Budweiser is getting a new look as its parent company tries to revive weak sales in the U.S.
Anheuser Busch unveiled a bolder, sleeker design for its cans Wednesday that puts a heavy emphasis on the “bowtie” design it has made a focus in recent marketing.
It’s the 12th redesign since Anheuser-Busch began offering Budweiser in cans in 1936.
The new cans will appear in the U.S. in coming weeks and in other countries later this year as the brewer tries to build the iconic U.S. brand’s sales in emerging markets.
Budweiser is one of the world’s best-selling beers and a top brand for parent company Anheuser-Busch InBev SA. But, like many competitors, its sales have suffered in the U.S. as consumers have faced high unemployment. Recent employment trends are particularly hard on its core customers _ young men.
The company said last quarter that it had sold 2.3 percent less Budweiser worldwide primarily because of a drop in the U.S. Its volume rose in some international markets. Anheuser-Busch joins many U.S. consumer product makers in looking for growth among the burgeoning middle class in emerging markets.
The brewer introduced Budweiser to Russia in 2010, is expanding its business in China and plans to take the brand in Brazil in 2012.
“The new design is the latest in one of many steps to reinforce Budweiser as a truly global brand,” said Rob McCarthy, vice president of Budweiser.
Anheuser-Busch InBev, the world’s largest brewer, reports its quarterly results next week.
Its top competitor in the U.S., Molson Coors Brewing Co. reported Tuesday that its second-quarter profit fell because price increases it made this year weren’t enough to offset cost increases and a drop in sales and volume.
Brewers are struggling with higher costs for ingredients, packaging and fuel. Anheuser-Busch InBev also has raised prices to offset those increases.
Authorities have recorded France’s first death from the European E. coli outbreak.
Health officials in Bordeaux said the 78-year-old woman died early Saturday morning.
She had been hospitalized in Bordeaux since June 24 with hemolytic uremic syndrome _ the rare kidney condition that the most seriously ill victims of the outbreak are suffering from need a personal loan with bad credit.
Bank of America’s $8.5 billion settlement with investors is the largest any bank has ever paid.
It might help assuage worries about how deep the bank’s mortgage problems might be and how long it might take to settle them. But for the nation’s largest bank and its CEO Brian Moynihan, the slate is far from clean.
The payout settles claims by just 22 investors who said Bank of America Corp. sold bonds based on substandard home mortgages. The bonds fell in value when the housing market collapsed and left the investors with losses on $424 billion worth of mortgages. The $8.5 billion settlement eclipses the last three years of earnings at the Charlotte, N.C. bank.
The uncertainty about just how bad Bank of America’s mortgage issues might be has scared investors and led to a 31 percent decline in Bank of America’s stock price since January of last year when Moynihan took over.
“This is a major step forward for our company,” Moynihan said in a conference call with investors on Wednesday.
Wall Street is cheering the move, sending the stock up 3 percent, to $11.14 Wednesday. It has been one of the worst performing stocks in the S&P 500 index in the past year.
But that rally could be short-lived. Analysts say the $8.5 billion is about double the amount they’d expected. The bank continues to fight other investor groups that are demanding similar settlements. Lawsuits from the Federal Home Loan Bank of Boston, bond insurers MBIA and Syncora Holdings linger. And Bank of America is likely to be ordered to pay a hefty portion of the estimated $20 billion multi-bank settlement over the mishandling hundreds of thousands of home foreclosures.
Paul Miller, a bank analyst at FBR Capital Markets, says he’s concerned about the bank’s ability to increase earnings at a pace that would make up for these higher costs. These worries are magnified by the fact that the economic recovery in the U.S. is slowing. That could reduce the number of loans the bank is able to make to consumers and businesses.
