Thrifting and Its Economic and Environmental Impact

From a young age, my family and I would routinely clean out our home and take our give-aways to Goodwill. Around high school, I started going back to Goodwill to buy my clothes. My friends and I used to take trips to San Francisco to stop by Buffalo Exchange, Crossroads, Waste Land, and all the small stores in between. Second-hand stores have a strong presence in the fashion industry. Whether it is through occupying the online space through websites like ThreadUp, or traditional retailers like Macy’s creating spaces for secondhand clothes in their stores, thrifting is pushing the fashion industry towards an environmental and economic change. 

Nowadays, it’s as important to appear socially conscious as it is fashion-forward. Nearly everything in my closet has been bought at a flea market, a thrift/consignment store, taken from a friend’s closet. Whether I buy clothes that are new with tags from a thrift store, or a shirt that’s been around since the ’70s, I find solace in knowing like buying clothes that aren’t brand new–it’s less wasteful. According to an article by Forbes, “Millennials prefer to do business with corporations and brands with prosocial messages, sustainable manufacturing methods, and ethical business standards.”

Buying second-hand clothing used to be looked down upon, but it has become one of the trendiest and most mainstream habits. Recently in Austin, Texas, I passed by a Goodwill Boutique. Now that thrifting has become widely accepted, stores are becoming curated in ways that cater to tastes and habits the same way that larger brands do. In 2018, Goodwill launched this new shopping concept with internal stylists and secondhand pieces from fashion influencers. 

Thrifting is beneficial for all parties involved. First of all, the shopper saves money by purchasing second-hand items. Whether shopping at a consignment store, or a non-profit like Goodwill, money is either circulating back to the original owner or through the community. Also, clothes are being upcycled which prevents waste. Goodwill NYNJ alone saved 38 million pounds of clothing from the landfill last year. 

The fashion industry makes up 10% of carbon emissions globally. According to the Ellen MacArthur Foundation, one garbage truck’s worth of textiles is wasted every second. The fashion industry is not only responsible for these environmental concerns, but also provides the lowest-wages in the world with dangerous conditions. These facts go against the values of current and future consumers. If long-standing corporations will not make the changes at their own will, hopefully, they will under the threat of the second-hand retail industry. 

The future of thrifting will disrupt the fashion industry as we know it today. According to a report by Colliers International Knowledge Leader blog, “From 2017 to 2019, millennial and Gen Z secondhand sales increased by 37% and 46%, respectively.” While the fashion industry at large is worth more than $2 Trillion, the secondhand market is projected to hit $41 billion by 2022. According to Fortune, grown 21 times faster than the retail market in the past three years. As consumers become more environmentally conscious, these numbers will grow and large corporations will begin to notice the shift––and will hopefully make changes in their own companies to become more sustainable too. 

Selling $1 billion in 68 seconds: Alibaba hits record on Singles’ Day


A screen shows the value of goods being transacted during Alibaba Group’s Singles’ Day global shopping festival at the company’s headquarters in Hangzhou, Zhejiang province, China, November 12, 2019. REUTERS/Aly Song

After 24 hours of frenzied shopping, Chinese e-commerce giant Alibaba said its sales for its annual Singles’ Day shopping reached 268.4 billion yuan ($38.3 billion) and hit another record high.

Singles’ Day shopping is also known as “Double Eleven”. Akin to Black Friday and Cyber Monday in the United States, as the largest e-commerce retailer in China, Alibaba began its annual sales promotion on November 11 in 2009, with merchants offering attractive discounts. But Singles’ Day is much larger. The Black Friday gained less than $25 billion in sales last year and less than $8 billion on Cyber Monday. Alibaba Group only spent 68 seconds to sell $1 billion of goods on their Tmall and Taobao and sold the first $10 billion in half-hour.

The event has been replicated at home and abroad, with promotions from rivals in China such as JD.com Inc and Pinduoduo Inc as well as South Korea’s 11th Street and Singapore’s Qoo10. JD.com Inc, the second-largest e-commerce giant, sold a total of 204.4 billion yuan($29.2 billion) of goods on Singles’ Day.

(Credit to Jiajun Chen)

According to the data from Alibaba Group, in the first year of Double Eleven in 2009, China’s online shopping market was not yet mature. Chinese people were not familiar with online shopping, and some remote families even did not have access to the internet. Most consumers lived in first-tier cities such as Beijing and Shanghai, so the sales were only 50 million yuan ($7.1 million).

