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Quest Means Business
U.S. Tradition; Interview with Angela Brav; Interview with Jan Zijderveld; The Growth of Fair Trade Products; Europe's Recovery on the Rocks; Ireland Back in Recession; Unilever Exec Says Europe's Problems Structural; European Markets Slip; Downbeat Europe Data; US Markets Fall; Goldman Sachs to Monitor Employee E-Mail; Employee E-Mail Privacy Issues; Dollar Slides Against Yen; Ryanair's "Care and Comfort" Battle; Air Lingus Becomes Hybrid/Low-Cost Carrier
Aired March 22, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: A case of less bloom and more gloom. Ireland slumps back into recession.
Mind your muppets. Goldman Sachs tells staff it's time to face the music.
And shut up and fly away. That's the message from the Air Lingus chief exec to his major shareholder.
I'm Richard Quest. I mean business.
Good evening. The head of the European Central Bank, Mario Draghi, says Europe can only get better. The numbers tonight seem to tell a different story. As the ECB president showers praise on the eurozone's economic fundamentals, new figures suggest its strongest nations can barely sustain their recoveries.
Join me over in the economic library, and you'll see exactly what I mean tonight. Now, look. Mario Draghi says quite clearly the worst of the euro crisis is over. It was in an interview with "Das Bild," the German newspaper, and he uses Germany as a model example. President Draghi says that the eurozone indicators are better than the US.
Not everyone agrees. For instance, former MPC monetary policy committee member and chief economist at CitiGroup, Willem Buiter, told Bloomberg Spain is at greater restructuring risk than ever before. So, Draghi says the worst is over, but that might be a fairly low bottom from which to rise, because others say there's still more misery to come.
And this is one of the reasons why. PMI, Purchasing Managers Index, eurozone manufacturing contracted even faster than expected, and the PMI number from Germany is a very good example. Three-month low, German PMI is at a four-month low, and that is one reason that people suggest.
Because where PMI goes, if we take last year and we saw weakening in the PMI numbers, which eventually translated into weaker economic growth with all the problems that we had at the end of the year.
Ireland is back into recession. GDP is down two-tenths of a percentage point in Q4 after falling in Q3. Ireland has been in a long recession in 07, 08. It enjoyed some growth in 10, but fundamentally has been off and now, back into recession.
So, whatever the numbers are saying, big business is agreeing and calling on Europe, too. Unilever's European president is warning that the problems that these numbers show mean that it's not just cyclical, it is structural, and Europe needs to loosen up if it's to grow.
(BEGIN VIDEO CLIP)
JAN ZIJDERVELD, PRESIDENT, UNILEVER EUROPE: What would I like Europe to do is become a little bit more pro-business. To make the environment a little bit easier for us to operate.
And we can learn a lot from the emerging world. It is a lot easier to do business in the emerging world. It's a lot more proactive, it's less bureaucratic.
The EU has said they would cut 25 percent of all regulations, I think by 2015. They're not on the way of doing that. To get an innovation through takes too long. To get approvals through takes too long. So, things are just too slow and too bureaucratic.
And if we want to reinvent this continent and make it innovative, growing, you need to be able to loosen it up a bit, let some fresh air. It's always like s spring clean. Europe needs a little bit of a spring clean to be able to innovate again and grow again.
(END VIDEO CLIP)
QUEST: And you can hear more of his views from -- and the full interview on tonight's "Marketplace Europe" in just over half an hour's time here on CNN. "Marketplace Europe" is after this program.
If Mario Draghi, as we saw, sees the glass half full. The markets see it as half empty. The most sharp falls, more than 1 percent, nearly 1 percent, over 1.5 percent, in all the major markets. If you take the Frankfurt market, where you can see, down and never recovered.
The hardest-hit -- the hardest stocks that were hit -- whatever, no, excuse me -- the hardest stocks that were hit were Tyson Group down 3 percent, Volkswagen, BMW, Lufthansa all lost ground because they are big- ticket items, they are cyclical stocks, and they will be hit if there's a slowdown.
Which is why in Paris you saw an exact similar replication, Renault the biggest -- amongst the biggest losers. All the major markets in Europe will be down, probably, for the week.
Mario Draghi insists that inflation above all and deficits are in better shape in Europe than they were and are in the US. Diane Swonk is the chief economist at Mesirow Financial. Diane's with me from Chicago.
We always love to talk to you, Diane, because you mange to bridge the Atlantic beautifully in the sense of putting it into perspective. Those PMI numbers, look, they're not dreadful in Europe, but they're certainly disappointing.
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Absolutely, and I think the most important issue for the US is not just Europe and about 20 percent of our exports go to the European Union alone, but more importantly is the impact they're having on emerging markets.
China is slowing quite dramatically, and that's been a real haven for our manufacturers as China's been this big construction zone. Now that it's slowing, it's hitting our imports pretty badly.