Bank of America is in worse shape than other major banks like JPMorgan Chase & Co. and Wells Fargo & Co. because of its purchase of Countrywide for $4 billion in 2008. What seemed like a bargain price for the country’s largest mortgage lender has cost the bank tens of billions more in mortgage losses, regulatory fines, repurchases of poorly-written loans and expensive litigation. At the same time, Bank of America itself had written a fair amount of bad mortgages. As it stands, the bank services one out of every five U.S. mortgages.
So even though most of the major banks sold the same kind of securities and have bad mortgages on their books, analysts say they are in better shape than Bank of America, which has $2.2 trillion in assets.
The other banks don’t have the same pressure to put the mortgage woes behind them. In March, the Federal Reserve didn’t allow Bank of America to increase its dividend, citing uncertainty about the depth of its mortgage problems. It was the only denial issued to any of the four largest U.S. banks. And it raised questions over whether the bank was strong enough to withstand another economic downturn.
The combined effect of the losses and the uncertainty prompted a reversal in the bank’s longtime strategy of fighting claims from investors, Moynihan admits. Since the beginning of the year, the bank has struck large settlements with multiple investors totaling $12.7 billion.
Most of the settlements are with investors that had purchased mortgages or mortgage backed securities. They want banks to buy back mortgages that had misinformation about qualifications of borrowers who received them. During the housing boom, lenders such as Countrywide routinely gave mortgages to people without documenting their income or ability to pay. This was a key driver of the financial crisis.
In January, the financial institution paid $2.6 billion to settle buyback claims on home loans sold to Fannie Mae and Freddie Mac. In April, the bank agreed to pay up to $1.6 billion to Assured Guaranty Ltd., an insurer that also pressed the bank to repurchase shoddy mortgages.
Some industry analysts say the string of settlements could open the door for similar agreements between investors and other large banks that sold mortgages, including JPMorgan, Wells Fargo and Citigroup.
“It’s like the tobacco lawsuits _ if Phillip Morris loses, it affects everyone else,” said Matt McCormick, a portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati, which manages about $4 billion in assets. He says banks face multiple issues, “”none of which are easy or inexpensive fixes.”
Even if other banks are pushed into settlements now, the amounts will likely be less eye-popping, because Bank of America has more exposure to bad mortgages.
Bank of America’s chief financial officer Bruce Thompson said in a conference call with analysts that by the end of the second quarter the bank would place $20 billion in reserves to cover costs related to future litigation and investor demands.
As a result of Wednesday’s settlement and other mortgage-related costs, Bank of America said it will take a $14 billion charge in the second quarter and will report a net loss of $8.6 billion to $9.1 billion in the second quarter of 2011. That’s up to 93 cents per share. The bank reports second quarter results on July 19.
It is not, by any means, the world’s oldest company. There are Japanese hotels dating back to the 8th century, German breweries that hail from the 11th. What is unusual about IBM, which celebrates its 100th birthday this week, is that it has been so successful for so long in the fast-moving field of technology. How has it done it?
IBM’s secret is that it is built around an idea that transcends any particular product or technology. Its strategy is to package technology for use by businesses. At first, this meant making punch-card tabulators, but IBM moved on to magnetic-tape systems, mainframes, personal computers and, most recently, services and consulting. Building a company around an idea, rather than a specific technology, makes it easier to adapt when industry “platform shifts” occur.
True, IBM’s longevity is also due, in part, to dumb luck. It almost came unstuck early on because its bosses were hesitant to abandon punch cards. And it had a near-death experience in 1993 before Lou Gerstner realized that the best way to package technology for use by businesses was to focus on services. An elegant organizing idea is no use if a company cannot come up with good products or services, or if it has clueless bosses online payday advance. But on the basis of this simple formula—that a company should focus on an idea, rather than a technology—which of today’s young tech giants look best placed to live to 100?
The most obvious example is Apple (founded in 1976). Like IBM, it had a near-death experience in the 1990s, and it is dangerously dependent on its founder, Steve Jobs. But it has a powerful organizing idea: Take the latest technology, package it in a simple, elegant form and sell it at a premium price.
