fortune--2020-04-20--The trillion-dollar question: How far will GDP fall?

“Bad” doesn’t even begin to tell the full story.
And yet “bad” is the conclusion every economist reaches when they run the numbers on the second quarter. The “Great Cessation” will result in a hit to the U.S. economy unlike any ever seen. All we’re left to argue over is whether the eventual recovery will be V-shaped (a quick, sharp rebound), U-shaped (a more protracted turnaround), or the dreaded, L-shaped (a bottom with no recovery) variety. Everyone who has ventured a prediction on GDP is starting from the same equation. It will be familiar to anyone who took “Intro to Macroeconomics” in college: GDP=C + I + G + (X – M).
The most important part of that equation is C: In 2019, consumption, the engine, accounted for 68% of U.S. GDP. Of that, services—paying for a doctor’s visit, hiring a management consultant, or booking a cruise ship vacation—is a massive part, representing 47% of the $21 trillion economy. Purchases of durable goods (think autos, laptops) and non-durable goods (food, clothes, shampoo) make up the rest, or 21% of the U.S. economy.
“You’ve probably cut back on consumption of discretionary goods—automobiles, household appliances, luxury items, building materials, consumer electronics. All those things add up, and they’re falling pretty sharply. Some of them are falling out of bed,” explains Mickey Levy, chief economist for Americas and Asia at Berenberg Capital Markets.
Drilling down on the Services numbers, Goldman Sachs calculates a 90% decline in sports and entertainment spending in April, and 75% falls in spending on public transportation and food services, which includes restaurants. Also, they predict a 65% drop in hotel bookings. About the only sector of consumption that could actually grow is healthcare spending, which Goldman sees climbing 1.6%.
So, with Goldman, Bank of America, Deutsche Bank and NatWest each estimating at least a 30% Q2 plunge, it’s safe to say consumer spending will fall by roughly $450 billion over the next three months.
“I” or business investment, meanwhile, accounts for 17% of GDP. (With C+I, we’re already at 85% of the U.S. economy). It includes everything from factories, manufacturing equipment, IP investments and inventory turnover. U.S. manufacturers account for 11.4% of economic output, and they’re hurting. According to the Institute for Supply Management, every facet of its manufacturing index—from new orders to employment to prices—shrunk in March. No surprise there as factories across the country, including those run by Boeing, America’s biggest manufacturer, plus the auto majors, shut down. April is expected to be even worse. Goldman forecasts a 35% decline in overall manufacturing activity—with the biggest hits to automobiles and parts suppliers.
Which brings us to one area of the equation expected to grow: G, for government spending. But that’s tricky. You’d think a $2.2 trillion stimulus bill and the hundreds of billions the Federal Reserve is pumping into the financial system would lift GDP. Technically, most of that is defined as transfer payments, which, by definition, don’t add to G. In the CARES Act, as it’s called, the government is committing up to $16 billion on the purchase of vital medical gear—which would lift GDP—though it’s a sum that’s unlikely to make much of a difference on the overall number—or for America’s frontline doctors and nurses, for that matter.
Coronavirus has devastated global trade, which means imports and exports will both crash. The U.S has run a trade deficit for years, a persistent drag on GDP. The net exports (X-M) tally will actually worsen in 2020, Goldman says. Imports, aided by a strong dollar, will outpace exports by roughly $190 billion this quarter alone, it forecasts.
There is no tried and true mathematical formula for pandemic economics. Economists say they’ll watch weekly jobless claims figures, and recalibrate forecasts. From there, some will be working off a model that adapts Okun’s law, named after the American economist Arthur Okun who first posited that for every 1% rise in the unemployment rate, you get a 2% fall in GDP.
That might be too extreme a calculus these days. The CARES Act, for one, is meant to blunt the economic destruction of mass unemployment posed by the coronavirus in the short term. Goldman reckons a better measure is a modified Okun—the “half-Okun,” if you will—that suggests a 1:1 correlation between rising unemployment and falling GDP.
But even the half-Okun paints a frightening picture. With consensus GDP expectations topping negative-30, that would portend Depression-era jobless numbers. Sure enough, the St. Louis Fed ventured the unemployment rate could hit as high as 42%. Now that would be bad.
A version of this article appears in the May 2020 issue of Fortune with the headline “How far will GDP fall?”
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Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-04-20--Crude math: Why $10 oil could be worth less than nothing

Who will pay for the coronavirus bailout ?
If you ’ re under 50 and working , you will

Oil prices are still sinking.
Despite a sweeping plan by OPEC+ to cut production, the hit to oil demand from global COVID-19 lockdowns—and dwindling storage—is sending crude prices to levels not seen for at least 20 years.
On Monday morning in Europe, WTI crude, which is weighted toward U.S. crude, was down nearly 38% to $11.30/barrel—the lowest level in more than two decades, surpassing the 18-year low on Friday. The Brent crude contract, which traditionally reflects the North Sea, was down 6% on the day, at $26.36/barrel.
“The real problem of the global supply-demand imbalance has started to really manifest itself in prices,” said Bjørnar Tonhaugen, head of oil markets at consultancy Rystad Energy, in a morning comment. “As production continues relatively unscathed, storages are filling up by the day. The world is using less and less oil, and producers now feel how this translates in prices.”
Until even more commitments to production cuts from oil-producing countries arrive, prices still had further down to go, he predicted.
The current dip reflects just how weak global demand is for oil—and how little impact, ultimately, even the 9.7 million barrels/day plus of production cuts from OPEC+ are expected to do to bring prices back while widespread lockdowns are in force.
Last week, the International Energy Agency forecast global oil demand will decline by a record 9.3 million barrels/day in 2020, compared to last year—and that’s if demand starts to recover in the second half of the year. The demand drop in April was forecast to be 29 million b/d compared to 2019, with May seeing a drop of 26 million b/d.
The deep weakness of the WTI price is slightly misleading, because the current price is for the May contract—which is about to close, on Tuesday. In the days before one month closes, most of the trading moves onto the next contract: in this case, June.
Such a structure—with earlier months pricing lower than later months—is common in oil markets, unless there is a near-term supply shock that produces demand to buy oil immediately. That gap also tends to get wider in the days before a futures contract closes. On Monday, May was nearly $9/barrel weaker than June.
This month, however, that pattern is exacerbated because production cuts are not expected to even begin until May—which means little hope of the oil market finding more of a balance between supply and demand that month, given the sheer size of the oversupply. Meanwhile, storage space globally is becoming scarce, and Texas’ Cushing storage facility is filling up rapidly, with 55 million barrels of the total capacity of 76 million already being used, according to the U.S. Energy Information Administration.
That creates even less demand for oil in the near term—with Bloomberg reporting last week that sellers in Texas were offering some oil for as little as $2/barrel. That was raising the prospect that sellers may eventually even have to go negative—that is, pay others to take their oil, in order to free up storage space. To wit, analysts warn that storage space is becoming more valuable than the oil itself.
That scraping $0 price also reflects the fact that as weak as the futures contracts may be, demand in the near-term world of physical oil trading, where cargoes of crude must get bought and sold, is much weaker.
Globally, crude is selling for a “huge” discount to the futures contract, according to S&P Global Platts, with the gap between the physical dated Brent contract and the Brent futures contract—in effect, the gap between the real world and the futures market—widening to at least $12/barrel late last week.
More must-read energy sector coverage from Fortune:
—Shell is largest global energy company to commit to net-zero emissions by 2050
—How Global 500 companies are responding to the coronavirus
—IEA warns of “staggering” demand drop in global oil markets
—For boom-bust oil towns, coronavirus is a very different kind of crisis—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: PSEG CEO on climate change action: “It should have been done yesterday”
Subscribe to The Loop, a weekly look at the revolutions in energy, tech, and sustainability.


