Business News Edition: The Winds of Change in Global Trade and Retail

Can the retail industry's shift towards health and sustainability alter supply chain dynamics? We explore this question as we dissect the latest trends shaping global supply chains, from Boeing's resolution of its strike and its promising future, to the quiet yet profound changes in consumer preferences. Discover how food retailers are navigating these new waters by emphasizing health benefits and sustainability in their strategies. Plus, hear about cocoa farmers in Ghana holding their beans for higher prices, and how this is rippling through the global cocoa market.

We'll also tackle the potential upheaval in global trade strategies with the anticipated changes in U.S. trade policies under the Trump administration. Dive into discussions about reshoring manufacturing, potential tariff increases, and how these shifts might reverberate through economies like the UK. Local news doesn’t escape our radar as we touch on Sunday trading laws in the Outer Hebrides, alongside updates on the grocery wars between Sainsbury's and Aldi, and sustainability in the dairy industry. And don't miss out on the market buzz surrounding Tesla's stock surge, with insights into how influential figures like Elon Musk are shaping broader geopolitical narratives. Join us for a comprehensive look at these pressing issues.

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Chapters

• 0:03 Supply Chain, Chocolate, & Retail News
• 12:58 Trade Policy Impact & Retail News

Transcript

Speaker 1: 0:03

Hello, tony Hines, here You're listening to the Chain Reaction Podcast, all about supply chain advantage. This is the news roundup all things impacting global supply chains this week. Thanks for stopping by. Hope you had a good week. Well, the strike at Boeing is over. The 38% pay offer plus some reforms to the pension scheme have been accepted by the trade unions on a vote of over 50% of the membership, and that means it's strike over. So in Portland, oregon, I'm guessing people will be pleased that it is, and in Seattle too. Now it's for Kelly Orberg to sort out some of the problems of Boeing and get the company moving forward in a direction to the future that everybody will be pleased with Quality problems solved and, of course, customers will be happy that they'll be getting planes from Boeing and perhaps the focus now will be on order output, quality and standards and getting the company back to a steady footing. The stock market's pleased. The share price has moved upwards and the government will be pleased too, as will suppliers, because they've been struggling too During the strike. It's estimated that the strike will have cost about 8 billion US dollars billion US dollars Now.

Speaker 1: 1:28

The key retailing industries have been going through some change, almost a quiet revolution for some time, and here are some of the reasons why that's so. Changing consumer tastes are one reason. Consumers are increasingly prioritising health and wellness, leading to a surge in demand for organic, natural and minimally processed foods. There's a growing appetite for sustainable products, too. Consumers are more aware of the environmental impact of their food choices and are seeking out products that are ethically sourced and environmentally friendly. There's also a switch to more local and artisan foods, supporting local and artisan food producers. Consumers are interested in knowing where their products come from and are willing to pay a premium price for locally sourced products. Even in these difficult and challenging times, the impact, of course, on food retailers has been immense. Retailers have expanded their product ranges to include more organic, sustainable and locally sourced options, increasing the number of SKUs that they have available in their retail stores, and brands are emphasising sustainability and health benefits in marketing campaigns and communication programs. To appeal to these changing consumer preferences, the supply chain, too, has had to switch the way it works, as retailers work more closely with suppliers to ensure that their products meet the new standards for health and sustainability. And the switch from distance to more local. The proximity effect has had some impact too, but of course, not everything is local and close to home. Many products still travel many miles from different parts of the globe where speciality fruits and vegetables are actually grown. There are challenges and opportunities for retailers. While there is strong demand for sustainable and healthy products, affordability remains a challenge for many consumers, and retailers have had to adapt their stores as consumer buying habits have changed. Retailers and brands have an opportunity to educate consumers about the benefits of sustainable and healthy food choices too, and they are quietly doing that all the time, in the offers that they make, in the encouragement through promotions to try out new products and get consumers invested in the ranges that they have. The quiet revolution reflects a broader shift in consumer behavior towards more conscious and responsible consumption. It's an exciting time for the food industry as it adapts to these new trends. Now, if you're interested in the change and the Quiet Revolution, there is a program called the Quiet Revolution in Retailing coming your way in December, so get along and have a listen to that one. Now.

