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Quest Means Business
UK Inflation Soars To 10.1 Percent, Highest In G7; US Retail Sales Unchanged In July; American Airlines Orders Fleet Of Supersonic Jets; Liz Cheney's Primary Loss And Possible Bid For Presidency; Severe Drought In The Western United States; Elon Musk Jokes About Purchasing Manchester United; Marketplace Nation Looks At Asian Immigrants And Their Place In Today's Economy And Marketplace. Aired 3-4p ET
Aired August 17, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN BUSINESS ANCHOR: We've got an hour together. It is the last hour of trading on Wall Street, a very warm welcome.
Markets have recovered some of the losses as you can see sharp losses by lunchtime, but now we are off a hundred points or so, that may be where
we'll stay for most of the session. There was a smidgen of green just about 2:45.
The markets and the events of which we are talking: Inflation in the UK is at its highest level in 40 years. Consumers are being hit at the most
American Airlines is buying 20 supersonic jets. The Chief Executive of Boom, that company building them will be joining us on this program.
And Elon Musk said he is only joking when he said he is buying Man U. Fans and investors got all excited.
We all live in New York. It's Wednesday, August the 17th. I'm Richard Quest Yes, I mean business.
Inflation in the UK hit double digits for the first time in four decades. Even though it was expected, it is shocking nonetheless. The prices in July
were up a whopping 10.1 percent year-on-year. It is the highest of any G7.
Some like the US and Canada arguably are seeing inflation slowing. The Bank of England even says the worst may still follow. It could be 13 percent
within months. To most consumers, no escape from soaring prices from staples of food and fuel, which are ever more expensive.
Anna Stewart is in London.
Anna, before we parse the numbers, why is the UK worse than others, say Eurozone or G7 countries?
ANNA STEWART, CNN REPORTER: Yes, it's not a title the UK would like and it has retained its title now for months in terms of inflation.
If we compare the UK to the US and Canada, well, it's just way more vulnerable to energy prices in Europe, particularly reports relating to the
war in Ukraine and sanctions on Russia, and then if you compare it to other European economies, France and Germany, for instance, well, the difference
there may be in the labor market, because in the UK, it is very tight. We have labor shortages.
Similar picture in Europe, Richard, but actually in the UK, it's not just the rebalancing from the pandemic. It's also Brexit. And I hate to bring up
Brexit once again, but there we go.
So this is why we are seeing such high inflation. This figure actually did come in as a surprise, it was higher than any of the estimates I saw,
higher than the Bank of England was expecting for this month, but they do believe it will go higher, still peaking at 13 percent in October.
QUEST: Right, well, working on the basis of the monetary lag and the measures they've taken so far. What's the consensus now for how many more
rate rises and higher rate rise?
STEWART: Yes, so six rate hikes already from the Bank of England. So they've already had a pretty aggressive approach and a half a percentage
point rate hike earlier this month.
But looking at these numbers, I think it could be more aggressive again, and we could see more rate hikes to come. But of course, in terms of the
economy, it's pretty much growing at zero percent at this stage, so you have to be quite careful in terms of monetary policy.
The big discussion point, I think, in the UK at this point is, what is the policy going to be from the government and the next Prime Minister? And of
course, we are in this very protracted long battle for the next Prime Minister of the UK in terms of the Conservative Party, and what will those
policies do? Would they help people? Particularly the poorest in society, which honestly, Richard, a report from the Institute of Fiscal Studies
earlier this week, made the very good point that for the poorest in society, who spent much bigger proportion of their spending on food and
energy, which is of course, key components of inflation right now. For them inflation will feel more like 18 percent come October.
QUEST: And the problem of course for government is how you help those most in need without adding monetary stimulus or stimulus -- fiscal stimulus, I
should say, to the economy at the same time as the Bank of England is monetary tightening.
Anecdotally, Anna, anecdotally, when you go out to do the weekly shop, what's it like?
STEWART: It is increasingly expensive. I mean, you notice it in big things like I don't know, alcohol, wine, but you do notice it in the staples as
I was actually quite shocked looking at some of the figures today. A pint of milk has gone up 40 percent in the last 12 months. A loaf of bread has
gone up some 30 percent in the last 12 months, so prices across even the cheapest staples have gone up considerably.
And Richard, when we're looking at the energy price gap in the UK, it is going to go up in October. It is going to go up again in January, between
October of last year and January next year, the households, the average household, the UK could be spending an additional $3,300.00 more just on
energy, so add food bills to that and you can see you've got a massive problem.
QUEST: Anna Stewart who is in London tonight.
In the US, retail sales held steady from June to July. American shoppers got a break from high gas prices. The average price has dropped as you can
see on the screen since the mid-June record. It went towards other items though, furniture, online shopping and the like.
Two US retailers, Target and Lowe's had Q2 numbers. Target's profits fell 90 percent. There's a really -- basically an inventory glut and they had to
cut prices. Lowe's, which was another, they managed to cut costs.
