Friday 12/06/20

1. In MARKETS & MACRO NEWS, global markets wobble on US second wave fears, the UK announces a major Brexit U-turn and we see the effect lockdown has had on spending
2. In CONSUMER GOODS AND RETAIL NEWS, Unilever puts its eggs in the UK basket, Beyond Meat expands European capability, B&M goes for growth and Amazon faces EU charges
3. In INDIVIDUAL COMPANY NEWS, Centrica, Johnson Matthey, Heathrow and Lufthansa announce job losses while Snap opens up to developers and DoorDash raises money
4. AND FINALLY, I bring you a brilliant father-son moment…

So markets wobble, US jobless numbers fall, the UK makes a Brexit U-turn and we look at how lockdown has affected spending…

Fears of second wave trigger sell-off on global markets (Daily Telegraph, Tim Wallace) highlights the fragility of world markets as US and European indexes weakened significantly as news outlined in headlines such as US coronavirus outbreak continues to spread south and west (Financial Times, Peter Wells) prompted fears that a second wave is around the corner. The latest figures suggest that the number of new coronavirus cases were highest in states that moved early to lift lockdown restrictions. The concerning thing here is that most of the seven states that are in the south and west showed increases that were at or near record highs. On a more positive note, US new jobless claims at 1.5m as hiring slowly returns (Financial Times, Matthew Rocco) shows that companies are starting to hire once more as the US reopens its economy. The number of people claiming first-time unemployment benefits came to 1.5m last week, down from the peak of 6.9m, the tenth consecutive week of decline. Continuing claims (claims from people who are actively receiving benefits) were also down. This all sounds like incremental good news, but obviously the rise in coronavirus cases is a cause for concern.

Meanwhile, in UK in U-turn on full post-Brexit border controls (Financial Times, Peter Foster and George Parker) we see that the British government has decided to

abandon plans to have full border checks with the EU on January 1st so as not to overburden businesses that are already facing coronavirus pressures. Instead, the government will allow a “light touch” regime at UK ports for incoming UK goods under either a deal or “no-deal” scenario (and no, Noel Edmonds is not involved). On the other hand, it looks likely that goods going the other way to France are likely to face full checks, although the UK is probably hoping that the Europeans will relent. * SO WHAT? * This will at least give logistics and trade groups something to work with as they have been complaining for the last few months about a lack of information making it difficult to plan.

Then Lockdown law blocks fifth of spending (The Times, Gurpreet Narwan) cites the latest figures from the Office for National Statistics which show that British households spent £182 a week less, on average, than they did pre-lockdown because they’ve not been able to spend on restaurants, travel and holidays among many other things. This fall in spending has coincided with a rise in unemployment and a fall in incomes. * SO WHAT? * I would say that, at the moment, it is very difficult to predict how spending will change after lockdown because people are being artificially supported by spending restrictions and furlough money (for those lucky enough to keep their jobs). They will no doubt be encouraged to spend and support local businesses etc. but consumers will need to feel a degree of economic confidence to let that happen. I do think, however, that when a vaccine/cure is found spending will see a massive boost because this would signal a return to normality and I think that the sense of relief will power a major upsurge.

Unilever tries to sort its structure again, Beyond Meat expands in Europe, B&M continues on the growth path and Amazon faces EU charges…

Unilever picks London as its home over Rotterdam (The Guardian, Zoe Wood) is a story that’s doing the rounds today. The company has a dual listing in London and Amsterdam, has done for years and then a couple of years ago decided to try and simplify the its corporate structure and make its base in Rotterdam. Investors got so angry about it that the company relented and now it seems that it is having another go – this time to make its HQ over here. * SO WHAT? * This is news that will excite some, but not most 🥱. As far as I can see, the main benefit of having a simplified structure is that it would make share-only M&A easier to execute, but apart from that there won’t be much change. Investors were massively against the HQ move to Rotterdam in 2018 because they thought it would mean it would lose its place in the FTSE100 and would therefore be sold off by all the tracker funds and UK-only funds. Unilever unification: soap saga (Financial Times, Lex) makes an interesting point in that it says that the company’s complex structure is due a clean-up – and so starting with where to plonk its HQ is a good place to start. This news is far more boring than it actually sounds 😂.

