Bill Gates loves trash
A big $28bn bet on a dirty future
Well, not Bill Gates per se, but his family office, Cascade. And not trash in the metaphorical sense of very speculative assets but actual, honest-to-God trash. Or trash management at least.
Oxford University’s Martin Schmaltz has drawn our attention to the somewhat weird allocations of Gates’s private investment firm, which, depending on your source, seems to manage either $70bn, $120bn or $170bn.
Here’s what Refinitiv lists as Cascade’s 10 biggest position in dollar terms.
The combined $16bn holdings of Republic Services and Waste Management — the two biggest waste disposal companies in the US — make up almost half of Cascade’s disclosed equity portfolio.
If you include water purification and pest control giant Ecolab as kinda in the same business (getting rid of unwanted stuff, whether germs, garbage or bedbugs) then the sector accounts for 52.5 per cent of Cascade’s public book, or $21.1bn in total.
That’s not all! The actual Bill & Melinda Gates Foundation — which owns Gates’s remaining Microsoft shares — owns another $5.6bn stake in Waste Management, $703mn in Ecolab and $290mn in Waste Connections, a different trash disposal company. So that’s $27.69bn in total for the sector.
Some caveats are in order. All these holdings are mostly from filings made in 2021-22, so there may be some changes (but neither Cascade nor the Foundation are high turnover investors). There will be other stuff that doesn’t need to be disclosed, so this will never be more than a partial snapshot. Cascade also owns most of the Four Seasons Hotels and Resorts, for example.
Still, it’s an interesting portfolio. It basically looks like a massive near-$28bn bet on a grimy future where sanitation will be the in-demand service. Mad Max, but with even more garbage.
Cascade has been managed by Michael Larson since 1994. He’s kept remarkably under the radar, with the exception of a 1999 article in Fortune, and a less flattering NYT piece in 2021 on the “culture of fear at the firm that manages Bill Gates’s fortune”.
The other top Cascade holdings are also a bit bizarre for a technology billionaire’s family office. Agricultural machinery company John Deere and Diageo make up the rest of the top five, while further down we find Canada’s national railway system; car seller AutoNation; Spanish construction company FCC; Otter Tail, a Minnesota utility, and Ginkgo Bioworks, a biotech SPAC.
Last one excepted it’s all very old-economy, which appears to be the long-term strategy. Gates’s biggest UK investments, for example, have been in retailer Carpetright, jet servicing group Signature Aviation and Bunzl, a distributor of disposable cutlery. Given the still-big chunk of Microsoft shares sitting in the Foundation’s books, perhaps low-tech is the point?
Vodafone/Elliott: activist seeks an opportunistic gain from tower sale
US activist’s gambit depends on German securities law protecting minorities from premature squeeze-outs
Nick Read riled shareholders with efforts to tame the multi-country hydra that is Vodafone. He was ousted. Interim replacement Margherita Della Valle says the UK-based mobile operator “can do better”. That is certainly Elliott Management’s view of the complex sale of the Vantage Towers subsidiary led by Read. The US activist has taken an exposure of more than 5 per cent to Vantage stock.
The unexpected intervention underlines the importance of scenario planning for other would-be dealmakers.
Vodafone split off and listed telecom tower group Vantage in Germany in 2021. Infrastructure with reliable incomes merited high valuations because rates were low. But after the market worth peaked at about €16.5bn last spring, Vantage stock dropped by a quarter as rates moved up.
The valuation returned to previous highs thanks to the partial sale plan. Vodafone would participate in a Vantage joint venture with investors including KKR, and General Infrastructure Partners. The deal requires the JV owners to buy out 18 per cent held by minority investors. They would receive €32 a share.
Elliott’s gambit depends on German securities law protecting minorities from premature squeeze-outs.
The JV controls about 89 per cent of Vantage, but not the required 95 per cent. If Elliott does not sell, Vodafone and its partners can still operate Vantage, under a “domination agreement”. But that would allow Elliott to bring German litigation requiring a revaluation of Vantage.
