FCC to vote to reform $45 billion business data market

The Republican head of the Federal Communications Commission on Thursday proposed easing regulatory requirements in the $45 billion business data services market, a win for companies like AT&T Inc, CenturyLink Inc, Verizon Communications Inc and others.

The proposal is a blow to companies like Sprint Corp and others that claim prices for business data are too high and backed a plan under President Barack Obama that would have cut prices but was never approved.

Small businesses, schools, libraries and others rely on business data services, or special-access lines, to transmit large amounts of data quickly, for instance connecting banks to ATM machines or gasoline pump credit card readers. Wireless carriers rely on them for the backhaul of mobile traffic. Reuters reported details of the proposal Wednesday.

FCC chairman Ajit Pai said in a blog post the commission will vote April 20 to reform the rule that telecommunications experts say would deregulate the market in most of the country but would retain regulations in some places.

“Where this competition exists, we will relax unnecessary regulation, thereby creating greater incentives for the private sector to invest in next-generation networks. But where competition is still lacking, we’ll preserve regulations necessary to prevent anti-competitive price increases,” Pai said.

Consumer groups Public Knowledge and Consumer Federation of America called Pai’s proposal a “bonanza” for big telecommunications companies that “will drain consumer pocketbooks of tens of billions of dollars per year.”Ajit Pai, Chairman of U.S Federal Communications Commission, delivers his keynote speech at Mobile World Congress in Barcelona, Spain, February 28, 2017. REUTERS/Eric Gaillard

Under President Barack Obama, then FCC Chairman Tom Wheeler in April 2016 proposed a sweeping reform plan for business data services that aimed to reduce prices paid.

Wheeler had proposed maintaining and lowering lower price caps using legacy data systems with a one-time 11 percent reduction in prices phased in over three years.

Sprint, which backed Wheeler’s proposal, told the FCC in a March 22 letter that “thousands of large and small businesses across the country are paying far too much for broadband because of inadequate competition.”

Sprint argued “a small handful of companies are overcharging the very investors and employers that are critical to our economic growth and are using anticompetitive tactics to ensure that these businesses never have access to competitive alternatives.”

AT&T argued Wheeler’s plan was “little more than a wealth transfer to companies that have chosen not to invest in last mile fiber infrastructure.”

(Reporting by David Shepardson; Editing by Cynthia Osterman)

 

India, Malaysia set to sign 15 business pacts today

New Delhi: India and Malaysia are expected to sign around 15 business-to-business pacts on Monday aiming to deepen commercial linkages between Asia’s third-largest economy and its third-largest trading partner in the fast growing ASEAN or Association of Southeast Asian Nations economic grouping.

The pacts are to be signed in the presence of visiting Malaysian prime minister Najib Razak in New Delhi. According to Indian officials, the total projects being considered by the two sides could amount to about $5 billion.

This is Razak’s third visit to India since taking office as prime minister in 2009. The Malaysian prime minister started his five-day India visit on Thursday in Chennai. On Sunday, the Malaysian prime minister visited Rajasthan, where Malaysian companies are engaged in road and other infrastructure projects estimated to be worth over $1 billion dollars.

In New Delhi on Saturday, talks with Prime Minister Narendra Modi focussed on scaling up economic ties further in areas like infrastructure and building of smart cities, besides food security. This comes at a time when the US has pulled out of the Trans-Pacific Partnership (TPP), a trade agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam that was stitched together by the US and aimed to ensure decreased dependency of these countries on trade with Asian giant China.Prime Minister Narendra Modi with his Malaysian counterpart Najib Razak in New Delhi on Saturday. Photo: PTI

“All regional states are recalibrating their regional policies at a time when there is significant uncertainty about China’s future profile and American commitments to the region. Malaysia is no exception and is looking to New Delhi to play a larger regional role,” said Harsh V. Pant, professor of International Relations, Department of Defence Studies, at London’s King’s College, in an email.

Also noteworthy were India’s remarks on the South China Sea, large parts of which are claimed by China brushing aside protests from many Southeast Asian countries including Malaysia.

“Prime Minister Najib and I are also conscious of our role and responsibility in promoting economic prosperity, freedom of navigation, and stability in the Asia-Pacific region, especially its Oceans,” Modi said after talks with Razak in New Delhi.

“India has been steadily making stronger statements on South China Sea. It can’t do much to change the maritime balance of power in the short term in the South China Sea waters. So it is making a normative argument about freedom of navigation so as to bolster its credibility amongst the regional powers,” Pant said.

Explaining the importance of Malaysia to India as a bilateral partner and as a key member of ASEAN, Pant said: “A multicultural Malaysia is a significant player in ASEAN at a time when some members are coming under Chinese sway. Indian diaspora is important in the country as well. India’s influence in the region can only increase if it builds strong bilateral ties with regional states.”

Malaysia is currently India’s third-largest trading partner in ASEAN after Singapore and Indonesia. Bilateral trade between Malaysia and India was at $12.8 billion in 2015-16 with the trade balance in favour of Malaysia. Both “prime ministers have expressed their aspiration to see this trade increase to $15 billion in the immediate future”, a statement from the India-Malaysia CEOs’ Forum that met in New Delhi on Saturday said.

“In terms of investment, there has been significant growth… The total investments from Malaysia stood at around $7 billion or more as against total investments of around $2.5 billion from the Indian side,” the statement said.

Malaysian companies have completed 53 highway and road projects in India worth $2.84 billion. In addition, there are seven projects valued at $ 0.34 billion that are still under construction. At present, there are around 120 Indian companies, including 61 Indian joint ventures, seven Indian public sector undertakings and 60 Indian IT companies operating in or from Malaysia.

Another reason for India to look at closer ties with Malaysia is the fact that it is seen as a moderate Muslim nation. Many in the government and the Indian strategic community agree that bilateral ties under former Malaysian prime minister Mahathir Mohammed, who was in power from 1981 to 2003, were far from satisfactory—mainly due to a perceived tilt towards India’s arch rival Pakistan. It was only after Razak—son of Malaysia’s second prime minister Abdul Razak and nephew of the third prime minister Hussein Onn—took over that relations seemingly turned the corner.

“Malaysia has been relatively successful in keeping radicalization under control though the threat is growing by the day. India and Malaysia can learn a lot from each other and also send a message out to the world as two states with significant Muslim population,” Pant added.

 

Business to consumer will remain one of the fastest-growing segments

 

BNP Paribas Asset Management India Pvt. Ltd’s track record, post Anand Shah’s joining the fund house in 2011 has been good. But, the calendar year of 2016 exposed chinks in stock picking strategy. Shah, as the fund house’s chief investment officer (now he is also the deputy chief executive officer and oversees the fund management as well as sales), has always liked investing in shares of consumer-facing companies. But last year, demonetisation and the entry of Reliance Jio in the telecom space adversely impacted his portfolios. His holdings in the telecom sector proved very costly. Will he be able to recover from this fall? Mint spoke to Shah to find out his future strategy. Edited excerpts:

Earlier this year, you had said that demonetisation had impacted your fund house’s equity schemes’ portfolios. It has been around four months since demonetisation. What’s your further assessment?

