacific, a smaller supplier, after receiving information that the company may be using forced labor. US halts import of goods suspected to have been made with forced laborThat order sent Malaysia's rubber glove industry into a frenzy. Malaysia's Minister of Human Resources, M Kula Segaran, convened a town hall meeting with all the big rubber glove companies, including Top Glove, Kossan and Hartalega, according to minutes from the meeting provided to CNN Business. Kula promised the Employment Act would be amended to incorporate a section on forced labor and that social audits would become compulsory from 2021. "There is a lot of compliance to be done and there is a lot of work to be carried out to ensure worker's rights, accommodation and general welfare is protected," MARGMA said in a statement released on October 2 of last year, a day after the WRP ban was announced. The ban was lifted in March after the US Customs and Border Protection ascertained that WRP Asia Pacific was no longer using forced labor to produce gloves, according to a statement. In July, the company said it had begun to reimburse workers who had paid "unethical recruitment fees."Other industry members are also starting to examine their work practices. On August 10, Hartalega announced that it would start reimbursing 40 million Malaysian ringgit ($9.6 million) in recruitment fees to its workers by the end of 2020. Countries once praised for their handling of coronavirus are struggling to deal with new outbreaksTop Glove said this week it had submitted an independent auditor's report to US Customs and Border Protection and hopes for an "expeditious upliftment" of the ban. But Hall, the labor rights activist, says the broader industry needs to do much more to improve the working conditions of foreign employees. "Many of the serious forced labor indicators identified in the 2019 audits remain systematic within the workplaces of the Malaysian rubber gloves industry," he said. And the companies' remedial actions don't go far enough, he added. ''Workers hired under so called zero-cost recruitment policies since 2019 are not included, although they often paid considerable fees, nor are workers who already resigned or who were hired before the arbitrary dates set by the companies." As a former Top Glove employee, Taha is not eligible to be reimbursed for his recruitment fees. He moved back to Nepal in October 2019 — and is still paying off debt. "I went to Malaysia to help support my six siblings and parents, but I wasn't able to set aside any money during my time there and I am still in debt." "I'm worse off than before I left."

Michelle Toh and Serenitie Wang, CNN Business

2020-09-07 03:33:19

business

business

https://www.cnn.com/2020/09/06/business/china-livestream-shopping-spc-intl-hnk/index.html

Live-stream shopping in China could be worth $170 billion this year. But it's a tough market to crack - CNN

A rising class of creators in China are racing to get in on live-stream shopping, an emerging form of retail that has become an estimated $66 billion industry.

business, Live-stream shopping in China could be worth $170 billion this year. But it's a tough market to crack - CNN

A multibillion-dollar shopping obsession goes mainstream in China

Eight months ago, Meng Hu quit her job as a flight attendant in Guangzhou, China to pursue her dream of becoming an online star.She gave notice to the airline just before Covid-19 slammed aviation, created a makeshift home studio in her one-bedroom apartment, and started filming herself talking — a lot.Hu, 27, is an influencer, with a twist. Since January, she's been working full-time as a live-streaming host on Taobao, Alibaba's (BABA) eBay-like online marketplace. There, she has built up a following of more than 400,000 fans."I've been talking nonstop," Hu said, laughing. "My throat gets really hoarse. [In this job,] you need to talk a lot, because your mood is contagious. You can't just do things halfway. Only when you talk enthusiastically can you get your audience excited."Hu is part of a rising class of creators in China who are racing to get in on live-stream shopping, an emerging form of retail that has grown into an industry worth an estimated $66 billion. Although the trend has been part of Chinese internet culture for years, analysts say the coronavirus pandemic has made it mainstream.Read MoreEven the Chinese government has voiced its support, calling the industry the "new engine" of e-commerce growth and encouraging live-streaming as a solution to unemployment, which has risen sharply in China due to the pandemic. Live-stream shopping is a blend of entertainment and e-commerce. Viewers buy goods online from people who show off their latest finds — from lipsticks to laundry detergent — in real-time videos. Many liken the concept to TV shopping channel QVC, but the Chinese model is distinctly more modern, mobile and interactive. Hosts can give their fans discount coupons and flash deals in real time, while viewers can click to send their favorite stars virtual "gifts."But as Hu and other newcomers are discovering, making it in this field is not easy. The industry is tough, and few workers can parlay their skills into a successful career.Meng Hu, a live-stream shopping host in Guangzhou, speaking to fans on Taobao Live. Hu quit her job this year to pursue her dream of becoming an online star.The Covid-19 boomIn the first half of this year,  more than 10 million e-commerce live-streaming sessions were hosted online, according to the government.As of March, there were 560 million people watching shopping live-streams in China, an increase of 126 million compared to last June, according to a report published by the China Internet Network Information Center. Almost half of them used live-streaming for online shopping, according to the report.Sandy Shen, a research director of digital commerce at Gartner, said live-stream shopping would have taken two or three years to become a mainstream trend in China prior to the pandemic. Instead, it took two or three months, she said.Experts project the industry still has a lot of room to grow. In 2019, China's live-stream shopping market was worth 451.3 billion yuan ($66 billion), according to iResearch, a Shanghai-based market research firm. That could more than double to almost 1.2 trillion yuan (roughly $170 billion) this year, the firm forecast in July. Analysts predict the trend could catch on overseas, too. In parts of Southeast Asia, for example, Alibaba (BABA)-owned Lazada allows live-streamers to promote merchandise. And Amazon (AMZN) has a home-shopping video-streaming hub for its Western users.A day in the lifePart of the allure of venturing into this world is the prospect of a big payday. Brands routinely announce tens or hundreds of millions of dollars in sales in a single sitting. Top influencers can earn millions of dollars a year, according to Taobao, which compiles a ranking of the highest paying hosts and their estimated earnings. And even prominent business leaders are getting in on the act.But experts note that there are also scores of people at home wringing their hands."If you are just a normal, ordinary merchant selling on Taobao, and you are just using all your own employees, with no pre-marketing, you're probably just going to have a couple of hundred people watching. And they will maybe just stop for five or 10 seconds, and if they find it's not interesting, they'll just leave," said Shen. Kim Kardashian West promoting her fragrance to Chinese fans on Alibaba's Taobao live-streaming platform in November. "Even one of the world's top influencers needs the right platform to sell into China," Alibaba said. For people like Hu, the live-stream host in Guangzhou, the ongoing boom presents both "a chance and a challenge.""Viewers might have doubled, but there's probably about seven or eight times more new live-streamers now," she estimated. "So many people like me have joined live-streaming, and are selling products and doing the [same] thing."Hu said she now earns in a month what she used to make in a year. But the hours can be grueling. She typically spends seven hours a day speaking on live-stream to her fans, offering deals on everything from vacation getaways to snacks to skincare products. After that, she spends hours each night reading up on products she plans to sell."Every day I wake up, I work, work, eat, work, and sleep," she said. "It is hard." The production takes a village. More than 20 people work behind the scenes to support Hu's work, directly or indirectly, by her estimate. That includes teams from a local talent agency that help her choose which products to feature, what discounts to offer fans and how to plan her filming schedule. Her husband helps out with odd jobs and occasionally pops up on camera, too. Hu and her team make money, meanwhile, through a couple of avenues: The companies pay for their products to be featured, and then Hu earns a commission off of each sale she makes. A typical commission rate varies from 6% to 16% depending on the platform, according to the iResearch report.The new gig economyLike most of the world, China has been rocked by an economic and jobs crisis this year, although the country has recently shown signs of a rebound. To help keep people afloat, the government has seized on the trend by encouraging people to live-stream.This February, for example, China's Ministry of Commerce encouraged e-commerce platforms to help farmers sell their produce online, particularly through live-streaming.Even Chinese President Xi Jinping has taken notice. In March, he visited a village in northwestern China where he spoke with residents who were selling agricultural goods over live-stream, according to the state-run news agency Xinhua. Xi praised the power of e-commerce, saying it had great potential to help keep people out of poverty.In May, the Ministry of Human Resources and Social Security even added "live-streaming host" to its list of recognized professions, meaning the government would start counting those people as officially employed. State media said this would help the country create new "job pools" to balance out the loss of manufacturing jobs that had been wiped out by the pandemic. Chinese President Xi Jinping talking to a live-streaming host during the set-up of a live shopping session to market local produce in Jinmi, Zhashui county, northwest China's Shaanxi province in April.Some local governments are even working to transform their towns into live-stream shopping hubs. In Guangzhou, authorities are hoping to turn the city into China's "live-streaming capital." To that end, in June they held a three-day live-stream shopping "festival," where businesses conducted more than 200,000 broadcast sessions, according to state media."As the economy recovers, the job market is in fact expanding," said Fu Linghui, a spokesperson of the National Bureau of Statistics, at a press briefing last month. He singled out "gigs like live-stream shopping" as the kind that were "vital" to stabilizing the market."For the government, they see this as a trend that can help keep the economic growth, and also help keep the employment," said Shen. "They view this as an opportunity, and it is. I think if you create the infrastructure, give support, it can definitely help lift the economy."The hard truthEven so, the industry's impact on the economy is probably limited, according to Xiaofeng Wang, a senior analyst at research firm Forrester. She noted that live-stream shopping is still a very small percentage — estimates suggest around 5% — of the country's e-commerce market, and a tiny share of the overall retail sector."I don't think live-stream e-commerce alone will save the economy," Wang said.Of the 400,000 people that China's Commerce Ministry says hosted a live-stream shopping event in the first half of 2020, it's likely that only 5% to 10% will succeed and earn a living, estimated Iris Pang, chief economist of Greater China at ING.She said it was hard to predict how many jobs had been added to China's economy so far because many people working in this field were not full time."I think it will boost job numbers only by a little," Pang said. "It shouldn't be big enough to move the needle.""People who want to do this should be expected to work really hard," said Heng Xia, CEO of NStar MCN, a Hangzhou-based talent agency. Nice represents Hu and more than 150 other online personalities. "This is a high intensity job," Xia said. "Most people can't really do it. We've hired many new graduates, and some of them couldn't make it." Alibaba co-founder Jack Ma and celebrity influencer Li Jiaqi participating in a challenge to sell lipsticks over live-stream in 2018. Live-stream shopping has existed in China for years, but the trend has taken off in recent months. That's the question currently facing Seven Zhou, a live-streamer in Hebei province who's trying to carve out a new career on the short video app Douyin, the Chinese version of TikTok. In January, the former consultant was put on furlough after his company lost clients due to fallout from the pandemic. Like Hu, he decided to quit with high hopes of making it big.But as time went on, Zhou said, he realized that goal was more unattainable than it looked. Douyin requires anyone hoping to become a seller on its platform to have at least 1,000 followers, but he found it tough to reach that milestone. To find an audience, he started hosting two-hour live-stream "chats" each day. The experience was painfully "awkward," he said. Few viewers stopped by his channel. His videos flopped, hardly getting any "likes."Eight months on, Zhou is wondering whether he is cut out for this business. The 30-year-old hasn't yet decided whether he'll throw in the towel, but says he is disillusioned with the industry and all the stories of overnight success."It hasn't gone well," he said. "The system isn't as simple as it seems."

Kocha Olarn and Nectar Gan, CNN Business

2020-08-12 02:02:12

business

business

https://www.cnn.com/2020/08/11/business/red-bull-heir-intl-hnk-dst/index.html

The Red Bull heir, a crashed car and the scandal that angered Thailand - CNN

In the past weeks, new developments have thrust the alleged hit-and-run case against Vorayuth "Boss" Yoovidhya back into the spotlight -- and angered Thais who have long felt that the country's legal system unfairly favors the rich.

business, The Red Bull heir, a crashed car and the scandal that angered Thailand - CNN

The Red Bull heir, a crashed car and the scandal that angered Thailand

Before dawn on September 3, 2012, a roaring black Ferrari struck a police motorcycle in downtown Bangkok, knocking the officer to the ground and dragging his body down the darkened street before speeding away. According to police, a trail of oil leaking from the sports car led investigators to the luxury home of one of Thailand's wealthiest families, the co-owners of the Red Bull energy drink empire. The man driving the Ferrari, police say, was Vorayuth "Boss" Yoovidhya, the heir to a family fortune that Forbes estimates to be worth $20.2 billion.Vorayuth was subsequently charged with five criminal counts, including speeding, hit-and-run, and reckless driving causing death, but the case stalled for years as the billionaire scion repeatedly missed or postponed prosecutors' summonses. Authorities believe he left Thailand in 2017.Vorayuth Yoovidhya is arrested at Thong Lor police station in Bangkok, Thailand, on September 3, 2012. For years, the family of the police officer killed in the crash, Sgt. Major Wichien Klanprasert, were left in limbo.Read MoreThen on July 23, Colonel Sampan Luangsajjakul of the Royal Thai Police confirmed that the Office of Attorney General (OAG) had decided to drop all charges against Vorayuth, who police said was aged 30 at the time of the accident, not 27 as they had previously indicated.The decision to drop the charges thrust the case back into the spotlight — and angered Thais who have long felt that the country's legal system unfairly favors the rich. Some called for a boycott of Red Bull products. Others said the decision not to prosecute Vorayuth was the latest and most blatant confirmation of a perceived culture of impunity of the elite in Thailand. "The public sentiment is that there are different standards when it comes to the rich and the poor."Ekachai Chainuvati, law lecturer at Siam University in Bangkok "The public sentiment is that there are different standards when it comes to the rich and the poor," said Ekachai Chainuvati, a law lecturer at Siam University in Bangkok.Since then, public pressure has mounted, prompting multiple inquiries by the OAG, police, the lower House of Parliament and Prime Minister Prayut Chan-ocha, who vowed to "ensure justice in Thai society without dividing it along social class lines."From there, the story has veered wildly — from the death of a key witness to the OAG's decision to instruct police to investigate Vorayuth for two potential charges that could lead to his indictment.Through it all, the young heir and his immediate family have maintained their silence. But at a time of reignited protests for political change, many people are demanding more accountability for the actions of the rich and powerful at the very top of Thai society. A life of luxuryBetter known by his nickname "Boss," Vorayuth grew up in one of Thailand's most prominent families. His grandfather, the late Chaleo Yoovidhya, created the Red Bull energy drink — a fizzy mix of vitamins, sugar, and caffeine — and built it into a global empire. Born to impoverished Chinese immigrants in northern Thailand, the self-made billionaire started his career selling pharmaceutical supplies. In 1956, he founded his own company, TC Pharmaceutical, which developed over-the-counter drugs for headaches and fever. Chaleo soon became convinced a bigger market was out there for energy drinks. He invented Krating Daeng, a sweet, caffeine-powered beverage that first became popular with day laborers and truck drivers.A Thai man drinks a bottle of Krating Daeng, an original Thai version of popular drink Red Bull, in a store in Bangkok in July 2001.In 1984, Chaleo teamed up with Austrian entrepreneur Dietrich Mateschitz and later launched Red Bull, a carbonated version of Krating Daeng that would become a hit among athletes, partygoers, college students and late-night workers worldwide.After Chaleo's death in 2012, his son Chalerm Yoovidhya took over the business, according to Forbes. Chalerm and his family currently rank second on the site's list of 50 richest Thais, behind the agribusiness behemoth of the Chearavanont brothers.The Yoovidhya family owns about half of the Red Bull global business, which sold 7.5 billion cans of the drink across 171 countries in 2019. The family's empire includes real estate interests, restaurants, a winery and Thailand's only official importer of Ferrari cars.The parent company of the Thai Red Bull brand, TCP Group, has tried to distance itself from the controversy around the alleged hit and run. In a statement, it said Vorayuth had "never assumed any role in the management and daily operations of TCP Group, was never a shareholder, nor has he held any executive position within TCP Group." Like his father and grandfather, Vorayuth kept a low profile and was little known among ordinary Thais prior to the 2012 accident. When police officers followed the path of leaked oil to the Yoovidhya mansion, an unnamed man on the premises initially claimed that he was driving the Ferrari at the time of the crash, police said at the time.He was later fined $200 for giving false statements. Vorayuth was taken to a police station for questioning, where he allegedly admitted driving the car and hitting the motorcycle, but claimed he was suddenly cut off by the bike, police said at the time. He was released on bail on a bond of 500,000 baht, about $16,000.In the ensuing years, Vorayuth did not appear in court for several summonses from public prosecutors, with his attorney claiming he was sick or on business trips abroad. The prosecutor finally issued an arrest warrant against him in April 2017 — almost five years after the incident. But it was too late — Vorayuth had already left Thailand, police said.Interpol issued an international wanted notice against him, but it no longer appears on the site. Vorayuth's whereabouts are officially unknown.CNN has attempted to contact Vorayuth and his immediate family through their lawyer but has not received a response.Thickening plotFor a long time, the case against Vorayuth seemed to be on hold.By September 2017, the statute of limitations had expired on four of the charges — including speeding and hit-and-run. Police had until 2027 to prosecute the most serious charge — reckless driving causing death. That is, until the OAG dropped the case, as CNN reported on July 23.Net Narksook, the public prosecutor in charge of the case, did not offer any reason for the decision, but a letter issued by the OAG informing police of the decision suggests it was based on "new evidence" that claimed Vorayuth was not speeding at the time of the fatal crash. According to the letter dated June 12, Vorayuth was originally accused by police of traveling at an estimated speed of 177 kilometers per hour (110 miles per hour) — well above the 80 kph (50 mph) speed limit. However, the letter said the police expert who initially assessed the Ferrari's speed changed his estimate in 2016 from 177 kph to 79 kph — just below the speed limit. It did not explain how he reached the lower number.Two "additional witnesses" told prosecutors in December 2019 that the Ferrari was only moving around 50 to 60 kph (31 to 37 mph) at the time of the crash, according to the document.Thai police officers inspect a Ferrari car on September 3, 2012. One of the witnesses, Jaruchart Mardthong, claimed that he was driving a pickup truck behind the police officer, and saw his motorcycle suddenly cut in front of Vorayuth's Ferrari right before the crash, the letter said.Jaruchart first gave a statement to police a few weeks after the crash, but was asked to give an additional statement last December, according to the OAG and police. He was expected to be called again to give evidence as multiple investigators examine why the charges were dropped. However, in the early hours of July 30, Jaruchart, too, was killed in a motorcycle crash.Death of a witness The sudden death of a key witness at the height of the controversy reignited public uproar. CCTV footage seen by CNN showed a man police identified as Jaruchart riding his motorcycle on an empty road in the northern city of Chiang Mai, before colliding with another motorcycle traveling in the same direction.Lt. Gen. Prachuab Wongsuk, commissioner of the Provincial Police Region 5, said the two men had met that night while drinking at a bar, and Jaruchart agreed to follow his new acquaintance to another venue. Timeline Sept 3, 2012 Sgt. Major Wichien Klanprasert, a Thai police officer, is killed when his motorcycle is struck by a Ferrari allegedly driven by Vorayuth Yoovidhya. Sept 2012 Vorayuth is charged with reckless driving causing death and speeding, among other crimes. Sept 2013 Speeding charge expires. Apr 2017 An arrest warrant is issued for Vorayuth, but he has already left the country. Sept 2017 All other charges, besides reckless driving causing death, expire. Jul 23, 2020 Thai Royal Police confirm to CNN that the OAG advised them to drop the case against Vorayuth in June. Public outcry follows. Jul 26, 2020 OAG appoints a committee to examine why the case was dropped. Jul 27, 2020 Police also announce an internal investigation. Jul 29, 2020 Prime Minister Prayut Chan-ocha orders a probe into the circumstances of the case. Jul 30, 2020 Key witness Jaruchart Mardthong dies in a motorcycle accident. Aug 4, 2020 The OAG's committee recommends the OAG advise police to re-investigate the case. Aug 10, 2020 OAG accepts the recommendations and gives police until August 20 to file a report on their findings. Sources: Royal Thai Police, CNN reporting Police say their inquiries suggest Jaruchart lost control of his motorcycle and clipped the wheel of the other rider, who survived the crash. Prachuab said the collision appeared to be an accident, but police hadn't ruled out a possible "murder motivation." "We are investigating suspects surrounding Jaruchart," he said. To some observers, the timing was curious — Jaruchart's death came one day after Prime Minister Prayut announced that he had set up a committee to investigate the dropping of Vorayuth's case.Others have raised another point of suspicion — Jaruchart's cellphone had gone missing after the crash. Jaruchart had been working for the owner of local football club. Lt. Gen. Prachuab told CNN that another of the club's employees had told police that he took Jaruchart's cellphone after the crash and deleted all the photos. He said he wanted to remove any evidence of his association with Jaruchart because he was going to run in a local election and didn't want to be associated with the Red Bull scandal, Prachuab said.As speculation swirled around the cause of the incident, Prayut ordered a halt to Jaruchart's cremation scheduled for August 2 and Chiang Mai police seized his body for a second autopsy. The second autopsy showed Jaruchart had suffered a fractured skull, a ruptured spleen, a broken rib bone, and bleeding in his brain and stomach — injuries consistent with a traffic accident, authorities said. Results of the first autopsy have not been released. Then on Tuesday, August 4, another twist. The OAG's committee cited more "new evidence" — expert opinion from Sathon Vijarnwannaluk, a physics lecturer at Chulalongkorn University who estimated that the Ferrari was traveling at 177 kph, matching the initial conclusion drawn by the police expert.The committee said it had heard interviews Vijarnwannaluk gave to several Thai media outlets the previous week, in which he claimed to have been a part of the original team tasked by police to examine the crash. He said his team used CCTV footage to calculate the speed of the Ferrari, and had concluded that it was traveling at 177 kph. The OAG committee claimed that Vijarnwannaluk's assessment was not included in the police case file, and thus the public prosecutor was unaware of his estimate when he decided to drop the charges. The committee said the public prosecutor didn't see the 177 kph estimate anywhere in the police report.An OAG spokesman said Vijarnwannaluk's expert opinion led the committee to recommend that the OAG order police to reopen the investigation into the speed of Vorayuth's Ferrari at the time of the crash for the possible charge of reckless driving causing death, said Prayut Bejraguna, deputy spokesman for the OAG.The committee also suggested police investigate an additional drug allegation against Vorayuth, as it said blood tests conducted following the accident showed traces of the drug, Prayut said. On Monday, the OAG announced that it was acting on both recommendations and gave police investigators 10 days to file their report."The main message we are sending today is that the OAG has revived the case, given breath back to it, so it can... bring 'Boss' back to the justice system," said Prayut, from the OAG. A family scandal The scandal has not only angered Thai society, it's driven a wedge through a family that has long remained silent on the issue.In a rare statement last month, some members of Vorayuth's extended family apologized "for the news of our family member that has caused anger, hatred, and dissatisfaction that is increasingly voiced in society.""We have to issue this letter to express our regret over this incident and to confirm our respect for a justice system which should provide justice to all without discrimination," the statement said. Vorayuth Yoovidhya walks to get in a car as he leaves a house in London on April 5, 2017. The family of the police officer killed in the 2012 crash, have expressed surprise at the latest turn of events. In an interview with "Hone-Krasae," a popular Thai television talk show, his sister-in-law Nattanun Klanprasert said she was shocked to hear that new evidence had emerged.She said police had previously told her there were no eye-witnesses to the crash."Now, Sr. Sgt. Wichien became the one who committed recklessness instead and caused the accident. He became wrong?" she said, her voice raised.The charges against Vorayuth have not been reinstated — yet — but he is still a wanted man. Vicha Mahakun, head of the independent probing committee set up by Prime Minister Prayut, said Wednesday the arrest warrant against Vorayuth is still in place, after a court asked police to withdraw their previous request to revoke it.Police have until August 20 to interview witnesses and compile a report for the OAG — only then could a case that has intrigued and angered the Thai public for years take another step towards a possible conclusion in court. Kocha Olarn reported from Bangkok, Thailand. Nectar Gan wrote and reported from Hong Kong.

Jazmin Goodwin, CNN Business

2020-07-07 10:26:35

business

economy

https://www.cnn.com/2020/07/07/economy/unemployment-black-youth/index.html

It's not just about money. Black youth will bear permanent scars from this recession - CNN

Prior to the pandemic, Generation Z had offered the prospect that inequality in America might finally narrow, at least by some measures. Now, with economists expecting that youth will suffer the greatest coronavirus-related economic setbacks among America's workers, those hopes are dimming.

economy, It's not just about money. Black youth will bear permanent scars from this recession - CNN

It's not just about money. Black youth will bear permanent scars from this recession

Adraint Bereal was preparing for his end-of-semester thesis showcase a few months ago, gearing up for a summer internship at an ad agency in New York. A 22-year-old recent graduate of the University of Texas at Austin, Bereal is the first in his family to attend college, and he was intending to use his design degree to start a career in photography and design. Then he got an email saying his internship had been rescinded due to Covid-19. Around the same time, he learned that his program department had made the decision to move his senior exhibition, which he'd been working on for more than two years, completely online. The project, called "The Black Yearbook," documents the lives of Black Texan college students, who make up less than 5% of the student body at UT Austin. "You spend your four years building up to this one moment where you get to finally announce who you are and what type of designer you want to be," he said. "It was a big shocker. I was depending on that internship to help me transition to being in New York full-time." Bereal now faces what he describes as a "burning question mark" in his life regarding what he'll do next and where he will go. His hours at his part-time job have been reduced since the pandemic, a lease he shares with four roommates ends in July, and he worries about how he'll pay off the roughly $10,000 he owes in student loans. "If I stay in Texas, how long am I staying for? Am I going to be able to afford where I'm going? Am I going to be able to have money to support myself? These are all things that are kind of running around in my mind," he said. Bereal graduated from the University of Texas at Austin in May with his BFA in design. He was set to start an internship at an ad agency in New York this summer, but his offer was rescinded due to Covid-19. Read MorePrior to the pandemic, Generation Z had offered the prospect that inequality in America might finally narrow, at least by some measures. Now, with economists expecting that youth will suffer the greatest coronavirus-related economic setbacks among America's workers, those hopes are dimming. Made up of people born after 1996, Gen Z is more diverse and "on track to be the most well-educated generation yet," according to the Pew Research Center. Before the pandemic hit, the strong economy offered more pathways for youth to start their careers. Their earnings potential was promising. And the tight labor market meant employers had to widen their net when considering diverse job applicants. Tatjana Meschede, a senior scientist and associate director for the Institute on Assets and Social Policy at Brandeis University, said there had been "room to hope" that, although longstanding economic disparities would not completely disappear, at least they might shrink among today's young people. "The pandemic cut that all short," she said.  Now, just like the millennials who entered the labor force after the 2008 financial crisis, members of Generation Z will likely experience permanent declines in earnings. But those setbacks aren't evenly distributed. Among young workers, Black youth will likely bear one of the largest burdens. Black youth suffer from higher levels of unemployment and often earn lower wages than their White peers with the same levels of education. They're also less likely to come from families that have the wealth to provide substantial financial support during a downturn. And among those who go to college, Black students, on average, carry higher levels of student debt than their White peers. These challenges can also be true for other minority groups — but for Black youth, these economic setbacks can be particularly difficult to overcome, experts say. A weak job market now, coupled with family financial strains, can force young workers to make tough sacrifices early on. Those decisions can change the course of their career paths, impacting their health and wellbeing, as well as big lifetime decisions like homeownership, marriage and having children further down the road. "It would be a mistake to just see it as just a money thing, just thinking about how some communities have wealth and some communities don't. It is a whole ecosystem of opportunities," said Mehrsa Baradaran, a law professor at the University of California, Irvine, and author of "The Color of Money: Black Banks and the Racial Wealth Gap." The scarring effects of a recession Four months ago, Gen Z was enjoying the strongest labor market in 50 years. After the coronavirus hit, that disappeared within weeks. The United States is now grappling with massive unemployment  and a tough economy amid a health crisis and widespread unrest. What was once the best job market is now the worst since the Great Depression, with the unemployment rate at 11.1% for the country overall, and at 20.7% for workers in their teens and early twenties.Racial inequality starts early, just as people are first entering the work force: 19.6% of Whites ages 16 to 24 were unemployed in June, according to the Bureau of Labor Statistics, but the unemployment rate for Blacks of the same age was 27.7%. A year ago, before the pandemic, it had been 8.2% for White youth and 14.9% for Black youth. Young people of any ethnicity graduating into an economic crisis suffer from sustained higher unemployment rates, persistent earnings losses and increases in poverty that can last for 10 to 15 years after they leave school. They also suffer from increases in mortality and lower socio-status later in life, according to a report by UCLA economist Till von Wachter. But in addition to hurting the population broadly, economic crises exacerbate preexisting inequalities. That's because in weak job markets, employers tend to be more selective, elevating discrimination and biases against certain groups. And among workers, those who have the weakest financial safety nets often don't have the luxury to pursue personal aspirations but are instead forced to make decisions based on economic necessity. "Every time we don't deal with the structural inequality, we essentially are put in a position where it's harder to recover," said Andre Perry, a fellow at the Brookings Institution and author of "Know Your Price: Valuing Black Lives and Property in America's Black Cities." He further cites that's because inequalities typically compound once a new crisis hits. Student loan debt can perpetuate existing disparities Student debt is yet another factor that can limit the kinds of decisions Black students can make concerning their own futures. Often, these sacrifices take the form of accepting low-wage job opportunities with fewer worker protections, picking a less expensive college over their dream school, or having to work multiple jobs to pay the bills. "The biggest thing for people just graduating now is the issue of debt," said Olugbenga Ajilore, a senior economist for the Center for American Progress, a left-leaning think-tank.  Black college graduates owe an average of  $23,400 in loans when they finish their  bachelors'  degrees, versus $16,000 for their  White peers, according to a 2016 study by Brookings, a nonpartisan think-tank. Four years after finishing college, Black graduates owe an average of  nearly $53,000, mainly due to accrued interest and graduate school borrowing. That's nearly twice  as  much as  White graduates over the same time frame. In addition to the job crisis, Black youth and their families struggle with the potential high costs of student loan debt. With less access to generational wealth, taking on student loan debt is often the only choice for many Blacks students to be able to attend college. During the current crisis, however, some Black students are deciding that's a level of risk they can't afford to take, and are pivoting their plans as a result. Nana Prempeh, 17, from Somerset, New Jersey,  comes from a family of nurses;  it's a profession she always saw herself pursuing. It was her dream to attend Rutgers University, a public college in New Jersey, and if money wasn't an issue, she would have gone there. But after weighing the costs of a four-year degree and the weak economy during the pandemic, Prempeh decided to attend community college instead. In a couple years, she'll reevaluate whether it's worth it to transfer to a four-year university or a two-year nursing school program, but for now, the lower cost of attending a community college offers a financial cushion in an uncertain economy. Nana Prempeh, who recently graduated from high school, plans to attend Raritan Valley Community College in the fall. She decided to attend a community college rather than a four-year university to save costs during the uncertain economy. She noted that she sees hardly any of her classmates weighing the same tradeoffs, but she's confident about the call she's made for herself. "I don't want to have student loans. I'm probably going to look back years from now and be like 'Wow! This was a really good decision,'" Prempeh said.   There are potential downsides, however. Attending a community college is of course typically cheaper than attending a four-year university, but for most people getting an education beyond the associate's degree conferred by a two-year school means being more competitive in the job market and earning more over the course of their career. "In the end, it's the four-year college degree that sets you up for life," said Meschede.And for Prempeh specifically there are added risks. Nursing programs have been a popular choice for students, now and before the pandemic, and if Prempeh does decide to try to go to one after completing a two-year program, it's possible she could end up waitlisted or denied admission altogether. Research shows the student debt crisis has impacted Black borrowers more than any other ethnic group. Black students are more likely to borrow at higher rates and take out more student loans. The percentage of Black students who take out loans to attend college tops 90%, compared to 66% of White students, according to a report by the Student Borrower Protection Center, a consumer advocacy group. Additionally, Black students pay back their debt at an average rate of 4% annually, compared to 10% for White students. "Student debt is so much larger than it's ever been before and that also puts constraints on the kind of jobs you can get," said Ajilore, senior economist for the Center for American Progress. Ajilore adds that if Black youth are faced with the option to take their dream job, it could limit their ability to pay down debt and make other long-term financial decisions. Not to mention, some Black parents of Gen Z children are still recovering from the Great Recession of 2008. "If they didn't have to go through the Great Recession, they would have a greater ability to help their kids go through this pandemic," Ajilore said. According to the Federal Reserve's Survey of Consumer Finances, the median net worth of White families in 2016 was $171,000, nearly ten times the net worth of Black families at $17,150. "Parents and students are in the same boat so to speak, because Black parents have been less likely to have wealth. Particularly after the last housing bubble, it's very difficult for families to get ahead," Perry said. Mamourou Kone, an 18-year-old from the Bronx, is set to  attend Nazareth College in Rochester, New York,  in the fall. Kone worked several odd jobs in high school, from retail to babysitting, and he intends to work multiple part-time jobs — on campus, through a work-study program, and off-campus, too — after starting college. Mamourou Kone near his home in the Bronx, New York. Kone planned to attend Nazereth College in Rochester, New York in the fall, but he may stay closer to home if he cannot find a job in Rochester. Working while in college is a necessity for Kone, who needs to help his mother with financial expenses back home. But a second wave of Covid-19 could put a damper on his college plans if it means he cannot find a job near campus. It's a possibility that has him contemplating staying in the Bronx, where he thinks he may have more work opportunities than in Rochester. If he's unable to find a job while in school, Kone said, he would consider transferring to a college near the Bronx, instead. He was looking forward to moving to Rochester, in part because it guaranteed new opportunities away from the neighborhood where he grew up. Kone says many of the opportunities he'd get in college in Rochester are either limited back home or don't exist at all. Going to college away from New York City would also let him expand his network beyond the friends and family he grew up with in the Bronx — something he feels could benefit his career going forward. "College will completely open my eyes. A lot of people in my community don't go to college and don't see themselves going to college," Kone said. I always saw myself going to college, it's always been a goal of mine. I'm glad I stuck with it." Persistent job discrimination and bias still existThe racial opportunity gap shows no signs of narrowing. Beyond the vast unemployment numbers are other factors that affect Black youth such as low-wage job opportunities and job discrimination. It's a reality that  recent UT Austin graduate Bereal says he struggles with constantly.   For Bereal, his dream job is a creative one, in photography and graphic design. But now amid uncertain times, he's considering pivoting towards tech, where more opportunities exist for designers. A career in tech could mean more money for him, but it's not the career he would have chosen — and it's the kind of choice that a White student would be less likely to have to make. "This is one of those moments where you kind of have to do what you have to do to make ends meet," he said. But beyond having to make potential sacrifices with his career path, Bereal says he also faces what he considers "a slap in the face" when it comes to job inequities and discrimination within the industry. "Because there aren't very many Black men, in particular, that are dominating in the creative space, I feel like I have to work three times as hard to be valued as someone that could be paid equally,"  he said. Black job applicants' race has pervasive effects on their employment prospects, on average. Black Americans are twice as likely to be unemployed compared to  Whites, and when they are employed, those who work full-time earn roughly 21%  less than their White peers. "We know that job discrimination has infected many different markets and that discrimination is the drag that helps maintain wealth disparities," Perry said.   According to a 2003 study by researchers from the University of Chicago and the Massachusetts Institute of Technology, job applicants with popular "white sounding" names like Greg and Emily resulted in a 50% more likelihood of getting callbacks from employers than applicants with popular "black sounding" names like Lakisha and Jamal. The biases and discrimination faced by Black job seekers exist in both good and bad economies. But in weak economies, when employers are unable to hire a wider pool of applicants, that bias and discrimination is often amplified. The persistent racial discrimination and bias Black job seekers face in the labor market limits their opportunities to gain better paying jobs and benefits compared to their White counterparts. This ultimately disrupts their job growth trajectory and earnings potential down the line, which experts say, can impose significant costs on Black households and their ability to generate wealth — only exacerbating long-term disparities exposed by the racial wealth gap. "The racial wealth gap leads to who has more police, who has better school options, who has job offers after graduation, who has family wealth so that they don't need student loans, who is trusted and criminalized, and who's resume sounds smarter and not. A lot of these things go back to these wealth gaps," Baradaran said. "All of this is interrelated." Closing the racial wealth gap: 'It requires stimulus'The Black-White wealth gap doesn't just put a significant strain on Black people. It also limits the growth of the US labor market and economy. That's what one McKinsey & Company report says. The 2019 report on "The economic impact of closing the racial wealth gap" estimates that US GDP could increase by 4% to 6% if the racial wealth gap were closed by 2028. Experts say, however, that closing the gap will require strategic policy changes. The same was true before the impact of the coronavirus. "It requires stimulus," said Perry. "It will take hundreds of years, even if you remove racism, for this Black-White wealth gap to close. And so, at some point, you need an infusion of stimulus and an infusion of cash." Perry proposes policies that eliminate some of the debt of students who come from low net-worth families and create opportunities to help young people generate financial security, such as homeownership. "Black people, on average, put most of their savings in their home. But the last couple of crises really wiped out the wealth in those homes," Perry said. "We need other ways to build wealth besides homeownership." He adds that other wealth building opportunities such as baby bonds — federally-funded savings account for children started at birth — or reparations can aid in eliminating preexisting gaps. "If we can figure out ways to eliminate student loan debt, get more homebuyers, and young people in jobs with 401(k) or other retirement plans, we'll start to see some movement," Perry said. "But there's no way around it — at some point you have to eliminate debt and build wealth."  As for Black graduates like Bereal, he says the only way through these tough times is to keep pushing forward. While his summer internship was supposed to be the launchpad into his dream career as a photographer and graphic designer, Bereal says The Black Yearbook is still giving him that opportunity. After raising more than $20,000 on GoFundMe, Bereal is working to produce an exhibit and mass produce copies of the yearbook. "I've always just tried to really go out of my way to show up and show out and show people what I'm worth and what the quality of my work is," Bereal said. "And make it known that I'm growing and I'm going to continue to grow."Bereal is the creator of 'The Black Yearbook', a project highlighting the stories of Black Texan college students on campus, who make up only 5% of the student body.

Story by Nathaniel Meyersohn, CNN Business Video by Moss Cohen, CNN Business Photographs by Maddie McGarvey for CNN

2020-06-26 14:55:03

business

business

https://www.cnn.com/2020/06/26/business/dollar-general-robberies/index.html

Dollar General is cheap, popular and spreading across America. It's also a robbery magnet, police say - CNN

At a time when other retailers are struggling, Dollar General is booming. But these insiders and security experts say the company is failing to protect workers from violent crime.

business, Dollar General is cheap, popular and spreading across America. It's also a robbery magnet, police say - CNN

Dollar General is cheap, popular and spreading across America. It's also a robbery magnet, police say

In the year before Dave Dukes killed a man who was trying to rob the store where he worked, he'd witnessed three other robberies. After each of them, Dukes, 28, would say later, he'd asked his supervisors at Dollar General to put in a security guard. But, according to Dukes, his bosses didn't do that — though, because of how many robberies he'd been through, they did start sending him out to train employees at other stores.After the third robbery, Dukes started bringing a gun to work.Then, in October 2019, the fourth robbery happened.Read MoreAccording to the local prosecutor's office, a man entered the store with a gun and demanded money from the cashier. When Dukes tried to intervene, the man — Roosevelt Rappley, just 23 years old — pointed his gun at Dukes. Then Dukes pulled out his own gun and shot Rappley, killing him. A grand jury in Ohio reviewed the case and found Dukes "acted lawfully under the circumstances," according to the prosecutor's office.But by then Dukes was out of a job, allegedly having been fired by Dollar General for violating company policy. Dollar General's 2019 policy said that possession of a firearm on the company premises may result in termination.Dave Dukes stands in his lawyer's office in Dayton, Ohio in March. Dukes was a Dollar General clerk who shot and killed a man during an armed robbery. It was the fourth robbery he had witnessed on the job.Dollar General declined to say why Dukes was terminated, saying in an email that it does not comment publicly on specific employment situations. The company said it does not retaliate "against employees who make good faith reports of safety concerns." It also maintains that the safety of its employees is a top priority.Rappley's family is still trying to process his death eight months after the robbery. Rappley's sister Jasmine Jessery said in an interview that she didn't hold a grudge toward Dukes. "He was protecting himself," she said. Jessery described her brother as a kind person who had linked up with the wrong crowd. "Everything went sour" then, she said. A thriving businessBusiness is booming at Dollar General, the chain adding more stores every year than any other retailer in America. That was the case even before the coronavirus pandemic, but Dollar General has been in an even stronger position during the pandemic as price-conscious consumers stock up on essential items.Dollar General has kept its stores open since the coronavirus hit, and its stock price has rallied 23% since the beginning of the year even as the S&P 500 has lost 5%. In March, the company announced a goal of hiring up to 50,000 new workers to meet increased customer demand. Former executives, store employees, law enforcement officials and retail security experts told CNN Business that while the company's low-cost, no-frills model might be embraced by Wall Street, it is putting its workers at risk. Dollar General stores, which process a high number of cash transactions, are a prime target for armed robberies, they said. Some of the former company officials and current and former employees spoke on the condition of anonymity either to discuss internal conversations or for fear that speaking out would impact their jobs. Dark side of a booming businessAt a time when other retailers are struggling, Dollar General is thriving. The company plans to add 1,000 stores in 2020.Meanwhile, insiders and security experts say the company is failing to protect workers from violent crime.In Dayton, Ohio, seven Dollar General stores accounted for 29% of commercial robberies in 2019. Police say they had repeatedly recommended stores improve security measures. At least six Dollar General employees have died during robberies since 2016, according to a review of news and police reports. "Every night I was just waiting for there to be a phone call that said, 'Hey we've lost somebody,'" Brian Flannery, who oversaw security at around 2,000 Dollar General stores in the northeast as a divisional loss prevention director from 2011 to 2015, said. "It wasn't a matter there [of] if you were going to have a bad robbery. It was a matter of when."At least six Dollar General employees have died during robberies since 2016, according to a review of news and police reports. And while the FBI doesn't specifically track robberies at dollar stores as it does those which occur at convenience stores and gas stations — other robbery targets — police have warned company managers that its stores are vulnerable. In a statement in response to this story, Dollar General said, "We employ a number of measures designed to create and maintain a safe work environment for our employees and a safe shopping environment for our customers, all while protecting company assets." The company said its safety and security measures take federal and state laws, retail industry standards and law enforcement recommendations into account and its measures are "designed to prevent, deter and if necessary, respond to criminal activity in our stores." "Our employees are our greatest asset. Their safety and security is of paramount importance," Dollar General added.The problem of robberies isn't exclusive to Dollar General. In an interview with CNN Business, Jason Hall, a lieutenant with the Dayton Police Department, described local dollar stores as "robbery magnets."He has tracked robberies at local chains including Dollar Tree, Family Dollar and Dollar General over the last few years — and Dollar General, by far, had the most incidents.Lieutenant Jason Hall, photographed in March, says the Dayton Police Department repeatedly made security recommendations to dollar stores in the area but many of those recommendations were ignored.In Dayton alone, police were called to 86 robberies at just seven Dollar General stores between 2016 and 2019. Robberies at Dollar General locations accounted for 29% of the 80 commercial robberies in the city in 2019, according to figures provided by the department. Dollar General declined to comment on how much it spends annually on crime prevention or any specific measures in its stores to protect workers and prevent robberies "as to do so potentially compromises the integrity of those measures, provides a roadmap to would-be wrongdoers and may place customers and employees at risk."Growing at a price As other retailers have struggled in recent years, dollar stores have enjoyed breakneck growth. The Great Recession, slow wage growth and widening inequality in America had all boosted discount retailers. Now the pandemic is as well. The two largest players are Dollar General and Dollar Tree, which bought Family Dollar in 2015. There are a few differences between the chains. At Dollar Tree, for example, all items are exactly $1. The stores tend to be in middle-class suburban areas. Dollar General's more than 16,000 stores, on the other hand, sell items largely in the $1 to $10 range, meaning there is more cash in registers. That makes stores more susceptible to robberies, according to retail security experts. Dollar General stores are predominantly located in rural areas. About 75% of its stores are in towns with fewer than 20,000 people. Todd Vasos, the company's CEO, has described his core customers as struggling Americans. Dollar General's primary customers make $40,000 a year or below per household. "We do very good in good times and we do fabulous in bad times," Vasos said on a call with Wall Street analysts in May. "We're very, very bullish on what post-Covid looks like because...I think we're very well positioned no matter what this economy does to both our core customer and to the customer overall." We do very good in good times and we do fabulous in bad times."Todd Vasos, CEO, Dollar GeneralInvestors like Dollar General because it's been relentless at making more with less: less real estate, less labor and smaller product sizes than its larger big-box competitors. In its latest fiscal year, Walmart's US stores had a 5.1% operating profit margin before taxes; Dollar General stores boasted an 8.3% margin — an indicator that Dollar General is more efficient at keeping costs low and turning sales into profits. Since 2010, Dollar General's annual profits have increased five-fold and its stock has surged more than 800%. Its locations have nearly doubled, and now the chain boasts more US stores than Walmart, Kroger, Costco and Home Depot combined. A record 25,000 retail stores are expected to close this year, but Dollar General still plans to open 1,000 new locations in 2020, or roughly 20 new stores a week. But the company's low-cost approach often comes at the expense of employees, former executives said. Efforts to keep costs down have also kept the company's leadership from wanting to take bigger steps on security, these executives said.Visibility inside the stores is often poor for workers because of the design, according to law enforcement officials. Stores tend to be small and crowded, with high shelves and piles of boxes and carts lining the aisles. Some police patrolling outside complain that it's difficult to see inside because windows are covered with advertisements and signs. Dollar General said in an email that "we continually review and, as needed, adapt operating procedures and store layout [and] fixturing." Staffing is intentionally kept at a minimum, often with just one or two low-wage employees on site at any given time, former executives said. And although store registers are often flush with cash because it's what many customers use to pay, security guards are rarely on the premises. The Dayton Police Department says in 2017 it recommended Dollar General keep its windows clear as a security precaution. This store on Dayton's Salem Avenue, which was the site of four robberies between 2018 and 2020, had its windows covered as of March 2020.Security guards were viewed as costly to the company's bottom line, the former executives also said. One former Dollar General executive described the difficulty in convincing other company leaders that security guards could deliver a positive return on investment. "We certainly didn't get a return having somebody standing there and paying $10 or $12 an hour," the former executive said. "Out of the 13,000 stores when I was there, probably less than 100 stores had some type of outside security." Another of the former Dollar General executives, who focused on security, said he was "heavily chastised" for frequently going over budget on monthly guard expenses. Adding staff to stores would have also jeopardized the low-cost model. "It's a low margin business, so you have to have low labor [costs] to make a profit," said one of the former executives. "Putting more labor in the stores took away from the profit, or you have to raise prices. And there was no appetite to raise prices because it's a low-price business." The company has invested in interactive security monitoring services. At thousands of stores in higher-crime neighborhoods or that have experienced frequent incidents, cameras are monitored by offsite security agents. The agents can communicate with employees in the store and make public announcements over the loudspeakers letting customers know they are on camera. If the agents see a robbery or suspicious activity at the store, they can alert the local police. There are also two-way phones and panic buttons that employees can press to talk directly with a security agent if they are in distress. Interface Security Systems, one of the services that Dollar General uses, boasts on its website that its technology helps companies reduce security guard costs by 88%. Dollar General also has used iVerify, another off-site monitoring company. Earlier this year, Securitas Electronic Security acquired the customer contracts of iVerify. This Dollar General store on N Gettysburg Ave in Dayton is where Dave Dukes said he experienced four robberies in just a year on the job.The remote monitoring systems can be effective at deterring shoplifting inside the store, according to experts. But unlike human security guards who can act as a visible, physical deterrent, they are less effective at deterring robberies, according to police, former employees at iVerify and Interface, and retail security consultants. One former iVerify executive said, "it's rare that you're going to be looking at a video when the robbery occurs." He said the remote monitoring was better-suited for investigating robberies after they occurred. Securitas, the company that now owns iVerify's customer contracts, did not respond to request for comment. A representative for Interface said "there is a place for both remote interactive monitoring and security guards in most retail chains" and that its interactive remote monitoring systems with live video and two-way audio were a strong crime deterrent. When robberies do occur, some of the former Dollar General executives said, the company offered reactive, short-term measures — such as adding a security guard to a store for a few weeks. "It was literally whack-a-mole. You would get the okay to spend cash when there was an incident. A reactive security program in that kind of environment is not what you're looking for," said Flannery, the former divisional loss prevention director at Dollar General. Dollar General said it disagreed with Flannery's characterization of its security efforts and that it doesn't believe "those assertions are supported by facts." The safety concerns take a toll on some workers.When Kenya Slaughter works the cash register at a Dollar General in Alexandria, Louisiana, she makes sure she has enough $1 and $10 bills in the drawer, so she won't have to go back into the safe. When she has to take out money from the safe behind the register, she "strategically positions herself" so she's not opening it with her back turned. Still, potential robbers "know we don't have security and that people are in there alone," she said. Indeed, Dollar General employees told NBC News in a report last month that they've been stabbed, shot and held at gunpoint. Significant 'shrink'In recent years, Dollar General has focused on solving another problem. Current and former staffers said there was an intense urgency to combat "shrink" — or merchandise lost due to shoplifting, employee theft or inventory errors. In its latest annual report filed in March, Dollar General called the problem "significant," noting that "higher rates of inventory shrinkage or increased security or other costs to combat inventory theft could adversely affect our results of operations and financial condition." The sources said they felt that the company prioritized reducing "shrink" over preventing robberies, which had a human toll. "In the two years I sat in the executive meetings, I never remember anybody bringing up armed robberies as a problem. We talked about loss of product and store manager turnover," said one former top Dollar General executive. "The people that are below the store manager level are just a commodity." The obsession with reducing shrink was often turned inward, with Dollar General treating some of its own workers with constant suspicion, said Tracy Vargas, an assistant professor of sociology and criminal justice at the University of North Carolina at Pembroke. Vargas worked as a clerk at Dollar General in 2014 and 2015 for her PhD dissertation on dollar stores at Syracuse University. She also interviewed 50 employees from across the country. In her dissertation, she described workers being treated like criminals with surveillance cameras often focused on their activities rather than on customers. The people that are below the store manager level are just a commodity."A former Dollar General executiveDollar General said its "understanding is that Ms. Vargas's employment with the company was intended solely to validate her preconceived notions regarding the company for purposes of a book that she was writing, rather than in furtherance of serving the customers and communities that rely on us." It added: "We categorically deny the assertions." A 13-foot poster in the store backroom, known as the Shrink Chart, displayed performance statistics including the number of times each employee voided cash register transactions that week, Vargas said. (A large number of voided transactions or price checks could be interpreted by managers as a sign of employee theft.) Meanwhile, Dollar General provides little training on how to handle robberies, sources told CNN Business. Former store workers, including Dukes and Vargas, described when they were first hired being shown a simulation video of a robbery. There are no hands-on drills and they did not have to review the video annually, some of these sources said. In some stores, signs are posted in back rooms giving employees directions on what to do "should the unlikely event of robbery occur." Vargas told CNN Business that Dollar General employees are "sitting ducks" and "considered to be profit risks to the corporation's bottom line." "Employees are alone, exposed, and at the mercy of whomever [decides] to walk through the door that day," she said.Law enforcement raises concerns In some cities, local officials have urged Dollar General management to take more steps to prevent violent crime. They say their warnings have largely gone ignored.Dayton police have prepared reports on crime at local Dollar General, Dollar Tree and Family Dollar stores. On February 1, 2017, members of the department presented a Dollar General divisional loss prevention director with a 32-slide PowerPoint deck detailing the factors the department believes to be "enabling factors" in robberies. The factors included blocked windows, high shelves, lack of maintenance outside the stores and lack of security guards in high-incident locations. DOLLAR-STORE-CPTED (PDF)DOLLAR-STORE-CPTED (Text)It's a "fairly large issue for us," Hall, the Dayton Police Department lieutenant, told CNN Business. "We've made a lot of recommendations to try to improve these situations. We have noticed that not many of these recommendations have been implemented or fully implemented." Dollar General said it "enjoys frequent communication with the Dayton Police Department" and that it implemented the department's exterior maintenance suggestions in 2017. The company claimed the department did not provide "specific store safety and security measures."A representative for Dollar Tree, which owns Family Dollar, said "working with and supporting local law enforcement is absolutely important to us. We continually refine our security program, which includes cooperating with local police departments to share photos and videos to support their investigations."In St. Louis, where there have been "high calls for police service for larcenies, disturbances [and] hold-ups" at Dollar General and Family Dollar in recent years, "implementing security is often suggested and ignored," said Rich Sykora, an attorney for the city of St. Louis. Lt. Hall described robberies at local dollar stores as a "fairly large issue" in the area. Seven Dollar General locations accounted for 29% of robberies at Dayton businesses in 2019, according to the department's data."We will take a fresh look at the St. Louis market and implement the appropriate steps," a Dollar Tree representative responded.In rural Effingham County, Georgia, Sheriff Jimmy McDuffie said three of the five Dollar General stores in the area have been hit in recent years. "We don't call them dollar stores. We call them stop and robs," he said. McDuffie presented a list of safety concerns to Dollar General stores in the county, he said, including recommendations to improve lighting and limit the number of boxes piled up inside the stores, which can make it difficult for officers to see inside. "Put in some security measures," he urged. "Light the parking lots up." "They say they're going to do better, but it doesn't seem to come to fruition," he told CNN Business. And in the Pee Dee region of South Carolina, there have been a string of robberies at Dollar General stores over the past year. "None of the stores have added outside cameras that could potentially capture the mode of transportation and the direction of travel for suspects," said Tammy Erwin, a deputy at the Marion County Sheriff's Office in South Carolina."There are no security officers at any time. There are shifts with only one employee working in the entire store," she said. She added that she wonders why Dollar General won't implement "a buddy-system of employees, so that no one is alone in the store." We don't call them dollar stores. We call them stop and robs."Jimmy McDuffie, Sheriff, Effingham County, GeorgiaDollar General's 2019 handbook of operating procedures says "at a minimum, two employees must be involved in the closing process. For safety purposes, always use the buddy system." But there is no mention of similar policy for opening stores in the morning or at other hours of the day. The company says it "tries to minimize the time that employees are alone in the store." The company said it has received "no formal safety and security policy change" from the sheriff's offices in Effingham County, Georgia, and Marion County, South Carolina. Dollar General said it was "aware of a single request from a member of law enforcement in St. Louis," who requested that Dollar General implement facial recognition software from a company "in which we understood the individual to have a personal and financial interest." Deaths on the jobFamily members of Dollar General employees killed during armed robberies and security experts say it's not just a lack of in-store security measures that are the problem. Out of the six Dollar General employees killed since 2016, two were shot as they left stores to deposit cash from the register at the bank. Some Dollar General employees take cash deposits to the bank by themselves: The company's policy in its 2019 store operating procedures says that stores should make one or two such deposits each day depending on their location, and that the deposits can only be made by "key carriers," or high-ranking employees. Ron Holder took a job as a store manager at a Dollar General in Richmond, Virginia, and hoped to work his way up the ranks at the company and become a district manager. But he was killed in his car outside of Dollar General one morning after picking up a cash deposit from the store, according to the FBI. His case is still unsolved. Ron Holder (left) and DeQuan Anderson (right) were Dollar General employees who were both killed on the job during armed robberies. (Courtesy Angela/Courtesy Janine Anderson)In Houston, 20-year-old DeQuan Anderson was killed in 2017 as he got in his car to bring cash from the store to the bank. His mother, Janine, has filed a wrongful death lawsuit. The case has gone to arbitration. Janine Anderson described her son in an interview as "an all-around good kid" who was active in his church and developed a love of photography in high school. He saved up money to buy a camera and equipment and took it everywhere he went. "He always was going to have some type of career in art," she said. "That was his passion." Before his death, DeQuan had raised concerns about the bank-drop process on multiple occasions, the lawsuit said. But despite previous robberies at the store, Dollar General did not increase its security or hire an outside security company to transport cash to the bank, the lawsuit alleges. Dollar General declined to comment on pending litigation. Meanwhile, Dukes, the former Dollar General employee in Dayton, Ohio, is trying to bounce back after the October robbery that changed his life. He has had trouble finding work after the shooting. He is hoping to be more present in his kids' lives. "I don't regret anything that I did," he said. He was defending himself, he said.But Dukes believes the robbery could have been avoided if Dollar General had taken his advice and put in permanent armed security. He hopes company executives will start doing more to protect their employees. "They don't know what's going on inside these stores every day. They don't. Store managers are the ones that deal with that every day. But I would tell them that they need to take better care of their staff." Dukes said he repeatedly asked Dollar General to hire security guards, but managers dismissed his requests. He hopes the company will do more to protect its workers.Additional camera: Craig Waxman, Jeremy HarlanVideo graphics: John GeneralSupervising producer: Bronte LordPhoto editors: Marie Barbier, Brett RoegiersVisual editor: Tal YellinStory editors: Alex Koppelman, Annalyn Kurtz, Anjali Robins

Kerry Flynn, CNN Business

2020-06-11 21:20:58

business

media

https://www.cnn.com/2020/06/11/media/refinery29-workplace-culture/index.html

Refinery29 is reeling from claims of racism and toxic work culture. Employees say it's even worse behind the scenes - CNN

Sixty current and former Refinery29 employees who spoke with CNN Business over the course of a lengthy investigation painted a picture of a toxic workplace culture.

media, Refinery29 is reeling from claims of racism and toxic work culture. Employees say it's even worse behind the scenes - CNN

Refinery29 is reeling from claims of racism and toxic work culture. Employees say it's even worse behind the scenes

Amid the protests over the death of George Floyd and larger racial inequalities in the US last week, Refinery29 swapped the colors of its website, going from its usual jewel-tone to the Black Lives Matter movement's signature black. It was supposed to be a show of solidarity and of unity between a progressive website aimed at women and the movement. Instead it inspired a revolt. In the ensuing days, a number of former employees came forward on Twitter to call out what they saw as hypocrisy on the part of the website's leadership, especially when it came to matters of race and diversity. The site's co-founder and editor-in-chief, Christene Barberich, had repeatedly confused one black woman with another, one said; another tweeted that an executive once confused her with the caterer; a third person said she was paid $15,000 less than her two white coworkers who were doing the same job. And within less than a week, Barberich was out of her job, saying on Monday she was stepping down "to help diversify our leadership in editorial." Ashley C. Ford, the former employee who said Barberich used to confuse her for another black woman, was one of the most prominent people who spoke out, saying in one tweet that she'd left Refinery29 after nine months because of a "toxic company culture where white women's egos ruled." She was moved to tweet, she told CNN Business afterward, by seeing a thread from another former employee, Ashley Alese Edwards. "[W]hen I started reading that thread and started seeing some of the responses to it, the big thing that hit me was, 'Oh, you idiot. Leaving didn't make anything stop. ... You left and they kept doing this. They kept treating women like this. They kept treating black women like this,'" she said. Read MoreJournalists of color are fed up and speaking outFord and Edwards were not the only ones who spoke out, or the only ones with disturbing stories to tell. Some sources who spoke to CNN Business said there was a glaring lack of diversity at the company. Some said that despite the inclusive image that the site tried to present, Barberich made a number of editorial decisions that had the effect of diminishing minority and especially black women. When Barberich was approving photos for the site, a former editor and a former executive photography director told CNN Business, she would reject some as "off-brand." The pictures she rejected that way were consistently of women who were either black or plus-size, they said. These two former employees said they knew the types of celebrities that Barberich would approve to be included in Refinery's coverage, and that her decisions appeared to be based on race. "If I wasn't at my desk looking like I was producing, I had to have a damn good excuse. It was terrifying." Kristin Booker, a contract writer at Refinery29 in 2014Barberich "loved Solange Knowles, Janelle Monáe was OK, but otherwise our team knew which celebrities would get rejected... the black ones," the former editor said. "We kept pitching them anyway. But it was a running and grim, unfunny joke on our team. We'd say, 'Gee, I wonder who will possibly get cut?' Because we knew." In response to this accusation, Barberich said in a statement, "My goal has always been to help close the representation gap and I believe that is reflected across the pages of Refinery29." The former executive photography director said she repeatedly filed human resources complaints against Barberich for her editorial choices but was told by an HR representative that it was not the company's job to manage Barberich, who reported to global president and chief content officer Amy Emmerich. Statement from Nancy Dubuc, CEO, VICE Media Group"We are deeply dismayed to learn of the toxic culture that has existed at Refinery29, issues we were not made aware of when we acquired the company in November 2019 and for which the founders have apologized and taken accountability. It is unacceptable, and we are grateful to all the people who bravely came forward to shed light on the situation. We have announced a search for a new Editor-In-Chief of Refinery29 and an immediate action plan to ensure that our workplace empowers diversity, equity, and inclusion inside our walls and reflects the brand purpose audiences have come to know us for."Statement from Christine Barberich, former editor-in-chief of Refinery29 "I co-founded Refinery29 to do something different: I wanted to amplify and build community around women rarely seen or heard in media, including media directed at women themselves. I know now that we fell short in cultivating that same mission and building that same safe space within Refinery29, to the detriment of Black women and women of color in particular. Leadership at Refinery29 owns that, and I own that. I realize that, over the past fifteen years, these women have given Refinery29 its voice, its purpose, its defining vision. I couldn't see how my own perspectives and privileges held back the changes that needed to be made to further that purpose and vision, and to provide these women with the support they needed. That was a failure on my part. To all those I let down, especially members of my own team: I'm deeply sorry. The reason I stepped aside this week was to acknowledge that failing, and to make space for a new editor-in chief and a new generation of leadership at Refinery29 who can forge a path with an even deeper commitment to our original mission."Nancy Dubuc, the CEO of Vice Media Group, which owns Refinery29, said in a statement to CNN Business on Thursday, that Vice was unaware of the "toxic culture" at Refinery29 when it acquired the company. "It is unacceptable, and we are grateful to all the people who bravely came forward to shed light on the situation," she said. Dubuc added that Vice is looking for a new editor-In-chief for the site and has put in place an "immediate action plan to ensure that our workplace empowers diversity, equity, and inclusion inside our walls and reflects the brand purpose audiences have come to know us for."In a lengthy statement responding to CNN Business' questions about her alleged actions, Barberich said she had co-founded Refinery29 to "amplify and build community around women rarely seen or heard in media." She acknowledged a personal failure to do that, "to the detriment of Black women and women of color in particular," saying, "I couldn't see how my own perspectives and privileges held back the changes that needed to be made to further that purpose and vision, and to provide these women with the support they needed." She continued, "To all those I let down, especially members of my own team: I'm deeply sorry. The reason I stepped aside this week was to acknowledge that failing, and to make space for a new editor-in chief and a new generation of leadership at Refinery29 who can forge a path with an even deeper commitment to our original mission." When Vice Media announced last year that it was acquiring Refinery29, Dubuc sent a memo to staffers in which she acknowledged the seemingly mismatched company cultures. Vice is the notoriously edgy hipster outfit that was the subject of a 2017 New York Times article exposing toxicity and sexual harassment scandals inside the company, while Refinery29 is a fashion site aimed at progressive women and promoting diversity and inclusion. "[H]ow can the 'bros' ever mesh with the feminists of Refinery?" she asked. But 60 current and former Refinery29 employees who spoke with CNN Business over the course of a lengthy investigation painted a picture of a culture that actually fit quite well. The issues at Refinery29 were not limited to ones around race, they said. Refinery29's official mission is for women to "claim their power," but the video team was led by a male manager who, three former female staffers allege, verbally abused them in public. Refinery29 promotes stories about self-care, but 23 employees said overly ambitious traffic demands made them feel chained to their desks, and others said it kept them from taking vacations. Refinery29 tells women to ask for more money, even publishing a book that dealt in part with the subject, but 27 staffers said they were underpaid or restricted from raises.   "When people talk about the cultures not meshing it's astonishing to me because from what I can tell the cultures are very similar," a former editor said. "[A] culture that's about corporate excess and workers being treated terribly, that's Refinery."   Unbothered Refinery29 had started as a fashion and beauty blog. But over time it evolved into a site that included coverage of women's issues, pay gaps, and sexual harassment, among other topics. In 2016, it launched The 67% Project, a campaign to promote female representation of "all shapes and sizes" by highlighting the population of women "who are defined as plus size." Money Diaries, a reader-generated column, challenged women to speak more openly about salaries and money management.    Refinery29 office in New York City. (Courtesy of Chad McPhail) Many of the sources who spoke to CNN Business about their experiences at Refinery29 said they had joined the company enthusiastic about being part of a brand dedicated to women's empowerment. But once inside they were shocked by a workplace that seemed at odds with its public image. "Walking around that office when I worked there, it was very white, very straight," a former producer said. "That always bugged me. It's not what I expected. It's not that they didn't believe in the message, but the talent needs to reflect the content they are producing." Nikki Tucker, a former social media editor, said, "Refinery was really touted as that millennial place of inclusivity, where women are celebrated. You're not shamed for your body. It felt right up my alley. As a black woman in America, there aren't really too many spaces for me to be at a place where inclusivity is celebrated — at least, so I thought." Kristin Booker, a writer on contract at Refinery29 in 2014, recalled that she was one of only a few black people in the office when she worked there. Ford worked at Refinery29 in 2017. She "would spend a lot of time in office late," she said, and the people who were "most likely there, still working ... were black women." "When I talked to those women about how much money they were making and what their expectations were and what their relationship was like with their superiors, it became very clear to me that I was being treated differently and I didn't want no part of that," Ford said. Chart of Refinery29's diversity in 2018, obtained by CNN BusinessIn 2018, Refinery29's staff was 69% white and 8% black, according an internal diversity survey obtained by CNN Business. According to updated numbers provided by Vice, Refinery29's staff as of June 9, 2020 was 54.42% white and 10.7% black. These numbers are comparable to at least some of Refinery29's competitors', according to publicly released data. In 2019 BuzzFeed US' staff was 7.7% black and Vox Media was 8% black.Among those who spoke out publicly about Refinery29 last week were founding members of Unbothered, a sub-brand for black women. Current and former staffers who spoke with CNN Business frequently cited Unbothered, along with other similarly progressive, inclusive work like The 67% Project and The Anti-Diet Project as among the editorial projects they were most proud of and that were most celebrated internally. But getting Unbothered off the ground was a struggle, according to its founders. "Creating Unbothered was a year-long journey that led to the strongest community of Black women I had ever seen at the company," former senior social media editor Alessandra Hickson said in a statement to CNN Business that she then posted on Instagram over the weekend. "But it was also, unfortunately, one of the hardest years of my life thanks to a toxic culture that left me emotionally drained." Hickson wrote that she "observed other colleagues, usually Black and Brown women, be subjected to tone policing, pay disparity, and open verbal abuse."  Sesali Bowen, a former senior entertainment writer and a founding member of Unbothered, also spoke out online and in an email to CNN Business. "I thought it was a privilege to be getting exposure and experience across different areas of the company. I thought I was uniquely valued," Bowen wrote in the email. "In hindsight, I believe I was being tokenized as a fat Black woman and underpaid for my work." Bowen said Barberich once "ran her fingers through my hair" as she complimented her new hairstyle.  CNN Business corroborated this account with an eyewitness who said the incident happened out in the open where others could see. In her statement on Thursday, Barberich apologized for this, saying "I am truly sorry if this happened and if she felt uncomfortable in any way." She also apologized for confusing Ford with another woman: "I could have certainly called her the wrong name. If I did, I sincerely apologize," she said. Publicly, Refinery29 touts the success of Unbothered, but several of its founding members told CNN Business that the company initially had been resistant to the idea. Former producer Ryen Williams, who was laid off in 2018, recalled frequent meetings she had with Amy Emmerich, Refinery29's chief content officer, about the need for more content created by people of color. Eventually, Emmerich helped the founders settle on an Instagram profile separate from Refinery29's main account that became Unbothered, which has since grown to a full vertical with a newsletter and a tab on the site. "In addition to being segregated, we were told that we wouldn't be given resources to create," Williams told CNN Business. "After it took off ... the company realized that Unbothered could be monetized and that's when they started to care." On Thursday, Emmerich issued a statement about the launch of Unbothered, saying, "When we start new franchises we start small, with a soft launch, and ask ourselves 'what would resonate with the audience?' [Hickson] was instrumental and the only full time staff with one freelancer. However we used shared services from across the company -- from photo, design and video. In 2018 [Hickson] left -- and since then Unbothered has grown to 4 dedicated staff and 1 freelancer." Refinery29 office in New York City. (Courtesy of Chad McPhail) Raven Baker, a former associate social media editor for Unbothered, said she left the company due to burnout. She had repeatedly brought up to management concerns about low morale and team issues, she said, to which the company responded by changing staffers' seat assignments. "Unbothered is supposed to be a safe space for black women on the internet. How is that when it's not even a safe space in the workplace?" Baker said. Unbothered continues to lack support at Refinery29. Several former and current staffers told CNN Business that the Instagram account is primarily run by an intern making $15 per hour.  Emmerich sent a memo to staff on Thursday, apologizing "to the many Black women and POC who have spoken out about the unacceptable culture at Refinery29 with courageous, raw and painful stories about their experiences. No qualifications, no excuses -- I am sorry." She acknowledged that she "let our audience down" and vowed to be "more present" going forward. Even after the launch of Unbothered, Barberich repeatedly made other editorial decisions that placed non-white women in the background of the site's coverage, or excluded them altogether. In addition to the comments sources said she made about photos of women who were not thin and not white being "off-brand" and the list of acceptable celebrities sources said she kept that included only black celebrities who are light-skinned, one former editor who spoke to CNN Business said they had witnessed several instances in which Barberich picked photos of white people over ones that included people of color because she said "white faces" drove more traffic. Another former editor and a former producer said they witnessed similar editorial decisions by Barberich. Barberich allegedly made some of these decisions based on A/B testing — a method used to compare two variations of the same content online to see which performs better with readers. "White faces always got more clicks than brown or tan faces, which is the audience's doing, not the company's, yet the data always had the final say," the former editor said.   The producer concurred, saying, "Most employees pushed very hard for diversity on the site." "The pace there was untenable"Before it became a digital media empire, Refinery29 started in 2005 as a niche fashion blog about independent shops in New York City. Its four cofounders -- Justin Stefano, Philippe von Borries, Piera Gelardi, and Barberich -- led it together until Stefano and von Borries, who bore the titles of co-CEOs, stepped away from day-to-day roles after the Vice acquisition. Refinery29 founders Justin Stefano, Christene Barberich, Piera Gelardi, and Philippe von Borries speak onstage during a 2018 event in New York City. Stefano and von Borries on Wednesday addressed the allegations in a post on the Refinery29 website, saying, "Even though we're no longer at the company, as co-founders and former Co-CEOs, at the end of the day the buck — and the culture — stopped with us." "After having read these accounts, we recognize how our privilege as two white male CEOs created blinders that kept us from seeing the struggles, exclusion, and aggressions that you felt at R29. This is an earthquake of a wake-up call," they said. "We wanted to create an inclusive environment but didn't spend enough time with team members listening to them and hearing their stories." The company evolved into a "rare haven for young women to be taken seriously," said one former staffer. Women, many in their twenties, wrote about fashion and beauty in their own voices and attended some of the industry's most high-profile events. "The brand really, truly, was on fire," said Annie Tomlin, a former beauty director. "I have so many emails from people wanting to get a byline or photo credit there. Brands and publicists were deeply interested in being my friend because I worked there. It was the cool place to be."     But Tomlin, who started at Refinery29 in 2012, said that on her first day she left the office "in tears" when she learned the reality of the company's ambitious traffic goals. She had 12 years of experience in media and saw herself as a "very quick learner" but, she said, "the pace there was untenable." "I felt like I was thrown into the deep end," Tomlin told CNN Business.  "Even if you were doing everything you could, there were some factors that are beyond your control." Ten staffers who spoke to CNN Business said management's relentless push for traffic was apparent in a constant stream of emails sent to the editorial teams to communicate how they were pacing relative to their goals. A former Refinery29 editor described the emails as "quite impressive and thorough" but added that "every time I saw that email arrive, my stomach would tighten because it could mean we suddenly had to scramble to make up for lost pageviews."  It's not unusual for publications to push for traffic. Advertising revenue depends on bringing readers to a site; hitting traffic goals can be the difference between a publication's thriving or dying. But former Refinery29 staffers said they found themselves overworked by what they say were the company's overly ambitious traffic goals.  Some of the staffers who spoke to CNN Business said they saw traffic as a reflection of their own popularity. Three former writers said they would get reports that showed who was behind in hitting their traffic goals.    "Screenshots of articles were put up during meetings, and names weren't cropped out, so you felt the failure personally," a former writer said. "It sucked."  Booker, the writer who was on contract at Refinery29 in 2014, nicknamed it the "shame board."  One way that many sites keep a strong output of content to drive traffic is by picking up original reporting from other news outlets and rewriting it — known in the industry as aggregation. Another way is by monitoring trending stories from social media to see where readers' interests are at any given moment. These stories are often easy to produce, requiring little or no reporting and yet driving a significant number of readers to a site.   But Refinery29 wanted it both ways: they wanted the fast trending stories, but done as if they were another, more labor-intensive, kind of article. A former editor who spoke to CNN Business said their team of three reporters was asked to produce 12 to 15 stories total per day. Each of these stories was supposed to include multiple interviews, plus original photography or illustrations. That workload would be daunting even for a seasoned newspaper beat reporter, who, on a typical day, might produce just one or two stories.   The desire on the part of Refinery29 to create beautifully packaged stories with original reporting was admirable, but at least six former employees told CNN Business that the pressure from all of it led to burnout. Booker said she typically wrote six to seven stories a day.  "I wasn't used to the feeling of if I left my desk for longer than a few minutes, somebody was going to come looking for me," Booker said. "If I wasn't at my desk looking like I was producing, I had to have a damn good excuse. It was terrifying." Similarly, some staffers on the video team said they were under what they considered "aggressive" mandates for video views. Some producers would play Refinery29 videos on a loop at their desks to increase views, according to two former staffers on the video team.  In the pursuit of traffic, Refinery29 went from unearthing unique stories about fashion to chasing trending stories and celebrity news.   "I used to describe Refinery29 as Vogue in the modern era. After 2016, especially the last couple of years, it became more about selling so our content watered down...to a younger teen magazine," said a former Refinery29 designer.    Jess Rezendes, a supervising story producer, told CNN Business that the day she "realized that Refinery29 was full of sh*t" was when co-founder Gelardi sent an email to encourage staffers to write and generate traffic as a way to support "A Day Without A Woman," a strike that took place in March 2017 to protest President Trump's policies. Other female-centric sites, including Bustle and Teen Vogue, went dark for the occasion. New York Magazine's culture site The Cut also went on strike to support the cause. Gelardi did not ban staffers from participating in the strike, but Refinery29 kept publishing stories that day. For Rezendes, the email was disingenuous and showed what she called Refinery29's "hypocrisy" because she felt that it was self-serving for the company to be producing content rather than striking. Refinery29 offered unlimited vacation as a perk, but some writers say the push for traffic made taking time off nearly impossible. According to five former writers, editorial staffers had to prep a minimum of one story for every vacation day they took, something not typically required of journalists in other newsrooms. At least two people said that this policy prevented them from taking time off.   The hope was that writers could complete the extra work between the business hours of 9:30 a.m. and 6:30 p.m., according to an internal email obtained by CNN Business. But that was not always possible, according to the five former staffers.   One former writer said after taking one sick day due to an infection, her manager asked her to "double" her output -- meaning at least four stories -- when she returned the next day.    Toxic managers Barberich wasn't the only manager at Refinery29 who current and former employees accused of toxic behavior in interviews with CNN Business. There is also Stone Roberts, who was hired from Scripps in 2014 to help Refinery29 increase its video output. In a 2018 interview with Forbes, Emmerich, the chief content officer, cited Roberts as a "great partner" who "helped pave the road so when I got here at Refinery29, I could run." Refinery29 hired Emmerich in January 2015, also from Scripps, to help build out the site's video production. Stone Roberts (L) and Amy EmmerichDespite this high praise for Roberts, staffers on the video team said they felt demoralized by him. Three former staffers said he yelled at and insulted them in meetings when other employees were around. Two of those former staffers who were subjected to this abuse said he was "vindictive" when called out on it. One of those staffers said he lost his temper and cursed at them. This person said Roberts later apologized by placing a bottle of hard alcohol on her desk and muttering "sorry" as he walked away. "To me, it wasn't an environment that's actually fostering female empowerment. It was fostering insecurity," the staffer said.   Roberts told CNN Business in a statement through Vice that he had "received extensive management training and coaching between 2015-2016 to address these issues." But at a routine video team meeting in 2017, three witnesses said Roberts lashed out at the video team over an anonymous employee satisfaction survey about Refinery29's workplace culture. Some staffers who took the survey told CNN Business that they cited his behavior as a reason for their job dissatisfaction. In a packed conference in the New York office, Roberts "sits there and just tears into the entire team. 'You guys destroyed me. How could you do this to me?'" a former staffer in attendance told CNN Business.    "To me, it wasn't an environment that's actually fostering female empowerment. It was fostering insecurity."former employee on the video teamA second former staffer who was at the meeting said, "We were all in there and he was clearly really upset and he addressed it and it was a weird vibe because it sucks to hear these things about yourself, but at the same time, how is this surprising?"  In August 2017, Roberts moved to Los Angeles to "build out the video team," according to reports. That's the "story we were all told," a former staffer said. What's not clear is whether Roberts was reprimanded or punished for language his co-workers found offensive. He is now the Senior Vice President and Head of Global Production & Operations at Vice Studios Roberts said in his statement that he moved to Los Angeles "for family reasons." Money disparities   Refinery29 has covered the gender wage gap and offered strategies for women to ask for raises. In fact, Refinery29 produced an editorial package, "The Secret Guide to Getting More," in December 2017 as a how-to guide on salary negotiations. It was billed as a "first step toward asking for what you deserve." But when nearly a dozen employees did exactly that, they said, they felt they were shut down.   One former writer told CNN Business that around the same time the guide was published, she was given a promotion, but it was only in title.     "Here you are telling readers they should ask for more, but you're giving me a promotion that is title-only," the former writer said. "The messaging we were constantly given is we're family. We'll take care of you. We're a family. But that's not the way you treat your family." Refinery29 office in New York City. (Courtesy of Chad McPhail) A former designer at the company said she was rebuffed when she took her pay disparity complaint to human resources after she learned that a male colleague in a similar role made more than she did. Another former writer said their manager offered a raise, only to revoke it later without providing a reason. A former editor said she tried and failed to secure a raise for a writer to match the salary of another writer with similar experience who was making $14,000 more. A former female employee said she had to threaten legal action in order to secure a raise to match what a male colleague in the same role was making. "At the top level when I tried to fight this, they were all women, and no one really paid any attention to it. How is this possible here?" the former designer said.  Megan McIntyre, a former beauty director, said she discovered she had been making at least $30,000 less than her friends in similar positions at other publications. When she asked for a larger raise than the $5,000 bump from a promotion, she was turned down.    "The response at the time was along the lines of we can't give you this kind of raise because then we'd have to let other people go," McIntyre said. "That's the thing where they spent too much money and now they can't afford to pay you what you're worth."   Refinery29's biggest cash infusion came in August 2016 through a $45 million funding round led by Turner, a relationship that meant Refinery29 could expand its video footprint. (CNN was a division of Turner, an entity that now operates under the umbrella of AT&T's WarnerMedia, which owns CNN.) Refinery29 held a champagne toast to celebrate.  "That meeting felt like nothing could stop us, that our content was going to be on TV and Refinery29 was going towards world domination," said a former Refinery29 designer.    In December 2017, Refinery29 laid off 34 employees, about 7.5% of its workforce, and the company shifted to focus on "growth engines," including long-form scripted and unscripted video.    After those layoffs, Refinery29 employees began talking about unionizing to address the problems at the company.  In January 2019, a few months after Refinery29 laid off dozens more people, 40 members of the editorial staff unionized with the Writers Guild of America, East. In December, Refinery29 staffers agreed to be covered under Vice's union. "The messaging we were constantly given is we're family. We'll take care of you. We're a family. But that's not the way you treat your family." Former writer at Refinery29"[Vice's] contract establishes salary minimums, which have been crucial in bringing those who were underpaid -- including most of our writers, editors, contractors and freelance writers -- up to industry standards," Leah Carroll, a member of Refinery29's labor management committee, said in a statement in May. "We also were able to secure annual cost-of-living wage increases and standardized job descriptions across the unit." Carroll was one of at least 10 Refinery29 staffers who was laid off in June when Vice Media cut 155 jobs due to the economic fallout of the pandemic. For one former editor, her frustration over Refinery29's pay disparity stemmed from what she saw as the company's wasteful spending on the free snacks, kombucha on tap, happy hours and extravagant holiday parties she saw when she worked there.    "We'd hear how successful the company was, how we were profitable and bringing in revenue, and getting these massive advertising deals," the former editor said. "It was hard to see and hear, like, 'There's all this money! But you can't have any.'"   

Donie O'Sullivan, CNN Business

2020-06-05 10:32:58

business

business

https://www.cnn.com/2020/06/05/business/facebook-employee-resigns/index.html

Exclusive: He quit his Facebook job because of Zuckerberg's inaction on Trump's posts - CNN

A Facebook employee who quit the company this week told CNN he is worried the platform will be used to further escalate violence in the United States.

business, Exclusive: He quit his Facebook job because of Zuckerberg's inaction on Trump's posts - CNN

Exclusive: He quit his Facebook job because of Zuckerberg's inaction on Trump's posts

New York (CNN Business)A Facebook employee who quit the company this week told CNN he is worried the platform will be used to further escalate violence in the United States. Timothy Aveni, a 22-year-old Facebook software engineer, quit after Facebook CEO Mark Zuckerberg refused to take action on President Donald Trump's warning last week that "looting" would lead to "shooting," as protests gripped the United States. Aveni announced the move in a Facebook post that went viral. Zuckerberg's inaction, Aveni said, proved the 36-year-old billionaire had abandoned one of his key principles to shut down calls for violence on Facebook. "Zuck has told us over and over that calls to violence would not be tolerated on the platform, even if they were by the President of the United States," Aveni told CNN Thursday from his home in Menlo Park, California, near Facebook's world headquarters. Aveni said he saw grim parallels between Facebook's decision to allow Trump's message on the platform and the manner in which Facebook was used to fuel violence against the Rohingya, a persecuted Muslim minority group in Myanmar. Facebook admitted in 2018 that it had failed to do enough to prevent its platform being used to fuel bloodshed in Myanmar. Read MoreAlthough the company has implemented new policies and procedures since -- especially around misinformation, online hate, and incitement to violence -- some Facebook staff say they have been left wondering if some of the company's most significant commitments are hollow. Zuckerberg had pledged that calls for violence would not be tolerated. "If anyone, including a politician, is saying things that can cause, that is calling for violence or could risk imminent physical harm ... we will take that content down," he said testifying before Congress last October. Facebook CEO Mark Zuckerberg testifies before Congress in October.As protests, some violent, played out across the US, President Trump posted on Facebook and Twitter last week, "these THUGS are dishonoring the memory of George Floyd, and I won't let that happen. Just spoke to Governor Tim Walz and told him that the Military is with him all the way. Any difficulty and we will assume control but, when the looting starts, the shooting starts." His phrase "when the looting starts, the shooting starts," mirrors language used by a Miami police chief in the late 1960s in the wake of riots. Aveni viewed Trump's post as a call for violence. Twitter took action on identical language posted on its platform saying Trump had glorified violence. Zuckerberg decided to take no action, explaining in a Facebook post, "we decided to leave it up because the National Guard references meant we read it as a warning about state action, and we think people need to know if the government is planning to deploy force." "I don't think that this was a decision made based on principle," Aveni told CNN Thursday, "I think he made the decision and then tried to find some way to connect it to principle, because that was convenient for him. And that's not the way these things should go." Decision to quit After interning at the company twice during college, Aveni started a full-time job at Facebook immediately after finishing college a year ago. He was optimistic about the role he could play at Facebook, saying, "I think Facebook in a lot of ways is a really positive force for good in the world. There are incredible ways that Facebook is able to connect people to other people, and we're seeing all over the world that that is having a really positive impact on people's lives." Facebook had, by the time he joined in 2019, faced scrutiny on a number of fronts. Aveni said he understood that. "So I knew that Facebook wasn't pure," he said. "And I acknowledged that, you know, to some extent, maybe I, I should accept blame for, for going there anyway. But I really do think that in many, many ways, Facebook is a net positive in the world, and I wanted to help contribute to the positive." Timothy Aveni quit his job at Facebook after CEO Mark Zuckerberg refused to take action on a post from President Trump.After revelations of widespread misinformation before the 2016 US presidential election, Facebook partnered with the International Fact-Checking Network (IFCN) to work with a global network of third-party fact-checkers. While posts debunked by fact-checkers remain on Facebook, a fact-checking message is appended to them. Facebook often points to the network of third-party fact-checkers when it attempts to push back on the perception that the company itself is an arbiter of truth. As an engineer, Aveni said he is part of a team that is responsible for showing fact-checks to Facebook users.It was only a few months into his time at the company though that Aveni, a registered Democrat, began feeling disturbed by what he viewed as the company reneging on its principles. In September, after protests from Republican US senators, Facebook removed a fact-check on an anti-abortion video. Aveni saw Facebook's intervention in the fact-check of the anti-abortion video as highly problematic, evidence, he says, of Zuckerberg bowing to pressure from conservatives and an abandonment of principle. An investigation by the International Fact-Checking Network found the fact-check to be "fair and accurate." But it was Facebook's inaction on Trump's posts last week was what ultimately led Aveni to quit. Others stay Aveni's public resignation, along with growing public outcry from current employees on social media, is essentially unprecedented in a company where dissent is usually kept in-house. Some employees, according to Aveni, have chosen to stay at the company in an attempt to use their positions to change it. Aveni described resigning as an "extreme option." "I think that the right option for a lot of people, including many of my colleagues, is to keep trying to do the right thing from within the company. I just felt like I couldn't do it anymore. I was exhausted." Aveni resigned from his job in a public post on Facebook.Despite his public Facebook post on Monday slamming Zuckerberg, when Aveni spoke to CNN Thursday he was still an employee of the company — having given Facebook two weeks' notice. On Thursday night, a Facebook spokesperson told CNN that Aveni was no longer an employee. A fact that Aveni said had not been relayed to him when asked by CNN on Thursday night. Aveni said he still had access to systems including his work email.Aveni said he decided to go public with his resignation to show those who suffer racial injustice "in this really chaotic time in the country that we are allies." Aveni said he has been overwhelmed by the outpouring of public support since his post on Monday. He's received messages about potential new work, and he confirmed, "I have received outreach from some employees at Twitter." A Facebook spokesperson did not respond directly to Aveni but pointed to a statement the company had issued earlier in the week, "We recognize the pain many of our people are feeling right now, especially our Black community. We encourage employees to speak openly when they disagree with leadership. As we face additional difficult decisions around content ahead, we'll continue seeking their honest feedback."The spokesperson also pointed to Zuckerberg's two public posts on the issue. Some optimism One group controversially exempt from the fact-checking system at Facebook is politicians, who can lie without having their posts or ads flagged with fact-checking messages or penalized by the algorithm under Facebook's current rules. "We don't fact-check political ads. We don't do this to help politicians, but because we think people should be able to see for themselves what politicians are saying," Zuckerberg said in a speech defending the policy last year, "I know many people disagree, but, in general, I don't think it's right for a private company to censor politicians or the news in a democracy." Despite disagreeing with that exemption, Aveni said he think Facebook has done a good job fighting misinformation. "They've spun up a great misinformation team that's done really incredible work in making sure that misinformation doesn't have as big of an impact as it would have had otherwise," he said. But, Aveni warns, it doesn't matter how good the technology is, or how good partnerships with the likes of fact-check organizations are if Zuckerberg and company leadership aren't going to step-up in the moments that matter. "I think [Zuckerberg is] scared to take action when it really, really matters," Aveni said, "And that concerns me because I don't know how many chances we have to do the right thing anymore. I think we're seeing the country go down a really, really dangerous path."

