|Bid||4,632.50 x 0|
|Ask||4,633.00 x 0|
|Day's Range||4,581.50 - 4,647.50|
|52 Week Range||3,905.00 - 5,333.00|
|Beta (3Y Monthly)||0.54|
|PE Ratio (TTM)||18.34|
|Earnings Date||Feb. 1, 2019 - Feb. 8, 2019|
|Forward Dividend & Yield||1.47 (3.20%)|
|1y Target Est||45.13|
With not one but two consumer goods giants reporting ... Investors in the sector had a chance to do some comparison shopping on Thursday (October 17). First, Nestlé. Organic growth slowed in Q3, it said - overshadowing what normally would be share-positive news: An announcement of a plan to return 20 billion Swiss francs to investors - around 20 billion dollars - primarily through share buybacks. Nestlé was instead the biggest drag on Switzerland's benchmark index - its shares slipping over three quarters of a percent. Unilever rose. Adding a per cent and a half in early trade - in a UK share market subdued by Brexit worries ... Though sterling weakness on those worries has been good for the firm - making its exports cheaper. Turnover beat estimates with a near 6 per cent rise to just under 15 billion dollars. But a slowdown in India and China has dampened sales growth to 2.9 per cent - three had been expected. And emerging market sales - a key focus for Unilever - slipped. Drink also featured in the latest earnings.... Nestlé wants to reorganise its ailing bottled water business - whose brands include Perrier and San Pellegrino ... While French spirits maker Pernod Ricard also spoke of slower growth in India and China. Q1 sales overall were up 1.3 per cent on an underlying basis. Its shares on Thursday were over three per cent down.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. China continued its grind to more moderate growth in the third quarter as investment slowed, providing little upside for a global economy flirting with its first recession since 2009.Gross domestic product rose 6% in the July-September period from a year ago, the slowest pace since the early 1990s and weaker than the consensus forecast of 6.1%. On the upside, factory output improved and retail sales held up, but slowing investment growth remained a concern.Policy makers appear to be allowing the world’s second-largest economy to drift lower as they seek to clean up the financial system and curb excessive credit growth while they fight a confidence-sapping trade war with U.S. President Donald Trump. With a drop off in exports to the U.S. expected to continue as long as tariffs remain, the economy is likely to keep struggling as falling factory prices hit company profits and rising consumer inflation hits spending power.Even with the slowdown, year-to-date growth of 6.2% suggests the government can hit its target of an expansion of 6% to 6.5% for 2019. Until now, officials have focused on limited, targeted measures such as reserve-ratio cuts and credit support, wary of expanding the nation’s already heavy debt load. A meeting of the Communist Party’s top leadership due in the coming days may present an opportunity to review stimulus settings.“China’s economy is grappling with both external and internal headwinds,” said Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong. “Exports started to contract of late amid wobbly global demand and rising tariffs in the U.S. Despite some stabilization in retail sales and industrial production in September, overall demand continues to soften, reflecting still relatively tight credit conditions.”Stocks pared earlier gains after the data, with the Hang Seng slipping 0.5% and the Shanghai Composite falling 1.3%. The offshore yuan was weaker at 7.0850 per dollar at 2:43 p.m. in Hong Kong.Further Details from the Report:Factory output rose 5.8% in September, retail sales expanded 7.8%, while investment gained 5.4% in the first nine monthsInfrastructure investment growth picked up to 4.5% in the nine months to SeptemberThe contribution of net exports to GDP growth picked up to 19.6% in the 9 months through September. That’s not necessarily an indication of economic strength though, as it was likely led by a pullback in importsConsumption’s contribution increased to 60.5% from 55.3%; Investment’s contribution slowed to 19.8% from 25.9%The surveyed jobless rate remained at 5.2%Nominal growth, which is un-adjusted for inflation, slowed to 7.6% from a year earlier, according to Bloomberg calculations. That’s the slowest since the third quarter of 2016.The nominal growth rate “tends to capture the cycles in the economy better,” according to a research note from Trivium China. It also gives a better idea of whether growth is fast enough to repay the nation’s growing debt, as lending is denominated in nominal values and isn’t adjusted for inflation.The slowing nominal rate indicates that the deflator, a reading of inflation across the economy, dipped to 1.6%.As China slows, it is buying less from the rest of the world, pushing its trade surplus higher and dragging on global economic growth. That’s having a knock-on effect on trade partners, from developed economies like Germany to commodity suppliers.Global policy makers including People’s Bank of China Governor Yi Gang are meeting in Washington this week for the International Monetary Fund’s annual meetings. The IMF set the tone for the gathering, making its fifth-straight cut to its forecast for 2019 global growth, which is on pace for the slowest expansion in a decade.The long-term slowdown underlines the challenge for companies doing business in China now, where high sales growth had once been a given.French distiller Pernod Ricard SA said growth in China slowed to 6% in the latest three months, less than one-quarter of the year-earlier rate. Nestle SA said sales in the country were flat for the first nine months, while Unilever said business there “slowed a little” in the latest period.What Bloomberg’s Economists Say..“China’s 3Q GDP growth, while avoiding falling below 6% for now, was in line with our view that the consensus forecast appeared optimistic. September industrial production growth was unexpectedly strong, but a further deceleration in investment growth underscores the challenges of using infrastructure spending to support growth.”Chang Shu and David Qu, Bloomberg EconomicsFor the full note click hereInvestors are looking for further confirmation of a detente between the U.S. and China on trade, as signs emerge that an agreement struck between negotiators in Washington this month and due to be signed by President Xi Jinping and Trump in November isn’t water-tight.China’s Ministry of Commerce Thursday signaled that Beijing is still pushing for the removal of all tariffs imposed by the U.S. since the trade war began -- a concession that’s not currently on the table.“The economy would almost surely slow further with the current policy stance,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “Due to the lack of demand now, the government has to create more demand by itself through infrastructure spending. Even a trade deal is not an substitute for an escalation of stimulus.”\--With assistance from Kevin Hamlin, Rachel Chang and Carolynn Look.To contact Bloomberg News staff for this story: James Mayger in Beijing at firstname.lastname@example.org;Tomoko Sato in Tokyo at email@example.com;Miao Han in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Jeffrey Black at email@example.com, James MaygerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
ZURICH/LONDON (Reuters) - Global consumer goods companies have been banking on emerging markets to drive their growth, so signs on Thursday that sales have come off the boil in the once-booming economies of China and India could set alarm bells ringing. Unilever, Nestle and drinks group Pernod Ricard all pointed to slower progress in key Asian markets as a factor for muted sales growth over the last three months but for the time being are keeping targets intact. Packaged goods companies like these have been relying more on emerging markets to offset changing habits in developed economies, where growing numbers of consumers are turning to fresher foods, niche brands or cutting back on spending.
