Gapping down
In reaction to earnings/guidance:
- CALM -4.3%,
Other news:
- GOTU -10.6% (China will increase oversight of online education tech according to Bloomberg),
- TAL -6.8% (China will increase oversight of online education tech according to Bloomberg),
- JYNT -5.6% (to be removed from S&P SmallCap 600),
- EDU -5% (China will increase oversight of online education tech according to Bloomberg),
- IMGN -2.7% (CFO to step down after medical leave),
- TTM -2% (Delhi Transport Corporation signs a definitive agreement with Tata Motors' subsidiary for operating 1500 electric buses),
- KRUS -1.7% (files for $125 mln mixed securities shelf offering)
Gapping up
Other news:
- GLBL +7.1% (will operate as Alvarium Tiedemann Holdings, listed on NASDAQ under the ticker symbol ALTI on January 4)
- HYZN +5% (enters into Equity Capital Contribution Agreement with CVX)
- TSLA +4.4% (CEO Musk tells workers not to be 'bothered by stock market craziness')
- RXO +2.9% (will move to S&P SmallCap 600 from S&P MidCap 400)
- TSM +1.1% (holds 3nm volume production and capacity expansion ceremony, marking a key milestone for advanced manufacturing),
Economy Has Drinkers Choosing Prosecco Over Champagne
Sales of higher-priced liquor and wine are slowing after years of growth
Shoppers are reaching less for the top shelf.
For more than a decade, high-price drinks have driven sales growth in the wine and spirits industries as people traded up for fancier brands. That is now changing: Sales growth of costlier spirits and wine is slowing, and even reversing, as shoppers seek out more value.
The shift is another sign that behavior is changing among some of the least price-sensitive shoppers as economists forecast a recession. While demand for luxury goods has largely held up in the face of inflation and other economic headwinds, makers of pricey handbags and clothing this fall warned of a slowdown, saying customers were becoming more cautious.
The belt-tightening is spreading as well-off consumers feel the effects of stock-market losses and softening real-estate prices, said Rabobank strategist Stephen Rannekleiv. He likened the trend to the spending choices wealthy shoppers made during the 2008 global financial crisis.
“Call it a psychological effect,” Mr. Rannekleiv said. “How set am I for retirement? How much can I spend today without affecting my future?”
U.S. retail-store sales of superpremium spirits—which include American whiskey priced at $24 to $39.99 for 750 milliliters—dropped 3.7% in the 48 weeks ended Dec. 3, after growing 4% in 2021, according to an analysis of Nielsen data by the Bump Williams Consulting Co., a beverage-industry consulting firm. Sales growth of ultrapremium spirits, which include tequila priced at more than $50 and American whiskey at more than $40, has slowed to 2% from 24% in 2021.
Joe Berne and his wife recently bought a new house, and their finances are stretched with three children in college. So he has stopped buying his favorite tequila brand, which sells for as much as $200 a bottle, and switched to one that costs about $40.
He spotted a bottle of Teremana Añejo tequila a couple of months ago in a liquor store near his new home in Wappingers Falls, N.Y. Mr. Berne, a software developer who drinks tequila several times a week, had heard about the brand, backed by actor Dwayne “The Rock” Johnson. He asked the store clerk if the price on the tag—just under $40–was a mistake. It wasn’t. He took home a bottle and liked it so much that he returned and bought two more.
“This one really hit for me,” said Mr. Berne, 51 years old. He said his favorite Don Julio 1942 tequila, which he used to buy about four times a year, “is better but not that much better.” He said he might now splurge on it once a year.
This holiday season, prosecco sales are booming as people choose the more affordable Italian bubbly over French Champagne, according to Liz Paquette, head of insights for online alcohol retailer Drizly. The average bottle of prosecco on Drizly’s website sells for $16, while the average bottle of Champagne sells for $57, she said.
Wine club membership sign-ups, an important driver of high-end wine sales, have also flattened in 2022, according to an analysis by WineDirect and Enolytics, which provide e-commerce platforms and other services for winemakers.
In November, Diageo DEO -0.80% PLC, which makes Don Julio tequila and Cîroc vodka, said sales of smaller packages such as 375-milliter bottles were picking up in the U.S. because of their more-affordable price points, but shoppers weren’t trading down to cheaper brands.
Retail-store sales rose more than 18% in 2021 for wine priced from $50 to $99.99, according to Bump Williams Consulting. In 2022, they are down 4.5%. Sales are also lower for wine priced from $25 to $50. What’s selling well? Bottles priced around $18 or $19.
Consumers instead were seeking out deals from large-format retailers and club stores, Debra Crew, Diageo’s chief operating officer, said at an analyst conference in November. She added that the higher-income consumer appeared strong, and categories such as high-end tequila were selling well.
Constellation Brands Inc., STZ -0.22% which sells Casa Noble tequila and Robert Mondavi wine, has unloaded its cheap wine brands over the past several years and shifted its portfolio toward more premium offerings. In early December, its finance chief, Garth Hankinson, said at an analyst conference that growth in high-end drinks might be slowing but that it will bounce back.
“You’re not necessarily seeing broad trade-down,” he said. “The consumer remains resilient.”