Story by Jon Sarlin, CNN Business Video by Jon Sarlin and Janelle Gonzalez, CNN Business Photo illustration by Ken Fowler

2020-11-23 12:42:45

business

tech

https://www.cnn.com/2020/11/23/tech/zoom-founder-eric-yuan-risk-takers/index.html

Everyone you know uses Zoom. That wasn't always the plan for founder Eric Yuan - CNN

When Eric Yuan founded Zoom, he set out to create a 'frictionless' video conferencing app to be used by businesses. But then a global pandemic turned Zoom into a household name.

tech, Everyone you know uses Zoom. That wasn't always the plan for founder Eric Yuan - CNN

Everyone you know uses Zoom. That wasn't the plan

The tweet was when Eric Yuan knew something had to change. Boris Johnson, the UK prime minister, shared a photo from his first ever virtual cabinet meeting. The cybersecurity red flags jumped out immediately.See more from this year's Risk Takers, featuring 10 leaders making 10 big bets to push business forward.Some cabinet secretaries' Zoom screen names were visible, you could see which platform the cabinet was running its computers on, and most glaringly, the meeting ID was visible for all to see. The significance of the moment was not lost on the team at Zoom. "That was the big aha moment," Zoom board member Santi Subotovsky told CNN Business. Zoom founder Eric Yuan poses in front of the Nasdaq building after the company's IPO in April 2019. (Kena Betancur/Getty Images)Read MoreZoom grew into a vastly profitable business selling software to businesses that could enable a venture capital firm to seamlessly take virtual pitch meetings from around the globe or an executive to deliver an all-hands to a remote workforce. Powering British Cabinet meetings was never on the radar. "Our company that used to be a 100% enterprise-focused, is now powering the world. It's powering governments, education, social activities... And then when the other shoe dropped, it's like we need to get ready for that," Subotovsky said. Zoom was already enmeshed in controversy. Less than two weeks earlier, The New York Times had raised the flag on "Zoombombing," opening the door to a flood of scrutiny, from its feeding data into Facebook to the New York State Attorney General scrutinizing its data practices. But for Eric Yuan, the 50-year-old founder and CEO of Zoom, it was the Johnson tweet that changed everything.This morning I chaired the first ever digital Cabinet. Our message to the public is: stay at home, protect the NHS, save lives. #StayHomeSaveLives pic.twitter.com/pgeRc3FHIp— Boris Johnson #StayAlert (@BorisJohnson) March 31, 2020 "This was our wake-up call," Yuan told CNN Business over a Zoom interview from his San Jose home in April. Yuan blames himself for not anticipating that users might want to share a screenshot of a meeting. For his business clients, sharing a screenshot of your board meeting would be unthinkable. But business clients weren't his only worry anymore. The world had become his customer. Within a week, Zoom pushed out an update that would hide the meeting ID from view. But for Yuan and his team at Zoom, the damage had only just begun. Yuan built Zoom to please his customers — to use Zoom-speak he wanted to "deliver happiness" — and for years that meant giving his business clients a high-quality video conferencing platform that was easy-to-use. "Frictionless," as the company likes to say. But during a global pandemic that has transformed Zoom into an essential tool for schools, church groups, weddings, and the cabinet of a G7 economy, Yuan is trying to figure out how to make Zoom something it was never meant to be. Now, "Zoom is not only a business communication company, suddenly it's becoming an infrastructure company," Yuan said.Since the pandemic, Yuan has had little time to enjoy his family's multiplying fortune ($19 billion at last count, according to Forbes). He refers to April as one of the most stressful times in his life, which consisted of three things: Zooming, eating and sleeping, and he barely did much of the last one."I've had several sleepless nights" Yuan said in front of a virtual background with the words "WE CARE" hovering over a heart-shaped earth. What is the question keeping the CEO of the company — one that is now worth more than double General Motors —up at night?Yuan takes a breath. "How did we get here?"Zoom is headquartered in San Jose, California. (Smith Collection/Gado/Getty Images)Shandong to Silicon ValleyYuan grew up in the Shandong Province in China in what he describes as a middle-class family. The child of geological engineers, Yuan was an average student who studied computer science, and after a stint working in Japan, decided he wanted to come to the center of technological innovation: Silicon Valley."I wanted to embrace that first wave of internet revolution," Yuan said. Yuan applied for an H-1B visa to come to America but was rejected. And then rejected again. And again. In what has now become part of his founder's lore, Yuan applied eight times before being accepted into the United States. Yuan entered Silicon Valley in 1997, during the first internet boom. Entranced by fast-growing companies like Netscape and Yahoo, who were revolutionizing the world's communications, Yuan wanted to get in on the ground floor of a bustling startup. He found it at WebEx, a young company — he was among the first 20 hires — whose goal was to leverage rapidly increasing bandwidth capabilities into online meetings where you could share your desktop screen easily and cheaply. Yuan, who was 27 years old at the time of his arrival, fit into the global workforce of WebEx — a significant number of Chinese immigrants were recruited alongside Yuan — but found himself stymied by his inability to speak English. While he could understand the conversations around him, he says he couldn't participate. "I couldn't join a marketing team or a sales team," said Yuan. "I had to go back to writing code."Yuan's former colleagues associate Yuan's limited English (he still has a thick Chinese accent) with him being repeatedly overlooked. "I saw a tremendous amount of unconscious bias against Eric because he didn't look the part, he didn't sound the part," says David Knight, a former VP of Product Management at WebEx. "We put so much stock in how people communicate. We ascribe their eloquence to be their intelligence."While Yuan couldn't control how others understood his English, he focused on what he could control: his work."I knew two things from my father: keep working hard, stay humble, and someday you'll be OK," Yuan said.Eric Yuan speaks before the Nasdaq opening bell ceremony on April 18, 2019 in New York City. The company's IPO priced at $36 per share, at an estimated value of $9.2 billion. (Kena Betancur/Getty Images)The WebEx yearsWebEx was founded by two immigrants: Subrah Iyar came from India and ran marketing and sales, while Min Zhu, a Stanford-educated immigrant from China, was in charge of technical development. Both became mentors for Yuan. WebEx's early days were similar to many startups in the Valley: a flat, diffuse hierarchy that rewarded long hours from a loyal staff intent on changing the world. "We were very scrappy," said Ed Wong, a friend of Yuan's who worked as a product manager with him at WebEx. Unlike other product-focused companies, WebEx sold itself as a cheap cloud-based "SaaS" (software as a service) that only required you to download its product: no expensive hardware purchases necessary. "Your economics had to be different," explained Subrah Iyar to CNN Business. "The price point for SaaS meant that you didn't get too much money upfront, you got it on a monthly basis."That SaaS model put tremendous pressure on the employees of WebEx to continually service and respond to their customer's demands. Companies were taking risks moving meetings and events online and any disruption in that service was seen by the WebEx team as an existential threat."Nobody thinks of web conferencing as mission critical. But when a meeting goes south and you've got eight or ten executives on the call, it's a big deal," said Knight. "If WebEx was down for five minutes, I would spend the next month traveling and meeting customers, explaining to them why it happened and why it wouldn't happen again," said Velchamy Sankarlingam, who worked alongside Yuan as an engineer at WebEx. "If your service goes down, you're going to get churn. People are going to switch away."Yuan proved his worth to Iyar and Zhu, rising to lead the engineering team as the company's fortunes grew. First there was the RuPaul Super Bowl ad in 2000, then a successful IPO later that year. WebEx even received an unlikely boost after 9/11. Amid global panic, companies who didn't want their employees flying unnecessarily instead turned to a service that could enable cheap and easy virtual meetings. And because WebEx was built on the cloud, Yuan and his engineering team's software could scale and meet the increasing demand. After first fielding an offer from IBM, Iyar and the WebEx board decided to sell their company in 2007 to Cisco for $3.2 billion.Yuan, who was so attached to WebEx that he referred to it as "his baby," now found himself an employee of the one of the largest technology companies in the world. The WebEx team celebrates their IPO in 2000. WebEx cofounder Subrah Iyar, in a greige shirt, is flanked by Eric Yuan in a black polo shirt and hat. Yuan was an engineer for the company at the time. (Photo courtesy of Subrah Iyar)From fast-growing startup to a 'rounding error'Thanks to the Cisco acquisition, Yuan became a rich man. But while some WebEx employees took their earnings and split — wary of making the transition from fast-growing startup to cog in a Fortune 500 corporation — Yuan stuck around. It was still his baby after all. "He wasn't ready to leave yet. He had a lot of loyalty," said David Knight, a VP at WebEx at the time of the acquisition. But, that loyalty was quickly tested. "Almost immediately they started to dismiss everything that we did," said Matt Sheppard, then a WebEx employee. "Eric was dismissed, along with the other leadership at WebEx, as being kind of second rate." But still, Yuan stayed. "Every time I felt like leaving, I just got emotional," said Yuan, who worked at Cisco for four years. Former WebEx employees who made the transition to Cisco describe a key philosophical difference in how the two companies handled their customers. While WebEx's SaaS business model required them to serve their customers 24/7, Cisco made its billions selling physical routers and switches. "It's a completely different mindset," said Sankarlingam. "Cisco just sells the gear. And after that it's up to your network ... if a company's network goes down, nobody's going to go blame Cisco."WebEx, once a fast-growing startup, now was a cog in a blue-chip behemoth. "We were a rounding error in Cisco's business," Knight said.Yuan felt for the first time that he couldn't satisfy his customers. He says his WebEx customers grew frustrated with the quality of the product. They wanted WebEx to work reliably and more intuitively. And above all else, they wanted video to run seamlessly. "He was sincere, almost naïve in that he always cared about the WebEx customers and that they were not being attended to," said Iyar, who was often told by Yuan that he should have never sold the company.Yuan would confide in Iyar that he felt like he was betraying the customer-obsessed ideals he learned at WebEx. "He had the advantage, in retrospect, that that's the only thing he grew up with, right? In a sense, one of his strengths is that he's a purist to that model," said Iyar.For Yuan, his time at Cisco turned out to be invaluable: it transformed him from engineer to entrepreneur. Yuan's frustrations at Cisco "sparked the flames in his fire that he became very competitive," said Sheppard. Founding Zoom "was purely a reaction to them not listening to him."A Cisco spokesperson told CNN Business in a statement that the WebEx acquisition was a "very important one for us and changed the way the world works. We thank Eric for his time at Cisco."Zoom foundingYuan left Cisco in 2011, along with around 40 China-based WebEx engineers. Initial funding for his new company came from his acquaintances and former colleagues, including Subrah Iyar. "If he told me he was sending a person to Mars I would have put money in," recalls Iyar. With funding and staff in place, Yuan could launch his new baby: Zoom. The pitch was simple. Build a better WebEx. A substitute teacher works from her home in Arlington, Virginia, using Zoom to communicate with students and their families. (Olivier Douliery/AFP/Getty Images)"He didn't try and revolutionize it. He just made it better and cheaper and higher quality and simpler and video-centered," said Knight, who left WebEx shortly before Yuan. Yuan's plan to capture WebEx's enterprise market relied on building Zoom video-first. It would be cloud-based, run on Macs and PCs, iPhones and Androids, and you could make it work without downloading any software in your browser. But above all else, Yuan wanted to make his customers happy. "I wanted to join a company where I woke up every morning and felt happy: I wanted to build a better solution to deliver happiness to the WebEx customers," said Yuan. "That's it."AT&T, which owns CNN's parent company WarnerMedia, offers business customers Cisco's WebEx collaboration software, which competes with Zoom.'The Holy Grail'It turns out, what makes the customers of video conferencing happy are the things they don't have to think about. No one wants to download an app or sign up for an account if they don't have to. They just want the thing to work. But ask any engineer and they'll tell you that making a simple product is never simple. "You have to build a lot of discipline into the product," Oded Gal, a former WebEx veteran who now works alongside Yuan at Zoom as its Chief Product Officer, told CNN Business. Just as WebEx built a cutting-edge screensharing platform off the new bandwidth enabled by the DSL and T1 lines of the 1990s, Zoom would be built off the advanced data networks capable of streaming HD video. "Video was not possible in the 2000s because the bandwidth was not there," said Iyer. "That was changing."In a Zoom call, each user can upload upwards of two streams (one for video, one for screensharing) to a cloud server which then compresses each stream, adjusts the output for the bandwidth and CPU capability of each computer or phone, and sends them back, with as low a latency as possible. Multiply that by up to 100 users, and the problem becomes exponentially more complicated."You don't know what you don't see, you just experience the end result," said Iyar. Alexis Garrod, CrossFit Potrero Hill partner and head coach, demonstrates an exercise to participants while instructing a class over Zoom in an empty gym in San Francisco in April. (Jeff Chiu/AP)"Everybody thinks video conferencing is easy and it turns out the tech is really hard to do," says Knight. "You don't control the network, you don't control the ISP, you don't control whether somebody turns the microwave on and interferes with the WiFi."While figuring out how to make scalable video calls was a daunting challenge, for Yuan's Zoom team, it was only half the battle. They also had to make Zoom frictionless enough that anyone could use it. So easy that it makes his customers happy. Zoom could work in any browser. It wouldn't need you to adjust your firewall settings. And unlike WebEx meetings, with their hard-to-remember pins and meeting IDs, Zoom would be accessible with a simple link. "Getting rid of that user friction... in the tech world, it's kind of the holy grail," said Beth Kindig, technology analyst at beth.technology. Zoom spreads Yuan's new baby was up and running. Yuan's plan for Zoom was to pilfer off WebEx's customers. To attract new users, Zoom began offering a freemium version of its product. Meetings under 40 minutes with up to 100 users would be free to use. Yuan's bet was that as more users tried Zoom, businesses would see that it worked better than WebEx, and would end up paying to switch to his new product.Zoom's freemium model gave it an entrance into a crowded marketplace where its competition were some of the largest companies in the world. Of course, there was Cisco's WebEx, but Zoom was also up against Microsoft and Google. But while companies might have had established deals with WebEx, Zoom's freemium accounts meant that the employees at those companies could just use Zoom."Everyone had Cisco WebEx, or they had Microsoft Suites," said Kindig. "But everyone used Zoom because of how easy it was to just send out that link."The "Saturday Night Live" cast used Zoom to film the show from their homes. (SNL/Twitter)Live from Zoom, it's 'Saturday Night Live!'Zoom was winning. Yuan's freemium strategy worked and tech companies, entranced by Zoom's simplicity and efficiency, signed up for premium Zoom subscriptions. In a few short years, Zoom found itself the video conferencing market leader, and, after a successful 2019 IPO, Yuan became a billionaire multiple times over. Yuan's baby was all grown up. But a funny thing happened on the way to dominating the B2B remote video conferencing market: a global pandemic turned Zoom into a household name. With the world shutting down in a matter of weeks, every institution, every school, every college, every family now found themselves in desperate need of a way to communicate. Yvonne Reiter performs a Torah reading over Zoom as she celebrates her bat mitzvah ceremony at home during the coronavirus pandemic. (Lindsey Wasson/Getty Images)"You don't go into a pandemic with the video conferencing solution you wish you had. You go into the pandemic with the video conferencing solution you have," said Bill Marczak, a research fellow at the Citizen Lab. Over a mindboggling month of coronavirus-fueled growth — according to Zoom, its traffic rocketed up to 3,000% in May — Zoom unexpectedly joined Google, Kleenex and Band-Aid in the hallowed branding pantheon of proprietary eponyms. "You free to Zoom?" a phrase that would have been incomprehensible to the vast majority of us a couple of months ago, became an invitation your grandparents understood.And during an unprecedented spike in traffic, Zoom's cloud network, built on AWS and Oracle, scaled up to meet the crushing demand. Yuan's obsessions — his focus on video, on ease-of-use, on building scalable architecture — all paid off, and amid a cratering global market, Zoom's stock surged over 600% since the beginning of 2020. But as Zoom transitioned from IT departments to "Late Night with Jimmy Fallon" and 10 Downing Street, security researchers began to dig into this newly ubiquitous company. Was this easy-enough-for-anyone-to-use product actually safe for any of us to use?'Speed at the expense of all else'The hits came quick. First it was "Zoombombing." Then Zoom's encryption was discovered to be inadequate and its data was found to be routed through Chinese servers. Its privacy policy was picked apart.Lawsuits were filed, New York Attorney General Letitia James sent a letter asking whether the company "is taking appropriate steps to ensure users' privacy and security," and institutions like NASA, New York City schools, and SpaceX banned their employees from using Zoom. Zoom says that the problems stem from its overnight transformation into an infrastructure company for the world. Before, Zoom expected its business customer base to have security teams who would enable best practices, like enabling passwords by default. Yuan wrote a blog stating that the servers located in China were an accident due to the surge in traffic, and Zoom data would not be routed through them again. "[Yuan] realized that he has to be the IT department, the compliance department for the world, which I don't think he signed up," said Yuan's old mentor, Iyar. Zoom acted swiftly, quickly patching uncovered security vulnerabilities, purchasing Keybase, an encryption startup, instituting a 90-day product freeze, and hiring Alex Stamos, former chief security officer at Facebook, and Lea Kissner, formerly the global lead of privacy technology at Google to bolster its security team. The company has since come to an agreement with Attorney General James, and New York City public schools are now permitting its use.In November, Zoom settled with the Federal Trade Commission over what the agency described as "unfair and deceptive security practices," including misleading its customers about whether end-to-end encryption was actually being used. "The hundreds of millions of consumers who rely on Zoom every day to conduct business, get healthcare, educate their kids, and connect with family members have a right to expect the company to take steps to protect their personal information," the FTC wrote in a blog post. In a statement to CNN Business, Zoom said the FTC settlement was "in keeping with our commitment to innovating and enhancing our product as we deliver a secure video communications experience."When you begin to examine Zoom's security vulnerabilities, a theme emerges. "A lot of the security issues we saw seem to be the result of choices made that privileged user experience over security," said Marczak, who was part of the Citizen Lab team that uncovered security vulnerabilities in Zoom. "You get this clear pattern where it looks like there were these vulnerabilities that were caused by decisions made to increase speed at the expense of all else."Musician Tati Diaz Bonilla plays the keyboard as a student listens and watches through Zoom during an online lesson from his apartment in Buenos Aires, Argentina. (Marcelo Endelli/Getty Images)Marczak helped uncover a vulnerability in Zoom's "waiting room." The waiting room is the first step of a password protected meeting, where the host could choose to let people in. Marczak and his colleague John Scott-Railton discovered that Zoom was sending an encrypted stream of the meeting to those not-yet-accepted. A savvy user could scoop up that data and spy on the meeting, "presumably, so that when you were admitted the video would show instantly," explains Marczak. Or, take the Boris Johnson photo. Having the meeting ID visible on the top-left corner of the screen was an intentional choice to make Zoom's customers not have to dig around menus to find a meeting ID. "We wanted it to be easier for the end user to let others join," Yuan said. But having a visible meeting ID meant that a screenshot posted on social media would allow anyone to enter the ID and join in (assuming that the meeting was not password protected). "Did we think about privacy? No, that's the problem," Yuan said. 'His product did so well, it broke'Zoom's security and privacy problems aren't Yuan's only concerns. On the heels of Pfizer's stunning announcement of a successful vaccine trial, Zoom's stock cratered, hinting at investor skepticism as to how the company would fare in a return to normalcy. And then there are the competitors, jealously eyeing the massive profits that Zoom has raked in over the last year. Open your Gmail app and you'll find a prominent "Meet" button, beckoning you to invite others into a video chat. Microsoft blanketed the airwaves with ads touting the Zoom-esque video chat features of its Teams platform and Facebook, no stranger to copying from a rising competitor, launched its "Messenger Rooms" back in April. Zoom's long-standing ties to China are also becoming an increasing liability. The company has utilized Chinese developers from its onset — its R&D department in China has over 700 employees — a practice that Zoom warned in its annual report "could expose us to market scrutiny regarding the integrity of our solution or data security features." In April, Speaker of the House Nancy Pelosi erroneously referred to Zoom as a "Chinese entity," while rejecting the idea of a Zoom enabled remote Congressional session. (Zoom is an American-based company, headquartered in San Jose). In July, a bipartisan group of senators wrote a letter to the Justice Department, urging them to investigate both Zoom and TikTok's connections to China."We believe that it is imperative that the Department of Justice investigate and determine whether Zoom and TikTok's business relationships, data handling practices, and operational connections to China pose a risk to Americans," wrote Sen. Josh Hawley (R-MO) and Sen. Richard Blumenthal (D-CT). Yuan admitted to CNN Business in April that as tensions between China and the United States rise, Zoom might have to adjust its long-standing ties to China, suggesting Denver, Ohio or Virginia as possible sites for a relocated Zoom R&D center. "If things get worse, we do have a plan," said Yuan. Subsequently Zoom announced it would triple its workforce in India, and open two R&D centers in Phoenix and Pittsburgh, with plans to hire "up to 500 software engineers" between the two cities. Portuguese Minister of State, Economy and Digital Transition, Pedro Siza Vieira, meets via Zoom video conference with members of the Portuguese Foreign Press Association AIEP to discuss the government's economic response to the coronavirus pandemic. (Horacio Villalobos/Corbis/Getty Images)Meanwhile, the safety of Zoom has remained a controversial subject amongst security researchers."Zoom is Malware," reads one headline, while a trio of security researchers published "Zoom isn't Malware," offering a number of steps to bolster up security for the average user. And while Zoom's continued public lashing is ongoing, it could end up helping them in the long run."I think that probably a lot of CEOs are envious of his position," said Kindig. "His product did so well, it broke.""Thank you, Zoom, for listening," wrote Doc Searls, a technology journalist who had been highly critical of Zoom's privacy policies. "At least in public, they're taking all the right steps," echoed Marczak.More on ZoomZoom profit skyrockets 3,300% on remote work trendZoom is backing away from China — and doubling down on IndiaZoom's massive 'overnight success' actually took nine yearsYuan says the scrutiny that Zoom has received has been a blessing in disguise, allowing him to improve his company in ways that he never could have imagined otherwise. He now devotes his entire day only to security and privacy matters. "The harshest criticism may be the best words you ever hear," Yuan muses. Even in response to Nancy Pelosi wrongly describing Zoom as a "Chinese entity" Yuan blames himself."If the world misunderstands us, then I don't blame others, it's our problem... We are a very proud American company. The company is a public Nasdaq company, headquartered in San Jose. I'm a Chinese American. I truly believe... as long as you do the right thing, sooner or later they will know it... just be patient.""In ten to twenty years, when people write the history of Covid-19, I want them to write that Zoom did the right thing for the world," Yuan said. CORRECTION: An earlier version of this story misstated the year for Zoom's 600% stock surge. It was 2020.This story was originally published in May 2020, and updated in November.

Sherisse Pham, CNN Business

2020-05-05 04:07:24

business

tech

https://www.cnn.com/2020/05/05/tech/tiktok-bytedance-coronavirus-intl-hnk/index.html

TikTok-owner ByteDance is raking it in during the coronavirus pandemic - CNN

For TikTok-owner ByteDance, the coronavirus outbreak has been a boon to business.

tech, TikTok-owner ByteDance is raking it in during the coronavirus pandemic - CNN

TikTok is winning over millennials and Instagram stars as its popularity explodes

Hong Kong (CNN Business)Alana Tsui hadn't really thought about joining TikTok before the coronavirus pandemic. The artist and influencer already had a healthy following on Instagram. And like many other friends, the 31-year-old had dismissed TikTok as an app for pre-teens. But the spread of the virus in New York City forced Tsui to wait out the pandemic indoors, and she found herself with a lot of spare time to try something new. "I thought, I'm in lockdown, I don't have anything to do ... and it looked fun," Tsui said. Now she finds herself sometimes posting four videos a day on the platform. These 12 essential apps will make quarantine bearableTsui is not alone. In the last few months, hundreds of millions of people around the world have downloaded the short-form video app as the United States, Europe and elsewhere impose strict restrictions in order to curb the spread of the coronavirus.Read MoreFor many people, the app has become a fun escape from all the grim news about the virus and its economic toll. TikTok has seized on the moment, pushing upbeat hashtags such as "#HappyAtHome," which has seen many users rope their parents into doing TikTok videos. It is also promoting live streams of soothing content: On a recent Wednesday, for example, one such stream was broadcasting live footage from a panda sanctuary. The promotions appear to be paying off. TikTok was downloaded 315 million times from January through March, according to Sensor Tower — an amount that the analytics company says topped any other app ever for a single quarter. TikTok now has 2 billion downloads overall, doubling its total from just 15 months ago.The company is also winning over coveted users, like Hong Kong-based content creator and influencer Taylor Richard, who boasts more than 300,000 followers on Instagram (owned by Facebook (FB)) and 1.1 million subscribers on YouTube (owned by Google (GOOGL)). She said TikTok approached her last year to come join its platform. Richard, 31, thought it skewed a bit too young for her. View this post on Instagram My Pajama Collection 💫 I got 6 looks. A post shared by Taylor R (@taytay_xx) on Apr 23, 2020 at 8:21am PDT Then the coronavirus outbreak hit, and Richard found herself hooked on TikTok's 15-second videos. She also liked that more "older people, like my generation and older, are joining it. And a lot of the songs are from my generation," she said. Richard, who has about 15,000 followers on the app, joined in early April and TikTok now sends her weekly emails, telling her which hashtags are performing well, and giving examples of trending video content. The record-breaking influx of new users is a major win for app owner ByteDance, which has been trying to capitalize on TikTok's worldwide appeal. The app is the only social media platform made by a Chinese company to gain significant traction outside of China. But the Beijing-based startup's success inside of China during the pandemic has also been enormous — and may provide clues as to how TikTok hopes to grow into a major money maker in the future. A record quarterly haul ByteDance's mobile apps raked in $157 million from January to March, according to Sensor Tower. Close to 90% of that amount came from China, and was almost entirely driven by Douyin, the Chinese version of the company's killer app. It was a record quarterly haul for ByteDance, representing a 423% increase compared to the same period a year earlier, and up 50% compared to the previous quarter.Bytedance did not respond to requests for comment for this article.The first week of February was Douyin's biggest week ever, with users spending over 3 billion hours in the app — up 130% from the weekly average in 2019, according to analytics company AppAnnie. In China, live-streaming is very popular. Influencers often make money by receiving virtual tips during live streams. "In general on Chinese apps, there's a habit of tipping content creators," said Wiktoria Marszałek, an account manager with Nanjing Marketing Group, a company that helps foreign firms grow their brands and sales in China.FaceTime dance parties and digital picture frames: How people are staying connected to their grandparentsFor example, she said, Douyin users buy virtual donuts or hearts that they can gift to content creators or influencers during live streams. All of that translates into in-app revenue for ByteDance. The company still makes most of its money from advertising. Consulting firm R3 estimates that ByteDance made about 140 billion yuan ($19.8 billion) in advertising revenue in 2019."In many categories, it outstripped Tencent (TCEHY) and Baidu (BIDU)to become the No 1 adverting platform" in China, said Greg Paull, a principal with R3. But the in-app revenue it gets from Douyin and TikTok users is more than just chump change. Douyin and TikTok revenue "is skyrocketing now," said Randy Nelson, an analyst with Sensor Tower. Sensor Tower views TikTok and Douyin as essentially the same app, citing the similarities in branding, marketing and user experience.Nelson said the app's success in monetizing users vaults it into the same league as top entertainment companies. When it comes to non-gaming apps, TikTok ranked third in March for global in-app revenue, after dating app Tinder and YouTube. Disney's (DIS) new streaming app and Netflix (NFLX) rounded out the top five. "It was above Disney+, it was above Netflix. And that's without Android in China," he added. Sensor Tower can only track data from the App Store and the Google Play store, and the Play store is banned China. Bytedance raked in $157 million last quarter, the vast majority of which came from Douyin, TikTok's Chinese sister app.Some influencers are betting on TikTok post-pandemicTikTok has not seen as much of a windfall as Douyin, because it only started monetizing through advertising and live streaming last year, according to a TikTok spokesperson. But Douyin provides clues as to how TikTok hopes to emulate the financial success of its Chinese sister app. For example, TikTok last year made live streaming available to users with a certain number of followers. It remains to be seen if the feature will take off outside of China, though. Westerners are "not as used to the Chinese style of live streaming" where influencers stream for hours just to hawk goods, said Marszałek, of Nanjing Marketing Group. "In China they're just sell, sell, sell," she said. Nurses and doctors are flocking to TikTok to crack jokes and lip sync. But are they eroding patients' trust?Giving virtual money to content creators on social media isn't common practice either — Facebook has an in-app currency that it introduced so users could tip content creators, but it has never gained traction, according to Nelson, of Sensor Tower. TikTok has also begun experimenting with e-commerce buttons for select advertisers and influencers, according to Digiday. The ad revenue would be split between TikTok and the influencer, similar to what is already done in China on Douyin. Like many other social media companies, TikTok is anticipating the coronavirus will deal a blow to advertising revenue in the United States, Europe and other markets where it operates. It has begun "donating" advertising credits to health organizations so they can post updates about the pandemic. TikTok will be offering more free ad space to restaurants and small businesses when they start to re-open, the spokesperson said. Once companies start spending again, users like Tsui are betting TikTok will be where they splash out money. With dance challenges and explainer videos, publishers invade TikTok to court Gen ZBefore moving to New York, Tsui lived in Hong Kong where she earned about $1,500 per month partnering with brands and advertisers to promote their wares to her 74,000 followers on Instagram. Breaking through on Instagram in New York has proved difficult. But now, "because everyone is talking about TikTok, the brands are really targeting influencers and doing ads on TikTok," she said. Tsui joined TikTok at the beginning of April. One of her posts managed to land a coveted spot on the app's "For You" feed — a place where users can watch content that TikTok's algorithm believes they will like, based on past behavior in the app. Tsui went from 17 followers to more than 10,000 overnight. She currently has about 27,000 followers. The New Zealand native is now trying to figure out TikTok's notoriously opaque algorithm in the hopes that she can develop a strong enough following to bring in earnings. "I definitely think TIkTok is the way to go in the future in terms of advertising and product promotion," Tsui said.

Isabelle Gerretsen and Ivana Kottasová, CNN Business

2020-05-03 07:32:13

business

business

https://www.cnn.com/2020/05/03/business/cheap-clothing-fast-fashion-climate-change-intl/index.html

The world is paying a high price for cheap clothes - CNN

The fashion industry is starting to care about its role in the climate crisis. But rapid consumption and fast-changing trends are in direct tension with retailers' sustainability missions.

business, The world is paying a high price for cheap clothes - CNN

The world is paying a high price for cheap clothes

When shoppers entered H&M's flagship store in central London last summer, the first thing they would have seen was a dark blue, flowery minidress hanging front and center. On sale for just £4 (or $4.80 US), the dress featured more than a low price tag. It also boasted a green label with the word "CONSCIOUS."Further down the aisle, recycling bins stood next to a collection of striped t-shirts and dresses.This setup is not uncommon in H&M's 4,473 stores stores across the world. That's because the company wants to be seen as a climate champion. The Swedish clothing empire runs an array of sustainability programs, encouraging customers to bring back unwanted clothes for reuse. It's been releasing annual sustainability reports since 2002 and launched its first Conscious Collection using organic cotton and recycled materials in 2010. More recently, the H&M Group announced a plan to make all its apparel from recycled or sustainably-sourced materials by 2030. It has also tried adding "repair and remake" stations in select stores, and it's testing clothing rentals in Stockholm.Read MoreLike its other fast fashion rivals, H&M's core business model is fueled by low prices, rapid consumption and fast-changing trends — all of which are in direct tension with its sustainability mission. The global fashion industry generates a huge amount of waste - one full garbage truck of clothes is burned or sent to a landfill every second, according to the a report by the Ellen MacArthur Foundation, a leading non-profit working to improve the industry's sustainability record.H&M displays dresses from its 2018 Conscious Exclusive collection. The retailer wants to be seen as a climate champion — but that sustainability mission is in direct tension with its fast fashion business model. (Stefanie Keenan/Getty Images for H&M)When a shirt costs $5, it's quickly seen as disposable. We are more likely to dispose of cheaper, mass-produced clothes than more expensive items, according to a 2009 study into consumer habits. H&M is well aware of the problem. The company's Sustainability Engagement Manager Hendrik Alpen admitted the fast fashion industry is struggling to balance its climate commitment with its desire to meet consumer demands. "It's not exactly rocket science, if you look at how the global population will develop, by 2040, we might be 9 billion people. That is of course great from the perspective of having more potential customers," Alpen told CNN Business. "But if we look at the planetary boundaries ... the equation is not working out."Piñatex garments with an H&M Conscious label. (Ivana Kottasova/CNN) How clothes are harming the planetCollectively, the global fashion industry produces nearly 4 billion metric tons of greenhouse gas emissions, or 8.1% of the world total, according to Quantis, a climate consultancy that analyzes the fashion industry's environmental impact. That calculation includes the seven life stages of a garment, beginning with creating the fibers used to make it — by growing cotton, for example — to assembling the clothing and eventually, transporting and selling it. The estimates consider both apparel and footwear.When you're standing in a mall or shopping online and ready to click "buy," it's hard to fathom the global consequences of individual purchases. But consider the impact of a single cotton t-shirt or a pair of jeans as examples.The process of making one cotton t-shirt emits about 5 kilograms of carbon dioxide — around the amount produced during a 12-mile car drive. It also uses as much as 1,750 liters of water. That's in part because cotton is a water-guzzling crop. Inefficient irrigation, as well as the bleaching and dying process, add to the water usage, Quantis told CNN Business.Producing a pair of jeans consumes even more water — around 3,000 liters — due to the dyeing and bleaching involved, according to calculations by Quantis. Making a single pair of jeans emits around 20 kg of CO2, the same amount produced during a 49-mile car journey.There are more sustainable ways to grow cotton that include relying mainly on rainwater, rotating crops to preserve soil quality and limiting the use of pesticides. However, sustainable cotton remains a niche product, comprising only about 15% of the 2017 global total, according to the CottonUp initiative.In 2017, the fashion industry devoured around 79 billion cubic meters of water, enough to fill nearly 32 million Olympic-sized swimming pools. And it's only expected to get worse. The Global Fashion Agenda and Boston Consulting Group expect the fashion industry's water usage will increase another 50% by 2030. That's a threat, they warn, particularly to cotton-producing countries, which are quickly running out of water. Researchers at the Twente Water Centre at the University of Twente in the Netherlands say 4 billion people experience severe water scarcity for at least one month each year. Nearly half of those people live in India and China, the world's top two cotton producers. In Central Asia, another major cotton region, cotton farming is partly responsible for drying up the Aral Sea, once one of the four largest freshwater lakes in the world. It doesn't end with the production. Washing clothes can also have a detrimental effect on the environment, especially because of synthetic materials like polyester that contain plastic fibers. After frequent washes, those fibers break down into microplastics, which can make their way to oceans and harm marine wildlife. "60% of materials used by the industry are plastic fibers [and] the equivalent of 50 billion plastic bottles are leaked into the ocean through garment wash every year," said Francois Souchet, who leads the Ellen MacArthur Foundation's Make Fashion Circular program which brings together all the key players to create more sustainable fashion. Denim manufacturer Levi Strauss is on a mission to change this.For years the company has been encouraging its customers to reduce the number of times they wash their jeans. A 2013 report commissioned by the company revealed that consumer care was responsible for 23% of water used in the life cycle of its jeans. Levi's also found a way to create its signature faded denim, by using just a thimble of water and ozone gas instead of the traditional method, which can use up to 42 liters of water.The company uses stones instead of water to achieve the "worn-in" look. This technique has reduced the volume of water used in garment finishing by 96% since 2011, the company says.A worker unloads jeans from a fabric dyeing machine at a factory in India. (Dhiraj Singh/Bloomberg/Getty Images)Sustainability comes at a high price H&M launched its Conscious Collection in 2010. To qualify for a "Conscious" label, clothes must contain at least 50% sustainable materials, such as organic cotton or recycled polyester, according to the H&M website. The company was accused of "greenwashing" consumers by being vague about the collection's sustainability credentials. Last summer, the Norwegian Consumer Authority sent a letter to H&M, accusing the company of misleading consumers with overly general sustainability claims associated with its Conscious Collection. The NCA told CNN Business that the information on H&M's website did not specify the amount of recycled material used in each garment."We think this is information that the consumer should have available as the clothing is marketed as recycled," said Elisabeth Lier Haugseth, NCA director general. "You should know if this means 2% of the clothing material or 50%."When asked about this, Alpen, the H&M sustainability manager, said the company would take the criticism and learn to "communicate that extra value" to consumers. The Conscious Collection includes items like a vegan pink jacket made from Piñatex, a leather-like material made out of pineapple waste and recycled polyester rather than animal hides.The catch: it originally cost $299.We consumers have a lot of power. I think we all know we don't need 20 t-shirts. That maybe it's better to pay a little bit more and have two t-shirts."Carmen Hijosa, founder of Ananas Anam and creator of PiñatexThat price tag, which stands out in a sea of otherwise super-cheap clothes, illustrates a hard truth; although H&M is making more of an effort to talk about climate change, it's hard to scale up sustainable practices and still keep prices low. Developed by leather goods specialist Carmen Hijosa, Piñatex has become a sought-after material. Hijosa has teamed up with a number of luxury designers, including Hugo Boss, Trussardi and Edun, in addition to her H&M collaboration. She hopes to scale her company so Piñatex can eventually supply more apparel-makers with a leather alternative at a lower price point. For now, she acknowledges the $299 H&M jacket is probably out of reach for many consumers. In an effort to encourage people to donate clothing rather than toss it aside, Levi Strauss & Co. displayed 19,000 pairs of jeans at a stadium in 2014. (Jed Jacobsohn/Getty Images for Levi's)But she also told CNN Business that it's up to shoppers, too, to play their part - by purchasing fewer and longer-lasting goods."We consumers have a lot of power. I think we all know we don't need 20 t-shirts," she said. "Maybe it's better to pay a little bit more and have two t-shirts.""I think we are much, much more aware," she added. "People stop for five seconds and think: 'if I buy this, it's going to be a waste in six months time, if I buy this, it's going to last longer, it [costs] more, but I am going to use it more'."Throwaway fashionFast fashion companies produce billions of garments each year to provide their consumers with the latest trends. Critics, ranging from Greenpeace to the UK Parliament, say such mass production promotes the idea that clothes are disposable and encourages excessive waste.Over half of fast fashion items are thrown away in under a year, according to estimates by management consultancy giant McKinsey & Company.The problem is becoming apparent. In its 2019 "Fixing Fashion" report, the UK's House of Commons' environmental audit committee proposed that the government introduce a fast fashion tax to combat consumers' disposable mindset. The inquiry's tagline: "Fashion: it shouldn't cost the Earth." The committee's overarching message was straight forward: People need to rethink the way they dress by buying fewer but higher quality items that will last. "Isn't the real problem with the fast fashion industry that if you are selling stuff at £5 people aren't going to treat it with any respect and at the end of its life it's going to go in the bin?" asked Mary Creagh, the parliamentarian who chaired the committee. The proposed tax was tiny, just one pence (or about 1 US cent) per item. The lawmakers wanted to use the revenue to stop clothes from going to a landfill. And ultimately the government rejected the idea, saying it wanted to focus on eliminating single-use plastic first.Most used clothing isn't recycledIn a bid to play its part, H&M launched a recycling program in 2012, allowing customers to exchange unwanted clothes for discount vouchers. H&M's latest sustainability report stated that of the used garments it collected, 50% to 60% were sorted for rewear or reuse. About 35% to 45% were recycled to become non-fashion products like cleaning cloths or insulation materials or made into new textile fibers. The remaining 3% to 7% that could not be recycled were burnt for energy production. 0% ends up in landfill. The company aims to operate a 100% circular business model by 2030, which means ensuring that there is "no end of life [for materials] but creating a closed loop where everything is used as long and as often as possible and ultimately recycled," Alpen said.Piñatex jackets including the one developed for H&M's Conscious Exclusive collection (left). (Ivana Kottasova/CNN)But some critics call this yet another example of greenwashing on the part of the company. Orsola de Castro, a designer and a co-founder of Fashion Revolution, a non-profit global movement, said that the industry's focus on circularity is a sign that the biggest companies are "hell-bent on continuing" with their current business model."These brands know very well that just throwing a couple of millions at some experimental circularity [project] was not going to solve the problem, but it was going to give them the opportunity to say 'in the future, we can produce as much we want, you will be able to buy as much as you want, because ultimately, we will recycle everything', but that is absolutely not true," she said. The future the companies talk about, she said, is so far away, it won't make a difference any time soon. "We need to usher in a different behaviour by changing buying habits in the meantime, and that to me is slowing down," she added.H&M Group says it collected more than 29,005 metric tons of unwanted clothing in 2019, but admits that for many types of textiles, viable recycling solutions either do not exist or are not commercially available at scale.Worldwide as of 2015, 73% of clothes ended up in landfills or incinerators because they cannot be recycled, according to the Ellen MacArthur Foundation, a non-profit working to improve the industry's sustainability record. Signage at an H&M Conscious event showcases the company's ambitions to eventually get to a 100% circular business model by 2030. (Brian Ach/Getty Images for H&M)The main challenge is a lack of recycling infrastructure for textiles. Current technology only allows less than 1% of clothing to be recycled into new apparel, Francois Souchet, who leads the Ellen MacArthur Foundation's Make Fashion Circular program, told CNN Business. He said the fashion industry should design clothes with end of use in mind by integrating recyclable materials, such as lyocell, a fiber made from biodegradable wood pulp."The products are not designed to be turned into new [items] or refreshed in style...the materials that are used mean you cannot economically recycle clothes," he added.Most experts and fashion companies acknowledge the task ahead is huge and will require a multitude of solutions and technology that is not yet available. "I don't think there is a truly sustainable fashion business, but looking at the rest of the industry today, I can say very confidently that H&M is one of the most sustainable options out there," Alpen said.

James Griffiths, CNN Business

2020-05-02 01:14:07

business

tech

https://www.cnn.com/2020/05/01/tech/iloveyou-virus-computer-security-intl-hnk/index.html

'I love you': How a badly-coded computer virus caused billions in damage and exposed problems which remain 20 years on - CNN

Wearing a striped shirt and Matrix-style dark glasses, Onel de Guzman stared at the floor as he made his way through a crowd of photographers into a hastily arranged press conference in Quezon City, a suburb of the Philippines capital Manila.

tech, 'I love you': How a badly-coded computer virus caused billions in damage and exposed problems which remain 20 years on - CNN

'I love you': How a badly-coded computer virus caused billions in damage and exposed vulnerabilities which remain 20 years on

Hong Kong (CNN Business)Wearing a striped shirt and Matrix-style dark glasses, Onel de Guzman stared at the floor as he made his way through a crowd of photographers into a hastily arranged press conference in Quezon City, a suburb of the Philippines capital Manila. Skinny, with a mop of black hair falling to his eyebrows, he appeared to barely register the journalists' shouted questions, his only movement the occasional dabbing of sweat from his face with a white towel. Seated to his right, de Guzman's lawyer Rolando Quimbo had to lean in close to hear the 23-year-old's mumbled response, which he then repeated in English for the waiting press. "He is not really aware that the acts imputed to him were indeed done by him," the lawyer said. "So if you ask me whether or not he was aware of the consequences I would say that he is not aware." It was May 11, 2000, and if de Guzman was feeling shell-shocked, he had good reason to be. He was accused of authoring and releasing the first truly global computer virus that had disrupted the operations of businesses and government agencies the world over, from Ford (F) and Merrill Lynch to the Pentagon and the British Parliament, and was on track to cause a estimated $10 billion in damages — all in the name of love. Twenty years on, the ILOVEYOU virus remains one of the farthest reaching ever. Tens of millions of computers around the world were affected. The fight to contain the malware and track down its author was front page news globally, waking up a largely complacent public to the dangers posed by malicious cyber actors. It also exposed vulnerabilities which we are still dealing with to this day, despite two decades of advances in computer security and technology. Read MoreThis account of the virus is based on interviews with law enforcement and investigators involved in the original case, contemporaneous CNN reporting and reports by the FBI, Philippines police and the Pentagon.Multiple attempts to reach Onel de Guzman for this article, including through his family and former lawyer, were unsuccessful. De Guzman had not commented publicly since around 2000, until this week when author Geoff White tracked him down to the phone repair shop he now runs in Manila, where he admitted to authoring the virus. LovestruckOn the afternoon of May 4, 2000, Michael Gazeley was in his office at Star Computer City, a warren of IT companies and shops selling electronics and gadgets overlooking Hong Kong's Victoria Harbor.A few months earlier, Gazeley and his longtime business partner, Mark Webb-Johnson, founded their own information security firm, Network Box, which specialized in protecting customers from online threats. Both men had decades of experience in the industry, and had just finished the grueling (though occasionally lucrative) work of preparing for the new millennium by staving off the Y2K bug that threatened to cause widespread damage to systems worldwide. Though largely remembered today, much to the chagrin of those involved, as an overreaction — or worse, a hoax — the Y2K bug was real, and the potential costs massive. They were avoided thanks to the diligent efforts of programmers around the world working together. It was a sign of the new connectivity that the internet, still in its relative infancy, was fostering. That connectivity cut both ways, however, as Gazeley was reminded of that afternoon. All the phones in his office started ringing at once. First were his clients, then came non-customers, all calling frantically in the hope that Network Box could help stop a virus that was screaming through their systems, destroying and corrupting data as it went. They all told the same story: Someone in the office had received an email with the subject "ILOVEYOU" and the message, "kindly check the attached LOVELETTER coming from me." When they opened what appeared to be a text file — actually an executable program masquerading as one — the virus quickly took control, sending copies of itself to everyone in their email address book. Those recipients, thinking the email was either some weird joke or a serious declaration of love, opened the attachment in turn, spreading it even further. A screenshot showing a copy of the ILOVEYOU virus email which spread around the world in May 2000.Office email servers were soon clogged as thousands of love letters went back and forth, disseminating the virus to more people. It turned out to be much worse than just a self-propelling chain letter. At the same time as it was replicating itself, the ILOVEYOU virus destroyed much of the victim's hard drive, renaming and deleting thousands of files. Many of the increasingly panicked callers Gazeley was fielding inquiries from did not have backups, and he had the awkward job of explaining to them that many of their files — everything from spreadsheets and financial records to photos and mp3s — were likely lost for good. "This wasn't something that people were used to as a concept, they didn't realize that email could be so dangerous," said Gazeley, recounting the first calls. The entire concept of the internet was still relatively new in 2000. According to statistics from the International Telecommunications Union (ITU), a United Nations body, just 28% of Hong Kongers had access to the internet at that time, along with 27% of the United Kingdom, and 15% of France. Even in the United States, where the technology was invented, only some 43% of Americans were getting online. Two years earlier, Hollywood star Meg Ryan asked "is it infidelity if you're involved with somebody on email?" as the movie "You've Got Mail" introduced people to the idea of cyber-romance — and that email could be used for something other than boring office work. Network Box co-founder Michael Gazeley was among the first cybersecurity experts to have to tackle the ILOVEYOU virus.Computer chaosFrom Hong Kong, where the virus crippled the communications and ravaged file systems of investment banks, public relations firms and the Dow Jones newswire, the love bug spread westward as the May 4 workday started. Graham Cluley was on stage at a security conference in Stockholm, Sweden, when the virus hit Europe. He had just finished describing an unrelated virus which targeted a now-defunct operating system, hijacking users' accounts to broadcast messages to their coworkers, including "Friday I'm in LOVE." This, Cluley cracked, was likely to cause severe embarrassment for most people, but could potentially lead to some office romance.As the conference broke for coffee, attendees' mobile phones and pagers began going off wildly. Several guests approached Cluley, asking if the virus he'd described was spread via email. He assured them it wasn't — and, anyway, it was limited to a niche system that most people didn't use. "They said, Well, that's weird because we're suddenly getting loads of emails with the subject line 'I love you,'" Cluley said in an interview from his home in the United Kingdom. When Cluley turned on his own phone, he was bombarded with notifications of missed calls, voice mails and text messages. Back home, Cluley's employer, the anti-virus firm Sophos, had been getting "absolutely hammered" with phone calls from clients begging for help and journalists trying to understand what the hell was going on.Cluley raced to the airport to catch a flight to London, and even traded phone batteries with a generous taxi driver as the constant stream of messages drained his Nokia cellphone of power. When he landed in the United Kingdom, a car was waiting to whisk him to a TV studio to discuss what had by now become one of the biggest tech stories in the world. Destructive viruses timeline 1991 Michelangelo virus predicted to take down millions of machines, but in the end only a handful are affected. 1999 Melissa, an email worm named after a Florida topless dancer, spreads to thousands of computers worldwide. 2000 ILOVEYOU virus clogs up email servers and causes billions of dollars in damages worldwide 2001 Anna Kournikova worm uses promise of photos of the tennis star to inflict repeat of ILOVEYOU chaos. 2005-2007 Stuxnet virus begins targeting Iranian nuclear facilities in example of what some later describe as "first cyberwar weapon". 2008 Conficker virus creates "botnet" of millions of infected machines but ultimately is never used. 2011 Duqu virus discovered and said to be related to Stuxnet, sparking renewed fears of a potential cyber arms race. 2013 Hackers use CryptoLocker virus to seize computers and force people to pay to restore access in new "ransomware" attack. 2016 Denial of service attack launched via Mirai botnet -- which uses infected internet-of-things devices -- knocks dozens of major sites offline. 2017 WannaCry ransomware attack strikes businesses and public institutions around the world. Source: US Army In five hours, ILOVEYOU spread across Asia, Europe and North America, some 15 times faster than the Melissa virus did when it struck a year before, infecting over 1 million computers.Soon after starting business on May 4, the United Kingdom's House of Commons had to take its overloaded email servers offline, as did the Ford Motor Company and even Microsoft, whose Outlook software was the primary means of spreading the virus. At the time, Windows controlled more than 95% of the personal computer market, and Outlook came bundled with Microsoft Office, then all-but-required for doing business on a computer. For most people, Outlook was email. Unlike today, when many email services are run via centralized servers — think Outlook.com or Gmail — companies in 2000 were running email off the same servers on which they hosted their website. This could be janky, slow and startling insecure. Back then, Cluley said, "many companies didn't have in place filters their email gateways to try and stop spam, let alone viruses."Even though the United States had advance warning, the virus spread just as quickly there — as almost everyone seemed apparently unable to resist opening the "love letter." Within the Pentagon, there was consternation as the virus hit the United States Army Forces Command (FORSCOM) mailing list, with 50,000 subscribers. From there, almost every major military base in the country — barring a handful that didn't use Outlook — watched as their email services were crippled and forced offline for hours as the problem was fixed. Searching for the culpritAcross the Potomac River, at the FBI's Washington, DC, headquarters, Michael Vatis was scrambling to get a handle on the crisis. As director of the National Infrastructure Protection Center (NIPC), a relatively new intergovernmental agency tasked with tackling cyber threats, Vatis was awoken early May 4 with news of the ILOVEYOU virus hitting the United States. The NIPC soon sent out an alert warning of a "new, in-the-wild worm virus identified as LoveLetter or LoveBug [that] is being propagated globally via e-mail," but it came too late to prevent much of the US government and military, as well as dozens of private companies, from being affected. As anti-virus companies slowly began rolling out patches, stemming the damage and enabling companies to come back online, attention within the FBI turned to tracking down those responsible. The investigation was led by the New York field office, which soon found evidence pointing back east, beyond Hong Kong, to the Philippines. "In a very short period of time, we ended up identifying individuals in the Philippines and seeking the assistance of Philippine law enforcement," said Vatis, now a partner at the New York law firm Steptoe. "And a very short time after that, the Philippine authorities ultimately made an arrest." Both the technical fix and first break in the case came so fast because, for all its rapid dissemination around the world, the ILOVEYOU virus was clumsily coded and startlingly unsophisticated. It mashed together several existing pieces of malware and did little to hide its workings. "Every single victim of the love bug got a copy of the love bug's code, the actual source code," said Cluley, the Sophos analyst. "So it was simple to write an antidote. It was no more complex than any of the other thousands and thousands of viruses we'd seen that day. But of course, this one was particularly successful at spreading itself." As well as containing the blueprint for defeating it, the code also included some lines pointing to the identity of its author. It contained two email addresses — [email protected] and [email protected] — both of which were based in the Philippines. There was also a reference to GRAMMERSoft Group, which it said was based in the country's capital. While investigators were wary that those clues could be a smokescreen, the virus also communicated with a server hosted by the Manila-based Sky Internet, to which it sent passwords scraped from victims' computers. Sky quickly took the server offline, which stopped at least part of the virus in its tracks.Without the servers to send information to — and it appears the virus's author was never able to access what was sent to the server, or at least act upon it — ILOVEYOU became purely an engine of chaos and destruction. It churned through email inboxes around the world and deleted files, while not actually serving the apparent original purpose of scraping passwords. A suspect emergesFour days after the virus began spreading, Philippines police searched an apartment in Manila and seized computer magazines, telephones, disks, wires and cassette tapes. They also arrested one of the occupants, Reomel Ramones. Ramones, a curly-haired 27-year-old who worked at a local bank, seemed like an unlikely computer hacker, and investigators wondered if they had arrested the wrong guy. Attention turned to the apartment's two other residents: Ramones' girlfriend, Irene de Guzman, and her brother, Onel. Onel de Guzman — who was not in the apartment when it was raided, and could not be found — was a student at AMA Computer College. The college was home to a self-described hacking group, the now-defunct GRAMMERSoft, which specialized in helping other students cheat on their homework. While police could not prove initially that de Guzman was a member, officials at the school shared with them a rejected final thesis he had written, which contained the code for a program bearing a startling resemblance to ILOVEYOU. In the draft thesis, de Guzman wrote that the goal of his proposed program was to "get Windows passwords" and "steal and retrieve internet accounts [from] the victim's computer." At the time, dial-up internet access in the Philippines was paid for by the minute, in contrast to the blanket-use fees in much of Europe and the United States. De Guzman's idea was that users in the developing world could piggyback on the connections of those in richer countries and "spend more time on [the] internet without paying." Reading his proposal, de Guzman's teacher was outraged, and wrote "we don't produce burglars" and "this is illegal" in the margins. But while the thesis would cost de Guzman his degree, his teacher's argument about illegality would be proven incorrect.Onel de Guzman, seen here in May 2000, was quickly accused of being the author of the ILOVEYOU virus. Legal loopholeAfter several days out of the public eye, de Guzman appeared at the press conference in Quezon, flanked by his lawyer and sister. Asked whether he might have been responsible for the virus, he responded through his lawyer: "It is possible." "He did not even know that the actions on his part would really come to the results which have been reported," his lawyer said. To a ripple of laughter from reporters, the lawyer added, after a mumbled consultation with de Guzman: "The internet is supposed to be educational so it should be free." Asked what he felt about the damage caused by the virus, de Guzman said "nothing, nothing." Nothing would also turn out to be de Guzman's punishment, despite reams of evidence gathered by police in the Philippines and the agreement of the country's National Bureau of Investigation (NBI), the FBI and private security investigators, that he was the culprit. The problem was not a lack of proof, but the lack of an appropriate law to charge him with. The Philippines, like a number of countries at the turn of the millennium, had not legislated against computer crime. And an attempt to prosecute de Guzman on fraud charges was later dropped. While the Philippines did have an extradition treaty with the United States, it only applied to crimes prosecutable in both countries. Once the case was dropped, there was little chance of sending de Guzman abroad. While Philippines lawmakers did rush through a law criminalizing computer hacking soon after the ILOVEYOU incident, it could not be applied retroactively. "We were unable to bring to justice a wrongdoer who caused harm to millions of people and companies around the world," Senator Edgardo J. Angara said years later, echoing the embarrassment felt by many Philippines politicians and law enforcement officers. For others in the country, de Guzman was a hero. "Here is a Filipino genius who has put the Philippines on the world map," wrote one newspaper columnist. "[He] has proven that the Filipino has the creativity and ingenuity to turn, for better or for worse, the world upside down." It even spawned a movie, "Subject: I love you," which depicted the virus creator as a lovelorn man trying to reconnect "with the only woman he had ever loved." At de Guzman's college, a fellow student told the New York Times, the virus had "made us proud." Another basked in the ability of a Filipino hacker to "penetrate the Pentagon ... even though the Philippines is a third-world country, even though we're behind in technology, they were able to do that." Two decades on, this reaction still annoys Cluley, the Sophos investigator. "It's the kind of thing that has you thumping your head against a wall in frustration," he said. "This was when malware was just beginning to get a little nastier and a little more malicious and more financially motivated.""This wasn't the message we wanted to give young people, that this was all right."The risk of attacks like ILOVEYOU has not gone away. So-called ransomware attacks which targeted many businesses in 2017 relied on just the same kind of social engineering as the love bug. Long legacyThere were admirers of de Guzman's work outside the Philippines, too. Within hours of ILOVEYOU spreading, remixed copycats had sprung up, with messages such as "very funny," "joke," "Mother's Day," or, most cynically, "VIRUS ALERT!!!" Amazingly, despite the near wall-to-wall media coverage of the ILOVEYOU virus at the time, this did not stop many people opening suspicious attachments which bore a different message. The love bug and its variants would cause some $10 billion of damage, the FBI later estimated, before updates to anti-virus software and email clients reined them in. To this day, ILOVEYOU remains one of the farthest reaching viruses, striking millions of machines in countries across the world. "It had an enormous effect," said Vatis, the former NIPC director. "It was really worldwide front page news for at least several days in a way that computer attacks had not been in the past." While previous attacks had caused more direct damage, and those in the future would be more sophisticated and far more effective in their goal, they were also much more limited in scope. Other viruses have targeted specific locations, businesses or governments. ILOVEYOU could affect just about anyone running Windows Outlook. "It hit home in a way that other previous attacks did not," Vatis said. "It made people aware that this is not just something that happens to defense agencies or owners of websites, this is something that can happen to any Joe or Jane sitting at home on the computer or in the office, and it can shut you down and really disrupt your ability to operate." And while email clients have gotten better at filtering out malicious-seeming messages, the main weakness that ILOVEYOU exploited remains impossible to fix. "You can update your operating systems or you can have the best email filters in the world, but you can't patch the human brain," said Cluley. To this day, some of the most successful cyber attacks — whether they be linked to nation-state actors, criminal organizations or lone-wolf hackers — have used social engineering as their primary weapon. The hackers that stole emails from the Democratic National Committee (DNC) in 2016 did so by tricking Hillary Clinton's campaign chairman John Podesta into handing over the password to his Google account. Those who targeted Google in 2003 went after the company's employees over instant messaging. And ransomware attacks, an increasingly common form of scam whereby victims' computers and accounts are frozen until they pay to unlock them, almost always work by getting people to click a dodgy link. While some hackers use zero-day exploits, previously unrevealed vulnerabilities in key software, or purpose built spying tools to go after their victims, many do not use code much more sophisticated than that seen in the ILOVEYOU attack. They don't need to. "Humans are always the weak link," Vatis said. "It's almost always easier to exploit a human through some social engineering gambit than it is to crack, you know, some technological defensive measure." One thing that has changed somewhat since ILOVEYOU is how prepared most companies are for such an incident. Most at least have some kind of anti-virus protection, and back up their data. But all the experts who tackled ILOVEYOU two decades ago agreed that there remains a startling degree of complacency over potentially devastating cyber attacks. "What's frightening is that 20 years after, there are still plenty of organizations who don't take this seriously until they are hit," said Gazeley, the Hong Kong cybersecurity expert. "So many people still don't plan ahead." What largely prevents such an attack is that most companies and individuals outsource running email servers to those who know how to do it best — primarily Microsoft and Google — and rely on them to filter incoming messages, cut out spam and warn of potential attacks. Were a worm like ILOVEYOU to find a way past those filters, and spread fast enough to prevent the companies rolling out a patch, the possibility of it doing major damage remains. There is no reason to expect that the average user has grown any less complacent today. With email providers doing most of the work in spotting dodgy messages, they may actually be more so. Vatis said that the potential effect on online communications of such a worm could be "devastating," as could the knock on the global economy as companies go offline or lose business all at once. He compared the situation to people who avoid getting vaccinated for the flu every year. "That's not a problem for society as a whole until the vaccination rate drops below a certain percentage," he said. "And then you have a lot of people getting really sick."

Shannon Liao, CNN Business

2020-05-01 09:49:11

business

economy

https://www.cnn.com/2020/05/01/economy/unemployment-benefits-new-york-asian-americans/index.html

Unemployment benefits: Claims from Asian Americans have spiked 6,900% in New York. Here's why - CNN

In New York state, about 147,000 Asian Americans have filed initial unemployment claims in the last four weeks alone, up 6,900% from the same time a year ago. That's by far the largest percentage increase experienced by any one racial or ethnic group.

economy, Unemployment benefits: Claims from Asian Americans have spiked 6,900% in New York. Here's why - CNN

Unemployment claims from Asian Americans have spiked 6,900% in New York. Here's why

Ten days before New York issued a stay-at-home order, Truman Lam, 35, was already contemplating whether to close his restaurant Jing Fong, an icon in Manhattan's Chinatown. It was Tuesday, March 10. During the peak lunch hour, he went upstairs to count how many customers he still had. Jing Fong's dining room is massive; a destination for banquets and weddings, it can hold up to 794 people — and on weekends, there has historically been a long wait to get in for dim sum. But on that day, Lam counted just 36 guests.Business had started to slow as early as January and was down 80%. All of the parties in March were canceled, too, he said. "That day, I decided, you know what? Let's just close for the rest of the weekdays," Lam told CNN Business, adding that he was thinking about staying open on the typically busier weekends.As long as the restaurant could cover workers' wages each day, Lam felt it was still worth it to stay open. But "it became more and more obvious that we couldn't even cover the payroll for that day," Lam said. Read MoreSoon after, Lam made the final decision to furlough 170 staff members across two locations and encourage them to apply for unemployment benefits. He declined to say whether he has filed for benefits, too.Across New York, businesses like Lam's have shut down during the coronavirus pandemic and Asian American workers have filed for unemployment benefits at extraordinary rates. In the state, about 147,000 self-identified Asian workers have filed initial unemployment claims in the last four weeks alone, up from just 2,100 during the same period last year. That's a 6,900% increase — by far the largest percentage increase experienced by any one racial or ethnic group. In contrast, claims were up 1,840% for white workers, 1,260% for black workers, and 2,100% for Hispanic and Latino workers in New York. Truman Lam, manager of Jing Fong Restaurant in Manhattan's Chinatown, pictured in February. (Jorge Corona / New York University)New York stands out from other states in that in early April, it started releasing detailed demographic breakdowns of unemployment claimants every week. Not surprisingly, claims are skyrocketing for every group in the state, reflecting the sharp economic downturn that nationwide has left 30 million Americans filing first-time unemployment claims since mid-March.But even so, the increase for Asian Americans is an oddity: It's so large, it's disproportionate to the size of their labor force. Asian workers make up about 9% of New York state's population and work force, but now account for 12.5% of initial claims over the last four weeks. A year ago, they made up just 3.7% of claims during the same time period. For the other groups, claims are either roughly in line — or well below — the size of their populations. White workers, for example, make up 65% of New York's labor force, but only 51% of recent claims. What's the cause? Academics and members of the community point to several potential factors ranging from xenophobia to Asian Americans working in industries hard hit by the pandemic, including food and services. Many Asian workers also say they began social distancing earlier in the crisis than others — a factor that led some to close down businesses even before official lockdowns. Lam, for instance, believes the main reason his restaurant began to lose business starting in January is because of "Chinese people practicing social distancing early." One regular customer told him that their parents hadn't left the house in a month since January except to get coffee and the newspaper."Jing Fong was first established around 1978," said Lam, who took over daily operations of the business after his father, uncle and grandfather. "And we've never seen anything like this before."Jing Fong's massive dining room, shown here a year ago, is usually bustling with customers, but after business slowed, it closed in mid March. (Jing Fong Restaurant)Low unemployment rates never told the full story For much of the last ten years, Asian workers have had the lowest unemployment rate and highest median household income of any racial or ethnic group in the US. Part of the reason is due to their higher education levels. All of those figures contribute to the common perception that Asian Americans are more economically successful than average and to the pernicious model minority myth about Asian Americans being polite, working hard and pulling themselves up by their bootstraps.But studies have shown low unemployment rates and high household earnings obscure persistent disadvantages for Asian Americans, including workplace discrimination and increasing income inequality within the group.We've never seen anything like this before."Truman Lam, manager of Jing Fong RestaurantAverages also hide the fact that Asian Americans — one of the fastest growing populations in the US — are a diverse population. Those who self-identify as Chinese, Indian or Filipino ancestry make up the three largest Asian groups in the US, but no one ethnicity makes up a majority. The same is true of Asian Americans in New York State, where smaller populations of Burmese, Bangladeshis and Pakistanis are also growing quickly.Economically, Asian Americans are the most divided racial or ethnic group in the US, a Pew Research study found, with high-income Asian Americans in the 90th percentile earning 10.7 times as much as Asian Americans in the 10th percentile. All of those underlying factors are at play now in New York's data, as unemployment claims spike disproportionately for the Asian community. Low-wage workers hit first One theory from experts to explain the high unemployment claims is that many Asian Americans work in industries that were hardest hit by lockdowns — places like restaurants, small shops and nail salons. While overall, Asian Americans are more likely to work in education and health services than retail and restaurants, those who were hardest hit by layoffs and furloughs early in the pandemic probably were in low-wage service sectors. Wellington Z. Chen, executive director of the Chinatown Partnership, a nonprofit that focuses on revitalizing the neighborhood, said that Asian communities' reliance on industries like food services and personal care meant they bore the brunt of shelter-in-place orders. "You can't cut nails from six feet away, right?" said Chen. "A lot of people are not going to hang on. [They're] not going to make it." Nationwide, Asian workers make up about 6% of the US labor force, but 57% of 449,000 "miscellaneous personal appearance workers," a category that mainly includes nail salons. You can't cut nails from six feet away, right?"Wellington Z. Chen, executive director of the Chinatown PartnershipOn the opposite end of the income-spectrum, however, they also represent 35% of software developers, 20% of physicians and surgeons, and 23% of pharmacists. Those white collar jobs are generally more resilient to layoffs —but economists expect those sectors could be hit later in the pandemic as well.But occupations alone likely don't explain the disproportionate rise in Asian unemployment claims as other groups work in hard-hit industries too. That's why experts also point to other potential explanations. Racism and xenophobia as a factor Business owners and workers told CNN Business that recently, racism and xenophobia against Chinese and Chinese-looking people have been a factor in driving business closures and unemployment claims. In some of New York City's predominantly Asian neighborhoods, business owners told CNN Business that foot traffic took a downturn months before lockdowns were in place. Not only that, but Asian employees and business owners said they were also apprehensive about commuting to work, as people would give them strange looks and news about anti-Asian hate crimes was spreading across their social media networks. Lin Weng, 25, who lives in Sunset Park, a neighborhood known as Brooklyn's Chinatown, applied for unemployment benefits after she was furloughed from her coffee shop on March 22. But while customers were still coming into the shop, she said, she experienced an incident in which she was associated with the coronavirus potentially due to her race. "This lady walked in... and the first thing she asked me was 'do you guys have the coronavirus?'" said Weng, who added that the woman proceeded to order an iced coffee but then changed her mind and left. "And I'm just [thinking] like, 'are you asking me or telling me?'" Lin Weng poses in her home in April. She applied for unemployment benefits after being furloughed from her job at a coffee shop. (Lin Weng)Reports of attacks against Asians and those appearing to be East Asian have intensified after the coronavirus outbreak began in China in January. The NYPD Hate Crimes Task Force told CNN Business that of the 14 coronavirus-related hate crimes it investigated since the start of the outbreak, all of the victims were of Asian descent.Jennifer Lee, a sociology professor at Columbia University, said that President Donald Trump's reference to the coronavirus as a "Chinese virus" exacerbated fears among Asian Americans, by playing into xenophobia. "While he no longer refers to coronavirus as the 'Chinese virus,'" the damage has already been done," she wrote in an email.In addition to racism and xenophobia, Asian businesses in neighborhoods like Chinatown and Flushing have faced caution from their own communities as well. Some Asian customers have drastically cut back their interactions with Asian-run businesses, as owners noticed huge drops in traffic. Early social distancing hurt Chinese businesses Some essential businesses, including Asian-run supermarkets in Flushing and laundromats in Brooklyn, have closed despite being allowed to operate under shelter-in-place rules. The Korean American Dry Cleaners Association of New York estimates that 70% of its 1,500 members will soon or already have temporarily closed their operations, according to Ahyoung Kim, small business project manager at the nonprofit Asian American Federation. Reasons varied from workers being unwilling to come in, to some contracting the virus, or because business had dropped off. Some Chinese American workers who have applied for unemployment told CNN Business they agreed with their bosses' decision to close, even if it meant that they lost income. Zixian Tang, 25, who lives in Flushing, Queens, worked at a popular karaoke place that closed on March 15. Even if his boss had not chosen to close the place, Tang said in comments translated by CNN Business from Mandarin Chinese, "I'm not willing to go to work because I'm afraid" despite having rent to pay. "The death toll is too high," he said.Jennifer Feng, 38, a nail technician at an ordinarily bustling mall salon in Flushing told CNN Business in comments translated from Mandarin that the salon decided to cancel its many upcoming appointments and close on March 16, several days ahead of New York's stay-at-home order. While she can apply for unemployment, she said she is waiting for her stimulus check to hit first to see if she needs the extra benefits.Jennifer Feng, 38, a nail technician at a mall salon in Flushing, takes a photo at home on April 30, 2020. (Jennifer Feng)Feng said she believes Flushing stores closed early because the Chinese American community acted faster in taking precautions, from social distancing early to wearing face masks, compared to those in other groups.Economists from Columbia University, New York University, and the University of Massachusetts Boston said they can't know for sure whether xenophobia or caution were reasons for the high amount of unemployment claims from Asian Americans. It's too early, and data on that is unavailable so far. A different story for South Asian communities While workers of East Asian backgrounds say they grappled with shop closures, social distancing and xenophobia early on in the pandemic, South Asian neighborhoods in Queens were still pretty crowded at the end of March. "I went to Patel Brothers the first week of the shutdown," said Annetta Seecharran, executive director of the Chhaya Community Development Corporation, a nonprofit that serves the South Asian community, referring to a destination Indian grocery store in Jackson Heights, Queens. "It was life as usual, like nobody had actually heard of any pandemic." Mohammed Uddin, 42, told CNN Business that although the virus' first case in New York was announced on March 2, only when the death toll began to rise in mid-March did he begin to realize it was a dangerous situation. If I got any other job, which is not close to people, of course I'll go to work."Mohammed Uddin, former Access-a-Ride driverCompared to stores in Flushing, the ones in Jackson Heights — a diverse neighborhood known for Indian, Bangladeshi and Latino American residents as well as other groups — stayed open longer, Uddin observed. But despite different reaction times — and, anecdotally, fewer coronavirus-related hate crimes against them, South Asians are also reporting a sudden uptick in unemployment claims, according to Seecharran.Uddin said he left his job as an Access-a-Ride driver on March 17 because it involves chauffeuring elderly and ill patients from their homes to hospitals and he felt it was too risky. His friends, drivers who introduced him to the job, quit too, he said. Mohammed Uddin was a used car salesman, then a driver for Access-a-Ride, but is now unemployed. (Mohammed Uddin)"I was very scared of getting anything," he said. He developed a cough and fever that worried him. He lives with his wife, a 2-year-old, a 7-year-old and his mom, 67, and dad, 75, both of whom have diabetes. "If I got any other job, which is not close to people, of course I'll go to work," he said.Small numbers in 2019 meant a large spike for 2020 Another factor behind the large jump: Asian Americans filed very few claims last year, so that's partly why their percentage gains were higher than any other group, said Christian Moser, assistant professor of economics at Columbia Business School. "The larger number... will come from the fact that we've started out with such a low level to begin with for Asian Americans," he said. The small base numbers in 2019 can be potentially explained in part by pride, said Ahyoung Kim, the small business project manager. And now, it's possible Asian American people are rethinking that stance given the combination of racism and economic fallout they've experienced during the pandemic. "I can't speak for all Asian cultures, but at least in the Korean community, there has been a bit of shaming, in a cultural sense that you can't really demand stuff from the government," she said. "There's a huge shift in the community. Those that are asking are now realizing, 'I can take this money and we should take this money because there really is no choice.'" Undocumented immigrants missing from the numbers Even as unemployment claims have surged, the number almost surely undercounts the total of Asian Americans who are unemployed during the pandemic, as undocumented immigrants are ineligible to apply. About 238,000 undocumented Asian immigrants live in New York state, according to the Migration Policy Institute, a nonpartisan think tank. There's no data on how many of them have lost jobs recently. Sora Lee, 23, who lives in Bayside, Queens, told CNN Business that her whole family is ineligible. Both her parents are undocumented, while she and her sister worked jobs that were paid in cash. All four of them lost jobs recently, although her dad is unemployed due to an injury unrelated to coronavirus.Sora Lee was paid in cash and isn't eligible for unemployment benefits. Neither are her parents, who are undocumented immigrants. (Sora Lee)Her mom, who requested to remain anonymous because of her immigration status, is a nail technician who lost her job after her salon closed. "I would like to be working because of the money, but at the same time, it's very dangerous because of the virus, so it was a good idea to close down," she said in comments translated from Korean by her daughter. Thanks to a babysitting gig, Lee does have some income right now, but she's the only one in the family who does and her mother said she's worried she won't be able to pay her bills. Rent, electricity, cable, internet, car insurance and life insurance payments due soon total up to $2,600 and the family is leaning on credit cards and about $1,000 left in savings. She said she wished that undocumented immigrants could be eligible for some sort of relief. The long road ahead The financial impact on Asian Americans may change how these neighborhoods look once the pandemic ends. During the 2008 recession, Asian Americans had the highest long-term unemployment of any group, according to a 2012 study from Marlene Kim, a professor of economics at the University of Massachusetts Boston."I'm going to predict that this is going to happen again," Kim told CNN Business. "I think it was part discrimination but also part other people dropped out of the labor market, they didn't even look for jobs. But Asians kept looking for jobs and being counted [as unemployed.]" Economists predict that nationwide, unemployment could surge to around 20% by June — a level not seen since the 1930s Great Depression.New York's skyrocketing unemployment numbers could be just the beginning. And with many working in sectors hard hit by coronavirus and potentially facing discrimination, it could be difficult for Asian Americans to find jobs once New York opens back up again.Wilson Tang, 41, owner of Nom Wah Tea Parlor — a dim sum restaurant that first opened in 1920 — said almost all of Manhattan's Chinatown has shut down. He has furloughed about 55 employees in Chinatown and is keeping a location north of Little Italy open only for takeout and delivery. "I have told the people that we laid off to please go exercise that right and use the unemployment benefits that they've paid towards and the company has paid towards and whatever stimulus checks or whatever resources they can to survive and weather this storm," he said.Correction: An earlier version of this story misstated the number of Jing Fong employees who were furloughed.

Story by Donie O'Sullivan, CNN Business Video by Richa Naik and John General, CNN Business Photographs by Heather Fulbright, CNN

2020-04-27 10:41:02

business

tech

https://www.cnn.com/2020/04/27/tech/coronavirus-conspiracy-theory/index.html

Exclusive: She's been falsely accused of starting the pandemic. Her life has been turned upside down - CNN

Maatje Benassi, a US Army reservist and mother of two, has become the target of conspiracy theorists who falsely place her at the beginning of the coronavirus pandemic, saying she brought the disease to China.

tech, Exclusive: She's been falsely accused of starting the pandemic. Her life has been turned upside down - CNN

Exclusive: She's been falsely accused of starting the pandemic. Her life has been turned upside down

Maatje Benassi, a US Army reservist and mother of two, has become the target of conspiracy theorists who falsely place her at the beginning of the coronavirus pandemic, saying she brought the disease to China. The false claims are spreading across YouTube every day, so far racking up hundreds of thousands of apparent views, and have been embraced by Chinese Communist Party media. Despite never having tested positive for the coronavirus or experienced symptoms, Benassi and her husband are now subjects of discussion on Chinese social media about the outbreak, including among accounts that are known drivers of large-scale coordinated activities by their followers. The claims have turned their lives upside down. The couple say their home address has been posted online and that, before they shut down their accounts, their social media inboxes were overrun with messages from believers of the conspiracy. "It's like waking up from a bad dream going into a nightmare day after day," Maatje Benassi told CNN Business in an exclusive interview, the first time she has spoken publicly since being smeared online. Maatje Benassi at her home on Wednesday, April 22. She said the experience is "like waking up from a bad dream going into a nightmare day after day." (Heather Fulbright / CNN)As the coronavirus has spread around the world, so has misinformation about the disease. Technology giants have touted the steps they are taking to combat coronavirus misinformation, but these efforts have failed to help the Benassis. The family's suffering highlights the potential for blatant falsehoods to be rewarded and amplified by social media platforms. It also serves as a powerful reminder that misinformation online, however wild or obviously untrue it may seem, can have real and lasting consequences offline. Read MoreMaajte and her husband Matt are still active in their government jobs. Maajte is a civilian employee at the US Army's Fort Belvoir in Virginia where she works as a security officer. Matt, a retired Air Force officer, is a civilian employee with the Air Force at the Pentagon. Despite working for the US government, the couple are experiencing the same feelings of helplessness familiar to others who have been the target of harassment and misinformation. "I want everybody to stop harassing me, because this is cyberbullying to me and it's gone way out of hand," Maajte said while fighting back tears. Matt has tried to get the videos taken down from YouTube and to prevent their spread online. The couple said they contacted an attorney, who told them there was little that could be done, and local police, who told them much the same. Origins of a coronavirus conspiracy theory Conspiracy theories are not dissimilar to viruses, in that they evolve and mutate to spread and survive. Before Maatje Benassi became the main protagonist in this conspiracy, variations had circulated online for months. In the early weeks of the coronavirus, conspiracy theorists began claiming, without evidence, that it was a US biological weapon. Later one member of the Chinese government publicly promoted the notion that the US military brought the virus to China. US Defense Secretary Mark Esper said it was "completely ridiculous and it's irresponsible" for someone speaking on behalf of the Chinese government to promote such a claim. It wasn't until March, months after the first reported coronavirus cases in China, that conspiracy theorists turned their focus to Maatje Benassi. The baseless theory began with her participation in October in the Military World Games, essentially the military Olympics, which was hosted by Wuhan, the Chinese city where the coronavirus outbreak began last year. Maatje Benassi competed in the cycling competition there, suffering an accident on the final lap that left her with a fractured rib and a concussion. Despite the crash, Benassi still finished the race, but it turned out to be the start of something worse. While hundreds of athletes from the US military took part in the games, Maatje Benassi was plucked out of the group and given a starring role in the conspiracy theory. A letter that Maatje Benassi received in the mail from an unknown sender. Her family's address was posted online after she became the target of conspiracy theorists. (Heather Fulbright / CNN)Perhaps the most prominent cheerleader of the idea that Benassi had a role in the imaginary plot to infect the world is George Webb, a prolific 59-year-old American misinformation peddler. Webb has for years regularly streamed hours of diatribe live on YouTube, where he has amassed more than 27 million views and almost 100,000 followers. In 2017, CNN revealed how Webb was part of a trio of conspiracy theorists that pushed a false rumor about a cargo ship with a "dirty bomb" that was set to arrive at the Port of Charleston in South Carolina. The bomb never materialized, but the claims did lead to parts of the port -- one of the biggest in America -- being shut down for a time as a safety precaution. Until recently, Webb said, his YouTube videos included advertisements -- meaning the platform, which is owned by Google, was making money from Webb's misinformation, as was Webb himself. Webb even claimed that the Italian DJ Benny Benassi, whose 2002 song "Satisfaction" became a worldwide sensation, had the coronavirus and that he, along with Maatje and Matt Benassi, were part of a Benassi plot connected to the virus. (Benny told CNN Business he has never met Maatje and Matt, and they said that as far as they know, they are not related. Benny pointed out that Benassi is a very common last name in Italy.) Benny Benassi told CNN Business he has not been diagnosed with the coronavirus. Like artists around the world, he canceled his concerts because of social distancing and travel restrictions. (Webb previously claimed the DJ is Dutch, he is not.) In a phone interview with CNN Business on Thursday, which he livestreamed to his followers on YouTube, Webb offered no substantive evidence to support his claims about the Benassis and said he considered himself an "investigative reporter," not a conspiracy theorist. He also said that YouTube recently stopped running ads on his videos after he began talking about the coronavirus. Webb said he had normally made a few hundred dollars a month directly from YouTube. YouTube confirmed to CNN that it was not currently running ads on Webb's channel, but it declined to say whether ads appeared there in the past or provide details on how much money his channel may have made. A company spokesperson said YouTube was committed to promoting accurate information about the coronavirus. The company removed some threatening comments about the Benassis that had been posted under Webb's videos when asked about them by CNN Business. YouTube also said it had removed some videos posted by Webb in the past.False theories online spark real world concerns While the allegations about the Benassis may be wildly untrue, the threats they face and the fear they feel are very real. Matt Benassi said he fears this could "turn into another Pizzagate," referencing another baseless conspiracy theory that claimed a pedophilia ring that somehow involved Hillary Clinton, among others, was operating out of a Washington DC pizzeria. The fringe theory didn't receive much mainstream attention until a man showed up at the pizzeria in late 2016 and fired an assault weapon, saying he was there to investigate "Pizzagate." Maatje's husband Matt says the family are afraid for their lives. (Heather Fulbright / CNN)"It's really hard to hold him [Webb] accountable," Matt Benassi said. "Law enforcement will tell you that there's nothing that we can do about it because we have free speech in this country. Then they say, 'Go talk to a civil attorney,' so we did. We talked to an attorney. You quickly realize that for folks like us, it's just too expensive to litigate something like this. We get no recourse from law enforcement. We get no recourse from the courts." Matt Benassi said he has complained to YouTube but even when the company does take videos down it can take days for it to do so. By that time, a video can go viral, and the damage is done. Worse still: videos Webb has posted to YouTube that are removed are often re-uploaded to the platform. In China, the YouTube videos attacking the Benassis are uploaded to popular platforms there such as WeChat, Weibo, and Xigua Video and are translated into Chinese, according to an analysis by Keenan Chen, a researcher at First Draft, a non-profit that researches disinformation. Matt and Maatje Benassi both work for the US Military. (Heather Fulbright / CNN)The Benassis' experience is unfortunately not unique, said Danielle Citron, a professor of law at Boston University School of Law and a MacArthur Fellow who studies online harassment. Faced with "cyber mobs," as Citron describes them, law enforcement often can't or won't investigate. As for the likes of YouTube, Citron said the law has to change: "Right now, they're totally immune from legal liability under federal law. And so they can just walk away." Whatever happens next, "the damage is done," according to Maatje Benassi. "I know it [will] never be the same. Every time you're going to Google my name, it will pop up as patient zero."

Mick Krever and Nic Robertson, CNN

2020-05-03 04:50:09

business

business

https://www.cnn.com/2020/05/03/business/uk-farming-coronavirus-gbr-intl/index.html

UK engineers, chefs and waitresses are farming after being furloughed - CNN

Some locals are picking up seasonal work on farms in southeast England after being furloughed or let go because of the coronavirus outbreak.

business, UK engineers, chefs and waitresses are farming after being furloughed - CNN

A few weeks ago, they were engineers, chefs and waitresses. Now they're farming

Kent, England (CNN Business)The British government wants you: To cut lettuce from the fields, pick berries from the bushes and load boxes of fresh produce into cold storage warehouses.While many people hunker down at home, reloading the internet sites of grocery stores to secure a home delivery slot or dreading the socially distanced, masked visit to a supermarket, it's easy to lose sight of the supply chain and where that food is coming from.As Covid-19 cases surpass 180,000 in the United Kingdom, British farmers are facing spring cut off from the Eastern European migrant workers that make the harvest possible. But with thousands of Brits laid off or furloughed, the UK government now says its official policy is to try to get locals onto the fields. "We estimate that probably only about a third of the migrant labor that would normally come to the UK is here," George Eustice, the environment secretary and top British official on farming, said at press conference on Sunday. The government would work with farms to "encourage those millions of furloughed workers to in some cases consider taking a second job, helping get the harvest in in June."Back to basics. The "blitz spirit." A nationwide effort to bind together wounds, not far off from the World War II campaign that carried the nation through the relentless German bombing campaign of 1940 and 1941.Read MoreBack breaking workAt the crack of dawn on a farm in Kent, southeast England on Monday, a group of six women are dressed in an idiosyncratic mix of T-shirts and down jackets. Bent double at the waist, they cut lettuce after lettuce from the earth, trimming leaves and then packing them onto pallets. Farm director Nick Ottewell, affable and full of nervous energy, looks on.Farming is complex enough in a normal year, he says. The pandemic has stranded his workforce and eliminated buyers like McDonald's (MCD), which used to use his Apollo lettuce in its chicken wraps, when it still sold them.Managing it all is "virtually impossible." He doubts the farm will even break even this year. The Betts family own the farm here, land they've been tilling since the early 1900s. Ottewell reckons they're about 45 people short, and the clock is ticking. In two weeks, they have to harvest their most important crop: iceberg lettuce.And yet without any advertising, the farm has gotten 50 unsolicited inquiries from locals seeking work, through word of mouth and stories in the Kent press.Ottewell chose eight to come in for training. So on the last sunny day in a run of unusually fair English spring weather, a mix of young and old, male and female, gathered in an open-air conference room for a socially distanced induction.'An honorable thing to do'Daniel Martin, 32, sits in a kitchenette across from a female trainer with a laptop.Until recently, he was a civil engineer, playing a crucial role in the British construction industry. Then came coronavirus, and he was furloughed.Daniel Martin, 32, was furloughed from his civil engineering job."With construction sites closed, a lot of the clients have ceased work," he explains. "So it dried up for us."His friend worked on the farm, and Martin figured driving a forklift would be better than sitting on his couch all summer."I just wanted to be active, to get involved. Keep me fit, get me out of the house, otherwise we're locked down at home. I enjoy being outside."Getting out and about: A running theme.Nick Ottewell talks with Sally Penfold, 45, who says providing the nation with food is "an honorable thing to do.""I was fed up with being indoors, not earning any money," said Sally Penfold, 45. "I just wanted to get out there and do some kind of work. I think providing food for the nation is quite an honorable thing to do."She lost her waitress job at a restaurant in Hastings, after the UK government lockdown took effect at the end of March."I got a job in an Italian restaurant. And I worked there for about six weeks. And then the restaurant got closed down."She heard about the farm through a story on local radio, while staying with a friend, and decided that tending the land would be better than being "stuck at home for weeks on end."Thomas Tanswell, 32, was laid off from his restaurant job. "I needed to re-enter the world."Thomas Tanswell, 32, can relate.He too lost his job, as a chef, to coronavirus."I decided basically I need to start getting active again," he explained. "I could feel my mind maybe going a little bit. I decided I needed to reenter the world -- maybe take lemons to make lemonade, I guess."A love of the outdoors and a fear of idle hands made farm work an obvious option, Tanswell said."It just fits like a glove for me. Especially this time of year. So it might be something I'd be interested in long-term as well, to be honest. It seems like such a nice place and nice atmosphere."'Commit to us'The enthusiasm was genuine, and yet Ottewell looked on with nervous hesitation.Among his chief concerns is that the new recruits won't last, perhaps because they can't handle the hard work, get bored or go back to their old jobs. That could be disastrous, abandoning him and his crops mid-season.The Alliance of Ethical Labour Providers, which helps provide farms with laborers, said that about 55,000 people have expressed interest in farm jobs. How many actually went on to accept a position? Just under 150, as of April 24, the alliance says.Ottewell would love to have a bevy of Brits fill the 45 positions he has to fill before the all-important iceberg harvest. But he isn't hopeful. "I've been working this industry my whole adult career, which is around 25 years now as a manager, and all of my experience tells me that that just isn't going to be the case," Ottewell said. He chafes at coverage in Britain's tabloid media. When a large lettuce grower in East Anglia chartered a plane to fly seasonal workers from Romania in mid-April, The Sun wrote that a UK company was paying for immigrants "to show Brits how it's done.""It's seasonal work," Ottewell says. "And British people haven't wanted to do seasonal work, for whatever reason.""Companies like ours have relied on migrant workers for decades to have businesses. However, we're here. And you're welcome to come. But come and commit to us for the summer."CNN's Matt Brealey, Lewis Whyld, and Mark Baron contributed to this report.

Story by Hanna Ziady and Eoin McSweeney, CNN Business Video by Fred Pleitgen and Claudia Otto, CNN Business

2020-04-27 13:47:52

business

business

https://www.cnn.com/2020/04/27/business/volkswagen-restart-production-wolfsburg/index.html

Germany: VW Wolfsburg plant reopens after coronavirus shutdown - CNN

Volkswagen reopened the world's biggest car factory at Wolfsburg in Germany on Monday after the coronavirus forced it to shut down for the longest period in its 82-year history.

business, Germany: VW Wolfsburg plant reopens after coronavirus shutdown - CNN

The world's biggest car factory just reopened. Here's what Volkswagen had to do

London (CNN Business)Volkswagen reopened the world's biggest car factory at Wolfsburg in Germany on Monday after the coronavirus forced it to shut down for the longest period in its 82-year history. The world's largest carmaker has made 100 changes to the way its plants operate as it tries to restart business without risking the health of hundreds of thousands of workers. Its experience underscores the daunting task ahead for manufacturers as they resume work in a world still reeling from the pandemic."We have never developed, produced and sold vehicles under these conditions before," said Bernd Osterloh, the top labor representative at Volkswagen (VLKAF).Automakers plan to restart factories in early May. UAW says not so fastThe gigantic Wolfsburg plant is located on the banks of an equally impressive feat of human engineering, the 200-mile long Mittelland Canal connecting sea and inland ports in Europe. Originally built in 1938 to house workers for Volkswagen's factories, Wolfsburg is still home to the group's headquarters and has produced more than 45 million cars since 1945. It's where the iconic Beetle was produced for more than three decades and where the automaker's bestselling models, the VW Golf series and the Tiguan, are made today. Read MoreThe plant shut on March 19 as the novel coronavirus tore through Europe, prompting carmakers to halt production across the continent after borders were closed and national lockdowns imposed. Its reopening is symbolic of wider efforts to kickstart economies in Europe, where some 14 million people work in jobs connected to the automobile sector.The sprawling factory complex covers 6.5 million square meters (70 million square feet). It churned out about 700,000 cars last year, or roughly 3,500 a day. Some 63,000 people work on the site, about half the residents of the city after which it is named. Reopening Wolfsburg has been anything but straightforward. The plant depends on a supply chain spanning 71 countries and more than 2,600 companies, all dealing with the fallout of the coronavirus. Volkswagen has put in place 100 different health and safety measures, agreed with its workers, with information displayed on more than 8,000 posters at the plant, and explained in booklets."Volkswagen is setting a standard for German industry with this agreement," said Osterloh.What's changing at WolfsburgThe company plans to ramp up production slowly, in line with the availability of parts, government requirements and the demand for cars, which collapsed as the coronavirus spread. It expects to build 1,400 cars at Wolfsburg this week, rising to 6,000 next week, or about 40% of output prior to the pandemic."At Volkswagen, health takes precedence over speed," Thomas Ulbrich, head of e-mobility for the Volkswagen brand, said in a statement last week when the company reopened its electric vehicle plant in Zwickau, Germany.Volkswagen's gigantic factory complex in Wolfsburg, Germany.Wolfsburg will restart with one shift of 8,000 production line workers instead of the usual 20,000. Hours will initially be reduced for some employees, with shift changes arranged so that workers arriving don't meet those that are leaving. Workers will be expected to check their own temperature and change into their uniforms at home each morning, rather than on site. They will be asked to use elbows to open doors and walk in single file once inside, following markers on the floor to keep space between people. Social distancing will be enforced during team meetings and over lunch breaks, with reduced seating in common areas and conference rooms converted into office spaces. Canteens will remain closed and workers asked to bring their own lunch. Water dispensers have been temporarily removed to reduce the likelihood of infection and air conditioners set to circulate as much fresh air as possible.Tools will be disinfected after every shift and workers will no longer pass them to one another by hand, instead setting materials down in containers so that others can pick them up at a safe distance. Several hundred additional hand washing facilities are being installed throughout the plant. Employees walk towards an entrance gate at the Volkswagen plant in Wolfsburg, Germany, on April 27, 2020. Vehicles will be spaced further apart on the factory floor and workers will complete tasks on the same car separately where possible. Masks will be worn where it is not possible to keep 1.5 meters (5 feet) apart.Another huge challenge for Volkswagen and other manufacturers will be ensuring that the armies of suppliers entering their factories do not increase the risk of infection. Volkswagen, which also owns the Audi, Porsche and Seat brands, said it has shared its 100-point safety plan with more than 40,000 suppliers and logistics partners throughout the world. Before the pandemic, 2,000 trucks would ferry some 21,000 raw materials and vehicle components to the Wolfsburg plant each day. Now, drivers will be required to remain in their vehicles at all times and the machinery used to unload the trucks will be cleaned more frequently during shifts."We have been in close contact with our suppliers throughout the whole period of the corona crisis, throughout the shutdown and when we reopened plants, making sure they will be able to deliver the parts we need," a VW spokesperson said.The opening of plants in Zwickau and Bratislava, Slovakia last week went off smoothly "so we're optimistic that we'll handle this in the appropriate way at Wolfsburg," the spokesperson added. Volkswagen's experience in China, where it has already reopened 32 of its 33 plants, offers a blueprint. "There was not a single part missing when we started to produce."The company resumed production at plants making components across Germany from April 6, including in Brunswick and Kassel, and in Poland from April 14, to safeguard the supply of parts to its factories in China.Volkswagen workers at a component plant in Kassel, which resumed production on April 6.Volkswagen's production in China has reached 60% to 70% of its pre-coronavirus levels. Plants there have been open for well over a month, suggesting that a return to anything close to full production in Europe is still several weeks away. But carmakers have plenty of time to get this right, given demand for their products has also evaporated.Tough times aheadCar sales in China, the world's biggest car market, declined 42% in the first quarter of 2020 compared to the same period last year, according to the China Association of Automobile Manufacturers. Sales in the United States and Europe have plunged too.Demand in China could bounce back quite quickly, but car sales in Europe will take at least 10 years to return to 2019 levels, according to Ferdinand Dudenhöffer, founder of the Center Automotive Research at the University of Duisburg-Essen.Volkswagen and other German carmakers, BMW (BMWYY) and Daimler's (DMLRY) Mercedes-Benz, will fare far better than rivals such as Renault (RNLSY) and Citroën because of their heavier exposure to China's recovery, he added. Still, the institute expects Germany's automobile manufacturing sector to cut 100,000 jobs over the next three to four years, about 12% of the total, as a prolonged demand slump forces production cuts.

