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First Move with Julia Chatterley
Russia: No Oil Exports To Countries That Impose Price Cap; China Continues To Ease COVID Restrictions; Croft: Price Cap Meant To Keep Russian Oil On Market; England Power Past Senegal To Reach Quarterfinals; PETCO CEO: Pet Food One Of The Last Things People Cut Back On; CNN Near Volcano As Lava Creeps Closer To Hawaii Roadways. Aired 9-10a ET
Aired December 05, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
JULIA CHATTERLEY, CNN HOST: A warm welcome to FIRST MOVE, great to be back with you this Monday and its pretty manic Monday for news. Let's start with
some of the good stuff. England's World Cup win puts them in the final eight but a Chunnel challenge with the French are weighed.
In business news, the West hoping Russian or price caps will carry some weight. And the U.S. jobs market strength while that's no debate,
unemployment gains are far from sedate. Even as wage hikes continue to agitate at least some people on Wall Street.
Let's take a look U.S. stocks set for a softer, open futures that far from all neat while the rhyming continues. But we're done for now as Investors
await the challenges and of course assess the challenges posed by energy and wage inflation. Europe, as you can see also under pressure though the
U.K. the FTSE 100.
They're bucking the trend even with all this year's volatility in the United States. The DOW coming into today's session down just 5 percent now
for the year look at that rebound the recent recovery driven by hopes that the Fed will slow the pace of rate hikes and allow some time to evaluate
what's already in the system in Asia in the meantime COVID relaxation causing exhalation.
Hong Kong shares finishing today's session up by more than 4.5 percent. Analysts at Morgan Stanley also going overweight in China they see a clear
path now towards reopening even if it takes some time.
The HANG SENG, in fact rising 12 percent over the past week has widespread citizen protests in China, triggering an easing of some lockdown
restrictions across some of the major cities oil also responding to those Chinese reopening hopes. Fewer lock downs in the world's second largest
economy surely will lead to more demand for oil even as OPEC Plus moves to keep their production targets steady uncertainty.
Of course surrounding the West's newly implemented $60 a barrel price cap on Russian oil exports also, I think lending some support to prices here.
The EU, the G7 and Australia hope the cap will have Russia's ability to fund the war in Ukraine. But the program of course could to backfire and
push prices even higher.
Adding to the already severe global inflationary crisis we will discuss throughout the show and it's also where we begin today's show. Clare
Sebastian joins us now to unravel this oil situation and unravel indeed it is.
Just explain Clare, what's going on because we've got three things the decision by OPEC to stamp out with their current plans. We've got the oil
embargo or sanctions on seaborne or kicking into play and of course, that's $60 price cap so separate things but not mutually exclusive. Explain the
impact.
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, exactly, Julia, a lot of moving parts. OPEC, it seems is sort of holding fast to its plan to wait and see
what the impact of these new sanctions on Russia will be because these are they've been in the works for months, of course, but these are the biggest
energy sanctions that the West will have put on Russia over the course of this 9 plus months war. This embargo by the EU of all seaborne oil kicking
in as well as the $60 price cap.
And I think the vast majority of the uncertainty surrounds that price cap because this is a measure designed essentially to prevent Russia from
selling its oil above $60 to third countries so not the ones that are introducing the price caps. Obviously because they are the ones bringing in
the embargoes, but this is designed to limit Russia's revenue around the world as it tries to sell its oil that would have gone to Europe to other
countries at $60.
I think there are questions about how much of a dent that will make in Russia's revenues Euros. According to August media is currently trading at
around sort of $49, $52 a barrel so below the price cap, but there are other grades of Russian crude oil that are selling right now for above the
price cap. So the thinking among experts that I've been speaking to is that it will make a limited dent. But of course, the key thing to remember about
this is this is a mechanism that will be reviewed every two months or so.
So they can of course bring down that price cap as they choose. And really the secondary point of this price cap mechanism was to try to stabilize the
oil markets to keep Russian crude flowing so as to avoid potential price spikes. I think the key to whether that happens is what Moscow's next move
will be the Kremlin is threatening to not sell oil to anyone complying with this price cap even if it means cutting production if they do have to cut
production. That could mean that prices spike higher.
[09:05:00]
CHATTERLEY: Yes, so we have to consider whether or not Moscow's threat is credible to not supply. If buyers say look we have to only pay $60 and
we're not paying any more. I think one of the critical implications of this is the sort of external factors in terms of the services to this oil
industry to the insurance that's provided, because part of this is, if you don't adhere to that $60 price cap, then perhaps that means it negates any
provision of those kinds of services and insurance, which for any buyer is a huge deal wherever you are in the world.