However, an increasing number of people began to get access to the internet and enjoyed the convenience of online shopping with the rapid development of the internet in China. By this year, the sales increased by more than 500 times compared with 2009 and hit 268.4 billion yuan ($38.3 billion).

According to a report released by China’s Office of the Central Cyberspace Affairs Commission, 854 million people were actively using the internet in China by June 2019, and China’s internet penetration rate was 61.2 percent. Among the significant number of internet users, online shoppers accounted for 74.8 percent and reached 622 million.

“The younger generation is buying more, and the customer from rural areas, the customers from lower-tier cities, they are buying imported products,” Tmall General Manager Alvin Liu told reporters.


Alibaba’s massive 11.11 countdown party included American star Taylor Swift on a moving stage with LED lights that required 300 people to operate. (Credit to Alibaba)

To attract more people to participate, especially younger generations, Alibaba hosted a “Countdown Gala” featuring a performance by pop singers, including Taylor Swift. This year, Alibaba also focused on live-streaming through its platform. Over 200,000 brands from all over the world took part in the promotion of Singles’ Day, and some retailers hired social media influencers or celebrities to promote their products before the shopping festival.

Influencers are promoting products vis live-streamed video. (Credit to Alibaba)

“Nearly all our brands have opted for live streaming promotions some times this year,” says Josh Gardner, who helps overseas companies sell products on Tmall as CEO of Kung Fu Data.

My favorite fall vegetable is a sweet potato

Michelle Obama is not the only fan of sweet potatoes. Sweet potatoes are a key ingredient in plenty of American dishes, especially during the fall. The starchy vegetable has also seen an increase in demand as new health trends show how nutritious they are. According to René Simon, director of the Louisiana Sweet Potato Commission, domestic demand for fresh sweet potatoes has been increasing 3% to 5% year after year, and exports too, with 14% to 15% of the crop exporting mostly to Canada and Europe

According to the “Vegetable and Pulses Outlook” by the U.S. Department of Agriculture’s Economic Research Service, in 2017 North Carolina produced about half the nation’s sweet potatoes, valued at more than $346 million, but that was expected to change somewhat. In September of 2018, Hurricane Florence hit North Carolina, stretching 450 miles wide while dropping a record-breaking rain, including seven inches in a day in one region.

The storms, plus heavy rains after a dry summer in Mississippi, Louisiana, Arkansas and Alabama, as well as North Carolina, created some harvest challenges. Wholesale prices of orange U.S. grade No. 1 sweet potatoes from North Carolina ranged from $14-16 at Hunts Point Produce Market in Bronx, N.Y., the week ending Nov. 25, 2017. That range jumped to $20-22 for the same week in 2018.

In 2019, North Carolina has shipped 1.3 million cartons of the 2018 season’s sweet potatoes, according to the Jan. 31 marketing service movement report, which is a dip from the same time last year, which showed shipments at 1.56 million cartons.

Weather was not the only challenge for the 2018 season. Labor shortages and costs have also been key factors that have affected the industry negatively. According to Kay Rentzel, executive director of U.S. Sweet Potato Council Inc, the labor pool is nearly non-existent in many areas, making agricultural reforms for guest workers a priority for the industry.

Louisiana has hardly any local farm workers and depends almost all on H-2A non-immigrant workers allowed to come to the U.S. for temporary or seasonal agricultural work. Other states have been dealing with his issue as well.

In conclusion, the sweet potatoes you’ll buy for this year’s casserole will be more expensive than last years. I’m sure this will not be a problem for Michelle.

https://www.thepacker.com/article/sweet-potato-supplies-weather-storms

https://www.thepacker.com/article/fresh-trends-data-shows-appeal-sweet-potatoes

https://www.wired.com/story/this-martini-wants-to-kill-climate-change-one-sip-at-a-time/

https://www.thepacker.com/article/sweet-potatoes-prices-fall-popularity-fuels-production

Apple Fights Housing Crisis

In addition to Apple’s announcement of the new “Airpods Pro”, last week, Apple announced that they are making a $2.5 billion pledge to help ease the egregious cost of living in California, particularly in the Silicon Valley area.