Speaker 1: 4:31

We all love chocolate, don't we, or do we? Well, I do for one, and I'm partial to a piece of small dark chocolate every now and again. But of course, the raw material for chocolate is cocoa, and cocoa farmers in the world's second largest producing country, ghana, are hoarding beans in anticipation of some higher prices, potentially squeezing supplies to a global cocoa market looking to recover from last season's disastrous harvests. Cobod confirmed the practice, with some blaming it for slowing the bean purchases. One farmer in Ghana said he had 300 bags, but he won't sell. He'll sell after Christmas, he says, because he wants to see which way the prices go. The farmers have been reacting to comments made by Vice President Mahamudu Bawamia, who told his supporters that the government would raise prices for farmers. So they're hanging on now. It's the way of the world, isn't it? If suppliers think they can make more money, quite often they're prepared to hang back or create a shortage, as indeed in oil markets. It happens through cartels such as opec and opec plus, and people try to get as much as they can for the product, and I suppose you can't blame them for that. But the market price of these goods will determine what happens in the end. So it's all about supply and demand, and if you can squeeze supply thinner to push up prices, then that's what you might do. But cocoa is a very important product for chocolate companies and, of course, other businesses too.

Speaker 1: 6:19

Tesco is the UK's largest retailer and it's joined forces with milk suppliers Arla and Moolah, uk and Ireland, putting sustainability at the heart of the dairy industry. It's a significant step, they say, in uniting the dairy industry to accelerate the reduction in emissions. It's to farm in harmony with nature and commit to better animal welfare standards. According to Tesco, ashwin Prasad, chief Commercial Officer at Tesco, said they have been playing a leading role in transitioning to a low-carbon agriculture sector for some time and these long-term partnerships are part of the plan. It will see 400 of Tesco's Sustainable Dairy Group farmers across the UK joining the initiative and they hope to broaden this partnership by reaching out to other organizations across the dairy industry for inputs and support. So anything that can reduce emissions in the production and delivery of products is to be welcomed.

Speaker 1: 7:26

Another large UK retailer, sainsbury, is extending its price matching with Aldi at its convenience stores. It wants to be competitive in prices leading up to Christmas. Sainsbury claims to have added 200 products to the Aldi price match campaign in its local stores and they hope to steal more of the market away from other convenience stores during the Christmas period. The Aldi price match will replace the pocket-friendly prices campaign. Simon Roberts, chief executive at Sainsbury's, said that they've put food at the heart of the business over the past four years and they've invested nearly £1 billion in value. They want to give customers more of what they want outstanding value, unbeatable quality food and great service. So obviously the Aldi price match is an important strategy for Sainsbury's.

Speaker 1: 8:25

The recent budget by the UK new government is likely to be inflationary. The increase to employers national insurance costs and the increase in the minimum wage will push up costs for retailers and a number of leading retailers this week have said it could add significant cost. Marks and Spencer said it could add £60 million, as did Wetherspoons, and those costs are likely to push up prices in stores and in hospitality and as a consequence that could be quite inflationary and it could delay the lowering of interest rates, which indeed will mean that working people will pay more for their goods and services and they'll also pay more for their housing costs. So this is an unintended consequence of the budget which will push up supply chain costs across the board. There's also concern that the changes to inheritance tax on the farming community will have consequences for farmers and their families being able to continue farming on the same piece of land that they might have farmed on for generations and that's gaining more and more traction. And the farming community is very upset by these changes. At a stroke of the pen, the government might have unintentionally aided the concentration of farming further in the United Kingdom and hastened the industrialization processes of bigger companies taking over farms. So food security and food health is under attack In the United Kingdom.

Speaker 1: 10:14

The new budget, which has increased inheritance tax on farms by 20%, would cause a loss of 59 of the most marginal constituencies if there were a general election today, and it would take less than 5% for a Labour defeat, according to the iNewspaper. And they may well lose a lot of seats in the May election next year, when 21 county councils in England, which include swathes of farmland, face a vote, said the I. So the backlash from this inheritance tax is quite significant, I think, and there are protests by farmers no farmers, no food, no future, and they're planning to hold events in London to protest against this in the coming weeks. So this really has set the cat amongst the pigeons, as they say. This particular tax, the Bank of England cut the rate to 4.75% for interest this week. That's a 0.25 cut, and that's despite the bank being critical of the recent budget, explaining that it's likely to be inflationary. The main reason for this, of course, is the increase to employers' national insurance, which will feed through into higher costs for business, and also the increase in the minimum wage is likely to add some pressure in particular industries, including farming and hospitality.