SEBASTIAN: This is exactly why the G7 in the EU has been able to bring in this price cap. Essentially, it's not really a price cap; it's mainly the
fact that if you do you can buy Russian oil over the $60 mark. If you want but you will not be able to access G7 or EU insurance or financial services
or trade services any of those kinds of services that go into shipping crude oil.
And of course, the EU and the G7 do have a stranglehold on that market. So that is why they are able to do this. It comes with a lot of reporting
requirements. You have to keep documentation, but according to experts that I was speaking to there isn't actually any sort of on the ground
enforcement along the way.
They're hoping that the penalty of a temporary ban for any ship that's found to be in violation of the sanction on accessing those services for I
think 90 days, that will be enough of a deterrent stop people going against it. But there are potential loopholes, one of which is that there are
reports that Russia has been amassing a sort of shadow fleet of old oil tankers to try to do its own shipping services to get around this Julia.
CHATTERLEY: It's going to be interesting to see what buyers like China and India do and actually what the broader market does in the short term as
they sort of scramble to get to grips with how all this is going to work. I'm actually quite surprised that oil prices are higher, but we shall see.
Clare Sebastian, thank you so much for that.
To Ukraine now, the new wave of missile attacks across the country. At least 2 people have died in Zaporizhzhia, an air raid sirens have also been
heard in the Capital Kyiv. And Will Ripley now joins us from a shelter there. Will, just explain exactly where you are, what you can hear and what
you've seen.
WILL RIPLEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: So we heard the air raid sirens going off a little over three hours ago, Julia. I had our usual
live position which is upstairs near the top floor looking out. And then after those air raid sirens reports started coming in have dozens of
Russian missiles being fired, headed in this direction and then heading hitting locations potentially across Ukraine.
And so we came down to this underground. I say bomb shelter; it's a reinforced concrete area adjacent to the underground parking garage. So
it's not necessarily specifically just the bomb shelter, but you can see they've set it up. There's Wi Fi, there's tables, and there's everything
that you need to continue to operate into broadcast safely.
As we wait for an all clear, which has not arrived we don't know if there are going to be multiple waves. We don't know if still know how many
missiles were fired or how many were intercepted versus those that hit their targets but we do know last attack about 12 days ago Julia, Russia
fired more than 70 missiles and while Ukraine did shoot down more than 50 of them, 20 of them still hit their targets. It affected the power grid in
a very serious way for millions of people across this country that is facing plunging temperatures with the cold weather rapidly approaching.
(BEGIN VIDEOTAPE)
RIPLEY (voice over): In Ukraine, winter is coming in the Capital Kyiv. The Foreign Minister warns snow won't be the only thing falling from the skies.
DMYTRO KULEBA, FOREIGN MINISTER OF UKRAINE: We are anticipating another massive missile attack by Russia and the goal of this attack is to bring
total destruction to our energy system.
RIPLEY (voice over): Crews are racing to restore power. These tents set up by the government a badly needed break from the bitter cold. At this fast
food place, braving below zero temperatures at the outdoor grill keeps the doors open when the lights are off.
Some customers said they only want to come when there's no power because the food tastes so much better. We're just Ukrainians she says, that's our
secret ingredient. Another secret for surviving dark times candles, a good cry and prayer.
RIPLEY (on camera): When you come here, what do you pray for?
RIPLEY (voice over): We pray for peace for the war to be over, she says. Describing the hardship of life without electricity, but then I come here
and remember how much time we spent hiding in basements. Hiding from Russian soldiers who occupied and terrorize their town Bucha, the site of
what Ukraine calls unspeakable war crimes.
RIPLEY (on camera): If you didn't know what happened here, this could be any church in any quiet Kyiv suburb until you look closer and notice the
bullet holes and this cross marking a mass grave for more than 100 men women and two children.
[09:10:00]
Like five of veer go chucks neighbors.
What it sounds?
UNIDENTIFIED FEMALE: A cluster bomb.
RIPLEY (on camera): A cluster bomb?
Bullet holes in her children's bedroom windows. After living through the hell of the Russian occupation, she can handle living without power.
VIRA GOYCHUK, BUCHA DISTRICT RESIDENT (ph): And what is the real problem is where it's not electricity. We don't have any connection. So I have kids,
and if something wrong, I cannot even call to the hospital and call emergency.
RIPLEY (voice over): She tells me when the power goes out; she loses his cell phone service and internet, but then.
GOYCHUK: Oh my god, this miracle.
RIPLEY (on camera): Is that the lights coming on now?
GOYCHUK: Yes.
