Return to Transcripts main page
First Move with Julia Chatterley
Reuters: Musk Looking To Cut Some 10 Percent Of Tesla's Workforce; African Union Leader Meets With Putin On Food Security; Futures Lower; Solid Jobs Than Expected Rate; JP Morgan CEO Warned Of Economic "Hurricane" This Week; Only 5th, FDA-Registered Infant Formula Manufacturer In The U.S.; Byheart Manufacturing Moving To 24/7 Schedule. Aired 09-10a ET
Aired June 03, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ELENI GIOKOS, CNN HOST, FIRST MOVE: All right, you're watching FIRST MOVE. I'm Eleni Giokos in Dubai great to have you with us.
We begin with important new economic numbers out of the United States. The U.S. has just released its latest look at the state of the American jobs
market. It's a crucial piece of information for economists looking for signs of slowing growth as the Fed begins hiking rates.
Now 390,000 jobs were added last month a bit higher than anticipated the numbers show that the U.S. jobs market remains very healthy, but there are
signs that jobs growth is beginning to ease a bit. Meanwhile, U.S. unemployment rate held steady at 3.6 percent. U.S. Futures have been
trending lower all morning and Wall Street Futures are still pointing to a lower open as well. As you can see the DOW Jones slated to open down seven
tenths of a percent, S&P also down 1 percent right now, these are the Futures.
Rahel Solomon joins me now, Rahel let's break this down. I just had a quick look over these numbers. Much better than anticipated, you have a very
steady unemployment rate at 3.6 percent. And I have to say notable gains in some of those sectors. And it's still within hospitality and leisure. I
guess the question is what is going to happen in the future? But before we get into the future, let's talk about what you've picked up in the latest
RAHEL SOLOMON, CNN CORRESPONDENT: Yes, let's talk about the now Eleni, you just talked about futures saying that they were lower, and we were watching
them as these numbers crossing, they pretty much stayed the same. So no big surprises here, I think are the headline when we look at the numbers.
Yes, about 390,000 jobs added. And to put that in context, Eleni for the last 12 months, the number started with a four began with a four. So for at
least 12 months, we have seen more than about 400,000 jobs added. So it's still a strong number. But it could be going in the right direction in
terms of what the Fed wants to see in terms of what the White House here wants to see.
Of course, we got that op-ed from President Biden earlier this week, talking about the fact that we could see slowing job growth. Of course, the
idea and the priority for both the Federal Reserve and the White House is that they want to lower inflation. And so they want to see sort of a little
bit more balance in terms of the jobs market.
But yes, let's go through today's report. So the unemployment rates pretty much staying 3.6 percent. That's about the third month in a row, we're
seeing that employment and leisure and hospitality, as you mentioned, Eleni, that increased by about 84,000 in May.
Employment in professional and business services rose by about 75,000 in May. So again, still a very strong jobs market but I think the devil is in
the details as they say. It could be going in the right direction in terms of cooling sort of the demand for workers right now.
We have heard Fed Chairman Powell talk about how there are practically two open jobs right now for every one person looking for a job and how that
could be perhaps inflating wages? And so they want to see some more equilibrium in the jobs market. And this could be one indication that it's
beginning to happen.
GIOKOS: Yes, really fascinating, right. And this is as we're anticipating a recession and we're hearing warning bells and you know very big concerns
about what the inflationary outlook is going to do to the economy. So time will only tell.
But I have to say we really do care how Elon Musk feels. And he's weighing in on the state of the economy. And he says this doesn't feel good. Tell me
what he said. And you know whether we should be paying attention to his statement.
SOLOMON: Yes, it does feel like anytime Elon Musk speaks, that gets quite a bit of attention. But even more so this week, Eleni because of the
perspective and the context in which it comes. So Elon Musk, this according to Reuters, putting out a statement to employees at Tesla, that he has a
super bad feeling about the economy and that he wants to cut about 10 percent of jobs at the electric carmaker.
Eleni I have to point out in mid-April during earnings for Tesla, we heard him talk about record profitability and the demand for the product. So this
is not necessarily a reflection of profitability or demand. But it does make you scratch your head if short time ago Elon Musk was talking about
how they were able to pass on increases to consumers because demand was so strong and record profitability.
And now we're hearing him say that he has a super bad feeling about the economy. Of course, these comments coming just a few days after you and I
spoke about Jamie Dimon sort of updating his forecasts and calling for perhaps an economic hurricane a warning saying brace yourself and that he
doesn't know if what we might experience in the U.S. economy and perhaps even globally is going to be a smaller hurricane or something more along
the lines of Superstorm Sandy.
So, the warnings appear to be growing louder and coming from quite prominent people in the business world and the clouds appear to be getting
GIOKOS: Yes, absolutely. I mean, you've got inflation, that's a big risk. You've got high oil prices and you've got, you know, the Fed hiking rates.