Rebecca Wright and Salman Saeed, CNN Business

2020-04-22 04:38:17

business

business

https://www.cnn.com/2020/04/22/business/bangladesh-garment-factories/index.html

Bangladeshi garment workers face ruin as global brands ditch clothing contracts amid coronavirus pandemic - CNN

When Fatema Akther arrived for work at the Alif Casual Wear garment factory in Dhaka in late March, she had no idea it would be her last day.

business, Bangladeshi garment workers face ruin as global brands ditch clothing contracts amid coronavirus pandemic - CNN

Bangladeshi garment workers face ruin as global brands ditch clothing contracts amid coronavirus pandemic

Hong Kong/Dhaka, Bangladesh (CNN Business)When Fatema Akther arrived for work at the Alif Casual Wear garment factory in Dhaka in late March, she had no idea it would be her last day."My line chief came and told me that I didn't have to work anymore," said Akther, 25, who had been employed there for five years. She said the company, which could not be reached for comment, decided to close the factory, leaving her without a source of income past March.Coronavirus: Latest news on the Covid-19 global pandemicThe coronavirus pandemic has led factories to furlough or lay off more than half of the country's nearly 4.1 million garment workers, according to estimates from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). Like Akther, most of them are women, and the roughly $110 they earn every month is often their families' only source of money."My family runs on my single income," said Akther, who said she provides for her husband and child. "I don't know how my family will survive."Global lockdowns and unprecedented job losses have caused demand for just about anything that isn't food to evaporate, including clothing. That's led the international apparel brands and retailers who rely on the cheap labor that Bangladesh provides to cancel or suspend an estimated $3.17 billion worth of orders in the country, according to BGMEA.Read MoreThe loss of business has exposed a rift between those major brands and the factory owners they contract with. Members of Bangladesh's business community say they've been left to pick up the tab, which has put their factories and workers in dire straits."It's abysmal, it's unreal," said Rubana Huq, President of the BGMEA, adding that there is little legal recourse in the country for factories to demand that international retailers fulfill the terms of their contracts. "I don't want any grant, I don't want any kind of charity, I just want the bare minimum justice for our workers."The fallout is also devastating news for the South Asian country's economy, which is disproportionately reliant on the apparel industry to keep its economy humming. Garments make up roughly 80% of Bangladesh's exports, Trading Economics says, and generated more than $30 billion last year, according to the country's Export Promotion Bureau — making it the second biggest exporter of such goods in the world after China. In total, the industry contributes 16% of Bangladesh's GDP. Millions of jobs at riskThe millions of factory workers aren't the only ones at risk, either. Around 15 million jobs in the country are reliant on the industry, directly or indirectly, according to the Bangladesh Commerce Ministry. That includes food sellers, truck drivers and port workers."It's a very dangerous situation which may impact a lot of people," said Bangladesh Commerce Minister Tipu Munshi.Sweeping government lockdowns have also separated some workers from their families, since many travel from smaller villages to Dhaka to find work. The capital and largest city in Bangladesh, which was locked down late last month, is where most of the country's garment factories are based."The biggest problem right now is food, we don't know how we will eat," said Rezaul Islam, 26, who said he was laid off in late March from a Dhaka-based factory and is now stuck in the city. The nationwide lockdown, which has been extended until Saturday, forbids people from going out except to pick up groceries, medicine or other necessities."We have families in our village who are dependent on us," Islam said. "Whatever we earn here we send it back home. Now my family (will) have to live without eating."A garments factory is seen empty during government imposed shutdown as a preventative measure against the COVID-19 coronavirus, in Dhaka on April 6, 2020.A question of ethicsIslam called on the factories to pay their staff during the crisis. Wages are already low in the industry, which means many workers don't have a lot of savings to dip into now."It's not fair to kick us out like this," Islam said. "Either give us back our job or give us three months' salary."Permanent workers who are terminated after having been with a company for at least a year are entitled to some pay for at least 60 days, according to Bangladeshi labor law. Islam says he was paid for a month. The factory where he worked, Saturn Textiles Ltd., could not be reached for comment.But factory owners stress that they can't prop up their workers alone, particularly if the brands they work with aren't fulfilling the terms of their contracts. More than half of the 316 Bangladesh suppliers surveyed by Penn State University's Center for Global Workers' Rights said that most of their finished or in-process orders have been canceled since the pandemic began. The survey respondents' clients were mostly European and American brands.The survey found that more than 98% of buyers refused to contribute to the partial wages of furloughed workers that the law requires. The buyers are contractually obliged to cover the total costs of the goods they ordered, including 16% for paying salaries, BGMEA says. The factories have to buy the raw materials and pay staffing and overheads before they are paid by the brands and retailers, Rubana Huq says, meaning all the business risk is taken on at their end.Upholding those contracts is the ethical thing to do, said David Hasanat, the chairman of Viyellatex Group, which has six factories in Dhaka.After a garment factory collapsed in the capital seven years ago and killed more than 1,000 people, there was an outcry about ethics in the industry and nearly 200 brands and more than 1,600 factories signed an agreement promoting safe working environments for workers."They talk about sustainability, they talk about ethics," Hasanat said. "So this is the time to showcase their good words, whether they really believe [in] these ethics." A closed down garments factory in Dhaka, Bangladesh. (Credit: Viyellatex Group)The role of international brandsCNN Business reached out to several major international brands who do business with Bangladeshi factories for comment.Some brands, including Swedish clothing chain H&M, US supermarket giant Walmart (WMT) and UK retailer Primark, have agreed to pay in part or in full for the goods they already ordered."We intend to honor our commitments to products that are finished or in the production process, and we are working with suppliers on a case-by-case basis to address any exceptions and develop solutions to minimize impact," Walmart said in a statement. The company estimates that the "exceptions" amount to less than 2% of their annual apparel orders in Bangladesh.Primark, which Penn State's study named as a brand that failed to make a firm commitment, said Monday that it will now "take all product that was both in production and finished, and planned for handover by April 17."US retail sales plunged 8.7% in March, deepest drop on recordBut others, including Gap (GPS), have not made any assurances, said Aruna Kashyap, senior counsel in the women's rights division of Human Rights Watch."These workers are really poor," said Kashyap, who is based in Dhaka. "They have worked in the supply chains and the operations of these brands for months and years. And at this moment of crisis it's really important for brands and retailers to live up to their human rights responsibilities."Asked whether the company would pay for goods ordered from Bangladeshi factories, Gap told CNN Business that the company is "making decisions based on the best interest of our employees, customers and partners, as well as the long-term health of our business," including reducing expenses after closing stores in North America and Europe."We are committed to working closely with our long-standing suppliers to best assess how we can work together through this crisis," the company said.An exterior view of fashion retailer Gap's Oxford Street store on February 11, 2016 in London.Others connected to the American retail industry, though, pointed out that the pandemic has been crippling them, too. US retail sales plunged 8.7% in March, the worst monthly decline on record.The situation has "created a temporary liquidity crisis that is threatening to burn a permanent hole in global supply chains," said Steve Lamar, the President and CEO of the American Apparel & Footwear Association."That is why we need governments to work together and with global financial institutions to make sure there are enough financial resources to keep supply chains solvent, so they can keep workers employed during these crises," Lamar said. "Common sense measures like deferring tariff payments and fully funding loan programs for retailers — now largely closed — are just two of the tools all governments should be implementing."A uncertain futureThe Bangladeshi government is providing some assistance. In March and April, Prime Minister Sheikh Hasina announced more than $8.5 billion in stimulus measures that includes loans to help factory owners pay worker salaries.The bill for saving the world economy is $7 trillion and rising "The Prime Minister [is] very much serious on this," said Munshi, the commerce minister. "No one should die of starvation. They have to get their money, they have to live." Munshi said Hasina has instructed factory owners to look after their workers.Even so, factory owners said they are concerned about taking out the government loans. The money would still have to be repaid within two years — a commitment they feared making given how unclear the coronavirus pandemic remains."The government is doing their best," said Hasanat, of Viyellatex Group. "But we are not a rich country, we don't have much foreign reserves, so I'm also worried about whether the government has the capability to support [during] this uncertainty."

Kyung Lah, CNN

2020-04-01 10:50:40

business

business

https://www.cnn.com/2020/04/01/business/one-block-small-businesses-los-angeles/index.html

One block in America. Six businesses on the brink of disaster - CNN

As of 2019, there were an estimated 30.7 million small businesses in the US, employing 59.9 million people, or almost half of the private sector workforce. Small businesses drive the American economy, but as the coronavirus pandemic has proven, they do so from a cliff. Many are about to fall off.

business, One block in America. Six businesses on the brink of disaster - CNN

One block in America. Six businesses on the brink of disaster

Los Angeles (CNN Business)As of 2019, there were an estimated 30.7 million small businesses in the US, employing 59.9 million people, or almost half of the private sector workforce. Small businesses drive the American economy, but as the coronavirus pandemic has proven, they do so from a cliff. Many are about to fall off. Behind those numbers are the actual people who own and work at the small businesses. It's impossible to tell all of their stories, but we can tell some. So last week we talked to the owners of six small businesses on a block of Colorado Boulevard in Los Angeles about their hopes and fears right now.The block of Colorado Boulevard in Los Angeles where the businesses are located. The block and its businesses are very much unique, made up of a group of independently-owned stores in the heart of a gentrifying community in eastern Los Angeles. But you could transplant them anywhere in the country -- any town, any large city -- and the stories would be much the same. Most of the business owners on the block are women, and many are minorities, reflecting a growing trend in the US. They went into what they do with a leap of faith — and a lot of financial risk. Now they're on the brink of ruin. Money may be coming from Washington in the next few weeks; they may not make it that long. Below are their stories, as they told them. Quotes have been edited for length and clarity. Read MoreValerie Brown, owner, Eagle Rock Community Acupuncture. Open since 2009. "I wanted to find a place where I could foresee there being foot traffic, Colorado Boulevard is great. I signed the lease in 2008. Both these financial times were and are gloomy, that's for sure. I didn't have as much at stake back then. I was moving into a situation where I thought, 'Oh, things are going to be getting better.' Now I'm in a situation where things were fine and now they're getting worse.I'm very attached to my community. When I go into Trader Joe's I know people. This business has been around for so long, we remember each other. I miss the connection. I feel for all of us shopkeepers. If I know that we're going to be back in business up and running by May, I think I have enough to get by. If it takes until June, I still think I could do it, but I'd be awfully nervous. If it doesn't look like we can go back by June, I think I'm going to have to cease this business model because it's just not going to be viable. I sure hope that that's not the situation. I hope that at some point this year, we'll all be back to eating in restaurants, going to movies, getting community acupuncture. It would be heartbreaking because of all the connections I've made. And, you know, the patients mean a lot to me, and the community means a lot to me. I do hope that California will find a way to be lenient with the small businesses and perhaps give us back some of the money that we've pre-paid in order to be in business in the year 2020. We'd need abatement on the rent. To have to pay rent, when we can't work, we'd be drowning in a lot of debt.So far from what I've heard, [the stimulus packages are] probably going to benefit big industries most. Probably hotels, airlines, things like that. Something funny I heard recently was, [what if] if the small business owners received the stimulus and Wall Street had to set up a GoFundMe account instead of it being always in reverse. I'm just not optimistic that something that would help small businesses and not give big handouts to the people who don't need it."Samara Caughey, owner, Purple Twig, a children's art studio. Open since 2009. "It's always a financial risk, always a leap of faith to own your own small business. I started very small. I rented a storefront, did the minimum to get the space ready, and opened up. I hoped parents would drop their kids off to make art, and they did! Then it grew from there. When I moved there, it was me and Peek-a-boo, a children's indoor play place. In the last 10 years, Colorado Boulevard has grown into a place that the community desires. A lot of the businesses are owned by women. The community has been welcoming. They all have an identity — each storefront. All have a passion, all believe in what they're doing. This situation is very overwhelming, that's the best word I can use to describe it. We're all going through it. I don't feel like, 'oh poor me.' I'm trying to focus on creative thinking! I'm offering subscriptions for children age 5 to adults. Seems more important than ever to express yourself.I am also fortunate that much of my income comes from summer camp. As long as they register, I have income. If this goes on through summer, I will have to close. That would be such a shame. We are so important to this community in making it vital. If we have to shut down, so many would be affected. I can hold on until the end of May. Hopefully we get a handle on this situation by then.A loan will not do anything for me or most of the shops on this street. Unless we can get grant funding, that's what we need. Leave the large businesses to get the loans. It becomes more and more apparent we're on a welfare system for the rich where we give millions to the large businesses. They can afford the loans. We can't." Jen Yates and Alex Hartunian, owners, Studio Metamorphosis, a fitness center. Open in this location since 2017.Alex: Any small business can owner can relate. It is not easy.Jen: We just put everything together and ... I mean scrounged every single dollar, every penny to open, and we did it. Alex did all of the construction there. He literally poured in blood, sweat and tears, with his own hands.Alex: It was really abrupt. We saw the world changing around us. And I was terrified. It was scary and Jen was equally scared. And we were just like, 'How are we going to survive... we're gonna wake up the next morning and have zero income. Like, how does that work?'Jen: When you put everything into watching something grow, and then it stops suddenly, it's so painful. I was sitting on the floor, just sobbing. Seeing it empty on a day where it should have been full was just heartbreaking to me. This has been my dream, opening up a studio. It was everything, our whole lives, and it's just gut wrenching. Alex: Yeah, we're scared. Jen: Yeah, I mean, I think each day, we look at each other and [think], 'How are we going to make this work, how are we going to stay afloat?' But yeah, we're scared like everybody else in the world, because the uncertainty is the scariest part of it.Alex: If we have like hundreds of thousands of dollars of debt in three, four months, what's the point? How will we open? Will people be ready to jump right back into business? Will people still be scared? And the more time goes on, the more the financial equation becomes looming in terms of like, a huge, huge problem. ...[Debt] forgiveness is going to be probably the number one thing that's going to put people at ease and make them comply with the stay at home order. People are scared so they're doing side work. People are getting out there and maybe perpetuating this virus. People want to know that if they hang tight [that] the government [will] tell us, 'Nothing's going to happen to your credit, you're not going to lose your home, you're not going to lose your place of business, and everybody just needs to be in this together.' That's the message out there, but we need to hear that from our government.Jen: We have to take care of our staff. I mean, we're not producing income, and they're not getting paid. And it's heartbreaking because they're starting their families and some of them are getting married now and they're beginning to start a whole new chapter in their lives, and they're so scared about what all this means for them. ... Alex and I will continue to fight and do whatever we can to generate some income to stay afloat. When challenges are presented I don't back away, and I'm going to keep moving forward and fight for it.Laura Porter, owner, Bloom School of Music and Dance. Open since 2008. "My husband and I started Bloom back in 2008. At first, it was just the two of us, teaching everything that we could teach, while holding down other jobs. Both of us have been musicians and educators for decades, and we were being sent all the kids who wanted to quit. We decided we wanted to teach music education differently. I want to build a school with teachers who have like minds, who treat every student completely individually. Let's feel and express the beat in different ways, hear the rhythmic echoes and play games and feel that joy before we tell them to sit still and listen to the adults.It's really brought all of us together and sharing. Sharing ideas, trying to figure out a better way to do something, and really feeling like we're in it together. It's not showing up between three and eight to do your thing and then you're going home. You know, everybody in the whole school is thinking about this 24-7. We're kind of approaching our business in a lot of ways like educators — How can we do this better? How can we make it more engaging? How can we bring more joy?Like most of the schools across the country, everyone's on Zoom, [somehow,] doing live streaming, to keep things going. So far, we're holding strong. It's not April 1st yet so that's when payments are due. But right now we're holding strong.It's so frightening because it's a day-by-day thing. You know, I can't even look at September because there's no history in our lifetime for this, right? For anyone, it's not just the businesses, it's all the people that have supported those businesses over the years. [Elected officials] have to listen to the average American out of work. They always talk about how important it is for everybody to spend. If they're out of work, they can't spend. They have to put themselves in other people's shoes and small businesses are a big part of that. [If] they help small businesses, it can help the people that work for them."Michelle Helseth, owner, Native Boutique, a clothing store. Open in this location since 2014. "I bought my house here when my daughter was three, so 19 years ago. I always wanted to open up a shop in our neighborhood.I think this block, this is the heart of the neighborhood. You could do everything from buying wine to cheese to having breakfast and lunch. Going shopping, buying a gift, to having your kids get educated with arts and music and dance or just going to having a children's birthday party next door. We just have everything on this block, all independently owned, all individual owners, majority women-owned.The whole world is trying to process this new reality. It's so fictional. This is something we would see in a movie theater but it's happening.As far as business, it's just come to a screeching halt.And then workman comp's insurance tried to draw from my account. I have no staff, what's the point? So I have to call my workman's comp and say, 'You know I have no staff right now so there's no reason for you to deduct my account.' I just invested in all this inventory. And so I'm extended, expecting for sales pick up in March and April, to get us back where we needed to be. I wish I was able to have reserves. We just don't. We're a small business where I'm a single mom. It's not like I have a husband bringing another income or, or a partner, I don't. This is my everything here.I'm concerned about going deeper into a hole, more debt. We need financial support to help us get through this from our government. We need grants, not just loans. You know, if they're going to give us loans, [it should be] zero interest loans. Our businesses are the frontline of keeping our neighborhood safe. If we're not here, creating a pleasant, happy, beautiful environment for community for shoppers, for families, for residents ... How safe will the community be when you're having blight on your main shopping boulevard?"Michelle Wilton, chef/owner of Four Café. Open since 2010."I definitely cycle through every emotion. I get angry, I get sad. I think what makes me the saddest is just our employees. I have this overarching sense of responsibility for their lives as well and to provide for them. So, that has been really hard for me trying to just navigate. I need to pay them, they have children.We just haven't generated enough sales to even cover the labor on some nights so myself and our other business partner ... have been working. He's been working in the front of the house and I've been doing all the cooking. We're just really waiting to see what the stimulus is, because if the stimulus comes out and says that they're going to help pay for our staff, then we want to get everybody scheduled immediately just to give them hours, of course. But right now the reality of it is if we don't make the sales we can't pay for the labor.We just added a whole grocery section of online ordering where people can buy toilet paper, they can buy a dozen organic eggs, organic milk, any of our cookie dough, or organic bread... they can pull up curbside and pop their trunk and we put it in and it's a complete, no-contact way of shopping.I put sourdough bread kits on our site, we started pizza kits, hopefully it will generate more business so that we can employ more staff. I had to reinvent the whole thing. Anything I can to help generate business and help employ our staff, that's my number one thing, we have staff that have kids and I just get so worried about them.I have two small children, a four-year-old and an eight-year-old, and it has been tricky trying to succeed at all things. Because now I'm a homeschooling mom, so I do that in the morning and then I go to work ... and I'll go and bake or prepare. My husband will take over with the kids behind me, but we haven't taken them out. My son has asthma so it is a little scary."-- CNN's Kimberly Berryman contributed reporting.

Jackie Wattles and Peter Valdes-Dapena, CNN

2020-03-27 15:44:27

business

business

https://www.cnn.com/2020/03/27/business/automakers-ventilator-production-coronavirus/index.html

Automakers are racing to make ventilators. But it's not that easy - CNN

It seems only natural that, in the rush to address the critical shortage of ventilators in the US due to the coronavirus pandemic, automakers would again be among the first to answer the call to help.

business, Automakers are racing to make ventilators. But it's not that easy - CNN

Automakers are racing to make ventilators. But it's not that easy

(CNN)US automakers have come to the rescue when the nation has faced supply shortages during wartime in the past. Ford built heavy bomber airplanes and GM built amphibious assault craft, among other things. So it seems only natural that, in the rush to address the critical shortage of ventilators in the US due to the coronavirus pandemic, automakers would again be among the first to answer the call to help.So far Ford, GM, Toyota and Tesla, which have all temporarily shut down their factories in recent weeks, have pledged to help.On Friday, President Donald Trump announced he was invoking the Defense Production Act to require GM to "accept, perform, and prioritize" federal contracts for ventilators. That should help expedite things. But switching from cars to ventilators is not so easy. Ventilators are complex machines that use sophisticated software and specialized parts, and companies that seek to manufacture them face several hurdles — including intellectual property rights, the need for specially trained workers, regulatory approvals and safety considerations. Ford is working with 3M and GE to make respirators and ventilatorsSo far, automakers have announced they've been teaming up with existing ventilator makers to help them ramp up production. And some, like Ford (F), and GM (GM), are exploring producing ventilators in their own factories.Read MoreBut it's a race against time. Already, sick patients are overwhelming hospitals in New York. The state fears it is headed for a situation like the one that played out in Italy, where ventilator shortages forced doctors to choose which patients get to use the potentially lifesaving machines."The number of ventilators we need is so astronomical," New York Governor Andrew Cuomo said Thursday, adding that hospitals have resorted to using experimental solutions, such as putting two patients on one machine.There are about 160,000 ventilators available in America but as many as 740,000 could be needed, according to the Johns Hopkins Center for Health Security.Ventilators can help some of the most seriously ill COVID-19 patients who start losing the ability to breathe on their own. The devices offer gentle breathing assistance so a person's lungs can rest while they fight the virus.The best way automakers can help fastNot all ventilators are exactly alike. Some are more complex than others. The sickest COVID-19 patients' lungs can stiffen, requiring high-end machines that cost up to $50,000. Those machines can be precisely tailored for patients and must be operated by trained medical professionals. Production and assembly of these high-end devices are best left to traditional ventilator manufacturers, according to Vafa Jamali, a vice president at Medtronic, which is one of only a handful of companies that manufacture ventilators. Key components are made in-house by experienced workers. Medtronic said. Not only does it not want to outsource that production, but auto makers aren't capable of making these high-end machines — at least not quickly."Because this is a lifesaving device, it can't be off. Practice and experience making the parts is really, really critical," Jamali said. One of Medtronic's premium ventilator machines. Some of its components are highly specialized, and, the company says, require trained in-house workers.On its own, Medtronic said it has already boosted its weekly ventilator production by 40% since January, in part by putting its assembly lines on a 24-hour schedule. And the company plans to ramp up production by another 200% over the next several weeks by doubling the workers on existing production lines. Its goal is to ramp up output of top-of-the-line ventilators to 500 per week, a five-fold increase.Still, the company will only be able to manufacture ventilators by the hundreds — and doctors need them by the thousands.That's why the company says it is welcoming ideas from automakers to help fill the gap.Medtronic has spoken with Tesla, GM and Ford, though the companies don't have any formal plans to work together yet, Medtronic told CNN Business.General Motors (GM) said last Friday that it was working with another ventilator maker, Ventec Life Systems, to help increase Ventec's production. The companies are ramping up to produce as many as 10,000 units a month or more, they said in a later announcement. Some of the ventilators will be built in GM's Kokomo, Indiana, electronics assembly plant. The first of these ventilators are expected to be delivered in April, the companies said.'Desperate' shortage of ventilators for coronavirus patients puts manufacturers on wartime footingThe New York Times reported late Thursday that the White House was about to announce the venture between GM and Ventec, which the report said would allow for the production of as many as 80,000 ventilators. But the Federal Emergency Management Agency said it needed more time to assess whether the venture was too costly.GM responded to the report in a statement, saying "efforts to set up manufacturing capacity at the GM Kokomo facility are already underway to produce Ventec's critical care ventilator." It also said it had begun hiring workers for the venture.For its part, Ford has announced it is working with GE Healthcare to increase production of GE's ventilators.Jim Baumbick is the vice president in charge of all of Ford's vehicle product lines, but lately he's turned his attention to gearing up healthcare technology production.He said Ford, which introduced mass production to the auto industry, has identified efficiencies that can be made to GE's production processes that will increase output in coming weeks. Ford has also been able to find additional suppliers for some parts that make up the ventilators, Baumbick said, so that GE doesn't face bottlenecks in its supply chain.The automaker has even suggested changes to parts so they could be more easily produced by other suppliers. GE Healthcare declined to provide additional details about its work with Ford, but did say it is planning to double its output by the end of June.Toyota is also "finalizing agreements to begin working with at least two companies that produce ventilators and respirators to help increase their capacity," the company said Friday in an emailed statement. Toyota did not say which medical device companies are involved.A less complex machine Medtronic makes less complex ventilator machines for the less critically ill as well, and the firm is considering making "one or two" of its designs open source. That would allow outside manufacturers to take over production of fully functioning machines. Jamali said he is confident automakers could get the job done. But, he added, "the question is: What is the time frame of when you start and when you're meaningfully putting ventilators on the market?" Jamali said.As part of its partnership with GE Healthcare, Ford is helping to design a new, simple ventilator that would be relatively easy to produce, Baumbick said. To do this, Ford and GE designers are starting with a machine used for anesthesia. It's a machine that, at its core, is a sort of ventilator. The idea, Baumbick said, is to strip away anything that isn't needed for breathing."It's kind of getting down to first principles," Baumbick said. Medical supplies were displayed at the Jacob Javits Center before a news conference with New York Gov. Andrew Cuomo.Once that machine has been successfully designed, he said, it could be manufactured at a facility outside of GE. It could even be made at a Ford factory, he added. But the companies did not give a timeline for when that production could begin. The Food and Drug Administration says it has implemented drastic regulatory changes to allow automakers and other non-medical manufacturers to quickly take up such tasks."FDA's message is clear," the agency said in a March 22 statement. "If you want to help expand production of ventilators to save American lives in this pandemic, we are going to work with you to sweep every possible barrier out of your way."James Dyson designed a new ventilator in 10 days. He's making 15,000 for the pandemic fightFor example, the agency said it is not enforcing rules that require ventilator manufacturers to gain FDA approval before making slight changes to their devices. That approach "will help manufacturers that want to add production lines or manufacture at alternative sites [that] may have different manufacturing equipment," according to the FDA guidance.Intellectual property concerns loomBut some traditional manufacturers remain cautious about working with third parties. If there is a flaw in production, "it would be a catastrophe if you got those devices out en masse," said Jamali. "You could cause a lot of damage in the patients that are most acute."Intellectual property rights may also present obstacles. Designs for ventilators, their software or key components are often patented or involve trade secrets. The medical device industry has "historically been extremely sensitive about protecting its intellectual property," said Debbie Wang, a Morningstar analyst who covers Medtronic. "And I can't imagine that would necessarily go away," she added — even in the face of a pandemic.Patrick Keane, an IP attorney that works with hospitals and ventilator manufacturers, agreed that intellectual property concerns could make traditional manufacturers hesitant to work with third-party manufacturers.The Defense Production Act is the most powerful tool the government has to ensure that doesn't happen. Invoking it allows the White House to direct production. What is the Defense Production Act?It will be up to the companies who are given ventilator manufacturer directives to ensure they aren't liable for patent infringement after the crisis passes, according to Keane.The president was under growing pressure to use his DPA powers in order to better coordinate the production and distribution of badly needed ventilators. Doing so, proponents argued, would alleviate the concerns of state governors, such as New York's Cuomo, who are desperate for new ventilators.But the issue will continue to come back to a major supply gap and a race against the clock. Current ventilator production levels fall far short of demand — and setting up new production lines is no simple task."You don't want people who are producing air conditioning units for cars to all of a sudden start producing entire ventilators," he said.

Charles Riley, CNN Business

2020-03-21 06:40:50

business

business

https://www.cnn.com/2020/03/21/business/coronavirus-economy-markets/index.html

30 days that brought the world to the brink of a depression - CNN

Monday, February 17. The novel coronavirus outbreak is raging in China, but fewer than 1,000 people have been infected outside the country. With the virus out of sight and mostly out of mind, the Dow Jones Industrial Average stands just shy of 30,000 points, driven by the longest US economic expansion in history.

business, 30 days that brought the world to the brink of a depression - CNN

30 days that brought the world to the brink of a depression

Monday, February 17. The novel coronavirus outbreak is raging in China, but fewer than 1,000 people have been infected outside the country. With the virus out of sight and mostly out of mind, the Dow Jones Industrial Average stands just shy of 30,000 points, driven by the longest US economic expansion in history.What investors couldn't know is that over the next 30 days, the coronavirus would burst out of quarantine in China, with major outbreaks in South Korea and Italy, then Spain, France, Germany, the United Kingdom and the United States. It brought business to a sudden stop, sent stock markets into a meltdown and forced central banks to take emergency action on a scale even greater than during the 2008 global financial crisis. A global recession, once unthinkable in 2020, is now a foregone conclusion and some experts warn that the pandemic could drag the world's economy into a depression. More bad news: The coronavirus outbreak may just be getting started.Central banks and governments are now unleashing a tsunami of interest rate cuts, loan guarantees and new spending, tapping emergency powers to reassure investors, cushion the shock to companies and workers and preserve the foundations of a functioning economy for the future. In the United States, the Trump administration is asking Congress to approve a rescue bill that would inject $1 trillion into the economy to prevent mass layoffs as huge swaths of the world's biggest economy shut down and airlines, hotels and restaurants run out of cash. In an extraordinary move, the UK government on Friday said it would pay 80% of the wages of anyone at risk of losing their job because of the pandemic. Cash handouts are coming as countries do 'whatever it takes' to survive the pandemic shockRead MoreYet the rescue efforts may already be too late. Goldman Sachs estimates that 2.25 million Americans filed for unemployment benefits this week — that would be the biggest number on record. Meanwhile, the number of coronavirus cases marches higher. The global number of infections has topped 270,000, and more than 11,000 people have been killed worldwide. Spain, Italy, France and the United Kingdom are under partial or complete lockdowns. California, which boasts the world's fifth largest economy, has directed 40 million people to stay at home. "The coronavirus has created unprecedented financial and societal disruption," David Kostin, chief US equity strategist at Goldman Sachs, said this week. Most exposed to the fallout are businesses and workers in transport, the energy industry and hospitality as international aviation shuts down, oil consumption collapses and pubs, bars and restaurants are ordered to close. "In the worst case, entire industries could be destroyed," Moody's Investor Services said in a note on Friday.While the pandemic is still unfolding, economists are already thinking about how it will change the world. Many expect significant shifts in how supply chains are constructed and how global trade is conducted. The merits of capitalism, democratic systems of government and globalization are likely to come under intense scrutiny. A warning from AppleFebruary 17 was a holiday in the United States and stock markets were closed. But on that Monday, Apple sounded the alarm. It warned that it wouldn't meet its revenue projections for the first three months of the year because the coronavirus had reduced iPhone manufacturing capacity in China, and with Chinese stores closed or operating reduced hours, demand for the company's products was also dropping. When US markets reopened on February 18, investors pushed the company's stock down by 2.6%.Coronavirus could spark another Great Depression, former Trump adviser warns The initial hit to its stock may have been modest, but Apple was the first major US company to warn that the coronavirus was affecting its business in a big way. What's more, Apple laid out exactly why the epidemic was such a big threat: the reaction to the outbreak was hammering both supply and demand. That dual threat is exactly why pandemics can be much more damaging than many other "black swan" events. People are more likely to stay home during an outbreak to avoid getting sick. Doing so limits demand for consumer goods and services, as well as energy. Decisions by companies and governments to close shops and idle factories, meanwhile, curtail production. "A severe pandemic would resemble a global war in its sudden, profound, and widespread impact," the World Bank said in a report from 2013.In the month following Apple's (AAPL) warning, thousands more companies came under huge pressure. Carmakers, which rely on global supply chains and timely deliveries to keep their plants open, shuttered factories in Europe and then the United States. Airlines canceled international flights to China, and then just about everywhere else. CAPA Centre for Aviation, a consultancy, says most carriers will be bankrupt by the end of May unless governments bail them out. Cathay Pacific planes are seen parked on the tarmac in Hong Kong.Eswar Prasad, a professor of trade policy at Cornell University, said the nature of the pandemic will encourage companies to begin reviewing the costs of global economic integration. "The free flow of goods, capital, and people has generated enormous benefits but also created channels for rapid worldwide contagion from financial shocks, geopolitical conflicts, and epidemics," he said. The debate over how companies and governments should respond is already underway, with some observers arguing that countries must make more essential products including medical supplies at home in order to prevent shortages, an impulse that could accelerate a rollback of globalization exemplified by the trade war between the United States and China. But William Reinsch, a senior adviser at the Center for Strategic and International Studies, said that the pandemic can't undo the technological advances that have dramatically boosted global trade over the past 50 years. "The larger question is whether those tools will be used in the same way and to the same degree as they have been," he said. One change that Reinsch sees coming is how executives think about the supplies they need. "The coronavirus crisis has taught them that supply chains are a lot more fragile than they thought, that supplies can be suddenly interrupted for unexpected reasons, and that a prudent manager will not only have a Plan B, but a Plan C and Plan D as well," he said.Policymakers respond as markets crashStarting on February 18, US stocks entered a stunning freefall that wiped away roughly a third of their value and ended the longest bull market in history. The Dow has fallen nearly 35% since Apple issued its coronavirus warning, posting shock declines on March 9 (-7.8%), March 12 (-10%) and March 16 (-12.9%). The index closed at 19,174 points on Friday.Markets in Europe and Asia have also plunged. Europe's Stoxx 600 has lost roughly a third of its value since February 18, and Hong Kong's Hang Seng Index has dropped 18% over the same time period. According to Bank of America, $27 trillion has been wiped off global stocks since the end of January. Companies exposed to fallout from the pandemic have seen their stocks decimated. Shares in United Airlines (UAL) are down roughly 70% so far this year, while French carmaker Renault (RNLSY) has plummeted 62%. Marriott International's (MAR) stock is down 50% over the same period. Share prices may come under even more pressure. According to Neil Shearing, the chief economist at Capital Economics, the ability of central banks to put a floor under stock markets is limited. "History suggests that equity markets are only likely to bottom out when it becomes clear that the flow of new cases of the virus has peaked. Until this happens, we should expect stock markets to remain under pressure," he said.US Federal Reserve Chairman Jerome Powell gives a press briefing after the surprise rate cut on March 3.Central banks have responded to the mounting economic devastation by slashing interest rates and using other tools in their arsenal to support growth and prevent financial markets from seizing up. The US Federal Reserve cut interest rates at emergency meetings on March 3 and March 15, reducing them to a record low near zero while committing $750 billion to buy government bonds and other securities. The Bank of England has also cut interest rates twice, on March 11 and March 19. In Japan and Europe, where interest rates have been in negative territory for years, central banks have joined the Fed in announcing hundreds of billions of dollars worth of asset purchases. Governments have promised to inject huge sums into the economy. Morgan Stanley says spending commitments from the United States, Europe, Japan, the United Kingdom and China add up to at least $1.7 trillion. And a much larger sum has been promised in the form of credit guarantees."While the initial response from developed economies was slow, over the last few days — as economic and financial market disruptions persist — we have started to see strong commitments from policy makers, indicating a sizable fiscal expansion plan is in the offing," Morgan Stanley chief economist Chetan Ahya told clients on Thursday.What happens nextGoldman Sachs warned Friday that US GDP could plummet at an annual rate of 24% during the second quarter, with unemployment peaking around 9% later this year. The bank said that reports suggest a "sudden surge in layoffs and a collapse in spending, both historic in size and speed."The economic collapse predicted by Goldman would be significantly worse than the sharpest contraction during the Great Recession, when GDP dropped by a rate of 8.4% in the fourth quarter of 2008. It would also surpass the previous post-World-War-II record of 10% set in early 1958.Recently assembled vehicles made by Peugeot owner PSA Group, which has closed plants due to coronavirus.The picture is much the same in other countries where businesses are shutting down because of the coronavirus. According to Deutsche Bank, if the pandemic affects the United Kingdom for longer than expected, its economy could shrink 6% this year as the country plunges into the worst recession in a century.Kevin Hassett, an economist and former CNN contributor who is returning to the Trump administration to help the coronavirus response, said this week that the pandemic could spark a repeat of the Great Depression that began in 1929 and lasted for years."We're going to have to either have a Great Depression, or figure out a way to send people back to work even though that's risky," he said. "Because at some point, we can't not have an economy, right?"— Julia Horowitz and Matt Egan contributed reporting.

Danielle Wiener-Bronner, CNN Business

2020-03-20 10:32:43

business

business

https://www.cnn.com/2020/03/20/business/panic-buying-how-stores-restock-coronavirus/index.html

Panic buying: How grocery stores restock shelves in the age of coronavirus - CNN

Americans are panic buying because of the global coronavirus pandemic, clearing supermarkets across the country of essential items. But our food system doesn't need to rapidly increase supply. It just has to relearn how to distribute it.

business, Panic buying: How grocery stores restock shelves in the age of coronavirus - CNN

How grocery stores restock shelves in the age of coronavirus

By Sunday, Stew Leonard Jr. and his team were ready for a break. "Saturday was really, really busy," Leonard, the CEO and president of Stew Leonard's, a grocery store chain with seven locations across New York, Connecticut and New Jersey, said. "Everybody was exhausted after Saturday." Sunday was a day to take stock of what was left in his supermarkets. As soon as they were back in order, Leonard had to prepare for another busy day. Before his stores opened on Monday morning, there were lines of people waiting to get in. Amid the coronavirus pandemic, Leonard has seen spikes in customer visits. After a recent presidential address about the outbreak, people swarmed his stores, he said. When the stock market crashed and rumors spread about closures and restrictions in New York and New Jersey, the same thing happened. As Americans grow more nervous about the implications of the global pandemic, and as the government puts extraordinary limitations on public life, customers across the country have been clearing supermarkets like Stew Leonard's of essential items. Toilet paper is out. Paper towels are out. Hand sanitizer has been out for weeks. Shoppers are snapping up nonperishable items like canned goods and cereal and emptying shelves of fresh staples like milk, meat and bread. A worker restocks the meat section of a Stop & Shop supermarket in North Providence, Rhode Island. (David Goldman/AP)Read MoreIt's not unusual for grocery stores to see a run on items during times of crisis. People stock up ahead of hurricanes, tornadoes and other natural disasters. But natural disasters don't affect all of America, much less the world. Food demand in retail locations is at "unprecedented levels," said Morris Cohen, a professor of operations, information and decisions at the University of Pennsylvania's Wharton business school. "There will be spot shortages caused by panic buying," he noted. But if you go into a grocery store right now and don't see what you want, that doesn't mean that what you want isn't out there somewhere. People aren't eating more food. They're just eating it at home. Empty shelves mean there's a bottleneck, not a shortage. Food that had been destined for restaurants, bars, offices and other gathering places will need to go to homes instead, and the system will have to account for the increased volume of groceries Americans cooking at home are suddenly buying. But the supply chain is built for some disruption, and there's cushioning for it. Our food system can deal with the current demand; it just has to relearn how to distribute the supply. As long as farmers can keep farming, truckers can keep driving, packaging can be made and supplied and grocery stores can stay open, the empty shelves should be just a temporary inconvenience. A major break in that system, however, could cause real trouble. Big grocery chains have a large network of suppliers. (Mary Altaffer/AP)A network, not a chainThe current surge in demand may be unprecedented, but supply chains are built to react to disruptions. A bad crop yield or a factory fire could lead retailers to swap suppliers or turn to alternative products. Those types of behind-the-scenes impacts aren't rare. But they are rarely seen by consumers. Major supermarket chains and retailers have networks that stretch into suppliers all over the world, Cohen said. If there are shortages from one supplier, they can turn to another. To think about how supply chains work, it's best not to imagine a physical chain, Cohen explained. Instead, picture a network: "If one pathway is broken, if one link in it is severed, there are alternative paths." Though Stew Leonard's is a fraction of the size of national grocery chains like Publix or others, Leonard also relies on a network for his products. That has helped him avoid running out of fresh food at his stores. "We have had to switch over to other suppliers" for fresh staples like milk and meat, Leonard said. "What we've been able to do is get plenty of butter, eggs and milk. Meat we've had no problem," he said. The shelves do have product. They are stocked. They are getting restocked on a regular basis. The supply chain in this country is very efficient and it's very effective."Greg Ferrara, president and CEO, National Grocers AssociationGreg Ferrara, president and CEO of the National Grocers Association, which represents about 21,000 independently-owned grocery stores in the United States, said that his members have seen an "astronomical" surge in demand. "However," he added, "the shelves do have product. They are stocked. They are getting restocked on a regular basis. The supply chain in this country is very efficient and it's very effective."Over time, and if the situation persists, some food could be diverted from certain vendors to others. Food that had been shipped to corporate and university cafeterias, cruise lines, airlines and restaurants could instead be sent to grocery stores and retailers. Some companies are already starting to make adjustments. Baldor, a New York City firm which sells food to restaurants, schools and other food service outlets, is now offering delivery to individuals. The existing supply "has to be reallocated," said Cohen. "There has to be an efficient way of doing that. And that could be a challenge because this is going outside the normal structure of how business is conducted." But, he noted, eventually a balance should be reached. Shoppers are stocking up on canned foods and other shelf-stable products. (Jeremy Hogan/Echoes Wire/Barcroft Media/Getty Images)Shelf-stable goods makers react As people rush to buy canned food and other nonperishable items, big consumer goods companies are trying to meet demand without needlessly ratcheting up production. Bumble Bee Foods, which sells canned fish, "has seen a spike in demand," President and CEO Jan Tharp told CNN Business in an email. "We are in constant communication with both our suppliers and customers and have been successful at keeping up with the accelerated sale of our products." General Mills, which sells a vast portfolio of well-known brands like Cheerios, Annie's snacks and pasta and Progresso soups, among others, is seeing "a short-term increase in customer orders in the US," said Kelsey Roemhildt, corporate communications manager for the company. Demand for soup, cereal, snacks and dry baking mixes in particular has gone up. To help meet that spike, General Mills is taking steps like increasing production of some items. "Up until this point, the supply chain has been working remarkably well," CEO Jeff Harmening said during a discussion of the company's third quarter financial results Wednesday. "Food continues to flow, we continue to make it. Our retailers continue to stock as quickly as they can. And that all is actually working pretty well." Harmening added that "we anticipate continuing production" as usual, noting that the company is encouraging social distancing at work and taking other measures to try to keep employees safe. Everybody who works in supply chain just rues the day when this bullwhip effect gets started." Willy Shih, professor of management practice in business administration, Harvard Business SchoolStill, some disruptions are inevitable. Nestlé, which sells frozen meals, bottled water, baby food, cereal, chocolate and other items, warned of delays in Europe because of border closures. But the company noted that in the United States, supply is "relatively insulated" because most ingredients are locally sourced. "Our factory, warehouse and distribution centers remain open, with additional measures in place to ensure the safety of our employees and business partners," a Nestlé spokesperson said. And companies have to be careful about dramatically increasing production. People only need so much of toilet paper or shelf-stable goods. Eventually, they'll start dipping into their own supplies rather than shopping for more, and demand will fall. Any manufacturers that hire more employees or open new facilities because they see the higher demand as a new normal could pay a price. There's a name for that phenomenon, explained Willy Shih, a professor of management practice in business administration at the Harvard Business School. It's called the "bullwhip effect." "Everybody who works in supply chain just rues the day when this bullwhip effect gets started," he said. "And that's in fact what we're seeing now."The bullwhip effect is one reason it's important to tamp down panic buying, and try to prevent people from purchasing more than they need. Some retailers are limiting purchases of some items in an attempt to stop customers from hoarding. (Frederic J. Brown/AFP/Getty Images)Rationing supply Facing the surge in demand, grocery stores and retailers are limiting sales of certain items to try to prevent panic shopping and hoarding, and give them a chance to restock shelves.Walmart said that some items, including cleaning supplies and paper products, are in high demand. It is working to restock those products quickly by sending deliveries directly to stores and prioritizing shipments to certain regions. The chain has instructed store managers to limit sales on high-demand items at their discretion.Kroger is capping purchases of cold, flu and sanitary products. In a message to customers, CEO Rodney McMullen said that the company's supply chain teams are trying to make sure that items are available as soon as possible. Publix is also limiting the purchase of certain items, as is H-E-B. "Panic does not promote progress," the Texas chain said in a release, adding that customers should come back if they don't find what they need the first time.There are companies that may be weighing whether it makes sense to increase production in order to avoid the bullwhip effect. But others may not have that option. Some toilet paper makers say they'd been running factories 24 hours a day, seven days a week as their normal practice. For them, ramping up production would be all but impossible, even if they wanted to. Farmers who raise dairy cows or cattle or grow produce are in similar situations. They can't immediately grow more crops or milk more cows. And they may not have to -— they just have to figure out where to ship their products. And their farms must continue to function. Industry associations representing farmers have said they're not too worried about the short-term food supply, but if their workers get sick, that could strain their operations. (Angela Weiss/AFP/Getty Images)Support for farmers A resilient supply chain should be able to withstand shocks. But it needs enough food in the system to work. So far, our fresh food supply has avoided major disruptions. Jim Mulhern, president and CEO of the National Milk Producers Federation, offered a reassuring perspective on dairy production. "Dairy supplies aren't experiencing production interruptions at this time," he said in a statement Monday. "The US food-supply chain is more than capable of meeting demand." Before the crisis hit, US farmers were on track to produce record amounts of poultry, beef, pork and milk, said John Newton, chief economist at the American Farm Bureau Federation, which represents farmers. And the food should be safe to eat. The USDA has said it is "not aware of any reports at this time of human illnesses that suggest COVID-19 can be transmitted by food or food packaging." There's no crisis in the food supply right now. Our concern is what's going to come six months later." Zippy Duvall, president, American Farm Bureau FederationZippy Duvall, the Farm Bureau's president, said he's not worried about the short term — but he has concerns about what could happen months from now. "There's no crisis in the food supply right now," he told CNN Business. "Our concern is what's going to come six months later." A number of factors could threaten the food supply moving forward. Tyson, one of the world's largest meat producers, warned in a recent SEC filing that "if a significant percentage of our workforce is unable to work, including because of illness or travel or government restrictions in connection with pandemics or disease outbreaks, our operations may be negatively impacted." If farmers get sick or have to significantly alter the way they work because of safety measures, the food supply could take a hit. If transportation systems break down, or if truckers are unable to deliver products, our access to the food those farmers grow could be threatened. Duvall is particularly concerned over a recent decision by the federal government to suspend immigrant visa services in Mexico, another attempt to slow the spread of the coronavirus. Farmers rely on immigrant labor, and Duvall worries that the changes will affect harvesting in the spring and planting in the summer. He recommended that the administration classify farm workers as emergency workers on applications for temporary agricultural work visas. "Empty shelves can be frightening, but empty fields and barns would be devastating," he warned. Duvall noted that he has been pleased with the Trump administration's efforts to help farmers so far. For now, however, the system is working. "The supplies are there," Newton said. "The key is making sure that the supply chain remains very strong, and the key component of that strong supply chain is access to labor."

Story by Donie O'Sullivan, CNN Business Video by Richa Naik and John General, CNN Business

2020-02-10 11:12:32

business

tech

https://www.cnn.com/2020/02/10/tech/clearview-ai-ceo-hoan-ton-that/index.html

Clearview AI's Hoan Ton-That says he's stockpiling billions of our photos - CNN

Clearview AI's cofounder Hoan Ton-That claims his company has scraped billions of photos from the internet, including popular sites like Facebook, Twitter and YouTube — all to help law enforcement solve crimes. But what does that mean for your privacy?

tech, Clearview AI's Hoan Ton-That says he's stockpiling billions of our photos - CNN

This man says he's stockpiling billions of our photos

If Hoan Ton-That is feeling the pressure, he isn't showing it. Over the last month, fears about facial recognition technology and police surveillance have intensified, all thanks to Ton-That's startup, Clearview AI. First came a front-page investigation in The New York Times, revealing Clearview has been working with law enforcement agencies to match photos of unknown faces to people's online images. Next, cease-and-desist letters rolled in from tech giants Twitter, Google and Facebook. Lawmakers made inquiries and New Jersey enacted a statewide ban on law enforcement using Clearview while it looks into the software. But during an interview at CNN's studios in New York City last week, Ton-That didn't seem particularly fazed, saying the last few weeks were "interesting." He demonstrated the technology and described himself as "honored" to kick off a broader conversation about facial recognition and privacy. He's eager to build a "great American company" with "the best of intentions" and wouldn't sell his product to Iran, Russia or China, he said. He claimed the technology is saving kids and solving crimes. And he said he welcomes government regulation.Read MoreBut so far, Ton-That and Clearview have triggered more concerns than acclaim.Despite the backlash to his technology, Hoan Ton-That, the CEO of Clearview AI, told CNN Business he feels "honored" to kick off a broader conversation about facial recognition and privacy. (Niamh McDonnell / CNN)A face in the crowd Clearview AI is controversial for many reasons, but perhaps the most important is its massive database. The company claims to have scraped more than 3 billion photos from the internet, including from popular social media platforms like Facebook, Instagram, Twitter and YouTube. Not only that, but Clearview retains those photos in its database even after users delete them from the platforms or make their accounts private.Clearview sells access to its database to law enforcement agencies, so those agencies can match unknown faces to other images. CNN Business saw firsthand how the technology works in a demonstration last week. First, Ton-That ran a photo of my face though the database, pulling up in seconds multiple different pictures of me from across the internet.Most jarringly, he found a photo that I had probably not seen in more than a decade, a picture that ran in a local newspaper in Ireland when I was 15-years-old and in high school. Needless to say, I look a lot different now than I did then; in fact, my producer, who has to spend far more time than she'd like looking at me through a camera, didn't even recognize me. But the system did. Clearview has given similar demonstrations to law enforcement, and some have been convinced to hand over taxpayers' dollars for the tool. The Chicago Police Department, for instance, is paying almost $50,000 for a two-year Clearview "pilot," a police spokesperson confirmed to CNN Business.Within seconds, Clearview pulled up an old photo of CNN Business' Donie O'Sullivan, from when he was 15 years old. CNN has blurred faces in this photo to protect people's privacy. (Niamh McDonnell / CNN)But clearly, I wasn't a random person Ton-That had pulled from a crowd. He knew he was coming to CNN to meet me and he knew I'd ask him to run my face through his system. He even admitted he had searched my images before we met. (And, it's worth noting, though the photo is old and I'm almost unrecognizable, the page it's on does include a caption with my name.)So we surprised him and also asked him to run a search for my producer.That at least appeared to make Ton-That a little nervous. "Can we cut this if it doesn't work?" he quipped. We said no. But it did work. As we scrolled through the images it had found, my producer noticed that Clearview had found pictures from her Instagram account, even though her account has been private, accessible only to her followers. Ton-That explained that Clearview had probably downloaded the photos from her account before she had made it private last year.Ton-That's representative had my producer's name in advance of the interview but Ton-That said he had not run her face before the live demonstration.Both Clearview tests for my producer and I returned no false positives.Scary but effective?The parts of Ton-That's demonstration that spooked my producer and me — his access to photos that are no longer publicly available online and his ability to find a photo of me as a minor — are likely among the things his law enforcement clients find appealing. He said more than 600 law enforcement agencies in the US and Canada are using the tool, a number CNN Business has not independently verified, and when asked, he wouldn't specify how many are paying customers versus those using free trials. He also said that a number of banks are using Clearview software for fraud investigations, but declined to name any of the banks. CNN Business reached out to America's 20 largest bank chains. JPMorgan Chase, Bank of America, Wells Fargo, US Bank, Ally Bank and SunTrust all denied using the software. The others either declined to comment or didn't respond to CNN Business' request for comment. At least some of Clearview's clients, like the Chicago Police Department, appear to be under the impression that the company only has access to public images that anyone could find online — but clearly, in the case of my producer, Clearview also has access to some information that is no longer public. When asked to clarify its stance, a Chicago Police Department spokesperson told CNN Business "the message here is that the information gained from Clearview was at one point placed in the public domain." Ton-That claims Clearview is 99% accurate and doesn't turn back higher errors when searching for people of color, a problem that's well-documented among other facial recognition tools. CNN Business has not conducted a full analysis of Clearview's software. Some law enforcement agencies do report instances in which they believe the tool has been effective.In New Jersey, Clearview was used as part of an investigation into a child predator ring. Police there used Clearview in a sting to identify a man before he showed up for what he believed was a meeting with a minor, Gurbir Grewal, the New Jersey Attorney General, told CNN Business. In that instance, Clearview helped police look into the man's background before he walked into the sting and helped them determine if he was likely to be armed, Grewal said. Despite its apparent utility, the attorney general -- who only learned about Clearview and its use in New Jersey after The New York Times' report on the company — ordered law enforcement in the state to stop using the technology until a review is completed."I was deeply disturbed," he told CNN Business. "I was concerned about how Clearview had amassed its database of images that it uses with its technology. I was concerned about its data privacy and cybersecurity measures that it takes." Ton-That told O'Sullivan that he's ready to defend Clearview AI's technology in court, if necessary. (Niamh McDonnell / CNN)Shutting the barn doorAccording to Ton-That, Clearview has downloaded billions of images from major social media platforms and from all different kinds of websites across the internet — including, evidently, from my local newspaper.Downloading and storing pictures this way is against most of the major social media platforms' policies. The practice has prompted the likes of Facebook, Twitter and YouTube to send Clearview cease-and-desist letters. Despite Facebook's concerns about the company, Peter Thiel, who sits on Facebook's board was an early investor in Clearview. Facebook, Thiel, and Ton-That all declined to comment on whether Thiel knew about how Clearview was downloading Facebook data and that it was against Facebook's rules."In 2017, Peter gave a talented young founder $200,000, which two years later converted to equity in Clearview AI. That was Peter's only contribution; he is not involved in the company," Jeremiah Hall, a spokesperson for Thiel told CNN Business. The cease-and-desist letters don't seem to faze Ton-That and maybe for good reason.I was deeply disturbed. I was concerned about how Clearview had amassed its database of images that it uses with its technology. I was concerned about its data privacy and cybersecurity measures that it takes." Gurbir Grewal, New Jersey Attorney GeneralTechnology companies have essentially no control of what happens to data, in this case pictures, after they are downloaded from their platforms. Ensuring someone actually complies with a cease-and-desist letter when it comes to data is also essentially impossible. Once images are downloaded, as they have been by Clearview, they can be copied again and again, stored on multiple computers and servers in different places all around the world, and that's even before they are distributed or made available to third parties. Clearview's clients can access the images.In 2015, Facebook asked Cambridge Analytica to delete Facebook data it had gathered, but when it emerged in 2018 that all the data may not have been deleted, it turned into one of the greatest scandals Facebook had confronted in its history.Ton-That's defense of his technology and his collection methods may land him in court and make him party to landmark rulings that set precedent for how American grapples with artificial intelligence in the 21st century.Asked if he is ready to step out from behind the computer screen to face days in court, he says, "Sure. Yeah. I don't think there'll be that many."

Lydia DePillis, Julia Horowitz, and Danielle Wiener-Bronner, CNN Business

2019-11-08 11:20:29

business

investing

https://www.cnn.com/2019/11/08/investing/shareholder-rights-proxy-proposals/index.html

Corporate America is quietly working to suppress the voices of small investors - CNN

Earlier this week, the US Securities and Exchange Commission took a significant step to curtail the power of small shareholders.

investing, Corporate America is quietly working to suppress the voices of small investors - CNN

Corporate America is quietly working to suppress the voices of small investors

Emily Cunningham, a user experience designer, is just one of 750,000 people who work for Amazon. Like most rank-and-file employees in corporate America, she doesn't have a direct line to the CEO; nor does she usually have much sway over what the company does. But Cunningham does own more than $2,000 in Amazon stock, and at the company's annual shareholder meeting this May, that little slice of ownership entitled her to a voice. So she stood up to use it."I would like to ask for Jeff Bezos to come out on stage so that I can speak to him directly," Cunningham began, speaking into a cavernous auditorium in Seattle. She hadn't been able to get through the words during a practice session the night before, breaking down in tears every time she tried. This time, however, it came out smoothly, as she drew strength from a group of colleagues in the audience, all clad in white."Mr. Bezos will be out later," said the event's emcee, Amazon General Counsel David Zapolsky. "Will he be hearing this speech?" Cunningham asked.Emily Cunningham and other Amazon employees filed a shareholder resolution, asking Amazon to create a plan to cut its reliance on fossil fuels. (Jovelle Tamayo for CNN)Read More"I assume so," Zapolsky replied. Cunningham never did find out whether Bezos had been there to hear her speech, which was about climate change — but it didn't matter. She and other Amazon employees had filed a formal shareholder resolution, asking Amazon to create a plan to cut its reliance on fossil fuels. The proposal secured support from 31% of the shares that were voted.That may not sound like a win, but in the world of shareholder resolutions, in which votes are symbolic and not binding, it was a resounding result — the kind of message even a $900 billion company couldn't ignore. Four months later, amid growing scrutiny from shareholders and employees, Bezos announced a pledge to make Amazon carbon neutral by 2040.Cunningham is just one person in a long line of shareholders who have used their stakes to push corporations to address social and environmental issues. But on Tuesday, the US Securities and Exchange Commission took a significant step to curtail their power.Raising the thresholdsThe rules around how shareholders engage with the companies they own are complicated and may seem arcane, but the stakes are high. It's a battle about the nature of capitalism and public markets, who controls the engines of commerce, and by what standards they should be judged. On Tuesday, five SEC commissioners passionately debated those points in an open meeting. The regulators, led by Chairman Jay Clayton, voted 3-to-2 to propose new rules that, among other things, would make it harder for small investors to get a proposal on a shareholder ballot.Corporate America was pleased. The Business Roundtable, US Chamber of Commerce and the National Association of Manufacturers all applauded the decision. The Chamber has in fact been banging this drum for more than a decade. "Shareholder activism that elevates one group's agenda over the goals of other investors doesn't just ruin companies — it ruins a country," Chamber CEO Thomas Donohue said in a speech in 2006. Companies have been speaking out against shareholder rights for a long time, but recently, they've picked up the megaphone again. For the last year, companies in the oil and gas industry, along with conservative think tanks, the NASDAQ stock exchange and pro-business lobbying groups have been pressuring the SEC to make changes that could dampen shareholder rights. Why now? Shareholders have been filing more environmental and social proposals than ever before. Amazon Employees for Climate Justice demonstrated outside of Amazon's annual shareholder meeting in Seattle in May 2019. (Jovelle Tamayo for CNN)The power of a proposalOver the years, small investors have used shareholder proposals as a tool to advocate for change on many issues, ranging from board nominations and executive compensation to social and environmental causes. Among them: General Motors' exit from apartheid South Africa. The phaseout of styrofoam cups at McDonald's. The end of assault rifle sales at Walmart. Since the 1940s, shareholders have had the right to pose questions and propose changes to the directors of public companies, and to put those proposals up for a vote by their fellow investors. And the bar to propose a resolution has been relatively low. Since 1998, it's been set at just $2,000 in stock or 1% of a company's shares — whichever is lower. (For most publicly-traded companies, $2,000 is, by far, the lower threshold.) Currently, a shareholder must own at least that much stock, continuously, for at least a year to qualify. The proposals, which are sometimes called "proxies" because shareholders can delegate their votes to others, come from a variety of sources: individual investors, large asset managers, labor unions, public pension funds, or activist Catholic nuns.For Natasha Lamb, it's a job. As managing partner of Arjuna Capital, a socially-oriented investment fund, she's leveraged shareholder proposals to push for gender equality at companies ranging from Facebook to Citigroup, and prompted meaningful change. Natasha Lamb, managing partner of the investment fund Arjuna Capital, uses shareholder proposals to push for gender equity. (Jovelle Tamayo for CNN)After an Arjuna-backed campaign between 2016 and 2018, 22 companies agreed to disclose the pay gap between their male and female employees, adjusted for job titles. Those wins came when a resolution didn't earn the majority of votes. That's because shareholder proposals are not won by a majority. In fact, they're not really won at all — even if a proposal earns a majority of votes, the company is generally not required to make a change. But they are meaningful in a symbolic way, serving as both a battle cry and negotiating tool from shareholders who want to agitate for corporate accountability.That's because companies know that if the shareholders don't feel heard, they can wield power in other ways: they can oust members of the board, vote down executive pay packages and, ultimately, divest from the company. To keep them happy companies have to pay attention to what they want. Sometimes, wins can be achieved even when the proposal didn't make it onto a shareholder ballot. Lamb has at times found that just the threat of a high-profile shareholder battle can prompt a company to preemptively make changes behind closed doors. For the companies, negotiating with activist shareholders behind the scenes can keep the shareholders' complaints out of the news and potentially stave off a public relations crisis."The shareholder proposal itself is a critical piece on the board, if you think about it in terms of chess," Lamb said. "But the win is if you have a productive dialogue with the company ... that's success." Lamb sees shareholder proposals as a way to guide companies toward better returns, noting that Arjuna encourages companies to act within their "enlightened self interest." After all, Arjuna Capital manages clients' money, and higher financial returns are the goal. She sees equal pay and climate change initiatives as a way to boost those returns. Shareholder resolutions can be used to advance a wide range of positions — not just traditionally liberal causes. Justin Danhof, general counsel for the National Center for Public Policy Research, has used them to try to push companies to the political right, leading a team that took "the model of liberal shareholder activism and did a 180."Justin Danhof, general counsel for the National Center for Public Policy Research, uses shareholder proposals to push companies to add conservative directors to their boards. (Jovelle Tamayo for CNN)He has filed a number of proposals urging companies like Starbucks, Apple, Amazon and Facebook to consider adopting "true diversity." In his view, this means adding conservative directors to corporate boards.Danhof targets corporations because they're "much more amenable to pressure than most politicians," he explained. "I consider filing a shareholder resolution the opening salvo in a negotiation."Sounding the alarmCompanies have never loved dealing with their shareholders. But for some, the last two years of mounting activism have been downright alarming. As asset managers like BlackRock, State Street and Vanguard have become increasingly willing to throw their considerable heft behind environmental and social resolutions, companies have started seeing proxy votes as threats. In 2019, average overall support for environmental and social shareholder resolutions reached an all-time high of 28%, buoyed in part by "yes" votes from institutional investors, noted an analysis from the EY Center for Board Matters. Once shareholder resolutions achieve 30% support, the report explained, companies tend to pay attention. If a proposal reaches 50%, and investors feel that the company hasn't sufficiently responded, they tend to consider voting directors out. This year, Amazon alone received 14 shareholder resolutions — more than any other company, according to a count by Alliance Advisors. Though a couple were either withdrawn by their proponents or excluded with the permission of the SEC, 12 measures on issues ranging from food waste to hate speech made it onto ballots. Corporate America has had enough — and it's using its full toolkit to fight back.In addition to negotiating behind the scenes and asking the SEC to exclude shareholder resolutions from proxy ballots, corporations are pressing for changes in laws and regulations that could stop troublesome shareholder campaigns before they start.Shareholder proposals that focus on social and environmental issues, like the one sponsored by Amazon employees, have been gaining more votes in recent years. (Jovelle Tamayo for CNN) That's where Tuesday's SEC meeting comes in.The regulator proposed that shareholders be required to hold at least $25,000 in a company's stock if they want to file a resolution after just one year of ownership.Smaller shareholders with just $2,000 in stock would have to own it for at least three years before they become eligible to file a resolution.That higher threshold could shut small investors out. SEC Commissioner Allison Herren Lee, who dissented against that change, noted the $25,000 threshold is prohibitive for most retail investors, who have a median stock portfolio of $27,700."Main Street investors would generally have to invest virtually their entire portfolio into one company — something we strongly discourage — to enjoy the same rights as Wall Street investors, or they would have to wait three years to catch up to them," she said. Large companies, however, argue that small shareholders should not be allowed to exert an outsized influence. The Business Roundtable has said that shareholders may use proposals as a form of "social commentary or to advocate for a social aim, regardless of the proposal's financial impact on the company." Corporations also say they end up racking up significant legal costs to respond to each proposal — ExxonMobil, for example, notes that it incurs more than $100,000 in costs per proposal, adding that "our experience is that the costs can greatly exceed this amount based on the significant board and senior management time dedicated to each proposal." (Assuming a cost of about $100,000 per proposal, even a dozen proposals, amounting to $1.2 million, wouldn't put much of a dent in the company's budget — Exxon reported $21 billion in earnings in 2018.) Companies also don't like that just a handful of particularly-active shareholders — four people in total — file more than a quarter of shareholder proposals every year. Jay Clayton, chairman of the Securities and Exchange Commission, voted in favor of changing the current shareholder proposal rules. (Andrew Harrer/Bloomberg via Getty Images) Other rule changes proposed by the SEC would make it harder for shareholders to resubmit repeat proposals and could make proxy advisory firms that vet shareholder resolutions more beholden to the companies they analyze. It can take time for shareholders to raise awareness and build support for an issue that eventually hits the main stream, like pay parity, and higher resubmission thresholds could shut out meaningful proposals as they gain steam. It's hard for experts to predict exactly what changing the ownership threshold and rules around resubmission would do to shareholder activism. What's clear is that tighter regulations could very well shut people out, and make it easier for companies to ignore their shareholders — possibly to the detriment of other stakeholders.Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, noted that restrictions on shareholder rights could end up hurting companies, as well. "If you try to attempt to limit [shareholder resolutions], in one way or another, inadvertently you may remove from consideration a resolution that has greater core significance to the company," he said. "A rule that is less restrictive is probably the better rule." The updates are now subject to a 60-day open comment period, which means the public can push for fewer restrictions — and that corporate America can ask for more. After Amazon employees demonstrated in favor of a a shareholder proposal related to climate change, Bezos announced a pledge to make Amazon carbon neutral by 2040. (Jovelle Tamayo for CNN)Acting like an ownerAt Amazon's shareholder meeting, Cunningham wasn't the only one asking uncomfortable questions about climate change. During the Q&A session, when Bezos actually had come out on stage, another audience member asked why the company wasn't moving faster to reduce its carbon emissions. "It's hard to find an issue that is more important than climate change. The science is super compelling on this, there's no doubt," Bezos said. "There are a lot of initiatives underway, and we're not done. We'll think of more, we're very inventive." That kind of public commitment can re-order a company's priorities, changing environmental impact from a side concern to one that could pose a real risk to the company's stock price. In September, Amazon released an analysis of its carbon footprint — an effort that had been requested by three successive shareholder resolutions in the early 2010s — and the Amazon employees say they'll be back next year.For them, it's a way of literally living up to the company's "leadership principles," which emphasize acting like an owner."Fighting climate change seems like ownership in spades," said Maren Costa, a member of the group who has worked at Amazon since 2002. Doing it through her stock portfolio, rather than simply internal pressure, "was a real lightbulb for me," Costa said in an interview in May. "I wish we'd been doing this forever."

Story by Peter Valdes-Dapena, CNN Business Video by Sean Clark, Jeff Hsu, Joseph Coleman, and Shane Csontos-Popko, CNN Business

2019-11-05 17:39:30

business

cars

https://www.cnn.com/2019/11/05/cars/lamborghini-supercar-electric-supercapacitor/index.html

Lamborghini's long shot mission to take its super fast cars into the electric age - CNN

Lamborghini is working with researchers at MIT on an insane-sounding technology that could change the world of high-performance cars: Supercapacitors that store energy in the actual body of the car instead of relying on batteries.

cars, Lamborghini's long shot mission to take its super fast cars into the electric age - CNN

Lamborghini's mission to disrupt the future of electric supercars

(CNN)Lamborghini doesn't just make supercars, it invented them. Certainly, there were fast, expensive cars before Lamborghini came along. But nothing was ever like a Lamborghini. The Italian automaker's creations were low to the ground and made to slip under the air. The engines were big and loud and sat right behind the two seats. The doors opened up into the air.The Countach defined not just Lamborghini, but all sorts of high-performance supercars. Now, the Italian automaker is taking on a new challenge: To develop a way to make supercars emissions-free, without using the lithium-ion batteries other automakers are relying on.Today's battery technology simply won't do, insists Maurizio Reggiani, chief technical officer at Lamborghini. Batteries are too heavy, too bulky and they can't perform at a high level for long enough. After a lap or two around a twisting race track at speeds reaching 160 miles per hour, where fast acceleration and hard braking are repeated over and over, a battery can begin to give out. Also, batteries are bulky and heavy and weight is the enemy of high performance.Lamborghini has been working with researchers at the Massachusetts Institute of Technology since late 2017 on two possible solutions. One is a new form of battery made from carbon that can actually make up some of the internal body parts of the car so they don't add size or weight. The other is a different kind of energy storage altogether: a supercapacitor.Read MoreMaurizio Reggiani, Lamborghini's chief technical officer, doesn't think battery-driven supercars will perform at a high enough level."A supercapacitor with the same power is three times lighter than the normal lithium-ion battery," explained Reggiani. "This is important because, in terms of packaging and in terms of weight, it gives me a big advantage in a super sports car."If you've ever walked on a shaggy wool carpet then gave someone an electric shock, you've acted as a capacitor. Your body stored up an electric charge and released it quickly. Ferrari and Lamborghini say 'Not so fast' on electric supercarsThe main advantage of supercapacitors is that they can deliver a bigger jolt of power, pound for pound, than batteries -- without heating up or degrading. That's great for supercars, where bursts of power and speed are needed.But today's supercapacitors aren't as good at storing energy as batteries. Supercapacitors have been used to power city buses that recharge at each stop. In the time it takes passengers to get on and off, the bus can charge enough to make it to the next stop and recharge again. That's not an ideal solution for a car, though. Lamborghini and MIT are working to solve that problem. They announced this week that MIT researchers have invented a new material that could allow the creation of supercapacitors capable of holding two to three times as much energy as the supercapacitors now being produced. It's significant progress in just a couple of years, but that still puts the technology at about 20% the energy density -- or energy storage per unit of volume -- of lithium-ion batteries, said Riccardo Parenti, head of concept development at Lamborghini.It's an insane sounding technological long shot, but this technology could dramatically change the world of high performance cars -- if this team of university scientists and auto company engineers can figure it out.The standard bearerLamborghini has a proven track record when it comes to long shots, though. There are various stories about the beginnings of the company, most involving a dispute between founder Ferruccio Lamborghini and a haughty Enzo Ferrari, the founder of Ferrari. The gist of the tale is that Lamborghini, a Ferrari customer at the time, loved the way the cars drove but was dissatisfied with their durability and refinement. Based on his experience running his tractor company, Lamborghini had some suggestions as to how Ferrari could make his cars better. Ferrari, the stories go, told Lamborghini just where he could put his nice ideas.Lamborghini's founder, Ferruccio Lamborghini, decided to build his own cars. Previously, he ran a tractor company. Undeterred, Lamborghini decided to make his own cars instead. He built a factory in Sant'Agata Bolognese, Italy, not terribly far from Ferrari's headquarters in Maranello. The company's first models, the Lamborghini 350GT and 400GT, were handsome, classically proportioned grand touring cars with long hoods and strong 12-cylinder engines. Then someone had a radical idea. It was the 1960s and the Ford GT40 race car was competing in the Le Mans 24-hour race. The car's design, with its big V8 engine mounted behind the seats, caught the attention of Lamborghini engineer Giancarlo Dallara. "'Why do we not make a car with a rear engine?,'" Dallara recalled telling Lamborghini. "And Mr. Lamborghini immediately said, 'Yes, do it!"The Turin-based design firm Bertone and its new designer, Marcello Gandini, were chosen to come up with the body. The result was the beautiful Miura and it was a sensation. With the Miura, Lamborghini captured the world's attention. The Lamborghini Miura is still regarded as one of the most beautiful cars ever made.But it was Lamborghini's next supercar, the Countach, that would have an even bigger impact.The Countach's engine was mounted back-to-front instead of side-to-side. That meant the seats had to move even further forward, almost to the front wheels. That alone gave the car unique proportions. Gandini also gave the car a body covered in sharp, aggressive angles and lines.Bugatti: The rebirth of the world's fastest, most beautiful carsWhile the team worked on a mock up of the car, one very large and rough craftsman was astonished by what they were creating, Gandini told CNN Business. "Countach!" the man kept saying over and over as they worked, he recalled. At the time, in that part of Northern Italy, many people still spoke the local Piedmontese dialect. "Countach" was a mild curse word, the rough equivalent of "damn!" Gandini thought it would make a fine name for the car.Designer Marcello Gandini created the shapes of both the Miura and the Countach.Introduced in 1973, the first production version of the Countach, the LP400, wasn't the best -- its numerous flaws in performance and handling were addressed in later updates -- but it is still regarded as the best-looking version of the car.A nearly perfect double-pointed wedge, the Countach looked like it would chop through the air like a hatchet blade. The roof was so low that, instead of a rearview mirror it had a sort of periscope recessed into the roof allowing the driver to see behind the car. It was so wide that the doors couldn't open outwards so they swung upward.The Countach came to define not just Lamborghini -- almost every Lamborghini model since has had the Countach as an inspiration -- but all sorts of high-performance supercars. The Lamborghini Huracán production line at the automaker's headquarters in Sant'Agata Bolognese, Italy.Lamborghini's new Aventador SVJ is very much a descendent of the Countach, with its V12 engine mounted roughly in the middle of the car. It relies on Lamborghini-invented technologies to harness the air flow over the car to improve cornering and acceleration. On a recent drive through mountain roads north of New York City, the Aventador SVJ felt glorious as it shifted gears through its seven-speed automatic transmission and whirled easily through turns at impossible-seeming speeds. But it also consumed a lot of high-octane gasoline. With concerns mounting about global warming and the industry shifting away from internal combustion engines that rely on burning hydrocarbons, Lamborghini knows future descendents of the Countach will need to radically change. A road less traveledBatteries, which power most electric cars today, would seem to be the logical solution for powering Lamborghini's next generation of supercars. Other automakers, including some closely related to Lamborghini, have had some success designing battery-powered supercars that can hit high speeds.Lamborghini's sister brand Volkswagen -- both companies are owned by the Volkswagen Group (VLKAF) -- recently set a lap record for an electric car on Germany's challenging Nurburgring race track with its ID.R electric race car. The same car had set the record for the fastest time ever by any car at the Pikes Peak International Hill Climb in Colorado.Lamborghini is working with researchers at MIT to power cars like the Terzo Millennio using carbon nanotubes and supercapacitors. Outside of Volkswagen, Rimac, a Croatian company, produces fully electric supercars costing millions of dollars with top speeds claimed to be well over 200 miles an hour. But, in terms of performance, its cars are more similar to a big, heavy Bugatti than a Lamborghini. They're fast when driven in a straight line, but aren't their best in sharp curves, founder Mate Rimac concedes. Rimac admits that today's battery technology has serious limitations. But he believes many of the problems, such as overheating, will be solved eventually, he told CNN Business in an interview earlier this year. He just couldn't say when that might be -- just as Lamborghini can't say when supercapacitors might have energy storage capability to replace batteries or when smaller, lighter batteries could be incorporated into the car's body parts.Capacitors and their stronger siblings, supercapacitors, have been used for things like camera flashes and to power electric motors in industrial settings. A supercapacitor powered the starter motor in that Aventador SVJ I drove, but the car relied on its V12 engine to drive.The Lamborghini Sián, a hybrid, uses a supercapacitor in addition to its V12 engine.As its next step, Lamborghini recently unveiled a hybrid supercar called the Sián that uses a supercapacitor instead of batteries to store energy that's used to add power to the car's 12-cylinder engine.Just in case supercapacitor energy storage can't be improved enough, another lab at MIT is working on the new form of battery that could store energy in structural components of the car. These new batteries, made from carbon nanotubes, would free up all the space batteries usually take up. In 2017, Lamborghini unveiled the Terzo Millennio, a concept car that the company envisions would use both technologies, said Parenti, with the structural batteries storing energy and feeding it to improved supercapacitors.Reggiani won't say, yet, when he thinks a car like the Terzo Millennio might be possible. But as far as he's concerned, the usual approaches to making an electric car won't work for Lamborghini."The full electric vehicle, for us, must be like this," he said. "Otherwise, it cannot be a Lamborghini."Correction: A photo caption in an earlier version of this story misidentified the model of the car on the production line at Lamborghini's headquarters.

Story by Danielle Wiener-Bronner, CNN Business Photo illustrations by Max Pepper, CNN Business

2019-10-25 09:59:45

business

business

https://www.cnn.com/2019/10/25/business/mcdonalds-popeyes-chick-fil-a-chicken-sandwich/index.html

McDonald's, Popeyes and Chick-fil-A are going head to head for the best chicken sandwich. Here's why - CNN

Chick-fil-A popularized it, Popeyes made it go viral, and now McDonald's franchisees want to outdo them all. Here's why America's fast food giants are so focused on chicken sandwiches.

business, McDonald's, Popeyes and Chick-fil-A are going head to head for the best chicken sandwich. Here's why - CNN

Crispy, spicy and hugely popular: Why chicken sandwiches are taking over America

Months after this summer's brief but brutal fried chicken sandwich battle, rivals are diligently plotting to win the longer war.Popeyes, which sparked the latest fight with its spicy chicken sandwich in August, is scrambling to bring back the viral sensation "as soon as possible." Chick-fil-A is steadily growing its reach, outselling chicken chains nearly twice its size. And McDonald's franchise operators, who watched the fight from the sidelines, are pressuring their corporate boss to bring the crispy, breaded prize home. "JFK called for a man on the moon," they wrote in a July letter. "Our call should be a category leading chicken sandwich." Why all the hype over a fried cutlet on a bun? As visits to fast food restaurants stagnate, rivals are eyeing Chick-fil-A's runaway growth. The chain added about 1,000 locations and nearly tripled its sales over the last decade. With more than $10 billion in sales in 2018, the company has surpassed both Wendy's and Burger King to become the fifth largest fast food chain after McDonald's, Starbucks, Subway and Taco Bell."If you have the biggest share of a growing category, that is profits galore," said Michael Haracz, who until August served as McDonald's manager of culinary innovation. "That is exponentially more sales, more buzz, more foot traffic to your restaurant." Read MoreMcDonald's, which says it is "synonymous with burgers," has reason to worry: Beef consumption has fallen in the United States. Chicken is now the most popular meat by far. There will be "clear winners," Haracz said, who will dominate the space and scoop up profits — as long as they can keep up with demand. Thirty-year food fightThough the fight over fried chicken was especially buzzy this summer, it was part of a dynamic that dates back at least 30 years.In 1989 McDonald's launched a national "country-style" McChicken sandwich and sparked a fight with Hardee's, then one of the largest fast food chains in the country. "While McDonald`s is touting their new product, it isn't even comparable to our Chicken Fillet Sandwich, which has been on the market since 1979," Hardee's president said at the time, according to a 1989 report from the Charlotte Observer. The newspaper published the story with the headline, "Chicken sandwiches incite fast food war." Over the ensuing decades, fast food chains have launched and relaunched new iterations of the sandwich. McDonald's has had multiple versions, including premium and limited-time offerings. Within the last year alone, it's served the Ultimate Chicken Sandwich, the Mighty Chicken Sandwich, a spicy BBQ chicken sandwich and the McChicken.As companies experimented with chicken sandwiches, they occasionally caused a stir. In 2010, KFC made headlines with the Double Down — a limited-time-only cheese and bacon sandwich with two pieces of fried chicken where the bun should have been. (KFC briefly brought it back in 2014.) But even though items like the Double Down have gone viral, there may not have been anything quite like the frenzy that happened this summer, when Popeyes launched its national chicken sandwich. People stood in line for hours for a chance to taste (and post photos of) the sandwich. Workers reportedly put in grueling hours as store operators scrambled to keep up with the surge in impatient customers.It wasn't that Popeyes wasn't expecting the sandwich to be a hit. It painstakingly researched what would work with customers, and eventually landed on the right combination — a buttermilk battered and breaded white meat filet, topped with pickles and a choice of mayo or a spicy Cajun spread and served on a toasted brioche bun. Popeyes called the sandwich the "biggest product launch in the last 30 years." Felipe Athayde, president of the Americas at Popeyes, told the New York Times that the company had "very aggressively forecasted" demand, and expected to have sufficient supply through at least the end of September — about six weeks after its August 12 launch date. But stores throughout the country sold out of the sandwich within about two weeks. Many point to a Twitter exchange as the instigator. On August 19, one week after Popeyes sandwich hit stores, Chick-fil-A's official Twitter account posted a message: "Bun + Chicken + Pickles = all the <3 for the original." Popeyes interpreted the message as a jab, retweeted the post and added ".... y'all good?" ... y'all good? https://t.co/lPaTFXfnyP— Popeyes Chicken (@PopeyesChicken) August 19, 2019 The sassy response struck a nerve. It's racked up nearly 87,000 retweets and 324,000 likes, spawned memes and elicited innumerable cry-laugh emojis from social media users. Chick-fil-A didn't take the bait, but Wendy's stepped in and sparred with Popeyes on Twitter to the delight of onlookers. It's unlikely that the brand war would have made such a huge impact if Americans weren't already interested in fried chicken sandwiches. "There had always been fried chicken sandwiches," said Kara Nielsen, vice president of trends and marketing for CCD Innovation, a food and beverage consultancy. But she traces the current interest in the item to the 2008 financial crisis. "One of the things that surged out of that recession moment was an interest in comfort food, as well as a lot of people opening food trucks, creating food stalls," she said. "And so there were definitely a lot of fried chicken sandwiches coming out at that time. And it's never really stopped."And as fried chicken sandwiches gained local fans, a small, quirky chain was chugging steadily along. The rise of Chick-fil-AChick-fil-A traces its roots back to founder S. Truett Cathy's original diner, Dwarf Grill, which opened in 1946. Cathy opened the first Chick-fil-A in 1967, in the Greenbriar Shopping Center in Atlanta.For years, the company expanded primarily in shopping mall food courts. Then, in 1986, it opened its first standalone location in Atlanta. Today the chain operates more than 2,400 restaurants in 47 states and Washington, D.C. Other chicken chains are larger — Popeyes, for example, has more than 2,600 US restaurants and KFC has roughly 4,000. But Chick-fil-A outsells them.Chick-fil-A's first restaurant in Atlanta's Greenbriar Mall in the late 1960s.Ranked by annual revenue, Chick-fil-A is the fifth largest US restaurant chain after McDonald's, Starbucks, Subway and Taco Bell — all of which have far more stores. Chick-fil-A's individual stores are more productive than any of its bigger competitors. They pulled in an average of $4.4 million in 2018, well above unit sales at McDonald's or Starbucks, according to Technomic, a company that specializes in research on the food industry. The chain is also, according to polls and surveys, beloved. An Axios Harris Poll published in March found that Chick-fil-A had the best reputation among US adults compared to Starbucks, Yum! Brands (which owns KFC, Pizza Hut and Taco Bell), Chipotle, Papa John's and McDonald's. And for the past four years in a row, US teens surveyed by Piper Jaffray said Chick-fil-A was their favorite restaurant. Customer service and food quality help explain Chick-fil-A's success. But it also has a commercially important X-factor: authenticity. R.J. Hottovy, an analyst who covers food for Morningstar, said that in recent years, companies that have specialized in a particular product and appear more authentic tend to do better than those that try to appeal to everyone.Chick-fil-A scores high on authenticity. It has stuck to Christian roots by keeping stores closed on Sundays, for example. But that conservative tradition has also earned backlash. In 2012 CEO Dan Cathy said he opposed gay marriage on religious grounds. That year the company was also criticized for donations made by the WinShape Foundation, which was started by founder Truett Cathy and financed largely by Chick-fil-A profits, to groups some characterized as anti-gay. Chick-fil-A says that is has "no political or social agenda," and that "everyone is welcome in our restaurants." Still, new stores have been met with protests. Some fans of fried chicken sandwiches may welcome an offering from a purveyor they see as more politically neutral, like Popeyes. Nevertheless, Chick-fil-A has grown at a steady clip and picked up those devoted followers. "There's so many people now who have an understanding or a notion of what Chick-fil-A is, even if they never eat there or if they've never seen one," Nielsen noted. "It's become a bit of this mythical thing, and clearly millennials have found it, and found that it fits their bill."As Chick-fil-A locations pop up in more cities, more people rush to test out their sandwiches. That's helped boost fried chicken sandwich sales — and gotten other fast food chains to pay attention. "This fried chicken trend keeps evolving because companies like Chick-fil-A expand their reach," Nielsen said. While Chick-fil-A creeps across the nation, one group in particular is trying to defend its territory. McDonald's franchise operators are calling for reinforcements. A McMissionOn July 10 — a month before Popeyes launched its sandwich — the board of the National Owners Association, a group of McDonald's franchisees that formed in 2018, sent out a strongly-worded letter to its members. "We are finding ways to drive profitable growth," the board wrote. "Yet, we are still losing guest counts. This continues to be a concern." One reason for the loss, the board argued, is that customers craving a delicious fried chicken sandwich aren't going to McDonald's. They're going to Chick-fil-A. "A favorite, that our customers want, is a chicken sandwich. Unfortunately, they have to go to Chick-fil-A for it," the board said. "Chick-fil-A's results demonstrate the power of chicken. Yes, we have great Chicken McNuggets and our McChicken is a very good product. But we do not compete in the premium chicken sandwich category, either grilled or crispy."The letter continued with a warning: "Our US Southeast markets' results should concern everyone. You may not have Chick-fil-A's in your market or to the degree they have them in the southeast, but they are coming. And they don't discount." McDonald's knows how to make chicken into a hit. In the early 1980s, around the time Americans first started losing interest in beef, McDonald's founder Ray Kroc wanted to add a chicken entree to the menu. The company's initial attempts, like a deep fried chicken pot pie, didn't resonate with customers. But eventually, McDonald's landed on a winner: Chicken McNuggets, which launched in 1983, were so successful that by 1985 the chain had become the second-largest chicken seller in the fast food space behind KFC."Chicken has been on the radar for quite a while at McDonald's," Haracz said. "There's a variety of chicken sandwiches being tested."In the third quarter of 2019, traffic at US McDonald's restaurants was down. During an October call discussing the earnings, one analyst wondered whether McDonald's lost sales because it sat out the great chicken sandwich war. "I think it's fair to assume with everything going on in the quarter with chicken that we would go a little bit the opposite way on chicken. So I think that's a fair conclusion," answered Kevin Ozan, the company's chief financial officer. For now, McDonald's is keeping its plans close to the vest. The company declined to tell CNN Business when it expects to launch its next chicken sandwich, but noted, "We are inspired by the customer demand for premium chicken sandwiches, and are working closely with our franchisees to deliver what our customers want. Stay tuned." A source close to the conversation between the owners and McDonald's leadership said a premium chicken sandwich may start rolling out as soon as this year. But while McDonald's tinkers and focuses on other areas of the business, its franchise owners have been getting impatient. In late August, after Popeyes' massively successful launch, Blake Casper, NOA's director, sent out another somber note. "It was a busy week, especially if you work at Popeyes," he wrote. "Popeyes came out with a chicken sandwich that rivals Chick-fil-A. It's the first time Chick-fil-A has blinked, or more accurately, was forced to blink. But make no mistake, they blinked. Wendy's got into the action and unfortunately, we're still not in the game." But, Casper continued, it's not over yet. "That is going to change. We are working on a chicken sandwich that will compete. We will be in the game. People will tire of the service at Popeyes and they want an alternative to Chick-fil-A," he said. "They want a chicken sandwich at McDonald's. We are going to give it to them."