Beyond Meat sinks its teeth into Europe with new Dutch facility (Financial Times, Emiko Terazono) heralds the launch of its first European manufacturing facility in the Netherlands, which is owned and operated by Zandbergen, its distribution partner. This is all part of Beyond Meat’s intentions to move forward with an “aggressive” pricing strategy on its plant-based protein products and ongoing discussions with fast-food chains about selling its wares in the region. The chief exec has already said he will be cutting prices in the US market in order to be more competitive with meat. Beyond Meat has already partnered up with Starbucks in China and will trial its burgers in Yum China’s KFC, Pizza Hut and Taco Bell outlets. The company also bought its own manufacturing facility (also in the

Netherlands) that it will be kitting out with a view to be operational by the end of this year. * SO WHAT? * This sounds like a good move for the company because it is generally a good thing to be closer to customers – especially given that Beyond Meat is trying to secure distribution deals in Europe in an increasingly competitive field. Companies like Impossible Foods and Beyond Meat were pretty much niche operators for some time but the “meatless” market has become so “hot” recently that the big companies have started to take notice and the likes of Unilever and Nestle are trying to muscle in. Sales of plant-based meat substitutes have shot up in the lockdown, in part due to the scarcity/expense of meat as meat processing factories suffered greatly in the coronavirus outbreak.

B&M leaves door open to more stores despite large expansion (Financial Times, Jonathan Eley) highlights a rare success story in the face of the coronavirus as the discounter said it could open more stores than originally planned as the brand has become ever more popular during the outbreak. The chief exec said that B&M had gained confidence from its strong performance in retail parks despite sometimes being the only outlet open in the destination. * SO WHAT? * Variety discounters like B&M, Home Bargains, Wilko and Poundland typically do well in economic downturns as consumers become thriftier. B&M has benefited in particular from being able to stay open throughout the lockdown and its stock of DIY and gardening goods among other things. The shine was taken off a strong performance by a cautious full year outlook but I would have thought the company would be able to continue to thrive, albeit with higher overheads because of the implementation of social distancing measures.

I thought I’d mention Amazon to face charges from EU over treatment of third-party sellers (Wall Street Journal, Valentina Pop and Sam Schechner) because this has been rumbling on for a while now. The European Union is planning on investigating formal antitrust charges against the e-commerce giant for its alleged maltreatment of third-party sellers. The first charges could be officially filed next week or shortly thereafter and stem from Amazon being both a marketplace and a competitor, making it unfair for the third party merchants who sell their wares on its site. Amazon obviously denies any abuse of power allegations. We’ll just have to see how it pans out…

Yesterday saw lots of job loss announcements, Snap moves to evolve and DoorDash raises cash…

Bleak day for UK as Centrica, Johnson Matthey and Heathrow announce big job losses) highlights the rather sobering news that Centrica, the owner of British Gas, is going to cut 5,000 jobs, Johnson Matthey 2,700 and Heathrow is launching a redundancy programme. It’s not just the UK either as Lufthansa sheds 22,000 staff as carrier counts the cost of lockdown (Daily Telegraph, Oliver Gill) – further evidence that the aviation industry is taking painful steps to “rightsize” itself.

Snap opens up to developers in push to create WeChat-style superapp (Financial Times, Hannah Murphy) highlights Snap’s invitation to developers to make cut-down versions of their apps to put on Snap’s platform (a project called “Snap minis”). Snap seems to want to emulate Chinese “superapps” such as WeChat where you can do all

sorts of things like message other users, buy products, send payments or book taxis all “under one roof”. Snap founder Evan Spiegel said he was got the inspiration to do this from one of his major investors, Tencent, which is WeChat’s parent. * SO WHAT? * This sounds like an excellent idea and you would have thought they will have great mentoring on this from Tencent. It would certainly broaden the appeal of Snapchat’s offering.

Following hot on the heels of the Just Eat Takeaway acquisition of Grubhub, DoorDash nears deal to secure funding from T.Rowe Price, Fidelity, others (Wall Street Journal, Cara Lombardo and Liz Hoffman) shows that America’s largest meal-delivery company is trying to get funding from a number of major investors that could value it at over $15bn. It had signalled an intention to float on the stock market in February and it seems that the momentum is turning in its favour as the IPOs of Warner Music, ZoomInfo and others have been warmly welcomed. Food delivery is certainly surfing a wave of popularity at the moment!

…in other news…

I think that we all need some uplifting moments in these strange times and this story just made me smile: Japanese dad opens bar inside his house just for him and his kid (SoraNews24, Casey Baseel https://tinyurl.com/yb42aagb). What a great idea!