And so, even though the US economy is improving internally, we're now losing that silver lining to the cloud that we saw of 2011, which was the export and manufacturing machine that had been driving the US economy so strongly in 2011.
QUEST: Right.
SWONK: So, this is something really critical to us is the spillover effects from Europe along with the direct export losses.
QUEST: Do you believe we should be worried that Europe in 2012 is heading for a repeat of 2011 of very encouraging start coming out of 2010, which just vanished as the year went on?
SWONK: We do need to continue to worry about Europe. Now we've gotten past sort of the initial crisis, although one could flare up overnight, as we've seen.
I do think the euro crisis is moving away, but we're in chronic illness in Europe, right? And anytime you're in a chronic illness and intensive care, you worry about when something's going to flare up again and when you're going to fundamentally get better.
I think we still need to see some much more fundamental steps towards structural reforms in Europe, which you heard echoed earlier.
And Ben Bernanke also talked about Europe making progress, but not enough, in his comments this week as well --
QUEST: OK.
SWONK: -- because Europe needs to get it back together on a lot of fronts to be able to deal with the austerity and some structural reforms that promise some growth going forward, as well.
QUEST: Do you get the feeling, talking about the US -- most forecasts, I now see 2.25, possibly up to 2.75 percent for 2012. Look, it's just below trend, it's roundabout trend, it's not enough to bring down unemployment, it's not enough to do anything structural, but it's OK. Is that your forecast, too?
SWONK: Well, it's OK compared to what we had. Remember, you talked about the threshold really being low, and the threshold we're overcoming is really low, here. We've still got over 42 percent, almost 43 percent of the long-term unemployed remain unemployed and are making up a huge number of the unemployed.
This is what Ben Bernanke is very concerned about, people who've been unemployed more than six months make up more than 40 percent. The shadow unemployment rate well into the double digits, still close to 15 percent, off a bit from the highs we had seen. And so, we're growing.
We also have to take into account, it's 80 degrees here. I know that's not Celsius, and I can't translate it --
(LAUGHTER)
SWONK: But it's like Florida in Chicago, and it's been that way for the last three months. And the weather itself, some analysis from some very good people at Macro Advisors suggest that it added as much as 70,000 jobs to the month of February, and could take away over 50,000 as we get into more normal seasonal conditions in March.
And so, some of our strength is a little bit false. I think it's much more resilient and sustainable than what we had --
QUEST: OK --
SWONK: -- but that doesn't say a lot.
QUEST: Right, but everybody -- briefly, finally, every analyst, and I know you're not a stock picker or a stock analyst per se, and I can see the shake of the head, but everybody says to me that the US is still the best game in town.
SWONK: We're the cleanest of the dirty shirt pile --
(LAUGHTER)
SWONK: -- and I do think we have some bright stars out there, some bright lights. The good news is, small business formation is picking up --
QUEST: Right.
SWONK: -- and that's the backbone. New business formation. That's the backbone of innovation, that's the backbone of who we are. It is what sustained the 1990s. Not enough to recreate the 1990s --
QUEST: All right.
SWONK: -- but it's a start, a baby step in the right direction.
QUEST: "The cleanest shirt of the dirty pile." Diane, good to see you, as always. And keep cool in those 80 degrees. Believe me, I can't work out 80 degrees, either, and what it is in Celsius.
(LAUGHTER)
QUEST: But thank you very much. No doubt Jenny Harrison will take huge delight in hauling me over the coals later in the program on that -- 80, it's divided by 3, multiply --
The US markets are feeling a little queasy at the European numbers. This is the way they're trading at the moment, down 89. This, 13,000, is looking a little bit dodgy. Only 35 points between that and going through.
When we come back in just a moment, Goldman Sachs is hunting for muppets. It's not Kermit or Miss Piggy, but nasty references to clients. What is legal when it comes to searching your e-mail? QUEST MEANS BUSINESS.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Lock up your inbox. Goldman Sachs is searching for muppets. The chief executive, Lloyd Blankfein, wants all Goldman employees to have their office e-mails checked. They are looking to find the staff who may have insulted clients.
Greg Smith's famous article when he resigned from Goldman last week said, if you remember, he said quite clearly, "Over the last 12 months, I've seen five different managing directors refer to their own clients as 'muppets,' sometimes over internal e-mail."
Now, if you think that sounds harmless enough -- after all, we all like the Muppets, we all have a good laugh with them, Kermit and the gang - - we don't mean Kermit and the gang in the UK, and indeed, probably where you are, it is a derogatory term. Reuters is reporting that Blankfein wants e-mails to be scanned for the world "muppets" and other insulting terms.
There aren't many details about how Goldman plans to do this yet, but it does raise important questions about office e-mail. So, for example, here is your office e-mail. The first question, of course, privacy. Should my boss read my e-mail in the first place? Do I not have a right to write and him not read, or her not read?
Then, you have the legality question. Can my boss read my e-mail? Is it law? Is it allowable? And things like data protection legislation.
