Germany Leaves Its Natural Gas in the Ground
The country can’t say it wasn’t warned about overreliance on Russia for energy
Regarding Walter Russell Mead’s “Germans See Affluence Ahead” (Global View, Oct. 18) and Joseph Sternberg’s “Germany Finally Says the F-Word: ‘Fracking’” (Political Economics, Oct. 7): My firm’s geologists had researched European shale resources. We estimated that, with fracking, Europe had about 700 trillion cubic feet of recoverable natural gas, enough to power the continent for 50 years. I was asked to present this information to the energy-security-policy leadership (Energie Sicherheitsführung) of the German parliament in April 2006.
At the time Germany was already planning to expand its gas pipelines to Russia. That natural gas cost around $17 per million British thermal units, compared with a cost of $3 at home. I asked the leaders to imagine the positive effects of being able to power their economy from local resources and in that price range. Their faces showed stunned disbelief. As one of their Ph.D.s explained in German: “A Halliburton truck fracking on a German hill? Never, never!”
Following the meeting, they budgeted the princely sum of 300,000 euros to study what I had presented, but they decided to stick with the pipelines. The Germans can’t say they weren’t warned.
US health agency warns of worsening sexual health crisis
Rates of transmitted infections are rising including a 26 per cent jump in syphilis cases
More funding is needed for sexual health services along with innovative testing and prevention tools to tackle an “alarming” rise in sexually transmitted infections across the US, the nation’s top public health agency has warned.
Dr Leandro Mena, director of the division of STD prevention at the Centers for Disease Control and Prevention, told the Financial Times that new data showing the number of syphilis cases surged by more than a quarter last year highlighted the “crisis” unfolding in the sexual health of America.
The rise in cases of syphilis and other bacterial STDs — such as gonorrhoea and chlamydia — is being fuelled by a combination of underfunding of sexual health services, reduced condom use among certain groups and stigma surrounding sexual diseases and access to treatment, he said.
“We find these [statistics] pretty alarming. For six or seven consecutive years STI rates have been increasing in the US and last year’s 26 per cent jump in syphilis cases was one of the largest year-to-year increases that we have ever seen,” he said.
The resurgence of STIs in the US and elsewhere is causing concern among health officials, who warn services are already overstretched owing to Covid-19 and monkeypox. Last year the CDC estimated one in five Americans had an STI at some point during 2018 and the lifetime cost of treating new infections acquired during that single year would be up to $16bn.
Mena said US prevention and treatment services for sexual health had been underfunded for more than two decades, resulting in a more than 40 per cent reduction in per capita purchasing power when inflation is taken into account. This had resulted in a decrease in testing and screening services in many communities, he said.
“To address the crisis that we recognise that we have in the sexual health of America I think we really need innovation,” said Mena. “We need to improve access to stigma-free, discrimination-free, affordable sexual health services . . . we need more tools to fight the national spike in bacterial STIs.”
Preliminary data released last month by the CDC shows 2.5mn bacterial STI infections were reported in 2021, a rise of 4.4 per cent on the previous year. The number of gonorrhoea and chlamydia cases grew by about 3 per cent year-on-year while reported cases of syphilis, a potentially life-threatening disease when not treated, increased significantly faster.
Infection rates for syphilis reached a historic low in 2000-2001, according to CDC data, but have steadily increased since then. Over a five-year period reported cases of syphilis have surged almost 70 per cent while the number of congenital cases — when a mother passes a syphilis infection to her baby during pregnancy — has surged by 184 per cent since 2017.
“Congenital syphilis can have devastating outcomes that affects perhaps the most vulnerable individuals in society, newborns. It is also 100 per cent preventable, so it represents in many ways failures in our systems,” said Mena.
He said there had been a decline in use of condoms among some groups, including young people, and men who have sex with men as the availability of antiretroviral treatments for HIV expanded in recent years. Substance abuse and the opioids epidemic is linked to increases in risky sexual behaviour and stigma played a role in keeping people away from accessing screening services and treatments, said Mena.
He said people needed access to “stigma-free and affordable” sexual health screening services to tackle increasing infection rates. The development and rollout of home test kits and point of sale testing in pharmacies or locations other than health clinics could also help, added Mena.