Rahel Solomon is with us.
Welcome back, Rahel.
Yesterday, we talked a great deal on this program about retail sales and we saw stonkingly strong market for retail stocks.
Was this a blip?
RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: Yes, I think it depends on how you read the report. And Richard, there are many ways to read it and we're
getting all sorts of comments today.
So some would look at today's report on July retail sales and say consumer spending held steady, and if you look at it, year-over-year, actually it
rose 10 percent. Others, however, would say, not so fast, because these numbers are not adjusted for inflation and when you actually look at
volumes, those were actually lower.
So it would sort of be like consumers are still spending, but they are actually bringing home less. So it depends on sort of how you look at it,
but we're really seeing, you know, it's really hard to sort of make generalizations about the whole retail environment because companies like
Walmart, while they are warning about profits, they're still seeing sales rise.
I mean, sales rose nine percent in this most recent quarter, however, companies like Wayfair is seeing their sales really plummet.
QUEST: Right. And yet, at the same time, we've got this question of whether we're seeing a redistribution, aren't we, from upper end to middle
end, middle end to lower end.
SOLOMON: Oh, what I mean, absolutely. You're seeing consumers trade down really all across the economy, right? I mean, I did a story last week,
Richard, where there was some research where, you know, folks are even trading down on their alcohol consumption that they're still spending on
alcohol, but they are perhaps, you know, avoiding the premium label.
So you're seeing it really in lots of data that people are becoming a lot more discretionary about where they spend. The question, however, is, you
know, Richard, you and I talk a lot about the resilience of the US consumer, but I would argue that retailers are going to need quite a bit of
resilience as well to weather this high inflation environment where consumers are trading down.
But also, and we don't talk about this a lot, retailers too, are dealing with increased costs because of things like inflation, because of labor
So retailers are facing a hard time as well.
QUEST: Rahel Solomon, thank you.
Gerald Storch has run several retail businesses, the former Vice Chair of Target. Gerald is with me from Florida.
You are extremely pessimistic about the retailing environment as we go into the winter, and I'm wondering whether we've been a little bit fooled this
week with some okay numbers from some discount retailers, but actually the worst is to come.
GERALD STORCH, CEO, STORCH ADVISERS: Yes. I don't know if I'm pessimistic, but I think quite realistic about the numbers are saying. The sort of
reopening euphoria is over. And we're -- you know, as we get through the summer here, we're entering the hangover headache from all of this.
So when you look at the composition of the July retail sales report, it tells a very clear story in conjunction with the Target, Walmart, et cetera
So what we see is the consumer is betting heavily on food at grocery stores, whereas restaurant sales are starting to slow down. You're seeing
consumer spend on home improvement. You know, housing prices have risen. So it is sort of a safe bet to work on improving, you know, kind of fixing up
your home. And then e-commerce is soaring.
But what's not selling is discretionary items like apparel, that's kind of done and over with. People got dressed up, went out and said, "Okay, I've
done that," you know, "I had my vacation." Now we're going to go back to reality with very strong inflation. I don't agree there is any sign of
abating in the US on inflation.
It's not as bad as the UK, but it is still pretty bad and it is not slowing down. And then also you have the slowing economies, and the Fed continue to
Consumers aren't stupid. They get all this and their spending habits reflect it.
QUEST: Are we seeing -- for those of us who've been around through more than one economic cycle, we know that people do first things they'll trade
down, then they will stop -- well, first they'll stop the luxuries, then they trade down. Then they actually start to buy more important things. In
your view, are we seeing all of those normal recessionary activities taking place?
STORCH: Indeed we are. I would just add, of course with a heightened component of e-commerce given the secular growth in e-commerce regardless
of what else is going on.
And you know, the whole Walmart-Target thing is brilliant, because Walmart says, well, in tough times, Target as well, in great good times, and
Walmart is doing much better than Target.
We tend to lump them together because people say, oh, they both had problems with inventory. Well, look, at the latest report, Walmart's gross
margin rate was down a little over a hundred basis points. Target's gross margin was down almost 900 basis points.
That's nine times worse with what they had to mark down, because they sell a lot more discretionary high-end items, and they're just not selling.
QUEST: If you are an LVMH and a luxury group looking at this winter, should you be worried or is that always money at the top?
STORCH: You know, it's really funny, you know, these companies have not suffered yet. Part of it is they've had you know, they have a global
business in different parts of the globe and strong at different points.
But the other thing that is going on is the stock market has come back, and the number one correlate with luxury sales is stock market performance. And
so when the stock market is so strong, I don't think they have anything to worry about at all. That's where the money comes from.
QUEST: And this idea, forgive me, but I know that since you are in retailing, you are well used to having the word "Christmas" said even
before the summer holidays are over. How important will this Christmas -- this holiday season be do you think?
