☀️☕️ Mega-Supermarkets, Food Deserts and Pharmacy Deserts

📊 Also: PCE Thursday; Obesity Viking roars; PlayStation slashes; No Apple car; Japan core inflation spot-on; B57k 🎓 Antitrust

📈 Market Roundup [28-Feb-24]

US large-cap S&P 500 closed 0.17% UP ▲

Tech-heavy Nasdaq Composite closed 0.37% UP ▲

Pan European STOXX Europe 600 closed 0.18% UP ▲

HK/China's Hang Seng Index closed 0.94% UP ▲

Japan's broad TOPIX closed 0.18% UP ▲

📝 Focus

  • Mega-Supermarkets, Food Deserts and Pharmacy Deserts

📊 In the Markets

  • PCE Thursday; Obesity Viking roars; PlayStation slashes; No Apple car; Japan core inflation spot-on; B57k

📖 MoneyFitt Explains

  • 🎓 Antitrust

💸 Personal Finance Corner

📝 Focus

Mega-Supermarkets, Food Deserts and Pharmacy Deserts

The Federal Trade Commission and eight states are suing to block supermarket chain Kroger’s $24.6 billion plan to buy smaller rival Albertson and bolster Kroger's position as the second-largest player in the US grocery market, with a combined 22% share, behind Walmart at 34.8%.

The antitrust🎓 regulator is warning that it would likely lead to further grocery price hikes amid already rising food costs, which have increased by 25% over the last four years. This action is in line with broader Biden administration efforts to prevent giant companies from doing deals that could lead to less competition and fuel inflation, exacerbating consumer financial strains.

Kroger counters with its business model of reducing prices annually since 2003, the need for efficiency gains for its unionised workforce (vs. non-unionised Walmart, Costco, Amazon and fast-growing Aldi) and its proposed divestiture of over 400 stores and distribution centres (or more) to C&S Wholesale Grocers. But the FTC is haunted by its greenlighting of Albertson’s 2015 acquisition of Safeway, where a similar divestiture to a tiny firm led to the latter’s bankruptcy and store closures.  

..... ▷ The Kroger-Albertsons deal could lead not only to store closures in neighbourhoods where both chains have a presence, easing competition for the remaining one, but the likely shuttering of less profitable outlets. 

And that could exacerbate the lack of grocery stores in poorer communities, potentially leaving more areas without access to essential services.

..... ▷ “Food deserts” are areas in the United States where residents face limited access to healthy, affordable foods. 

These communities, often concentrated in low-income and historically marginalised regions, lack grocery stores or markets that offer fresh produce, whole grains and lean proteins. 

As a result, people in food deserts rely on processed and unhealthy options, leading to health disparities. 

Chronic diseases like obesity, diabetes, and heart conditions are more prevalent in these areas due to inadequate nutrition.

Just tape your prescription to a tumbleweed and hope for the best. - Image credit: Tenor

..... ▷ Having pharmacies within supermarkets is not exclusive to the United States, but it is much more common there than in many other countries.

As a result, the potential closure of less profitable stores after the deal could further limit pharmacy services, impacting low-income individuals' access to vaccinations and essential medications in poorer urban and rural areas.

Similar to food deserts, where healthy food options are scarce, there are “pharmacy deserts” in working-class neighbourhoods. Research from USC shows that one in three neighbourhoods in populous US cities lacks easy access to pharmacies.

📊 In the Markets

With corporate earnings season winding down, US socks closed near flat on Tuesday as investors awaited inflation and economic data that could influence the timing of a Federal Reserve interest rate cut. 

Thursday's release of the January personal consumption expenditures price index (PCE), the Fed's preferred inflation gauge, is the most keenly awaited datapoint this week. Meanwhile, Fed Governor Michelle Bowman again suggested a cautious approach to rate cuts due to ongoing inflation risks. 

And Bloomberg reports that Apple is shelving its never-confirmed plan for a Tesla-busting EV to concentrate its firepower on AI.