He said the CDC is evaluating “exciting” research published in July which showed that a single pill of a common antibiotic taken up to the three days after sex could significantly reduce infection rates from bacterial STIs.
“We’re very encouraged by these initial data in an NIH funded study for the use of doxycycline as post-exposure prophylaxis to prevent infection,” said Mena.
He said the agency wants to review the full data set from the study before issuing guidance to doctors on use of doxycycline among high-risk groups. This would consider the issue of anti-microbial resistance and whether prescribing the antibiotic in this manner could cause other pathogens to build resistance against doxycycline, said Mena.
Japan made intervention of at least $30bn to prop up yen
Officials have suggested the government has ‘limitless’ funds to defend the country’s currency
Japanese authorities are likely to have spent more than $30bn last week in their second intervention in a month to prop up the yen after it fell to a fresh 32-year-low against the dollar, according to estimates by traders.
The intervention conducted on Friday came after the yen hit ¥151.94 to the dollar, causing it to briefly surge to ¥144.50 during a typically quiet time of the week for trading. The yen closed around ¥147 on Friday.
During a visit to Australia over the weekend, Fumio Kishida, Japan’s prime minister, said the government would take “appropriate measures” to address excessive volatility in currency markets.
“We cannot tolerate excessive volatility caused by speculative trading. We are watching developments in the foreign exchange market with a strong sense of urgency,” Kishida said while declining to confirm if an intervention was carried out on Friday.
Finance ministry officials have not commented on whether they had conducted an intervention on Friday, but two people close to the government confirmed that the action was taken. Authorities had already spent $20bn in September conducting Japan’s first yen-buying operation since 1998.
The Bank of America estimated after last month’s intervention that the Japanese government, which has $1.3tn in foreign reserves, could execute up to 10 more interventions by selling liquid assets.
Masato Kanda, the country’s top currency official, recently suggested that the government had a “limitless” amount of funds to conduct interventions, according to Japanese media.
But analysts say that the effectiveness of such interventions would be limited as long as the interest rate differentials between ultra-loose Japan and the tightening US remained wide. Japan is not alone in its struggle to respond to sharp volatility in financial markets with both regulators in Taiwan and South Korea also introducing market-supporting measures.
Takahide Kiuchi, executive economist at Nomura Research Institute, said the latest intervention had a bigger impact than expected due to several factors. Traders were surprised because they had expected the government to intervene during Tokyo trading hours instead of during European and US market hours.
“There is also the possibility that the size of the currency intervention was significant,” Kiuchi said without specifying the size. Currency traders estimated that Japan spent at least $30bn in the intervention.
Analysts said the move may have been precipitated by a report in the Wall Street Journal that Federal Reserve officials were likely to debate next month on whether to approve a smaller rate increase in December as global financial stress mounts because of the sharp rate hikes.
De facto UK windfall tax on green energy is ‘catastrophic’, sector warns
Trade body argues that revenue cap on renewables will penalise low-carbon investments
The UK government’s de facto windfall tax on low carbon electricity companies will have “catastrophic consequences” for investment in green technologies such as wind and solar, energy companies have warned.
Energy UK, a trade body that represents companies including Centrica, EDF Energy, ScottishPower and SSE, this weekend joined criticism of the government’s revenue cap on low carbon electricity generators, which was confirmed by Liz Truss’s government before she stepped down as prime minister.
The policy, which was introduced to raise funds for the government’s energy bills support scheme for households and could remain in place until the end of 2027, is included in a controversial energy prices bill that is still progressing through parliament. However, ministers are yet to confirm the level of the cap.
It applies to companies that own low carbon electricity generation assets such as wind and solar farms, plus nuclear and biomass power plants. Gas-fired power plants are excluded despite also benefiting from the surge in wholesale power prices following Russia’s full blown invasion of Ukraine.
Energy companies have branded the policy an effective windfall tax and are concerned it is even more punitive than a separate levy on oil and gas producers, which was introduced by former chancellor Rishi Sunak in May.