This legal process lasts at least five years. Under German law, Elliott would be likely to receive compensation in lieu of dividends set at 5 per cent a year above German short-term rates, currently slightly more than 1.6 per cent.
A court might or might not bump up the Vantage valuation. If Vodafone and its JV partners do not fancy waiting, they may have to pay Elliott and other minorities more for their shares, currently valued at about €800mn.
Read might have foreseen Elliott’s intervention, given that it did something similar at Kabel Deutschland. But foresight does not appear to have been his strong point.
The Strategy Behind Skims’ Viral White Lotus Campaign
The brand’s latest celebrity-fronted ad serves as another example of how it is wielding star power beyond its famous founder.
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Simona Tabasco and Beatrice Grannò star in Skims' Valentine's Day campaign (Courtesy Skims)
KEY INSIGHTS
- Skims' Valentine's Day campaign, starring 'White Lotus' actresses Simona Tabasco and Beatrice Grannò, went viral last week.
- The campaign is another example of Skims' evolving approach to celebrity marketing, which is centred around creating cultural moments.
- As the company, which crossed $475 million in revenue last year, grows, its marketing will continue to expand beyond Kim Kardashian herself.
Skims may have one of the world’s most recognisable faces as its founder, but lately it’s been leaning on celebrities with more subtle star power in its marketing.
For its Valentine’s Day campaign, which dropped on Jan. 23, the shapewear, intimates and loungewear label cast Simona Tabasco and Beatrice Grannò, two Italian actresses who have recently shot to the top of the cultural zeitgeist thanks to their roles as swindling sex workers in HBO’s hit series The White Lotus.
The campaign’s creative is fairly simple, as is standard in Skims’ marketing. The two actresses — who are also best friends in real life — are clad in coordinating pink bra-and-panty sets against a no-frills grey backdrop. Much as they often did on the show, they have their arms around each other as they whisper and giggle into each other’s ears. It ends with Tabasco saying “Tutti indossano Skims,” with Grannò repeating the phrase in English: “Everybody’s wearing Skims.” Accompanying images are much of the same: The two together, against a simple backdrop of grey or an over-sized red heart, in matching Skims sets.
Simple though it may be, the campaign was effective. Though it’s too early to determine EMV (earned media value) across social media, according to Tribe Dynamics, the firm that calculates the metric, the ensuing online chatter was quick and obvious. “Damn, I wish I’d thought of that,” one marketer wrote on Twitter. Consumer reception was positive, too: “Not me wanting to buy everything from Skims because they got the two women from White Lotus as a part of the campaign,” another Twitter user wrote.
“When the casting is this strong, this relevant and has such a nice tie to your brand story, you don’t really have to have too much more,” said Kylie Vandeven, associate creative director at ad agency VMLY&R, who did not work on the campaign. “The casting itself was the campaign.”
Employing clever casting as the bulk of the creative strategy has become Skims’ marketing calling card. In April 2022, it rolled out its “Fits Everybody” campaign, which starred former Victoria’s Secret angels Tyra Banks, Heidi Klum, Candice Swanepoel, and Alessandra Ambrosio in their first campaign together. (It did receive some backlash online, due to lack of body diversity.) When it launched bras in September 2022, it recruited a cast of 50 women representing various ages and body types, including model and actress Brooke Shields, singer Becky G, actress Juliette Lewis, comedian Chelsea Handler and musician Cassie. Skims’ holiday campaign in 2022 featured Snoop Dogg and his entire family in matching plaid pyjamas.
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Former Victoria's Secret angels Heidi Klum, Tyra Banks, Alessandra Ambrosio and Candice Swanepoel all star in a 2022 campaign for Skims.
“We are a brand and a company that participates in popular culture, and we actively try to create [based on] what’s happening around us in that moment,” Jens Grede, the co-founder and CEO of Skims, told BoF.
