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Great topic Charlie. From my perspective, Tesco’s current predicament is representative of the broader food supply challenges in the UK that are created as a result of Brexit.

It appears that ~1/3rd of Britain’s food currently comes from EU sources and as established above, the weakening pound will have implications across the value chain in the form of higher prices for consumers, lower margins for suppliers, lower margins for Tesco, and/or meaningful supply chain enhancements/improvements to combat the challenges. However, what I’m most concerned by is the impact that Brexit may have on the cost/prices of goods produced within the UK (and the implications go well beyond dairy).

According to Business Insider, ~30% of the UK food and drink manufacturing workforce are European migrants, and the Brexit vote already appears to be deterring EU workers from moving to Britain. This is a MAJOR issue in the short to medium term – barring immediate manufacturing automation, UK F&B manufacturers would need to hire UK citizens and in an environment with extremely low unemployment rates (~4.3%), UK citizens are likely a more expensive labor resource. These increased labor costs will likely also lead to increased prices for consumers.

Another concerning factor is that in a period with increasing food costs/prices (and decreasing strength of the pound), the poorer UK citizens will likely be the hardest hit – less able to purchase healthy fruits and vegetables as prices rise (and so, more susceptible to poorer food choices – e.g., fast food/soda/etc.). I mention this only because it is just another implication/derivative of the Brexit decision that may not get much attention.

Sources:
[1] http://www.businessinsider.com/tesco-ceo-dave-lewis-brexit-supermarkets-food-prices-2017-10
[2] http://www.businessinsider.com/brexit-uk-food-supply-eu-report-sleepwalking-crisis-2017-7?r=UK&IR=T
[3] http://www.businessinsider.com/uk-food-industry-warns-brexit-could-leave-a-third-of-firms-unviable-2017-8?r=UK&IR=T
[4] http://www.bbc.com/news/business-41252976

Very thought-provoking write-up. Most critics of NAFTA cite two statistics to illustrate the “negative” impact of the agreement: (1) the swing in the US-Mexico trade balance from a $1.7B surplus in 1993 to a $64B+ deficit in 2016 and (2) the fact that the U.S. auto sector has lost 350k+ jobs since 1994 while employment in the Mexican auto industry has increased by 400k+. However, these statistics do not capture the full picture. One must recognize that while the burden of NAFTA has been highly-concentrated in specific industries like auto manufacturing (as mentioned above in several comments, an argument could be made that jobs would have been lost to automation regardless), the benefits of NAFTA have been distributed more widely across society. A 2014 PIIE study of NAFTA effects (https://piie.com/publications/policy-briefs/nafta-20-misleading-charges-and-positive-achievements) found that 15,000 net jobs are lost in the US each year due to the pact but that for each of these lost jobs, the economy gains ~$450k in the form of higher productivity and lower consumer prices. The risk inherent in this PIIE finding is that the NAFTA benefits (specifically, lower automobile prices) may still be accruing to the wealthier population….leaving displaced workers in difficult position – jobless or in a lower paying job and unable to recognize or experience NAFTA’s economic benefits.

Sources:
[1] https://www.cfr.org/backgrounder/naftas-economic-impact
[2] https://piie.com/publications/policy-briefs/nafta-20-misleading-charges-and-positive-achievements
[3] https://www.census.gov/foreign-trade/balance/c2010.html#2017

Thanks Mel – this is a really interesting topic. If the Amazon Go concept is successful, it will surely revolutionize retail as we know it.

I can’t help but wonder about the broader economic implications of the adoption of this technology. According to the Bureau of Labor Statistics, cashiering is the second most common occupation in the United States (3.5 million people employed) and the Amazon Go concept has the potential to eliminate most of these jobs. This outcome may just be inevitable as Amazon Go tech appears to drive significant value for the consumer – not only will these new stores save customers money (via lower priced goods supported by reduced overhead), they will also save shoppers time (who doesn’t hate standing in line), and perhaps enable retailers to optimize/personalize marketing/promotions as well. What I struggle with is that this technology targets the country’s most economically vulnerable (low-skilled labor). This is another situation where only time will tell – the “rise of the machines” has been a constant fear for decades and to-date, new technologies that were originally feared (e.g., automobile) have ended up creating new, higher-paying jobs….the question is whether the displaced labor will be suited for these new jobs.