The Plan 

As part of this announcement, Apple laid out a five-point course of action that includes $1 billion for affordable housing investment fund, $1 billion in mortgage assistance for first-time home buyers and in addition, opening up 40 acres of Apple-owned land, valued at around $300 million, for affordable housing. Apple stated that the remaining $200 million will be given to a San Francisco Affordable Housing fund and additionally, surrounding vulnerable cities. While the severity of the housing crisis, in both the Bay Area and California as a whole, is urgent and rapidly increasing, Apple’s plan will take two years to reach completion–depending on the availability of projects, that is. That being said, money made on the projects will be reinvested in future projects over the coming five years. 

Apple CEO Tim Cook

Overall, Apple believes that their efforts will give the state of California an open credit line to build more houses and suppress the economic constraints that large tech companies have plagued regions like Bay Area, and many more, with. The financial package was created in partnership with California Governer Gavin Newsom, who pledged to inspire the “biggest wave of homebuilding in modern history.” 

Other Tech Companies Participate

Seeing as Apple is not alone in contributing to the housing crisis, other large tech companies have pledged and drafted similar initiatives and programs. This past June, Google pledged $1 billion to “redevelop company-owned land for affordable housing” and additionally, created an investment fund to attract developers to construct, at minimum, 5,000 affordable housing units in Silicon Valley. In January, Facebook partnered with an organization to raise $500 million aimed at fighting the housing crisis in California. Beyond the Bay Area, companies like Microsoft and Amazon have publicly stated that they would funnel funds towards affordable housing initiatives in Seattle (where they are headquarted).

The Housing Crisis

So what’s the issue at play here? Currently, in San Francisco, 7,000 people are homeless and in San Jose, the average home value is $1 million–double the price from 2012. With an influx of tech companies and high-paid workers flooding into both San Francisco and the surrounding Bay Area neighborhoods, a shortage of affordable rent and housing options have crowded out middle and low-income workers (See Graph Below for Average Home Sale Prices). As a result, five Bay Area counties have been named five out of the six most expensive places to live in the country. Those who’ve fallen victim to this phenomenon include: teachers, restaurant workers and a multitude of people working blue collar jobs. 

Apple CEO Tim Cook stated “Affordable housing means stability and dignity, opportunity and pride. When these things fall out of reach for too many, we know the course we are on is unsustainable, and Apple is committed to being part of the solution.” Apple, clearly, is aware that as a juggernaut in the tech industry, their power and success have sweeping social and economic effects on the markets and economies surrounding their businesses headquarters. While IPO’s of tech companies and an increase in tech employees have driven up home values and rent prices in regions like the Bay Area, some of the housing costs issues are fed by problems in which companies like Facebook and Apple are not directly responsible. For example, San Jose, a city of 1.035 million people, has issued over 1,300 housing permits for residential buildings in the first half of 2019, however only 134 are for affordable housing. This poses as a threat to the completion of tech companies efforts aimed at helping the issue. George Ratiu, a senior economist at Realtor.com, cautions that at this pace, the 20,000 units that Facebook envisioned might actually take years and years to complete. Because construction isn’t keeping up with demand and housing prices are steadily increasing, people are leaving. In a direct response to the Bay Area housing issues, many have relocated to cities like Austin, Texas or Charlotte, North Carolina. 

Too Little Too Late

While it’s only right that companies accountable have begun to try and reverse the effects they’ve had on the housing market, economists and scholars warn that they might’ve come flying to the rescue a little too late. Vice President of Market Economics at Auction.com Daren Blomquist warns that because of the time it takes to build more houses and inventory, these companies might be too late. In an interview with MarketWatch, Blomquist stated “Even if ground was broken tomorrow on the new affordable housing being promised, that housing wouldn’t likely be available for at least another year, if not more.” Senator Bernie Sanders even said that apples entrance into the real estate lending industry is an attempt to dilute the fact that they helped create the current housing crisis. 

While the amount of money that these large companies have donated is rather large and worthy of recognition, some believe that it’s just a dollar short. MarketPlace notes that the public housing issue needs an injection of around $50-70 billion dollars on a national level. To this end, experts accept the money with open arms, but they know that it won’t be the end all be all for the housing crisis. 