(Bloomberg Opinion) -- Nestle SA Chief Executive Officer Mark Schneider is in a good spot. He’s on the verge of capping what he set out to do when he became the Swiss food behemoth’s first outside leader for almost 100 years.Nestle is on track to meet its target for operating margin a year early. Its organic sales growth goal for next year looks attainable. And on Thursday the company unveiled plans to return another $20 billion to shareholders by 2022. That is unless it can find better ways to spend some of the money on acquisitions.The latest buyback comes just as the last $20 billion capital return — announced in June 2017 — is being completed.The German-American CEO took over in January 2017 with the aim of making changes. He received a blessing in disguise that June, when activist investor Dan Loeb’s Third Point bought a stake and started agitating for change, giving Schneider the license to move quickly.Under pressure from Loeb, he has changed up of 9% of Nestle’s the portfolio so far, in line with his plan to trade 10% of it by the end of 2020. He has sold off the U.S. confectionery business, the Gerber life assurance unit and most recently the dermatology arm, all for better-than-expected prices.And he has made canny acquisitions, including spending $7 billion for the rights to market Starbucks Corp. products outside of its cafes, which is helping drive growth in Nestle’s coffee unit. Adding Sweet Earth, which makes meat substitutes, also looks smart given the boom in plant-based protein products.Combined, the moves mean Nestle is on track to meet the low end of the target for full-year underlying operating margin of between 17.5% and 18.5% in 2020, a year early. Organic growth in the mid-single digits by 2020 looks possible, too. Nestle forecasts about 3.5% expansion in 2019.But from here, life gets tougher. Obvious disposals have been made, although Schneider could go further in pruning parts of the U.S. frozen food business, which includes Hot Pockets and DiGiorno pizzas, and its joint ventures in chilled dairy, cereals and ice cream.The decision to no longer run the challenged waters arm as a separate business and instead integrate it into Nestle’s three main geographic regions indicates that that business won’t come up for sale in its entirety.Nestle believes its range of waters, which include the Perrier and S.Pellegrino brands, are capable of delivering strong growth, thanks to demand in emerging markets and the trend for health and wellness in developed regions. But staying so committed to the business looks like a rare strategic misstep, given the pressures on the lower end of the market and growing environmental awareness.As for further acquisitions, more bolt-ons that take Nestle into nascent but potentially fast-growing consumer categories along the lines of fake meat, look likely given the creation of a unit to bolster expansion both within the group and outside of it.There is one portfolio change that seems to remain stubbornly out of Schneider’s plans: selling Nestle’s 32 billion–euro ($35.6 billion) stake in L’Oreal SA, the world’s biggest maker of beauty products.Loeb has been pressing to offload it. Nestle doesn’t need the money, and would prefer to link any change to a big strategic move. But there is merit in considering the disposal. Concern is rising about a slow-down in luxury demand in China, something that has been buoying L’Oreal’s premium cosmetics brands. Meanwhile, the U.S. make-up market looks more challenging after a boom. If conditions deteriorate, Nestle may have missed the best chance to extract maximum value.And it can’t afford any slip ups. The shares have risen 44% since Schneider arrived in January 2017, and trade at a forward price earnings ratio of 22 times. While the premium to Unilever NV is deserved, at this elevated valuation, there is less room for error than when Schneider walked in to shake up what was then a lumbering food giant. To contact the author of this story: Andrea Felsted at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Unilever’s growth fell just short of estimates last quarter on disappointing sales of ice cream in Europe and black tea across the developed world.The 2.9% third-quarter gain in underlying sales growth at the owner of Lipton tea and Ben & Jerry’s ice cream compared with a 3% consensus analyst forecast.Key InsightsEurope was the only region where underlying sales growth stalled. The continent struggled against tough comparisons after hot weather in 2018 boosted ice cream sales.In the third quarter, Unilever’s sales fell by 0.1% in developed markets, highlighting the challenge the world’s biggest brands face as shoppers increasingly favor locally made labels with more artisanal cachet.Unilever’s growth over nine months lagged slightly behind the performance of rival Nestle SA, which also reported results on Thursday.Market ReactionThe shares gained 1.3% early Thursday in Amsterdam. They’re up about 15% so far this year.Get MoreFor more on Unilever’s numbers, click here.Click here to see the statement.(Updates with shares)To contact the reporter on this story: Thomas Buckley in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Eric Pfanner at email@example.com, John LauermanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Investing.com -- There's a Brexit deal in the offing, although it still needs to be approved by a recalcitrant British parliament. The pound and other U.K. and European assets are responding with enthusiasm. Elsewhere, Netflix (NASDAQ:NFLX) is set for a pop after stronger-than-expected earnings in the third quarter, even though subscriber growth again fell short of expectations. There are also regular updates on U.S. industrial production and the housing market, while oil is struggling after a big build in U.S. crude stocks last week. Here's what you need to know in financial markets on Thursday, 17th October.
Investing.com -- Consumer goods giant Unilever (LON:ULVR) upheld its guidance through next year Thursday after revenue grew at an annual rate of 5.8% in the third quarter to 13.25 billion euros ($14.6 billion), while underlying sales grew 2.9%.