Re-monetisation appears to be now happening. Money is coming in. The economy that was largely cash-led has suffered, but things there as well are slowly resuming back to normal. So, four-wheelers never really got impacted. But two-wheelers, which largely dealt in cash, were impacted. Multiplexes, which largely dealt with credit cards and online bookings didn’t suffer as much, but single screen theatres where people book tickets largely by cash, suffered. Formal economies didn’t get impacted. The informal economy got adversely impacted.

But things are getting back to normal now. Most of our equity schemes have recovered their losses more or less.

You have always liked businesses that face the consumer. After the demonetisation impact, no matter how temporary an impact it has appeared to have had on the various industries, have you changed your likings about the sort of sectors you invest in?Abhijit Bhatlekar/Mint

The B2C businesses has created wealth for investors for decades. They also have more entry barriers and so it is not easy to take away a retail consumer in a hurry. There are valid reasons to invest in B2C companies. Further, the other two segments (business to business or B2B and business to government or B2G) have made a comeback.

In the B2B space, the metals sector is back as the Chinese economy has normalized and there’s hope of an economic recovery in the US. We have exposure to this segment.

In the B2G segment, the government’s spending is up. There are businesses that will benefit from government spending.

A bulk of our portfolios will remain in B2C businesses because comfortable demographics will ensure that it will remain one of the fastest growing segments in the market. On top of it, before demonetisation, we were looking at these companies to do well on the back of a good monsoon last year as well as the pay commission. Both these factors are not going away in a hurry. So, to us, this (demonetisation) is temporary, the B2C segment will only bounce back with a vengeance.

Your schemes’ performance went down big time in the calendar year 2016. Was their exposure to telecom sector the only reason or were there other reasons?

Two things happened together. The good part of the portfolio, business to consumer (B2C) segment companies, which gave me 600-700 bps outperformance for the last 8 years was dealt a blow (demonetisation), which is a once in a century phenomenon. One basis point is one-hundreth of a percentage point. I believe we won’t see another demonetisation for next one century at least. So while the fall in share prices of our holdings in the telecom sector stocks could have been absorbed by the otherwise resilient B2C companies, even the latter got impacted by demonetisation.

When you were buying more shares of Bharti Airtel Ltd throughout 2015-16, did you not see Reliance Jio’s impending impact? There was a lot of buzz around—and expectation from—the telecom company. Something big was expected by most of us.

We were prepared for a 50% lower pricing in data. We were not prepared for free handouts. Nobody anticipated. We have seen in the past that competition exists where the likes of Telenor and Tata Telecom enter the markets offering 30-50% discounts in tariffs and plans. And slowly and gradually, new entrants capture market share. That’s how B2C companies work. They capture market share, but they don’t capture it overnight.

For example, despite some banks like Kotak Bank and Yes Bank offering (close to) 6% interest on savings bank rate, we don’t see people leaving their banks and queuing up outside these banks. The B2B segment is price sensitive; price doesn’t generally matter in the B2C segment.

But Reliance Jio’s strategy and entry was extremely disruptive. It destroyed the sector’s health.

What is your outlook on the telecom sector now and where do you go from here as far your schemes’ exposure to this sector is concerned?

We have already sold our holdings in Idea Cellular much earlier than when Jio came, as that’s where we suffered large underperformance. Bharti Airtel has not performed badly for us, actually.

The telecom sector now is in a complete flux where balance sheets have grown because companies now have to deliver a 4G network in 2017 and 2018, as opposed to 2020. They had to prepone their capital expenditure, be it spectrum purchase or electronic capex. Typically, there is a 10-year cycle for every technology cycle. So, if 3G came in 2010, 4G was expected in around 2020. So now telecom companies have expanded their balance sheets, but their revenues have shrunk due to stiff competition. This combination reduces Return on Capital Employed and Return on Equity, as an industry, to abysmally low levels.

Consolidation has just begun, which is good. We still have more firms than many developed nations. Abroad, there are 2-3 firms, so we will see another year of pain, before another round of consolidation happens.

Analysts have pushed back earnings visibility further. What do you think?

We do have earnings problem at Nifty level but that’s not true for quite a few companies. Despite pockets of volatility in the past 3-4 years, we haven’t had problems of earnings growth for the companies in our portfolios.

If you look at financial year (FY) 2015, the first half (up to September 2014) was profitable, we didn’t have growth issues. We had a de-growth on year-on-year earnings between September 2014 and March 2015. Most of the de-growth came from commodity producers. Earnings didn’t collapse for everybody in the second half of FY2015. And thus, if you look at entire FY15, half of the Nifty companies’ earnings grew at 15% average, and half of Nifty companies’ earnings fell by 15%. And the same story continued in first half of FY16 because year-on-year, the commodity prices were lower. While lower commodity prices were great for macro economy, it had some negative impact on the earnings of the commodity producers.

In the second half of FY16, the Reserve Bank of India (RBI) announced asset quality review of banks’ lending portfolios. Since companies had to recognize their bad assets more stringently, their earnings, led by those of the corporate banks, fell. Those banks that had lent to metal companies suffered further as commodity prices had fallen. And in the second half of 2016, crude oil prices fell from 50$ a barrel to 30$ a barrel and steel prices further went down. So commodity producers and corporate banks dragged down Nifty earning growth in FY16. The country as a whole wasn’t messed up. Some pockets suffered. We had decent growth in earnings for our underlying companies in FY2015 and FY2016.

FY2017 was looking fine with good monsoons (after 2 years) and spending boost due to implementation of pay commission for government employees. But then, in the second half came demonetization, and that has put new doubts on earnings visibility on most of the companies.

Coming back to present times, and looking at expectations for FY2018, we believe that our economy is doing well. Growth is coming back. To a lesser extent than we would like, but I think the government and RBI are doing the right things. Lower interest rates, lower inflation, investments on infrastructure—everything is moving in the right direction. It’s the harder way of economy recovery; wherein we are spending money on roads, railways which doesn’t give us GDP growth rate immediately.

But, I believe these are the right things to do for sustainable economic growth as well sustainable earnings recovery. We believe more than half of the index companies are already benefiting from these activities and it’s not that all the segments of the market are doing badly. There are plenty of opportunities to do stock picking.

Last year apart, your overall long term performance has been good. Yet, BNP Paribas Asset Management India Ltd’s overall assets under management hasn’t grown as much, as opposed to the industry.

Till December 2015, BNP Paribas Asset Management India Ltd was one of the fastest growing asset management companies in the Indian mutual funds industry. Our distribution strength lies in global markets. So globally, we are one of the seven largest offshore funds in the world that invest in India. Our Indian arm is profitable making it one of the very few fund houses in our size bracket to be profitable.

We have to now stabilize our performance, which is happening already. We have strengthened our tie-ups with distributors and last but not the least, we are putting in place our fixed income pie. We are making investments wherever needed.