Other giants are still struggling to move beyond their core technologies. Oracle, founded in 1977, peddled databases as the answer to all its clients’ problems. But in the past decade it has moved into other corporate software, and hardware too. Google, founded in 1998, knows the importance of an idea. “Organizing the world’s information and making it universally accessible” is its motto, put into practice on mobile devices through its Android software. But Google is still heavily dependent on a single product — Internet search and related advertising.
The Economist
Opening statements are scheduled to begin in the first trial to result from a probe by New York City prosecutors into insider trading carried out by market researchers serving hedge funds.
The statements are scheduled to start Thursday for the securities fraud trial of Winifred Jiau (Jow). A jury was selected Wednesday. Jiau was arrested in December in a government crackdown on specialists in the financial industry who pass off inside information about companies as legitimate research instant personal loans guaranteed. The Freemont, Calif., resident has remained in custody, unable to make $500,000 bail.
Prosecutors say she provided inside information while she worked as a consultant for two years for Primary Global Research, a Mountain View, Calif., firm. She has pleaded not guilty. Eight of 13 people charged in the probe have pleaded guilty.
The debut this Thursday of the smaller but remodeled Macy’s in downtown St. Louis is a part of a broader plan to rework the Railway Exchange Building.
New paint, carpeting, displays and merchandise lines are the main components of the store’s face-lift, which began in early March. On Monday, workers continued to lay carpet in some areas.
The store is shrinking to three floors from seven at the Railway Exchange but will carry more clothing for office workers and more housewares targeted at residents of downtown lofts and apartments. Gone are the store’s furniture department and two restaurants. All 134 store employees remain.
Macy’s signed a five-year lease for the store plus two floors of offices when developer Rick Yackey and Bruce Development of Clayton bought the 21-story building in August for $18.5 million.
Yackey said Monday that now-vacant store space on the fourth floor would be converted to “class A” conference centers and a fitness area for tenants he hopes to attract to the largely empty building.
The pedestrian bridge over Olive Street will be the conference center’s entrance, said Yackey, adding that he hoped the center would open in a year. The “more vibrant” Macy’s will bring additional activity downtown, he said.
“I think that the store is going to do a lot better,” Yackey said. “Macy’s is committed to making it successful.”
Macy’s officials said the company was open to lease renewals.
Yackey and Bruce Development plan a $112 million renovation of the Railway Exchange. The city has approved up to $27.8 million in tax-increment financing, plus money from a community improvement district and a transportation development district.
Macy’s officials won’t divulge the cost of the store’s remodeling, but city officials have pegged it at $5 million to $7 million.
The closing in 2008 of Macy’s Midwest headquarters cost 850 jobs and left the building largely empty. Macy’s has said the company’s ability to sell the building to developers was a factor in its decision to keep the store open.
Melinda Nichols, the store manager, said Monday that Macy’s tried to respond to customers’ requests. Such requests led to the stocking of women’s swimwear, which Nichols said tourists bought so they could use their hotel’s pool.
“We work very hard to listen to what the customer tells us and relay that back to (Macy’s buyers in) New York,” she said.
Australian employers unexpectedly cut workers in April by the most since 2009 as hiring weakens in states less affected by the nation’s mining boom, sending the local currency tumbling and stocks lower.
The number of people employed declined by 22,100, after a revised 43,300 gain in March, the statistics bureau said in Sydney today. Economists in a Bloomberg News survey forecast a 17,000 increase in April, according to the median of 21 estimates. The jobless rate held at 4.9 percent.
The Australian dollar fell as much as 1.1 percent, two-year bond yields declined and the nation’s benchmark stock index sank as investors trimmed bets the Reserve Bank of Australia will raise borrowing costs next month. The RBA has held its benchmark interest rate at a developed-world high of 4.75 percent since November, prompting a decline in sales at stores including Myer Holdings Ltd. (MYR)
“Consumers are more cautious since the global financial crisis and that’s feeding through to employment,” said Riki Polygenis, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne, whose forecast for a 5,000-job drop was one of only two declines in the survey. “The mining sector is a very small employer compared with manufacturing and retail, which are struggling in the current environment.”
