November 2008 Archive
Ever see the movie Fantastic Voyage? Really, really miniaturized people floating around in the blood stream, sent on a mission to save some poohbah’s life. Great for a science fiction plot. Now it’s great for reality too, in the form of nanotechnology. Really, really tiny particles on an atomic and/or molecular scale are manufactured to create many new materials or add desired properties to already existing ones.
Applicable to a myriad of uses, from medicine to electronic, nanotechnology is alive and well in the food and agriculture sectors. Behold — nanofoods — little tiny (engineered) things added to what we eat. In the food industry, nanotechnology crops up in a number of areas. Nanotech is used in packaging materials, farming practices, food processing, and also in the foods themselves.
The use of nanotechnology in food packaging is already commonplace. Nanotech in this instance can include engineered materials added to packaging to provide a feature such as preventing oxygen from spoiling food. (Ever wonder why that celery in your frig stays crisp for months?)
McDonald’s uses hamburger containers and other cardboard products that incorporate nanomaterials, including starch-based glues sourced from renewable resources that replace petroleum-based glues. In the burger containers, nanomaterials are being used to replace polyvinyl acetate (PVA) and polyvinyl alcohol (PVOH), which bond graphics to their cardboard containers. Other packaging that uses nanotechnology include plastic beer bottles made with nanocomposite materials — plastic films that increase shelf life and antimicrobial and antifungal packaging.
In the works are packaging that reflects heat to keep ice cream frozen in, say, a hot car; self-healing packaging that repairs itself if perforated, and packaging that can change its properties under certain conditions — for example, milk cartons that change color if the milk has spoiled.
Nanotechnology can shape agricultural practices, as well. In the works there are fields embedded with nanosensors that can measure everything from nutrient levels and water content to the presence of disease, fungi, or other pests. These sensors could also be engineered to interact with nanoparticles or nanocapsules to deliver precisely measured quantities of pesticides and/or fertilizers. Nanotech is also used by livestock farmers. Animals are tracked, identified, and monitored though embedded nanochips. The same type of chips are being developed to deliver measured quantities of vaccines and treatments for disease.
Nanotechnology is (surprise, surprise) already in use by food processors. Nanoparticles and nanocapsules are added to foodstuffs to increase shelf life, alter their properties, enhance nutritional value, and change taste. Take, for example, good old bread. Tuna oil (a source of omega-3 fatty acids, which are said to be of help in preventing heart disease) in the form of nanocapsules is added to some types of bread. No fishy flavor though. The capsules break and release their oil in the stomach so there is no unpleasant taste.
Nanotechnology is also in use as enhanced emulsifiers that give low-fat ice creams the flavor and texture of full-fat ice creams. Kraft Foods has plans for a nanotechnology-enabled drink in which everyone buys the same drink but then can decide its color, flavor, and texture.
As Mork from would say, “Nano, nano.”
As President-Elect Obama prepares to take office in January, new research has added a weapon to his health care reform arsenal. A report, just published by the journal Health Affairs, supports Obama’s contention that Medicare Advantage — a program that allows private insurers to offer Medicare-funded health plans — is wasteful and ineffective. Obama has pledged to make cuts to the program, a move that would have serious implications for many private insurers.
Among other things, the Health Affairs report finds evidence that Medicare Advantage plans are considerably more expensive for the government and don’t improve health outcomes for senior citizens or produce efficiencies that lower health care costs.
Nearly a quarter of all Medicare beneficiaries belong to private Medicare plans, a number that has grown enormously since the Medicare Modernization Act of 2003 gave incentives to private insurers to expand access to such plans. The theory behind Medicare Advantage, popular with Republican lawmakers, is that private insurers can more efficiently provide coverage, thus lowering costs for seniors and the government.
The problem is, that hasn’t happened. The federal government pays about 13% more for each Medicare Advantage enrollee than it does for an enrollee in traditional government-run Medicare. MA participants may receive additional benefits from their private plan — like fitness club memberships and vision benefits — but non-MA seniors and taxpayers are the ones who foot the bill for those extras.
In the last presidential debate, Obama called the extra money going to private MA insurers “a giveaway.” And it’s true that the expansion of Medicare Advantage has been a boon for many private insurers, which have enrolled millions of retirees when other new customers were hard to come by. UnitedHealth, Humana, and Kaiser Foundation Health Plan are the largest providers of private Medicare plans, though Humana might be hit the hardest by any cuts to the program. The company has grown its Medicare Advantage business aggressively and now depends on it for more than 40% of revenues. WellCare Health Plans and HealthSpring are also mightily beholden to Medicare Advantage members.
Needless to say, those companies aren’t going to be happy with cuts to Medicare Advantage, though there are other parts of Obama’s health care reform agenda — namely, the expansion of health coverage to more than 45 million uninsured Americans — that might soften the blow. Still, I wouldn’t expect them to give up their government paychecks without a fight.
On Friday Wal-Mart Stores announced that Mike Duke, currently head of the company’s international division, will succeed Lee Scott as president and CEO of the world’s largest retailer in February (read here). Earlier in the week, the world’s second-largest retail chain, France’s Carrefour, announced that its CEO, José Luis Duran, is being replaced in January by a 32-year-veteran of Nestlé, Lars Olofsson (read here).
