Original link: https://www.latepost.com/news/dj_detail?id=1372
Starbucks Schultz: Be China’s No. 1 Western Consumer Brand
Starbucks interim CEO Holder Schultz will retire in April, and he has a lot of work ahead of him.
In addition to assisting the incoming CEO to integrate into the team better and faster, it is also necessary to deal with the international political and economic environment where the risk level does not decrease but increases. Since the second half of this year, consistently rising recession expectations and labor costs have pushed up operating leverage, the appreciation of the U.S. dollar has partially offset the growth of international stores, and geopolitics has left global companies with little room to escape.
Schultz believes that Starbucks will rebound faster in the post-pandemic era than during the 2008 financial crisis, and has pushed forward its expansion target of 45,000 stores globally (9,000 in China) by 2025. On Starbucks’ latest quarterly conference call this week, he said the recovery in the past three months has underpinned management’s confidence in its expansion plans.
The Chinese market still occupies an important part of the conference call. In the quarter ended Oct. 2, Starbucks’ revenue rose 6% and same-store revenue rose 11%. Among them, the same-store revenue of Chinese stores shrank by 16% year-on-year, which was better than the previous quarter (-44%).
Schultz said that he saw signs of early recovery in the Chinese market during the quarter, but because of the uncertainty related to the epidemic, it is expected that the Chinese business will recover non-linearly, at least in the fourth quarter of this year, and then it is expected to improve significantly.
Speaking as a statesman rather than an entrepreneur, he reiterated that offline brick-and-mortar businesses are inevitably “extremely sensitive” to evolving macro challenges, but “based on our success in this country and our determination to grow long-term,” he reiterated that continued Invest in China and expand the user base.
We believe that when the impact of COVID-19 abates here, Starbucks will not only be the undisputed leader in our category, but likely the No. 1 Western consumer brand in this country. Because during the pandemic, Starbucks has continued to make meaningful investments in its partners and business despite its impaired performance.
In May he said something similar:
I can’t think of any other western consumer brand — let alone a food and beverage retailer — that has performed as well in China as we have over the past 20 years. I am very proud to say that I come to China regularly to build relationships of mutual respect and trust with government officials and to work closely with our Chinese team.
Schultz expects that between October 2022 and July 2023, the number of Starbucks stores in China will increase by 13%, which is higher than the 7% growth rate of the number of global stores in the same period. Currently, Starbucks has 6,021 stores in 230 cities in China. (Gong Fangyi)
German Chancellor visits China to maintain business worth $240 billion a year
In the past four years, the entire European investment in China has been concentrated in a few large German companies. Only four German companies, Volkswagen, BMW, Daimler and BASF, accounted for more than 33% of the investment – three of which group CEOs visited China with German Chancellor Scholz today.
According to the German Institute for Economic Research, German investment in China reached a record 10 billion euros in the first half of this year, an increase of 60% year-on-year. Including the above-mentioned groups, many German companies have intensively disclosed new Chinese investment plans in the past two months:
- In October 2022, Zeiss, the optical leader, invested US$25 million in Suzhou to purchase land and build a project for the first time. The project is called “Fengqi”, and it is expected that 20% of its products will be dedicated to the Chinese market;
- In October 2022, Volkswagen announced plans to invest 2.4 billion euros in a joint venture with Horizon;
- In October 2022, media reports stated that BMW intends to transfer the MINI electric car production line from the UK to China as part of a joint venture project with Great Wall Motors;
- In September 2022, the first factory of chemical giant BASF’s new chemical base with an investment of 10 billion euros in Zhanjiang, Guangdong started operation;
- In September 2022, Merck’s OLED material production base was completed and put into operation in Jinqiao, Pudong, Shanghai.
There are many factors driving the growth of German investment in China. Since 2012, Germany has been China’s largest trading partner in Europe. China and Germany are each other’s important bilateral trade partners, and Germany’s advantageous industries such as chemicals, automobiles, electrical appliances and machinery are exactly what China urgently needs in the economic upswing.
Last year, the total trade volume between China and Germany exceeded 245.3 billion US dollars, accounting for nearly 20% of the total import and export volume between China and Europe. In 2019, then-German Chancellor Angela Merkel visited China, one of the purposes was to repair Sino-German trade that was affected by the global trade dispute. This time, Scholz said in a signed article before his visit:
The EU has precisely positioned China as a triple role of partner, competitor and adversary. While competition has definitely increased in recent years, we have to address that. Accept competition and take the consequences of this systemic competition seriously into the decision-making process. At the same time, we must explore where cooperation is in our mutual interest. Ultimately, the world needs China — for example, in the fight against infectious diseases like Covid-19… We will seek cooperation that is in our common interest, but we will not ignore controversies. Because this is an important part of a frank exchange between Germany and China.