Energy UK has sent a briefing to all MPs ahead of chancellor Jeremy Hunt’s fiscal statement — expected on October 31 — warning that the cap, as it is currently designed, would “cement a tax regime heavily tipped in favour of oil and gas, and send a disastrous message [to global investors] about the UK’s climate commitment”.
The group argues that while the levy on oil and gas — which raised fossil fuel producers’ headline tax rate from 40 to 65 per cent — is charged only on profits, the cap will limit its members’ profit opportunities, which is potentially even more damaging.
The group also points out that Sunak’s so-called energy profits levy on fossil fuel producers was accompanied by a generous investment allowance that companies can use to reduce their tax bill if they embark on new drilling operations.
The oil and gas levy includes a sunset clause that would remove it at the end of 2025, whereas the energy prices bill would hand ministers the power to keep the revenue cap in place two years longer, until the end of 2027, Energy UK warns.
Unless similar allowances are built into the revenue cap, the government will “penalise investment in clean, cheap, low-carbon generation in favour of polluting oil and gas extraction”, the briefing says.
A “poorly designed” revenue cap would be “an unprecedented policy that could have catastrophic consequences for the investment needed to safeguard both our climate targets and energy security both this winter and beyond”, the briefing adds.
Energy companies are hoping a new Conservative prime minister will pause some of Truss’s initiatives and work with the sector to design better solutions to the energy price crisis.
A spokesperson for the government said: “We are taking action to temporarily decouple gas and electricity prices and set a fair price for low carbon electricity generation and will shortly be running a consultation on the Cost-Plus Revenue Limit to ensure that interested parties can have their say on its design.”
“The Energy Prices Bill comes alongside longer-term measures in place to reform the energy market, giving Britain back control of its own homegrown energy and breaking ties to the ever-increasing volatility and uncertainty of the global gas market.”
The driverless car revolution is stuck in the slow lane
There is still no consensus on how autonomous vehicles should work
The hype cycle of driverless cars is on yet another depressing downswing. Last week, Tesla boss Elon Musk admitted that full self-driving software was not yet ready to be used without someone sitting behind the wheel. Mobileye, Intel’s autonomous driving unit, cut its valuation expectation from $50bn down to $16bn. Multiple media outlets have published stories mocking the sector for its failings after billions of dollars of investment.
The peculiar thing is that this has all happened just as robotaxis arrive on the streets of San Francisco. For $10 or so, you can catch a driverless car from the famous Painted Ladies on Alamo Square to the bars of Nob Hill, watching from the back seat as the wheel turns itself to manoeuvre the car through traffic.
The test scheme was launched by Cruise, an autonomous vehicle business that is majority owned by General Motors. Like Uber, it has an app that you can use to call a car to meet you. Prices are similar too, though presumably the rides should be cheaper if it takes off.
It is disconcerting to see a driverless car pull up beside you and listen as a robotic voice tells you to put on a seatbelt and enjoy your ride. But every journey I have taken has been perfectly smooth. The cars are cautious drivers when they spot obstacles, which is very reassuring for nervous passengers. This could also be why there have been reports of cars stuck in the road and blocking traffic. After a crash with a speeding vehicle, Cruise recalled its robotaxis and updated the software. It now plans to expand the scheme to Austin and Phoenix.
Hailing a driverless car to get from one part of town to another feels like living in the future. It can sometimes seem as if all the money in tech is being poured into digital advertising, cryptocurrencies and consumer apps. Live in San Francisco for long enough your phone will fill up with apps for every conceivable convenience. But autonomous vehicles, an ambitious, difficult and potentially life changing sector, offer a more tangible example of tech progress.
It has been an outrageously expensive endeavour, of course. McKinsey put the total invested at over $100bn since 2010. Last year alone, funding into autonomous vehicle companies exceeded $12bn, according to CB Insights.
Development has been much slower than expected too. The dream of driverless cars has been around for almost as long as the automobile itself. The modern era can be dated back to Google’s self-driving project, now Waymo, which began in 2009. By the time I arrived in San Francisco in 2018 it seemed as if driverless cars would surely be on every road in a matter of months. Uber claimed that it would soon do away with human drivers while Waymo and Lyft were launching robotaxi schemes in Phoenix and Las Vegas. Everyone from SoftBank to Apple was investing in autonomous vehicles.