fortune--2020-04-20--These women are the World’s Greatest Leaders

Good morning, Broadsheet readers! Sheryl Sandberg’s Option B is more relevant than ever, Michelle Obama weighs what her 2020 involvement will look like, and these are 2020’s greatest leaders. Have a productive Monday.
– World’s greatest. The governors. The mayors. Mary Barra. Rihanna.
These are the World’s Greatest Leaders, as honored in the May issue of Fortune. The annual list usually highlights all kinds of leadership, but this year is devoted to those demonstrating particular skill and inspiration during the coronavirus crisis.
You’ve probably heard about the governors, Michigan Gov. Gretchen Whitmer among them, who are fighting for their citizens’ health and financial security during this crisis. The mayors—San Francisco’s London Breed, Seattle’s Jenny Durkan, Chicago’s Lori Lightfoot, and Oakland’s Libby Schaaf—are doing the same.
Rihanna is No. 16 on the list of 25 for her significant financial commitments—among the first from a celebrity—to helping families impacted by the pandemic. Mary Barra and her efficacy in pivoting GM to manufacture ventilators put her at No. 9. There are also appearances by Angela Merkel, Challenge Seattle’s Chris Gregoire, and Rachael Bedard, the Rikers Island physician who won’t let the public forget about her vulnerable patients. You can see the whole list here.
For more from Fortune‘s May issue—and a different kind of leadership—check out my story about the future of the restaurant industry. I spoke to different kinds of restaurateurs—from the CEO of Chipotle to the owner of a small eatery—about what’s at stake for their businesses and industry. Moonlynn Tsai, co-owner of the New York Malaysian restaurant and coffeehouse Kopitiam, went through two years of savings in a month. She’s fighting for her 28 employees and her establishment, a touchstone of the Chinatown community.
Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe
ALSO IN THE HEADLINES
- The world's Option B. Sheryl Sandberg wrote her book Option B about personal grief. But she's adapting its lessons to the kind of mass grief the world is experiencing right now over the coronavirus pandemic. In this interview, she shares that she lost a family member (her fiancé's cousin) to complications from the virus. Business Insider
- Her own kind of politics. Even though President Barack Obama has endorsed Joe Biden in the 2020 presidential race, Michelle Obama has not yet officially backed the former VP and may choose not to to avoid getting back into the partisan fray. For now, her primary focus is voter turnout. NPR
- First pick. In the WNBA draft on Friday, Oregon's Sabrina Ionescu—the standout of this year's college basketball season—was the first pick, as expected; she went to the New York Liberty. The draft also included honorary picks for the late Gianna Bryant and her teammates, Alyssa Altobelli and Payton Chester. ESPN
- Inside voices. Think childcare during a pandemic is tough in the U.S.? In Spain, children aren't allowed outside—at all. The country is considering relaxing the strict rules. NPR
MOVERS AND SHAKERS: Joy Driscoll Durling, CIO and digital enablement officer of Vivint Smart Home, joined Domo's board of directors.
IN CASE YOU MISSED IT
- Shoot for the moon. If you're at all interested in women and space, you've got to check out this series. The package covers everything from the women who could be the first to walk on Mars to the new spacesuit that wasn't quite designed for women to the female-dominated NASA jobs. Marie Claire
- The original coronavirus discovery. In 1964, June Almeida looked into her microscope and found what would soon be known as "coronaviruses." She's finally getting her scientific due: National Geographic
- The risk of mikvah. Synagogues are closed and Passover seders took place over Zoom, but one tenet of Orthodox Jewish life remains in place: the mikvah, or the ritual bath Orthodox women must take after their periods before getting physically close to their partners again. Women are scared of the potential for coronavirus transmission in the shared pools, but don't see alternatives—besides physically separating from their husbands indefinitely. The Atlantic
- Dress for climate success. Greta Thunberg, fashion icon? Even though the climate activist discourages buying more than you need, children's brands are now selling clothes inspired by Thunberg's yellow raincoat or even her own image. The real way to dress like Greta, though, is to buy secondhand. Washington Post
ON MY RADAR
How Erykah Badu created her own livestream company for ‘Quarantine Concert Series’ Variety
It’s time for the hospitality industry to listen to black women Eater
Patti LuPone, live from her basement The New Yorker
Allow Fiona Apple to reintroduce herself Vulture
PARTING WORDS
"I’m not trying to take away anyone’s diaper delivery, but no corporation is above the law.”
-Stacy Mitchell, co-director of the Institute of Local Self-Reliance, who advocates for stricter regulation of Amazon


fortune--2020-04-20--3 restaurateurs on how the battered food-service industry is weathering the coronavirus pandemic

This article is part of a Fortune Special Report: Business in the Coronavirus Economy—a look at the impact of the pandemic on more than 50 industries.
The coronavirus recession has left no industry untouched, but the restaurant business is arguably the hardest hit so far. The food and beverage sector accounted for 60% of the jobs lost in March, the first wave of the tsunami that has since prompted 16.8 million Americans to apply for unemployment. The impact on those workers foreshadows a supersize blow to the economy at large. The restaurant industry—which includes five chains large enough to appear in the Fortune 500—contributes an estimated 4% of the U.S. GDP, or roughly $1 trillion.
To get a sense of the ways in which the industry has been impacted—and how it might ultimately pick up the pieces, Fortune spoke to three restaurateurs, each leading a very different type of establishment.
Brian Niccol
Chairman and CEO, Chipotle
National chain
2,600 locations
$5.6 billion in annual revenue
85,000 employees
The Impact of the virus on Chipotle and its employees “breaks my heart,” says Brian Niccol. The crisis comes at a particularly frustrating time for the new CEO, who was guiding the chain past its earlier food safety issues by redesigning restaurants and rolling out new menu items like carne asada—changes that helped provide a 15% bump in revenue last year.
“We’ve kind of hit the pause button on those things,” he says. Instead, Chipotle, like its chain-restaurant peers, is focused on adapting to the new reality: plunging consumer demand and a workforce increasingly concerned about its health and safety—not to mention longer-term job security. The brand has reduced hours at 10% of its stores and closed 3% of locations—mostly those in shuttered malls or shopping centers—furloughing those employees. The rest of the hourly workforce, still coming in, received a 10% pay bump through mid-May; Chipotle employees typically get three days of sick leave, and now those working during the crisis are eligible for up to two weeks of sick pay, depending on their work schedules.
$150 billion Estimated cash flow required for independent U.S. restaurants to pay all current expenses
Some long-term changes to the company may be positive, Niccol says. More diners are now turning to the chain, traditionally a lunch staple, for dinner, he notes. Digital orders—already up 90% last year to 18% of total sales—will, he expects, become a permanent consumer habit (although that revenue stream largely depends on the continued success of partners like Uber Eats). Niccol also predicts that restaurant industry employees, burned by rapid layoffs at other companies, may start paying closer attention to the financial health of their employers (Chipotle has prioritized a healthy balance sheet as it has recovered from its 2015 E. coli outbreak): “Employees are going to have a closer eye on, ‘What is the health of my company? How good of a cash position are they in in the event of a crisis?’”
Tom Colicchio
Owner, Crafted Hospitality
Midsize restaurant group
5 Crafted Hospitality locations
4 ’wichcraft locations
475 employees
Tom Colicchio has high standards—for his staff, for Top Chef contestants, and for the nation’s lawmakers. As one of the founders of the newly created Independent Restaurant Coalition (IRC), the Crafted Hospitality and ’Wichcraft owner has become a spokesman for the sector’s 11 million or so servers, chefs, kitchen staff, and hosts, and is calling for government support. “Without help, the restaurant industry is going to be decimated,” he says. Colicchio is lobbying for changes to Congress’s CARES Act that account for the particularities of running a restaurant. For instance, the legislation forgives loans for companies that keep employees on the payroll for at least eight weeks after disbursement; many restaurants need the money now but suspect that it will take far longer to return to business as usual. Colicchio opted to close the doors of his establishments on March 15, sending his nearly 500 employees to file for unemployment rather than try to transfer to a takeout model as some of his fine-dining peers have done. The risk outweighed the pros of staying open, he says: “I couldn’t live with myself if, for a couple thousand dollars a night, someone may end up on a respirator.”
The IRC is pushing for new tax rebates and other longer-term support, but for Colicchio, the immediate priority is keeping the industry—and its role as a community touchstone—alive. “Our neighborhoods without restaurants aren’t neighborhoods,” he says. “Our buildings with ground floors empty—that just feels like the city is dead.”
Moonlynn Tsai
Co-owner, Kopitiam
Independent restaurant
1 location
28 employees
Kopitiam’s Moonlynn Tsai in New York City’s Chinatown. Courtesy of Yin Chang
It was only January when Manhattan’s Chinatown, home to Moonlynn Tsai’s Malaysian coffeehouse and restaurant, first felt the sting of the coronavirus. Diners, concerned about the new disease in China, began avoiding the area—despite an utter lack of evidence that the virus was present in the neighborhood.
Three months later, Kopitiam—named for the Hokkien word for coffeehouse—remains open, but it’s making less than 5% of its usual sales. The beloved eatery, first opened in 2015, is deeply entrenched in the community. Its staffers are a mix of local high-schoolers and elderly residents, and Tsai and her business partner, chef Kyo Pang, are trying their hardest to continue serving their neighbors. The pair furloughed their staff on March 17, days after New York City ordered restaurants to close, but paid all employees through April 1. They’ve tried to keep some revenue coming in with takeout orders, as well as gift cards and special offers like an at-home kit to build the restaurant’s famous kaya jam toast. But the challenges continue. Tsai said suppliers have gone from delivery every day to three times a week. In just a month, Kopitiam burned through all its savings from the past two years.
Looking ahead, Tsai fears for her fellow Chinatown establishments. If her restaurant—fawned over by food critics and with a savvy digital presence—can’t weather the storm, what will happen to others?
As for Kopitiam, she’s not ready to think beyond the next days. “I’ve learned to numb myself. If I start sitting still, all the emotions are going to come,” Tsai says. “We were hoping by now we could expand, but everything we had for that has been wiped out. If this happens again—how do we make sure we’ll be okay?”
A version of this article appears in the May 2020 issue of Fortune with the headline “86 the restaurant industry?”
More coronavirus coverage from Fortune:
—Saving a city: How Seattle’s corporate giants banded together to flatten the curve
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—Inside the surreal “Mask Economy”: Price-gouging, bidding wars, and armed guards
—Researchers working on “contact tracing” say they welcome Apple and Google’s help
—How every sector of the S&P 500 has been impacted by the coronavirus selloff
—If you’ve been a little busy lately, here’s what’s going on with the 2020 election
—Looking for a travel refund? Here’s what airlines, hotels, and theme parks are offering
—PODCAST: COVID-19 might have upended the concept of the best companies of the year
—VIDEO: 401(k) withdrawal penalties waived for anyone hurt by COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-04-21--Singapore was once a coronavirus hero, but now it’s a cautionary tale. What happened?