Making Magic Happen
This time, Grede said that the campaign’s genesis was simple: Both he and Skims co-founder Kim Kardashian are fans of the show. The morning after the finale aired, Kardashian suggested casting the two as the stars of a Valentine’s Day campaign. They felt that the show’s momentum would continue throughout awards season and charged ahead with getting the campaign together. It ended up dropping just over six weeks after the finale — and just a few weeks after it picked up two trophies at the Golden Globes.
“The ability for them to be able to identify people who are, whether they’re emerging or they’re of the moment, are so in the thick of culture, and get that into a campaign in a very expedient way is their magic power,” said Eunice Shin, partner at brand strategy firm Prophet.
What also helps, Grede said, is letting the talent speak for themselves — in more ways than one. Skims’ campaigns usually take a minimalist approach that puts whoever is appearing in them centre stage, not competing for attention with a storyline or even an elaborate backdrop. But they also allow the talent to be partners in imagining what the campaign will look like, according to Grede.
“We don’t script anything,” said Grede. “It’s a modern approach, where you’re not micromanaging talent, but really starting from what the talent wants to say and to create. It’s really led by them rather than by us.”
He added that much of the brand’s marketing strategy is led by the idea of creating moments in culture, much as, he said, Kardashian’s own career has been. (He pointed to her wearing Marilyn Monroe’s gown to last year’s Met Gala as an example.) That could include hopping on current trends, like the Valentine’s Day campaign, or striking a nostalgic note. Shields’ appearance in Skims’ bra campaign, for example, was her first underwear shoot in three decades.
And though Kardashian remains Skims’ most important ambassador, as the company grows, it is increasingly looking beyond her when it comes to casting campaigns. The brand, which hit $475 million in revenue last year, hopes to follow a trajectory like that of the Jordan brand, which also began as a celebrity label but has evolved to be bigger than its famous founder.
“Kim is the Michael Jordan of the influencer generation,” said Grede. “We’ve been lucky to have this platform, but we want that platform to be broader than any one person and to be really combined in spirit rather than anything else.”
What Hermès Really Thinks About NFTs
In the opening days of its trial against the MetaBirkins creator, the luxury house revealed some of its own thinking around web3 and virtual worlds.
Hermès’ battle against the MetaBirkins NFTs isn’t just about protecting its brand in the physical world, it turns out.
The French luxury house sees web3 and virtual worlds as part of the future and has been investigating releasing its own NFTs, the company’s global general counsel, Nicolas Martin, testified Tuesday in a high-stakes trial pitting Hermès against Mason Rothschild, creator of the colourful digital interpretations of its iconic Birkin.
Hermès, unlike a number of peers in the luxury world, has so far abstained from jumping into the blockchain-based digital assets, suggesting perhaps it saw NFTs and other virtual goods as incompatible with its brand, known above all for its exquisite materials and meticulous craftsmanship. But the company has been actively researching a variety of virtual opportunities, according to Martin. (Hermès has also applied for trademarks on various virtual assets, though sometimes brands use the tactic just to keep others from grabbing them.)
Martin shared the behind-the-scenes details while taking questions from Hermès’ attorneys in the case, which is taking place in a Southern District of New York courtroom in lower Manhattan. For a year now, Hermès has been in a legal battle with Rothschild, who it accuses of infringing and diluting its trademarks on the Birkin’s name and design. Rothschild contends his MetaBirkins NFTs are artistic expression and therefore protected as free speech in the US. The two sides were unable to reach a settlement or win a summary judgment, so a jury trial has now commenced.
Of course, it serves Hermès’ case to say the company was planning its own NFTs. It wouldn’t just be physical goods then but also any forthcoming digital items it could claim are affected by Rothschild’s MetaBirkins. Martin said in his testimony the company suffered by having lost the opportunity to be first into the digital market with a Birkin product.
He also described a number of other virtual products Hermès is considering.
One he mentioned was an NFT-based digital twin of a physical good. In an example, Martin said you might buy a scarf from Hermès and receive access to a digital file — presumably the NFT-linked asset — that shows the scarf moving and gives you the story behind the product.
Hermès has also looked into offering NFTs to attendees of events. He didn’t specify what type of event but one could imagine guests of one of the brand’s runway shows might receive one.