Starbucks is entering a new era and 4 jokes reveal the biggest problems haunting its business

 

  • Starbucks is sandwiched between inexpensive fast-food chains and high-end “Third Wave” coffee shops. 
  • While it built its empire on its cool, Euro-inspired image, Starbucks is increasingly known for “basic” drinks like the Unicorn Frappuccino. 
  • Moving away from the core brand sent Starbucks “over its skis” in the past, the CEO told Business Insider – and he’s well aware of past mistakes.
  • Starbucks’ new mission: to be everything to everyone. 

The other weekend I went with my family to a coffee shop that my mother deemed “the most beautiful” Starbucks she’d ever seen.

It was a sprawling, comfortable space on the main street in suburban Michigan, where we were visiting family. The exterior was covered in wood shingles and river rocks. Customers lounged in chairs outside and tapped away on their laptops at tables indoors. Chatty baristas were happy to help us with my mom’s low-cal venti iced-coffee order, my cold brew, my dad’s tea, and my brother’s request to use a bathroom.

Starbucks

It had little in common with the drive-thru Starbucks my parents visit in North Carolina or the crowded store where I pick up my mobile coffee orders in New York City.

These differences show the central tension of what Starbucks has become: all things to all people, and in the process, a brand that’s become intermittently muddled and decidedly middlebrow.

Once the chain persuaded Americans to spend $4 on a cup of coffee with Italian names for drinks and sizes that made coffee an elite experience bordering on pretentiousness, the Starbucks of 2017 is just as known for the super-sweet Pumpkin Spice Latte and the made-for-Instagram Unicorn Frappuccino.

Starbucks is sandwiched between low-end brands like Dunkin’ Donuts and McDonald’s, which siphon off some of Starbucks’ customers with lower prices, and, at the other end, the “Third Wave” coffee chains such as Intelligentsia and Blue Bottle, with their precise pour-overs and baristas who make art out of latte foam.

As Starbucks enters a new era, with plans to open 10,000 locations in five years, and the move of longtime CEO Howard Schultz (the man behind the brand’s most revolutionary choices) from chief executive to chairman of the board, the company is trying to figure out if it can be everything to everyone.

The means serving Unicorn Frappuccinos for Instagram-obsessed college students, nitro cold brew for snobs, and a morning cup of joe for commuters on the go. All the while, it needs to fend off competition that its own success helped create at both ends of the market.

At Starbucks image is key. And, what some customers think about Starbucks has long been reflected by the jokes about the chain.

The “Venti” joke

Starbucks 1

When Chris Allieri visited Starbucks in Boulder, Colorado, as a freshman at the University of Colorado in 1992, he had to call his parents.

“It was magic, like a temple to coffee,” Allieri, the founder and principal of marketing firm Mulberry & Astor, told Business Insider.

The location, built in a former gas station, was modern, light, and airy. The smell of coffee wafted through the air, as employees ground beans in the store. Baristas – a new word to Americans back then – gave off a perfectly cool vibe, and the coffee options were seemingly endless. Everything about the store was different from the cafes and convenience stores where most people purchased stale-tasting coffee in the ’90s, if they even bought the beverage instead of just making it at home from Folgers Crystals.

On the phone from his dorm, Allieri told his parents he was convinced that Starbucks would be the next big thing.

“I kept saying, ‘This is bigger than coffee – you don’t get it!'” he recalls telling his father. “And I remember him saying, ‘Well, you should buy the stock.’ As if. I was a broke college student. If only I had the money, or the foresight.” If Allieri had purchased $1,000 in Starbucks stock back in 1992 – the year the company went public – he’d have $180,000 today.

The Starbucks experience

Starbucks has made billions of dollars by creating something that didn’t exist: a space where customers could not only treat themselves to fancy Italian-style beverages but also relax and socialize. It was a brand that immediately felt sophisticated and elite, making customers like Allieri feel as if they were joining an exclusive club.

When the first Starbucks opened in New York City, The New York Times had to define what a latte was and explain it was pronounced “LAH-tay.” Starbucks played up its exotic nature in everything it did, down to its sizes, with “grande” and “venti” providing a connection to the Italian coffee culture that inspired Schultz.

“Starbucks was an affordable way to get luxury,” Craig Garthwaite, an assistant professor of strategy at Northwestern’s Kellogg School of Management, told Business Insider. While Starbucks was clearly pricier than your average cup of coffee, it was a small luxury in the grand scheme of things. Most people couldn’t afford to buy a BMW, but they could treat themselves with a “grande vanilla latte” as a small symbol of their expensive tastes.

In the 1990s and 2000s, the little details that set Starbucks apart and allowed it to charge a few extra dollars, were new and foreign – and ridiculed by many. As Starbucks expanded, the chain was mocked for calling its beverage sizes tall, grande, and venti instead of small, medium, and large.

In 2004, “Mr. Language Person” Dave Barry published an article in The Times that hit on the tropes of the venti joke:

Starbucks decided to call its cup sizes “Tall” (meaning “not tall,” or “small”), “Grande” (meaning “medium”) and “Venti” (meaning, for all we know, “weasel snot”). Unfortunately, we consumers, like moron sheep, started actually USING these names. Why? If Starbucks decided to call its toilets “AquaSwooshies,” would we go along with THAT?

Starbucks versus Dunkin’ Donuts

In 2006, the venti jokes were so common that Dunkin’ Donuts launched a campaign lambasting a “certain competitor” for using elitist words that were a perplexing mix of French and Italian. In the ad, which it called “Fritalian,” customers stand, slack jawed, looking at a coffee shop’s menu board filled with a nonsensical mishmash of words, such as “Limon Au Deau,” “Lattcapssreso,” and “Isto Cinno.”

“Delicious lattes from Dunkin’ Donuts – you order them in English, not Fritalian,” the narrator says in the commercial’s conclusion.

Dunkin’ advertising “lattes” shows how mainstream the beverage had become over the last decade, in large part due to Starbucks’ influence. As Starbucks grew, lattes had become a symbol of elitist liberals, out of touch with the average American. In 2004, a conservative PAC ran an ad during the Democratic Caucuses featuring an Iowa couple telling Howard Dean to take his “tax-hiking, government-expanding, latte-drinking, sushi-eating, Volvo-driving, New York Times-reading, body-piercing, Hollywood-loving left-wing freak show” back to Vermont.

Yet in 2008, Dunkin’ Donuts was selling more inexpensive versions of Starbucks’ semi-Euro beverages, while maintaining the brand’s all-American identity.

Starbucks didn’t want an all-American identity. For Schultz, confusing, potentially elitist naming conventions weren’t a bug; they were a feature.

“Customers believed that their grande lattes demonstrated that they were better than others – cooler, richer, more sophisticated,” Bryant Simon wrote in his book about Starbucks, “Everything But the Coffee.” “As long as they could get all of this for the price of a cup of coffee, even an inflated one, they eagerly handed over their money, three and four dollars at a clip.”