From cookies to cashmere , the comfort economy gains momentum during the coronavirus pandemic

In the early days of the coronavirus pandemic, Singapore was a global standard bearer for taming the deadly illness. Now it’s home to Southeast Asia’s largest recorded outbreak and is racing to regain control.
One reason behind this reversal can likely be traced back to six days in February, when the earliest sign of what would become an explosion in cases among migrant laborers first appeared. It’s a cautionary tale of how even countries experienced in handling epidemics can be wrong-footed by this elusive disease, particularly when it takes root in disadvantaged communities.
In early February, Singapore had a low-level outbreak that it was containing effectively without disruptive measures like closing schools. It was being globally lauded for its calm, measured approach to the virus. Around the same time, a 39-year-old Bangladeshi national, one of an army of almost 1 million foreign laborers in Singapore, developed symptoms of the coronavirus.
In the days after he fell ill, the laborer visited a clinic and a hospital for help, only to be sent home each time. Home for the worker was a dormitory where men sleep about 10 to a room, sharing toilets and cooking facilities. He also visited the Mustafa Centre, a 24-hour shopping mall popular with migrant laborers and locals alike. It wasn’t until Feb. 7 that he was admitted to hospital and a day later, tested positive for the virus.
The Bangladeshi was Singapore’s patient number 42, and the first apparent case among low-wage foreign workers in the city’s dormitories. Infections among migrant laborers now account for more than 70% of the country’s 9,125 infections, and Singapore is seeing record daily increases in its tally, with new cases exceeding 1,000 on Monday and Tuesday.
The country didn’t record its first deaths until late March, but fatalities now stand at 11, and its less socially restrictive strategy has been replaced by a partial lockdown that’s being tightened and extended until June 1.
Opportunities Lost
Many governments have been caught out by the unexpectedly infectious pathogen, with opportunities for early containment lost as patients were sent home instead of being immediately tested and quarantined.
But unlike other Asian nations such as South Korea, some health experts say Singapore was slow to revise a response plan honed during its experience in 2003 with Severe Acute Respiratory Syndrome, or SARS. That strategy saw the nation focus on hunting down people who had come into contact with an infected person, a classic public health approach known as contact tracing.
Covid-19 — highly contagious and manifesting in some with little or very mild symptoms — has turned out to be “nothing like SARS,” said Jeremy Lim, an adjunct associate professor at the National University of Singapore’s Saw Swee Hock School of Public Health.
“The old playbook has to be thrown out and a new one written,” he said. “The difficulty for countries including Singapore is that one needs to write the playbook as they execute measures. It’s like the metaphor — fixing an aeroplane’s engine while mid-flight.”
The case of Singapore’s Patient 42 shares similarities with that of a patient in South Korea who triggered a turning point in that country’s epidemic, which has exceeded more than 10,000 cases.
Korean Pivot
Ten days passed between South Korea’s Patient 31 going to a hospital with symptoms, and when she was finally quarantined. In the days between, the woman, a member of a religious sect, attended services where people worshiped sitting on the floor, elbow-to-elbow for two hours at a time.
Until then, South Korea was — just like Singapore — testing people found through contact tracing. But faced with an explosive outbreak within a group that has more than 200,000 worshipers, Korean officials rapidly pivoted to a strategy known as community testing: it compelled church leaders to hand over a list of its members and began testing them all, regardless of whether they showed symptoms or had had contact with an infected person.
Because of its rapid pivot to community testing, South Korea’s epidemic spiked quickly but also ebbed rapidly. It managed to slow the growth of infection by early March and never had to institute a lockdown. Hong Kong also widened its virus response beyond contract tracing to include community testing as it became apparent the coronavirus was different to SARS, where those infected fell seriously — and obviously — ill.
After the emergence of Patient 42, Singapore didn’t appear to immediately undertake large-scale community testing within the foreign labor community, despite their living conditions being favorable to the spread of infectious disease and calls from worker advocacy groups. The country tested and quarantined 19 people who were in contact with the worker and asked companies that operate the often cramped dormitories to undertake more cleaning and take residents’ temperatures.
Singapore’s Ministry of Health didn’t respond to questions on how many foreign laborers were tested in the weeks after Patient 42, but officials’ comments indicate that large-scale community testing didn’t start until much later.
During a briefing on April 14 — by which time hundreds of infected workers were being discovered almost daily — the health ministry’s director of medical services, Kenneth Mak, said some 1,500 workers had been tested and there were plans to test 5,000 more. More than 200,000 of the laborers, many of whom toil on Singapore’s construction sites, live in the dormitories.
Singapore’s early public rhetoric indicated a reluctance to test widely, with a focus on those with symptoms to avoid wasting tests. On March 10, Mak said that “community testing for all people, irrespective of whether they have symptoms or not, will generate a lot of activity” but have a low yield.
Oft-Forgotten Group
Low-wage foreign workers comprise a fifth of the overall population in Singapore, but largely live separate from the local community. The dormitories — where clogged toilets and overflowing rubbish chutes have been reported — are a far cry from the country’s glitzy skyline showcased in Hollywood blockbusters like “Crazy Rich Asians.”
This is not the first time that an infectious disease has hit Singapore’s foreign workers, who earn as little as $18 a day.
In 2008, some were infected in an outbreak of chikungunya, a disease carried by mosquitoes that triggers debilitating joint pain. Their dormitories lacked ventilation and insect screens. In the same year, a worker who subsequently died from chicken pox spread it to 10 others and the dormitory director was eventually sentenced to jail. Singapore has dozens of worker dormitories, which are operated by private companies like Keppel Corp. and Centurion Corp.
“It’s hard to explain why the authorities did not up the ante in terms of infection controls at the dorms — perhaps there was a policy blind spot with the focus being on Singaporeans,” said Eugene Tan, a political commentator and law professor at the Singapore Management University. But “in public health, the migrant workers are very much a part of the community, and the early vigilance against community spread did not embrace the foreign workers.”
On Tuesday, Prime Minister Lee Hsien Loong said that most migrant worker infections being discovered are mild cases and vowed that the government would look after their health, welfare and livelihoods.
Lockdown Challenge
Singapore is now entering the third week of a partial lockdown it calls a circuit breaker. Social gatherings are banned and only essential businesses are allowed to operate. Schools are now shut, as well. The implementation has been unusually bumpy for a country used to being lauded as being efficiently run and whose citizens are known to be law-abiding. The penalty for flouting new social-distancing rules on the first offense went from a warning to a $300 fine within days, and just before the lockdown started, the government banned all personal gatherings after earlier only prohibiting those of more than 10 people.
“The many changing instructions — sometimes a few times a day — doesn’t give confidence that we’re indeed gold standard,” said Inderjit Singh, a former Member of Parliament with the ruling People’s Action Party.
National Development Minister Lawrence Wong told reporters April 14 that Singapore adjusts its measures based on the circumstances: “Our posture has not changed, our strategies, our approach has not changed,” said Wong, who co-chairs a ministerial task force to tackle the virus.
Singapore says it’s now aggressively testing in the foreign laborer community. It is also accelerating the construction of some worker dormitories and has shifted thousands of healthy laborers working in essential industries to temporary housing facilities that offer more space. These include vacant military camps, public housing units and lodgings built out at sea commonly used in the marine industry.
Manpower Minister Josephine Teo has said that the standard of living in dormitories should be bolstered. Doing so over the objection of employers who must bear the higher costs is “not only the right thing to do but also in our own interests,” she wrote in a Facebook post on April 6.
As for Patient 42, his condition is now stable after two months in intensive care on a ventilator, but he missed the birth of his first child while in the hospital, the advocacy group Migrant Workers Centre said on April 16 in a Facebook post. “He is able to breathe on his own and will require speech therapy moving forward as part of his recovery process.”
More coronavirus coverage from Fortune:
—The trillion-dollar question: How far will GDP fall?
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—Thermal-imaging tech is on the rise. Can it help fight the coronavirus?
—Privacy concerns split Europe’s push to build COVID-19 contact-tracing apps
—5 veteran investors on how to approach the coronavirus stock market
—More surveillance and less privacy will be the new normal after the coronavirus
—Looking for a travel refund? Here’s what airlines, hotels, and theme parks are offering
—PODCAST: COVID-19 might have upended the concept of the best companies of the year
—VIDEO: 401(k) withdrawal penalties waived for anyone hurt by COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-04-21--From cookies to cashmere, the comfort economy gains momentum during the coronavirus pandemic

Singapore was once a coronavirus hero , but now it ’ s a cautionary tale .
What happened ?