Nathaniel Meyersohn, CNN Business

2019-10-11 10:30:26

business

business

https://www.cnn.com/2019/10/11/business/costco-5-dollar-chicken/index.html

Costco is going to extremes to keep its rotisserie chickens at $4.99 - CNN

At the back of Costco's stores, past the televisions, jewelry, jumbo-sized ketchup jugs and tubs of mixed nuts, is one of the retailer's most prized items: The rotisserie chicken that costs just $4.99.

business, Costco is going to extremes to keep its rotisserie chickens at $4.99 - CNN

It's only $4.99. But Costco's rotisserie chicken comes at a huge price

At the back of Costco's stores, past the televisions, jewelry, jumbo-sized ketchup jugs and tubs of mixed nuts, is one of the retailer's most prized items: The rotisserie chicken that costs just $4.99. Cheap Kirkland Signature rotisserie chickens aren't only a quick way for families to get dinner on the table. For Costco, the chickens are a lure, pulling customers into stores and getting them to browse the aisles, adding sometimes hundreds of dollars worth of items to their shopping carts before they pick up that bird.The chickens have become almost a cult item. 91 million were sold last year, double the number from a decade earlier. They have their own Facebook page with nearly 13,000 followers.So Costco is willing to go to extreme lengths to keep its chickens at $4.99. For the past few years, it's been recruiting farmers for this moment: The official opening of a sprawling, $450 million poultry complex of its very own in Nebraska.It's a highly unusual move for one of the world's largest retailers. Costco will control the production process from farm to store, making key decisions down to the grain chickens eat and the type of eggs hatched. Costco has even put its socially-conscious corporate reputation on the line, fending off local critics who have rallied against the Nebraska operation.Read MoreThis is a big experiment not only for Costco, but the broader industry as well. Retailers will be watching Costco's plan closely. It's one of the largest-scale tests of a store's ability to become its own meat supplier. And there's no guarantee it will work.Costco's $4.99 birds. The company sold more than 90 million rotisserie chickens last year.The 'inexorable rise of chicken'Costco is so determined to keep its rotisserie chickens at $4.99 that it's been willing to lose money selling them in the past. Even as competitors increased their rotisserie chickens to $5.99 in recent years, Costco held its price steady."As prices changed dramatically and we saw the competition raising the price, it was a hot price," Costco's chief financial officer Richard Galanti said in 2014. Costco was willing to sacrifice "$30 million, $40 million a year on gross margin by keeping it at $4.99," Galanti said the following year. "That is what we do for a living."Jeff Lyons, senior vice president of fresh foods at Costco, who joined the company in 1990 as its first meat buyer, declined to say whether Costco still loses money selling them. But rotisserie chickens have been a "very, very good business and very consistent growth for a long period of time," he said. "We're right about 100 million right now."But in recent years, it has become even more difficult for Costco to keep its rotisserie chicken prices down. Americans are eating more chicken than ever before, and the company faces supply challenges and cost pressures in the highly concentrated poultry industry. A small number of massive producers dominate America's chicken supply: Tyson, Pilgrim's Pride, Sanderson Farms, Perdue and Koch Foods. Together, those companies control more than 60% of America's $65 billion poultry market, according to Watt Poultry, a meat industry publication."A more consolidated industry has more bargaining power against its customers," said Timothy Ramey, a longtime poultry industry analyst. Costco wants to reduce its reliance on those big producers.Traditional chicken suppliers are also producing fewer birds to be sold as rotisserie chickens.An estimated 15% of chickens today are sold as whole birds, down from around 50% of all poultry in the 1980s, according to the Department of Agriculture. Instead, they are chopped up into breasts, legs, thighs, chicken nuggets and wings to feed Americans' insatiable appetite for chicken at grocery stores and fast-food restaurants."Make no mistake: Consumers want cheap Walmart chicken," said Ramey. "That explains the inexorable rise of chicken."As the number of full-sized birds in production drops, bird weights are going up to keep up with demand. Companies like Tyson Foods can make a higher profit by cutting up and skinning heavier chickens and selling their parts.Bird weights are expected to continue rising, presenting a problem for Costco. Costco needs birds around six pounds to cook in stores."We were having trouble getting the size bird we wanted on a consistent basis," said Lyons from Costco. "We couldn't take a seven-pound bird or an eight-pound bird and make it work. They're too big. They wouldn't even fit on our rotisserie line."Bird sizes are growing to feed demand for chicken.Chicken operations in NebraskaThat's why Costco is seizing control of its chicken supply chain. Costco believes it can slash costs by bringing production in house, saving up to 35 cents per bird.It has already done the same with hot dogs.Costco sold kosher hot dogs at food courts until 2009, but suppliers started to run low on beef. So it brought production in-house and switched to its own Kirkland Signature-brand hot dogs. Costco now produces 285 million hot dogs at a plant in California.Costco picked Nebraska for the poultry plant because the area had grain, water and labor available. Those are the three biggest costs involved with chicken production.How Kirkland Signature powers Costco's successAlthough Nebraska is not known for chicken production, corn prices have fallen in recent years, leading to interest from farmers looking for new opportunities. The United States' trade war with China has also taken a toll on farmers."We had to have farmers who were willing to grow for us, and we found overwhelming support," Walt Shafer, a veteran Pilgrim's Pride executive overseeing Costco's operations in Nebraska, said in a recent interview. "These grain farmers out here want to diversify." The retailer is building a poultry complex in Fremont, Nebraska, a farming town near the Iowa border. The complex includes a processing facility, hatchery and feed mill.The nearly 400,000 square-foot plant in Fremont will employ 950 workers. The plant will take 45 weeks to ramp up to full production. Once it's at full speed, the plant will process about 100 million chickens a year, or 40% of Costco's annual chicken needs. Costco will process around two million birds a week in Nebraska to supply to stores on the West Coast.Costco's nearly 400,000 square-foot processing plant in Fremont, Nebraska will eventually process about 100 million chickens a year.Costco is partnering with Nebraska farmers to raise breeder hens to lay eggs. Those eggs will then go into hatcheries, and the chicks will be delivered to Nebraska growers. The chicks will grow for around 42 days in hundreds of specialized barns in the area until they mature into six-pound broilers —chickens raised specifically for their meat. Then they're off to the processing plant.If the Costco plant is successful, other major food retailers will likely make a business case for bringing animal protein needs in-house." Will Sawyer, animal protein economist at CoBankThere are few examples of retailers vertically integrating in the agricultural industry like this, experts say. Walmart is seizing control of part of its Angus beef supply chain, and both Walmart and Kroger have integrated their milk supplies. But none are as sweeping as Costco's operations in Nebraska. "Costco's poultry complex is more than just a multi-million dollar experiment from a retailer known for doing things differently," said Will Sawyer, an animal protein economist at CoBank, a leading agriculture lender. "If the Costco plant is successful, other major food retailers will likely make a business case for bringing animal protein needs in-house." Contract concerns$4.99 broilers come at a price beyond Costco's bottom line. Costco has billed itself as a socially responsible and worker-friendly company, even earning praise and a store visit from then-President Barack Obama for raising its minimum wage in 2014.But by getting into the chicken business, it's wading into a controversial industry with many skeptics, including some who come from Costco's customer base. Its poultry farm ambitions have sparked backlash among environmentalists and farmers' advocates in the Fremont area.Opponents of the plant in Fremont like Randy Ruppert, a local activist, worry about the environmental impact of the plant and poultry barns, such as water contamination from runoff, ammonia from chicken feces and other health risks. In neighboring Iowa, poultry operations have been linked to high levels of nitrates in tap water. "They are bringing degenerative farming to Nebraska, nothing else," said Ruppert, who formed a nonprofit group, Nebraska Communities United, that has led resistance to the company. Critics packed local town halls to voice concerns and put up anti-Costco signs in the area. Some residents in Fremont and surrounding towns oppose Costco entering Nebraska.The poultry industry has also come under heavy scrutiny for offering unfair contracts to chicken farmers. Around 90% of broilers in the United States are raised under contracts with farmers. Under the contract system, farmers build the barns and invest in their upkeep, while larger companies supply them with chicks and feed.Grain farmers in Nebraska, who previously farmed corn and soybeans, are investing $350 million collectively and building barns to raise chickens. Most of the farmers had not previously grown chickens, so Costco is responsible for educating and leading the farmers.Costco claims that it's setting a "new and improved standard" for industry contracts. "Our contract, we think, has one of the best pay rates in the industry," Shafer said in the interview.Opponents, however, argue that Costco's 15-year contracts are a risky investment for farmers.They are bringing degenerative farming to Nebraska — nothing else."Randy Ruppert, founder of Nebraska Communities United"We all hoped that Costco was going to present the opportunity to start to build a better system for poultry," said Lynn Hayes, an attorney at Farmers' Legal Action Group, a nonprofit group that provides legal services to farmers.But the contracts are a "letdown," she said. "It's still far from good enough to justify the kind of investments that farmers have to put into it" because their barns can't be repurposed for other uses if their operations disappoint.Robert Taylor, a professor emeritus of agricultural economics at Auburn University and a longtime critic of the poultry industry, blasted Costco's contracts. "This particular form of contract agriculture essentially makes the farmer an indentured servant," he said. "The farmer is basically reduced to a chicken house janitor." Taylor argued that Costco growers' annual income for chicken farming will come out to around $60,000 after labor expenses. That's a lot less than the $90,000 to $130,000 Costco says farmers will bring home in pay.Costco's secret weapon: Food courts and $1.50 hot dogsCostco pushed back on these charges.Shafer, the executive leading poultry operations in Nebraska for Costco, said "we have one of the lowest risk poultry contracts available" because Costco's poultry business keep growing every year."I have no doubt that Costco will continue to do the right thing by our growers for the next 15 years and beyond," he said.Despite a contentious response and the high costs of pushing into the poultry industry, Costco remains confident that the Nebraska experiment is key to its growth. "We know that we're going to be in poultry. We see the future," said Costco's Lyons. "We're always working five to 10 years out front."

Story by Danielle Wiener-Bronner, CNN Business Video by Zach Wasser & Bronte Lord, CNN Business Photographs by Christie Hemm Klok for CNN

2019-09-24 12:30:04

business

business

https://www.cnn.com/2019/09/24/business/nestle-awesome-burger-plant-based-meat/index.html

Nestlé's Awesome Burger is the company's answer to the plant-based meat craze - CNN

Nestlé is joining the plant-based craze with its own competitor to the Impossible Burger and Beyond Meat. The Awesome Burger, currently rolling out in US retailers, marks a turning point for fake meat.

business, Nestlé's Awesome Burger is the company's answer to the plant-based meat craze - CNN

The Awesome Burger is Nestlé's answer to the plant-based meat craze

If you turn off Highway 1 at just the right spot in Moss Landing, California, past fruit stands, roadside cafes and artichoke farms, you may catch a sudden whiff of bacon. It's surprising, because this exit leads to the headquarters of the vegetarian meal company Sweet Earth, where bacon — at least the kind made from pigs — is absolutely not on the menu.Monterey County, where Moss Landing is situated, is the perfect place for a vegetarian business. Home of the Salinas Valley, the so-called "salad bowl of the world," it's one of the most productive agricultural areas on the planet, growing more than 150 crops including lettuce — lots of lettuce. It's been Sweet Earth's home for years, well before Nestlé acquired the then 350-person company in 2017. But these days, it's turning into something else — Nestlé's Plant-Based Protein Center of Excellence, the beating heart of the massive food company's recent foray into fake meat. At the Moss Landing facility, where factory workers crank out the wheat-gluten-based Benevolent Bacon responsible for the scent, changes are afoot. Nestlé is spending more than $5 million to renovate the facility, adding new equipment, more freezer capacity, "meat" smokers and more. Construction is underway, and soon employees will start making a slew of new products, including the Awesome Burger, Nestlé's answer to the Impossible and Beyond Meat burgers.Sweet Earth is located in Monterey County, California, home of the "salad bowl of the world." The product, currently rolling out to retailers including Fred Meyer, Hy-Vee, Ralphs, Safeway, Stop & Shop and others, is hardly a breakthrough. Like Impossible and Beyond's version, the plant-based burger is designed to cook, look and taste like real meat. And like Impossible and Beyond Meat's products, a bite of the Awesome Burger patty, when topped with condiments, lettuce, tomato and onions and served in a moist bun, is a satisfying approximation of a real beef burger.But the Awesome Burger is a big deal because it marks a turning point for fake meat.Read MoreImpossible Foods has been around since 2011, Beyond Meat since 2009. The buzzy startups have been growing rapidly, with orders pouring in from Burger King, Dunkin', Subway and Sodexo, which counts university and corporate cafeterias among its customers.Like many young companies, Beyond and Impossible have struggled, as well. Impossible faced shortages, reassigning employees from its corporate office to its refrigerated warehouse to help meet demand (the shortages, it says, are over). Beyond had a wildly successful IPO and has since held a secondary offering, but its losses remain steep, and experts fear the inflated stock price may be a sign of a bubble. Impossible is private and doesn't disclose financial information.The Awesome Burger is designed to look, cook and taste like real meat. Nestlé, on the other hand, is the largest food company in the world, according to Forbes. It has about 140 years on Beyond and Impossible. Its breathtaking scale dwarfs Impossible and Beyond: The Swiss company employs 308,000 people, rakes in tens of billions of dollars in annual sales, has offices in countries around the world and owns a wide variety of well-established brands, including Dreyer's and Häagen-Dazs ice cream, Toll House chocolate chips and cookie dough, Gerber baby food, DiGiorno frozen pizza, Lean Cuisine, Stouffer's and more. Sweet Earth has already benefited from that scale: While under Nestlé's umbrella, it has rolled out frozen pizzas, empanadas and new entrees. Nestlé is a master of supply chains and a profit machine, unlike its younger competitors. Its relationships and its broad product platform mean that Nestlé can ensure the Awesome Burger will, in some form or another, be everywhere — in restaurants, on grocery shelves and incorporated into frozen meals. Nestlé is already partnering with McDonald's on vegan patties in Europe — if that relationship extends to the United States, the Awesome Burger could be in the biggest burger chain in America. McDonald's, for its part, has said that it is still deciding whether to serve a meatless (but meatlike) burger in the United States. And through Sweet Earth, Nestlé is also launching a line of plant-based deli meats, including turkey, ham, salami and sausage, this spring. The products will be sold in a dedicated, branded deli counter as well as on shelves. Tucker Bunch, culinary innovation and development chef at Sweet Earth, prepares food in the office's test kitchen. Nestlé is not the only major food company angling for a piece of the plant-based pie. Kellogg plans to launch a line of meat substitutes called Incogmeato under its Morningstar Farms brand next year. Kroger is introducing its own plant-based products, from burger patties to Bolognese sauce to sour cream, this fall. Hormel Foods, maker of Skippy, Spam and AppleGate, has also introduced a line of plant-based and blended products, as has Tyson, one of the world's biggest meat, pork and poultry processors. Big Food launching plant-based products is "literally the best thing that could happen for the sector," said Bruce Friedrich, executive director of the Good Food Institute, a nonprofit that supports plant-based businesses. "When the biggest food and meat companies in the world are launching plant-based meat products, that will do more to mainstream plant-based meats and to make the pie significantly bigger than probably anything else." By partnering with fast-food companies and selling in retail, Impossible and Beyond are making plant-based foods available to many consumers. But "there's a difference between 'able to get' and mainstream," Friedrich added. "It's about omnipresence." When the biggest food and meat companies in the world are launching plant-based meat products, that will do more to mainstream plant-based meats and to make the pie significantly bigger than probably anything else." Bruce Friedrich, executive director of the Good Food InstituteOnce all the new products hit shelves, consumers will be able to take their pick — they'll make choices based on ingredients, taste, nutritional profile and packaging. If the trend develops, it'll give Big Food a chance to compete in a new and lucrative space. But if plant-based meat proves to be a fad and phases out, it could mean the loss of millions of dollars for big companies who made a bad bet. But Nestlé thinks plant-based protein is here to stay. And it's banking on Sweet Earth to put it at the front of the pack. The Awesome Burger in all its glory. How vegetables became sexy It may seem like the plant-based trend came out of nowhere, but vegetarian products have been around for decades. Veggie burgers started hitting grocery shelves about 30 years ago. Gardenburger, which makes burgers primarily out of vegetables and grains, was founded in 1985. Slowly, the market expanded. Dr. Praeger's, which also makes veggie burgers, launched in 1992. Tofurky debuted its holiday roast in 1995. It took about another 15 years for mainstream eaters to start paying attention. Several factors led to popular interest in plant-based foods, noted Kara Nielsen, vice president of trends and marketing for CCD Innovation, a food and beverage innovation consultancy. "When we look back and look [at] what were the steps that preceded this, there were quite a few. Including vegetables becoming really sexy and interesting," Nielsen said. When we look back and look [at] what were the steps that preceded this, there were quite a few. Including vegetables becoming really sexy and interesting." Kara Nielsen, vice president of trends and marketing for CCD InnovationThings started turning around for vegetables around 2010, according to Nielsen. That year, President Bill Clinton started talking openly about his decision to go (mostly) vegan as a way to manage his health. Plenty, a best-selling vegetarian cookbook that New York Times food writer Mark Bittman called "among the most generous and luxurious nonmeat cookbooks ever produced," hit shelves. Soon, the plant-based diet was luring celebrities like Jay-Z and Beyoncé, who pledged in 2013 to give being vegan a try. Bill Gates, who invested in Beyond Meat, raved about the company in a 2013 blog post. Suddenly, veganism wasn't a fringe category dominated by lentils and activists. It was a lifestyle embraced by the powerful and famous — and it was drawing interest from influential, wealthy investors. As plant-based diets were becoming more popular, other changes were hitting the food sector. Big food companies like Nestlé and Kellogg used to be able to set the tone when it came to food trends, launching new products or line extensions without much competition from upstarts. But the food business has become more fragmented. Young companies can crowdfund to launch products and use online retailers to sell them, reaching an audience quickly and without the use of traditional channels like established grocery stores. The bustling space has also started to attract more funding: Research firm CB Insights found that between 2013 and 2017, the number of investors — including venture capitalists, private equity firms and others — pouring funds into food and beverage startups has more than tripled. Pea protein is a key ingredient in Sweet Earth's plant-based Awesome Burger. To compete, big consumer packaged goods firms have launched their own venture arms and accelerators to help them identify new acquisition targets or give them a view into what people want to eat. Still, large companies have nearly missed the boat on some new trends, said Nielsen. For example, big brands were slow to launch non-GMO or gluten-free products. Nestlé, Kellogg, Kroger and the other big companies chasing Impossible and Beyond don't want to be left out of the plant-based trend, which is particularly attractive. As increasingly health-conscious consumers turn away from processed, sugary foods, it fits neatly into the health and wellness space big companies are trying to build out. And it has the added bonus of signaling and supporting sustainability efforts. When Nestlé announced plans to reach net-zero greenhouse gas emissions by 2050, it said it would bring plant-based products to market as part of the effort. Plant-based alternatives to meat use significantly less water and release far fewer emissions than animal products. Plus, plant-based products appeal to several demographics: Aging consumers who want to reduce their meat intake for health reasons, Millennials who worry about the warming planet and even younger consumers who may be primarily concerned with animal rights. And, potentially, there's lots of money to be made. US retail sales of plant-based foods have grown 11% in the past year, according to a July report from trade group Plant Based Foods Association and the Good Food Institute. Barclays predicts the alternative meat sector could reach about $140 billion in sales over the next decade, capturing about 10% of the global meat industry. Jefferies predicts that by 2040, the alternative meat market could make $240 billion in annual revenue globally. For companies that want to grow while presenting themselves as pro-health, pro-environment and generally with it, the plant-based trend seems like a slam dunk.For Nestlé, there were a few possible ways into the meat substitute trend. Last year, it started selling vegetarian meals through Lean Cuisine. In Europe, it has a line of plant-based products under its Garden Gourmet brand. The company could have launched the Awesome Burger under those brands, or cooked something up from scratch. Instead, it bought Sweet Earth. The Sweet Earth gambit Sweet Earth may just seem like a mom and pop operation that was in the right place at the right time — a humble maker of frozen veggie burritos and imitation bacon that lucked out when Nestlé decided to hop on a new trend. Its offices, with open cubicles and windows that frame the pale California sky or let workers peer into the factory on the main floor, lack Nestlé branding. Sweet Earth's mascot, a farmer seated in a Lotus-like position, can be spotted throughout the office, in a small painting by the elevator and on a wall-mounted gong. Employees have access to fruit and vegetables from a backyard community garden, and can kick their feet up on a tree stump ottoman in a sun-drenched meeting room. But as non-corporate as it seems, the operation was launched by a business-savvy couple with years of experience selling big brands. Kelly and Brian Swette, who started the company in 2011, each have a background in marketing. Both spent years at PepsiCo, Brian as chief marketing officer and Kelly as a brand manager and director of marketing for the Pepsi brand. Brian also was the director of Jamba Juice, sat on the Burger King board, and was a brand manager for Procter & Gamble. Kelly was the global vice president of marketing at Calvin Klein. Sweet Earth CEO Kelly Swette in the employee garden at Sweet Earth's headquarters.The Swettes each had their own reasons for wanting to start a vegetarian meal company. In 2004, the couple's teen daughter Briana started keeping a vegetarian diet because she was concerned about the environment and animal welfare. Kelly, responsible for the household cooking, looked for quick, easy, appetizing plant-based foods and found the options lacking. Meanwhile Brian, who helped start Arizona State University's Global Institute of Sustainability in 2002, noticed that food played too small of a role in the sustainability movement. Both saw an opportunity. "We thought there was a marketplace," Brian noted. "It was pretty clear to me as you'd talk to young people, saw their behaviors and you saw the menus change, that there was a desire for delicious and nutritious food that was plant-based." Sweet Earth quickly started getting attention from industry experts. Trade publications handed out accolades, highlighting the company's frozen burritos, fake bacon and veggie burritos in best-of lists. Kelly Swette, who remains Sweet Earth's CEO (Brian is president) also started receiving attention — in 2015, Goldman Sachs called her one of the 100 most intriguing entrepreneurs of the year. It was pretty clear to me as you'd talk to young people, saw their behaviors and you saw the menus change, that there was a desire for delicious and nutritious food that was plant-based."Brian Swette, President, Sweet EarthTwo years later — right around the time Sweet Earth started thinking about launching a meatless burger that looks and tastes like meat — Nestlé acquired the business. It didn't disclose the financial terms of the deal. "More and more consumers [were] interested in eating plant-based, but in a more familiar way," Kelly recalled. After the acquisition, with access to Nestlé's huge R&D capabilities, Sweet Earth was able to speed up development of the Awesome Burger. That was good news for Nestlé. The Sweet Earth acquisition "gives us a lot of speed to market," said John Carmichael, president of Nestlé USA's food division. "They've been at this for multiple years now," he said. The deal "gives both of us a jumpstart on a market that's maturing as we speak." Nestlé's Awesome Burger started shipping out to grocery stores weeks before the Impossible Burger got to retail for the first time. Kroger's collection is also reaching shelves this fall. A whole world of choice is opening up to consumers who want to test out — or fully buy into — meat substitutes. It's a new but already crowded market, and each brand will have to set itself apart. When my colleagues and I tried the Awesome Burger in Sweet Earth's test kitchen, it tasted good — but it didn't taste exactly like meat.Sweet Earth produces poultry alternative Mindful Chik'n and meat substitutes Awesome Grounds and the Awesome Burger. The Awesome Burger is made out of pea protein, coconut oil, wheat gluten and canola oil, among other ingredients. Beyond Meat also lists pea protein, canola oil and coconut oil among its main ingredients. Impossible, on the other hand, uses soy protein, coconut oil and sunflower oil, in addition to other things. Nutritionally, the Awesome Burger looks a little different. An Awesome Burger has 260 calories, 26 grams of protein, six grams of fiber and 15 grams of fat per each four-ounce serving. An Impossible Burger of the same size has 240 calories, 19 grams of protein, three grams of fiber and 14 grams of fat, and a four-ounce Beyond Meat burger has 250 calories, 20 grams of protein, two grams of fiber and 18 grams of fat. A four-ounce serving of real ground beef, made of 80% lean meat and 20% fat, has about 290 calories, 19 grams of protein, zero fiber and 23 grams of fat, according to the USDA. The Awesome Burger's relatively high protein and fiber count is by design, said Kelly Swette, noting that those factors could help set it apart from the competition. That aside, the Awesome Burger looks a lot like the Impossible Burger, down to the branded toothpick stuck into the bun when served to customers (or at least, to us). As the market grows and more meat-like products with cheeky names hit shelves, consumers might mistake one product for the other — or they might reach for brands they've been hearing about for years, like Beyond Meat and Impossible. The space is "superlative-laden, I would say, in terms of the naming," Brian Swette conceded. But "our intent is to leverage" the Sweet Earth brand, he said. "There will be some marketing and distribution wars that will take place." There will be some marketing and distribution wars that will take place." Brian Swette, president, Sweet EarthCarmichael thinks that Sweet Earth's credentials as an established vegetarian food company will also help set it apart from competitors. Some, like Friedrich of the Good Food Institute, think it's a mistake to look at the plant-based sector as zero-sum. Entrants into the space won't steal share from each other, Friedrich said, but help expand the sector. But that doesn't mean every brand will do well. Kara Nielsen pointed to the low-calorie ice cream trend fueled by Halo Top as an example of how the plant-based trend could play out. "Everybody wants to have one, and there's not going to be enough room," she said. "One will be the victor." The Awesome Burger should be "pink to warm-red" in the middle when done, according to the patty's package. And as the plant-based market heats up, a backlash could be brewing. Customers interested in unprocessed foods, like whole grains, beans and vegetables, may turn away from the product when they realize that, like any other burger, it's prepared in a factory. "Most consumers are not aware of how these products are actually put together," said Darren Seifer, food and beverage industry analyst for research group NPD. "Right now it's about the plant-based part of it. They figure, it's a plant, and it's a bunch of plants put together. Beyond that I would say that there's still some confusion." Nestlé itself may face its own challenges. Because it sells bottled water, it's been accused of making money off of precious public resources. Nestlé says it is "committed to continuing to conserve and protect water resources in the areas where we operate" and set up a web page responding to concerns about its water usage in California after activists tried to prevent Nestlé from withdrawing water in the state. The company has also been criticized as a contributor to plastic pollution. In response, it's committed to make all of its packaging recycling or reusable by 2025 and to reduce single-use plastics by testing out reusable packaging and other innovations. Plus, allegations of animal cruelty at a Nestlé supplier put the company in the spotlight this year (Nestlé has cut ties with the farm in question, and says it has been working with its dairy suppliers to develop a program supporting improvements, including in animal care). "In our community, Nestlé has had a bit of pushback," said Anna Starostinetskaya, senior editor at VegNews, a vegan lifestyle brand with a news website and magazine. "But because Sweet Earth has been a pretty beloved company ... some vegans might be attracted to it." Kelly Swette said she's not concerned that Sweet Earth's association with Nestlé could drive away vegan or vegeterian customers. "Our values and mission are supported by Nestlé," she said. "Together we are stronger." Paul Mankowski, head of research and development for Nestlé Foods, said that selling affordable vegan food is "an opportunity to get more plant-based products in consumers' hands."Paul Mankowski, head of research and development for Nestlé Foods, and Kelly Swette showcase products in the test kitchen at Sweet Earth. Environmentally conscious consumers may warm to Nestlé because of its efforts in the plant-based space — but they may decide to go with a company they see as less controversial. Some, perhaps most, customers may not even realize that there's a connection between Sweet Earth and Nestlé. The Awesome Burger package features Sweet Earth's name and logo prominently, but doesn't mention its parent company. Nestlé says it is committed to the plant-based sector. It says plant-based products are an important, growing part of its business, a trend that's here to stay. But decades of experience means that Nestlé has seen fads come and go, and knows how to exit when it needs to. For example, the company is distancing itself from candy, which was for years a key part of its business. Last year it sold off US candy, including Butterfinger, Crunch, Raisinets, Nerds, Laffy Taffy and others to Ferrero in a $2.8 billion deal. "This move allows Nestlé to invest and innovate across a range of categories where we see strong future growth," Nestlé CEO Mark Schneider said in a statement at the time."We've lived through trends and we understand how to deal with trends," noted Mankowski. "We are well-positioned to drive into trends and to pivot when new trends come."There are some signs that not every market has a voracious appetite for plant-based products. Tim Hortons launched Beyond Meat as a limited menu item across Canada in June, and has since said that it will continue the test just in British Columbia and Ontario because of the "positive guest response." After a limited retail test in the United Kingdom, Nestlé pulled its Garden Gourmet line from shelves in that market, saying that it "was received very positively," and that it's planning to return to the region. Brian Swette says he's not worried about the Awesome Burger or other Sweet Earth products being offloaded by Nestlé. "We're supervising, along with Nestlé, the formulation of the product, and the making of the product and the distribution of it. I'm very confident on all three aspects," he said. "That's not going to happen to us."

Story by Samantha Murphy Kelly, CNN Business Video by Moss Cohen and Sofia Barrett, CNN Business

2019-08-09 10:06:25

business

tech

https://www.cnn.com/2019/08/09/tech/5g-review/index.html

5G review: I tried 5G. It will change your life — if you can find it - CNN

Self-driving cars. Robotic surgeries. Toothbrushes that detect when you're sick. This is the future 5G technology promises in less than a decade's time. But AT&T, Verizon, Sprint and T-Mobile have a long way to go before they deliver on that promise.

tech, 5G review: I tried 5G. It will change your life — if you can find it - CNN

I tried 5G. It will change your life — if you can find it

Self-driving cars. Robotic surgeries. Toothbrushes that detect when you're sick. This is the future 5G technology promises in less than a decade's time; internet connections so fast they'll support an entirely new way of life.But for now, I'm standing on an avenue in downtown Chicago waving my Samsung Galaxy 5G smartphone around to find coverage that's not blocked by the tree to my left. I finally take a few steps back from the lamppost, adorned by a hard-to-miss, clunky black antenna, and bam, my Netflix download begins: a complete download of a two-hour film in less than 10 seconds — in stark contrast to the seven-or-so minutes it'd typically take on 4G. This was my experience testing the newly launched Verizon 5G network in Chicago last month. When it worked, it really worked, often hitting over 1 gigabit per second in speed tests — an incredible feat for a piece of technology that fits in your pocket. 4G LTE in the United States averages about 35 megabits per second. 5G, the fifth generation of cellular network technology, is nearly 30 times faster — and about 10 times faster than the average American home broadband speed. Read MoreBut 5G isn't just about speeds on smartphones. Other technologies will be made possible with its ability to handle much more bandwidth, allowing the data from sensors, thermostats, cars and robots to work together in real time.Samantha Kelly, CNN Business tech editor, tested 5G networks in New York (pictured here), Chicago and Dallas.Think of it like this: If 3G is a two-lane highway and 4G is six lanes, 5G will turn it into 12 lanes. It'll handle significantly more traffic and bandwidth with zero latency, a word that refers to immediate response times for data transfers — will allow self-driving cars to process all the information they need to make life-or-death decisions in the blink of an eye, or the health care industry to help power the next generation of telemedicine and robotic surgeries. (A surgeon in China recently conducted a liver transplant on an animal from a location 30 miles away by controlling a robotic arm running on 5G. The same procedure on a 4G network would have increased the chance for mistakes). Mobile carriers are pouring billions of dollars into 5G. The new networks and associated technologies are expected to add $17 trillion to the global GDP by 2035, according to ABI Research. But there will be a significant lag between 5G's rollout and that financial impact. It's not dissimilar to the 3G iPhone — an impressive piece of standalone technology that didn't make a big economic impact until a year later with the arrival of the App Store. A few years after that, 4G paved the way for on-demand apps such as Uber, mobile video consumption on Netflix and FaceTime, real-time rerouting via Google Maps and social sharing on Instagram and Snapchat.We've maxed out the 4G capabilities of what our phones can do, but 5G could offer a doorway into what's next. However, carriers have a long way to go before they deliver on that promise. My 5G network tests, often performed via the Speedtest app, were inconsistent. If I turned a street corner on Verizon, 5G went out of range — a major drawback to the high-frequency spectrum approach being adopted by some carriers. That technology delivers lightning-fast speeds but doesn't cover wide areas, penetrate indoors and can be blocked by rain or, in my case, leaves. Inside a Verizon store on Michigan Avenue, I looked out at the cellular radio equipment hanging on another lamppost 20 feet away, unable to get on the network from the other side of the glass window. It poetically captured the current state of 5G: The future was staring right at me but I couldn't quite access it. Rollout bluesVerizon was my first experience with 5G: I've since tested the networks for Sprint, T-Mobile and AT&T, CNN's parent company. Each provided a different experience. My speed tests on AT&T dominated, reaching an impressive 1.6 Gbps in a Dallas park and downloading "Spider-Man: Into the Spider-verse" in 5 seconds. (Think of all the movies you could download in the 60 seconds you have on the tarmac before a flight takes off.) I also tried Sprint, which uses a lower frequency for its 5G network, in Chicago. It was the most consistent in terms of coverage — I was able to duck into a Starbucks, turn street corners and hop into a car without dropping from the network. But its speeds were slower than some of the other networks; I downloaded a movie in about 15 seconds. (This is still mind-blowingly fast.) Rollouts for past networks weren't always pretty, resulting in calls dropped, spotty coverage and drained batteries. As Jon Stewart put it in 2011 on "The Daily Show," "Those of us in the 'iPhone community' have sacrificed one thing for the ability to carry around every photograph we've ever taken, or song we've ever listened to, or home video, or compass. We have sacrificed the ability to make phone calls. For years, for years."Now the past could repeat itself. Upgrading tens of thousands of cell sites in the US to 5G will take six to eight years to catch up to 4G's footprint, according to Dan Hays, executive advisor at consulting firm PwC."It's an enormous program involving tens of thousands of people all over the country, and not everyone has the skill set to climb the towers to swap antennas," he said.5G, which uses similar equipment to 4G, operates on two main types of cell sites: large macro-cell sites that can be installed on towers or rooftops (or hidden in fake cacti and trees), where they are typically housed in enclosures like cabinets or a large closet; and small cells the size of a pizza box, which hang on a light pole, wall or ceiling inside of a building. The latter is a method already in use by 4G networks, but on 5G, it'll move some functions to the cloud, Hays explained. Eventually, many 5G cell sites will need to be closer together in areas previously covered by a single 4G cell. "Not all 4G cell sites are easily upgradable," Hays said. "Some could be upgradable with as little as a software update while others may need to be replaced completely."A Verizon 5G small cell in Indianapolis.You have 5G. Now what?Even in the areas where 5G is already up and running, getting onto the network can be tricky. To start, you'll need one of the few, pricey, 5G-compatible phones, such as the $1,300 Samsung Galaxy S10 5G or $999 LG V50 5G. (Some testers from the Wall Street Journal and PCMag reportedly overheated when the devices reached a certain temperature. I didn't have similar issues).When more devices start to offer 5G — and consumers organically upgrade to these new models — we'll likely see a surge in adoption; that is, if the networks are up and running in more places by then. By 2024, Ericsson Mobility projects more than half of mobile subscriptions will run on 5G in the US. (Apple is expected to launch a 5G iPhone in the fall of 2020). For now, one of the biggest challenges in testing 5G coverage is finding it. I was given a map from Sprint highlighting spots in downtown Chicago where I could pick up 5G. I seamlessly navigated neighborhoods without dropping off the network, envisioning what life will be like when I can download an entire TV season in the few seconds before my coffee order is ready. But without a map on hand in Dallas, I was left guessing which areas would give me 5G Sprint coverage (I was usually wrong). In Chicago on Verizon, 5G worked well on main avenues but not on the side streets — the equipment hadn't yet made it over to those blocks. On T-Mobile in New York City, I several times found myself automatically connected to 5G while wandering around different neighborhoods. But other times, I could see the carrier's cell sites on buildings nearby and still struggled to get onto the network. Different carriers, different approachesThe four major mobile carriers' approaches to 5G vary based on the spectrum each company already owns. This is why Verizon can say its network is all about speed, Sprint promises continuity, T-Mobile wants to be nationwide first in 2020 and AT&T is doubling down on connecting businesses. Wireless companies have traditionally used low-band spectrums for cell phone service because they travel farther and penetrate walls better than higher frequencies. But higher frequencies offer much faster speeds. The frequencies AT&T and Verizon, known as millimeter wave or "mmWave", are using are significantly higher than Wi-Fi. It is the fastest and most responsive form of 5G but doesn't travel far. Sprint's mid-band spectrum casts a much wider net of coverage, allowing 5G users the ability to access it both inside and outdoors. However, my tests on Sprint's network often showed half the speeds of what I often saw on the high-band spectrum. (Sprint has committed to covering 11 million people with 5G by the end of the year.) Meanwhile, T-Mobile is focused on deploying low-band spectrum, but in New York City, its network runs on high-band spectrum — a move that could allow the company to build out its existing infrastructure in the area to get its foot into the 5G race. If it merges with Sprint — a deal that was recently approved by the Justice Department — it'll be that much closer to reaching its coverage goal.Beyond phonesNarrowly focused on businesses, AT&T's 5G network is only open to companies and developers, and not available to the general public (though it will be soon). But it's already being used by Rush University Medical Center in Chicago to deliver near real-time remote healthcare monitoring and the ability to transmit large imaging files quickly. It aims to eventually support artificial intelligence to help patient care and augmented reality to train medical students.Meanwhile, AT&T Stadium, home of the Dallas Cowboys, is the first stadium with 5G in the country, where beige high-frequency 5G antennas blend into the industrial, modern aesthetic of the football-shaped venue. The world's most valuable sports franchise plans to give workers, such as parking lot attendants and food service staffers, 5G devices to make everything from in-seat hot dog deliveries to virtual reality fan activations even faster. In July, I performed a series of speed tests inside the stadium that brought in results close to what I experienced outside at the Dallas park, over 1 Gbps per second. "We need to understand what 5G is and how it will enhance our fan experience," said Matt Messick, chief information officer of the Dallas Cowboys. "We're one of the first to start asking questions. It's one thing to start talking about it then to have it and start testing it."Messick didn't elaborate on what exactly to expect, but stadium-goers are competing with a limited pool of bandwidth; the ability to make calls, check the internet for stats and post videos to social media without lag times is as good of an incentive as any to offer fans in the stands.Mo Katibeh, CMO of AT&T Business, envisions future cities not needing stop lights as self-driving cars automatically communicate with other connected vehicles nearby. Experts project this could become a reality as soon as 2026. "Everything will be interconnected and 'talk' to each other," Katibeh said.A 'dose of reality'5G is expected to have a major impact on the economy, but exactly how that will look is mostly unknown."Right now, job creation is all about the deployment of the network, such as from the tower climbers and equipment technicians," said Hays, adding it could create a whole new economy just like the internet did. 5G could create up to 3 million new jobs across various industries in the US, from smart city development to robotics and food services, according to Accenture. But Hays called most projections around 5G "overly optimistic," considering for now it's only a faster version of 4G. "There is a dose of reality that needs to come when you talk about 5G," he said. Some of America's 5G ambitions will confront the realities of red tape, costs and other practicalities. For example, some experts say millions of delivery drones could one day be supported by 5G coverage, but the networks today aren't built to work 1,000 feet in the air. Augmented reality could come to car windshields, serving up turn-by-turn directions or even pop-ups of job listings as you drive by businesses. But because US states require glass replacement each time a rock cracks a window, it'll be harder for insurance companies to agree to pay for new windshields."Technology development is certainly becoming more feasible, but the question of who will pay also remains," Hays said.In Samantha Kelly's test of 5G networks, it took longer to download a movie on T-Mobile's network in New York than it did on other carriers. But even so, 38 seconds to download a nearly 2-hour film is mind-blowingly fast.Consumers aren't looking to pony up for the benefits of 5G either. According to a recent PwC study, about two thirds of respondents said they weren't willing to pay more for 5G than what they're already spending on 4G. (More than half said they already pay too much for internet access). Verizon originally announced it would charge an extra $10 a month for 5G coverage, but has since delayed the additional charge for an undetermined amount of time.Edward Oughton, senior research associate at the University of Oxford who closely studies 5G development, likened the technology to the Concorde, the high-speed turbojet-powered supersonic passenger airliner that flew at twice the speed of sound."[It] did not revolutionize global travel; the jumbo jet did," Oughton said. "The technology is very fast but only a few wealthy users will be able to afford it at least initially — most of whom will be in urban and suburban areas." He argued getting the cost per bit of data transfer down is key. "This is where the biggest productivity benefits will lie; not in faster access in cities," he said. All four major US mobile carriers declined to share how many people are currently using their 5G networks, but said they're continually adding new customers. "Early users might be disappointed with 5G in the beginning as carriers work out kinks," PwC's Hays said. "Consumers should lower their expectations in the months and years ahead." I took his guidance ahead of my final 5G test with T-Mobile in New York City. The carrier's 5G network wasn't the fastest — it took me longer to download "Spiderman: Into the Spider-verse" on T-Mobile than any other network (about 38 seconds) — but my reaction reminded me how quickly we judge new technologies. When I reached for my 4G phone hours later and a mere app took nearly five times as long to download, I had a newfound appreciation for 5G, even with its limitations. It'll inevitably produce headaches, with spotty service requiring expensive devices to access it — but eventually, we will look back on this time trying to remember what life was like without it.

Lydia DePillis, CNN Business

2019-07-29 16:03:58

business

economy

https://www.cnn.com/2019/07/29/economy/hahnemann-hospital-closing-philadelphia/index.html

Rich investors may have let a hospital go bankrupt. Now, they could profit from the land - CNN

For decades, Hahnemann University Hospital served as the main safety-net hospital for downtown Philadelphia's neediest residents. But soon, the doors will close, leaving a gaping hole in the city's ability to serve its poor. A private equity-backed firm bought the hospital and could let it fail, and now stands to profit from the valuable real estate underneath.

economy, Rich investors may have let a hospital go bankrupt. Now, they could profit from the land - CNN

Rich investors may have let a hospital go bankrupt. Now, they could profit from the land

For decades, Hahnemann University Hospital served as the main safety-net hospital for downtown Philadelphia's neediest residents. But last week, it released its last patient. Within a month, the hospital's 2,572 staff will all have been laid off, and the doors will close, leaving a gaping hole in the city's ability to serve its poor — not to mention any victims of trauma, like shootings or car accidents."It's not safe. We're right here in the middle of everything. Jefferson [University Hospital] isn't that far, but for a life-threatening situation, minutes matter," said Maria Gutierrez, a Hahnemann oncology nurse who on Wednesday received a call from a manager saying all her shifts had been canceled. "That's why he wants the land."The "he" Gutierrez was talking about is Joel Freedman, the California-based owner of the private equity-backed company that bought Hahnemann and its sister hospital St. Christopher's for $170 million in early 2018. About a month ago, the entity that owns the two hospitals filed for Chapter 11 bankruptcy protection, saying that although St. Christopher's was profitable, Hahnemann's financial situation was unsalvageable.If you have a success like Hahnemann — that will blow up. Everybody will know that you can make money on the real estate of a hospital."Eileen Appelbaum, co-director of the Center for Economic and Policy ResearchNot included in the filing: The entity that owns the entire city block's worth of land underneath the hospital, as well as a few associated medical office buildings and parking garages, which Freedman had split off from the operating businesses when he and his co-investors acquired them. The same central location that made Hahnemann valuable as a health care provider — spitting distance from City Hall and the convention center — also makes the site incredibly desirable for a high-end hotel or condominiums.That's fueled accusations from the city, the state, the unions representing the hospital workers and even Vermont senator and presidential candidate Bernie Sanders that Freedman allowed the hospital to slip into bankruptcy, and now wants to free up the land for a potentially lucrative sale.Hahnemann University Hospital served as the main safety-net hospital for downtown Philadelphia's neediest residents. But last week, it released its last patient. Within a month, 2,572 staff will all have been laid off.Read More"There's no way he doesn't make money off the land," said Patrick Clancy, president and CEO of Philadelphia Works, the city's workforce development agency, which is now charged with helping thousands of newly unemployed workers. "He will have left our city and gone back to wherever he calls home with money in his hands and 2,400 people scrambling around."Freedman declined to comment for this story, noting via email "I will have a lot to say about the Hahnemann situation in a few weeks." In a statement released July 15, he said that the state of Pennsylvania had declined to provide needed financial assistance — which the state disputes — and that he remained open to any solution that would keep the hospital operating. Freedman has not commented publicly on what may lie ahead for the site.Still, walking away from ailing businesses while profiting from their real estate is right out of the private equity playbook.It's happened again and again in the retail and grocery sectors, which are filled with low-margin businesses that sit on land that could be more valuable if repositioned. From Toys 'R Us to Payless Shoesource, thousands of people have lost jobs when their employers are liquidated, after having been loaded down with unsustainable debt."The firms know that even if everything else gets wrong, there's always this real estate to sell," says Jim Baker, who runs the Private Equity Stakeholder Project, a nonprofit that advocates for people negatively impacted by private equity ownership. "That becomes part of the deal from the outset."When it comes to a hospital, however, the stakes for the community are even higher. If the Hahnemann bankruptcy goes through as planned, advocates worry other private equity firms may try it with struggling hospitals in gentrifying neighborhoods all over the US."If you have a success like Hahnemann — that will blow up," says Eileen Appelbaum, a private equity expert who is co-director of the left-leaning Center for Economic and Policy Research. "Everybody will know that you can make money on the real estate of a hospital." Senator Bernie Sanders held a rally at Hahnemann Hospital in early July, promising to introduce legislation that would create a $20 billion fund to help local governments purchase hospitals in financial distress.Private equity at the bedsideThe drama at Hahnemann is playing out against the backdrop of a health care industry that private investors are rapidly transforming.According to the management consulting firm Bain & Company, the global value of disclosed private equity buyouts of health care assets ranging from nursing home chains to medical device manufacturers rose to $63.1 billion in 2018, the highest level since 2006. Health care overall has higher margins than any other industry sector, Bain reports, and is seen as relatively durable in the event of an economic downturn, which is why health care buyouts as a share of all private equity deal volume has been rising as well.It's not clear yet what that means for patients. A recent article in the Journal of the American Medical Association expressed concern that private investors tend to demand high returns in a short time frame, which can pressure physicians to push more expensive treatments over less profitable ones, and pressure hospitals to rely on medical staff who have less training.More broadly, wrote authors Suhas Gondi and Zirui Song of Harvard Medical School, private equity firms don't have the same incentives as academic and nonprofit hospitals to use revenue streams from private insurance to subsidize indigent care and medical research. Their charge is primarily to increase profits for investors, usually by consolidating assets in a given geographic area or specialty, before selling them off."In the last couple years there's been a profound acceleration in private equity deals in healthcare," said Joseph Bruch, a PhD student at Harvard studying how that trend affects patient care, on which there is little definitive research so far. "We just don't know, and it's happening very fast." From the start, Hahnemann Hospital seemed like an odd target for a private equity investor. Its former owner, Tenet Healthcare, had lost $15 million on Hahnemann and St. Christopher's in fiscal year 2017. Philadelphia is a very competitive market, with several large academic health systems all offering state-of-the-art facilities and vying for patients with private insurance plans.Hahnemann, which served mostly patients insured through Medicaid and struggled to stay afloat on those low reimbursement rates, would have needed massive investment in equipment and IT systems in order to have a shot at attracting a more lucrative clientele. And health care generally has been moving away from large inpatient facilities towards smaller community-based clinics that can provide most services at a lower cost.Freedman said he would try to turn it around. "We are thrilled and proud to be the new owners of these venerable Philadelphia hospitals and the outstanding clinical and academic programs for which they are recognized," he said in a press release, when the sale went through in 2018.His company, American Academic Health System, is a subsidiary of El Segundo-based Paladin Healthcare, of which Freedman is the sole board member. The acquisition was financed with a $51 million loan from the investment firm Harrison Street Real Estate, and with a revolving line of credit from MidCap Financial, an affiliate of Apollo Global Management, one of the largest private equity firms in the country.Joel Freedman (left) poses for a photo with the president of Howard University, Wayne A.I. Frederick in January 2018. Freedman's company, American Academic Health System, previously managed Howard University Hospital, but the university has said it will not renew the contract, which ended in March.On its website, American Academic touts its management of Howard University Hospital in Washington DC since 2014, saying it reduced costs and increased revenues. That contract ended in March, however, and Howard said it decided not to renew with American Academic. The other hospital system that an affiliate of American Academic managed — Avanti Hospitals, a portfolio of facilities in California that Freedman co-owned until January — agreed in December 2018 to pay $8.1 million to the federal Department of Justice to settle allegations that it submitted false claims to Medicare and Medicaid. Ultimately, American Academic did not invest much in Hahnemann through its subsidiary, Pennsylvania Academic Health System. In bankruptcy filings, the company's restructuring offer said that Hahnemann was losing more money than the previous owner had disclosed, that its technology systems were a mess, and that it carries significant pension obligations, along with more than $100 million in debt to Drexel University College of Medicine — which used Hahnemann as its primary teaching facility — and a host of vendors. St. Christopher's was also paying monthly rent of $1.3 million to properties co-owned by Freedman and Harrison Street. On May 8, MidCap filed a notice of default, after which Pennsylvania Academic Health System tried to sell the hospitals. When that failed, it moved to take them through bankruptcy.The city and the state tried to keep the hospital open. A spokesman for Governor Tom Wolf told CNN Business that the state deferred taxes and offered to put Hahnemann on a payment plan, which hospital management never agreed to. Jim Engler, chief of staff to Philadelphia Mayor Jim Kenney, said that public officials had started meeting with hospital management in April to figure out a funding arrangement that would keep the hospital open, but that they were coy."During all that time, when we discussed the future of the hospital, we made requests for documentation to see what the real financial condition of the hospital was," Engler said. "And they never provided any of that documentation."In a joint statement released in early July, Wolf and Kenney said Hahnemann's owners "want a bankruptcy proceeding to protect the profits they extracted from the hospital and community," and welcomed any suggestions for "how we can help mitigate the damage done by Joel Freedman and his firm."Allen Wilen, the chief restructuring officer for the hospital, said in a statement that the talks had been fruitless. "While certain aspects of these discussions were initially promising, there were numerous conditions put forth that were unworkable," he said. Freedman blamed the state for reducing the supplemental payments the hospital had received for its Medicaid population, and according to the bankruptcy documents, a potential sale to Drexel fell through.In a last-ditch effort, the city even ordered the hospital to stay open under a 1969 regulation that requires the city's health commissioner to sign off on the closure of an emergency room. But the hospital still stopped admissions on July 17. And there's little else the officials can do: Hahnemann is private property, and the zoning allows for many different uses, so the city doesn't have much leverage.Doctors and nurses have been among those demonstrating against the closure of Hahnemann University Hospital in Philadelphia in protests over the last couple months.Who gets paid? At this point, it's not clear that Freedman and his co-investors will be able to walk away with the full value of the real estate.In bankruptcies like these, if creditors can prove that the debtor never really planned to try to turn around the business and simply stripped its assets, a judge may rule that they have a claim to the proceeds. In this case, that would mean the former owner Tenet, Drexel University, and other vendors may get some of their money back. The real winner could be MidCap Financial, whose nearly $60 million in loans are secured by the mortgage on Hahnemann's main hospital building and the land underneath it, as well as the right to collect Hahnemann's unpaid bills. In the meantime, it's charging interest rates and fees that could generate millions of dollars.Regardless of who gets paid, it's unlikely that Hahnemann will ever re-open as a full-service hospital, said Joseph Fetterman, a Philadelphia-based executive vice president at the commercial real estate brokerage Colliers International. The land could be more valuable as a hotel or condos, the healthcare market in Philadelphia is already oversaturated, and there's no path to profitability for a safety-net facility that needs massive capital investment.These hospitals close under their own weight... This will not be the last. And the real question is, how do the needs of the community get balanced with the right planning solution for the city?"Joseph Fetterman, executive vice president, Colliers International"These hospitals close under their own weight," Fetterman said. "The value proposition of these older facilities is by natural occurrence a diminishing prospect. This will not be the last. And the real question is, how do the needs of the community get balanced with the right planning solution for the city?"That question is actively being debated on the national stage. Sanders held a rally at the hospital in early July, using it as a backdrop to stump for his Medicare for All plan, and promising to introduce legislation that would create a $20 billion fund to help local governments purchase hospitals in financial distress. Beyond helping struggling hospitals, Democrats are moving to clip the wings of private equity. Earlier this month, a group of lawmakers led by Massachusetts senator and presidential candidate Elizabeth Warren introduced a bill that would constrain many of the funds' activities, most notably by making the private equity firm itself liable for any debts incurred by its acquisitions.That legislation is likely going nowhere in the Republican-controlled Senate, but stands a chance of passing if the political winds change after the 2020 election.If the Hahnemann bankruptcy goes through as planned, advocates worry other private equity firms may try a similar strategy with struggling hospitals throughout the US. A system stressed The impact of Hahnemann's closure is already starting to be felt. In the last three weeks, the emergency room at nearby Thomas Jefferson University Hospital has been seeing up to 290 patients per day, up from an average of 175. Despite added staff and building out new space, that's boosted the time from when a patient walks in the door to when they meet a provider from 13 minutes to 18 minutes. Its maternity ward has gone from a projected annual delivery rate of 1,800 births to about 2,800. "It's been stressful," says Jefferson's president, Bruce Meyer. Complicating the issue: The vast majority of the new patients are insured through Medicaid. The state and federal government had funneled millions of dollars a year to Hahnemann to supplement low reimbursement rates. "In candor, we would need to see some of that come to Jeff to sustain the economics of this patient population," Meyer said.About 573 medical residents who started at Hahnemann on July 1 — the day after the bankruptcy petition was filed — now have to find new places to call home for the next year. The approximately 800 nurses who were employed at the hospital have a good shot at new jobs in Philadelphia's strong health care market, said Clancy of Philadelphia Works. But with so many looking at once, many might have to travel much further or go back to school to upgrade their certifications. And at the moment, no severance money has been offered to ease the transition. There are other kinds of disruptions from the wind-down, which has been more abrupt and chaotic than anyone anticipated.We lose a paycheck. We lose our maternity leave. We lose our health insurance. But we lose a family, too." Emma Vrancik, Hahnemann oncology nurseHahnemann oncology nurse Emma Vrancik, 26, had been scheduled to deliver her second child in August. But when she was told that her health insurance would be ending in July, having endured serious complications during her first pregnancy, she decided she couldn't take the risk of untold medical bills if something went wrong again. So she asked her doctor to induce the birth early. Her daughter, Dylan, has lost a pound since birth because of difficulty eating, and remains in the sixth percentile for weight."I forced my body to do something it's not supposed to do," said Vrancik, who brought the newborn to a protest outside the hospital Wednesday, and teared up talking about the difficult choice.Still, she thinks mostly about her patients. Vrancik didn't know what to tell them when they asked her what was next for their care."Of course, we're all wondering, where are we gonna go," Vrancik said. "But the bigger question for us is, where are they gonna go? No one else wants the people that we treat. But we want them.""Our patients keep coming back. We spend birthdays with them. We get them Christmas presents. We're there when they get their diagnosis, and until whatever end they have, and they're family," Vrancik continued. "We lose a paycheck. We lose our maternity leave. We lose our health insurance. But we lose a family, too."

Story by Jenni Marsh, CNN Business Photographs by Nichole Sobecki for CNN Business

2019-07-23 21:39:14

business

business

https://www.cnn.com/2019/07/23/business/startimes-china-africa-kenya-intl/index.html

China is slowly expanding its power in Africa, one TV set at a time - CNN

In China, few people have heard of StarTimes. But in Africa, the Chinese company is helping villages switch from analog to digital television and exerting China's power along the way.

business, China is slowly expanding its power in Africa, one TV set at a time - CNN

How China is slowly expanding its power in Africa, one TV set at a time

In the outskirts of Nairobi, Kenya, Michael Nganga is watching a Chinese Kung Fu movie. His small home in Limuru village doesn't have running water and its walls are made from corrugated metal. Yet outside, where chickens roam the yard, the father-of-two, who repairs shoes for a living, has a large Chinese-built satellite dish that connects his old television set to hundreds of channels — many of which are being beamed from Beijing. "It's advantageous to have many TV channels," said Nganga, who was limited to a few local Kenyan stations before the Chinese dish. "Because you can know how the world is changing every day." The StarTimes in AfricaStarTimes has 10 million subscribers in 30 African countries.It's the primary contractor carrying out Chinese President Xi Jinping's 10,000 Villages Project, a lofty plan to take digital television to impoverished parts of Africa. Nganga's connection to the wider world is directly thanks to Xi Jinping, the president of China.In 2015, Xi announced the 10,000 Villages Project, a lofty plan to take digital television to impoverished parts of Africa, such as the village where Nganga lives. Previously, television access in many parts of the continent was a privilege of the elite, and those who were connected relied on old-fashioned, snowy analog reception. Read MoreXi's dream was to upgrade huge swathes of Africa to modern, digital satellite TV networks, that could broadcast a constellation of channels over long distances — so long, in fact, that a TV channel from Beijing could be beamed to African homes. This was more than just a philanthropic gesture. It was a stroke of soft-power genius that would raise China's profile among Africans, while giving Beijing a tighter grip on the continent's communications infrastructure and control over how it is portrayed there in the media. And it would boost the fortunes and power of one important Chinese company that otherwise keeps a low profile.StarTimes has been the Chinese government's primary contractor to carry out the 10,000 Villages Project, paving the way for the Beijing-based firm — not any of its American or European media competitors — to dominate the African market of 1.2 billion people. A spokesperson for StarTimes said it was "important" for Beijing to work with "an experienced and cost-conscious enterprise for the assignment." Today, the company beams Chinese TV shows into the homes of 10 million subscribers in 30 African countries, pushes China's state-owned propaganda news network into households over Western news networks, and controls television networks to such an extent in Zambia and Kenya there have been fears the company could black out TVs in those countries, if it wanted to. While channels like the BBC reach more people and South African distributor MultiChoice has more subscribers, StarTimes' breadth of reach has some critics worrying: Does the company, with its close ties to Beijing, now have too much power over African television networks?In many ways, StarTimes' situation runs parallel to better-known communications giant Huawei, which is battling global criticism for its control over 5G internet networks and ties to Beijing. But unlike Huawei, StarTimes has become one of Beijing's most powerful soft power tools in Africa — without much of the world even knowing its name. Here's how it got that way.The African opportunity In 2000, the Economist ran a cover story about Africa titled "The Hopeless Continent." The headline aptly captured the pity through which much of the Western world viewed the African continent at the time: $1 trillion in development aid hadn't prevented famine from taking one million lives in Ethiopia in the 1980s, stemmed the scourge of AIDS, or stopped a brutal genocide from slaughtering roughly the same number in Rwanda in the 1990s. Aid dollars served to ease Western guilt over what then British Prime Minister Tony Blair called a "scar on the conscience of the world," but aside from drilling for oil and establishing military bases, little energy went into doing real business in Africa. Meanwhile, China took an entirely different approach.A StarTimes transmission site in Limuru, Kenya. Satellite dishes receive content from China, uplink it from Kenya, and beam it out across the country.In the same year as that Economist cover, Chinese President Jiang Zemin invited heads of state across Africa to attend the inaugural Forum on China-Africa Cooperation in Beijing, to discuss how the two regions could better work together. By the mid-2000s, the Chinese government, under its "Going Out" strategy, was encouraging entrepreneurs to head abroad and forge stronger ties with African nations.Chinese entrepreneurs looking to make early inroads in nascent markets started moving to Africa. George Zhu, for example, went to Nigeria and launched Transsion, which sells cheap multi-SIM handsets and now has the biggest smartphone share on the continent. Ren Zhengfei took Huawei into Kenya, a country that today remains unfazed by the West's concerns about the company's ties to Beijing. And not long after that, TV enthusiast Pang Xinxing decided to pivot his telecommunications company StarTimes away from China, where the TV market was quickly becoming saturated, and into Africa.Pang reported seeing a largely underdeveloped market where many families either did not have a TV or were sharing one with several households. "Even if there is a TV, they can only watch two or three channels, digital TV is beyond their imagination," he said back in 2002. Furthermore, there was normally only one strong company in each country and users were being charged about $70 a month for a subscription — a huge fee on a continent where GDP per capita was around $700 a year at the time.Pang saw an opportunity for a low-cost TV provider. Today, StarTimes has some of the world's most affordable digital TV packages, which can cost as little as $4 a month. His arrival was also perfect timing in another way. A 2006 United Nations treaty had tasked African countries with making the switch from snowy, unreliable analog signals to digital by 2015. It was a deadline that nearly all African governments missed but the pressure was on to invest — and to find a company that could help them do it.That gave StarTimes another revenue stream — building and operating the digital TV infrastructure of nations.A StarTimes transmission site in Limuru, Kenya.In 2007, Pang landed the company's first digital TV license in Rwanda. The next year, StarTimes launched the Rwanda Digital TV Platform, offering Rwandans more than 30 channels for $3 to $5 a month, including four Chinese channels from the main state-owned broadcaster in mainland China. When contracts came up to turn off governments' analog networks and take them digital, at first "StarTimes was the only company competing," said Dani Madrid-Morales, an assistant communications professor at the University of Houston, who researched the company while studying as a PhD student at City University of Hong Kong. "Then [Pang] was able to provide evidence that StarTimes had experience in African countries and offer very low prices." Other competitors started to join the market, said Madrid-Morales. But StarTimes almost always won. Control of a continent's airwaves?Nearly two decades later, the China-Africa summit President Jiang had hosted in 2000 has become one of the most important diplomatic events in many African nations' calendars. In 2018, virtually every African head of state descended on Beijing for the Forum on China-Africa Cooperation to secure a slice of the $60 billion in development loans and business deals on offer. While in the capital, heads of state and top ministers from Sierra Leone, Lesotho, Malawi, Zambia, Central African Republic, Malawi, Ghana and Uganda all had an important appointment.They visited Pang at the StarTimes' huge mothership on the outskirts of the capital. "I don't think any head of the BBC has had one-on-one meetings with so many African heads of state," Madrid-Morales said.I don't think any head of the BBC has had one-on-one meetings with so many African heads of state."Dani Madrid-Morales, an assistant communications professor at the University of HoustonBefriending governments has been crucial to the StarTimes' business, as it bids to win state contracts to help countries make the leap from analog to digital TV. Angela Lewis, a PhD candidate in the international communications department of Nottingham University in Ningbo, China, who has been researching the company for years, said the company has had full backing Beijing in doing this. StarTimes is the only private Chinese company with authorization from the Ministry of Commerce to operate in foreign countries' radio and TV industries. Furthermore, China's state-owned EXIM bank has provided the company with hundreds of millions of dollars in loans to enter the African market. StarTimes claims to be a private enterprise pursuing business goals while maintaining "cordial relations with its parent state."The idea that a company with such close ties to Beijing has control over many African nations' TV networks has sparked headlines such as "StarTimes plots to take over Africa public broadcasters" — echoing concerns that internet security experts have expressed over 5G giant Huawei and how its ties to the Chinese state could compromise other nations' communications infrastructure.A receptionist sits at her desk in the lobby of the StarTimes headquarters in Nairobi.In Zambia, for example, StarTimes entered into a joint venture called TopStar with state broadcaster ZNBC to help the country make the switch to digital TV. The deal gave the Chinese player a 60% share in the state broadcaster for 25 years. That split in the Chinese partner's favor has caused critics to fear that StarTimes has effectively taken control of the country's television network.Josephat Nchungo, an international trade analyst at the University of Zambia, said: "The primary objective of this partnership is providing the infrastructure for digital TV. The secondary objective is also to exchange culture and knowledge between the two countries. StarTimes has been so controversial because people interpreted it as a sale of the state broadcast to the Chinese and hence the loss of sovereignty."StarTimes has been so controversial because people interpreted it as a sale of the state broadcast to the Chinese and hence the loss of sovereignty."Josephat Nchungo, international trade analyst at the University of ZambiaSimilar concerns have been raised about deals in Ghana, by the Independent Broadcasters' Association, and Kenya, where StarTimes has also partnered with state broadcasters to operate the new digital network."If the StarTimes pulled out of some countries," said Madrid-Morales, "the country's TV stations would stop working. Essentially, StarTimes has the power to black out some countries' TV networks, if it wants." That's a claim that StarTimes pushes back on, saying that the company "does not control any country's TV network and does not have the capacity to spark media black outs." That matters because satellite television is the preferred and more affordable option for many Africans.While viewers in the West increasingly consume content through online streaming services such as Netflix and Hulu, the prevalence of pay-as-you-go data contracts in Africa makes watching shows on these type of services expensive. StarTimes subscriber Purity Njambi watches television with her children, from left, James Ngugi, Margaret Wahu and Agnes Wambui at their home in the Ndumbuini village.George Mbuthia, research analyst for East and West Africa, at IDC, said: "Although video streaming services are on the rise in Africa, for the majority of the population, mobile video streaming remains out of reach. This is due to poor connectivity and high cost associated with live streaming. Few users use mobile phones for streaming while majority prefer pay-TV."There are also economic concerns in the deals that StarTimes has made.To pay for the $271 million contract, for example, Zambia took out loans from China's Export-Import Bank. "In order for partnerships to happen, the African country must usually take money from Exim bank," said Lewis. That raises fears that countries will be saddled with debt to China.It's just one example of how Beijing benefits when StarTimes prospers.Haggai Kanenga, from the department of development studies at the University of Zambia, said: "The loan shows the money for this project is coming from the Chinese government itself, so these two — the StarTimes and the Chinese government — cannot be separated. In Zambia, they are widely viewed as one."A hard play for soft power While StarTimes chased big government contracts to operate digital TV infrastructure, it also wooed consumers with cheap TV packages they could buy on digital networks, which often severely undercut local competitors.From the beginning, the Chinese startup was regularly offering more channels than MultiChoice, the South African market leader in Anglophone Africa, and Canal+ in French-speaking countries — and for half the price. Consumers could get StarTimes cable and satellite TV packages for as little as $4 per month.The loan shows the money for this project is coming from the Chinese government itself, so these two — the StarTimes and the Chinese government — cannot be separated. In Zambia, they are widely viewed as one."Haggai Kanenga, researcher at the University of ZambiaCompetitors often complained they were facing unfair competition because StarTimes was so cheap, Madrid-Morales said. But there was little they could do. The content offering by StarTimes included the sort of Filipino and Turkish soap operas that audiences in places like Kenya had been watching for years. But it added Chinese dramas and Kung Fu films to the mix — the latter proved so popular that StarTimes launched the StarTimes Kung Fu TV channel dedicated to them. While not overtly political, the Chinese dramas were carefully curated to portray China as a modern, urban place, said Madrid-Morales — despite the fact that about half of China's population still lives in the countryside. The idea, he says, was to portray China as a wealthy, modernizing country.That aspirational narrative worked. One Chinese drama "A Beautiful Daughter-in-law Era" — about the intermarriage of a countryside migrant woman to an urban man — proved wildly popular in Africa in the early days after being translated into Swahili, Madrid-Morales said. An orange StarTimes satellite sits atop a home in the Ndumbuini village.In 2011, the company established a huge translation campus on the outskirts of Beijing, where it hired mostly foreign staff to voice Chinese dramas into English and African languages including Swahili and Yoruba. The StarTimes Dubbing Contest scoured African countries seeking out voice actors to be whisked to China to narrate new content. There was also another key component to StarTimes' programming: pro-Chinese news.The cheapest TV packages only gave viewers access to Al Jazeera and China Global Television Network (CGTN) — a state-owned news broadcaster that is part of Xi's soft power mission to "tell the China story well." That has often translated into reporting the news with a pro-China slant, to such an extent that in the United States, CGTN recently had to register as a foreign agent under anti-propaganda laws. One analysis of the 2014 Ebola outbreak in Africa, for example, found that 17% of stories by CGTN (then operating under a different name) mentioned China, emphasized the role its doctors played in the relief efforts. In reality, China had spent far less than the US, United Kingdom and Germany fighting the disease. Western news channels, such as the BBC, whose broadcasts in many African nations are not subject to the kind of government censorship that they are in China, were available only on more expensive packages. A huge turning pointIn a flashy business district in downtown Nairobi, Japhet Akhulia is celebrating at the StarTimes' new glass headquarters. After another round of price slashing, StarTimes has hit 1.5 million subscribers in Kenya, putting it just behind the established player MultiChoice, says Akhulia, brand marketing director for the company in the East African country. Japhet Akhulia is the director of brand marketing at StarTimes Kenya.StarTimes has been in Kenya since 2012, but its recent growth has been driven, at least in part, by the support of President Xi.In 2018, Beijing gave Akhulia's team 800 million Kenyan shillings (roughly $7.8 million) to roll out the 10,000 Villages project in Kenya. That money would take StarTimes to an additional 16,000 households and 2,400 public institutions, such as schools and hospitals, across the country for free. Half that money was for equipment, and the half was for implementation costs including travel of StarTimes' staff.In most villages where the StarTimes installs TV for free, a mural is painted with the flags of Kenya and China side by side. That StarTimes enjoys a mutually beneficial relationship with Beijing is clear: the company is paid to execute the 10,000 Villages Project, and gains more customers from doing so. Xi gets to put Chinese content into households across Africa.That symbiotic relationship caused onlookers like Lewis to question how private StarTimes really is."It's obviously a proxy for the Chinese state," she said.Pang has never given an interview to Western media, enabling him to answer such allegations. As the StarTimes' founder's fortunes have amassed, he has kept an assiduously low profile even on matters such as whether or not he is a Communist Party member.When asked about the government's relationship with StarTimes, a spokesperson for the Chinese Ministry of Foreign Affairs in Beijing said via fax: "The Chinese government is always encouraging quality and reputable Chinese enterprises to develop in Africa.""It's not easy to carry out the 10,000 villages project. Many foreign countries have neither the capability nor willingness to do this. In fact, the project has earned extensive recognition from local governments and people," the spokesperson continued. "Last year, elementary students in remote Zambia watched the World Cup thanks to this project. Zambian president Edgar Lungu said publicly several times that the China-Zambia relations are mutually beneficial, and any distorted publicity can't stop us from advancing our friendship for mutual principles and benefits."Localized contentSande Bush is a comedian known as Dr. Ofweneke. But recently he's been wondering if his stage name should be Dr. Love. That's because Bush is the co-presenter of hit dating TV show "Hello, Mr. Right," which pairs Kenyans with potential love matches. "Actually, men have proposed on air," says Bush. "These guys were literally just falling in love at first sight. It was beautiful." "Hello, Mr. Right" is important because it was StarTimes' first foray into producing African-made content in Kenya, having already successfully tested the waters in Nigeria. The project shows how the Chinese company is evolving in local markets to maintain its foothold. While conceived and directed by Chinese executives, the format of the show was shaped by its African co-hosts Bush and Vera Sadika. "It was easy to communicate. We gave them fresh ideas. We're very modern and we know what's trendy," Sadika said.Comedian Dr. Ofweneke is the co-host of the popular StarTimes dating show "Hello, Mr. Right."As StarTimes secured its stronghold in Africa, creating localized content was key to growing its position in the market — and warding off Western competitors, who having seen the success of Chinese companies like StarTimes and Transsion on the continent. Meanwhile Netflix has been painfully slow to the continent. It finally entered Africa in 2016 — but even then it encountered criticism for demanding too much bandwidth for many slow internet connections in the region, where many people still have pay-as-you-go data contracts. Good internet speeds can be prohibitively expensive. StarTimes' localization has benefited local African creative industries, which have received investment from the Chinese firm."Africa is a scientific experiment for the creative industries of China," Lewis said, noting that the underdeveloped market in Africa often gives entrepreneurs a blank slate to play with. The more Chinese firms invest and experiment in Africa, the deeper their marketplace dominance is entrenched on the continent — and the more Beijing's soft power grows. While Spotify and Apple Music target users mostly in developed markets, for example, Boomplay, which is owned by two Chinese companies, has become the largest streaming music service in Africa; it has 46 million users on the continent with a catalog of five million videos and songs, according to the company's figures.The Chinese phone giant that beat Apple to AfricaThat early adoption advantage is what StarTimes has been banking on for decades, as it hoovers up government contracts and customers, from poor to elite, sewing up television markets across the continent. As the African continent continues to migrate to digital TV, StarTimes' subscriber base is predicted to jump to 14.85 million by 2024, according to Digital TV Research — putting it ahead of MultiChoice.That will only deepen China's influence in a region that the West once saw as "the Hopeless Continent." But should African nations be worried about StarTimes' influence and relationship with Beijing, in the same way the West is about Huawei?Madrid-Morales doesn't think so. The potential negative consequences of having StarTimes dominate Africa's television networks are still just possibilities, he said. Secondly, the costs associated with building these networks are enormous. Many countries couldn't have done it without Beijing."In the tradeoff between letting go of some sovereignty and building a state-of-the-art telecommunications network, most African countries have chosen the latter," he said.CNN's Serenitie Wang also contributed to this report.

Story by Lydia DePillis, CNN Business Video by John General and Richa Naik, CNN Business

2019-07-16 10:10:24

business

business

https://www.cnn.com/2019/07/16/business/amazon-cardboard-box-prime-day/index.html

Amazon's incredible, vanishing cardboard box - CNN

Happy Amazon Prime week, the discount-fest that will clutter front stoops and front desks with packages bearing that ubiquitous smiling arrow. It's a reminder that the rise of e-commerce has come encased in a cardboard box — but it won't always be that way.

business, Amazon's incredible, vanishing cardboard box - CNN

Amazon's incredible, vanishing cardboard box

Happy Amazon Prime week, the discount-fest that will clutter front stoops and front desks with packages bearing that ubiquitous smiling arrow. It's a reminder that the incredible rise of e-commerce has come encased in a cardboard box, plus a lot of filler to protect items on the way there. But it won't always be that way. Retailers and shippers are working rapidly to shrink, make lighter, and re-use all that extra packaging — and eventually, maybe, get rid of it altogether. United States of AmazonHow Amazon Prime Day became the shopping Super BowlWhy some Amazon workers are going on strike on Prime DayTimeline: Amazon's extraordinary 25 yearsWill Bezos ever leave Amazon?Machines can now suck nearly all the extra space around a set of items to be shipped. Paper mills are experimenting with techniques to glue wood fibers together in a way that makes cardboard stronger with fewer trees. Amazon itself has an 85-person team devoted to improving its packaging, and is pushing retailers to pack their products in a way that doesn't require another box on top. Kim Houchens has led that Amazon team for four years. "My goal would be zero packaging of any type over the next couple years," Houchens says, "by working with the manufacturers to think through product design and their primary package, to make sure that it serves the needs of transportation all the way to your door so that we don't have redundant packaging added during the process." Read More Over the past decade, e-commerce has been a welcome boost for the cardboard industry at a time when demand in sectors like food and manufacturing has stagnated. Shopping online is seven times more cardboard-intensive than picking up items from a store, according to the commodity data analytics company Fastmarkets, and e-commerce generated 1.3 million tons of container board in North America in 2018 — a jump up from 1.1 million the year before. "In a regular brick-and-mortar supply chain, products are put in blister packs, and then go into a box on a pallet and don't leave that box until they're in the store," explains Derek Mahlburg, an analyst with Fastmarkets. "In e-commerce, the products get shipped to individual houses, so they get taken out of that box very early, and then they get put in a new box." That increased demand has also driven prices upward, Mahlburg says, prompting retailers and shippers to try to find ways to waste less cardboard in their packaging — which has environmental benefits, as well.Why the United States uses so much cardboardThe United States is starting from a low baseline when it comes to cardboard recycling. Because America has abundant space for tree farms, pulp is relatively cheap; the country has long been a big exporter of wood fiber. Also, boxes usually have to travel longer distances than they do in more dense places like Europe, and historically boxes made out of recycled material haven't been strong enough to survive the journey intact. There hasn't been much regulatory or consumer pressure to increase recycling rates, depressing the supply of cardboard to be recycled. In those places, both companies and governments have imposed much more ambitious sustainability targets. A strict new law in Germany requires that manufacturers report how much packaging waste they generate. JD.com — the Amazon of China — is shooting for 100% recyclable or reusable packaging by 2020. For those reasons, only about 35% of North America's total manufacturing capability is geared toward recycled content, according to Fastmarkets, compared to 80% in Europe and 93% in Asia. "It's not so quick to switch factories that have been using virgin materials for many years," says Natasha Valeeva, an analyst at the Dutch financial services firm Rabobank. "We expect more pressure from society. The trend is everywhere, but in Europe it may be progressing faster in this direction. It's from a consumer perspective, but also from regulations." Still, the United States is gradually changing, as paper companies have converted old newsprint mills into recycling facilities. They're also lowering the "basis weight" of cardboard, or the amount of material that has to go into every square foot. "Corrugated companies are trying to take the paper out of paperboard," says Quint Marini, who runs the UPS packaging lab, which works with companies to cut down their shipping costs. Mills have gotten better at making recycled cardboard that stands up to wear and tear, so it's usable for longer shipping routes. Mark Schlossman is the chief operating officer of Accurate Box, a manufacturer in Paterson, New Jersey, that produces boxes to order for companies ranging from PepsiCo to Jimmy John's. He says his company's boxes have gone from 70% virgin paper five years ago to 70% recycled today. "The recycled liner board world has made tremendous strides in the last number of years, both in its availability and its pricing, and in the quality of its paper," Schlossman says. "In the box world, strength can be very very critical." Even recycling, however, has an environmental impact — it requires huge amounts of water and energy. That's why shippers are also trying to use less cardboard in the first place. In the early days of e-commerce, retailers would order large numbers of a few sizes of boxes, throw whatever needed to be shipped into one that seemed big enough, and fill all the empty space with bubble wrap and styrofoam peanuts.No longer. In consultation with shippers like UPS — which in 2015 started charging by volume, not just weight — companies are shrinking their boxes by using algorithms that can tell them the precise dimensions they need to get an order from point A to point B. One of the leaders in the world of "right-sizing" packaging is a Salt Lake City-based company called Packsize, which makes machines that retailers buy and use to make custom boxes in their own distribution centers. Their most advanced machine can automatically determine the optimal size for the combination of items that need to fit a box as soon as a customer clicks "buy," then route all the items onto a conveyor belt that automatically cuts and forms the box to size — no human assistance necessary. "It's like an oversized Tetris that has been optimized," says Packsize CEO Hanko Kiessner. That not only saves on cardboard, it also allows shippers to pack boxes more densely in their trucks, requiring fewer trips. "When you have many smaller sized Tetris cubes, you have gaps, but the gaps are significantly smaller," he says. Amazon as regulatorWith nearly half of the e-commerce market, the biggest force in box shipments is Amazon. The company buys millions of boxes a year from manufacturers close to its fulfillment centers. It employs statisticians, operations researchers, data scientists, material engineers and computational engineers — the types of people who design airplane wings — to think about boxes, bags and envelopes. "We put those groups together, probably for the first time in the corrugate box business, to ask, 'what is happening to the corrugate box in the back of a truck?'" says Houchens. The different stresses and strains on boxes in different parts of the truck told them how big each one really needed to be, and how thin the cardboard could get without jeopardizing the product inside. Amazon also uses machine learning algorithms to monitor feedback that comes from customers via call centers and social media on any damage that occurs in transit, to see when they've gone too far. Using pilot production lines and partnerships with big tape and glue manufacturers, Amazon creates new designs and materials that its suppliers then figure out how to produce at scale — like a fully recyclable plastic-free padded envelope mailer, for example, rather than the standard bubble-wrap-and-paper version. With all of that combined, Houchens says they've managed to reduce packaging material by 19% in tons over their baseline year of 2016. Still, there's plenty of room for improvement. Companies are starting to design packaging differently for products that are bound for a customer's doorstep rather than a store shelf, so that those sold through e-commerce don't need an "overbox" at all. Tide laundry detergent now comes in a container that looks like boxed wine, rather than a plastic bottle that ships in a paper box. Amazon has the scale and buying power to push those changes faster — and has been, since it helps its bottom line, as well. For the past year, for large items and those weighing 20 pounds or more, the company has been paying retailers $1 per package that is easily recyclable and able to ship without a brown Amazon overbox. Starting in August, it will stop paying that incentive, and instead charge $1.99 per package that doesn't comply. Retailers are starting to see better packaging as an opportunity, too. Shipping in their own boxes also allows brands to make a stronger connection with their customers, with specialized messages on the inside to enhance the experience of getting something in the mail. They're trying to capitalize on the "unboxing" trend, wherein people record themselves opening a package and posting the video to YouTube, making the box that much more visible."It is a billboard, in a sense. It's the last impression that people have, your last point of contact with someone is when the box arrives at peoples' home," says Rachel Kenyon, vice president of the Fibre Box Association, which represents paper-based packaging manufacturers. "If you can take that one step further by enhancing that unboxing experience, it's a great opportunity." Consumers are tired of garbageRightsizing, lightweighting, and getting rid of overboxes have reduced the rate of cardboard consumption so much that analysts believe production will slow, even as more goods are ordered online. As shopping through the mail becomes more common, companies and postal services are experimenting with ditching single-use cardboard containers altogether. Amazon is running a pilot in India where products are delivered to homes in plastic totes, since it's more common in India for someone to be home during the day to receive them. (Security and privacy are a big reason why overboxes are used at all.) And in China, a company called Suning.com is using shared plastic delivery boxes in 13 cities that can be almost infinitely reused. In the United States, the rise of delivery lockers may allow for box-free delivery to spread as well. America's addiction to absurdly fast shipping has a hidden costUntil everything is reusable, paper-based packaging companies are making the argument that at least cardboard is better than single-use plastic, even as they take steps to make packaging less damaging to the planet. And consumers, they point out are starting to reject products that come swathed in garbage. "With social media, you can see people are not accepting certain things any more, and potentially not re-ordering because of it," says Herwin Wichers, market development director for Smurfit Kappa, a global Dublin-based paper packaging manufacturer that serves both Europe and the US. "Price is still an important part, convenience is still an important part, but the sustainability angle is starting to influence peoples' decisions." At the same time, however, there's still a clear difference between the progress made in the US vs. Europe and Asia, with their stronger government mandates and culture of waste reduction. Without similar pressure, even with Amazon pushing for change, the US will struggle to catch up.

Story by Lydia DePillis, CNN Business Video by John General and Richa Naik, CNN Business

2019-07-15 10:09:15

business

business

https://www.cnn.com/2019/07/15/business/fast-shipping-environmental-impact/index.html

Fast, free shipping has an environmental cost - CNN

Free rush shipping can come with a a cost to the environment — and retailers are doing a careful dance to try to mitigate it without turning customers away.

business, Fast, free shipping has an environmental cost - CNN

America's addiction to absurdly fast shipping has a hidden cost

Search. Compare options. Click buy. Look out for a package on your doorstep the next day, or even that same day, without ever having to get in your car. The mail truck comes by and drops off your order with a bunch of others, probably on a route she would've been driving anyway, no extra trip needed. Totally green, right? Well, not exactly.United States of AmazonHow Amazon Prime Day became the shopping Super BowlPrime Day: Amazon gives first glimpse of its dealsTimeline: Amazon's extraordinary 25 yearsWill Bezos ever leave Amazon?In May, Amazon announced that tens of millions of items on its platform would be available not only for free two-day shipping, but same-day delivery, with a Prime subscription. Other retailers have no choice but to compete: Fast lead times at no extra charge can make the difference between winning the sale or losing it. Following Amazon's rollout, Walmart unveiled free one-day shipping without a membership fee, and Target already had a free one-day program for its loyalty cardholders. According to the research firm Rakuten Intelligence, over the past two years the time from purchase to delivery has declined from 5.2 days to 4.3 days. Amazon is faster still, at 3.2 days on average. The problem is, there is a cost to the environment — and retailers are doing a careful dance to try to mitigate it without turning customers away.Read More"The time in transit has a direct relationship to the environmental impact," says Patrick Browne, director of global sustainability at UPS. "I don't think the average consumer understands the environmental impact of having something tomorrow vs. two days from now. The more time you give me, the more efficient I can be."In theory, e-commerce can be greener than a bunch of shoppers making personal trips in their own cars: Consolidating products and delivering them on one route to a bunch of homes requires fewer miles on the road. In a 2012 study, University of Washington professor Anne Goodchild found that grocery delivery can cut between 80% and 90% of carbon emissions, for example, compared to consumers going to pick up their items on their own. However, she says, that calculus changes significantly if items are coming from further away and have to be sent immediately, which creates fewer opportunities for lumping deliveries together. "The efficiency and those benefits of delivery came from consolidation and sharing a big vehicle," Goodchild says. "And as we move away from that, if we move towards basically paying someone to make a trip for us, a lot of those benefits are eroded." Miguel Jaller, the co-director of the Sustainable Freight Research Center at the Institute of Transportation Studies at UC Davis, found that if a delivery van makes less than about six stops on a trip, the emissions advantage disappears. (And even with more stops per trip, there still may be more nitrogen oxide involved.) In 2017, UPS disclosed that the e-commerce boom had decreased the number of packages it dropped off per mile, leading to more trucks on the road and higher greenhouse gas emissions. In the worst-case scenario, with one delivery per trip, the carbon emissions can be as much as 35 times greater than they would be for a fully-loaded delivery van. That doesn't happen very often, but contracted last-mile courier services — like Amazon Flex and Walmart's Spark Delivery — may be delivering only a few orders at once, often in a personal vehicle or small van. What's more, many consumers are ordering online and still making trips to the store, meaning there are just more cars on the road. With great scale comes greater efficiency Inefficient routes are not only more carbon-intensive — they're also more expensive for the shipper. If fast delivery is free, it's only because the retailer is subsidizing that delivery to fight for customers at a time of fierce competition and rapid growth. That means consumers aren't feeling the true cost — either environmental or financial — of getting their e-commerce goods super quickly. "There are some companies that can absorb the cost," Jaller says. "One of them — it's one of the largest ones — has been absorbing the logistic cost for a while. And it's in the billions of dollars per year." Jaller was referring to Amazon. For its part, Amazon says that the bigger it gets, the more efficient it can be. The news that Prime was transitioning to one-day shipping came with the announcement of an $800 million investment in logistics infrastructure, like fulfillment centers, trucks and smaller distribution hubs close to population centers. Because of its scale, Amazon denies that it's speeding up at the environment's expense. The items eligible for same-day delivery are typically common orders, like diapers and detergent, that can be pre-positioned where consumers are most likely to need them. That cuts down on transporting things by air, which emits dramatically more carbon than ground transportation. "Prime Free One-Day is possible because we've been building our network for over 20 years," a spokesperson said in a statement. "This allows Amazon to work smarter based on decades of process improvement and innovation, and to deliver orders faster and more efficiently." There are a few other companies that might be able to rival that level of proximity to the customer and volume of goods, which allow them to consolidate deliveries even at a fairly rapid rate. Walmart, for one, has more than 4,700 store locations and an extensive network of warehouses from which it can deliver packages, so trucks don't have to visit multiple locations.Some third-party logistics providers also say they are big enough to offer same or next-day service for retail clients without sacrificing carbon efficiency. XPO Logistics is among the largest, with 90 facilities across the country, and says it uses machine learning algorithms to direct where inventory should be stored. "We look at who's buying the products from where, and who's returning products to where, and are able to forecast where to have the products strategically positioned nearby the consumer," says XPO's chief information officer Mario Harik.But forecasting demand is still an inexact science. Amazon itself has offered consumers a new option, called "Amazon Day," to help them consolidate their deliveries into one drop-off per week. The company also offers discounts and rewards when shoppers choose "no-rush shipping," which gets people their packages in six business days."I would not say [Amazon is] pretty environmentally friendly," Jaller said. "I would say less environmentally bad than others."The tradeoff between speed and carbon emissions gets larger with smaller retailers that make more custom deliveries, from meal kit services to subscription razor companies — but they feel they need to match the shipping convenience of market leaders to maintain their foothold. And when things are free, people tend to consume more of them, which could raise overall emissions even further. In general, it's very difficult to pin down the environmental impact of e-commerce, let alone how much of an effect delivery speed has on carbon emissions. It depends on the layout of each city, the gas mileage of each vehicle and logistics networks that change from week to week. Consumers might even use the time they saved while shopping online to do something else that involves driving. If Amazon delivered everything in electric vehicles, one-day shipping might be just as climate-friendly as individual trips — but in a recent big last-mile investment, Amazon ordered 20,000 conventionally-fueled delivery vans.Still, it's pretty clear that the climate would benefit if everything slowed down a little. If consumers were more aware of the impact of their ordering choices, they might think twice about asking for things as soon as possible. Especially if it's something they don't really need immediately, like a new rug.Fortunately, behavioral economics has a lot to say about this problem. There is an answer: Just nudge"Nudging," or leading consumers to make the best choice on their own without seeming bossy about it, is a tactic used everywhere from health care to traffic enforcement. Utility ratepayers have been persuaded into using less power and water by invoices that tell them how much they're consuming compared to their neighbors — bringing the power of guilt and social norms to bear on decision making. Similarly, hotels invite guests to keep their towels rather than replacing them with fresh ones each day in order to conserve resources. How Amazon Prime Day became the shopping Super BowlThere is already evidence that e-commerce consumers may be able to be gently pushed toward less harmful choices. Josué Velázquez Martínez, a research scientist at MIT's Center for Transportation and Logistics, found in a test in Mexico that 52% of consumers were willing to wait longer when told at checkout that slower shipping would save trees. Sometimes all that needs to happen is reframing the decision, by "relabeling" standard shipping as "green shipping," and making it the default option so that shoppers have to pro-actively choose the faster speed rather than the other way around. Jenic Mantashian, executive vice president of behavioral science consulting firm BVA Nudge Unit, says you could even give people points or badges for picking the greener option that can be redeemed for discounts. Many people want to be seen as responsible. Companies could leverage that self-consciousness and create a "virtue signal" to neighbors — put slower-shipped boxes in a different color — without having to raise prices."We've seen traditional economic incentives work, in terms of changing behavior," Mantashian says. "But we've also seen how your personal core values and what you're trying to achieve as a human being is super important." If that fails, of course, retailers could also fall back to regular price-based incentives — and they might not even lose that much business. According to a survey by the consulting firm Capgemini, consumers who felt they received good service were willing to pay nearly 5% of the total order value for two-hour wait times. And that would be good for both companies and the environment. "If they paid the true price of that delivery, they would ask themselves if they really needed it sooner," says Goodchild. "I think that the fundamental idea of really paying for what it cost in terms of traffic congestion and emissions is something we don't do right now. The more we did, the more balance there would be in what people are asking for and what people are willing to buy."It may be true that the best things in life are free — but in this case, it's usually because the earth is paying for it down the line. — CNN Business' John General and Richa Naik contributed reporting.