It's just it's an interesting combination. Rahel, I'm sure you and I have a lot of these conversations--
SOLOMON: It is and we will, but Eleni you know, I should say that the asterisk to Jamie Dimon's comments were that the strong part of the economy
was the jobs was the labor market. And we're seeing that today as well.
GIOKOS: Yes. Interesting times, Rahel Solomon, always good to see you. Thank you so much. Now as President Biden says inflation is his top
economic priority. He's now planning to meet with Saudi Crown Prince Mohammed bin Salman later this month. This comes after OPEC and its allies
decided yesterday to increase oil production by 200,000 barrels per day in July and in August. The White House praises Saudi Arabia's role in the
decision hailing it as a diplomatic breakthrough.
Well, today marks 100 days of the war in Ukraine. The country's military says it's now pushing back Russian assaults in some areas in Eastern
Ukraine as heavy fighting continues in the region. Ukrainian forces also claiming they have made progress during counter attacks in the southern
region on Kherson. Matthew Chance is in Kyiv with more.
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, it has been 100 days now since Russia launched this attack on Ukraine. I think the fact
that it's lasted for so long that Ukraine has not folded in the face of this Russian assault, a surprise many, not least in Moscow.
But of course the price has been high. Ukrainian officials say about 20 percent of the country has fallen under Russian control, an area the size
of Luxembourg, the Netherlands, and Belgium put together. The death toll has been catastrophic, too.
There were no exact figures but when you combine civilians and soldiers on both sides, its estimated tens of thousands of people have died. And in
some of the most supporting seeds, witnessed in Europe for a generation, innocent civilians seem to have been targeted in alleged war crimes,
something that's going to keep prosecutors busy, potentially for years to come.
Fleeing the violence, millions of people have been forced to escape their homes Ukrainian officials say the fighting has displaced 12 million, 5
million have left the country altogether, either to Europe or to Russia, to where Ukraine officials say people are being forcibly evacuated.
At the moment, the military focus has shifted to the Donbas region of Eastern Ukraine, where Russian officials - Russian forces and their proxies
are battling for control of Severodonestk taking more than 80 percent of that city.
But elsewhere in the east, Ukrainian troops say they're making counter attacks to recapture territory with the help of sophisticated weaponry
being supplied by the United States and other Western countries. Ukrainian officials are pleading for even more of that military support, to allow
them to continue to defend their country for another 100 days, and if necessary, beyond Matthew Chance, CNN Kyiv.
GIOKOS: Meanwhile, in Russia, the Head of the African Union meeting with President Vladimir Putin to ask him to lift the blockade of grain and
fertilizer stocks from Ukraine, this as Africa faces a food crisis caused by the war in Ukraine. David McKenzie now joins me from Johannesburg.
David, good to see you!
Here's also the reality a lot of African leaders have not voted to condemn Russia's invasion of Ukraine. So I guess the question is do you think we'll
see a breakthrough in this meeting?
DAVID MCKENZIE, CNN CORRESPONDENT: I'm not so sure if we will see one in the short term, but you can expect Eleni that the Russian President will
try to shift blame away from his own actions in terms of blockading Odessa and other ports to stop millions and millions of tons of grain from leaving
Ukraine to go into export to around the world, including countries in Africa.
And yes, there are certain countries in the continent that are facing a food crisis. And this is a cascading effect that could only get worse if
this conflict drags out. First, we believe the prices will continue to increase on top of inflationary pressure. And then you could see a scenario
that you'll even have a lack of food for distribution both for export and for the aid group.
So you know the World Food Program had called the blockade a "The declaration of war on global food security" just this week Eleni.
GIOKOS: Yes. And, David, very quickly, could you give me a sense of the pricing on the continent how it is going to affect in real time some
MCKENZIE: Well, there as you know, more than 50 African countries all have different impacts from this conflict. I think the early impacts will be
seen in the North Africa region or sub parts of the Middle East and Asia, Central Asia, particularly, because they have such a great dependency on
Ukrainian and Russian grain and oil, sunflower oil that is.
You will also see an ongoing effect because of fertilizer. Russia is one of the biggest producers of fertilizer critical for global agriculture. As
just this week, the Head of the African Union was complaining that the impact of the restrictions on the Swift banking system has constrained
African countries in particular from purchasing key agricultural products.
There is this chink in the armor now in terms of global solidarity with Ukraine because of the impacts. I think that individual countries,
particularly here in Africa will be feeling in the months ahead, Eleni.
GIOKOS: David, it's such a good points the inflationary impact is going to be big. David McKenzie in Johannesburg thank you. Now these are the stories
making headlines around the world some breaking news from Germany, at least three people have been killed and more injured after a train derailed in
the south of the country. Local police say the train was traveling towards Munich. And we'll keep you updated as we get more details on that story.
