How are FMCG Leaders Preparing for Brexit?

How are FMCG Leaders Preparing for Brexit?
With difficulty is the simple answer. Because the only thing that appears certain at the moment about Brexit is that it is causing a great deal of uncertainty…across all industry sectors. Speaking regularly as I do with commercial leaders in FMCG, it is the subject that is unsurprisingly raised every time we meet.

How are FMCG Leaders Preparing for Brexit?

The actual Brexit deal (or no deal) the UK will end up with remains unclear with just six months to go. But key concerns about the impact on the bottom line centre on how restrictions on freedom of movement of both people and goods will affect supply chains, and how new import duties will alter the share of wallet.

Short term impact will include losses from currency fluctuation, and increased costs from arranging work visas (or whatever system replaces free movement of people) and changing packaging and labelling.

Longer term effects include delays in new product development and investment in UK factories, as companies wait for clarity on the UK’s future relationship with the EU.

Industry areas such as farm to fork are already suffering negative effects. A survey published by the Food & Drink Federation found nearly a third of the EU workforce had left the UK within a year of the referendum while 47% of the remainder were considering joining them.

Earlier this month, in response to the impending staffing crisis, the Government announced a post-Brexit migrant farm workers’ visa scheme for up to 2,500 EU nationals for 2019 and 2020.

There is an expectation that the post-Brexit import duties could radically change consumer spending habits, with many likely to reduce expenditure on premium items which will become more expensive, as UK wage restraint continues.

These are not only restricted to ranges like high end skincare products; a recent report by the LSE found that food shortages and price rises could mean even dairy products we import from the EU like butter and speciality cheeses could become occasional luxuries, with milk products attracting tariffs of up to 74%.

In response, increased investment is being made in data analytics to make sure the right product is available to the right consumer at the right time. An example is the personalised online targeting of luxury items to those less likely to be impacted by price increases.

At the same time discussions are underway with retail partners about product placement on the shop floor, simplifying ranges and doubling down on the everyday essentials for the average consumer.

Unlocking further value from the supply chain is another key area being explored, with import duties and potential restrictions on the movement of goods leading firms to seek new UK based suppliers where feasible.

An executive at a global FMCG firm told me: “Brexit, like political turmoil, is not new for multinational FMCG giants as they face similar changes every year across the globe. However, the UK economy has always been a lucrative market for higher value per capita sales and Brexit will undoubtedly throw more caution in the spending power of the shopper.

“We need clarity on overall government policy and other rules to trade across the European region. For the UK to continue being the spearhead for business investment, any dynamic FMCG firm needs immediate clarity and stability on future government policy.”

With just over two months until the last European Council of 2018 – widely seen as the last possible date for an Article 50 divorce deal to be agreed – the clock is ticking. FMCG leaders needing certainty to plan a path to steady growth in a new post-Brexit economy wait in hope.

Stuart Richards is a Senior Consultant in the Global Consumer Practice at HW Global Talent Partner. Contact him at stuartr@hwglobalpartner.com or +44 (0) 161 249 5170 or +44 (0) 7787 254 600.

Chanel Chooses London for Global Office

Chanel Chooses London for Global Office
The luxury goods maker Chanel has told the BBC it’s elected to set up its global office in the UK. For the first time in its 110-year history, the brand is gathering the majority of its global business functions under one roof.

Chanel, renowned for its tweed suits, handbags and perfume, had global sales of over £7bn last year, and employs more than 20,000 people. It has over 30 million social media followers on Instagram.

Chanel Chooses London for Global Office

Chanel told BBC Radio 4’s Today programme that it “wanted to simplify the structure of the business and London is the most appropriate place to do that for an international company. London is the most central location for our markets, uses the English language and has strong corporate governance standards with its regulatory and legal requirements”.

The decision – which is understood to involve dozens of jobs – means that Chanel has picked London as the base for its global team over other locations such as New York, or even its creative hub of Paris.

Chanel, whose Little Black Dress has come to epitomise the label’s Parisian heritage, is retaining its head designer Karl Lagerfeld and his team in the French capital.