Subscribe to Outbreak, a daily roundup of stories on the coronavirus pandemic and its impact on global business, delivered free to your inbox.
Beauty is in the eye of the beholder, but the same might be said for comfort these days, too. Scroll through Instagram, and staying healthy and happy in the quarantine era appears to consist of bespoke sweatpants, CBD-infused gummies, and plush bedding delivered straight to your door.
Behold, the comfort economy: a potpourri of brands, retailers, and influencers—all targeting consumers looking for a little dose of self-care and some anxiety relief. This convergence of industries has already been brewing for awhile, but it has since exploded with the coronavirus pandemic and subsequent shelter-in-place mandates, forcing many people to self-isolate at home and practice social distancing when in public.
“Health and wellness retailers—from drugstores to fitness fashion retailers and the likes of Peloton—have been able to take advantage of shoppers’ penchant—and panic—to protect themselves and remain healthy,” says Wendy Liebmann, founder and CEO of market research consultancy WSL Strategic Retail. Retailers that sell groceries have won the day—so far, she says, but retailers that sell home and office goods along with pet supplies have also done well “as shoppers hunker down and cuddle up.”
“At Girls’ Night In, we’re expanding upon self-care to include ‘community care,’” says founder Alisha Ramos. “Self-care is not an end in itself; it’s a means to an end. For us, that end means giving back to the community around us and taking care of each other.” Meredith Jenks
The term “self-care” has different meanings for different people, but it has rapidly become part of the lexicon—especially for millennials and Generation Z—over the past few years.
For Alisha Ramos, founder of the popular newsletter Girls’ Night In, self-care is being able to tune in to what you need in the moment physically, mentally, emotionally, and socially.
“No matter your generation, we’re living in a more stressed-out, anxious world right now. The concept of self-care is an enticing antidote to that, and retailers have found ways to interpret it in various ways,” Ramos says.
Demographically, it’s a broad movement, according to Liebmann, although the more expensive self-care products and services are driven by higher incomes. And interest in natural, alternative remedies and services skews younger, she says. “Retailers are adapting to what shoppers want,” Liebmann says, noting her firm’s research has tracked shoppers moving toward this approach to taking care of one’s own health since 2014, evolving from what she describes as “sick-care to self-care.”
“This was grounded in the economic issues surrounding being sick—the cost of getting well, being out of work, etc.—to the growing stress of everyday life and a new set of values that emerged out of the 2008 recession…and the quest by Americans for greater well-being,” Liebmann explains. “The other factor that drove self-care was a lack of trust in many of the institutions and retailers who were ‘supposed’ to take care of shoppers’ health and well-being.”
At Girls’ Night In, which defines itself as a club for women who’d prefer to stay in on Friday nights, Ramos says the newsletter features products that her team is personally purchasing or eyeing. “It’s currently a sensitive time for shopping and consumer spending, so we’ve been careful to share products across a wide range of price points, as well as products created by smaller makers and businesses,” she explains.
After founding Parachute in 2014, CEO Ariel Kaye says she learned a great deal about intentional design and purposeful living. She’s included those lessons in her new book, “How to Make a House a Home” (Clarkson Potter). Courtesy of Parachute
“Self-care is a conscious choice to invest in your health and well-being, as well as personal growth and development,” says Ariel Kaye, CEO and founder of home essentials brand Parachute. “Finding ways to incorporate rituals that nurture and make you feel good are essential.”
She suggests a reciprocal relationship has emerged: Consumers are looking for goods, communities, and experiences that contribute to their happiness, and retailers have responded through content and physical products.
However, Liebmann remains cautious, stressing retailers recognize that as the economic crisis grows, shoppers will have to cut back on spending and maintain tighter budgets. Retailers will need to adjust with not only more affordable wellness and self-care products, but also respond with easier access to online options as well as empathetic digital marketing.
“Shoppers are moving from the panic of the first days of the pandemic. We are now seeing them consider the more mundane realities of everyday life,” Liebmann says. “Stress is reaching new levels as people juggle so much.”
Spring is traditionally a time to clean and refresh the home, and Parachute’s catalog offers a wide range of items, from bath towels to bedding, including mattresses. Since millions of people nationwide started working from home in mid-March, the company has seen a steep increase in sales for its classic bathrobe, made from 100% long-staple Turkish cotton using Aerocotton weaving technology. “Robes have transitioned into the everyday wardrobe, and I’m here for it,” Kaye exclaims.
Parachute’s classic bathrobe in “stone.” Courtesy of Parachute
Kaye says it became clear in the beginning of March that COVID-19 was going to impact Parachute’s business. On March 14, the company, based in Venice, Calif., closed its 10 retail stores for the foreseeable future. “Retail is a meaningful revenue driver for us, and our stores are profitable,” she says. But e-commerce sales have been holding up, and Kaye speculates customers are taking this time to invest in their homes to make them more comfortable and cozy. Parachute also has a growing hospitality program, partnering with boutique hotels on linens and robes, but the program has been forced to pause as the travel industry has been hit especially hard.
“I think that we are all slowing down and being more conscious as consumers,” Kaye says. “I see that people are looking for quality rather than quantity, and supporting local, small businesses in any way they can.”
“I miss my team and our office, but am happy that we get to connect virtually,” says Parachute CEO Ariel Kaye. “I remind myself daily that we’re all doing our best, and that we’re in this together.” Courtesy of Parachute
Parachute’s office employees are currently working from home, meeting for videoconference calls daily to track business, collaborate on projects, and just provide a check-in for everyone. Parachute did lay off a few members of its headquarters staff, and it has had to furlough its retail employees for the foreseeable future. “This is a big adjustment, personally and professionally,” Kaye admits. “There are days that I feel great and others that are a struggle. There is a lot of uncertainty to process, and that can feel overwhelming.”
Parachute has since partnered with Platform, a shopping center in Culver City, Calif., to offer its robes through a “drive-thru” retail service; customers can shop from their cars while adhering to social distancing mandates. The company is also building out its own curbside pickup program, and it launched free virtual styling consultations. When restrictions lift on nonessential businesses, Parachute is looking into in-store appointment shopping as well as “buy online, pick up in store” options. Longer term, Kaye says, Parachute looks forward to opening more retail locations across the country “when the time is right.”
The new look
The first step to getting comfortable at home—whether you’re working or not—starts with what you’re wearing. And suffice it to say, most of us aren’t putting on traditional office attire each day anymore. While April is expected to be a bloodbath for apparel retailers that rely on heavy in-store foot traffic, brands that deliver direct to consumers and transition well from season to season are expected to fare better. Athleisure sales, in particular, are expected to grow by 6.5% globally, according to UBS. (However, while been athleisure brands have been able to capitalize—so far—on the work-from-home shift, Liebmann cautions against getting overly excited. “For the most part, shoppers aren’t running out to buy new things,” she says. “They are mostly wearing what they have.”)
Nevertheless, Naadam—a luxury knitwear brand that many New Yorkers might recall from subway ads featuring serene models dressed in cashmere turtlenecks while holding baby goats—has seen sales surge over the past six weeks, tracking at more than 180% year-over-year, which CEO and cofounder Matt Scanlan attributes to the new safe-at-home lifestyle.
“Naadam is a fairly seasonal business, so we are in the fortunate position that the immediate impact of COVID-19 has not dramatically changed our financial outlook for the year,” Scanlan says, projecting 2020 will still be a year of growth for the brand. “While this time of year is comparatively less busy, since our peak season is September through February, we still have a 100% projected sales increase to last year.”
Naadam’s “Everyday” cotton jogger tracksuit. Courtesy of Naadam
Select women’s cotton and cashmere lounge sets sold out immediately, but Naadam recently restocked the products. And jumpsuits are also flying off the shelves—nearly 10,000 units were sold within the first two weeks they became available online. These aren’t your average sweatshirts that you might throw on for household work. They are $75 cashmere sweaters and $175 cashmere lounge pants. Cotton joggers start at $135.
“The demand for the product continues to be so high that we have had to pull back product,” Scanlan says. “The item goes offline in the next few weeks, and won’t be reintroduced until the fall.”
Naadam has seen increased cart sizes for loungewear products, resulting in higher average order values, which the company attributes to people shopping not just for themselves, but for family and friends with whom they are quarantined. Additionally, the brand has seen an increase in male shopping behavior online across all product categories. Typically, men’s sales represent 20% of overall business at Naadam, but currently, the company is tracking closer to 40%. “We are also seeing a lot of our first-time customers repeat-purchase in a very short time period of about two weeks,” Scanlan says. “All of this feels very circumstantial. We expect, overall, to have a much busier summer sales season as our product relevance has clearly been extended.”
Self-care represents many different categories of retail, Scanlan says, from consumer-packaged goods like skin care to apparel, such as activewear and loungewear.
“Ultimately, I think self-care is a residual effect of larger trends in consumer preferences, such as sustainability and health and wellness, both of which are a derivative of our global economy providing unparalleled transparency across global supply chains,” Scanlan says. “People have been given more information to make more informed consumer choices, and thus feel more empowered than ever to take control of their own wellness and well-being in all aspects.” That’s from what you eat, to your workouts and wellness routines, to your mental health, and, in Naadam’s case, to how you dress.
“If you are spending 95% of your time inside at home, then, in theory, 95% of your online purchases will reflect your behavior,” Scanlan says. Apparel will shift away from dresses and suits to loungewear and sleepwear, while bedding, home decor, and skin care—all of which easily converge under the self-care umbrella—have become top-of-mind purchases for consumers around the country. Yet this change in behavior has positioned some products for success and others for major difficulties. “We are in the fortunate position that our products have matched consumer demand for low-cost, high-quality loungewear,” Scanlan says.
“The uncertainty is scary, and the isolation can be difficult,” says Naadam CEO Matt Scanlan. “We lead such fast-paced lives, and this is a very real reminder of how quickly things can change and what truly matters most.” Courtesy of Naadam
So far, Naadam has been able to maintain its team of 80 employees, and Scanlan says there are no plans to furlough or make any other HR-related changes as a result of COVID-19. “Our business has not suffered in the short term, and we have made a commitment to keep our teams intact,” Scanlan says. “We think it’s really important we provide stability and not contribute to the larger economic shifts related to unemployment.”
While Zoom has become the most prevalent (or at least, buzzy) tool for teleconferencing, Scanlan admits his team spent some time juggling multiple systems with varying degrees of success. “We needed to acclimate to the technology systems for proper communication and accommodate meetings and plans that had been scheduled months in advance,” he explains. “Our business’s success hinges on strictly adhered to time and action calendars that support product production and development. There are dozens of checkpoints related to product testing, fitting, and planning that need to be done in person. Sample products have been shuttled around in passenger-less Ubers on a daily basis for weeks now.”
Anticipating warmer months ahead—when that cozy feeling might be too close for comfort in a turtleneck—Naadam is preparing to launch a temperature-regulating sleepwear collection, which was pushed ahead of schedule given the shopping climate right now. This is the first time that Naadam is launching sleepwear, but it has been in development for nearly two years. “We work across a vertically integrated network of global manufacturers that provides nimbleness and transparency, which has allowed us to maintain and even speed up our production launch schedule during this time,” Scanlan says.
Not-so-guilty pleasures
Another side effect of the COVID-19 outbreak: a shift in consumption patterns. The toilet paper shortage continues at many grocery stores in major cities, and alcohol sellers have also witnessed a stock-up mentality taking hold.
“Consumers are now buying in larger quantities and showing a vast preference for products that can be shipped to (and enjoyed within) the home,” says Catharine Dockery, a venture capitalist and founding partner of Vice Ventures. “They’re also continuing to spend on self-care products, more so than before, as they look to cope with the stress and isolation of quarantine.”
“Finding ways to incorporate rituals that nurture and make you feel good are essential,” says Parachute CEO Ariel Kaye. Courtesy of Parachute
Vice Ventures is a seed-stage fund that invests in startups within industries that are traditionally seen as “bad” or taboo, as outlined by vice clauses. These categories include cannabis and CBD, sex tech, e-gambling, and nicotine harm reduction. But these products are not mutually exclusive to self-care, at least not for its investors and customers. Dockery defines self-care as the implementation of products or behaviors that are intended to provide long-term mental or physical benefits to the individual. That could be anything from a new strain of cannabis (where legal) to a fancy new candle that makes you feel happy to be at home, she suggests, citing her own guilty pleasure: Diptyque candles, which range from $38 to $198 per unit.
Dockery sees two factors driving the self-care movement right now: the destigmatization of enjoyment and the idolization of productivity. “Having fun is simply getting more socially acceptable, and we’ve started to lose this social sense that life is intended to be a slog from beginning to end with the only definition of success being the family you leave behind and the material wealth you accumulate,” she explains. “I also see self-care as a way of further promoting a work hard/play hard mindset—especially popular in younger generations, in which individuals are taking better care of themselves in the hope that they see monetary, professional, or personal rewards.”
Under the Vice Ventures umbrella, Dockery thinks most of the brands in the firm’s portfolio have some aspect of self-care. A few of the most prominent examples: Maude, sex-positive products from body oils to toys; Recess, a CBD-infused sparkling seltzer; and Lucy, a maker of alternative, lower-dosage, smoke-free nicotine products. Both Lucy and Recess e-commerce sales have doubled over the past week, and Maude is indexing to surpass total sales this year by 200% over 2019 results, with a 20% increase in returning customers and, particularly, a 15% spike in lubricant sales.
Recess describes its brand as having “canned a feeling.” Courtesy of Recess
Early on in the crisis, when most of the quarantine precautions were confined to China, Dockery says some of the brands at Vice Ventures experienced production hiccups, with a few even running out of product owing to a combination of supply chain friction and consumer stockpiling behavior. “At the moment, we’re seeing the early effects taking place in companies that had a very short runway coming into the pandemic,” Dockery says. “This group is relatively well mixed between companies who were already in a difficult cash flow situation and those who had the bad luck to time a capital raise for early spring. Fundraising markets have dried up meaningfully, so most of those who had the ability to cut their burn and wait out the crisis have done so.”
And while it’s hard to argue that any of these products don’t contribute to self-care and provide comfort to the consumer in one way or another, some of the products that have received funding from Vice Ventures might be classified as “guilty pleasures”—and then some. Dockery says the most limiting aspect of that classification is the “guilty” part.
“There’s a social stigma here that still is being broken down—not all pleasures have to be guilty. We’re often trying to find products that carry less guilt for the consumer, and which promote harm reduction alongside enjoyment,” Dockery says. “For us, the mentality of self-care also needs to come with an understanding that most things we do for or to ourselves are not 100% positive or negative. We don’t classify driving as a guilty pleasure, though it pollutes the environment and supports the oil and gas industries. Why do we insist people should carry guilt for seeking happiness?”
Lisa King, a teacher turned professional baker, founded Columbus-based Brownie Points, which produces ooey-gooey brownies in rich and decadent flavors. Courtesy of Goldbelly
Comfort food
In America, at least, one cannot discuss comfort without including comfort food. With most restaurants shuttered and grocery stores enforcing new rules to maintain social distancing, Americans are reevaluating how and where they get their food. And for many people, food is the fastest and easiest quick fix for mood enhancement, which is often now arriving via delivery.
Typically, the holiday season leading up to the New Year is the busiest time of year for Goldbelly, an online marketplace, curated with regional and artisanal foods from purveyors across the United States. March and April are usually a slower period for the company, according to founder and CEO Joe Ariel. But like everything else, that changed this spring. Goldbelly has seen sales up by 100% across all categories—especially in its savory food categories, like Chicago-style pizza, New York City bagels, Philadelphia cheesesteaks, and the all-time classic comfort food macaroni and cheese, compared with sweets, such as cakes and cookies. Ariel speculates that more people are looking for foods they can enjoy for lunch and dinner, while also stocking up.
“At Goldbelly, we believe in the emotional power of food, so we are finding that our customers are ordering more food that delivers a sense of comfort and nostalgia. We’re seeing the most classic American comfort foods as the top sellers,” Ariel says. “Our mission is to bring people comfort through food, whatever they dream of, wherever they are. Now more than ever, we recognize how important our mission is, and we’re working around the clock to keep up with demand and to onboard many new restaurants.”
Founded in Brooklyn in 1965, Di Fara Pizza is a New York institution known for Neapolitan pies made with a three-cheese blend of fresh buffalo mozzarella, fior di latte, and Parmigiano-Reggiano, and topped with scissor-cut basil. Courtesy of Goldbelly
When dine-in restaurants without takeout or delivery services were forced to close their doors indefinitely, Ariel says he knew that many of his vendors would be relying on Goldbelly’s nationwide shipping business. Since mid-March, Goldbelly has seen an influx of new customers, as well as returning customers, ordering in larger quantities—up to 30% to 40% more than normal. Goldbelly has approximately 500 vendors across all 50 states, and it is looking to onboard twice as many restaurants as it has retained in the past.
“The future in our industry is going to be about meeting customers on their own terms. Restaurants and businesses are now more willingly serving their customers through delivery and online sales,” Ariel says. And more retailers are making the jump. Shake Shack, for example, partnered with Goldbelly last month to ship its famous ShackBurger directly to customers’ homes across the country. This is something that may not have been likely a few months ago, Ariel admits, but says customers are loving it. “They are so thankful to have that experience in their homes,” he says. “It’s an edible hug in a box.”
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fortune--2020-04-21--How Hong Kong squashed its second coronavirus wave