Calm down, King Ragnar, it’s just a Phase 2 trial - Image credit: Vikings (2013-17) / History Channel via Tenor

Another Obesity Horse in The Race. Viking Therapeutics surged 121% on positive results from its obesity treatment drug in a mid-stage “Phase 2” study, bringing its one-year gain to 672%. 

Patients on Viking's VK2735 lost up to 14.7% of their body weight, 13.1% better than its placebo group. Eli Lilly's Zepbound Phase 3 study resulted in just a 7-8% improvement over its own placebo group. 

The news is particularly bad for Eli Lilly as Zepbound acts in the same way as VK2735. Both mimic the activity of receptors called GLP-1 (glucagon-like peptide-1) but also GIP (gastric inhibitory polypeptide) and improve both the feeling of satiety and blood sugar markers while slowing down the speed at which the stomach empties itself. (Novo Nordisk's Wegovy/ Osempic molecule semaglutide and Zealand/ Boehringer’s survodutide work on GLP-1 alone.) [MFM: GLP1ng down Obesity Drugs - more than a 2-horse race.]

Asia-Pacific markets traded mixed Tuesday, with Hong Kong stocks leading declines and Japan’s Nikkei 225 giving up earlier gains. Wall Street's retreat from record highs dampened sentiment. 

Sony Interactive Entertainment announced plans to lay off approximately 900 employees, constituting 8% of its global PlayStation workforce. Layoffs will impact employees worldwide, with the closure of PlayStation's London studio and other affected studios. This move follows a recent sales forecast reduction for the PlayStation 5 console, with Sony revising sales projections to 21 million units from an earlier forecast of 25 million. The announcement reflects ongoing challenges in the gaming space. [MFM: Game Ov…?]

Japan's core consumer prices in January were up by 2% from a year ago, exceeding expectations of 1.8% and matching the Bank of Japan's 2% inflation target. Core CPI in Japan excludes fresh food prices but, unlike core inflation data in most other countries, includes oil products. 

Incidentally, in the UK, core inflation does exclude volatile items such as food and energy prices, but alcohol is included. Well, of course it would.

Somewhere in England it’s always 5pm somewhere else in the world. - Image credit: Tenor

Bitcoin surged past $57,000, its highest since December 2021, driven by MicroStrategy's $155 million purchase of 3,000 bitcoins. Analysts cite inflows into bitcoin ETFs and the upcoming halving event as additional bullish factors.

📖 MoneyFitt Explains

🎓 Trustbusting! Antitrust, monopolies, competition and consumers

While it may seem anti-capitalistic for a government agency to stop one private company from buying or merging with another on either agreed or hostile terms, there are strong reasons for it to happen!

Competition or antitrust laws exist to protect consumers from unlawful monopolies or unfair business practices which would harm them through higher prices and less competition, while benefiting certain powerful companies.

The stated mission of the US Federal Trade Commission (FTC) is to protect the public from deceptive or unfair business practices and from unfair methods of competition. The European Competition Commission and the Competition and Markets Authority in the EU and UK have similar mandates.

Preventing mergers and acquisitions from resulting in monopolies is perhaps the easiest part of the job, but firms that have become monopolies or overly concentrated market power can also be broken up.  

Collusion between several companies in formal or informal cartels with practices such as price fixing is also forbidden, though proving it in court can be a lot harder.

Weird name, though.

The word "antitrust" is most often used in the US and comes from the battle with "trusts", which were pioneered in the 1880s by oil magnate John D Rockefeller to group companies across US state lines under one controlling legal body specifically to concentrate power and reduce or eliminate competition. Thus, was born the Standard Oil Trust. (S for Standard, O for Oil, hence "ESSO".) Only in 1911 was it finally broken up and split into 34 companies.

In the US, both the Federal Trade Commission and the entirely separate Department of Justice Antitrust Division enforce federal antitrust laws, agreeing to take cases based on expertise in particular industries or markets. Perhaps just one agency would seem... monopolistic?

💸 Personal Finance Corner

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