Know If It Is GMO: Campbell Soup Label Disclosure

It has been about a week and a half since The NY Times and other mainstream news sources reported that Campbell Soup Company has announced that it will disclose on their product labeling all genetically modified or genetically engineered ingredients across every entry in all their product lines. I have reported on the GMO labeling issue in the past, especially with the situation in California, where all the huge food companies joined together to defeat that proposed ballot initiative.

 

This choice by Campbell’s Soup at this time will certainly apply pressure to other food industry players to comply in disclosing their GMO containing products. In the process, the federal government will also be under scrutiny, particularly the FDA, to initiate fundamental and substantive progress on a labeling requirement system for genetically modified ingredients in consumer food products.

 

The component of the decision by Campbell Soup that is significantly newsworthy is the size and scope of the amount of products it covers. This food industry giant has several brands encompassing the full range of the grocery channel from Prego sauces, Swanson broths, V8 beverages, and Pepperidge Farms bakery products.

 

The iconic Campbell’s Soup brand alone has an enormous amount of products especially with the line extensions of recent years to add lower sodium and gluten free soups for an increasingly health conscious American consumer. The reality of the consequences for this move sent shockwaves through the food industry and through the Wall Street analysts who evaluate the factors which will potentially impact a given publicly-traded corporation such as Campbell.

 

In some of the media reports I researched, it was noted that some investment analysts believe that this choice toward full disclosure by Campbell’s is going to “scare the consumer” when they pick up a can of soup and read that it contains genetically engineered ingredients. These same reports indicate that a drop in sales which will cause a chain reaction to a decrease in revenue will cause a drop in the stock price. The competition in the soup aisle and the other grocery aisles could stand to benefit from this decision by Campbell’s.

 

The move to full disclosure of these ingredients will serve as a stark dose of reality to the average American consumer of just how widespread the use of genetically engineered products is within the food supply currently. The average consumer may, at that point, start to question whether the competition in the aisle also contains GMO ingredients. The impact of this decision on the sales of healthier trending grocery outlets such as Whole Foods, Wegman’s, or Trader Joe’s remains to be seen.

 

Furthermore, this decision will inevitably shift the focus onto the fact that the key ingredients in many of our food products: corn, soybeans, and sugar beets are all genetically engineered. The alternative sources of these staple commodities which are grown currently in conditions that are organic or GMO free are produced in nowhere near the quantities needed to sustain the entire food supply. The global farming system could not produce those crop yields of GMO free food ingredients if they wanted to because the seeds are genetically modified and the soil of so much farmland is contaminated with pesticides and chemicals such as Roundup.

 

Green Mountain Debate

 

Vermont passed legislation on the state level requiring food sold there to have a full disclosure of genetically engineered ingredients on every product label. This is thought to have been the driving factor behind the decision by Campbell’s Soup Company to make the change to their labels across the board.

 

The legislation passed in the Green Mountain State also brought about renewed vigor in the food industry regarding the debate over the GMO disclosure laws. One side of this discourse feels that the food industry should be insulated from having to disclosure this information fully, yet another group feels that the disclosure should be limited in scope. Further still, a third faction of this argument believes that the federal government needs to pass legislation that supersedes the state government level activity on this issue.

 

In fact, I believe that the motivation behind Campbell’s Soup and their decision to fully disclosure the GMO ingredients in their respective products is to push the federal government to adopt a coherent policy for the entire industry. This new label disclosure by a major player such as Campbell’s “moves the needle” on the conversation with the federal government and food industry leaders. When asked about the motivation for the decision in an interview with the NY Times, Campbell Soup Company CEO, Denise Morrison, explained that the consumer has “the right to know” if a product contains genetically modified components.

 

In the view of the food industry players involved, most of them would rather deal with a federal mandate on how to label GMO ingredients than the alternative, which is to deal with each individual state passing their own procedures relative to the labeling of these ingredients. The rationale behind this viewpoint is due to the fact that changes to any food product label are expensive and time consuming for the food companies involved.

 

A system for GMO disclosure which is reliant on the legal activity of 50 separate state governments that could come up with 50 different procedures or sets of requirements for a label on a food product is a recipe for disaster. It will dominate the time for numerous departments in the respective food company, it will drive up labor costs because the labels will have to be switched out during the production runs depending upon which state the product is being distributed to, and it will increase the cost to the consumer as well.

 

Conversely, the federal system would allow for one universal change to the label of a given product which would be effective across the country and be far more efficient for everyone involved. However the system has to be done in the right way, it should be cohesive and inclusive so that circumvention is not attainable. Some consumer advocacy groups linked to the “no GMO” movement have voiced concerns that the federal system may provide loopholes for the food industry to get around fully disclosing the specific genetically engineered ingredients in their products.

 

The argument could be made that this situation is not a clear victory for the “no GMO” movement because we still have no federal mandate on a universal labeling system, the state level legislation is still active which forces those groups who are advocating for “right to know if it’s GMO” to fight separate lobbying battles in each state, and the bottom line is that the GMOs are still in our food we will just be told what they are exactly.

 

This choice by Campbell’s is clearly an indication of the strength of the healthy eating and wellness trends in the American consumer landscape. In the months to come it will be interesting to see which companies within the consumer packaged goods industry will follow suit with label disclosures on GMO ingredients.

 

In my professional experience in the food industry working with product line extensions across a variety of segments and dealing with label declarations, Campbell Soup Company was bold in this move and correct in their assessment that we need a federal system for GMO disclosure. A state-by-state format for this type of consumer labeling situation is a nightmare scenario for all parties involved. The need for a decision by federal regulatory entities needs to become a high priority in 2016, the American people and the food industry need it to happen sooner rather than later.

