tv Bloomberg Business Week Bloomberg August 24, 2019 3:00am-4:00am EDT
booming industry and plant-based murders. the market darling of sparkling water is losing ground. jason: joel weber is with us on why he put -- >> we wanted to do this story in a summer issue. it is the zeitgeist of summer. one thing that has happened is consumers have shifted away from soda and embraced sparkling waters. they have encapsulated that and boomed. all of a sudden it has gotten competitive. lot about learned a their competitors, mainly pepsi and coca-cola. >> they are owned by national a beverage and out as part of their portfolio. but going against coca-cola or pepsi, once they opened their war chest and looked at
sparkling water, they can say we know how to put that in a can. jason: that is coming in from the top, then you have craft beers and food, now it is sparkling water. >> it is what they introduced the marketplace. category and the rejuvenated it, and they are met on both sides. taylor: we learned as well about the founder and ceo, what is he like? >> this is a person who came into his own and saw an opportunity, then has ridden this bloom. he is idiosyncratic. jason: we will hear more on that later on. thank you so much. we turn now from bubbles to recessions. taylor: after the yield curve inverted, warnings of a looming recession.
inverted yield curve mean recession is coming? >> that is what it has historically meant. records going back to the 19th century, it is a reliable precursor of recession. curve inverted briefly, then stopped inverting and came back again. it is an often on kind of thing. the yield curve does not mean what it used to mean. that is because even in normal times it is flatter than it used to be. it is flat to start with. tick down likely a into inversion. in thetalk about this broader economic landscape. one thing we saw and talked a 10 about on the rayleigh show --
radio show is a concern we may be talking ourselves into recession at a time when things are going well. >> bloomberg had the ceo of bank of america saying that, echoing franklin roosevelt, the only thing we have to fear about recession is faring recession. it is -- is fearing recession. thing,son said the same he is optimistic and yet he is helping the fed will cut a half percentage point in september just to get ahead of the recession talk. taylor: when we talk about the , you know inflation more than anyone else. is that part of what is driving that curve flatter? curve is reflecting not just the actual outlook for
inflation, but the uncertainty about the inflation outlook. -- if you think inflation will be 2%, but in the back of your mind it might jump to 4%, you will pay less for a long-term bond and make its yield higher. if you are confident that inflation is not a problem, if you are worried about deflation with $16 trillion of negative yielding debt around the world, it might be that we want a lower yield. jason: thought-provoking as always. in a pod. two peas will boris johnson try to out trump trump in france at the g7 summit? taylor: we break it down. this is "bloomberg businessweek ."
jason: welcome back to "bloomberg businessweek." i am jason kelly. taylor: i am taylor riggs. join us every day on the radio. and listen to our podcast on apple podcast and soundcloud. jason: find us online at businessweek.com and our mobile app. president trump and other world leaders are set to meet in
france to discuss major global challenges at this years g7 summit. i spoke with the executive editor and bureau chief craig gordon on what to expect. >> the most interesting thing we the be watching for, sit-down between donald trump and boris johnson. two peas in a pod. this is johnson's first g7 since minister.rime they are like-minded and have the same politics. we will be saying the first time if johnson tries to outshine donald trump who tries to make a big figure at these events. europeaking a trip to and will meet the rest of the g7, that will be what everyone is watching. johnson, the throwdown. jason: trump literally elbowed
somebody out of the way. >> the g7 has been lively as of late. he pushed aside the prime minister of montenegro who later ind the president should be the front row, not meet. the g7 last year was where they signed a communique, and the famous picture of merkel glaring at him. trump gets on air force one to tweets, i withdraw my support for the communique because he was mad at justin trudeau. these tend to be moments of high drama. there are only seven of them, and they are in a room and take up a lot of oxygen. on the substantive side, what great timing, the world economy is starting to slow down and germany gearing on recession, the u.s. still has strong
numbers. what a great time to get the leaders of the seven most important economies together to talk about it. will they do anything to solve it or put stimulus in there? we do not think so. this may be a squandered opportunity. can they do anything to put the brakes on this slowdown in the global economy? jason: you wrote it is a complicated relationship, and there is a great story about this relationship between the crown and merkel -- macron and merkel. an enema crown is the host of this, and angela -- this is an uneasy alliance. >> the summits tend to be six
versus one, the one being donald trump. have five versus two. trump and johnson may make common cause on some issues. unifiedhe five or six european leaders, big fractures. macron wants to be the king of europe, and angela merkel does not like that. they sparred over that but held rand.ether on the trump has pulled out of it. boris johnson is not a fan of it although he reaffirmed support for it. merkel and macron have held together. france and germany would love to do more business with iran.