Scott, who has held the top job at Wal-Mart for nearly a decade, appears to be going out on top. Wal-Mart is one of the precious few bright spots in today’s bleak retail environment. Indeed, hard times appear to be good times for Wal-Mart (see previous post). After a tide of bad publicity and merchandising missteps by Wal-Mart in the mid-2000s, which tarnished its reputation relative to rivals Target and Costco, the tables have turned in Wal-Mart’s favor. In October, a dismal month for the nation’s retailers, Wal-Mart stood apart, posting a 2.4% sales gain and beating its own and analysts’ forecasts. The company is growing market share and appears poised for a strong holiday season (read here). “This is the kind of environment that Sam Walton built this company for,” crowed Scott at a meeting of analysts and investors in Bentonville recently.
Duke, who at 58 is just a year younger than the retiring Scott, has the resume for the job, having led the Wal-Mart Stores division from April 2003 until September 2005 before taking responsibility for international.
Duran, who led Carrefour for just three years, is leaving under pressure from its major shareholders, including the US private equity firm Colony Capital and Bernard Arnault, chairman of luxury group LVMH Moet Hennessy Louis Vuitton. After winning seats on Carrefour’s board earlier in this year, the investors essentially demoted Duran in August, stripping him of the chairman’s title, and now have succeeded in orchestrating his ouster. Duran, who had worked to expand Carrefour’s international business as a hedge against sagging sales in France, was done in by the global spending slowdown and investor dissatisfaction.
Carrefour’s shares have lost about 44% of their value since January, while Wal-Mart’s share price is up about 11% (although down from its September high.)
Scott has certainly chosen an opportune time to go. Duran, alas, had no choice.
Good-bye, banking and construction, hello coffee shops! As my beat at Hoover’s has changed from the banking industry with its current “Song of the Volga Boatmen” soundtrack, I am now covering other industries that provide slightly more happiness in these troubled times.
Specifically, coffee shops. And here is what I’ve learned: Fair trade may be most well-known in connection with coffee, but it’s no longer restricted to the queen of beans. Now, items labeled fair trade include chocolate, flowers (also another one of my new industries), fruit, sugar, rice, and more. Even products with multiple ingredients such as baked goods can be labeled “fair trade” since many of their ingredients come under the label.
Why is fair trade booming? A part of it comes from a sense that one can have one’s morning buzz and help the world, too. Fair trade increases the money that goes to farmers and growers in poor regions. It encourages the use of organic farming techniques and supports growing cooperatives that give farmers more clout in marketing their crops.
Like microlending, fair trade recognizes that there’s a little capitalism inside all of us.
Especially now that the banking industry seems to have decided to unleash its inner socialist, that’s kind of refreshing.
Sort of like that cup of coffee first thing this morning.
Some pirates have hijacked one of Saudi Aramco’s supertankers on the high seas and sailed it to the coast of Somalia. It contains a cargo worth $100 million.
The Sirius Star, with a full load of about 2 million barrels of Saudi crude (more than 25% of the kingdom’s daily output), was captured November 15 some 450 nautical miles southeast of the Kenyan port of Mombasa, and was rerouted to the Somali port of Eyl.
Surprised about the audacity? You bet. However, maybe we should not be. Piracy does not belong exclusively to the days of Sir Francis Drake, the American privateers, or that rummy character Captain Morgan. It is a common fact of life today in some of the world’s busiest sea lanes, such as the Straits of Malacca, the South China Sea, and off of Africa’s east and west coasts. About 200 incidents were reported to the IMB Piracy Reporting Centre in the first nine months of 2008. Of these reported acts of piracy, some 115 vessels were boarded, 31 vessels hijacked, and 23 vessels fired upon. These incidents led to 581 crew members being taken hostage, nine were kidnapped, nine killed, and seven are missing. Serious business.
The Gulf of Aden and the Indian Ocean off of the east African Coast is the world’s hot spot for piracy. In 2008 alone there have been reported 66 piracy attacks off of Yemen, 11 off of Tanzania, and 9 off of Kenya. Somalia’s pirates are the boldest, willing to commandeer any vessel of any size. Somalia has been devoid of a stable central government since 1991, and warlords and their militias rule the land and the sea and have become more audacious and more successful in the piracy business in recent years. The main aim of the hijacking of vessels is rarely to make a political statement, or for the commodities on board, it is the ransom money that can be extorted from the vessel’s owners ($30 million in the past year according to some accounts). Money that can equip militias with bigger and better boats and weapons.
The US, the UK and other countries have about a dozen military vessels patrolling the area as part of the anti-terrorist Djibouti-based coalition Combined Task Force 150. But the conditions off of Africa have deteriorated so quickly that last month the United Nations Security Council adopted Resolution 1838 to fight piracy off the coast of Somalia. Unless protection can be guaranteed, serious international think tanks like the UK’s Chatham House warn that not only will insurance premiums skyrocket, but some vessel owners may look to take longer, more expensive routes to avoid the hunting grounds of pirates, both spiking the price of crude supply. Not to mention the real nightmare possibility of the scuttling or running aground of a supertanker resulting in a major environmental disaster.
Saudi Aramco, like other Middle East oil producers (such as Abu Dhabi National Oil, Kuwait Petroleum, and National Iranian Oil), has hardened its production and refining infrastructure to protect its industry from the threat of Islamic terrorism. Now, facing a rise in terrorism of the old fashioned kind — pirates looking for booty — producers will need to harden their transportation routes in increasingly dangerous waters. And that means higher costs for consumers worldwide.