RIPLEY (voice over): First place, she goes, the kitchen.
RIPLEY (on camera): Coffee, that's your number one priority.
GOYCHUK: Yes, it's my number one.
RIPLEY (voice over): She's grateful for the little things in life.
GOYCHUK: It's a moment of happiness.
RIPLEY (voice over): Grateful just to be alive.
(END VIDEOTAPE)
RIPLEY: The fact that pretty much everyone here in Ukraine has to live under the constant threat of Russian missiles raining down as evidence the
Ukrainian say that the United States, Germany and other nations need to make a decision quickly about getting more advanced missile defense systems
into this country. Not to mention the fact that these power stations that are damaged are relying often on very old Soviet designed parts that are
not so easy to replace. It's not like the United States can just send a shipment of them.
Although they're sending loads of generators, which are certainly helpful for getting households and businesses back at least partially up and
running. We just had more people come into the shelter underground here, Julia. Clearly though, the solution Ukrainian says to be able to shoot down
more of these if these incoming Russian missiles and we wait and see for word of which ones hit, which ones were intercepted. And right now we just
don't know when this apparent latest attack is going to end.
CHATTERLEY: And they continue to make their plea for greater aerial support and Air Defense Systems. Will, thank you for the report. Will Ripley there?
OK, the power of protest China easing COVID restrictions after angry protests across the nation.
More than 20 cities have now scrapped requirements to show a COVID test to use public transit and transport. And Apple supplier Foxconn is restoring
production capacity at the world's largest iPhone plant. Ivan Watson joins us now with all the details. It was a powerful, poignant message, I think
sent by the people there that they simply had enough. And Ivan, it seems the authorities are listening and acting.
IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT: Yes, there is even a protester who's taking some credit about the developments of the last week
speaking to CNN, saying, hey, it's our protest that helped make this happen. We don't really see into decision making in the Chinese government.
But if you look at the chronology here that basically two weekends ago, you had protests spread out almost simultaneously across the country.
And then in a matter of days, the Chinese government has gone from what Xi Jinping was saying at the end of October at the Communist Party Congress.
He was saying that you needed to have tenacious pursuit of the zero COVID strategy to just a couple of days ago, a Vice Premier saying that China's
pandemic containment faces a new stage and mission, and that one measure that you no longer have to get a negative PCR test for COVID. To ride on
public transport in more than 20 cities around the country that is substantial.
And it is something that is giving some kind of good spirits to some people in China that said there are still a number of restrictions for travelling
between provinces, for example. You can travel out of Shanghai, but if you come back in you have to quarantine yourself at home. You still have
testing, for example, in Beijing; it still requires a COVID test every 48 hours to go to shopping malls or to office buildings. And that testing has
gotten more difficult because abruptly the authorities removed many of the testing points.
That means there's more demand at fewer points and longer lines. And this is part of the daily routine that Chinese all over the country have had to
live with. But again, there are some signs of improvement and given the pressure that Chinese people have been living under that Chinese businesses
have been struggling to function in schools every side of society that is caused for at least a chance to breathe and exhale.
CHATTERLEY: Yes, for now Ivan Watson, thank you so much for that report there. And as Ivan was saying chronology of protests and response important
in Iran too.
[09:15:00]
Over the weekend, Iran's Attorney General said the country's parliament and the judiciary are reviewing strict laws mandating women wear headscarves in
public. He also made comments suggesting around so called morality Police had been "abolished". However, state media and others remain skeptical.
CNN's Salma Abdelaziz joins us now on this. I think the response and the reaction to this summer is understandably cautious big questions over
whether some of the hardliners, the toddlers are on board with this. Will it satisfy the protesters? Salma of who have called for broader regime
change? What do we make of what we've seen?
SALMA ABDELAZIZ, CNN CORRESPONDENT: I mean, first Julia, we have to start with understanding we don't know exactly what we're seeing, right? This is
the OPEC nature of the Iranian government where press freedoms are limited, where international journalists are not getting access to those
demonstrations on the ground that makes these conflicting reports so murky, so confusing.
Let's start by breaking down exactly what the attorney general of Iran said over the last few days. I'll start with most controversial one these
reports that Iran's morality Police might have been shut down or abolished. This was an off the cuff remark by the attorney general, in response to a
question from a reporter who said where is the morality Police?
And he was asked that question because by and large, those on the ground say they have not seen those patrols taking place during the course of the
last three months, during the course of these demonstrations. Now, state media has pushed back on these comments made clear that the morality Police
actually fall under the purview of the Interior Ministry. So the attorney general would have no power in that case.
