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Quest Means Business
ECB Says It Will Raise Interest Rates In July; PGA Tour Suspends Players Of Saudi-Backed Golf Tournament; Zelenskyy: Millions May Starve Because Of Russian Blockade; Summit Of The Americas; Fighting Inflation With AriZona Tea; Call To Earth: Penguins; Travel Industry Struggling With Demand Surge. Aired 3-4p ET
Aired June 09, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:13]
RICHARD QUEST, CNN BUSINESS ANCHOR: There is an hour to go before the closing bell rings on Wall Street for the Thursday session and the selling
is still underway and it looks like it is getting worse over the last 20 minutes or so. So let's see where we end the day. The NASDAQ is also
sharply lower.
The reasons are many multifarious and we've been over them before, but the markets are down. They are in a bad mood and the main events that we are
following: The end of easy money in Europe as well. The ECB readies its first interest rate rise in more than a decade.
The PGA Tour strikes the latest flow in a billion dollar battle for the future of golf, suspending players who will take part in the Saudi-backed
golf tournament.
And Italians may be forced to tighten their belts in more ways than one. Rising pasta prices are straining the economy as part of the food crisis.
We're talking about tonight.
We are live in New York as always. It's Thursday. It's June the 9th. I'm Richard Quest and I mean business.
Good evening.
The European Central Bank said today, it will soon embark on its most aggressive tightening in its history. The ECB said it will increase rates
by a quarter of a percentage point in July and thereafter, expects further increases in the months ahead.
The bank has raised its forecast for inflation and lowered expectations for growth. Classic.
The ECB President Christine Lagarde said things could get even worse.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, PRESIDENT, EUROPEAN CENTRAL BANK: If the war were to escalate, economic sentiment could worsen, supply side constraints could
increase, and energy and food costs could remain persistently higher than expected.
(END VIDEO CLIP)
QUEST: Now, when they raise rates in July as now expected, it will be the first ECB rate rise in 11 years. They are of course arguably behind the
curve in a sense, other Central Banks have already well and truly begun their tightening.
The Bank of England has raised rates four times since the end of last year. In the U.S., the Fed has completed two rate hikes including one of course,
which was half a percentage point and have said more half point rate rises are on the horizon, and Australia's RBA has also raised rates by half a
point.
Anna Stewart is in London.
The ECB had to stop its nontraditional loans and bond buying first. But it's interesting that they've not just given us a roadmap, they have
actually almost given us a calendar.
ANNA STEWART, CNN REPORTER: Fascinating and actually, even before this meeting, because since last meeting, Christine Lagarde has signaled in
interviews, even in a blog that this rate rise in July was coming and that we can expect more as well for September.
So in many ways, Richard, for the first time ever, we actually got forward guidance even before the meeting, which is really, yes, out of character I
would say for the ECB.
QUEST: It speaks to the underlying currents within the governing council between those hardline, more hawkish that believe it should have been
started a long time ago, and arguably the southern countries who are now more worried about the effects of higher interest rates on their economies.
STEWART: Yes, and there has been this argument, is the ECB behind the curve? Great charts coming into me looking at it, four from of the Bank of
England, two from the Fed, why has the ECB not acted? Well, one of the reasons and we can get to supply sort of side inflation, but one of the
reasons is that ECB has a mandate for price stability across multiple economies with huge differences.
If you look at Germany right now, inflation last month was around eight percent. For Estonia, it's 19 percent. Same goes for the economic growth
picture.
So it's an incredibly hard one to manage, always a lot of differences on the board, but clearly not today.
QUEST: Do we have any idea where roof of rises -- where this cycle might end? And the reason I say of course, we know with the Fed, we're looking at
neutrality of around two and a half to three percent, but the feeling is rates may have to go to four or even five percent if you're going to get
rid of this level of inflation.
STEWART: So this has been a really interesting one and where is neutral? And actually there has been a bit of a difference between people I've been
speaking to, perhaps it's around the two percent level and that's certainly where Deutsche Bank think it will be maybe by this first or second quarter
of next year.
So we're expecting, of course, almost promised 25 basis point hike in July, possibly more, possibly double that in September and then possibly a few
more.
So I think neutral is probably two percent.
[15:05:07]
QUEST: And if you were to take the consensus because I know you're reading round on this, is the consensus that the ECB and the Euro zone, will,
albeit narrowly navigate a recession.
STEWART: That one is a toughy. Now, look at the economic projections from the ECB today, it's still pretty bullish. They are expecting economic
growth of two percent next year, that is much more optimistic, Richard, than the OECD and the World Bank.
At this stage, they're looking to swerve recession. But a lot, of course, depends on inflation, and they are the first point out that that picture is
so uncertain, and the ECB much more so than the Fed or the Bank of England, Europe is so much reliant on Russia and on Ukraine for energy, for food
goods and that is why this picture is much, much more complicated for them.
