Bloomberg Businessweek Europe 18-Apr-2022

wehicle—and test Tesla’s Eccles islets a0The IBKR GlobalTrader app makes it easy to trade stocks worldwide. Open your account in minutes and enjoy low commissions on over 90 stock markets in the US, Canada, Europe, and Asia. Scan the globe for Trade in Fractions Deposit in your Free educational undervalued stocks of US Shares local currency resources Download on the App Store Get itor for Phone and iPad Google Play IBKR GlobalTraderer 18,2022 “ An Earnings Test for Tech Netflix reports quarterly earnings on April 19, followed by Alphabet, Apple, Meta, Microsoft, and Twitter the week after. 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But now they are being filled and killed by plastic pollution. 33 billion pounds every year. Join the campaign to save the oceans. Oceana.org/plastics Crore eas hr ©, PNT UeADVERTISEMEN. Three P’s to Beat the Rising Cost of Education It’s hard to overstate the importance of education. the realization of their personal goals. t's an investment that lasts a lifetime. While an investment in knowledge pays the best interest, the cost of education is soaring across much of the world In Singapore, for example, the price of tuition increased 80% between 2001 and 2021, while tuition and fees at private universities in the United States increased 144% over the same period. For many students and their families, it's a struggle to keep up. . Three P’s In Hong Kong, eround 92% of students work in paid employment to get by, Financial Planning while 43% of parents sacrifice leisure activities to support their child's Oe tniversity education. Around 74% of students and 51% of parents do the same in Singapore. And in the U.S., 59% of parents worry they won't be PRAMAS to financial suppor ther cidrens education.Planning For Success ‘Yet paying for education shouldn't be a burden. One of the most common observations ‘among families about education is, that they should have planned sooner. ‘Around 48% of parents in Hong Kong ‘and 47% of parents in Singapore wish they had started saving for their child's education earlier. And most wished they had saved more regularly. Families should map out their ‘education journey now, according to HSBC. That includes the goals they have for their children and the dates they'll need funds for their education, To build that fund, there are several creative investment options to consider: an insurance plan with a saving element that will ultimately yield regular annuity payments as their children start college; investing in property while your children are studying abroad —essentially a bolt-hole for them to stay in; and educating kids about financial literacy and investing early—from savings accounts to student bonds and exchange-traded funds (ETFs) “Think of education that you're investing Goswami, Chief Customer and Marketing Officer, Global Wealth and Personal Banking, HSBC. “To make the most of it you need clarity (on what you're trying to achieve Do you want your children to go to a school in your country? Do you want them to go overseas? Whatever itis, you must plan proactively.” ‘ADVERTISEMENT Professional Help This is where getting professional help makes a difference. Whether you're a parent getting ready for your child's future or a student looking to study abroad, a trusted bank providing international support is crucial —from helping you calculate and manage costs up front, to choosing the right investment strategy. Through expert guidance and careful planning across savings and investment accounts, the costs become manageable. “Keeping up with the rising costs of education comes dawn to the three P's," explains Richa. “Financial planning, professional advice and persevering with the plan.” For families preparing for their child to study abroad, navigating the logistics can be challenging, HSBC helps by enabling students to open an account overseas before they move and transfer their credit history to their new country. Those with a Premier account can enjoy the privileges wherever they go. And when it comes to the most daunting part of all—the actual physical relocation—HSBC can assist with everything from travel bookings to moving company referrals. The bank makes the entire process easy so families can focus con making the most important investment of their lives, “When | was young, my parents couldn't give me a lot of money, but they were able to provide for an education, says Rtcha, “That gave me the ability to make my dreams come true. Higher education is a superpower that puts you on the path to success. It's something every parent wants for their children, “To all the students out there, | would say dream big and know that you can be anyone that you choose to be. Let us take care of the other stuff—opening an account before you go to school, sorting ‘out your debit and credit cards, organizing your insurance. Leave all of that to us, so you can go do great things with your life.” rR Uy ETO Uy Prete rate Cerra lt) Pr ated Seer) Peery Dart aN iol] Cr to be.” en) Study Abroad HSBC Intemational Sewices Parents | stuey Abroad HSBC Intemational Servicesm REMARKS Making DoWith Less Fertilizer @ Can record prices spur efficiencies that would benefit the environment, as happened with the oil shock? @ By Elizabeth Elkin, Samuel Gebre, and Matthew Boesler James Cox counts himself lucky. The owner of a 687-acre farm in Gloucestershire, a bucolic county in the southwest of England known for its quaint villages and rolling landscape, bought all his fertilizer for the 2022 planting year well before the recent surge in prices-meaning he had enough to feed his wheat and oats, as well asthe barley that’s just sprouting. ‘And he doesn’t intend to use itall. “We are already considering reducing to some extent how much fertilizer we put on this year’s crop so we have some left over for next year,” Cox says, citing soaring prices for synthetic nutrients. He’s trying to calculate exactly how far he can stretch his reserve without compromising the quality and quantity of his harvest. “How much dare we trim the fertil izer back from what we were originally planning to use and how much will that impact the crop margins for this year?” Commercial farmers the world over are asking the same question. Costs for the chemical fertilizers that power mod- ern agriculture-nitrogen, phosphorus, and potassium—were already soaring in 2021 for a variety or reasons: a runup in natural gas, the primary feedstock for much of the nitrogen fertilizer produced globally; late summer storms on. the U.S. Gulf Coast that temporarily closed plants in the region; government sanctions on a major Belarusian potash producer in response to a journalist's arrest; and growing resource nationalism on the part of countries such as China, the world’s largest phosphate producer, which began restrict ing exports last year. ‘And that was all before Ukraine was invaded by Russi major low-cost exporter of every type of crop nutrient, giving prices a fresh jolt-in North America, one gauge shows they've almost doubled from a year ago. As with many other commodities, the world has in recent decades increasingly come to rely on Russia for its fertilizer needs. In 1992, the year after the dissolution of the Soviet Union, the country’s production of nitrogen amounted to 4.9 million nutrient tons, close to 7% of worldwide consumption, according to data compiled by the International Fertilizer Association (IFA) and Green Markets, a Bloomberg company. By 2019, that had risen to almost 10%. The country’s global share in phosphates and potash also climbed, to 8% and 20%, respectively. Since the war began, fertilizer shipments out of Russia have been severely disrupted, with some domestic producers intentionally holding back supply in response to Western sanctions and many major shipping lines unwilling to touchREMARKS ‘Bloombers Businessweek ‘Api 18, 2022 the product if they could even get it. Shortages in Brazil, the top destination for Russian shipments, as well as in other countries that rely on Russia for supplies, including India and China, could result in smaller harvests and higher crop costs. The Food and Agriculture Organization warned in a report last month that food and feed prices could climb by ‘as much as 22% in the 2022-23 marketing season as a result of the conflict in Ukraine, increasing the risk of malnutr and even famine. Amid such dire predictions it may sound callous to talk of silver linings. Yet the fertilizer shock of 2022 could ultimately end up paying dividends similar to those ofthe twin oill shocks of the 1970s. The Arab oil embargo brought the U.S. economy to its knees, but it also kick-started an energy con- servation drive that reshaped the American