STORCH: Well, I think it's going to be really important, particularly for the retailers that aren't doing well. So I do believe we're going to see a
return to the retail bankruptcies that were so profligate or so widespread before coronavirus hit.
So we're going to see a lot of bankruptcies from some well-known names, you know, sort of these retailers that are not doing well, that weren't doing
well before the virus hit and aren't doing well now, and also all the mom and pops, I think they're in big trouble.
They have not been able to keep up with rising costs, they haven't been able to staff, their stores. I think we're going to see a huge number of
casualties from this Christmas and those will become apparent as we get to the spring.
QUEST: That's awful, really, in a way isn't it? The mom and pops in there, that is that is the differentiation on the high street.
STORCH: It is. I'm not worried about Target and Walmart or you know, or Tesco's of the world. I'm worried about the mom and pops a lot right now.
QUEST: All right, lovely. Thank you. Well, not lovely, but you know what I mean. Thank you. We'll talk more. We will talk more, I promise you as we
get towards Christmas. Thank you, sir.
STORCH: My pleasure.
QUEST: It's QUEST MEANS BUSINESS.
American Airlines is now the latest carrier banking on supersonic travel by the end of the decade. The Chief Executive of the company building the
fleet of planes is with me next.
QUEST: American Airlines aims to offer supersonic travel to passengers by the end of the decade by ordering 20 jets from Boom Supersonic, the
Boom has revealed the final production design of Overture last month. It's got wings that are designed for supersonic aviation, of course, and Boom
says the planes will realize in 2025, could be ready for passengers by 2029.
Blake Scholl is the CEO of Boom. He joins us from Denver.
So you had United Airlines who in essence -- there is also the Japanese carriers, but you had United, now you've got American and your order book
is now heading towards 130.
BLAKE SCHOLL, CEO, BOOM: Yes, that's right. We've got 130 airplanes on order and preorder and 35 where airlines have already made meaningful
nonrefundable deposits, and I think we're just seeing growing momentum here that supersonic travel is back and it is going to go back in a bigger way
than Concorde ever was.
QUEST: Okay. Now, when you say -- and I realize you know, the list price is perhaps $200 million, and you're never going to tell me what they've
actually paid. But what for you is a meaningful nonrefundable deposit?
SCHOLL: Well, I actually will tell you what they pay, which is we've actually yet to discount the airplane, $200 million is the list price, and
it's the actual price in all of our airline agreements. Now, I can't get into what the prepayment terms have been, but what I can say is it is
significant, meaningful industry standard.
QUEST: Right. So what is it that American and United like, bearing in mind that your plane will only be able to fly supersonic over water? So
essentially, if you look for a US carrier, out of the east or the west, well, the west is too far for Asia, I suppose Hawaii certainly is a major
potential, but you're really looking transatlantic.
SCHOLL: Well, it's transatlantic or North Pacific, and this all really starts with what passengers want. So imagine Tokyo to Seattle in four and a
half hours. Imagine New York to London in three and a half, you know, or roundabout four and a half from Miami to Paris.
So there are actually hundreds of routes around the planet, where Overture will be able to give passengers a really meaningful speed up with two times
faster flight over water, and about 20 percent faster over land.
And so it's those transoceanic flights, primarily they get the biggest boost, but even over land, there is still a speed advantage.
QUEST: If we look now at the reality, and the dates involved, '25, you have your plane; '29, you're looking to entry into service. How realistic
are those dates?
SCHOLL: Well, a typical aircraft development program takes about eight years and we've actually laid Overture out as a 10-year effort, starting
when we had a focus team on it about two and a half years ago, and going through '29, when we said, will carry our first passengers and we're on
We finished our wind tunnel testing, we've already got our final design. We've started to announce the supplier, they are going to build the
airplane. We're breaking ground on the factory that will build it later this year.
So we've got a lot of work cut out for us, but the timeline ahead of us is very achievable.
QUEST: And what is the biggest single issue that you will face, recognizing that we know how to build supersonic planes. So, the artists
that build a supersonic plane that is sustainable. But I mean, there's not much you can do about the sonic boom, that will be there, so what is your
biggest challenge in all of this now?
SCHOLL: Well, I'll talk about what's different from Concorde because I think that's important to understand and then I'll talk about the
challenges that are ahead of us.
The single biggest problems that Concorde had was it was too expensive to fly like a $20,000.00 ticket which just wasn't affordable to many people.
And additionally, that the aircraft is famously gas guzzling and unsustainable. And so those are the two biggest things we have to make
different. And Overture; one, we will have fares where airlines can be profitable, fares three quarters lower than what was charged on Concorde.
So more like a business class fare rather than a ultra-premium to first class. So that's number one.
And then number two, we're designing around sustainable aviation fuel, meaning supersonic flight cannot just be fast and convenient, it can also
be zero carbon for the planet.