Not least of all, he noted that the communications department is working on what he described as a small metaverse where individuals could interact.
The ideas aren’t entirely novel. Digital twins are one of the more widely explored roles for NFTs in luxury, with proponents including the Aura Blockchain Consortium — founded by LVMH, Prada and Cartier — touting them as a means to provide an item with a public and tamper-proof certificate of authenticity. And NFTs given out as proof of attending an event are common in the web3 world. They’re called proof of attendance protocols, or POAPs.
There’s also no guarantee any of these products will ever be released to the public. Hermès — and other luxury companies in a similar position — could ultimately decide they aren’t a fit for the brand and abandon them in the research phase. But they show Hermès isn’t simply sitting by watching others dive into virtual goods without considering the opportunities.
Whether the existence of Rothschild’s MetaBirkins would have any impact on Hermès’ success in these spaces is debatable. They’re effectively collectables without any utility; they can’t be used in any virtual environments, for instance. It doesn’t seem as if Hermès planned to release NFTs of this sort.
But that’s far from the only issue that will determine the outcome of the case. Some other vital matters involved include whether the MetaBirkins confused consumers into thinking the project was somehow sanctioned by Hermés; whether their artistic value is trivial compared to how much they infringed on Hermès trademarks for financial profit; and not least of all, whether the technical underpinnings of an NFT matter here.
We commonly talk about NFTs as whatever image they show, whether a digital Birkin or mutant ape. But an NFT is just a bit of code on a blockchain. To keep the file size smaller — and thus processing workloads and transaction fees lower — many collectable NFTs, including the MetaBirkins, use a workaround where the image isn’t on the blockchain itself. It exists in a separate repository and the NFT just points to it. In theory, whoever controls that repository could change that image, though the NFT code would stay the same. So is the NFT just the code or is the image included?
Already the trial has delved into these technical issues, leaving the judge, Jed Rakoff — who also happened to preside over Adidas’ losing trademark dispute with Thom Browne — frustrated at the lack of clarity. He seemed inclined to say an NFT and the image are one and the same. It’s too early to say whether if or how any of these technical distinctions will factor into the jury’s decision.
Swatch Group Raises Prices For Omega SpeedMaster Watches, Following Rolex’s Lead
Luxury watch conglomerate Swatch Group AG raised prices across a slew of its brands, increasing the cost of the flagship Omega Speedmaster by about 7 percent in the UK and Europe, according to investment bank Jefferies.
The price of an Omega Speedmaster automatic watch with a moonphase complication in the UK is now £10,600 ($13,060) as of Feb. 1, up 7.1 percent compared to January last year, Jefferies analysts led by Kathryn Parker said in a report. Prices for the same model rose an average of 6.8 percent in Italy and 2 percent in the US.
Increases at Swatch brands including Omega, Longines and Tissot follow a similar move by the top Swiss watchmaker Rolex SA to boost prices by about 2.5 percent in the UK and Europe in January. Rolex had already raised prices across the continent in the autumn, in an unusual move, to counter rising costs and currency fluctuations caused by a strong US dollar and Swiss franc against a weaker sterling and euro. Rolex usually raises prices just once a year.
The uplift shows Swatch brands believe consumers will accept steeper prices as demand for high-end timepieces stays strong.
Luxury watch brands including Rolex and Omega are ramping up prices in the UK, Japan and South Korea by more than other locations to offset weaker currencies and to prevent price discrepancies across regions and countries, according to the note. For example, the cost of an Omega Seamaster 300 dive watch rose by at least 6.5 percent in all three countries, compared to more modest uplifts in the US and China.
The price of the hit MoonSwatch, the budget-friendly, bio-plastic Swatch version of the Omega Speedmaster, rose in Korea and Japan by more than 7 percent. Swatch Group, which sold a million MoonSwatch units last year, did not increase prices in the US, UK and Europe where the popular timepiece sells for about €260 ($283).
A spokesman for Swatch Group declined to comment on the report.