auto and building industries, to name but two. Under pressure from Asian competitors, Detroit’s Big Three introduced more compact, fuel-efficient cars. Meanwhile, advances in lighting, insula- tion, and appliances reduced home energy use. Because of the sum of innovations like these, the global economy is much less oil-dependent than it used to be. In 1973 it took a little less than one barrel of il to produce ‘$1,000 worth of gross domestic product (at 2015 prices). By 2019, that was down to 0.43 barrel-a 56% decline. More efficient use of fertilizers could likewise yield big benefits for the planet. Patented in the early 1900s, the Haber- Bosch method used to convert hydrogen and nitrogen into ammonia rates as one of the most important discoveries in history. It’s estimated that without nitrogen fertilizer, the planet would only be able to support approximately half our present-day population of 7.9 billion. But there are down- sides. Production of synthetic ammonia emits more carbon dioxide than any other chemical-making process. ‘The damage doesn’t stop there. Microbes present in soil break down fertilizer, releasing nitrous oxide into the atmosphere, which pound for pound has 300 times the planet-warming impact of CO,. Synthetic nitrogen is also a threat to biodiversity. Much of what's used on crops gets washed away by rains or floods and finds its way into rivers, lakes, and oceans, where it unleashes algal blooms that create oxygen-depleted dead zones. One of the largest, in the Gulf of Mexico, is bigger than the state of Connecticut. “Producing more with less” is how Patrick Heffer, IFA’s deputy director general, frames the challenge to farmers. In many countries, growers have already been experimenting ‘with ways to use synthetic crop nutrients more efficiently. By techniques such as rigorous soil testing and so-called precision agriculture, food producers can figure out just how much nutrition their land needs-and apply not a teaspoon more. Innovations include controlled-release formulations, usually tiny capsules that dissolve gradually when they come into contact with moisture, releasing nutrients, In Brazil, where fertilizer use has been growing faster than in the U.S., the demand for soil testing is at an all-time high this year, says Renato Alves Filho, chief executive officer of Fertilizer Consumption ‘elgrams perhectare of arable land 7 hina / Brea Zina 7US. Laboratério Solos & Plantas, the biggest agronomic analysis chain in the country. The company processed 20,000 samples in the first 90 days of the year, compared with 12,000 for the same period in 2021. Similarly, in the USS, Corey Lacey, president of the Agricultural Laboratory Testing Association and laboratory manager for United Soils, forecasts that this will be one of the biggest years for testing in decades. Education also has a role to play. In China, a 10-year pilot project that provided land management training to 21 million small landholders achieved a more than 10% increase in yields on average over the decade, while nitrogen fertilizer use decreased by as much as 18%, Since all of the major agricultural producers expend significant sums on farm subsidies, government policy could be used to prod changes. In November, the European Parliament voted to adopt a Farm to Fork strategy that targets a 20% reduction in fertilizer use by 2030. Sri Lanka showed the rest of world the importance of not moving too quickly. Last April, its government imposed a ban on synthetic fertilizers as part of an effort to transition, the country to organic farming. The policy was rolled back in November amid protests by farmers and soaring food infla tion. But the damage had already been done. Officials predict rice paddy production will drop by up to 30% in the current the tea crop, a key export, has also suffered. Humankind may never manage to completely wean itself off synthetic fertilizer. According to projections, food production will have to increase 70% by 2050 to sustain the planet's growing population. Sub-Saharan Africa has the world’s high- est birthrates, but the average application of fertilizer there is approximately one-eighth of the global average. There is widespread agreement that level is too low. In Brazil, many farmers are steeling themselves for an ‘unnerving season of trial and error. Napoledo Rutilli, who farms 4,200 acres in Diamantino, in the heartland of the coun- ‘ry’s grain bet, is waiting for the end of the winter com harvest around June before testing the soil and deciding how much fertilizer he’ll need for his next planting of soybeans. Those tests will be key, seeing as he hasn’t yet bought any nutrients for the next planting. “I'll change the way I work,” says the second-generation farmer. “We need to reinvent ourselves.” © —With Tatiana Freitas and Tarso VelosoTes Ue THe PY snl SUSINESS ORG yy Oe F a {\ XeBloomibera Businossweok ‘Ai 10,2022 How Uniqlo Became AFavoritein China @ In addition to making popular styles, it's kept quiet about the country’s human-rights record At first glance, the barriers to Yamaguchi, Japan- based Uniqlo becoming China’s favorite clothing brand look impossibly high. Encouraged by government leaders, Chinese shoppers are growing increasingly nationalistic as political tensions with liberal nations mount. Anti-Japanese sentiment in the country is long-standing and pervasive. And mpetition from both local and global fashion rivals is only getting fiercer. Nonetheless, the global retailer known for fune- tional basics such as Tshirts, jeans, and thermal underwear secured 1.4% of China’s hugely frag: mented $350 billion apparel market in 2021-a larger share than any other single brand. Founded by one of Japan’s richest men, Tadashi Yanai, and owned by Fast Retailing Co., Uniqlo has succeeded in China thanks in part to poli vy, smart product strategy, and moving into > vemes EismausINESS <4 the market early, analysts say. Other global brands targeting China’s vast pool of increasingly wealthy consumers would do well to examine the Japanese company’s strategy-and to consider its drawbacks. Relying too heavily on Chinese shoppers remains risky for any foreign brand, and not only because it might put off Western consumers who are troubled by the nation’s human-tights record With President Xi Jinping pushing for more self- sufficiency and tussling with the U.S. and other democratic nations over trade, cybersecurity, and other issues, continued access to the country’s consumers is far from guaranteed. “The Uniglo China business could be more important than anything else for Fast Retailing in the future,” says Takahiro Kazahaya, an analyst at Credit Suisse AG in Tokyo. But its ongoing success “should not be the underlying assumption.” Fast Retailing did not respond to a request to comment on this story. With almost 900 stores, Uniglo has more than twice the number of shops in mainland China as does rival H&M, which is struggling there. Not content with dominating urban cores in the biggest cities, where disposable incomes are higher, it’s aggressively opening shops in the surround- ing suburbs as well. Meanwhile, the apparel giant keeps expanding into China’s lower-tier cities such as Bijie and Tieling to catch newly emerging middle-class customers. Uniglo made 532 billion yen ($4.2billion), about a quarter of its overall revenue, in China last fiscal year. That’s roughly three times its sales in North ‘America and Europe combined, And its network of more than 860 Chinese stores is now bigger than its 806-location footprint at home in Japan-a reminder that China is key to the company’s current sales as well as its future growth, Uniglo’s focus on functional garments such as light down jackets has won over Chinese shoppers, says Leng Yun, a fashion commentator. Quality and attention to detail mean local companies find Uniqlo products “very difficult to copy,” she says. ‘An emphasis on well-made, affordable basics rather than trendy fashions has also helped differ- entiate Uniglo from global fast fashion giants H&M and Zara. But fashion lines aren’tall that set Uniqlo apart in the Chinese apparel market, There’s also its approach to contentious political issues, Xinjiang in particular. In 2019, concerns about forced labor in the region’s cotton industry had already begun toarise. Yet, as apparel manufacturers operating in China attracted more international scrutiny, Uniqlo and its founder, Yanai, kept quiet. In December 2020 the USS. barred Xinjiang cotton Bloombers Businessweek ‘Apri 18,2022 Uniglo in China Uniciows. Haat Nurbor of Urigo stores ‘Stores in Ghia 7 ching / Japan 7 South Korea 7US, ————_—_____ 800 400 Share of rverue from Ching, 122 products from entering the country, and within months the U.K., Canada, and