Welcome to week 325! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription to be read in their entirety, although complete articles might be found by an Internet title search.
Please let me know if you have questions or comments.
(5 July 2018): [SR] “’Barrel-Aged Stout and Selling Out’ Review: Windy City Windfall” The Wall Street Journal
——–“The popular image of the brewing industry is of a war between Craft and Big Beer. It’s small, independently owned breweries facing off against multi-billion-dollar corporations hawing bland-tasting beer with outsize control over the global market. These terms are useful for drawing battle lines in the beer world, but as Josh Noel explains in ‘Barrel-Aged Stout and Selling Out,’ the reality is slightly more complicated. Mr. Noel’s book recounts the rise of Chicago-based Goose Island Brewery, a vanguard name in craft brewing that was purchased in 2011 by Anheuser-Busch InBev, the biggest and baddest beer maker on the planet. Mr. Noel, a beer and travel writer for the Chicago Tribune, uses the tale of Goose Island and Anheuser-Busch to elucidate ‘how craft beer became big business.’ His briskly written narrative will be of interest whether one prefers Bud Light or Goose IPA.”
********The WSJ review was interesting, and I wish it were possible for those who do not subscribe to it to read it in its entirety. Failing that, the review by John Holl provides an excellent substitute. Looking at this from the perspective of western North Carolina, one sees that phenomenon of a craft brewer being incorporated into a larger brewer is local, too. Wicked Weed and Oskar Blues are mentioned in the review and, as it turns out, Wicked Weed helped Noll finish his book. Holl, as a reporter on the beer scene, has a different perspective than most. He notes: “When it comes to writing about beer, what we’ve mostly had for the last several years are broad strokes history books, tasting books, niche category books, cookbooks, travel guides, or nerdy, scientific looks at ingredients or processes. With the release of Barrel-Aged Stout and Selling Out . . . the writing game will change. I firmly believe that folks will look differently at how beer should be covered.” You can learn more about John Noll and his book at his website.
(5 July 2018): “Why Soybeans Are at the Heart of the U.S.-China Trade War” Bloomberg.com
——–“China’s newly imposed tariffs against U.S. soybeans heralds a major trade shift for a crop that’s soared to prominence in recent decades. While the Asian nation is targeting a slew of American farm goods in this round of taxes [tariffs?], soybeans are the top agricultural commodity the county imports from the U.S. by far. The oilseed, used to make cooking oil and animal feed, accounts for about 60 percent of the U.S.’s $20 billion of agricultural exports to China. If China retaliates with 25 percent tariffs, American shipments may drop by at least $4.5 billion, according to a study by the University of Tennessee. Brazil, already the world’s biggest soybean shipper, is set to be the biggest winner, filling the gap left by the U.S.” As a harbinger of things to come, the most-active “soybean futures on the Chicago Board of Trade sank 14 percent in June as tensions swelled between the U.S. and China, the largest loss in four years.”
********This article clearly show the indirect effects of a tariff. In this case, the Chinese tariff on U.S. soybeans leads to a substitution of Brazilian soybeans for those grown in the U.S. So, while China and the U.S. engage in “Tariff Wars,” some other countries will benefit.
(6 July 2018): “’No comment’: The death of business reporting” The Washington Post
********This article relates the experience of Post business and economics reporter Steven Pearlstein as he “went looking for a well-run company to write about.” The company he identified—Clorox—regularly shows up “on the list of best companies to work for.” What he found was a company unwilling to talk with him because “Clorox’s executives were too busy.” About this, Pearlstein remarked: “Such is the sorry state of corporate media relations these days. Even the prospect of a positive story can’t crack open the door to the executive suite.” Regarding such declining access to executives, Alan Murray, a former reporter and editor of The Wall Street Journal who now heads up Fortune, noted: “One, they [the executives] don’t trust us. And, two, they don’t need us.” The article continues with an informal look at the declining coverage of business news by the media and the declining trust in the media by business, a sort of “vicious circle” with no clear end in sight.
********There is much of interest in the article, but one thing stood out for me. I.e., the distinction between ‘earned media’ and ‘owned media’. The former refers to stories in traditional media that result from business activities—mergers, profits, malfeasance and the like. The latter refers to media created and distributed by the business itself. Clearly, the business—organization more generally—cannot directly control earned media but it can completely control owned media. Of course, even earned media can (and is) influenced by owned media, through press releases, and quarterly and annual reports, but the control is not complete. As one executive told Pearlstein, top executives “live in an environment where they can’t tolerate a whole lot of risk. . . . A negative story, if it is picked up by social media, can be more damaging than ever. That’s why they have become so nervous about engaging the press.”
********It turns out that there is a third type of media: paid media. For more detail, see the blog post by Sean Corcoran, “Defining Earned, Owned, and Paid Media.”