This also explains why Scholz approved the Central Plains Group’s acquisition of a 25% stake in the Port of Hamburg in the dispute. The Port of Hamburg is the largest container port in Germany and the third largest in Europe. In the first half of this year, the container throughput of the Port of Hamburg to China reached 1.3 million TEU (20-foot equivalent units), accounting for nearly 30% of the total throughput.
The diversified cooperation environment also strengthens the flexibility of Germany’s own trade and supply chain, so that they can realize their respective interests and demands in long-term cooperation.
For example, pharmaceutical company Bayer’s sales in China reached 3.856 billion euros last year, accounting for 26% of total sales. The largest single market for BMW, Volkswagen and Mercedes-Benz is China, where more than one-third of all new cars sold by the three carmakers last year were in China. BASF’s sales in China reached 12 billion euros last year, accounting for 15% of the global market, and this figure may reach 50% in 2030.
Most of these German companies entered the Chinese market ten years ago, and are familiar with the policies and soil here, from which they can obtain the raw materials, energy and labor that the manufacturing industry needs in large quantities. According to data from the Ifo Institute for Economic Research, 46% of German manufacturing companies source a large amount of raw materials from China. According to data from the Federation of German Industries (BDI), Germany relies on imports of 93.5% of rare earths, 90.4% of graphite and 87.1% of bismuth from China. (Qiu Hao)
Five ministries and commissions announced the operating rules for personal pensions
On November 4, the Ministry of Human Resources and Social Security, the Ministry of Finance, the State Administration of Taxation, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission jointly issued the “Implementation Measures for Individual Pensions”, which stipulates the participation process, operation methods, account management, supervision and management responsibilities and other detailed rules.
The China Banking and Insurance Regulatory Commission has also solicited opinions on the detailed rules for personal pension investment (“Interim Measures for the Administration of Personal Pension Business of Commercial Banks and Wealth Management Companies”), and will determine the list of the first batch of institutions that offer personal pension business.
This is the latest progress of the “Opinions on Promoting the Development of Individual Pensions” in April this year, and some basic contents such as “closed operation of individual pension fund accounts” and “per person’s annual payment cap of 12,000 yuan” have been extended.
Participants must open a special fund account in a bank and bind it to a personal pension account. After the launch, the payment is entirely borne by the participants themselves, and they can choose to purchase financial products such as savings deposits, wealth management products, commercial endowment insurance, and public funds that meet the regulations. Payment can be made monthly, instalments or annually. Expires once or instalments.
China’s pension system was established in 1991. At that time, the “Decision on the Reform of the Endowment Insurance System for Enterprise Employees” mentioned that a system combining basic endowment insurance with enterprise supplementary endowment insurance and individual savings endowment insurance for employees was gradually established.
Among them, the basic old-age insurance is the “pension” that is most often referred to now, or the “first pillar of the pension” in the industry. Supplementary pension insurance (including enterprise annuity and occupational annuity), known as the second pillar.
This time, the individual pensions jointly promoted by multiple ministries and commissions, as well as other commercial pension insurance, are called the third pillar.
According to statistics from Changjiang Securities, as of the end of 2020, China’s pension balance was 9.35 trillion yuan. The first, second and third pillar pensions accounted for 62.13%, 37.86% and 0.006% respectively. (Gong Fangyi)
Silicon Valley layoffs, Twitter is the most confusing
News of layoffs by several Silicon Valley technology and Internet companies has been sent out one after another. Some companies are neutralizing past aggressive expansions, while others are preparing for a potential recession. And of course there’s Twitter where no one has any idea what management is thinking.
Amazon said it will suspend hiring for the next few months due to “economic uncertainty.” Amazon first suspended hiring in its retail business last month.
- Given how many people the company has hired in the past, management decided this week to suspend new hires, which could remain in place for several months, depending on economic and business conditions, said Amazon’s senior vice president of people.
- In the third quarter of this year, Amazon’s growth rate accelerated, but its operating profit decreased by 47.96% year-on-year. The number of employees at the end of the quarter was approximately 1.544 million.
Apple, whose financial numbers seem to live in a parallel world, is also upgrading cost-cutting plans. In addition to research and development positions, they have suspended recruitment including corporate business and software engineering, as well as some functional positions and contract employees.
- In a statement to the media, Apple said it would continue hiring, but taking a “very measured approach” in some areas of its business given the current economic environment.
- “We want to be able to think through and make informed decisions that will allow us to drive innovation on a long-term and sustained basis.”