Starbucks’ strategy has long been different from that of McDonald’s or Dunkin’ Donuts. While Dunkin’ Donuts attracts customers with low prices and convenience, Starbucks’ strategy has been rooted in attracting customers to what Schultz called the “romance and theatre” of the coffee-shop experience.

“Any retailer can throw a few ingredients in a cup and say here’s your latte, but Starbucks has differentiated themselves with the experience,” Melody Overton, the creator of the blog Starbucks Melody, said.

When customers are making venti jokes, Starbucks is at its best, as an aspirational brand that’s unlike any other. The chain’s problems come when the venti becomes the norm.

The Starbucks on every corner joke

Throughout the ’70s and much of the ’80s, Starbucks was a coffee roaster first and a coffee shop second. But in the early ’80s, Schultz joined the company and became convinced that Starbucks could achieve a seemingly impossible goal: remain premium while becoming ubiquitous.

Schultz had never wanted Starbucks to stay small, like other regional chains such as Peet’s. In fact, Schultz left the company for a brief period in the mid-’80s because he was unable to convince Starbucks founders that the company could be an international chain, not just a coffee roaster. In 1987, Schultz acquired the Starbucks’ brand and 17 locations from its founders, who decided to focus their energy on Peet’s. Then Schultz began planting the seeds for one of the most ambitious retail expansions in history.

Between 1998 and 2008, Starbucks grew from 1,886 stores to 16,680.

Starbucks stores

“From the beginning, what they were hoping to be is the third place between home and work,” Garthwaite said, referring to the chain’s sociology-inspired mission to become a meeting place. “To achieve that goal, you have to be everywhere.” And soon Starbucks was.

Even when Starbucks had just 700 stores, the chain seemed pervasive, with NPR’s “All Things Considered” announcing as an April Fools’ joke in 1996  that Starbucks’ was building a “transcontinental coffee slurry pipeline” as part of efforts to become omnipresent. In 2000, an Onion headline read “New Starbucks Opens In Rest Room Of Existing Starbucks.” That same year “The Simpsons” aired an episode in which Bart visits a mall in which every store was swiftly being turned into a Starbucks. Lewis Black had a joke in 2002  about seeing a Starbucks across from a Starbucks, which he declared a sign of the end of the universe and evidence against a loving god.

It wasn’t an exaggeration. Around that time, if you stood at just the right spot in New York’s Astor Place, you could see three Starbucks without moving your head.

But unlike the venti jokes, these jabs spelled trouble for the company.

Overexpansion

“The number of new stores got ahead of Starbucks’ ability to have the [employees] to staff those stores,” Starbucks CEO Kevin Johnson told Business Insider. The company “got over its skis,” sacrificing training and upscale marketing for speedy growth and shareholder returns without thinking of the consequences.

As a result, Starbucks made decisions that would leave the company reeling as it moved away from its roots as a sophisticated, luxury brand.

Schultz had stepped down as CEO in 2000. While he remained on the board, new leadership was more focused on expansion than safeguarding Starbucks’ unique brand.

Opening locations across the US and beyond meant adding menu items that appealed to a wider swath of customers, from the failed cocoa-butter Chantico, which launched in 2005 and lasted a year, to the fruity Sorbetto, which launched in 2008 and was pulled after one year . To speed up operations, stores swapped high-end La Marzocco espresso machines for automatic machines. Starbucks no longer smelled like coffee as the chain had begun brewing from flavor-locked packaging.

On their own, each change would have likely gone unnoticed, but taken as a whole they were almost deadly.

“The damage was slow and quiet, incremental, like a single loose thread that unravels a sweater inch by inch,” Schultz says in his book “Onward.”

While customers may not have been able to pinpoint the changes, they noticed a different environment at Starbucks. “They lost a little bit of their luster – a little bit of their chutzpah, a little bit of their sparkle,” Allieri said of Starbucks in the mid-2000s.

As quality slipped at Starbucks, McDonald’s and other fast-food competitors smelled opportunity, adding lattes and other specialty coffee beverages to their menus at lower prices. Customers began buying their coffee elsewhere.

“More and more people were asking themselves, ‘Why am I paying $4 for a cup of coffee?'” said Oded Netzer, an associate professor of business at Columbia.

It was a grim situation. Starbucks had built a business on its sophisticated brand. Then, as it became ubiquitous, the chain became sterile and corporate. Further, in the recession, expensive coffee was no longer an affordable luxury.

The breaking point

The chain finally reached a breaking point in 2008 .

In January of that year, Schultz returned as CEO, with the mission of “re-igniting” customers’ “emotional attachment” to Starbucks . In February, Schultz closed all 7,100 US Starbucks locations for three and a half hours to retrain baristas on how to make the perfect espresso. And in July, Starbucks announced it was closing 600 underperforming stores.

As the company’s fabled “visionary,” Schulz began trying to bring the company back to his roots, a role he took with zeal. Beans were once again ground in stores, a new type of espresso machine was installed across all locations, and stores were redesigned to “recapture the coffeehouse feel,” adding touches like local decorations and secondhand furniture .

He righted the sinking ship financially. The company’s stock has increased by 1,140% from Starbucks’ low in late 2008, and the company has opened 10,000 new locations around the world.

But few would say Starbucks fully recaptured the premium image it had crafted in the ’90s. Instead, it entered a period of appealing to both the wealthy and the working class, serving the urbane and the moms in minivans who go through its drive-thrus. Shoppers expect a Starbucks to be nearby, and they no longer wince calling a drink “grande.”

This is a big reason Starbucks is stuck in the middle now, sandwiched between chains focusing on no-frills value, like Dunkin’ and McDonald’s, and the “third wave” of high-end shops. Some are independent; others are fancier chains, like Intelligentsia and Blue Bottle.

Starbucks’ ubiquity empowered rivals at both ends. Over the past year, these problems have once again reared their heads as Starbucks’ stock stagnated. Store traffic slowed after years of growth post-2008.

Instead of being mocked for being pretentious, Starbucks now finds itself with something like the opposite problem.

The “basic” joke

The story of Starbucks’ current place in Americana can be summed up in one drink: the Pumpkin Spice Latte.

The PSL, as it’s known, sometimes derisively, is a seasonal concoction of cloves, nutmeg, and other spices synonymous with fall. It’s been on the menu since 2003, when Starbucks decided it wanted to create an autumn drink.

According to lore, the PSL was created while brainstorming ideas for a new espresso-based seasonal beverage. The innovation team sat with a pumpkin pie on one side and an espresso machine on the other, alternating shots of espresso and bites of pie in an attempt to deconstruct how best to combine the two flavors.

The drink has become an autumnal tradition. Over the past 13 years, Starbucks has sold 200 million cups of its Pumpkin Spice Latte. It’s even created an entire category of PSL products, from breakfast cereals to Pumpkin Spice Peeps . It has a  Twitter account .

It also happens to be the defining drink of the “basic b—h.”