So U.S. President Joe Biden made an emotional appeal to lawmakers last night pressing Congress to pass gun control laws. His speech followed a
string of horrific mass shootings. He said too many everyday places in America have become killing fields. The gun violence archive reports that
there have been 233 mass shootings in the U.S. since the start of this year.
Now police in Hong Kong are warning people not to hold public commemorations of the 1989 Tiananmen Square Massacre. Activists have been
organizing vitals among every year in almost every year on the 4th of June, but authorities have recently banned the gatherings citing COVID concerns.
Police will do the same this year and are threatening five year prison terms for what they call illegal assemblies.
Beginning June 8 unvaccinated travelers flying into South Korea will no longer need to quarantine. Seoul's Incheon International Airport will
return to 24 hour operation for the first time since April 2020. COVID testing will still be required prior to visit and again within three days
It's a game of geopolitical chess in the South Pacific and China just came up short in the latest round. This week, Beijing failed to get what it
wanted in its sweeping attempt to extend its influence in the region. The U.S. and Australia are now racing to outplay China and make sure the
strategic region stays out of its orbit. Ivan Watson has the details in this report.
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): To many outsiders island nations in the South Pacific or a tropical paradise exotic
and remote, and yet the focus of intense diplomatic activity from China, part of a Chinese push for influence that's turning the Blue Pacific
continent into a zone of geopolitical competition between China and its Western rivals.
WATSON (on camera): China's Foreign Minister has been leading a delegation on a whirlwind 10 day tour across the South Pacific meeting face to face or
virtually with officials from at least 11 different Pacific island nations. Most of these countries entire populations are dwarfed by even a small
WANG YI, CHINESE FOREIGN MINISTER: Don't be too anxious don't be too nervous, because the common development of the prosperity of China and all
other developing countries would only mean greater harmony, greater justice and greater prosperity of the whole world.
WATSON (voice over): The last time great powers competed in the South Pacific was World War II, when the U.S. and its allies fought a grinding
island hopping military campaign against Japan. Since the war, many Pacific islands still have close ties to the U.S. and its Western allies.
But in March that status quo shaken with the leak of a secret security agreement between China and the Solomon Islands signed the following month.
It allows the Solomon's government to call for help from Chinese police and armed forces. In May the release of another proposed document, the Chinese
Pacific Island countries common development vision, a sweeping vision slammed by the President of the Federated States of Micronesia.
In this letter, he accuses China of offering attractive economic assistance as part of a bid to take control of security, communications infrastructure
and fisheries in the islands.
WATSON (on camera): Just days after being sworn into her new job, Australia's Foreign Minister rushed to shore up Western support for the
PENNY WONG, AUSTRALIAN FOREIGN MINISTER: And Australia will be a partner that doesn't come with strings attached, nor imposing unsustainable
financial burdens. We're a partner that won't erode Pacific priorities or Pacific institutions.
WATSON (voice over): During his visits, China's Foreign Minister refused to take questions from independent journalists.
UNIDENTIFIED FEMALE: That no questions will be asked at this press conference.
WATSON (voice over): Prompting a boycott from reporters in the Solomon Islands like Dorothy Wickham.
DOROTHY WICKHAM, SOLOMON ISLANDS JOURNAIST: And we wanted our government to remember that we were a democratic society. I mean, they are in parliament,
for the in democratically by the people. And if they were to go around signing agreements with foreign powers, then at least our people should be
WATSON (voice over): Meanwhile, the Prime Minister of Fiji has a warning.
FRANK BAINIMARAMA, FIJIAN PRIME MINISTER: Geo political points scoring means less than little to anyone whose community is slipping beneath the
rising seas, whose job has been lost to a pandemic.
WATSON (voice over): On Monday, Chinese diplomats backtracked offering a softened vision of Chinese influence in the Pacific expect more visits from
high level delegations in the months ahead as foreign governments scramble to secure influence in the South Pacific Ivan Watson, CNN, Hong Kong.
GIOKOS: Alright, so straight ahead a closer look at today's stronger than expected U.S. jobs report. What does it mean for Chair Jay Powell and
President Biden as they ramp up their battle against inflation? And we'll speak to JP Morgan's Chief U.S. Economist after the break.
GIOKOS: Welcome back! U.S. Futures still pointing to a lower Wall Street open after the release of today's stronger than expected U.S. jobs numbers.
S&P 500 pointing down almost 1 percent, DOW Jones also under pressure. Alright, so those job numbers really important 390,000 jobs were added to
the American economy in May it was far higher than most had anticipated. Wage growth also remains very robust.
Now all this is pointing to a still solid U.S. jobs market even as the U.S. Federal Reserve begins raising rates to help cool down inflation. Earlier
this week, JP Morgan CEO Jamie Dimon warned of an economic hurricane that he believes is brewing as the Fed tightens and inflation remains high.