And if all that wasn't enough to think about, employee relations. Is it not an abuse of my trust to read my e-mails?
So, Goldman's going Big Brother on its employees, trying to find those who are calling people muppets. Mark Watts is partner and data protections expert at the legal firm Bristow's. Let's go through the privacy question first.
MARK WATTS, PARTNER AND DATA PROTECTION EXPERT, BRISTOW'S: Sure.
QUEST: I understand we have different legislation in different parts of the world
WATTS: Yes.
QUEST: Here's my e-mail account here. Do I have a right to privacy even though it's a company e-mail account?
WATTS: Yes, you do. Over here you do, and that may come as a surprise to some people, because you'd think, well, it's the company, they're giving out computers, they're saying, hey, you can use them. You can look at the internet. It should be fair enough, maybe, that they can look at what you look at, read your e-mails, but that isn't how it is, at least in Europe.
QUEST: Right. So, in Europe, where it says at the bottom, often that boilerplate language that it may be read by the company --
WATTS: Yes
QUEST: -- you're basically saying if I say to my boss, "You are not reading my e-mails" --
WATTS: Well, you don't even need to say it to your boss. So, it's just more complicated. And what may have happened here is you've got a US organization, perhaps -- we don't really know -- but possibly approaching this the way they do in the US.
In the US, they'd say, hey, employee, you've got no privacy. They might even say get over it. We can do whatever we want. If you want to use our assets, those are the rules.
Over here, it's so much more complicated. We've got human rights legislation that can give employees a right to privacy that would also extend into the workplace.
QUEST: De facto -- I can throw a bit of Latin in with the best of them --
WATTS: Go on, then.
QUEST: De facto, every one of us has agreed, probably in the terms and conditions, the staff regulations, whatever it might be --
WATTS: Yes.
QUEST: -- to allow our employers access to our e-mails.
WATTS: A lot of people have, and it might be that employers can point to that sometimes. But it depends how detailed it is.
When you agreed to that, I bet you didn't have in mind, and maybe you didn't do this, that e-mail to your doctor where you're making an appointment because you've got -- you've got some embarrassing illness, whatever it is. You did not have that in mind that your employer down the road could, if they wanted to, at a whim, just look at that e-mail.
QUEST: No. But hang on, hang on. If they are searching for "muppets" --
WATTS: Yes.
QUEST: -- which could by any description be gross misconduct, does that -- you're --
WATTS: Maybe. I mean, it depends. So, let's just take that. It isn't as simple as they can look at e-mails or they can't. What they have to do here is have a very clear purpose, be justified in what they're doing.
But maybe it's justified. Client -- being rude about your client. That isn't so good for your business, so maybe they've got a justified purpose. But what they need to do is to have a proportionate response to that. And we don't really know whether they have or not.
But search everybody's e-mails? Maybe not. Search the ones who are client facing who might have been involved in those sort of communications? Maybe. That's -- it doesn't -- you can't justify looking at everything of everybody.
QUEST: Thank you very much.
WATTS: That's the point.
QUEST: Thank you very much, indeed. You've been fascinating. Thank you very much, indeed.
WATTS: You're welcome.
QUEST: Come back again. When we come back in just a moment, ashes to ashes for Ryanair's legal battle. In just a moment, we'll look at why Europe says airlines must cough up for care and comfort. And we meet the chief executives of Air Lingus.
First, though, Thursday's foreign exchange rates. The dollar slides against the yen with an unexpected Japanese trade surplus that's pushing the Japanese currency higher. The yen is still, though, about 7 percent down since the start of the year.
(COMMERCIAL BREAK)
QUEST: Now, no extraordinary excuses for Ryanair. The airline seems set to lose the latest stage of its battle to avoid paying care and comfort costs to passengers stranded by the volcanic ash cloud.
Now, Ryanair claims that the incident in 2010 cost nearly $37 million because it had to provide hotels and meals and the like. But they said it was so extraordinary that the EU passenger protection rules shouldn't apply.
Today, a legal opinion from a European court of justice advocate didn't agree. It said there's no room for particularly extraordinary events to release an airline from its obligations.
Ryanair's legal battle is all about this European regulation. It is called Regulation 261, "establishing common rules and compensation." This demands that passengers who are unable to board their flights must be adequately cared for while they wait.
"Assistance to passengers," it says here. "Where necessary, they must be provided with meals, refreshments, and hotel accommodation." Now, that's the case even if the cancellation is due to extraordinary circumstances. It's not compensation, it is care and comfort.
The chief executive of the Irish carrier Aer Lingus wants Ryanair to sell its 30 percent stake in the company. Aer Lingus has shifted to a hybrid model. It's trying to be both a low-cost and a legacy carrier in carving out its own niche competition against its budget rival.
At Dublin Airport, the Aer Lingus chief executive, Christoph Mueller, told me it's a 270-degree turnaround that lets customers customize.