So put all of that aside, but what is important here is that hijab law being reviewed. Of course, one of the major demands of these
demonstrations, which started after the death of 22-year old Mahsa Amini in the custody of morality Police, allegedly for not wearing her headscarf
properly. One of the major demands is that the hijab law be scrapped.
Now, it is under review by the judiciary and the parliament. That review could take about 2 weeks' time, but it's not clear Julia if this could be a
tightening of restrictions or you loosening of restrictions.
And to your question as to whether or not this satisfies protesters. Well, this movement has going to get much bigger than where it originally
started. Now many people taking to the streets want to see the entire Islamic system of Iran dismantled.
In fact, I think that the hijab law would do very little to slow the protests on the ground. But it does reveal to us all this back and forth
Julia where we're trying to read between the lines, trying to figure out what these conflicting reports mean. What it really reveals to us is an
Iranian government that is struggling to contain a huge movement against it.
That's really shaking the core of the authorities in Tehran. Again, three months go now people still continuing to come out to the street despite in
very tough crackdown. That has left hundreds of people killed, according to rights groups thousands arrested and yet no letting up Julia.
CHATTERLEY: Salma Abdelaziz there, thank you so much for that report. OK, straight ahead here on FIRST MOVE oil market machinations, OPEC + embargoes
and price caps. We'll assess the implications after this. Plus, pet prioritization U.S. pet cat giant Petco, branching out forging new
partnerships with insurers, and even pet friendly holidays - after this.
(COMMERCIAL BREAK)
[09:20:00]
CHATTERLEY: Welcome back to FIRST MOVE with a look at global oil prices climbing after OPEC and its key allies including Russia agreed to maintain
production cuts which could go on until at least the end of next year. And today the European Union's ban on Russian seaborne oil comes into effect
covering around two thirds of Russian imports to the European Union. At the same time, the EU, Australia and the G7 nations have agreed to impose a
price cap of $60 a barrel on Russian oil shipped.
Two nations not adhering to the embargo the idea is to keep all flowing around the world keep prices under control while restricting revenues
received by Russia. Russia in the meantime has threatened not to supply nations that end up complying with those restrictions.
And a spokesperson for the Kremlin has said Moscow won't recognize price caps on oil exports. Helima Croft is managing director and Global Head of
commodity strategy at RBC Capital Markets. Helima, I'm so glad you're here because that was my best effort at actually simplifying this. And I
realized for most of our audience out there that probably scratching their heads and going what on earth is going on here?
Can you please explain? I think for most people they understand what the point of the embargo is. And we restrict revenues that Russia receives for
energy oil in this case, but then the price cap confusing.
HELIMA CROFT, GLOBAL HEAD OF COMMODITY STRATEGY, and RBC CAPITAL MARKETS: So the price cap is essentially a means to keep Russian oil on the market
because the EU six packets of sanctions, you mentioned the seaborne oil embargo into Europe also contained a ban provision of services, shipping,
insurance, brokering to move Russian barrels two third countries.
And officials in this town, Washington concluded that if those sanctions came into effect, you could lose millions of barrels of Russian oil from
the market. So the price cap was devised as a way to allow Western service providers to continue to move Russian barrels, but at a cap $60.
So essentially saying that Russia cannot profit extraordinarily from any rise in prices now $60 some have said is too high a cap Ukrainians have
come out and said that is way too high they were pushing for $30. And so the question is, is it really going to dent Russian revenue?
But certainly officials are hoping that it will keep Russian oil on the market. So the big question is, will Russia play along? Will they make good
on their threats to withhold oil from consumers that pay at the cap or seek to pay below? That is a big uncertainty in the market right now.
CHATTERLEY: What do you think? What's the betting in the market? Because surely, if we look at the price reaction today, those in the market are
suggesting that look, it's not a credible threat, because surely otherwise prices would be spiking higher than they are around what 2.5 percent today.
CROFT: I think it's really still a wait and see in the market right now. I mean, you still have, you know, concerns about additional Fed rate hikes.
You still have some concerns about demand, even with the COVID relaxation story.
So I think people just don't know what's going to happen because the initial days of the war, you did have this buyer strike. As you know,
people said I don't know if I can touch Russian oil. I think people now are waiting to see you know, Russian oil has recovered production is back to
almost pre-war levels.
So I think a lot of people are waiting to see, is there really going to be a disruption? Or is it in Russia's interest to simply take the money and
keep supplying? The one thing I would say is though, Russia has made good on threats to cut off gas.
Remember, they said they would cut off supplies to any consumer that didn't pay in Rubles. They cut off a few and then the European Commission
essentially folded on that issue, but we've seen Russia pull back gas from a number of European countries. So the question is, does Russia decide to
essentially do a warning shot and cut off some oil consumers in the hopes of driving prices higher?
