Venezuela Slips Further Into Chaos

Grind for August 24th, 2018
“I have great faith in fools; self-confidence my friends call it.”

– Edgar Allan Poe

For Your Health

The Headline

Pepsi to purchase SodaStream for $3.2 billion

The Grind

PepsiCo Inc. has agreed to purchase SodaStream International, one of its fiercest critics, as consumers move towards sparkling water and away from sugary sodas.

The deal was agreed on just four weeks after Pepsi CEO Ramon Laguarta approached SodaStream executive Daniel Birnbaum. According to people familiar with the deal, there were no other bidders involved.

Israel-based SodaStream offers countertop appliances that allow users to carbonate tap water at home. The machines, which include reusable bottles, have become increasingly popular as consumers seek to reduce plastic waste.

SodaStream entered the market with a “create your own soda” pitch, but has since positioned itself as a maker of homemade seltzer.

“Sparkling water has grown more quickly than the overall bottled water category in the US, clocking volume growth of 38% last year, reports The Wall Street Journal. “That compares with 7% growth for the overall packaged-water industry.”

The Details

SodaStream has long criticized Pepsi for its use of plastic.

“The bottled water industry is the biggest marketing scam of all time,” said Mr. Birnbaum last year when Pepsi introduced its premium bottled water brand LIFEWTR.

Pepsi’s Finance Chief, Hugh Johnston, insists Pepsi shares SodaStream’s views on the environment.

“SodaStream’s point of view is that they want a healthier, more sustainable planet,” says Johnston. “There was a good cultural match here in terms of the values.”

Pepsi has been under pressure this year to restructure its brand amid weak sales of its core beverages (Pepsi, Mountain Dew, and Gatorade).

Johnston believes the acquisition of SodaStream will enable Pepsi to take advantage of the growing demand for sparkling water as well as reach markets in Japan and Germany, where there is a strong market for “in-home beverage creation.”

Desperate Times

The Headline

Venezuela drops the value of its currency by 95%

The Grind

Venezuelan President Nicolás Maduro on Sunday announced a desperate economic plan to pull the country out of its death spiral.

“We are going through a re-balancing process,” said Maduro. “This does not happen overnight.”

Key changes to take place beginning on Monday:

— Bolívar drops nearly 95% in value; is renamed “sovereign bolívar”

— Bolívar to USD exchange rate increases from 250,000 to 6 million

— Massive increase in minimum wage

— 4% increase in value added tax

The sovereign bolívar will be pegged to the state’s oil-linked cryptocurrency (the petro), meaning it will fluctuate in line with oil prices.

The petro is currently valued at about 3,600 sovereign bolívars (60 USD).

The Background

Roughly 7% of Venezuela’s population (2.3 million people) has fled the country since 2015.

Those who continue to live in Venezuela struggle with severe food and medicine shortages, high unemployment, political unrest, and triple-digit inflation. Those who choose to leave face increasing violence from residents of other countries.

Last weekend, Ecuador and Peru announced new border controls designed to keep fewer Venezuelan migrants from gaining entry.

According to the United Nations, more than 1 million Venezuelans have entered Colombia over the past 15 months. At least 500,000 have fled to Ecuador since January, including 30,000 this month.

On Saturday, a mob of Brazilians burned down a migrant camp in the border town of Roraima after a local store was robbed (allegedly by Venezuelans). Brazil dispatched 120 troops to clean up the incident, which sent roughly 1,200 Venezuelans fleeing back home.

Did you know… One cubic mile of seawater contains about 50 pounds of gold.