 

The next round in this fight is to eliminate GMOs which is an entirely different challenge with its own set of issues.

 

 

(Frank J. Maduri is a freelance writer and journalist with a professional background in marketing for the food, pharmaceutical, and healthcare industries. He has experience with food and beverage line extensions for national consumer products brands involving compliance with federal and state labeling requirements.)

 

 

The Complexities of a Global Economy Reliant on China

(This post originally was submitted to a subscription-only financial investment site. I have included it here on my blog in order to reach a wider audience.)

 

The first two weeks of 2016 have proven that the global economy being so reliant on China can wreak havoc on the stock markets of all the major indexes in the world. The uncertainty which is pervading Wall Street regarding the future of the Chinese economy and their currency is the underpinning for the rapidly declining performance of the US financial markets.

 

The second issue with the global economy is the precipitous drop off in the price of oil. The price for a barrel of crude oil is now down to below $30.00 and this huge price decrease on a commodity as vital as oil is great for consumers paying less at the pump to fill their cars, but it is detrimental to the overall economic outlook.

 

The rationale behind the drop in oil prices is tied to two main factors. First, it is a matter of basic supply and demand: the world has too much oil and far less demand for this resource. The United States alone has contributed to this situation with the abundance of laws clearing the way for the rise in hydraulic fracturing, or fracking, in huge swaths of land called shales or shale plays. The result of fracking created conditions in the market where oil was entering the system from several new entry points in different states that previously did not contribute to the oil supply. This added to the increasing supply quantities.

 

The second component to the drop in oil prices is the decreasing demand from emerging economies in other parts of the world including, and most importantly, the Chinese economy. The slowing growth of manufacturing and other factors in China have a chain reaction effect where the world’s largest emerging market needs less oil.

 

In addition, a factor that is certainly contributing this issue and will continue to be in the coming months is the freedom of Iran from economic sanctions and their subsequent reentry into the oil market. The broader issue is that Iran has not made any money from their oil supply due to the international sanctions levied because of their nuclear program; so any revenue it makes from the sale of oil is gravy to them. This will translate into a commodity pricing battle between Iran, Saudi Arabia, Libya, Iraq, and other Middle Eastern countries who are in dire need of liquid cash so they have turned on the oil faucet, so to speak.

 

The evidence of the impact of these new Middle Eastern players (Libya, Iran, and Iraq) is demonstrated by the dip in oil prices below the $30.00 threshold. Many economists will attribute this to an overabundance of supply of oil because a couple of reputable studies show that American demand has not diminished and that Americans are driving more now on average than in the past several years.

 

Fuzzy Math

 

The root cause of the issue revolving around a global economy that is reliant on China is that the accounting practices in that Asian powerhouse have been consistently under scrutiny for being unreliable in the best case scenario. This inherent unreliability coupled with inconsistent practices in quality control as well as variability in their supply chain all equals what Wall Street cannot handle: unpredictability.

 

That unpredictability coupled with the turbulent valuations surrounding the Chinese currency, the yuan, and the result is the wild swings in the trading activity across all the major stock indices from the start of 2016. The data coming out of China, financial or otherwise, is so completely unreliable and lacks so much credibility that the integrity of the entire financial marketplace is vulnerable to the deficits we have witnessed in the first two weeks of this year.

 

Some economists and financial market analysts will tell you that China is a growing economy with an emerging middle class which was bound to hit some “bumps in the road” and that this was expected. My take is slightly different in that I do not think our entire global economic future should be underpinned by the performance (or lack thereof) in China. I know it may seem naïve but I feel like it must change, it is a fundamental flaw in the global system.

 

Other economists and experts predict that it is precisely because of this widespread reliance on China and products manufactured and exported from there all over the world, that the global system will collapse worse than it did in 2008. In that case, if the first two weeks of this New Year are any indication, we might be in for that situation playing out exactly in that manner.

 

Elbow Room

 

The other notion that is prevalent in some circles of the financial realm at this point is the thought process that the Chinese yuan might be trying to elbow its way into the top currency spot in the world.

 

I find even the mention of this so fraught with concerns because of all the issues with the currency valuation in China at this point. The recent decline in the overall growth of the Chinese economy will have a reverse effect in that I believe it will drive investors back to the American economy and to invest in the US dollar. The US dollar is, and will remain, the top currency in the world based on the stability of our democracy and our economy, even in the event of a recession or a downturn.

 

It is time for us as investors and for the world economies involved to look at China with caution and to prepare your portfolio strategy accordingly for both the short term and the long term investment objectives. In the end, this year is showing us what most of us already knew, we cannot trust the information coming out of China and we need to embrace different practices when evaluating their economy in the future.

 

 

 

2015 Year In Review

This year was certainly a very busy one for me both personally and within the writing profession. I embarked on some new forays into different types of writing, took on some interesting projects, and met some fascinating new people along the way.

 

In the days following Christmas, I started to look back on all of the content I produced, not only for Frank’s Forum but for other entities, and I compiled a look back at 2015. The best manner to do this type of piece is to share the links to the work and some of the back story behind it. The overall theme being that the support and encouragement I get from the readers is the true indication of what I have truly achieved in my writing work. I am grateful and blessed to have your support.

 

The amazing aspect of writing is that no matter how long you have undertaken it; there is always something new around the corner, so to speak, it is constantly evolving. It is true that after some quantity of years each writer “finds their voice” which is certainly true in my case.