(BEGIN VIDEOTAPE)
CHRISTOPH MUELLER, CEO, AER LINGUS: Our end consumer price is relatively low. That attracts people to fly with us. And then, they can add on modules of service, like lounge access, like fast-track security, or have a warm meal onboard, and that works quite well.
This is exactly what the customer seems to want. Not to buy a huge business class ticket and get everything, irrespective of if there is a need for it. Or as opposed to the simple transportation our low-cost carriers offer.
QUEST: But don't you invariably, then, fall between all the stools? The person who wants a bit more will go with the legacy, and the person who wants a bit less will go with the low-cost carrier. And you're left nutcrackered in the middle.
MUELLER: Our history shows in the last two years that everybody wants to go with us. We offer what people want. We gained 8 percent market share in a shrinking market. We gained the market share predominantly from the low-cost carriers and from the legacy carriers. That, I believe, is a proof of concept.
QUEST (voice-over): Straddling the world of low-cost and legacy is one challenge for Aer Lingus. Another is the relationship with its closest rival, Ryanair, which also is a key shareholder.
QUEST (on camera): Two attempts to take you over and -- won't make a third. Do you home Michael O'Leary and Ryanair now just goes away from your shareholding?
MUELLER: We have always said it's very, very difficult to have the largest competitor being your principle shareholders. Fortunately, it's not enough that they take a seat on our board and have more insights in our strategy and our tactical moves.
But at the end of the day, I believe Ireland is the only legislation in Europe which would allow such a move, and that's the reason why the Office of Fair Trading in the UK have taken up that case.
QUEST: But what do you want him to do? Go away? Sell his shares? Get rid of it?
MUELLER: That would be the best solution. Whether he will do that, he has announced at various occasions various attempts to do that. We will see.
First and foremost, we have to achieve a better fare price to make it more attractive for this and other shareholders to trade our shares more.
QUEST: What do you want? No mess -- no equivocating here -- what do you want the Irish government to do with their stake?
MUELLER: We have always advocated the Irish government to dispose the 25 percent. They --
QUEST: To whom?
MUELLER: Our prediction is that the flotation into the free market would be the best solution for the time being. Because to invite another airline to our supervisory board or to our shareholder register would make things for the time being even more complicated because, as you know, Ryanair is -- has not a lot of partnerships in the airline world and not a lot of friends.
QUEST: So, you would like the -- the Irish government stake, so there's no -- to go basically into a free market?
MUELLER: That would be our first option. If a trade buyout could be found for the 25 percent joining amicably forces with Ryanair, that would be the exception, from what I just said, but that likelihood is so small that I believe you cannot build a strategy upon it.
(END VIDEOTAPE)
QUEST: That was Christoph Mueller of Aer Lingus on the future for his airline. And one postscript to that. JetBlue said last week it was not interested in making an investment in Aer Lingus even though it is the airline's partner in the United States.
It's time to choose the next leader of the World Bank, and the US still hasn't put forward its own candidate. As President Zoellick bows out, we'll take a look at the other presidential race next.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, it is the news that will always come first.
There was a dramatic and deadly end to the 31-hour siege in Toulouse in France. Officials say the self-styled jihadist, Mohamed Merah, died of gunshot wounds after he fired on commandos who stormed his apartment. Two police officers were injured. Officials say Merah confessed to seven killings and recorded videos of at least some of the murders.
Renegade soldiers took to the airwaves in Mali on Thursday to tell the people they are now in control. Earlier, they suspended the constitution, sealed Mali's borders, and imposed a curfew. Soldiers say the ousted the president because of the government's handling of an insurgency. It's not clear what's happened to the president.
(BEGIN VIDEO CLIP)
(BOMBS EXPLODING)
(MEN SHOUTING IN ARABIC)
(END VIDEO CLIP)
QUEST: In Syria, an opposition group says security forces have killed at least 59 people nationwide today. Video posted online appears to show a market being shelled in Homs. A voice can be heard saying it's an historic site fired on by a government tank. CNN cannot confirm the authenticity of these images or the reports.
Three more bodies have been recovered from the wreckage of the Costa Concordia cruise liner. That brings the overall number of people who died on the ship to 28. Four people are still missing. The cruise ship ran aground and capsized on January the 13th.
Barack Obama has taken his energy tour to Oklahoma today, where the U.S. president approved plans to fast track the southern part of the controversial XL Keystone Pipeline. His critics say that isn't enough. They want him to approve the entire project.
Nominations for the presidency of the World Bank are due in tomorrow. The U.S. still hasn't made its choice, or if it has, it hasn't announced it publicly. You'll know traditionally, the head of the bank has always been an American. The IMF gets -- goes to a European.
Developing nations say they want a bigger say.
Maggie Lake is in New York -- before we go any further, Ms. Lake, who has officially declared and who is just rumored to be skulking around the corridors?