On Monday, Hong Kong reported zero new cases of COVID-19, a milestone that seemed to signal that the Special Administrative Region had contained a “second wave” of coronavirus infections set off by overseas residents returning home. It was the first day in six weeks that Hong Kong, which has 1,026 coronavirus cases total, had no new patients to report.
“Given that the situation of COVID-19 infection remains severe and that there is a continuous increase in the number of cases reported around the world, members of the public are strongly urged to avoid all nonessential travel outside Hong Kong,” the Center for Health Protection (CHP) said in a statement, canceling its daily press briefing, as there was nothing new to report.
Despite the positive news, the CHP urged members of the public to remain diligent about hygiene and social distancing, since another wave could ever be on the horizon.
Swell
Hong Kong has remained a bright spot in effective disease control throughout the COVID-19 pandemic, which has infected nearly 2.5 million people worldwide and claimed over 170,000 lives. Gabriel Leung, the dean of medicine at Hong Kong University, has called the city the “gold standard of infection control.”
In an interview with Fortune in March, Leung attributed Hong Kong’s success to early screening measures at ports, a robust health care system with sufficient isolation wards, extended school closures, and a society-wide adoption of face masks.
All combined, the measures helped keep Hong Kong’s total number of COVID-19 cases to around 120 until March. However, as the severity of the pandemic grew globally, many overseas residents decided to return to Hong Kong, bringing with them a second wave of infections.
By late March, the number of local cases had more than tripled to 411, forcing the Hong Kong government to adopt more stringent measures.
Breakers
Already in March, arrivals from foreign countries were required to wear tracking bracelets and undergo two weeks’ quarantine upon arrival. As case numbers continued to climb, Hong Kong barred entry to all nonresidents—except those from Macau, Taiwan, and mainland China—and required all remaining arrivals to submit to mandatory testing for COVID-19.
Within Hong Kong, restrictions on movement also increased. During the last week of March, the government ordered all cinemas, theaters, arcades, and other entertainment venues to close.
In the following weeks, bars, karaoke clubs, gyms, spas, and virtually all other service providers were shut down. Restaurants remain open but are restricted to operating at half capacity with tables spaced 1.5 meters apart.
Police wielding measuring tapes have brought charges against dozens of rule-breaking eateries while 130 members of the public have been fined for breaking a rule that prohibits gathering in groups of more than four people.
Quarantine breakers are facing stiff punishment too. On Monday, a man was sentenced to four weeks in prison for violating his mandatory two-week isolation period—the first such prosecution in Hong Kong.
Undertow
While the second wave appears to have subsided, the Hong Kong government has decided against easing the restrictions that helped mitigate the infection’s spread. On Tuesday, chief executive Carrie Lam announced that the social distancing rules—many of which were due to end Thursday—will be extended for another two weeks.
Chuang Shuk-kwan, head of communicable disease at the CHP, has said that there should be a 35-day period of no locally transmitted COVID-19 infections before the contagion could be considered under control. The latest locally transmitted case in Hong Kong occurred on Sunday.
“The [Hong Kong] government understands that citizens are upset about the halt in social activities. It is causing inconvenience to daily life, leisure, entertainment, and gatherings with friends. Please be tolerant,” Lam said, noting that Hong Kong has yet to implement a complete lockdown on the scale seen in the U.S., Europe, or much of China.
The extended semi-lockdown will be bad news for businesses, which were reeling from months of protests last year before the COVID-19 pandemic struck in January. In the first quarter of the year, the Hong Kong government released $37 billion worth of relief packages to local businesses and individuals, but the economic toll of the turmoil continues.
On Monday, Fitch Ratings downgraded Hong Kong’s credit from AA to AA-minus, anticipating a 5% fall in real GDP this year.
In that sense, Hong Kong faces the same conundrum as other jurisdictions, as the public health benefits of its standout coronavirus response come at a devastating economic cost.
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fortune--2020-04-21--Binx aims to capture a milestone in STI testing technology