Swatch chief executive Nick Hayek told Bloomberg News last week that the company could hit record sales of as much as 9 billion Swiss franc ($9.8 billion) in 2023 as China reopens.
Swiss watch exports hit a record 24.8 billion Swiss francs by value in 2022, rising 11.8 percent from the year before. Export growth slowed in December to 5.8 percent.
EA Shows Why Mobile Games Are a Minefield
‘Apex Legends Mobile’ misfire drives videogame publisher to pull plug amid tough period
With annual revenue now over $7 billion, Electronic Arts EA -11.51% is the largest stand-alone game publisher in the U.S. save for Activision Blizzard. ATVI -0.42% EA also has a few games capable of generating more than $1 billion a year on their own, including “Apex Legends.” The battle-royale style shooter was EA’s answer to the blockbuster “Fortnite” and has been a resounding success since its surprise launch in 2019 for consoles and PCs. Analysts estimate the game’s total revenue has surpassed that of “Madden NFL” to become EA’s second-biggest property next to the blockbuster soccer franchise “FIFA,” according to Visible Alpha.
But even that is not enough to ensure success in the finicky mobile game market. EA surprised investors Tuesday with the news that it is pulling the plug on the mobile version of Apex, which has been in release for less than a year. It wasn’t a quality problem; “Apex Legends Mobile” was named Game of the Year for 2022 by both Apple and Google for their respective mobile platforms. But during a conference call to discuss the company’s fiscal third-quarter results, EA Chief Executive Andrew Wilson said that while the game resonated with many core players, failure to keep enough casual players engaged still limited the audience. “And in a game that relies a lot on team play and competitive play, liquidity of the overall player base is really, really important as you think about the future experience for players over time.”
The experience with “Apex Legends Mobile” also caused EA to kill a planned mobile version of its “Battlefield” franchise, which has been in development since at least mid-2021. And that wasn’t the only bad news in the results. EA delayed the release of the console game “Star Wars Jedi: Survivor” from mid-March to late April. Net bookings for the December quarter also came up about 6% shy of Wall Street’s forecasts, as EA’s games faced stronger competition during the crucial holiday quarter, which included a newly resurgent “Call of Duty” iteration from rival Activision Blizzard.
All told, EA cut its projected net bookings for the fiscal year ending in March by 8%, to around $7.1 billion. That implies a shortfall of about $500 million for the March period relative to the company’s prior target, much of which is owing to the “Star Wars” title delay. EA’s stock price slid 11% Wednesday morning.
Delays are now common in a videogame market where each release is expected to be merely a starting point for years of recurring revenue from live services. But EA’s struggles in mobile might prove a bigger problem over the long term. Mobile is the game industry’s largest addressable market. Apple alone said at this time last year its global installed base surpassed 1.8 billion devices. Market research firm Newzoo estimates that mobile games accounted for half the game industry’s total revenue in 2022—and was 78% larger than what console games generated for the year.
But mobile has still proven a hard market to crack—at least in a way that reliably moves the needle for a company the size of EA. The industry remains dominated by casual titles—“Candy Crush Saga” and “Clash of Clans” are still top-five grossing games more than a decade after their initial releases. And the slowing economy has hit just as mobile game makers were grappling with changes made by Apple to its iOS operating system that makes it harder to effectively market games to new players. That has hurt even well-established players. Take-Two Interactive, which acquired mobile game maker Zynga last year, cut its own forecast for the March fiscal year by 7% during its last quarterly report, citing release delays as well as the impact of the weakening economy “particularly in mobile.”
EA’s struggles also call into question the idea that popular games on PCs and consoles easily translate to mobile. That logic not only underpinned Take-Two’s acquisition of Zynga, but also is a major theme of Microsoft’s effort to buy Activision. “There’s cognitive dissonance in the desire to unite global gaming communities around core IP vs. the reality of that IP not always translating so well across platforms,” wrote Clay Griffin of MoffettNathanson in a note Wednesday morning. EA is hardly in a space to disagree.