(Bloomberg Opinion) -- Italy’s second-richest tycoon made his fortune in spectacles, and now he has ideas about how to run a bank. There is no doubting Leonardo Del Vecchio’s entrepreneurial flair. But his decision to take a 7% stake in Mediobanca SpA and opine publicly about its strategy merits caution. He is but one shareholder, and he should not dictate the lender’s strategy.Del Vecchio is not a naturally passive shareholder or owner. Chief executive officers at his glasses maker Luxottica Group SpA would rotate at an alarming pace. The merger of Luxottica with French lenses group Essilor diluted his dominant holding into a non-controlling stake and created a balanced board with representation from both sides. The arrangement soon fell into acrimony. That is an inauspicious backdrop for a large and potentially growing investment in Mediobanca.His motivations are unclear. The benign explanation is that this is portfolio diversification: Most of Del Vecchio’s wealth is tied up in the eyewear industry. He has some financial exposure to Italian insurer Assicurazioni Generali SpA and lender UniCredit SpA, but this is relatively small. The more worrying possibility is that it really is about meddling with another Generali shareholder — Mediobanca owns 13% of the insurer — or that it relates to some other personal agenda.Del Vecchio has reportedly said Mediobanca needs to be more ambitious in mergers and acquisitions, expand in investment banking, and rely less on the income it receives from Generali. It is not obvious all of these ideas would benefit other shareholders. Wealth management is where acquisitions might make sense for Mediobanca, but deals are risky given that the main assets — the people — can walk out of the door. Mediobanca CEO Alberto Nagel has been rightly cautious.Lifting exposure to investment banking activities, reviving a former strategy, would re-introduce more volatile revenue streams and risk lowering the multiple of earnings on which the shares trade.The function of the Generali stake is a trickier question. Corporate finance theory would dictate that Mediobanca should sell it and return cash to shareholders. If the bank needed cash in the future, it would then ask shareholders to stump up when it could show what the funds would be used for.That works for big, diversified corporations like Unilever NV. But a smaller, less well-capitalized, Italy-focused bank would probably find the capital markets unwilling to provide funds just when it needed them most — for example, in hard times when bid targets were most affordable. So long as there is a possibility that Mediobanca might want to do M&A, the stake is best seen as a financial resource to be retained.It’s possible that Del Vecchio’s vision and Nagel’s could align if Mediobanca finds a decent takeover target, which the Generali stake could pay for. But while Mediobanca’s existing strategy looks sound, and the group is well run, Nagel cannot be complacent. The Generali stake makes a big contribution to net income but doesn’t require any management effort. And Mediobanca’s central and treasury functions make an uncomfortably high dent in the profits that the other businesses bring in. An upcoming strategy refresh offers the chance for Nagel to set some hard targets for revenue growth and further cost efficiency that would dispel any suggestion of low ambition.To contact the author of this story: Chris Hughes at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- This week, the Nobel Prize in chemistry was awarded to John Goodenough, Stanley Whittingham and Akira Yoshino for their work developing the lithium-ion battery. The Royal Swedish Academy of Sciences, in announcing the award, said the three men “created a rechargeable world.” The ubiquitous battery is now found in items as varied as hearing aids and power grids. It is a testament not just to technological revolutions, but also to the power of advancements in performance and decreases in cost. Whittingham began working on the lithium-ion battery in an Exxon Mobil Corp. laboratory in the 1970s, when it was being considered for automotive applications. The lithium-ion battery wasn’t a fit for cars then, but research and development continued and the technology improved, to the point that it became a viable power source in search of an application. But it was Sony Corp., not Exxon Mobil, that would introduce the first lithium-ion battery for consumers. That new device in need of a suitable power source? The handheld 8 mm camcorder. In 1995, camcorders created the biggest source of demand for lithium-ion batteries. By 2000, laptops had become the biggest driver of demand; by 2005, it was feature phones. By 2010, the smartphone was the biggest source of demand for lithium-ion batteries. As this rather dramatic chart shows, passenger electric vehicles have vaulted past consumer electronics to become the single biggest source of demand for lithium-ion batteries, less than 15 years after Martin Eberhard built the first Tesla Roadster battery pack from 6,831 of the lithium-ion cells used in laptop computers.The lithium-ion battery has come a very long way in other ways, too. Battery costs have come down by more than 80% in nine years.And battery manufacturing capacity has increased more than 200-fold in 15 years. There is far more expansion planned. Next year will see more new capacity added than the global manufacturing capacity’s total in 2016. By 2023, total capacity will have more than doubled.The combination of cost, capacity and capability has in itself created a new market for the lithium-ion battery: energy storage within power grids. We need look no further than northern Indiana, where power utility Nipsco plans to replace coal-fired power with wind, solar and solar-plus-storage projects. The Royal Swedish Academy of Sciences concluded its announcement of this year’s chemistry prize rather poetically: “Lithium-ion batteries have revolutionized our lives since they first entered the market in 1991,” the academy said. “They have laid the foundation of a wireless, fossil fuel-free society, and are of the greatest benefit to humankind.” Sometimes being good enough is revolutionary, too.Weekend readingSome of 2019’s wackiest investment predictions are coming true. “Firms that align their business models to a net zero world will be rewarded handsomely,” Bank of England Governor Mark Carney said in a speech in Tokyo this week. “Those that fail to adapt will cease to exist.” Carbon Tracker estimates that Japan’s coal-fired power generation fleet could end up as $71 billion of stranded assets. Singapore’s Temasek Holdings Pte has decided against investing in Saudi Aramco’s initial public offering, in part over environmental concerns. Unilever says that it will reduce its use of virgin plastic by 50% by 2025, and reduce its absolute use of plastic packaging by 100,000 metric tons. A new Organization for Economic Cooperation and Development study finds that obesity-related diseases will claim more than 90 million lives in the next 30 years, lower life expectancy by three years, and reduce gross domestic product by 3.3% in OECD countries. Three out of 10 low-income Americans do not have access to broadband of any kind. In the latest “Stephanomics” podcast, Bloomberg Economics’ Stephanie Flanders explores why birthrates are so low, and what those low birthrates mean for the global economy. Arkansas’s Ouachita Electric Cooperative Corp. is seeking a 4.5% decrease in its electricity rates, thanks to its solar power assets. Northrop Grumman Corp. has launched the Mission Extension Vehicle-1, the first satellite designed to service and extend the life of other satellites. Dyson Group Plc has pulled the plug on its electric vehicle plans, saying “we simply cannot make it commercially viable.” The most detailed map of U.S. automobile emissions. Get Sparklines delivered to your inbox. Sign up here. And subscribe to Bloomberg All Access and get much, much more. You’ll receive our unmatched global news coverage and two in-depth daily newsletters, the Bloomberg Open and the Bloomberg Close.To contact the author of this story: Nathaniel Bullard at firstname.lastname@example.orgTo contact the editor responsible for this story: Brooke Sample at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nathaniel Bullard is a BloombergNEF energy analyst, covering technology and business model innovation and system-wide resource transitions.