The Ideal Solution

So what’s the correct answer? While the insane amount of donations that tech companies have pledged will surely have an impact, the true solution extends way further than donations. Beyond investing in construction, critics have acknowledged just how integral it is that all groups–businesses, community members, government actors– work together in fighting this issue. Having just the private sector involved in determining the supply of housing could actually increase housing prices all together and furthermore, in the end, it really won’t benefit companies to become reliant on tech juggernauts to save the day with large donations in the face of a crisis. 

Perhaps more effective would be if policymakers worked together to address zoning and building regulations. More specifically, the same regulations and zoning practices that have delayed developer’s agency in building new homes. Seeing as tech companies have a rather large public platform to vocalize a political and social voice, perhaps tech companies could publicly exert pressure on state and local law agents to loosen the above regulations. If they threaten to leave the area or usurp previously mentioned donations should these regulations persist, lawmakers might actually reassess and address the current housing regulations. 

Going forward, tech companies should be proactive rather than reactive. For example, housing developers have to pay a fee that supports the construction of affordable housing in the city of Mountain View (located near Silicon Valley). To allow housing developers to buy land before prices shot up, LinkedIn made this money available two years in advance to the actual construction. If Apple, Facebook and Google look into the future to draft proactive measures, they might be able to circumnavigate the existence of future problems instead of addressing them after the fact. 

Sources

  1. https://www.kjrh.com/news/national/apple-will-spend-2-5-billion-to-help-solve-californias-housing-crisis
  2. https://www.latimes.com/california/story/2019-10-21/gavin-newsom-california-housing-crisis-solution
  3. https://www.marketwatch.com/story/apple-facebook-google-and-amazon-are-putting-billions-of-dollars-toward-affordable-housing-but-that-money-may-be-too-little-too-late-2019-11-08

Venezuela’s extreme economic collapse!


The president of Venezuela, Nicolas Maduro

Venezuela’s debt has doubled in only one year!

Venezuela has been in the news over their economic collapse for the past couple of years. Some economists and historians have even deemed Venezeulas economic collapse as the biggest in decades outside of war. Most recently, Venezuela hit the news as their national debt doubled in one year and is not almost double the level of the country’s GDP. As Simon Constable says in his Forbes.com article “Venezeula Sinks Further into Oblivion” “At the end of the second quarter, total borrowing[in Venezuela] reached 198.4 percent of GDP”(Constable). When businesses and household debt become included in debt, the total debt comes out to be 221 percent of GDP.


Venezuelan citizens protesting the president and other government officials.




Hyperinflation is at 9,072 percent!

You read that right! Another economic indicator that is plaguing the Venezuelan economy is its 9,072 percent inflation rate! Well at least its better than deflation right? Only if you can recover from 9,072 percent worth of inflation! Foreign investors have placed such high interests rates on Venezuela’s lackluster cryptocurrency- the Petro which also further raises in the inflation rate and debt since it is impossible for Venezuela to pay their debt back. Venezuela has also taken out massive loans of 63 billion dollars from China since 2007, which also looks like they will not pay back anytime soon. Also, since 2016, every quarter has produced double-digit declines in GDP. Furthermore, when inflation was at 7,000 percent, President Maduro implemented a policy to eliminate the zeros from paper Bolivar bills so that a ten thousand Bolivar bill would be now worth ten. This further raised inflation and caused more economic turmoil. It is also important to note that the 9,072 percent inflation rate is just right now and the total inflation rate is expected to eclipse 15 million percent by the end of the year.

Why is Venezuela in this economic collapse if they have the most oil-rich country in the world?

You read that correctly. Venezuela, in the biggest non-war related economic collapse in decades, has the most oil reserves of any other country in the world. So how are they in crisis with an extremely valuable resource in oil? Well, that is a great question and is a big factor of why the Venezuelan citizens are so critical of the people in power. In fact, the only reason why Venezuela is not recovering from the economic collapse is because not only is President Maduro taking most of the money and resources in for himself, but also the actual leading oil company in the country, PDVSA, is so terribly run.

Conclusion

One of the many violent Venezuelan protests this year.

In conclusion, Venezuela is not just in an economic collapse, but also a political one. Because the country has virtually no assets or wealth, besides their terribly run oil reserves which aren’t helping decrease inflation, civilians are starving and homeless, while the political leaders use the mere money and resources left to live lavishly. To fix this issue, first off President Maduro needs to be out of office, and a new economically driven candidate can be elected to at least stop hyperinflation from getting worse. The head of PDVSA needs to be fired so the resource-rich company can promote value within Venezuela.