The dangers of being basic

If you are an American between the ages of 10 and 30, being basic isn’t necessarily a definable term; it’s a feeling you get about a certain kind of person, almost always female. To be a “basic b—h” is to buy into an unoriginal image of what is enjoyable and feminine, and to broadcast these uninspired tastes to the world. It’s the opposite of being edgy or cool – it’s behaving as expected, buying into a certain degree of groupthink. Wearing Uggs and leggings? Basic. Instagramming your fingers, coated in Essie nail polish, clutching a rainbow bagel at brunch with your girls? Basic. Pumpkin Spice Lattes? The most basic thing of all.

Thought Catalogue listed “liking Pumpkin Spice Lattes” as No. 2 on the list of “21 Signs You’re A Basic B*tch”  in 2012.

By fall 2014 the topic had exploded. Twitter was flooded with jokes about “basic white girls” loving PSLs. More than one group of white people released a parody rap video about Pumpkin Spice Lattes (“pumpkin spice latte rap” yields more than 2,000 results on YouTube). BuzzFeed published a think piece about PSL and class anxiety , “breaking down why we’re actually dismissive of all things pumpkin spice.”

For Starbucks, the onslaught of PSL jokes is good and bad. On one hand, the Pumpkin Spice Latte is incredibly popular – estimates suggest the chain has made a billion dollars selling the drink . On the other hand, being seen as a beacon for the basic is far from the upscale coffee-shop image that the Starbucks brand is built upon and that Schultz fought tooth and nail to win back in 2008.

“You can say tough luck, we’re going to go with the new customers because they’re the majority now,” Netzer said on Starbucks’ attempts to serve both mainstream teens and coffee snobs. “The problem with that is [the original] strategy is why Starbucks can charge $3 more for coffee than McDonald’s or Dunkin’ Donuts.”

Schultz righted the chain after it became sterile – but he wasn’t able to regain the brand’s upscale “cool” factor.

“Something we all have to come to terms with as we get older is we’re all going to lose the it factor at some point,” Garthwaite said. It’s nearly impossible for a large corporation to maintain the “edgy, hip factor” that comes with being a small company doing something revolutionary, that Starbucks managed to capture in the late ’80s and early ’90s.

But Starbucks wants to try. For the past two years, Netzer says, the chain has realized that it was once again straying from its roots and doubled down on coffee to win back the “coffee connoisseurs” who were the brand’s base in the ’90s.

Beyond basic

The first result of that plan opened in Seattle in 2014. Called a “Roastery,” the 15,000-square-foot location combines coffee production, menu tests, and architectural whimsy. The Roastery has become a huge part of the company’s plans to roll out an upscale brand called Reserve.

“Ubiquity will create sort of a natural gravitation pull toward a commodity,” said CEO Johnson. Becoming a commodity is obviously something Starbucks wants to avoid, even as it grows. “Which is why our strategy really includes a key pillar to elevate the brand – which is why we’re building Roasteries.”

Globally, 1,000 Reserve stores will serve Roastery-style concoctions and food made in the stores. And 20% of all Starbucks locations will feature a Reserve Bar, to allow for more complex ways to prepare drinks.

Still, don’t count out the power of the Pumpkin Spice Latte-loving basics just yet. In April, as evidence grew that Starbucks was planning to open a third American Roastery in Chicago, the chain launched its most Instagrammable – and many would say most basic – beverage yet: the Unicorn Frappuccino.

The Unicorn Frappuccino is a brightly colored beverage that changes its color and flavor when stirred. Aesthetically, it’s remarkable, looking better when you photograph it yourself than in company advertising. Culinarily, it’s kind of gross – a sugar bomb that tastes like an Orange Julius married with Sour Skittles.

It was also an instant hit, flooding social media with customers’ photos of the drink, providing Starbucks with immeasurable free advertising. And nowhere was the drink more prevalent than on the “basic” hashtag on Instagram, where half of the posts are of the Unicorn Frappuccino. Scrolling through #basic, it’s as though the hashtag has been transformed into a Starbucks ad.

The everyone drinks Starbucks joke

Imagine walking into a Starbucks in 2022. The building is towering – an open space the size of a large auditorium. In one corner, there’s a bar with baristas mixing nonalcoholic coffee cocktails; in another, a roaster heating beans; in another, a full-service restaurant. Employees are clad in leather aprons and low-key hipster garb. Scruffy coffee roasters wear beard nets. The menu is made up of items that easily surpass the $10 mark – drinks that seem more fit for a classy Manhattan cocktail menu than a coffee shop.

Then imagine walking into another version of Starbucks five years down the road from today. Customers are staring at their iPhones, rushing in just as an employee greets them by name and hands them their drink. There’s no cash register, no workers taking orders, just baristas making drinks and handing off beverages to customers rushing in and out.

In fact, both of these Starbucks exist now, within just a few miles of each other in Seattle, Washington. One is the first Starbucks Roastery and the other is the first Starbucks’ test mobile-only store, which was launched earlier in April in Starbucks’ offices.

Looking at Starbucks’ history, it’s clear that the brand evolved – and will continue to evolve – out of necessity, as it is pulled in different directions.

“As our customer base has grown, sometimes our customer wants that third place experience, and sometimes they want convenience,” Johnson told Business Insider. “We’re not sacrificing one for the other, but it is a delicate balance.”

Striking a balance means drawing from all of Starbucks’ past eras – and the lessons Starbucks has learned from the jokes people tell.

The Roastery and Reserve stores are perhaps the obvious response to people mocking Starbucks. The new store formats, with their small-batch brews and siphoned coffee, are created to counter jokes about Unicorn Frappuccinos, Pumpkin Spice Lattes, and the increasingly basic nature of Starbucks. Schultz, who stepped down as CEO but will remain on the board, is at the helm of the project.

With the Roasteries, Starbucks has a chance to bring back the innovative, exotic Starbucks brand of the ’90s but at a much larger scale. Schultz told Business Insider in October that the Roasteries have shown Starbucks that there is a “real opportunity” for Starbucks to create a “super-premium brand.”

“As companies face the threat of e-commerce and mobile shopping, the burden of responsibility of the brick-and-mortar retailers is to create a very immersive, dynamic experience,” he said.

But Starbucks needs to be more than super-premium. It also needs to be convenient, basic, Instagram-worthy, and more.

Can Starbucks have it all?

Johnson says that the biggest reason you don’t hear jokes about “Starbucks in Starbucks’ bathrooms” as much any more is that the company has changed what a Starbucks looks like, rolling out new store formats in recent years and with more in the works.

“Take everything from an express store on Wall Street that is very small square footage, small menu, and it’s all for convenience. Customers walk up, we serve them their food and beverage quickly,” Johnson said, listing store formats. “Then, it’s our core Starbucks stores – the third place. Starbucks stores with drive-thrus. And now we’ve got Reserve bars and Reserve stores and Roasteries.”