the European Union imposed sanctions. Japanese officials showed concern about human-rights violations in Xinjiang but stopped short of acknowledging such reports as fact. HEM, Nike, and other brands soon started pub- licly expressing unease, too, sparking a nationalistic backlash that led Chinese social media users to call for boycotts of their products. But Yanai took a different tack. “I want to be neutral between the U.S. and China,” in ine with the company's practice of staying out of politics wherever it sells clothes, he told Nikkei Asia in December 2021. “The U.S. approach is to force companies to show their allegiance. I wanted to show I won’t play that game” ‘As more outspoken peers saw their greater China revenue slump sharply, Uniglo’s takings rose 17% in the year ended August 2021. Credit Suisse analyst Kazahaya expects the company’s Chinese profit to surpass what it makes in Japan next year. China’s significant contribution to Uniqlo’s sales “increases the emphasis on ensuring that these consumers are happy,” says Mark Tanner, managing director of China Skinny, a marketing and brand- ing company in Shanghai. Fast Retailing strives to keep China's officials sat- isfied, too. No foreign clothing brand pays more taxes or employs more people in Shanghai, according toa 2021 government statement. The company also rented a bigger booth than any of its competitors atthe politically important China International Import Expo last year. ‘The company is active in philanthropy across China as well, making charitable donations to cit- izens affected by natural disasters and regularly working with local colleges on student competitions. ‘That’s led to Uniglo being perceived as a valuablemousINESS ‘Bloombers Businessweek ‘Api 18, 2022 contributor to society-an important consideration for businesses aiming to expand there. Uniqlo also has relatively deep roots in China, as one of the first Japanese apparel makers to begin manufacturing clothing there around the turn of the millennium, says Mike Allen, an analyst at Jefferies Japan Ltd. Setting up Chinese retail operations at the same time was a relatively low- cost decision-and a prescient one. As the rise of China's middle class gained momentum, Uniqlo ‘was already established. “It was just the right Price point for Chinese consumers whose wealth was increasing quite rapidly and who had started to eye high-quality products,” says Allen, Today, continued success could hinge on keeping China’s increasingly nationalistic consumers focused squarely on its products rather than anything political. Jason Liang, a 29-year-old architect in Shanghai, is a fan of Uniqlo’s good-value basics ‘who stopped shopping with Nike and H&M following the Xinjiang backlash. “It’s a relief to me that I don’t see anything that explicitly shows Uniqlo is one of the Xinjiang cotton opponents,” Liang says. If evidence emerged showing the company hhad taken a stand, “I think I would just stop using it” he adds. “Why do we need a brand that frames our country?” Yet turning Uniqlo into the world’s No.1 brand, as founder Yanai hopes to do, means finding success in both China and the Westa challenge as tensions increase between China and the U.S. And ‘Western shoppers want to know more about their clothing’s provenance. “What happens in China doesn’t stay in China,” says Isaac Stone Fish, founder of research company Strategy Risks. “Global consumers and regulators ‘can have insight into and take offense at the steps a ‘company like Uniqlo takes to succeed in the Chinese market” —Daniela Wei and Lisa Du ‘THE BOTTOM LINE Uniqlo gets a quarter fits sales from China, whore operates more stores than back home Japan Remaining ‘Chin’ top apparel brand wl require avoiding politcal missteps Getting Africa to Drink at Home @ Liquor brands used influencers to persuade locked-down consumers to change their habits When Val Nasubo wanted a drink, she did what most people in Kenya do: headed out to a bar to share a round with friends. But now the 31-year-old data ‘analyst from Nairobi has discovered she prefers having a drink at home. “I love the comfort of fixing myself a drink after a long day at work,” she says. “(m always searching for new cocktail recipes.” Alcohol producers in Africa hope that Nasuibo’s stay-at-home approach is part ofa trend that could solve a tricky problem. The pandemic proved especially difficult for makers of drinks there. Diageo Ple has said that 75% of its alcohol revenue in Africa came from drinking establishments and restaurants before the pandemic. So when the spread of Covid-to kept patrons away from crowded social settings, consumers didn’t read- ily shift to at-home drinking. As sales missed expectations, the industry responded by trying to get Africans to warm to the idea of buying booze for home consumption. It wasn't easy. Most people associate alcohol with hanging out ata local watering hole or storefront, where there are usually tables and chairs. And many ‘thought they didn't have the space to host gatherings in their homes, according to Daniel Mettyear, head of research for Europe, the Middle East, and Africa at alcohol market researcher IWSR. Advertising also proved a challenge, because a lot of market- had been targeted at customers of those very <4 Gaitho has more than 100,000 rstagran followersmausINESS Bloombers Businessweek ‘Apri 18,2022 ‘4 same bars and restaurants that were now empty. Enter paid influencers like thirtysomething Julia “Jules” Gaitho. Her Instagram account is, filled with posts about Gordon’s, a Diageo gin brand. There are photos of her sipping a cocktail on a patio and a park bench. In one video she shows off her mixology skills, pouring ice cubes, «in, ginger ale, cranberry juice, and raspberries into a glass to make a red Gordon's Ruby Cooler cocktail at home, then inviting her followers to re-create a similar drink. “Word of mouth remains one of the most pow- erful marketing tools,” says Gaitho, who has more than 100,000 Instagram followers. “Those who follow me feel like my friends and can relate to my life experiences.” Social media influencing had been around for more than a decade, but in Africa it hadn't become as popular a marketing tool. Many big brands still focused on entertainers or sports stars to pitch their quaffs, or they bought television ads and bill- board space. ‘The pandemic upended that strategy. Hours spent online surged as people avoided away-from- home gatherings or observed curfews. To capture the attention of the continent’s young, rising middle class, alcohol brands poured resources into social media. Soon influencers were being paid to promote big booze brands and the pleasures of drinking away from a bar or club. Even the use of so-called nano-influencers, who have only a couple thousand followers, boomed. ‘They were initially popular with small businesses but are now favored by global brands, according to Wowzi, a Kenya-based startup that helped ageo with its social media campaigns. These small influencers can earn from $300 to $2,000 a ‘month through paid posts. “We've found that there is more trust atthe nano level,” says Mike Otieno, a ‘Wowzi co-founder. Since the start of the pandemic, Diageo has doubled its spending on digital media advertising in East Africa, helping it reach more people without relying on expensive media such as television, Advertising on TY presents other challenges as well, since most African markets, including Kenya and Nigeria, restrict the airing of alcohol ads to after 10 p.m. ‘The shift to influencer marketing helped boost alcohol consumption outside drinking establish: ments by 22% in 2020, according to IWSR, dwarf- ing the 2.3% rise recorded in 2019. While the pandemic accounts for much of that increase, fur- ther growth i likely, with alcohol consumption in Africa expected to grow by 18% in volume from 2021 to 2025, and by 20% in value, according to IWSR. ‘Africa was also ripe for influencer marketing because of the surge in low-cost smartphones and affordable internet service. That’s pushed even more people to social media and away from TV. Big consumer companies such as LOréal, Unilever, and Nivea maker Beiersdorf increasingly run influencer campaigns. Big liquor brands’ drive to expand at-home usage could be crucial for them to withstand any ature lockdowns. The industry also sees increas ig home drinking as a way to get more young adults interested in making their own cocktails with higher-end liquors, which bring higher margins. During the pandemic, Diageo started to see a return on its social media spending, with increased at-home sales and growth in premium brands such as Tanqueray and Johnnie Walker, says Waithera Kabiru, head of media futures at East African Breweries Ltd. “When