Inflation on the rise? China’s CPI rises to near eight-year high

In October, China’s consumer-price index rose 3.8% compared to last year, the National Bureau of Statistics said Saturday — higher than a median of 3.5% predicted by economists polled by The Wall Street Journal, and far outpacing September’s 3.0%.

China Consumer Price Index (CPI)

The Consumer Price Index or CPI measures changes in the prices paid by consumers for a basket of goods and services. It is widely used as an economic indicator. And It is the most widely used measure of inflation and the effectiveness of the government’s economic policy.

According to data released by NBS, “food/tabacco/wine” has the greatest increase, 11.4%, among all other categories. And among all food categories, pork price has the most significant jump: it rises 101.3%, accounting for 2.43 percentage points in the increase of the CPI.

A doubling of pork prices sent Chinese consumer inflation to its highest level in nearly eight years, constraining Beijing’s ability to stimulate the economy as growth continues to slow.

Soaring pork prices lifted overall food-price inflation to a more-than-11 year high, as consumer demand drove up prices for pork alternatives including eggs and other meat products. And the reason behind the price spike was African swine fever, a highly contagious virus that is lethal to pigs but not to humans.

During this summer, I worked as a reporter at “The Paper,” one of China’s most influential digital news outlets. And one of the investigative stories I worked on was about the outbreak of the African swine fever in Chinese rural villages in Jiangsu Province. Dozens of villagers reported large-scale death of pigs due to the disease. The videos they shot showed countless dead pigs abandoned by both sides of the road or in the ditch. They told me that “nearly all the pigs in the village died overnight.”

As a result, they sold the only surviving pigs at a very low price to reduce loss. Some of them sold the dead pigs at an even lower price. This contributed to a declining producer-price index (PPI) — pork-related products could buy the raw pork at a better price. However, the disease caused a sudden decline of pork available to the public and the demand for pork suddenly grow exponentially. Therefore, the CPI increased in response.

Another interesting trend I have noticed during my investigation was that the Chinese government has been trying really hard to cover the fact that the African swine fever has taken over. My story received a prior restraint and did not get published successfully dut to government censorship. During the first months of the outbreak, there was fairly less coverage of the disease in the mainstream media. On one hand, the government officials have announced in public that the fever has been eliminated, and they did not want the public to distrust them. On the other hand, admitting the disease would create a public disturbance that could further push down the pork prices. 

However, if the PRC does not address the issue directly and keep avoiding the topic, the situation will continue to worsen and push the CPI to a dangerous level.

While the prices charged by retailers to consumers are in an inflationary spiral, prices China’s factories charge to their clients are in a deflationary spiral. China’s PPI, seen as a key indicator of corporate profitability, dropped 1.6% into the deflationary territory from a year earlier, marking the steepest decline since July 2016. And it’s the result of both demand and supply pressures on the Chinese economy.

On the demand side, the exports weakened because of a slowing global economy and the ongoing trade war with America. Exports from China declined by 0.9% year-on-year to $212.93 billion in October of 2019, following a plunge of 3.2% in September, according to Tradingeconomics.com.

On the supply side, there’s excess factory capacity, due to the building of factories that practically duplicate each other, as discussed in a previous piece here. These factories churn out similar products and engage in a price war.

The increased CPI and decreased PPI may foresee inflation for China, and the Chinese government has to address the issue involved in order to get things back on track for 2020.

Reference:

2019年10月份居民消费价格同比上涨3.8%. http://www.stats.gov.cn/tjsj/zxfb/201911/t20191109_1708139.html.

“China Consumer Price Index (CPI).” China Consumer Price Index (CPI) | 2019 | Data | Chart | Calendar | Forecast, https://tradingeconomics.com/china/consumer-price-index-cpi.

MarketWatch. “China’s Consumer Inflation Hits Nearly 8-Year High.” MarketWatch, 11 Nov. 2019, https://www.marketwatch.com/story/chinas-consumer-inflation-hits-nearly-8-year-high-2019-11-10.