In essence, Schultz and Johnson have realized that as Starbucks became ubiquitous it picked up new types of customers, from snobs to basics. Wedged between fast-food chains and hip coffee shops, Starbucks’ new strategy is to create different types of stores – all with an emphasis on customer service – that match up with different types of competitors. Express stores are as fast as any fast-food chain, while Roasteries serve beverages as complex as any indie shop.

“They’re bringing back the coffee and bringing back the service,” Nezder said about the proliferation of Starbucks formats. “I think it’s brilliant. I think it’s addressing the problem they’ve had for years.”

Others aren’t as convinced that Starbucks can pull of the balancing act.

“You can’t be everything to everyone,” said Gairthwaite, who is skeptical of Starbucks’ ability to compete with smaller brands like Intelligentsia and Stumptown while continuing to meet the needs of the majority of customers. “They’ve always struggled with this idea that some people want the artistry and some people just want a drink.”

Vlogger Bethany Mota may have best captured this Starbucks moment. Her video, “Types of People at Starbucks,” which describes customers including the Secret Menu Snob, the Instagram Addict, and the Rude Customer, has racked up more 1.5 million views on YouTube. Starbucks’ customers are increasingly visiting the chain for different reasons – and Starbucks is responding by trying to tailor its stores to all these needs.

“The problem with success is you get harder, more difficult problems to solve,” Garthwaite said.

Perhaps the next Starbucks joke will be, who wants a low-fat Nitro Unicorn Pour-Over to go for $10?

 

France’s Presidential Runoff Is A Victory For Global Business

Preliminary results for Sunday’s French president runoff election set up a stark choice on May 7 between finalist presidential candidates Marine Le Pen’s isolationism and protectionism and Emmanuel Macron’s focus on innovation, entrepreneurship and globalism. As Macron himself said on Sunday, “The French have expressed their desire for change. We’re clearly turning a page in French history.”

Macron represents the politics of hope over fear. He understands that trade and immigration are the best fabric for a flourishing modern economy. His platform calls for a loosening of labor rules, a cut in the corporate tax rate and investments in renewable energy, agriculture and medical technology. As minister of the economy, Macron advocated for new business models, investment in innovation and technology and a more flexible workforce – a strong set of policies on which the French and global technology industries can thrive.

Like President Trump, Macron defied party politics and ideology. In fact, in the past year he simply created his own movement and party, focusing on a pro-growth, pro-business platform. “I make no concessions to conformism,” Macron often says.

He is poised to spur economic growth. Not only does he offer firsthand experience as a successful financier and cabinet minister, but he has also championed French entrepreneurs as well as established companies. When he was an economic minister, I sat in his office in Paris and discussed the importance of innovation and the choking impact of government regulation. I have been honored to host him twice at CES in Las Vegas and at our annual CES Unveiled Paris in 2015 and 2016.FRANCE-VOTE-POLITICS-MEDIA

In contrast to Macron, Le Pen advocates for restrictive immigration positions and argues that French citizenship should either be “inherited or merited” – hardline positions that would undoubtedly keep talented workers out of France and hamstring business. Her proposals to tax French companies that hire foreigners and companies that relocate jobs outside of France would make attracting the best and brightest all but impossible for French businesses. Her promise of a referendum to leave the European Union (EU) contrasts with Macron’s promises to “defend the integrity” of the single market.

The demands are high for France’s next president to keep the country safe, jumpstart its economy and improve the domestic labor market. Macron’s experience in business, desire to grow the economy and personal involvement in urging the French to embrace new business models portend well for French economic growth.

Sunday’s first-round presidential vote is an encouraging sign that France will choose progress over protectionism and innovation over repression. The global technology sector should support Macron and his positions, propelling innovation and economic progress into the future.

Trump proposes to cut business tax to 15%

Donald Trump's top economic adviser Gary Cohn (right) and Treasury Secretary Steven Mnuchin (left)

The White House made its opening bid for what officials called the “biggest tax cut” in US history — with cuts that would benefit businesses, the middle class and certain high-earning individuals — but left unanswered questions about whether the plan would be paid for, or how.
A list of goals for the tax overhaul, unveiled by President Donald Trump’s top economic adviser Gary Cohn (pictured right) and Treasury Secretary Steven Mnuchin (pictured left) Wednesday, calls for slashing the federal income-tax rate to 15 per cent for corporations, small businesses and partnerships of all sizes. It also imposes a one-time tax on about $2.6 trillion in earnings that US companies have parked overseas. The plan would end the taxation of corporations’ offshore income by moving to a territorial system, in which most foreign profits would be exempt from US taxes. Currently, the US taxes business income no matter where it’s earned.
On the individual side, it proposes condensing the existing seven income-tax rates to just three, cutting the individual top rate to 35 per cent from 39.6 per cent. It would also end a 3.8 per cent net investment income tax that applies only to individuals who earn more than $200,000 a year, repeal the alternative minimum tax and eliminate the estate tax, which currently applies only to estates worth more than $5.49 million for individuals and $10.98 million for couples. At the same time, the plan would eliminate the federal income-tax deduction allowed for state and local taxes — a provision that would hit high earners in high-tax states, including New York and New Jersey. The only itemized deductions that would be preserved under the plan would be for home mortgage interest and charitable contributions.
“In 2017, we are still stuck with a 1988 corporate tax,” and it’s one of the reasons “we are one of the least developed countries when it comes to corporate tax,” Cohn said. The move to tax partnerships, limited liability companies and other so-called “pass-throughs” at 15 percent would represent a major tax cut for many businesses — from mom-and-pop grocers to hedge funds — including Trump’s own business empire. Under current law, those companies pass their earnings and deductions through to their owners, who then are taxed at their individual income tax rates. Shortly after the election, Mnuchin said Trump’s tax plan would provide “no absolute tax cut for the upper class.” It wasn’t immediately clear Wednesday whether the plan would pay for itself; Mnuchin and others have said it would stimulate enough economic growth to cover the cost of the tax cuts. Economists have called that proposition into question — raising questions about whether any tax cuts it proposes would have to be temporary under congressional rules. “This is going to be the biggest tax cut and the largest tax reform in the history of our country and we are committed to seeing this through,” Mnuchin said at an event in Washington on Wednesday morning.
Trump’s goal of enacting a large tax cut faces daunting obstacles in Congress, including surefire Democratic opposition.  The Republican Party is divided on how and whether the plan should be paid for. And a Senate rule prevents any tax plan from adding to the federal deficit outside a 10-year window — if it’s enacted with a simple majority rather than 60 votes, a procedure known as budget reconciliation.

9 Investigates: Prison baby ‘business’

 

OCALA, Fla. – 9 Investigates learned adoption attorneys are paying for food, clothing and other items for inmates serving sentences right here in Central Florida, in anticipation of being able to adopt out those inmates’ babies.

Though some describe it as ‘buying a baby,’ it’s legal, and one particular attorney has been supporting both pregnant inmates and others financially, for several years.

Inside Lowell Correctional Institution, north of Ocala, thousands of Florida women are serving out sentences.  Among them is a population often forgotten; unborn babies with uncertain futures.