MAGGIE LAKE, CNN CORRESPONDENT: Everyone is rumored at this point, Richard. It is widely assumed that Nigerian finance minister and also an ex-Colombian finance minister are on the short list, coming from emerging markets. But again, no confirmation. The official deadline is tomorrow. And it seems like everyone holding their cards a little bit close to their chest right now.
You know, this is -- this has been a discussion that's been happening for a while, as you well know. But the fact that the emerging countries, the developing countries are really the ones with the rapid growth rates, that they are the growth engine for the global economy while Europe and the U.S. lag has really put sort of a new sense of urgency on this discussion and this debate.
It is assumed it is going to go to an American this time. And let's go over who are the people who are considered to be on the short list.
Have a look.
(BEGIN VIDEOTAPE)
LAKE (voice-over): He's the man with the weight of the World Bank on his shoulders, Robert Zoellick.
(BEGIN VIDEO CLIP FROM 2007)
GEORGE BUSH, PRESIDENT OF THE UNITED STATES: I'm pleased to announce that I will nominate...
(END VIDEO CLIP)
LAKE: Nominated by President Bush in 2007, he's finishing his five year term and stepping down in late June.
The big question, who will take his place?
The deadline for countries to hand in their nominees is Friday. And as in the past, the U.S. is expected to get its nominee approved, even though there may be challengers this time around.
Those thought to be in the running for the U.S., former Obama adviser and Clinton administration the Treasury secretary, Larry Summers, and Senator John Kerry, the former Democratic presidential nominee.
There's also speculation that President Obama might decide to nominate a woman. Also reportedly being considered, Susan Rice, the current U.S. ambassador to the United Nations, the CEO of PepsiCo, Indra Nooyi, and Secretary of State Hillary Clinton, who's planning on leaving the administration if Obama is reelected.
DAVID GORDON, RESEARCH DIRECTOR, THE EURASIA GROUP: President Obama would like to nominate Secretary of State Clinton, but I don't think she wants it. And I don't think his persuasive powers are likely to move her.
LAKE: So who's likely to get the nod?
GORDON: If I had to make a bet, I -- I think of the five, the -- the leading candidate right now is Larry Summers.
LAKE: In an interesting twist, Jeffrey Sachs, the head of Columbia University's Earth Institute, has expressed interest in the job. He's written an op-ed in "The Washington Post" titled, "How I Would Lead the World Bank." Sachs is critical of the Zoellick regime and its efforts to fight poverty. And he has the backing of some developing countries.
Still, don't hold your breath.
GORDON: If the emerging market countries were serious about an alternative candidate, that candidate would not be an American.
LAKE: Reports say two other non-American names may also be nominated. We should know who the World Bank member countries ultimately choose as their next head later next month.
(END VIDEO TAPE)
LAKE: And it's certainly turning out to be more of a horse race, Richard, than some had thought, especially when it comes to the possibility of an emerging country getting the top vote.
If that doesn't happen, what you may see -- and this is what people are sort of expecting -- very similar to the IMF, it does, once again, go to an American, but you get somebody from a -- a developing country with a very, very senior post, maybe a deputy post, to sort of set the stage for the transition next time.
QUEST: In other words -- in other words, Maggie, it's the carver (ph). I mean, you know, you -- and one of the reasons for that is -- which we saw at the IMF, was the failure of developing nations to coalesce around a single candidate.
LAKE: Yes. Yes. That was the problem, you're right. But everyone learns from those experiences, don't they?
And as we said, you don't have a whole host of names coming out. You only have two right now from those. And it will be interesting to see what happens. One would think they learned from that experience and this time the campaigning will be a little bit more directed.
But again, this is sort of new treaty, so it's going to be interesting to watch.
QUEST: All right, do me a favor, Maggie.
I haven't got my penny. Get a pen. Get a pen. Write on a piece of paper who you think it's going to be, fold it over and put it in your desk drawer.
At the end, we'll see which one of us managed to get...
LAKE: Will do.
QUEST: -- will do. All right.
LAKE: Will do.
QUEST: She'll change. She'll cheat. She will cheat. She'll cheat at the last minute.
(LAUGHTER)
QUEST: Maggie in New York. Next...
LAKE: Never.
QUEST: It's too late.
Jeffrey Sachs, who Maggie referred to, is on our program tomorrow night, QUEST MEANS BUSINESS. We will be talking to him about his candidacy to be the president of the World Bank, as, effectively, well, not as the only officially declared candidate. That's right here tomorrow. And you ought to be here, too. it's more functional than five star, the basics are the same. The Intercontinental Europe's chief exec on how to run an Olympic Village.
QUEST MEANS BUSINESS.
Good evening.
(COMMERCIAL BREAK)
QUEST: There's no place like home. And in the case of the Olympics, the home away from home for 17,000 people. It's a challenge for Intercontinental, the first time a hotel group has been asked to run the Olympic Village on a site in East London. European chief exec, Angela Brav, told Jim Boulden that when it comes to providing that accommodation, silver and bronze won't do. It has to be gold.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN CORRESPONDENT: What is it about the Olympics that's important for IHG?