So those are two big difference, and then as we look at what we have to accomplish over the next few years there's no standout challenge, it's not
the passengers who want it, it's not the airlines who want, it's not to the regulations that support it, but we are building a very complex safety
We take that incredibly seriously. So we're going to have to go through a lot of testing to ensure that the aircraft that we are designing and
building is safe for our friends and family and loved ones and the traveling public.
QUEST: And you're still -- I mean, I will allow you slippage, but you're still holding to some idea of 2029. And also, crucially, how many other
airlines, I mean, you're talking to just about everybody, I imagine, how many are closed?
SCHOLL: Well, it starts with what passengers want, and you're right, like passengers around the planet. I don't know a single person who wants to
spend more time on an airplane. And as we continue to make progress and gain momentum, the airline interest everywhere it goes up. And yes, we are
-- we are having great discussions with airlines on multiple continents.
QUEST: I guess that, you know, you've just got to build the thing now, aren't you? You've just got to build it. You've just got to build it and
fly it. I mean, it sounds so straightforward, but that's the job.
SCHOLL: Yes, I mean, it is a complex engineering task, but it's not -- it doesn't need new science. It doesn't need new regulations. It doesn't need
new physics, we just have to build it.
QUEST: A suitable memento for it. Thank you. Thank you, sir. Good to have you as always.
Cocoa prices have rallied recently with low supplies of fertilizers in West Africa because of sanctions on Russia. Now, Uganda isn't exactly known for
cocoa production, as Eleni Giokos reports though, it is significantly targeting a larger chunk of what is a $12 billion industry.
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT (voice over): For more than 100 years, this family-owned plantation was known for exporting raw
cocoa beans, but Uganda is not known for this commodity.
Approximately 60 percent of the world's cocoa comes from Cote d'Ivoire and Ghana. However, Uganda's production volume has more than doubled in the
last 13 years. Exports have jumped from nearly 14,000 tons per year to more than 44,000 tons in 2021.
STEPHEN SEMBUYA MAGULU, CEO, AFRICAN CHOCOLATE COMPANY: Me and my people kept on asking questions, why is it that there's too much demand for this
cocoa that is being exported out of the country? What comes out of the crop, the cocoa that we're growing on from? So we discovered first
chocolate, so this gave birth to the business that we call African Chocolate today.
GIOKOS (voice over): Stephen Sembuya Magulu is CEO of the African Chocolate Company, a local chocolate producer in Uganda.
MAGULU: We started manufacturing chocolate, because we saw this as an opportunity to be pioneers in chocolate making in Uganda.
GIOKOS (voice over): In 2014, Magulu's company began producing its own chocolate after noticing the growing market for a refined product, a smart
move for the business.
MAGULU: Our business has been able to grow massively. We are producing 10,000 chocolate bars a month.
GIOKOS (voice over): This type of progression is one of the goals for the African continental trade area, building on existing efforts in production
to generate more profits on the continent, boosting opportunities to expand the value chain.
In 2022, raw cocoa beans averaged around $2.45 per kilogram, while the price of refined chocolates was around $5.00 per kilogram.
DR. EMMANUEL IYAMULEMYE, MANAGING DIRECTOR, UGANDA COFFEE DEVELOPMENT AUTHORITY: The potential for cocoa in Uganda is very bright. The
government is focusing on research and it is also providing free seedlings to the farmers to increase cocoa production.
GIOKOS (voice over): As the sector grows, the government is also planning to build a cocoa processing factory in the region, an opportunity to
produce more intra-African trade, changing the game or at least the region.
This is broadening the cocoa markets in Africa.
Eleni Giokos, CNN.
QUEST: An excellent example, of course, of this idea of the difference between the raw material. I remember this when I made the program about
cocoa and coffee. The difference between growing the beans and adding the value added, which then as you saw in that piece shows just a tremendous
difference for the countries that are involved.
A quick look at the markets. I'm sorry, I'm rambling there, but it's such an important part of the commodity market.
As you can see there, we are just under 34,000, but the Dow is holding its own just down slightly really, it is a down day taking a bit of a breather
and there's the triple stack. The NASDAQ is the worst of the day. We're off over one percent.
One hundred forty odd points.
So the votes are in and counted and in Wyoming, Republicans have taken Donald Trump's side, which of course is a defeat for the former President's
harshest critic. It raises very fundamental questions for the Republican Party about what it stands for, and how it will move forward. We will
discuss in a moment.
QUEST: News to bring to your attention: A spokesman for the Chief of Police in Kabul in Afghanistan says there are casualties after an explosion
inside a mosque and the explosion took place during evening prayers. The emergency hospital says it is treating 27 people and that includes five
children. No details on the nature of the exposure, what caused it and the Security Forces are investigating.
When I've got more to tell you on it, I will indeed do so immediately.