Mourdoukoutas, Panos. “China’s Price Trap.” Forbes, Forbes Magazine, 11 Nov. 2019, https://www.forbes.com/sites/panosmourdoukoutas/2019/11/10/chinas-price-trap/#ecf1c105454d.

Daryl Morey vs. the World

Hailing from Baraboo, Wisconsin, Houston Rockets General Manager Daryl Morey was on  top of the world. By relying on statistical analysis and the true shooting percentage stat, he has built the Houston Rockets basketball team into an NBA powerhouse. They have made the playoffs every year since 2012, a feat only two other teams have accomplished in team history. Morey has made some of the biggest signings of all time by securing James Harden, Russell Westbrook, Chris Paul, Dwight Howard, and many more players to long term deals.

The Houston Rockets have maintained their strong international presence created by the 2000s, and opened the door for the first Chinese star in the NBA by drafting Yao Ming in 2002. Now, James Harden is the 3rd highest selling jersey in China, where the NBA is the most popular sports league. According to Vox, more people watch NBA games in China than in the U.S. The NBA has built its reputation as a global league primarily through China as a touchpoint, creating hundreds of millions in revenue through merchandise sales and countless fans through Chinese NBA exhibition games. The economic and cultural stakes of the NBA’s relationship with China are no light burden. 

And then with a single tweet having nothing to do with basketball, Daryl Morey threatened to collapse the NBA’s massive commercial market in China. The owner of the very team that first struck superfandom in Chinese basketball fans hearts, became a major enemy of the Chinese corporations that air NBA games. He tweeted, “Fight for freedom, stand with Hong Kong.” While Morey may have tweeted with good intentions and used his American right to speak freely, China saw his tweet as a rebellion effort and insult to their country. China’s biggest airer of NBA games, Tencent, put all Rockets broadcasts on hold. Chinese fans were outraged by Morey’s comments and seeming insensitivity to China’s stake in the Hong Kong protests. The NBA sent out two statements, one apologizing to China for Morey’s “wrong” actions, and one acknolwedging the situation to the U.S. public. This did not go over smoothly, as both sides could read the other, and recognized the NBA trying to pander to sentiments to maintain a sense of peace (and keep their flow of profit). Morey has since removed his tweet, and kept quiet about the whole situation. 

This speaks to the larger trickiness present in U.S.-China trade in the age of social media. With a few words Morey probably didn’t think twice about, he threatened the balance of a billion dollar industry in which billions of people across the globe participate. Daryl Morey has found support from those who are unhappy about Chinese censorship’s power over American industries, which is exemplary of the American government’s current sentiments towards trade with China. 

This situation is unfortunate because the global commerce, sponsorship, and ambassadorial pursuits of the NBA have built up so much momentum in the past few years, and Morey’s tweet may set that progress back. Though this doesn’t drastically affect the trade war, upsetting the titanic corporation of Tencent does upset the hundreds of millions of viewers who lose out on NBA games and American corporations who stand to make huge profit on sponsorship deals. 

Sources: 

https://www.si.com/nba/2019/08/16/rockets-daryl-morey-james-harden-better-shooter-michael-jordan

Wineconomics: Climate Change

One of many chateaus in Bordeaux, France

In 2018, my family and I took a trip to Bordeaux, France, a region that prides itself for world-class wine. We visited multiple chateaus that looked like miniature palaces from the 19thcentury. On the outside, they were extravagant and radiated quite a historic glow. On the inside, they were surprisingly minimalistic: fermenting cylinders, labyrinth cellars, and reception offices. Each chateau representative we have talked to offered a unique insight into why their chateau’s wine is better than the neighbor’s. Organic growing techniques, hand-picked grapes, land, sun, shade, grape mix all play a role in making the best quality wine. Interestingly, it is the land and regional weather patterns that decide who gets to produce the best wine. As I learned during my tour, Petrusis among the top vineyards in Bordeaux with an average price of $2,895 for a bottle of wine. Why? It’s the land. Recently, however, the wine industry, not just in France but all over the world, has been changing due to human-induced climate volatility. Climate change already affects crop yield, geographical preferences, and quality of wine among other things. What does is it mean for the wine industry in economic terms and what does it mean for consumers?