Why -- why were you keen to do this?
ANGELA BRAV, EUROPEAN CEO, INTERCONTINENTAL:
Right. Well, first of all, the Olympics is a fantastic opportunity for IHG to showcase our brands. And we were selected. We were chosen to be the provider of ho -- of the hotel.
BOULDEN: But it's not just the hotels here on the site. You're also going to be running the athletes' village.
So do you -- what are the 17,000 athletes and coaches going to see different from what they would if it was like a government-run flat?
BRAV: This is the first time that the -- a hotel company has been selected to run the Olympic Village. So, yes, it is the first time for us, but we serve just under, maybe less than a half million guests every night around the world in 100 countries. So we're pretty good at taking care of guests. You know the stress that they're going to be under. We're going to be a part of their lives at probably the best and, maybe for some athletes, less than the best time of their lives. And -- and just having compassion and understanding and being able to meet their needs while they're here and understand what their needs might be prior to them even knowing what their needs.
BOULDEN: Of course, the hotels will be full during the Olympics.
But what about afterwards?
We always talk about legacy. You're convinced that this is a site for a hotel that's going to -- going to work?
BRAV: Oh, I am absolutely convinced. And I think the owner of this property is convinced, as well, since we are primarily a franchise company.
BOULDEN: Yes.
BRAV: We actually do business with investors. And the investor for this particular hotel knows that long after the Olympics, there will be a Stratford and there will be a need to come to Stratford. So there's no need for you to go into London if you have business, for example, right here in this -- in Stratford.
If you have business here in Stratford, you -- you want to make sure that there's infrastructure here for you so that you don't have to stay in London. You can stay right here. And, of course, we have this fabulous Holiday Inn and the Staybridge Suites. So we have over 350 rooms just in Stratford, right outside this fabulous, as you can see, Olympic Village behind us.
BOULDEN: So the trend of secondary cities, is it that people want, actually, hotels where the work is, so they don't always want to be in the center of town?
And you're not talking about the necessary 400, 500, 600 bedroom hotel, you're talking about 100, 150 rooms?
BRAV: Exactly.
BOULDEN: Yes.
BRAV: We're talking about hotels that are just large enough to -- to meet the needs of that particular community. And like here, we have this particular Staybridge -- and, in fact, we're standing on the balcony of the Staybridge.
BOULDEN: Yes.
BRAV: It has 150 rooms. And the Holiday Inn, which is right next door, has about 180.
BOULDEN: Does it cannibalize the existing Holiday Inns and the existing hotels or is it -- is it a true growth strategy?
Or are you spreading it out?
BRAV: Well, first of all, abs -- there's absolutely no cannibalization because people that come to Stratford want to stay in Stratford. They don't want to stay in downtown London. The people that want to stay in downtown London are going to choose to stay there.
So it's actually putting hotels where people want to stay.
(END VIDEO TAPE)
QUEST: The chief executive of InterContinental Hotels for Europe.
And they will be providing the accommodations -- well, in charge of running the accommodations.
Jenny Harrison this evening at the World Weather Center -- oh, Dear Miss. Harrison, my Fahrenheit and my Celsius, I was -- I was exposed...
JENNY HARRISON, CNN METEOROLOGIST: Experience.
QUEST: -- to my ignorance earlier in the program.
HARRISON: Never mind. I'm sure it's not the first time, eh?
It won't be the last, either.
QUEST: Hey. Hey.
HARRISON: Listen, I need to...
QUEST: Hey.
HARRISON: -- I need to talk about something serious, Richard. I need to bring your attention...
QUEST: Please.
HARRISON: -- to the World Water Day, because this is something which has been going on. The United Nations set it up. It was discussed in 1992.
Since 1993, we have had the 22nd of March every year designated as World Water Day. Every year, there's a different theme.
This year it is water and food security. And very apt, as well, given the situation across Central and Western Africa. Vast areas of this continent are in severe drought. Eight countries actually facing, the U.N. saying, a food crisis. That means 10 million people could be facing the possibility they're in danger of starving to death.
This is why -- this is the main reason, because of the drought. And so it is now just too dry to sustain crops, livestock and, obviously, the people that live there. These eastern areas in particular under extreme drought in many cases. And, as I say, out toward the west, as well, much of there under severe drought.
And, in fact, drought is still the main problem worldwide. And in the last century, drought was responsible for more deaths than any other natural disaster. One out of eight people don't have access to safe drinking water.
So this is what we mean when we say that drought in particular, but also floods, but drought in this case, can lead to these food emergencies.
So it's all about becoming conscious of your water footprint, not just the water you drink or the water you put to -- to make your food, but water in every single thing that we use in our every day lives. And that is something they're asking for you to become more aware of.