Michael Feroli joins me now he is the Chief U.S. Economist for JP Morgan and, Michael, really good to see you. Thanks so much for joining us. These
numbers, even were higher than what you had anticipated, you had expected an increase of 375,000. We're sitting at 390,000. What are you reading into
the latest jobs figures?
MICHAEL FEROLI, CHIEF U.S. ECONOMIST, JP MORGAN: So I would say that's a pretty modest surprise in the grand scheme of things. But overall, I
thought today's numbers were actually kind of welcome insofar as yes, we got stronger than expected job growth. But we also had a no change in the
unemployment rate; we and others had expected that to decline.
So that's been steady at 3.6 over the past three months. And I think that we'll also be welcome to the Federal Reserve who has been hiking rates, as
you say, to cool the economy and really to prevent the unemployment rate from falling further. And while average hourly earnings and wage growth
remains strong, it has cooled some over the past several months so some of that inflationary pressure.
I wouldn't say it's going away. But it's at least moving marginally in the right direction. The Federal Reserve probably would like to see the
unemployment rate actually move up modestly. So to the extent we actually got to stop declining, I think that's probably something they would like to
see here again, even though we got a little bit stronger than anticipated job growth last month.
GIOKOS: Yes, it's a balancing act, isn't it? I mean, what does this tell you? I mean, I understand these for the month of May; we need to look ahead
as well. But what does this tell you about what is to come? Because there's talk of recession, there's fear of the impact of inflation on spending
power. If we dig in further into these numbers, the sectors that really did well was sort of leisure retail still looking pretty robust.
FEROLI: Yes, that's right. I think what you're seeing in the industry detail is still a lot of that reopening, hiring occurring, which is a long
drawn out process, you got to remember, we're still over 800,000 jobs below where we were prior to the pandemic. So I think what you're seeing in the
industry data is a lot of that normalization of sectorial activity.
And I think in terms of, you know, recession concerns, I don't think anyone's concerned about, you know, recession, May or June. But as we look
ahead and the Fed does need to continue to increase interest rates, that that eventually will bring the economy to a standstill.
Now, I think what this tells you about that is most interesting, as I said, in terms of what it tells you about the Feds where the Fed is going to have
to go. Right, so we know they're raising rates, again, 50, base half percent in both June and July. And then the question really becomes what
happens, the next live meeting after that is September, what does this tell us?
You know, not much, but it is, you know, to the extent we didn't see that, that further decline in the unemployment rate, may reduce some of the odds
that they have to go 50 or half percent in September. And to the extent the Fed can go a little more gradually, that would be reduced some of those
recession odds as we look out several months.
GIOKOS: Yes. So Micheal, I'll have to ask you, you know, Jamie Dimon coming out and saying of course the CEO of JP Morgan coming out and saying, look,
there's economic hurricane brewing, when you were listening to that? Were you surprised? Or is this because he's been looking at some of your
forecasts and forecasting that he's making that statement?
FEROLI: Look, I think it's - we've been warning about recession risks ever since the Fed had to really kind of step on the brakes a little more
aggressively here. And historically, when the unemployment rate gets very low, and the Fed starts raising interest rates, that's how you almost
always get into recessions.
There's a few exceptions when you have a pandemic, but generally, if you look in the post war era, recessions follow fed hiking cycles and the Feds
in a hiking cycle now, so it's, I think, a very warranted concern and some of our models would suggest over the next two years, the probability of
recession is above 50 percent. Now what the Fed needs to do here--
GIOKOS: You know it is a hurricane - is it an economic hurricane would you use that language as an economist? I know you're like focusing on the
numbers but yes--
FEROLI: I mean, I think that's the one way of describing, you know, a recession. Recessions are not fun. The unemployment rate generally goes up,
you know, considerably. And for those people who experienced that, that's certainly a very worrisome situation.
FEROLI: So but you know, what I would say is, as you said, it's a balancing act. What the Fed has to do here is get growth to slow but not slow so much
that we turn into negative territory.
GIOKOS: Yes. So Elon Musk also said he has a very bad feeling about the economy. You guys are trying to do your modeling; you're trying to see all
these externalities that are emerging, because you don't really know what will happen in terms of supply demand.
Are you also feeling relatively uneasy in terms of the modeling you have right now that they basically, you know, based on a lot of things that we
don't really know, as yet we don't know how this war is going to play out. We don't know what kind of supply disruptions are going to emerge.
FEROLI: I mean, our concerns about downside growth risks are certainly above - well above average compared to you know, I've been here 17 years. I
would say this is a period when it does look like you know, the outlook is certainly very cloudy when it comes to prospects for growth not only the
Fed hiking rates, but as you say, the hit to purchasing power from higher energy prices, the slowdown receding in China.
So there are a lot of worries out there and certainly, you know, so far we've been talking mostly about the domestic risks from higher interest
rates from the Fed but then we look globally and it's not you know, supportive backdrop right now. So I think it's not unreasonable to be a
little bit worried about the outlook certainly when you look out at least 12 months.