trump tends to be the main storyline, so you have intriguing subplot. where does abe fit in? be fun to watch, especially the european unity that they have held together, i do not think they will do it a third time. jason: you mentioned brexit, that will be top of mind. will boris johnson start to negotiate in public with the eu leaders about what the elements are? for a noo be heading deal brexit, and that is coming up at the end of october. >> much like the seven most important people talking about the economy, you also have the same to talk about exit. as an american watching from afar, it feels like the u.k. leaders are playing like it pair of threes, but they act like they had a royal flush.
europeans are tired of this conversation, boris is not offering them anything different. out.es look like crashing they will have a chance to talk about it, but hard to see substantive progress being made. taylor: turning to politics in the u.s., on the campaign trail democrats are in a heated debate about how to do achieve their goal of universal health coverage. >> they have coalesced around a basic visible they want universal health care coverage. the united states is not there yet, but in terms of how to get there, there are differing opinions and deep divisions ranging from the idea of single-payer health care where the government is the only insurance company, that is supported by bernie sanders and elizabeth warren. then the more moderate democrats want to make substantial
changes. joe biden supports adding to obamacare a government run insurance option that people can look at the menu of private plans or if they want a public option. that is the debate now, and it has sparked intense rivalries and intense battling as they try to convince voters they have their finger on the pulse of what to do. taylor: from your conversations and reporting on the ground, what plans seem most likely to go forward? answers.are different one isashiest medicare for all. that is the bernie sanders single-payer plan. obstacles inunting
congress. have the senate, it is highly unlikely to get through because democrats oppose it as well. on the joe biden side you have the public option that obama tried to get into thousand 9-10, and this will be difficult because it faces a 60 vote threshold in the senate were republicans could block it, and based on my reporting they have no intentions of going along with that. even the most modest democratic proposals face difficulties in congress. and a health industry that is determined to kill them. they do not want a government run option to compete with private insurers because they would have to lower cost to compete. they are working to kill this thing. jason: still the calm, protests in hong kong, what is underneath
jason: welcome back to "bloomberg businessweek." i am jason kelly. taylor: i am taylor riggs. you can also listen to us on the radio. in london on dab digital. economicn this week's section, all eyes are on hong kong. in june demonstrations were triggered by a government proposal that would allow china to extradite those accused of crime. the protests include a broader set of demands. jason: what is behind the antigovernment protests that
continue to rock that city? >> the protesters have limited their specific demands to political goals like universal suffrage. both feeding into this anger and inest is growing inequality hong kong, and the sense that you do not have equal opportunity. this is a place that has had huge divisions between the house and have-nots -- tween the haves and have-nots. taylor: one of the key statistics that stuck out to me, hong kong comes back to the property market, and median property prices have climbed 21 times median household income. people can barely afford their homes. >> i think people do not understand what that means. we have this great graphic.