QUEST: And there you have the graph of the rate rise.
STEWART: Beautiful graph, beautiful graph.
QUEST: Which we have seen so far, basically, you can see where it all ends up.
Thank you, Anna Stewart in London with that story.
The PGA Tour has struck the latest blow in its billion dollar fight for the heart of golf. The PGA Tour has suspended 17 players for competing in
today's kickoff in the LIV golf series. It's a Saudi-backed event. It's drawn players with massive cash prizes.
Now, this weekend's prize is $10 million more than the renowned Masters and double that of the Arnold Palmer Invitational.
Some players may make more from this one series than from their entire time on the PGA Tour. Phil Mickelson has made $94 million over his career. He is
reportedly making 200 $million to play LIV golf events, and Dustin Johnson will reportedly make double his $74 million career earnings.
Alex Thomas is at St. Albans in England where Day One has commenced.
The fundamental objection by the PGA Tour to them during this, to being involved in this is what? Is it just straight protectionism? You signed up
for us, you can't sign up for them?
ALEX THOMAS, CNN WORLD SPORT: It's an existential threat to the PGA Tour, Richard. We've seen breakaway competitions and other sports, but golf has
been pretty stable for many decades now. And at the top of the tree has been America's PGA Tour, the richest, the most prestigious with all the
history and tradition, the King of Golf.
Arnold Palmer, as TV took over broadcast sport back in the 50s and 60s, Jack Nicklaus, Tiger Woods actually made it soar through the roof, still
the men that puts bums on seats, literally and metaphorically in TV terms.
Now, you've got LIV Golf coming in, and it has made quite a modest start, but the potential because of how deep Saudi Arabia's pockets are, in terms
of the billions of dollars they can put in is massive. They could stamp on the PGA Tour. The PGA Tour could have chosen to work with them, instead,
they've come out fighting.
Jay Monahan, the PGA Tour Commissioner, choosing the nuclear option in terms of what to do about the players that have jumped ship already,
suspending them for all competition, even the ones that quit the tour beforehand. He won't even let them come back as a sponsor's invite, picking
and choosing when they play.
And it was a scathing two-letter memo that he issued just as the players started out on the course, here at the Centurion Club, just outside London.
It is open Civil War at the top of professional men's golf, LIV Golf, calling the PGA Tour move, vindictive and saying it won't end here. They
have offered to fund any legal action and I fear that's where this is heading now -- Richard.
QUEST: Alex, thank you.
Bob Harig is with me, golf writer for ESPN and "Sports Illustrated" joins me now. He is also the author of "Tiger and Phil: Golf's Most Fascinating
Rivalry." He is from inside the press tent at the tournament.
So look, Bob, who is going to win this one?
I mean, the weight of money is vast, coming from the Saudis. So if money alone is your barometer, then LIV wins.
BOB HARIG, GOLF WRITER FOR ESPN AND "SPORTS ILLUSTRATED": Yes, that's right, Richard. I mean, the money that we're discussing here is really --
it's beyond what I think anybody ever dreamed, you know, and it's very difficult for the PGA Tour to fight that.
They have 40 some odd events. You know, they -- as you were just noting, you know, their prize funds are less than half of what's being offered out
here. And nobody gets guaranteed money on the PGA Tour, which is frankly, kind of really why this all began.
There's been a thought over the last several years that the needle movers, you know, the stars of golf are sort of, you know, they're picking up the
slack for everybody else and they are not being rewarded for their value. Well, now it has escalated to the point that, you know, just astronomical
contracts are coming along and it's got to be a little scary for the PGA Tour.
[15:10:10]
QUEST: Right. But why would the PGA Tour not play nice and go along -- on the basis that there is plenty of room for everybody or maybe there isn't?
HARIG: Yes, I mean, it's a great question and I think that's what the LIV people and Greg Norman who is the Commissioner had hoped and wanted.
Norman's contention all along has been that these guys are independent contractors, they should be allowed to play where they want, whenever they
want. The PGA Tour, however, has rules that say you have to play a minimum of 15 events, that's their rules that you sign on to as a member. And if
you want to play outside of that, you need to get what they call Conflicting Event Releases, basically permission to play.
And to be able to play eight or 10 or 14 LIV events isn't going to work with playing 15 PGA tour events. So there is, you know, a knocking of heads
right there. I don't know how that part of it could work. I mean, I don't know how you get along, really.
They've made promises to their TV partners -- I'm talking about the PGA Tour -- and they're title sponsors that they would have a representative
number of the top players competing every week, because those guys weren't going to be playing anywhere else.
QUEST: Right.
HARIG: But now, obviously, that's changed.
QUEST: So I remember -- you will remember, cricket. Cricket had something similar with single days and matches and the Murdoch's and that they all
tried to break open that back in the 80s and the 90s. Now, in those days, a lot was made of the fact that the new game of cricket or the revised game
would be more exciting.