Justine Picardie, editor-in-chief of Harpers’ Bazaar and Coco Chanel’s biographer, hailed the move as a mark of the global powerhouse’s confidence in the UK’s long-term prospects.

She pointed out that it also moves Chanel closer to one of its fastest growing customer bases with “spending on luxury goods by affluent London households being only second to Hong Kong, in terms of growth”. She added: “Chanel leads the way. My strong intuition is that other (luxury brands) will follow.”

The reasons Chanel gives for its decision echoes those cited by the likes of banks and manufacturers who’ve opted to move operations to the UK over the years.

The news comes as many businesses voice concerns about the continued uncertainty over Brexit and future trading arrangements, and the impact that may have on investment and jobs.

Chanel’s decision will be welcome news to British designers as London Fashion Week gets underway. They’re potentially facing upheaval to their supply chains in the form of tariffs, delays at the border and exchange rate volatility in the event of a no-deal Brexit.

Such concerns could, according to Paul Alger, of the Fabrics and Textiles Association, make buyers at catwalk shows hesitate to place orders, which would be due for delivery next spring.

The fashion industry contributed over £32bn to the UK industry in 2017, according to the British Fashion Council. That’s an increase of 5.4% on 2016, making it one of the fastest growing sectors of the economy.

 

Volkswagen’s Beetle Car Comes to the End of the Road

Volkswagen’s Beetle Car Comes to the End of the Road
Volkswagen is ending production of its Beetle in 2019, closing the door on one of the world’s most iconic car designs. The German company said output would end at its plant in Mexico next July after production of celebration models.

The Beetle has its roots in Nazi Germany with the creation of a “people’s car”, but went on to star in a series of successful Disney films as a vehicle called Herbie. But sales, particularly in the key US market, have fallen in recent years.

Volkswagen's Beetle Car

Consumers in the US have increasingly turned to larger cars such as crossovers and sports utility vehicles.

Volkswagen, in the wake of the diesel emissions scandal and huge investment in electric vehicles, says it will look to slim down its model range with a greater focus on family and electric cars. The company say the final Beetle models will be available in both coupe and convertible styles.

“The loss of the Beetle after three generations, over nearly seven decades, will evoke a host of emotions from the Beetle’s many devoted fans,” said Hinrich Woebcken, chief executive of Volkswagen Group of America.

The Beetle was originally designed in the 1930s by legendary engineer Ferdinand Porsche – a name now synonymous with fast cars – at the behest of Adolf Hitler, who wanted to see a cheap and practical mass-produced car made available to the German people.

But the outbreak of war would stall its production, as military necessity took precedence. The plant would be severely damaged, then fell into the hands of allied forces – who were eventually to play a large part in its recommissioning.

The company is already thought to have reviewed a possible model revamp and options for electric versions in recent years, before deciding on its abandonment.

But Mr Woebcken didn’t completely rule out that the model could one day be resurrected: “Never say never.”

Volkswagen sold 11,151 Beetles during the first eight months of 2018, down 2.2% from the same period a year earlier.

US consumers looking for a small Volkswagen vehicle overwhelmingly prefer the Jetta sedan, or the Tiguan compact sport utility vehicle.

Tax Cut for Self Employed Workers Scrapped

Tax Cut for Self Employed Workers Scrapped
A planned tax cut for 2.7m self-employed workers has been scrapped by the UK government. It was originally due to scrap Class 2 National Insurance contributions in April but the move had been delayed by a year and has now been shelved. It cited concerns that low-earning self-employed people would pay more to access the state pension, and it would make the tax system more complex.

Labour’s John McDonnell called it a “betrayal of the self-employed”.

The government was originally due to scrap Class 2 NI contributions, paid by self-employed people with profits of £6,205 or more a year, in April 2018 but last year announced it was delaying that for a year.

But it announced on Thursday that they would not now be abolished in this Parliament. The move was set to save millions of workers about £150 a year.

But there had been concerns that the move would hit more than 300,000 self-employed people earning less than £6,000 a year who were paying the Class 2 NICs voluntarily, in order to access the state pension. They would have faced being moved to Class 3 contributions, raising weekly payments from £2.95 to £14.65.