Story by Danielle Wiener-Bronner, CNN Business Photographs by Stephen Lam for CNN Business

2019-06-27 10:01:13

business

business

https://www.cnn.com/2019/06/27/business/impossible-burgers-beyond-meat/index.html

Impossible Burgers are so hot, there's a shortage. Here's how they plan to compete against Beyond Meat, Nestle and Tyson - CNN

Impossible Burgers are so popular, their maker can barely keep up with demand. Here's how the company plans to compete against Beyond Meat, as well as food giants like Nestle, Tyson and Perdue.

business, Impossible Burgers are so hot, there's a shortage. Here's how they plan to compete against Beyond Meat, Nestle and Tyson - CNN

Impossible made fake meat a hot commodity. Now it could be a victim of its own success

Something extraordinary is happening behind the scenes at Impossible Foods. The company has seen a huge surge in demand. And though you wouldn't know it from stepping into its Bay Area headquarters, it's in a frenzy. The problem: Impossible is running low on fake meat.The company makes a plant-based protein that can be fashioned into burgers. Its audacious goal is to help eliminate the need for animals from the meat supply by 2035. Today, Impossible is a marquee brand in one of the hottest sectors of the food business.Impossible's main office in many ways fits the startup mold: Employees work at desks in an open-concept layout, pausing to play ping pong or meet in conference rooms with cute names like "Jello" and "Ice Cream." Read MoreBut the calm order is deceptive. It's not business as usual there.The number of orders for Impossible Burgers just keeps rising, and the company, founded in 2011, is struggling to keep up. We're going to go after the vast majority of people who are still buying meat as our customers."Pat Brown, Impossible Foods CEOSome of the office workers have been voluntarily reassigned to Impossible's factory in Oakland, where they work 12-hour shifts in what is essentially a warehouse-sized refrigerator. The temperature is 38 degrees, and the tasks include packing boxes and operating machinery. They've given up weekends, toiling from 3 PM to 3 AM or vice versa. To appease frustrated customers including high-end restaurants, Impossible, which usually sells its product through a network of more than 400 distributors, has started FedExing shipments directly. And it's shifted from making patties to selling only five-pound bricks of the plant-based protein. The bricks, though not ideal for most restaurant customers, are more efficient to make and require less packaging. It's been a "company-wide scramble," said CEO Pat Brown. But a welcome one. Impossible Burger patty samples are seen at the test kitchen inside the company's headquarters in Redwood City, California.Shortages aside, it's a good time to be Impossible. Interest in plant-based protein has spiked as consumers, looking to eat healthier and reduce their impact on the planet, give meat substitutes a try. Impossible's main competitor, Beyond Meat, has impressed investors so much that its stock has more than doubled since debuting on the stock exchange in May — a sign that Wall Street thinks the trend has legs. But interest in the product also means that young companies like Beyond and Impossible, which is still privately held, may not be able to dominate the trend for long. Nestlé, which sells a meatless burger in Europe, plans to introduce a US version this fall. And big meat producers like Tyson and Perdue are putting their own spin on the trend with blended products made with real meat and vegetables. They may launch closer alternatives to Impossible's protein, as well. As the field gets more crowded, Impossible will have to figure out a way to not only keep up with skyrocketing demand, but also to maintain its competitive edge. The question is: how?All hands on deckImpossible Foods enjoyed some early successes after Brown, who is now 64, founded the company in 2011. A biochemist and former pediatrician, he speaks passionately about the company's environmental mission. He points to meat production as the leading cause of a global decline in wildlife over the last 50 years, and gave up what he has described as his "dream job" as a tenured professor at Stanford University's School of Medicine to devote himself to developing a better alternative.Pat Brown, Impossible Foods CEO, wants to help eliminate the need for animals in the meat supply chain by 2035.Five years in, Impossible started selling plant-based burgers, which gained notoriety in part because they seemed to bleed like real meat. The company attracted funding from Bill Gates and launched in White Castle restaurants.But in January 2019, Impossible went into overdrive.It was then that the company launched the Impossible 2.0. Earlier versions of the protein had been optimized to cook well on a flat-top stove as a burger patty. The new iteration, however, is more versatile, designed to mimic meat when grilled, sautéed, braised or stewed. Of course, the company hoped it would be a success. But the speed at which the product took off was surprising, said David Lee, the company's chief financial officer. Impossible 2.0 quickly drove up orders. Burger King started testing an Impossible Whopper in 59 restaurants in St. Louis. That test went so well that a month later, in May, the chain shared that it would start selling the Impossible Whopper in its 7,300 US restaurants by the end of the year. A technician weighs a tray of Impossible meatballs inside the test kitchen.For Impossible, that meant that orders were coming in from every direction: Old customers, new customers and a national chain with thousands of locations. To put that hockey-stick like growth in context: At the end of April, Impossible products were in about 7,000 restaurants total. Two months later, they're in nearly 10,000. By the end of the year, if Impossible's product is served in every Burger King as planned, it could be available in at least 17,000 restaurants altogether. I wasn't scared. I was ecstatic. We've been preparing for some time to have a runaway success." David Lee, Impossible Foods CFOAt the end of April, Impossible issued a mea culpa to customers, acknowledging a shortage. The company "sincerely apologizes to all customers, particularly those who have come to depend on the additional foot traffic and revenue that the Impossible Burger has generated," it said in a statement at the time.The shortage required an all-hands-on-deck approach. But executives didn't panic. "I wasn't scared. I was ecstatic," Lee said. "We've been preparing for some time to have a runaway success." Flasks of soy leghemoglobin — or heme — undergo fermentation inside a shaker at Impossible Foods' research and development lab.Impossible's product "was designed at the very beginning to scale globally," Lee said.The company's secret weapon is heme — an iron-containing molecule found in plants and animals that, according to Impossible, is responsible for meat's flavor and aroma. Before launching commercially in 2016, the company had spent hundreds of millions of dollars and many years figuring out how to make heme in a way that was easy to scale. By sourcing heme from fermented, genetically-modified yeast, rather than harvested soy plants, Impossible could prepare it in large batches with minimal environmental impact. Equipment is also key. To make sure that the company can grow quickly, Lee explained, Impossible uses machines that are already available on the market. It doesn't have to make or customize them. We are absolutely committed and determined to get ahead of the demand and never be in a position where we can't serve our customers again."Pat Brown, Impossible Foods CEOThe process means that Impossible should be able to produce a lot of material, quickly. But with such an unexpected surge in demand, it still has had trouble keeping up.That led Impossible to implement a new planning system, stochastic modeling, that factors in large fluctuations in demand. For Impossible, it could be a better way to plan ahead for large orders from new clients like Burger King. Labor is the other crucial part of the equation. Overall, the company employs about 440 people, including 110 in research and development and 180 in its manufacturing plant. The rest are general business professionals in fields like sales, marketing and finance, working mainly out of the Redwood City headquarters, and some remotely. While about 40 those employees have recently taken up manufacturing shifts to help with production, Impossible is focused on bringing on more factory workers. Lab coats hang inside the lab.Eventually, the company would like to have three, shorter shifts instead of two 12-hour ones.Brown is confident this approach will help Impossible catch up on orders and prevent future shortages. "We are absolutely committed and determined to get ahead of the demand and never be in a position where we can't serve our customers again," he said.But shortages may not be the biggest threat Impossible faces. Enter Big Food Right now, consumers seeking plant-based proteins may feel like they have two main options: An Impossible Burger or a Beyond Meat burger.There's a Goliath entering into the market." Arash Azadegan, Rutgers Business School associate professorBeyond is in itself a formidable opponent. Unlike Impossible Burgers, Beyond's plant-based product, made from pea protein, is sold in both restaurants and grocery stores. The company had a blockbuster IPO in May, and has since continued to floor investors. It reported an impressive spike in sales in the first quarter.Impossible plans to launch in grocery stores by the end of the year. And though it hasn't announced any plans for an IPO, hype around the sector has helped the company raise another $300 million. The recent round of funding included cash infusions from celebrities like Jay-Z, Katy Perry, Serena Williams, Jaden Smith, Trevor Noah and Zedd. But competition is growing. Food giants, attracted by predictions of massive, sector-wide growth, are entering the market. Heme is added to a bowl of soy-based mixture in the test kitchen.Food industry analysts agree that the plant-based protein sector has huge potential. The meat substitute market will grow to $22.9 billion in 2023, compared to $18.7 billion in 2018, predicts research firm Euromonitor International. In the United States alone, Euromonitor said, those figures will jump from $1.4 billion in 2018 to $2.5 billion five years later.Euromonitor's numbers are modest compared to others. Barclays estimates that the alternative meat sector could reach about $140 billion over the next decade, capturing about 10% of the global meat industry. Nestlé is already taking an aggressive position in Europe by supplying patties to McDonald's for its meatless burgers in Germany. When Nestlé launches a meatless burger in the United States in the fall, it could start scooping up big restaurant partners. Nestlé's scale, volume and extensive distribution channels could make it a game changer, said Arash Azadegan, an associate professor at Rutgers Business School with expertise in supply chain management. The company's large, well-established system can help keep costs down and supply plentiful. "There's a Goliath entering into the market," Azadegan said.But it's not just about Nestlé. Tyson and Perdue have launched their meat-and-vegetable blended products, and may well come out with others that more closely resemble Impossible and Beyond's burgers. Smaller players, like Dr. Praeger's, are experimenting with their own meat-like, plant-based proteins.Eventually, every meat seller will have some version of Impossible and Beyond's product, predicts William Rosenzweig, faculty director of the sustainable food initiative at UC Berkeley's Haas School of Business."Being a first mover does not constitute a long-term position," he said, pointing to Blue Apron as an example of another hyped startup in the food industry. Although it initially led the meal kit trend, Blue Apron later struggled to succeed among a crowded field of competitors.An Impossible Burger patty is seasoned in the test kitchen.Impossible, similarly, has a recognizable brand. The company "has done a fantastic job of creating an identity for its product early on," Rosenzweig said. By making sure that its products keep the Impossible branding when served in restaurants (the Impossible Whopper, for example, isn't called the "Vegan Whopper") Impossible has made sure to get its name out there. But that may not be enough. "Scale matters in food," Rosenzweig said. And branding doesn't tend to impact how people select foods that they think of as ingredients, like burger patties. You might order a grass-fed burger at a restaurant, but you're not likely to request one made by Tyson. As plant-based protein burgers hit the mainstream, people may be perfectly satisfied with whatever they're served, Rosenzweig said. "If it's in a bun, and it's filled with delicious ketchup and mustard and pickles and onions," he said, nuances in taste or appearance may not matter. Ultimately, consumers may go for the cheapest, most accessible option. For now, Impossible Burgers are sold at a price that's slightly more expensive than real meat burgers. The Impossible Whopper costs about a dollar more than the regular Whopper. At White Castle, the Impossible slider costs $1.99. If Nestlé and others introduce a cheaper, comparable product, it could crowd Impossible out. Beefier than beef?Impossible argues that taste is what matters most, and that its army of scientists will make the most appealing burger. The company's research and development team is constantly tinkering with Impossible's protein, looking for ways to make it more realistic. Experts spend hours smelling different aroma combinations, teasing out odors like salami, pepperoni and even cheese to help Impossible hone in on the exact scent of cooking meat. Impossible's goal is to win over meat eaters with a product that is "beefier, more craveable" than real beef.Other employees are encouraged to participate in elaborate taste tests in a dedicated room, where blue lights are used to mask the real color of the food samples. (Color can influence the way people interpret flavor, the thinking goes.) In addition to the lab, Impossible also has an industrial test kitchen where scientists experiment with different cooking techniques, fashioning the protein into meatballs, lasagnas and sausages. The goal is not to target vegans and vegetarians, per se, but meat eaters."We're going to go after the vast majority of people who are still buying meat as our customers," Brown said. He believes that one day, consumers will prefer the taste of Impossible protein to meat from animals. The approach also allows Impossible to shrug off concerns that it could lose customers who want a healthier, less-processed product, or for whom a blended meat and veggie product is preferable. Using heme, the company plans to develop a product that will be "beefier, more craveable" and "tastier" than real beef, Lee said. Time will tell if people prefer plants to meat, or meat to plants — or something else altogether. "I don't think anyone else has come close to us in terms of being able to make a plant-based product that really delivers as meat," Brown said. "But I love the fact that a bunch of people are acknowledging the value of it, and jumping in," he added. "The more the merrier."

Emiko Jozuka, CNN

2019-06-26 23:30:34

business

business

https://www.cnn.com/2019/06/26/business/japan-american-honda-hnk-intl/index.html

How US-made Japanese autos became an American success story - CNN

In 1979, 22-year-old Neil Vining spotted a job advertisement that took him by surprise.

business, How US-made Japanese autos became an American success story - CNN

How Honda survived a trade war with the US and won over Americans

Hong Kong (CNN Business)In 1979, 22-year-old Neil Vining spotted a job advertisement that took him by surprise. Japanese automaker Honda was hiring American workers for its first plant on US soil. "It was a bit of shock that Honda decided to come to Ohio," says Vining, now a chief engineer at Honda's Marysville auto plant. Back then, Marysville was a quaint, rural town with about 7,000 people. There was one high school, a few mom-and-pop stores and a single drive-through restaurant. It was a world away from the gritty, industrial US motor heartland of Detroit. Photos: How Japan met America in rural OhioNeil Vining, left, was one of 64 original hires made when Honda set up its first, ground-breaking plant on US soil in 1979.Hide Caption 1 of 12 Photos: How Japan met America in rural OhioA local newspaper announces Honda's intention of setting up a manufacturing plant in Marysville, Ohio.Hide Caption 2 of 12 Photos: How Japan met America in rural OhioSoichiro Honda, the founder of Honda Motor, inspects plans for the construction of the new motorcycle plant in Marysville.Hide Caption 3 of 12 Photos: How Japan met America in rural OhioShige Yoshida, American Honda's retired vice president, was tasked with exploring the possibility of setting up a Honda production plant on US shores in the 1970s.Hide Caption 4 of 12 Photos: How Japan met America in rural OhioProduction began at Honda's Marysville motorcycle plant on September 10, 1979. The CR250R motocross bike was the very first model to be built.Hide Caption 5 of 12 Photos: How Japan met America in rural OhioHot off the assembly production line, a Japanese worker showcases the CR250R motorcycle model at Honda's Marysville plant.Hide Caption 6 of 12 Photos: How Japan met America in rural OhioAssociates pose alongside the CR250R motorcycle model at Honda's first motorcycle plant. Hide Caption 7 of 12 Photos: How Japan met America in rural OhioNeil Vining was hired to work in the Marysville motorcycle plant in Ohio in 1979Hide Caption 8 of 12 Photos: How Japan met America in rural OhioThis Honda Accord, also known as VIN 001, was the first product to come out of the Marysville Auto Plant in 1982.Hide Caption 9 of 12 Photos: How Japan met America in rural OhioThe front of the Marysville motorcycle plant where Neil Vining and Shige Yoshida first worked in 1979.Hide Caption 10 of 12 Photos: How Japan met America in rural OhioOhio State Senator Theodore Gray and Honda Motor President Kiyoshi Kawashima attend the Marysville auto plant groundbreaking ceremony in 1980.Hide Caption 11 of 12 Photos: How Japan met America in rural OhioSoichiro Honda's wife clutches his shirt to prevent him falling while he bows and greets associates at the Marysville plant. Hide Caption 12 of 12Vining, who was working for a small engine manufacturer, says getting a job at the new Honda plant felt like the opportunity of a lifetime. "Honda was a household name," he says. "We recognized it for its quality and reasonable price."Vining was one of the 53 American and 11 Japanese original hires at Honda's (HMC) first US motorcycle plant, which expanded to include an auto plant in 1982. Since then, Japan has become deeply embedded in the US auto economy.Read MoreToday, Honda, Nissan (NSANF), Toyota (TM) and Subaru (FUJHF) all operate manufacturing plants across the United States, with Toyota and Mazda planning a new $1.6 billion auto assembly plant in Alabama that will employ around 4,000 people when it opens in 2021. Last year, Japanese car makers created 1.6 million jobs in the US, according to the Japan Automobile Manufacturers Association. While Japanese car makers claim to build one third of all vehicles in the United States, and purchased $61.2 billion in US auto parts in 2018, many of those cars use imported Japanese parts, which were worth $16 billion last year. President Donald Trump sees that as a problem. In May, he declared imported auto parts and vehicles a national security threat and threatened to slap up to 25% tariffs on them. That has left the future of Japan's auto industry on American soil looking uncertain. As Trump and world leaders descend on Osaka, in Japan, Thursday for the G20, tariffs and the trade war with China will be high on the agenda. But this isn't the first time Japanese motor brands have been threatened by a trade war. In the 1980s, the United States also hit Japanese automakers with tariffs designed to bring motor manufacturing back to America.Those measures only helped Japanese brands like Honda thrive.Made in JapanWhen Honda arrived in the United States, the "made in Japan" label was tarnished by bad memories of World War II and associated with poor quality workmanship, due to low levels of economic development in Japan in the post-war years. "[Japanese automakers] had to overcome a lot of prejudice and mockery," says Wanda James, author of "Driving from Japan: Japanese cars in America." During the 1950s, however, quality Japanese products such as the Minolta and Pentax cameras entered the United States market, shifting American attitudes. Honda's 1963 marketing campaign dubbed 'You meet the nicest people on a Honda' aimed to disconnect motorcycles from the rugged, counterculture biker image embodied by US brands.In 1959, the American Honda Motor Co. was established in Los Angeles and, after partnering with a few local dealerships, began importing small bikes such as the Honda 50 to the United States. By the 1960s, American Honda sales were shooting through the roof, going from $500,000 in 1960 to $77 million in 1965 — fueled by a 1963 marketing campaign, sloganed "You meet the nicest people on a Honda," which inspired the Beach Boys' hit song "Little Honda." By deliberately attempting to disconnect motorcycles from the counterculture image embodied by acolytes of the Harley-Davidson brand, the campaign created a new market, selling Hondas as a lightweight, lower-cost option to people who had never before thought of buying a motorcycle. Oil crisis ... or a blessing?The next decade gave Honda another big break. In 1973, tensions between the United States and the Arab world sparked an oil embargo that sent gas prices soaring. The embargo was lifted in 1974, but high oil prices remained. Four Honda facts 1948 Soichiro Honda and Takeo Fujisawa establish Honda Motor Co., Ltd. In 1949, they introduce their first product, the "Dream" D-type motorcycle. 1959 Honda establishes its first overseas subsidiary in Los Angeles, California. 1974 Honda engineers create a CVCC engine, making the Honda Civic the first vehicle to meet the strict emissions standards of the US Clean Air Act -- a law established in 1970 against air pollution. 1982 The Accord became the first car from a Japanese manufacturer to be produced in the US at Honda's Marysville Auto Plant in Ohio. Source: Honda As Americans started seeking smaller, more fuel-efficient vehicles, Japanese car makers had an advantage over gas-guzzling US brands. "That's what sold a lot of the US public to the Japanese brands to this day," says David Emerling, the director of the Center of Automotive Research (CAR) in Ohio.Sales were also supercharged by the introduction of the 1970 Clean Air Act, which restricted the amount of lead in gasoline. In 1974, Honda engineers created a new type of combustion engine, which made the Honda Civic the first vehicle to meet the strict new limits on auto emissions, as the car could run on both leaded and unleaded petrol. Honda bosses decided to expand the business and, in 1975, Shige Yoshida, then vice president of American Honda, was dispatched to scout out a location for an automobile plant. The goal was to source parts locally and make products suited to local consumers. Yoshida says Honda Motor chose Marysville owing to the friendly, hardworking locals, presence of a testing track in East Liberty, Ohio, and a favorable investment climate. As the plant prepared to open, Yoshida, now age 87, started visiting auto factories in Detroit to get a feel for how Americans operated. "I really liked how people-oriented one manager I met seemed," says Yoshida. "He walked through the production aisles greeting and smiling at everyone."Shige Yoshida was tasked with exploring the possibility of setting up a Honda production plant on US soil in the 1970s.Later in the 1980s, Yoshida welcomed US automakers to visit the Honda plants in Marysville. The collaboration, he says, was a good thing for the industry. "Everyone saw Honda as an advantage, not a threat," says Emerling. "Because they knew that job creation in a very rural state in Ohio would have an immense impact on the economy." Trade war of the 1980sWhen recession hit the United States in the 1980s, Japan was the world's second largest economy. Many Americans feared they were about to be overtaken. After President Ronald Reagan took office in 1981, the United States began pressuring Japan to open its market to American companies and reduce the trade imbalance between the countries — much as Trump today is trying to reduce the trade deficit with China, now the world's second largest economy.A trade war began between Washington and Tokyo, as the US administration introduced Voluntary Export Restraints (VER), which capped the number of imported vehicles to the United States. In 1981, Japanese automakers were only allowed to export 1.68 million vehicles to America. Before the quotas were introduced they had exported 1.82 million in 1980, according to JAMA. Honda produces its 3 millionth vehicle on January 21, 1993, a special Anniversary Accord model to commemorate 10 years of US auto production in Marysville, Ohio.American consumers, caught up in the battle for global economic dominance, bore the cost by paying more for Japanese cars. A similar effect is being seen today, with retailers reporting that tariffs on Chinese products are driving up prices on consumer goods at home.To avoid the quotas of the 1980s, more Japanese automakers decided to move manufacturing on to American shores and establish alliances with domestic car makers.Nissan set up its first motor manufacturing plant in 1983 in Tennessee and Toyota set up shop in Fremont, California, in partnership with General Motors, in 1986. Faced with import restrictions, Japanese automakers also pivoted to selling more lucrative, luxury vehicles, such as the Honda Acura and Toyota Lexus, which competed with the medium-sized cars that had traditionally been the bread-and-butter of American brands.As Japanese automakers adapted to the political climate, they flourished. Almost one in three passenger cars sold in the United States was made by a Japanese-owned firm in 1991. By 2007, Toyota had overtaken General Motors (GM) to become the world's leading automaker. New automotive realityFast forward 12 years and Japanese manufacturers are once again under the gun. But while Trump is threatening tariffs to boost the US economy, experts say the President's tactics could actually deal a devastating blow to American consumers and workers.Production began at Honda's Marysville plant on September 10, 1979. The CR250R motorcross bike was the first model to be built."With history as a guide, a tight quota on Japanese auto produced cars or auto parts will hurt not just American consumers, but also American firms," says Thomas J Prusa, an economics professor at Rutgers University. "That's because many American jobs are tied to the supply chain that comes from Japan."It's not just jobs that are at risk. With history as a guide, a tight quota on Japanese auto produced cars or auto parts will hurt not just American consumers, but also American firms. —Thomas Prusa, Rutgers UniversityCurrently, Japanese automakers fund research into manufacturing and advanced technologies such as artificial intelligence in tech hubs such as Silicon Valley. Tariff costs could squeeze budgets for such initiatives, says Manny Manriquez, general director of the Japan Automobile Manufacturers Association USA."The US auto industry can't function and thrive if it's cut off from international trade," adds Manriquez. "Trade restrictions and continued uncertainty will not just weaken the entire automotive industry, they could result in lost opportunities for the US."Last year, in a bid to cement his "America First" strategy, Trump withdrew from the Trans-Pacific Partnership agreement, a trade deal between the United States and 11 other countries. Since then, Tokyo has spearheaded a revised pact with the remaining signatories. And in 2019, Japan's free trade agreement with the European Union — which benefits automakers — also took effect. Such deals position Japan well for doing business with partners outside America. Toyota Motor said that Trump's position "sends a message to Toyota that our investments are not welcomed, and the contributions from each of our employees across America are not valued."The company added that it hopes trade negotiations can be resolved quickly.Made in AmericaSince setting up shop in the United States, Honda has crossed many milestones. It produced its 25 millionth US-made car in 2018, and employs more than 31,000 people in the United States to make products that include cars, trucks, vans, SUVs, motorcycles, lawn mowers, and even robots. Photos: Inside Honda's historic car plant in the USA worker inspects cars on the line in the welding department at the Honda plant in Marysville, Ohio.Hide Caption 1 of 11 Photos: Inside Honda's historic car plant in the USA clock showing the time in Ohio, California and Japan hangs in the Heritage Center in Marysville. Honda Motor chose Marysville owing to the friendly and hardworking locals, presence of a testing track at the Transport Research Center in East Liberty, Ohio, and a favorable investment climate.Hide Caption 2 of 11 Photos: Inside Honda's historic car plant in the USNeil Vining was one of the 64 original hires at Honda's first motorcycle plant in Marysville. He is now a chief engineer. He says it's Honda's work culture, which challenges workers to keep growing, that made him want to stay. "Mr. Honda believed ordinary people could do extraordinary things," Vining said.Hide Caption 3 of 11 Photos: Inside Honda's historic car plant in the USWorkers at Honda learn the "Honda Way" -- an engineering and management ethic that emphasizes efficiency and constant innovation. Hide Caption 4 of 11 Photos: Inside Honda's historic car plant in the USNew Honda employees are called "associates." The titles aim to stress equality and collapse hierarchies between workers.Hide Caption 5 of 11 Photos: Inside Honda's historic car plant in the USAssociates gather for a pre-shift meeting. Everyone at Honda dresses in white.Hide Caption 6 of 11 Photos: Inside Honda's historic car plant in the USAssociates abide by Honda's strict production standards, making sure they spot and call out any defects along the assembly line. Hide Caption 7 of 11 Photos: Inside Honda's historic car plant in the USJapanese associates eat lunch at the Honda plant. The cafeteria's options include Japanese cuisine. Over the decades, local businesses in Ohio have expanded to cater to the Japanese population. Hide Caption 8 of 11 Photos: Inside Honda's historic car plant in the USJosie Marshall works on the bumpers of a car. In 2018, Honda produced its 25 millionth US-made car.Hide Caption 9 of 11 Photos: Inside Honda's historic car plant in the USHonda now has 5 plants in Ohio. The company makes products that include cars, trucks, vans, SUVs, motorcycles, lawn mowers.Hide Caption 10 of 11 Photos: Inside Honda's historic car plant in the USAround the Honda plant, 64 trees were planted to represent the company's 64 original hires in Marysville. Over the decades, Honda Motor has embedded itself in Ohio and now counts more than 15,000 associates and over 134 suppliers.Hide Caption 11 of 11Since being hired in 1979 as the ninth production associate for the ground-breaking Marysville motorcycle plant, Vining has witnessed Honda evolve. He has worked in everything from manufacturing to information technology. He has seen the company grow from making motorcycles to engines, to setting up research and development facilities. Vining says in upholding both Japanese and American ideas in Marysville, Honda merged two cultures. "In the beginning, we talked about the Japanese culture and we also had an American way of doing things. But what we found is that we created what we called the 'Honda way,'" says Vining. "It became the best of the American and Japanese ways." CORRECTION: An earlier version of this story incorrectly stated the number of passenger cars Japan exported to the US in 1980.CNN's Natalie Leung, Jason Kwok, James Griffiths, Brett Roegiers, Mohammed Elshamy and Brad Lendon contributed to this report. Edited by Jenni Marsh in Hong Kong and Mark Thompson in London.

Story by Lydia DePillis, CNN Business Map by Tal Yellin, CNN Business Photographs by Jenna Schoenefeld for CNN Business

2019-06-14 10:06:48

business

economy

https://www.cnn.com/2019/06/14/economy/opportunity-zones-investing-los-angeles/index.html

Opportunity Zones: A 'mind boggling' tax break was meant to boost distressed communities. Is it working? - CNN

One in ten Americans live in an Opportunity Zone, one of 8,764 low-income, high-poverty census tracts where investors can receive a major tax break. These areas span downtowns, rural areas and desperately poor neighborhoods — as well as upscale urban playgrounds.

economy, Opportunity Zones: A 'mind boggling' tax break was meant to boost distressed communities. Is it working? - CNN

A 'mind boggling' tax break was meant to help the poor. But trendy areas are winning too

A plywood fence hides what remains of a small daycare center, coffee shop and auto body place that were demolished last month at 6th and Hobart Street in Koreatown, one of Los Angeles' fastest-developing neighborhoods. It's a few blocks from the sleek Line hotel and just off busy Wilshire Boulevard, a strip dotted with luxury apartment complexes and construction work on a new subway line. The site is slated to become a Hyatt Centric hotel — and if all goes according to plan, it will also save its investors a tidy sum because of a massive new tax incentive program born from President Donald Trump's Tax Cuts and Jobs Act a year and a half ago. That law made it substantially cheaper to back either real estate projects or operating businesses in one of 8,764 low-income, high-poverty census tracts across the country that have been designated "Opportunity Zones." One in ten Americans now live in one of the zones, which were chosen by state governors out of the thousands of eligible tracts; they span downtowns, rural areas and desperately poor neighborhoods — as well as upscale urban playgrounds. The program's backers say it will push capital into places that have historically missed out on it, and they intentionally crafted it to be free of the many rules and restrictions that have guided similar programs in the past. Opportunity Zones are not subject to criteria set by state governments like Low Income Housing Tax Credits, for example, or funneled toward mission-driven developers and lenders like New Markets Tax Credits, which allow investors to lower their income taxes by providing capital in depressed communities. Bryan Shaffer, left, and Leo Y. Lee at the site of a new luxury hotel in Los Angeles' Koreatown. Shaffer is helping Lee, the developer, line up financing for the project. They are seeking Opportunity Fund investment for part of the cost.In doing so, however, they opened up large tracts that were already magnets for investment, potentially sucking any new dollars away from places that could really use it. And even though data is scarce and capital is only starting to flow, anecdotal reporting suggests that Los Angeles is a microcosm of how the program is playing out nationally. Read MoreAlong with Koreatown, tracts designated as Opportunity Zones include parts of Hollywood, Downtown, and the Arts District right next door, which TimeOut has dubbed "LA's trendiest neighborhood." So far, that appears to be where most of the deals are getting done — rather than places like Census tract 5425.02, better known as Compton, where the median household income is $35,457, barely half of the national median. About 35% of people there live below the poverty line — almost triple the national poverty rate. Bryan Shaffer is a principal with George Smith Partners, a boutique firm that helps developers finance complex deals. He's working on the Koreatown hotel project, and can name a handful of others in the neighborhood that are also looking for capital from Opportunity Funds, the tax-advantaged investment vehicles that can funnel money into businesses or real estate projects located in Opportunity Zones. "Accountants and attorneys looked at this and said, 'Wait a minute, this could be huge'," Shaffer said. "The question from the community development side is: It's good that we're seeing more development in Koreatown, but is there a point where it spreads? It's not a clear picture." That's left people who are interested in community-oriented development — projects like affordable housing, health care clinics, grocery stores and businesses that employ local residents — scrambling for the attention of investors who might be willing to accept a normal return, rather than a super-charged one. And the way the Opportunity Zones have been set up, both investors and the people trying to attract them face a deadline. The value of the tax break starts to decline after the end of 2019. Even though it still has value in future years, fund managers seeking to maximize their return are prospecting deals that are shovel-ready, low risk and straightforward. Toys lie on the ground as a preschool is cleaned out before it gets demolished at a construction site in Koreatown.Maurice Jones is president of the Local Initiatives Support Coalition, a national community development nonprofit, which is helping communities leverage Opportunity Zones to further their own goals. The sense of urgency among investors, he said, makes it harder for communities to attract capital for complicated projects in marginal neighborhoods."There's a panic going on that is a constructed panic," Jones said. "The more people say 'this can only happen this year,' the more it will only happen in a few places. People need to stay calm." A tax break with no strings attachedOpportunity Zones were born as an idea that both liberals and conservatives could love. The tax provision was the brainchild of the Economic Innovation Group, a think tank cofounded by the Napster entrepreneur Sean Parker. It found legislative champions in South Carolina Republican Senator Tim Scott and New Jersey Democratic Senator Cory Booker, who slipped a section into the omnibus tax bill steamrolling its way through Congress in late 2017, attracting little attention amid the debate over deep corporate and individual tax cuts. In some ways, it resembles other geographically-defined tax breaks like the state-based Enterprise Zones of the 1980s and the Empowerment Zones designated by President Bill Clinton in 1993, which haven't proven very successful in the past. But that's where the comparison ends: This incentive is more valuable and less restricted than any of its predecessors. It applies to almost any type of project, requires no bureaucratic approval or monitoring and has no cap. According to its framers, that was by design. If the old programs were too rule-bound to make much of a difference, this one would create a much bigger funnel of money, at least some of which would reach underinvested areas — even if a bit of it also ends up leaking out to projects that might have happened anyway. The status quo is far worse than what is a massive policy experiment in providing an incentive for investment,"STEVE GLICKMAN, COFOUNDER OF THE ECONOMIC INNOVATION GROUP"What would bother me is not having enough aggregate investment to move the needle. You really need tens of billions of dollars to dig out of this hole we've dug," said Steve Glickman, a former Obama administration official who co-founded the Economic Innovation Group and now runs a consulting firm that advises Opportunity Funds. "The status quo is far worse than what is a massive policy experiment in providing an incentive for investment." The openness of the tax break has made Opportunity Zones the talk of investor confabs like the Milken and SALT Conferences last month, which had nine sessions on the subject between them. (SALT is put on by SkyBridge Capital, the investment fund of former White House communications director Anthony Scaramucci, who has started a real estate investment trust focused on Opportunity Zones himself.) Manny Friedman, CEO and co-chief investment officer of EJF Capital described Opportunity Zones as "the biggest program that anyone has ever seen in their lifetime," at the Milken Institute Global Conference in Beverly Hills in April."People in this room do not understand how gigantic this is," EJF Capital CEO Emanuel Friedman said at the Milken Global Conference in Beverly Hills, barely containing his enthusiasm onstage. "I'm here to tell you this is the biggest program that anyone has ever seen in their lifetime.""It'll be a trillion dollars of equity just to start with. It's going to transform your lives, it's going to transform the lives of the people on the stage," continued Friedman, whose firm is raising a $300 million Opportunity Fund that has already announced projects in South Carolina, Washington DC, and Oakland, California. "If you live in Silicon Valley, you should be selling your house, because every startup is going to be moving to an Opportunity Zone, because the advantages are so mind boggling across the board." And it's not just opportunistic hedge funds. Some of the country's biggest banks, which have already been lending and investing in poor areas for years as part of their obligations under the federal Community Reinvestment Act, are positioning themselves to benefit from the zones as well. PNC closed a $486 million fund last summer, for example, and Goldman Sachs began setting up funds days after the law passed. "We've been investing in these communities for close to two decadaes, so there isn't really a change in strategy," said Margaret Anadu, who heads Goldmans Sachs' Urban Investment Group, on the company's podcast. "I think how we're thinking about it is as another tool in the tool belt." Here's how it works: Someone who reinvests a capital gain worth $100 in an Opportunity Zone in 2019 gets a 15% "step up in basis," which means she has to pay the federal capital gains tax on only $85 of that original income. At a tax rate of 23.8%, that comes to $20 — and she doesn't have to pay it for another 10 years. Can average investors take advantage of Opportunity Zone tax breaks?On top of that, if she holds the investment for at least 10 years, she pays no capital gains taxes on the proceeds from Opportunity Zone investment. The Economic Innovation Group calculated that would result in a net after-tax profit of $76, compared to $36 if the original capital gain were invested in a regular stock portfolio, assuming 7% annual rates of return for both. Looked at another way, if a stock market portfolio generated after-tax returns of about 2.8% per year, the Opportunity Zone incentive amounts to an extra 3 percentage points on top of that if held for 10 years, which can add up to a lot for larger deals — especially for projects that already looked good to begin with. And because of how those zones were selected in the first place, plenty of projects fit that description. Tracts could qualify as relatively poor and low-income based on Census statistics from 2011 to 2015, when many downtown areas had just started to redevelop. And the law allowed a few tracts to be chosen based on sharing a border with a qualifying tract, even if they weren't poor enough to make the cut. Downtown Los Angles seen from the Lincoln Heights neighborhood.For example: The entire core of downtown Phoenix is now an Opportunity Zone, including its convention center and sports stadiums. So is most of downtown Portland, Oregon, including its tony Pearl district, replete with clothing boutiques, vintage furniture stores and a Whole Foods. Large swaths of south Seattle and west Oakland adjacent to booming tech hubs, big chunks of long-gentrified Brooklyn and Harlem and even bits of lower Manhattan, about half of inner-city Philadelphia and Baltimore — all now confer generous tax benefits upon those who invest in businesses or real estate projects. In the hot real estate market of the last several years, those urban cores have been flooded with high-end condos and glassy office buildings. That creates a windfall for investors funding projects that they might have funded anyway. "It's not going to make something feasible if it was infeasible to begin with," said Paul Silvern, partner in charge of the Los Angeles office of the real estate consulting firm HR&A Advisors. For some projects, he said, "this is just icing on the cake." There's no official count of how many Opportunity Funds exist, nor how much money they've raised; the Treasury Department has so far declined to do any such tracking and a bill introduced by Booker and Scott to require it hasn't yet passed. A running tally by the real estate consulting firm Novogradac puts the number at 134, and it captures only those that have been publicly announced — most of which are raising enormous sums to deploy in a basket of projects. The largest known fund, run by LA-based CIM Group, is looking for $5 billion.If you believe that markets work, then deploying capital in such a way that makes a successful project by definition means that you are improving the community," ALEX BHATHAL, FOUNDER OF RAJ CAPITALOn their websites, the fund managers advertise potentially lucrative investment opportunities like industrial warehouse spaces, data centers and vacation rentals. Defenders of the program often say that investment is inherently good for communities, regardless of what it's for, because of the jobs they create and ancillary businesses they might foster. Alex Bhathal's family co-owns the Sacramento Kings basketball franchise, for which they developed a stadium and sports district in downtown Sacramento. He's now running a fund called RevOZ Capital, and said he is vetting a pipeline of more than 100 possible deals all over the country. "If you believe that markets work, then deploying capital in such a way that makes a successful project by definition means that you are improving the community," said Bhathal. "The increase in economic activity, the increase in tax base, does have a multiplier effect." Effie Turnbull Sanders runs the South Los Angeles Transit Empowerment Zone, which is hoping to attract funding for affordable housing, pharmacies, grocery stores, childcare centers and sit-down restaurants that serve locals.Plenty of people are skeptical of that assessment, though. At the moment, high-end housing is already displacing long-term, mostly African-American residents in neighborhoods like Crenshaw. In the census tract that covers its commercial strip, the median household income is less than $22,000 and 1-in-4 households receive food stamps, but in the wider neighborhood the average home value has risen from $366,000 in 2012 to $852,000 last month, according to the real estate website Zillow. The late rapper Nipsey Hussle had been planning his own Opportunity Fund that would source capital locally and do projects of interest to the community, according to the Los Angeles Times. Hussle was gunned down in late March. Effie Turnbull Sanders is the executive director of the South L.A. Transit Empowerment Zone, a consortium of local nonprofits that won an Obama-era contest for extra help with economic development priorities like job training, small business investment and crime prevention. About half the geographic area her group covers now falls into Opportunity Zones, and they're organizing to pull capital into affordable housing, pharmacies, grocery stores, childcare centers, and sit-down restaurants that serve locals. Without community involvement, she worries that outside investors will flood the neighborhood looking for only the most lucrative deals. "We're hopeful that with our efforts this could support our goals and residents' interests," Sanders said. "But without guardrails, it could be potentially devastating."'We can't afford to be cynical' States and localities can't create much in the way of guardrails for Opportunity Zones. The 2017 federal law on which the zones are based provided for only minimal local oversight of projects, and neither party in Washington seems interested in amending it. But they're still trying to make the best of it. One strategy: Sweetening the pot for particular types of projects by pouring additional tax breaks on top of the federal incentive.Maryland, for example, extended a large slate of tax breaks to Opportunity Zones and allowed localities to slash property taxes for projects on vacant lots. Alabama passed legislation that would deepen tax benefits for tech companies and grant tax breaks for projects that underperform expectations in order to "de-risk" investment in marginal areas. Many states also subsidize Opportunity Zones indirectly, since their laws conform to federal tax rates, either automatically or by act of the legislature. Still, no amount of tax forgiveness will get a deal done if investors don't know the specific opportunity exists, and many investors are not used to working in distressed communities. That's why local governments and nonprofits are also trying to surface investable projects, and speed their progress forward through thickets of zoning approvals. Michael Banner, of the Los Angeles Local Development Corporation, has watched economic development programs come and go for decades. Dozens of cities, for example, have created investor prospectuses with all the available properties in Opportunity Zones, and ready-to-go projects that just need capital to get moving. Los Angeles is in the process of creating one, and Deputy Mayor for Economic Development Billy Chun pledges to work with developers to ease the cumbersome entitlement process for projects on the list. "We have no way to dictate what they do," Chun said. "We just have to put it out there, to try to make it easier for investors to do affordable projects, rather than market rate. If we set the narrative with the private market, and really showcase, 'This is the right way to do things,' meaning talk to us, work with us, there's a value add that we can help with."Investors may turn their attention to such projects after making it through their first round of low-hanging fruit. But Michael Banner, who has watched economic development programs come and go in Los Angeles for decades and now runs the nonprofit Los Angeles Local Development Corporation, doubts that the Opportunity Zone designation will overcome pervasive caution about truly marginalized neighborhoods. "Is the amount of incentive that I'm going to get enough to make me adjust my investment criteria, to say I'm covered for the additional risk?" said Banner, who is seeking Opportunity Fund investment for a small office project in Lincoln Heights. "I'm not so sure, from an institutional standpoint, that that's enough."What really tends to spur private investment, Banner thinks, is public investment — like renovating parks, building out light-rail systems, and planning large university and hospital campuses that tend to depend heavily on federal and state funding. "It's hard to get private investors to show up without someone priming the ground," he said. By reducing both federal and local government tax revenue, the California Budget and Policy Center worries that Opportunity Zones will only make those public amenities harder to pay for. Meanwhile, the Trump administration has advertised Opportunity Zones as a holistic replacement for government subsidies. For example, Secretary of Housing and Urban Development Ben Carson told a congressional committee in April that maintenance funds weren't necessary for hundreds of thousands of public housing units because they were located in the favored Census tracts, which would draw in private investment. Houses line the street in the Crenshaw neighborhood of Los Angeles.There may still be a role for government in steering investment towards projects that wouldn't otherwise get it: Creating publicly-run Opportunity Funds. California Senate Majority Leader Robert Hertzberg, who represents the San Fernando Valley, would like the state itself to raise private capital and deploy it to desirable projects, especially those that are a priority to a local or state agency, that will still generate a reasonable return.The need is too great for people to cross their arms, raise their eyebrow, and say 'this isn't working.' This is a new way to get oceans of capital into places that really need it,"Kunal Merchant, president of CalOz.Barring that, Opportunity Zone advocates point out examples of the tax break prompting local banks, companies and high-net-worth individuals to invest not in far-off metropolises, but rather in their own backyards. They know that not every project will be a paragon of community impact, and that plenty of investors will get richer by claiming the tax break on projects they would have funded even without it. But the tax break is not going away, they point out, and the outcome will depend on people working diligently to channel private capital into places it might not go of its own accord. "We can't afford to be cynical," said Kunal Merchant, president of an advocacy group for California Opportunity Zones called CalOZ. "The need is too great for people to cross their arms, raise their eyebrow, and say 'this isn't working.' This is a new way to get oceans of capital into places that really need it."

Lydia DePillis, Will Houp and Tal Yellin, CNN Business

2019-06-07 14:18:59

business

economy

https://www.cnn.com/2019/06/07/economy/us-economy-since-the-recession/index.html

The US economy is about to break a record. These 11 charts show why - CNN

The United States is nearing its longest economic expansion on record, but the recovery was gradual and uneven for many Americans. Here's how far it has come since the Great Recession ended in 2009.

economy, The US economy is about to break a record. These 11 charts show why - CNN

The US economy is about to break a record. These 11 charts show why

The US economy has been on the upswing for a very long time. Even after factoring in Friday's weak jobs report, which showed a slowdown in hiring, US employers have added jobs for 104 months in a row.Come July, the expansion will beat out the 1990s to become America's longest period of continuous growth on record. But unlike the 1990s boom — which included steady job creation, low inflation and a surging stock market — this latest expansion has been more like a prolonged, gradual crawl. It took years for America to emerge from its worst setback since the Great Depression.The recovery has also been uneven. It started at different times in different parts of the country, lifting some people more than others. And now, questions are intensifying around just how close America is to the end of this business cycle, and what — if anything — could finally bring it to an end. Let's take a look at the ten years since the economy bottomed out to see where things stand. Read MoreEmployment is boomingThe share of Americans who want a job and can't find one, known as the unemployment rate, is one of the clearest indications that the US economy has returned to health. At 3.6% in May, the rate has been hovering near 50-year lows. Meanwhile, consumer sentiment has reached historic highs. CNN polls also show that 7 in 10 Americans think the US economy is in "good shape" or better. Part of the reason that unemployment is so low is that employers have more open positions than they can easily find workers to fill them. The job openings rate, which measures job listings as a percentage of the total number employed, zoomed past the hiring rate in 2015. There have been more job openings than workers to fill them since early 2018, meaning that there's theoretically a job for everyone — if they're in the right places, with the right qualifications. That doesn't mean that everyone has as much work as they want, however. A broader measure of underemployment, which also captures discouraged workers and those who want to work more hours, was slower to sink and still hasn't reached its lowest point on record, in 2000. Also, the labor force participation rate for people in their prime working years — which measures the share of the population who either have jobs or are looking for one — remains a full percentage point below its pre-recession high and two points below the all-time high in 1999.The tightening labor market also took a long time to translate into higher wages, with average hourly earnings growth topping 3% in 2018, not counting inflation. Many employers have added non-wage benefits like better health care and help repaying student loans, but those total compensation costs still haven't topped the 3.5% year-over-year growth rates reached before the recession. Also, those gains have flowed disproportionately to people switching jobs — workers who stay with one employer for long periods of time still aren't always getting regular raises. Why have wages been slow to recover? Economists generally chalk it up to the decline of labor unions, slow productivity growth, automation that allows employers to replace workers if they get too expensive, and a continued influx of workers from the sidelines who may not have been able to afford to hold a job because childcare or transportation costs exceeded their wages.But economists argue that the longer unemployment remains very low, the more ground workers are likely to regain — especially those that employers have historically overlooked, like people of color, the disabled and the formerly incarcerated. Markets roared back, but not everyone has benefitedMost American businesses — or at least, those that survived the recession — didn't take long to return to profitability. As a percentage of GDP, after-tax profits have been significantly higher than they were during previous decades, as the share of corporate income going to labor has declined. The stock market started rebounding almost immediately and has hit record after record, driven in part by loose monetary policy that propped up asset values. Even after a couple of stumbles brought on by instability in China and a confluence of factors at the end of 2018, the S&P 500 has still more than quadrupled in value since bottoming out in February 2009. That sustained bull market didn't help everyone, however. Only 54% of Americans say they own stocks either directly or through a 401(k), according to a Gallup poll in 2017, down from 65% in 2007. Wealthier people were able to buy low during the downturn and benefit from ten years of gains, while poorer people had to get by on their wages, contributing to the continued rise in wealth inequality in the post-recession period. Housing prices recovered as well, but more so in tech hubs like San Francisco, New York, even Denver and Portland. Those are also the cities where zoning restrictions have kept a lid on housing supply, sending prices soaring as high-paying tech employers flocked to previously-abandoned city centers. In those places, high housing prices are bad news for renters, who have faced much steeper increases in the cost of shelter as a result of the years-long drought in non-luxury apartment construction that developers are still trying to build their way out of. In other places, housing values remain depressed. Smaller cities in the industrial Midwest were hit hard by the drop-off in manufacturing employment during the recession. Even after tens of thousands of vacant properties were demolished and the foreclosure rate virtually disappeared, homes are still worth far less than they were in sections of Detroit, Cleveland and Erie — which has a lingering impact on residents' financial well-being. Warning signs are on the horizonFor both consumers and businesses, memories of widespread defaults and bankruptcies have faded fast, and we are living in a new era of debt. Cheap capital has prompted companies to take nearly as much leverage as ever as a percentage of the economy. Much of it has gone into share buybacks and acquisitions, propelling a movement towards consolidation that some argue has retarded business dynamism and stifled innovation. Although total mortgage debt has subsided — in part because so many people lost their homes through foreclosure after the financial crisis — Americans have racked up more credit card debt than ever and student debt has multiplied nearly sevenfold since the end of the recession, as people took refuge from a bad job market by going back to school. More important than the raw amount of debt, however, is the difficulty consumers are having when they try to pay it back. Here, student debt is proving to be the biggest problem: Delinquency rates for student loans have surpassed those for home loans, since the jobs graduates got weren't always well-paid enough to keep up with rent, grocery and loan payments at the same time. Unlike mortgages, student loans can't be discharged in bankruptcy. And there's mounting evidence that those heavy debt burdens have kept young people in particular from purchasing their first homes, although the overall homeownership rate has rebounded to its historic average. Finally, government borrowing has also ballooned as a percentage of GDP over the last decade. It started during the Great Recession, when the government passed several stimulus measures to resuscitate the economy. The national debt should have subsided as tax revenues recovered, but massive tax cuts in 2017 only added more red ink. All that debt is only sustainable if interest rates remain as low as they have been on account of the Federal Reserve's prolonged strategy of buying US Treasuries in order to stimulate the economy. But an interest rate shock would swamp many deeply indebted companies in short order. That's why it's important to think about the risks — which at the moment center mostly around international trade. The United States' negative trade balance with other countries isn't necessarily a problem in itself, since American consumers benefit from products made more cheaply in other countries, and American businesses often locate their more knowledge-intensive jobs on their home turf. But it has proven a political hot potato, as President Donald Trump has imposed or threatened tariffs countries he says are "taking advantage" of the United States. Whether or not he's right, the escalating trade war tops the list of concerns for growth going forward for members of the National Association for Business Economics, whose most recent survey showed that 56% of its members saw trade tensions as the biggest downside risk for the economy in 2019. That doesn't necessarily mean tariffs will tank the recovery — but of course, it's happened before. When will the expansion end?Although it's an imperfect measure, the single broadest measure of economic growth is gross domestic product, and by that metric, the US has been performing fairly consistently since 2014. The economy has had only a handful of negative quarters since 2009, after four of them in a row. What's more, the US growth rate has remained significantly above those of most other developed countries, due in part to an oil and gas boom that has boosted exports and helped revive manufacturing. But even that is dropping off, with most economists projecting growth on the order of 2% in 2019, down from almost 3% in 2018, and declining thereafter. In that scenario, the best the United States can hope for is that a slow march towards economic health just gets a bit slower, rather than erasing a decade of painful progress.If the US does end up in another recession, it may not be immediately obvious. The National Bureau of Economic Research, which officially dates the beginnings and ends of business cycles, took 15 months to declare that the turning point had occurred in June 2009. Fortunately for America, research has found that long and deep recessions lead to more durable recoveries — not the other way around.

Story by Frank Pallotta, CNN Business Video by Moss Cohen, CNN Business

2019-05-23 09:42:21

business

media

https://www.cnn.com/2019/05/23/media/star-wars-land-disney-galaxys-edge/index.html

Star Wars land: Galaxy's Edge is a Star Wars fantasy — and what Disney does best - CNN

With Galaxy's Edge — Disneyland's new Star Wars land opening in Anaheim, California next week — Disney shows off one of its core corporate strengths. Here's how its theme parks could keep the Star Wars magic alive long after the Skywalker saga ends.

media, Star Wars land: Galaxy's Edge is a Star Wars fantasy — and what Disney does best - CNN

Galaxy's Edge is a Star Wars fantasy — and what Disney does best

Disney Imagineer Scott Trowbridge and I are sitting next to the Millennium Falcon. The ship is scarred with blast marks and rust; by all indications it's the same ship that made the Kessel Run in less than 12 parsecs. You know: a piece of junk.Of course, we're not in a galaxy far, far away, we're in Anaheim, California, and the behemoth near us isn't a real spaceship. But starting Friday, when Disney's new Star Wars: Galaxy's Edge opens to the public, Trowbridge — the creative force behind the land — wants guests to forget about that for a while. "We want the place to feel deep, so that your relationship with it can also have that kind of depth," Trowbridge says, motioning around what Disney calls the Black Spire Outpost — a bustling trading port on the planet Batuu. Trowbridge is speaking as if everything around him is, in fact, real. He's doing this not just because Disney's parks run on the belief in Disney magic, but because all of it must feel real in order to sell this new land to millions of Star Wars fans (a finicky bunch) and Disney park-goers (even finickier).That's especially important now. This December, the Skywalker era of Star Wars will be over. Disney is now trying to prove that the franchise is much more than just the family drama of Luke, Leia and descendents like Kylo Ren. It's betting that Galaxy's Edge will help do that.Disney calls the land the company's largest expansion at its parks ever. Its Imagineers are using innovative technology and spare-no-expense design to wrap guests into an experience. There will be a ride that allows guests to fly the Millennium Falcon, shops that allow them to build their own lightsabers, and restaurants that will serve galactic fare like fried Endorian tip-yip — or, as we like to call it, chicken.Guests at Galaxy's Edge will be able to pilot the Millennium Falcon on a ride called Smuggler's Run.Read MoreFor Disney, Galaxy's Edge represents an investment in the future, but it's also a reflection of something that has been one of the company's core strengths since it was envisioned by Walt Disney himself.For most of its history, Disney's success as a media powerhouse has relied on what company executives and MBA professors have long referred to as "synergies" — complementary businesses that don't just thrive on their own, but also all work in service of one another. Other companies have of course adopted similar strategies and used their various subsidiaries in this way. But Disney has practically made it into an art form. Take Marvel, which Disney has owned since 2009. First Marvel makes a comic book series, which creates characters and stories and develops a fanbase for them. Then Disney makes a movie out of those comics. The stars of that movie go on "Jimmy Kimmel Live," the main late night show on ABC, which Disney also owns, to talk about it. Then, having proved that Marvel characters can thrive on the screen, Disney makes Marvel TV shows and sells them to rivals like Netflix. Later it makes a new movie, and uses "Monday Night Football," the biggest show on ESPN, which Disney also owns, to unveil a trailer. Then Disney decides to start a Netflix competitor, and it uses new Marvel shows as well as those old Marvel movies (which it ensures people won't be able to see elsewhere) as a draw. All the while, it's running special cruises on its cruise line featuring characters from the Marvel movies, creating whole new theme lands dedicated to Marvel — and, of course, making new comics and toys that reference the movies.The theme parks are one of the most important gears in Disney's synergy machine. It's the same basic idea: create or repurpose a story people love, build a deeper connection through an attraction, sell merchandise that lets them take the experience home, maybe create a blockbuster film franchise out of one of the rides, make a ton of cash, repeat. The Skywalker saga, which started with Luke, Leia and Han in 1977, ends in December.With Galaxy's Edge, Disney can move further toward realizing the full potential of the $4 billion it spent in 2012 to acquire Lucasfilm, which owns Star Wars and Indiana Jones. And it can — it hopes — future-proof Star Wars even as the Skywalkers' family drama comes to an end. If it works, that strategy will bring generations of new fans in to Star Wars, helping the company compete against Netflix and other rivals in a splintered and hypercompetitive media landscape. It's not just about synergies, though. For a long time, Disney's media networks division, including ABC, ESPN and the Disney Channel, has been the company's biggest money maker, but it has come under pressure in recent years. Disney may one day soon need the theme parks to pick up some of the slack.Of course, for that to happen, they'll also need fans to embrace a Star Wars story that doesn't include the Skywalkers. 'Everything has to feel real'In building Galaxy's Edge, Disney reportedly spent $1 billion to fill up 14 acres inside Disneyland with state-of the-art rides, food and merchandise that can be personalized. (A second location, in Disney World, opens at the end of August.) Guests can quench their thirst with blue milk, one of Luke Skywalker's drinks of choice, and visit Oga's Cantina — the first bar in Disneyland other than the private Club 33 to serve alcohol. Custom bottles of Coca-Cola, served in the land, will look like little droids and feature labels written in Aurebesh — a fictional language used in the film franchise."For those guests who want to play Star Wars with us, we have ways," Trowbridge said. That deeper personalization will be made possible by technology including the Play Disney Parks app, which guests can download on their smartphones, and the resort's all-in-one bracelet, MagicBand. Oga's Cantina is the first bar to serve alcohol at Disneyland outside the private Club 33.When guests pilot the Millennium Falcon, which they'll do on the ride Smuggler's Run, their choices will impact their experiences in the rest of Galaxy's Edge. For example, if a guest loses cargo on the ride, Trowbridge said, the bartender at Oga's Cantina might issue a warning: "I'd watch out if I were you, because I think your name's on the list of the local bounty hunter." Smuggler's Run will also use real-time video rendering technology created by legendary visual effects company Industrial Light & Magic, a branch of Lucasfilm. That technology will react to how the guests use the ride's 200 cockpit controls.Think of it this way: You could have gone to Disneyland and ridden Peter Pan's Flight any number of times over the past 64 years — but you could never be Peter Pan. At Galaxy's Edge, Disney wants you to feel like Han Solo.And that's only one of the land's most innovative rides. Guests will be able to build their own personal droids.Rise of the Resistance, which will open later this year, is what Trowbridge calls the "biggest attraction we've ever built." Disney hasn't revealed much about the ride, but we do know it will have multiple ride systems, full-sized AT-AT Walkers and even a John Williams score. Disney CEO Bob Iger calls the ride "the most technologically advanced and immersive attraction that we have ever imagined." "We're pushing the limits of imagination and innovation," he said at Disney's annual shareholder meeting in March. "We'll actually blur the lines for our guests between fantasy and reality and put them right in the middle of the rebellion and give them an active role in a fight against the First Order." For some guests in the future, the experience will be so encompassing that they won't even leave the Star Wars galaxy to sleep. Disney is planning a full-service Star Wars-themed hotel, which will one day open near Disney World's Hollywood Studios and will have characters and storylines as well as a starship design."Everything has to feel real," Trowbridge said. "We want there to be stuff for you to surprise you, to make you feel like you've actually walked into this universe of Star Wars."First Order Stormtroopers signal that Galaxy's Edge takes place during the current film trilogy. From Sleeping Beauty's Castle to the Millennium FalconDisney could've just created a Millennium Falcon ride and lines likely would have been hours long. Instead, the company created an entire world with different locales and characters. Rather than touring familiar places like Tatooine or Cloud City, guests will find themselves in Batuu. Instead of Harrison Ford's Han Solo, they'll find an animatronic version of Hondo Ohnaka, a pirate introduced in the "Star Wars Rebels" animated series, signing park-goers up for Smuggler's Run. "There's a risk that people will get in there and go, 'Hey, where is Luke Skywalker? Where's Darth Vader? I want to see that," said Robert Niles, editor of ThemeParkInsider.com. "If people come away disappointed because they're not just reflecting an old experience then that could create a bit of a chilling effect on trying to expand the franchise."So why not just create a land full of characters and hot spots that fans already know and love?Walt Disney points to sketches of Sleeping Beauty's Castle in 1955, four years before the company released the animated film. Well, it's actually a smart move by Disney to expand the series beyond the family drama of the Skywalkers. Visitors build a stronger connection to the brand when they are front and center as opposed to an observer in this Star Wars universe, Niles said."Now, if a Star Wars show comes on Disney+ and the characters say, 'we're going to Black Spire Outpost,' consumers may say, 'Hey, wait a minute, I've been there before," he said. "Disney wants to be directly relevant to every consumer, every day."Disney not only wants to boost its theme park revenue, Niles said, but also the company wants Galaxy's Edge to have an effect on other ancillary parts of the company."It's all about, at its heart, Disney positioning itself as a lifestyle brand," he said. "It is part of your lifestyle so much so that you incorporate Disney in pretty much everything you do, from making Mickey Mouse waffles in the morning to watching Disney+ at night."This general idea is nothing new for Disney. The company's theme parks have long been one of the strongest extensions of Disney's corporate universe, showcasing its existing intellectual property and serving as a breeding ground for new storylines and characters.In some cases, the theme parks market films and other content. For example, Adventureland, one of Disneyland's original themed lands, was based on Disney's award-winning nature film series, "True-Life Adventures." Walt Disney himself named Disneyland's focal point "Sleeping Beauty's Castle" in 1955, four years before the company was due to release the animated feature "Sleeping Beauty." In other cases, the complementary relationship has worked the other way, with the theme parks feeding content to Disney's vast array of other businesses. "Pirates of the Caribbean" started as a ride in 1967. More than 35 years later, it spawned a $4.5 billion film franchise that then influenced new rides around the world. Disney has also tried this model with "The Haunted Mansion" and will attempt it again next year with "Jungle Cruise," a film starring Dwayne Johnson and Emily Blunt. A 1957 map outlining Disney's synergies at the time. Disney Disney's slate of upcoming films also corresponds with two of its major parks projects, Galaxy's Edge and Pandora — The World of Avatar, which opened in 2017. The company announced earlier this month that it would alternate releases of new "Star Wars" and "Avatar" films each December between 2021 and 2027.Galaxy's Edge is also a major investment in the future of Disney's parks division at a time when that division looks more important to the future of the whole company. Profits in Disney's media networks hit a high in 2015, but have since declined 15%, likely due to cord-cutting and rising programming costs, neither of which promise to improve soon. In that same period, profits for Disney's parks and resorts have gone up 47%.It's no wonder, then, why Disney is investing so heavily in the parks, even beyond the Galaxy's Edge expansion. It's adding new attractions to Epcot including a "Guardians of the Galaxy" roller coaster and a ride based on "Ratatouille," building new Marvel-themed areas at Disney's California Adventure, Disneyland Paris and Hong Kong Disneyland and a "Zootopia"-themed land in Shanghai's Disneyland Park. "This has become one of our most profitable businesses as we've expanded around the world. And that has justified greater investment," Iger said in an interview with CNN Business' Christine Romans.As its theme parks become more important to its bottom line, Disney also needs to invest in them in order to keep its competitors in that space at bay. Comcast's Universal Studios shook up the theme park industry in 2010 with the Wizarding World of Harry Potter, an interactive land set in the story of Harry Potter. "I think Wizarding World encouraged Disney to be as aggressive as they are being with Galaxy's Edge," Niles said. "Disney doesn't want anyone to say, 'Oh, Universal's the creative leader in this industry because Harry Potter was so good.'"The Wizarding World of Harry Potter allowed guests to purchase magic wands for use in the park, drink Butterbeer, the frothy butterscotch-flavored beverage from the series, and ride the Hogwarts Express train. It was a gamechanger in the theme park industry, and Disney didn't want to be outdone, Niles said. "With Harry Potter it no longer became acceptable for a top-level attraction just to be a standalone ride in this kind of mildly decorated area. You had to create an experience that brought you into a world from the moment you stepped foot into it," he said. "So Disney had to create something that was not just their most immersive thing, but the most immersive thing." Trip Miller, a Disney shareholder and managing partner at hedge fund Gullane Capital Partners, describes theme parks as the "Rock of Gibraltar" for Disney — safer and more stable than the media side of the business. "The media side is just so rapidly changing, so whether Galaxy's Edge turns out really well for them or it's just kind of a mediocre capex spend, I think there's very little risk," he said. May the Force be with you... AlwaysWe already know what Star Wars is capable of. The space saga has made more than $9 billion at the global box office since 1977. Accounting for inflation, five of the top twenty highest-grossing films in North American box office history are Star Wars movies. The original "Star Wars" alone made more than $1.6 billion domestically — second only to "Gone with the Wind" in the United States after inflation.Those numbers don't include the costs to produce and market the films, but they also don't account for all the other ways Disney has already made money off the universe, like TV shows, licensing, home video sales and merchandise. When "Force Awakens" hit theaters in 2015, analysts estimated that the merchandise tied to the film could generate $5 billion in sales within a year. Jeff Bock, a senior box office analyst at Exhibitor Relations, wouldn't take a guess at how much the brand is now worth to Disney, but said the company "wouldn't sell 'Star Wars' for $25 billion at this point."Of course, because it's Disney, there are several other major Star Wars projects in the works beyond Galaxy's Edge. There are new films coming from "Game of Thrones" creators David Benioff and D.B. Weiss. And there's a new live-action series: "The Mandalorian," which follows a Boba Fett-esque bounty hunter. "The Mandalorian" will air on the company's upcoming streaming service, Disney+ — part of its strategy to use its huge library of beloved content, characters and worlds to draw users to Disney+ and away from competitors like Netflix. But the franchise is now at an inflection point. Disney would very much like Star Wars to live on past the nine movies that George Lucas envisioned and the family he created. Galaxy's Edge is a physical manifestation of that hope and its strategy, said Suzanne Scott, an assistant professor at the University of Texas' Moody College of Communication."If Galaxy's Edge had been set on Tatooine, fans would have enjoyed scrutinizing every detail against its cinematic counterpart," she said. "In creating Black Spire Outpost, they get all the appeal and familiarity of a spaceport/border planet, plus all of the creative freedom."That creative freedom allows Disney and Trowbridge to do more than just create a new world for Star War fans to enjoy — the land also presents a stepping off point for all kinds of new Star Wars experiences, memories, stories and, of course, profits too. "We have so many stories we want to tell," Trowbridge told me as we sat looking around Galaxy's Edge. "That's one of the great things about Star Wars. There will never be an end to the number of Star Wars stories that we can tell."Art Direction: Allie SchmitzEditors: Annalyn Kurtz and An PhungPhoto Editors: Brett Roegiers and Natalie Yubas

Story by Lydia DePillis, CNN Business Photo illustrations by Max Pepper, CNN Business Video by Bronte Lord, CNN Business

2019-05-15 09:55:43

business

economy

https://www.cnn.com/2019/05/15/economy/real-estate-commissions/index.html

The internet didn't shrink 6% real estate commissions. But this lawsuit might - CNN

For decades, Realtors have managed to keep commissions at a nearly flat 3% for each the seller's and buyer's agents, even as the internet has allowed homebuyers to do much more of the legwork on their own. A new lawsuit takes aim at that longstanding business model.

economy, The internet didn't shrink 6% real estate commissions. But this lawsuit might - CNN

The internet didn't shrink 6% real estate commissions. But this lawsuit might

After moving eight times as her husband's job transferred them around the world, Lindy Chapman felt she knew a thing or two about selling real estate.Unlike her first home purchases, by 2015 she could do most of the initial research online, narrowing her home search to a few contenders before even bothering with a Realtor. Plenty of agents, it seemed to her, no longer did enough work to justify the traditional 6% commission: 3% on the seller's side, and another 3% for the buyer's agent. So by the time Chapman moved to Dallas — a particularly frustrating relocation in which she ditched her agent and bought a home that was for sale by owner — she got her own Realtor's license, thinking she could do a better job and charge less for it."It was obvious on this move that the traditional system no longer operates in line with what the consumer needs in the 21st century," Chapman said. "I literally had everything I needed in the palm of my hand to find homes and all the related facts. I just needed someone to open doors, write the contract, and connect me to schools and the community." But in trying to offer cheaper services to others, Chapman realized just how entrenched the commission structure is. When she listed homes for sale, the system boxed her in: If she didn't offer the standard 3% to buyers' agents, she worried they wouldn't show the home to their clients. Read More"The client wants Netflix and the technology for Netflix is here," Chapman said. "And it's like Blockbuster saying, 'no, this is the only way to watch videos.'"A wave of disintermediation has squeezed margins in many sales and advisory professions. Travel agencies have shrunk from 100,000 employees in 2000 to 53,000 in America today, as websites like Expedia, Priceline and Kayak have allowed travelers to book their own itineraries. Financial advisors, who used to charge between one and two percent of the assets they managed for clients, have been shifting to fee-for-service models in order to compete with automated advisers and low-cost index funds. Real estate agents have been a puzzling exception to that trend. Half of buyers now find their homes independently online, according to a survey by the National Association of Realtors. Yet 87% of them still end up retaining an agent, and the commissions rates have barely budged. According to data collected by the brokerage consulting firm T3 Sixty, the average commission has declined from 6.1% in 1991 to 5.1% in 2016, but most of the drop came in luxury homes. On a $310,000 house — the median home price in America — a 6% commission comes to $18,600, and it's usually baked into the price of the home. The ability to make a decent living has kept drawing people to the profession. The National Association of Realtors now has 1.36 million members, surpassing the previous height reached during the the housing boom. It's not always a full-time gig. About 6 million homes are sold in the US per year — amounting to just a few transactions per agent on average — but the median annual income for real estate agents is still $50,300, according to the Bureau of Labor Statistics. For decades, Realtors' earnings have been maintained through an opaque structure that allows home shoppers to believe that the seller covers the agents' costs, and that the consumer has little choice in the matter. That entire system could crumble, if a trio of recently-filed lawsuits are successful. In a complaint filed in early March in the Northern District of Illinois, five law firms teamed up to allege that high commissions were a result of collusion by the National Association of Realtors and the nation's largest brokerage franchises in violation of federal antitrust laws. The firms include heavy hitters like Hagens Berman, which boasts work on cases including the state tobacco lawsuits that led to a $206 billion settlement, as well as Cohen Milstein, which co-led a case against Apple for monopolizing the market for e-books. The class so far consists of just one person — a home buyer in Minneapolis. But the lawyers are currently recruiting more plaintiffs, and stand to gain millions in attorneys' fees if a jury awards damages. In April, two nearly identical lawsuits were filed, one by two home sellers in Missouri and one by a Minnesota corporation. On the other side of the suits, the National Association of Realtors is a powerhouse trade group organized in active chapters across all 50 states. It spent about $150 million on federal lobbying and elections in the 2018 cycle, according to the Center for Responsive Politics. More importantly, it also controls access to the Multiple Listing Services that Realtors need in order to list and show homes. A NAR spokesman responded that the suit is "utterly without merit," and that the current system "promotes efficiency and helps advance the best interests of all clients." The association also distributed an FAQ for its members on what they should know about the case, saying that the complaint is "wrong on the facts, wrong on the law, and wrong on the economics." But it's still sending shivers through brokerage offices, which have a lot invested in the status quo. Without it, the United States could end up looking more like Australia and the United Kingdom, where buyers' agents are rare. In most developed countries, according to a survey by the discount brokerage Surefield, commissions range between 1% and 4%; buyers depend much more on online portals to find their desired home and seller's agents can represent both parties."It kills the industry," said Rob Hahn, a real estate marketing consultant with the firm 7DS Associates, who predicts the number of people in the profession would drop to just 200,000 if the lawsuit is successful. "A lot of things that we as consumers value go away." Why the 6% model has enduredThe current way in which Americans buy homes is a combination of intentional design, historical accident and litigation. It all started in the late 1800s, when boards of local brokers convened at their meeting halls to swap information about properties their clients had for sale, hoping to find a buyer at the highest price. In 1908, the predecessor to today's National Association of Realtors officially created the "Multiple Listing Service," a corporation owned by local agents, who contributed listings to a shared repository of available houses in a given market. As hundreds of MLSes sprung up across the country, listings were usually published in the form of a book, to which only licensed realtors had access. Controlling information about properties for sale allowed the Realtors' association to set rules for how the market functioned. It also allowed them to set up a way to get paid: The listing agent would stipulate to buyers' agents what their cut would be if their client bought the house. It's not clear exactly how the rate came to be set at 6%, but the commissions were laid out in a schedule by local boards of realtors, whose codes of ethics forbade undercutting the prevailing rate. In 1950, the Supreme Court ruled that constituted an illegal price-fixing conspiracy. After that, there was no official rate, but 6% commissions lived on through unspoken rules. Now, here's why listing agents set the fees for buyer's agents in the first place. Originally, the same brokerage usually represented both buyer and seller, so commissions went to the same place and were higher if the house sold for more money. In the 1990s, lawsuits mostly put an end to that practice, and buyers' agents are now often assumed to represent their clients' best interests. However, seller's agents still set the commission rates, and the incentive structure remains in place: The higher the sale price, the more buyers' agents get paid. Other factors have pushed the industry to create this system and then maintain it. Brokerages that list homes usually also have buyers' agents, and seller's agents themselves often serve househunters, so they have an incentive to offer high commissions to the buy side as well. And, crucially, brokers know that buyers' agents might skip showing a house if the listing doesn't offer a full 3% commission. "I've been in traditional offices, watching someone go through listings," said Tom Wemett, a buyers' agent in Western Massachusetts. "He immediately checks to see what they're offered, and threw away two or three listings that might have been perfect for their client. The buyer doesn't know any different, unless they're searching on Zillow or Trulia and says 'why didn't you show me this one?'" The internet changed everything — and nothing Multiple Listing Services first went online starting in the 1990s. Within a decade, some brokers were allowing their clients to browse the listings on their own in exchange for lower fees, because they didn't have to do as much work. The National Association of Realtors didn't take kindly to the practice, and allowed brokers to withhold their listings from the data feeds that supplied those websites. In 2005, the Department of Justice sued the NAR, on the grounds that the policy suppressed competition from new business models that would provide consumers with a better deal. Three years later, the Justice Department and NAR entered into a settlement that would require all MLSes to provide listings to online brokerages. That allowed sites like Zillow and Redfin to flourish. The consumer now has access to most of what Realtors used to monopolize, and 44% of them now go to the internet as their first place to search for a home, according to NAR's own surveys. Although the feeds on consumer-facing real estate websites include more information than ever before, from interactive maps and historical tax information to local school ratings and commute times, they lack one important detail: How much the buyers' agent is going to get paid. That information is often disclosed in the contract that the buyer signs with his or her agent. But it's not something agents usually dwell on — and even if it comes up, buyers are simply told that the seller pays the fee. The question of who pays the buyer's agent is an almost existential one in the debate over commissions. Technically, the seller pays the listing agent out of the proceeds from the sale, and the listing agent then gives the buyer's agent her cut. Of course, sellers wouldn't have the money in the first place if buyers hadn't paid it to them. And commissions are reflected in the asking price for the home — driving up the amount buyers pay.Some companies have tried to raise awareness about the prevailing fee structure and compete on price. Khalil El-Ghoul runs a brokerage in Washington, DC, called Glass House Real Estate that rebates part of the buying agent's commission back to the homebuyer. He has to fight the perception that offering a lower-priced service means buyers won't have access to all the properties that a full-service agent might show them. "The way the industry says commissions work is that the buyer pays nothing and our services are free," El-Ghoul says. "I'm saying 'no, this is actually costing you money.' I do the exact same thing, I just charge less, and try to be transparent about it." Over the years, plenty of companies like El-Ghoul's have tried to offer lower-cost services, but few have gained significant scale. A Denver-based company called TRELORA charges $4,000 to list a home and tried to offer flat fees to buyers' agents, but stopped after their listings got way less interest and switched back to the standard 3%, the company's CEO Brady Miller told CNN Business. Others offer a la carte services that "unbundle" the job of an agent, charging flat fees for functions like showing a house or writing a contract, but their use remains fairly rare. Even Redfin, which early on, refunded two-thirds of the typical 3% buyer's agent commission to buyers, backed off that model and now only refunds a smaller amount of the money. (Such refunds also remain illegal in ten states.) It also just rolled out a feature that allows unrepresented buyers to easily bid on homes, saving the seller from having to pay anything to the buyer's side. Traditional agents see the continued prevalence of high buyers-side commissions as evidence that consumers prefer the full package, even at a hefty price."Why is this traditional method by and large the most popular one?" asked Craig Cheatham, CEO of an association of brokerages called the Realty Alliance, noting that plenty of startups have failed trying to disrupt the industry. "Why do they seem to all be in the trash heap within five years? People want to do it the way things have been set up."But those who are still trying say lack of information about how buyers' agents get paid and what they actually do makes it incredibly difficult to use lower rates to attract clients. Three and a half years ago, Alex Doubet founded a company in Dallas called Door that charges sellers a flat fee of $5,000 and rebates about half of the standard commission back to buyers. Door makes up for the lower revenue per customer by offering mortgage and title services and handling more clients, which Doubet says the company's salaried agents can do because they're more efficient and specialized. That's prompted a steady stream of hostile comments from the rest of the industry, Doubet said. "We receive a bunch of pushback from traditional agents," Doubet said. "They badmouth us. The classic refrain is, 'you get what you pay for,'" Doubet said. Despite Door's presence, Doubet said, about 86% of the listings on the North Texas MLS are offering at least 3% commissions to the buyer's agent. Door itself still requires sellers to offer other buyers' agents a 3% commission in order to attract bids. Economic research backs this up: A 2015 study found that homes offering a commission of less than 2.5% to the buyers' agents took 12% longer to sell and were 5% less likely to sell at all. "It's really hard to educate consumers that their broker is making 3%," said Paul French, Door's chief marketing officer. "Today there's an artificial barrier around the old way that's being defended to the death." The case that could break the system That's where the lawsuit comes in. It begins with a professional land surveyor in Minnesota named Christopher Moehrl who bought a house in 2017, with a combined commission of 6%. The class action case alleges that the NAR, in requiring MLS listings to include a uniform offer of compensation to buyers' agents, is functionally fixing prices. Moehrl did not respond to CNN Business' request for an interview, and the legal teams representing him said he would not grant one. "If buyer brokers were able to do this job for the same percentage as they did 20 years ago, and the internet has made their jobs a lot easier, and real estate values have appreciated, here is an artificial impediment to competition," said Benjamin Brown, an attorney with Cohen Milstein, one of the five law firms on the case. If there were no such rule, the complaint argues, agents would be paid in the same way as any service provider: Through a price disclosed at the outset, which would allow the consumer to shop around. The suit seeks damages to be determined at trial, but Brown says they could range into the billions of dollars.Plenty of buyers and sellers would likely balk at paying tens of thousands of dollars to someone who may have put in very little work on their behalf. That would drive many buyers' agents out of the profession, which some economists have argued would actually be more efficient, since the high commissions have drawn in more agents than are actually needed to keep the market functioning. Realtors have several responses to this contention. First they argue that they do lots of work for clients. On the buyer's side, they say, consumers still need help sorting through everything they read on the internet in order to make a wise decision. After all, they argue, buying a home is often the largest purchase a person will make in their lifetime, with potential pitfalls ranging from disputes over repairs to sudden problems with financing."Many of them don't know what to look for and are overloaded with information," said Russ Cofano, a consultant who has run a state Realtors association as well as real estate tech companies. "I think if you asked a lot of buyer agents today, they would say their job is harder. Even though they're engaging with buyers later in the process, they're having to do a lot of course correction." On top of that, since traditional agents don't get paid unless their client goes through with a purchase, they have to offset all the work they do for clients who never end up buying. Plus, closing costs are high enough already, with fees for the title company, appraisals, inspections, etc. Having the seller technically pay for the commission allows it to be tacked on to the mortgage and paid over time rather than all at once like a regular fee. "It's tough to shoulder that cost out of pocket," said Austin Guy, who runs a real estate software company called Homebloq. "If we're going to put all that on buyers, they're sort of screwed here. The risk is, what you think is going to work out better for consumers from a competitive standpoint might end up hurting them." (Guy does think there should be more transparency, however.) And finally, defenders of the current system argue that consumers do bargain over fees. It may happen up front when the buyer contracts with an agent, or at closing, when both agents will cover any number of expenses — from a new fridge to a thorough cleaning — in order to get the deal done. None of that, they say, is captured by the incomplete, approximate statistics gathered by industry analysts. "What's offered in the MLS is something that can ultimately be negotiated during the course of the deal," said Rebecca Jensen, CEO of the Chicago-area MLS. "At the end of the day, the check that goes to the buyer's agent is less than that."It's difficult to tell how widespread negotiation is. One 2009 study paid for by NAR found that commission rates do tend to vary with housing prices, which would suggest that Realtors relax their fees on very expensive homes, and charge more in down markets when homes are harder to sell. An industry under pressureWhether or not the lawsuits succeed, traditional brokers and the MLSes they depend on are facing challenges from all sides. One is a crop of startups offering private listings, off the MLS, to high-net-worth clients who might pay a premium to avoid a bidding war. That allows the property to sell more quickly, even if agents take a higher cut. Then there are a group of companies known as iBuyers, like OpenDoor, which will buy homes sight unseen and hold them only as long as it takes to sell them again, which allows sellers to skip the MLS and attendant commissions altogether. Billions of dollars of investor capital have been flowing into these startups, allowing them to gain market share without necessarily turning a profit. Some of the more established online listing portals, like Zillow, have launched their own iBuyer platforms as well. Keller Williams, the nation's largest brokerage franchise, just got into the iBuyer game, too. Even companies that have tried to make the real estate industry more competitive worry that will end up fragmenting the MLS, undermining a system that — while flawed in some ways — at least allowed all listings to be broadly available. Glenn Kelman, the CEO of Redfin, describes himself as "completely unreconstructed in my ambition to make real estate better for consumers." But he fears that if real estate agents aren't incentivized to contribute to the MLS, the whole network could break down. After all, the National Association of Realtors' firm rules have created an economic contract — the prospect of earning commissions — that gives market participants a reason to collaborate and create an information commons. If that financial motivation goes away, the real estate market may turn into a collection of well-capitalized tech fiefdoms that hoard information, allowing few consumers to access all of it. "What I feel almost protective about, in this really sad elegiac way, is the MLS," Kelman said. "Scientists believe that the dinosaurs were living a very marginal existence when the asteroid hit. I think the ecosystem in real estate is already just extremely vulnerable."

Matt Egan, Annalyn Kurtz, Allie Schmitz and Jen Tse, CNN Business

2019-04-23 20:21:48

business

investing

https://www.cnn.com/2019/04/23/investing/bull-market-history/index.html

Bull markets through history: Here's how the last 12 bull markets came to an end - CNN

The S&P 500 is once again at record highs, and the current bull market is the longest on record. How could it come to an end? We look to history for a few clues.

investing, Bull markets through history: Here's how the last 12 bull markets came to an end - CNN

Stocks are at an all-time high. Here's what stopped the last 12 bull runs

(CNN Business)US stocks are back at all-time highs as the longest bull market in American history continues its record-setting run.How much longer can the good times roll?It's anyone's guess, but bull markets and economic expansions don't die of old age. Credit crunches, political uncertainty, wars and rampant speculation have ended previous bull markets.Overall, the S&P 500 has gained 334% in the 121 months since its Great-Recession low in March 2009. Bull markets occur when stocks gain at least 20% from their most recent low. Since the Great Depression, that's happened 12 other times to the S&P 500, according to Howard Silverblatt, senior index analyst for S&P Dow Jones Indices.Here's how they each came to an end. Read More1932 to 1937: Recovery from the Great DepressionIt took several years for financial markets to start recovering from the Great Depression, the deepest recession in modern American history. The Composite Price Index, a predecessor to the S&P 500, fell 86% between September 1929 and June 1932, but then followed that slump with 325% gains over the next five years.The bull market was supported in part by President Franklin Roosevelt's New Deal, which unleashed massive government spending programs to stabilize the economy. But four years later, Roosevelt pulled back on those programs. He slashed spending to balance the budget. Around the same time, the Federal Reserve tightened its reserve ratios for banks. Its timing was off. The economy hadn't fully recovered from the Great Depression yet, and tighter monetary and fiscal policy led to a double-dip recession, often called Roosevelt's recession.From March 1937 to April 1942, stocks declined 60%.Unemployed men eat soup and bread at a cafeteria circa 1935.1942 to 1946: World War II drives economic activityThe United States entered World War II in December 1941 after Japanese bombers attacked Pearl Harbor. American factories ramped up production of tanks, machine guns and fighter planes. Women, who previously had been discouraged from working outside their homes, took over manufacturing jobs as men went abroad to fight. Fueled by the war effort, the S&P 500 gained 158% from April 1942 to May 1946.The sudden jolt to the economy wasn't sustainable. Americans eventually cut back on spending and ramped up their savings, which led to a minor economic slowdown known as an inventory recession. From May 1946 to June 1949, the S&P 500 fell 30%.In 1942, these factory workers cleaned Merlin engines to be used in bombers and fighter aircraft.1949 to 1956: The post-war economy boomsAfter the war ended, the United States enjoyed an era of prosperity. President Dwight Eisenhower focused on balancing the federal budget. Consumerism flourished, propelled by the idea of the American Dream and a suburban utopia, complete with automobiles and television sets for every family. Americans had more children, fueling what would later become known as the Baby Boom. The S&P 500 gained 266% between June 1949 and August 1956.The stock market boomed so much that by 1955, lawmakers feared it could end in a 1929-like bust. The Senate Banking Committee launched a "friendly" inquiry into the stock market, to consider whether new regulations were needed. That same year, Federal Reserve Chairman William McChesney Martin, Jr., delivered a famous speech likening the central bank to a chaperone that needs to take away the "punch bowl" just as a party is warming up. The central bank raised interest rates and economic growth slowed. The Suez Canal crisis and the Soviet Union's invasion of Hungary added to uncertainty fueling the minor bear market. From August 1956 to October 1957, the S&P 500 fell 22%.An American family, posing in their yard in Los Angeles in 1952.1957 to 1961: The Cold War ramps upIn 1957, the Soviet Union launched Sputnik, the first man-made satellite to orbit Earth. US stocks declined as American leaders worried that their country was losing the Cold War. But after a short-lived bear market, the S&P 500 enjoyed nearly four years of growth, gaining 86% between October 1957 and December 1961.When the bull market eventually fizzled out, it wasn't entirely unexpected. As a young Warren Buffett noted at the time, "stocks have been rising at rather rapid rates. Corporate earnings have not been rising. Dividends have not been increasing." In other words, stocks were overvalued and a decline was warranted. Stocks declined 28% between December 1961 and June 1962.Nikita Khrushchev, center, who led the Soviet Union during the first part of the Cold War, stands in front of a model of Sputnik III.1962 to 1966: JFK aims to 'get America moving again'On the campaign trail, President John Kennedy had promised to "get America moving again," but after he took office in 1961, tensions flared between the president and the steel industry, leading to a brief bear market known as the Kennedy Slide. Stocks eventually started picking up again in 1962.Later, in 1963, the bull market was dealt a scare when Kennedy was assassinated. The S&P 500 plummeted nearly 3% that day and trading was shut down two hours early to honor JFK's memory. But Wall Street rebounded swiftly, with the market recovering all its losses just days later. The market expansion endured for nearly three more years. Heading into 1966, the economy was strong. Unemployment was just 4% and companies were rushing to fill large back-orders for goods. But when inflation started picking up, the Federal Reserve responded by tightening credit conditions. The move proved too restrictive and triggered a credit crunch. The S&P 500 fell 22% from February to October 1966.Wall Street rebounded after President John F. Kennedy was assasinated in 1963.1966 to 1968: The go-go yearsSpanning barely two years, the mid-1960s bull market was the shortest in modern American history. But the S&P 500 still managed to soar nearly 50% during the run. nThe stock market was boosted in part by a robust job market. By late 1968, the unemployment rate was just 3.4%. But the period was also marked by social and political earthquakes.1968 marked a turning point for the Vietnam War, when the North Vietnamese launched a surprise attack known as the Tet Offensive. Martin Luther King, Jr., and Robert Kennedy were assassinated, and in November, Richard Nixon won the presidential election. Instability, coupled with a weakening economy and high inflation, led to a bear market and a minor recession. The S&P 500 fell 36% from November 1968 to May 1970. The late 1960s were a tumultous time, marked by Vietnam War protests and the assasinations of Rev. Martin Luther King, Jr. and Robert Kennedy. But the US stock market posted strong gains anyway.1970 to 1973: Investors buy the Nifty Fifty McDonald's, IBM and Disney helped carry the American stock market to new heights in the early 1970s. Investors piled into the Nifty Fifty, a group of the country's largest and fastest-growing companies. The S&P 500 generated strong annual gains north of 23% on average during the bull market. But the mania eventually went too far. Valuations on Nifty Fifty stocks such as Polaroid and McDonald's were inflated to unsustainable levels.Then, in January 1973, President Nixon announced phase three of his economic plan, relaxing wage, price and rent controls he had enacted in earlier years. Although he asked businesses and workers to continue to follow the guidelines voluntarily, they seized upon the opportunity to raise prices and make wage demands. Runaway inflation followed. The S&P 500 declined 48% between January 1973 and October 1974.Companies like McDonald's, IBM and Disney — which were part of a group of fast-growing stocks called the Nifty Fifty — carried US stocks to new heights in the early 1970s.1974 to 1980: A modest bullThe stock market didn't exactly go gangbusters during this bull market between 1974 and 1980. The S&P 500 generated annual returns of just 14% on average, the weakest of the modern era, as investors grappled with the 1970s oil crisis.Amid double-digit inflation, Federal Reserve Chairman Paul Volcker quickly ratcheted up interest rates to as high as 20% in the early 1980s. While that strategy, known as the Volcker Shock, succeeded in taming price increases, it also made it more expensive to borrow money and ushered in a recession. The S&P 500 fell 27% between November 1980 and August 1982.The stock market went up in the mid 1970s, even as the US economy grappled with high oil prices and runaway inflation. Long lines became common at gas stations, as gasoline prices exceeded $1 a gallon for the first time in history.1982 to 1987: ReaganomicsAfter Volcker tamed inflation, President Ronald Reagan cut taxes, sending the stock market soaring. The S&P 500 boomed, generating average annual returns of nearly 27% — the best since during the Great Depression. And the unemployment rate broke below 6%, down from a peak of nearly 11%. But the bull market would end in an instant as the Dow crashed an astonishing 22.6% on October 19, 1987, a day now known as Black Monday.Computerized trading, which was still relatively new, was partly to blame. The bear market was super short, lasting only three months. While the S&P 500 fell nearly 34% between late August and early December, it still finished the year in positive territory.The 1980s were a good time for the US stock market, as investors welcomed tax cuts passed by President Ronald Reagan.1987 to 1990: The Black Monday comebackAfter Wall Street's darkest day proved to be just a blip for stocks, the S&P 500 advanced 65% from December 1987 to July 1990, marking the second shortest bull market in the modern era before another downturn struck. The United States entered a mild recession in July 1990 as oil prices more than doubled after Iraq invaded Kuwait.Between July and October 1990, the S&P 500 fell 19.9%, making it a borderline bear market because it fell just shy of a 20% drop.In one of the most dramatic days in Wall Street history, stocks crashed more than 20% on October 19, 1987. But it was just a blip for the market.1990 to 2000: Roaring 90sThe end of the Cold War and the dawn of the Internet Age ushered in an era of enormous prosperity. The S&P 500 surged more than 400% over the decade, driven higher by robust economic growth and stable inflation. It remains the strongest bull market ever. The United States experienced the longest period of uninterrupted economic growth in modern history. Investors, sensing the enormous potential of the internet, recklessly piled into dot-com stocks in what Federal Reserve Chairman Alan Greenspan dubbed "irrational exuberance." Eventually, frothy share prices were no longer justified by underlying business fundamentals. Many of these companies, like Pets.com, went belly-up. The S&P 500 fell 49% between March 2000 and October 2002.Early tech companies like Microsoft boomed during the 1990s, fueling huge stock market gains. 2002 to 2007: Housing boomThe mid-2000s bull market planted the seeds for the meltdown that would arrive later in the decade. Aided by low interest rates from the Greenspan-led Federal Reserve, the period was marked by excessive leverage. Subprime mortgages enabled more Americans to purchase homes often with no down payment and at short-term "teaser" rates. The real estate market surged and rising home values led Americans to spend aggressively. Stocks rose 102% between October 2002 and 2007. But Wall Street made risky bets that eventually backfired.When home prices starting falling, borrowers began defaulting en masse. Investment banks like Bear Stearns and Lehman Brothers, which held some of the risky subprime debt, suffered huge losses and collapsed. The deepest financial crisis and recession since the Great Depression followed, with the S&P 500 falling nearly 57% between October 2007 and March 2009. New home construction surged in the early aughts, driving a boom in the US economy and stock market. 2009 to now: Long, slow recoveryNo matter when it ends, the recovery from the Great Recession is already the longest bull market in American history. Spanning more than a decade, the market boom has been driven by a combination of slow-but-steady economic growth, record corporate profits and record low interest rates.The bull market, after surviving several near-death experiences, has catapulted to quadruple its crisis low. The record-setting rally has been punctuated by the rise of the tech industry, with Apple, Amazon and Google joining Microsoft as America's most valuable companies.A man tries a virtual reality game inside a 360-degree projection dome. Tech stocks have been strong perfomers in the longest bull market in history.