So these are the key questions that I think market participants will be weighing and then there's OPEC. OPEC decided to stay the course on the 2
million barrels a day production cut. I think OPEC is waiting to see are demand concerns going to be the big story in the market or supply
tightness, but they reserve the right to come back in if market conditions change materially.
[09:25:00]
CHATTERLEY: OK, I have a question about OPEC which I'll come back to but you mentioned something that I think it's really important there. Actually
two things, the self-sanctioning that we saw at the beginning of the war, when people acted as if Russian oil was toxic anyway, and sort of did their
best to move away from it as best they could. And we saw, so the price suppression, at least in Russian terms already.
What's the danger here, perhaps that in the same way, as you describe, in this sort of initial scramble, where everyone works out how this is going
to work? And particularly in terms of services and insurance, the provision of insurance services, everybody says, look, I didn't know what I'm doing
here? And I'm very nervous whether $60 is being paid as a limit or not. I'm not providing anything because I think this is something that we're simply
not talking about enough.
CROFT: I think that is a big concern, what compliance departments, will the legal departments essentially lead with? No, because remember, we did not
actually get this price to Friday afternoon, final provisions were being written over the weekend. And so if you are an insurance provider, if
you're a trading house, you probably are not entirely sure what you can do and what you cannot do.
Yes, you know, the price cap countries have talked about essentially saying, it'll be light touch enforcement. But what does that really mean?
So I do think there is a risk that you could see barrels come off the market, simply because no one is sure right now about the true regulations.
CHATTERLEY: Can I ask what the breakeven is for Russia today? You mentioned. Yes, go on?
CROFT: I mean, this is a really interesting question, because some would say you needed to set it at about $30 because that's closer to break even
cost. I mean, we simply do not know yet. You know, what price Russia really needs to fund this war effort, because they face you know, such a series of
onerous sanctions that hit other aspects of the economy. Oil is now the funding mechanism for this entire effort and so those in Washington that
would say, Russia has to sell oil, even at the cap would say they have no other means to obtain revenue.
CHATTERLEY: Yes, this is critically important, though, for understanding the response from President Zelenskyy and wide nations like Poland, we're
pushing for a far lower price. To your point, if their breakeven is around that $30 a barrel for Russia. I want to get back to OPEC, because you
mentioned that, hypothetically speaking in a real parallel universe type situation.
And if we weren't seeing what we were with the war and the embargo, and now the price caps would have been reasonable based on the economic outlook.
And obviously, perhaps China relaxing, changes that even overnight, to be reducing supply further, because they were heavily criticized for what they
did, what a couple of months ago. And fast forward to today and I just wonder whether it looks far more reasonable when politics or the run into a
midterm isn't of relevance?
CROFT: That I think is a great question, because you have not heard a lot of criticism in Washington about the latest OPEC move. And I think that
there has been, you know, some acknowledgment that looks where prices are now that we did not see the OPEC decision in October send prices above 100.
It was a pretty, you know, short lived price rally.
And so from the standpoint of Washington, I think they look at where retail gasoline prices are at 340 a gallon. And they're feeling pretty good about
the sort of gasoline picture at this moment. But again, everyone's going to be paying attention to what happens in the coming weeks.
It is simply day one of the sanctions. We know very little yet about whether Russia is going to follow through on their credits that withhold
supply. I think that is that is the big wildcard that we just don't know. There's so much uncertainty in this market right now.
CHATTERLEY: Yes, but I'd have to tell you what, I'm less uncertain just in terms of what the heck's going on. Thanks for speaking to you. So great to
get you on even on day one we should watch this face Helima Croft, great to have you on.
CROFT: Thank you so much.
CHATTERLEY: Thank you, Managing Director and Global Head of Commodity Strategy at RBC Capital Markets. We'll speak again soon. Thank you.
CROFT: Thank you.
CHATTERLEY: OK, coming up 14th through and four to go. We'll take you to Qatar where the World Cup quarterfinals take sheet next.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE! On Wall Street U.S. stocks are up and running in their first full week of December trade. The countdown to
the holidays well and truly beginning that said not so festive start to the session a bit of consolidation I think after two straight weeks of market
gains with rising energy prices.
As we've been discussing, weighing on sentiment a not so beautiful stock picture but at least we have the beautiful game to talk about two big
matches in the World Cup spotlight this Monday, the faceoff between Japan and Croatia. And later today, Brazil and South Korea all four teams looking
strong on the pitch but are those stock markets, making people rich?