Since then, however, the sector’s fortunes have waned. The same year, an Uber self-driving car killed a woman who was crossing the street in Arizona. Tests were stopped and optimism collapsed. Two years later Uber sold its driverless car unit to local start-up Aurora.
The challenge remains substantial. Driverless cars do not just have to control the mechanics of a vehicle, they have to understand the world around them and make rapid decisions when circumstances change. There is still no consensus on how they should work either. Cruise maps the roads it drives by mixing road data collected by both cameras and lidar — laser-based sensors. Tesla has called lidar a “crutch”.
If it was possible to build the infrastructure for driverless cars from scratch things would be simpler. Roads are busy and messy. They are full of different users making irrational decisions. Cars must not just see the obstacle ahead but know whether it is about to move and, if so, in what direction.
Cruise’s robotaxi test is a fairly conservative one. The cars can only drive between 10pm and 5.30am. If I want to show visitors the wonders of autonomous vehicles I have to wait for night-time and make sure I’m in the right part of the city.
Still, the money keeps coming. Either driverless cars are an example of sunk cost fallacy or their slow start is not seen as a hindrance to eventual adoption. Uber has signed a deal with Motional — the start-up that works with Lyft to offer autonomous vehicle rides in Vegas. Volkswagen’s automotive software subsidiary Cariad is investing $2bn in a partnership with Chinese chipmaker Horizon Robotics. Waymo is planning to expand its robotaxi service to Los Angeles and Cruise hopes to get regulatory approval for robotaxis without pedals or steering wheels.
It has been a slow and expensive road. It may still be years before the cars are widespread. But for many of the biggest companies in the world, driverless vehicles are still inevitable.
Price of rich red wine to soar as UK abandons duty freeze
Growers and importers warn that consumers will pay the price for tax changes that penalise stronger drinks
Prices for some of Britain’s favourite rich red wines are set to soar, growers and importers have warned, after ministers reversed plans to freeze duty rates ahead of an alcohol duty overhaul that will penalise stronger drinks.
The UK Treasury last month announced in its “mini” Budget a revamp of duty rules that will increase the payments due on most wines, including almost all reds, from August 2023.
New chancellor Jeremy Hunt subsequently scrapped a separate temporary freeze that would have protected duty on all types of alcohol from inflation-linked rises. Hunt’s change aims to save the public purse £600mn a year.
The scrapped freeze means that duty on wine will increase in February in line with inflation and again in August, with the earlier increase feeding through to bigger rises that growers had expected in August.
Hal Wilson, co-founder of Cambridge Wine Merchants in the UK, said: “We will see massive [price] increases on naturally made wines that are 14.5 per cent, 15 per cent. These come from Spain, Portugal, Australia, South Africa, Chile, North America, France.”
Wilson said the additional costs, in addition to Brexit-related paperwork, would deter some growers from selling into the UK market. “It’s a great market, and big, and people want to be in the market but we’re hearing from the Australians that there is a limit to how much money they’re prepared to lose.”
The changes will tip the typical price of a bottle of red wine produced in Australia over the £10 mark, a key level in the “price sensitive” UK market, said Richie Vandenberg, chief executive of South Australia’s Limestone Coast Winery. He said higher duty rates come at a time of “extraordinary input pressure and inflation” for growers.
The new pricing could unintentionally drive consumers toward lower quality wines or “ready-to-drink” wine-based products and away from “the big rich red wines which people love in the UK”, he said. “Ultimately the people that will pay for it are the punters.”
Australia’s wine growers had hoped that a new free trade agreement with the UK signed last year would help fill an export void left by China’s imposition of punitive tariffs in 2020. Limestone Coast, a bulk supplier that operates The Hidden Sea brand, is one of the country’s largest exporters and had hoped the trade deal would reduce the cost of its wine for British consumers while improving margins for growers.
Wine producers and trade groups have warned the UK government that the potential £26mn benefit for Australia’s wine growers from the agreement will be wiped out by an additional £70mn in costs related to the tax changes.
The duty overhaul to take effect in August 2023 will charge higher rates on drinks with a higher proportion of alcohol by volume, with lower rates for less alcoholic beverages, a system backed by health campaigners.