 

However, I found that challenging myself to take on new projects or new types of writing (song lyrics was the challenge in 2015) it helped in my overall growth as a writer and changed my perspective in approaching older projects that had been tabled for a while. The saying “everything old is new again” comes to mind in this regard.

 

I am proud to share my writing with you, the audience, and I have been surprised and overwhelmed by the way that my work has resonated with you. I am pleased to share this year in review with you and appreciate the generosity of your time in reading the words that I have produced.

The beginning of 2015 in January began with the culmination of a large project I was working on revolving around a series of articles I researched and wrote about an auto-immune disease known as Scleroderma. The articles were all really well received and were picked up by various medical type internet based news sources. The link below is to the series for the Medium website which gained pretty widespread exposure for this important and to some extent obscure disease:

https://medium.com/@FMaduri/scleroderma-suffering-in-silence-part-1-2729b5ae6259#.2awlnmbph

 

I have also included below the link to Part 2 of the series for Medium which is the conclusion to that series of articles. I am currently in the research phase for another article on Scleroderma which focuses on some new treatments for this disease:

https://medium.com/@FMaduri/scleroderma-suffering-in-silence-part-2-631acdd2134f#.9huv5v8g3

 

Most of you know that a portion of my writing involves sports writing, and as a staff writer for SB Nation covering the New York Red Bulls, an article that I wrote in January 2015 was very well received. It involved the sudden firing of Head Coach Mike Petke and summed up the emotions from the perspective of the fan base:

http://www.onceametro.com/2015/1/8/7508301/the-fallout-from-the-firing-of-mike-petke

 

In a link back to this site, I wrote a follow up story to an article series I had done previously on a very important topic: homelessness in the American military veteran population. The initial series garnered some significant readers and the follow up report was something I felt I had to include here:

http://frankmaduri.com/follow-up-homeless-veterans-in-u-s-cities/

February brought the idea for an article in another area where I have gained publishing credits over time, Catholic media, with an article on Candlemass Day:

http://www.catholic365.com/article/708/the-light-of-the-world-candlemass-day.html

 

A big local story that hit close to home for me was the campaign to save Mater Dei Prep, the high school attached to my parish. The article I did for the local Patch site really resonated with readers, and in the end, the school was saved from closure through the generosity of donations as well as a concerted fundraising campaign:

http://patch.com/new-jersey/rumson/mater-dei-prep-campaigns-save-school-closure

 

The winter of 2015 was one of the coldest in history and that served as an inspiration for a work of poetry I published in March called “Winter Sky”. Many of you who have followed my work over the years know that my poetry is where I produce some of the most uninhibited content to evoke emotions in my readers. If you are new to reading my work I hope you will take the time to read my poetry:

http://allpoetry.com/poem/11946822–Winter-Sky–by-Frank-J.-Maduri#share

 

In April, along with the arrival of Spring, I delved into a new area of writing: song lyrics. I had been told for years by people closest to me that read my poetry that it could very easily be translated into lyrics. One of the most incredible moments in my writing career was opening the envelope in the mail from the U.S. Copyright Office with all of the certificates to copyright my published song lyrics. I have included the link to them below:

http://frankmaduri.com/song-lyrics-by-frank-j-maduri/

 

This next work of poetry was shared by readers on Facebook for a total of 1,300 times which I was very grateful and humbled by:

http://www.catholic365.com/article/1356/poetry-blessed.html

 

The month of May brought a special report on the food industry, where I concentrate a specific focus on based on my prior industry experience. This article came about in response to a growing trend I picked up on which the food companies were making ingredient changes to appeal to the natural foods trend. This piece ventures into that topic and the debate over whether it is all just a savvy marketing technique:

http://frankmaduri.com/fast-food-recipe-changes-smart-science-or-smart-marketing/

 

The summer brought me into other projects which did not involve news writing or creative writing being published. However in the late part of July I did publish this piece for Sportsblog.com which I recently received the honor of having one of the top blogs covering the NJ Devils hockey team. This article though was on the NBA and it combined my understanding of sports, marketing, sports finance, and politics. It gained an enthusiastic response to which I am grateful:

http://fjmaduri.sportsblog.com/posts/2933778/chess-game–the-nba–milwaukee—-the-new-bucks-arena.html

 

A poem I wrote a while before I published it became the highlight of my work in August. It was originally written while I was covering a news story on the drought in California:

http://frankmaduri.com/poetry-by-frank-j-maduri-drought-conditions/

 

I have held a position with UPI (United Press International) for a few years now where I produce commentary pieces for them in certain topic areas. I have been blessed and fortunate to have several of those articles become published internationally through their platforms. I wrote a piece which did very well in October on the merger of two huge brewing companies and explained the implications on a larger scale for consumers:

http://www.upi.com/Top_News/Analysis/Outside-View/2015/10/14/Whats-Brewing-The-InBev-SABMiller-Merger/2191444694279/

 

The environment and environmental stewardship is a large component of my writing for this site and for others. I will share with you a piece I did on an environmental issue that was alarming to many readers:

http://frankmaduri.com/below-the-ground-fracking-wastewater-irrigation/

 

In addition I have written many articles on business and finance in the past. This article in particular was the topic of some very kind and positive feedback from a small business group and was even read by my sales rep from my website hosting company who called me to tell me he was really impressed by my knowledge of this topic which was very gracious of him:

http://frankmaduri.com/strong-bucks-the-strength-of-the-us-dollar-the-impact-on-small-businesses/

 

I had a crossroads in my life this summer and this blog post was the result of a confluence of those factors and reflections on recent years including Hurricane Sandy which I did a substantial amount of reporting on in recent years:

http://frankmaduri.com/return-to-the-playground-the-stalled-recovery-of-union-beach/

 

I leave you all in this year in review with an article that was one of the most read pieces I had the blessing and honor to produce this year for Catholic365.com – it was shared close to 2,500 times on Facebook and received over 3,000 link shares across all social media platforms overall in the metrics I keep. I hope it will provide you inspiration and hope for the year ahead in 2016:

http://www.catholic365.com/article/1303/the-3-oclock-hour-the-chaplet-of-the-divine-mercy.html

 

Thank you all for your continued support of my writing work. I am blessed and appreciate all of your encouragement. Happy New Year and May God bless you all in the year ahead!