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Why should society permit the existence of food companies that contribute to poor health? The standard answer is that people should be allowed to make bad choices about what they eat and drink. But that’s a slippery defense when the consumers are children and the choices they face are loaded against their wellbeing, as Thursday’s British government report on childhood obesity makes clear.The snacks industry — from Mondelez International Inc. to Coca-Cola Co. and from Nestle SA to the Kraft Heinz Company — needs to rethink its purpose, and strategy, if its license to operate is to endure.Former U.K. chief medical officer Professor Sally Davies, the report’s author, cites multiple causes for a saddening rise in obesity among England’s 10-11-year-olds since 1990. The giant food brands are only part of the problem but that hardly absolves them from leading the solution. As Davies says, cheap unhealthy food tends to be the most readily available. Portion inflation is rampant. Advertising or sponsorship is pervasive. Healthy options are often unaffordable for those on low incomes, while the unhealthy options are cheap.Davies’s recommendations include some radical ideas. The U.K. public may be banned from eating and drinking on public transport. Industry faces calorie caps on food portions consumed “out-of-home,” tiered VAT on unhealthy food, plain packaging and the end of tax deductibility of marketing costs for unhealthy products. These may just be proposals. But the direction of travel is clear.This is what happens when an industry fails to self-regulate to mitigate its worst effects. Governments wake up. The food and drink industry is a big employer and a big taxpayer. Even so, the economics favor intervention. The medical costs of obesity, coupled with lost productivity, are 3% of global GDP, according to McKinsey research from 2014. Today’s unhealthy children are tomorrow’s sick workforce.The U.K. Food and Drink Federation, the lobby group, says “punitive action” might hinder continuing the progress the manufacturers have already made in cutting salt, sugar and calories from their products over the last four years. It says the industry must “take the consumer with us.” The question is whether it is taking itself and its customers to an early grave. The industry needs to see this problem as an opportunity not a threat. First, it should be clear about its role in society. Making treats that people want to eat can be a good reason for a corporation to exist, but not when it adds to a public health crisis. This doesn’t mean PepsiCo Inc. ending production of Doritos. But it does mean defining responsibly what the target market — and age group — is for such products. And it requires combining marketing with education.At the same time, food manufacturers should redouble their efforts to innovate healthier, cost-effective alternatives to sugar and salt. This is a chance for the food giants to think about the huge market for healthy snacks. Food technology has a vital role here and it’s best mediated by the private sector. R&D has already helped, as with the development of Nestle’s so-called hollow sugar.This week the OECD proposed reforms to corporate taxation, which would allow governments to tax digital companies that generate revenues in countries where they have no physical presence. The food industry faces a similar revenue challenge. Its products will be subject to extra taxes in certain markets until they start to use their well-funded research labs to help meet national health objectives.It’s not clear that the sector sees obesity as a strategic issue yet. Unilever NV is recycling plastic packaging but still aiming to sell lots more Ben & Jerry’s ice cream. The debate among investors about what stocks to divest centers on fossil fuels right now. If food companies don’t act, they’ll join tobacco and oil in the sin bin.\--With assistance from Lara Williams.To contact the author of this story: Chris Hughes at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Consumer goods giant Unilever vowed to halve the amount of new plastic it uses over the next five years, by shifting to more recyclable and alternative materials and refillable options to meet consumer demand for less waste. The company, which sells Ben & Jerry's ice cream, Dove soap and Knorr soup, said it would achieve this target by cutting its use of plastic packaging by over 100,000 tonnes and accelerating its use of recycled plastic. The Anglo-Dutch firm currently uses more than 700,000 tonnes of virgin plastic - created using raw materials instead of recycled materials - each year and expects to halve that usage by 2025.
(Bloomberg) -- They’re the big dogs of modern mergers and acquisitions—rapacious dealmakers that have devoured mighty corporations, bankrolled young disrupters and upended entire industries. And they’re not looking so tough anymore.Since 2014, when the latest wave of mergers and acquisitions began to build, three names have inspired fear and envy in the M&A world. In doing so, each has been totemic of a particular vogue in the capital markets:3G Capital, the Brazilian investment firm that has picked off some of America’s most famous brands and aggressively squeezed out costs and jobs Valeant Pharmaceuticals, the ill-fated Canadian company that gobbled up drugmakers, drove up prices and fueled outrage over high prescription costs And SoftBank, the big-dreaming—and big-spending—Japanese conglomerate that has backed the likes of Uber and WeWork and remains one of the most powerful forces in Silicon ValleyFrom the start, the three M&A powerhouses adopted wildly different strategies. But for any investor, the similarities deserve attention. Wall Street believed them and their many imitators to be exceptional. Turns out, they weren’t, and aren’t.(4)That’s worth remembering at a moment when the financial world is struggling to come to grips with the yawning gap between what the pros think companies are worth and what those companies actually fetch on public markets. (See WeWork’s botched initial public offering).Not long ago, 3G, co-founded by billionaire Jorge Paulo Lemann, seemed unstoppable. Lemann became a global name by cobbling together the world’s biggest beermaker, Anheuser-Busch InBev; picking up brands like Burger King and Tim Hortons; and driving the 2015 merger between Kraft and Heinz to create one of world’s largest food companies.3G has since stumbled—hard. Mixing Kraft and Heinz turned out to be a disastrous idea, and not just for those two companies.The investment firm’s usual combine-and-cut formula failed miserably at Kraft Heinz. Since Lemann teamed up with none other than Warren Buffett to do the deal, sales and profits have tanked. 