digital is the lead media, we get better performance out oft,” she says. ‘The company, which owns such brands as Tusker beer and distributes global brands like Johnnie Walker and Captain Morgan locally, also increased investment in shipping to homes. It teamed up with e-commerce platform Jumia to offer promotions that included deliveries of food and alcohol pairings, such as barbecue and beer. ‘At Diageo, its beers, premium spirits, and luxury liquors all experienced substantial jumps in market penetration after it launched its influencer push in East Africa. “There has been stickiness in at-home consumption,” Kabiru says. “The behaviors we saw during the lockdown have stuck” —Mumbi Gitau THE BOTTOM LINE About 75% of Diged'slauor salesin Aca occurred ouside the home. So the crinks gant had ory new ‘marketing methods aboot at-home dng ding the parser ort promises alcoho Sales a share of ‘lelcoha sales by volume, 2019 ‘oa l il Europe North America Would a Russian Gas Ban Crush German Industry? © As pressure builds for an embargo, business warns of a disaster Along the banks of the Rhine, Europe’s biggest chemical factory churns out the building block compounds for tite country’s powerhouse automo- tive, pharmaceutical, and agricultural industries— all fueled by pipelines filled with Russian gas. BASF SE’s plant in Ludwigshafen is emerging as ‘asymbol of Germany's opposition to a full embargomousINESS on Russian gas amid rising calls to punish President ‘Vladimir Putin for his war on Ukraine. Cutting it off, BASF says, could render its factory-the biggest sup- plier of the base chemical acetylene inoperative, sending shock waves through many industries and causing Germany's economy irreversible damage. ‘The warnings, echoed by ArcelorMit ‘Thyssenkrupp, and others, have alarmed ps makers in Chancellor Olaf Scholz’s administration, Which has been scrambling to offset Germany's rei ance on Russia for roughly one-third of its energy. But debate is raging over whether the economic pain from a gas embargo would be as deep and last- ing as the industry says. Germany could face a €220 billion ($240 billion) hitto output over the next two years should gas supply be severed immediately, according to a joint fore- cast of economic institutes, tipping the country into a recession of more than 2% next year. But econ- omists disagree over the extent of the shock, and some argue Germany could ride out the pain with an effort to save energy and secure alternative supplies. “The impact would be substantial but manageable if politicians implement the right policies in time,” says Ruediger Bachmann, an economics professor at the University of Notre Dame. BASF’s massive Ludwigshafen facility employs some 40,000 workers across 200 production sites that use roughly the same amount of energy as a million-person city. About half of the gas the factory consumes is used to produce chemicals and can’t be substituted. The other half is used to gen- erate vast amounts of electricity. ‘Two steam crackers operate around the clock to break down a liquid hydrocarbon mix called naph- tha into smaller molecules. Those are then distilled into the preliminary products for plastics, paints, solvents, pesticides, and vitamins. If the plant receives less than 50% ofits normal gas supply, the steam crackers-and the network of plants that feed off them-grind toa halt. A major supply disruption could also stop production of BASF’s more advanced chemicals, such as polyurethane foam, a material essential for the plastic panels, steering wheels, and seating found in cars built by BMW, Mercedes-Benz, and Volkswagen. According to Christian Kullmann, chief executive officer of specialty chemicals maker Evonik SE, shutting down such factories would have a devas- tating cost. “Once chemical plants are shut down, they remain silent for weeks and months,” says Kullmann, whose customers range from Airbus to BioNTech to Unilever. There would be a “huge domino effect through almost all industries” Some carmakers are echoing the chemical \dustry’s unease. “We got a good idea of what the impact of a shutdown of operations would look like during coronavirus with the lockdown,” says Murat Aksel, Volkswagen AG's head of purchasing. “We simply cannot shut down for two months or longer. ‘The consequences would be massive.” While it would be costly and disruptive, analysts say, global supply chains could be rerouted to replace German-made chemicals. “There are no shortages foreseen,” says Markus Schaefer, Mercedes-Benz AG's head of development. “There's always a global sup ply and different sources for our polymers.” Germany has backed European bans on Russian coal and oil and plans to cut its dependence on gas by 2024. It also is planning to grant itself powers to put critical energy infrastructure under temporary state control, says a person familiar with the plan. the government so far has held fast to the industry view. “We can only implement measures that we can sustain and that we know won't lead to severe economic damage for Germany,” Economy Minister Robert Habeck told broadcaster ZDF in March. —William Wilkes and Monica Raymunt, with Wilfried Eck-Dorna and Chris Reiter THE BOTTOM LINE. Germany's industrial mactine depends on Russian energy to make building blocks for everything rom car "eats to drupe An embargo could open the doar to foreign als BASs marimoth Ludwigshafen factoryBloomberyBusinesswock =p 18,2022 Amazon’s Drones “They weremore concerned aboutpumping flights outand didn’twantto slowdown”TECHNOLOGY Bloombers Businessweek ‘Apri 18,2022 investigation had previously revealed that a Boeing 787 factory Carbon ran in South Carolina tended to value production over safety. Several employees told the newspaper they'd been retal- {ated against for raising safety concerns. Although the problems predated Carbon’s arrival, they con tinued on his watch, the Times reported. Boeing executives defended the plant’s commitment to safety, but a month after the Times article appeared, Carbon was on his way out. Current and former Amazon employees say that Carbon brought discipline and focus to the pro- ‘gram but also that it wasn’t long before he began pushing speed over safety. Amazon didn’t make him available for an interview, but spokesperson Zammit cited Carbon's wealth of industry experi ence and said Amazon was “excited that he’s lead ing the next phase of our mission? avid Johnson, a drone flight assistant for about a year, mostly at remote testing fac ties in rural Oregon, says Amazon often conducted tests with inadequate equipment and ‘without a ful fight team, forcing employees to handle more than one role. Johnson says he once warned his bosses that his laptop had a broken keyboard but he wasn’t given a replacement in time for a test. He went ahead with an external keyboard that made it difficult to com- pletea preflight inspection in time. Johnson says he ‘was still completing his checklist when the drone took off, earning him a reprimand for taking his, eyes off the aircraft. “They were more concerned about pumping flights out and didn’t want to slow down,” he says. Two former Amazon employees corroborated Johnson’s account that crew members have been assigned multiple roles to keep tests ‘going ifthe fall team isn’t present. Amazon's Zammit called those claims false. “Crew members are assigned to only one role per flight,” he said in his statement. Carbon was sensitive about language in written documents because of potential liability or regulatory scrutiny and let only select people view video of crashes, restricting the program's earlier openness, according to current and former employees. One employee suggested during a meeting that safety concerns were being “swept under the rug,” according to several people who ‘were there. Carbon bristled, these people say, and cautioned the employee to bbe more careful with his choice of words. They say Carbon’s reaction had a chilling effect. “The people most worried about safety were the ones conducting flights in hazardous situations, Air Wars Companies are racing to build fleets of drones to rush goods to customers > Alphabet's Wing Payload up 1026 Max cuisina B48mmph ‘The pitch A fending aera that uses vertically rented proper tohover over Is target fewerng payload to the rouns twitharetractasl tether (Track record Wing which doos most 1 testing stra io rans pat datvery projects nthe US ancewope Slams fo have mace more tan 200000 eommoredeveries > Walmart Payload. up to410 Max cruising speee 64 mph ‘The ten Cataput-aunehed redwing drones, madeby pine erator 10 thet destation ke an apane packages that descend by parachu (Track recor: Zptne, which gt its Start dalvering medical supplies to rural fines, saysits complatod mundvods