Another win for Donald Trump against his critics in the Republican Party. The Vice Chair of the January 6 Committee, Liz Cheney has lost her primary
bid and it wasn't even close. She lost by nearly 40 points to Harriet Hageman, the candidate who had been endorsed by Mr. Trump.
The former President described the result is wonderful for America. Cheney's term in Congress will run until the end of January when she is
hinted at possible plans.
(BEGIN VIDEO CLIP)
SAVANNAH GUTHRIE, NBC NEWS ANCHOR: Are you thinking about running for President?
REP. LIZ CHENEY (R-WY): That's a decision that I'm going to make in the coming months, Savannah. I'm not going to make any announcements here this
morning, but it is something that I am thinking about and I'll make a decision in the coming months.
(END VIDEO CLIP)
QUEST: Gabby Orr is following the story from Washington.
So, she is thinking about it. Now, one assumes she has no realistic chance of getting a nomination; therefore, a run for the presidency or for the
Republican presidency or an Independent run would be just really is a way of getting her views out.
GABBY ORR, CNN REPORTER: I think Cheney is still looking for a path forward after losing her primary last night and as you heard in that sound
byte, one of the things that she's weighing is a future presidential bid. Of course, we don't know if she would run as a Republican candidate in the
GOP presidential primary or if she would run as an Independent, conservative alternative to Donald Trump. But her one mission as she has
stated, last night and previously over the past 18 months is preventing Donald Trump from ever holding office again. Whether she think she has the
best chance of doing that by challenging him herself in a presidential primary, or helping to build a coalition that could prevent him from
becoming president is still an open question.
QUEST: But Gabby, if we look at the numbers, particularly the ten that voted to impeach Donald Trump and the fact that all five of them have all,
sort of, lost. About four decided not to run, two have gone on ahead and I think it's four or five, four -- four have -- have now lost. And there is
a difference between those Republicans who take part in primaries and the general Republican party, or is there not?
ORR: There is absolutely a difference and I think that what was made clear last night, when Cheney lost by 40 percentage points was that the
Republican party, as of right now. It's base is not with somebody like Liz Cheney. It is very much shifted to the right. It is aligned with Donald
Trump who has time and time again endorsed and put forward candidates in a number of primaries this cycle successfully. Eighty-five percent of the
candidates that Donald Trump has backed, recruited and endorsed in the 2022 cycle have successfully made it out of their primaries.
Now, of course, the question is whether they can fair well in a general election, and I think we're seeing in states like Arizona and Pennsylvania
and -- and Nevada, Wisconsin, that a lot of these candidates are facing an uphill battle. And Cheney is trying to seize on that, she's trying to say,
look, Trump isn't necessarily picking the best people and that is partly because these people have embraced his lies and his falsehoods about the
QUEST: So when will we get an indication, do you think? Because obviously the next thing that happens is, you go to the presidential primary. Now,
we're -- we're still some -- some way off from that, but when will we get an indication that, you know, the Republican party will fight for survival
if it feels Donald Trump is not the best candidate?
ORR: I think the first indication that we'll get of that is what happens when Donald Trump announces he is running for president again.
ORR: We are told that he definitely intends to run again. It's just a matter of when that announcement could come, and privately he has told
aides and we've reported this before that he -- he seems to think that when he does announce it will clear the GOP field. That nobody will step
forward to challenge him and the nomination will be his. Now if that isn't the case and you do see people like Mike Pence, Mike Pompeo, Liz Cheney,
Larry Hogan, Chris Christie, I mean, there's so many names and so many people who could jump in to challenge him. If that does happen, there will
be a battle for the soul of the Republican party and I think it's going to be an ugly 2024 GOP presidential primary.
QUEST: We'll watch it closely and you'll be there to help us understand it and (inaudible) to report on the ugliness and all its glory. Thank you.
I'm grateful. Thank you. And so to the west of the United States where the largest reservoir is dried up or drying up. It's threatening the water
supply and there are 40 million people who rely on the water. It's the Colorado River and it's dropping to its lowest level on record, where
officials are being forced to implement restrictions. CNN's Bill Weir is there.
(BEGIN VIDEO CLIP)
BILL WEIR, CNN CHIEF CLIMATE CORRESPONDENT: Whiskey is for drinking. Water is for fighting. That's supposed Mark Twain quote has been a western
slogan since the first settlers, but now the worst drought in 1,200 years has water managers in seven states, 30 tribal nations and Mexico fighting
over every precious drop.
CAMILE TOUTON, BUREAU OF RECLAMATION COMMISSIONER: But to date, the states collectively have not identified and adopted specific actions of sufficient
magnitude that would stabilize the system.
WEIR: That was the commissioner of dams and reservoirs admitting that upper and lower basin states have failed to agree on ways to cut their
water use by up to 25 percent.
PAT MULROY, FORMER COMMISSIONER FOR SOUTHERN NEVADA WATER AUTHORITY: I think ultimately the states are going to realize they're playing Russian
roulette, and they're going to have to come to their senses.