3G’s dream of turning Kraft Heinz into the savior of Big Food ended when Unilever rebuffed its $143 billion takeover offer in 2017. This February, Kraft Heinz took a staggering $15.4 billion writedown. The company’s stock has plunged more than 70% from its peak, helping to drag down rivals like Kellogg, Campbell Soup and General Mills.Former management consultant Michael Pearson had a similarly radical idea at Valeant: that drugmakers like itself had no business actually making drugs.Instead, it would borrow money to acquire rivals, dramatically increase the price of their treatments and fire almost everyone. Rinse, repeat. Valeant’s ambition peaked in 2014 when it teamed up with activist investor Bill Ackman to mount an audacious $54 billion takeover offer for Allergan, the maker of Botox.The bid was spurned, but Ackman and Pearson were undimmed and, as if to prove their theory, took the company on a buying spree that included gastrointestinal drugmaker Salix ($11.1 billion) and Sprout, a developer of female libido stimulants ($1 billion). For a while investors approved, sending Valeant’s market value to $90 billion in August 2015. Then things went spectacularly wrong.Accounting irregularities, mounting debts and political angst over surging drug prices destroyed not only the Valeant dream, but those of the entire specialty pharmaceuticals industry. Among those that followed Valeant to that 2015 peak, Perrigo, Endo International, and Mallinckrodt have since lost, respectively, 74%, 96%, and 98% of their market values. For its part, Valeant is 93% lower, with a new management, board and shareholder base, and has renamed itself Bausch Health.There is no nice way to bring SoftBank into this part of the story.By almost any conceivable measure, it is having a diabolical 2019. The quixotic Masayoshi Son, a startup kingmaker of undoubted brilliance, has staked SoftBank’s billions—and its reputation—on three companies: Uber, the ride-hailing app which has lost about a third of its value, or $19 billion, since its May IPO; Slack, a messaging platform which debuted in June and is down 35% from where it ended its first trading day; and WeWork.(5)The scale of these blowups, so starkly at odds with SoftBank’s recent esteemed status, has dislocated the U.S. IPO markets as investors and would-be public companies look skeptically at one another across a widening gulf of value perception.In hindsight, the impermanence of the three dealmakers’ strategies is easy to skewer. But the success of 3G and Valeant was fueled by some of the most well-known names in finance. SoftBank, meanwhile, tapped entire nations to bankroll its ambitions of creating a future of robot-human harmony.These failures could end up restricting Son’s access to future funding, but it’s unlikely to diminish his vision for what he has said is a 300-year plan to grow the company he started 38 years ago.Nor, probably, will it dampen his enthusiasm for what he has called the gold rush of investing in nascent technology. “It’s just a money thing. It’s not important, it’s just a process. What is more important is humans’ happiness. How do we help ourselves, humans, become happier?” Son said in 2017, calling himself a “super optimist.” “There’s always a solution.”What’s more likely is the end of the burgeoning trend of taking loss-making companies public in the hope the future will come to them. Perhaps, too, some doubt will attach itself to the idea that pumping a young business with money and expecting it to succeed isn’t an idea of wheel-inventing novelty.Either way, there will be something else to worship soon enough. There always is.(1) Another area of commonality is a tolerance for bad corporate governance. In the case of Kraft Heinz and (to be very charitable) Valeant, there was sloppy accounting. For SoftBank, it was willing to put up with the various untraditional practices of Travis Kalanick and Adam Neumann.(2) I can’t add anything revelatory to the mass that has been written about SoftBank and WeWork, the fact that it valued it at $47 billion, whether or not Messrs. Son and Neumann met for 10, 30, or 60 minutes, etc. So I won’t. But it’s hard to feel not a little sad for Adam Neumann. The Disney prince/founder/ex-CEO of WeWork, who just weeks ago was gallantly riding toward his public market destiny, has been banished from the kingdom, leaving a regency of lesser mortals to seize the reins.To contact the author of this story: Ed Hammond in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Hauck at email@example.com, David GillenBen ScentFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- In the five years since Tesco Plc was plunged into the biggest crisis in its history, Dave Lewis, its chief executive officer, has executed an (almost) textbook turnaround of Britain’s biggest retailer.He’s now decided that his job is done and he will hand over the reins next year to Ken Murphy of Walgreens Boots Alliance Inc.“Drastic Dave” — a moniker Lewis picked up because of his cost-cutting zeal in a former job at Unilever Plc — took Tesco out of intensive care. He revived sales growth, restored profit, cut debt and reinstated the dividend. The shares are 18% higher than they were back in 2014, when Tesco announced a bombshell 250 million-pound ($307 million) profit black hole. That stock price increase is twice that of the FTSE 100 index.There’s still a vague sense of disappointment, though. One might have expected some Lewis initiatives, such as taking prices closer to those of the German-owned discount grocers Aldi and Lidl, to bear more fruit. While Tesco is managing to grind out incremental growth in an ever-more-competitive market, it’s hard to get too excited by that.Lewis did deliver on his key turnaround target: lifting the company’s operating margin to between 3.5% and 4% six months earlier than expected. So he’s making the wise move for a CEO of going out on a high note.But it’s curious that he didn’t appear to be in the running for two other high-profile CEO posts that have been filled recently, at the consumer goods giants Unilever Plc and Reckitt Benckiser Group Plc. Lewis doesn’t have another job to go to and plans to take some time off before thinking about his next move.The choice of replacement is certainly a surprise. Lewis’s natural successor was Charles Wilson, the popular ex-boss of Booker, which Tesco bought in 2018. However, he stepped back from running Tesco’s British arm last year due to illness. Murphy was joint chief operating officer at Walgreens’ British pharmacy chain Boots before being promoted at the American parent. So he does have experience in the fiercely competitive U.K. retail market.Still, he has no direct experience of the cutthroat grocery sector, which has been transformed by the price-slashing antics of Aldi and Lidl. This is Tesco’s greatest challenge. At least Murphy will benefit from the advice of Wilson, who still has a senior role at Tesco.While the supermarket giant has prospered from the weakness of its great rival J Sainsbury Plc, the latter appears to have gotten its act together lately. And while the British shopper has remained pretty immune to Brexit so far, a no-deal departure from the European Union might change that.It won’t be easy to balance these challenges against an investor base that’s expecting a special dividend or buybacks from next year. Already Tesco’s U.K. sales growth has slowed. That may reflect a broader deceleration across the grocery market, after a strong 2018, but a slowdown is a slowdown. Shareholders are naturally cautious about the management change, although the stock did rise 2% in a falling London market on Wednesday.At least Lewis didn’t hang around beyond his sell-by date, unlike so many other CEOs.To contact the author of this story: Andrea Felsted at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- One of the most successful Silicon Valley-Asia venture capital firms is counting on the humble mom-and-pop store that dominates India’s retail landscape to hold its own against Amazon.com Inc. and Walmart Inc.Menlo Park, California-based GGV Capital, a $6.2 billion investor in some of the biggest unicorns in the U.S. and China including Airbnb, Xiaomi Corp., and Slack Technologies Inc., is backing startups that serve the tiny, family-run businesses known as kiranas.