francisco are under 10 of those ratios, and we think of those as pricey. people live in these gerrymandered subdivided apartments. we interviewed some of them and there have been some young people who have good jobs. youth unemployment is not an issue. people are thinking about moving to taiwan and other places where they have more opportunity. jason: what happens next? protests aside, what are the economic challenges that could change or not change in the near term? , the chiefam executive of hong kong, has to think about what she can do to .ppease these movements that potentially is a problem for the people and hong kong who
became rich from property, and that is almost every important billionaire in the territory. because the island has a system it inherited from british colonial rule where land is leased for long periods of time from the government, it has constrained supply and driven up prices. ado not think we will see wholesale dismantling of the system, but the government has been toying with the idea of taking back some of the land they have given to developers who have not developed it. jason: these stories remind us of the economic might and importance of hong kong in the broader world the. this is not an isolated story. founder of the biggest conglomerate, almost half of that company's revenues come from europe, and this week they
bought a restaurant in the u.k. that is one thing, it will hurt less if the government moves against the conglomerates now than 20 years ago, because they have become so diversified. taylor: this brings us nicely to another story, some of the property developers walking that fine line between needing help from beijing but not wanting to .istract the protests how are they walking that line? >> they have stopped short of backing lam, and say they have backed her calls for calm. semantics are important. economically it hurts them. gdp will be shaved by 0.3% this year, and property
prices could fall 10% in 12 months because of the protests because it is hitting economic production. tourists are not visiting. stores are having to shut down along the routes of the demonstration. jason: the protests present a new reality for businesses as well. taylor: the cautionary tale of china's crackdown on cathay pacific. >> they are caught in the middle, and it is a lesson for other companies who do business in china about the dangers of being caught in this tug-of-war. squire is the company who has a big stake in cathay pacific. theas been in china since 1800s, so it knows its way around and has different businesses.
river travel, shipping, whatever, big business. it owns coca-cola franchises in 11 provinces. they also own 45% of cathay. they were good knowing how to play the game in china. in the 1990's, they decided the way to stick around was sell a piece of company to china to stay in beijing's good graces. they did that, and today they pacific, andthay air china owns 30%. that supposedly will keep you safe. when the protests came up, a lot of cathay employees were sympathetic, and that has sent the government off the rails, and they have used all the pressure that they can to make
sure the company behaves. said, all thend employees who participated should be banned from working in china. all of your employees who go in our airspace, you have to provide their names. you will also have a safety inspection. how tong is they know make it difficult to do business if you do not do business the right way. it is also a sign that china says you can play in our markets but you play by our rules. resignationing the of the cathay pacific chairman is one sign they sent that you have to play by our rules. >> it is a strong sign, but it is enough -- is it enough? one paper is saying they should do more because they have
renegade employees. this is showing other companies that do business in hong kong, it is part of china and do not forget that. we have seen other companies pulled into this, luxury brands that had t-shirts and apparel that suggested hong kong was its own country. they have been forced to apologize. there is a lot of back-and-forth, and on the opposite side companies are saying, we think the government is great. has the protesters say hsbc gone too far and is defending the government against demonstrators, and that has gotten them in trouble in the local market. behind you are falling beijing, then the locals are angry at you. jason: still ahead, troubled
♪ jason: welcome back to "bloomberg businessweek." taylor: still ahead, in the year that saw ipos from uber, lyft, pinterest, the breakout star is a company making fake burgers. jason: and a former venture capitalist bridging personal and professional wellness. i sat down with the founder of reset. russo: and how ralph &
has become the choice for billionaires and royals around the world. jason: but first, this week's cover story is lacroix. it used to fly off the shelves but today is struggling in a crowded market. shareholders are concerned about corporate mismanagement. >> lacroix is the brand of sparkling water that most people have known and loved for many years. for the past three years, the brand has essentially had a lock on the market. years in the past year and a half, there have been a number of competitors from the biggest soft drink companies in the world like coke and pepsi. they have introduced their own sparkling waters to compete, and as a result, they are under tremendous pressure to retain its status as a leader in the market.