Story by Lydia DePillis Video by Jeremy Moorhead Photographs by Maddie McGarvey

2019-03-07 14:41:03

business

economy

https://www.cnn.com/2019/03/07/economy/future-of-manufacturing-youngstown/index.html

In the shadow of an empty GM factory, Youngstown shows what manufacturing's future looks like - CNN

Unlike Silicon Valley, which has scant experience with heavy manufacturing, this faded industrial hub has all the know-how necessary to reinvent how America makes things in the future.

economy, In the shadow of an empty GM factory, Youngstown shows what manufacturing's future looks like - CNN

GM is gone. Now come 3D printers and robots

Youngstown, Ohio (CNN Business)On the banks of the Mahoning River in Northeast Ohio, not far from where the first steel mill in the area once operated, sits a warehouse where the future of manufacturing is slowly taking shape. A massive 3D printer fills the space: A 12-foot by 25-foot steel plate on the floor is surrounded by 8-foot steel walls, and on top, a beam holds what looks like a giant ballpoint pen. Proprietor Michael Garvey has been test-running the machine on large hunks of black plastic, which could eventually take the shape of anything from a boat hull to an airplane wing. It's a far cry from the noisy, belching metal industries that once employed tens of thousands of people here — but local leaders are trying to make 3D printing technology as important to their economy as the Bessemer steel process was decades ago.Although 3D printing is currently just a side project for Garvey, he plans to scale the business rapidly. He's already staked out a facility where he can put several more of these gigantic, room-sized printers, fed by melted-down plastic pellets, which he figures he can bring in by railcar loads. Michael Garvey, CEO of M7 Technologies, stands next to one of the biggest 3D printers in the world in Youngstown, Ohio.Unlike Silicon Valley, which has scant experience with heavy manufacturing, this faded industrial hub has all the know-how necessary to reinvent how America makes things in the future.Read More"With our history in Youngstown, we've got to learn how to adapt," Garvey said. "We have the skill sets that we developed in a legacy industry, and we're transitioning those skill sets to more of a 21st century digital environment." History is one thing, but it's also Youngstown, Ohio's present, with the closure this week of the Mahoning Valley's last major manufacturer: General Motors' Lordstown Chevy Cruze assembly plant, which employed 4,500 people as recently as 2017, plus thousands of others at local suppliers that will also shut down as a result. We are a community at risk. And if we don't get involved in Industry 4.0 in a substantial way, we're pretty much sealing our fate." Michael Garvey, entrepreneur in Youngstown, OhioIn recent years, the federal government has poured money into a lively collaboration between academics and industry focused on preserving US manufacturing for the next generation. And plenty of existing companies are adopting other new technologies to get leaner and more productive. But even if they succeed, the thousands of solid, middle-class jobs that local residents could get from GM with just a high school diploma probably aren't coming back. Rather, the new manufacturing industry will require a smaller number of highly-educated engineers, programmers and machine operators — the types of skills that today are in short supply not just in the US, but around the world. A factory in Youngstown, one of the great steel cities of the early 20th century.Garvey came back to Youngstown from a trading floor job on Wall Street in the 1980s to rescue his father's bronze foundry, which had suffered along with the steel mills that used to line the river. He started a company that allowed those plants to run more efficiently by measuring imprecisions in the operation of their machinery, thereby reducing downtime. The giant printer project will ultimately run using robots that talk to each other with little human involvement, known in manufacturing jargon as "Industry 4.0." It's part of a progression that started with water and steam power, advanced with electricity, leapt forward with computer chips, and now involves devices communicating with each other and learning on their own through artificial intelligence. It may employ fewer people per widget produced, but the way Garvey sees it, the area has no other option. "We are a community at risk," he said. "And if we don't get involved in Industry 4.0 in a substantial way, we're pretty much sealing our fate."The Silicon Valley of 3D printingThe Mahoning Valley's transformation began in earnest in 2012, as the number of manufacturing workers in the area started rising from an all-time low, when the Obama administration put one of its five National Manufacturing Institutes in Youngstown. This one was focused on a process called "additive" manufacturing — i.e., 3D printing. The local business incubator, which had been trying to nurture information technology startups, pivoted to focus on advanced manufacturing. So did Youngstown State University, which lured some of the best faculty in the field with more than $10 million worth of equipment. Products made by a 3D printing machine in Youngstown, where a local business incubator focuses on advanced manufacturing.That model, bringing in federal funding and academic brainpower, is one that's worked well before in developing innovation clusters and enriching communities down the line. Silicon Valley, for example, couldn't have happened without the US Department of Defense buying the microchips that Bay Area companies started to produce, or if Stanford University hadn't fostered entrepreneurs who then patented technologies and spun out their own companies.3D printing has been around for a decade now, and it's still often seen as a novelty way to pump out plastic trinkets and models. People working with the technology in Youngstown, however, saw the machines as a way to extend and enhance the region's existing industrial base, strengthening the mom-and-pop machine shops that still dot the city like corner pubs. Take the production of all the devices needed to make things out of metal, like gauges, clamps and drill bits. Traditionally, tools and other parts are cast with molds made out of sand, producing rough steel forms that have to be further sanded down. They take several steps and sometimes weeks to make, can break easily and aren't able to handle delicate details.That's why some startups at the Youngstown Business Incubator specialize in 3D printing the molds for those tools — which can take a tenth of the time — and are working with big manufacturers to incorporate the process into their production lines. In 2014, a Youngstown State graduate named Zac DiVencenzo started a company called Juggerbot 3D at the incubator. He works with plastics companies like DSM Additive to align his products as closely as possible to what equipment manufacturers are looking for: A quick way to experiment with and produce parts, from gearboxes to pump houses. Youngstown is an ideal location, he said, as it's less than a few hours drive from plenty of big assembly plants. "My partners might not be as close," DiVencenzo said, "but my customers are." Zac DiVencenzo, COO of Juggerbot 3D, stands next to a 3D printer.On top of making precision parts and molds for heavy manufacturing, Juggerbot sells its own proprietary 3D printer, and is experimenting with medical devices and surgical implants, like a prosthetic knee socket or a perfectly-fitted shoe insert, that can be printed to order. Other activities at the incubator include producing spare parts for the US Air Force's older airplanes that it can't get anywhere else, and soon, 3D printing eyeglasses to fit peoples' features based on a facial scan. The point to all these endeavors is to create a flexible manufacturing base that can adapt to customers' needs quickly, rather than the rigid assembly line at the now-shuttered GM plant in Lordstown. That plant is configured to only be able to manufacture one model of car, and shifting to something different would require millions of dollars of investment, plus months of idle time. Incorporating additive manufacturing is also a way for smaller Youngstown companies to remain resilient and make products at a lower cost, so that when downturns come or a large client moves away, they can pivot to other markets. Factories like a large aluminum can manufacturer have gotten in touch with Youngstown State to see if there are ways they can incorporate 3D printing into their operations. "They know their world is going to change too," said Jim Tressel, president of Youngstown State. "Don't know how. But they know, like Thomas Edison said, 'there's a better way, find it.'" If Youngstown can turn itself into a 3D-printing manufacturing base, it will still be smaller scale and more distributed, rather than relying on enormous tent-pole companies of years past. It won't be as visible to the outside world — but it will be less vulnerable to the whims of any one institution.3D printing machines in the Youngstown Business Incubator."Lordstown is very unfortunate. However, it's the thing that everybody sees every day," said Ethan Karp, director of a coalition of manufacturers called MAGNET. "What they don't see is the wide world of much smaller companies in our region that are healthy and growing and improving."Of course, there's no guarantee that getting an edge in additive manufacturing will turn around Youngstown's fortunes. Even if the area becomes a global center of 3D printing innovation — YSU is hosting a worldwide conference on the technology in 2020 — other places are also pursuing the technology, and competition for talent is fierce. That's why the university is also investing in research areas like natural gas extraction and biomechanical engineering, just to hedge its bets."I think it's our big stack of chips," said Mike Hripko, vice president of external affairs for Youngstown State, of 3D printing. "But it's not our only stack of chips." Fewer man-hours, more robotsEven if technology allows manufacturing to continue in the Mahoning Valley — whether through 3D printing or other advanced techniques — it likely still won't be the jobs dynamo that the automakers and the steel mills were at their peak. Vallourec, a French producer of steel pipes that employs 750 people on the site of the former Youngstown Sheet and Tube factory, has been automating production and removing human hands from the most dangerous parts of its process for years now. Eric Shuster, the plant manager, said that threading pipes used to require a team of 10 workers, but now needs only seven or eight people. "There is going to be some loss," he said. "You have to expect that. We don't see the growth in the head count." Frank Deley is the president of Taylor-Winfield, a company that makes tools for manufacturers all over the world.Despite technological advancements that have cut down on the man-hours involved in manufacturing, the industry says it's in dire need of workers, because the economy is doing well and a generation of people who went into the profession decades ago is now retiring. Last fall, the job openings rate climbed to its highest point on record, according to the US Bureau of Labor Statistics.That scarcity of trained workers, in turn, fuels further attempts to squeeze humans out of the process. Taylor-Winfield is a Youngstown-based company of 87 people that's been around for more than a century making tools and systems of tools for manufacturers all over the world. It has an R&D lab with sensors and lasers that allows teams of robots to turn out products with almost no human touch. "What we hear time and time again is that hiring people throughout the country is difficult," said the company's president, Frank Deley. "So once we figure out the process, we figure out how to automate it." Deley hires people from local universities, reasoning they usually have family ties to the area and won't just leave for a better salary somewhere on the coasts. It's a strategy many companies have had to rely on, since Ohio can be a difficult place to lure people to if they don't have some pre-existing relationship there. In recent years, the industry has been taking this problem into its own hands. Jack Schron runs a company called Jergens outside Cleveland, which produces hooks, racks and fasteners that hold things in place, from machines to concert speaker systems. The products haven't changed that much, but the process of making them has. One person now tends two giant machines at once, requiring specialized knowledge and extensive on-the-job training. Schron starts people as temps, hires them on if they work out, and moves them all around the factory floor as they learn new things. Larry McRae, a CNC machinist, works on the floor of Jergens, a manufacturing efficiency company in Cleveland.He's also been pushing for cooperation among manufacturers, like support for shared training programs. Their graduates might end up somewhere other than the company where they gained their skills, but overall, the pool of new recruits gets bigger."We trust that we'll get our fair share," Schron said. "We have to wake up to the fact that manufacturing is not Lordstown. It's all of us working together."READ MORE ON GMAs GM's Lordstown plant idles, an iconic job nears extinctionRead the letters kids wrote to save their town's auto plantGM is getting rid of these 6 carsWithout GM, Lordstown, Ohio, will never be the sameAnd what about all the Lordstown employees being laid off? Even with manufacturers complaining loudly about how desperate they are for workers, the jobs they have to offer are often very different from the ones GM is cutting. For one thing, they'll require more education, which is available through various state and federal programs but difficult to undertake if you're already over 50 and were counting on being able to finish out your working years at the plant. It may mean starting over at the beginning, where years of seniority don't matter, and making far less than unionized auto workers did in the past. "I think there will be some pain in that transition," said Glenn Richardson, managing director of advanced manufacturing at Jobs Ohio, the state's private sector economic development partner. "If you're having to retrain, you're coming in at an entry-level position. But I think the potential is there to get back to that."And right now, there aren't a ton of training programs in 3D printing, given how new the technology is. Barb Ewing runs the Youngstown Business Incubator, and believes in the power of entrepreneurship to revitalize the local economy — but less is known about the power to create enough work for everyone. "How do you prepare your community for jobs that don't even exist?" she said. As GM's Lordstown plant idles, an iconic American job nears extinction

Story by Lydia DePillis Video by Jeremy Moorhead Photographs by Maddie McGarvey

2019-03-06 14:10:26

business

economy

https://www.cnn.com/2019/03/06/economy/gm-lordstown-workers/index.html

As GM's Lordstown plant idles, an iconic American job nears extinction - CNN

General Motors' Lordstown, Ohio plant will make its last Chevy Cruze and close its doors on Wednesday. As recently as the early 2000s, a job in an auto plant could be a launchpad to the middle class, but those jobs are increasingly rare.

economy, As GM's Lordstown plant idles, an iconic American job nears extinction - CNN

As GM's Lordstown plant idles, an iconic American job nears extinction

Lordstown, Ohio (CNN Business)When Felice Robinson was hired at General Motors' Lordstown plant in 1995, she thought the rest of her life was taken care of.Robinson, who was then in her mid-20s, had been bouncing around a series of low-paid retail jobs when she learned the giant factory down the road was hiring. The assembly line position came with generous health care benefits, an hourly wage more than twice what she had been making at a menswear store, and the promise of a secure retirement — if she could hold on to the job for 30 years."It was a whole different world," Robinson, who's now 50, told CNN Business in late February. "I couldn't believe how lucky I was, to be making that kind of money without a college degree." That world has been evaporating for decades now. On Wednesday, when the Lordstown plant will make its last Chevy Cruze and close its doors, it will get even smaller. Felice Robinson stands in her home in Warren, Ohio, after getting off of the night shift at work at the Lordstown GM plant.For GM, the move is part of an overall strategy to shift away from sedans and toward higher-margin trucks and light SUVs in an era of low gas prices. GM is also pouring money into electric and autonomous cars, which are still primarily in the research and development phase. And with GM's investment in a ridesharing platform called Maven, the company is looking forward to a future in which fewer people own vehicles at all. Read MoreFor workers, the transition means uncertainty, dislocation and immersion in a labor market with far fewer opportunities for those without training beyond a high school degree. As recently as the early 2000s, a job in an auto plant could be a launchpad to the middle class, but those jobs are increasingly rare. During the Lordstown plant's heyday in the 1970s, GM was one of the biggest private sector employers in the United States, with more than 618,000 employees. That number is now down to about 103,000. And the jobs that remain are not all what they once were. Since 1990, wages for US auto workers have declined 18%, adjusted for inflation. Retirement benefits have declined as well. As of 2017, only 8% of factories offered pensions.Those trends are especially pronounced in the Youngstown, Ohio region, an area about halfway between Cleveland and Pittsburgh in which Lordstown sits. Thirty years ago, about 1 out of 4 local workers were employed by the manufacturing industry. Now, less than half that many are. Since the beginning of the Great Recession, real hourly earnings have dropped by 8% in the area, while rising 11% in the rest of the country. Flags lined up outside of the Lordstown GM plant.All that has made GM jobs stick out: Full-time production workers make between $61,000 and $88,000 a year after only a couple years on the job, according to their United Auto Workers union contract, not including additional overtime pay and bonuses. That's well above the average wage in the Youngstown area, which was around $38,000 in 2017. Unlike during the Great Recession, GM is cutting these jobs — along with about 1,400 more hourly positions at US plants elsewhere — at a time when it's profitable and the national economy is strong. That's an indication that GM sees its future as one with fewer factory-floor workers, not more of them. And for the Youngstown area, losing the last major supplier of the type of jobs that made it a manufacturing powerhouse decades ago is a particularly symbolic blow. About 400 of the 1,400 people who'll no longer go to work at GM's sprawling Lordstown complex after this week have accepted transfers to other plants, and will keep their healthcare and pensions. Other former workers at the plant, which used to run 24 hours a day, were not as fortunate. As demand for the Cruze weakened over the past two years, its second and third shifts were cut, and 3,000 people were laid off. Many of them won't be offered the same transfer opportunities this latest group will.GM says that 350 Lordstown workers are eligible for retirement, those who transfer will get $30,000 in relocation assistance, and that it's working to find new employment for anyone who wants it. READ MORE ON GMRead the letters kids wrote to save their town's auto plantGM is getting rid of these 6 carsWithout GM, Lordstown, Ohio, will never be the same"We understand that the decision that was made is very difficult for this community because it impacts people and families," GM spokesman Daniel Flores told CNN Business. "Unfortunately, customers are not buying the product at a volume that would justify continued production. In the end, we made this decision at a point in time where we have the ability to offer opportunities to people who want to keep working for GM."Robinson thinks she probably has enough seniority to get a placement at one of GM's other facilities, like the metal fabrication plant in Cleveland or the transmission factory in Toledo. She dreads transferring — she'll have to leave her 68-year-old aunt who needs support, as well as the rest of her family and friends, and the town she's always called home. But she has little choice: Despite the strongest US labor market in a generation, the economy is not generating the types of jobs that GM offered her as a young woman. At least not in Youngstown. "They have me by a chokehold. There's nothing I can do," Robinson said. "I make $32 an hour. I'm not going to go get a $12-an-hour job. I couldn't survive on that at all. I'm going to get up and go, ride it out, try to get the best gig I can get, and be done with them." The 'good old days'The loss of General Motors won't be the first time the Youngstown area took a shock to the heart. It's been reeling ever since the sudden collapse of the local steel industry in the late 1970s, when competition from cheap imports — and the failure of American steel mills to compete — led to the disappearance of nearly 50,000 jobs over five years. The first woman member of the UAW Local 1112 works on the Vega production line in 1970.Through that time, the auto industry became something of a lifeline. The Lordstown plant, which opened in 1966, hired thousands of workers, and thousands more worked in smaller, independent machine shops that supplied auto parts to GM. The GM plant floated the local government, providing some $2 million a year in tax revenue, said Terry Armstrong, superintendent of the Lordstown school district. The Lordstown school campus, with its spacious lecture halls and a planetarium, was built without debt. It's just not the same company that I used to work for. It's so much more cutthroat, and it's meaner. I know that the old GM is gone."Felice Robinson, a GM employee for 24 yearsThe unionized jobs paid far above market, topping out in the $30-an-hour range, for reasonably humane tasks like installing seatbelt harnesses, securing engine brakes or driving forklifts. Former GM worker Tom Albright, who retired in 2015, remembers being able to do his work faster than the rest of the line and then relax. "I could get ahead of the job for three hours, and at that point I could go goof off for three hours," said Albright, whose son still works in the plant. "Those were the good old days. It ain't like that anymore. They get every nickel that they can out of that individual working that job on the floor." But then cracks started to show in the US auto industry, starting with competition from Japanese automakers in the 1980s and continuing with NAFTA in 1994. Employment slid, as work was outsourced to lower-paying suppliers, including plants in Mexico. The Lordstown plant wasn't immune to the changes that have been affecting the workforce more broadly. In 2007, as the automakers were bleeding cash, the union accepted the creation of a lower wage tier for entry-level workers, meaning that they made 45% less per hour and got a 401(k) plan instead of a guaranteed pension. After GM's bankruptcy in 2009, workers told CNN Business, the job became harder, with management pressing for less downtime."Slowly but surely, they became less and less thoughtful about the people who worked for them," said Robinson. "It's just not the same company that I used to work for. It's so much more cutthroat, and it's meaner. I know that the old GM is gone." But many in the community still recognize that those jobs feed families, donate to local charities and buy cars. They also generate other jobs: Since manufacturing brings in capital from outside the area rather than just recirculating it, each factory position is estimated to get three or four more people working in fields like healthcare, food service, retail and education. That's why, last fall, the United Auto Workers local 1112 and the region's chamber of commerce started the Drive it Home campaign — a community effort to post signs, send letters and work with politicians to convince GM to build another product at the Lordstown plant. It was meant to mimic another push two decades ago when Lordstown was in competition with other cities to win another car model to replace the Chevy Cavalier. That one worked, with the help of officials at the plant who joined the effort. Letters from elementary school kids hang inside the UAW Local 1112 hall in Warren, Ohio."The one difference is that this time plant management was not interested in participating," said James Dignan, president of the Youngstown/Warren Regional Chamber. "The plant management used to be very engaged locally. But they're losing some of that tie and that feel from the company to the community." Dignan said they're working to get another user for the plant if GM decides to give it up permanently. But to the local union workers, getting another GM product is far preferable to getting another company. These are their jobs, and they'll likely still have more protections and higher wages than any other employer.For 24 years I've done nothing for this company and this union but bend over. This is all I've ever done. I never thought it would come to this." Tammy Vennitti, a GM worker who was laid off in 2018"We don't want Elon Musk coming in. We don't want Amazon building a distribution center," said David Green, who's been president of UAW Local 1112 since last May. He led another local within the plant in 2007 when the company asked to pay new workers lower wages. "I supported that because the promise was product and job security," Green said. "Do what we had to do to keep working, keep our communities and our families alive and thriving. It feels like they betrayed us a little bit."The Lordstown school district set up a community pantry to distribute food, clothes and supplies to families affected by the GM layoffs.So far, the company hasn't shown its cards — and the uncertainty is what gets to people. Why take a transfer, if it seems likely that Lordstown will get a new car within the next year and you could come back? For that matter, what new employer would take a chance on someone who would bail as soon as Lordstown re-opened? Plenty of people remember how GM re-opened its plant in Spring Hill, Tennessee in 2011 after having shuttered it two years earlier.That's why, for those who have the option, the choice of whether to go or stay is so agonizing — even though the job had its fair share of hardships.Tammy Vennitti, 55, was laid off with the second shift back in June last year. She had signed up for a training course in order to keep her supplemental unemployment benefits, and then put those plans on hold in January when GM called back those who'd been laid off to fill in for the people who were being moved out to other plants. Vennitti applied for a transfer to a plant in Toledo, and she doesn't know if she'll get it or whether she'd take it if she did, given that she lives with her 27-year-old daughter and 18-month-old granddaughter. But she needs the healthcare benefits to pay for the blood pressure pills her doctor put her on during the stress of being laid off for months, not to mention care for a body that took a beating over 24 years of lifting 30 to 40 pounds, 400 times a day. GM's gold-plated insurance paid for a shoulder replacement, carpal tunnel surgery and cortizone shots for a knee that had no more cartilage to cushion her bones. "For 24 years I've done nothing for this company and this union but bend over," Vennitti said. "This is all I've ever done. I never thought it would come to this." Tammy Vennitti sits in her friend's home in Newton Falls, Ohio. She was laid off and takes medicine to help with the stress of losing her job.The jobs of the futureWhat's next for employment in Youngstown? The local chamber of commerce said there are 13,000 job openings in the area. Team NEO, an economic development non-profit focused on Northeast Ohio, said there will be strong demand in the coming years for workers in information technology, healthcare and manufacturing. But unlike the manufacturing jobs of the past, which usually did not require education beyond high school, 65% of those jobs will require a post-secondary credential by 2021, the group estimates. There are plenty of training opportunities, since GM workers get assistance both from the state and the US Department of Commerce through trade adjustment assistance. So far, there's been strong interest in truck driving certificates, an Ohio state official said, since those take only a few weeks to get and pay relatively well.Some workers saw the end coming early and took steps to prepare. Trish Amato, 43, was hired too late to get a traditional pension, lessening the need to hang on to a GM job. She used GM's tuition benefits to finish her bachelor's degree and get a master's degree in special education. When she was laid off in 2018, Amato thought about going to the plant at Spring Hill, Tennessee. But she and her partner, whose truck driving job also depends on Lordstown being open, didn't think they could afford the rent in the booming area south of Nashville. Trish Amato, a laid-off GM worker herself, works at the UAW's transition center helping people access benefits and training opportunities.So instead, they're thinking of trading in his big rig for a motorhome and traveling the country, while she teaches online courses from the road — a future that wouldn't have been possible without GM's help in going to school, and that she wouldn't have embraced without GM shuttering the Lordstown plant."GM is hard to walk away from because the insurance benefits are awesome," Amato said. "GM gave us a good life. Am I disappointed in what they're doing? For other people, yes. For me, no. If something like this didn't happen, I wouldn't be able to follow a dream." We don't want Elon Musk coming in. We don't want Amazon building a distribution center."Dave Green, UAW Local 1112 presidentFor the next generation, the question is what kind of wages the new working class jobs will pay. The local high school has started a training program for the logistics industry, helping prepare kids for jobs in the many distribution centers that are popping up in the area. "That's our way of giving kids a little bit of a leg up," said Armstrong, superintendent of the Lordstown school district, where about 15% of students have parents who worked in the plant.But, he said: "I don't see them paying what the GM jobs paid." TJ Maxx, for example, is building a facility that will employ 1,000 people in the area. Job listings for entry-level warehouse workers at its other locations range between $10 and $13.50 an hour.Terry Armstrong is the superintendent of the Lordstown school district, which has already been losing students as parents have moved out of town to keep their jobs with GM. The GM plant had also been a regular stop for politicians on the stump, from John McCain to Barack Obama, giving kids a sense that their town mattered. On Tuesday, the school held a group photo to support the Drive it Home campaign; students and staff alike wore blue and brought their GM cars.But after this latest blow, will Lordstown students have confidence in a future in manufacturing? "It would be really hard to convince many of them of that right now, with the plant closing," Armstrong said. "They're able to make the cars of the future, we just have to make that chance available."

Matt McFarland, CNN Business Video by John General, CNN Business

2018-10-30 16:10:43

business

tech

https://www.cnn.com/2018/10/30/tech/segway-history/index.html

Segway history: The rise and fall — and rise again — of the scooter company - CNN

Roger Brown still remembers the shocked looks people gave him the first time he rode a Segway through the halls of the company's New Hampshire headquarters.

tech, Segway history: The rise and fall — and rise again — of the scooter company - CNN

Segway was supposed to change the world. Two decades later, it just might

Bedford, New HampshireRoger Brown still remembers the shocked looks people gave him the first time he rode a Segway through the halls of the company's New Hampshire headquarters.It was early 2013, a rough time for the startup and its aspirations of changing how the world gets around. Brown had bought the company for just $9 million a few weeks before and flown in from his home in Tennessee to begin turning things around. What better way to get a sense of the place than to zip about on its signature product?As Brown cruised the halls on the self-balancing two-wheeled scooter, an employee pulled him aside to lecture him on the risks of riding without a helmet. Brown was dumbfounded. "I own the company," he told the employee. "I can do it." With that, he whizzed away. A few hours later, he received an email outlining the company's safety policies, which included mandatory helmet use. Either Brown would change his ways, or he'd be written up. All these years later, he still finds it more than a bit silly. "You would've thought I went to the Baptist convention and walked around with a pro-abortion sign," he said recently.Read MoreThe fuss over a helmet was the least of Brown's problems. He was the third person to own Segway, which had grabbed headlines in 2001 with the Segway PT and a promise to supplant the automobile and reinvent transportation. Instead, the company's flagship product became a punchline and the company a mess. In the years before Brown bought Segway, a half-dozen CEOs had come and gone, many of its best engineers had defected, and the VCs who had once showered Segway in cash had moved on to the next big thing.There was a significant dork factor. It was never truly socially accepted.Matt Gelbwaks, early Segway employeeBrown bought the company from the estate of Jimi Heselden, a British entrepreneur who died after riding his Segway off a cliff. Segway was barely getting by on the meager revenue it brought in selling the PT to tour companies, security companies and police departments. But Brown saw a global brand with a powerful distribution channel. Six million tourists rode Segways on tours of cities like San Francisco and Washington, DC each year. He planned to buy other transportation companies focused on short trips, like e-bike startups. All he had to do to make Segway profitable, he figured, was run the place well.Brown brought on new employees to change Segway's uptight culture. He led an effort to trim costs by reengineering a circuit board, ditching the PT's expensive gyroscope in favor of a cheaper solution, and negotiating a better battery contract. It worked. Segway turned a profit within a year of Brown's arrival. He sold the company to the Chinese firm Ninebot on April 1, 2015 for more than $75 million.For a time, he was happy. Then one day in August of this year, he got lunch at the Boathouse, a barbecue joint in Cincinnati. As he ate wings and pulled pork sliders, Brown noticed people riding scooters along the riverwalk outside, and not just any scooters: Segway scooters. Ninebot introduced the Segway scooters shortly after Brown cashed out, triggering the scooter-sharing craze that has swept the world in the last year. You can find Ninebot's scooters in more than 100 cities, from the Americas to Asia, Europe and Australia. Ninebot can barely keep up. The company, which has more than 1,000 employees, will ship more than one million scooters this year — 10 times the number of PTs Segway sold in its first 17 years. Silicon Valley-backed Bird and Lime, both of which launched in 2017, lead the trend. They're growing faster than the ridesharing leaders, Uber and Lyft, did in their early days. Uber and Lyft have responded by launching their own scooter services this fall. So has Ford. All rely on Ninebot scooters. "If I would've had the vision of Bird or Lime," Brown said, "Segway would have been worth $10 billion."Scooters are built at Ninebot's factory in China.When Brown owned the company, he focused on the Segway PT, which cost thousands of dollars. It had always been too expensive and ahead of its time. Now, though, the urban transportation revolution that Segway founder Dean Kamen and his truly gifted engineers dreamed of is unfolding, even if they aren't a part of it. Many are thrilled."We knew this was the way future transportation products would work," said former Segway lead engineer Doug Field, who has since worked at Apple and Tesla. "Anyone standing on something that's powered by electricity and a computer is a Segway descendant." The next big thingKamen is a colorful character, even among techies. He dropped out of college. He flies about in his own helicopter. He owns an island off the coast of Connecticut, and has joked about founding his own nation.He's also one hell of an inventor. Kamen made his name developing medical devices, such as a portable insulin pump and heart stents. In the 1990s he built a self-balancing wheelchair so the disabled could be at eye level with anyone. Even as he worked on medical devices, Kamen pondered the future of urban transportation. He didn't see a place for automobiles in that future, and liked to say you don't need a 4,000-pound vehicle to move a 150-pound person one mile. After finishing the wheelchair, developing an entirely new mode of transportation was the obvious next step.Dean Kamen rides the Segway PT. (Photo by Mark Peterson/Corbis via Getty Images)Kamen met Field in the mid-1990s when Field was working at Johnson & Johnson, one of Kamen's business partners. Kamen found himself struck by Field's intelligence.Field, for his part, seemed destined to revolutionize transport. His mother wrote in his baby book that her son would one day work on stuff with wheels. Kamen's vision of moving people about on small, electric machines enticed Field, who had started his career developing vehicles at Ford. He found the challenge of developing self-balancing technology irresistible.At Segway, Field earned a reputation as a brilliant engineer and calm leader who listened to everyone, didn't micromanage, and was beloved by all. "You got the impression he was searching for perfection among leadership, team-building," said Jason Sachs, an early Segway employee. "His character and manner made people trust him."The world got its first glimpse of the Segway PT — Personal Transporter — on Good Morning America on December 3, 2001. It was, in a word, a sensation. Few products have enjoyed such hype. John Doerr, an early investor in Google and Amazon, predicted it would be bigger than the internet and that it would achieve $1 billion in revenue faster than any product in history. Hype aside, the PT was an impressive gadget. Gyroscopes allowed it to balance perfectly on two wheels. Instead of using handlebars or a steering wheel, riders shifted their weight to turn. It marked the first consumer application of drive-by-wire technology, in which software, not mechanical linkages, makes a machine turn, accelerate, and stop. Riders zipped along at up to 12.5 mph for as much as 12 miles on a single charge.A Segway tour passes through Hanover, Germany. (Photo by Swen Pförtner/picture alliance via Getty Images)The PT was truly innovative, even revolutionary. Kamen, who had spent parts of about six years developing the PT, spoke seriously of rendering cars obsolete. His employees talked about working with urban planners in China to design new cities around their two-wheeled transport."There was a lot of reference to drinking the Kool-Aid," said early Segway employee Matt Gelbwaks. "We're here to change the world. It's bigger than us. It's bigger than us individually, it's even bigger than us collectively."Things didn't quite work out that way. Although brilliantly designed and meticulously built, two significant drawbacks hobbled the PT: It cost $4,950 and it was hard to look like anything other than a nerd riding one. It became a punchline, and then a trope, as a prop in television shows like "Arrested Development" and movies like "Mall Cop." It didn't help that guys like Apple co-founder Steve Wozniak took to playing polo with them and that President George W. Bush fell off of one in 2003.Former president George W. Bush falls off a Segway; Actor Kevin James races NASCAR stock cars on a Segway to promote his 2009 movie, "Paul Blart: Mall Cop;" Apple co-founder Steve Wozniak plays Segway polo.That same year, Gelbwaks launched an experiment in Celebration, Florida, to see how people used the scooters. The company sold them at a deep discount to roughly 100 residents. Within a year nearly all of the participants had stopped riding their Segways. Why?"There was a significant dork factor," Gelbwaks says. "It was never truly socially accepted."Cash crunchThe experiment in Florida highlighted another problem: Segway developed and tested the PT under the greatest secrecy. The company worried a competitor might beat it to market, and suspected Japanese automakers were working on a similar device. Employees kept the shades drawn. In some cases, they sealed the blinds with tape, lest someone try to peek through the narrow gap between the blind and window frame. They hid the scooters in plywood crates before transporting them. But working this way kept Segway from figuring out what people might want or need in a scooter."How do you do product testing if you can't go outside?" said Jonathan Pompa, an early Segway engineer. "It worked really well at driving around an engineering office, because that's what we were doing with it, instead of driving around in a city."Kamen's singular focus on the PT created another problem: Although Segway built prototypes of electric bikes, four-wheelers, skateboards and even a unicycle — many of which Ninebot, its eventual owner, currently offers — it never commercialized them. It couldn't, because it didn't have the money.Segway struggled to bring the price of the PT down to a consumer-friendly $1,000. The cost of its nickel metal hydride battery made that impossible. Manufacturing in New Hampshire, rather than China, didn't help. Despite the company's best efforts, the PT remained frightfully expensive."Five or six grand for one of these things was crazy," said Klee Kleber, Segway's vice president of marketing from 2004-07. "The price was way out of whack."Amazon CEO Jeff Bezos stands on a Segway PT with Dean Kamen and NASDAQ Vice Chairman David Weild, center, after opening the NASDAQ on Nov. 18, 2002, the same day the device went on sale to the public. (Photo by Mario Tama/Getty Images) You won't get any argument from Jim Norrod, the company's CEO from 2005 until 2009."A lot of people said our products were too expensive, they were too high-priced. Yeah, they were," Norrod said. "You know why? I needed the money to run the company."Beyond the exorbitant cost, the world was not ready for electric vehicles. Oh sure, there were plenty of wealthy techies for whom it was a fun toy, and Segway was able to experiment with rental programs and even to explore a partnership with Zipcar, the car-sharing outfit. But it lacked the infrastructure needed to truly transform transportation. Plus, buying one was a headache. The first customers had to travel to regional training centers for lessons. And once you bought one, there was no clear place to ride it. A lot of people didn't want them on sidewalks. Unlike the ride-hailing and scooter startups of today, the company spent years working within the system to win friends and change rules."Did we need to pass a law in Mississippi? Did we need to pass a law in North Dakota? No," said Matt Dailida, who led a nationwide push to make Segways on sidewalks legal. "But it was a fundamental belief at the company's highest levels that we wanted to be engaging public officials and get their buy-in and excitement."Norrod was doing everything he could to rein in costs and keep Segway afloat when General Motors threw him a lifeline in 2007. The two companies started developing the EN-V, a pod-shaped lightweight electric vehicle concept that GM would unveil three years later at Expo 2010 in Shanghai.Just as things looked up, though, the financial crisis hit."I'm sitting there with no ability to bring money in," he said. "Venture capitalists are basically cutting out their non-profitable businesses. The stock market craters. That's what I'm staring at and saying, 'what am I going to do?' I had to find any deal that was going to work." GM seemed like an obvious buyer. Together they could commercialize the EN-V and fulfill the long-delayed Segway vision of post-car urban transportation. GM's bankruptcy dashed those hopes. Instead, Norrod engineered a sale to Heselden, the British entrepreneur. When he died, Brown took over.When Segway met NinebotIn 2014, Segway convinced the US International Trade Commission to investigate infringements of Segway's patents for its self-balancing technology. One of the companies listed in Segway's complaint was Ninebot, which quickly offered to buy the company. Ninebot saw a company that shared its vision of improving urban transport. It also saw a company with tremendous brand recognition. And it knew it would need Segway's patents to enter the US market. The two sides quickly closed the deal, which was announced April 15, 2015.Ninebot began almost immediately to sell a series of Segway branded scooters and other products priced at $1,000 or less. They've sold far faster than the Segway PT ever did, and were exactly the kind of affordable options Kleber, the former VP of marketing, envisioned. "Segway now is sort of where I thought we should've been 10 years ago," Kleber said.The golden age of electric transportationFifteen years after Kamen introduced the world to an electric vehicle, the world was finally ready for them. By 2017, the sharing and gig economies were in full swing, two things essential to the success of companies like Lime and Bird. People think nothing of sharing rather than owning things these days, and a ready supply of independent contractors makes charging and repairing scooters far easier — and cheaper. It also helped that smartphones, which make it a breeze to unlock a scooter and pay for a ride, are ubiquitous. And the ever-growing number of bike lanes in urban centers provides a place to ride safely.The business attitude has shifted, too. Segway's attempts at working with cities gave way to a more aggressive attitude of barging into a city with a few hundred scooters, setting up shop, and dealing with city officials later. The tactic rarely wins friends in government, but has allowed Bird and Lime to grow rapidly."At Segway we tried to do it the right way, and it was a nightmare," Kleber said. "So I kind of actually respect the fact that they're just blowing in and dumping the scooters in the street and letting it sort itself out." Bird scooters rest on a sidewalk in San Diego. (Frank Duenzl/picture-alliance/dpa/AP Images)Scooter startups also follow the Silicon Valley ethos of iterate, iterate, iterate, which runs counter to Segway's perfectionism. The startups favor cheap scooters — they typically cost just a few hundred bucks — that were never designed for the rigors of heavy use and adverse weather. But why worry about such things when scooters are essentially commodities, easily replaced when they inevitably break or get thrown into trees, rivers, or San Francisco Bay? Bird, Lime, and all their competitors prefer to move fast, learn from mistakes, solicit customer feedback, and then introduce improvements like bigger batteries.Anyone standing on something that's powered by electricity and a computer is a Segway descendent.Doug Field, former Segway VP of design and engineeringThe success of these companies draws mixed emotions from Segway veterans, but the most common feeling among the 20 former employees who spoke to CNN Business was excitement. Lightweight electric vehicles, long ridiculed as an expensive toy for nerds, are finally getting their due."I love it," Pompa said. "It's a transportation niche that hasn't been properly addressed."Yet some worry the current growth trajectory cannot continue, and that scooter startups run the risk of litigation and even financial ruin if they don't get serious about safety. People regularly ride without helmets (often in violation of local ordinances or state laws), zip through traffic or along sidewalks indiscriminately, and sometimes ride two-to-a-scooter. Two riders have died on the scooters this year."If you want to make this sustainable for a long time, significantly more thought should be put into this," said Stephan de Penasse, one of Segway's first employees. "Everyone's in for a fast buck." Segway's delayed victorySegway's office in Bedford, New Hampshire, is a quiet place. It focuses on the Segway PT, and the market for it is shrinking, according to Ninebot. As a result, there were layoffs earlier this year. When CNN Business visited in September, an area once used for testing the Segway PT had given way to palettes of scooters fresh from China. Most of the R&D and manufacturing has moved to a bustling building outside Beijing. Still, employees feel a tremendous sense of pride in what they've accomplished."People like to say Segway was a flop, but we're still here," said Roxanne Lamonde, a 12-year-veteran of Segway and its director of risk management and human resources. "There aren't many startups that started when we did and are still around."Many employees believe the popularity of scooters and success of companies like Lime and Bird vindicates Kamen's vision of personalized, electric transportation. "If Segway was a piece of leading to that vision of getting around congested cities easier, I guess I'm pretty proud of that," former employee Chip MacDonald said. "I just wish I could've been able to profit from it."As for Kamen, he believes the scooter boom confirms his ideas about the future of transportation. But he isn't terribly interested in talking about it, and wonders why the media would be. He considers the Segway a footnote to his career, something of far less import than the advances he pioneered in insulin pumps and dialysis machines, or the students he's encouraged, through his nonprofit FIRST, to pursue engineering.These days, Kamen is far more excited about his latest venture, the Advanced Regenerative Manufacturing Institute, which explores ways of regenerating human organs. He mentions this to me as he is driving home from a speech in Boston, where he'd gone to recruit employees (he's hired 60 engineers in the past two months alone). As usual, he was introduced to the audience as the inventor of the Segway."It's been 20 years," he said. "No matter what else I do in life, I'm the Segway guy."People usually praise the Segway and Kamen's efforts to remake transportation. But occasionally someone will ask if Kamen considers it a failure. When that happens, he often thinks of the Wright Brothers."They certainly weren't giving out frequent flyer miles by 1920," he said. "But I don't think anybody would say, 'Hey Wilbur hey Orville, how do you feel about that failure?'"And in the emerging world of micromobility, a catch-all term for small, computerized electric vehicles, Kamen is a visionary with a place in history."A lot of people laughed at him when the Segway was released or failed," said Sanjay Dastoor, CEO of Skip, a scooter-sharing company. "I always thought it was a shame for that to be people's first reaction. He had an amazing career, and really, Dean was right."

Story by Peter Valdes-Dapena, CNN Business Video by Sean Clark & John General, CNN Business

2018-10-18 12:07:27

business

cars

https://www.cnn.com/2018/10/18/cars/bugatti-volkswagen-factory/index.html

Bugatti: The rebirth of the world's fastest, most beautiful cars - CNN

When Volkswagen first bought Bugatti, the brand was nearly extinct. Now Bugatti is once again creating some of the fastest, most expensive production cars in the world.

cars, Bugatti: The rebirth of the world's fastest, most beautiful cars - CNN

Bugatti: The rebirth of the world's fastest, most beautiful cars

Molsheim, FranceInside the small glass building where some of the fastest cars in the world are made, there is never a sense of haste. There is also little noise. In a tunnel lined with blazing white lights, workers can look for tiny imperfections in the finished product. Elsewhere, they slide a 16-cylinder engine into its home just behind the driver's seat. Occasionally, they gather at a central table for a meeting. There is no assembly line here. It would make no sense to set one up. Only a few cars are being built here at any one time. At the Bugatti factory in Molsheim, France, a worker carefully inspects a Bugatti Chiron.This is the home of Bugatti in France's Alsace region. I'm standing inside a factory but Bugatti would never use that word. The company's executives always refer to it as "the atelier," the workplace of an artist or an artisan. A little pretentious, maybe, but the word fits. Built in 2005 by Bugatti's corporate owner, Volkswagen Group, the Bugatti headquarters in the town of Molsheim stands on land that was Ettore Bugatti's in the early 1900s, when he was building some of the world's fastest, most expensive and most beautiful cars. Read MoreVolkswagen has gone to incredible lengths to recreate the essence of what Ettore Bugatti's small shop was doing in the first half of the twentieth century. Bringing Bugatti back from the brinkJust three decades ago, Bugatti was, for practical purposes, extinct. After Ettore Bugatti's death in 1947, the brand never fully recovered. There had been sporadic attempts at reviving it, including one that produced a few examples of a well-regarded supercar, the EB110, which was made in Italy. None of these attempts ultimately succeeded. By the time Volkswagen purchased Bugatti out of bankruptcy in 1998, there was little left of it but a name and a red oval logo. Volkswagen has revived the Bugatti brand, known for making some of the fastest, most beautiful cars in the world. But rebuilding brands is something Volkswagen has proven it can do particularly well. In the same year Volkswagen bought the Bugatti brand, it also bought the British ultra-luxury brand Bentley. Under the decades long ownership of Rolls-Royce, Bentley had been largely reduced to a badge placed on cars that were otherwise little different from Rolls-Royces. With the introduction of visually striking cars like the Continental GT, Volkswagen returned Bentley to its roots as a maker of luxurious but fast and sporting automobiles, clearly distinct in feel and image from those of its former owner. (The Rolls-Royce brand was purchased by BMW, which built a new factory and set about restoring that brand's image as well.)Bugatti was in far worse shape than Bentley, however. By the time Volkswagen came into the picture, Bugatti cars hadn't been made in Molsheim in about half a century. Bugatti was reborn with the Veyron in 2005. Now, Bugatti sells two new ultra-fast supercars, the Chiron and the recently unveiled Divo, both built at the facility in Molsheim, with price tags starting at $3 million and nearly $6 million, respectively. The land of Le PatronLocating production back in France's Alsace region was a strategic move on Volkswagen's part. First, it lends an air of authenticity to the Bugatti brand. Buyers now frequently visit the atelier to discuss their cars and see where they're made. Those customers walk the grounds trod by "Le Patron," as Ettore Bugatti was called. Ettore Bugatti was an engineering genius, who had expensive tastes and loved horses. The son of a renowned Italian art nouveau furniture designer, Carlo Bugatti, Ettore Bugatti was a flamboyant engineering genius who became known for his fine tastes and his love of horses. The cars he created earned a reputation on the race tracks in Europe and the Americas as some of the fastest in the world. For those who weren't racing, Bugatti made fast cars covered in beautiful bodies designed by Ettore Bugatti's son, Jean Bugatti.Beyond history, there are other reasons for locating Bugatti production in Molsheim, executives say. There's a pool of skilled manufacturing workers to tap into and there is intense local pride in the town's most famous brand. Also, given the region's history — the border between France and Germany has moved back and forth across it several times in history -- many people speak German, the common language of the production floor.Ettore Bugatti was a fanatic about cleanliness and insisted that his workshop be spotless, as this modern one is. Antiseptically clean, the space looks like a cross between a semiconductor lab and a garage. Normally on a production line, time is very predictable. Time is at a premium. Here it is not." Christophe Piochon, head of production.Bugatti plans to produce a total of only 500 Chirons and just 40 Divos in a process that can take up to two months for each car."Normally on a production line, time is very predictable. Time is at a premium. Here it is not," said Christophe Piochon, Bugatti's head of production.The modern Bugatti facility is certainly much less self-contained today than it was in Ettore Bugatti's era. Now it is purely a "final assembly" location. Major components, such as the massive 16-cylinder engines and carbon fiber body sections, are made elsewhere and shipped here to be put together. Then the final results are painstakingly inspected and test driven on local country roads and at a nearby airfield.It can take up to two months to produce one Bugatti supercar.There is one other big difference. Volkswagen would actually like to make a sustained profit from the brand. "I don't think Mr. Bugatti was a businessperson at all," said Kruta.In Ettore Bugatti's day, money came in from customers and money was spent on making cars, paying workers and on Bugatti's own lavish lifestyle. He apparently gave little thought to whether the sums coming in bore much relationship to the sums going out.After two decades under Volkswagen's ownership, Bugatti — selling about 70 cars a year — has recently become profitable.The spaceships of the auto worldThere are far easier ways to make money in the car business. But high-end cars like the Chiron are also justified by the prestige they reflect on their parent company as well the lofty challenges they present. The Chiron, which starts at $3 million, is among the fastest production cars ever made. These are the spaceships of the automotive world. Brands like Bugatti allow an automaker's most talented designers, engineers and executives to explore bold aspirations without leaving the company to do so, said Erich Joachimsthaler, a branding consultant and CEO of Vivaldi. The cars themselves stick close to Bugatti's formula. In the 1930s, cars like the Type 57 Atlantic were among the fastest and most luxurious of their day. They are still considered some the most beautiful ever made.Today the Chiron is the fastest production car in the world but is also easy to drive on normal roads, just like the Type 57 cars were. That's far more of a challenge today given the much higher speeds made possible by modern engineering. It's also hard to create a car that can safely go over 250 miles an hour, but that still looks beautiful when parked."Our philosophy is really to create beauty from engineering superlatives that we have on the car and think through that," said Achim Anscheidt, Bugatti's head of design. "Technical development can be beautiful. If I think about, you know, the nose cone of the Concord, for example, or the Eiffel Tower or the Automium in Brussels."The design of today's Bugattis were inspired by cars like the Type 57 Atlantic.The large curves behind the Chiron's side windows, for instance, mimic the curves of a classic 1930s Bugatti. But they also frame enormous vents that draw in the huge volumes of air that feed the car's massive engine.One major difference between then and now is that, in his day, Ettore Bugatti cared little about what individual customers wanted. His notion was simply to build the best cars in the world and, if they really were the best, then customers would pay a lot for for them. Today, customers can select freely from literally limitless combinations of exterior paint colors and interior trims."We have to keep in mind that 30% of our customers are configuring their car not with the colors that we are offering but they're coming to us and saying 'I want the color of my wife's handbag for the interior and I want the color of my classic [Bugatti] Type 35 in the garage to be the exterior color," Anscheidt said.Le Patron never would have had the patience for that.

Story by Jenni Marsh, CNN Business Video by Luke Rotzler & Laurie Frankel, CNN Business

2018-10-10 22:00:38

business

tech

https://www.cnn.com/2018/10/10/tech/tecno-phones-africa/index.html

Chinese smartphone giant Tecno is dominating the African market with $40 phones - CNN

Transsion, a China-based smartphone manufacturer, is outpacing Apple and Samsung in Africa. It sells devices that take better selfies of dark skin and have features like a keyboard in Swahili.

tech, Chinese smartphone giant Tecno is dominating the African market with $40 phones - CNN

The Chinese phone giant that beat Apple to Africa

Addis Ababa, Ethiopia (CNN Business)One of China's biggest smartphone makers has never sold a handset in the country. Yet thousands of miles away, it dominates markets across Africa. Unknown in the West, Transsion has left global players like Samsung and Apple trailing in its wake in a continent that's home to more than a billion people.In cities like Lagos, Nairobi and Addis Ababa, busy streets are awash with the bright blue shopfronts of Transsion's flagship brand, Tecno. In China, the company doesn't have a single store, and its towering headquarters in the southern megacity of Shenzhen goes largely unnoticed among skyscrapers bearing the names of more famous Chinese tech firms.A Tecno sign in Addis Ababa. The brand is a common sight in African cities. The company took a different path to success from other top Chinese smartphone makers such as Huawei and Xiaomi, which started out in China before eventually expanding overseas. Transsion built its business in Africa. And it has no plans to come home.The perfect selfieRead MoreIn Edna Mall on the bustling Bole Road in Addis Ababa, the capital of Ethiopia, Mesert Baru poses for her Tecno Camon i. "This phone is seriously nice for selfies," says the 35-year-old shop assistant, admiring the picture she just took. Mesert's satisfaction is no accident. Tecno cameras have been optimized for African complexions, explains Arif Chowdhury, vice president of Transsion. "Our cameras adjust more light for darker skin, so the photograph is more beautiful," he says. "That's one of the reasons we've become successful."A Tecno user in Ethiopia using her smartphone.Transsion founder George Zhu had spent nearly a decade traveling Africa as head of sales for another mobile phone company when he realized that selling Africans handsets made for developed markets was the wrong approach. His timing could hardly have been better. By the mid-2000s, the Chinese government, under its "Going Out" strategy, was encouraging entrepreneurs to look abroad and forge stronger ties with African nations in particular. Cell phones were spreading rapidly in China, but in Africa — which has a roughly similar population — they were still a very rare luxury.Africa, in other words, could be the new China. Giving consumers what they wantIn 2006, Zhu launched Tecno in Nigeria, targeting Africa's most populous nation first. From the start, the company's motto was "think global, act local," which meant making phones that met Africans' specific needs."When we started doing business in Africa, we noticed people had multiple SIM cards in their wallet," Chowdhury says. They would awkwardly swap the cards throughout the day to avoid the steep charges operators would levy for calling different networks, says Nabila Popal, who tracks the use of devices in Africa for research firm IDC. "They can't afford two phones," says Chowdhury, "so we brought a solution to them." Zhu made all Tecno handsets dual SIM.A Tecno store on Bole Road in Addis Ababa.More innovations followed. Transsion opened research and development centers in China, Nigeria and Kenya to work out how to better appeal to African users. Local languages such as Amharic, Hausa and Swahili were added to keyboards and phones were given a longer battery life.I can spend 24 hours constantly talking, browsing on this phone, no problem. With a Samsung, no way.Sewedo Nupowaku, CEO of Revolution MediaExtra juice was important. In Nigeria, South Africa and Ethiopia, for example, the government frequently shuts off electricity to conserve power, leaving people unable to charge their phones for hours. In less developed markets, such as the Democratic Republic of Congo, Chowdhury says, consumers might have to walk 30 kilometers to charge their phone at the local market -- and have to pay to do so. "For those kind of consumers, longer battery life is a blessing," he adds. Sewedo Nupowaku, the Lagos-based CEO of entertainment company Revolution Media, says he switched from a Samsung S3 to a Tecno L8 for this reason. "I can spend 24 hours constantly talking, browsing on this phone, no problem. With a Samsung, no way." But perhaps Transsion's smartest move was its pricing. It has three main brands: Tecno, Infinix and Itel. Most of their feature and smartphones sell for between $15 and $200. Mesert says she bought her Tecno smartphone for 2,000 birr ($72). At a shop near her workplace, an iPhone 7 costs the equivalent of $906, and a Samsung Galaxy J7 around $360. Average monthly wages in Ethiopia range from 1,500 birr ($54) to 3,000 ($108) birr, and most vendors across Africa don't allow customers to pay in installments. "About 95% of Transsion smartphones cost under $200," says Mo Jia, an analyst at technology research firm Canalys. "They are the king of the budget smartphone."Tecno: 'We are African'Less than a decade ago, Chinese phones were barely on the radar in Africa. In 2010, Nokia and Samsung (SSNLF) dominated sales across the continent. By the first half of this year, Nokia's share of the market had collapsed and Samsung was selling only one in 10 phones. Transsion had come from nowhere to take more than 50% of the market, according to Canalys. For smartphones alone, it accounts for nearly a third of all sales in Africa, according to IDC. Apple (AAPL) has been complacent about African markets, Jia says, because it deemed the slim profit margins on low-cost phones not worth fighting for. Transsion, on the other hand, is happy to work with tight margins, he adds. Apple didn't respond to requests for comment.Transsion's rise reflects the wider role Chinese firms now play in providing the technology people across Africa use to communicate, including the high-speed internet networks on which smartphones rely. Despite security concerns in countries such as the United States and Australia about Huawei and ZTE, Jia expects demand for Chinese products to remain strong in Africa, where governments and consumers are so price sensitive.Transsion's assembly factory in Addis Ababa, Ethiopia.In its marketing, Transsion plays down its Chinese roots. "In Africa, we say that we are African," Chowdhury says, explaining why Tecno's stores carry no Chinese characters or signs of being a Chinese brand. In the 2017-2018 Brand Africa 100 report, published by African Business magazine, Tecno ranked as the 7th most admired brand in Africa. That was up from 14th the previous year, but it still lagged Samsung (2nd) and Apple (5th). The iPhone is still considered a luxury product that many Africans aspire to own. I like that my phone is made in EthiopiaMesert Baru, owner of Tecno Camon i In Ethiopia, Transsion went a step further to assimilate. Since 2011, every phone it sells in Africa's second most populous nation has been assembled at its facilities in the suburbs of Addis Ababa. About 700 workers piece together Shenzhen-manufactured screens, circuit boards and batteries to churn out 2,000 smartphones and 4,000 feature phones a day. Transsion says it has a total of 10,000 local employees in Africa, and 6,000 in China. Its low-cost African workforce helps it keep down prices, according to Jia. It also adds appeal for some consumers. "I like that my phone is made in Ethiopia," Mesert says.A homegrown rival to SpotifyNigeria, with its population of 186 million, is Transsion's biggest market. It has connected with consumers there through one of their biggest passions: music.Oye Akideinde, an amateur rapper turned software developer, was recruited by Tecno in 2015 to launch a music app called Boomplay, a homegrown rival to iTunes or Spotify. Most Nigerian internet users grew up illegally downloading music or streaming it for free on YouTube, according to Akideinde, a 40-year-old Lagos resident. Tecno's vision was to attract music lovers by uniting African and international artists on a single platform offering affordable downloads and streaming with advertising. It preloaded the app onto every Tecno smartphone and made it the default music player. The app now has 32 million users.Transsion is the parent company behind the popular brands Tecno, Infinix and Itel.Tecno spun off Boomplay and its apps division into a new company, TranssNet, last year. Backed by NetEase, a $30 billion Chinese internet company, TranssNet plans to introduce a suite of financial apps on smartphones made by Transsion. Chinese companies have been eager to use technology to tap into Africans' spending habits. In 2015, Kenyan mobile payments operator M-Pesa migrated all of its 12.8 million subscribers to Huawei's Mobile Money platform as it expanded across East Africa and beyond. The move increased the number of transactions M-Pesa could process, and the app's user base has more than doubled since then. Expanding in India and beyondFor Transsion, future growth is set to come from building its business outside Africa in other developing markets, such as Russia, Indonesia and Bangladesh. In 2017, it launched Tecno in India and within a year had claimed 5% of the huge market, according to IDC.How did Tecno make such rapid progress? Transsion's Chowdhury says another innovation tailored to local customs has helped. "Indian people use their hands to eat food," he says, "so their fingers get oily. What if you're having lunch and your boss calls? You try to take the call but your fingerprint won't work." The fix: screens that can read greasy fingers.

Ivana Kottasová, CNN Business

2018-12-13 17:30:04

business

business

https://www.cnn.com/2018/12/13/business/electric-cars-charge-bmw-porsche/index.html

The electric cars of the future could be recharged in 15 minutes - CNN

A group of companies including Germany's BMW, Porsche and Siemens say they have developed technology that could help make super-fast charging a reality.

business, The electric cars of the future could be recharged in 15 minutes - CNN

The electric cars of the future could be recharged in 15 minutes

London (CNN Business)The next generation of electric cars could charge their batteries in the time it takes to fill up at a gas station.A group of companies including Germany's BMW (BMWYY), Porsche and Siemens (SIEGY) say they have developed technology that could help make super-fast charging a reality.They unveiled on Thursday a 450 kW charging station that needs only three minutes to provide enough juice for a 100 kilometer (62 miles) drive. A full charge takes 15 minutes. Ian Ellerington, head of technology transfer at the Faraday Institution, said the technology is significantly better than what's currently available, even if there are major issues to resolve before it's put into widespread use."450kW is substantially quicker than the Tesla superchargers (120kW), and would in principle be 10 times quicker than the rapid chargers that are currently widely available," he said. Read MoreThe slow charging problemLong charging times are a major drawback of electric cars currently on the market. They slow down road trips, and they're a major inconvenience for owners who can't charge their cars at home. Ellerington said the next generation of chargers could help solve the problem."At 350-450kW, electric charging will take a time comparable to refueling with gasoline, which will make long journeys in [electric vehicles] as practical as in cars using liquid fuels," he said.Power troubleMore development work is needed to make 450 kW chargers a practical option, however. According to Ellerington, one major piece of the puzzle is building cars that can handle the increased power. "I believe that there are no vehicles currently on the market that could accept this amount of power, and it will need the next generation of batteries to take advantage of the full capability," he said. For the 450 kW charging project, BMW and Porsche designed cars specifically for the tests.The maker of Mercedes cars is spending $23 billion on batteriesKeith Pullen, a professor of energy systems at City, University of London, said that super-fast charging comes with other drawbacks. "If you charge a battery very quickly, it's less efficient [and] it actually damages the battery," he said. The technology could be useful in an emergency, but frequent use would cause a battery to wear out quickly. Draining the gridEngineers would need to solve another problem: super-fast chargers use a huge amount of power. Pullen said that a service station with 20 charging stations would use about six megawatts of power — the same amount as a typical small town. "This power has to come from somewhere and it has to come from the grid," he said. "You wouldn't be able to roll this out, there have to be major changes first."

Charles Riley, CNN Business

2018-12-11 16:06:01

business

business

https://www.cnn.com/2018/12/11/business/daimler-electric-car-batteries/index.html

Mercedes-Benz owner is spending $23 billion on batteries - CNN

The maker of Mercedes-Benz cars is spending billions on batteries as it accelerates the electrification of its product range.

business, Mercedes-Benz owner is spending $23 billion on batteries - CNN

The maker of Mercedes cars is spending $23 billion on batteries

London (CNN Business)The maker of Mercedes-Benz cars is spending billions on batteries as it accelerates the electrification of its product range. Daimler said in statement on Tuesday it was spending €20 billion ($23 billion) on battery cells, and investing another €1 billion ($1.1 billion) in eight battery factories in Germany, China, Thailand and the United States.The German carmaker wants to offer an electric or hybrid version of all its models by 2022, and it says the battery cell purchases will ensure a steady supply of essential components until 2030."We are systematically pushing forward with the transformation into the electric future of our company," Daimler CEO Dieter Zetsche said in the statement. German automakers are investing heavily in new technology in a race for the future as tech companies and upstarts like Tesla (TSLA) plow money into electric and autonomous cars.Read MoreDaimler (DDAIF) has already completed one battery factory in Germany, where it plans to build four more plants. It will build another near an existing car plant in Tuscaloosa, Alabama, and one each in Beijing and Bangkok.German automakers meet with Trump as he weighs new tariffs The company plans to offer 130 electric and hybrid models by 2022, in addition to electric vans, buses and trucks. Daimler said it would scrutinize all suppliers of raw materials used to make batteries. One key element is cobalt, much of which is mined in the Democratic Republic of Congo.An investigation by CNN earlier this year found that children were still working in small cobalt mines in the country.Daimler said it has 700 engineers working to audit suppliers, which must disclose their entire supply chain "right back to the mines." The company said it was also working with human rights experts. Rival German carmaker Volkswagen (VLKAF) said last year that it would spend more than €50 billion ($57 billion) on battery cells as it pushes to electrify all 300 models in its range by 2030.

Peter Valdes-Dapena, CNN Business

2018-09-28 16:44:52

business

cars

https://www.cnn.com/2018/09/28/cars/mercedes-benz-eqc-reveal/index.html

Mercedes-Benz reveals its first all-electric SUV - CNN

Mercedes-Benz revealed its first fully electric SUV in Stockholm Tuesday, another in a small rush of all-electric luxury vehicles expected to hit the market in the next couple of years.

cars, Mercedes-Benz reveals its first all-electric SUV - CNN

Mercedes-Benz reveals its first all-electric SUV

This story was originally published on September 5, 2018. (CNN Business)Mercedes-Benz revealed its first fully electric SUV in Stockholm Tuesday, another in a small rush of all-electric luxury vehicles expected to hit the market in the next couple of years.The Mercedes-Benz EQC will be the first production model in the German automaker's all-electric EQ line. Jaguar has already started production of its I-Pace electric SUV and both BMW and Audi are expected to unveil new electric vehicles later this month. Porsche recently announced the name of its Taycan electric performance car, which will hit the market next year.Mercedes has previously revealed a few EQ concept vehicles, starting with the Generation EQ concept SUV, at the 2016 Paris Motor Show. At the time, the company announced that EQ would become a new line of fully electric cars and SUVs.The EQC, which will have an estimated range of about 279 miles based on European driving tests, is the first to go into production. It will have two separate electric motors, one powering the front wheels and another for the back wheels. The front motor will be tuned for maximum efficiency while the back motor will provide more performance. Together, they will produce a maximum of 402 horsepower.The Mercedes-Benz EQC is differentiated by a black band running under the grill and a bar of white light above it.The EQC will be able to go from a stop to 60 miles an hour in just under five seconds. But its top speed will be limited to 112 miles an hour, which is modest by modern standards. Most luxury cars are capable of going at least 155 miles an hour, a speed that can be achieved on "unrestricted" parts of Germany's highway system.The dashboard has rose gold accents and a long flat panel display screen.Read MoreFor the most part, the EQC looks like a Mercedes-Benz crossover SUV with a sporty shape but there are few unique touches setting it apart from the brand's other vehicles. Besides some subtle blue decorations and exterior decorations, there is a black panel running under the grill between the headlights. At night, a line of white light runs across the top of the grill. Inside, there are rose gold colored accents under a continuous flat panel display screen that forms both the gauge cluster and controls for things like navigation and the stereo. It's similar to the interior of the recently revealed Mercedes A-class sedan.The Mercedes-Benz EQC also has a unique taillight design.Other models in the EQ range will be revealed later, Mercedes has not yet announced pricing for the new model but it will go on sale in the United States in 2020.Correction: A previous version of this story incorrectly stated the driving range of the EQC.

Kathryn Vasel, CNN Business

2021-03-09 16:35:31

business

success

https://www.cnn.com/2021/03/09/success/remote-work-covid-pandemic-one-year-later/index.html

The pandemic forced a massive remote-work experiment. Now comes the hard part - CNN

In March 2020, companies across the US abruptly shuttered their offices and instructed employees to work from home indefinitely as a result of the pandemic.

success, The pandemic forced a massive remote-work experiment. Now comes the hard part - CNN

The pandemic forced a massive remote-work experiment. Now comes the hard part

It's been one year since Covid-19 was declared a pandemic and businesses started closing. CNN Business looks back on the pandemic's impact on the global workforce and how things may have forever changed.In March 2020, companies across the US abruptly shuttered their offices and instructed employees to work from home indefinitely as a result of the pandemic. At first, many thought the shutdowns would last a couple months. But one year later, millions of workers are still working remotely.The pandemic has forced a large segment of the global workforce to go through a remote-work experiment on a scale never seen before -- and a lot has changed in the last 12 months.The boundary between our work and our personal lives has become blurred. Working at the kitchen table has become common and, for parents, juggling virtual school while trying to hit work deadlines has become a daily challenge.Seth and Nicole Kroll work while their son Louis, 5, entertains himself at their home outside of Boston. Employers have also been forced to become more nimble. They've had to loosen restrictions on where employees can work, equip them with the tools do so and support them both professionally and personally.Read MoreWe've learned many lessons as a result: meetings aren't always necessary, working a standard eight-hour shift may not be the best schedule for everyone, sitting at a desk doesn't always mean you're being productive and perhaps, you miss your coworkers more than you thought you would. Now that more people are getting vaccinated and kids are going back to school, things appear as if they might get back to "normal," but the workplace as we knew it may be forever changed.Some companies plan to remain 100% remote post-pandemic, while others -- including companies like Reddit and Microsoft -- will take a hybrid approach, giving workers more flexibility about where they work. A social distancing marker is displayed in front of a reception desk at the JLL office in Chicago.And, of course, some companies will want everyone to come back. No matter what the approach, workers and employers can expect to hit a few bumps in the road as they navigate the next phase of this grand work experiment."Many companies succeeded working remotely in 2020 largely because everyone was doing it -- there was no built-in preference for office workers or stigma against remote workers," said Andrew Hewitt, senior analyst at market research firm Forrester. "Hybrid is going to make managing this difference harder."The initial shock The World Health Organization declared the novel coronavirus outbreak a pandemic on March 11, 2020. In a matter of days, companies across the globe were shutting their offices and many had little to no time to prepare their employees for getting work done entirely outside of office walls. At business review site Yelp, the IT department had to scramble to find nearly 3,000 laptops for workers, primarily sales employees, when it went remote in March. "We always had spare laptops, but not 3,000," said Chief People Officer Carolyn Patterson. A Yelp employee's work-from-home setup, including their canine "office mate."Artificial intelligence software company, Coveo, emptied its offices in early March 2020. With more than 600 workers across the globe, employees were used to working in different time zones and locations. Still, in-person collaboration and gatherings are an important part of the company's culture. "We were a company that had a habit of getting together; literally flying people all over the world... to get together. People need to interact in person," said CEO Louis Tetu.What's your remote work situation like, one year later? Share your storyFrom the start, the company focused on making sure workers were well-equipped at their home office by allowing things like tech equipment and noise-canceling headphones to be expensed, as well as offering subsidies for high-speed internet. And it didn't come cheap."That meant we were going to give you the best chair, best screen ... that cost us into seven figures overnight," said Tetu.The cost, he said, was well worth it. "You cannot build a great company if your people aren't well."But it wasn't just figuring out the logistics of how to work from home that challenged employers and their workers at the start of pandemic. There was the mental and emotional toll it took as well.It became very natural for us to have meetings where we had medical, mental health practitioners and discussions about business strategy all in the same meeting."Cisco chief people, policy and purpose officer Fran Katsoudas."We recognized that our employees were coming to us for guidance for everything: the pandemic, how they lived, wanting to know what was safe and what wasn't safe," said Cisco's executive vice president and chief people, policy and purpose officer Fran Katsoudas. "It became very natural for us to have meetings where we had medical and mental health practitioners and discussions about business strategy, all in the same meeting."How Google, Microsoft and others plan to work post-pandemicTo help employees cope with the changes and uncertainties of the pandemic, some companies enhanced their benefits, offering things like free counseling, stipends for childcare and office set-ups and increased days off. But when it comes to the workforce post-pandemic, remote work will no longer be considered a special perk."It's no longer: 'Do you offer remote work?' But, do you offer it with enough organizational support so I can be as successful as the people who work in the office?" said Hewitt.He expects about 60% of companies will offer a hybrid work model, while 30% of companies will be back in the office and 10% will be fully remote.Now here comes the hard partDespite the challenges, Hewitt says the past year has been easy compared to what will come next. "We've been playing remote work on easy mode. We've all been doing the same thing, everybody has had equal access to information and promotions," said Hewitt. "It will get harder in 2021 with hybrid."Covid-19 has turned New York's famous business districts into ghost towns. Inequality between remote and in-office workers can become an issue among hybrid workforces. People in the office get more face time with the boss, which can lead to better relationships, increased access to information and top assignments."There was the stigma [before the pandemic], that remote workers were less productive and career focused," Hewitt said. And companies have grappled with allowing remote workers in the past. In 2013, Marissa Mayer, then-CEO of Yahoo, sparked controversy when she ended the company's work-from-home option citing the need for better communication and collaboration among staff. IBM called back some of its remote workers in 2017.We've been playing remote work on easy mode...It will get harder in 2021 with hybrid"Andrew Hewitt, senior analyst, ForresterTraining managers on how to equally incorporate remote and in-person workers in meetings and decision making, as well as how they communicate is a critical step in equalizing workforces. At Yelp, the majority of employees worked in the company's offices before the pandemic. The company is now giving most employees a choice to continue working remotely or come into the office a few days a week."We're going to be very cautious that managers don't shift into patterns that you have to come into the office for an important meeting, since that's not possible if people move away," said Patterson. Workers who move to areas with significantly higher or lower cost of labor could see their pay adjusted. The company created a three-tiered system to handle compensation changes for workers that relocate. "If you are moving from a tier one location to a tier three, you will experience a reduced salary, but we still want to be competitive," said Patterson.Coveo also plans to give employees flexibility to choose where they work, but it has no plans to mandate that everyone be 100% remote. "It's very dehumanizing," Tetu said of companies going fully remote and getting rid of offices. "I think Slack and Zoom are great, but there is no equivalent of getting people together and fostering a common culture."He's looking forward to the day he can get his team together safely."We are going to spend hundreds of thousands of dollars on plane tickets to bring everyone together. There is no question. There are massive gains and benefits in terms of cohesion." Permanent WFH sounds great. But it's harder than it soundsAs things start to return to normal and services like daycare reopen regularly, employers will likely become more strict with their remote working requirements, according to Hewitt. That could mean requiring the employee have childcare in place during working hours or standardizing a time zone that everyone works in."The other thing that does come up with 'anywhere work' is tax laws," said Hewitt. "That can get tricky and complex." Should an employee move to an area where a company doesn't already have employees or an office, it could bring administrative and tax burdens to the employer. Relocating could also affect workers' tax bills if they work in one state but live in another. The shrinking office Companies will also likely need less office space as more employees start working remotely. Tetu expects his company to use about 70% of the square footage that it did pre-pandemic. To meet the needs of a hybrid workforce, office designs are likely going to look different as well. There is a psychological impact of this that is lasting. Life has been shaken quite a bit, and there are multiple ramifications of this."Coveo CEO Louis TetuNot every worker will need a designated desk. Collaborative spaces will likely become a bigger priority so that more team-focused work can happen in the office, while individual work will be done at home. Some companies plan to use hot desking solutions, according to Hewitt, that allow workers to reserve a desk for when they're in the office. In an interview for CNN's Coronavirus: Fact vs. Fiction podcast, he said that some of Forrester's clients are looking to reduce 30% to 50% of their overall office space.A work station closed for social distancing at Catapult's offices in Boston. Yelp is also considering downsizing its office space, according to Patterson."As our leases come up, we will start reducing our footprint," she said, adding that Yelp's office spaces could be redesigned to include fewer desks and focus more on collaboration.Even as more people become vaccinated, experts warn that it's going to take time to return to any sense of normalcy at work. "There is going to be a long tail here, there is no question about that," said Tetu. "There is a psychological impact of this that is lasting. Life has been shaken quite a bit, and there are multiple ramifications of this."

Kathryn Vasel, CNN Business

2021-01-11 16:45:13

business

success

https://www.cnn.com/2021/01/11/success/google-productivity-laura-mae-martin/index.html

She helps Google workers be productive. Here are her pro tips - CNN

We can all use a little help when it comes to being more productive, especially these days.

success, She helps Google workers be productive. Here are her pro tips - CNN

She helps Google workers be productive. Here are her pro tips

We can all use a little help when it comes to being more productive, especially these days.Whether we're working from home or still going into the workplace, many of us have struggled to stay as productive as we were before the pandemic. Google said last month that its employees won't be returning to the office until September. That means the company will have to make a concerted effort to keep its workforce motivated and effective. CNN Business spoke with Google's executive productivity advisor Laura Mae Martin about how employees can stay focused and be more efficient when working from home. Here's what she had to say:(Editor's note: This interview has been edited for clarity and length. This conversation took place before Google employees announced they had formed a union. Google's director of people operations said the company supports the employees protected labor rights. "But as we've always done, we'll continue engaging directly with all our employees." But Google and Martin didn't offer any further comment on that news.) Read MoreHow has your role evolved since the shutdowns began in March? Productivity was always a focus at Google and I think when [the pandemic] happened, it just kind of shifted what that means, what that looks like. People are so used to being productive at work, but how does that look at home? Right away I developed my top tips for working from home and how to have that same sort of stride that you hit in the office: Pick a work spot. There are scientific principles that show that when you are sitting in the same spot and you have the sights, smells and sounds of a location, your brain constantly goes back to what you were thinking about in that spot. So even if you don't have a home office, even choosing the same chair in your kitchen over and over will start to help your brain to get in that place. Similarly, you want to pick spots where you never work. If you never take your computer into your bedroom, you'll start being able to relax more in your bedroom because you've created that boundary.Which 'race' are you running? There are two groups of people from what I've seen. You have the person who is like: 'Wow... I am kind of in a place where I have more time than I ever have. I am just working all day from home.' That person I call a marathon runner. They have this long extended day -- they really need to think about burnout, about structure, about pacing themselves. Then you have the sprinters, which I am one of those. I have young kids, they are home from school. I am working in little spurts. I have less time than I've ever had. You want to think about how your race is going to be affected by working from home. How you can be more productive and what races the people on your team are running. If you are a marathoner you might be able to have a meeting at any time of the day. But your teammate might be sprinting so it might be better to ask them when is the best time to meet.Plan ahead. I have a daily plan I make for each day the night before. It makes you so much more accountable if you have an hour-by-hour schedule because it eliminates that 'I am sitting down, what should I work on, what should I do?' It is a contract to yourself. Embrace the ebbs and flows. We all have these natural circadian rhythms. They drive our sleep, whether we are a night owl or an early morning person, when we have energy -- and that goes into productivity, too. Everyone has these peak bursts of productivity -- and they're not the same. This is kind of a chance to ask yourself: Am I the kind of person that, without a commute, can wake up and do some email and I enjoy a mid-morning workout? Or would I like to take a break in the afternoon and go for a walk, where that might not be feasible in the office? Figure out what your ebbs and flows are and that is something you even apply when you go back to the office. What would you tell people who are overwhelmed with their email? First, I tell people to get anything out of their inbox they don't need to see. Even if you don't open an email, seeing an email uses a little piece of your energy. So if you are on aliases that you don't need to be on, anything from a past job, any newsletter you don't need to see, take time to create a couple rules or filters and get those out of there. One nice way is searching for the word "unsubscribe" because that is usually an indicator it's not sent directly to you.Two, anything you do need to see and needs to be important -- like emails directly from your manager to you -- have those show in a certain way. Have the [email] pop up with a star, flags, anything you want. Maybe your boss emails the whole org, that should look different than your boss emailing you.The final step...is to think about your laundry. Think of your dryer as your inbox: put your emails into piles, saying this is something I need to do later or I need to fold. This is something I am waiting on a response from or something I need to hang. Put everything in piles, and then do the basic definition of batch-tasking -- you fold, fold, fold or you respond, respond, respond in a certain time and you put them all away at once. That is how I think of inbox zero. It's dryer zero. It's not, 'I've addressed every single thing and I am done' because that is unrealistic. But it means I've sorted everything and I know what I need to do, and I have it in piles so that my future self can do it quickly. How can a person know if they are actually being productive versus just working all the time? There is this misstep that the more hours you work the more productive you are. I think productivity is a little different than efficiency or output. You want to think: Did I set intentions, did I complete them and did I do them well? So all those things are important. What it comes down to is the planning piece. In that daily plan I actually have a box at the top that says "tomorrow will be successful if..." What is that? There is always going to be more, always going to be new things, but you're really thinking about: What are my plans, what can wait and what am I accomplishing? It's more about defining what your goals are to know if you hit them. What mistakes do people make when they think they are being productive?The number of hours you work does not always equate to the output. A lot of times it is a negative effect if you are working way too many hours. People are having so many more meetings because they are not getting those touch points at work. But you also want to think about being in meetings constantly all day -- is that really the goal for your job? People think of downtime or white space or think time as unproductive time, whereas really it's like pour-over coffee where the longer you let these ideas and conversations soak in, it's going to be much, much richer. And so having breaks, having downtime, having days off, all those things actually propel you forward.Laura Mae Martin is Google's executive productivity advisor. Do you think companies will be more flexible with how we work and scheduling? There are some companies that have had that mindset where your ultimate goal is your output each quarter or whatever it is you are being measured on. But I think more traditional companies may have a 9-to-5 mindset. This kind of shows the difference of what are you really accomplishing by having people just sit in their seats for that amount of time versus what do you want them to actually get done? And that is what we are measuring now since we don't know when people are putting butts in seats at certain times, so I certainly think that shift will happen, it probably already has for companies that were originally having clock-in, clock-out. I am the kind of person who works really well before 9, but after 3 I need a little bit of a break, so if I was required to be in my seat from 9 to 5, I wouldn't be as effective an employee. I hope people are figuring out for themselves what are those ebbs and flows so that when we go back into the office they can start to tailor their schedule more toward that. For working parents and caregivers, what is the best approach to avoid feeling overwhelmed?For me, it's thinking about the time that I do have, and how do I make the absolute most of it? So if you know that your kids are doing virtual school, and you have two hours, maybe that's all you have in a day, you should be so buttoned-up on those two hours: preparing everything you need to get things done, setting yourself up, there is no sitting at the computer getting lost in your email thinking 'Ugh I have so much to do, I only have two hours.' So taking that time and making the absolute most of it. Doing too many things at once I think is really pulling yourself in multiple directions. So the same way we would prioritize for a brand new project, that is how you need to prioritize this. Maybe you aren't doing everything you were before, maybe you are getting more help from others than you were before, figuring how you can fit that in in a way that still makes you feel like you can be a good parent, a good worker -- all of those things versus stretched thin trying to do it all at one time.

Kathryn Vasel, CNN Business

2021-05-17 15:25:00

business

success

https://www.cnn.com/2021/05/17/success/going-back-to-the-office/index.html

Why some companies want everyone back in the office - CNN

How the workforce will operate in the post-pandemic world is still in question.

success, Why some companies want everyone back in the office - CNN

Why some companies want everyone back in the office

How the workforce will operate in the post-pandemic world is still in question.More from Success Here's what Salesforce has learned as it reopens officesThese moms were doing it all. Then the pandemic hitGoing back into work? Prepare to prove you've been vaccinatedSurveys show many workers have grown accustomed to the benefits that working from home offers and want the flexibility in where they work to continue post-pandemic.While some companies have announced they will continue to operate remotely, others plan to take a hybrid approach, allowing employees to work from home some days and in the office the rest. But there are some companies that want things to go back to the way they were, with all their employees back in the office. "I am super passionate to get everyone back," said Sean Bisceglia, CEO of Curion. "What we are really missing is that creativity, and that spontaneity and the ingenuity and talking to your teammates face-to-face. The whole creativity has kind of been gutted without people being together. I've seen a big cultural effect of connecting to your co-workers."Read MoreCurion, a consumer product research and insights company, has around 350 employees across the US. Roughly half work in its testing facilities and the rest are in corporate offices. Its testing facilities closed for about a month last spring, but have been open ever since, with those workers coming back in phases to an eventual full return. But the company's corporate office workers have been working from home for more than a year now. And while productivity has increased, Bisceglia said that's part of the problem.Some workers can't wait to get back to the office "Productivity is through the roof, but it's over the top -- it's too much productivity where people are sending emails at 10:00 at night or 1:00 in the morning," he said. "You start worrying about burnout." The plan now is to have office employees back on a 50% rotational schedule by July 1 and then all employees back in the office 100% of the time by October 1. Some employees have already been working in the office. The company said it is paying attention to vaccination rates -- both on the national level and among its own workers, who they are surveying on a voluntary basis. "We believe that number will be higher than the national average," Bisceglia said. And while a recent employee survey showed that 65% of the company's workers want to return to the office in some capacity, he knows the transition might not be easy. "This one year has created so much emotional behavior ... this is probably going to be the hardest change management that we're going to have to do. The change to bring people back into the office is going to be a big effort."He added that some of the company's working parents have enjoyed the added time they get with their kids from working from home, and might not be eager to return to the office.Here's what Salesforce has learned as it reopens offices"We appreciate all that ... but that's the change management that we are going to have to deal with -- getting the working parents back into the office -- that is going to be the biggest change."Bisceglia recognized that the company risks losing employees over the decision. "We are in a very specialized field, we don't want to lose employees over this ... but I think it's worth the effort and the risk to bring back the culture and creativity and spontaneity." Workers who had pre-existing accommodations to work from home a few days a week before the pandemic will be able to continue to do so. But everyone else will need to return. "For those that were hired full-time to be in the office, that is our expectation come October, safely, of course," he said.To help with the transition, employees will initially be called back in teams to work two days a week in the office at first. For instance, finance and account services might come into the office on Mondays and Wednesdays and marketing and data services on Tuesdays and Thursdays.The company will use a hoteling system, meaning workers won't have a permanent desk but will instead reserve a desk when needed. He anticipates productivity to take a hit once everyone is back -- as workers spend more time commuting and socializing than when they were remote -- but, he thinks, the benefits of being in-person outweigh the risk. 'I don't have to choose between lifestyle and career.' How remote work changed these people's livesIn the UK, business connectivity provider Convergence Group plans to have some workers back in the office full-time. Employees that are part of the sales lead generation and service teams are expected to return to the office, while the majority of employees across the rest of the group will take a hybrid approach."It's the part of the business where interaction with each other is really key," said Franki Hale, Convergence Group's director of strategy and change. The company has a 24/7 call center and working remotely made it harder to resolve problems at the same pace as when teams were in office. "If there is a major service outage or issue they can just walk into a room and get on a white board and it takes them probably 10 minutes to resolve it rather than try to get everyone together to collaborate over [Microsoft] Teams or Zoom," said Hale.Chicago-based law firm Schoenberg Finkel Beederman Bell Glazer has had staff return to work over the past few months. Teams rotate coming in every other week. Some employees, including those in accounting department and office management, come in every day. "We thrive on being together, we are a friendly collegial group," said Adam Glazer, a managing partner of the 50-person firm. "And we are at our best when everyone is here and available and functioning together as a team." The firm is targeting June 1 as the return date for everyone to be back in the office if local regulations allow, and it will continue to keep an eye on local and state Covid numbers and rules. "Everything is subject to continuing to monitor the numbers and if the numbers go the wrong way, we will rethink this and ease up on the plans," said Glazer.The pandemic forced a massive remote-work experiment. Now comes the hard partWhile there have been some advantages to working in a remote world -- like not having to travel to take a deposition from someone in a different state -- collaboration and impromptu conversations have suffered, Glazer said. "In the practice of law there is nothing like being able to bounce an idea off a colleague down the hall or being of assistance when somebody else wants to run something by you," he said. Working from home offers employee flexibility, but it can also make it harder for young workers to gain experience from more tenured colleagues without in-person interactions. "It's of immense value to young attorneys who are still learning the craft, sampling ideas and living off of feedback, it's very helpful to be in the office for that," Glazer said. Glazer said there will be flexibility for employees to work from home when something unexpectedly arises."We will be much more tolerant and flexible about specific requests to work remotely," said Glazer. "We aren't ruling out the idea that it may be appropriate for certain people to work remotely on certain occasions. We are anxious, though, to regain a pre-pandemic sense of operations allowing for certain adjustments."

Kathryn Vasel, CNN Business

2022-01-27 16:35:48

business

success

https://www.cnn.com/2022/01/27/success/full-time-remote-decision-pandemic/index.html

These companies decided to go fully remote -- permanently - CNN

As the pandemic heads into yet another year, companies are still grappling with uncertainty in the workplace.

success, These companies decided to go fully remote -- permanently - CNN

These companies decided to go fully remote -- permanently

As the pandemic heads into yet another year, companies are still grappling with uncertainty in the workplace. More from Success Employers are preparing for big pay raises in 20225 mistakes to avoid if you have to lay off employees remotelyJob seekers have so much leverage in this labor market, they're ghosting employersMany have attempted to reopen their offices, only to be stymied by new variants or outbreaks that necessitated yet another shutdown or a delayed re-opening. So some businesses are removing the guesswork altogether by deciding to remain fully remote -- permanently.Here's what happened when these companies decided to pivot to remote work full-time. Enabling employees to make major life changesRead MoreWhen David Cancel started sales and marketing software company Drift in 2015, he and his co-founder believed strongly in an in-person work culture. "We were very strict about that. No one worked remotely. Everyone was in the office five days a week. All our rituals were in person, like our meetings, our kickoffs, our events... a very face-time-centric culture," said Cancel, who is also CEO.But when the pandemic hit in March 2020, offices across the country -- including Drift's headquarters in Boston and three satellite offices -- closed, and work became entirely remote. "It was a huge panic," said Cancel. "It wasn't that we didn't support work from home, we were against it. We didn't have any rituals, or setup or practice with doing anything remote." Employers had a rough 2021. Now here comes OmicronAt the start, adjusting the company's culture to a remote model was a challenge. "The hardest part for me in this transition was I had a limiting belief that I couldn't hire the most senior people...without meeting them in person. But I was forced to do that [when the pandemic started] and once I saw it happen and see those people get integrated and be productive, then... I said 'Oh, we should do this forever,'" said Cancel.In early 2021, the company announced that workers will work remotely full-time, and that office spaces will be used as "conversation spaces" for meetings, collaboration and events. "Those spaces are not to be used for primary work or set up for primary work." The about-face on remote work came with benefits for both Cancel and his workers. It allowed him to move back to New York City, for example, and his employees have also been able to make major life moves. "We've seen a lot of advantages to the team: people have moved to lower-cost places, closer to family -- and because of those moves, they've been able to get married earlier or make different life choices that they've been putting on hold for a long time."The company decided that employees who relocate to lower-cost cities would not have their pay adjusted. "We are location-agnostic when it comes to pay," Cancel said. Also hybrid work, with workers spending some days in the office and some at home, wasn't an option. "Inherently, we have a bias toward people who are around, whether we can detect it or not," said Cancel, who said he saw this firsthand at a previous company. "People that were in the office with the managers....they got disproportionately favored for promotions and opportunities. I wanted to make sure we were equitable that no matter where you were...you would have equal opportunity to everything in the company."Building a more diverse workforceDavis Smith, CEO of outdoor gear and apparel company Cotopaxi, was also firmly against remote work before the pandemic. But less than two months after employees started working from home in March 2020, he changed his mind. "We started realizing, [remote work] is working. Our teams are functioning more efficiently than ever before," he said. The decision to go fully remote means Smith doesn't have to worry about the constant decision making that comes with reopening or closing the offices. "It seems so distracting... we are just focused on building the business and great culture. We're not worried about having to make all those decisions. There's been a huge benefit in that -- just making that decision early," he said.The company kept its Salt Lake City office, and Smith said some employees choose to go in every day. "It's a small percentage...those people wanted a place to go." Smith said he rarely goes into the office these days, but finds that he's more deliberate with his relationships working remotely. "Every single day I have a goal to do one outreach to someone on our team -- I wasn't doing that before. I wasn't that intentional, I just thought: 'Oh I will will run into them in the office.'" The company has tripled in size during the pandemic and being fully remote has allowed it to build a more diverse team. "It's a lot easier to hire a diverse team when you aren't limited to a specific geography."While successful so far, Smith said he still worries about the potential long-term implications of a remote working model."I've asked myself many times: At what point does this catch up to us? Because so many people are new and maybe they don't understand the culture as deeply. But our culture has changed and all those rituals and traditions, we had to wipe them clean and start over and we've created new [ones] that work for this new environment." The company sends employees a weekly poll via Slack that asks about things like engagement, culture and other topics, including compensation and burnout, to help keep a pulse on employee sentiment and morale."There has been a lot of power in us saying early on we embrace this new way of working. This is the way of the future: we can either fight it or embrace it and figure it out faster than everyone else," said Smith.Keeping workers happyPre-pandemic, most of the employees at online brokerage firm Robinhood were expected to be in the office every day. But in December the company told employees it will become primarily remote, meaning there will be no location or regular in-office requirements for most workers. But it will keep its offices, including its headquarters in Menlo Park, California, open to employees. The shift to remote work over the course of the pandemic has had a noticeable effect, said Cindy Owyoung, vice president of inclusion, equity and belonging at Robinhood. "Over time, it became increasingly clear that our employees were happiest and did their best work when they had the flexibility to determine where and when they work best," Owyoung said in an email to CNN Business.