Sources:
[1] https://medium.com/@Inside/amazon-go-special-edition-fe22cdc8ae7
[2] https://www.theverge.com/2017/2/6/14527438/amazon-go-grocery-store-six-human-employees-automation
[3] https://www.cnbc.com/2016/12/10/will-amazon-go-replace-jobs-i-dont-think-we-can-stop-it-author-says.html

Really interesting topic. When I think about the growth opportunities in emerging markets, many of them involve leveraging new technologies to leapfrog the costs associated with antiquated or expensive traditional infrastructure (e.g., communication: cell phone use vs. landline, energy: renewable microgeneration vs. electrical grid). The topic you’ve discussed here tackles another important opportunity – transportation of goods or more specifically, last mile delivery.

The last mile often comprises a significant share of the overall parcel delivery cost and can be upwards of 50%+ according to a recent Mckinsey report [1]. As you noted, the inherent difficulties of fulfilling last mile delivery in a traditional manner (with trucks/etc.) become exponentially more difficult in underdeveloped markets where infrastructure (roads, storage facilities, etc.) are often ill equipped to satisfy the demand. It appears that necessity (and/or the lack of other options) is the key driver for the adoption of what Zipline has to offer in developing markets and in a way offers us a test case for how drones can revolutionize the transport of goods. I wonder if, in addition to the visibility that drones provide in the delivery process, there are other services that could be valuable here (e.g., drone serving as communication portal b/w customer and key constituents). These are really exciting times.

[1] Parcel delivery The future of last mile – McKinsey

Great topic KZ, I think you hit the nail on the head. While snow cannons may temper the impact from shortened winters and periods with less snowfall, they are not the long-term solution (they are expensive, resource intensive, etc.). As global warming progresses, operators (specifically, in lower altitude areas) will still be left “catching a falling knife.”

As you noted above, I believe diversification is the only real long-term solution for these operators. When I say diversification, I’m thinking of two actions:

(1) purchasing higher-altitude locations which have a much longer runway for snowfall and should benefit from the constricting supply in the industry (i.e., fewer viable ski mountains should drive more traffic at the viable locations)

(2) Introducing more attractive “off-season” activities (e.g., zip lining, mountain biking, golf courses, spas, etc.) to drive traffic. This sort of diversification is happening across the entire value chain. For example, many ski and snowboard manufacturers are now leveraging their manufacturing skills to produce surfboards/skate boards (i.e., Mervin Manufacturing)

I fear that regardless of the initiatives that are implemented, it will be almost impossible to replicate the revenues/profitability of a successful ski operation. Ski operators may be forced to accept the current trends as the “new normal.”

Fascinating topic WL. For me, the most interesting aspect of the current cryptocurrency craze is that the core of bitcoin/cryptocurrency strategy conflicts slightly with the direction that many technologies are going – towards centralized processing (e.g., cloud computing). For Bitcoin to work well, buyers and sellers need to have trust that their payments/transactions will be executed fairly/reliably and the decentralized ledger facilitates this trust by creating millions of copies of the ledger (and related transactions) and therefore, restricting manipulation by bad actors. The downside of this decentralization is that ALL the nodes in the blockchain (vs. one centralized point) hold copies of the ledger and receive updates for all the transactions. As inferred above by Justin, this constant updating extends the time period for moving data through the network which (coupled with the electricity consumption) creates another scaling issue.

There’s more discussion on this topic here:
https://www.cbinsights.com/reports/CB-Insights_Blockchain-Explainer.pdf