GIOKOS: Exactly where is that crystal ball? Anyway, Michael Feroli thank you so much really good to see.
FEROLI: Thank you.
GIOKOS: OK. And still to come on CNN, parents across the U.S. are still struggling to find baby formula as the shortage in the country drags on. I
speak to the CEO of one of the nation's newest formula manufacturers about helping meet demand that's coming up next.
GIOKOS: All right the opening bell at the New York Stock Exchange trade has officially begun and it's Friday, it is a down day down a tenths of a
percent right. So and of course, we've been expecting this all day. The Futures have been showing a much lower open this is despite the fact that
we had much stronger than expected reads on American jobs growth numbers, suggesting that the U.S. Federal Reserve still has a way to go before it
cools down the economy enough to ease inflationary pressures.
Now, Tesla shares are lower after Reuters reports that Elon Musk is looking to cut some 10 percent of the company's workforce Musk also reportedly
saying that he has, "A super bad feeling about the economy". Tesla shares down 66 percent.
Another Western tech giant is leaving China. Amazon said it is shutting down its Kindle Bookstore in the world's second largest economy Kindle
users will not be able to buy online books in the country, starting June next year.
The exit adds to a number of corporate retreats from the country as it fights to get a handle on the pandemic. We've got Selina Wang joining us
now Selina give us details about Amazon's decision?
SELINA WANG, CNN CORRESPONDENT: Well, Eleni this just add to that growing list, as you say, of these American tech giants that are either scaling
back or pulling out completely from China.
So Amazon made this announcement that it is going to be halting sales of its devices in the country. And it's also going to stop it is Amazon Kindle
Digital Business in China starting from next year.
Now, this comes on the heels of you've got LinkedIn, Yahoo, Airbnb, all of these tech companies in recent months scaling back or completely pulling
out from China. This is as you were seeing more pressure on both local and foreign tech companies in China from authorities. Part of that is part of
the government's tightening control over content and data collection.
Now when it comes to Amazon in particular, in addition to the growing difficulty in the regulatory environment they've also been struggling for
years against their homegrown competitors, including Alibaba and Jd.com, the market as well for these Kindle E-Readers for these digital books
that's also been falling as well for the sales of their devices. So also a growing market even though this was a prominent business for them inside
Now Amazon has been in China for many, many years. But in 2019, they actually stopped their online domestic marketplace as that growing domestic
competition was starting to tighten up. Now, this is what Amazon said in its statement however, because the company does still have some business
lines operating in the country, including advertising and cloud computing.
Amazon said, "Amazon China's long term commitment to customers will not change. We have established an extensive business foundation in China, and
will continue to innovate and invest".
Now also Eleni according to Reuters, importantly, the company says that it is not pulling out because of censorship concerns or because of government
pressure. But the broader context here, of course, is that many websites and apps media companies are blocked banned from China, including Facebook,
Google, YouTube, and Twitter, countless others. Domestic companies, they have thrived within this walled environment but they too face heavy
censorship that is only getting more difficult Eleni.
GIOKOS: Selina Wang, good to see you thank you so much. Now millions of parents across the United States are still struggling to find baby formula.
The shortage highlights the issues the U.S. has, depending on a handful of manufacturers for formula.
Byheart is hoping to fill that gap the New York based company is the only the fifth infant formula manufacturer to receive regulatory approval in the
United States and the first new manufacturer of baby formula in the country in 15 years.
The company launched in March right around the time Abbott's one of the nation's largest formula manufacturers initiated a voluntary recall of its
formula. Ron Belldegrun the Co-Founder and CEO of Byheart joins me now. Ron, really good to see you thank you so much for taking the time!
I want to get into how you started this business? And I know that you're the new player on the block, but it's taken you many years to be able to do
what you're doing right now? How difficult was it to break into a market that was dominated by a handful of players?
RON BELLDEGRUN, COFOUNDER & CEO, BYHEART: Yes, absolutely. Well, first of all, thanks very much for having me. You know, I'll first say, these are
unusually disturbing times for babies and their parents. You know, me, my Co-Founder and sister and I are in it. You know, my wife and I have a 2.5
year old and now a seven day old baby. Mia has a 10 month old currently drinking Byheart.
And you know, at the time of such joy and sleep deprivation and all the wonders of new parenthood to also need to be worried, like so many parents
are across the country, whether our babies will have you know, access to the very best nutrition is scary and simply unacceptable.
As you pointed out with our launch, earlier this year, we became the first new infant formula manufacturer to be registered with FDA in over 15 years.
And with that came a big responsibility. You know, all of us that Byheart, from corporate to our manufacturing in Redding, Pennsylvania, are working
tirelessly so that no parents need to feel that anxiety.