they have had a little bit of trouble doing that. that is essentially where we are now. taylor: and before we talk about some of the competition, take me behind the company that is lacroix. arguablypoignantly, that would be the founder behind that. what is he like? >> the ceo and founder of lacroix is a man named nick. he is the ceo of the company which holds many beverages, it is called national beverage corporation. they started off as a soda company. over the years, they acquired multiple brands and finally lacroix in the 90's. it was kind of a sleeper for a long time, they did not do much with the brand. nobody drank that much sparkling water. starting around 2010 four 2011
at times when americans stopped drinking as much soda, they turned to alternatives like sparkling water. old andwho is 83 years who started this company in 1985 , he suddenly found himself the steward of what became an amazing brand and the leader of the sparkling water market untransformed the entire category. -- and transformed the entire category. jason: to his credit, he really saw something. he took a personal interest to the point where he considers this his baby in the words of some of the folks you interviewed. what did he do that was different from others? , he recognized that the brand had potential because of its healthfulness. it did not have any sugar, it had no additives that really. -- additives, really.
when soda consumption fell and ,mericans started drinking less he was one of the first brands to start transitioning and the market. he saw lacroix as an alternative. 2006, he partnered with the breast cancer foundation to sponsor these walks. spotcame sort of an early in the health market as an alternative to soda. so he did see the potential of the brand. taylor: so what happened since then? early are a big leader on, you have to constantly work to maintain that lead. when did they peek, and what happened to contribute to the decline we have been seeing? >> it's a really interesting business story. the brand really started growing.
it started pretty gradually, actually, when you look at the company. 2011-2012, the stock increased a little bit. 2014-2015, it started gaining momentum. there was a critical team inside lacroix working with nick that really shaped the position of the brand. they decided to go after diet soda, they decided to really use social media at a time when that was not as prominent. the started trending on instagram and twitter and showing up in all kinds of photos in that kind of thing. it just gained steam. as a gain steam around 2015 or 2016, internally, there were already -- there was already friction. as the brand became more popular, he became more involved.
his dominating presence in the company, he is the owner and owns 74% of the stock, he really does it drive the company and is the one with the most power. but it started rubbing some people the wrong way. they felt he was not listening to their input or taking their advice. it did result around 2016 in a number of high-profile companyes leaving the leaving a power and knowledge vacuum. jason: and maybe not coincidently, that happened at a time when you have got pepsi coming into the market. you've got coca-cola coming in. so you got these message -- massive beverage companies coming in. venturehave some capital and private equity-backed startups coming in from the lower end. a classic alluded to
case of a market dominated company getting squeezed from both sides. so where are we now? now, they are essentially defending their place in the market. they are entirely under siege from so many places. i think it has caught them off guard. time toa very long realize just how much the competition was going to affect them. right now, they are in battle mode. jason: up next, if possible foods has burger king and whole foods. taylor: we explain the phenomenon and where you can get them. jason: this is "bloomberg businessweek."
"bloomberg businessweek." taylor: join us for bloomberg businessweek every day on the radio starting at 2 p.m. wall street on. you can also catch up on our daily show by listening to our podcast. and find us online at businessweek.com and through our mobile app. taylor: in this week's, fake meat goes mainstream. jason: here is the explainer on the start of the movement and its competition. >> beyond meet ceo loves talking about his big burgers, but don't ask him about the shares. his value has soared almost 500% after the ipo. he says he does not like to talk about the stock price. -hasbeen the star of meatement- meat -- beyond
has been the star of a movement, but the competition is not major food companies, it is impossible foods, another start of reducing so-called bleeding burgers. each company claims to have a superior product. for now, beyond has the numbers. it's burgers are sold and 53,000 locations. that is more than three times as many as impossible. and beyond has another product line that may impress consumers, sausages. benefit froms consumers focusing on the benefits of a diet without red meat but critics say that when it comes to nutrition, there is little difference between a fake burger and a mcdonald's quarter pounder. jason: so the nutrition may be debatable but investors are convinced. in a year that saw ipo's from clearnd lyft, the breakout star was beyond meat.