It would be instead of the multi-day test, it will be one day and it will be exciting. Is the LIV golf tournament going to be more exciting than the
PGA Tour?
HARIG: You know, it's funny, I'm not a big cricket expert. But I mean, as probably the short attention span America and I would guess that one day of
cricket and having the results come to me in one day is probably more appealing.
In this though, we're talking about three days instead of four. In golf, is that really that big of a difference? I'm not sure that it moves the needle
that much. I think we are used to the idea of 72 whole tournaments. Fifty four is fine. I don't know that it's a huge. I mean, what is different,
though, is these shotgun starts where they all start at the same time. We're not used to that.
So I mean, I don't think it's going to have the impact that you were suggesting, like cricket might have.
QUEST: So final question, who really has the power here? Besides the Saudis with the money. Put them to one side. Is it the players who have the
power, who basically say you need us more than we need you, in this case? Or is it the PGA Tour that says no, you want the Masters, you want the
Arnold Palmer, you want all these other things, you need us more than we need you?
HARIG: Yes. That's a great question. I really think it's the players who have the control and the power in this. I mean, you've got to have the
stars. You know, these -- the reason that we tune in is because we get used to these top guys. And you know, you could play golf tournaments with a
bunch of nobodies, are we going to watch, you know?
And that's why it was important for LIV to get a few of these big names to come on over. They were getting laughed at a month ago when it didn't
appear that they had anybody -- anybody of stature. And the PGA Tour, you know because they play so many events, they need as many stars as they can
have, because they can't play every week.
So I mean, they have a nice field at the Canadian Open this week. They have, I believe three of the top five in the world. You know, that's a
great week normally on tour when you get that. It doesn't happen every week. Where are they without those guys? There's probably not that many
people tuning in.
QUEST: Well, thank you, you. You've brought it very clearly to us tonight and I'm grateful for you. Thank you, sir.
HARIG: Thank you.
QUEST: It is QUEST MEANS BUSINESS.
The global food shortage around the world, every country in some shape or form. So say for example, Italy, where pasta, the beloved national dish, if
you will, after the break, we'll show you why it is another example of the food crisis.
(COMMERCIAL BREAK)
[15:17:11]
QUEST: Well, we warnings -- dire warnings -- about the consequences of Russia's war and the biggest grain exporter, of course. Ukrainian President
Volodymyr Zelenskyy now says international famine is real threat, warning hundreds of millions of people could starve if Russia continues to block
Ukraine's Black Sea ports.
And even if the blockade is lifted, Ukraine says next year's harvest could be reduced by almost half because of the loss of arable land.
The U.N. Secretary-General is warning the crisis could unleash an unprecedented wave of hunger and destitution, in his words, economic chaos,
if you will.
CNN's Clare Sebastian reports.
(BEGIN VIDEOTAPE)
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Just a day after talks between Russia and Turkey seems to lay the groundwork for at least some
kind of negotiation, perhaps even just on a temporary solution to the problems of Ukraine's grain exports, more and more obstacles now seem to be
getting in the way of that. One is that Russia may already be putting in place deals to sell Ukrainian grain to occupied areas.
On Wednesday, the head of the Russian military administration in occupied parts of Ukraine's Zaporizhzhia region said the first rail shipment of
grain had departed the town of Melitopol for Crimea to be loaded onto ships to Turkey and the Middle East.
Kremlin spokesman Dmitry Peskov said no agreements have been signed yet with Turkey or the Middle East, but work was underway. Ukraine, meanwhile,
is accusing Russia of stealing grain to sell for its own gain. This is what the country's Deputy Agrarian Minister told CNN's Julia Chatterley.
TARAS VYSOTSKYI, UKRAINIAN AGRARIAN POLICY AND FOOD DEPUTY MINISTER: Unfortunately, we have the situation where about half million ton of grain
has been stolen by Russians on the partly occupied territories of Ukraine.
We do know this because we have received their information from the people on the elevators that Russians came, just took this grain, came with
military power, and also we have the video and photo, and fact of cars and rail cars bringing these grains towards the direction of Russia or occupied
Crimea.
SEBASTIAN: Elevators are of course storage facilities for grain.
The Minister also said he had seen satellite images of the grain leaving Crimea for other countries. CNN has also uncovered evidence of this. And
secondly, Ukraine is stepping up the rhetoric. President Zelenskyy calling for Russia to be expelled from the United Nations Food and Agriculture
Organization accusing Moscow of potentially causing the starvation of at least 400 million people.
And thirdly, there are still fundamental disagreements about how to unravel this situation. Russia which has blockaded Ukraine's ports claims it's
ready to open up grain shipments.