Full-Time Cuts
The number of full-time jobs declined by 49,100 in April, the most since February 2009, and part-time employment rose by 26,900, today’s report showed. Australia’s participation rate, which measures the labor force as a percentage of the population over 15 years old, fell to 65.6 percent in April from 65.8 percent a month earlier, it showed.
Last month’s decline in jobs brings to 26,300 the number of net new positions created in the first four months of the year, the weakest January-through-April period of employment growth number since 1999.
The yield on two-year government notes dropped 8 basis points, or 0.08 percentage point, to 4.98 percent, the biggest decline since April 19. The Australian dollar slid 0.6 percent to $1.0634 at 1:28 p.m. in Sydney. Australia’s S&P/ASX 200 Index dropped as much as 1.6 percent to 4,703.10.
Asian Demand
Today’s report reflects surging Asian demand that is stoking investment in resource projects and helped send the currency this month to the highest level since it was floated in 1983.
A government report released last week showed retail sales unexpectedly fell 0.5 percent in March, the first decline in five months, and sales adjusted to remove inflation were unchanged in the three months through March 31 from the previous quarter.
Employment rose 22,900 in Queensland and Western Australia, states that are the biggest participants in the largest mining- investment boom in the country’s history. The number of jobs in New South Wales and Victoria, home to Australia’s two most populous cities, dropped by 56,200, today’s report showed.
“There are clear signs that the Aussie economy is losing momentum,” Savanth Sebastian, an economist at Commonwealth Bank of Australia in Sydney, wrote in a report after the release. “The latest result is also consistent with the anecdotal evidence we are hearing from businesses outside the mining sector.”
Falling Sales
Melbourne-based Myer’s sales fell 2 percent to A$657 million ($698 million) in the three months ended April 30, and Sydney-based David Jones, the second-largest chain, posted a 1.4 percent drop in revenue to A$411.7 million in the same period. Both companies were reporting third-quarter results.
Traders bet there’s a 10 percent chance central bank Governor Glenn Stevens will boost rates by a quarter of a percentage point to 5 percent next month, down from 24 percent before the jobs report, bank bill futures showed.
Australia’s government said this week that it will end 23 years of spending growth to ease inflation from the mining boom and support the return to a budget surplus.
Prime Minister Julia Gillard’s administration is trying to reduce the need for higher borrowing costs for consumers and businesses after the central bank said last week that higher rates will likely be needed “at some point” to contain inflation.
The RBA has increased rates by 175 basis points to 4.75 percent since October 2009. In contrast, the U.S. Federal Reserve has held its benchmark rate near zero since December 2008. That divergence contributed to about a 19 percent increase in the local dollar versus the U.S. currency in the past 12 months.
The RBA said in its May 6 quarterly policy statement that “most leading indicators point to further growth in employment over the months ahead, although at a slower pace than in 2010.” It also predicted the jobless rate would fall to 4.25 percent by December 2013.
China’s decision to keep its currency weak has caused the government to lose control of inflation and risks fuelling wage-price gains, billionaire investor George Soros said.
While the policy helped insulate China from the financial crisis in 2008, the world’s second-biggest economy has missed its chance to allow the yuan to appreciate to tame inflation, Soros, chairman of Soros Fund Management LLC, said yesterday at a conference in Bretton Woods, New Hampshire.
“It would be very advantageous to allow the currency to appreciate as a way of controlling inflation,” Soros said. “The authorities missed that opportunity. You now have inflation somewhat out of control, and causing some serious danger of wage-price inflation.”
The yuan gained 4.6 percent against the U.S. dollar in the past two years, the second-smallest gain of 10 Asian currencies tracked by Bloomberg, even as economic growth rebounded and foreign-exchange reserves jumped to a record. Inflation accelerated to 5.2 percent in March, exceeding government targets for a ninth month, according to the median estimate in a Bloomberg News survey.