 

 

Creating A Duopoly: The Dow – DuPont Merger

The $130 billion mega-merger announced late last week between Dow and DuPont is just the latest agreement in what has become an environment of increasing consolidation across all industrial and commercial markets. This deal is unique because once the merger takes effect then the companies plan to split into three separate publicly traded companies.

 

The rationale behind the three-way split is for tax efficiency purposes and will take nearly 24 months to complete just one phase of this complex transaction, which some on Wall Street believe will invite further regulatory scrutiny. In fact, regulators have been hitting the pause button on several merger deals in recent weeks. The most high profile being the Staples merger with Office Depot which is being blocked currently by the FTC (Federal Trade Commission) creating a saga where most recently the Staples-Office Depot legal team has filed a countersuit which is expected to be heard in federal court in March 2016.

 

Those who track and analyze M&A activity are bracing for another contentious scenario with the proposed merger between Dow and DuPont, two of the oldest and largest American companies in the chemical and agricultural products industries. The obvious prevailing theory being that if the FTC is giving Staples a huge amount of pushback over their proposed merger in the office supply industry, just imagine the type of scrutiny they could enact on the largest merger deal ever in the chemical space.

 

The Importance of EBITDA

 

The CEOs of both companies, Dow and DuPont respectively, were on all the financial cable network shows last week trying to get their corporate PR version of why the merger should move ahead in an attempt to set the narrative before the FTC and other regulators provide the public with their version.

 

In particular they were pressed by the financial media as to the rationale behind the merger followed by the split into three companies. The concerns are due to the regulatory process involved in that type of complicated transaction as well as the sheer amount of time required to complete the entire transition into three distinct and publicly traded companies.

 

Both CEOs explained that the most tax efficient method was to complete the transaction in this manner. In their view this protocol could actually reduce overall regulatory scrutiny and anti-trust concerns because the mega conglomeration would essentially be split into three parts.

 

The concerns from the side of the average stock holder, big investor, or the Wall Street firms analyzing this deal hinge on what this type of transaction will mean for earnings growth. This measurement of performance is always paramount, but takes on added significance if this deal gets cold water thrown on it by the FTC or other ant-trust regulatory bodies.

 

In order to address some of that potential reticence the two CEOs from both of these iconic American corporations discussed the importance of EBITDA to this overall transaction. I interpreted this emphasis to be driven by the strong value of the US Dollar which has stripped away the revenues for giant companies such as Dow and DuPont, so shifting the focus to EBITDA is being done to demonstrate the cash flow overall for the combined entity prior to the 3 way split.
In my own view, I would caution investors on that rationale because EBITDA can be manipulated in a variety of ways to present an unrepresentative picture of the financial health of any given business. I am in no way insinuating that this is the case with Dow-DuPont, no evidence of that exists at this point, but as a general rule of thumb I would tread lightly and not use that one measurement to determine the overall viability of a company.

 

Moreover, the bigger issue for this proposed Dow – DuPont entity is twofold:

  1. The flattening curve in the commodities pricing market
  2. The potential creation of a “duopoly” in the seed industry

 

The decreasing demand for agricultural products is also an issue here but the commodities markets that both companies have large stakes within have been beset by falling prices.

 

The creation of a “duopoly” has been mentioned in other media reports regarding this mega-merger. The eventual 3 way split into three companies would result in an agricultural products entity that would combine Dow and DuPont’s seed and crop protection product lines.

 

The major anti-trust “red flag” would result because in that scenario Dow-DuPont and Monsanto, just two companies would control a huge portion of that industry segment. They would be able to set pricing and enact inventory controls that could have enormous consequences to farming and access to commodity products and the food supply. That could be the cause of significant regulatory concern especially if the public is informed and expresses those concerns to their elected representatives in Washington.

 

Three Way Split

 

The three way split of the company, provided the merger is approved by the summer of 2016, should take place according to the reports anywhere from 18 to 24 months from that point. The three companies proposed in this merger announcement are:

  1. Agriculture Company – see above explanation
  2. Material Science – combines product lines from material sciences and performance plastics divisions and performance materials/chemicals
  3. Specialty Products Company – nutrition, health, industrial bioscience, safety, and communications product lines merged for this company to form

 

This merger is seen as necessary for the ultimate survival of both companies between the commodity market issues I raised earlier to the strengthening of the US Dollar, the unpredictability of agricultural product sales, and falling crop prices; Dow and DuPont were individually facing some difficult hurdles to their future growth.

 

DuPont was rumored to have been mulling a variety of staff reduction plans in order to slash costs due to the negative impact of market conditions on their business units. Meanwhile, Dow was said to be reviewing the repositioning of some of their product lines in the marketplace as well as exploring other options in the event that the proposal to merge with DuPont was met with resistance.