Three months ago Binx Health, a Boston-based biotech firm founded in 2005, started taking preorders for its flagship product, the Io, which has been in development for over a decade. It’s a deceptively simple piece of hardware—a white-and-gray box shaped like a sloped right triangle, just under a foot wide and deep and just over a foot tall, with a pink slot for a cartridge and a touch screen. But according to experts like Jeffrey Klausner, an epidemiologist at the University of California–Los Angeles, the Io and a number of similar devices in various states of development could be “a breakthrough in our efforts to prevent and control STIs.”
The World Health Organization (WHO) estimates that people worldwide contract 376 million new sexually transmitted infections (STIs) every year, including 156 million cases of trichomoniasis, 126 million cases of chlamydia, and 87 million cases of gonorrhea—diseases that can be painful in the short term and can contribute to an increased risk of infertility, among other chronic health problems, if left untreated. Rates of transmission in many nations have been on the rise for years. CDC data from 2018 suggests the number of chlamydia infections in the U.S. have doubled since the millennium, while the number of gonorrhea infections have increased by nearly 50% over the past decade.
There is likely no singular cause behind this slow-burn, silent epidemic, but stigmas around getting tested, disclosing results to partners, and seeking treatment certainly play a role. As does the difficulty many face in finding the time to visit clinics, which may be few and far between, or overburdened and underfunded, in some areas. The costs of testing and treatment also pose substantial barriers to uninsured and low-income populations. A CDC study from 2016 found that only about 12% of people age 15 to 25 got a recommended annual screening. Regular screenings are vital to controlling STIs, as these infections are asymptomatic in many people, yet transmissible. A sizable number of those who do go in for testing have to wait several days for their results to come back from the lab, then fail to come back for treatment if they test positive.
“We need new tools and strategies to combat this epidemic,” says Klausner. “We’ve lost control.”
For years, organizations like WHO have argued that one of the most important new tools needed to stem the rising tide of STIs are cheap, fast, and easy-to-use screening tests, which can be administered outside of traditional health care settings, by people with limited training or skills, yielding reliable results that allow patients to get the treatment they need almost instantly.
There are currently a number of reliable rapid point-of-care tests on the market for diseases like the flu, including the tests done at minute clinics in many neighborhood pharmacies today. Yet while early attempts at developing rapid point-of-care tests for STIs by screening bodily fluids for antibodies to diseases delivered quick results, they were not nearly as reliable enough, usually requiring a patient to visit a clinic to confirm the initial results, thus defeating the purpose.
Over the past decade, a number of biotech firms have developed devices—many of them seemingly simple boxes with insert slots for test cartridges, like Binx’s Io—that screen fluids for bacterial or viral DNA or RNA, yielding reliable results within a couple of hours. Some of these devices have been developing tests for common STIs. But according to a 2019 WHO report, many emerging point-of-care STI testing platforms are not uniformly practical. Some require extensive training to properly purify and prepare samples, need frequent calibration and maintenance, or come with huge—perhaps infeasible—price tags.
Binx’s Io hopes to overcome these limitations. A fully integrated, automated, and maintenance-free molecular testing platform, the Io lets users to drop fluid samples, either self-collected by a patient or taken by a clinician, onto a cartridge sans prep: Insert the cartridge into a slot, follow on-screen instructions, then get lab-level results within an unprecedented 30 minutes. Binx believes that’s fast enough to deliver results not just within a day, but within one doctor’s visit, allowing patients to walk out of a screening with a full diagnosis and, if needed, a treatment plan.
The Io system. Courtesy of binx
“You want to be able to do something in about 30 minutes,” Binx CEO Jeff Luber tells Fortune, “because the literature shows that people are willing to wait about 30 minutes” for results.
The Io got clearance for use in Europe in April 2019 for vaginal swab and male urine sample testing. In September, Binx announced that the Io had gone into the field for its first (and thus far only) real-world trial in the United Kingdom at three National Health Service Trusts (the British health care system’s term for specialized units) and in St. George’s University of London’s Applied Diagnostic Research and Evaluation Unit.
In August 2019, the FDA cleared the Io for vaginal swab tests for chlamydia and gonorrhea conducted in ob/gyn offices and certain clinics, but it has not yet been put into the field in the United States.
The Io isn’t the first FDA-approved rapid point-of-care molecular test for STIs. As of mid-2019, Cepheid’s GeneXpert system was cleared to test multiple types of samples for chlamydia, gonorrhea, and trichomoniasis. However, that platform takes 90 minutes to run a test. Cepheid did not respond to multiple requests for comment.
“Ours is the fastest FDA-cleared chlamydia-gonorrhea testing platform in history,” Luber says of Binx’s Io. “That’s a fact.”
Binx is currently seeking FDA clearance to run tests using urine samples on the Io and exploring the possibility of adding trichomoniasis screenings to its cartridges. The company, Luber says, will “be commercially launching the product [in the United States] within the second half of this year.” By year’s end, he hopes to have FDA clearance to market the Io for use in nonclinical settings as well, like urgent-care rooms and pharmacy minute clinics. That could potentially set the company up for great expansion in 2021.
Binx plans to provide clinics with free rental devices, then charge them between $60 and $90 per single-use test cartridge, which costs in the single-digits to manufacture. The company hopes that this will appeal to health care providers as it will undercut the cost of existing tests, which average about $125 but can run up to $200 each, allowing them to reap increased profits from insurance reimbursements or offer direct-paying patients savings. Reducing the need for patient follow-up and return visits would also cut down on administrative costs for doctors and on out-of-pocket expenses like co-pays for patients.
Luber claims that at least 13 health organizations have expressed interest in preordering the current Ios, even though Binx has not done much marketing. He hopes these early prospective buyers will represent up to $3.5 million in projected revenues. A Binx survey of 116 ob/gyns found that about three-fourths would be interested in adopting the Io or a similar platform.
But Binx’s greatest potential, for profitability and public health, likely lies in getting the Io into neighborhood pharmacies. Hilary Reno, director of the St. Louis County Sexual Health Clinic, notes that pharmacies are often far more accessible—conveniently located and open at all hours of the day—than most health clinics. Barbara van der Pol of the American STD Association adds that putting testing devices in pharmacies “is going to be huge in the fight against stigma, because it could be something you see everywhere,” as just another facet of everyday health. (Van der Pol also directs the University of Alabama–Birmingham’s STD diagnostics lab, which performed comparator testing on the Io.)
Combine this increased accessibility and normalizing visibility with the Io’s speed—the ability to potentially ask a minute clinic staffer to run a test for you, then go shopping or grab food nearby, and come back for definitive results and any needed prescriptions or advice—and pharmacy placement could have a huge effect on STI screening and transmission rates.
“We’re talking to a lot of retail pharmacies,” Luber says. “They’ve lost a lot of front-of-store sales in soap and paper towels and all of that to Amazon. So, they’re trying to do more things to generate revenue in health care.”
Since its founding—originally as Atlas Genetics, a spinoff of a University of Bath research project—Binx has had no issue attracting investor support, based on the promise of its tech. It started off with $1.5 million in seed funding, half of which came from the university-affiliated Bath Sulis Seedcorn Fund. Binx raised nearly $100 million through four rounds of funding from 2007 to 2017. Funders currently include Johnson & Johnson Innovation, the Novartis Venture Fund, Life Science Partners, RMI Investments, Technology Venture Partners, and BB Biotech. The company has also formed strategic investor partnerships with Consort Medical, whose subsidiary Bespark manufacturers Binx’s test cartridges, and Wondfo Biotech.
In 2018, the company rebranded as Binx Health and started selling at-home STI testing kits, which allow users to collect their own samples, send them in to central labs, then receive results online. At-home STI tests are accessible, private, and often comparable in price to or cheaper than traditional in-clinic testing. But they take several days to process and, if they detect an infection, require follow-up visits with health care providers to develop treatment plans.
David Cavanaugh, a partner at life sciences consulting firm DeciBio, tells Fortune that there is “potentially more of a white space opportunity” for a firm like Binx than there is for many other companies in the crowded rapid point-of-care testing platform landscape, given its focus on the relatively neglected field of STI testing. He also says that the Io’s speed and accessibility seem promising. Marco DeMeireles, a partner at investment firm TCG who focuses on emerging biotech opportunities, adds that there is always opportunity when the product has the potential to break down barriers for consumers who may need but currently have limited access to health services like regular STI testing.
But the Io is not a perfect device. A 2019 review of 107 rapid point-of-care molecular testing systems in various stages of development (not all of which test for STIs) shortlisted it as one of the 11 most promising platforms. However, it also noted that the Io, like many other rapid point-of-care devices, may not meet the needs of every community—like developing regions with limited electricity and climate controls.
Additionally, many clinics with limited resources, the review points out, may stay away from a device that currently tests only for two STIs, holding out for potential future systems that can test for the most common STIs, and perhaps other diseases as well, with similar levels of reliability and speed.
Reno adds that even if Io cartridges are cheaper than existing STI tests, patients without insurance are still not likely to be able to afford them. And Cavanaugh notes that recent regulatory changes are “expected to significantly decrease the reimbursement [values] of high-volume diagnostic tests,” like traditional lab tests for chlamydia and gonorrhea, in the near future. This may limit the Io’s appeal to potential buyers, or force Binx to lower its cartridge prices.
If Ios do make it into minute clinics, DeMeireles suggests that the company and investors may have to wait and see how consumers react to them—and how much paid and proactive marketing it would take to build awareness of and trust in them—before fully gauging their potential.
But no matter how profitable the Io turns out to be, the very fact that Binx and other companies are trying to bring products like this to market is heartening from a public health perspective. The spread of STIs has been one of the more worrying epidemics of the 21st century, yet thanks to all the stigmas built up around the subject, it rarely receives the attention, much less the innovation, it deserves. Every push to bring the latest in diagnostic technology, like rapid point-of-care platforms, to this field—to make testing easier to access, and to translate results into treatment—is a step toward making sex safer for all.
More must-read stories from Fortune:
—How Fortune 500 companies are stepping up during the pandemic
—How each industry is fueling the U.S. unemployment rate in one chart
—Couldn’t track your stimulus check? Errors and long waits plague IRS portal rollout
—22 million lost their jobs in the past month—real unemployment rate likely near 18%
—Stimulus checks are depositing: How people are spending the money
—PODCAST: COVID-19 might have upended the concept of the best companies of the year
—WATCH: The U.S. Postal Service is in deep financial trouble. Here’s why
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-04-21--Why the big banks will likely survive the coronavirus recession