A bottle of wine at 14.5 per cent alcohol by volume is set to incur 58p more duty by February 2025, according to data from the UK’s Wine and Spirit Trade Association (WSTA), before adding the extra administrative costs of handling the different tax bands and broader inflation, which includes a steep rise in prices for glass bottles.
A temporary rate will apply to wines between 11.5 per cent and 14.5 per cent for the first 18 months after that, before the full new duty scheme, with 27 bands for wine, takes effect.
Port will also rise steeply in price, said Steve Moody, managing director of Fells wine distributors, with a duty rise of more than £1 a bottle from next August. “We could lose 10 per cent, maybe 15 per cent, of the volume from the category overnight,” he said.
Tony Battaglene, chief executive of trade body Australian Grape and Wine, said it was “disappointing” that the UK had persevered with the changes to duties, especially as it is the largest export market for Australian wine by volume.
Miles Beale, chief executive of the WSTA, said the increased tariffs would “make the UK a much less attractive destination for most [overseas] wines”, adding that “wine is the only [alcoholic] product that can’t dictate its strength. Its ABV [alcohol by volume] is all down to the sun.”
US strong enough to avoid recession, says Biden economic adviser
Brian Deese brushes off fears that raising interest rates to fight inflation will stamp out the recovery
Joe Biden’s top economic adviser said the US economy had the “strength and resilience” to shield it from a recession, brushing off growing concerns that steep interest rate increases designed to fight inflation will quash the expansion.
Brian Deese, the director of the White House’s National Economic Council, spoke to the Financial Times as economists and chief executives are increasingly warning that the world’s largest economy will experience a downturn next year on the back of global weakness and much tighter monetary policy.
But the Biden administration is sticking to its view that the US will experience a form of “soft landing” with a shift to slower growth rather than a deep contraction, and a cooling of job growth rather than mass lay-offs.
“If we look at where the United States are, two things are clear. One is that we have a degree of strength and resilience in the labour market and household balance sheets and in business investment. That is continuing to move our economy forward, and that’s really important,” Deese said.
“The second is that we are in a stronger position than . . . frankly, any other country to navigate through this transition without having to give up those gains.”
Deese spoke ahead of midterm elections early next month with polls showing Republicans poised to regain control of the House of Representatives and possibly the Senate. He dismisses surveys showing that US voters disapprove of Biden’s handling of the economy. “I’m a believer that good economic policy ultimately makes good politics because you know, people are quite sensible,” Deese said.
The Federal Reserve has ploughed ahead with large 0.75 percentage point rate rises — with a fourth consecutive increase of that size slated for early November — but the US economy has not suffered a big hit from the monetary tightening. Interest-rate sensitive sectors like housing have slowed considerably, but other segments of the economy have shown surprising resilience.
So far this year, monthly jobs growth has averaged 420,000 positions. Still a healthy clip, that is down from 562,000 a month in 2021.
Inflation, meanwhile, continues to run rampant, with consumer price growth accelerating again last month to bring the annual rate for the “core” measure — which strips out volatile items such as food and energy — to 6.6 per cent.
Traders in futures markets for the federal funds rate expect it to peak at 5 per cent next year, suggesting further large rate rises this year and early next. Fed officials are set to begin discussing how to slow the pace of its rate rises while committing to keep rates at a level that restrains the economy for some time.
Jay Powell, the chair of the Fed, last month warned that the higher rates rise and the longer they stay at a restrictive level, the lower the odds the Fed can get inflation under control without causing significant economic pain.
“No one knows whether this process will lead to a recession or if so, how significant that recession would be,” he said.
But most economists now expect the world’s largest economy to tip into a recession in 2023 as job losses mount.
Gregory Daco, chief economist at EY Parthenon, forecasts a 0.7 per cent contraction in growth next year, with the labour market shedding 2.8mn jobs and unemployment rising to 5.5 per cent. That is 2 percentage points higher than its current level. Other economists say it is more likely the unemployment rate will top 6 per cent.