 

Final Analysis

 

In my view, as one who has reported on mergers and acquisitions across many industry types and for a few large news organizations, this particular transaction will face some significant regulatory hurdles on the path to approval. The rationale behind that reality exists on a multitude of levels, from the obvious (the sheer size of the two conglomerates involved) to the subtle (the impact on the commodities markets for certain agricultural products).

 

The most pressing issue involved is the potential for a duopoly in the seed business with the potential merged Dow-DuPont and Monsanto. The consolidation of market share of any single industry into the hands of two corporations is usually, but in no way an absolute, death knell for M&A activity on this scale.

 

In recent history some exceptions to this rule have been made but the seed business is a different scenario and it will be viewed in that regard during the regulatory process. It may not necessarily scuttle the deal, but a revision to how that proposed merged business unit will operate will likely be the resolution. The sale of current Dow or DuPont brands or business units to other competitors is also a likely outcome in order to usher the merger through the regulatory approval process.

 

In addition, it is important to note that this merger, if approved, will not completely insulate the current staff head count. The financial news media has reported that job cuts from various divisions of both companies will come in order to position “the books” from an accounting perspective and enhance the profitability of this acquisition.

 

It is also my opinion that the merger into a one company followed by the 3 way split into multiple publicly traded entities could likely derail this merger from the way it was intended. The complexities involved in the transaction coupled with the longer period of regulatory review needed for this deal to process successfully are factors in forming my opinion in this regard. That is not to say that will not eventually happen (with this much money involved that seems unlikely) but the manner in which the companies are split may change, and the market conditions will dictate how that will all eventually come to fruition.

 

In the end analysis, this announcement of the proposed merger of Dow and DuPont, two enormous and iconic American corporations, is just the beginning of a lengthy process toward a potential merger. In the interim, we will read and see reports detailing tax efficiency, earnings, commodity pricing, market conditions and a myriad of other terms detailing the road either to consummation or perdition for this merger. It is a sad, stark reminder that even the big fish are not immune to the rough waters of a constantly changing global economy.

 

 

The Great Escape: Pfizer’s Takeover Bid of Allergan

The pharmaceutical giant known as Pfizer is the latest industry giant to pursue the takeover of a smaller competitor in order to relocate their corporate offices overseas to avoid U.S. corporate taxation. In a transaction known as a tax inversion or “inversions” Pfizer is attempting to obtain Allergan, the maker of Botox among other industry leading products, for $150 billion dollars according to many media reports.

 

Allergan is headquartered in Ireland, which has one of the lowest corporate taxation rates in the world (17%) compared to the U.S. which depending on the size of the company is much higher (it is estimated that Pfizer has a taxation rate around 37%). I wrote an article for UPI previously on this topic when Walgreens mulled a shift of their corporate HQ to the UK and then disbanded the plan (http://www.upi.com/Top_News/Analysis/Outside-View/2014/07/25/Economic-patriotism-and-US-corporate-tax-inversion/6741406146830/).

 

This news comes amid the reports that the Department of Treasury is about to announce some changes in the rules for mergers and acquisitions which will make it more difficult for companies to complete these type of inversion transactions. The other political force at play here is the election cycle which the issue of inversions will be a hot topic for the 2016 Presidential campaign trail.

 

Counterpoint

 

The argument made by Pfizer for the defense of this transaction and the justification for it has three different components:

 

  1. Pfizer will still be spending a ton of money in the U.S. on R&D, employee payroll taxes, and other business spending to boost the domestic economy
  2. The change in HQ to Ireland will allow them to more easily access the foreign currency accounts they have for the business they conduct in their overseas units.
  3. The Pfizer financial advisors have made statements to the media that the bigger issue to the antiquated U.S. tax codes and business regulations which create an environment in their words which is “uncompetitive”.

 

In fair balance, they make some valid points but the fact remains that Pfizer has joined the ranks of other large companies in the pharmaceutical space and beyond to move their headquarters out of the United States which really negatively impacts the American economy from several perspectives.

 

First, the government has to make up that gap in the tax revenues they will lose from that corporation (especially one the size of Pfizer) relocating. The next big issue is the loss of the jobs which are generally higher paying and suitable for candidates with a higher level of education. The recent unemployment reports will demonstrate that our domestic economy is lacking those types of higher paying jobs and that millions of people with college and advanced degrees are “underemployed” working several part time jobs to supplement the income of a full time position that does not exist.

 

It is also bad for the public perception of America to have these corporations relocate and that should be the impetus for Congress and the leaders of businesses to get together and forge some type of agreement that works for both sides to avoid these types of inversions in the future. We all have a vested interest in making America remain the best nation on Earth. We have to work together to make that possible in the future.

 

 

 

 

Below The Ground: Fracking Wastewater & Irrigation

I have covered the drought in California and other Western states as well as the energy industry trend of hydraulic fracturing (aka fracking) to explore new reserves of petroleum products. These concepts converged today when I was conducting research for another story and came across the petitions from environmental groups, such as The Sierra Club, and letters to the editor in the LA Times from concerned citizens about the use of wastewater from fracking operations.

 

My previous research in this topic provided me with the knowledge that the oil companies are not required to disclose what chemicals are used in the fracking process. The test results of the water used is not released publicly, and the EPA has confirmed in the past to NBC News that the wastewater used from fracking has been injected into the groundwater supply wells in California.

 

The Sierra Club petition is aimed at the USDA with the goal of eliminating the use of fracking wastewater in the irrigation for crops used for food for human consumption. The second part of the survey involves an aspect of this issue that will make your mind explode: changing the guidelines which allow the food from some of those crops to be labeled “organic” in the future.