But we're also reminded constantly of why we started this company. You know, in a time of crisis, there's appropriately a lot of focus on getting
formula on the shelf. But for us, it was never about just getting formula on a shelf parents deserve better. It was about getting the highest quality
formula on the shelf.
Infant formula is critically important first foods sole source nutrition while all baby systems are developing. We started this company because we
are sitting in the most exciting era with breakthroughs in nutrition science.
We know more about breast milk than we ever have what drives the immune system? The Gut Micro Biome makes breast milk easy to digest with formulas,
often not. There has never been a bigger opportunity create formulas that come closer to breast milk.
But until now, these breakthroughs are kind of outpacing new products getting into the hands of babies because the barriers to innovating in this
category are so high, as you pointed out. You know, six years ago, we decided to take an approach that no new entrant hasn't decades, and that
was to really build entirely from scratch, because the only way to truly innovate.
GIOKOS: Ron you know, I'm so glad that you said that this is you know, one of the most delicate moments for a mother, right? And here's the point, you
want to know that you'll be able to get quality food for your child.
And yes - and you get to the shelf and you're expecting it to be there to be frank, I think the world was completely shocked that the United States
was running out of baby formula. You opted not to work with established manufacturers because they wanted to control the ingredients.
And that wasn't your game plan. Tell me about what you discovered in that process. And that lack of innovation that is occurring, despite the
knowledge, the new knowledge we have about breast milk?
BELLDEGRUN: So sorry, somebody just chimed in to the Skype. Could you repeat the question? I think there was a disruption in the Skype.
GIOKOS: Yes, OK. So you opted not to work with established manufacturers at this point in time, because they wanted to control the actual formula,
despite the knowledge, the new knowledge that we have of breast milk, give me a sense of what they were thinking?
BELLDEGRUN: Well look, I think, you know, this is, you know, sole source nutrition for babies. This is appropriately the highest barrier to entry
food in the world, the only food that requires clinical studies, and FDA registration for real novel infant formulas.
And, you know, every company in the last 15 years, we've entered the space of kind of taking a similar path, and that was to outsource to the one and
only contract manufacturer, and rely on sort of an expedited path to market that really only enables kind of incremental change to existing recipes.
Now, we at Byheart got into this to really drive meaningful change and translate the major advancements in breast milk research and nutrition
science into the very best products for babies. And in our view, there was only one way to do that and that was to build from scratch.
And so we brought together the world's experts to completely rewrite the recipe and conducted a major breakthrough clinical study to prove our
benefits. You know, as parents ourselves, we wanted evidence, not just claims.
And we acquired our manufacturing facility and built direct control of our end-to-end process to really ensure highest quality ingredients and full
accountability to parents from farm to formula.
GIOKOS: Yes, let's talk about farm to formula. The value chain is quite complex, because it's not that easy to get new players into the market
because everyone's thinking about market share being readily available, but here we've seen the worst case scenario playing out and the need to have
more players in the market?
BELLDEGRUN: Yes. You know, again, in the time of crisis, there's a lot of focus on getting product on the shelf, right? But we need to remember that
this is sole source nutrition in a time when all the baby systems are developing.
And therefore, it is critical to provide really the highest quality and best nutrition, you know, nutrition in this critical time of development
needs to work much harder for us. And so, our approach was really a belief that the more you control the process, the more you can impact the quality
of the formula.
And so we wanted to go out and buy our manufacturing facility in Redding, Pennsylvania, directly handpick and source all of our own ingredients.
Right from partners that we know and trust to ensure the highest quality ingredients and we wanted to work with the experts to really translate
really major advancements in breast milk research into a formula that would get closer than ever before to breast milk. And, you know, kind of be this
more kind of wholesome and functional alternative to breast milk.
GIOKOS: Yes. Ron, and just very quickly, do you think that the United States in terms of supply dynamics right at this minute are in a better
position with new entrants like you in the market?
BELLDEGRUN: Look, you know, we participated yesterday in the administration's roundtable. And what I heard at the meeting what the
president was encouraging. You know, I applaud all the other four companies in the space that are ramping up production and doing that most in this
The administration's efforts have been commendable as short term solutions to a very pressing issue. You know, import and some of the steps that have
been taken, you know, we'll be helpful in getting formula into the hands of babies quickly.
Our approach has been one to build, you know, sustainable solution. You know, this supply chain in the U.S. is far too fragile. We can't be in a
situation where one company has a recall and 40 percent of the countries without sole source of nutrition.
And so we, as one of just five companies in the country that manufacture infant formula are taking this responsibility very seriously. And we are
investing heavily into initiatives that collectively can allow up to another 500,000 new families to get Fed even above our initial plan.
You know, we are investing heavily in our manufacturing in Redding, Pennsylvania, with a $30 million new investment. We are hiring
aggressively. We're adding a whole new shift. We're moving to 24/7. We are moving to expand our manufacturing footprint. And so there isn't a lever
that we aren't pulling and we're doing that all here in the United States.