Well, that's the focus of our first installment of the Chatterley Cup in the financial market face-off between Brazil and South Korea. The - is the
clear winner up 6 percent since January versus the South Korean KOSPI which is actually down over 18 percent as you can see. And as for Japan and
Croatia, the NIKKEI down 3 percent year-to-date but still beating out Croatian stocks, which have fallen some 8 percent.
And from stock stocks to soccer, or should I say football, England advancing to the quarterfinals, setting a showdown with France at the World
Cup meanwhile, two underdogs Japan and South Korea hoping for more upsets against football heavyweights today.
And Amanda Davies joins us now from Doha with all the excitement and all the latest. It was yesterday but it's still today's news. We have to talk
about England's win. And then we could talk about everyone else?
AMANDA DAVIES, CNN WORLD SPORTS: I want to know Julia how I get a cup named after me please?
CHATTERLEY: You just do it.
DAVIES: I'm working on it. We will start winning and we saw those brilliant scenes of celebration. As the team returned back to their hotel has an ease
past Senegal really I've kind of had to apologize to a Senegal fan as I was buying my coffee this morning.
Because it was expected to be much tighter than it was and it really says that England's up nicely for that quarter final against France so much that
being a boss Gareth Southgate has described as the toughest test of his life against the defending champions.
And a team not only with such strength in depth, but with a Kylian Mbappe who just cannot stop scoring goals at the moment, he's scored another two
versus France or they're way past Poland which means he's leading the way in the goal scoring charts here at this World Cup.
[09:35:00]
And takes his overall World Cup tally to nine that sees him overtake Lionel Messi and Cristiano Ronaldo. But in terms of today's action Julia is all
eyes are on Mbappe's PSG teammate Neymar.
And the fitness or how well his ankle has recovered from that injury he suffered in their opening match against Serbia? Their Coach Chichi said
ahead of their tie against South Korea it was all going to depend on how he did in training on Sunday night.
And I have to say Neymar posted an update on his Instagram page which basically says he is good to go so that's a huge boost for Brazil as they
look to carry on this quest for what would be a record extending Sixth World title with of course all that extra emotion behind them at the moment
because of the get well soon messages and the feeling around Pele.
82-year-old Pele who we know is back in hospital. They've received a boost though in terms of his update his health, his family has released a
statement saying please do not talk about this as being end of life or palliative care. He's not in intensive care.
He is being treated for a lung infection so his families very much trying to play down the emotion around that. But it will be a huge; huge
encounters this one for Brazil up against the South Korean side back in the knockout stages for the first time since 2010.
And certainly wanting to carry on the mantle for Asia because it's been a great tournament this for the Asian teams. They know that if they win and
Japan get victory in their match against Croatia kicking off here in just under half an hour time from now we could have the first all Asian
quarterfinal at a World Cup.
Japan for their part going for what would be the hat trick of victories against big European sides.
They've already seen off Germany they've already seen off Spain. And now they face the 2018 runners up Croatia.
CHATTERLEY: Yes, wouldn't that be absolutely amazing actually, my heart is always with the Japanese supporters in particular given that they pick up
their litter after these games, which I just loved. And I have been reliably informed very quickly Amanda by swift and smarter minds that you
already have a cup of course in tennis, the Davis Cup.
DAVIES: I do it but it's spelled differently. It doesn't have the 'E' that Davis.
CHATTERLEY: I know. I agree please. Yes. So just don't ask, don't wait just take on. That's my, the moral of this story. Make your own. Amanda, great
to have you with us thank you! All right, still to come Petco getting its polls into the hotel industry. Yes, you haven't right and helping pet
parents get into the holiday spirit. Petco, CEO, joins us next.
(COMMERCIAL BREAK)
[09:40:00]
CHATTERLEY: Welcome back to a furry friend segment now on FIRST MOVE! As we discussed many times on this show pet ownership soared during the pandemic
from March 2020 to May 2021, roughly one in five U.S. households acquired either a cat or a dog.
And just for some perspective, last year in the UK, there was 12.5 households that had a dog as part of their family and with more than 1500
locations across the United States, Mexico and Puerto Rico Petco continues to hunt for post pandemic growth opportunities.
In just the last few months, it's teamed up with Nationwide Insurance that's the largest provider of pet health insurance in the United States.
And it's also partnering with Marriott Hotels, for those looking for pet friendly holidays around the world. It's also expanding their offerings to
smaller pets, and I'm including your friendly fish. Yes, I am.
Joining us now is Ron Coughlin. He's CEO of Petco. Ron, always a pleasure to have you on the show welcome! We have clearly much to discuss. But let's
just talk about the last six months because I looked back at what you were saying back in August. And I know you reset guidance at that point.