In a written statement, Treasury Minister Robert Jenrick said the change had been intended to simplify the tax system for the self-employed but it had “become clear” that a “significant number” of self-employed people with the lowest profits would have ended up paying more.

“Having listened to those likely to be affected by this change, we have concluded that it would not be right to proceed during this Parliament, given the negative impacts it could have on some of the lowest earning in our society,” it said.

Trying to address the concerns would have meant “greater complexity to the tax system, undermining the original objective of the policy”. He added: “The government remains committed to simplifying the tax system for the self-employed and will keep this issue under review in the context of the wider tax system and the sustainability of the public finances.”

But shadow chancellor Mr McDonnell said: “This is yet another betrayal of the self-employed. These people are the engine of the economy and have been let down again, while giant corporations have seen their tax bills slashed.”

The Federation of Small Businesses said it would hit more than three million people and would “net the Treasury more than £350m annually in the three years to 2021”.

FSB Chairman Mike Cherry said the Treasury “should have worked harder” to find ways to protect low-earners.

“The self-employed community has been let down today, missing out on a promise to reduce their tax burden. This raises serious questions once again about the government’s commitment to supporting the self-employed. ” He added: “Class 2 NICs is a regressive levy that indiscriminately hits sole traders and makes life even tougher for those who are hard-up.”

British Airways Boss Apologises for Data Breach

British Airways Boss Apologises for Data Breach
The chief executive of British Airways has apologised for what he has called a very sophisticated breach of the firm’s security systems. Alex Cruz told the BBC that hackers carried out a “sophisticated, malicious criminal attack” on its website.

The airline said personal and financial details of customers making bookings had been compromised.

British Airways Boss Apologises for Data Breach

About 380,000 transactions were affected, but the stolen data did not include travel or passport details. BA said the breach took place between 22:58 BST on 21 August and 21:45 BST on 5 September.

Mr Cruz told the BBC’s Today programme: “We’re extremely sorry. I know that it is causing concern to some of our customers, particularly those customers that made transactions over BA.com and app. “We discovered that something had happened but we didn’t know what it was [on Wednesday evening]. So overnight, teams were trying to figure out the extent of the attack.

“The first thing was to find out if it was something serious and who it affected or not. The moment that actual customer data had been compromised, that’s when we began immediate communication to our customers.”

BA said all customers affected by the breach had been contacted on Thursday night. The breach only affects people who bought tickets during the timeframe provided by BA, and not on other occasions.

Mr Cruz added: “At the moment, our number one purpose is contacting those customers that made those transactions to make sure they contact their credit card bank providers so they can follow their instructions on how to manage that breach of data.”

The airline has taken out adverts apologising for the breach in Friday’s newspapers.

 

Google Releases Content Safety API to Identify Child Abuse Images

Google Releases Content Safety API to Identify Child Abuse Images
Google has today announced new artificial intelligence (AI) technology designed to help identify online child sexual abuse material (CSAM) and reduce human reviewers’ exposure to the content.

The move comes as the internet giant faces growing heat over its role in helping offenders spread CSAM across the web. Last week, U.K. Foreign Secretary Jeremy Hunt took to Twitter to criticize Google over its plans to re-enter China with a censored search engine when it reportedly won’t help remove child abuse content elsewhere in the world.

Earlier today, U.K. Home Secretary Sajid Javid launched a new “call to action” as part of a government push to get technology companies such as Google and Facebook to do more to combat online child sexual abuse. The initiative comes after fresh figures from the National Crime Agency (NCA) found that as many as 80,000 people in the U.K. could pose a threat to children online.

The timing of Google’s announcement today is, of course, no coincidence.

Google’s new tool is built upon deep neural networks (DNN) and will be made available for free to non-governmental organizations (NGOs) and other “industry partners,” including other technology companies, via a new Content Safety API.

News emerged last year that London’s Metropolitan Police was working on a AI solution that would teach machines how to grade the severity of disturbing images. This is designed to solve two problems — it will help expedite the rate at which CSAM is identified on the internet, but it will also alleviate psychological trauma suffered by officers manually trawling through the images.