[15:20:12]
But first, it says, Ukraine needs to de-mine the coastal waters around its southern ports. Ukraine says the real threat to world food security comes
from Russia, and is wary of any Russian talk of humanitarian maritime corridors.
And meanwhile, time is not on their side, an estimated 20 million tons of grain are stuck in Ukrainian storage facilities. And the U.N. warned this
Thursday that the situation could tip 47 million more people into acute hunger this year than previously estimated.
Clare Sebastian, CNN, London.
(END VIDEOTAPE)
QUEST: Wherever you look, this looming food crisis is now the major talking point for world leaders. In Davos last week, there was little else
on their agenda, some of them voiced major concerns.
(BEGIN VIDEO CLIP)
NGOZI OKONJO-IWEALA, DIRECTOR GENERAL, WORLD TRADE ORGANIZATION: It's really a serious problem. I think, first and foremost, of course, the
Ukrainians in a way, but then the world's poorer people and poor countries. You know that these countries, a lot of them depend on importing wheat and
other grains and food supplies from the Black Sea region.
XAVIER BETTEL, PRIME MINISTER OF LUXEMBOURG: I'm even more afraid of what will happen maybe in Africa, because if the prices of food are going to
rise, we have here countries where the political systems are more stable, and we should not forget that, for example, the Arabian Spring happened
because of food prices getting up.
KRISTALINA GEORGIEVA, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: None of the big challenges we face -- climate change, dealing with debt levels
in low income countries -- preventing a food crisis, which is already, by the way happening from exploding to a point that tens of millions of people
are severely affected. We need to work together.
(END VIDEO CLIP)
QUEST: Now, food shortages will hit everybody. It'll hit the world's poorest of course, and it will hit them the hardest. But even in the
developed economies, the OECD, there will be food inflation, and that will hurt families, too.
Italy, for example, has lowered its growth estimates for the year, rising food prices is a major reason for the slowdown and the shortage of grain
impacting the country's staple dishes.
Barbie is with us at a restaurant in Rome to tell us more.
And I think the important thing to note here is that, you know, whilst some countries are talking hunger and famine, but everybody, the rich as well,
the middle classes, everybody is hit by what's happening.
BARBIE NADEAU, CNN CONTRIBUTOR: That's right, you know and here in Italy, you know that the staple that pasta with tomato, that's the most basic meal
you can have, the consumers are going to be paying extra for it, but we found some producers who are doing everything they can to try to absorb
those costs so they don't go to the consumers.
Let's hear what we had to -- what we found out.
(BEGIN VIDEOTAPE)
(UNIDENTIFIED MALE speaking in foreign language.)
NADEAU: Gracias.
(UNIDENTIFIED MALE speaking in foreign language.)
NADEAU (on camera): This is the quintessential Italian meal -- spaghetti with tomato. But the price of this Italian staple has increased
tremendously over the last year.
(voice over): To understand what it costs to produce pasta from durum wheat and tomato sauce from fresh tomatoes has gone up, we went directly to
the source.
Here at the Maestri Pastai pasta factory in southern Italy, owner Valentina Castiello tells us the price of some of the raw materials to make her pasta
have jumped by 100 percent.
She tells us her company is trying to find ways to absorb the excess, but some of it will go to the consumer.
VALENTINA CASTIELLO, OWNER, MAESTRI PASTAI PASTA FACTORY (through translator): We have increased the price of our final product by 30
percent. The cost is high, but the consumer continues to buy the affordable products that everyone can use at home.
NADEAU (voice over): The average Italian eats around 50 pounds of pasta every year. Castiello says to confront the rising cost of living,
distributors are actually buying more inventory from her factory because even if the price of pasta goes up, it is still by far the most affordable
way for many Italians to put food on the table.
The rising costs range from packaging to electricity to fuel to transport these goods.
But it isn't just pasta makers struggling to produce economical food. At this tomato farm near Rome that Dalila Maraska (ph) owns with her father
and brother, things aren't much easier. She tells us that fertilizer costs alone have risen 150 percent over last year.
They had to make a drastic decision to reduce the number of tomatoes they planted by 40 percent because they have no idea what the market will be
like when these new tomato plants are ready to harvest.
[15:25:02]
(DALILA MARASKA speaking in foreign language.)
NADEAU (voice over): Maraska says the tomato is the base of the Italian diet. During the summer, as fresh produce and during the other seasons as
canned products.
The factors driving the prices of these fundamental Italian ingredients are complicated. First came the pandemic, then Russia's war in Ukraine, and
now, the uncertainty of what's next.
(END VIDEOTAPE)
NADEAU (on camera): And you know, Richard, when you look at those producers and those are small producers, these aren't these huge, gigantic
production houses, they're taking a cut in order to make sure that that doesn't go back to the consumer. And that's, I think, really the Italian
way, but that's probably going to change, too -- Richard.