of thousands of comers detveres ands working ona package delivery lot wth Walmart in Arkaneas: Walmart has also Conducted deliver tls with DroneUp and Fytrex which operate quadoopter- Sve drone models —_— 4 Amazon's Prime Air © Payload-up tos (© Nox cruising speed 69 mph ‘© Tho iter: Amazon stakedits claim In drones in 2013, promising 30-minut lvery emits Warehouses as soon echnology and rgulatory framowork wore roads. ‘@ Trackrecord Amazons aera have {one trough malor changes, vale {tam a quadeopte to ayeré erat that can tako of vertical and fy he a plane before descending oan alits destination Is sin testing icing at drone range neastern Oregon, a Yo 4 United Parcel Service Shouse sa Sits csr nt oh ene ene anes les Cee eee Seep ohemsesshan eaten nar quaoopie' operat mere ‘e Treckrecord UPSin 2010 became {ho rst compar to get FAA approval o ‘pera a dono atin, using Matters N2tomakedalerios at eect hospitals, Unverties and retremen communitiesTECHNOLOGY ‘Bloombers Businessweek ‘Api 18, 2022 and the ones least concerned about safety were the ones sitting behind a desk somewhere,” says, one former employee, who requested anonymity to discuss internal matters without authorization. Over a four-month period last year there were five crashes at a testing site in Pendleton, Ore., a remote agricultural area in the high desert known for its annual rodeo. Accidents are inevitable in an aviation testing program, where equipment is deliberately pushed to the max to determine breaking points and improve designs. But these were vehicles Amazon. was hoping to deploy for public tests. In May a propeller dislodged, causing a drone to tumble and crash upside down while its other motors were still running. The machine sustained substantial damage. Amazon employees cleared the wreckage before notifying federal officials, so no inspection was conducted. The FAA advised the company not to disrupt crash sites in the future, federal records show. In June a motor conked out while a drone was transitioning from a vertical climb to forward motion. The automaticsafety feature designed to land the machine in such instances didn’t work. ‘The aircraft flipped over, and a stabilizing safety function also failed. “Instead of a controlled descent to a safe landing, {the drone] dropped about 160 feet in an uncontrolled vertical fall and was consumed by fire,” the FAA wrote in a report on the incident. The ensuing blaze scorched 25 acres and was extinguished by the local fire department. Insider, the business news website, previously reported some of the incident’s details, and published a report in April on the high costs, of Amazon drone delivery. Antoine Deux, who was, a senior engineer on the drone program for four ‘years before leaving in 2018, said that after all the ‘years and money invested, he would have thought ‘Amazon would be farther along. Deux also said the company’s drone is too heavy compared with Alphabet’s aircraft, which weighs about 11 pounds. “Every time you increase the weight of the load, the drone gets heavier, needs more batteries,” he said. “It’s a vicious circle’ With crashes proliferating, morale on the team ‘worsened. Departures in 2021, Carbon’s first full ‘year running the department, exceeded 200 people, more than double the previous year, according to documents reviewed by Bloomberg. Skeete was put in charge of improving morale, siving him a front-row seat on the department's turmoil. In Corvallis, Ore., he discovered there were no portable toilets on a testing range. Female employees had to radio the entire team when they needed a bathroom break, forcing testing to be suspended while they searched for facilities off site. Skeete says he reported the situation but ‘was told the property owner didn’t want portable toilets om his land. The testing continued, and ‘Skeete says he continued to question the wisdom of assigning people to a job with no restrooms. Amazon says it later installed portable toilets at the testing range. In another instance, Skeete spoke up about plans to keep testing drones only five days after a ‘motor failed and a drone crashed. Those eager to continue tests assured the team they had checked roughly 180 motors on about 30 other drones, Skeete says. But he doubted this because testing ‘each engine is time-consuming, Amazon disputed the number of motors requiring checks. Shortly afterward, Skeete told his boss he no lon: ger wanted to work for him. He was advised to seek a different role at Amazon and, after his replace. ment was hired, spent weeks on the payroll with nothing to do, He filed an internal ethics complaint laying out his safety concerns but was told no such issues had turned up. In March, Skeete was fired and offered what he deemed a small severance package in exchange for signing a nondisclosure agreement. “I didn’t sign it because I'm someone who speaks up for myself and others,” Skeete says. “So many people before and after me have not been willing to speak up.” —Spencer Soper and ‘Matt Day, with Alan Levin and Benoit Berthelot “THE BOTTOM LINE. Amazon ramping up testing of dalvry ones even after years of fasing to its internal goals. Federal regulars have questioned the crones arworhness. ‘ASkeeto outside a ‘rene tosting acy in regenTECHNOLOGY Bloombers Businessweek ‘Apri 18,2022 Indian Startups Thrive After TikTok Ban Jiya Kiran Valambhia’s success story as a social media influencer is a familiar one in the age of TikTok. Each day she uploads a short clip for her 300,000 followers featuring her doing dance moves such as the thumka hip shake or the dhak hak chest thump, set to hit Bollywood songs. ya, the daughter of a carpenter, earns about $500 a month by endorsing smartphone makers and online tutoring and gaming companies. But because she lives in Jamnagar, a small town in western India, none of this happens on TikTok. ‘The Indian government banned the app in 2020 as part of a broader crackdown on Chinese tech services, which it says are a threat to its sovereignty and security. So the 14-year-old Jiya uses Josh, a local app designed to mimic the TikTok experience. ‘The immediate trigger for India’s ban on Chinese tech products was a bloody fight in June 2020 between the two countries’ military forces along their long-disputed border in the Himalayas. At least 20 Indian soldiers were killed, the deadliest clash with Chinese troops in more than four decades. With tensions high after the incident, Indian officials said they feared Chinese-made consumer internet products such as TikTok and WeChat could be used for espio- nage. TikTok’s parent company, ByteDance Ltd., said at the time that it complied with all Indian Jaws and hadn’t shared information about Indian users with the Chinese government. But in the two years since, India has continued to add Chinese services to a blacklist that now contains more than 200 of them. Like many instances of technonationalism, a rising global trend, the measure has come with commercial benefits for local companies. Dozens of homegrown Indian startups building short video, gaming, messaging, and productiv: ity apps have been booming since the ban took effect. Short-video apps in particular have seen rocketing growth in the past two years, with Josh and rivals Roposo, Moj, and MX TakaTak amass- ing hundreds of millions of users and attracting billions of dollars from global backers including Alphabet Inc.s Google and Goldman Sachs Group Inc. Josh, which says it targets Bharat, a term denoting non-English-speaking Indians who live outside the country’s half-dozen most affluent cities, has more than 150 million monthly active users, Bangalore-based VerSe Innovation Pvt Ltd., the company that makes the app and also runs the news aggregator Dailyhunt, announced in April it had raised $805 million from investors who val- ued it at $5 billion. VerSe introduced Josh, which means “spar- Ale” or “passion” in Hindi, just four days after the TikTok ban began, eager to capture the more than 200 million Indians using TikTok who needed an alternative. “Users were desperate for a replacement,” says Umang Bedi, Verse’s co-founder and chief executive officer and the former head of Meta Platforms Inc’s Indian operations. Bedi says his team contacted 200 top TikTok influencers, some of whom had millions of follow. ers, luring them with paid contracts. “Those cre ators gave us legitimacy quickly,” he says. VerSe also roped in thousands of other creators-chefs, musicians, singers, and stand-up comedians-by conducting creator workshops in small cities and distant towns such as Kota and Bharuch. More than 200,000 creators now use the platform. U.S~-based tech companies have also been ‘working to win over India’s enormous population, much of which is coming online for the