Tariff Delay, Roche Buy, Brexit Vote: CEO Daily for February 25, 2019
I suspect Paul Polman had a good weekend.
The recently retired CEO of Unilever dedicated his time at the top to trying to show that what’s good for the world is, in the long run, also good for his shareholders. His shareholders didn’t always agree. Their spat came to a head when 3-G-owned Kraft Heinz, which is equally dedicated to the notion that it can cost-cut its way to success, tried to buy Unilever. Polman successfully fended off the takeover, but many of his shareholders weren’t pleased.
Then last week, Kraft-Heinz announced a $15 billion write-down. And yesterday, word emerged that the company was thinking of selling off its Maxwell House brand. The acquire-and-cut playbook appears to have hit a wall. (You can read Geoff Colvin’s account of what happened here.)
When I wrote about these two competing models of capitalism in CEO Daily two years ago, the CEO of a Fortune 50 company called me within minutes of the piece’s publication, lecturing: “It’s a false choice. You need both!” I take the point. Polman’s social responsibility only works if he can deliver financial results. And part of the reason the Kraft Heinz playbook broke down is because other food companies were forced to copy its cost-cutting playbook, leaving fewer targets for its acquisitive strategy.
But last week’s news makes clear that 3-G-style short-term returns can often come at the expense of long-term success. I, for one, am happy Polman won this round.
By the way, the Kraft-Heinz debacle is also taking a toll on Berkshire Hathaway. But Warren Buffett avoided comment.
More news below.
President Trump is stretching out the moratorium on new U.S.-China tariffs past its March 1 deadline. He says there has been substantial progress on core issues such as forced tech transfers and intellectual property theft. So what's the new end date for the sort-of-truce? There isn't one. (P.S.: Do watch this mortifying video of Robert Lighthizer flat-out contradicting Trump on the definition and significance of MOUs.) Wall Street Journal
Roche is shelling out $4.3 billion for Spark Therapeutics, a gene therapy outfit that will help beef up the Swiss firm's haemophilia portfolio. Roche CEO Severin Schwan: "Spark Therapeutics haemophilia A programme could become a new therapeutic option for people living with this disease." Reuters
British Prime Minister Theresa May has delayed a key vote on her Brexit deal that was scheduled for this week. She now wants lawmakers to vote on the deal as late as 17 days before the Brexit date, which is currently just under five weeks away. Opposition leader Jeremy Corbyn says she is "recklessly running down the clock to force MPs to choose between her bad deal and a disastrous No Deal." CNBC
So what happens if Special Counsel Robert Mueller submits his report to Attorney General William Barr and the report is not made public? House Intelligence Committee Chair Adam Schiff has a plan: subpoena the report and bring Mueller before the committee. NBC
Around the Water Cooler
Best Picture went to Green Book, Alfonso Cuarón won Best Director for Roma, Rami Malek got Best Actor for Bohemian Rhapsody, and Olivia Colman got Best Actress for The Favourite—her acceptance speech was utterly charming. Guardian
Economists still overwhelmingly expect a recession to hit by the end of 2021. According to a National Association for Business Economics survey, 10% think it will come this year, 42% next year and 25% see it coming in 2021. Most respondents reckon the Fed will keep raising interest rates this year. Bloomberg
Microsoft has released the second version of its business-oriented augmented-reality headset, HoloLens. The software firm is allowing partners to create their own industrial versions of the HoloLens 2, with Microsoft's Azure cloud running everything in the background. Fortune
If you're going to start using smartphone apps to tie your shoelaces, you'd better make sure the apps work. Nike has just found this out the hard way, as a malfunctioning app marred the launch of its $350 Adapt BB sneakers. As one review read: "App wont pair with left shoe. Paired with sneakers right after unboxing then completely crashed after last update." BBC