For example, 1,500 liters of water are needed to produce a kilogram of wheat. Ten times that amount are needed to produce a kilogram of beef. And these bottles of water, it takes seven liters of water to produce the actual plastic that actually holds the water.
So -- and as you might expect, water will increase the demand for water as the population increases.
Mexico severely impact, also. Texas here, Richard. 2011 was the driest year in the history of Texas. And, obviously, here, $8 billion losses because of the -- the severe drought in place there.
QUEST: OK. Many thanks, indeed.
Jenny Harrison at the World Weather Center.
And that is QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable.
"MARKETPLACE EUROPE" is next.
(COMMERCIAL BREAK)
JULIET MANN, CNN CORRESPONDENT: Welcome to MARKETPLACE EUROPE.
I'm Juliet Mann on a farm in the heart of the English countryside. Farming plays an important part in the European economy. The U.K. is the largest producer of sheep and goat meat in the EU and the fourth largest producer of beef and veal.
With the U.N. predicting the world will need to produce 50 percent more food by 2030, the pressure is on to increase production more sustainably.
Coming up on the show, from soups and sauces to soap powder and shampoo, I'll be talking to Unilever's president for Europe, the company behind some of the world's biggest brands.
Hearing what the farmer whose family has been running this farm for three generations thinks about the future for farming in Europe.
And I find out what's behind Britain's growing appetite for fair trade produce.
Like many farms across Europe, Boycott Farm here in Buckinghamshire (ph) has had to look beyond traditional crops and animals to boost their income. Alongside a beef herd, pigs and 6,000 chickens, this 17th century barn is now home to a tea room, restaurants and a thriving farm shop. Whatever marketplace you shop in, the chances are, there's a Unilever product in your basket. With over 400 brands, they sell more packaged tea and make more ice cream than anyone else in the world.
In this week's FaceTime, I caught up with the man at the helm of the business in Europe.
(BEGIN VIDEOTAPE)
MANN: You're looking to double your growth with an environmental edge.
How can you be sure that that's what investors want?
JAN ZIJDERVELD, PRESIDENT EUROPE, UNILEVER: No, that's what consumers want. In the end, we're a consumer company. The number one people we think about is the people of the world, the people that use our products.
And what they want is products from companies they know that they make these products responsibly. So when they buy P.G. Tips, they know that the tea is grown from sustainable plantations.
MANN: It's a huge investment, though, bringing out all these product lines. You've also got pressures with commodity prices.
Now, how do you maintain that balance without putting it all on the consumer to get you back to growth?
ZIJDERVELD: No, in the end, it's -- it's business as usual. So commodity prices have gone up. So the first place is to look at your own cost structures to see what costs you can take out of the business and where you can be more efficient and what you can do better.
But in the end, it's really going back to the consumer and thinking what sort of things can we do to help her?
Because the funny thing is, for the consumer, good value doesn't necessarily mean cheap.
MANN: In Europe, you're saying the focus is on the consumer, getting it right for them. You're also in emerging markets, though. And Russia seems to be a growing market.
Why is Russia such a hot ticket or are you just going there because Nestle and L'Oreal are already there?
ZIJDERVELD: If you look at the -- where the opportunities are for the future, it's obviously the BRIC countries. But it's much more than that. So it's Russian business or China, but it's also the Vietnams of this world, it's the Pakistans and Bangladeshes of this world. It's Africa, the -- the growth in Africa.
So as a global enterprise, we really have to look at where the opportunities are. And that's where the people are, the population growth is, where the economies are growing and the consumption is still low.
MANN: You're very positive. You're full of energy and I imagine that's quite infectious for the people who work for you.
But it hasn't been plain sailing. There have had to be cost cutting and major changes within the -- the company's structure itself, hasn't there?
ZIJDERVELD: Absolutely. Business is -- is a tough place. In the end, we have to do what is needed to succeed. And Europe is a tough environment. So when markets are not growing and, actually, the cost to compete is going up, because the consumer demands great products, demands it at a good price, demands innovation, you've really got to turn every euro in every part of the business to be able to actually reinvest that into the marketplace.
MANN: What are the main obstacles or barriers to doing business in Europe, would -- would you like to see some tweaks to certain EU regulations, for example?
ZIJDERVELD: Well, it's absolutely clear that having now spent eight years outside Europe, that doing business in the emerging world is a lot easier.
Why?
The environment is easier. It's much more pro-business. People welcome business.
And I think in Europe, having now been for -- back for a year, there is too much negativism. People don't understand that business -- and 99 percent of the business -- is a force for good.
MANN: If you could bend the ears of all the European commissioners in Brussels, would you like to run Europe the Unilever way?
ZIJDERVELD: Well...
(LAUGHTER)
ZIJDERVELD: -- well, we're not so arrogant to think that we can run Europe. It's difficult enough to sell soap and tea and a bit of ice cream. So let's just try and do that well, first and foremost, before we start running Europe.