first time. A year after the TikTok ban, Instagram became the country’s most popular social media app. But ‘on Valley has its own conflicts with India’s government over issues such as censorship and restriction on encryption. Verse also believes U.S. tech companies are focused only on a slice of the Indian market, leaving ample space for local alternatives. “Facebook and Instagram are largely for India’s ‘sophisti- cated’ internet users-they don’t have enough local-language content,” says Virendra Gupta, co-founder of Verse. “We run Indian-language content factories. The Silicon Valley companies have missed this learning” Almost a billion Indians are expected to watch short-form videos over the next three years. Bedi says he wants at least half of them watching on Josh. —Saritha Rai THE BOTTOM LINE Insihas ted security concerns as the reason ts banned more than 200 Chinese apps but he ‘commercial mplsations ofthe poly have been significant @ Aclone called Josh has 150 million users and ‘$805 million in new investment on "¥Most dowloaded Zoos media saps inca (Mace inion 2019 2021 2 Ben oe Facev00%A MATCH MADE JUST FOR YOU Innovation Meets Traditional Matchmaking Our programs are expertly tailored by CUSTOMIZED our Matchmakers for every client. No online profiles, because your personal CONFIDENTIAL life is exactly that, personal. 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Baird coed eee ted Ea foe co ca) Ce PTR @s ee Coo) oS, Coe ood Seer Ree eng Google Earth, rece ee) coed eae) Ce aC ki oe * Pee renee eet ny coer Cae eed Es eee Dn ee ns Creer earg rere teed @ zuricHBloomibera Businossweok ‘ot 18,2022 Curious Profits From Blank Checks @ There's often a burst of trading in SPAC warrants before deals are announced A pattern of prescient and potentially very lucrative trading has taken shape on a once-obscure corner cof Wall Street—and US. investigators are suspicious. ‘The setting is the world of special-purpose acquisition companies, or SPACs, the shell corporations that have flooded onto markets in recent years to raise money from investors and hunt for companies to buy. The instrument isa warrant, which gives holders the right to buy shares at a specified price in the future. SPACs happen to issue a lot of warrants. The curious trading patter starts when someone buys piles of a SPAC’s warrants, sending the daily volume of trading 10, 20, even 60 times above nor: mal levels. Within a few weeks, word emerges that the SPAC has found a business to buy, often sending the warrant prices surging, Such spikes in warrant trading appear before about 1 in 4 SPAC deals, shows a Bloomberg review of almost 300 mergers announced since late 2018. ‘The potential profits can be dramatic: In more than dozen cases, warrant buyers would've at least dou: bled their money if they held on to the instruments for mere days or a few weeks. In one case the warrants soared 888%, The Securities and Exchange Commission is now ‘examining warrant trades that took place before > moOZrZz—Tn Sa Eateaby Pat Rognior andmrInance Bloombers Businessweek ‘Apri 18,2022 Pattern of Unusual Activity Before Deals SSPAC warrant acing + SPAC dea it normal warrant racing activity oF pubHe oxplanaton fr spikes, such as news ef merger aks Votune of asin spike Warrants 1 200% o : |v20%8 Date of deal announcement sy2022 | ‘4 deals to discern whether they were illegally based on inside information, according to people with knowledge of the matter. The SEC may open ‘more inquiries as it sifts through additional reports of well-timed bets flagged by market surveillance systems, such as one run by the Financial Industry Regulatory Authority. ‘The potential for making big money in warrants burst into public consciousness last year, when a surge in warrant trades preceded the October announcement that former President Donald Trump would merge his media platform with a SPAC called Digital World Acquisition Corp. In December, Digital World disclosed that Finra sought information on trades that occurred before the deal was announced. The SPAC also said the SEC requested descriptions of the company’s trading policies and procedures. Authorities haven't accused anyone of wrongdoing. Bloomberg's analysis shows there have been even larger spikes in warrant trading before numerous other SPAC deals. Such trades before SPAC merger announcements can be benign: Investors may act in response to a SPAC issuing an update on the pros- pects of finding a target company, a press report that talks have opened, or market moves affect: ing the price of underlying shares. Yet, Bloomberg ‘was unable to find public information that would explain about two-thirds of the bursts of warrant trading, including several of the most profitable. “The increase in volume before an announcement is atelltale sign of someone with information,” says John Griffin, a University of Texas finance professor who's studied options trading ahead of takeovers.mrInance. ‘Bloombers Businessweek ‘Api 18, 2022 ‘Spokespeople for the SEC and Finra declined to comment. It's not clear which warrants they're examining. The opening of an inquiry doesn't nec- essarily mean authorities will bring an enforce- ment case. SPACs, also known as blank-check companies, rapidly evolved from an oddity intoa fad. Hundreds of the shell companies have raised money in initial public offerings in recent years, setting out to find private businesses they can merge with and bring onto public markets. The newly combined company inherits the SPAC’s stock market listing but generally adopts the name of the acquisition target. For the private company, i'sa way to go public quickly; for some SPAC investors, the hope is to get in early ona hot new stock. Initial investors in a blank-check company usually end up with both common shares worth $10 each and warrants that they can trade or eventu- ally exchange for shares. The contracts typically give holders the right to acquire stock at $11.50 once a merger is completed, so their value can be sensitive toan announcement that a deal is pending. Bloomberg focused on trading in the 30 days prior toa merger announcement, a period in which someone might learn a deal is in the works. Any day in that window when the volume was at least 10 times higher than the typical amount was tagged as a spike. Bloomberg then calculated how much the warrants purchased that day would've gained if the buyer kept them through the announcement. VectolQ Acquisition Corp's purchase of electric vehicle maker Nikola Corp. two years ago shows ‘how quickly investors can profit. More than 1.6 milion VectoIQ warrants traded hands over two days in February 2020, reaching a price of 9t¢ each at the end of the second session. Almost two weeks later, the SPAC’s disclosure of a deal with Nikola sent the price soaring to $2.62, The contracts later climbed significantly higher. A spokesperson for Nikola declined to comment. Nikola separately agreed to pay $125 million last year to settle an SEC lawsuit accusing it of defrauding investors by misleading them about its technology and products. The company didn’t admit or deny wrongdoing in that case. Other spikes may have generated even larger pay- outs. Take Opes Acquisition Corp. About 2.25 million of the SPAC’s warrants exchanged hands on a Friday in June 2020, more than 60 times the normal amount, closing at around 42¢ each. The following Monday morning, june 8, the company announced it had signed a letter of intent to combine with BurgerFi International Inc.,a restaurant chain. Buyers of the warrants on June 5 would've been sitting on a pile of securities worth about {$930,000 at the end of that day. If they held them through June 30, when the merger agreement was announced, the contracts wouldve gained 888%, or about $8 million in additional value. A spokesperson for BurgerFi declined to comment. ‘To be sure, the market for some SPAC warrants is thin, leading to situations in which relatively small trades could result in a spike in volume. A modest purchase could also snowball if other traders or algo- rithms take notice and pile on, betting that someone ‘else in the market knows something, In other words, some of the trading during a spike may not be based ‘onany special information. ‘There's nothing illegal about many kinds of informed trading, even involving mergers. Accidentally overhearing of a pending deal on the subway, then trading on that information, is permis- sible. That's because, to prove insider trading, pros- ecutors generally need to show that someone has purposely breached a duty to keep information con- fidentil. If authorities do suspect impropriety, it can be tough to unravel who leaked. The list of insiders is often vast, including company executives, bankers, lawyers, and