Several high-profile US business leaders, including David Solomon of Goldman Sachs, Jamie Dimon of JPMorgan Chase, and Jeff Bezos, the executive chair of Amazon, have expressed their own concerns about a possible recession.
“The probabilities in this economy tell you to batten down the hatches,” Bezos wrote on Twitter this week.
Meanwhile, the IMF this month downgraded its own estimate of the US economic outlook, forecasting that output would be flat this year and grow by just 1 per cent next year, after a 5.5 per cent burst in 2021.
Deese said that the White House was “very focused” and was spending “a lot of time” on “the global challenges that are out there” — whether it was the war in Ukraine or the impact of China’s slowdown.
But he said “policy choices matter” on the domestic side and Biden was trying to remain “focused on what are those things that we can do to try to keep . . . our prospects as strong as they can be”.
Coperni seeks path to stardom, AMI and Jacquemus fight for top spot
Coperni's spray-on dress
Everyone has heard about the spray-on dress. Supermodel Bella Hadid appears half-naked on stage, her hands covering her breasts. Two men in black gently spray her body with a white substance that solidifies into a dress. A woman moves forward and slits it up to mid-thigh. The video goes viral. The bold stunt pays off and the young fashion brand Coperni becomes a global celebrity overnight.
In terms of visibility, Coperni’s show beat megabrands with much deeper pockets. According to the data analysis firm Launchmetrics, Coperni’s spray-on dress generated $26.3 million in media impact value, as much as the announcement last month that Rihanna would perform at the coveted U.S. Super Bowl half-time show in February.
Is such a PR coup enough for brand to take off? It certainly helps, as Miss Tweed found out. Other elements, come into play, however, such asconsistency between the brand’s story, its designs, distribution and the price at which it sells its wares. When these factors are perfectly aligned and coupled with strong management and execution, success is guaranteed, fashion experts say.
“What’s amazing is that a small brand like Coperni can beat the biggest brands just with a good idea,” notes Lucien Pagès who represents Coperni as well as many other promising young fashion brands. “That is also what democracy is about.” During the pandemic in 2021, Coperni stood out as one of the few brands that organized a real physical fashion show, which it held after dark in a parking lot. Cars turned on their lights as the model approached them, producing a refreshing and original effect. Some turned their lights off to let the green-light emitting sunglasses worn by some of the models glow in the dark. Earlier this year, Coperni produced two models of futuristic-looking sunglasses with Korea’s super-trendy eyewear maker Gentle Monster.
GROWING THE BRAND
Thanks to the spray-on-dress, Coperni has become one of the most talked-about brands in the highly competitive fashion galaxy. Bankers are already speculating that its biggest shareholder and global license partner, the investment firm Tomorrow London, is going to be approached by big groups such as Kering and LVMH to help Coperni grow bigger faster.
For now, Tomorrow says it is not interested in raising more capital, (although we all know that it would say that for the record). Its view is that it wants to grow Coperni over a period of years. So why would it give up such a great success story? “Overnight success is (relatively!) easy to attain,” saidStefano Martinetto, CEO of Tomorrow, told Miss Tweed.“But to grow a brand takes considerable patience, awareness, and commitment. On this, we are completely aligned withArnaud Vaillant and Sebastien Meyer,” referring to Coperni’s two founders.
“As with any emerging brandthatcatches the rocketship of explosive growth, the biggest challenge is to manage that growth in a sustainable wayto ensure longevity for the mid- to longer-term,” said Martinetto . Vaillant, who worked at Balenciaga, is the CEO of Coperni. His strength is in products and business. Meyer, who graduated from the Mod’Art International fashion school, is more focused on designs. The pair launched Coperni in 2013.
The name comes from the astronomer Copernicus. After winning the prestigious Andam fashion prize in 2014, Coperni was put on hold. Meyer and Vaillant paused their new-born brand in 2015 to work for Courrèges, a fashion label founded in 1961 which is trying to resuscitate Artemis, the family office of the Pinault family which controls Gucci owner Kering. The pair stayed for only three years. In the autumn of 2018, they met Martinetto who encouraged them to develop their own brand and offered financial backing and mentoring.