Wine cellar in one of the many chateaus in Bordeaux

When thinking about an economy of a region or a country wine may seem like a miscellaneous factor, yet the world’s elite and wine enthusiasts have turned this alcoholic beverage into a portfolio investment diversification that brings in millions of dollars in profit. Cult Wines, a U.K. wine portfolio manager, in fact, returns 13% on wine investments annually. Wine has become a status symbol and fierce competition between the world’s renown vineries has encouraged an appreciation in value and rapid industry growth. In 2018, the global wine market had a total value of $302 billion and it is expected to rise to $450 billion by 2024. That’s more than 3 times the GDP of Ukraine. In 2016, the California wine industry output was $57.6 billion (2.3% of California’s GDP in 2016). This is not a major economic driver; however, the Californian wine industry is responsible for 786,387 jobs nationwide of which 325,000 are based in California alone.  

The wine industry is a particularly interesting area to investigate under the economic and environmental spotlight because in some cases it defies what one might think of climate change. Regions, that were once unsuitable for producing high-quality wine, such as Mosel and Rhine Valleys in Germany can now make world-class wine. According to research conducted by two professors from Princeton and NYU, in the 3C warming scenario, the value of vineyards in Mosel Valley may double while revenues may rise by 180%. As temperatures rise the northern regions of France and Germany will generally produce higher quality wine which is good news for Bordeaux. Studies show that a 1C increase in temperature leads to a 61.1% increase in price for Grand Cru Bordeaux wines. Sounds like climate change is good news? Not so fast. If the temperatures keep rising California may produce worse quality wine. Additionally, according to the Intergovernmental Panel on Climate Change (2000) A2 scenario, the total area suitable for growing grapes in the U.S. will shrink from 4.1 million square kilometers to 3.5 million square kilometers by the end of the 21stcentury. Given that the California wine industry is so ubiquitous in the U.S. and employs over 700,000 people nationwide the rising temperatures will pose a significant challenge to Napa vineyards. Changing wildfire patterns will also pose an economic threat to the industry. Fortunately, rising temperatures are a long-term phenomenon that leaves plenty of room for vineyards to adapt by shifting harvest seasons and employing extensive irrigation techniques. 

There are, of course, limitations to the accuracy of economic forecasts, and it is too early to say what the true impact on the industry will be. One thing is certain – Petrus is still going to be expensive and there will be no shortage of fine wine in the near future. 

Sources:

https://www.bloomberg.com/news/articles/2018-07-19/why-the-best-investment-vehicle-is-one-you-can-drink

https://www.mordorintelligence.com/industry-reports/wine-market

https://ideas.repec.org/a/tpr/restat/v92y2010i2p333-349.html

https://academic.oup.com/reep/article/10/1/25/2583835

https://www.nytimes.com/interactive/2019/10/14/dining/drinks/climate-change-wine.html

https://winesvinesanalytics.com/features/article/173240/Economic-Impact-of-California-Wine-114Bhttps://scholars.unh.edu/cgi/viewcontent.cgi?article=1419&context=honors

Plant-Based Meat Companies ‘Beefing’ up their Presence in the American Economy

In the past few years that has been a sudden boom in the plant-based meat industry. The trend has become so popular that many of your favorite fast-food chains have deals cut out with the big name brands such as Impossible Foods and Beyond Meats. With chains releasing new plant-based menu items recently, it has shown that the potential for this industry may have not hit its peak quite yet.  

According to reports by the Plant-Based Food Association, sales from plant-based foods in 2018 were higher than $3 billion. Despite all the excitement and craze for plant-based meats, many are still skeptical that this isn’t going to help drive revenue for fast food chains. With a reduced number of beef products hitting the shelf, the benefits for our ecosystem are positive but this will come at the cost of the farmers who have dedicated their lives to the industry. Plant-based products have the opportunity to completely change the fast-food market but will leave behind the cattle farmers in doing so.

In October, following the addition of the “Impossible Whopper” to their menu, Burger King’s parent company Restaurant Brands saw a 5% rise in sales for the quarter which is the highest growth the company has seen since 2015. Burger chains weren’t the only ones to capitalize on the hype. As for fast-food giant KFC, the company partnered up with Beyond Meat for a plant-based chicken nugget. The chain test trialed the product at an Atlanta location and it sold out in the same month it was released.

The repercussions of the meat industry are evident with a rise in deforestation due to cattle as well as the carbon emissions in the atmosphere. But many benefits show us that we should not cut out beef entirely.