And you were seeing a sort of temporary as you called it softening in some purchases, things like toys, fast forward to your latest earnings. And
things look pretty good. So to talk about what you're seeing and what you're thinking at this moment?
RON COUGHLIN, CEO, PETCO: Yes, well, great to be here and congratulations on the England advancing. So if you look at the pet industry, it continues
to be one of the strongest industries of any tracked market, if you look at what Nielsen's tracking - we delivered revenue growth of 4 percent this
past quarter, and beat on the top line beat on the bottom line.
If you look at food, there is no cutting back on food actually you seeing continued premiumization towards more premium products. If you look at
services like veterinary and grooming the same thing but people are cutting back on discretionary items like replacing a tennis ball or a collar and
lead it.
From past recessions we know that is temporary. But that's really how it's playing out. But overall, the pet industry is one of the most resilient
through economic downturn times.
CHATTERLEY: We've talked in the past, particularly for Gen Z and Millennials. And I've sort of framed the term pet prioritization that
they're seen as a member of the family so even in an economic slowdown environment.
And as you've said, perhaps some substitution effect takes place and people decide to be a little bit more cautious with what they're buying those who
resilience there, perhaps that some don't understand is that sort of the underlying message of what you're saying, even if you are seeing that
slowdown, they continue to increase in terms of sort of premium foods and some of the more expensive items?
COUGHLIN: One of the last things people will cut back on is for their pets, especially the food for their pets. And what's happening as you said
Millennials and Generation Z are adopting more and more of the new pets. And they are really driving this humanization trend.
You know, pets used to be in the wild and they were in the backyard and from Millennials and Generation Z years. They're very much in the bed. And
if they're having fish and sweet potatoes, guess what? So is fluffy having fish and sweet potatoes.
CHATTERELY: I know I have to say I know a lot of owners that cook at the same time for their pets. Now, here's where I draw the line and I sort of
look at one of the expansions that you've done with the vital care loyalty program that you have.
And extends now to hamsters, birds and fish among other small pets and it's a sort of monthly subscription and it's 999 I believe dollars for dogs and
cat 999. For the smaller pets, is that people still going to pay that kind of money for it for smaller pets if we do see a more determined downturn,
Ron?
COUGHLIN: We talk about that grouping being companion animals. We launched it several months ago and it has far exceeded our expectations. The passion
that those pet parents have for their reptiles for their birds their fish is extraordinary.
[09:45:00]
So that allows them to take the best care of their pets. You know, one of the most interesting facts in pet parenting is 54 percent of pet parents
say they want a one stop shop for their pet. And that's what - allows them to do is get that one stop shop care for their pet.
CHATTERLEY: I have fond memories of my father talking to our Guinea Pig and reviving fish on various occasions. So certainly to children, I know the
importance of that. Talk to me about some of these deals and what that's going to provide just in terms of expanding your potential partnerships and
those that come online and buy your products?
Whether we're talking about pet friendly holidays, and the deal with Marriott, or even the pet insurance and I know nationwide incredibly well?
What does that bring?
COUGHLIN: Well, first to me, it's a great endorsement because both companies came to us. They're number one in their space, Marriott is number
one hotel company nationwide, number one in pet insurance. And they really see us as a platform with our 25 million customers.
With Marriott it's starting with their homes and villas program and 80,000 properties that you now know our pets - were pet friendly. And we can
actually provide the bowls, the beds et cetera before you go on their trip, which is quite special.
When I come to New York, the hotel puts out bowls and beds for me and it makes me feel at home. And it made my Yummy feel at home as well. And with
insurance similarly, my dog Yummy was a double cancer survivor each time that was a 20 or $30,000 bill.
And that can be hard on a lot of folks and sometimes you maybe say I can't afford that. And what pet insurance allows you to do is make sure you are
taking the best care of the pet. And for Petco it also provides us with ability to take those nationwide customers and make them Petco vet
customers make Petco grooming customers or merchandise customers. So the dogs or cats get better taken care of and nationwide, be is able to bring
them insurance. So it's really powerful for both parties.
CHATTERELY: Yes, I mean, it's the statistics that you provide in terms of the coverage of pet insurance in the United States, around 2.5 percent
compared to Europe where it's around 25 percent. To me, it's just standard part of the conversation with pet ownership. Ron, but you actually
mentioned the magic word there.
And I do want to talk about Yummy if you don't mind, because you and I have shared our mutual love of our pet babies and Yummy was such an incredible
fighter. Two times cancer survivor. But you did lose him since we last spoke.