The yuan’s gain since April 2009 compares with a 31 percent advance for the Indonesian rupiah, a 22 percent climb by the South Korean won and a 21 percent jump by the Singapore dollar. Only the Hong Kong dollar, which is pegged to the U.S. currency, has appreciated less than the yuan.
‘Marginal Role’
China’s currency was little changed at 6.5367 per dollar as of 10:02 a.m. in Shanghai, trading near a 17-year high. Twelve- month non-deliverable forwards climbed 0.07 percent to 6.3660 per dollar in Hong Kong, reflecting bets the yuan will gain 2.6 percent, according to data compiled by Bloomberg.
China has resisted pressure from U.S. officials to let the yuan appreciate more rapidly, rejecting Treasury Secretary Timothy F. Geithner’s argument that a stronger currency would make it easier to manage inflation pressures.
“While exchange rates can be an effective tool to contain inflation in some countries, I don’t think that’s the case for China,” said Li Cui, chief China economist at Royal Bank of Scotland Plc in Hong Kong. “It’s not so surprising that we are seeing higher inflation in China as price growth is mainly driven by strong domestic demand, while imported inflation only plays a marginal role.”
‘Critical Question’
China’s economic growth accelerated to 9.8 percent in the fourth quarter, driven by a pickup in industrial production and retail sales. The government will report first-quarter economic data on April 15.
The People’s Bank of China raised interest rates four times and boosted banks’ reserve requirement ratios six times since the third quarter to help contain inflation. HSBC Holdings Plc said last week the possibility of another rate increase is rising. Credit Suisse Group AG forecasts the benchmark one-year deposit rate, which has risen 1 percentage point to 3.25 percent, will climb another 1.5 percentage points by the end of the year.
“This cannot continue indefinitely,” Soros said. “There’s great resistance with the government mechanism to relax the system which serves the interest in power very well. I find that the critical question for the future of China.”
A stronger currency would combat inflation by making foreign goods cheaper in China. The nation reported its first quarterly trade deficit in seven years yesterday, driven partly by rising commodity prices. Inbound crude oil shipments rose 12 percent by volume and 39 percent by value, while iron-ore imports rose 14.4 percent by volume and 82.5 percent by value.
Bretton Woods
Soros, 80, reportedly made $1 billion in a successful bet in 1992 that Britain would fail to keep its currency in a European exchange-rate system that pre-dated the euro. Other successful trades included a bet that the deutsche mark would rise after the collapse of the Berlin wall and a wager that Japanese stocks would start to tumble in 1989.
He spoke at a conference sponsored by the Institute for New Economic Thinking, which Soros helped found and supports.
U.S. and European officials met in Bretton Woods in 1944 to draw up rules that governed much of the world economy for almost three decades. Nations agreed to fix exchange rates, establish the International Monetary Fund and start the process of rebuilding Europe’s economy in the aftermath of World War II by encouraging coordinated economic policies.
The Bretton Woods era ended in 1971, when inflation forced the U.S. to abandon the dollar’s peg to gold, an anchor of the system, heralding the era of floating exchange rates. The Bretton Woods agreement had linked currencies around the world to the price of gold and restricted their fluctuations versus the dollar, requiring intervention by participants to comply.
Blockbuster Inc. mulled bids from Carl Icahn and others in an auction process that began Monday in New York that will decide the fate of the troubled video-rental chain.
Potential bidders, lenders and Blockbuster representatives met in several rooms at the U.S. Bankruptcy Court in the Southern District of New York on Monday. A sign on one room said it was reserved for Carl Icahn’s Icahn Acquisition Corp. The billionaire investor did not return a call seeking comment.
The Wall Street Journal reported liquidation firms Gordon Brothers Group and Hilco Merchant Resources submitted a joint bid for some of Blockbuster’s assets including its DVDs. Gordon Brothers could not be reached. Hilco declined to comment.
