Skip to Content

Best Practice Is a Two-Way Street — CEO Daily, Thursday 7th December

Good morning.

Anyone who thinks you can’t make money in China needs to talk with AB InBev CEO Carlos Brito, as I did earlier today at the Fortune Global Forum in Guangzhou. Brito’s company has grabbed 20% of the beer market here, and says it has become one of his fastest-growing and most profitable markets. Moreover, it’s now teaching best practices to the rest of the company.

“When I started ten years ago in China, China was always absorbing best practices from elsewhere, and they had no problem learning from others,” he said. “But now China is exporting best practices. So it’s a big shift.”

The key to winning in China, Brito says, has been pairing beer with entertainment. “People look for more than products, they look for experiences. So it’s very important to provide consumers with entertainment where beer, beverages and food is at the center of it.”

You can read more about the day’s conversations at the Forum here. And if you are interested in investing in China yourself, here are five recommendations from Fortune’s annual investor guide, out today. (Warning: The Alibaba pick may be controversial with some CEO Daily readers, who question how the company measures sales.)

Also this morning, we are publishing Jen Wieczner’s excellent piece on activist investor Elliott Management. Take the time to read it.

And some news: We announced in Guangzhou this morning, along with Prime Minister Justin Trudeau, that Canada will host the 2018 Fortune Global Forum next fall – date and city to be announced soon.

Other news below.

Alan Murray

Top News

•  VW Manager Gets Seven Years for Diesel Fraud

Oliver Schmidt became the first person to be jailed for his role in the Volkswagen diesel scandal. The former general manager of the company’s engineering and environmental office in Auburn Hills, Michigan was sentenced to seven years after pleading guilty to charges of conspiracy and violating the Clean Air Act. Judge Ben Singer made clear that he did not think justice had been served yet, indicating that ultimate responsibility for the fraud lay higher up the VW chain of command. Various criminal investigations are still ongoing in Germany but none have so far unearthed a smoking gun that would incriminate top management.   Fortune

 IMF Warns Chinese Banks to Bolster Capital

In its first comprehensive assessment of China’s banks in six years, the International Monetary Fund called on them to raise more capital than required by international standards in order to protect themselves against the risk of an economic shock. It found that 27 of 33 banks that it ‘stress-tested’ were undercapitalized, although it said the ‘Big Four’ state-owned banks had adequate capital. The Fund said China still hasn’t addressed the underlying causes of the ongoing expansion in government and corporate debt, despite measures to bolster financial stability this year. Critics routinely point out that overall levels of debt are still rising, and that the talked-about ‘deleveraging’ should more accurately be described as a slowdown in credit growth. FT, metered access

Broadcom Lets Its Results Do the Talking

Broadcom posted an impressive set of quarterly results that will do its credibility with Qualcomm investors no harm as it pursues its hostile takeover bid. Earnings were well above expectations as sales of smartphone parts to – presumably – Apple offset weakness in its wired infrastructure business. It also raised its dividend and guided for revenue 10% above market expectations for the current quarter. Earlier this week, the Singapore-based company had proposed replacing Qualcomm’s entire board after the latter refused to discuss its $105 billion offer. It didn’t add anything on the subject of the deal yesterday, other than to tell investors that it could wrap one up, including regulatory approvals, within a year.   WSJ, subscription required

An Old Hope

If there is anything that can generate more sequels than the Star Wars franchise, it’s the saga of Walt Disney’s CEO succession. The Wall Street Journal reported late Wednesday that Bob Iger could stay on as CEO beyond 2019 to ‘bed down’ any acquisition of 21st Century Fox assets. The WSJ said that a deal worth close to $40 billion could be little more than a week away from completion. The Iger angle is a counterpoint to the previous day’s FT story, which had the character of a trial balloon, mooting Fox CEO James Murdoch, son of Rupert, as a future successor to Iger. WSJ, subscription required

Around the Water Cooler


Dems Wake up and Smell the Franken Sense

A majority of Democratic Senators, including Minority Leader Chuck Schumer, called on Al Franken to resign his seat over growing allegations of sexual harassment. Franken’s office said he hadn’t taken any decision yet. Quite apart from the merits of the allegations, the Democrats are anxious to be seen as tougher on harassment to sharpen their profile in next week’s special election in Alabama, where Republican candidate Roy Moore still leads opinion polls despite facing multiple unsavory allegations of his own. Fortune

• ‘Paranoid’ Walmart Moves Its Name Into the Ether

Wal-Mart Stores dropped the ‘Stores’ from its official name, in a symbolic move that reflects its evolution beyond brick and mortar retail. CEO Doug McMillon said in a statement that he felt the name change was needed to be “consistent with the idea that you can shop us however you like as a customer.” Over in Guangzhou at Fortune’s Global Forum, chairman Greg Penner noted tongue-in-cheek that this year’s robust performance, especially in the online space, owed much to “paranoia” about its e-commerce competition – notably Amazon and Alibaba.   Fortune

Who Needs a Correction When You Can Just Have Your Money Stolen?

Another day, another illustration of the serious flaws of Bitcoin. Cryptocurrency marketplace NiceHash said the contents of its Bitcoin wallet had been stolen in a security breach and one executive said nearly $64 million had been lost. NiceHash said the hack was “a highly professional attack with sophisticated social engineering.” We haven’t got space here to address other grievous flaws such as volatility, scalability and transaction costs (not least the associated energy demand). But it wouldn’t do any good anyway: Bitcoin is up 40% in the last week alone, and the only hope is that the bubble can burst before it assumes an economically important scale. Fortune

Saudi Buyer Destines Salvator Mundi for the Abu Dhabi Louvre

The buyer of the Salvator Mundi painting attributed amid some controversy to Leonardo da Vinci turns out to have been a Saudi prince, according to documents reviewed by the New York Times. The buyer, Prince Bader bin Abdullah, is not a renowned art collector but is a close association of Crown Prince Mohammed bin Salman. On Wednesday, the newly opened Louvre in Abu Dhabi museum in the United Arab Emirates tweeted an announcement that the painting is “coming.”   Fortune

Summaries by Geoffrey Smith;