“I didn’t know what I was going to do with my child,” a former inmate told Investigative Reporter Karla Ray.  “I was safe, I knew where I was going to go, but I didn’t know what I was going to do, and it was scary.”

The former inmate who went on the record with 9 Investigates agreed to do so under the condition of anonymity, because some of her own family members don’t know she gave up a baby for adoption while serving a Grand Theft sentence inside the women’s prison.

“I just want him to know I did it so he could have a better life.  I didn’t want him to suffer from my mistakes,” the former inmate said.  “I was in a rough part of my life, and I did what was best for him at the time.  I’ll always love him.”Image result for 9,Investigates:,Prison,baby,'business'

9 Investigates learned through speaking with several former inmates and employees, that choice is often met with large financial incentives by private adoption attorneys.  The woman who spoke on the record with us received $5,000, which was split into a prison commissary account and a lump sum given to a family member outside of prison.

Karla Ray asked, “For some people, can you see them making this decision because of that?”

“Definitely.  Yeah.  Because when you’re in prison, and you have nothing and all these people have stuff, it’s hard it’s hard to sit with nothing,” the former inmate said.

One adoption attorney who admits to working such agreements with pregnant inmates every other week inside Lowell is Lynn Lawrence.  We traveled to her office in Morriston to talk with her about what some described as a ‘baby broker business.’

Karla Ray asked, “Is it right to offer a financial incentive to women in a vulnerable situation like that?”

“It’s not like buying a baby,” Lawrence said.

It is illegal to sell a minor, but under Florida law, adoptees or adoption entities can pay for expectant mothers’ prenatal care, living expenses, or medical expenses up to 6 weeks after a baby is born.  For inmates, much of that is already covered by your tax dollars, but extra food, water, clothing and hygiene items must be purchased by inmates through the prison’s canteen.

“That’s why they get canteen checks, because I want to make sure the baby is taken care of,” Lawrence said.

“Chips, soda, stuff that makes you feel more comfortable being there, it sucks when you have nothing, so, it’s nice to have money while you’re there,” the former inmate said.

Over the last 5 years, there were at least 369 pregnant inmates at Lowell.  The Florida Department of Corrections notes those inmates arrived pregnant for their sentence.

Lawrence says she’s helped adopt out around 10 babies per year from the prison, declining to say how much she has made off the deals done beyond the barbed wire.

“All adoption agencies and attorneys are trying to make the best situation possible,” Lawrence said.

The alternative to private adoption presented to inmates is working through DCF contractor Kids Central, to identify temporary or permanent caregivers within the inmate’s family.

If no one is suited or available, the child could end up in the state welfare system, which is something the mother we spoke to says was her greatest fear.

“People say, ‘you’re selling your baby, you’re doing this,’ but I did it for my child, because I wanted him safe,” she said.

Lawrence told us she is not the only attorney who goes into Lowell to talk to inmates about adoption, and she points out that she is never the first to initiate a meeting; inmates call her.

The Department of Corrections told us they were unaware of this practice, and any suspicions of illegally-handled adoptions should be reported to law enforcement.

The 16 best big cities for starting a business in 2017

 

Salt Lake City is one of the best places to start a new business, thanks in part to an abundance of investors and workers.Aqua Mechanical/Flickr

Entrepreneurship is a fixture of the 21st century iteration of the American Dream. Today, about 10% of the US labor force works for themselves, according to the Bureau of Labor Statistics. Still, it’s no easy task to get a business off the ground. In many cases, the state of a local economy can greatly affect your chance of success.

In it’s latest report, WalletHub determined the best places for launching a business based on three categories:

  • Business environment (50-point weight): five-year business survival rate, length of the average work week, startups per capita, average growth of business revenues, and average growth in the number of small businesses, industry variety, and entrepreneurship index.Salt Lake City
  • Access to resources (25-point weight): venture investment per capita, financing accessibility, share of college-educated population, prevalence of investors, high-education assets, human capital availability, and working-age population growth.
  • Business costs (25-point weight): office-space affordability, labor costs, corporate taxes, and cost of living.

A total of 18 metrics were gathered for each of the 150 most populated US cities. WalletHub then calculated the total score — the highest of which was a 56.85 — for each city based on its weighted average across all metrics to determine the final ranking (read the full methodology here).

Cities in the Midwest and the South proved to be the best places to start a business in 2017. Below, check out the top-16 cities, along with their total score and individual rankings for business environment, access to resources, and business costs.

 

SkySlope Lets Real Estate Brokers Manage Business Online

 

Real estate has always been one of America’s most lively industries. Every year, some two million licensed agents and 86,000 brokerage firms work day and night to move billions of dollars worth of commercial and residential properties. Bearing that in mind, it’s not difficult to imagine why so many young professionals flock to join the industry.

But it takes a lot of hard work and meticulous organization in order to achieve success in real estate. That’s something Tyler Smith, founder and CEO of industry game-changer SkySlope, found out the hard way.

“When I was 19, my friend and I decided to buy a house,” he says. “We had no expectations of what home buying should look like. We found a house, made an offer, and get this: our Realtor advised us to forgo a warranty and a home inspection to save some money.”

In hindsight, that was some pretty awful advice.  Immediately after closing on the deal, Smith’s new hot water heater broke down and ended up costing more in repairs than it would have taken to purchase a home inspection and a home warranty.

The awful experience convinced Smith that if his Realtor could offer that sort of customer service and still make “a huge chunk of change”, anyone could make it in the real estate industry.

“Real estate seemed like a no brainer,” he says. “I figured I could do it better, and it seemed pretty easy.”

That being said, the industry was a bit harder to crack than Smith has initially hoped.

“I laugh now because getting into real estate turned out to be harder than I thought,” he says. “But eventually, I figured out how to leverage business by building relationships. Customer service turned out to be the gift that keeps on giving; give white glove service to people, and they can’t help but refer you. I built my entire business on this principal.”

The business Smith refers to is SkySlope — a rapidly growing B2B software as a service (SaaS) platform that helps real estate agents and brokerages effectively manage their transactions online.

Real Estate Broker Software

Since its inception in 2010, SkySlope has grown by leaps and bounds. The company’s business has more than doubled in size over the last 12 months, and now helps to manage the transactions for some of America’s largest brokerages. Century 21, Keller Williams and Alain Pinel have all fallen head-over-heels for SkySlope’s ever-expanding pool of offerings.

That being said, SkySlope wasn’t built in a day — and it took Smith quite a while in order to assemble the perfect team to address the industry concerns that had plagued his own time selling real estate.

“As a Realtor, I needed my business to be accessible to my team and at my fingertips, no matter where I was,” he says. “Plus, giant paper files are cumbersome and archaic.”

“In my search to be super-efficient, I literally tried every application on the market. To be honest, I spent a lot of money, and in the end, none of them were robust enough. Similar to my outlook on getting into real estate, I figured I could create a platform that could handle transaction management and I could do it better than what was being offered.”