 

So, I imagine many of you out there are like me when you purchase organic foods, you feel like you are protecting your family by spending the extra money for an organic product. I found the news that foods made with petroleum and chemical laced water very unsettling to put it diplomatically.

 

In a report I found through an NBC News affiliate in California at one point over 3 billion gallons of tainted wastewater was pumped back into the groundwater aquifers. This news comes on top of an already angry public sentiment toward oil companies and the state government there because of the horrible drought conditions. It takes millions of gallons of water to conduct fracking operations to force out the potential oil resources below the ground. The state government has put water restrictions in place for residents but allows corporations to use water for fracking and also continues to allow huge companies like Nestle to bottle water (see my earlier article on that issue).

 

In that same report testing was done on the water in wells in the affected area and the samples came back with high levels of arsenic and thallium among other chemicals. This news comes at the same time that the Keystone pipeline proposal was rejected by the Obama Administration and because of the widespread prevalence of fracking, combined with other factors, oil prices are low amidst sagging demand and increased supply levels.

 

I stumbled upon an article a few weeks ago about the growth of the middle class in China which has resulted in increased demand there for American food products particularly fruits and nuts. The majority of the supply for these crops here in the US is from California farms. There is a backlash now, that during a prolonged period of drought, we are essentially exporting water to China in the form of the resources used to make products such as almonds and citrus fruits. It is an interesting concept to ponder.

 

The plight of the California farmer has already made news headlines with stories of water prices skyrocketing which are forcing farmers into very dangerous positions. In some cases what used to cost the farmer $25,000 in water now costs $250,000 for the same amount of this precious resource. The issue now is that some of those water sources have been contaminated with fracking wastewater, which obviously is a huge problem for everyone involved. The EPA has to work with the various levels of government to eliminate this practice.

 

In Too Deep

The standard practice with fracking now with regard to the disposal of wastewater used to find pockets of oil or natural gas is to release it deep into the ground, often as deep as they have drilled in their search for new energy resources. I would maintain based on this issue with irrigation water being tainted that the entire process of handling the wastewater disposal needs to be reviewed and changed. In the current system it becomes too easy to accidentally taint the groundwater supply intended for human and animal use.

 

I have been writing for years now that the entire process of labeling food especially organic products needs to be completely overhauled. This news is evidence of that need and for the USDA and the other federal agencies to move that process forward vigorously in the weeks and months ahead.

 

It also becomes clear through this situation that energy companies are in too deep, quite literally and figuratively when it comes to the process of fracking. The fact that they are not mandated by law to disclose what chemicals and at what level those chemicals are used needs to be revised.

 

I urge you all to learn more about this issue because I know I am not alone when I read that the organic tomatoes I have downstairs some with possible tainting from petroleum based chemicals and other toxins. We need to protect our crops, our land, and our water supply from these harmful chemicals, and we can do it if we act together in unity.

Consolidations Abound: Walgreens Strikes Again

In watching the financial news this morning on CNBC and noticed on the stock ticker that Rite Aid was up about 30% which immediately made me curious as to the rationale behind such a big jump. Then, a few minutes later, the news broke that they were in merger talks with pharmacy giant, Walgreens, and it all made sense.

 

The proposed merger was just formally announced a few minutes ago at the end of the business day here in the Northeast, with Walgreens set to pay $17 billion to obtain Rite Aid. The deal, if confirmed through regulatory channels, would merge two of the top three pharmacy chains in the United States.

 

Walgreens has been active in recent years with mergers and acquisitions of other regional pharmacy chains, Rite Aid was one of the last major players in the marketplace to essentially complete the major consolidations of the landscape in that industry. The proposed merger would give Walgreens an enhanced presence in the Northeast and Mid-Atlantic regional markets and bolster their competition with market leader CVS.

 

The other rationale for the merger is to gain leverage with PBMs and other distributors for better pricing on prescription drug products. A combined Walgreens – Rite Aid conglomerate would have a better chance to forge deals with suppliers than if they remained separate entities. This activity comes amidst rising demand for prescription drugs due to the availability of healthcare coverage provided by the Affordable Care Act.

 

However, the major pharmacy chains such as CVS and Walgreens have been warding off increased competition from club stores and the appealing mail order pharmacy providers which have gained traction in recent years. In a move that received comparatively little mainstream media coverage earlier in 2015, CVS acquired the prescription pharmacy component of Target stores for a little under two billion dollars. The company plans to change over some of the in-store pharmacies to CVS locations within Target floorplans. That represented a big move by CVS to gain a bigger presence in the market and gain penetration into the types of big-box retail stores that have become the main competition for them in recent years.

 

Walgreens issued a statement today indicating that, at least in the near term, Rite Aid will remain as a brand and that they will not be changing the names of retail locations over to Walgreens. In the future, the Rite Aid name which has stood for decades in the Northeast could disappear. The stock price of Rite Aid did shoot up today in trading by 40% by the end of the day on Wall Street. Conversely, Walgreens was up about 4% at the close of the day.

 

What does this mean for the consumer? Well, in short, it will mean less competition and less choice in the options for where your family will have their prescriptions filled, it could mean higher prices but ultimately it could provide a better alternative for the consumer if the combined entity is able to leverage distributors into better pricing.

 

However I always return to the fear of monopolies, whenever too few companies are in control of a commodity as important as prescription drug products, I have to give pause to the consumer. I know that many neighborhood pharmacies today look like retail corner stores with the amount of personal care items they stock, but do not let that fool you, the majority of sales at Walgreens or CVS are still derived from prescription drug products (about 70%).