GIOKOS: Ron, thank you so much for your time really good to have you on the show much appreciate it. And thank you for you at home joining us on
today's show; "Marketplace Europe" is up next. I'm Eleni Giokos take care.
ANNA STEWART, CNN CORRESPONDENT: Hello, and welcome to "Marketplace Europe". This month we are at the "Watches and Wonders Trade Show" in
Geneva. Take a look because all the big watch brands and all of the watch fans are here.
And it's the first time they've been able to gather in person for three years. So imagine the excitement to finally get your hands on some of the
most extravagant, most expensive timepieces in the world?
STEWART (voice over): After years of waiting, there's no time like the present. Watchmakers have dealt with pandemic restrictions for years. Now
they want to make up for that lost time. At the end of last year, Deloitte asked Swiss watch executives how they judge the outlook for 2022. More than
three quarters of them said they were feeling positive.
KARL-FRIEDRICH, SCHEUFELE, CO-PRESIDENT, CHOPARD: The industry has shown resilience, remarkable resilience in the last two years, going through
COVID and coming out now more or less. I think, watch and jewelry industry is thriving in a way and this will certainly help.
STEWART (voice over): Deloitte there's travelers and in store shoppers are the lifeblood of the luxury watch industry. So for executives in Geneva,
their return is a moment to savor.
CATHERINE RENIER, CEO, JAEGER-LECOULTRE: Something I guess we dreamed off, but didn't really truly believe it would happen until the last minute
because we've learned to adapt ourselves to you know, always changing environment. This is very important to be back physically and because we
are of course in an industry where the touch and feel of our product makes a lot of sense.
STEWART (voice over): With that in mind, it's only fair that I get a close up look at what these brands have to offer.
RENIER: What you see here is the Atoms I Breeze, so the novelty of 2022 in a brand new designer, totally transparent with a circular glass that also
represent in a way the permanent motion of Atmos so it's very natural, very rounded.
STEWART (voice over): Without tradeshows like these watch houses have been pushed to innovate, whether it's new watchmaking tech, or ways to try
something on using only your Smartphone. The Head of IWC says the industry is learning to adapt.
CHRISTOPH GRAINGER-HERR, CEO, IWC SCHAFFHAUSEN: We have learned a lot during the pandemic years, how to reach more of our clients globally more
effectively and more efficiently? And that's why the hybrid format to digital technologies now coming here to "Watches and Wonders" and making
this a truly transversal event.
We are using the whole creative force of what we can bring to the market. We're interacting with our clients on new challenges and new ways. And
we're making sure that whatever the situation is globally, we stay in touch with our clients and we make sure we provide the best product we possibly
STEWART (voice over): And it's not just how to sell watches that's changed. It's the jewelry itself. Tag Heuer Centerpiece this year is a timepiece
covered in lab grown diamonds. The Carrere Plasma is worth some $375,000 Frederic Arnault says it's his brand's way of standing out.
FREDERIC ARNAULT, CEO TAG HEUER: We want to innovative throughout our history and we wanted to try and be the first to really have an ambitious
vision on lab grown diamonds. And our approach was if we go there, we need to offer something radically different.
STEWART (on camera): So you can't wire yet but perhaps we can go?
ARNAULT: Let's go definitely.
STEWART (on camera): Who in the world is going to buy one of these?
ARNAULT: We already have a few calls.
STEWART (on camera): You already have a waitlist?
ARNAULT: We already have a waitlist, but we're going to keep it limited in production. We don't want produce too many.
STEWART (on camera): That's - to keeping the volume down to keep the luxury feel to it.
ARNAULT: It's important to have the right balance between offer and demand and always produce one watch less than what the market wants.
STEWART (voice over): The buyers are back the watch companies are just glad to be seeing them in person.
STEWART (on camera): In an industry known for big price tags, there's a certain prestige to being the priciest. Now Patek Phillipe has the record
for the most expensive watch ever sold. A Grandmaster Chime sold for more than $31 million at an auction in 2019.
And now the brand has become an icon of pop culture, as well as the luxury world. I spoke to the President Thierry Stern.
STEWART (voice over): If some of these watches look familiar, you're either a watch connoisseur, or a serious hip hop fan, whether it's Cardi B, or
Jay-Z and Beyonce. Patek Phillipe, which dates back to 1837, has today become the rappers brand of choice. In fact, the lyrics website genius said
the company was mentioned in a third of songs on the Billboard Hot 100 back in 2017, quite a shift for a company that counted Queen Victoria as one of
its early clients.
STEWART (on camera): Your brand is steeped in heritage and history. It's also more recently become synonymous with bling with hip hop artists.
Probably not a direction you saw it going in, but how does that make you feel?