Google’s new tool should assist in this broader push. Historically, automated tools rely on matching images against previously identified CSAM. But with the Content Safety API, Google said that it can effectively “keep up with offenders” by targeting new content that has not previously been confirmed as CSAM, according to a blog post co-authored by engineering lead Nikola Todorovic and product manager Abhi Chaudhuri.

“Quick identification of new images means that children who are being sexually abused today are much more likely to be identified and protected from further abuse,” they said. “We’re making this available for free to NGOs and industry partners via our Content Safety API, a toolkit to increase the capacity to review content in a way that requires fewer people to be exposed to it.”

Most of the major technology companies now leverage AI to detect all manner of offensive material, from nudity to abusive comments. But extending its image recognition technology to include new photos should go some way toward helping Google thwart — at scale — one of the most abhorrent forms of abuse imaginable. “This initiative will allow greatly improved speed in review processes of potential CSAM,” Todorovic and Chaudhuri continued. “We’ve seen firsthand that this system can help a reviewer find and take action on 700 percent more CSAM content over the same time period.”

Among Google‘s partner organizations at launch is U.K.-based charity the Internet Watch Foundation (IWF), which has a mission to “minimize the availability of ‘potentially criminal’ internet content, specifically images of child sexual abuse.”

“We, and in particular our expert analysts, are excited about the development of an artificial intelligence tool which could help our human experts review material to an even greater scale and keep up with offenders by targeting imagery that hasn’t previously been marked as illegal material,” added IWF CEO Susie Hargreaves. “By sharing this new technology, the identification of images could be speeded up, which in turn could make the internet a safer place for both survivors and users.”

Access to the Content Safety API is only available by request, which can be initiated through this form.

Google & Mastercard in Credit Card Data Deal

Google & Mastercard in Credit Card Data Deal
Google has reportedly bought Mastercard credit card data in the US to help it track users’ offline spending in stores. The two firms had not made the deal public but it was discovered by Bloomberg.

Mastercard denied suggestions that its data could be used to identify exact purchases.

The Open Rights Group told the BBC the confidential nature of the deal raised privacy issues.

“This raises serious concerns regarding the use of private financial data,” said legal director Myles Jackman. “Will Mastercard be compensating their clients for the data they have given away to Google for their own financial gain?”

Google says all the data is anonymised and that users can opt out of ad tracking by switching off the web and app activity control.

It is testing a service for ad buyers in the US that shows how digital ads influence in-store spending.

On its website, the firm claims that advertisers who qualify to use its “store sales management” service can see whether an ad click or video view results in an in-store purchase within 30 days.

Google said the service was a test product in the US and only available to certain ad buyers. It launched the ad tool in 2017.

“Before we launched this beta product last year, we built a new, double-blind encryption technology that prevents both Google and our partners from viewing our respective users’ personally identifiable information,” the firm said in a statement.

“We do not have access to any personal information from our partners’ credit and debit cards, nor do we share any personal information with our partners.

Mastercard told the BBC it offers its own “media measurement services” to retailers, in which the merchant provides advertising campaign details and it supplies spending data for the duration of the campaign.

“We only provide merchants and their designated service providers trends based on aggregated and anonymised data, such as the merchant’s average ticket size and sales volumes,” said a spokesman. “We do not provide insights that track, serve up ads to, or even measure ad effectiveness relating to, individual consumers.”

Funding Circle to Raise £300m with Listing

Funding Circle to Raise £300m with Listing
Funding Circle, the peer-to-peer lender, plans to raise £300 million by listing on the stock market in London. The firm offers loans to small businesses in the US, Germany and the Netherlands as well as the UK and the funds will be used to expand in new markets.

Funding CircleFunding Circle said the listing would help “engender trust” with investors, borrowers and regulators.

The venture was founded in London in August 2010.

Under its business model, small firms can apply to borrow money from a pool of funds supplied by individuals or firms. The arrangement cuts out banks, hence the term peer-to-peer.

It is the first such lender to float on the London stock market and could be valued at up to £2bn.

Since 2010 Funding Circle has lent more than £5bn in loans to 50,000 small businesses from 80,000 investors – including some £1bn in the first half of this year. Revenue jumped to £63m in the first half of 2018, up from £41m in the same period last year.

Loans under management as at the end of June were more than £2.5bn.

