Monday 24/06/19

1. In MARKETS AND COMMODITIES NEWS, global markets brace for turmoil and the falling cobalt price damages DRC
2. In RETAIL/MAIN STREET-RELATED NEWS, Carrefour looks to reverse out of China and restaurants put pressure on delivery prices
3. In CIGARETTE-RELATED NEWS, San Francisco aims to ban e-cigarettes and Philip Morris looks to expand its heat-not-burn offering in the UK
4. In NEWS ON PLUCKY BRITS, Brompton thinks the future is in e-bikes and Meatless Farm looks to America
5. In OTHER NEWS, I bring you a cute tortoise…

So global markets brace themselves for more US/Iran fallout and falling cobalt prices hit DRC…

Global markets braced for turmoil as US prepares Iran sanctions (The Guardian, Richard Partington) shows that everyone is bracing themselves as a Trump tweet (what else??) gets everyone panicked about rising tensions with Iran. He said that “We are putting major additional sanctions on Iran on Monday”, which will put more upward pressure on the oil price. This comes in the week that Trump is due to meet China’s Xi Jinping to talk about trade. * SO WHAT? * Stock markets have been rallying recently as hopes of breaking through the current trade impasse between China and the US have been increasing. However, if Trump leaves the meeting empty-handed and Iran

tensions increase, markets could be in for a bit of a correction.

Plummeting cobalt price takes toll on Democratic Republic of Congo (Financial Times, Henry Sanderson) highlights the fact that its price has fallen by a whopping 65% over the last year and that this is having a detrimental effect on the world’s biggest producer, the Democratic Repulic of Congo (DRC). The DRC is one of the world’s poorest countries but produces over 60% of the world’s supply of cobalt, a metal that is used in the lithium-ion batteries. The price hit its ten-year peak of over $40 a pound in early 2018, but is now around the $14 mark, according to Fastmarkets. The price has cratered due to an oversupply of the metal, which was mined to take advantage of the higher prices, but Chinese demand has dried up. * SO WHAT? * There appears to be virtually no control over cobalt mining and related activities in the DRC, so until someone gets more of a grip, extreme volatility is likely to continue.

Carrefour aims to exit China while restaurants start questioning delivery prices…

Carrefour moves to quit China with deal to offload most of business (Financial Times, David Keohane) shows that Europe’s biggest retailer has had enough of China and has agreed to sell 80% of Carrefour China to Suning.com, a major Chinese retailer, for €620m in cash. The deal is expected to close by the end of the year. Carrefour set up shop in China back in 1995 and now has 210 hypermarkets and 24 convenience stores – but the business has proved to be a drag of late, not great when it is fighting a price war on the domestic front with E.Leclerc, Casino and Auchan. * SO WHAT? * This sounds like a smart move and at least they will have some interest in any upside by keeping a small slice of the Chinese business. Carrefour has been focusing on moving away from its hypermarket format towards convenience store and e-commerce formats of late. I’m not sure whether this is a good thing or not TBH – by doing this, it is just copying the German discounter competition and probably trying to surf the trend of more frequent shopping trips that make smaller stores more viable. On the one hand, it is commendable that Carrefour is prepared to rip up its traditional business model, but on the other it might lose its identity in the process – and if it does that, what’s the point of shopping there??

Restaurants are arm-twisting delivery companies to lower fees (Wall Street Journal, Heather Haddon) shows that some big restaurant chains are starting to revisit fees charged by delivery companies, making things particularly difficult for smaller start-ups in this highly crowded space. US food delivery companies such as Grubhub and Postmates have benefited from restaurants signing up with them but now increasing competition is giving restaurants more confidence to negotiate lower delivery rates. McDonald’s, Applebee’s and Cousins Submarines are among those doing just that at the moment as they claim that higher delivery charges hit their profitability. Delivery services tend to charge around 25% in fees per order. * SO WHAT? * This is bound to happen as competition in this area intensifies. Restaurants that signed initial terms to stay in the game and not go the way of apparel retailers now have the shoe on the other foot and have the power to push back. The delivery segment has done extremely well in the last few years in attracting capital – venture capital firms have poured $4.8bn into 60 deals in food delivery companies last year alone – but competition is increasing. Grubhub’s market share since 2017 has halved, whilst that of DoorDash and Uber Eats have gained ground. Given that success in food delivery depends largely on scale and solid infrastructure, surely we are due to see more consolidation. It’s just my opinion, but I think that the “low hanging fruit” for food delivery – certainly in the larger economies – is maturing all the time, so I would be more inclined to turn my attention to “dark kitchens” (you know, the stand-alone kitchens that just do food for deliveries) as an exciting growth area – and maybe real estate companies that have exposure to this space. 