“It’s all about powering the little guys,” said Hans Tung, managing partner, in a recent joint interview with fellow investor Jixun Foo in Bangalore, where the duo was meeting a dozen entrepreneurs. “We’re backing startups that provide technology and working capital to make kiranas more efficient, so that these mom-and-pops can become e-commerce and lending enablers in their communities,” Tung added.From the poshest neighborhoods to teeming slums, typical Indian kiranas are cramped spaces that can just about fit a king-size bed but are chock-full of sacks of rice, lentils and dried chili peppers. Their floor-to-ceiling shelves are stacked with toothpaste and cooking oil, and their shopfronts festooned with colorful bags of potato chips, tiny sachets of shampoo and pickles. With their personalized service, the stores usually offer door-step delivery and interest-free credit.GGV, which has focused almost exclusively on China and the U.S. for two decades, is bullish about India. “We are seeing the same movie played out a little differently in emerging economies,” said Tung. “India can be very big over the next 10 years.” As much as 20% of the $1.9 billion fund raised by the VC firm last year will be allocated to India as well as Southeast Asia.India has the market size and talent pool to make things happen and now investors are lining up with capital, said Foo. GGV Capital will write $5-10 million in checks in the case of very early-stage entrepreneurs and $50 million checks for later-stage startups, he said.The firm has built an investment strategy around kiranas based on the premise it’s better to play with a model that already exists rather than building new supply chains that could take as long as a decade to materialize. GGV’s first such investment amounting “to tens of millions of dollars” is in Udaan, a Bangalore-based B2B marketplace for small businesses, the partners said. More recently, GGV has put money in Khatabook, a mobile app that’s a digital version of the bahi khata, or the hand-written ledger that owners of tiny businesses traditionally use to keep track of daily accounts. It’s an earlier-stage bet so the investment is “lower”, Tung said.Large global investors like Tiger Global Management, Lightspeed Venture Partners and even consumer giant Unilever’s investing arm are backing technology startups that serve kiranas but GGV Capital is the first to crystallize a proposition that goes beyond India to include the neighborhood-store equivalents of kiranas in Indonesia, Vietnam and Latin America.“Across these countries, the value of the average online order is still low and the cost of last mile logistics is very high,” said Foo. “Entrepreneurs are finding a different way by empowering the mom and pops and that can get e-commerce going.”In India, even the biggest conglomerates including Tata and Reliance have been unable to diminish kiranas’ dominance while newer online retail entrants Amazon and Walmart-owned Flipkart are trying to embrace them, using the shops to facilitate deliveries or offer assistance to customers going online for the first time. Reliance has already said it will equip kiranas with technology as part of its online-offline e-commerce model.GGV also sees the neighborhood stores as more than a place to shop. “If you power them up and earn their trust, they can be the place to serve the community far beyond just groceries and daily necessities,” said Tung.To contact the reporter on this story: Saritha Rai in Bangalore at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Richemont and Alibaba Group Holding Ltd.’s luxury joint venture has gone live in China, presenting 130 brands in one location on the Tmall e-commerce site.Tom Ford, Brunello Cucinelli and Jimmy Choo join Richemont brands Cartier, Piaget and Vacheron Constantin on the site. Investors have awaited details on the partnership since the companies announced it about a year ago.The venture, called Feng Mao, will start a launch campaign for the platform in the second week of October, after China’s Golden Week holidays, the companies said Monday. That gives time to promote the business ahead of China’s Nov. 11 Singles’ Day holiday, when unmarried couples shower each other with gifts.Richemont is leading luxury-goods makers in e-commerce expansion after acquiring high-end internet retailers YNAP and Watchfinder. It’s a way for the Swiss company to capture Chinese consumers -- who Alibaba CEO Daniel Zhang has said may make up almost half of the global luxury market by 2025 -- without the expense of opening physical stores.Last year, Singles’ Day brought in $31 billion in revenue to Alibaba, making it one of the biggest events in e-commerce ever.Feng Mao is 51% owned by Richemont, while Alibaba holds 49%, and will operate the site under the Swiss company’s Net-a-Porter brand. The venture hired Yating Wu, a former Unilever manager, as its chief executive officer in recent months.(Updates with details on timing in third paragraph.)To contact the reporter on this story: Thomas Mulier in Geneva at firstname.lastname@example.orgTo contact the editor responsible for this story: Eric Pfanner at email@example.comFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
"People are surprised that our Amazon business is only a couple of hundred million," CFO Graeme Pitkethly said at the Bernstein conference in London, adding that the company generated less than 200 million pounds in sales from the online behemoth last year. "No one makes money on Amazon if you sell below $10 ... and a lot of our business is in products below $10," he said. Unilever, the maker of Dove soap and Ben & Jerry's ice-cream, reported annual sales of about 51 billion pounds in 2018.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Nigeria and Benin are embroiled in a trade dispute two months after signing an agreement to free up the movement of goods and services in Africa.Nigerian President Muhammadu Buhari ordered the partial closing of its boundary with Benin last month to curb smuggling of rice and other commodities. The blockade has had a ripple effect across West Africa, with factories and traders struggling to import key raw materials and having to use alternative routes for their exports, according to the Lagos Chamber of Commerce.The border restrictions come after Nigeria and Benin in July agreed to join the African Continental Free Trade Area, which targets greater economic integration through the removal of trade barriers and tariffs on 90% of commodities. The duty-free movement of goods is expected to boost trade in the market of 1.2 billion people, similar in size to India, and a combined gross domestic product of $2.5 trillion.“Over 80% of West African cross-border trade is by road,” said Muda Yusuf, the head of the Lagos business chamber in the Nigerian commercial hub. “The cost is quite enormous and the closure is not sustainable.”Benin is a key transit route for traders and operates a system that allows landlocked neighboring countries to use its harbors for imports.The impact of the dispute is being felt as far afield as Ghana, which is separated from Nigeria by Benin and Togo. Manufacturers have complained about the impact on costs, John Defor, research director at the Association of Ghana Industries, said by phone. In Nigeria, units of multinational companies including Unilever NV are in talks with the government to find a solution.The restrictions are the latest taken by Nigeria to protect its foreign-currency reserves by curbing imports. The central bank has restricted access to dollars for the import of more than 40 items from cement to soap, while the government wants Africa’s most populous nation to become self-sufficient in the production of staples such as rice.Protectionist PoliciesTraders and smugglers in Benin have taken advantage of Nigeria’s protectionist policies to import and re-export goods to their bigger neighbor, said Ahmadou Aly Mbaye, an economics professor at Cheikh Anta Diop University in Senegal’s capital, Dakar.Rice is a good example. Benin, with a population of 11 million that is barely 5% of Nigeria’s, is the biggest buyer of the grain from Thailand, the world’s second-largest exporter. Official shipments from Thailand to Nigeria have dwindled to almost nothing from more than 1.2 million tons in 2014, while those to Benin have increased by more than half.“Benin is basically importing for Nigeria,” Mbaye, who is a senior fellow at the Washington D.C.