COUGHLIN: Yes, you're going to make me cry. Yummy wasn't just my dog. He was all pet Ghost Dog. And he was really meaningful. We called him the
Chief Dog Officer. And he was really the embodiment of our mission about improving lives.
And whether it was the great food that we served him whether it was the pets at Petco that took such great care of him he lived to 15, which is a
long life for a lab and I'm sure that if he wasn't taken care of so well, he wouldn't have had that type of life. But like I said it really he was a
reinforcement of everything that we stand for in terms of improving lives of pets and the people who work at Petco.
CHATTERLEY: You know, it's so important to discuss, Ron, as well, because you know, their love is so innocent and unconditional except where food is
concerned, at least in most cases, then it's naughty and entirely conditional.
But I think we all feel a profound sense of loss because it is a family member. And I think there are people at times that can be embarrassed by
how devastated they are by the loss of a beloved pet so thank you for sharing?
COUGHLIN: One of my first weeks on the job I got an email from one of our partners who work for us - worked at Petco and said, you know, we're a pet
company, we have human bereavement, and we don't have pet bereavement.
And I said you're right and one week later we announced pet bereavement. So now if you're pet - if you lose your pet, you get time off at Petco. And I
can tell you I felt like I definitely needed some time off when I lost Yummy.
CHATTERLEY: Ron. Nothing lasts forever, but their love and yours. It truly does. Thank you, most speaking.
COUGHLIN: Thank you.
CHATTERLEY: Thank you! Ron Coughlin, there the CEO of Petco, we're back after this.
(COMMERCIAL BREAK)
[09:50:00]
CHATTERLEY: And welcome back! Authorities are closely watching the eruption of them on a lower volcano on Hawaii's Big Island. CNN's David Culver gets
a bird's eye view of what can only be described stunning scenes.
(BEGIN VIDEOTAPE)
DAVID CULVER, CNN CORRESPONDENT (voice over): We are on the road before sunrise quickly realizing we can already spot our destination some 30 miles
out. There you see it that red orange glow Mauna Loa erupting. To give you a better view though, we go up in the morning dark iridized helicopters
Darren Hamilton, our pilot and guide giving us rare access.
Having flown in military hot zones Darren even admits this is firepower like no other. It can also be challenging, especially with heavy fog or
volcanic smog. Those acidic gases dangerous if the concentration levels are too high.
On the ground, officials closely watching the lavas potential impact on Saddle Road, the main highway that connects the east and west of the island
erupting last Sunday for the first time in 38 years Mauna Loa the world's largest active volcano is one of five that make up Hawaii's Big Island. And
it's not the only one currently erupt in neighboring Kilauea also active though no longer shooting lava to the surface like it did in 2018.
DOROTHY THRALL, LIVES NEAR VOLCANO: We're - Street which is where my house was, and it's that away on the opposite side of the subdivision.
CULVER (voice over): Dorothy Thrall invited us to where her home now sits buried under 60 feet of lava. You can see a metal streetlight fused into
the rock four years after Kilauea did this to her Leland Estates Community. She still walks it as though she's on her old street with your old
neighbors.
CULVER (on camera): When you have something like this I assume you're all dispersed after that?
THRALL: Yes, we lost that sense of community and we lost in addition to the homes.
CULVER (voice over): Mauna Loa's eruption an emotional trigger for Dorothy and others forcing the trauma from Kilauea back to the surface. The 2018
lava flow wiped out more than 600 homes here some untouched but left lava locked an island within the island.
Dorothy showed us this video she captured a few weeks back trekking over lava rock helping friends gather the last of their belongings from their
home. The reminders of devastation here are dimmest?
THRALL: This was a home. They evacuated the second night and I believe it went under the third night.
CULVER (on camera): And just took their home?
THRALL: Just took their home.
CULVER (on camera): And four years later, it's still steaming?
THRALL: Still steaming.
CULVER (on camera): And how long will it steam like that?
THRALL: Probably 30 to 40 years.
CULVER (on camera): How is it that you can still see beauty after so much loss?
THRALL: Because lava is beautiful. OK, it's a curtain. It's Paley's creation. That's how the island was formed. That's how the island was
built.
CULVER (voice over): An appreciation shared by Native Hawaiians leaving offerings on Mauna Loa and thousands of tourists and locals arriving past
sunset just to witness the lava glow.
[09:55:00]
Nighttime traffic backs up for miles to avoid the congestion. Let's get back to the skies. Which has already crossed one volcano road power lines
and all a searing slice right through it? Darren estimates it's moving 30 to 40 miles per hour.
(COMMERCIAL BREAK)
END