MODERN AND MINIMALIST
Vaillant and Meyer, both in their early 30s, are obsessed with innovation, technology and the Silicon Valley and do a great job expressing that sensibility through their designs, fashion experts say. Coperni’s style is modern and minimalist. One of its bestsellers is the swipe bag, a narrow tote with an ovoid handle inspired by the airplane mode on/off toggle on iPhones, but vertical rather than horizontal. The swipe bag was presented in March 2019 as part of Coperni’s first “return” collection after its four-year hiatus. Bags represent a significant part of its business already, the brand said, but it is not the bulk of it. Footwear is also growing, and so is ready-to-wear.
Coperni does not have its own boutique yet but it “is clearly an option we are exploring,”Martinetto said. It nowdepends on wholesale partners. Online, these include Ssense, MyTheresa and Net-A-Porter, and offline it works with department stores Neiman Marcus, Printemps and Selfridges and a few concept stores such as Tom Greyhound in Paris. Turnover on Coperniparis.com is approaching 10 percent of total revenue and “is growing quickly as consumers want to engage directlywith the brand,” Martinetto said.
A CERTAIN UNIQUENESS
A smart idea is great but other things also come into play. “What is needed to succeed is a certain uniqueness in communication, in the product and in the design,” explains Yann Rivoallan, president of the French Federation of Women’s Ready-to-Wear who has spent much of his working life helping fashion brands build a presence online. “You also need a good quality distribution network at the operational level, whether it is online, in-store or both,” he told Miss Tweed at the Hyères fashion festival which took place in mid-October.
The two brands that tick all these boxes are Simon Porte Jacquemus and AMI Paris, usually referred to as AMI and Jacquemus. They are France’s most often cited success stories. As such, they have become rivals which industry observers follow closely. Both are around 12 years old. Both are led by talented designers who are natural communicators.
The first is led by Simon Jacquemus, 32, who is from the South of France and celebrateslavender fields, the sea, Marseille and its proximity to North Africa. The brand appeals to young women with ties to those regions and there are many of them in France.
AMI,known for its Ami de Coeur logo,a heart atop of the letter A, is a shortened version of the designer’s name Alexandre Mattiussi.AMI is about Paris and France north of the Loire, says Vincent Grégoire of the Paris-based consultancy NellyRodi. “It is a more bourgeois, more cerebral brand. Unlike Jacquemus, it does not risk taking a stand on diversity.”
AMI and Jacquemus enjoy formidable growth. The two brands, which made tens of millions of euros a few years ago, are both projected to generate more than €200 million in sales by the end of this year. Yet their business models are quite different, as are their strategies.
Jacquemus makes 73 percent of its turnover online. Some 33 percent comes from online wholesalers and 40 percent from on its own website, which has been up and running from day one when the brand was launched in 2010. Back then, Jacquemus won immediate fame by staging a mock protest on Vogue Fashion Night (when luxury boutiques in Paris opened late) with supporters screaming his name and holding banners saying “Jacquemus en grève” (“Jacquemus on strike”) on the French capital’s chic Avenue Montaigne. Among them was the model and friend Jeanne Damas, who six years later would launch her own Rouje fashion brand.
Jacquemus opened its first stand-alone pop-up boutique at the end of September – just at the start of Paris Fashion Week – on Avenue Montaigne, where it all began. It is sandwiched between Gucci and Dolce & Gabbana. The brand plans to rent the space for six months to test demand and sell-through at full price. It does not want to commit yet to a bricks-and-mortar boutique. However, it will at some point.
CHINA CLOSED
AMI is the opposite of Jacquemus in its retail strategy. It has been frantically opening boutiques in the past 18 months, thanks to cash injected by Sequoia Capital China, the Asian arm of California’s Sequoia investment company which has made a fortune backing companies such as Cisco, PayPal and YouTube. The investment in AMI is the first overseas investment for the Chinese venture capital firm which has invested in Chinese Internet behemoths JD.com, Alibaba and Tencent. At the time the deal was announced in January 2021, no financial details were disclosed aside from the fact that AMI had made €50 million in sales in 2020.
CEO Nicolas Santi-Weiland Mattiussi retained minority stakeswhile the private equity firmNeo Investment Partners, which had sold its majority holding to Sequoia, kept a stake in the brand.AMI said itexpected sales this year to double after having reached €133 million in 2021.