OpenSea chief seeks to distance NFTs from crypto crisis
Head of leading marketplace responds to digital assets slump following FTX scandal
The chief executive of OpenSea, the world’s leading non-fungible token marketplace, has sought to distance NFTs from cryptocurrencies as the sector is hit by the knock-on impact of a series of scandals.
Devin Finzer, 32, told the Financial Times that the crypto industry had seen “some setbacks recently”, referencing the fall of FTX, the cryptocurrency exchange that collapsed into bankruptcy in November helping to trigger a fall in the value of digital assets.
OpenSea soared in value as online collectibles and digital art called NFTs built upon the same blockchain technology as cryptocurrencies became a hype-fuelled market over the past two years.
But the head of New York-based company insisted that NFTs retain a bright future, believing that consumers will continue to spend real-world money to acquire digital images and display them in their homes and in online virtual spaces.
“It is not necessarily the case that NFTs will always be bought and sold denominated in cryptocurrency as they are today,” he said. “There are a variety of reasons why that makes sense in the current ecosystem, but as we get broader and more accessible, there is no reason that NFTs could not at least be denominated in US dollars.”
OpenSea has seen monthly trading volumes in cryptocurrency ether fall 95 per cent from a $4.9bn peak in January last year to $253mn in November, according to data from a user named “rchen” on Dune Analytics. The daily number of NFTs sold in ether on the platform has dropped 68 per cent from a peak of 2.3mn in January to 740,000 last month.
“NFTs do not exist in a vacuum, there is the overall macro climate which has changed dramatically, and that affects consumer spending and the broader crypto climate, which is experiencing a winter right now,” Finzer said.
The company cut 20 per cent of staff in July, with Finzer anticipating a “prolonged downturn” and leaving OpenSea with about 300 employees.
Finzer maintains that the company has a “healthy runway”, having raised $423mn over several funding rounds since 2021, which saw investments from venture capitalists Coatue and Andreessen Horowitz. Angels, including Reddit founder Alex Ohanian, actor Ashton Kutcher and singer Shawn Mendes, also participated in previous rounds.
OpenSea raised the majority of its capital, $300mn, during its most recent funding round announced in January this year, valuing the company at $13.3bn.
NFTs use blockchain technology to certify ownership of a digital asset, which is recorded on an immutable ledger of transactions. They use the same technology that underpins cryptocurrencies and are usually bought and sold in cryptocurrencies such as ether.
This year, the crypto market has suffered a series of scandals, including the collapse of stablecoin terraUSD and a marketwide crash that saw the price of popular tokens such as bitcoin plummet. A raft of legislation is being introduced to regulate the volatile industry, including the UK’s Financial Services and Markets bill and the EU’s Markets in Crypto-Assets Regulation.
Governments and law enforcement bodies worldwide are also deciding whether NFTs should be registered and disclosed as financial securities.
“It is really important that regulators and government officials understand that this is not the same as the broader crypto industry where there is a lot of focus around financial use cases,” Finzer said.
He said the value of NFTs should be decided by how people engage with it, whether through using tokens to attend exclusive events, play games, or display digital artwork in their homes.
“It is already the case that people are using Instagram [to share NFTs] with their friends,” Finzer said. “[In future] more and more of your property may be digital as opposed to physical art . . . right now, it is maybe early adopters that are displaying NFTs inside of their homes, but that could be something that continues to happen more and more.”
Blue sky thinking: bacteria have an appetite for recycling
Start-ups are raising funds to speed up process that uses microbes
The world is awash in plastic. Some 400mn tonnes are produced each year. Most is not recycled and ends up in landfills or the ocean. As it degrades, plastic also accumulates in the food chain. Microplastics are widespread in fish.
Yet plastic production is accelerating It is expected to grow 50 per cent by 2050 to almost 600mn tonnes a year, says the International Energy Agency. Recycling is expensive. Researchers think plastic-munching microbes offer an alternative solution.
Microbes are nature’s recyclers. They can create enzymes — or proteins — that break down organic matter into soil. In 2016, researchers in Japan discovered a bacteria that produced enzymes able to break down polyethylene terephthalate (PET), a substance used to make plastic bottles and polyester clothing.
Enzymes are an appealing choice. Although industrial chemicals can break down plastics, enzymes require less energy, making them a potentially greener option. Their use also allows easier recycling of plastic from mixed garbage.
The problem is that even the best enzymes tend to work relatively slowly, making them economically inefficient and hard to scale up to handle commercial volumes. Any naturally occurring plastic-gobbling bacteria would require serious bioengineering if they are to degrade plastic hundreds, or thousands, of times faster.
The main hurdle is an economic one. New plastic is cheaper than recycled versions. Without subsidies, plastic-eating bacteria and their enzymes will continue to compete with cheaper virgin plastics sourced from petroleum.
Start-ups are raising funds to speed up biorecycling. In the UK, Epoch Biodesign, which is targeting plastics that cannot currently be recycled, raised $11mn this summer. Across the channel, French company Carbios announced in 2019 that it had successfully produced new plastic bottles from PET with a process that makes them infinitely recyclable.
The goal is for bacteria to break down old plastic and create components used for new plastic. Eventually, plastic could become an enzyme-enabled circular economy.