Date: 2024-10-19 Page is: DBtxt003.php txt00017705
News 191113
Oxford Center Morning Report
All sorts of different news
Peter Burgess
VENTURE CAPITAL The failures of Softbank’s $100 billion Vision Fund, the largest venture fund ever created, have led to protests and violence around the world: “Masayoshi Son, SoftBank’s chief executive, was hailed as a kingmaker in 2016 when he unveiled the Vision Fund. Using the cash hoard, Mr. Son poured money into fledgling companies across the world, many of which have a business model of hiring contractors who deliver their services. Above all, he urged these startups to grow as fast as possible. ... SoftBank’s Vision Fund is an emblem of a broader phenomenon known as ‘overcapitalization’—essentially, too much cash. Venture funds inundated startups with more than $207 billion last year, or almost twice the amount invested globally during the dot-com peak in 2000, according to CB Insights, a firm that tracks private companies.
“Flush with the cash, entrepreneurs operated with scant oversight and little regard for profit. All the while, SoftBank and other investors have valued these startups at inflated levels, leading to an overheated system filled with unsound businesses. When the companies try to cash out by going public, some have run into hurdles. ... The model of using contractors, which has defined the last decade of startup investing, has created work opportunities. But among people who are most dependent on these companies, unrest is growing. Protests against SoftBank-funded startups have erupted in New York, Bogotá, Mumbai and beyond, with many captured on video and posted to YouTube. Some of the videos, which have been viewed thousands of times, showed chanting workers or destruction of property.”
RETAIL
A French design firm, Studio NAB, proposes repurposing big-box retailers’ parking lots into urban agricultural centers: “The design strips away asphalt to bring life back to the soil trapped underneath it. In one section, greenhouses and fruit trees grow produce that can be supplied directly to the neighboring store ... [Nicolas] Abdelkader also envisions produce being delivered to nearby homes by cargo bike. In another section, former parking spaces are converted into shared garden plots for people living in the area. In the final section, some parking spaces remain—but even here, the asphalt has been replaced by green space that can help sequester CO2 and absorb rainwater. An algae-filled awning over the cars sequesters more carbon and generates electricity for car chargers. The idea might be appealing to retailers—losing business to Amazon and other online retailers—that want to give customers more reasons to visit.”
MARKETING
As weddings evolve into a direct-to-consumer market, the ring company Manly Bands has cut back on display advertising: “Manly Bands has doubled its advertising on Facebook and Instagram this year. The increase to those platforms comes as the company has moved away from display advertising, instead focusing its efforts on video ads. … The video ads were made in the spirit of other DTC companies like Dollar Shave Club, Squatty Potty and Purple Mattresses, using humor to address a common issue, according to CMO Stephanie Bregman, who attributes that approach to its success. At the same time, the company retooled its strategy for its Facebook and Instagram video ads. Instead of segmenting for specific audiences, i.e., going after ‘engaged couples’ as it had been, Manly Bands went broad and set the audience for its video ads as anyone in the US, … The approach runs counter to current digital marketing norms, as the ability to target niche audience segments is often touted as the reason why companies allocate more of their marketing budgets to digital channels over traditional today.”
E-COMMERCE
Chinese manufacturers selling on Amazon continue to undercut competitors, sometimes with fake goods: “Tony Sagar began noticing the China effect around 2015. His company, Down Under Bedding in Mississauga, Ontario, had sold goose-down duvets on Amazon since 2014—these days, for $699 for a queen-size version. Then Chinese competitors hit, listing goose-down duvets for sometimes a sixth his price. He bought one and had it tested: Inside was inexpensive duck down. ... ‘They’re claiming they’re selling a $500-$700 duvet based on false specifications, so people say, ‘$120, it’s a good deal!’ Mr. Sagar said. ‘Amazon is making a direct push for these factories in China.’
“[E]ven though [Amazon Marketplace] has become a source of fake or dangerous goods, Amazon has denied it is liable for what’s sold there, saying in court cases that it neither makes nor sells the products in question. In its annual Securities and Exchange Commission filing this year, Amazon disclosed for the first time that counterfeits and fraudulent products are a risk factor. It said Amazon may be ‘unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods,’ among other issues.”
TRADE
Add furniture retailers to the list of small businesses worried about the ongoing impact of tariffs: “The furniture business is one of many caught up in the Trump administration’s tariff campaign against China, and lately the pain has started to intensify. ... ‘I have to lose money, which I’ve been doing since the 25 percent [tariff] started. Millions of dollars are being lost,’ said Jay Berkowitz, chief executive of Arnold’s. Mr. Berkowitz said his company, with about $20 million in sales, has had to pay $2.2 million of furniture tariffs—enough to wipe out all of its profit for the year since the duties took effect and force the company to operate at a loss. Arnold’s raised the price of its furniture by about seven percent, Mr. Berkowitz said. A larger increase would have posed a significant threat to sales, he added. … Retailers credit two factors with cushioning the impact to consumers: increased furniture supplies from non-tariffed countries, and the availability of financing plans that allow shoppers to spread out payments over time.”