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Good morning.
Big bank profits took a beating in the first quarter, and analysts are saying the recession could cause full-year profits to crater by more than 60%. But unlike in the Great Recession, this time, the banks likely will stay afloat. Why? Because they entered this year with the strongest capital levels they have had since 1940, largely as a result of regulatory actions taken after the last downturn. (It’s comforting to know we do sometimes learn from a crisis.) Fortune’s Shawn Tully looks at the state of the big banks in a story for the May edition of the magazine, which you can read this morning here.
Separately, Fortune’s new podcast, Leadership Next, takes a break this week from our focus on the coronavirus. Instead, we are airing an interview I did before the crisis hit in full force, with the delightful Eileen Fisher, clothing designer and entrepreneur. You can listen to the podcast here.
Fisher has been in business for 36 years, and from the beginning, her company has been a pioneer in working with suppliers to assure sustainable practices, and more recently, working with customers to encourage recycling of clothes. She and her employees have maintained 100% ownership of the company so “we don’t answer to shareholders…or to quarterly numbers.” She also has adopted the B-Corp framework, to ensure that the company measures and tracks its sustainability efforts.
I asked her if she has seen more companies moving in that direction in recent years. “Radically more, in the last two years,” she answered. “I think it is becoming an urgent thing, especially with the next generation coming up, and the planetary crisis that everyone is aware of. The companies that aren’t doing this kind of work are going to be gone in five years, or 10 at the most.”
I wasn’t able to get back to Eileen to see whether the pandemic had altered her view of the next decade. But I did notice this story in The Hudson Independent: her company transformed its corporate offices in Irvington, N.Y., to make personal protective equipment. It expects to make 500 masks a week.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Oil prices
The oil price is in the red again. The price of a barrel of WTI crude collapsed yesterday to minus $37.63; the first time in history that it went negative. The drop was, however, in many ways a case of technical trading and a weak market colliding. The May contract will close later on Tuesday, and whoever is left with the contracts risks taking delivery of real oil—and limited options for where to store it, as a backlog of oil risks filling up storage tanks completely. This morning the price recovered to the lofty heights of $1.60 or so…before falling as low as minus $7.80. Futures for the coming months are also sinking, as are the markets in general. Fortune
Bust airline
Virgin Australia has gone into voluntary administration, under the weight of $4.8 billion in debt. The Australian government refused to bail out the airline by taking a stake. For now, Virgin Australia's 10,000 staffers get to keep their jobs, but it's hard to predict what will happen after it exits the bankruptcy process under new ownership. Expect more of this—a lot of airlines are perilously close to the edge. Guardian
Facebook ban
Facebook has banned events that contravene social distancing orders put in place by state governments. Specifically, the social network has trashed listings for anti-quarantine protests in California, New Jersey and Nebraska. As a result, Donald Trump Jr. has attacked Facebook for "quashing people's free speech." BBC
Immigration ban
President Trump said he would temporarily shut the U.S.'s borders to immigrants, "in light of the attack from the Invisible Enemy, as well as the need to protect the jobs of our GREAT American Citizens." The enemy in question—the novel coronavirus—is of course already well established within American borders; the U.S. has the highest infection and death figures in the world, by quite some margin. As for jobs, it's hard to see how the move might revive the collapsed demand for labor. Fortune
AROUND THE WATER COOLER
Contact tracing
Most experts agree that we're all going to need to carry around smartphone apps that will allow us to be warned when we have been in contact with a COVID-19 carrier. But how the matching and warning process takes place will have major privacy implications—as is clear from a massive argument taking place among European technologists, who are working on such systems. Fortune
Retail survivors
Which retailers are doing relatively well in the coronapocalypse? As Fortune's Phil Wahba explains, it's those that take seriously the integration of stores and shopping technology. Gartner's Kimberly Becker: "The retailers that were already doing it successfully are the ones that are going to recover much more quickly." Fortune
Israel deal
Israel won't be heading for a fourth straight national election, after Benjamin Netanyahu and rival Benny Gantz—neither of whom won a majority in the last three—finally struck a deal. Netanyahu will remain prime minister for the next 18 months, with Gantz as his deputy; then they will switch roles. Washington Post
Oh nein
Oktoberfest is off. In what will be a blow to the Munich economy, Bavarian state president Markus Söder and Munich mayor Dieter Reiter decided that the risk was too high to allow the September-to-October event to go ahead. The cancellation demonstrates how, even though Germany is starting to slowly open up its economy again, mass gatherings will remain verboten for quite a while yet. Bloomberg
This edition of CEO Daily was edited by David Meyer.