QUEST: And it is fascinating this, absolutely fascinating because it is economics in real life that people have to make tough decisions when
they're doing the weekly shop. But at the same time, I was interested that you know, pasta is the staple that does allow you to put food on the table.
NADEAU: That's right. You know, we're not talking about caviar, or even you know, meat and fish, we're talking about basic, basic, basic pasta.
It's on every menu of every restaurant, the one behind me, the one across - - everywhere. And Italians are still going to eat it, but they're going to not, you know, have the second plate after or they're not going to have the
dessert or they're not going to have the nice wine. Those are going to be some of the sacrifices.
But Italians will be able to feed their families on a box of pasta, even if they have to pay 30 percent more. The pasta maker told us, she has raised
her price 30 percent. They're still going to buy because it's still cheaper than a lot of other things in the supermarket at this point.
QUEST: And that's the key point, isn't it? Still the cheapest thing. Thank you. Thank you. Good to have you with us.
Coming up next, President Biden is calling for unity in the Americas at a Summit, though missing key players including the President of Mexico.
We are in Los Angeles after the break.
QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. We have a lot more QUEST MEANS BUSINESS as we continue. We're going to be talking to the Chair of AriZona Beverages
on how they are managing to keep prices low or at least static.
And travel chaos continues in Europe. Lufthansa is canceling hundreds of flights.
We're going to all of that in a moment only after giving you the news headlines, because this is CNN and on here, the news always comes first.
[15:30:23]
(MUSIC PLAYING)
(voice-over): Russian state media says two British men and a Moroccan man were sentenced to death today by a court in the pro-Russian unrecognized
Donetsk People's Republic.
The court alleges the three fought as mercenaries for Ukraine. Authorities say the men were captured in Mariupol in April and the condemned have one
month to appeal to the foreign secretary, who said the ruling had no legitimacy.
Ukrainian President Volodymyr Zelenskyy says the fate of the eastern Donbas region is being decided in Severodonetsk. Ukrainian forces are fighting in
the streets of the city, trying to push back Russian invaders. They say they are catastrophically short of the artillery needed to offset Russia's
shelling.
The House committee investigating in January 6th insurrection at the U.S. Capital is to hold its televised hearing only hours from now. The panel
will unveil findings from more than 1,000 witnesses and 140,000 documents. Speaking a moment ago, President Biden said what happened was a flagrant
violation of the U.S. Constitution.
(BEGIN VIDEO CLIP)
JOE BIDEN, PRESIDENT OF THE UNITED STATES: As I said, when it was occurring and subsequent, I think it was a clear, flagrant violation of the
Constitution. I think these guys broke the law. They tried to turn around and overthrow an election.
And there's a lot of questions who's responsible, who's involved. I'm not going to make a judgment on that. I just want them to know that we're going
to -- a lot of Americans are probably going to be seeing for the first time some of the detail that occurred.
(END VIDEO CLIP)
QUEST: President Biden has called on CEOs to invest in Latin America. He's arguing the region has huge economic potential. The president, speaking at
the Summit of the Americas, where he is hosting dozens of Latin American leaders.
However, the whole event has been dogged by controversy with several leaders, including Mexico's president, boycotting it. They are protesting
against the exclusion of Cuba, Venezuela and Nicaragua. Mr. Biden made a plea to work together in the interests of resilience.
(BEGIN VIDEO CLIP)
BIDEN: Rising inequity and food insecurity around the world can fuel political instability. You all know that. The question is not if we face
another pandemic, it is when we face it.
And are we going to be prepared this time?
So the economy in the future will increasingly belong to those who place a premium on resilience and reliability.
(END VIDEO CLIP)
QUEST: Priscilla Alvarez is with me.
So the extent even Mexico's president hasn't bothered. It's a bit of an own goal by the U.S.
But why didn't they want those countries there?
After all, in the United Nations, they're used to have countries having to attend that they don't particularly like or don't particularly want and
aren't friendly with. You can get by.
PRISCILLA ALVAREZ, CNN CORRESPONDENT: Well, the U.S. has stood firm that they were not going to invite autocratic governments of Cuba, Venezuela,
Nicaragua, to the Summit of the Americas. In his remarks yesterday and today, Biden emphasized democracy, democratic institutions.
Officials noted, leading up to the summit, they didn't feel that the exclusion of these leaders was going to disrupt the initiatives they are
trying to roll out here, at the Summit of the Americas.
There would still be representatives of all the countries of the Western Hemisphere. But it overshadows this summit that Mexico's president, as well
as the presidents of Honduras, El Salvador, Guatemala, all key leaders and partners in this region, have decided to not attend here this week.
QUEST: I remember going through my age here, I remember attending the very first Summit of the Americas, which was held in Miami, more years ago than
I like to think about.
I always wonder when this event comes around, is it still relevant?