WEIR: For almost 30 years, Pat Mulroy was in charge of Southern Nevada's water and led an aggressive conservation campaign to tear up lawns, reuse
waste water and scold water wasters.
UNKNOWN: Can't water in the middle of the day ma'am. You'll be fined if you don't change your watering clock.
WEIR: All measures she'd like to see happen downstream.
MULROY: I think they're kind of kicking the can down the road past the election if you want to -- want me to be very frank about it. I don't
think anybody wants to make great public announcements about measures they may have to take prior to the election.
WEIR: Rather than to force new action, the Feds will let the states keep talking, while the next round of automatic cuts will lure water delivery by
seven percent to Mexico, eight percent to Nevada and 21 percent to Arizona.
UNKNOWN: You can hear this crunching. It's just starting to dry up.
WEIR: Here alfalfa farmers are already being paid to let their fields go fallow, while some are switching to crops like yuli. A rubber plant that
grows in the desert.
UNKNOWN: Crop switching, looking at lower water use crops like yuli is one of the solutions we need to be looking at in a drier future to allow
communities to sustain themselves.
WEIR: Thanks to some creative water accounting, California will not face mandatory cuts next year, but their governor's already warning of a future
with a lot more people and a lot less water.
GAVIN NEWSOM, GOVERNOR OF CALIFORNIA: The science and the data leads us to now understand that we will lose 10 percent of our water supply by 2040.
If all things are equal, we will lose an additional 10 percent of our supply by 2040.
MULROY: We have this very real possibility this coming year, if we have another lousy winter. All things being equal, that we will drive this lake
down to elevation 1,000. That is 100 feet above dead pool and you're at the bottom of the martini glass. So it doesn't take much to tip that over
and get to the point where nothing can go downstream, and if you don't take it seriously now. If you think that you're going to avoid this, do a rain
dance. Go pray, do whatever, that we have a great winter. You're insane.
(END VIDEO CLIP)
QUEST: Can't get more blunt than that. (Inaudible) Elon Musk almost broke the internet with one of his latest tweets. He said he was buying
Manchester United. The news caused havoc online and it was a joke, which is somewhat unusual. The buzz did no harm to the (inaudible) share price
which shot up, (inaudible) the question, the wisdom of them. They're all sort of (inaudible) buying things. Even though the club's market cup is
$2.2 billion, it's currently bottom of the English Premier League, hasn't won a title in almost 10 years. All of which, stoking United's frustration
with the current owners, the American Glazer (ph) family but it's still a phenomenal brand, if not the biggest. Don Riddell, what did you make of it
Don? What did you make when you saw it there? I'm buying Man -- Man U.
DON RIDDELL, CNN WORLD SPORTS CORRESPONDENT: You would know better than me Richard, whether or not we take Elon Musk seriously when he spouts off on -
- on social media. Is he buying Twitter? Is he buying Coca-Cola? Is he buying Manchester United? I mean, the reason it got everybody excited was
because United seems to be a club in dire straits right now. You talked about the financial, kind of, evaluation of the club, $2.2 billion. I
mean, at last year, the Glazers were quoted as saying or they were -- they were reported as saying they would sell if it was over 4 billion pounds.
Well clearly the evaluation is much less than that now, but United fans are desperate for a change. You mentioned rightly, they haven't won a title in
10 years. They haven't won any kind of trophy in five years and currently they are rooted to the foot of the Premier League table. They've played
two teams that they really should have beaten, at least given their standing in the game. They've lost both those games. The club seems to be
absolutely redeless right now.
One of their former players, Gary Neville, who is now one of the leading analysts in the UK said that Manchester United is a graveyard for players.
So they can't even attract the top names. So they do seem to be in a bit of a death spiral at the moment, and that is why the fans are just so
desperate for some kind of change. And if it's the world's richest man, well what -- what could possibly go wrong?
QUEST: And yet the brand, I mean, it's global, is everybody heard. Everybody knows, it -- it -- it is a cornerstone. So in your -- well not
your view, but in the market's view and I mean the -- the football market not the financial market, would Musk be better than Glazer?
RIDDELL: I don't know. What does he really know about football? I mean, I think football fans are so invested in the emotion of their club, that
they want to see somebody come in and spend money on it.
And that's the one thing that the Glazers haven't really done. United fans, to their credit, warned about the Glazer takeover in 2005, because it
was a leverage buy out. But Glazer didn't put a cent into the club, they basically borrowed against the club's own assets to complete the purchase.
And whilst the United fans were very vocal about this back in 2005, 17 years ago, it, kind of, didn't matter for a number of years because they
were winning so many trophies and they were doing so well, and they were therefore commercially very successful.