Kathryn Vasel, CNN Business

2021-04-13 14:47:26

business

success

https://www.cnn.com/2021/04/13/success/workers-back-to-the-office/index.html

Some workers can't wait to get back to the office - CNN

For some workers, remote work has been burdensome, with distractions from kids, partners and roommates, makeshift work spaces and little to no divide between work and home life.

success, Some workers can't wait to get back to the office - CNN

Some workers can't wait to get back to the office

While some employees are enjoying the flexibility of working from home, Janell Longa can't wait to return to the office.More from Success To prevent burnout, LinkedIn is giving its entire company the week off2020 taxes: Everything you need to know76 all-cash offers on one home. The housing madness shows no signs of slowing"As soon as I'm...fully vaccinated I am going back to the office," said Longa, who does administrative IT as a long-term temp for a medical supply company.She and her husband have been working from their 550-square-foot apartment in Florida since last spring. And because they both work with sensitive information, they can't be in the same room, so she works from their bed while he's on the loveseat in their living room. "I am probably going to have permanent back and shoulder problems for the rest of my life because of this past year," she said.Remote work during the pandemic has been a boon for some workers, giving them more time with family, more freedom and flexibility over their schedules, plus the comforts of home. And many companies have pledged to allow employees to work fully or partially remote even after the pandemic ends. Read More'I don't have to choose between lifestyle and career.' How remote work changed these people's livesBut for some, remote work has also been burdensome, with distractions from kids, partners and roommates, makeshift work spaces and little to no divide between work and home life."There is a group that wants to go into the workplace," said Brian Kropp, chief of research for the Gartner Human Resources Practice. "They don't have a place to work, or they have roommates -- they don't have the physical setup and infrastructure to work from home."Longa barely leaves the bedroom during the day, usually only for bathroom breaks. And if her husband works late, she has to stay in the room or leave the apartment. Springs in the mattress she sits on are damaged from her long days, and the side of the loveseat where her husband sits to work is worn out. She's also worried she's going to have to replace their personal laptop, which she's been using for work. "It's literally on all the time from 7:30 in the morning until I go to bed. And I use my keyboard all day now, which I didn't used to do."One benefit is that Longa doesn't miss her nearly 45-minute commute to and from work each day, and can now go a few months without having to fill her car up with gas.But the commute can act as a break between work and home life, and without it, work-life balance has been elusive for many remote workers. "I am really keen to get back to the office," said Sarah Williams, associate director of the Business School, University of Wolverhampton, UK, who's been working from home for more than a year. "For me, that blurring of the lines between home and work has been tough because I've felt like I am living at work rather than working at home." Since working remotely, her days tend to be dominated by back-to-back meetings, which don't leave a lot of time to step away from her home office.Sarah Williams, associate director of the Business School, University of Wolverhampton, UK, has been working from home for more than a year and misses the buzz of being on campus."So you aren't actually getting a chance to process anything or start to work on anything until after the working day, because the working day is spent in meetings," she said. "The productivity happens after that. When you are writing reports or actually actioning the items that are given to you in the meeting, you are doing that after 6:00 pm." Being in the office also has professional advantages -- especially for new employees. "People who are starting new jobs, it's very difficult in a remote work environment," said Erica Volini, Deloitte's Global Human Capital leader. "They want to get to know the organization, understand the culture. They feel like those connections with their peers and manager can help them to move up within the organization and without that it sort of feels like 'Am I moving forward?'"Working from home can also be isolating."The big issue for most employees is the social part of it -- getting coffee with a friend is fun, happy hours, and talking about what you did over the weekend -- all that stuff matters," Kropp said.It's been a year. Here's what your home office should look likeSocial connections are harder to forge when working remotely. And while technology has made collaboration easier, it doesn't always make up for in-person interaction. "What is missing are those informal conversations that just spark when you are at the water cooler together. Those ideas when you are passing in the hallway and you say, 'oh I meant to talk to you about that' -- that is very difficult to get done in a remote work environment," said Volini. "That is a big part of how organizations build new ideas, communities and relationships." Williams said she misses the buzz of being on campus. "I am missing the corridor conversations, the quick coffees in the coffee shop that spark ideas ... you simply can't recreate those chance encounters when you are working from home."When she's able to return, Williams is hoping to spend the majority of her days working from her office on campus, and one or two days a week at home. Companies that make the decision to go all virtual could lose employees, but the same can be said for companies who require everyone back in the office."Employees are signing up for a certain culture and a certain experience. But it's going to work both ways. I think there will be some employees who really gravitate toward a company that makes a remote-first option available," said Volini.

Anneken Tappe, CNN Business

2022-03-09 15:10:59

business

economy

https://www.cnn.com/2022/03/09/economy/us-job-openings-quits-january/index.html

No end to the worker shortage: America had 11.3 million jobs available in January - CNN

America's worker shortage is far from over: In January, the nation had 11.3 million jobs to fill and not enough workers to do so, according to new data from the Bureau of Labor Statistics.

economy, No end to the worker shortage: America had 11.3 million jobs available in January - CNN

No end to the worker shortage: America had 11.3 million jobs available in January

New York (CNN Business)America's worker shortage is far from over: In January, the nation had 11.3 million jobs to fill and not enough workers to do so, according to new data from the Bureau of Labor Statistics.This exceeded economists' expectations but was a decrease from the revised December number, which was updated to be a new record high at 11.4 million. The previous peak for open positions was set at 11.1 million last July.The Job Openings and Labor Turnover Survey is just the latest economic report to witness a big revision. Analysts and economists have become used to significant changes to other jobs data, including the government's monthly employment report, throughout the pandemic. That has thrown a wrench into the methodology of a lot of the data economists rely on.Despite the high level of available positions, job openings fell in several industries as infections from the Omicron variant of the coronavirus weighed on some businesses. Hotels, restaurants and bars recorded the biggest decrease in available positions, followed by transportation, warehouse, utilities and the federal government.Professional and business services, education and transport and warehousing counted the most available job openings.Read MoreMeanwhile, the number of hires and quits were unchanged between December and January: 6.5 million workers were hired and 4.3 million workers quit their jobs at the start of the year, the data showed Wednesday."The hires rate remains higher than the quits rate in every major industry. This indicates that when workers quit, they are taking other jobs -- likely in the same sector -- not dropping out of the labor force altogether," said Elise Gould, senior economist at the Economic Policy Institute, in a tweet. The quits rate improved to 2.8% from 3% in December.Better pay, as people are trying to offset the higher prices everywhere from the grocery store to the gas pump, has been a big motivator for Americans to switch jobs. Correction: A previous version of this story did not take into account the Bureau of Labor Statistics revisions to the December data. Following that revision, December job openings are the new record high.

Matt Egan, CNN Business

2022-03-16 12:37:17

business

business

https://www.cnn.com/2022/03/16/business/gas-prices-biden/index.html

Biden demands faster drop in gas prices as oil tumbles - CNN

President Joe Biden is using his bully pulpit to call out the tendency for gasoline prices to go up like a rocket when oil spikes, but only drop like a feather when crude crashes.

business, Biden demands faster drop in gas prices as oil tumbles - CNN

Biden demands faster drop in gas prices as oil tumbles

New York (CNN Business)President Joe Biden is using his bully pulpit to call out the tendency for gasoline prices to go up like a rocket when oil spikes, but only drop like a feather when crude crashes.Biden fired off a tweet Wednesday morning highlighting the painfully slow decline in gasoline prices in a bid to draw scrutiny to a decades-long trend that critics say hurts consumers by failing to pass savings along to drivers. "Oil prices are decreasing, gas prices should too," Biden said on Twitter. "Last time oil was $96 a barrel, gas was $3.62 a gallon. Now it's $4.31. Oil and gas companies shouldn't pad their profits at the expense of hardworking Americans."Oil prices are decreasing, gas prices should too. Last time oil was $96 a barrel, gas was $3.62 a gallon. Now it's $4.31. Oil and gas companies shouldn't pad their profits at the expense of hardworking Americans. pic.twitter.com/uLNGleWBly— President Biden (@POTUS) March 16, 2022 The administration's focus on the intricacies of energy prices shows the level of frustration inside the White House with one of the central drivers of high inflation. Gas prices skyrocketed to record highs last week, following a spike in crude oil to levels unseen since 2008. Read MorePrices at the gas pump are going down -- but only very gradually. The national average for regular gas dipped to $4.31 a gallon on Wednesday, according to AAA. That's down a penny from Tuesday and two pennies from Monday. That's despite the fact that Brent oil collapsed by 28% between the March 6 intraday peak and Tuesday's close. 'It just seems to take a long time'This is nothing new. The industry even has a nickname for this practice: Rockets and feathers."This has been going on for 40 years," Andy Lipow, president of consulting firm Lipow Oil Associates, told CNN. "Prices do dip, it just seems to take a long time. You can't deny the data that is out there."Old or new, Biden isn't a fan, especially after observing this phenomenon last fall when gas prices retreated slowly after the administration released emergency oil reserves and Omicron hit."Try explaining how it's just rockets and feathers to President Biden, and you'd better be ready to hear, 'That's a bunch of malarkey' coming back at you," a senior White House official told CNN. "The president is very much within his rights to point out that if you're going to have rockets on the way up, you need to have rockets on the way down, not feathers."Oil prices dropped 30% in a week. What gives?But it may be unreasonable to say pump prices should change instantly just because oil prices do. It takes time for price swings to filter through the supply chain. A gas station owner may be selling fuel today that was purchased days earlier when oil prices were much higher. (That's especially true in today's extremely volatile market.)"Don't get me wrong. There would be some lag," Lipow said. "What if I was the guy who just bought my tanker load yesterday and the next two days crude oil dropped?"Tom Kloza, global head of energy analysis at the Oil Price Information Service, said gas stations have little choice but to pass along the impact of higher oil prices on the way up because of the pressure on their profit margins."And on the way down, It's like, 'We'll be as patient as we can,'" Kloza said. "They will fall, but at a much slower pace."Joe Brusuelas, chief economist at consulting firm RSM, noted that gasoline prices are a function of past purchases and expectations around the cost of future deliveries -- and there is vast uncertainty right now about the direction of oil prices. "Criticism of price setting at gasoline stations is somewhat misguided," Bruseulas said. $1,300 hit to householdsThere are real economic consequences here. Every 10-cent increase in the price of gasoline costs consumers at least $11 billion over the course of a year, according to Moody's Analytics.Gas prices have surged over the past year and a half, and at the end of last week, they stood about $1.50 a gallon higher than the 2019 average. If prices stay this high, consumers will pay $165 billion more over the course of 2022 than they did in 2019, according to Moody's Analytics.Oil prices dropped 30% in a week. What gives?Put another way: Annual average spending on gasoline would climb by roughly $1,300 per US household, Moody's told CNN. The senior White House official suggested gas station owners are not passing along savings to consumers as quickly as they could."This is using price power in a way that is not particularly fair from the perspective of the consumer," the official told CNN.GasBuddy's Patrick De Haan said earlier this week the gas price drop should accelerate if oil stays below $100 a barrel. "Stations lost their shirt on the way up, but now margins are improving and they will start passing the discounts on to you," De Haan wrote on Twitter.'Uneven' link between oil and gas pricesOf course, the oil industry was in deep distress just two years ago. Oil prices crashed, with US crude turning negative for the first time ever, driving gasoline prices dramatically lower.The National Association of Convenience Stores, a trade group that represents the fuel retailing industry, acknowledged in a blog post Wednesday that retailers might not immediately slash prices after an oil rally "to make up for the margin they lost during the price increase.""On any given day, retailers don't know where wholesale prices could be heading, so they try to recapture lost margin as quickly as possible—because they don't know if wholesale prices may rise and margins could tighten," the NACS said in the post.The industry group also pointed out that one complicating factor is that the fuels industry is currently going through its annual government-mandated transition to summer-blend fuels. "Retailers want lower gas prices just as much as their customers," the NACS said. "When prices are low, consumers have more disposable income to make in-store purchases. They're also happier, which is also good for business."The American Petroleum Institute, the trade group representing the oil and gas industry, said in a statement that retail prices in many industries go down slower than they go up. "On gas prices, the American people are looking for solutions, not finger pointing," said Frank Macchiarola, API's senior vice president of policy, economics and regulatory affairs.There is some academic research that supports the argument from the White House.The Federal Reserve Bank of St. Louis published a report in 2014 pointing out there is an "uneven" relationship to how oil prices impact gas prices. That report was based on a review of academic work measuring the so-called pass-through of oil and gasoline. "When oil prices rise after being steady for some time -- gasoline prices shoot up quickly," the Fed paper said. "In contrast, when oil prices fall after being steady for some time, gasoline prices retreat slowly."Who owns the gas?Biden's focus on this issue comes after House Democrats wrote a letter last week urging Congressional leadership to immediately investigate and hold hearings on "alleged price gouging within the oil and gas industry."Democrats also introduced a Big Oil Windfalls Profit Tax that would aim to "curb profiteering" by oil companies. Although gas stations are often emblazoned with the logo of a major oil producer like Exxon or Shell, they are often owned and operated by independent retailers. Gas station owners are licensed to represent that household brand. For example, ExxonMobil (XOM) says it does not own or operate retail gas stations in the United States, even though there are countless Exxon and Mobil gas stations throughout the country. As of the end of 2020, Exxon listed nearly 11,000 distributor sites in the US. Oil refiners own less than 5% of the nation's roughly 150,000 retail gas stations, according to the American Petroleum Institute. Many gas stations are owned by an individual or a family, while others fall under a corporate entity that owns hundreds. At the end of the day, Kloza said people who can wait before buying gas will benefit."If you can hold off five days to fill up your tank, you will get a lower price," Kloza said.

Anneken Tappe, CNN Business

2022-03-16 18:01:21

business

economy

https://www.cnn.com/2022/03/16/economy/federal-reserve-interest-rate-hike/index.html

Federal Reserve hikes interest rates for the first time since 2018 - CNN

The Federal Reserve is raising interest rates for the first time since 2018, the central bank announced Wednesday at the conclusion of its highly anticipated two-day monetary policy meeting.

economy, Federal Reserve hikes interest rates for the first time since 2018 - CNN

Federal Reserve hikes interest rates for the first time since 2018

New York (CNN Business)The Federal Reserve is raising interest rates for the first time since 2018, the central bank announced Wednesday at the conclusion of its highly anticipated two-day monetary policy meeting.The move marks the end of the Fed's pandemic-era easy money policy and comes amid soaring inflation across America. The federal funds rate now stands at 0.25-0.5%."We feel the economy is very strong and will be able to withstand tighter monetary policy," Fed Chair Pro Tempore Jerome Powell told journalists during Wednesday's post-meeting press conference.The quarter-percentage-point increase had been well telegraphed by the central bank, with Powell hinting at it repeatedly over the past few months. Earlier this month, he told lawmakers that he favored a quarter-point raise.This is the first rate increase since December 2018 and the first time rates have moved from their level of near zero since the bank slashed them almost exactly two years ago in March 2020 in the wake of the pandemic. Read MorePrices have soared over the past year for the majority of Americans, pushing inflation well above the Fed's long-term target of 2% and forcing its hand. The central bank has a dual mandate to keep prices stable and employment at the maximum.But during the pandemic, prices have risen on the back of high demand, supply chain chaos and higher energy costs. Initially, Powell referred to the pandemic inflation as "transitory" before retiring the use of the term during a Congressional hearing last November. All the expectations for factors that could bring down inflation -- such as an improvement in the supply chain gridlock and rising labor force participation -- have not materialized, Powell said. So the Fed had to act.For the year ended in February, consumer prices rose 7.9%, while the prices US producers received for their goods soared 10% over the same period. Neither figure is adjusted for seasonal swings.Meanwhile, the US labor market recovery has come along swiftly following the shock of the spring 2020 shutdown, which marked the largest job loss in history. As of February, the nation was still short 2.1 million jobs compared with the same month two years earlier.Between the strong job market and high inflation only half of the Fed's mandate is fulfilled.What will the Fed do next?Wednesday's policy update also included a new set of projections from the central bank, showing that Fed officials expect a median federal funds rate of 1.9% by the end of this year, before raising it to 2.8% in 2023. But the Fed could also raise rates faster, if inflation does not moderate. The central bank has six meetings left this year. The next one is scheduled for May 3-4.The central bankers also revised up their inflation predictions to a median of 4.3% by year-end, compared with 2.6% projected in December.US economic growth was meanwhile cut to a median 2.8% this year, from the 4% expected in December.Spillovers from the Russia-Ukraine conflict will hit the US economy and are already putting upward pressure on inflation, Powell said Wednesday."The implications for the US economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity," the Fed said in Wednesday's statement.But there's no reason to worry just yet."We think that will hit GDP to some extent; 2.8% is still really strong growth," he said. "We feel the economy is very strong and will be able to withstand tighter monetary policy."

Paul R. La Monica, CNN Business

2022-03-16 17:05:32

business

investing

https://www.cnn.com/2022/03/16/investing/stocks-federal-reserve-inflation-russia-ukraine/index.html

Covid. War. Inflation. Recession fears. The stock market can't keep up - CNN

It's been a year full of worries for investors, from geopolitical conflict to inflation to the pandemic, and it doesn't look like the concerns will ease anytime soon.

investing, Covid. War. Inflation. Recession fears. The stock market can't keep up - CNN

Covid. War. Inflation. Recession fears. The stock market can't keep up

New York (CNN Business)It's been a year full of worries for investors, from geopolitical conflict to inflation to the pandemic, and it doesn't look like the concerns will ease anytime soon.The combination of these major macroeconomic and geopolitical issues will make it difficult for stocks to climb out of their hole and finish 2022 in positive territory, some experts say."There are way too many headwinds to expect good returns for stocks this year," said David Spika, president and chief investment officer of GuideStone Capital Management. Despite big Wall Street rallies the past two days, the stock market has tumbled overall in 2022. The Dow is down nearly 7% this year, the S&P 500 has fallen about 10% and the Nasdaq is off more than 15%.Three concerns in particular are weighing on stocks. Russia's invasion of Ukraine has pushed oil prices up.Read MoreBefore that, investors were already fretting about inflation and the likelihood that the Federal Reserve would raise interest rates multiple times this year to fight it. Meanwhile, Covid-19 hasn't gone away, with the recent spike in cases in China raising alarm bells."I don't see any way we get positive returns for stocks," Spika said, adding that it would be a victory if stocks "only" fall in the single digits this year.Uncertainty continues to weigh on investor sentimentSpika said it's unreasonable to expect that the Russia-Ukraine crisis will end anytime soon. And even if it did, Spika argues that stock valuations are too high given that interest rates are about to rise."Double-digit percentage drops are possible. The past few years were strong and that was fueled by easy monetary policy," he said. "That tailwind is about to turn into a massive headwind." Stephanie Lang, chief investment officer with Homrich Berg, agreed that "the age of easy money is over."While the Fed's higher interest rates are high on investors minds, it's only one part of the problem for the stock market.When will people get fed up with high prices?"The list of strains on stocks is pretty long. We have the war, the reminder that the pandemic is endemic and significant, long-lasting disruptions to supply chains," said Vincent Reinhart, chief economist at Dreyfus and Mellon. "Investors are understandably hunkering down."Reinhart added that the Fed will probably raise rates several times this year to try to put a damper on inflation. But there are concerns that the central bank waited too long to raise rates and now may face a stagflation problem, the combination of slow growth and high prices."It's going to be tough for the Fed to get it right," Reinhart said. "Any reasonable person would say that recession risks are more elevated today than six months ago."Lang thinks the central bank "missed the mark on inflation" and will have to make more aggressive moves going forward. The Fed is in a tough spot, but some hope it won't raise rates too sharplyOther experts aren't so sure that major moves are ahead. They say that the Fed recognizes there is a risk of going overboard with rate hikes, and that gradual, small increases may not slow down the economy too drastically. That could mean that the worst may soon be over for stocks."If the Fed overshoots on rate hikes that would be a longer term problem for the economy," said Louise Goudy Willmering, a partner with Crewe Advisors. "But if the Fed isn't too aggressive, we still can have growth. The economy doesn't have to fall off the side of a cliff."Willmering also said that it's way too early to give up on hopes of a market rebound later this year. It's only March, after all. Of course, it may be tough for stocks to stage to a huge rally like the one following "the fear induced drop of 2020," she said. But she added that if worries about Ukraine and supply chain issues finally subside, earnings growth could return to more normal levels, which would boost stocks.Biden's plan to reshape the Fed just hit a hurdleEven if the broader market does continue to struggle, there may be some pockets of strength. Lang said investors should be looking at quality, safe haven stocks that pay dividends, such as consumer goods companies and healthcare firms. And Spika said energy stocks and smaller companies with more exposure to the US economy than international markets should also do well in a rising rate environment.Still, even with stocks rebounding as they have the past few days, there may be more volatility ahead — which could create better opportunities for investors. "When do you start buying?" Spika said. "Once we get clarity about what's going on in Ukraine."

Mark Thompson, CNN Business

2022-02-08 11:43:21

business

business

https://www.cnn.com/2022/02/08/business/bp-shell-profit-windfall-tax/index.html

BP and Shell profits revive calls for windfall tax to tackle fuel poverty - CNN

News that Britain's biggest oil companies made $32 billion in profit last year is stoking calls for the UK government to impose a temporary tax on their earnings to help households pay soaring energy bills.

business, BP and Shell profits revive calls for windfall tax to tackle fuel poverty - CNN

Huge profits at BP and Shell revive calls for windfall tax to tackle fuel poverty

London (CNN Business)News that Britain's biggest oil companies made $32 billion in profit last year is stoking calls for the UK government to impose a temporary tax on their earnings to help households pay soaring energy bills. Reporting earnings on Tuesday, BP (BP) posted an annual profit of almost $12.9 billion. Shell (RDSA) reported a profit of $19.3 billion last week after what it described as a "momentous" year. Profits at both companies have been boosted by a huge rebound in oil and natural gas prices after they collapsed at the start of the pandemic. The bumper earnings have allowed them to accelerate investments in lower carbon and renewable energy projects while also handing billions of dollars to investors in the form of dividends and share buybacks. Between them, BP and Shell spent $7.7 billion buying back shares last year, and the windfall for investors looks set to continue.BP said it expected to be able to deliver share buybacks of $4 billion per year, while Shell announced plans to hand back $8.5 billion to shareholders in the first half of 2022, including proceeds from last year's sale of its assets in the Permian Basin in the United States.Read MoreThe huge profits coincide with the announcement that energy bills for most UK households will rise by 54% in April, fueling a cost-of-living crisis that the Bank of England has forecast will mean the biggest drop in disposable incomes in decades.Anti-poverty campaigners and opposition politicians have been calling for weeks for Prime Minister Boris Johnson's government to introduce a one-off levy on oil and gas companies to fund a cut in sales tax on energy bills and financial relief for the poorest households who are already struggling with 30-year high inflation.Chancellor Rishi Sunak tried soften the blow of rising gas and electricity bills last week by spreading the pain over a period of years. The finance minister also announced a £150 ($204) reduction in local taxes for about 20 million households.Despite the measures most households will still be left paying hundreds of pounds more to heat and light their homes. The Joseph Rowntree Foundation said some families on low incomes would face annual bills as high as £2,326 ($3,152) from April, while the Resolution Foundation warned that the number of households in "fuel stress" — those spending more than 10% of the family budget on energy -— would double to 5 million. "The Chancellor's energy plans last week left families more worried than ever," tweeted Labour Party spokesperson Rachel Reeves on Tuesday. "It's time for Labour's plan for a one off windfall tax on oil & gas producers to cut bills."Reeves has said that the rate of corporate tax the companies pay should be increased by 10 percentage points for a year. The additional revenue would be spent on eliminating the 5% sales tax on energy for a year. Labour would also increase energy subsidies for the poorest households to £400 ($545) per year from £140 ($190).Windfall taxes have been used in the past by British governments of the left and right, but there's no sign that Johnson and Sunak are about to adopt the Labour Party proposal. Industry group OGUK, which represents UK oil and gas producers including Shell and BP, said last month that a windfall tax would make energy companies less likely to invest in the country, causing "irreparable damage to the industry" that would "leave consumers even more exposed to global shortages."

Charles Riley, CNN Business

2022-03-16 13:22:45

business

energy

https://www.cnn.com/2022/03/16/energy/russia-oil-output-opec/index.html

Russia could lose 30% of its oil output within weeks, IEA warns - CNN

Russia could soon be forced to curtail crude oil production by 30%, subjecting the global economy to the biggest supply crisis in decades — that is, unless Saudi Arabia and other major energy exporters start pumping more.

energy, Russia could lose 30% of its oil output within weeks, IEA warns - CNN

Russia could lose 30% of its oil output within weeks, IEA warns

London (CNN Business)Russia could soon be forced to curtail crude oil production by 30%, subjecting the global economy to the biggest supply crisis in decades — that is, unless Saudi Arabia and other major energy exporters start pumping more.The world's second-largest crude oil exporter could be forced to limit output by 3 million barrels per day in April, the International Energy Agency warned on Wednesday, as major oil companies, trading houses and shipping companies shun its exports and demand in Russia slumps. Russia was pumping about 10 million barrels of crude per day, and exporting about half of that, before it invaded Ukraine. "The implications of a potential loss of Russian oil exports to global markets cannot be understated," the IEA said in its monthly report. The crisis could bring lasting changes to energy markets, it added. Canada, the United States, the United Kingdom and Australia have banned imports of Russian oil, affecting roughly 13% of Russia's exports. But moves by major oil companies and global banks to stop dealing with Moscow following the invasion are forcing Russia to offer its crude at a huge discount.Big Western oil companies have abandoned joint ventures and partnerships in Russia, and halted new projects. The European Union on Tuesday announced a ban on investment in Russia's energy industry.Read MoreThe IEA, which monitors energy market trends for the world's richest nations, said that refiners are now scrambling to find alternative supply sources. They could be forced to reduce their activity just as global consumers are hit with higher gasoline prices.So far, there's little sign of relief. Saudi Arabia and the United Arab Emirates are the only producers with significant spare capacity. Both countries are part of the 23-member OPEC+ coalition, which also includes Russia. OPEC+ has been increasing its collective output by a modest 400,000 barrels per day in recent months, but often fails to meet its own targets. The UAE's ambassador to the United States said last week that his country supported pumping more, but other officials have since said it is committed to the OPEC+ agreement. Neither the UAE nor Saudi Arabia has so far shown a "willingness to tap into their reserves," according to the IEA. "The long-running inability of the bloc to meet its agreed quotas, mostly due to technical issues and other capacity constraints, has already led to sharp draws in global inventories," the IEA said. If major producers do not change course and open the taps wider, global markets will be under supplied in the second and third quarters of 2022, the agency warned. The West is trying to persuade Saudi Arabia and the UAE to change course. British Prime Minister Boris Johnson was visiting the Gulf Wednesday to discuss ways of increasing diplomatic and economic pressure on Russia with the leaders of both countries. The UK government said in a statement that the leaders are expected to discuss "efforts to improve energy security and reduce volatility in energy and food prices."Wild marketsGlobal energy markets have been extremely volatile in the wake of Russia's invasion. Just over a week ago, Brent crude leaped above $139 per barrel. Analysts warned prices could touch $185, then $200 as traders shunned Russian oil, pushing inflation even higher and adding huge strain to the global economy.But there's been a rapid reversal since then. Brent crude futures, the global benchmark, have cratered almost 30% from their peak. They settled below $100 per barrel for the first time this month after shedding another 6.5% on Tuesday.The crisis could help drive huge changes in global energy markets. Additional supply could eventually come online from Iran and Venezuela if the United States and its allies ease sanctions on the two countries. Talks over a nuclear deal with Iran appear to have stalled, but an agreement could still be reached. Last week, the European Union outlined plans to slash gas imports from Russia this year by finding alternative suppliers, speeding up the shift to renewable energy, reducing consumption through energy efficiency improvements and extending the life of coal and nuclear power plants.Saudi Arabia, meanwhile, is in talks with Beijing to price some of its oil sales in yuan, the Wall Street Journal reported on Tuesday. That would erode the US dollar's dominance in global energy markets and deepen Riyadh's ties in the east. — Mark Thompson and Julia Horowitz contributed reporting.

Anna Cooban, CNN Business

2022-03-15 12:13:39

business

business

https://www.cnn.com/2022/03/15/business/britain-cost-of-living/index.html

Britain's cost of living crisis is pushing millions to the brink - CNN

Nazmin Begum has a problem: she's having to pay much more to keep her two children warm and fed as the United Kingdom endures its worst cost of living crisis in three decades.

business, Britain's cost of living crisis is pushing millions to the brink - CNN

Britain's cost of living crisis is pushing millions to the brink

London (CNN Business)Nazmin Begum has a problem: she's having to pay much more to keep her two children warm and fed as the United Kingdom endures its worst cost of living crisis in three decades."Everything's increasing," she told CNN Business during a visit to The Boiler House, which provides discounted food, footwear and fuel vouchers from a red brick building on a public housing estate in east London. Begum's energy bills for her one-bedroom apartment have shot up by about £70 ($92) in the past three months, even though she's using similar amounts of fuel. She works at Tesco (TSCDF), a supermarket chain, where she has seen "every single product" rise in price."Milk was 80p ($1.05). The smallest one, that's gone to £1 ($1.31)," she said. "The bread — the cheapest bread that we used to do for £1 — has gone to £1.20 ($1.57)." Annual consumer price inflation hit 5.5% in January in the United Kingdom — its highest level since 1992 — fueled by product shortages and a sharp spike in demand as pandemic lockdowns were lifted. Wages aren't keeping pace. Read MoreAverage worker pay suffered its biggest drop in more than seven years in the three months to January, falling by 1% over the same period a year ago once inflation is taken into account, the UK Office for National Statistics said on Tuesday. And the war in Ukraine has driven energy costs even higher — gasoline and diesel prices have soared to new record highs in recent days.The Boiler House has multiple sites, including the Northwold Youth & Community Hub in east London.The Boiler House Youth and Community Space started its food pantry during the coronavirus pandemic. Unlike a traditional food bank, guests browse and shop for their own items, paying a £6.50 ($8.50) fee to receive about £35 ($46) worth of food and toiletries. But the charity's services have expanded to provide members with shoes and help paying their energy bills as many struggle with the most severe knock to their purchasing power in years. Davina Mathurin, project officer for The Boiler House, summarized the dilemma many are facing. "Do you either keep the house warm so [your] children don't get ill?" she said. "Or do [you] buy food so they can eat and they're not hungry?"Millions of people's fuel bills rose in October when Britain's energy regulator increased its consumer price cap — the maximum suppliers can charge per unit of energy — by 12% after a global natural gas supply crunch pushed wholesale prices up to record levels.A shopper carries his purchases in Walthamstow, east London, on February 13.On the day CNN Business visited in February, Mathurin had started referring some members to fuel voucher programs organized by charities that offer up to £49 ($64) to help with bills. Demand was high, she said. Monique John, another regular visitor to the Boiler House, told CNN Business that she owns a smart meter. The device helps her conserve energy, but her money does not stretch nearly as far as it used to. "You just literally watch [the meter] go down and down and down and down and down," she said. 'There's just nothing left to give'The worst is yet to come.In April, the energy price cap will soar by 54% — its largest ever rise — burdening 22 million people with an annual bill of roughly £2,000 ($2,618). Inflation is also expected to peak above 7% and a new payroll tax to help fund health and social care will take effect. Steam and smoke is seen rising from the chimneys and central heating vents of houses in January in London.The higher costs could push the number of "destitute" households — defined as those unable to afford basic necessities — up by a third to hit 1 million, according to analysis by The National Institute of Economic and Social Research. Russia's invasion of Ukraine last month pushed wholesale gas prices up even further as global markets panicked over whether sanctions would hit Russian exports. Analysts at investment bank Investec said Britons' annual energy bills after October — the next time the price cap is adjusted — could rocket past £3,000 ($3,927) as a result. "Now there's just nothing left to give from people's budgets. There's no way the numbers add up now," Lucy Bannister, policy campaigns manager at the Joseph Rowntree Foundation, an anti-poverty charity, told CNN Business."Children are feeling too scared to ask for the heating to be put on," she added. "They're really kind of taking on that stress that they're seeing their parents go through. Feeling hungry and not asking for a snack."The government will try to ease the pain by cutting local taxes and allowing millions of Britons to spread the cost of their energy bills over the next few years. A government spokesperson told CNN Business that it was "providing support worth around £12 billion ($16 billion) this financial year and next, to help households with the cost of living."The spokesperson added that the government would raise the minimum wage by more than £1,000 ($1,309) a year and hike a benefit claimed by people on low incomes by the same amount. Both will start in April.Critics say the government's response is inadequate and fails to target those who need it most. Ian Allinson, a member of the executive committee at Manchester Trades Union Council, which organized a protest against higher costs in February, said the situation is "alarming." He said the government's plan to delay energy payments won't help vulnerable people."We're appalled when the main measure the government has announced [to bring down energy bills] is that we have to give ourselves a loan," he told CNN Business. "A lot of people are struggling with debt already. The idea that there's then enforced further debt rather than any genuine help is just shocking."People march through Manchester on February 12, as protests were held nationally against rising energy bills and the cost of living.Angry Britons are taking to the streets. Protesters, and the opposition Labour Party, have called for a windfall tax on energy companies like BP (BP) and Shell (RDSA), which made billions in profit last year. "It's just scandalous that the government is choosing to not do something effective to support ordinary people but is happy to leave those mega profits for the companies that are inflicting this on us," Allinson said. Paychecks can't keep upAt a north London church, piles of groceries are laid out in a grid on the floor of a small side building. Volunteers are packing the donated items into bags before driving them to people's doors. Cooking Champions, an organization which caters for charitable groups and local businesses, started its delivery service in April 2020 after the pandemic hit. Annalisa Moseley is one of the first to receive her shopping. The mother-of-two said that without Cooking Champions, some weeks she would have no food. Thinking about what will happen after April is stressful, she said. Volunteers at Cooking Champions in London create food parcels using donated and redistributed food."It's all on my shoulders sort of thing to make sure the kids are warm and fed and everything," Moseley said. "It has been getting me down a little bit, but just got to carry on. Keep trying."Moseley receives Universal Credit — a benefit for people who are out of work or on low incomes. The government hiked payments by £20 ($26) a week during the pandemic, but that ended in October 2021. The benefit will increase by 3.1% in April, but that's less than half the expected rate of inflation.Rising wages can't keep up either. The Spring Community Hub, a food and clothes bank 15 miles to the south across London, runs another door-to-door delivery service. Lately, volunteers have helped increasing numbers of younger and more affluent people. "We're seeing more working people and people on those precarious hours particularly," CEO Felicia Boshorin told CNN Business. "When the actual money comes, it's not enough," she added.Parents are 'dreading' SeptemberSeptember looms large for parents worried about the cost of school uniforms. Shirts, sweaters and jackets emblazoned with school logos — mandatory in the United Kingdom — can run into the hundreds of pounds for a single child.One in 10 British families have fallen into debt buying items needed for school, according to a 2020 survey by The Children's Society, a charity. That figure could grow in 2022 — clothes and footwear were the biggest contributors to inflation in the month to January, according to the Office for National Statistics. Caroline Rice, who lives in Northern Ireland, is "dreading" the new school year. She is a member of Covid Realities, a research project documenting the experiences of low income families during the pandemic. "I can't afford £100 ($131) for oil, so why would I pay £50 ($65), £60 ($79) for a school blazer?" she said.Back at The Boiler House, parents are turning up with their children to browse shelves of colorful sneakers, donations provided by charity Sal's Shoes. Begum's daughter rushes over to a pair of white and pink sparkly Converse and tries them on. "With poverty there is that loss of dignity if you're just effectively being handed handouts," said CJ Bowry, the founder of Sal's Shoes.Sal's Shoes' St Paul's Centre in Crewe, on February 16.Its three pop-up stores around the country aim to give "families a shopping experience," she said. "So they can visit these shops and try on shoes and choose shoes and see a selection of shoes — but they don't have to pay."Sal's Shoes has sent nearly 3 million pairs to 54 countries in its eight years, though more and more are being sent closer to home. The charity distributed 48,000 pairs around the United Kingdom in 2021, its highest number ever. Bowry said she receives calls every day from school principals asking for support."We have headteachers who've done playground duty and then ring us because they've literally noticed children in their playground with the soles flapping off their shoes," she said. 'Hardship is harder'The Bank of England expects inflation to cool after peaking in April, but high prices will stick around. For people who have taken on new debts and fallen behind on their bills, there will be a scarring effect that could last for years. Research by the Joseph Rowntree Foundation last year found that 4.4 million low income households began borrowing or added to existing debts during the pandemic. Of that number, more than two thirds are behind on their repayments. Joseph De-Ville, another member of Covid Realities, lives in Cornwall with his wife and three children. He got into debt a couple of years ago to pay for his mother's funeral, and told CNN Business about the constant struggle to provide for his family. "This is the parts of life that people aren't seeing," he said. "We're locking it up into credit cards so we can cope, and then we're struggling to pay the debts because [of] the interest rates — because we're having to take high interest rate credit cards just so we can get by." For over a decade, real incomes and living standards for millions of Britons have dropped. For De-Ville, the rising cost of living is just the latest chapter of an extended crisis."Hardship is harder," he said.

Curt Devine, Casey Tolan and Majlie de Puy Kamp, CNN

2022-03-17 20:42:08

business

business

https://www.cnn.com/2022/03/17/business/putin-wealth-sanctions-invs/index.html

A palace, a yacht and a hidden fortune: How Putin purportedly maintains a life of luxury - CNN

The Russian President, who has drawn international ire for his recent unprovoked invasion of Ukraine, reportedly relies on billionaire oligarchs to support his lifestyle

business, A palace, a yacht and a hidden fortune: How Putin purportedly maintains a life of luxury - CNN

'There is literally no paper trail': How Russia experts say Putin hides a fortune

(CNN)The sprawling billion-dollar palace that sits on a hilltop overlooking the Black Sea is seen by some Kremlin critics as the ultimate emblem of Russian President Vladimir Putin's legacy of corruption.Dubbed "Putin's Palace," the 190,000 square-foot mega-mansion was purportedly built for his personal use with funds from billionaire oligarchs, whom he allegedly allowed to flourish in Russia's notoriously corrupt economy so long as they shared the wealth -- with him.The property has its own amphitheater, underground hockey rink and private seaport, according to a documentary produced by jailed Russian opposition leader Alexey Navalny's anti-corruption group. There is a no-fly zone in the skies above and a no-boating zone in the surrounding waters. The magnificent fortress stands in stark contrast to the tiny 800-square-foot apartment Putin claims in his official 2020 financial disclosure. Yet, despite the opulence of the hilltop retreat, "I would be very surprised if Putin ever sets foot in there again," Nate Sibley, an expert on Russian corruption who advises members of Congress, told CNN. Read MoreSibley said the palace symbolizes what he sees as a bygone era of Putin pursuing, through the wealth of oligarchs, a luxurious lifestyle that he could never afford on his government salary. While Putin is believed to have amassed a hidden fortune by such means earlier in his career, Sibley said, he has since become less reliant on his wealthy benefactors over the years and has surrounded himself instead with government and military loyalists who share his hardline nationalist views. The sprawling palace and property on the coast of the Black Sea are seen in this image from a video by Alexey Navalny's Anti-Corruption Foundation.That shift, some Russia experts told CNN, may make it more difficult to make Putin personally feel the sting of economic sanctions the US and its European allies have imposed to punish him for invading Ukraine.Putin has positioned himself, as Sibley put it, "above the fray." It wasn't always that way. Nearly two decades before Putin drew international ire for his most recent unprovoked invasion of Ukraine, the Kremlin had Russia's richest man plucked off his private jet and charged him with crimes against the state. Mikhail Khodorkovsky, an oligarch worth an estimated $15 billion at the time, sat caged in the middle of the courtroom during his highly publicized trial. Khodorkovsky, who had been critical of government corruption under Putin's leadership, was convicted of tax evasion and fraud, though he argued the charges were politically motivated. Putin pardoned him in 2013 and he has since lived in exile.Biden is vowing to seize Russian oligarchs' yachts. Here's where they are right now Putin's bold move against the billionaire oil magnate was seen as a message to other oligarchs: You might be next.The tactic demanded the unwavering loyalty of the oligarch class. The ensuing influx of cash, gifts and goodwill is one explanation for how Putin, who claims a salary of just $140,000 a year, is suspected of being one of the richest people on the planet. He is rumored to own or have access to not only the Black Sea palace, but also a $100 million yacht, according to published reports. CNN was unable to verify Putin's connection to the palace or yacht. The Kremlin has dismissed reports of Putin's purported hidden wealth.That the properties and other possessions aren't in his name doesn't matter, said Tom Burgis, author of a book on international money laundering called "Kleptopia." Burgis likened Putin to The Godfather and said it's understood that when he asks an oligarch for something, it's not really a request.Mikhail Khodorkovsky, left, and his close associate, Platon Lebedev, seen in a defendant's cage at a courtroom in Moscow on July 12, 2004."Ultimately they owe everything they have to the boss. And with the click of a finger, as he has shown in the past, Putin can take everything," Burgis said. "However influential they may seem, they are ultimately dependent on him."Several of Putin's closest associates -- including childhood friends, a woman who was reportedly his former lover, and a professional cellist who is the godfather of one of his daughters, have secretly amassed huge fortunes outside Russia during his time in power, according to leaked financial documents. A complicated web of shell companies, offshore banks and hidden transactions obscures their wealth, with accounts spirited away inside one another like Russian nesting dolls. But a series of leaks in recent years from firms that facilitate the offshore finance system, including the Panama Papers and the Pandora Papers, have stripped away some of those layers of secrecy. The assets tied to Putin's inner circle include an apartment in a Monaco luxury building overlooking the principality's glitzy harbor. The fourth-floor flat was purchased in 2003 for $4.1 million by a shell corporation called Brockville Development Ltd., a company registered in the British Virgin Islands, documents published by The Washington Post show.The real owner of the company: Svetlana Krivonogikh, a former shop cleaner from St. Petersburg who reportedly had a romantic relationship with Putin two decades ago, according to documents obtained by the International Consortium of Investigative Journalists and reported on by the Post and The Guardian. The company was registered just weeks after Krivonogikh, who was 28 at the time, gave birth to a girl. The full 'Putin list' of Russian oligarchs and political figures released by the US Treasury Proekt, an independent Russian media outlet that was banned in the country last year, reported that Putin started a relationship with Krivonogikh in the 1990s before he became President, and that her daughter has a patronymic middle name that means "daughter of Vladimir."Krivonogikh has declined to comment about Putin to reporters, but her daughter -- who had tens of thousands of Instagram followers before recently deleting her account -- has acknowledged to interviewers that she shares a resemblance to the President. In addition to the Monaco apartment, Krivonogikh owns a majority share in a ski resort where Putin has been seen hitting the slopes, several other luxury apartments in St. Petersburg, and a yacht, the Post and the Guardian reported. The leaked documents don't make clear the source of the fortunes amassed by Putin's inner circle. But in several cases, businesses and financial institutions linked to them have won lucrative state contracts. Russia has the largest amount of wealth hidden in offshore tax havens, both in terms of absolute volume -- conservative estimates peg it around $800 billion in 2017 -- and as a percentage of national GDP, according to a 2020 report by the Atlantic Council. Do you have information to share about this story? We offer several ways to reach our journalists securely. On average, 10% of world GDP is held offshore. However, in Russia, offshore wealth accounted for as much as 60% of GDP in 2015, according to a 2018 Journal of Public Economics research paper, the most recent estimate available. Experts say about a quarter of this dark money is indirectly controlled by Putin and his tight-knit circle of oligarchs and poses a "serious national security threat" to the United States. The Mueller report illustrated how Russian offshore accounts were used to interfere in the 2016 elections. Earlier this month, the Justice Department announced the formation of a task force devoted to enforcing sanctions and other economic restrictions designed to isolate Russia from global markets. The KleptoCapture task force will target not only Russian officials and oligarchs, but "those who aid or conceal their unlawful conduct."White House announces new sanctions on Russian oligarchs Gary Kalman, the director of the US office of Transparency International, an anti-corruption advocacy group, said enforcing sanctions will not be easy."It is extraordinarily difficult for law enforcement to try and 'follow the money' because at some point you are going to literally hit a brick wall," Kalman said. "There is literally no paper trail."The United States and the United Kingdom are ideal places to stash large amounts of money, they are among the deepest financial markets in the world, and both accept anonymous shell companies, according to the Atlantic Council.A group of international researchers found that shell companies in the US can be set up in under an hour for as little as $200, without having to legally disclose who owns or controls it. For decades, Western companies -- banks and law firms -- have profited from helping Russian oligarchs hide their money, setting up complicated corporate structures that make it nearly impossible to link assets or bank accounts to individuals.Russian President Vladimir Putin, center, and Defence Minister Sergei Shoigu, right, watch the Navy Day Military parade on July 27, 2014, at the main naval base of Severomorsk, Russia.In the eyes of some longtime Putin observers, the enigmatic Russian leader has shifted his focus from pursuit of wealth to consolidation of power."It's difficult to understand precisely what's happening inside the Kremlin and inside the mind of Vladimir Putin. But he is more and more in a tight relationship with a very small group of people, and they tend to be more on the military and intelligence side rather than business people," said Jill Dougherty, former Moscow bureau chief for CNN, "because, obviously, if Putin cared about business, he would not be prosecuting this war in Ukraine.""Right now it is not up to the oligarchs," said Stanislav Markus, an associate professor of international business at the University of South Carolina. "It is the guns, not the money that speak loudest in the Kremlin today."Regardless of whether priorities have shifted inside the Kremlin, Maria Pevchikh, head of investigations Navalny's Anti-Corruption Foundation, argues both the palace near the Black Sea and Russia's invasion of Ukraine demonstrate the way Putin sees himself as much more than a government official. "He sees himself as a czar, as king of some sort," Pevchikh told CNN. "He has huge plans. He has the vision of him being a historical figure, being so powerful, so mighty, so important, and they invest a lot of money into this narrative."Scott Glover contributed to this report.

Matt Egan, CNN Business

2022-03-17 17:46:40

business

business

https://www.cnn.com/2022/03/17/business/oil-gas-prices-russia/index.html

Oil spikes back above $100 as Russia fears grow - CNN

Oil prices surged Thursday back above $100 a barrel on renewed concerns about the war in Ukraine disrupting Russia's energy supplies.

business, Oil spikes back above $100 as Russia fears grow - CNN

Oil spikes back above $100 as Russia fears grow

New York (CNN Business)Oil prices surged Thursday back above $100 a barrel on renewed concerns about the war in Ukraine disrupting Russia's energy supplies. After sinking below $94 a barrel earlier this week, US crude soared 8% to settle at $102.98 a barrel. Brent crude, the world benchmark, spiked 9% to $106.64 a barrel. The swift rebound in oil prices will be watched closely by leaders in Washington and on Wall Street because high energy prices threaten to exacerbate inflation and slow the economy. Energy traders blamed Thursday's spike on growing pessimism about a resolution between Russia and Ukraine being reached in the near term. Biden demands faster drop in gas prices as oil tumbles"The mood has darkened a little bit," said Robert Yawger, vice president of energy futures at Mizuho Securities. "It sounds like this is going to be a dragged-out situation." Read MoreThe recent drop in oil prices was driven in part by hopes for a potential ceasefire. The longer the war goes on, the bigger the threat to Russia's oil flows. "Given Putin's actions in recent times we shouldn't get our hopes up," said Matt Smith, lead oil analyst of the Americas at Kpler. The International Energy Agency warned Wednesday that a staggering 30% of Russia's oil production could be knocked offline within weeks, exposing the world economy to a potential supply crisis. "The implications of a potential loss of Russian oil exports to global markets cannot be understated," the IEA said in its monthly report. Despite Thursday's rebound, oil prices remain well below their recent peaks. US crude spiked to a nearly 14-year high of $130.50 a barrel on March 6, while Brent hit nearly $140 a barrel. Gasoline prices are only inching lower, drawing criticism of the energy industry from the White House. The national average for regular gas dipped to $4.29 a gallon on Thursday, according to AAA. That's down by two cents from Wednesday and four cents from the record high of $4.33.

Catherine Thorbecke, CNN Business

2022-03-11 15:31:09

business

tech

https://www.cnn.com/2022/03/11/tech/us-digital-dollar-cbdc/index.html

The US dollar could go digital. Here's what you need to know - CNN

As technology continues to revolutionize the way people live, work and spend, central banks around the globe have kicked off efforts to reinvent their local currencies for the digital era. Now, the United States is the latest to signal "urgency" in researching a potential digital version of its dollar via a Central Bank Digital Currency, or CBDC.

tech, The US dollar could go digital. Here's what you need to know - CNN

The US dollar could go digital. Here's what you need to know

(CNN Business)As technology continues to revolutionize the way people live, work and spend, central banks around the globe have kicked off efforts to reinvent their local currencies for the digital era. Now, the United States is the latest to signal "urgency" in researching a potential digital version of its dollar via a Central Bank Digital Currency, or CBDC. Part of President Joe Biden's executive order regarding digital assets on Wednesday includes "placing urgency on research and development of a potential United States CBDC, should issuance be deemed in the national interest," according to an accompanying fact sheet released by the White House.China, the world's second-largest economy by gross domestic product, soft-launched its digital renminbi in January and the CBDC already boasts more than a hundred million users. All told, around 100 countries are exploring CBDCs at one level or another, International Monetary Fund managing director Kristalina Georgieva said during remarks at the Atlantic Council think tank last month. "We have moved beyond conceptual discussions of CBDCs and we are now in the phase of experimentation," Georgieva said. "Central banks are rolling up their sleeves and familiarizing themselves with the bits and bytes of digital money." David Yermack, the finance department chair at New York University's Stern School of Business, told CNN Business that it is now "inevitable the entire world will be issuing money in this way." In the United States, the pandemic propelled demand for cashless payment methods and many Main Street investors have embraced cryptocurrencies like bitcoin and ethereum, putting pressure on the government not to fall behind on the trend. Read MoreWith the Biden administration now throwing new weight behind innovating Americans' money, here's what to know about a potential CBDC.What is a Central Bank Digital Currency and how would it work?The Federal Reserve defines CBDCs as "a digital form of central bank money that is widely available to the general public." A key difference from current forms of digital cash in a bank account or payment app is that the money would be a liability of the Fed and not commercial banks — hence the "central bank money." This means it would be an actual US dollar in digital form, not an investment in a cryptocurrency or a holding in your PayPal. There are differing opinions on how this would work and what it would look like, but in theory it could alleviate the need for third-party processors when transferring money. "At a very high level, a CBDC is just digital money that would be issued by the central bank," Sarah Hammer, the managing director of the Stevens Center for Innovation in Finance at the Wharton School of the University of Pennsylvania, told CNN Business. "It would be based on the fiat currency of that country, so it would be based on the money supply — and then it would be implemented using a government database or approved private sector entities working with the government."Yermack, who has been studying the rise of digital currencies for years, added that a CBDC "would actually operate an awful lot like Bitcoin or other cryptocurrencies.""You'd have a network of wallets, probably held by members of the public, where people could pay each other directly without going through a third party," Yermack said.A significant tech decision for policymakers, according to Hammer, is whether a US central bank digital currency runs on a blockchain, the technology underpinning cryptocurrencies like Bitcoin, as it would throw federal government weight behind this emerging tech."It can be operated through a central database, or through distributed ledger technology, the blockchain," Hammer said.The Federal Reserve Bank of Boston and the Massachusetts Institute of Technology published joint research last month on a CBDC experiment dubbed "Project Hamilton." The work used blockchain technology and "produced one code base capable of handling 1.7 million transactions per second," per a statement from the Boston Fed. This was far above the benchmark of 100,000 transactions per second the researchers initially sought out to achieve. The statement added that Project Hamilton "focuses on technological experimentation and does not aim to create a usable CBDC for the United States." Yermack, however, said it is "likely that whatever they're working on is going to be what the Fed grabs onto and tries to scale up." China's digital yuan, however, notably does not operate on blockchain tech. The digital yuan aims to replace cash payments and can be accessed through a government-backed mobile app as well as Tencent's WeChat. It uses existing tech infrastructure used by approved Chinese commercial and online banks and payment platforms, and is issued by the People's Bank of China. What are the potential benefits and risks?A CBDC could potentially offer consumers a more convenient, safer and cheaper alternative to the options available currently. It could also alleviate the need for cash and crackdown on fraudulent transactions, according to Hammer, as well as make it more efficient for collecting taxes or dispersing targeted government funds. "There are some financial inclusion benefits of having a central bank digital currency," she added, touting their ability to reach Americans that don't have bank accounts.There are several potential risks, including tech barriers and security concerns as well as privacy threats, Yermack noted. Its potential to take on some of the work performed by commercial banks and credit markets has also caused some to worry. The Fed warned specifically of potential cybersecurity risks in a January report, saying, "Any dedicated infrastructure for a CBDC would need to be extremely resilient to such threats, and the operators of the CBDC infrastructure would need to remain vigilant as bad actors employ ever more sophisticated methods and tactics." Moreover, a CBDC could potentially threaten the independence of the Fed and raise a slew of new policy questions."The risk of political abuse is huge," Yermack said. "If you give the central bank this kind of power, the political safeguards would probably need to be much higher than currently in place for the Federal Reserve."While Yermack says a CBDC will likely call for some "thoughtful political redesign" and a transition period as nations experiment with it over the next decade, he still sees "many good reasons to do this." "Throw in the fact that people really don't like using cash — the preferences of the public are pushing governments in this direction as well," Yermack said.

Anna Bahney, CNN Business

2022-03-18 14:09:38

business

homes

https://www.cnn.com/2022/03/18/homes/us-existing-home-sales-february/index.html

US home prices rose 15% in February from a year ago - CNN

Home prices rose 15% to a median price of $357,300 in February from last year, as inventory stubbornly stayed near record lows, according to a report from the National Association of Realtors. But even as home prices continued to climb, sales slowed.

homes, US home prices rose 15% in February from a year ago - CNN

US home prices rose 15% in February from a year ago

(CNN)Home prices rose 15% to a median price of $357,300 in February from last year, as inventory stubbornly stayed near record lows, according to a report from the National Association of Realtors. But even as home prices continued to climb, sales slowed. Sales of existing homes -- which include single-family homes, townhomes, condominiums and co-ops -- were down 7.2% from January and 2.4% from a year ago, NAR reported. "Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases," said Lawrence Yun, NAR's chief economist. "Some who had previously qualified at a 3% mortgage rate are no longer able to buy at the 4% rate."Yun said given the jump in home prices and climbing rates, the cost of buying a home is significantly higher than a year ago. For a buyer who closed on a median-priced home in February with a 30-year fixed rate mortgage, monthly payments are 28% higher than they were a year ago, Yun said. Read MoreInventory slightly upA lack of available homes for sale has made the housing market even more competitive, pushing prices higher. The inventory of unsold homes crept up 2.4% from last month to 870,000 at the end of February, but it was still down 15.5% from a year ago.Homes typically remained on the market for only 18 days in February. But even if a buyer could get hold of a home before it was sold, they were still facing the hurdle of rising costs.However, first-time buyers, who have increasingly been squeezed out of the market, made small gains in February, with their share of existing home purchases rising to 29% from 27% in January. "The sharp jump in mortgage rates and increasing inflation is taking a heavy toll on consumers' savings," Yun said. "However, I expect the pace of price appreciation to slow as demand cools and as supply improves somewhat due to more home construction."Price growth continuesFebruary's 15% jump in median home prices marks 120 consecutive months of annual price growth -- or 10 years.After a decade of home price increases, the current US median home sales price is more than double the $155,600 median in February 2012, when home prices began their current streak, said Danielle Hale, Realtor.com's chief economist.The recent ramp-up in new home construction will help add much needed supply to the market, said Hale. "Our expectation is that home sales will remain relatively high throughout 2022, as homebuyers get creative about how to spend their housing budget amid rising prices of competing expenses like energy, food, and child care, driven up by inflation," she said. "So far, buyer activity has been resilient to the extra costs of homeownership, but demand will be tested by an extraordinary year."

Tami Luhby, CNN Business

2022-03-18 12:06:50

business

economy

https://www.cnn.com/2022/03/18/economy/gas-prices-americans-decisions/index.html

Granddaughters vs. gas: Surge in fuel prices force Americans to make tough choices - CNN

Connie Waters' two young granddaughters are her life, and she's only grown closer to them during the pandemic.

economy, Granddaughters vs. gas: Surge in fuel prices force Americans to make tough choices - CNN

Granddaughters vs. gas: Surge in fuel prices force Americans to make tough choices

New York (CNN Business)Connie Waters' two young granddaughters are her life, and she's only grown closer to them during the pandemic.The retired secretary from Salt Lake City babysits for Layla, 3, and Harlow, 1, three times a week while her daughter and son-in-law are at work. She also loves to watch Layla play soccer on Saturdays. But the girls live 45 minutes away, and the soccer games are even farther. The jump in gas prices has forced Waters, 64, who lives mainly off Social Security, to reconsider how often she can see them. She's already stopped going to the games, and fears she may have to cut back on caring for the girls.Connie Waters is not sure she can continue watching her granddaughters because of the high cost of gas."I do have such a good relationship," said Waters, who estimates it will now cost $60 to fill up her 2012 Ford Focus. "And it makes me really sad to think that I might not be able to continue. And if I don't continue, what are they going to do for care?"Like Waters, who spent about $38 to fill up her entire tank a month ago, many Americans are struggling to accommodate the swift and sudden rise in gas prices into their family budgets. The surge was sparked, in part, by Russia's invasion of Ukraine.Read MoreA gallon of regular gas cost about $4.29, on average, nationwide on Thursday, according to AAA. While that's down slightly from the peak last week of $4.33 a gallon, it's still up considerably from the $3.51 a gallon drivers were paying before the invasion began a month ago.An 80-cent increase at the pump translates into nearly $700 annually on household spending on gas, according to Moody's Analytics.Tough for delivery driversThe spike in gas prices is making it harder for Chris Rivelli to make money delivering pizzas. Rivelli, a senior at Northbridge High School in Massachusetts, works five days a week in order to save for college.He now has to shell out about $70 each time he fills up his 2016 Ford Fusion, compared to less than $50 a tank when he started the gig at the end of last year. When it's busy, he might use a half tank of gas ferrying pies to customers in one shift. Chris Rivelli sometimes pays more for gas than he earns delivering pizza in Massachusetts.On a good night, he could clear $55 in tips. But typically, he only makes $30 to $35 in tips a shift, on top of his $10 hourly wage. "With tips staying the same and gas prices going up, often times I lose money when delivering to a house because the tip does not compensate the gas I used," he said. "Sad times."However, Rivelli, 18, plans to stick it out for now since he likes his boss and colleagues. But if prices continue to rise, he said he may have to find another job.For Nicole Humphrey, who lives in the tiny town of Buhl in rural Idaho, the increase in gas prices means she can't look for a higher-paying position in Twin Falls, which is about 30 minutes away. That's where she can find jobs that pay $15 to $20 an hour. But the commute would eat up her raise, said Humphrey, 27, who works as a clerk at a local deli and drives a 2016 Nissan Xterra. Nicole Humphrey is taking classes online and spending less time with friends because of high gas prices.Humphrey already opted to stop taking classes at the College of Southern Idaho in Twin Falls because of rising gas prices and Covid-19. She plans to finish her bachelor's degree in information technology online at Western Governors University.Curbing her driving also means Humphrey is spending less time with friends, who are mostly in Twin Falls. She studies with one classmate on Zoom, but it's not the same."It can be pretty isolating," said Humphrey. "In areas where there are small populations that are spread out, rising costs are really hurting people."Limits on travelPatrick and Tracy Salyard had grand plans for the summer -- that is, until fuel prices spiked.For the past three years, the couple has lived with their two dogs in a 2002 Fleetwood Expedition motor home. After working the sugar beet harvest in Minnesota in October, they drove to Buckeye, Arizona, where they are staying until May. They put around $200 a day in their 90-gallon tank while on the road last fall, when diesel cost around $3.89 a gallon.The high price of diesel is forcing Patrick Salyard to rethink where he and his wife travel next.Now that the price of diesel is around $5 a gallon nationwide, on average, the Salyards have changed their itinerary for their next adventure. They had hoped to go to the beach in California, drive up the coast and then head across the country to New Hampshire. But now their tentative plan is to go Nashville, where they lived for many years, for a few weeks in May.What will they do after that? They aren't sure."Once fuel prices started rising, we knew California was like 'Well, maybe we can do that next year ... maybe'," said Patrick Salyard, 61, noting costs are higher out West. "Rising fuel prices have completely changed what our plans were going to be. With the way things are right now, everything is so uncertain."

Clare Duffy, CNN Business

2020-08-03 14:44:48

business

tech

https://www.cnn.com/2020/08/03/tech/sprint-tmobile-brand/index.html

Sprint, one of America's most storied brands, is no more - CNN

Sprint is a storied American brand, one that could cease to exist if its $26 billion merger with T-Mobile is approved. If the merger goes through, it would mark the end of several bruising decades for Sprint. However, even if the deal fails, the future of Sprint will still be up in the air.

tech, Sprint, one of America's most storied brands, is no more - CNN

One of America's most storied brands is no more

New York (CNN Business)Sprint was a storied American brand, but it is no longer. T-Mobile, which closed its $30 billion merger with the wireless carrier in April, officially retired the Sprint brand Monday."I want to acknowledge the Sprint history and its 120-year legacy that is now part of our legacy as we launch into this new era," said T-Mobile CEO Mike Sievert in a statement, adding, "We did it! Another historic day for new T-Mobile!"The long-awaited merger means the end of Sprint's long corporate history, but it also puts a capstone on several bruising decades of failed bets and teetering on the brink of bankruptcy. Though it was the fourth-largest wireless provider in the country, Sprint's missteps put it well behind larger rivals Verizon (VZ) and AT&T (T) (CNN's parent company) in terms of customer numbers and network performance, and the costly rollout of 5G loomed large. Without T-Mobile (TMUS), Sprint probably would have struggled to stay afloat and may have ended in bankruptcy court, something even Sprint has begun to hint at.The Slow DeclineRead MoreSprint was born out of the thousands of miles of telegraph wire that ran along the Southern Pacific Railroad's tracks to facilitate train dispatches. The name "Sprint" was an acronym for the system: Southern Pacific Railroad Internal Networking Telecommunications. In the 1970s, the group opened up access to the long-distance calling network for private customers. Two decades later, the Sprint Corporation became its own company and entered the wireless business with the 1992 acquisition of Centel, making it the country's only provider of wireless, long distance and local calling. The following years were relatively successful for Sprint, perhaps helped by its famous "pin drop" commercials starring "Murphy Brown's" Candace Bergen touting the performance of the network. In 2004, Sprint merged with Nextel in a bid to dramatically grow its wireless customer base and — sound familiar? — better compete with Verizon and AT&T. But that deal was an abject failure, and all of Sprint's success came crashing down. The Nextel deal had several issues, including incompatible technologies: Nextel phones didn't work on Sprint's network and vice versa. That meant the merged company couldn't reap the benefits of their combined infrastructure. Customers fled Nextel and didn't necessarily join Sprint. Sprint eventually wrote down nearly all of the merger's value and shut down Nextel's network in 2013.The failed merger left Sprint's balance sheet depleted, so it didn't have the same kind of cash to invest in improvements to its network as competitors. They've allowed themselves to sink deeper and deeper into a hole that would be hard to get out of at this point."Jonathan Chaplin, managing partner at New Street ResearchSprint also made a wrong bet on 4G technology. It rode the WiMax horse, which was the Betamax of 4G. That left it "wrong footed" when all the other carriers chose the LTE standard for their 4G networks, said Craig Moffett, founding partner at research firm MoffettNathanson. SoftBank acquired Sprint in 2013 and made a first attempt at merging it with T-Mobile, but the effort was scuttled by regulatory concerns. Still, a below-average network used to be enough to draw in customers because Sprint was willing to charge below-average prices. As time went on, though, that became less appealing. These days, people need their phones for everything from banking to paying for the subway, so low prices matter less than having a network that works everywhere, all the time."Sprint used the comical tagline: We're almost as good for less money," Moffett said. "And almost as good is, for obvious reasons, not a terribly compelling value proposition."Moffett says the company lost money on many of the customers it drew in with steep promotions — they would choose Sprint over competitors when it offered them discounted service, but when it raised their rates to a price that was sustainable for the business, they would switch carriers. Sprint posted net losses in the hundreds of millions of dollars last year. It also lost tens of thousands of postpaid subscribers, who are the customers most likely to pay their monthly bills and least likely to switch carriers. The new T-MobileA federal judge in February ruled in favor of allowing Sprint and T-Mobile to combine, a decision that dramatically altered the landscape of the United States wireless market. Verizon, AT&T and the new T-Mobile are now roughly equal in the number of customers they maintain.But combining Sprint and T-Mobile won't be easy. They use different network bands and technologies -- something T-Mobile is familiar with, after it merged with MetroPCS in 2012. That could take some time to integrate.Although Sprint is dead, T-Mobile is in a celebratory mood."This is so much more than just rebranding thousands of Sprint locations with a fresh coat of magenta paint," Sievert said. "This is about giving customers even more access to our expanded retail footprint ... and reap the benefits from all that new T-Mobile has to offer!"

Danielle Wiener-Bronner, CNN Business

2022-03-10 19:20:37

business

business

https://www.cnn.com/2022/03/10/business/burger-king-russia/index.html

Burger King pulls support from its Russian locations - CNN

Burger King is the latest fast food chain to pull corporate support from its businesses in Russia.

business, Burger King pulls support from its Russian locations - CNN

Burger King pulls support from its Russian locations

New York (CNN Business)Burger King is the latest fast food chain to pull corporate support from its businesses in Russia. Restaurant Brands International, which owns the burger chain, said Thursday it "has suspended all of its corporate support for the Russian market, including operations, marketing and supply chain." The company is also stopping investment and expansion in the region. That doesn't necessarily mean that Burger King restaurants will be closed in Russia, however. The chain's roughly 800 locations there are "fully franchised and managed by a local master franchisee," the company said. That means RBI (QSR) cannot simply pull the plug on those restaurants, as other brands, including McDonald's, have done in Russia. Burger King said it is committed to "redirecting any profits from franchised operations to humanitarian aid for Ukrainian refugees.""BK Russia is a standalone business owned and operated by our franchisees in the country," RBI said in a statement to CNN. "We have long-standing legal agreements that are not easily changeable." A Burger King at a food court in a shopping center in Moscow.The company also owns Tim Hortons, Popeyes and Firehouse Subs restaurants, but those chains don't have locations in Russia, RBI said.Read MoreThe announcement follows similar ones by multiple restaurant, consumer goods and other firms, which are distancing themselves from the Russian market due to the country's invasion of Ukraine. This week, McDonald's (MCD) — which operates most of its roughly 850 locations in Russia — said it would close them temporarily. Starbucks (SBUX) said that its licensed partner in the country "has agreed to immediately pause store operations," adding that it was also stopping shipments of its products to Russia. Yum Brands (YUM), which owns KFC, Pizza Hut, Taco Bell and the Habit Grill, also said it is working with its operators to close restaurants there. The company is "suspending operations of KFC company-owned restaurants in Russia and finalizing an agreement to suspend all Pizza Hut restaurant operations in Russia, in partnership with its master franchisee," Yum Brands said in a statement.Papa Johns said it "has suspended all corporate operations in Russia," including operational, marketing and business support in the market. The pizza chain added that in Russia, "all restaurants are owned by independent franchisees, and a master franchisee who controls operations." Papa Johns currently receives no royalties from those stores, the company said.

Danielle Wiener-Bronner, CNN Business

2022-03-08 17:37:23

business

business

https://www.cnn.com/2022/03/08/business/mcdonalds-pepsi-coke-russia/index.html

McDonald's is temporarily closing Russian restaurants - CNN

McDonald's and Starbucks are shutting their restaurants and cafes in Russia, and Coca-Cola is suspending its operations there in response to Russia's invasion of Ukraine. PepsiCo is also pulling some products from the country.

business, McDonald's is temporarily closing Russian restaurants - CNN

McDonald's, Starbucks and Coca-Cola leave Russia

New York (CNN Business)McDonald's and Starbucks are shutting their restaurants and cafes in Russia, and Coca-Cola is suspending its operations there in response to Russia's invasion of Ukraine. PepsiCo is also pulling some products from the country. The decisions followed pressure from critics and similar moves by other Western companies. On Twitter, people used boycott hashtags to target companies like McDonald's and PepsiCo that until Tuesday were quiet about their plans for Russia.McDonald's, PepsiCo and other companies were called out by New York State Comptroller Thomas DiNapoli. Before McDonald's and PepsiCo made their announcements, DiNapoli emailed a number of companies represented in the New York State Common Retirement Fund, including those two companies, urging them to stop doing business with Russia. "Companies like McDonald's and PepsiCo, which have a large footprint in Russia, need to consider whether doing business in Russia is worth the risk during this extraordinarily volatile time," DiNaPoli said in a statement. Read MoreOn Tuesday, McDonald's spoke out, and other major food sellers followed. McDonald'sMcDonald's said Tuesday that it is closing its Russian locations. "McDonald's has decided to temporarily close all our restaurants in Russia and pause all operations in the market," CEO Chris Kempczinski said in a statement on that day.There were 847 locations of McDonald's in Russia at the close of last year, according to an investor document. Globally, most McDonald's (MCD) locations are operated by franchise operators. But that's not the case in Russia, where 84% of locations are operated by the company, according to the document. Russia's restaurants, along with another 108 in Ukraine, all operated by McDonald's, accounted for 9% of the company's revenue in 2021, according to the document. "In Russia, we employ 62,000 people who have poured their heart and soul into our McDonald's brand to serve their communities. We work with hundreds of local, Russian suppliers and partners who produce the food for our menu and support our brand," Kempczinski said. "And we serve millions of Russian customers each day who count on McDonald's. In the thirty-plus years that McDonald's has operated in Russia, we've become an essential part of the 850 communities in which we operate." But, he added, "at the same time, our values mean we cannot ignore the needless human suffering unfolding in Ukraine." StarbucksIn a Tuesday message to employees, Starbucks CEO Kevin Johnson said that "today, we have decided to suspend all business activity in Russia." He added that "our licensed partner has agreed to immediately pause store operations and will provide support to the nearly 2,000 [employees] in Russia who depend on Starbucks for their livelihood." Johnson added that Starbucks is halting shipment of all Starbucks products to Russia. "We condemn the horrific attacks on Ukraine by Russia and our hearts go out to all those affected," he said. CokeCoca-Cola also said Tuesday that it is "suspending its business in Russia." The company stated that "our hearts are with the people who are enduring unconscionable effects from these tragic events in Ukraine," adding that it will monitor the situation as things change. PepsiCo, Danone and UnileverOn Tuesday, PepsiCo CEO Ramon Laguarta laid out how PepsiCo is approaching the situation."Given the horrific events occurring in Ukraine we are announcing the suspension of the sale of Pepsi-Cola, and our global beverage brands in Russia, including 7Up and Mirinda." Laguarta added that Pepsi is suspending capital investments, ads and promotional activity in Russia. But PepsiCo will continue to sell some of its products, including baby formula, baby food, milk and other dairy options."We have a responsibility to continue to offer our other products in Russia, including daily essentials," Laguarta said. "By continuing to operate, we will also continue to support the livelihoods of our 20,000 Russian associates and the 40,000 Russian agricultural workers in our supply chain as they face significant challenges and uncertainty ahead," he added. Farryl Bertmann, a registered dietitian and senior lecturer in the nutrition and food sciences department at the University of Vermont, warned that if big food companies leave Russia entirely the citizen population could suffer, even if they have other sources of food. "I feel very strongly that people should be given the opportunity to purchase a variety of foods at different price points," she said. "That can only be successfully done if access is there." She said that "ultimately, foods need to be made available," adding, "I would be very concerned if the food environment [were] to dramatically change." Other companies have taken a similar approach to Pepsi.Danone (DANOY), which makes Silk milk alternatives, Activia, Oikos yogurt, baby formula and more, said in a LinkedIn post on Sunday that "we have decided to suspend all investment projects in Russia," adding that it would "maintain our production and distribution of fresh dairy products and infant nutrition, to still meet the essential food needs of the local population." Unilever (UL) made a similar statement this week, saying that "we will continue to supply our everyday essential food and hygiene products made in Russia to people in the country," adding "we will keep this under close review." The company noted it is has suspended imports of its products to Russia and is stopping all investment in the country, in addition to stopping exports from there. It said it won't profit from its presence in Russia. Biden announces ban on Russian energy importsYum and its franchise operators Some restaurant chains have to work with franchisees to make big decisions, like closing operations. Yum Brands (YUM), which owns KFC, Pizza Hut, Taco Bell and the Habit Grill, said in a statement that it is "suspending operations of KFC company-owned restaurants in Russia and finalizing an agreement to suspend all Pizza Hut restaurant operations in Russia, in partnership with its master franchisee."The company added that "this action builds on our decision to suspend all investment and restaurant development in Russia and redirect all profits from operations in Russia to humanitarian efforts."Yum has about 1,000 KFC restaurants and 50 Pizza Hut locations in Russia. The company said that most of these are operated by independent owners.— CNN's Robert North contributed to this report.

Danielle Wiener-Bronner, CNN Business

2022-03-10 17:04:20

business

business

https://www.cnn.com/2022/03/10/business/mcdonalds-russia-history/index.html

McDonald's transformed Russia ... now it's abandoning the country - CNN

When McDonald's opened its doors in Moscow for the first time, it was a big deal.

business, McDonald's transformed Russia ... now it's abandoning the country - CNN

McDonald's transformed Russia ... now it's abandoning the country

New York (CNN Business)When McDonald's opened its doors in Moscow for the first time, it was a big deal. It was the dead of winter — January 31, in 1990 — but still people came out in droves. Grainy CNN television footage shows lines snaking out the door, and throngs of people inside, trying Big Macs for the first time.The Pushkin Square location was massive, with the capacity to seat hundreds of people. It was the largest McDonald's restaurant in the world at the time. Inside, the fast food joint was bustling. In most ways, it looked like any other McDonald's from the era. But there was a hammer-and-sickle flag under the golden arches and an international theme inside, featuring a model of London's Big Ben in the dining room.McDonald's, Starbucks and Coca-Cola leave RussiaBright-eyed McDonald's employees wearing maroon branded visors and big smiles took customer orders. They were the chosen ones — about 630 employees made the cut out of 27,000 applicants, according to a 1990 Washington Post article. They underwent a month of training before the store opened for business.The golden arches were an immediate success. On the first day, 30,000 people were served, a McDonald's record for an opening day, the CBC reported at the time. The location even had to stay open for hours later than planned because of the crowds. Soviet customers stand in line outside the just opened first McDonald's in the Soviet Union on January 31,1990 at Moscow's Pushkin Square. Read MoreMcDonald's arrival in Moscow was about more than just Big Macs and fries, noted Darra Goldstein, Willcox B. and Harriet M. Adsit professor of Russian, emerita, at Williams College. It was the most prominent example of glasnost in action, Soviet Union President Mikhail Gorbechev's attempt to open up his crumbling country to international relations."There was a really visible crack in the Iron Curtain," she said. "It was very symbolic about the changes that were taking place." About two years later, the Soviet Union would collapse. After that first spot opened up, McDonald's expanded its reach within the country. As of last week, there were about 850 locations operating in Russia. But Russia's invasion of Ukraine prompted McDonald's to change course, at least temporarily. On Tuesday, the company announced that it would pause operations at those restaurants, following similar decisions by other Western firms and pressure from critics. For Goldstein, this moment is just as symbolic, but far less hopeful. "If the opening of McDonald's in 1990 symbolized the beginning of a new era in Soviet life, one with greater freedoms, then the company's current exit represents not just a closing down of business, but of society as a whole," she said.How McDonald's got to Moscow Hundreds of people line up around the first McDonald's restaurant in the Soviet Union at Moscow's Pushkin Square, on its opening day.Opening McDonald's up in Russia wasn't easy. George Cohon, who oversaw McDonald's business in Canada from the early 1970s and into the 1990s, led the campaign to bring McDonald's to life in Moscow. It took 14 years to make that happen. In his book, To Russia With Fries (with an introduction by none other than Gorbachev) Cohon detailed the difficult process of opening up that first location. "On the Soviet side, there was very little real understanding of what was involved in establishing or operating a chain of McDonald's restaurants," he wrote. "For our part, we had to identify suitable sites (the Soviets' instincts seemed to be to put us behind the elevator shafts in hotels or somewhere in the outskirts of Moscow; our instincts, naturally, were pretty much the reverse)." UK sanctions Russian oligarch and Chelsea owner Roman AbramovichPerhaps more pressing than finding a suitable location was the search for a viable supply chain. McDonald's needed a steady supply of patties and potatoes for the thousands of people who would stream in every day. "We had to satisfy ourselves that it would be possible to source raw materials in Russia," he said. Cohon and other members of the team visited local food processing plants and found them lacking. McDonald's decided to set up its own. "In the absence of a reliable infrastructure, we were going to have to build one," Cohon wrote. "We were going to have to go right into the countryside and develop a network of suppliers that didn't exist before." When McDonald's did finally open its doors in 1990, some were skeptical and believed it wouldn't last. "It will all go downhill. We don't know how to run a restaurant like this," Andrei Grushin, an engineer who visited the restaurant on opening day, told the Washington Post at the time. But the pains McDonald's took paid off. Service with a smile One of the defining characteristics of the Moscow McDonald's location, at least on that first day, was the friendly staff. "They are always smiling," a young employee told CNN reporters on opening day. "As you know, in Moscow, not in every restaurant you can find smiling people." Another employee told the CBC that when she smiled at people, they asked what was wrong. "They think that I'm laughing at them," she said. At that time in the Soviet Union, "food service was really terrible," said Williams College's Goldstein. "It was rude, places were dirty. There often wasn't food that was listed." McDonald's was an "almost magical place where food always replenished itself and people smiled at you," she said. "It represented more than just a place to get American hamburgers." The hamburgers themselves weren't as exciting, at least not to some customers. "I don't like it at all," one man told the CBC of the food, shaking his head. Another said he liked the cuisine, but had "expected more." The meal was pricey. A meal could cost half a day's pay for the average consumer, according to the CBC. How Putin 'destroyed' the ruble and brought Russia to the brink of defaultOlga Berman, who grew up in Moscow before immigrating to the United States in 1993, recalled a trip to McDonald's with her family when she was a child. "We didn't really go out to eat a ton. So that was a huge experience in itself, to go to restaurants," she said. She remembers McDonald's as "sparkling new," she said. "It was really bright. It was super clean," she added. "It was an experience. it didn't feel like fast food that I know today. It felt like going to an actual restaurant." And the food? "I don't even remember what the food was like," she said. Christina Frankopan grew up in London. As a teenager, she went to Moscow for a few weeks to improve her Russian, right around the time of the opening of the first McDonald's location. In spring 1990, she went with friends to check it out."I went once or twice and the queue was just too long," she said. "And, and then eventually, we went one time, and it was doable." For Frankopan, McDonald's was no big deal. But her friends were excited — less about the food, as she recalled, than about the chain's styrofoam containers. "I was surprised that actually, the packaging was highly coveted," she said. Frankopan remembers people taking the packaging home and tacking it up on their walls. They said "it's an incredibly good insulating material," she recalled. But "I think, actually, it was a status symbol to be able to show, not only do I have one Big Mac box, I have queued for, you know, 15 times to get my Big Mac boxes." She added, "I think it's hard to overstate the symbolism of the place." As CNN reporter Richard Blystone put it, when he reported the story 32 years ago, "a Western hamburger emporium in Moscow has all the intrinsic appeal of an ice cream stand in hell."McDonald's pauses Russian operations A McDonald's in Moscow circa 2021. After years of investment, everything came crashing down this week. "In Russia, we employ 62,000 people who have poured their heart and soul into our McDonald's brand to serve their communities. We work with hundreds of local, Russian suppliers and partners who produce the food for our menu and support our brand. And we serve millions of Russian customers each day who count on McDonald's," McDonald's CEO Chris Kempczinski said in a statement on Tuesday. "In the thirty-plus years that McDonald's has operated in Russia, we've become an essential part of the 850 communities in which we operate," he added. But the current situation makes continuing in the market untenable, according to the executive, at least for now. "Our values mean we cannot ignore the needless human suffering unfolding in Ukraine," Kempczinski said. Plus, with the region in upheaval, McDonald's can no longer reliably secure the supply it needs. "We are experiencing disruptions to our supply chain along with other operational impacts," he said. After 32 years, "McDonald's has decided to temporarily close all our restaurants in Russia and pause all operations in the market." McDonald's will continue to pay its employees in Russia, the company said. But it's not clear when Russians will be able to visit a local McDonald's again. "At this juncture, it's impossible to predict when we might be able to reopen our restaurants in Russia," Kempczinski said.