Speaker 1: 11:48

Donald Trump is the new President-elect of the United States and he'll take up the presidency in January. Trump has already proposed imposing tariffs of up to 60% on goods from China, and this is part of a broader strategy that includes a blanket tariff of 10-20% on all imports. The higher tariffs are intended to protect domestic industries and generate revenues for the US government, but they could also lead to higher prices for consumers and lead to potential trade retaliation. The Trump administration will have significant impacts on trade and supply chains both in the US and globally. There'll be specific tariff hikes on China and Mexico. Mexico, of course you'll recall, is a backdoor entry point for Chinese products into the United States. That could lead to higher prices for American consumers and some global economic instability is what many predict. Renewed trade tensions, particularly with China, could disrupt global supply chains and increase the cost for US manufacturers, and that might lead to shifts in sourcing and production strategies. For many companies.

Speaker 1: 12:58

There may be some supply chain adjustments that take place. Reshoring is the obvious one. There may be a push for reshoring manufacturing to the United States to reduce dependency on foreign supplies, and this could create new jobs domestically but also lead to higher production costs. The administration's approach to deregulation could impact various sectors, including energy and technology, and this might lead to changes in supply chain strategies to comply with new regulations or take advantage of deregulation. There are rumours abounding at the moment that Trump will get rid of the CHIPS Act, and there may be other regulatory frameworks introduced by the Biden administration that will be taken down. Higher tariffs on goods from allies like the European Union could strain relations and lead to retaliatory measures, and that could further complicate international trade dynamics. Policies on energy production and environmental regulations could affect global energy markets and supply chains. For example, increased oil production in the United States could lower global oil prices, impacting logistics and transportation costs in a positive way. Overall, the Trump administration's trade and economic policies are likely to create both challenges and opportunities for supply chains, and companies will need to stay agile to adapt to the evolving landscape to navigate those changes effectively, donald Trump has already indicated that there's likely to be a shift in policy towards climate change, so we'll have to watch this space.

Speaker 1: 14:31

No doubt further details will emerge quite soon. The new Trump administration is expected to repeal several regulations imposed by the Biden administration. The AI executive order will be dismantled, and that was introduced by Biden's 2023 AI executive order, which established oversight and safety measures for AI development. This includes the US AI safety institute and requirements for companies to report on AI training methodologies and security measures. I've already mentioned climate policy. Trump has pledged to repeal Biden's climate agenda requirements for companies to report on AI training methodologies and security measures. I've already mentioned climate policy. Trump has pledged to repeal Biden's climate agenda, including the Inflation Reduction Act, which funds green economy initiatives. He also plans to increase fossil fuel development and pull the US out of the Paris Agreement once again. Labour regulations are also expected to be rolled back from the Biden era, such as expanding overtime pay eligibility and bolstering labour rights for temporary agricultural workers. The administration may also target regulation that makes it easier for investors to consider environmental, social and governance ESG factors in 401,000 investments.

Speaker 1: 15:44

And we've already discussed trade policies. Trump has proposed imposing tariffs of up to 60% on goods from China and a blanket tariff of 10-20% on all imports. That could significantly impact global supply chain trade dynamics. The changes are likely to have wide-ranging effects on various sectors, from technology and energy to labour and trade. The full impact, of course, will depend on how these policies are implemented and the responses from other countries and industries. The impact on the UK economy if the Trump administration pushes ahead with many of these trade policies could push up inflation by 5%, particularly if there's a trade war. So we're going to return to an era of some protectionism by the United States and we're going to see some closing down of free and open trade. Analysis by the National Institute of Economic and Social Research suggested that if Trump immediately imposed tariffs in early 2025, it could lead to the UK's GDP growth falling by 0.8% and inflation could rise to between 4% and 5% next year, up from 1.7% before dropping to between 3.5% and 4.5% in 2026. And it's likely to harm UK trade with the rest of the world and not simply with the United States.