Twitter is a different narrative entirely. Musk is not only open-mouthed, but also erratic in his actions. According to tweets from some Twitter employees, they lost access to work emails and some other corporate services before being fired from the HR department.
- Half of the 7,500 people are expected to lose their jobs, according to memos shared internally by Twitter employees.
- The retention notice will be sent to the employee’s corporate mailbox, and the dismissal notice will be sent to the employee’s personal mailbox.
- Musk asked Twitter’s technical team to save $1 billion in infrastructure spending every year. That amount is about the same as the annual interest that Musk accrues on a debt acquisition. (Gong Fangyi)
A-share turnover exceeds one trillion yuan again
Another trading day that has been rocked by several strands of unconfirmed news. The transaction volume of A-shares exceeded one trillion yuan, and nearly 80% of the more than 5,000 companies rose. Hong Kong stocks also generally rose, especially the China Internet sector, which fell almost every day a while ago.
In fact, the profit performance of the industry in the third quarter was still similar to that before, and some of them were worse than the second quarter. Among the 31 industries we counted, more than half (17) of the third-quarter net profit growth was slower than the second quarter, and 14 industries saw a year-on-year decline in net profit.
But as veterans who are used to the ups and downs of the market often say, when the market falls, no matter how good the news is, it will be interpreted as a negative one. And when the market goes up, it’s the other way around.
- On November 4, Chinese Foreign Ministry spokesman Zhao Lijian hosted a regular press conference. In response to a question about “China is considering canceling circuit breaker measures for inbound flights”, Zhao Lijian said, “I don’t understand the relevant situation you mentioned, please contact us. Relevant departments inquired. China’s policy and position on epidemic prevention and control are consistent and clear.”
- Shares of vaccine company BioNTech rose more than 5%, significantly higher than its peers. (Gong Fangyi)
OTHER NEWS
Under Armour’s revenue in the Asia-Pacific region stopped falling in the third quarter, and it still lowered its full-year performance forecast.
Following the 8% year-on-year decline in Under Armour’s Asia-Pacific revenue in the last quarter, it achieved a counterattack in the third quarter, with revenue increasing by 7% year-on-year, driving international market revenue to increase by 7% year-on-year to US$547 million. North American market revenue fell 2% year over year to $1 billion. Despite the surprise revenue of $1.6 billion in the third quarter, Under Armour lowered its full-year revenue growth forecast to low single digits due to inflation and supply chain disruptions.
Buffett once again reduced his holdings of BYD, and his shareholding ratio fell to 17.92%.
According to Hong Kong Stock Exchange documents, on November 1, Berkshire Hathaway sold 3.297 million BYD H shares at a price of HK$1.6987, reducing its shareholding ratio to 17.92%. This year, Buffett has accumulated 28.235 million shares of BYD H shares.
China Aviation Supplies will buy 140 Airbus aircraft.
According to the WeChat official account of China Aviation Materials, during German Chancellor Scholz’s visit to China, China Aviation Materials and Airbus signed a bulk purchase agreement for 140 Airbus aircraft in Beijing, including 132 A320 series aircraft and 8 A350 aircraft. Aircraft, with a total value of about $17 billion. In July this year, Air China, China Eastern Airlines and China Southern Airlines announced plans to purchase Airbus aircraft worth US$37 billion.
The Macao SAR will shorten the validity period of nucleic acid tests for entry from Guangdong from November 5.
The Macao SAR government stated that from 00:00 on November 5, the validity period of inspection for Macao residents and non-local employees who have not been vaccinated entering from Guangdong will be shortened to 24 hours. Macao residents who fail to enter the Macao SAR from Zhuhai City, Guangdong as required must immediately take a nucleic acid test at their own expense, and non-Macao residents may be refused entry.
Saudi Arabia hopes to get rid of its dependence on oil by producing electric vehicles.
Saudi Arabia, which takes oil as its economic pillar, is also turning its attention to new energy vehicles. Saudi Arabia’s sovereign wealth fund announced that it has established a joint venture with Foxconn, the iPhone’s contract manufacturer, and established an electric vehicle brand called Ceer. The new brand will obtain BMW’s component technology license, and the goal is to deliver the first car in 2025.
Morgan Stanley will start laying off workers globally as trading slows.
According to media reports, investment bank Morgan Stanley expects to start a new round of layoffs in the next few weeks. The global layoffs are expected to be carried out simultaneously, with the layoffs in the Asia-Pacific region focused on capital markets teams in mainland China and Hong Kong, as well as technology investment banking teams. With the global inflation and economic recession, some investment banks’ financing trading business has also been hit, and thus began to plan layoffs.
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