CNN Business staff

2022-03-02 09:56:19

business

business

https://www.cnn.com/2022/03/02/business/companies-pulling-back-russia-ukraine-war-intl-hnk/index.html

Companies pulling back from Russia over the war in Ukraine - CNN

Dozens of the world's biggest companies have abandoned or scaled back their operations in Russia in response to its invasion of Ukraine.

business, Companies pulling back from Russia over the war in Ukraine - CNN

Here are the companies pulling back from Russia

(CNN Business)Dozens of the world's biggest companies have abandoned or scaled back their operations in Russia in response to its invasion of Ukraine. The exodus affects every corner of the economy, from its vast energy riches through autos, finance, retail, entertainment and fast food, starving Russia of new investment and removing products and services that had become popular in the decades since the collapse of the Soviet Union. Here's a look at the major corporate departures. AutosFord (F) announced it was suspending its operations in Russia. The American automaker has a 50% stake in Ford Sollers, a joint venture that employs at least 4,000 workers and is shared with Russian company Sollers.Read MoreA Ford dealership and service center. The company has plants in St. Petersburg, Elabuga and Naberezhnye Chelny but said it had "significantly wound down" its Russian operations in recent years. The automaker said it was "deeply concerned about the situation in Ukraine," and noted it has "a strong contingent of Ukrainian nationals working at Ford around the world."General Motors (GM) said it was halting all exports to Russia "until further notice."GM doesn't have a significant presence there: It sells only about 3,000 vehicles a year through 16 dealerships, according to a spokesperson. That's out of the more than 6 million vehicles the Detroit-based automaker sells annually.Toyota (TM) announced it would stop making cars in Russia or importing them to the country "until further notice, due to supply chain disruptions."Volkswagen (VLKAF) is stopping production of vehicles in Russia and has suspended exports to the Russian market. The decision applies to the Russian production sites in Kaluga and Nizhny Novgorod.Nissan (NSANF) has suspended the export of vehicles to Russia, adding that it "anticipates that production will stop soon at our plant in St. Petersburg."AviationBoeing (BA) said it would suspend support for Russian airlines.A company spokesperson confirmed the aircraft maker was pausing "parts, maintenance and technical support services for Russian airlines," and had also "suspended major operations in Moscow and temporarily closed our office in Kyiv."Airbus (EADSF) followed Boeing with a similar move. In a statement, the company said it has "suspended support services to Russian airlines, as well as the supply of spare parts to the country."Big TechAirbnb cofounder and CEO Brian Chesky said in a tweet that his company was suspending all operations in Russia and Belarus.Amazon's (AMZN) cloud division, Amazon Web Services, said March 8 it would halt new sign-ups for the service in Russia and Belarus. The company has already had a "long-standing policy of not doing business with the Russian government" and does not have data centers, infrastructure or offices in Russia, the company said in a blog post."AWS has clear terms of service where if a customer is using AWS services to threaten, incite, promote, or actively encourage violence, terrorism, or other serious harm, they will not be permitted to use our services," Amazon said. "Any customer we know of who is participating in this type of behavior will have their access to AWS suspended."Apple (AAPL) has stopped selling its products in Russia.The tech giant said in a statement that it was "deeply concerned" about the Russian invasion. In response, the company has also moved to limit access to digital services, such as Apple Pay, inside Russia, and restricted the availability of Russian state media applications outside the country.A re:Store shop in central Moscow. re:Store is one of the largest Apple resellers in Russia.Facebook (FB)-parent Meta said it would block access to Russian news outlets Sputnik and RT, the Russia-backed television network infamous for promoting Russian President Vladimir Putin's agenda, across the European Union. The move comes after the company received "requests from a number of governments and the EU to take further steps in relation to Russian state controlled media," Nick Clegg, Meta's VP of global affairs, wrote in a tweet.Meta has also said it has applied algorithmic restrictions on Russian state media that should prevent those posts from surfacing as prominently in users' feeds.Hitachi (HTHIY) said March 10 that it is pausing exports to Russia and suspending all manufacturing in the country, "with the exception of products, services and support for electrical power equipment that are indispensable to the daily lives of people," it said.The Japanese conglomerate added that Russia accounts for just a small fraction — roughly 0.5% — of its revenue.IBM (IBM) CEO Arvind Krishna said the company has suspended all business in Russia."In Ukraine, we have been in constant touch with our local teams and continue to provide assistance that includes relocation and financial support," Krishna said. "The safety and security of IBMers and their families in all areas impacted by this crisis remains our top priority."Big Tech cracks down on Russian state media content amid mounting pressureIntel (INTC) has stopped all shipments to Russia and Belarus, the company announced. Microsoft (MSFT) said it was suspending all new sales of its products and services in Russia. President and vice-chair Brad Smith also said the company is stopping "many aspects" of its business in Russia in compliance with government sanctions. Microsoft also said it will continue aiding in Ukrainian cybersecurity. Netflix (NFLX) said it will be suspending its streaming service in Russia."Given the circumstances on the ground, we have decided to suspend our service in Russia," a Netflix spokesperson told CNN.No other details were provided.Previously, the company said it was refusing to air Russian state TV channels — something that the platform would have been required to do starting this week under Russian law."Given the current situation, we have no plans to add these channels to our service," the company told CNN Business.Nintendo (NTDOF) has stopped taking online orders in Russia.In a statement on its Russian website, the Switch console maker said that it had "suspended the processing of payments in rubles," and temporarily set its digital store on "maintenance mode."Roku (ROKU), which sells hardware allowing users to stream content through the internet, has banned RT worldwide.Russia tries to stop Western companies fleeing the countrySony (SNE) has halted all software and hardware shipments, and temporarily suspended orders on its online PlayStation store in Russia.The entertainment giant has also paused plans to launch Gran Turismo 7, a driving simulator game, in the country. Sony "joins the global community in calling for peace in Ukraine," it said in a statement.Spotify (SPOT) said it has closed its office in Russia "indefinitely" and restricted shows "owned and operated by Russian state-affiliated media." The streaming service removed all content from RT and Sputnik in Europe and other regions, a company spokesman said. "We are deeply shocked and saddened by the unprovoked attack on Ukraine," the spokesman added. "Our first priority over the past week has been the safety of our employees and to ensure that Spotify continues to serve as an important source of global and regional news at a time when access to information is more important than ever."Twitter (TWTR) has similarly announced plans to "reduce the visibility and amplification" of Russian state media content.YouTube, which is owned by Google (GOOGL), said it blocked Russian state media within Ukraine, including RT. The video platform also said it would be "significantly limiting recommendations to these channels." Google and YouTube have also said they will no longer allow Russian state media outlets to run ads or monetize their content.ConsultingAccenture is discontinuing its business in Russia as it "stands with the people of Ukraine," it said.The firm announced the move in a statement on March 3, where it thanked its "nearly 2,300 colleagues in Russia for their dedication and service to Accenture over the years.""We will be providing support to our Russian colleagues," the company added.In a similar move, Deloitte announced on March 7 that it would stop operating in Russia and Belarus. "While we know this is the right decision, it will have an impact on Deloitte's [approximately] 3,000 professionals located in Russia and Belarus. Like others, we know our colleagues in Russia and Belarus have no voice in the actions of their government," the firm said."We will support all impacted colleagues during this transition and do all we can to assist them during this extremely difficult time."EY, otherwise known as Ernst & Young, also said it would remove its Russian practice from its official global network, but allow it to "continue working with clients as an independent group of audit and consulting companies.""EY in Russia is a team of 4,700 professionals working in 9 cities of the country. The company has been operating in the Russian market for more than 30 years," it said on March 7."In light of the escalating war, the EY global organization will no longer serve any Russian government clients, state-owned enterprises or sanctioned entities and individuals anywhere in the world."Consulting and accounting firm KPMG International said that its "Russia and Belarus firms will leave the KPMG network.""KPMG has over 4,500 people in Russia and Belarus, and ending our working relationship with them, many of whom have been a part of KPMG for many decades, is incredibly difficult," the company said. "This decision is not about them -- it is a consequence of the actions of the Russian Government. We are a purpose-led and values-driven organization that believes in doing the right thing."PricewaterhouseCoopers (PwC) is also planning to break away from its Russian business."As a result of the Russian government's invasion of Ukraine we have decided that, under the circumstances, PwC should not have a member firm in Russia and consequently PwC Russia will leave the network," the "Big Four" consultancy said in a statement."Our main focus at PwC continues to be doing all we can to help our Ukrainian colleagues and support the humanitarian efforts," it added."We are also committed to working with our colleagues at PwC Russia to undertake an orderly transition for the business, and with a focus on the wellbeing of our 3,700 colleagues in PwC Russia."Energy and metalsBP said it was planning to exit its 19.75% stake in Russia's biggest oil company, Rosneft, and suspending their joint ventures — which amount to one of the biggest foreign investments in Russia.Equinor will also begin to exit its joint ventures in Russia, the Norwegian oil and gas company announced."We are all deeply troubled by the invasion of Ukraine, which represents a terrible setback for the world," said CEO Anders Opedal.The company said it had $1.2 billion in long-term investments in Russia at the end of 2021. It has operated in Russia for more than 30 years and has a cooperation agreement with Rosneft.Exxon is quitting its last Russian projectExxon pledged to leave its last remaining oil-and-gas project in Russia and not to invest in new developments in the country.The Sakhalin-1 venture is "one of the largest single international direct investments in Russia," according to the project's website. An Exxon subsidiary has a 30% share, while Rosneft also owns a stake.By quitting this project, Exxon would end more than a quarter-century of continuing business presence in Russia.Shell follows BP out of Russia as oil companies abandon PutinRio Tinto (RIO) was the first major mining company to announce it was cutting all ties with Russian businesses."Rio Tinto is in the process of terminating all commercial relationships it has with any Russian business," a Rio spokesman told Reuters.The miner owns an 80% stake in Queensland Alumina Ltd in a joint venture with Russia's Rusal International, the world's second-largest aluminum producer. The company did not comment on how its decision to cut ties with Russian businesses would affect Queensland Alumina dealings with Rusal.Shell is getting out of Russia and ditching its joint ventures with Gazprom, including its involvement with the moribund Nord Stream 2 natural gas pipeline.The UK-based oil company said on February 28 it would dump its stake in a liquified natural gas facility, its stake in a project to develop fields in western Siberia and its interest in an exploration project in the Gydan peninsula in northwestern Siberia."We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security," Shell CEO Ben van Beurden said in a statement.Shell has also decided to stop buying Russian oil and gas and will close its service station network.A Shell gas station seen in Moscow in 2020.TotalEnergies (TOT) also condemned Russia's actions and said it would no longer provide capital for new projects in the country. The French oil giant has done business in Russia for 25 years, and recently helped launch a major liquefied natural gas project on the Siberian coast.FinanceNorway's $1.3 trillion sovereign wealth fund will divest shares in 47 Russian companies as well as Russian government bonds, the Norwegian prime minister said.Mastercard (MA) said it was suspending its network services in Russia. Cards supported by Russian banks will not work in the company's network, and any cards issued outside of Russia will not work within the country. The credit giant, which has operated in Russia for more than 25 years, had previously announced that it had "blocked multiple financial institutions" from its network as a result of anti-Russian sanctions, and would "continue to work with regulators in the days ahead."Visa (V) said it is suspending all of its operations in Russia. It will end all Visa transactions within its borders, and Visa cards issued in Russia will no longer work outside of the country. In addition, all Visa cards worldwide "will no longer work within the Russian Federation," Visa said. American Express (AXP) said in a statement that globally issued American Express cards will no longer work in Russia, and cards issued in Russia won't work outside the country. The company also said it is ending its business operations in Belarus.Moody's said it is suspending commercial operations in Russia. Its investors service will "maintain analytical coverage for existing ratings from outside Russia."Goldman Sachs (GS) became the first major Wall Street bank to announce plans to exit Russia after the invasion of Ukraine. "Goldman Sachs is winding down its business in Russia in compliance with regulatory and licensing requirements," a Goldman Sachs spokesperson told CNN.JPMorgan Chase (JPM), America's largest bank, said it is "actively unwinding" its Russian business and not pursuing any new businesses in the country. JPMorgan cited "compliance with directives by governments around the world" for its decision.Western Union (WU) said in a statement that it is suspending operations in Russia and Belarus. "We have thoroughly evaluated internal and external considerations, including the consequences for our valued teammates, partners, and customers," the company said. "Ultimately, in light of the ongoing tragic impact of Russia's prolonged assault on Ukraine, we have arrived at the decision to suspend our operations in Russia and Belarus."Citigroup (C) expanded its exit from Russia, saying it's going to stop soliciting new clients. In pulling out of the country, Citi said it will "include other lines of business and continue to reduce our remaining operations and exposure," according to a company blog post from Executive Vice President of Global Public Affairs Edward Skyler. Citi noted that pulling its operations "will take time to execute" and that it is assisting multinational corporations.PayPal (PYPL) CEO Dan Schulman said the company is suspending services in Russia."The PayPal community will remain steadfast in our humanitarian efforts to care for those in Ukraine who are experiencing devastating violence and tragic loss," Schulman said.Food and beverage AB InBev, the maker of Budweiser and other beer brands, said it has "requested the controlling shareholder" of its Russia operations to suspend the license for the production and sale of Bud in the country. The company said it's also "forfeiting all financial benefit" from its joint venture operations. Employees will still be paid.Burger King said it is pulling corporate support from its businesses in Russia. Restaurant Brands International, which owns the burger chain, said it "has suspended all of its corporate support for the Russian market, including operations, marketing and supply chain." That doesn't necessarily mean that Burger King restaurants will be closed in Russia, however, as the company said the chain's roughly 800 locations there are "fully franchised and managed by a local master franchisee." This means that the company cannot simply pull the plug on those restaurants as other brands such as McDonald's have done. Coca-Cola (COKE) said that it is "suspending its business in Russia." The company stated that "our hearts are with the people who are enduring unconscionable effects from these tragic events in Ukraine," adding that it will monitor the situation as things change.Heineken will stop producing and selling beer in Russia. The brewer announced on March 9 that it would "take immediate steps to ring-fence" its Russian business, "to stop the flow of monies, royalties and dividends" out of the country. The beverage giant, which sells into more than 190 countries, had already announced a suspension on new investments and exports to Russia. "We are assessing the strategic options for the future of our Russian operations," it said in a statement. "We see a clear distinction between the actions of the government and our employees in Russia."McDonald's is temporarily closing its Russian restaurants. Eighty-four percent of McDonald' (MCD)locations in Russia are operated by the company, according to the document. Russia's restaurants, along with another 108 in Ukraine, all operated by McDonald's, accounted for 9% of the company's revenue in 2021.Nestle (NSRGF) is suspending all capital investment in Russia and halting advertising in the country. "We are working hard to help keep food available to the people, be it on store shelves or through donations of essential foods and beverages like baby food, cereals, soup and noodles to those in need across the region," the company said in a statement.PepsiCo said it is suspending the sale of Pepsi-Cola and global beverage brands in Russia, but will continue to sell some of its essential products.PepsiCo CEO Ramon Laguarta said that Pepsi is suspending capital investments, ads and promotional activity in Russia. But PepsiCo will continue to sell some of its products, including baby formula, baby food, milk and other dairy options."We have a responsibility to continue to offer our other products in Russia, including daily essentials," Laguarta said. "By continuing to operate, we will also continue to support the livelihoods of our 20,000 Russian associates and the 40,000 Russian agricultural workers in our supply chain as they face significant challenges and uncertainty ahead," he added.Starbucks CEO Kevin Johnson said that "we have decided to suspend all business activity in Russia," in a message to employees. He added that "our licensed partner has agreed to immediately pause store operations and will provide support to the nearly 2,000 [employees] in Russia who depend on Starbucks for their livelihood." Johnson added that Starbucks is halting shipment of all Starbucks products to Russia. Yum Brands (YUM), which has 1,000 KFC and Pizza Hut franchises in Russia, said it would suspend all investment and restaurant development in the country. The company said it would "assess additional options" and redirect all profits from operations in Russia to humanitarian efforts. HospitalityHyatt (H) is halting development in Russia and new investments there following the invasion of Ukraine. Hyatt said it continues to "evaluate hotel operations" in Russia while complying with sanctions and US government directives. Hilton has shut down its corporate office in Moscow and is suspending all new development activity in Russia, the hotel company announced Wednesday. The moves will not end the Hilton (HLT) brand in Russia, where there are 26 Hilton hotels. The company does not own any hotels in Russia. The 26 Hilton hotels in Russia are managed or franchised and represent a small percentage of the company's worldwide footprint of more than 6,800 properties, a spokesperson said. Marriott (MAR) has closed its corporate office in Moscow, and paused the opening of upcoming hotels and all future hotel development and investment in Russia. "Our hotels in Russia are owned by third parties and we continue to evaluate the ability for these hotels to remain open," it added.Industrials3 (MMM) said it has halted operations in Russia following the invasion of Ukraine.Dow (DOW) has suspended all purchases of feedstocks and energy from Russia, and says it "significantly reduced its operations and product offerings" in the country. Dow has also stopped all investments in the region, and is only supplying limited essential goods in Russia, including food packaging, hygiene, cleaning and sanitation products and household goods. General Electric (GE) suspended most of its operations in Russia, with the exception of "providing essential medical equipment and supporting existing power services."John Deere (DE), the world's largest agriculture equipment maker, has halted shipments of its products to Russia. A Deere spokesperson said the only equipment produced in Russia is at a small factory in Orenburg, Russia that makes seeding and tillage equipment.Caterpillar said on March 9 that it is suspending operations in its Russian manufacturing facilities. "Operations in Russia have become increasingly challenging, including supply chain disruptions and sanctions," the manufacturing giant said in a statement.Media & entertainmentDirecTV is cutting ties with RT.A spokesperson for the US satellite carrier told CNN Business that it had already been reviewing whether to renew the outlet's carriage agreement, which was due to expire later this year. Russia's war on Ukraine sped up its decision, according to the representative.Disney (DIS) is also suspending the release of its theatrical films in Russia, citing "the unprovoked invasion of Ukraine."The entertainment giant had multiple films set for release in Russia in the coming months. That includes Marvel's "Doctor Strange in the Multiverse of Madness" on May 5 and Pixar's "Lightyear" on June 16.A shopper opening an umbrella featuring Disney Princesses at the Central Children's Store in Moscow's Lubyanka Square in 2017."We will make future business decisions based on the evolving situation," a Disney spokesperson said.'The Batman' pulled from RussiaWarnerMedia said on February 28 that it would pause the release of "The Batman" in Russia.The film is one of the biggest blockbusters of the year, and is being released in most countries by Warner Bros. which, like CNN, is a unit of WarnerMedia.A company spokesperson said that the decision was made "in light of the humanitarian crisis in Ukraine," and that the company hoped "for a swift and peaceful resolution to this tragedy."WarnerMedia is also pausing all new business in Russia, ceasing broadcast of its channels, halting all new content licensing with Russian entities, and pausing planned theatrical and games releases. RetailCrocs (CROX) said March 9 that it will "pause its direct-to-consumer business, inclusive of e-commerce and retail operations, in Russia." It will also pause "the importation of goods into the country."Estée Lauder Companies said March 7 that it will "suspend all commercial activity in Russia, including closing every store we own and operate, as well as our brand sites and shipments to any of our retailers in Russia." The company had already suspended business investments and initiatives in Russia, it said in a statement.Fast Retailing announced March 10 that it was suspending Uniqlo's business activities in Russia.The turnaround came just days after Tadashi Yanai, CEO of the Japanese group, vowed to keep operating there, calling clothing a basic human necessity. Now, "it has become clear to us that we can no longer proceed," Fast Retailing said in a statement, citing "a number of difficulties."The company "is strongly against any acts of hostility," it added. "We condemn all forms of aggression that violate human rights and threaten the peaceful existence of individuals."H&M (HMRZF) will pause all sales in Russia.In a statement, the company said that it was "deeply concerned about the tragic developments in Ukraine, and stands with all the people who are suffering."The clothing giant's stores in Ukraine are already closed due to safety concerns.H&M Group, which operates a number of brands, had 168 stores in Russia as of last November, according to its website.Ikea, the world's largest furniture company, is closing its 17 stores in Russia. The company said the conflict is having a "huge human impact" and is "resulting in serious disruptions to supply chain and trading conditions." In addition to pausing its retail and manufacturing operations in Russia, it will suspend all trade with the country and its ally, Belarus.Ikea said 15,000 workers would be directly affected by the shutdown in the region. The company will continue to pay them, at least for the time being.Imperial Brands (IMBBY), one of the world's largest tobacco players, will sell off its Russian business.The company behind Winston and Gauloises cigarettes says its operations in Russia comprise 1,000 employees in sales and marketing, as well as a factory in the city of Volgograd.Imperial will "continue to pay their salaries until any transfer is concluded," it said in a statement.Inditex, the parent company of Zara, said it is pausing operations in Russia and closing 502 stores in the country. In a statement, the company said Russia accounts for about 8.5% of its earnings before interest and tax.Mothercare is suspending business in Russia and stopping shipments there."Our local partner has confirmed that it will be immediately pausing operations in some 120 stores and online," it said on March 9. Russia accounts for around 20% to 25% of sales for the retailer, which specializes in goods for parents and babies. Mondelez (MDLZ) said it would scale back all non-essential activities in Russia "while helping maintain continuity of the food supply." The company said it would focus on "basic offerings," and discontinue all new capital investments and suspend a advertising spending in the country.German sports company Puma said it is suspending operations of all of its stores in Russia. The company said it operates more than 100 stores in the country. Luxury fashion house Prada is suspending its retail operations in Russia. Procter & Gamble (PG) CEO Jon Moeller said in a letter to employees on March 7 that the company has "discontinued all new capital investments in Russia" and is "suspending all media, advertising, and promotional activity.""We are significantly reducing our product portfolio to focus on basic health, hygiene and personal care items needed by the many Russian families who depend on them in their daily lives," Moeller said. "As we proceed with the reduced scale of our Russian operations, we will continue to adjust as necessary."Unilever (UL) said it will "continue to supply our everyday essential food and hygiene products made in Russia to people in the country," adding "we will keep this under close review." But the company noted it is has suspended imports of its products to Russia and is stopping all investment in the country, in addition to stopping exports from there. It said it won't profit from its presence in Russia.Shipping goodsUPS and FedEx have suspended operations in Russia and Belarus. FedEx said it suspended operations to "support the people of Ukraine." DHL said it has suspended inbound shipments to Russia and Belarus.Maersk and MSC Mediterranean Shipping Company are both halting cargo bookings with Russia."As the stability and safety of our operations is already being directly and indirectly impacted by sanctions, new Maersk bookings to and from Russia will be temporarily suspended, with exception of foodstuffs, medical and humanitarian supplies," the Denmark-based company said in a statement."We are deeply concerned by how the crisis keeps escalating in Ukraine," the company added.MSC, a Swiss-owned container shipping line, said its suspension would cover "all access areas, including Baltics, Black Sea and Far East Russia."TransportationFrench train maker Alstom said that it will "suspend all deliveries towards Russia" in a statement on March 9. The group is also suspending all future business investments in Russia, it added. Alstom owns a 20% stake — as a capital investment — in Transmashholding (TMH), the Russian locomotives and rail equipment provider."There was no material business nor operational link between Alstom and TMH," the company said. "The book value will be re-assessed as part of the fiscal year 2021/22 closing accounts."— Rishi Iyengar, Michelle Toh, Diksha Madhok, Chris Isidore, Vanessa Yurkevich, Paul P. Murphy, Mark Thompson, Vasco Cotovio, Peter Valdes-Dapena, Frank Pallotta, Brian Fung, Oliver Darcy, Jordan Valinsky, Aliza Kassim, Chris Liakos, Pamela Boykoff, Robert North, Anna Stewart and Blake Essig contributed to this report.

Nathaniel Meyersohn, CNN Business

2018-10-30 19:16:55

business

business

https://www.cnn.com/2018/10/30/business/kohls-stores-amazon-retail/index.html

How Kohl's figured out the Amazon era - CNN

Kohl's isn't the flashiest retailer in America. But it's a go-to store for millions of moms.

business, How Kohl's figured out the Amazon era - CNN

How Kohl's figured out the Amazon era

New York (CNN Business)Kohl's isn't the flashiest retailer in America. But it's a go-to store for millions of moms. Kohl's has connected with mid-aged, middle-income women through a mix of stylish clothing brands and a knack for quickly reacting to the latest fashion trends.Wall Street has taken notice. Kohl's (KSS) is one of the hottest retail stocks over the past year, outperforming peers like Macy's (M), Nordstrom (JWN), JCPenney (JCP), and Gap (GPS).Much of Kohl's recent success can be attributed to the department store's improved tactics in its top business: Women's clothes.Doubling down on women's clothesRead MoreKohl's women's apparel division accounts for about a third of the company's roughly $19 billion in annual sales. Kohl's stands out against competitors because it makes a big chunk of the clothes it sells, under three $1 billion private-label brands — Sonoma Goods for Life, Apt. 9 and Croft & Barrow. It also has relationships with designers for exclusive lines, such as LC Lauren Conrad and Simply Vera Vera Wang. Private-label and exclusive brands make up 70% of Kohl's women's business and 42% of the company overall. By comparison, private labels represent 20% of Macy's total sales. Exclusive brands, like one with fashion designer Vera Wang, help Kohl's stand out against rivals.Controlling the supply chain for those clothes is a big advantage for Kohl's. It can nimbly respond to shoppers' style preferences and minimize inventory mistakes, such as ordering too many heavy jackets during a warm winter. In recent years, Kohl's has focused on mastering the basics to strengthen its shopping experience.For example, it has narrowed choices on the shelves to reduce clutter. It has also sped up the manufacturing timeline by 30% to move clothes from initial drawing stages to the shelves. The approach is paying off. Last quarter, Kohl's own brands had their best performance in five years. Inventory fell 8% per store, signaling that shoppers grabbed up just about everything they could find off store shelves."Kohl's has done an admirable job by investing in desirable products customers want," said Oliver Chen, a retail analyst at Cowen.Next year, Kohl's will start selling Nine West shoes, handbags, and an exclusive clothing line. It's adding a new private-label plus-size clothing brand, EVRI, and heightening the label around the stores with more racks and larger mannequins. The company sees an opportunity to appeal to women searching for fashion in extended sizes. Those mannequins will help Kohl's showcase EVRI in stores.Retailers wake up to opportunity in plus-size clothingKohl's is also chasing more Millennial women. It recently started selling PopSugar at Kohl's — a collection of tees, tops, skirts and shorts curated by the digital media company."We see an opportunity to draw more Millennial customers and young families to Kohl's," Greg Revelle, Kohl's chief marketing officer, said about the tie-up with PopSugar. Running with athleisure brandsKohl's has made an expanded push into selling more athletic brands, too. The strategy has driven sales and helped the company attract new, younger shoppers.Nike has become Kohl's largest national brand partner, and Adidas products are a top seller at its stores. Last year, Kohl's began offering Under Armour merchandise for the first time."Active and wellness is a permanent part of the American landscape. And we want to be the destination," CEO Kevin Mansell said earlier this year. Michele Gass, Starbucks' former marketing guru, took over for Mansell in May.The active and wellness division has grown to more than 15% of Kohl's overall sales.Kohl's is making a big bet on athletic brands like Under Armour and Nike.As part of Kohl's efforts to become a go-to athleisure retailer, it is testing expanded floor space for top athletic brands at 30 stores.Tie-ups with Amazon and AldiInvestors believe that Kohl's is well prepared for the future. Kohl's mastery of retail fundamentals gives it flexibility to rethink its store layouts and take risks.Over the last few years, Kohl's has reduced the size of 500 stores — close to half of its fleet — from 90,000 square-feet to 65,000 and 35,000 square-feet. The company makes the same amount of sales at those stores, but it saves money by carrying less inventory and employing fewer workers. For shoppers, Kohl's says the smaller format is easier to navigate. Most of its stores are located away from struggling malls. Reorganizing store space creates opportunities for outside-the-box thinking, too.While many retailers are fighting against Amazon, Kohl's has joined with the online seller. It offers free returns for Amazon.com purchases at more than 100 stores in Los Angeles, Chicago, and Milwaukee. Kohl's is also experimenting selling Amazon Echo and smart home devices at designated stations within 20 stores. More recently, executives announced a test with grocery chain Aldi to lease out 5 to 10 stores next to Kohl's beginning next year. Kohl's is looking to fill the spaces with other retailers and grocers that can help stores attract traffic. Chen believes Planet Fitness could be an attractive partner for Kohl's or even Amazon Go cashier-less stores.Bringing on complementary retailers' customers is a crucial part of Kohl's attempt to future-proof its business. Kohl's has had trouble growing sales since it doesn't offer a ton of must-have brands. Its shoppers are less fashion-driven than Macy's or Nordstrom's customers and likelier to stay home when the weather is rough, Chen said. Plus, TJX Companies (TJX) and Ross Stores (ROST) have undercut Kohl's in recent years with rock-bottom prices and a treasure hunt-like shopping experience.

Nathaniel Meyersohn, CNN Business

2019-04-30 14:06:01

business

business

https://www.cnn.com/2019/04/30/business/kohls-outfit-bar-millennials/index.html

After winning Moms, Kohl's goes after Millennials - CNN

Kohl's has built a loyal shopping base of middle-aged moms. Now, it's pivoting to chase a group of customers it has struggled with: Millennials.

business, After winning Moms, Kohl's goes after Millennials - CNN

Kohl's won over moms. Now it's going after Millennials

New York (CNN Business)Kohl's has built a loyal shopping base of middle-aged moms. Now, it's pivoting to chase a group of customers it has struggled with: Millennials. "We have not done our job," Kohl's CEO Michelle Gass said last year of the department store's history with Millennial shoppers. For Gass, who stepped into the top job at Kohl's a year ago, winning younger customers remains a key priority as she tries to make the 57-year-old retailer more relevant for a new generation of shoppers.Stores live in fear of Amazon. The Kohl's CEO embraced itOn-the-go Millennials don't want to spend time roaming around big-box retail stores searching for the right size and style, analysts and Kohl's executives say. They mix different brands and dress to fleeting fashion trends, which are often driven by social-media influencers. Younger shoppers also demand exciting store experiences, and quick and easy solutions for their wardrobe challenges."People are time-starved," Kohl's chief merchandising officer Doug Howe said in an interview. Shoppers in focus groups told Kohl's that they struggled to find what they wanted when shopping its nearly 90,000 square-foot stores and had trouble matching clothes together spread out across the stores. Plus, "Millennial customers don't buy one brand head to toe," he said. Kohl's is testing new outfit bars near the entrance of 50 stores in Philadelphia and Chicago in a play for Millennial shoppers.Read MoreLast year, Kohl's (KSS) created a "Millennial Initiative" team to develop ideas for experiences in stores and online that might attract younger customers.The task force's biggest bet yet: A Pinterest-like "outfit bar" at stores that lets women shop by "look" for work and social occasions — in one place.Kohl's is starting slow, rolling out the outfit bars near the entrance of 50 stores in Philadelphia and Chicago this spring. But executives' expectations for the initiative are high. "We haven't made, historically, this bold of a move," Howe said.'Life is short. Get the outfit.'CNN Business got an exclusive visit to the first outfit bar in Havertown, Pennsylvania, a suburb outside Philadelphia, the day it opened in late April.In the 600-square-foot section, Kohl's pulls together a curated mix of its national brands like Levi (LEVI), Nike (NKE) and Champion, as well as a few of its in-house clothing lines. The outfit bar gets prime real estate: The section is one of the first things customers see when they enter the store.A foldable floor sign at the front of the section introduces customers to the new concept: "The outfit bar. Find your new favorite look." Toward the ceiling in the back of the section, lit-up white letters read, "Life is short. Get the outfit," set against a neon green grass sign. It all seems tailor-made for Instagram.In the middle of the open section, three mannequins display varied styles: a sporty outfit, a sleek jumpsuit and blouse-and-skirt basics. PopSugar pants and tops and Champion jackets hang on side racks, while Levi's jeans are laid out on a table.A sign in the outfit bar encourages time-strapped shoppers to grab one of the looks Kohl's features in the section.There's a green jacket, denim jeans and a graphic T-shirt proclaiming "off-duty fun," while a multi-colored track jacket, denim skirt and Adidas sneakers comprise an "activewear anywhere" outfit. The outfit bar also features elevated wooden fixtures, which allow Kohl's to slide in LC Lauren Conrad heels and Adidas sneakers to show shoppers how an outfit might pair with shoes. Elizabeth Labor, 29, who was shopping at Kohl's for a job interview, told CNN Business she gave the outfit bar high marks.Labor said the "abundance of choices" at Kohl's often made it difficult for her to decide how to match clothes. But she found the outfit bar helpful. "It was cool to get some ideas of what you could piece together," she said.That's the goal for Kohl's: to give Millennials a distinct area in the store where they can quickly find styles and discover clothes they didn't know the retailer carries. The concept is a way for Kohl's to show off its hottest wares to existing Millennial customers and build cachet among new ones. Kohl's is partnering with influencers like Lilliana Vazquez to curate the outfit bar selection. Styles in the section will be updated every 30 days.Kohl's will partner with stylists and social media personalities—the first will be Today Show contributor Lilliana Vazquez— to curate the outfit bar selection and update it every 30 days with new looks to give shoppers a reason to keep returning to stores. A companion landing page on Kohl's site also allows customers to shop by outfit, instead of browsing by brand or clothing type. And Kohl's will promote the outfit bar on social media to help boost customers' awareness.The concept "should help Kohl's create a compelling area in store that is more attuned to the needs of Millennial shoppers," said Neil Saunders, managing director at GlobalData Retail.Generational shiftKohl's average shopper is 45, according to customer surveys from Cowen. That's a year older than Macy's (M) and JCPenney's (JCP) average shopper, two years older than Target's (TGT) and four years older than the average shopper at discount chains TJMaxx (TJX) and Marshalls. Amazon (AMZN) Prime shoppers are also younger than Kohl's, according to Cowen.Kohl's draws heavily from customers over 65 too, according to data from Morgan Stanley. Kohl's is shrinking stores and leasing out the extra space to Planet FitnessGreg Revelle, Kohl's chief marketing officer, said sweeping demographic shifts led Kohl's to go after Millennials, who have overtaken Baby Boomers as the largest generation in the United States. Also, he noted, about a million Millennial women every year become first-time moms. "We want to win as all these women make that transition," Revelle said.Strength with momsThe approach marks a shift for Kohl's, which has historically directed its efforts on strengthening its relationship with middle-aged moms."A number of our initiatives have really been around satisfying that core customer," Revelle said.Kohl's has connected with moms through a mix of stylish clothing brands and a knack for quickly reacting to the latest fashion trends. The company's women's clothing business accounts for close to a third of overall sales, and Kohl's relies heavily on its own brands.But now Kohl's wants to improve with Millennials. "Kohl's is simply not on the fashion radar of many younger shoppers," said Saunders. "There are many Millennial consumers who just don't set foot in its stores."About 29% of Millennial women said they shopped at Kohl's over the past year, compared to 50% at Target, 33% at TJMaxx and 31% at Macy's, according to GlobalData Retail data."We have a particular opportunity to gain share among Millennials, especially Millennial moms," Gass, the Kohl's CEO, said in March. "We expect to make a lot of progress."The Pinterest effectKohl's has taken several steps in recent years to target young moms.It started investing in digital and TV advertisements to reach customers under 35 for the first time. It's focused in particular on Pinterest, which Revelle said is "sort of the new style platform." Pinterest lets users bookmark or "pin" images ranging from clothing to home design.It has also brought in new brands including Under Armour (UA) and PopSugar to appeal to Millennials. Kohl's will closely study the outfit bars' performance for the next three months before making a decision about putting them in more stores. Executives will assess whether the outfit bar clothes perform better than they do elsewhere in the store. And, of course, they'll measure whether the concept brings in Millennial customers. Mannequins display varied styles in the outfit bar: a sporty outfit, a sleek jumpsuit and blouse-and-skirt basics. Howe, Kohl's merchandising chief, said a similar concept could one day make it over to Kohl's men's department, too.Though it's online trends like Pinterest and social-media influencers who helped inform the creation of the outfit bar, Kohl's believes its more than 1,150 brick-and-mortar stores give it an advantage to draw Millennials."We're seeing a lot of these Millennials starting to shop more in stores, particularly when they're shopping for their families," said Revelle. "It's much easier to look through everything, find what you like and check out. Plus, of course, you don't have to wait for delivery."Fighting off Target and TJMaxx As Kohl's battles for Millennial dollars, so are a large mix of big box retailers, brands and department stores.Target (TGT) has aggressively courted young parents by adding trendy new private-label clothing brands, such as A New Day, JoyLab and kids' line Cat & Jack.How Target is trying to woo mom and dadsTarget is "a popular destination for female Millennials and its new in-house fashion brands have been well received," said Saunders. It has improved the store experience by creating mini-sections in stores for it top brands. Walmart (WMT) has also stepped up its fashion game by partnering with celebrities like Ellen DeGeneres and Sofia Vergara for exclusive clothing lines and buying up hip online brands such as ModCloth and Eloquii.In the department store realm, Macy's recently unveiled Story, a new section in more than 30 stores that will change brands and concepts every few months to get customers to keep coming back to see what's new. Under a new CEO, JCPenney has poached executives from Target in recent months. Analysts believe it may be trying to follow Target's successful private-label strategy.And discount chains like TJMaxx and Ross (ROST), which have younger customer bases than Kohl's, are winning Millennials with low prices on stylish basics.For Kohl's to gain ground on those chains among highly coveted Millennials, it "does need to reinvent the store experience," said Saunders.

Nathaniel Meyersohn, CNN Business

2022-03-05 14:33:34

business

business

https://www.cnn.com/2022/03/05/business/coupons-history-jcpenney-macys-procter-and-gamble/index.html

JCPenney and Tide tried to get rid of coupons. It was a disaster - CNN

Clipping coupons is an American pastime. Reality shows devoted to extreme couponers have become sensations. But many companies that issue coupons hate them.

business, JCPenney and Tide tried to get rid of coupons. It was a disaster - CNN

JCPenney and Tide tried to get rid of coupons. It was a disaster

New York (CNN Business)Clipping coupons is an American pastime. Reality shows devoted to extreme couponers have become sensations. But many companies that issue coupons hate them. Critics say coupons are expensive, wasteful and inefficient advertising. Some companies have gone to great lengths to get rid of them.It didn't end well.A devoted base of shoppers loves the hunt of clipping coupons from newspaper booklets and, more recently, on their phones. Many will buy products solely on the offers they can find. Why every Costco product is called 'Kirkland Signature'Redeeming coupons makes shoppers feel smart — like they've outfoxed a brand — and gives them something to brag about to their friends. One study found customers who received coupons released feel-good oxytocin hormones and their heart rates decreased. Read More"If you can go into the store and walk out getting paid — some people chase that," said Jessie Alonzo, who runs the coupon blog MoolaSavingMom.com and shares coupon strategies with followers. "It's like a high."In the grocery industry, 865 million coupons were redeemed last year, according to marketing and payment services' firm Vericast.The rise of couponsCoupons have evolved over the years since Coca-Cola popularized them in the late 1880s.To promote Coca-Cola to the public, the bookkeeper of John Pemberton — the pharmacist who invented the Coke formula — used a city directory to mail coupons to Atlanta citizens, according to the company.Later on Asa Candler, founder of the Coca-Cola company, distributed paper tickets for complimentary free glasses of Coke. Within two decades, Coke had handed out an estimated 8.5 million free drink vouchers.Coupon use took off during the Great Depression. Some of the early distribution methods were newspapers and women's magazines, according to the Association of Coupon Professionals, a trade group for the industry.As chain supermarkets expanded in the 1940s, coupons became a widespread practice. The introduction in the mid-20th century of direct mail coupons and freestanding inserts in newspapers also propelled their popularity.By the 1970s, 65% of US households were clipping coupons, according to the trade group.Coupon clipping is a shopping ritual.Printed inserts in newspapers were the most-used coupons for decades, but the rise of online shopping and smartphone apps made digital coupons more popular. Coupons vs. salesCoupons are different than products on sale, price promotions or discounts at the store. Sales are available to all customers when they walk in or buy online. But brands target coupons in mailings and websites to reach the shoppers who are fiercely loyal to them."Coupons play an important role giving brands a chance to reach and activate shoppers who aren't making a brand choice" based on sale prices on shelves, said Aimee Englert, executive director of client strategy at Vericast. "Coupons help get a brand on the shopping list."Brands also dangle coupons whenever they introduce new products to spur shoppers to test them. Sometimes, companies also offer coupons to push shoppers to sign up for their loyalty programs.Coupons are expected to play a bigger role for shoppers as prices remain high. Sixty percent of shoppers said they were looking for more coupons to offset higher prices, according to an online survey of more than 1,800 customers in July by Vericast. "We are starting to see customers engaging in coupons a little bit more aggressively than before," Kroger (KR) CEO Rodney McMullen said on a call with analysts Thursday. Coupon failsBut coupons aren't loved by everyone.Brands and retailers dislike them because they prime shoppers to only buy products at deep discounts, making it harder for them to sell their merchandise at more profitable full-prices. Companies have said offering coupons is a waste of money that would be better directed toward dropping prices across the board or investing in improving their products' quality. Some companies have even likened coupons to a drug. "You're taking money and you're essentially paying the consumer to buy your product," said Kimberly Whitler, an associate professor at the University of Virginia's Darden School of Business and former marketing executive at David's Bridal and PetSmart. "It's taking away resources from building longer term, more sustainable equity in the brand." Coupons also can create challenges in predicting demand and keeping products in stock. It's much simpler and easier on operations to keep prices consistent. What's more, coupons cost money to design and produce, and some customers redeem expired coupons or fraudulent ones."The first time you do a coupon, it's awesome because it's incremental," Whitler said. "The problem is now it's baked into your base. You have to maintain that coupon." Macy's, JCPenney and other brands have unsuccessfully tried to kill coupons.But most brands have decided coupons are a necessary evil and remain a part of their pricing strategies. They're afraid to eliminate them for fear of driving away customers or losing business to competitors that keep them.Retail history is littered with cautionary tales of brands that tried to quit coupons and failed.In 1996, Procter & Gamble (PG), the maker of Tide, Crest and Bounty, experimented with a "zero coupon test" in three upstate New York markets where stores had opted to offer customers double or even triple the value of the manufacturer's coupons. P&G said it would pass its savings on marketing costs to consumers in the form of lower prices."More than 300 billion coupons are issued annually and less than 2% are being redeemed," said P&G's then-chief operating officer Durk Jager. "Some 8 million trees are cut down for coupons annually. About 40% of total coupon spending never reaches the consumer. We decided coupons have to go."But P&G's move alienated loyal coupon clippers in the area and they switched to competitors. Some of P&G's competitors also joined the test, such as Clorox (CLX) and Colgate (CL), and the New York attorney general filed an antitrust lawsuit against the companies. P&G brought back coupons and agreed to pay $4.2 million to settle the lawsuit, along with other manufacturers.Nine years later, Macy's (M) (then Federated Department Stores) acquired regional department stores that were known for their coupons and pulled back on them, hoping to wean the customers off them. But Macy's abandoned the plan after sales plunged: "Coupons are a religion in the Midwest," one analyst said at the time.JCPenney had the biggest coupon misfire.Customers use coupons while purchasing items at the checkout counter of a J.C. Penney Co. store at the Gateway Shopping Center in the Brooklyn borough of New York, U.S., on Saturday, Aug. 8, 2015.In 2012, Ron Johnson, the former head of Apple's retail stores and a Target executive who became the new JCPenney CEO, unveiled a sweeping overhaul of the chain. Central to the strategy was a plan to end coupons and discounts and replace them with low "everyday" prices."Rather than inundating the customer with a relentless series of sales, coupons, rebates and retail gimmicks," Penney shifted to "Fair and Square" prices.The plan backfired.Sales tanked nearly 25% in a year and the company's stock plunged. Johnson lost his job after just 17 months and Penney quickly brought back coupons. "We did not realize how deep some of the customers were into [coupons]," an executive said at the time.Johnson agreed: "Coupons were a drug."

Steve Contorno, CNN

2022-03-20 12:03:34

politics

politics

https://www.cnn.com/2022/03/20/politics/desantis-disney-florida-lgbtq-dont-say-gay-bill/index.html

DeSantis vs. Disney showdown in Florida was months in the making - CNNPolitics

A recent flap over a bill that opponents have dubbed "Don't Say Gay" has only bolstered Florida Gov. Ron DeSantis' standing within his party, and it has exposed a widening chasm between the current crop of Republican leaders and the corporations that have traditionally curried favor with the GOP.

politics, DeSantis vs. Disney showdown in Florida was months in the making - CNNPolitics

DeSantis vs. Disney showdown bolsters Florida governor's standing in GOP

(CNN)Months before Disney CEO Bob Chapek tiptoed into a roiling debate in Florida and before the legislation that opponents would call the "Don't Say Gay" bill was even filed, Gov. Ron DeSantis delivered a threat to business leaders who got in his way. "If you are in one of these corporations, if you're a woke CEO, you want to get involved in our legislative business, look, it's a free country," the Florida Republican said last June. "But understand, if you do that, I'm fighting back against you. And I'm going to make sure that people understand your business practices, and anything I don't like about what you're doing."DeSantis this month made clear he wasn't bluffing. A day after Chapek publicly condemned a controversial Florida bill that would ban classroom instruction about sexual orientation and gender identity before fourth grade, DeSantis ripped Disney to a room of supporters. He called Disney a "woke corporation" and criticized its business interests in China. Fox obtained and posted a video from the private event, and DeSantis and his staff helped spread it on social media.For DeSantis, already considered a future presidential contender, the episode has only further bolstered his standing within his party, and it has exposed a widening chasm between the current crop of Republican leaders and the corporations that have traditionally curried favor with the GOP. More and more, Republicans, once loath to criticize big business, have adopted former President Donald Trump's approach of calling out corporations whose stances on hot-button issues they disagree with. One longtime Republican consultant in Florida, who asked not to be named in order to speak freely about DeSantis and Disney, told CNN it was "a different day for the corporate-loving GOP in Florida."Read More"This thing with Disney, this is his modus operandi," the consultant said of DeSantis. "There's no playbook anymore for corporations. You just have to take your lumps." What the bill dubbed 'Don't Say Gay' by critics actually saysDisney has faced internal strife and a public reckoning in the days leading up to and after the bill's passage by the Florida Legislature. Chapek, who first said in a tepid statement that Disney's involvement would be "counterproductive" and did not publicly criticize the bill until it had passed, later apologized to his LGBTQ employees, telling them, "You needed me to be a stronger ally in the fight for equal rights and I let you down. I am sorry." The fallout continued Wednesday as some Disney employees staged walkouts. Meanwhile, conservative pundits flocked to Twitter to praise DeSantis for standing up to the entertainment giant. One commentator for the National Review wrote that DeSantis had given Republicans "a playbook for confronting woke ideology going forward." Disney did not respond to multiple requests for comment. Leaning into fightsTo the outside world, it was perhaps surprising that a Republican governor would put his state's best-known company on blast. Disney, after all, isn't just an iconic brand, it's also a main driver behind the tourism industry that helps keep Florida's income tax-less economy afloat. Before the pandemic, the theme park annually drew nearly as many visitors as there are people in the state (about 20 million), and it employs 77,000 Floridians.But unlike past GOP leaders, DeSantis has been unmoved by corporate pressure or threats of economic boycott over divisive policies. Rather, he has gained a national following by leaning into fights, no matter who is on the receiving end.One Republican noted that the legislation Disney objected to didn't originate with DeSantis and said his involvement was initially minimal. When he first remarked on the bill officially titled "Parental Rights in Education" in February, DeSantis acknowledged that there weren't many instances of Florida classrooms teaching about sexual orientation and identity.But as outrage against the bill spread throughout the country, to late-night television and the White House, DeSantis and his team began to aggressively push back. After "Saturday Night Live" poked fun at the bill, the governor's spokeswoman tweeted that anyone who opposed the measure was "probably a groomer," a term used to describe a sexual predator who trains a victim to trust the predator. Opponents of the bill said her comments evoked ugly, debunked arguments used in the past by anti-gay activists to diminish and demean the LGBTQ community.Florida state legislature leads the charge on a number of GOP prioritiesWith the bill gaining momentum, Disney, which is headquartered in Burbank, California, but has 38 registered lobbyists in Florida, worked behind the scenes with state lawmakers to try to soften the legislation. It passed both Republican-controlled chambers largely unchanged.Chapek told shareholders March 9 that he had called DeSantis after the bill passed the state Senate to convey the company's "disappointment and concern." DeSantis' office said his support for the legislation hadn't wavered. He then went public with his criticism of Disney."When you have companies that have made a fortune off being family-friendly and catering to families and young kids, they should understand that parents of young kids do not want this injected into their kids' kindergarten classroom," DeSantis told supporters in the video reported by Fox. This time, he didn't mention that there are few examples of this occurring in Florida. As a Republican legislative aide told CNN, "It's like Ron Burgundy said: That escalated quickly." Christopher Miles, a Miami-based GOP consultant, said watching a Florida governor go after Disney was "not a world I expected to be living in a couple of years ago." But he said DeSantis, like Trump, has gained popularity by bucking conventional wisdom.The surprise isn't that DeSantis pounced, Miles said, it's that Mickey Mouse walked into the trap."If you come at Ron DeSantis directly, he will come after you. He has made that clear," Miles said. "It's almost like Disney gave him a nice platform to run for president, and it was a good opportunity for him to spike the football. If you draw DeSantis into a fight, he's going to go to the mat."A shift within the GOPDisney's unsuccessful attempt to fight the Florida bill may also be the latest sign of corporate leaders' dwindling sway over state governments when it comes to divisive policies.Last year, Georgia marched ahead with legislation that put new voting restrictions in place despite objections from some of the state's largest businesses and Major League Baseball, which pulled its All-Star Game out of Atlanta.By the time Florida passed its own bill to limit early voting, the business community was largely silent.The NCAA issued a statement last year signaling it could pull championship events from states that altered the eligibility status of transgender athletes. Undeterred, DeSantis signed a bill banning transgender athletes from girls' and women's scholastic sports.The NCAA still held the men's and women's Division I Cross Country Championships in Tallahassee, only a few miles from where the anti-transgender legislation became law. Florida is scheduled to host several more championships in the coming years."If you don't want to hold an event in my state, you know what, I got a lot of events in my state," DeSantis said at the time. "I'm not worried about that."LGBTQ Floridians once hoped DeSantis could be an ally. Not anymoreIn the past, corporate leaders were able to convince some Republican politicians that contentious social policy bills would stifle economic activity in their states. In 2015, blowback was swift in Indiana when then-Gov. Mike Pence signed a bill making it legal for businesses to reject service to LGBTQ people if they cited religious exemptions. Criticism came from corporations, sports leagues and conventions, which warned of economic repercussions. Within 10 days, Pence signed new legislation softening the law.Before Disney weighed in, the Florida bill hadn't stirred that kind of response from businesses. "The folks who consider the GOP to be pro-business, that's not how they have been acting," said Cathryn Oakley, state legislative director and senior counsel at the Human Rights Campaign, the country's largest LGBTQ advocacy group. The organization recently rejected a $5 million donation from Disney because it felt the company hadn't done enough to stop the bill from passing in Florida.But Republicans remain convinced that overzealous corporate leaders are using their power to suppress conservative voices and ideals. Other than President Joe Biden and the media industry, no entity at last month's Conservative Political Action Conference in Orlando was treated as a greater threat to America than the corporate boardroom. An entire panel at CPAC was devoted to fighting back against what participants saw as the leftward lurch of multinational corporations. Pundits and politicians took turns knocking Fortune 500 companies such as Facebook, Spotify and even Coca-Cola, and attendees were encouraged to spend their money at businesses that were in line with their values."It is really important that we start building our own institutions and our own little networks that are friendly to the American way of life," said Terry Schilling, the president of the conservative American Principles Project.Fundraising pauseChapek announced after passage of the LGBTQ topics instruction bill that Disney would halt political contributions in Florida. Disney has been a prolific donor to Florida campaigns, mostly to Republicans, contributing more than $2.1 million to candidates and committees since the start of 2021. The company had previously donated $50,000 to DeSantis' bid for reelection this year.The DeSantis campaign released its response on Tuesday: A video of a campaign worker delivering the text of the legislation to Disney's headquarters in Central Florida and a message to "Just read the bill."Chapek said DeSantis had agreed to meet with Disney's LGBTQ employees. DeSantis' office said it was not aware any meeting had been scheduled.Disney shows off its post-Iger politicsDeSantis' dust-up with Disney has provided fodder for his political opponents in Florida, but few within the state's business community are coming to the company's defense. The Florida Chamber of Commerce and the Associated Industries of Florida, two top business groups, have remained silent throughout the saga. Neither responded to requests for comment.Nor have Republicans publicly defended Disney, their longtime campaign benefactor. One Republican aide said it was too soon to know the full impact of Disney's pullback on the GOP's ability to fundraise. In addition to cutting Republicans big checks, Disney properties often host GOP events at no cost to the party.It is unlikely to make a difference to DeSantis, who already has $89 million for his reelection fight."He thinks it doesn't matter. He's got a bottomless pit of goodwill, and his base will support him," said Ron Book, a longtime Florida lobbyist. "Everything he does, he's talking to his base."CNN's Frank Pallotta contributed to this report.

Frank Pallotta, CNN Business

2022-03-16 17:06:07

business

media

https://www.cnn.com/2022/03/16/media/disney-walkout-florida-bill/index.html

Disney employees are staging walkouts over company's response to the 'Don't Say Gay' bill - CNN

Last week, Disney and its CEO Bob Chapek bungled their response to Florida's controversial bill dubbed "Don't Say Gay." Now, some of the company's employees are staging a walkout.

media, Disney employees are staging walkouts over company's response to the 'Don't Say Gay' bill - CNN

Disney employees are staging walkouts over company's response to the 'Don't Say Gay' bill

New York (CNN Business)Last week, Disney and its CEO Bob Chapek bungled their response to Florida's controversial bill dubbed "Don't Say Gay." Now, some of the company's employees are staging a walkout.A Twitter account, "@DisneyWalkout," and an associated website, "WhereIsChapek.com," have organized a series of 15-minute daily walkouts, encouraging employees to protest during their breaks. The action will culminate with a full-day walkout on March 22. The Florida bill, which has been passed by the state's legislators but not yet signed into law, bans educators from discussions about sexual orientation and gender identity with children from kindergarten to third grade.It's unknown how many employees are taking part, but Disney's LGBTQ+ employee resource groups are not involved, according to a source familiar with the matter. Disney (DIS) declined comment about the demonstrations. Organizers of the walkout wrote in an open letter posted on its website that statements by Disney's leadership regarding the bill "have utterly failed to match the magnitude of the threat to LGBTQIA+ safety represented by this legislation." Read More"Primarily, those statements have indicated that leadership still does not truly understand the impact this legislation is having not only on Cast Members in the state of Florida, but on all members of the LGBTQIA+ community in the company and beyond," the organizers added. Disney CEO apologizes for 'silence' on 'Don't Say Gay' billThe organizers, who did not identify themselves, added that as a community they've been "forced into an impossible and unsustainable position" and they "must now take action to convince [The Walt Disney Company] to protect employees and their families in the face of such open and unapologetic bigotry." The backlash began last week when Chapek declined to issue a public condemnation of the bill, known as "Parental Rights in Education" bill. Instead, he noted that corporate statements are "often weaponized by one side or the other to further divide and inflame."After receiving criticism from inside and outside Disney, Chapek apologized for his initial response on Friday, saying that speaking to employees "helped me better understand how painful our silence was." Disney employs 75,000 people in Florida.The organizers added that they appreciate Chapek's apology, but there is "still more work to be done" and suggested steps that Disney can take to "regain the trust of the LGBTQIA+ community and employees." Gen Z won't stay quiet on Florida's 'Don't Say Gay' billOne such step is for Disney to "immediately and indefinitely" cease all campaign donations to those politicians involved in the bill's passage. On Friday, Chapek said that Disney will be "pausing" all political donations in Florida.Some Netflix (NFLX) staff also walked out on the job late last year over LGBT+ issues.The streaming company saw demonstrations from employees protesting Dave Chappelle's "The Closer" comedy special, which has been criticized for jokes aimed at transgender people.

Frank Pallotta, CNN Business

2022-03-11 20:59:30

business

media

https://www.cnn.com/2022/03/11/media/disney-chapek-apology-florida-lgbtq/index.html

Disney CEO apologizes for 'silence' on 'Don't Say Gay' bill - CNN

Disney CEO Bob Chapek apologized for his "silence" on Florida's controversial bill dubbed "Don't Say Gay," days after declining to condemn it.

media, Disney CEO apologizes for 'silence' on 'Don't Say Gay' bill - CNN

Disney CEO apologizes for 'silence' on 'Don't Say Gay' bill

New York (CNN Business)Disney (DIS) CEO Bob Chapek apologized for his "silence" on Florida's controversial bill dubbed "Don't Say Gay," days after declining to condemn it.On Monday, Chapek had spoken out about — but did not directly condemn — the controversial "Parental Rights in Education" bill, which would ban educators from discussions about sexual orientation and gender identity in classrooms. Disney employs 75,000 people in Florida."Thank you to all who have reached out to me sharing your pain, frustration and sadness over the company's response to the Florida 'Don't Say Gay' bill," Chapek wrote in a letter to employees Friday that was obtained by CNN. "Speaking to you, reading your messages, and meeting with you have helped me better understand how painful our silence was."He added that this issue is not just about "a bill in Florida, but instead yet another challenge to basic human rights...You needed me to be a stronger ally in the fight for equal rights and I let you down. I am sorry." Disney will also be "pausing all political donations in the state of Florida" to reassess.What the bill dubbed 'Don't Say Gay' by critics actually saysThe backlash began Monday when Chapek declined to issue a public statement about the bill, noting that corporate statements are "often weaponized by one side or the other to further divide and inflame."Read MoreInstead, he said at the time, "one of the ways Disney can make lasting change is through its content, citing films like 'Encanto' and TV shows like 'Modern Family.' These and all of our diverse stories are our corporate statements — and they are more powerful than any tweet or lobbying effort."The pushback was immediate, and by Wednesday, Chapek spoke against the bill on the company's annual shareholder meeting and said that his original statement didn't "quite get the job done."He also said he spoke Wednesday with Florida's governor, Ron DeSantis, about the bill. "The governor heard our concerns and agreed to meet with me and LGBTQ+ members of our senior team in Florida to discuss ways to address them," he added.And on Friday, the apology letter. In it, Chapek told employees that starting immediately, Disney is "increasing our support for advocacy groups to combat similar legislation in other states" and that the company is "hard at work creating a new framework for our political giving that will ensure our advocacy better reflects our values."Chapek also told employees that there's much more work to be done and that the company will share updates on that progress in the coming weeks.Florida isn't the only state pushing legislation that could be harmful to LGBTQ students"I truly believe we are an infinitely better and stronger company because of our LGBTQ+ community," Chapek said. "I missed the mark in this case but am an ally you can count on—and I will be an outspoken champion for the protections, visibility, and opportunity you deserve."

Devan Cole, CNN

2022-03-08 17:20:13

politics

politics

https://www.cnn.com/2022/03/08/politics/florida-dont-say-gay-bill/index.html

Florida legislature passes bill prohibiting some classroom instruction about sexual orientation and gender identity - CNNPolitics

Lawmakers in Florida gave final approval Tuesday to a bill that would ban certain instruction about sexual orientation and gender identity in the classroom, sending the controversial bill to the desk of Republican Gov. Ron DeSantis, who has signaled his support for the measure.

politics, Florida legislature passes bill prohibiting some classroom instruction about sexual orientation and gender identity - CNNPolitics

Florida legislature passes bill prohibiting some classroom instruction about sexual orientation and gender identity

Washington (CNN)Lawmakers in Florida gave final approval Tuesday to a bill that would ban certain instruction about sexual orientation and gender identity in the classroom, sending the controversial bill to the desk of Republican Gov. Ron DeSantis, who has signaled his support for the measure.Florida's GOP-controlled Senate passed HB 1557, titled the Parental Rights in Education bill, in a 22-17 vote. The state House had approved the bill late last month. Conservatives have argued that the bill is needed in order to give parents greater oversight over what students learn and discuss at school, stressing that LGBTQ-related topics should be left for families to discuss at home.Opponents, however, have dubbed it the "Don't Say Gay" bill, arguing the ban it creates would negatively impact an already marginalized community. They've pointed to data showing that LGBTQ youth reported lower rates of attempting suicide when they had access to LGBTQ-affirming spaces. The bill's opponents have also decried a part of the legislation that allows parents to bring civil suits against a school district for any potential violation of its rules, arguing it would open educators up to an endless barrage of litigation. The legislation has drawn scrutiny from Democrats in the state and elsewhere, including from President Joe Biden, who vowed last month to protect LGBTQ youth from such measures. Read MoreIf signed by DeSantis, a staunch conservative who has a history of supporting anti-LGBTQ measures in the state, the bill would take effect in July. His office declined CNN's request for comment on the Senate's passage Tuesday, instead pointing to remarks he made last week on the legislation. "To provide protections for parents, for preschoolers, kindergarteners, first graders, I mean that is something, I think, most parents would appreciate," DeSantis told reporters. "And we send the kids to school -- young kids -- and we want them to learn the basics. Some of these issues that are just simply not age-appropriate, I think parents want to see protection for that." Bill seeks to limit classroom instructionFlorida students participate in massive walkout to protest the 'Don't Say Gay' billThe bill states that "classroom instruction by school personnel or third parties on sexual orientation or gender identity may not occur in kindergarten through grade 3 or in a manner that is not age-appropriate or developmentally appropriate for students in accordance with state standards."In addition, the measure would require districts to "adopt procedures for notifying a student's parent if there is a change in the student's services or monitoring related to the student's mental, emotional, or physical health or well-being," something LGBTQ advocates argue could lead to some students being outed to their parents without the student's knowledge or consent. Advocates also fear the bill would restrict students' ability to speak confidentially with school counselors -- some of whom are a student's sole resource for mental health services.More than a dozen attempts by members of the Florida Senate to amend the bill on Monday failed, despite emotional pleas from some Democrats, including state Sen. Shevrin Jones, who brought some senators to tears as he spoke about his experience as a gay Floridian. State Sen. Jeff Brandes, a Republican, offered an amendment that would have broadened the legislation to prohibit all instruction of any sexual topics in an attempt to eliminate concerns from LGTBQ advocates that the bill stigmatized members of the community, but it failed.Brandes, along with one other Republican state senator, joined Democrats in voting against the measure Tuesday. 'There will be protests everywhere'During Monday's debate, the bill's Senate sponsor, Republican state Sen. Dennis Baxley, said that he was concerned that kids are "experimenting" with sexual orientation and that was part of his motivation for the legislation. The bill's co-sponsor in the Florida House, Republican state Rep. Joe Harding, previously told CNN that the bill is meant to deter school staff from inquiring about a student's gender identity or pronouns without including their parents in the conversation. Harding had said that he'd heard a few instances of parents complaining that school staff were discussing gender identity with their children without their input, though he didn't get into specifics of where in the state such instances occurred. After "Saturday Night Live" poked fun at the bill, Christina Pushaw, the governor's spokeswoman, posted on Twitter that anyone who opposes the bill is "probably a groomer," in essence smearing those who've raised concerns about the bill as sexual predators. Her comments harken back to debunked arguments used by anti-gay activists in recent history to smear and marginalize members of the LGBTQ community. Opponents of the measure have pointed to research from the Trevor Project, a nonprofit organization that works on suicide prevention among LGBTQ youth. The group said in a statement last month that "LGBTQ youth who had access to spaces that affirmed their sexual orientation and gender identity -- including schools -- reported lower rates of attempting suicide than those who did not." Students in Florida have been among some of the bill's loudest opponents, with several high schools across the state having held walkouts in recent days in protest of the bill."We wanted to show our government that this isn't going to stop. There were walkouts all last week. This is going to continue. If this passes, there will be protests everywhere," Will Larkins, a junior who helped organize a walkout at Winter Park High School in Orange County, told CNN on Monday.This story has been updated with additional background information and reaction.CNN's Jamiel Lynch, Steve Contorno and Caroll Alvarado contributed to this report.

Donie O'Sullivan, CNN Business

2022-03-10 00:47:38

business

media

https://www.cnn.com/2022/03/09/media/biolab-ukraine-russia-qanon-false-conspiracy-theory/index.html

Biolabs: Russia and QAnon have the same false conspiracy theory about Ukraine - CNN

A new conspiracy theory has become popular among some of the online communities that formed around QAnon -- one simultaneously being promoted by the Kremlin as a justification for its invasion of Ukraine. The false claim: the United States is developing bioweapons in Ukraine and Vladimir Putin has stepped in to save the day and destroy the weapons.

media, Biolabs: Russia and QAnon have the same false conspiracy theory about Ukraine - CNN

Analysis: Russia and QAnon have the same false conspiracy theory about Ukraine

New York (CNN Business)A new conspiracy theory has become popular among some of the online communities that formed around QAnon -- one simultaneously being promoted by the Kremlin as a justification for its invasion of Ukraine. The false claim: the United States is developing bioweapons in Ukraine and Vladimir Putin has stepped in to save the day and destroy the weapons.QAnon's core prophecy has always been that there is a "plan" and that former President Donald Trump will rid the world of an evil cabal, culminating in the unmasking, imprisonment or even execution of cabal members. But that prophecy dates back to when Trump was actually president -- now that he's not, believers have been convincing themselves there is evidence that the plan is still very much in place, maybe even more so than ever before. In the Kremlin's disinformation, some have seen that hope. There are US-funded biolabs in Ukraine, that much is true. But they are not building bioweapons. Actually, it's the opposite: Part of the reason for their creation was to secure old Soviet weapons left behind in the former Soviet republics. The State Department has described the claims as nonsense -- and the US and Ukrainian governments have repeatedly, and for years now, tried to bat down conspiracy theories about the labs and spoken about the work that is actually being done in them Russia's falsehoods about labs like this have not been limited to Ukraine. Similar claims were made about a lab in Tbilisi, Georgia; those were proven false. Dr. Filippa Lentzos, co-director of the Centre for Science & Security Studies at King's College London, visited the lab along with other experts and debunked the Russian claims. She told CNN the Russians are spreading the same lies about labs in Ukraine. She was stunned by Biden's inauguration. How this South Carolina mom escaped QAnonThere is a disinformation machine at work here. Read MoreIt goes a bit like this. The Russian government makes suggestive statements, leaving breadcrumbs that are dutifully repeated by official Russian state media -- and then, increasingly importantly, by dozens of faceless websites (some of which the US has alleged are tied to Russian intelligence). Social media accounts push the idea further, build on it, make it more fantastical -- and those more fantastical claims eventually end up getting picked up by official Russian media and the cycle begins again. Russia has been pushing various bits of disinformation about the US and biological weapons since the Cold War -- infamously publicizing, for instance, the false idea that the US manufactured the HIV/AIDS virus. Matt Field, an editor with the Bulletin of the Atomic Sciences, told CNN disinformation about US-supported bio-labs seems to peak when Russia finds itself under increased international scrutiny -- the allegations about the Tbilisi lab, for instance, bubbled up in 2018 amid the international scandal after Russia was found to have poisoned Sergei and Yulia Skripal in Salisbury, England. The methods used to spread this kind of disinformation are not new, either. Former KGB agents have said the KGB would plant stories in obscure or small publications in foreign countries and then those stories would be cited as sources in official Russian media.That process can happen a lot more easily today. Instead of having to go to the trouble of convincing an editor at a newspaper to publish disinformation, Russia can push it out on seemingly independent websites that present themselves as news outlets but are no more than Kremlin cut-outs. The US government has identified websites working in tandem with Russia's FSB security service. Russia still plants stories in real outlets too -- for example, in 2017 the leftwing US magazine Counterpunch detailed how it had been duped into running articles under the byline "Alice Donovan," which the US government later confirmed was a fake identity run by GRU Russian military intelligence. Russia does not necessarily need to push its disinformation to QAnon adherents, because the two have enough shared interests. Today, many Americans find themselves in online groups and following accounts that mobilized around QAnon -- there, Russian disinformation is sometimes embraced with enthusiasm. On an American QAnon online radio show broadcast Monday, one host read verbatim from Russian state media reports about biolabs. Over on the show's online discussion forum a person who had intentionally misspelled the word "Patriot" so it would include the letter "Q" wrote, "I had a hunch that these bastards were getting ready to release another bio weapon and we needed SOMEONE to put a stop to it. Putin stepped up. IMO this was part of his deal with DJT." "A central element of conspiracy theory belief systems is the constant refining of narratives and reactions to wider events to support the grand narrative," Ciarán O'Connor, a researcher with the Institute for Strategic Dialogue, a think tank that analyses disinformation, told CNN. Journalists and government officials have been trying to debunk the falsehoods and spread the truth. Big Tech companies have been trying to stop the conspiracy theory's spread on their platforms, too. But those measures have thus far been no match for the power of belief and the sustained campaign to promote this theory. On Tuesday, a Chinese Foreign Ministry spokesman helped the Russian effort, making his own suggestion that the US was up to something nefarious at labs in Ukraine. The same official in 2020 promoted the idea that the US military brought Covid-19 to China.

Ramishah Maruf, CNN

2022-02-26 22:48:27

business

tech

https://www.cnn.com/2022/02/26/tech/meta-youtube-facebook-rt-demonetize/index.html

Meta and YouTube demonetize Russian state media - CNN

YouTube said Saturday that it will temporarily halt the ability of a number of Russian channels, including state-sponsored RT, to monetize their content on the platform.

tech, Meta and YouTube demonetize Russian state media - CNN

Meta and YouTube block Russian state media from monetizing on its platforms

(CNN)YouTube said Saturday that it will temporarily halt the ability of a number of Russian channels, including state-sponsored RT, to monetize their content on the platform. It will also be "significantly limiting" recommendations to those channels, YouTube said in a statement. The company said the channels are affiliated with recent sanctions, and that it has restricted access to RT and other channels in Ukraine in response to a request from that country's government. Earlier Saturday, Ukraine Digital Minister Mykhailo Fedorov said on Twitter he contacted YouTube asking the platform to block "the propagandist Russian channels," and specifically mentioned Russia 24, TASS and RIA Novosti.In 2017, the US Justice Department forced RT's American arm to "register as a foreign agent." Intelligence researchers have said RT "conducts strategic messaging for [the] Russian government." Here's how social media platforms are responding to Russia's invasion of Ukraine Read MoreAs the crisis in Ukraine intensifies, social media companies have been scrambling to rein in misinformation and Russian state propaganda. A YouTube spokesperson said the company has removed hundreds of channels and thousands of videos over the past few days, including channels for coordinated deceptive practices. The move by YouTube follows the ban announced Friday by Meta on Russian state media's ability to run ads and monetize them on Meta's platform. Meta's head of security policy, Nathaniel Gleicher, said on Twitter Saturday that the company will continue putting labels on additional Russian state media posts. "These changes have already begun rolling out and will continue into the weekend," Gleicher tweeted Friday. "We are closely monitoring the situation in Ukraine and will keep sharing steps we're taking to protect people on our platform." Also on Friday, the Russian government moved to "partially restrict" Facebook (FB) access in the country after accusing the platform of unlawful censorship. Russia's Ministry of Communications claimed Facebook "violated the rights and freedoms of Russian citizens," alleging that the social network had clamped down on several Russian media outlets Thursday. Meta global affairs president Nick Clegg said Russia ordered the company to "stop the independent fact-checking and labelling" of four Russian outlets."We refused," Clegg said in a statement. "Ordinary Russians are using our apps to express themselves and organize for action. We want them to continue to make their voices heard, share what's happening, and organize."CNN's Clare Duffy and Brian Fung contributed to this report.

Clare Duffy and Rachel Metz, CNN Business

2022-03-15 15:05:01

business

tech

https://www.cnn.com/2022/03/15/tech/ukraine-russia-misinformation-challenges/index.html

Why Ukraine war misinformation is so hard to police - CNN

Russia's invasion of Ukraine is unfolding online like no war in history, providing a real-time stream of information on social platforms like Twitter, Facebook and TikTok. But with that unique view into the conflict comes a flood of misinformation that's especially hard to root out — effectively creating a digital fog of war.

tech, Why Ukraine war misinformation is so hard to police - CNN

Why Ukraine war misinformation is so hard to police

New York (CNN Business)Russia's invasion of Ukraine is unfolding online like no war in history, providing a real-time stream of information on social platforms like Twitter, Facebook and TikTok. But with that unique view into the conflict comes a flood of misinformation that's especially hard to root out — effectively creating a digital fog of war.In recent weeks, for example, clips from video games and scenes from old wars presented as views from Ukraine's front lines have gone viral alongside legitimate images. Heart-wrenching videos of families torn apart have been shared thousands of times, then debunked. And official government accounts from Ukraine and Russia have each made unfounded or misleading statements, which quickly get amplified online.Fact check: Pro-Russia social media accounts spread false claims that old videos show Ukrainian 'crisis actors' In some ways, it's the latest in a long list of recent crises — from the pandemic to the Capitol riot — that have spurred the spread of potentially harmful misinformation. But misinformation experts say there are key differences between the war in Ukraine and other misinformation events that make false claims about the conflict especially insidious and difficult to counter. Perhaps most notably, Ukraine-related misinformation has been highly visual and is spreading faster across borders, misinformation experts told CNN Business. The direct involvement of Russia — which is known for spreading misinformation online aimed at sowing discord and confusion — adds an extra layer of complexity. The emotional and visceral nature of the content also makes social media users quick to hit the share button, despite the complex misinformation landscape. "People feel helpless, they feel like they want to do something and so they're online scrolling and they're sharing things that they think are true because they're trying to be helpful," said Claire Wardle, a Brown University professor and US director at misinformation-fighting nonprofit First Draft News. "[But] in these moments of upheaval and crisis, this is the time that we are worst at figuring out what's true or false."Read MoreA 'torrent of images and videos being shared'Unlike the ongoing Covid-19 pandemic, when many viral false claims have been text-based, much of the misinformation about the war in Ukraine has been in the form of images and videos. And those visual formats are harder and more time consuming for both automated systems and human fact checkers to evaluate and debunk, to say nothing of everyday social media users.To vet an image or video, fact checkers typically start by searching the web to see if it has been posted previously, indicating that it is not from the current crisis. If it does appear to be recent, they can use tools to do things such as analyze shadows or compare the terrain shown to satellite images to confirm whether it was truly shot in the location it purports to show."Obviously, that's going to be much more time consuming," said Carlos Hernández-Echevarría, public policy and institutional development coordinator at Spain-based fact checking organization Maldita.es. By comparison, he said, "plainly false narratives about vaccination, say, like, 'They create autism' ... all that stuff is pretty easy to debunk." And while anyone can run a photo through a reverse-image search engine like Google Image Search or TinEye to see where it may have popped up online in the past, it can be a lot harder for people to find tools to verify videos, noted Reneé DiResta, technical research manager at Stanford Internet Observatory. You might be able to track down the display thumbnail that shows up with the video, she said, but it's trickier to find an entire video via reverse image search.This difficulty is clear with the deluge of videos moving through apps such as TikTok. These clips include not just misinformation in its original form but videos perpetuating misinformation as users post their own reaction videos."I've opened TikTok a few times and the video that pops up is something that is not an accurate presentation of what it claims to be," DiResta said. "Facebook and Twitter have had some rather extensive experience in content moderation during crises; I think TikTok is finding itself having to get up to speed very quickly."The visual nature of much of the misinformation spreading about the war in Ukraine makes it especially hard to detect and counter, experts say.The speed with which false claims and narratives are spreading from one country to the next has also increased — from several weeks in the case of the pandemic and other recent crises to just a matter of days or, in some cases, even hours now, Hernández-Echevarría said. This may be due in part to the fact that so much of the content is visual, and thus less reliant on a shared language. Images and videos also often have a more emotional appeal than text-based posts, which experts say makes users more likely to share them."Right now there's this torrent of images and videos being shared," said Brandie Nonnecke, director of the Center for Information Technology Research in the Interest of Society (CITRIS) Policy Lab at UC Berkeley. "The more the imagery moves you, the quicker it's going to move through social media networks."In one recent example, a video purporting to show Ukrainian soldiers saying emotional goodbyes to their families was viewed thousands of times on Instagram and was shared across various Facebook pages. However, AFP Fact Check found that the video was from 2018 and showed US Marines returning home to their families. Instagram and some pages on Facebook have since placed a label on the video warning users that it is "partly false information," but the video is available on at least one other Facebook page without a label. (Facebook-parent Meta did not immediately respond to a request for comment.) Analysis: Russia and QAnon have the same false conspiracy theory about Ukraine Coordinated efforts by Russia to spread false narratives have also become more overt and prominent since the war began. A false claim by Russia that the United States is developing bioweapons in Ukraine and Russian President Vladimir Putin has stepped in to save the day has recently reemerged and gained traction — first among QAnon adherents and, more recently, on more mainstream platforms and even among some lawmakers. There is also a new, troubling trend of videos that appear to be debunking false, pro-Ukrainian images and videos which are themselves fake and designed to sow confusion and doubt about Russia's actions, ProPublica reported last week. Some on the Ukranian side have spread misleading information. Earlier this month, as Russian forces were firing on Ukraine's Zaporizhzhia nuclear power plant, Europe's largest, Ukrainian Foreign Minister Dmytro Kuleba tweeted that "if (the plant) blows up, it will be 10 times larger than Chernobyl," referencing the largest nuclear power disaster in history. But while experts expressed serious concerns, they also said that the more modern plant was built differently and more safely than Chernobyl, and was unlikely to be at risk of blowing up. In many cases, false or misleading narratives are spread through mildly conspiratorial videos or images. Each individual piece of content might not be harmful enough to violate platforms' guidelines, but when users watch hundreds of videos a day, they may walk away with a skewed idea of what's happening on the ground, according to Wardle. "The wider narratives here that are shaping the war, shaping people's ideas of Europe and NATO and Russia, it's less about an individual TikTok video. It's like the drip, drip, drip of what those narratives are doing and the way that they're making people shape their understanding," she said. Platforms fighting back against misinformation Big social media platforms have taken steps to provide users with context around the Ukraine-related content they see. Twitter and Meta-owned platforms Instagram and Facebook, for instance, have begun removing or labeling and demoting content posted by or linking to Russian state-controlled media, including television network Russia Today (Facebook had said in 2020 that it would start labeling state-controlled media). TikTok said earlier this month it would pilot a similar effort to label "some state-controlled media accounts." TikTok also says it prohibits "harmful misinformation," although it's not clear how it defines that phrase. The three platforms also work with independent fact-checking organizations to identify policy-violating, false content or surface accurate information.Twitter and Meta have also said they are working to enforce their policies related to coordinated inauthentic behavior — which refers to bad actors using networks of fake accounts to spread falsehoods online — for potential Ukraine-related activity. Meta recently detailed a pro-Russia disinformation network that it removed, which included fake user profiles complete with AI-generated profile pictures and websites posing as independent news outlets to spread anti-Ukraine propaganda.Russia's misinformation offensive impedes diplomatic efforts to end the warSome of these efforts have landed the tech companies in hot water with Russia, resulting in their platforms being restricted or banned in the country and showing the tightrope they must walk as they manage the use of their platforms during the crisis. And the continued rapid spread of misinformation online proves that none of these methods can staunch the flow of falsehoods. Even if a piece of content is labeled on one platform, content is often repurposed on others that may not have equally robust fact-checking practices. When social networks host misinformation, the platforms' algorithms can quickly amplify its reach so it's seen by thousands or millions of users. There are now some efforts underway to use social media platforms to spread accurate information and teach users how to avoid amplifying falsehoods. The White House held a briefing last week with top TikTok influencers to answer questions about the war in Ukraine and the United States' role in the conflict, according to the Washington Post. And Hernández-Echevarría's Maldita.es has worked with with more than 60 other fact-checking organizations from around the world to create a database of debunked misinformation related to the war, which can be used by social media platforms and users. In order to cut down on the spread of misinformation online — and in light of constantly changing rules at social media platforms — Nonnecke would like to see a set of standards or best practices that these platforms must engage in during times of war, enforced by an outside group. "They shouldn't just be deciding on a whim what they want to do," she said.Major social media platforms must also boost their content moderation capabilities in languages other than English — in this case, especially in Eastern European languages such as Polish, Romanian and Slovenian, Wardle said. "My friend who's from Romania, she's like, 'This whole narrative around Putin coming to save Ukrainians from the Nazis, in the West you're all kind of laughing at it,'" she said, referencing the Russian President's claims without evidence that the Ukranian government is a "gang of drug addicts and neo-Nazis". "But she's like, 'Here, it's everywhere.'"

Rachel Metz, CNN Business

2022-03-16 22:33:03

business

tech

https://www.cnn.com/2022/03/16/tech/deepfake-zelensky-facebook-meta/index.html

Facebook, YouTube, and Twitter remove Zelensky deepfake - CNN

Facebook and YouTube said Wednesday that they removed uploads of a deepfake video of Ukranian President Volodymyr Zelensky that purported to show him yielding to Russia.

tech, Facebook, YouTube, and Twitter remove Zelensky deepfake - CNN

Facebook and YouTube say they removed Zelensky deepfake

(CNN Business)Facebook and YouTube said Wednesday that they removed uploads of a deepfake video of Ukranian President Volodymyr Zelensky that purported to show him yielding to Russia.The deepfake spread widely online Wednesday, as noticed earlier by Vice's Motherboard. In the video, which CNN Business has reviewed, Zelensky appears to stand behind a presidential podium and in front of a backdrop, both of which feature the Ukranian coat of arms. Wearing a green shirt, Zelensky speaks in Ukranian, appearing to tell Ukranians to put down their weapons in the weeks-old war against Russia.Deepfakes — which combine the terms "deep learning" and "fake" — are persuasive-looking but false video and audio files. Made using cutting-edge and relatively accessible AI technology, they aim to show a real person doing or saying something they did not. Experts have long been concerned that, as they improve, they would be used to spread misinformation.In a series of posts on Twitter Wednesday afternoon, Meta's head of security policy, Nathaniel Gleicher, wrote that the company spotted and removed the video earlier that day. "We've quickly reviewed and removed this video for violating our policy against misleading manipulated media, and notified our peers at other platforms," he wrote.YouTube spokesperson Ivy Choi said the video and reuploads of it have been removed from the platform because it violates the company's misinformation policies. "We do allow this video if it provides sufficient education, documentary, scientific or artistic context," Choi said in a statement.Read MoreA Twitter spokesperson said the company is tracking how the video is shared across the social network, and has taken "enforcement action" in cases where it violates company rules (such as its synthetic and manipulated media policy, which forbids users from sharing altered content that may confuse people or lead to harm; in some cases, Twitter may label tweets containing misleading media to give users more context).How a deepfake Tom Cruise on TikTok turned into a very real AI companyWhile the video doesn't look tremendously doctored, there are some telltale signs that the video is not what it appears to be. And Zelensky himself appeared in a video posted to an official Ukraine defense account on Twitter, saying he is continuing to defend Ukraine and refusing to lay down weapons against Russia. Hany Farid, a professor at the University of California, Berkeley, and digital forensics expert, pointed out several of the obvious signs that the video is a deepfake. First, it's a low-quality, low-resolution recording; this is a common trick to hide the distortions created when making a deepfake, as our brains tend to be more forgiving of glitches in low-quality videos. Second, the Zelensky in the video looks straight ahead without moving his arms throughout the clip — it's very tricky to make a convincing deepfake that includes head motions and hands moving in front of the face. Third, there are little visual inconsistencies in the video, he pointed out, that occur during the process of making a deepfake, which is created a single frame at a time. Though Zelensky's voice is harder for Farid to comment on, in part because he doesn't speak Ukranian, he said it sounds a bit off to him.The video comes weeks after the official Facebook account for Ukraine Land Forces posted a warning that such videos of Zelensky may appear. "Be aware - this is a fake!" the account wrote, soon adding, "Rest assured - Ukraine will not capitulate!" That warning was accompanied by an image that appeared to show Zelensky in a similar shirt as what appeared in the deepfake video, in front of the same backdrop and behind the same podium.As of Wednesday afternoon, the video could still be found online, such as in some posts CNN Business spotted on Twitter and YouTube in which users made clear that it was a deepfake.While Farid doesn't think the video fooled people, he thinks it "muddies the information waters," making it harder for anyone to trust what they see."Casting doubt on what you see and hear and read is a very powerful weapon in the information war and deepfakes are now playing a role in that," Farid said.

Brian Fung, CNN Business

2022-03-04 19:30:45

business

tech

https://www.cnn.com/2022/03/04/tech/russia-blocks-facebook/index.html

Russia says it's blocking access to Facebook - CNN

Russia moved to block access to Facebook within its borders on Friday, seeking to shut down the world's biggest social media platform and drawing a rebuke from the Biden administration.

tech, Russia says it's blocking access to Facebook - CNN

Russia says it's blocking access to Facebook

(CNN Business)Russia moved to block access to Facebook within its borders on Friday, seeking to shut down the world's biggest social media platform and drawing a rebuke from the Biden administration."In March 2022, a decision was made to block access to the Facebook network (owned by Meta Platforms, Inc.) in the Russian Federation," said a statement from Roskomnadzor, Russia's communications regulator.The Russian government said its decision came after Facebook had limited access to state media channels including RT and Sputnik. Russian officials accused Facebook of more than two dozen cases of "discrimination" against Russian media.Roskomnadzor said its bid to cut off Facebook from Russian users was intended "to prevent violations of the key principles of the free flow of information and unhindered access Russian users to Russian media on foreign Internet platforms."In response, Meta president of global affairs Nick Clegg said the company was doing "everything we can to restore our services" but that "millions of ordinary Russians" will soon "find themselves cut off from reliable information.Read More"The move to crack down on Facebook prompted White House Press Secretary Jen Psaki to respond during Friday's press briefing."This is part of their effort, as you know, to cut off a range of information from their public," Psaki said, highlighting steps Russia has taken to limit the flow of information about the war in Ukraine. "This is a pattern. This is not necessarily a new approach that they have taken, but to crack down on information in their country to reach the people. So, certainly we are deeply concerned about this and concerned about the threat to freedom of speech in the country."

Brian Fung, CNN Business

2022-03-12 15:11:14

business

tech

https://www.cnn.com/2022/03/12/tech/russia-internet-censorship-circumvention/index.html

Russian internet users are learning to beat Putin's internet crackdown - CNN

A digital Iron Curtain may be descending on Russia, as President Vladimir Putin struggles to control the narrative about his war in Ukraine. The Kremlin has already moved to block Facebook and Twitter, and its latest step in that direction came Friday as the government announced plans to block Instagram in the country, as well.

tech, Russian internet users are learning to beat Putin's internet crackdown - CNN

Russian internet users are learning how to beat Putin's internet crackdown

(CNN Business)A digital Iron Curtain may be descending on Russia, as President Vladimir Putin struggles to control the narrative about his war in Ukraine. The Kremlin has already moved to block Facebook and Twitter, and its latest step in that direction came Friday as the government announced plans to block Instagram in the country, as well. But despite Putin's efforts to clamp down on social media and information within his borders, a growing number of Russian internet users appear determined to access outside sources and circumvent the Kremlin's restrictions. To defeat Russia's internet censorship, many are turning to specialized circumvention technology that's been widely used in other countries with restricted online freedoms, including China and Iran. Digital rights experts say Putin may have inadvertently sparked a massive, permanent shift in digital literacy in Russia that will work against the regime for years. Since the invasion of Ukraine, Russians have been flocking to virtual private networks (VPNs) and encrypted messaging apps, tools that can be used to access blocked websites such as Facebook or safely share news about the war in Ukraine without running afoul of new, draconian laws banning what Russian authorities consider to be "fake" claims about the conflict. A rapid rise in downloads Read MoreDuring the week of February 28, Russian internet users downloaded the five leading VPN apps on Apple and Google's app stores a total of 2.7 million times, a nearly three-fold increase in demand compared to the week before, according to the market research firm SensorTower. That growth dovetails with what some VPN providers have reported. Switzerland-based Proton, for example, told CNN Business it has seen a 1,000% spike in signups from Russia this month. (The company declined to provide a baseline figure for comparison, however.) VPN providers are just one type of application seeing higher uptake in Russia. Since March 1, a range of messaging apps including Meta's Messenger and WhatsApp services have seen a gradual increase in traffic, said the internet infrastructure company Cloudflare, a trend consistent with an increase in traffic to global social media platforms such as Twitter, YouTube, Instagram and TikTok. But perhaps the fastest-growing messaging app in Russia may be the encrypted messaging app Signal. SensorTower said Signal was downloaded 132,000 times in the country last week, an increase of more than 28% from the week before. Russian internet traffic to Signal has seen "significant growth" since March 1, Cloudflare told CNN Business. Other private messaging apps, such as Telegram, saw a relative slowdown in growth that week but still witnessed more than half a million downloads in that timeframe, SensorTower said. In recent weeks, Russian internet users also appear to have increased their reliance on Tor, a service that anonymizes internet browsing by scrambling a user's traffic and bouncing it through multiple servers around the world. Beginning the day of the Ukraine invasion, Tor's metrics page estimated that thousands more Russian users were accessing the web through secret servers connected to Tor's decentralized network. Tor users got a helping hand from Twitter on Tuesday, as the social network — which has been partially blocked in Russia following the invasion — added the ability to access its platform through a specialized website designed for Tor users. Facebook, for its part, has had its own Tor site since 2014. And Lantern, a peer-to-peer tool that routes internet traffic around government firewalls, began seeing more downloads from Russia starting about two months ago, said Sascha Meinrath, a communications professor at Penn State University who sits on the board of Lantern's parent company, Brave New Software. Lantern has seen a 2,000% increase in downloads from Russia alone over the past two months, Meinrath said, with the service going from 5,000 monthly users in Russia to more than 120,000. By comparison, Meinrath said, Lantern has between 2 million and 3 million users globally, mostly in China and Iran. "Tor, Lantern, all the VPNs, anything that's masking who you are or where you're going —Telegram — everything, downloads are increasing dramatically," said Meinrath. "And it's a bootstrapping thing, so the people that are on Telegram, they're using that to swap notes about what else you should download." The most tech-savvy and privacy-conscious users, said Meinrath, know how to combine multiple tools together to maximize their protection — for example, by using Lantern to get around government blocks while also using Tor to anonymize their activity. The war for information technology The growing prominence of some of these tools highlights the stakes for Russian internet users as the Kremlin has detained thousands of people for protesting the war in Ukraine. And it contrasts with the steps Russia has taken to clamp down on social media, from blocking Facebook entirely to passing a law that threatens up to 15 years behind bars for those who share what the Kremlin deems "fake" information about the war. Natalia Krapiva, a lawyer at the digital rights group Access Now, said some Russian internet users have been using secure communications tools for years, as the Russian government began restricting internet freedoms more than a decade ago. In the past, the Russian government has tried to block Tor and VPN providers, Krapiva said. But it hasn't been very successful, she said, due to Tor's open, decentralized design that hinges on many distributed servers and the willingness of new VPN providers to fill the gap left behind by banned ones. What Russia faces now is an intensifying game of cat and mouse, Krapiva said. But while Putin may not be able to shut down censorship-resistant technologies entirely, supporters of the Kremlin can still try to drag it into Russia's wider information war and hinder adoption. On February. 28, Signal said it was aware of rumors suggesting the platform had been compromised in a hack — a claim the company flatly denied. Without blaming Russia directly, Signal said it suspected the rumors were being spread as "part of a coordinated misinformation campaign meant to encourage people to use less secure alternatives." Signal's claim underscores how quickly the information war has evolved from being about the news coming out of Ukraine to being about the services people use to access and discuss that news. If only a small minority of Russians end up embracing circumvention technologies to get access to outside information, it may allow Putin to dominate the information space within the country. And while there are many indications of growing interest in these tools, it appears to be on the scale of thousands, not millions, at least for now. "The concern, of course, is that the majority of the people, the general population, might not necessarily know about those tools," said Krapiva. "[They] can be complex if your digital literacy is quite low, so it's going to remain a challenge to have a bigger section of the population really adopt these tools. But I'm sure there will be more education and I want to remain hopeful they will persevere." Normalizing censorship-resistant tech Some digital rights experts say it's important for these tools to be used for ordinary and innocuous internet activities, too, not just potentially subversive ones. Performing mundane tasks like checking email, accessing streaming movies or talking to friends using these technologies makes it harder for authoritarian regimes to justify cracking down on them, and can make it more difficult to identify efforts to violate government restrictions on speech and access. "The more that regular users use censorship-resistant technology for everyday activities like unblocking movies, the better," said John Scott-Railton, a security and disinformation researcher at The University of Toronto's Citizen Lab. And this may only be the start. Meinrath said the government restrictions will likely trigger not just broader adoption of circumvention tools in Russia but also further research and development of new tools by Russia's highly skilled and tech-savvy population. "We're at the beginning of a J-curve," Meinrath said, adding: "This is a one-way transformation in Russia."

Analysis by Zachary B. Wolf, CNN

2022-03-14 22:58:44

politics

politics

https://www.cnn.com/2022/03/14/politics/russia-economy-sanctions-ruble-what-matters/index.html

Here's how we know sanctions are hurting Russia - CNNPolitics

With much of the world economy repudiating Russia after Vladimir Putin's invaders stormed into Ukraine, the country is on the cusp of a default on its foreign obligations. The West's economic blockade and sanctions of an unprecedented scale are clearly having an effect.

politics, Here's how we know sanctions are hurting Russia - CNNPolitics

Here's how we know sanctions are hurting Russia

A version of this story appeared in CNN's What Matters newsletter. To get it in your inbox, sign up for free here. (CNN)When the Communists and Vladimir Lenin took over Russia in 1917, they repudiated old czarist debts and the country defaulted on its foreign obligations -- the largest sovereign default in history. Now, with much of the world economy repudiating Russia after Vladimir Putin's invaders stormed into Ukraine, the country is again on the cusp of a default on its foreign obligations.While the West has made very clear it will not do anything that could be construed as joining in firefights against nuclear-armed Russia, its economic blockade and sanctions of an unprecedented scale are clearly having an effect.Needing helpRussia has sought economic and military help from China, which has stayed notably aloof during the Ukraine invasion, according to conversations CNN had with two US officials. White House national security adviser Jake Sullivan told CNN's Dana Bash on Sunday that China providing Russia with support is a "concern."Read MoreIt's not clear whether China intends to provide Russia with that assistance, and both countries denied that Russia had made the request. Sullivan flew to Rome on Monday to meet with Chinese officials and discourage help for Russia.Here, have rubles Russia is threatening to repay foreign creditors from "countries that are unfriendly" in badly devalued rubles, according to a report from CNN's Charles Riley.Either nonpayment or payment in rubles for more than $117 million in interest payments on dollar-denominated government bonds due Wednesday would mean Russia had defaulted on its debt.Russia has money to pay, but half of its foreign reserves are frozen by Western sanctions.The default itself could end up being an endnote, according to Riley, since Russia has relatively small amounts of foreign debt. But it could cause major problems for any US firms that are exposed to losses, and it would surely further isolate Russia from Western companies.Potentially seizing what remains Separately, Russia is threatening the growing list of companies pulling out of Russia, saying their assets could be seized by the state. Russia's richest businessman, Vladimir Potanin, president of metals giant Norilsk Nickel -- who despite his company losing most of its value is still worth about $22.5 billion -- implored Russia not to take the assets of Western companies."Firstly, it would take us back a hundred years, to 1917, and the consequences of such a step — global distrust of Russia on the part of investors — we would experience for many decades," he said in a message posted on Norilsk Nickel's Telegram account on Thursday.The only way this really endsThe question will ultimately be whether Russians are willing to accept their new status as global pariahs and give up the Western comforts some had grown used to.Putin is obviously willing to accept these things."Nothing will stop Vladimir Putin," said Vladimir Kara-Murza, the Russian dissident politician who survived two poisoning attempts. He appeared on CNN on Monday from Washington and said Putin has already erased 30 years of political gains since the Cold War ended. "The only strategic endgame to this is for Vladimir Putin to no longer be in power in Russia. This is the only strategic solution. ... Needless to say, only Russians can do that. Only Russian cans affect political change in our own country," he said. He argued the US and other countries should redouble efforts to get creative with technology and push information to Russians in the same way they did with radio networks during the Cold War.RELATED: Ukrainian President Zelensky will give virtual address to members of Congress What do Russians think? We don't entirely knowWhat effect the sanctions are having on everyday Russians and whether their minds are being changed seems unknowable at the moment. Draconian new laws essentially ended the independent press in Russia, and Western news organizations have removed reporters from the country.Valerie Hopkins, a Moscow-based New York Times correspondent who has left the country, told CNN on Monday how difficult it is to gauge public opinion, although the fact people are willing to risk arrest to protest is notable. A woman crashed Russia's state TV news broadcast Monday holding a "no war" sign and interrupting the diet of propaganda fed to most Russians by the state-run media."I have been reporting myself about Russians who don't believe their own Ukrainian families that there's a war," Hopkins said. "But as this has been going on, I think people are possibly finding out more information. The problem is it's illegal to even do a poll or ask a question, 'Do you support the war?' "Watch this: CNN's Brian Stelter interviewed Yevgenia Albats, editor in chief of the liberal, independent New Times, who has stayed in Russia despite the new law that forbids critical reporting. The West is running out of sanctionsIt seems now like this will turn into a test of wills. The West is running out of sanctions since its response to Russia was so swift and severe."The US has done practically everything it can to sanction all parts of the Russian economy, which will have a devastating effect as time goes on," said Angela Stent, a former national intelligence officer for Russia at the National Intelligence Council, appearing Monday on CNN."The Europeans would have to forswear purchasing Russian hydrocarbons, and they're not ready to do that yet," she said. "They can only do that if they're assured they have other supplies of oil and gas. There's not that much left to sanction." Oil prices fallIn the US, there are new indicators suggesting a domestic recession as a direct result of higher commodity prices expected due to the Russia invasion -- although the price of oil fell briefly below $100 per barrel on Monday, which means most of the price bump attributed to the Russia invasion has now been erased and should trickle out to gas prices, according to CNN's Matt Egan.What exactly can sanctions accomplish?The sanctions imposed on Russia are unique in that they are pinching off a country that had been so enmeshed in the global economy.But there is some fear that sanctions often don't ultimately lead to a capitulation -- and these sanctions, so severe, are not tied to a specific goal, according to Nicholas Mulder, a Cornell University professor with a new book, "The Economic Weapon: The Rise of Sanctions as a Tool of Modern War."In a Q&A with The Atlantic, Mulder argued sanctions need a more specific purpose."If there is a perception in the world, or on the part of Russia, that these are going to be permanent and they're going to be there no matter what Russia does, they will just be a weapon to wreck Russian society and the economy with. I don't think that will lead to the kind of longer-term international situation that we want to pursue."Total sanctions that damage people as well as governments are "morally fraught," he said. "If we embark on policies premised on the idea that bad governments and their people are one, then we have bought into a way of thinking that comes perilously close to how ultranationalists and fascists see the world," Mulder said.War on Russia's economyThat sanctions are now the key tool of war in the globalized society is not up for dispute.Retired US Gen. David Petraeus appeared on CNN's "New Day" on Monday and said there will come a time that Russians get fed up."At some point, again, the people are going to realize, you know, the stock market is never going to reopen. We aren't getting much for our ruble anymore. Various products that they used to take for granted are just not going to be on the shelves at stores. Again, this is starting to happen, and it will escalate in the weeks that lie ahead," he said.Meanwhile, in Ukraine the war gets worseAs those economic frustrations mount for Russians, the military horrors of Russia's invasion keep coming out of Ukraine:Shocking images of a pregnant woman struck down and later killed in the bombing of a maternity hospital in the city of Mariupol.Russians are primed to lay siege to Kyiv and targeting civilians in a residential apartment building. The refugee crisis is growing. More than 2.8 million people have fled Ukraine, including more than 1.7 million to Poland alone. And missile strikes just miles from the Polish border brought the war closer to NATO's borders.