SkySlope’s team of cutting-edge developers were able to achieve those goals in record time. But from there, Smith said he was surprised to find just how challenging it would be to ensure that his new, game-changing software actually took off.

“I laugh now because I had no idea the amount of work and people power it would take to produce, sell, onboard and support a product like SkySlope,” Smith says.

But once Smith and his small team were able to build a bit of momentum, the ball started rolling fast.

Fast-forward a couple of years, and SkySlope is now home to 70 employees. Based in sunny Sacramento, the company has already established poll position as the real estate industry’s leading SaaS provider – and it’s not hard to see why.

“We are a service that helps brokerages bring value to their agents,” Smith says. “By streamlining, digitizing and storing transactions, we allow agents to spend their time on their clients and prospecting, which in turn helps brokerage be more successful.”

That service has already proven invaluable to small, independent brokerages in helping them to establish unbeatable levels of customer service. In turn, small business owners are drastically improving their competitiveness over the real estate industry’s global giants.

“Small brokers have to show that they are on the leading edge of the industry,” Smith says. “Providing services like transaction management software and transaction coordination help the boutique brokerages compete with the big corporate brokerages.”

“Yes, there is a cost associated with these services, but that’s the cost of doing business. Small brokers may be hands-on, but are they helping their agents be more efficient and effective? If small brokers are providing value, then they will have loyal agents and they will be prosperous.”

At the end of the day, it’s this notion of providing great value that drives Smith and his ambitions for SkySlope. After all, the real estate industry is ever-changing – and the SkySlope CEO is well aware that his company’s services must continue to evolve, too.

“Currently, SkySlope is working on streamlining our product and making it more intuitive. Once we tackle that, we want to start building full automation into the software,” Smith says. “I want SkySlope to be the Tesla of real estate software — fully automated, extremely accurate, luxurious and accessible.”

According to Smith, full automation is undeniably where the industry is heading. And by simplifying procedures for bustling brokerages, real estate experts will be able to free up their time in order to offer more support to hard-working agents on the ground.

“I love real estate, and I loved being a Realtor. I don’t want to see the industry collapse under the weight of technology,” Smith says. “We have to leverage the technology that is rendering real estate less valuable, pivot, and implement value in a different way.”

“I think agents who are providing phenomenal, over the top customer service are going to thrive.”

 

“War Paint,” the ugly fight over the business of beauty

A new musical ON BROADWAY brings to life a historic rivalry that was anything but pretty. With Richard Schlesinger, we take a look:  

“All of my life’s work lost.
All because of her: Second-rate imposter.
She appropriated half my line.
I’m the scientist behind her design.”

The Broadway show “War Paint” tells the story of an unlikely fight between two successful women, in an unlikely time for women to be so successful.

In the early 1900s, before women could even vote, the flames of the feud between cosmetic queens Helena Rubinstein and Elizabeth Arden had already been ignited.

“They did really some vicious things, there was no question,” said author Lindy Woodhead, who wrote the book “War Paint” about the ugly fight over the business of beauty.

In the new musical, Christine Ebersole plays Elizabeth Arden. “She was very driven and very committed, and nothing deterred her,” she said.war-paint-patti-lupone-christine-ebersole-b-620.jpg

“Was she mean?” Schlesinger asked.

“Yeah!” she laughed. “But she could, of course, put on the charm.”

And Patti Lupone plays Helena Rubinstein. “I think their similarity is what’s so interesting, because they were enemies, but ambitious, ruthless, creative. And I also think very lonely.”

“My sons don’t call. My husband cheats.
Now they can pay their own receipts.
I’m back on top.”

The real story of Arden and Rubinstein is dramatic enough even without the music and the costumes. They might well have been friends. But in the case of these two powerful, wealthy women, similarity bred contempt.

They were enormously talented. They respected beauty,” said Woodhead. And, “they were tyrannical.”

And they both came from very little, and made very, very much.

elizabeth-arden-helena-rubinstein-loc-promo.jpg

Elizabeth Arden (left) and Helena Rubinstein.

LIBRARY OF CONGRESS

Elizabeth Arden was born Florence Nightingale Graham outside of Toronto in 1878, or 1884 (records conflict).

Her father was a peddler. In the show, as in reality, her arch-rival Rubinstein knew that. (“Pedigree?  What, she stepped off the pilgrim boat in her Chanel pumps? I know the truth: She’s Canadian!”)

Helena Rubinstein was born Chaja Rubinstein in 1872 in Krakow, Poland. Her father sold kerosene. And in the show, as in reality, Arden knew that (“Royalty?  Chaja Rubinstein?  Her father pulled an egg car to the slums of Krakow!”)

“He couldn’t even afford the donkey!” laughed Ebersole.

“That’s very mean,” said Schlesinger.

“But they’re also speaking the truth,” said LuPone.

And the truth hurt. As the money piled up, so did the resentment.

They opened salons around the corner from one another. According to Doug Wright, who wrote the script for the show, Arden stole Rubinstein’s favorite marketing director away, and then Rubinstein retaliated by stealing Arden’s husband and bringing him to her company. “That was a feud!”

There’s no record that they ever met. “Never spoke to each other, never referred to one another by name,” said Wright. Rubinstein called Arden ‘The Other One’ in her Polish accent, and Arden called Rubinstein ‘That Dreadful Woman.'”

But in the midst of all the no-name calling and all the fighting, they created an industry by making makeup respectable. When they started, the only women using cosmetics were hookers and show-girls. Today it is a multi-billion-dollar business, after Rubinstein and Arden laid the foundation for cosmetics departments in stores like Bergdorf-Goodman.

“So they not only invented the product, they invented how it was sold?” Schlesinger asked.

“The branding, the customer service … it never existed,” Woodhead replied.

The fight that propelled these two women has largely been forgotten, until now — perhaps, argues the show, because they were womenThe two stars sing a duet called, “If I’d Been a Man.”

Theirs was one of the great feuds in American business, like Macy’s and Gimbal’s. “But those were men, too,” said LuPone. “And I wonder whether we were a feud or simply a ‘catfight’ — whether they diminished the importance of this particular feud because they were women.”

In the end, there was no real winner of this feud … but no real loser, either. The reality is that they needed each other,” Woodhead said. “They fed off each other. It was very sparky. And it was great for business.”

Helena Rubinstein and Elizabeth Arden died within 18 months of each other.

And it would probably pain them both to know that they are being remembered together, as two women who produced all that makeup — but never made up.


For more info:

  • “War Paint” at the at the Nederlander Theatre, New York City | Tickets
  • Follow “War Paint” on Twitter, Facebook, Instagram and YouTube
  • pattilupone.net
  • Follow @RealPattiLuPone on Twitter
  • christineebersole.com
  • “Deconstructing Patti,” an evening of Broadway stories and songs with Patti LuPone and Seth Rudetsky benefitting Broadway Cares/Equity Fights AIDS, at the Nederlander Theatre, New York City, September 24 | Tickets
  • elizabetharden.com
  • thereddoor.com
  • helenarubinstein.com