Does it have a purpose?
ALVAREZ: It's a great question, a question that's lingering over the summit. It's felt here with foreign ministers telling me they have
expressed their thoughts to the administration about the fact that not all of the countries are here.
They feel that the countries of the Western Hemisphere should be represented when they're trying to evoke change.
[15:35:00]
And they're trying to bolster economies and societies to keep the economies afloat at a time when the pandemic has crippled economies. At a time when
the war in Ukraine has had a ripple effect on the energy and agriculture, et cetera.
There are certainly questions as to what the follow-up is going to be here. Secretary of state Antony Blinken has said it's not about what happened
over next few days; it's what happens over the next year. So that is where we will learn about how much effect these separations have had in the
hemisphere.
QUEST: Priscilla Alvarez, thank you for joining us. I appreciate you. Thank you.
On Friday, we will get consumer price data to the CPI. It's likely to show inflation is pretty much still at a 40-year high. You've already heard in
our report from Barbie in Rome, pass the company, passed on 30 percent higher costs to consumer. Or they simply make it shrinkflation, the
product's smaller.
Well, the beverage giant, AriZona Ice Tea, has pledged it won't do that. Not only that, it remains, and you can see on its can, its 23 ounce cans
have been 99 cents since they launched in 1992.
Other consumer prices have risen since that time. This is what it looks like. The project today, the cans are the same size. They are still 99
cents and it's printed right on the packaging.
Joining me Don Vultaggio, the founder and chairman of AriZona Beverages, is with me.
We ran it through the BLS' inflation calculator. By all rights and what's proper, you should be charging $2.07 for your cans, if you were to have
kept pace with inflation since starting.
You won't do that.
Why not?
DON VULTAGGIO, FOUNDER AND CHAIRMAN, ARIZONA BEVERAGES: I don't think our customers need another price increase. And we are just fighting hard to
maintain the price that will give consumers a reason to buy us.
The company recognizes the pain that everybody is going through. And if everybody pulls together, maybe we will get through it together.
QUEST: But even allowing for -- you're going to have to eat the extra cost. I assume the cost of making your fine teas have gone up, down to the cost
of distribution fees and diesel and manufacturing.
VULTAGGIO: They have. But we have done things behind the scenes, as we have done for my career, 50 years of business. You do the things that you can
control. Things I can't control, I cannot control.
But things I can control, like faster lines, automation, shipping through using trains, lightweight boxes so we get more on load, shipping at night,
those kinds of things is what the consumer doesn't see. But that's what I've been doing as a businessman for decades.
QUEST: What I find interesting is that we've got the inflationary crisis now but you hadn't been raising the prices even in average times like 2004,
2005. You've never decided to pop another cent or two on it, which suggests this is philosophical for you.
VULTAGGIO: Well, it's that; 99 cents is a hot number. Because of that, we get a lot of attention at retail. Retailers are working with us as well. As
their costs go up, they are not taking margin because the price of the can and the price to them has been stable.
And our suppliers who supply cans, flavors, packing, it's a group effort to get this done. Over the years, we've been able to overcome cost increases;
not right now because now is exceptional. But in the past we've been able to do it by flight waiting the can, run the cans faster on the line, help
more facilities in the Americas so we get closer to market.
So we've been able to offset costs that way. This is an incredible time. Hopefully, this will settle out and come back to normal because I think
it's not sustainable. But nevertheless, we are going to hold on as best we can and give our consumers an opportunity to breathe a little easier when
shopping.
QUEST: What are your future plans?
The thing I'm always fascinated about, a company like yours, your product, you managed to distribute it to every corner, every nook, every cranny of
the country. It's a real achievement.
How are you going to grow?
What do you want to do next?
VULTAGGIO: Well, we are constantly introducing and injecting new things. We're in different categories that we weren't in a few years ago. We're
doing alcoholic beverages.
[15:40:00]
We're doing coffee, for instance, ground (INAUDIBLE) coffee. We're doing concentrated coffees. We're doing snacks. We have a chip line. The
challenge always is to be relevant with consumers but more importantly, give retailers a reason to take you on because of our nifty packaging, our
way at the marketplace is different than the big guys.
A lot of the large companies use advertising as their vehicle to get shelf space and consumer awareness. We use packaging and a value story and then a
great product inside. Because the first time somebody buys us, I say they buy it for the package. For them, forevermore, after that, they buy it
because it tastes great and it smells great.
The categories we go into, we try to have the best in a category. Those decisions are made in my office, by me and my sons and some of my close
staff here. So we don't have a big organization burdened with a lot of expensive -- sometimes expensive -- but --
(CROSSTALK)
VULTAGGIO: -- people who are not as engaged as I am.
QUEST: I have to say, I am always fascinated these days by the concept and the practicalities of the family company, which has the ability for
decision making, nimbleness if you will, which I think is a huge advantage. I'm guessing you've found that to be the case during the pandemic.