But what would I like -- what would I like Europe to do is become a little bit more pro-business, to make the environment a little bit easier for us to operate. And we can learn a lot from the emerging world. It is a lot easier to do business in the emerging world. It's a lot more proactive. It's less bureaucratic. The EU has said they would cut 25 percent of all regulations, I think by 2015. They're not on the way of doing that.
To get an innovation through, it takes too long. To get approvals through, it takes too long. So things are just too slow and too bureaucratic.
And if we want to reinvent this continent and make it innovative, growing, dynamic, you need to be able to loosen it up a bit. Let some fresh air. It's almost like a spring clean. Europe needs a little bit of a spring clean to be able to innovate again and grow again.
(END VIDEO TAPE)
MANN: Jan Zijderveld, Unilever's president of Europe, there.
Coming up after the break, I'll be finding out what lies behind the growth in the market for fair trade produce in Britain.
(COMMERCIAL BREAK)
MANN: Welcome back to MARKETPLACE EUROPE.
Just over 40 percent of land in the E.U.'s 27 member states is agricultural. Here in the U.K., around three quarters of the land is used for farming. Food and farming contribute more than $140 billion to the U.K. economy each year.
(BEGIN VIDEOTAPE)
MANN (voice-over): Richard Hilton's family has been running this 75- acre farm since the 1920s. The biggest part of his business is this cloche of 6,000 chickens.
(on camera): What would you say that the biggest challenge is to the farming industry in the U.K. and in Europe as a whole?
RICHARD HILSDON, BOYCOTT FARM: It's just the amount of red tape we have to go through. We just -- we spent all that time, when I was a kid, outside working the land. Now it's 25 percent, I guess, of my time is spent in probably the computer, just putting forms in, etc.
In an ideal world, I'd love to farm without subsidies. I don't really want subsidies. I'd love to farm completely free and just do -- get on with what we want to do.
(END VIDEO TAPE)
MANN: The U.K. boasts the largest market for fair trade products. The fair trade movement aims to help farmers in developing countries by giving them a better deal for their goods, like sugar, which has scooped up a calorie busting 42 percent of the bagged sugar market here.
(BEGIN VIDEOTAPE)
MANN (voice-over): Browsing the aisles of this London grocery store, the shelves are packed with choices from all around the world. Now, more shoppers are selecting a premium brand that is bucking the trend of retail decline in the U.K., fair trade.
(on camera): Last year in Britain, sales of fair trade products overall was $2.07 billion. In the U.K., we drink 9.7 million cups of fair trade tea every day, 6.5 million cups of fair trade coffee every day and we get through 3.2 million bananas -- fair trade bananas -- every day.
(voice-over): Perhaps it's social conscience, since fair trade is about getting farmers in developing countries a better deal. But it's also about the price we pay. In many major U.K. supermarkets, buying fair trade doesn't cost consumers any more than conventionally produced equivalents. They're calling it responsible capitalism.
BRAD HILL, FAIR TRADE DIRECTOR, THE CO-OPERATIVE: From our point of view, it's about investment. It's about being fair to everybody in the supply chain, including our customers, as well, so they get a great product at a great price, but we can also afford to pay back to the farmers, as well. So, because we look forward to difficult times in terms of the sourcing of commodities, particularly in areas such as cocoa, then it makes pure business sense to actually engage with farmers now, so that in the future, when the supply is running short, you are actually a customer of choice of them.
MANN: Fair trade is a consumer label that covers a wide range of products, including bananas, sugar, cocoa and even gold. The idea is that retailers pay a premium, like one U.S. dollar per box of bananas, on top of the usual price, which is used to benefit the communities they're produced in.
DEMETRIO GONZALES, PENNSYLVANIA BANANA GROWER: Before, we were just covering our production costs. Through fair trade, we have been able to develop our community with investments in health, sanitation, water supplies and education.
MANN: Fair trade sales are growing, but the sector overall is still very small, just 0.1 percent of all food and drink sales worldwide are certified fair trade, according to free market think tank, the Institute of Economic Affairs. The U.K. is the largest market.
HILL: Even though across Europe, the consumers are saying, as they do in the U.K. -- and it's the same sorts of figures, around 60 percent, recognize they can make a difference through making a fair trade purchase, if the awareness of fair trade in the U.K. is so much higher than 96 percent, compared to an average about 47 percent in other European countries.
So if we can get that same visibility in Europe that we have in the U.K. by virtue of brands supporting fair trade, supermarkets supporting fair trade, then I think there's a real potential there to go after it in Europe, as well.
MANN: Fair trade is not without its critics, who query the sustainability of this model. But it's certainly one ethical choice that won't leave you any worse off or put a freeze on your guilty pleasures.
(END VIDEO TAPE)
MANN: That's it for MARKETPLACE EUROPE this week.
So for me and these Gloucestershire old slop pigs, the oldest spotted pig breed in the world, goodbye.
See you next week.
END