Blockbuster spokesman Michael Freitag would not confirm the bidders, saying the process was confidential. The courthouse action wrapped up by 6 p.m. Monday and was expected to resume Tuesday morning.
Blockbuster and its assets, including its name, kiosks and movie-download service, might be purchased together or separately. The stores and their DVDs could be liquidated, while others keep the name or the kiosk video-rental business, for example.
When Blockbuster, based in Dallas, filed for bankruptcy protection, it was down to 3,000 stores, less than a third of the peak of 9,100 in 2004 instant payday loan lenders. There are about 2,400 currently open with plans to close about 700 more by mid-April.
The auction process is expected to be complete before a sale approval hearing scheduled for Thursday.
Icahn was part of the group of debtholders that provided Blockbuster financing to operate while in bankruptcy in September.
Everyone in that group except for Icahn made the opening bid, known as a “stalking horse” bid, in February to buy Blockbuster for $290 million. That group, called Cobalt Video Holdco LLC, includes investment funds managed by Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Varde Partners Inc.
Other reports have suggested that bidders may include The Dish Network and SK Telecom, according to unconfirmed reports.
Blockbuster used to dominate the U.S. movie rental business. But it lost money for years as that business declined because customers shifted to Netflix Inc., video on demand and DVD rental kiosks.
European Central Bank officials indicated the economic uncertainty caused by Japan’s earthquake may not deter them from raising interest rates next month.
ECB Executive Board member Gertrude Tumpel-Gugerell and Governing Council member Yves Mersch both said yesterday that “strong vigilance” is necessary to keep a lid on inflation, a phrase the central bank uses to signal a rate increase is imminent. ECB President Jean-Claude Trichet also told the European Parliament he has “nothing to add” to his March 3 remarks, when he said policy makers may raise the benchmark rate from a record low of 1 percent at their next meeting in April.
The euro rose above $1.42 for the first time since November and government bonds declined as investors increased bets on higher ECB borrowing costs. Those bets had been pared in the wake of the devastating March 11 earthquake and tsunami in Japan, which damped economic sentiment globally.
“Obviously the current assessment could change depending on events going forward but for now, the signals from the ECB have been pretty clear and back up the early March ‘heads up’ for a hike on 7 April,” said Ken Wattret, chief euro-area economist at BNP Paribas SA in London.
“The risks to medium-term price developments are tilted to the upside,” Tumpel-Gugerell said in a speech in Salzburg, Austria. “Against this background, strong vigilance is, of course, necessary and we are monitoring the situation closely,” she said, adding the ECB is “ready and determined to take appropriate action” if needed.
Faster Inflation
Inflation in the 17-member euro-area accelerated to 2.4 percent in February and has been in breach of the ECB’s 2 percent limit since December.
“It is crucial at this stage to avoid that the recent rise in inflation translates into broad-based second-round effects, for instance via price-setting or higher wages,” Trichet said. “Such effects would give rise to broad-based inflationary pressures over the medium term.”
ECB council member Mario Draghi, who economists say is the frontrunner to succeed Trichet when his eight-year terms ends on Oct. 31, said in a speech in Milan that the central bank will act in a “firm and timely manner” to control inflation and that policy makers have to “remain vigilant in safeguarding price stability.”
Mersch, another potential candidate to succeed Trichet, said the ECB “stands ready to act in a resolute manner and at the appropriate time.”
Tumpel-Gugerell said the surge in oil prices above $100 a barrel is a “cause for concern.”
The ECB’s latest forecasts, which show inflation averaging 1.7 percent next year, “do not take into account the recent oil-price hikes and are based on the assumption that wage pressures will remain subdued,” she said.
At the same time, “all available forecasts indicate that the gradual recovery of economic activity in the euro area is likely to continue,” Tumpel-Gugerell said. “There are a number of positive signals” and “the overall economic situation is actually rather favorable.”
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