It now has 32 boutiques worldwide and more than 715 points of sale at wholesalers. Earlier this month, it opened a boutique in Seoul, South Korea. To promote it, and flag its presence to Koreans, it organized a high-profile show at the city’s landmark Gwanghwamun Square, with performances by K-pop stars and attended by traditional brand ambassadors such as French actress Isabelle Adjani. In China, AMI has three stores in Shanghai and boutiques in four other cities including Chengdu andNanjing. However, the timing of AMI’s Chinese expansion has been unfortunate: much of China has been closed this year because of a resurgence in Covid cases. It may have to wait a while before it reaps returns from such significant investments in this crucial market.
By contrast, Simon Jacquemus still owns 100 percent of his fashion company - a remarkable achievement. The brand was so successful that many industry observers speculated LVMH was backing the brand. This turned out not to be true. As Miss Tweed was first to report in May, Jacquemus expects sales to reach €500 million in two-to-three years. Jacquemus is on track to become one of France’s first major fashion unicorns, private companies valued at more than US$1 billion. It has come a long way considering its turnover was€50 million in2019 andaround €25 million four years ago – the level where Coperni is roughly now.
STRONG IN LEATHER GOODS
Another important difference between AMI and Jacquemus is that the latteris much stronger in leather goods. AMI still sells mostly ready-to-wear. One of Jacquemus’s bestsellers is the trapezoid-shaped Chiquito bag, which starts at a couple of hundred euros for the smallest version and can cost up to nearly €1,000. However, it has been raising prices in the past year as part of the brand’s elevation strategy. Jacquemus’s biggest markets are France,the United States and the United Kingdom.Ithas not yet set foot in China and is not hurrying to do so. Thishasturned out to bea blessing considering how many fashion brands have suffered with shops closing because ofthe country’s strict zero Covid policy.
To take Jacquemus to the next level, CEO BastienDaguzan,38, who officially started in May after working undercover for the brand since its early days,will need to hire talented retailers.Daguzan previously led Puig’s Paco Rabanne brand and before that was CEO of Lemaire.
The team around him and Simon Jacquemus are dynamic and creative but many are in their 20s and relatively inexperienced, industry sources say. If Jacquemus is to conquer the world, Daguzan will need to hire professionals to open stores around the world in good locations.However, the designer is certainly doing a great job staying in the news and controlling his image while appearing accessible.
Last August, he granted exclusive coverage of his wedding to Vogue France. Guests, many of them dressed in Jacquemus, were asked to leave their mobile phones at the door.“Jacquemus has mediatized his personal life,” explains Vincent Grégoire from NellyRodi. “This is why he appears to be very accessible.”
Like Simon Jacquemus, Mattiussi also comes across as genial and warm. And he is also a good communicator. Many remember the originality of the launch of his men’s wear line in a Paris bar. However, some critics say that years later they no longer understand what the brand stands for. AMI started with well-designed basic designs for men such as high-quality coats. Later, it branched out into women’s wear and critics say its designs are no longer unique or recognizable. “I am not really sure what is the brand’s story today,” an influential Paris-based senior fashion consultant told Miss Tweed, declining to be identified. “Before, it really had that refreshing take on men’s wear, it told something different. Now it sells lamé dresses to Asian girls which every brand can do. So, what does AMI stand for today?”
Well, the brand sells Paris now, or certain stereotypical images of the French capital – clearly targeting the Asian customer. That’s its main message. Earlier this year, AMI staged a show in Paris at the Sacré Coeur basilica, opened by French actress Audrey Tautou who was struggling to keep her balance as she strutted on high heels past the guests. On the front row sat actress Catherine Deneuve, singer Carla Bruni (wife of former French president Nicolas Sarkozy) and Isabelle Adjani - all celebrities past their prime who do not necessarily connect with the younger generation, fashion observers say.
AMI may be in the process of conquering the world but it risks losing some Parisian customers along the way. The competition between AMI and Jacquemus is bound to intensify. One has its eye on Asia, the other stays focused on the West. Who will win? Place your bets. It will be an interesting story to follow.