publicrelations specialists. Notably the cast of Wall Street players involved in SPACs differs somewhat from the crowd dominating more traditional mergers and acquis because historically SPACs were the domain of smaller underwriters and specialized law firms. As the market took off, the likes of Citigroup, Goldman Sachs, and Morgan Stanley quickly ramped up. {At smaller underwriters and law firms, compli- ance practices may not be as robust in prevent- {ng the misuse of material nonpublic information, says Michael Ohlrogge, a professor at New York University School of Law, who’s written exten- sively about SPACs. “Not all the law firms that are working on SPACs are top tier-or even close to it” he says. ‘The growing market also has attracted more hedge funds, some of which try to arbitrage price differences between shares and warrants. Traders might, for example, speculate on whether a SPAC has enough time to complete a deal before reaching its deadline to do so. The question for investigators is whether some knew more than they should, “When you have a market that has evolved this rapidly” says Chris Wallace, a portfolio manager at Levin Capital Strategies, who’s invested in blank- check companies and their warrants, “odd things ‘may occur.” —Noah Buhayar and Matt Robinson, with Dan Reichl and Crystal Tse ‘THE BOTTOM LINE Wareant-buying ahead of SPRC deals Couldve sumed as:muchas @%in pots Now the SEC ‘Serutnzng somect these racing patterns. Yopes orran wscng volume Trasng ‘spke 4pr0 orrant price o 6/3020 d ail eee arer0 ecto Wiorran tracing volume enone 9/3/20 Warrantprico enon 9/3/20 6/3020 0.00mrInance When Commercial Real Estate Gets Punchy @ Deals in Dallas, LA, and Denver highlight how crazy the market has gotten Ru Cues FORRENT Across the U.S, just 2 in 5 white-collar employees ‘make it to their desks on any given day. Office vacan- es are at 16%, and in many cities they've doubled in the past two years. And yet it’s not uncommon for bidding wars to break out over commercial real estate, at least for the best properties. What gives? “Iva tale of two cities,” says Gabi Koshgarian, chief operations officer of real estate brokerage Vicus Partners in New York, “The supernice offices are getting rented by superfunded fintechs.” Perfectly acceptable—but less flashy-spaces, she says, “are sitting stagnant, and you can get them for a steal” ‘The pandemic forced many companies to abandon their offices midlease, leaving behind fully furnished, wired spaces renovated in the past few years on seven-figure budgets. At the same time, executives say plush digs can attract talent, boost- ing demand for “Class A” buildings-techy, new, high-end~and firing up competition in the normally muted sublease market. Landlords of Class B and Class C buildings have been forced to offer sweeteners such as free rent (a month or two for every year ofthe lease), funding for renovations, and such extras as parking or lobby accommodations. Many will also throw in a Covid-9 clause, which defers rent in the event of new lockdowns. In big cities, prospective tenants might look at 30 spaces, quickly winnow that to 10, then play three or four finalists off one another; established tenants start two years in advance, allowing time to reconsider their options or go radio silent as a negotiation ploy. Here’s a peek at how three of them navigated the turbulence. @ THE BANK Dallas ‘August 2000-February 2022 (@ THE TENANT A regional office for a national bank, previously in 34,000 square feet, seeking space with high foot traffic and the possibility of ‘ground-floor retail. “They really wanted a cream- ofthe-crop building,” says Walt Batansky, chief financial officer of Avocat Group, which served as the bank’s agent. The bank also hoped to downsize to more-flexible, use it-as-you-needit space to accommodate its daily employee occupancy of 70%. @ THE HUNT Batansky presented a dozen properties, all mapped to show rivals’ locations. “A bank wants exclusivity-they don't want their customers walking past a competitor,” he says. That narrowed the search to five “hot targets’ @ THE NEGOTIATION Two landlords offered sub- optimal expansion and renewal terms, so Batansky pursued deals with the other three. Competition among owners has eased in the past year or two, because after the turmoil ofthe pandemic, “they're cautious about getting bluffed into significantly lower prices,” he says. “No one wants to see these rates drop” All three landlords showed scant fk vy on the rent but gave way elsewhere, offering ‘months of no rent and money for reconstruction. (@ THE DEAL A 10-year lease of 24,000 square feet. ‘The winning landlord doubled its funding toward renovations; the first eight months were rent-free. @ THE LAW FIRM Los Angeles Enty20e-Feonay 202 (@ THE TENANT Buchalter, a growing practice with 135 attorneys in 95,000 square feet across several floors of a 22:story building where it's headquar- tered. Buchalter wanted to bid adieu to the classic layout of secretarial pods surrounded by lawyers’ offices and downsize by almost a third, as more staff worked from home much of the time. (@ THE HUNT Even before Covid, renters had the stronger hand in downtown LA. in 2018 one landlord sent Buchalter an unsolicited offer to hold space for over three years until the firm was ready to move. “When landlords eat that much downtime, i's a soft market,” says Steve Walbridge, the West Coast lead at SquareFoot, an agent on the deal. He requested proposals from various properties, including the building featured in the 1980s NBC series L.A. Law. “We actually thought the spaces might be too nice,” says Adam Bass, Buchalter’s chief execu: tive officer. “There should be some humility in our space-certainly very nice and professional,” he says, but offices that are too flashy can set the wrong tone ina service business. The company’s architect ascer- tained space needs and costs, and the firm surveyed attorneys to determine their office desires. “NobodymrInance. admits that they don’t want to come in at all,” says Walbridge. Every lawyer got a private office. @ THE NEGOTIATION The existing landlord swooped in, and counteroffers flew back and forth. To compete, one building offered a dedicated ground-floor private lobby. “The landlords got much more aggressive, because we were one of just a handful of tenants on the market” says Walbridge. ‘The three finalists offered similar rates but showered the firm with a variety of concessions such as free rent, large improvement budgets, and the ability to return unused space. In the end, the existing land- Jord beat the other offers by about 10% over the term of the contract. “We just couldn't say no,” says Bass. @ THE DEAL A 12-year lease of 87,000 square feet across four floors (one with an outdoor area), with almost two years of free rent, plus free space on other floors during construction. Other perks included extra parking for clients and WiFi in the garage (a must for lawyers on billable conference calls) “It was multiple millions of dollars better to stay put,” Walbridge says. “We got a much better deal because of the pandemic.” @ THE JUNK HAULER Sune 2021-Decembe 2021 @ THE TENANT The Junk Trunk, a 20-employee company that will haul away everything from fur- niture to construction debris. It had a coworking space but wanted to upgrade to 2,003,000 square feet of its own, aiming to offer employees ample room for pingpong, lounging, and eating. @ THE HUNT Owner Nathan Schweid spent a half year viewing spaces, particularly rentals with protected parking for his trucks, several of which had recently been vandalized. Then, Aviva Sonenreich, managing broker at commercial firm Warehouse Hotline, posted a place offered at $2,900 a month onher Instagram feed, and Schweid messaged her. @ THE NEGOTIATION Sonenreich says three-year leases were the minimum pre-pandemic, with two- year renewals. As a newcomer, Schweid wanted just one year in case his business ended up on. the scrapheap. Sonenreich says the pandemic has hastened the pace of negotiations, with landlords offering a modest increase in sweeteners. “It’s like, “We will give you concessions-pick A, B, or C and don’t ask us for more,” she says. @ THE DEAL A one-year lease of 2,400 square feet for $2,450 a month, including 13 parking spaces (10 more than typical) for Schweid's fleet. Arianne Cohen Denver THE BOTTOM LINE Compettn forthe best offices res, but cumners of ess coveted space ste offering sweeteners such a5 months of ree ret or money to fundrenavations War Shock Since Russia's invasion of Ukraine, global investors have been betting on a world of greater scarcity. —Geoffrey Morgan scl oe World vities Index Heat care Sectors Realestate Performance Materials from2/23 Consumer staples