taylor: if you come to my terminal, in white, we taking a look at the share price. and turquoise, it is the bloomberg estimate of the aggregate price target. at one point, the shares were up 800% from the ipo. second quarter earnings were ok. there were a few things that make people nervous about and you are seeing a leveling out trading at 1.5, the average analyst price target. jason: well it has had an amazing run. for more on what is driving that phenomenon in stock price, we spoke with a reporter behind the story. >> it was a combination of a few factors. the first is that people have started to care about their health. they see anything with the word plant as being healthier. it's not necessarily healthier, but people think it is. there is also a lot of drive
coming from young people who wants to do better by the environment. before action is a major source of man-made omissions -- the emissions and so replacing beef is a popular way. it's a lot easier to get this burger van it is to buy a prius. and the technology has gotten so much better. bill gates was one of the earlier investors in both companies. he made it so that this became an area that was not just for vegans and not just for people trying something new, it became an actual place to invest. so companies like impossible foods and beyond were able to ramp up what they were doing. jason: i feel like almost every day, we talk about the stock price. it's incredible. >> incredible, but i want you to square with me something i have been trying to understand. if i go to white castle, i'm
going for unhealthy, not the treasures, i'm going because i want a better burger -- not nutrition, i'm going because i want a bad burger. why would i go to get a fake burger? >> that's a good question. what the company would tell you is that you go to white castle and say i feel like doing something a little better for the environment so i will go with this and it will taste exactly the same. does it taste exactly the same? i think most would say no. but what white castle is saying is that people are coming in and getting meet with the plant so they are -- meat with the plant so they are trying something new. taylor: the stock price is phenomenal. how do the stock prices compare? meat's ceo did not
want us to talk about the stock price and i don't blame him. wednesday so well, you might just yourself. jason: major ipo of the year. >> since the recession. it has been incredible to watch, and something nobody was inspecting to happen. but it has gone all the way up to more than $230. now it's back down a little bit. jason: there is an $8 billion market cap company give or take. >> it peaked at over 14 billion. there are some questions about whether or not they really have the revenue to justify that kind of market cap. but the bet is on the potential more than what they are doing today or tomorrow. is still in a startup phase, so they are not public and a lot of questions are swirling around over whether they will go public. right now, they are saying not
right now but they are not foreclosing it. companies, tyson is so huge, nestle is so huge. but at the same time, if one of them lands in mcdonald's, my guess would be the stock would go up. jason: and that is the holy grail. mcdonald's is the question everybody gets asked. burger king was a big move, mcdonald's will be even bigger. >> much, much bigger. when mcdonald's gets into any kind of market, they totally change the whole way that market operates. they changed apples, they changed potatoes, they changed chicken. everybody wants to be up to sell to mcdonald's. -- to be able to sell to mcdonald's. even the price at the supermarket would go down. balance,om burnout to using a holistic approach to professional growth. vc lizzie with former
jason: welcome back to "bloomberg businessweek." taylor: you can also listen to us on the radio on sirius xm channel 119, and on a.m. 1130 in new york, 106.1 in boston, 99.1 f.m. in washington, d.c. jason: a.m. 960 in the bay area, in london on dab digital, and through the bloomberg business app. work burnout is a struggle for many of us. that, and finding some semblance
of work-life balance. , the down with liz tran founder of reset. i talked about her new venture and how is taking a holistic approach to bridging personal and professional wellness. check it out. areeset is a place where we uniting all forms of professional and personal growth. we might haveay, a team of executives from a startup coming in to learn about team dynamics and close with a sound back. in the evening, have breath work or astrology sessions. it is a spectrum from career coaching to professional development through the holistic areas of meditation etc.. jason: this was not necessarily the path you set out for yourself, but here you are. you had some incredibly high-profile jobs especially as it relates to startups and venture capital. take us through your journey. >> i started at a venture capital firm for years ago
called thrive. it is great, a leading firm your have invested in companies like spotify, instagram, and cost less. my job is to work with the founders and those who worked with the companies to help them to unicorn companies within 2-3 years. so what i was doing was studying how companies were doing that and creating content around that. something i noticed was that when i was building these relationships with the ceos and the executive team, people love their jobs almost to the point where there was no separation of identity between what they did and who they were. all the ups and downs they experienced in their work played out in who they were and how they felt about themselves. over the last few years, i realize that while the work i was doing was valuable in terms of our company being successful, i wanted to do something that
