Covid-19 Daily Briefing

Daily briefings on the most relevant news affecting our industry from the past 24 hours.

Consumerism - Is Gen Z really ‘leading the way?’

If the headlines are to be believed, Generation Z (Gen Z) are progressive environmental activists who place sustainability above consumerism.

This can be seen in surveys: according to CNBC, more than half of Gen Z – or ‘Zoomers’ – were said to be looking for environmentally sustainable products. Meanwhile new Drapers research revealed more than three-quarters of Gen Z (and millennial) shoppers say that sustainability is important to them. 

Given these are the customers of the future, businesses are taking steps to show that their brands closely align with these green values.

Last year, young fashionista favourite ASOS announced a 30% reduction in their carbon footprint while iconic jeans brand Levi Strauss pledged a 90% reduction in greenhouse gas emissions by 2025.

Given Oxfam research found that the carbon footprint of new clothes bought each month in the UK was greater than flying around the world 900 times, carbon-cutting initiatives like these should be welcomed with open arms.

The fast fashion industry – which goes out of its way to target younger shoppers – is estimated to produce 1.2 billion tonnes of CO2, a figure exceeding that of international flights and shipping combined. 

But are Zoomers quite as progressive as they make out? The same CNBC survey that showed more than half of Gen Z customers were said to be looking for environmentally sustainable products, only 38% were willing to pay more for them. 

There seems to be a disconnect between what consumers say they want, and what they are actually willing to buy.  This isn’t just limited to demand for sustainable products either.

Following the Boohoo factory scandal in July last year – where warehouses were revealed to have poor health and safety records and workers were being paid below minimum wage – the company’s share price deservedly fell by over a third in the two days following the news. 

Yet the backlash seemed short lived. Just a few months later, Boohoo reported a sales surge, with half-year revenue growth of almost 50% at the end of August. Clearly customers had no long-term hesitations about continuing to shop there. A Vogue Business report found that of 105 Gen Z participants surveyed, over half were said to buy ”most of their clothes” from Boohoo and other fast-fashion retailers. 

While there may be an argument that younger consumers are out-priced by expensive sustainable fashion brands, this is not a strong one as the resources and technology are out there to help Gen Z in making informed decisions over choosing to shop at ethical brands over unethical ones. 

The continued success of brands like Boohoo and Primark, which are known not to prioritise ethics or sustainability standards, shows that in reality many consumers are relatively apathetic when it comes to choosing to shop at more conscience-driven brands, and remain attracted to cheap and convenient fast fashion. 

Primark has long remained a brand shrouded in controversy, claims in 2013 revealed they had Bangladeshi factory workers paid less than £24 a month – this came to light around the time a Primark factory was in such bad condition it collapsed, taking the lives of 1000 people.

Consumers are quick to call out corporations for their ethical and climate change policies (or lack of), claiming that they are not doing enough to help. Yet major businesses from Unilever to BlackRock are at least beginning to take strong stances on sustainability and ethics.

While this is undoubtedly motivated in part by what they believe will be best received by their customers, meaningful change is made harder by ‘woke’ consumers who demand one thing and do another. Time for Gen Z to put its money where its mouth is. 

Junk food advertising ban another hammer blow to hospitality

If you wanted to lose weight, would you make cutting out the calorific equivalent of half a smartie a day your top priority? Or would you download the couch-to-5k app?

Danton’s Death - or why you shouldn’t bet your life’s savings (just yet) on the Pfizer vaccine

Many moons ago when I was with my then very arty girlfriend, I got dragged along to a small theatre to watch a production of Danton’s Death, a play set during the Terror of the French Revolution.

The protagonist, Georges Danton (a historical figure), fights to end what he created – the office of the Revolutionary Tribunal which can sentence to death anyone for anything, whether real or imagined.

Predictably, for his efforts, Danton ends up having his head nicked off by the guillotine.

The stock market’s booming reaction to Pfizer’s vaccine rather reminds me of the tribunals Danton created and then sought to end.

Fuelled by the real or imaginary, stock markets create tangible windfalls or losses as real as the guillotine’s blade.

Now, obviously, it is on the face of it very good news coming out of the Pfizer camp, and one should expect to see stocks soar.  After all, a vaccine more than 90 percent efficient might spell an end to constant lockdown and return our lives to normal sooner than any of us have dared hope.

But if we should have learnt anything over the last few months, it is to adopt a wait and see approach.

Even assuming the vaccine is approved, the wide-scale rollout of it looks far from being practical – the thing apparently needs to be stored at -70 centigrade the day before it is used. That may make holding vaccinations in GP clinics, care homes and other locations difficult.

Despite this all being relatively easy to find and analyse (even for a man of my intellect), markets soared.

And what is most interesting is that what soared and what plummeted demonstrates that much of the activity in the market was underlined by an assumption that we are now smack-bang back on the road to normality

For example, business heavily impacted by the market, like airlines, made incredible gains.

On the other hand, stocks gobbled up during the pandemic tumbled.

HelloFresh, the meal delivery service, fell 15 percent in Frankfurt while London-listed Ocado, which delivers groceries and sells technology to do so to big supermarket chains such as Kroger of the US, fell 12 percent.

And the curse of modern-day working life, Zoom, the video conferencing service, fell 15 percent. It was only a few months ago when Zoom was valued more than the UK’s top 25 listed property companies combined.

What’s changed off the back of one announcement? Have we seen any tangible change to life yet or any tangible timeline for that? Last time I checked, the pubs were still shut.

Even Boris Johnson – a man who must be longing to call an end to this pandemic – was still sounding a cautionary note at the press conference yesterday.

Stocks may have surged yesterday, but they could equally plummet off a cliff tomorrow if there is negative news about the vaccine.

I would argue that if you are looking for strong investments right now, and with interest rates so low you need to put that money to work, choose income-producing assets.

On the whole, they are underpinned by long-term demographic trends and will be less susceptible to cyclical downturns.

Real estate has a whole heap it can promote, from Later Living to Build to Rent to PBSA. Markets might be jumping today, but I’m still confident that Covid-19’s legacy for institutional investors will be a flight to quality – and alternative real estate should make that case very clearly now. The full dynamics behind this deserve another blog.

Back to yesterday’s boom. Let’s be clear – the stock market is just behaving how it should. It reacts. It goes up. And it goes down. But it doesn’t need to answer why. Crowds never do.

Danton’s Death has, for me, the arching theme of the madness of crowds. The markets are the ultimate crowd. Perhaps a modern version would have as its protagonist a clever broker or fund manager urging his clients not to buy big back into airlines just yet. They probably still would.

Were we too harsh on Boris? No. Here’s why.

We respond to some of the debate yesterday's blog stirred up.

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