ware Communication senices Information techelony Consumer scretionary -03| Industria Totalindex Fine 44 tm Rising consumer prices and the threat of higher interest rates began nudging investors out of growth stocks and toward ‘commodities-driven companies in late 2021. But the war and sanctions on Russia, a major exporter of natural resources, accelerated the shift. “The entire market was surprised at how quickly commodities were bid up,” says Seth Goldstein, an equity strategist at Momingstar Inc. Shares of fertilizer makers, oil and ‘gas producers, and miners have soared since Feb. 23, the day before the invasion. @ For years, many funds shied away from ‘commodities because of paltry retums and growing investor attention to environmental issues. “Now that calculus has flipped,” says Rory Johnston, managing director and market economist at Price Street and author of the Commoaity Context newsletter. BCPC Cy Noteveryone racing to getin Pamasaus investments LLC, “snenvronmentaly conacieus San Francisco neta im, ‘osted rom fess fale a relates companion 207, Altough therise not and oa preesi¢ helping woh stocks om ‘only Been a coupe of months says Joe Sana he trmschet market aficer. Over helong un, ing cl press couldhasten the sit to cleaner technologies such as eo vehicles Nob, ‘snong recent op performer a soar power eculpent maker, Looking PCT @ Mosaic Fre 467.0% © Occidental Petroleum Oi and gas 4529 <~ @ Cameco Urarium ming A495 @ Thales Aerospace 448.4 © CF Industries Holdings Ferar A475 Enphase Energy Solarpowerequpment 46.9 @Nutrien Feror 43,7 © Constellation Energy Power generation 43.6 © Block Francia tecmoloay 438.5 © CrowdStrike Holdings Ccybersoouty 438.1 aineveg sanmys Bang uaeg omy foAvoiding ABrazilian Detroit @ The country’s Motor City is losing plants and jobs in a sign of manufacturing decline In 2019, when Ford shut down its auto plant in So Bernardo do Campo, on the outskirts of Sio Paulo, itmarked the end of an era. Almost exactly 100 years earlier, Henry Ford, trying to dodge a British ‘monopoly on rubber, founded Fordlandia deep the Brazilian Amazon. Beset by tropical pests and worker revolts, the project failed, and the town was abandoned in 1934. Today, tourists can visit the dere- lict rubber operation in Para state. In Sao Bernardo, the corporate ruins are not open to the public, but in mid-February this reporter got a tour. Picking his way through piles of broken con- crete, abandoned hard hats, and cracked safety goggles in suede designer shoes, Mauro Cunha Silvestri swept his hand over a horizon of mid- century buildings as he explained how he “hunts” for old manufacturing sites to transform into lux: ury high-rises and shopping malls. ‘Séo Bernardo’s residents described the closure of, the Ford plant, which employed some 2,700 workers, as a “trauma” and a “psychological hit” in interviews. For Silvestri, a partner at developer Construtora Séo José, its a dazal E C O N O M | C S) Underperforming Its Peers Manufacturing, vate added as share of GDP 7 Mexico 7 Argentine / Braz : ; ect ide 1965 1984 2020) Portes Cortina Lndblad AemECONOMICS Bloombers Businessweek ‘Apri 18,2022 Ford Brasil’s executive offices look frozen in time, with framed, yellowed advertisements for the 2019 Ranger and the (now discontinued) EcoSport Storm proudly lining walls above desks scattered with papers, as if everyone left ina rush. Striding into the boardroom, Silvestri unfurled a massive blueprint onto a conference table and began laying out his vision: a shopping mall where the assembly line once stood, a hospital in the parking lot, and e-commerce distribution centers where the warehouses are being tumed to rubble, He said he’s not authorized to disclose the names of potential tenants, but in the same breath men- tioned Alibaba, Amazon, and MercadoLibre with a twinkle in his eye. In the middle of our meeting, he received a Whatsapp message from a prospect asking if it’s possible to land a helicopter on the site. Silvestri says the rehab, budgeted at approximately 750 million reais ($160 million), should be complete by 2025. Sio Bernardo has endured more defections since Ford pulled up stakes. On April 5, Toyota Motor Co. announced it would be shuttering its factory here, its first outside of Japan, and consol dating production at other facilities in the country. Ny “Those of us who worked for Ford know very well how these workers are feeling now,” says Lucas Sanches Padilha, 28, who was among those laid off in 2019. “What is S40 Bernardo going to become if, these businesses keep leaving?” The city of under a millon has often been called Brazi’s Detroit, though the comparison is not all that flattering these days. It's also the cradle ofthe country’s labor movement and where Luiz Inacio Lula da Silva, a former two-term president with his eyes set on another, rose to prominence. As such, > “Un-Finnish Business | sampling of US. brand drawing onthe Nor Product CRD doseables @ EERO Mesring Fish name Product Homa Wi Fisystome @TAIKA @ KUUMA Proovet Cotfes Meanie Hot f @ RAAKA Product Chocolat @ELO Meaning Lie rh { Reefs Product: Smart nutiton =... ey, = ‘not a lot of words start with two Es,” says Eli Altman, creative director for A Hundred Monkeys. The trademark name Eero and the URL eero.com were both available, too. Four years later, in 2019, Amazon.com Inc. acquired the router maker, and it now sells a lineup of products under the name Eero, ‘American companies are increasingly assuming Finnish names to catch consumers’ attention, even when they have no direct connection to the country. There's Vuori sports clothing, Levaté CBD products, Raaka chocolate, and many more. The language, spoken by about 5 million people, is a treasure trove of unique words. (Altman's Berkeley, Calif.-based agency has a Finnish dictionary on an office shelf) Part of the Finno-Ugric language group, Finnish shares similarities only with Estonian, Hungarian, and a handful of regional languages such as Sémi, spoken by the Indigenous people of the same name. US. brands typically employ foreign-sounding names to convey certain cultural associations (for example, Au Bon Pain, which seeks to re-create French cafe bakery culture, or Héagen-Dazs, a nod to Danish). The draw of many Finnish words is the opposite—their lack of affilia~ tion for the average American. They can be seen as more neutral and harder to place, says Pekka Mattila, professor of practice in marketing at the Aalto University School of Business in Helsinki. "Having a Finnish brand name is an easy pick if you want to be different in a large market that is English-speaking,” he says. When consumers don't have a preconceived idea of a Word, brands can useit as a near-blank canvas. "The word raaka means raw in Finnish,” writes Brooklyn-based choc- olatier Raaka on its website. ‘We claim no Finnish heritage, but the cadence of the word and its meaning capture the essence of our chocolate and our process. When we make chocolate we're after something that feels the way Raaka sounds: strong, wild, playful, and most of all, different Finnish founders of US. startups are also starting to embrace their mother tongue, with brands including Taika coffee, Elo nutritional supplements, and the Virta diabetes treatment, all of which have Finnish names. Kal Freese, Who's Finnish, is a two-time Finnish barista champion and an alum of the tech accelerator ¥ Combinator. He's lived in ‘San Francisco for seven years and used an English name for hs first company in the US,, Sudden Coffee. The name of his latest venture, Taika, is Finnish for “magio"—itting for a company that manufactures adaptogenic mush- room coffee. The brand name Taika piques consumers’ curiosity, lingers in their mind, and is “positively weird,” the co-founder says. For an Anglo-American audience, Finnish words are nondescript, so they're malleable to companies’ needs as their business evolves. Taika is now tweaking its brand messaging from *Taika means magic’ to “Taika means creativity,” as it prepares to expand its product line to include carbonated drinks and nonbeverage offerings. "For a long time Finnish names have been a hidden secret, Freese says, adding that as more companies look for dis- tinctive names, he expects the naming trend to continue. And now that Finnish names are gaining traction in the US, foreign companies are embracing Finland’s web domain. The Finnish URL ending, fi, is increasingly being adopted by Web3 and crypto companies. As astand:in for “finance,” the fi works well for companies that have more ‘common brand names, such as Zapper or Structure. It usu: ally cheaper for firms to secure, too. —Kalle Oskari Mattila

Bloomberg Businessweek Europe 18-Apr-2022

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