focused on a more personal level whoumanity to help people were, on paper, very successful. jason: take us to that moment where you made the decision which obviously was a big one to go out on your own. there is some significant risk involved. >> the first thing is that we would look at all these companies and there were more and more popping up then in the holistic space. space. in the holistic so i thought there was a macro and micro shift happening, where individuals want something deeper in their lives. honestly, we are moving away from boutiques where fitness is everywhere and outcome a huge industry. i thought the same will happen for wellness and self-care. we are just ascending the hierarchy of needs. so the part of me that believes in the future of this, i thought this was a fundamentally sound business decision. it may not sound like it now,
but you have to get in early whenever a thinks you're crazy. that's another lesson -- when everyone thinks you're crazy. that's another lesson i learned from venture capitalism. another thing has been using these practices for the past decade. on and off from in india -- lived in india. they gave me the foundation for my spiritual life that may be so great at my job. working in high-pressure environments and the smartest people i've ever met. wasd the sense of who i about my ego was separate from the work i did and it made me better at my job. just in achieving success at thrive and getting to a point there were a thought i had set up to a compass these things, i did them, i built a team, what's next for me? it's experiencing the same trajectory we go through all of the needs on the hierarchy and then you hit achievement. after that, self-actualization.
that is what i thought, if i don't do it now, when will i do it? and what are we here for if not to help others? taylor: we turn now to pursuits. jason:. is our editor on the fashion house ralph & russo. >> they started out boyfriend and girlfriend, now fiance's. they have quickly risen to the tiptop of the fashion world. they are one of the first british brands in 100 years to become part of this french regulatory body that determines what is haute couture. think about the chanel's of the world, valentino's, there's started in the 60's or early 1900s. they have really gotten a beat on this market. they are both australian and
operate out of london. the have a lot of wealthy gulf clientele. family, even the british royal family. if you remember meghan markle's address that she wore for engagement photos. there was a lot of controversy because it was sheer. she ended up going with someone else for the wedding, but the engagement photos but it really raise the profile of this brand. since then, they have done other .eddings thinking about prices, probably the cheapest thing is about $2000. if you get something actually made by them, it can be over $100,000. that high touch element seems to be one of the really important things here. they are sort of spending money to make money. help us understand the business
model. >> dear member the dolly parton quote? spent a lot of money to look this cheap. what also cost a lot of money to look this expensive. they have been doing bags, purses expanding out and opening shops in monaco and doha. this kind of material they are so they top-of-the-line have actually been running at a loss for the last couple of years. you would think that with all of this clientele and wealthy customers. but it is very expensive to run that business, it is a very interesting window into how a brand like this actually makes money. over the summer, they got an from someone who you might or member was involved with an asset management company.
the fund that backed him head over 8 billion euros in redemptions because he has such a checkered past. for a brand like ralph & russo, for him to come in and do this investment for them, it was a really interesting idea in terms of who you can turn to in this market. jason: bloomberg businessweek is available on newsstands now. taylor: an online and through our mobile app. jason: what is your must-read? taylor: it's all about that yield curve. i love how peter coy broke down what a yield curve historically means in terms of protecting a recession but maybe this time it's different. jason: and the economic and political backdrop, how it plays into it. taylor: what was your favorite? jason: i am obsessed with this movement around fake meat. these plant-based burgers, i've tried a lot of them. you got to go out and get one. taylor: i will do that right after this. jason: you can find more stories
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emily: i'm emily chang and this is the "best of bloomberg technology" well you bring you the best interviews from this week in tech. wilbur ross says the u.s. will ease of sanctions on huawei for another 90 days but president trump says he is not quite ready for a deal. we will have the week in trade tensions. plus, twitter and facebook say they have proof of fake accounts backed by the chinese