Samir Desai, chief executive and co-founder of Funding Circle, told the BBC it was a “very simple business. We allow anyone to lend money directly to small businesses, cutting out the banks. We are not a savings product.”

Merrill Lynch, Goldman Sachs and Morgan Stanley are acting as advisers for the IPO.

As part of the share sale, Danish billionaire Anders Povlsen will take a 10% stake in the firm. His holding company, Heartland, is a major investor in online fashion retailers Asos and Zalando.

 

Workers in Open Plan Offices are ‘More Active’

Workers in Open Plan Offices are ‘More Active’
Workers in open-plan offices are more active and less stressed than those with desks in cubicles or private offices, research suggests. This could be because they make the effort to find privacy to talk away from their desk, the researchers said.

The US study used chest sensors to track movement and heart rate in hundreds of people in different buildings over three days. The potential health benefits should not be ignored, they said. But they said the study was observational only and factors like location of stairs and lifts could be at play too.

The University of Arizona study, published in Occupational & Environmental Medicine, claims to be the first to measure activity and stress in office workers, rather than asking them in a survey.

It said office workers tended to be a sedentary group compared to other workers, making them more likely to have health issues, including heart problems, tiredness and low mood.

Being less active during working hours has also been linked to greater feelings of stress.

In the study of 231 office workers in government buildings in the US, those in open-plan offices – with no partitions between desks – clocked up 32% more physical activity than workers in private offices and 20% more than those in cubicles. And those who were more active had 14% lower levels of stress outside the office compared to those who were less active.

Participants in the study also answered questions about their current mood every hour on their smartphones during work time. Older office workers were more likely to have higher stress levels. The most stressed people at work were also those who were highly stressed at home too. On the whole, men were more active than women.

Esther Sternberg, study author and professor at University of Arizona College of Medicine, said: “We all know we should be increasing our activity but no matter how we try to encourage people to engage in healthy behaviour, it doesn’t work for long. “So changing office design to encourage healthy behaviour is a passive way of getting people to be more active.”

Although people tend to like individual offices or cubicles more because they are more private, the researchers found open plan offices could have other benefits, such as better communication, more impromptu conversations and increased awareness of colleagues.

The researchers said other design features could also affect activity levels – such as how people circulate in their offices, where meeting spaces are located and how accessible stairs and lifts are.

Is it the End of the 9 to 5 Working Day?

Is it the End of the 9 to 5 Working Day?
Traditional workplace hours of 9am to 5pm are now only the norm for a minority of workers, research suggests. Just 6% of people in the UK now work such hours, a YouGov survey found. Almost half of people worked flexibly with arrangements such as job sharing or compressed hours, allowing them to juggle other commitments, it found.

Anna Whitehouse, a campaigner whose own flexible working request was refused by her employer, said there were still misconceptions about such arrangements.

In her case, her employer refused her request for 15 minutes flexibility at the start and end of each day to enable her to drop off and pick up her children from nursery.

Mrs Whitehouse, an author and blogger known as Mrs Pukka, said the refusal prompted her to resign and blog about the experience. “My background is as a journalist so I just started writing. I’m not a campaigner or an activist, but I had a moment of frustration and went with it.”

Since then she has started the Flex Appeal, aimed at convincing firms to trial flexible working and also to make people aware of their right to request flexible working. “It’s not about parents, it’s about people. There’s so much research out there showing working flexibly is better for mental health and for productivity,” she said.

Polling firm YouGov surveyed over 4,000 adults for the survey, which was sponsored by fast-food chain McDonald’s.

The study found most full-time workers would like to start work at 8am and finish by 4pm, hours chosen by 37% of those surveyed. The second most popular choice was 7am to 3pm, chosen by 21% of those surveyed.

It found flexibility was important to people of all ages and life stages, including parents and students, for example. Those who did work flexibly said it improved their motivation and encouraged them to stay in a job for longer.

Peter Cheese, chief executive of HR industry body the CIPD, said organisations willing to offer flexible working would attract a higher number of applicants. But he said more firms needed to step up: “Uptake of flexible working is still low and most jobs are not advertised as being open to different working arrangements,” he said.