4th August 2021
Good morning “Spiritual opium” and “electronic drugs” are the terms used by Chinese state media to describe online gaming as authorities are concerned that children are becoming addicted to them. This led Tencent – China’s biggest gaming company – to announce that it will introduce measures to limit the amount of time children spend playing its games. Bad news for all the Chinese kids on summer holidays!
- PepsiCo squeezes juice business for $3bn
- Government urges workers to return to the office
Yesterday's market moves
FTSE 100 +0.3% 7,106
FTSE 250 +0.4% 23,290
Markets continued to edge higher supported by upbeat company earnings reports and positive domestic Covid-19 trends, despite the backdrop of simmering Chinese regulatory concerns.
PepsiCo squeezes juice business for $3bn
What’s going on?
US snacks and drinks giant PepsiCo has struck a deal to sell 61% of its juice business to French private equity firm PAI Partners. The transaction, which includes Tropicana and a host of other juice brands, will net PepsiCo $3.3bn in cash.
Why is this important?
The deal is part of PepsiCo’s strategy to move away from the shrinking and low margin juice market in order to focus on its snack business.
In recent years consumers have become more concerned over the sugar content in juice, instead opting for water or low-calorie drinks.
US juice consumption peaked in the early 2000s but has steadily fallen since. Sales fell 3% between 2015 and 2020 and the trend is forecast to continue.
PepsiCo, the maker of Pepsi, Walkers and Doritos, had bought Tropicana in 1998 for $3.3bn.
The company said it will use the proceeds from the sale to invest back in its health-focused snacks and zero-calorie drinks.
This is not the first time that PAI Partners has acquired a food business. In 2019 it bought the ice-cream brand Häagen-Dazs in a joint venture with Nestlé.
PepsiCo is not the only drinks giant ditching juice. Coca-Cola has shed slow-selling brands, including Odwalla and Zico juices, over the last year so it can focus on stronger performers.
Government urges workers to return to the office
The Chancellor Rishi Sunak and Skills Minister Gillian Keegan are doing their best to persuade workers to return to the office.
Since July 19 the official guidance has no longer been to work from home if you can in England, and the government says it expects and recommends a gradual return to the office over the summer.
Data from the Office of National Statistics showed that last year 26% of British workers worked from home at some point. This figure was almost 50% in London alone.
Recent figures from the Centre for Cities think tank show that footfall in central London in recent weeks is still only around 34% of pre-pandemic levels.
Millions are still working from home and not spending cash on things like train tickets or Pret sandwiches — the kind of economic activity that is key to the UK’s consumer spending and service-driven economy.
The Chancellor’s argument is that young people especially benefit from the office environment as it helps them build strong relationships with colleagues. He credited the office for his career progression which saw him work at Goldman Sachs, before becoming a partner in a hedge fund and a director of an investment firm (owned by his billionaire father-in-law and founder of outsourcing giant Infosys).
The Skills Minister said that many young workers miss out on essential development experiences in their jobs when they work remotely. She added that older people have an obligation to pass on their skills and knowledge.
Millions of people have saved valuable hours and money from not commuting over the past 18 months. It’s hard to see the working world returning to the pre-pandemic pattern of working five days a week in an office. It seems more likely that employers will opt for a more hybrid model of a couple of days in the office and the rest remotely.
Stat of the day
46% of UK landlords reduced or paused tenant rental payments in 2020
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