THIERRY STERN, PRESIDENT, PATEK PHILIPPE: Well, of course, I didn't plan that. But I mean everybody likes watches. So you can be a singer or you can
be a painter. For me, I'm OK with that. You know, as long as you appreciate what I'm doing, you know, but I'm also talking about people with Bitcoins,
NFT, who are making a lot of money.
Those clients are minimum maximum, I would say 40 years old, and they're willing to have a Patek Phillipe and not the cheapest one, but they're
knowledgeable. They took the time also to learn about the watches.
They have the money, but they are smart also. So yes, for me, that's fine. As long as you are enjoying what you're - what you are buying, you know,
you have to wear your watch and have pleasure with it.
STEWART (voice over): The waiting list for some Patek watches can take up to eight years. Now the company has chosen to discontinue one of its
biggest models, rather than try to keep up with demand. For Thierry Stern that's a delicate, deliberate strategy.
STEWART (on camera): Let's talk about one of your older models, the 5711 you caused a huge stir by discontinuing it. Why would you stop making such
a popular watch?
STERN: Well, for two reasons. The first one, we never like to keep a watch too long in the collection. My objective is also to protect you as a
client. When you buy such a valuable watch, the price should maintain, or even go higher. And the only way to do that is to stop the watch.
The second one is that I need to be creative. I'm not willing to be a brand with just one single product. My objective is to follow the guideline of
Patek Phillipe to be creative, innovative, and never just stopped, you know, in the middle of something.
STEWART (on camera): We're going to go upstairs and have a look at some of your latest models. What are you going to show me?
STERN: So it's a nice mix of new ID and vintage style. I hope you will like it.
STEWART (on camera): Now this one I've seen outside this is a brand new launch?
STERN: Totally - this is totally new. So this will be for me I think the highlight for Patek Phillipe for this fair. It is what we call an annual
calendar with a travel time system. This is a dial my ID came to be frank from an old camera.
And when I look at it, I say I like this style. So I decided to create a dial that looks a little bit like an old camera. Now if you look at the
case, you also have on the side what we call Crude Perry. This is the DNA from my grandfather.
STEWART (on camera): This is collection the texture--
STERN: And this is a texture you see on the side. So I took the past to the future and I mixed them this is really what I like to do.
STEWART (on camera): You've got huge passion?
STERN: Of course it's such a great business you know. For me it's not a business to be frank it's more now pleasures to enjoy really doing what I
like you know. When I was a child I was looking in my drove my dad and I say I would like to do that. I have to go at 110 percent that's what I
expect from my team from myself and that's what our client expect from us. We are Patek Phillipe we have to go further.
STEWART: After the break on "Marketplace Europe" inflation is pushing prices up right across the continent and it could mean record revenues for
the kings and queens of luxury.
STEWART: Like every other industry prices in the luxury sector are heading up and up. However, when your clients already expecting to spend big the
impacts of inflation can look very different, Nina Dos Santos has more from London.
NINA DOS SANTOS, CNN CORRESPONDNET (voice over): If there's one thing that sets the luxury sector apart, it's the price tags. And as inflation takes
hold across Europe, goods, which were already expensive, are only becoming more so.
SANTOS (on camera): For firms selling everyday items like food and consumer goods high prices can seriously harm sales. For the luxury sector however,
they can be a badge of honor.
JOE MCDONNELL, HEAD OF INSIGHT, WGSN: Rolex have increased their prices Chanel have increased their prices LVMH obviously, there is this arms race
going on between brands, they need to maintain exclusivity and desirability.
SANTOS (voice over): As prices have gone up luxury sales have not slowed down. Last year carrying soul record revenues are LVMH said the brands like
Dior, Fendi and Tiffany all enjoyed record sales too. It might take more than high prices to scare away the loyal luxury buyers.
MCDONNELL: What we think of as our classic luxury consumer. They care less. You know where inflation is biting and food and oil and gas. You know, the
percentage of their income that they're spending on these will be minuscule compared to the mid-tier luxury consumer.
SANTOS (on camera): The inflationary pressures are real for the luxury brands, whether its production costs or raw materials and companies aren't
afraid to take action. Take for instance, Chanel, which has raised prices aggressively several times over the past year.
But what's different about the luxury sector is that customers are already expecting to spend big and they're expecting the highest quality.
SANTOS (voice over): Other sectors have focused on mass production and trimming costs. That's not the goal in high fashion. Hermes says that
handmade goods won't be hit by rising energy costs for example.
SANTOS (on camera): Europe's luxury sector won't return to its pre-COVID size until 2024 according to a study by Bain and Company. And rising energy
costs and tighter supply chains won't make that any easier. But higher prices haven't bothered the luxury industry too much so far. And they might
not bother its customers for now either, Nina Dos Santos, CNN.
STEWART: That's it for this month's "Marketplace Europe". You can take a closer look at our email@example.com\MPE for now from Geneva goodbye.