-based Brookings Institution, said by phone. “Protectionism is difficult to implement in a globalized world, because people find ways around it.”Buhari defended the blockade at a meeting in Japan with Beninese President Patrice Talon at the end of last month. He said Benin and its northern neighbor, Niger, should take “strict and comprehensive measures” to curtail smuggling across their borders.While Nigeria is committed to the African free-trade deal, the agreement “must not only promote free trade, but legal trade of quality made-in-Africa goods,” Buhari said in a Sept. 20 speech, which a spokesman shared in response to questions.A spokesman for Talon declined to comment.Countries which have ratified the African free-trade agreement are expected to start trading with slashed tariffs from July 2020.(Adds date for implementation of free-trade agreement in final paragraph)\--With assistance from Demetrios Pogkas.To contact the reporters on this story: Yinka Ibukun in Accra at firstname.lastname@example.org;Ruth Olurounbi in Abuja at email@example.com;Virgile Ahissou in Accra at firstname.lastname@example.orgTo contact the editors responsible for this story: Andre Janse van Vuuren at email@example.com, Paul RichardsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- The executives tasked with introducing Seventh Generation’s line of eco-friendly laundry detergents, dish soaps and cleaners to Southeast Asia faced a dilemma earlier this year. If the Unilever NV unit proceeded with the planned product launch before enough recycled plastic could be found for packaging, it could undercut sustainability goals tied to 20% of employee bonuses. Picking a non-recycled material could cost them all a chunk of money. “If you don’t have access to recycled resins, then we just won’t launch,” Seventh Generation Chief Executive Officer Joey Bergstein said the company decided at the time. His team eventually found suitable material from the region’s fledgling recycling infrastructure, and Seventh Generation hit store shelves there without lowering standards—or bonuses. The search paid off for Unilever, too, with the same supplies of recycled resins going into the packaging of the European consumer giant’s other brands in Southeast Asia.Most large companies now set sustainability goals, but few impose consequences on employees who fail to meet them. Around 500 corporations worldwide tie executive pay to environmental, social or governance goals, according to data compiled by Bloomberg. Not all of these are related to climate impact—diversity and safety are more prevalent than environment targets among this group.That’s beginning to change. “It’s is coming up more and more, but five years ago this wasn’t part of the conversation,” said Seymour Burchman, a managing director at Semler Brossy, a consultant that advises on compensation plans. With companies creating better data around environmental impact and risks, he said, the case for linking compensation gets stronger. “The board can’t ignore it.”The employers that most often link compensation to environmental impact aren’t crunchy consumer brands like Seventh Generation but gritty miners. Extractive industries need to measure environmental impact to get licenses required to operate in local communities, and Burchman said that incentive pay has been an effective way for miners to improve these results.Cameco Corp. links 40% of annual bonuses to safety, environment and community measures. Vale SA started linking emission reductions to annual bonuses in 2018. Rio Tinto Plc said in April it was considering how to link greenhouse gas cuts to short-term incentive plans. BHP Group—the world's largest miner—said Tuesday it will increase the amount of short-term incentives CEO Andrew Mackenzie has tied to carbon emissions reductions and climate metrics in 2020 from 4% currently. As more companies reckon with their carbon footprints and face pressure to embrace renewable energy, links between climate-related targets and compensation are spreading. General Motors Co. CEO Mary Barra had seven sustainability objectives last year, including reaching 200,000 electric vehicle sales in the U.S. GM’s proxy statement denoted each one with a little green leaf, alongside other traditional financial goals for CEO pay like revenue, dividends and share repurchases. There are other executives at the Detroit automaker with sustainability goals included in their compensation, although a GM spokeswoman didn’t say how far these targets extend down the line.Climate goals for executive pay are more common in Europe, where companies like Novozymes A/S, the Copenhagen-based maker of industrial enzymes, gives each employee his or her own incentives for meeting financial, social and environmental targets. Food and beverage maker Danone SA bases about 10% of CEO Emmanuel Faber’s pay on meeting climate commitments and creating a sustainable supply chain.Sustainability is increasingly creeping into traditional financial incentives for companies — and even their suppliers. Walmart, for example, has pledged to cut a gigaton of greenhouse gases out of its business by 2030, extending all the way into its supply chain. Earlier this year, in an effort to spur suppliers to do better, Walmart offered better financial terms to anyone who delivered on green goals. Walmart specifically links diversity and culture to 15% of executive incentive pay and 10% of pay for associates, but doesn’t break out environmental goals in its proxy. In the credit markets, nearly $70 billion of green- and sustainability-linked loans were issued this year, according to data compiled by Bloomberg. The loans let companies lower the cost of their debt if they meet specific sustainability targets. At Seventh Generation, the entire workforce sees pay change along with company-wide sustainability metrics. That puts the unit on the far end of adoption, which makes sense for an environmentally-minded consumer brand. “When you bake it into the incentive system people really feel compelled to go after it,” said Bergstein, the chief executive.Meeting goals on packaging and greenhouse-gas reduction prompted the launch of an ultra concentrated laundry detergent in 2018. The detergent weighs less, which the company claims will cut emissions from shipping by about 70%.Scientists working for Seventh Generation, however, have concluded that 92% of the company’s greenhouse-gas footprint stems from people washing and drying clothes at home—something very difficult for executives to change. Working with manufacturers to design washing machines that are more efficient didn’t seem like it would address that problem fast enough. So the company took an unorthodox approach.Seventh Generation set a target that 100 U.S. cities would need to pledge to shift to clean energy by 2030. If they didn’t, employees would lose out on incentive pay. Bergstein will admit that it sounds crazy: “What kind of control do we have over 100 cities across America to make that kind of commitment?” he said. “But we looked at each other and said if we’re really serious about cleaning up the energy grid, then we’ve got to do something like this.”Seventh Generation spent $1 million on lobbying efforts and worked with the Sierra Club and other groups to sway local officials. It worked — and its 160 employees got to keep their bonuses. “It would have been a lot easier to take that $1 million and spend it elsewhere,” Bergstein said. “But it really keeps your feet to the fire.”This story is part of Covering Climate Now, a global collaboration of more than 250 news outlets to highlight climate change.To contact the author of this story: Emily Chasan in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Aaron Rutkoff at email@example.com, Tim QuinsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Naspers Ltd.’s newly listed internet unit received an enthusiastic early response from investors, soaring on its trading debut to close a valuation discount to its biggest investment, Chinese tech giant Tencent Holdings Ltd.Prosus NV, as the new Amsterdam-listed company is known, jumped as much as 32% in early trading to value the business at about 125 billion euros ($138 