 

Consolidations have the downside of eliminating consumer choice from the marketplace, as it did with this proposed transaction. Rite Aid was carrying debt, but it controlled roughly 10% of the prescription pharmaceutical sales in the market and could have lived on without merging with Walgreens. In the end it comes down to the money, and Walgreens made an aggressive bid which provided a roughly 40% premium over the current valuation of the company. If I put it simply: the deal was too good for the shareholders to pass up.

 

Duke Energy Bets on Natural Gas

 

The other big merger in the headlines is in the energy industry segment and it involves Charlotte based Duke Energy buying Piedmont in a deal that is massive for Piedmont, and would represent less than 10% of Duke Energy overall. However, the deal reflects the need by Duke to obtain a better position in the natural gas segment of the energy marketplace.

 

The proposed deal has received some criticism, because if you follow the commodities markets, natural gas is down significantly because of extended periods of mild weather through this Autumn season throughout the USA. Therefore the demand for natural gas is diminished, but it would appear that Duke Energy is banking on a change in that demand curve when the winter months come roaring in.

 

Most long term forecasters for weather models are split on the amounts of snowfall or major storms we will see this winter but most of them agree that we will not see the record cold temperatures that we did last winter. Duke Energy has a good sense of the marketplace so I am sure that they feel that this investment will yield once the winter gets into full swing.

 

Natural gas also has a reputation for being cleaner than other energy sources so Duke is most likely going to look to capitalize on that trend as well. It is yet another merger in an increasingly consolidated business landscape.

 

The next big merger to watch: Bridgestone Tire proposed consolidation of the Pep Boys auto repair chain. In the end I hope that these consolidations will benefit the consumer but I am always reticent when two of the top players in any industry join forces, which is what we had today with Walgreens and Rite Aid; whether or not that benefits the consumer or just limits competition remains to be seen.

Deep Freeze: Halt In Arctic Ocean Drilling

The recent announcement by the Department of Interior regarding the two year halt in Arctic Ocean oil drilling was not entirely unexpected but is a victory for environmental protection just the same. The decision effectively ends oil production in that region even though several companies still hold leases for exploration. I have followed this issue closely over the past few years and the decision by the Obama Administration last week indicates the cumulative effect of a confluence of factors which impacted the timing of this announcement.

 

The decision by the federal government to halt oil exploration in Alaska comes on the heels of the announcement by Shell Oil that they have cancelled their exploration efforts in the Arctic Ocean due to poor results from test wells and the steep costs for those projects in a marketplace where oil prices remain low. In fact, according to several mainstream news sources, Shell spent $7 billion on the Arctic region exploratory project and it yielded zero oil.

 

The elected representatives of Alaska are obviously unhappy with this decision but the handwriting was on the wall in this situation with several oil companies suspending exploration efforts there due to limited light hours as the Alaskan winter approaches and the harsh weather conditions. These factors combine to make drilling expensive and potentially dangerous for these companies to undertake.

 

However, it is yet another blow to the already struggling Alaskan state economy which has been impacted by a number of issues including the rise of fracking. The practice of hydraulic fracturing, or fracking, has changed the supplier side of the equation for oil production in the United States. The increase in fracking throughout the “lower 48” has decreased the strategic importance of Alaska to the oil producing companies. It has also created conditions were the U.S. has a bloated supply of oil amid a time of decreased demand for the resource, we are essentially overproducing oil and the market has not reset itself.

 

The Kayakers

 

The environmental groups and the “kayakers” as they are known in Alaska are thrilled at the announcement that oil production will be halted for the foreseeable future. The rationale is simple: the halt to drilling protects wildlife as well as protects against the release of carbon reserves from the excavation process which have been linked to climate change.

 

Some scientific studies already display an increase in the ocean temperatures without the excavation efforts going on in that region. This warming of the ocean has a direct impact on the rates of polar ice melt. Any disruption to the environment from external sources creates a domino effect on the rest of the ecosystem.

 

Environmental groups, both locally and nationally, have been working to raise the awareness of the potentially negative consequences to drilling in the Arctic and the direct correlation they would have on a number or natural resources.

 

Cost Benefit Analysis

 

Unfortunately, even the idealists and the environmentalists understand that the decision by Shell and other oil companies to suspend operations in Alaska was not made as a result of environmental stewardship. It was made out of a cost benefit analysis which also, very importantly, took into account employee safety amid difficult or dangerous conditions in that region of the world.

The decision was also driven by market conditions where the supply and demand curve for oil is unfavorable at this point for the supplier. Shell and the other big players in the energy industry could not justify the expenditure with oil prices being as stagnant as they are currently. These companies have the reverse problem, they have to determine strategies to cope with an abundance of supply of oil domestically at this point.

 

The decision to suspend operations in the Arctic Ocean may have been driven primarily by economic reasons but it invariably provides a benefit to environmental protection. The excavation of that region could have triggered negative consequences for our natural resources and our ecosystem which would have impacted us for generations to come.

Senseless: A Tragic Morning in Virginia

I was running on the elliptical at my gym this morning when the breaking news came across CNN about the tragic and truly senseless shooting of two journalists in Virginia on live television while they worked a routine news story. Alison Parker and Adam Ward were both in the prime of their lives and their careers. They were brutally shot to death by a former employee of the same TV network who had some sort of vendetta against both of these former colleagues.