Cows essentially convert cellulosic energy which is then turned into a tasty meal that can be consumed by humans.  According to Frank Mitloehner of UC Davis, half of all land in California is marginal land and without cattle, you could not use that land and that two-thirds of all agricultural land could not be used for food production for people. In addition to that the excretions from cows help fertilize the soil which helps to bring us the best quality of crops to consume.

Around the world consumption for meat is still on the incline but as for the United States and the United Kingdom, the “meat peak” may have been reached in 2010. The alternative meat industry is proving that this “fad” isn’t going away anytime soon. The cattle industry is going to need a major re-adjustment for their business model now that the fast-food chains are going to be the central distributor for their products. The stigma of a different kind of fake meat has now turned into a positive market ploy for the chains to stay relevant in a culture seeing a rise in vegans.

Additional Sources

https://www.cnn.com/2019/10/28/investing/restaurant-brands-earnings-burger-king-popeyes/index.html

https://www.cnbc.com/2019/06/18/meatless-alternatives-are-on-the-rise-so-is-global-meat-consumption.html

The Price of Love: The Economic Impact of Valentine’s Day

There is no doubt about it: February is a rough month to be single. With retailers everywhere fueling Valentine’s Day, one can’t help but feel at least a little left out. But who is Valentine’s Day really for? In theory, it is to celebrate your loved ones, especially your significant other. In practice, however, many feel that Valentine’s Day is more for consumerism and retailers more than anyone else. With companies and retailers making massive profits every February, Valentine’s Day has been dubbed a Hallmark Holiday, curated to make people feel like they need to spend money to prove their love. In fact, one 1994 study surveyed 105 men “found that though they primarily associated a feeling of love or friendship with Valentine’s Day, a sense of obligation was a close second.” (theatlantic.com). With the percent of people planning on participating in Valentine’s Day hitting an all time low in 2019 (only 51% of people), it is clear that individuals aren’t buying gifts because they want to, but because they feel like they have to. 

Retailers everywhere embrace Valentine’s Day with full force in hopes of making a profit from the increased consumer spending of the season.

But just how much are people spending out of obligation? As it turns out, quite a lot. In 2019, “celebrants were spending a record amount of $161.96 per person. That beat the 2016 record of $146.84. It’s also 13 percent more than the $143.56 spent in 2018.” (National Retail Federation). On average, men spend as much twice as much as women for the big day, which can be explained by the antiquated social expectation for men to demonstrate their ability to provide for women financially (thebalance.com). And while you may feel victorious when you buy your spouse the purse she’s been eyeing for months, no one wins more than retailers during the season of love. In 2019, shoppers funnelled a record high of $20.7 billion dollars into the economy, according to the National Retail Federation. The industries profiting most from love (and obligation) are “jewelry at $3.9 billion, clothing/lingerie at $2.1 billion, flowers at $1.9 billion, candy at $1.8 billion, gift cards at $1.3 billion and greeting cards at $933 million” (FoxBusiness.com). Tiffany & Co. , for example, saw “better-than-expected results with overall worldwide net sales rising 15 percent” during the first quarter of last year, which Valentine’s Day falls under (The Financial). 

Consumer Spending Trends for Valentine’s Day in 2018 (Statista)

Consumer spending statistics tell us that spending for Valentine’s Day is on the rise, despite the fact that the number of people participating in the holiday seems to be falling. How can we explain this phenomenon? While I cannot pretend to have all of the answers, one possible explanation is increased consumer confidence due to an expanding economy. The U.S. economy has been steadily growing over the past few years and this leads people to feel secure in their financials. When people feel richer, they are more likely to splurge a little extra for special events like Valentine’s Day. So while five years ago, you may have bought your boyfriend the speaker system that costs $400, you are feeling financially strong this Valentine’s Day season and decide to buy him the $700 set instead. He’s a lucky guy…this year. 

Click here for the interactive version of this graph from the National Retail Federation

Regardless of whether you are buying out of devotion or out of societal pressure to live up to your role as ‘good significant other,’ the fact stays the same: you are buying. And as long as consumers continue to keep the holiday alive with gifts and special outings, retailers and Valentine’s Day will live happily ever after, oh so blissfully married by fervent capitalism and heart-shaped boxes.