FINANCE
In crisis, farmers are turning to high-interest alternative lenders: “After his local farm bank wouldn’t lend him as much as he said he needed in 2017, Iowa farmer James Kron turned to Ag Resource Management LLC, a Texas-based financial-services firm. Now, when he takes his corn and soybeans to grain elevators near his farm, he signs the checks over to ARM until his loan is paid back in full. He is one of many farmers leaning on alternative lenders to make it through the steepest agricultural downturn in a generation. With crop prices stuck at low levels, traditional farm banks are placing stricter terms on farm loans and doling out less money, leaving cash-strapped farmers such as Mr. Kron to seek capital from more lightly regulated entities.
“While firms including ARM, FarmOp Capital and Fora Financial can be a lifeline for farmers, their loans can carry interest rates double those of traditional farm banks, said farmers, agricultural economists and lenders. The funding can require closer monitoring of how farmers spend as well as liens on each bushel of grain they produce. ‘They keep their finger on you,’ said Mr. Kron, who has borrowed from ARM over the past three years at interest rates of about eight percent. Comparable rates at more-traditional banks are between two percent and five percent.”
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AGRICULTURE
Florida’s citrus industry is being destroyed by a lethal disease: “There are so many dead and dying Florida groves like Cee Bee’s that some economists have administered last rites to the state’s $9 billion citrus industry. 90 percent of the state’s groves are infected by a bacterium called huang long bing, which, like oranges, originated in China. The pathogen often prevents raw green fruit from ripening, a symptom called citrus greening. Even when the fruit does ripen, it sometimes drops to the ground before it can be picked. Under Florida law, citrus that falls from a tree untouched cannot be sold. “As the state prepares for the November to May harvest, thousands of growers have already quit, leaving ‘ghost groves’ in their wake. More than 7,000 farmers grew citrus in 2004; since then, nearly 5,000 have dropped out. About two-thirds of the factories that processed fruit to juice have shut down. The number of packing operations–which make oranges, tangerines and grapefruit look polished for picky buyers–has nosedived from nearly 80 to 26. And 34,000 jobs were eliminated in the 10 years up to 2016, according to a University of Florida study. The loss of so many farmers and citrus cultivation could be the death of the state’s second-largest industry behind tourism, and one that produces more than 80 percent of the country’s orange juice, some economists say.”
Gotham Greens is one of several growing companies that cultivates produce indoors for those who want locally farmed vegetables year-round: “The New York-based company, which opened its first greenhouse in Brooklyn in 2011, recently built greenhouses in Providence, Rhode Island, to serve New England and in Baltimore to serve the mid-Atlantic region. It also has announced plans to build a greenhouse in Denver. Growing produce indoors, which can be done year-round and almost anywhere because it’s not dependent on the weather, has become an increasingly popular business as consumers seek local, pesticide-free foods that don’t travel thousands of miles to arrive in their refrigerators, only to spoil in a few days. Greenhouses, which rely on sunlight, and vertical farms, which use artificial lights, also can control the growing environment to produce particularly healthy plants. … Greenhouse-grown lettuce has become more affordable as technology has improved and commercial operations have scaled. A clamshell of Gotham Greens lettuce costs about $3.99 at Jewel-Osco, but it lasts in a customer’s refrigerator for three weeks while commodity lettuce starts to wilt in four days, Puri said.”
SUSTAINABILITY
Paravel is the first direct-to-consumer luggage company to make its product entirely out of recycled materials: “Last month, it announced that all of these products would now be made from recycled plastic derived from plastic water bottles. And the brand has just launched wheeled luggage, every single part of which will be made from recycled materials, from the polycarbonate shell to the lining to the zippers and telescopic handles. The suitcases appear to be priced to compete directly with Away. The carry-on comes in two sizes, a smaller one priced at $255 and a larger one at $275. (Away’s cost $225 and $245 respectively.) … Paravel is targeting a slightly different market than these companies as a direct-to-consumer lifestyle brand. Until now, the brand has focused on making products that have a vintage feel, bringing back the romance of travel. But now, the brand is making the case that if we want to have a world left to explore, we need to think about how we manufacture our suitcases.”
FOOD AND BEVERAGE
Dean Foods, America’s largest milk producer and parent company of Land O’Lakes, has filed Chapter 11: “The 94-year-old company has struggled in recent years because Americans are drinking less cows milk. 2019 has been particularly brutal: the company's sales tumbled seven percent in the first half of the year, and profit fell 14 percent. Dean Foods stock has lost 80 percent this year. The company, which makes some of the country's most recognizable milk and dairy products, including Dairy Pure, Organic Valley and Land O'Lakes, has blamed its struggles on the ‘accelerated decline in the conventional white milk category.’”
And that's what's ahead.
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