San Fran goes against the herd and Philip Morris aims for IQOS glory…

San Francisco set to ban E-cigarettes (Wall Street Journal, Talal Ansari) tells us that San Francisco could be the first US city to ban e-cigarettes this week, which is particularly ironic given that it is home to one of vaping’s biggest players – Juul Labs. The San Francisco Board of Supervisors will be holding a final vote on a ban tomorrow. The ban will only be temporary initially, pending a Food and Drug Administration (FDA) assessment of the health risks of e-cigarettes. The FDA has given e-cigarette companies until 2022 to submit their products for review. Importantly, the sale of cigarettes won’t be illegal but users will have to pay a $1,000 fine or face other penalties. * SO WHAT? * E-cigarettes are still a very new product and the fact that they have become so popular among kids and teenagers so quickly has taken regulators by surprise. It’ll be interesting

to see whether other cities follow San Francisco’s example. I’m betting that they won’t given the tobacco industry’s very deep pockets and lobbying powers, but vaping’s seemingly unstoppable growth has at least been slightly dented by this new crackdown.

Philip Morris to put heat on cigarettes (The Times, Alex Ralph) heralds the potential opening of hundreds of stores across the UK that will push cigarette alternatives – with an initial roll out of Philip Morris International’s IQOS stores selling heated tobacco and vape products in Bristol and Manchester. There are already four stores in London, but this signals the launch of a major expansion. * SO WHAT? * Philip Morris has faced challenges from landlords in the past who have been reluctant to do business with a tobacco company. However, I would have thought that rising vacancy rates and continued strife on the high street will mean that they will throw their morals out of the window and be glad to see rents from new tenants. This sounds like a great move by Philip Morris, with impeccable timing!

Brompton eyes an e-bike future and Meatless Farm puts the US in its sights…

Straight outta Brompton: company predicts ebikes future (The Guardian, Sarah Butler) is an interesting article where the folding bicycle maker predicts that electric bikes will make up at least half of its business within the next 10 years. It has sold over 2,500 of its new e-bikes since their launch in August and believes that their popularity will increase. The company is expected to take its new product to Germany and the US in the coming months after already being available in the UK, Belgium, Netherlands, Spain and France. * SO WHAT? * Interesting, but as an ex-bike rider myself, I am highly sceptical of e-bikes as they are way more expensive than normal ones and have more that can go wrong with them. E-bikes have been a growth area for the likes of Halford’s and Evans, but let’s face it – not everyone can afford them. What’s wrong with relying on leg-power?? Still, good luck to Brompton, though. 

I believe I have mentioned this company before but Meatless Farm looks to stir up US vegetarian market (Financial Times, Emiko Terazono) highlights a British company wanting to take on plant-based protein groups Beyond Meat and Impossible Foods in their own backyard and have signed up with Amazon-owned retailer Whole Foods Market. The new agreement will mean that its plant-based mince and burger patties will be sold in the US retailer from this summer, signalling an expansion from its current UK distributors Sainsbury’s and Morrisons. Whole Foods will have exclusive distribution for six months, after which time Meatless Farm will be looking to broaden. * SO WHAT? * It’s great to see a UK start-up braving it in a major market. The hype surrounding the likes of Beyond Meat and Impossible Foods means that the timing is as good as any. It would be interesting to see what its offering is like in comparison to the others, but if it can sign distribution deals like its American cousins, its future should be bright! It’ll either do well itself or another company will buy it IMHO as it is in a fragmented market. Bigger companies wanting to get a piece of the action will be increasingly willing to pay to fast forward their progress in this area by acquiring tiddlers like this.

And finally, in other news…

I thought I’d leave you today with the heart-warming Turtle missing back legs gets Lego wheelchair (Metro, Jimmy Nsubuga https://tinyurl.com/y3grouky). Ahhhhhh!