 

The shooter eventually took his own life with a self-inflicted gunshot wound and died in the hospital around 1:30 this afternoon. I still cannot believe that such a senseless crime happened today in a small, rural area outside of Roanoke. I will never understand what drives someone to commit such a horrible act of aggression against another human being.

 

I was in shock as I watched the interview at the gym with the General Manager of the television station who was explaining that the cameraman, Adam Ward, was engaged and that his fiancée is one of the producers of the morning show, so she watched these horrific events transpire live in their newsroom.

 

It was at that point that I had a feeling that this crime was perpetrated by someone with intimate knowledge of their station because no other motive really made sense. The reporter, Alison Parker, was in a serious committed relationship with another fellow employee who was a news anchor, they have been together for three years. Therefore, a jealous ex-boyfriend did not fit in this situation. The nature of the crime suggested it was someone who knew them both, I was saddened to learn later that my suspicions were correct.

 

In another unfortunate sign of the times we live in, as I was running, CNN posted another news alert that New York City and their Counterterrorism Unit had bolstered security at all New York news stations. That made sense to me especially until they determined the motive behind this attack, if it was terrorism related then New York always has to be extremely cautious with that.

 

However, it is on these days that I even more fully realize how blessed I am to be alive. I become even more grateful for all that I have been afforded in my life because it is a reminder that at any point it can be taken away.

 

The shooter mentioned the tragedies in Charleston, South Carolina and at Virginia Tech in a manifesto he sent to ABC News. He mentioned being angry but wanting to die in peace. These tragedies he mentioned and including the one in which he caused by his actions today have become unfortunately commonplace in our country.

 

The recent movie theater shootings and the announcement late last week by Regal Cinemas that they would begin a policy of checking bags and searching people for weapons have highlighted the unfortunate need for more security against gun related crime.

 

Furthermore, the series of school related violent tragedies punctuated by Columbine (which the Virginia shooter also mentioned in the document sent to ABC News) and the Sandy Hook tragedy are some of the most profoundly disturbing events we have experienced in our nation. This violence, this disrespect for life has to stop.

 

I covered a variety of aspects of the Sandy Hook school tragedy in my own work for a few different organizations. I have covered other events where I have had to interview someone or multiple people such as what Ms. Parker was doing today in a story on tourism when this horrific event transpired. I have never feared for my own safety while working a news story or an event or a fundraiser where I was representing a media outlet or submitting the story to a variety of outlets. We live in a nation where that should not be acceptable under any circumstances. These young people were just doing their jobs, something has to change, something has to be done to deal with gun related violence in America.

 

I am not sure what the solution is, and quite frankly, I do not have a solution. I just feel very strongly that human life is sacred, that all life should be protected, and that innocent people should not die at school or at work or in a public place in a civilized society. This crime today, and other attacks like it, are completely senseless and they simply must be eliminated from our national way of life. We should not, and honestly, cannot allow these sorts of tragic crimes where innocent lives are taken to continue.

 

The main issue here in this case, and with many others like it, remains that the root cause is not addressed. In many cases those who carry out these horrific acts have problems or issues that are not being addressed. An improvement in the availability of mental or psychological counseling and intervention would resolve these situations before these people are pushed to the breaking point and taking the lives of others. Something has to be done to change how we as a society deal with these issues.

 

My thoughts and prayers go out to the families of the victims today, to the family of the man who caused this tragedy, and to all those who knew those who died this morning in Virginia. My prayers continue that one day we will find peaceful solutions to our societal problems and that our culture will embrace the concept that all human life is valuable and should be respected. My prayers continue that other Americans agree with my sentiments and that tangible progress can be made to end this senseless violence in our country on a permanent basis.

Poetry by Frank J. Maduri: “Drought Conditions”

I wrote this poem over a year ago while working on a news story on the California drought. In searching through my older poetry for something else I thought I would share it and it, sadly, is still very relevant today. The West is still in a drought and society is still grappling with these same issues.

 

“Drought Conditions”

 

I’m working a news story about California

They and the West are without water

Another ominous sign of climate change

The drought is so severe, the stats staggering

The West has lost 63 trillion gallons –

In a 3 year period and whole cities

Are restricting water and fining violators

But Nestle is still allowed to bottle water –

From California springs and sell it for profit

Across state lines, while others have no water

Nevada has no water and no full time jobs

A drought of two critically necessary commodities

People are stuck literally without water or money

Arizona & New Mexico have no water either

And have immigrants flooding their borders

The notion we should reject these suffering –

Often ill and poor souls shows a drought of another kind:

It’s a drought of our societal morality

 

They want to end the words “under God”

From our time honored Pledge of Allegiance

A drought on our national root values

Companies are moving out of America

To avoid paying their corporate taxes

A drought of their patriotic responsibility

The news media wants to drive fear

Fear of everyone and everything different –

Than you are. A drought of hope

 

Society shifting into secularism

Promoting individualism and relativism

A drought on our consciousness

A drought on our communal harmony

A society of “me” and not “we”

What about “We the people”?

There’s no mention of “I” by the Founders

A drought of our civilization

Aimed at keeping us focused away-

Away from the real problems

 

A drought in Africa causing famine

Children dying in fields by the dozen

I.S.I.S. roaming and prowling

Killing innocent people indiscriminately

A drought of any basic human dignity

A drought of any respect for human life

These problems, all of them could be addressed

If we all banded together in harmony

If we ignored society and turned to God

For He is the Living Water

That will heal this parched Earth

 

 

Copyright – 2015 – Frank J. Maduri – All rights reserved. No copying, duplication, reproduction, or use of this content is permitted without the express written permission of the author.