But now that all that success has dried up and the trophies have dried up, this is why the fans are now really, you know, sounding the alarm bell and
saying we need to do something different here. The Glazer family, absent, they hardly ever come and watch the games. They hardly ever address the
supporters to give them any indication of the future direction of the club. So I think a lot of supporters would feel that anything is better than the
Glazer family and certainly somebody that wants to come in and spend money on the club would be welcome.
QUEST: Don Riddell, thank you sir. Just what we needed to hear tonight. Thank you. And that's Quest for Business for the moment. I'll be with the
dash to the closing bell with you hopefully, but it's only after Marketplace Nation.
KRISTIE LU STOUT, ANCHOR FOR CNN INTERNATIONAL: In 1960, there were 980,000 Asian Americans registered in U.S. Census data according to the PEW
Research Center. Fast forward to 2019 and there were 22.4 million, a number that's expected to more than double by 2060 at which point PEW says
the number of immigrants from Asia will have surpassed Hispanic, white and black immigrants in the U.S. For Asia focused companies offering a taste
of home, that could be big business. I'm Kristie Lu Stout coming to you from Los Angeles on this special episode of Marketplace Asia.
On today's program, we visit an online retailer that is hoping to tap into the Asian American market and growing demand from non-Asian customers as
well. We discuss this start-up's plans for expansion, despite supply chain challenges and inflation on the rise. Plus we meet with Christine Tsai,
the CEO of 500 Global, a venture capital fund based here in California and it's betting big on southeast Asia. All this and more to come.
STOUT: In the corner of Los Angeles, this casual deli has been named one of the best new restaurants in the world by Conde Nast Traveler. Yangban
Society is a creation of Katianna Hong, a skilled chef who's cooked in Michelin starred restaurants and is now serving up Korean fried chicken.
KATIANNA HONG, OWNER OF YANGBAN SOCIETY/CHEF: It's not trying to take Korean cuisine and elevate it. It's not trying to take American cuisine
and -- and add Korean things to it. It's literally just food that's authentic to us.
STOUT: Hong and her team (inaudible) the menu that crosses cultural boundaries, Korean Banchan, Japanese cutlets and Matzah Ball Soup. Also on
site, a mini-mart that's a nod to the convenience stores of South Korea and Japan. Is there a typical Yangbang Society customer and what would he or
she experience when they come here?
HONG: The customer basis is, like kind of, all across the board. If I had to pick one, probably a young -- the young Asian-Americans, the newer
STOUT: Asian-American buying power is big and it's growing. According to Neilson, it was worth $1.2 trillion in 2020.
JO RAMPOLDT, MANAGING DIRECTOR AT ALIXPARTNER: Asian-Americans are the fastest growing ethnicity in the -- in the country and growing very
rapidly. Tend to buy a lot of groceries for at-home preparation and at- home consumption. So it's growing number of people and even disproportionate to that, it's a very growing market for food retailers.
STOUT: Food retailers like brick and mortar giants H Mart and 99 Branch and e-commerce players as well.
ALEX ZHOU, CEO OF YAMI: We have customer from all the states. It includes Hawaii and Alaska.
STOUT: Alex Zhou is the CEO and founder of Yami, an online marketplace for Asian goods based in southern California. Born in China, he came to the
U.S. to study engineering in the Midwest. Zhou says he started to import Asian goods because of his own struggle to source his favorite products.
ZHOU: If you look at, on the Fall of 2013, (inaudible), JD.com, many folks domestic market in China, and (inaudible), like, for fear the mainstream
demand and nobody actually look at this like niche market, right, which is Asian product for overseas.
STOUT: Yami sells over 300,000 products spanning a wide range of categories from beauty, do you sell this, to toys and food including its
top seller from China, instant luosifen. A snail based rice noodle soup known for its infamous smell. Sour, spicy, stinky, it's good.
ZHOU: It's good.
STOUT: To boost its online offerings, Yami says he recently raised $50 million. The same month rival Weee!, an online grocery that offers Asian
and Hispanic foods in the U.S. announced they had reeled in more than $835 million in funding. The market is hot but headwinds are picking up. As
inflation bites, Zhou says his labor costs are rising, along with the price of shipping and warehouse losing. The pandemic has also made it harder to
import goods from Asia.
ZHOU: There's the international freight, supply chain problems. We don't have (inaudible) in our warehouse, but the customer demand is still
STOUT: But Zhou remains optimistic, in the wake of supply chain disruptions, Yami incorporated new business models that includes working
with homegrown partners such as American mom and pop shops looking to sell online. And business is growing thanks to a new, expanding customer base.
RAMPOLDT: The number of non-Asian consumers that are shopping Asian specialty stores continues to grow.
STOUT: Why is it that more and more non-Asian customers are buying Asian products and does this have something to do with the so-called Netflix
ZHOU: Some of them are pop culture fan, you know, Asian pop culture. They love, you know, Blackpink, BTS. They love Squid Game on Netflix. So they
start increasing Asian pop culture, organically they start looking for the product and the brands behind this culture.