billion). The group’s 31% stake in WeChat creator Tencent is worth about $131 billion, the result of a timely investment made almost two decades ago.The investor reaction is an early vindication of the strategy masterminded by Naspers Chief Executive Officer Bob van Dijk, who took the helm of the Cape Town-based company five years ago. His plan to carve out Prosus into a new listing in Amsterdam was designed to attract a more global investor base and realize more value, while weakening the group’s dominance over the Johannesburg stock exchange.The move to Euronext is “to facilitate our next phase of growth,” Van Dijk said in an interview with Bloomberg TV just after the market opened. Prosus’s classified-ads business is the largest in the world, while the group also sees fast expansion in internet payments, food delivery and online trading in second-hand goods, he said.While the discount to Tencent was all but wiped out, the firm is still trading below the sum of its parts when you add other assets, including shareholdings in Russia’s Mail.Ru Group Ltd. and Delivery Hero SE of Germany. Van Dijk’s next challenge will be to generate higher returns from those investments and prove that Prosus isn’t merely a proxy for holding Tencent stock.“Our next step will be to bed down and invest in our core business units,” Chief Financial Officer Basil Sgourdos said by phone.Shares in Prosus -- a Latin word meaning ‘forwards’ -- declined slightly after the early surge. The value as of 11:28 a.m. in Amsterdam was 121 billion euros, making it the third-largest publicly traded company in the Netherlands, behind Royal Dutch Shell Plc and Unilever NV. Its market value rivals that of Europe’s biggest tech company, Germany’s SAP SE.Naspers is retaining a 73% stake in Prosus, and will keep hold of South African businesses including the newspapers that form the basis of the company’s origins a century ago. Its stock rose in Johannesburg, trading 5.4% higher as of 11:28 a.m. local time.“Naspers has been looking to unlock value in the steep discount applied to its Tencent holding and the successful listing of Prosus today has certainly gone some way to achieving that target,” said Neil Campling, an analyst at Mirabaud Securities. “Prosus is not only the Tencent holding though.”(Updates with CFO comment in sixth paragraph.)\--With assistance from Swetha Gopinath, Anna Edwards, Matthew Miller and Kit Rees.To contact the reporters on this story: Loni Prinsloo in Johannesburg at firstname.lastname@example.org;John Bowker in Johannesburg at email@example.comTo contact the editors responsible for this story: Thomas Pfeiffer at firstname.lastname@example.org, Jennifer RyanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Wall Street was a very conservative place politically when I started working in the capital markets in 1999, but it seems to have lurched to the left lately. It’s not only that many of the people who work there have become more liberal, but more importantly, left-leaning behavior by publicly traded companies is being rewarded by the stock market.The decision by the Business Roundtable, which is an organization led by JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, to explicitly state that the purpose of a publicly traded company is social responsibility and not creating value for shareholders is just the latest example of this lurch to the left. For decades, most public companies have chosen to remain politically neutral. That remained the case even after the Citizens United Supreme Court decision on campaign finance in 2010 that held that the free speech clause of the First Amendment prohibits the government from restricting independent expenditures for political communications by corporations. Most expected the Citizens United decision to result in conservative political speech, but it has been quite the opposite. Ben and Jerry’s, a unit of Unilever Plc, recently launched a flavor of ice cream designed specifically to support Bernie Sanders’s presidential campaign.Nike Inc.’s shares are up about 36% since the start of 2018, compared with 9.20% for the S&P 500 Index, despite backlash from some conservative outlets for signing controversial former National Football League quarterback Colin Kaepernick to a marketing deal and then bowing to pressure from the left and pulling its special edition sneakers featuring the “Betsy Ross Flag” that some feel was a symbol of racism. I was recently in a Nike outlet store here in Myrtle Beach, South Carolina, and it was packed with a checkout line 30 people deep in the middle of summer.The technology sector leans to the left, led by Google’s parent company Alphabet Inc. and Amazon.com Inc., whose Chief Executive Officer Jeff Bezos owns the Washington Post. Many consumers may complain about the liberal orientation of these companies, but there is not a lot they can do to avoid them. Sure, share prices of tech firms have stalled lately, but that’s more likely due to the threat of antitrust action than a reflection of their political orientation.The list of companies who have engaged in left-leaning speech, marketing or protest is getting long. The list of actions include pulling advertising from various Fox News programs, supporting the Women’s March, pulling products related to President Donald Trump from stores and banks dropping business with the certain gun makers. There have been few consequences, and no serious boycotts of these companies by conservatives, or at least none have been effective. Conservative media outlets had some fun with Procter & Gamble Co.’s $8 billion charge for Gillette, attributing it to backlash from an ad campaign asking men to “do better.” But the razor business has been bad for a while, with competitive threats coming from all sides. And more men are growing beards these days, so one is probably not related to the other.Corporate America may have declared a political orientation for strategic reasons. Companies today have more data and information than ever on their customers. What works for Nike may not work for Bass Pro Shops.Then there’s the waterfall of money that is earmarked for environment, social and governance, or ESG, investing strategies. It is the only form of active management that seems to be gathering assets even with a mixed track record when it comes to returns. The idea here is that companies engaging in socially responsible behavior should be rewarded by the stock market, but that isn’t always true. Indexing is widely considered to be a left-wing philosophy, the idea that you would invest in all companies equally, instead of trying to pick the best stocks. It has even famously been called worse than Marxism by Sanford C. Bernstein & Co. As everyone knows, index fund assets have been growing at an astronomical pace. By some estimates, passive strategies now make up 40% to 50% of all assets under management, and it shows no signs of slowing down. Even actively managed funds with great performance are losing assets.We’ve come a long way from suspender-snapping, bull and bear cufflinks and “lunch is for wimps.” Back then, the idea that you would invest your money and not seek the highest return would have seemed odd.I assume that decisions to engage in political speech are carefully considered by managements, but I still find it disconcerting. I’m from a generation that grew up believing the job of a public company was to “make money,” not “do good.” When they both align, then great, but what hasn’t changed is that people still like to see the value of their investments go up every year.To contact the author of this story: Jared Dillian at email@example.comTo contact the editor responsible for this story: Robert Burgess at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Jared Dillian is the editor and publisher of The Daily Dirtnap, investment strategist at Mauldin Economics, and the author of "Street Freak" and "All the Evil of This World." He may have a stake in the areas he writes about.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.