VULTAGGIO: Oh, absolutely. Like a lot of companies, we had the same issues. People who are concerned. We didn't lay anybody off. We didn't furlough
anybody. We set up people to work from home. I was in the office every single day with my key staff. We got through it.
A lot of companies like with this inflation use the opportunity to take advantage, I think. Sometimes situations exist that are difficult. But you
have to work through it. I've been at it for decades. Work together, have good solid people who make decisions as if it's their own.
I wish the government with would do that when they spend the taxpayers' money. And I think everybody would be better off. And as an entrepreneur
and a guy who works hard, what we have, we don't take for granted our success.
More importantly, we don't take advantage of how the situation -- we're doing things that are foolishly done because we are not thinking about it.
We think about and we go forward with eyes open with all the information we can. And that's how we've stayed in business and compete with giants.
QUEST: Don, I'm very grateful that you joined us today to talk about it. I'm even more grateful that I've got a can of your excellent green tea with
ginseng and honey, which I am liberally imbibing and will continue to do so for the rest of the program.
VULTAGGIO: Thank you very much, Richard. Thanks for the opportunity.
QUEST: Thank you.
Coming up on QUEST MEANS BUSINESS travel's summer season is off to a rough start. The Kayak CEO will be with me we.
We'll talk about -- well, we know why -- what happens next, how bad will it get?
You will need some green tea with ginseng and honey.
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(COMMERCIAL BREAK)
[15:45:00]
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QUEST: You can't beat the penguin. And New Zealand's rugged coastline is home to some of the world's most endangered species of penguins. Of course,
they are cute, gorgeous to look at, create a vast ahh. But apparently they have a vicious bite, according to experts who are trying to protect them.
Our CNN's Kristie Lu Stout now looks at a team treating these adorable but threatened animals.
(BEGIN VIDEOTAPE)
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KRISTIE LU STOUT, CNN ANCHOR AND CORRESPONDENT (voice-over): On New Zealand's South Island coast, on 150 acres of private land, Penguin Place
is a rescue and rehabilitation center for sick, starving and injured penguins. It's also a haven for this native endangered species.
JASON VAN ZANTEN, CONSERVATION MANAGER, PENGUIN PLACE (voice-over): Hoiho is the Mali word for yellow-eyed penguin and it means "noisy shouter."
Sometimes after you act and you are going to see one you will hear them screaming at each other. They are the world's only solitary species of
penguin. So they don't like each other.
STOUT (voice-over): They don't seem to like human contact, either, says Penguin Place conservation manager Jason Van Zanten.
VAN ZANTEN (voice-over): Believe it or not, yellow-eyed penguins aren't stupid. They can be lethal as they look. They have a really vicious bite
and they can do quite a bit of damage.
STOUT (voice-over): Many of these birds come to Penguin Place from the Dunedin Wildlife Hospital nearby, where they are under the care of founder
and director, Dr. Lisa Argilla.
DR. LISA ARGILLA, FOUNDER AND DIRECTOR, DUNEDIN WILDLIFE HOSPITAL (voice- over): I love penguins. They are quite state assembly little individuals. They all have their own individual personalities as well.
STOUT (voice-over): This is a Fiordland crested penguin or tawaki. It's one of New Zealand's rarest mainland penguin species.
ARGILLA (voice-over): Seems extraordinary when they're in such strife, reaching levels of being endangered. Just trying to say these guys as best
we can, stop them becoming extinct.
STOUT (voice-over): Dr. Argilla and her team treat up to 50 penguins here per season.
ARGILLA (voice-over): Most of the injuries we see are actually predator related. This guy has got what's really been consistent with the nasty gash
wounds all over the feet from a barracuda. I guess climate change is definitely having an impact on the temperatures of the ocean. What fish are
around and where they're dispersing so that could be why we are seeing more injuries.
STOUT (voice-over): At Penguin Place, these young birds are feeling the effects of climate change, unable to find enough food in the ocean due to
rising sea temperatures, as well as fishing practices, Van Zanten says. Around 80 percent come in underweight and need fattening up.
VAN ZANTEN (voice-over): These birds have been declining a lot recently and the last 10 or so years we've lost about three-quarters or 75 percent of
the population. So that's a lot really, really quickly.
Humans also have a big part to play. A lot of our public beaches, unfortunately, do have a lot of traffic on it and we cause a lot of
disturbance for these birds. Private reserves like us are really important for the species ongoing.
The work we're doing is absolutely critical for these guys any survival here on the mainland. So 95 percent of the birds that come in to us our are
successfully released back out into the wild.
STOUT (voice-over): For Van Zanten's birds, things are looking up but for the full recovery of this penguin species, it's baby steps.