Speaker 1: 17:16

Now some people in the UK may recall that back in the 1980s there was a lot of controversy over the introduction of Sunday trading laws. Well, this week I read a story that the Outer Hebrides, particularly the island of Lewis, have been split by an announcement that its branch of Tesco's plans to open on Sundays. So time's catching up with everybody. Here we are, 40 years later, and we're still discussing Sunday trading. The Isle of Lewis has maintained its tradition of observing the Christian Sabbath, despite the relaxation of laws regarding Sunday trading in most of the mainland of the United Kingdom back in the 1980s. 1,800 people have signed a petition in opposition to Tesco's plan, which will take effect from Sunday, the 17th of November. The population on Lewis is 19,658 and Stornoway, its only town, has around 8,000 residents. Sunday trading was restricted in the United Kingdom until 1994, and that's when the Sunday Trading Act came into force. But there was lots of discussion prior to that, in the 1980s, in the late 1980s, leading up to the Act in 1994. It was first announced in 1986, and it was the only defeat that Margaret Thatcher suffered in the House of Commons when she proposed Sunday trading.

Speaker 1: 18:44

Well, it might not come as any surprise to many of you that Elon Musk is likely to take a prominent role alongside President Donald Trump, and he's already been involved in some discussions this week with President Zelensky in Ukraine on a call with Donald Trump. But the thing that interested me, there was a couple of stories this week that talked about how BMW could gain from US tariffs. With its plant in South Carolina, which produces more than 1,500 vehicles a day, it's the biggest factory for BMW worldwide and a main exporter to markets including Germany, china and Britain. Tesla shares surged by 12% in pre-market trading after the Republican Party claimed victory for the US presidency. Here's a quick summary of some of the other news stories this week affecting supply chains.

Speaker 1: 19:47

The French wine output is expected to fall by nearly a quarter this year, after adverse weather affected vineyards. The Champagne region is most badly hit. According to the French Farm Ministry, it projected wine output for this year at 36.9 million hectolitres, 23% below last year's small vintage production. Global food prices have risen with demand. World food prices rose in October to an 18-month high. That's according to United Nations data. Apart from meat, with vegetable oils jumping more than 7% from the previous month, there are concerns over the rise in palm oil production, and dairy prices have risen 2%, along with cheese and butter, which have also seen strong demand. China is one of the leading metal consumers in the world and copper prices have fallen as a result of fiscal stimulus measures announced by the Chinese government.

Speaker 1: 20:40

Many companies have warned that the extra burden of costs from the UK budget measures this week, particularly national insurance, will increase their costs. Asda, serco, vistri, marks Spencer, sainsbury and other companies have all said that these adjustments will cost retailers and that's likely to push up prices. The ASDA chairman, lord Stuart Rose, told shareholders that the increase in employer taxes is a big burden for businesses to carry. Sainsbury's warned of a £140 million hit and Marks and Spencer said earlier in the week that it would mean £60 million in extra costs for them. It's a double whammy because they've got the national living wage increases along with these employer national insurance charges. Asda also reported a two and a half percent decline in its third quarter revenues and they've cut 475 head office jobs recently.

Speaker 1: 21:34

Oil prices closed the week at $73.62 per barrel. Fuel costs were 4.2% lower. For IAG, the international airlines group that own British Airways, with costs lower and ticket prices higher. They've reported soaring profits this week £1.7 billion and that's up 15.4% for the year to September this year from last year. Total revenues up to 9.3 billion. That's up nearly 8% on last year. They're also going to buy back shares of about 350 million euros. Fuel costs were 4.2% lower. The North Atlantic market is very strong for British Airways and that recorded a 3.9% boost in capacity year on year. Despite all the doom and gloom around higher costs for retailers, stuart Machen at Marks Spencer's oversaw a 17% jump in profits on the back of food sales.

Speaker 1: 22:40

Well, that's it for this week. I hope you've learned something from the news edition of the Chain Reaction Podcast, and there are some great episodes coming your way in the next couple of weeks. So get subscribed and find out about those new episodes as they drop, and I'll see you next time in the Chain Reaction Podcast. I'm Tony Hines. I'm signing off. Thanks for listening. Bye for now. Thank you.