STOUT: Back at Yangban Society, Asian and non-Asian diners gather in it's vibrant dining room and they all share the same thing, hunger for a new and
STOUT: Southeast Asia has been digitizing rapidly for a number of years. In 2019, around three in five of the population had regular access to the
internet according to Google, Temasck and Bain up from one in five just over a decade before. But the pandemic brought record demand for tech apps
in the region. In 2020, more than 40 million people in southeast Asia came online for the first time the researchers say. Much of this was prompted
by COVID-19 lockdowns and increased reliance on digital finance, e-commerce and transport apps. Investment followed, tech entrepreneurs in the region
attracted a record $21.5 billion of private capital in 2021, up from $8.8 billion in 2020 according to Preqin.
500 Global is one U.S. based venture capital firm that is committed to the southeast Asian market. An early investor in some of the region's biggest
names like Grab, Carousel, Bukalapak and now has its eye on younger players as well. I spoke with its co-founder and CEO Christine Tsai about emerging
trends and headwinds to come.
CHRISTINE TSAI, CEO OF 500 GLOBAL: Southeast Asia specifically, when we first started investing, was a very (inaudible) market, but now and today
in 2022 it's a completely different story.
STOUT: She's the momma bear who looks after the founders she invests in. Tsai's at the helm of a fund worth more than $2.8 trillion. Her company's
mission, to uplift people in economies around the world through entrepreneurship. You studied cognitive science at Berkley. You worked at
YouTube and Google. So what led you to starting and running your own venture capital firm?
TSAI: Early on at Google, I didn't know what venture capital was. That was, kind of, an opaque industry to me, but, you know, by the time I left
Google what was so exciting for me to then go and start my own venture firm was the fact that venture is a role where you can really help -- help
founders build the next generational company or iconic technology.
STOUT: 500 Global has worked with over 2,500 companies. How many of those companies are from southeast Asia?
TSAI: So our southeast Asia portfolio is more than 300 companies at this point and growing. They are spread across Singapore, Malaysia, Indonesia,
Vietnam, Thailand, a couple in the Philippines and even some of the emerging markets like Cambodia. So our -- our portfolio over all in
southeast Asia is about seven unicorns, which is, you know, company's valued at $1 billion or higher.
STOUT: What do you look out for to make and to find that investment opportunity? Are there any particular concepts or personalities that you
look out for?
TSAI: Ultimately the most important thing is the team. We have a lot of founders who've been successful who have been more humble or more
coachable. They are the stereotypical loud personalities, but we also do look at what is it that they're building. This be a category leader in the
region, if it's a, sort of, quote, "copycat" of a model that's in another part of the world, say the U.S. What does this team have to make this
model work in -- in the region?
STOUT: Now, some southeast Asian tech start-ups have gone public recently including 500 Global portfolio companies like Bukalapak, Grab, have seen
their share prices tumble within months of IPO. There's that downward pressure on them.
So what's happening here?
TSAI: If you think back to 2020-2021, specifically for -- for venture, it was a really unprecedented year for funding. There's a lot of concern
about evaluations getting out of control and I think what you're seeing now is really -- certainly a correction, at least specifically for venture.
STOUT: They're about 1,000 new unicorns this year. Everyday more than one unicorn is minted. It seems that it's not really a rare creature anymore.
Is being a unicorn something that entrepreneurs should still aim for?
TSAI: Absolutely not. If I meet a founder that says, my goal is to be a unicorn, I -- I do have question marks because being a founder is -- is
such a difficult journey. And what I like to see is that they're really excited and passionate about what they're building, empathy for their
target customer and they really just want to build something iconic and big. Not necessarily have a price tag on it.
STOUT: So what are the areas of opportunity in southeast Asia, especially given all the economic uncertainty out there?
TSAI: We have seen a lot of opportunity around a broader category that we call rural digitization. So this could be around Fintech and -- and -- and
payments and -- and financial inclusion, as well as commerce, consumer commerce. Things that are in, kind of, more frontier tech or mobility and
those are areas that we seem quite excited about.
STOUT: The region is not immune to the global economic slowdown, rising interest rates and inflation here in the United States and in Europe, could
spell further insecurity for business across Asia. This is according to Preqin, but in the long run markets across southeast Asia remain ones to
watch. This is according to some experts because of rapidly growing populations and emerging digital economies that could drive new
opportunities in tech innovation. For more on these stories and others, check out our website. Just go to CNN.com/marketplaceAsia. I'm Kristie Lu
Stout in Los Angeles. Thank you for joining me. I'll see you next time.
RICHARD QUEST, ANCHOR FOR CNN INTERNATIONAL: And there's the closing bell for you tonight is about to start ringing. The DOW is off 160 odd points
and the markets are lower. (Inaudible) we'll talk about that in the days ahead.