ARGILLA (voice-over): Oops, you can do it. Penguins are like sentient (ph) species for the ocean. They're the ones that are going to be affected by
climate change first and the most.
[15:50:00]
They are screaming at us, saying that the climate is a disaster. And we have just got to hope that the humans listen to them because we don't want
to lose these guys.
(END VIDEOTAPE)
QUEST: Listen and tell us what you are doing, #CallToEarth.
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(COMMERCIAL BREAK)
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QUEST: The misery for travelers continues. Lufthansa is slashing hundreds of flights in July. It says it can't find the workers. It's mounting travel
chaos wherever you look. There were 1,000 flights canceled this week. Delays, nearly 40 percent of flights from Paris' Charles de Gaulle today
were late. And the travel industry is shocked by the chaos.
Joining me here is the CEO of Kayak.
Steve, the situation is awful. Last night, the CEO of Wizz Air said it was unacceptable.
What needs to be done?
STEVE HAFNER, CEO, KAYAK: Well, Richard, the first thing that needs to be done is, we need to add to staff back into the industry; we need to add
capacity to do so as well, not just that the travel suppliers but also the government entities that process people going through borders and through
checkin and checkout lines.
But I think rather than focus on the negative, the positive is that travel is back after a couple years in hibernation. Everybody in the industry is
very pleased with that. Obviously, prices are through the roof as well. No one is very pleased about that. And service levels aren't where we would
like them to be.
QUEST: I sort of feel travel is back. That is to be celebrated. But I booked a ticket a short while ago online. The amount of carrier added fees
on a transatlantic ticket, I assume some form of fuel surcharge, is extraordinary.
Are we being ripped off?
Or is this legitimate now?
HAFNER: I don't think we're being ripped off. I think the airlines have gotten very sophisticated in understanding how to unbundle their fees. So
there's a base fare for transportation of taking you from A to B. Then all the other things you might want to bring with you, bags or seat selection,
they are pricing that for you.
But you're not being ripped off because the airline P&Ls are showing the windfall profits of other companies, like oil companies, for example.
[15:55:00]
So the airlines are suffering through staffing shortages. They are not getting the equipment they want from Boeing and Airbus. And of course, they
have to pay for the same gas price, for fuel that everybody else is.
QUEST: The one thing I noticed, everybody is talking about now is experiences. Everybody wants experiences. It follows on from the pandemic,
the bucket list, all these sorts of things. I assume you're starting to see this as well.
HAFNER: Absolutely. At Kayak, we process billions of customer requests for information every month. Those queries have changed during the course of
the pandemic. People are looking for off the beaten path destinations, more willing to consider non-hotel accommodations.
They don't want to stay at Marriotts. they want to stay in more authentic and local experiences. They're willing to stay for longer, they are willing
to drive to get there. So I think a lot of those changes have to be factored into the supply patterns going forward. And we're very on top of
it here at Kayak.
QUEST: Do you think these changes are permanent, as much as anything is in travel?
In the sense that, is it a fact -- we know business travel will probably not -- 30-40 percent of it will not come back. But we don't really know if
the future full direction of leisure.
Are you getting any thoughts on that?
HAFNER: Yes, what we're seeing is that the increase in leisure is offsetting the decrease in business. I think that's actually a good thing.
As people get wealthier in most countries around the world, they tend to spend their money on experiences; specifically the younger demographic
versus assets. And I think that's good for everyone.
QUEST: Steve, good to see you. I'm grateful. Thank you very much. Let's hope it's not too chaotic a summer. We will talk as we continue.
I need to show you the markets. While we were on air, I sort of suggested this would happen at the beginning of the program. I wasn't in any great
prescience, believe me; I've just seen it before.
The 600 level is the low of the day. The triple stack shows a similarly grim picture of the three. The Nasdaq is off 2.5 percent. Whether this is
just a reversal of recent gains or we're looking at something more going on, higher interest rates, I don't really know. Too soon to say. But it is
a grim day.
And a "Profitable Moment" after the break.
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(COMMERCIAL BREAK)
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QUEST: Tonight's "Profitable Moment": it was really good to have the founder and chair of AriZona Beverages. You know, this is 99 cents and, as
I said earlier, it should by rights be $2.07 if you are just adjusting for inflation.
But the argument he made tonight was what he can afford, to not to do that and I think it, once again, speaks to the advantage of the family business
that we saw again and again over the pandemic.
We saw it during the great financial crisis, we've seen it repeatedly, the ability of the family company to take decisions in the long term interests
of everybody, not just the short term interests of the shareholders or the stakeholders, whatever that might be. It's fascinating.
And the drink is pretty good, too, 99 cents. And that's QUEST MEANS BUSINESS tonight. I'm afraid the market is off awfully. A bit more of an
AriZona tea by the time we are finished. Whatever you are up to in the hours ahead, if you can, I hope it is profitable.
END