(7 July 2018): [SR] “A Milk Startup Takes On 300 Million Cows” The Wall Street Journal
——–“India boasts the world’s largest dairy herd—some 300 million buffalo and cows that produce 165 million metric tons of milk annually. Yet the average farmer owns just two cattle, and most live on one-family farms on tiny plots that lack roads and electricity. In the U.S., the second-largest producer globally, the average dairy farm has nearly 150 cows. . . . Between cow and consumer, milk quality has suffered. Middlemen in India often sneak water, sugar or powdered milk into raw milk, adding volume and lowering the quality. The milk that independent middlemen gather from farmers and deliver to towns and villages is often unpasteurized and not properly refrigerated. That’s why almost all Indians boil their milk.” In these circumstances, Srikuman Misra moved back home to eastern India “to launch a milk company . . . Armed with social media, smartphone apps and big-data analytics, Mr. Misra’s dairy business is among hundreds of start-up companies leveraging the arrival of the internet in rural areas in India.”
********The article has a captioned six-minute video that appears to be available to those who do not subscribe to the WSJ. The written article clearly indicates how legal and political factors, as well as historical and social factors, have slowed the move to profitability of Misra’s business—Milk Mantra—which sells, among other things, Milky Moo. Its motto: “No need to boil.” Misra and his wife, Rashima, a partner and marketing executive, believe that “India’s emerging middle class would spend more on a high-quality, healthy product.”
(9 July 2018): “Why America’s cheese capital is at the center of Trump’s trade war” The Guardian
——–“Plymouth, Wisconsin, styles itself as the cheese capital of the world.’ The town of 8,445 people . . . was once the site of the National Cheese Exchange where cheese commodity prices were set and today about 15% of all US cheese passes through the town. Now Plymouth residents are worried they will become one of the first big victims of Donald Trump’s escalating trade war. In retaliation for his administration’s tariffs on steel and aluminium, the US’s largest trading partners, Canada, China, the EU and Mexico, have all targeted the cheese industry with regulations and extra duties . . . Cheese may seem an unlikely target for an international trade dispute. But the retaliation is a well-aimed political kick directed at a state that produces 27% of the country’s cheese (3.37bn pounds in 2017) and which Trump barely won in the last election.”
********(Spelling note: aluminium is a variant spelling of aluminum and is used more generally outside North America. It is more consistent with other element spellings such as helium, lithium, and magnesium.) I was interested in the relationships among Canada, Mexico, and the U.S. The article notes that Mexico is the top dairy market of the U.S. and “implemented tariffs of up to 15% on cheese in early June in retaliation for Trump’s tariffs on steel and aluminium. On Thursday that tariff rose to 25%. Canada, which has astronomically high tariffs on dairy products of 270%, has also imposed more restrictions. Canada’s power dairy lobby managed to exclude much of dairy from the North American Free Trade Agreement . . . But what was once a bargaining chip in an ongoing discussion over the renegotiation [of] that agreement is now off the table.”
(9 July 2018): “Starbucks will stop handing out plastic straws by 2020” The Washington Post
——–“Starbucks, which doles out more than 1 billion straws a year, says it will phase out single-use plastic straws from its stores by 2020. The coffee giant—the largest retailer to commit to eliminating single-use plastic straws—said that it will replace the ubiquitous plastic straw with recyclable ‘strawless’ lid,’ as well as straws made from biodegradable materials, as part of a no-plastic-straws movement that has gained momentum in recent years.” According to sales representative Kara Woodring for Aardvark, a paper straw manufacturer, paper straws can “easily run four times” the price of plastic straws, which “typically cost less than a half-cent each.” Woodring went on to note, “Straws are kind of an unnecessary item we’ve gotten accustomed to . . . If you can go without, that’s great.”
********For me, the article shows the invisible handshake at work, i.e. social and historical forces that affect human behavior. A video of a sea turtle with a plastic straw in its nose that went viral has led to a raised awareness of the contribution of plastic straws in global environmental degradation, especially in the sea. Although this movement will surely decrease the demand for plastic straws, it might well lead to a decrease in demand for straws as a whole, i.e., plastic and paper, as more come to the realization that straws are “an unnecessary item we’ve gotten accustomed to.”
(9 July 2018): “Amazon Antitrust Critic Joins FTC as Agency Sets Sights on Tech” Bloomberg.com
********In the 20 June 2018 TIF Weekly (322) there is a mention of Lina Khan’s 2017 article 2017 “Amazon’s Antitrust Paradox” in The Yale Law Journal, which is available as a pdf. She is joining the Federal Trade Commission “as a legal fellow for the next few months” as the agency “prepares to increase antitrust scrutiny of technology firms.” Her article argues that “the current antitrust enforcement framework is ill-equipped to tackle Amazon’s dominance and the potential harm it poses to competition.”
May you have a good week! Bruce