fortune--2020-04-21--Coronavirus closures at Smithfield’s pork plants are latest test for its overseas owner

The shuttering of Smithfield Foods pork plants last week was a new twist in the U.S.’s battle against the coronavirus. But for Smithfield’s Hong Kong–based owner, it’s another hurdle in what’s been an especially rocky road in recent years.
On April 12, Smithfield, the American food manufacturer based in Virginia, shut down a meat processing facility in South Dakota after a COVID-19 outbreak at the plant infected over 700 employees. Two days later, the company announced it was shuttering two additional meat processing facilities, in Missouri and Wisconsin, citing smaller coronavirus outbreaks and concerns that the South Dakota closure would create a bottleneck in its supply chain. A company spokesperson told Fortune the South Dakota facility will reopen after it receives clearance from local and federal officials. The Missouri plant will remain closed until the South Dakota facility reopens, since it sources raw materials from the South Dakota location. The Wisconsin facility will be shuttered for two weeks.
A Buzzfeed investigation published April 16 reports that Smithfield management did little to protect and inform workers about the virus’s danger immediately following the first reported case at the South Dakota plant in late March. Smithfield did not contest any of the specific allegations in the article, but told Buzzfeed the company took a “very proactive approach” in instituting and communicating pandemic safety measures for its employees.
The coronavirus outbreak at Smithfield’s South Dakota plant has stirred up baseless conspiracy theories that imported Chinese hogs were responsible for the infections. The unfounded claims seem to lean on Smithfield’s ties to China; the company is owned by Hong Kong food conglomerate WH Group, which until 2014 was based in mainland China. But Smithfield denies importing any hogs to the U.S. from China and says that food-borne exposure is not a viable mode of coronavirus transmission.
In reality, WH Group’s problems related to the coronavirus go beyond false rumors circulating on fringe corners of the Internet. Plant closings from the pandemic are the latest test for the world’s largest pork producer, which in recent years has also contended with the African swine fever outbreak that devastated Chinese pig populations and the U.S.-China trade war.
Smithfield’s overseas owner
Chairman and CEO of the WH Group, Wan Long, has long been known as China’s “No. 1 butcher” for buying a meat processing factory in China’s central Henan province in 1984 and building it into a $24 billion giant.
Over the past three decades, Long’s company grew into China’s largest domestic supplier of pork, but even then, it couldn’t keep up with China’s booming appetite.
An employee removes internal organs from a pig at a Smithfield Foods pork processing facility in Milan, Mo., U.S., in April 2017. Daniel Acker—Bloomberg/Getty Images
In 2013, WH Group fully acquired Smithfield for over $7 billion in what was then the largest-ever Chinese investment into the U.S. (It was surpassed in 2017 by the HNA Group’s purchase of U.S. airplane-leasing firm CIT Group.)
“The deal was aimed at increasing the supply of U.S. pork into China,” says Darin Friedrichs, a senior commodities analyst at INTL FC Stone in Shanghai. “Imported products like U.S. pork are usually seen as more premium products that can command a higher price.”
China’s growing appetite
Over the past few years, the WH Group reckoned with unprecedented challenges at home, making its foothold in the U.S. market especially important. Vicious outbreaks of African swine fever have killed up to half of China’s domestic pig population and remain a problem that is “very much still around,” says Edgar Wayne Johnson, senior technical consultant with Enable Ag-Tech Consulting and a pork industry expert in Beijing.
The disease forced producers there to look abroad for supply. WH Group, given its Smithfield acquisition, was well-positioned for the pivot—until the trade war hit. Because of the U.S.-China conflict, tariffs on importing U.S. pork to China rose up to 72%, meaning that Chinese firms had to shift again—this time away from U.S. pork producers to those in South America and Europe. In March 2019, Long said shipments between Smithfield and his Chinese companies had fallen by 45% in 2018 because of the trade war. An oversupply of pork in the U.S. led to lower margins.
China’s need for imported pork, however, would buoy both Smithfield and the parent company.
The WH Group reported a 32% increase in total profits in 2019 with a growing reliance on its Smithfield operations. According to the company’s 2019 annual report, in 2018 the U.S. accounted for 37% of the company’s profits compared to 56% in China. In 2019, those figures shifted to 46% and 47%, respectively. The company said the growth in Smithfield’s operations was driven by a “discernible expansion in exports to China” despite limitations imposed by the trade war. The WH Group reported that it shipped three times the amount of U.S. pork to China in 2019 versus the previous year.
China’s pork prices “were on a tear,” says Brock Silvers, chief investment officer of Adamas Asset Management in Hong Kong, which explains the spike in profits. In January 2020, pork prices in China were 116% higher than the previous year. As swine fever depleted hog stocks in China, major producers like the WH Group’s Shuanghui China business remained profitable by selling existing inventories at higher prices, Silvers says.
“As a highly internationalized company, the WH Group would also have been able to repatriate its own overseas inventory, or to secure foreign supply for transport to home markets,” says Silvers. On both a domestic and international level, “the WH Group kept [pork] supply flowing in China.”
China relaxed the tariffs in January of this year in the run-up to phase 1 of its trade deal with the U.S., which provided the industry more hope that pork imports to China would return to normal. In February, the U.S. Department of Agriculture said it expected U.S. pork exports to China to grow by nearly 13% in 2020 compared to 2019. COVID-19 has reduced China’s demand for pork somewhat as restaurants closed during months of lockdowns, says Friedrichs. Yet the Chinese Ministry of Agriculture said on Monday it projects all pork imports to China to increase 33% this year.
Coronavirus vs. meat supply
The WH Group said earlier this year that it was bracing for a blow from the coronavirus, as much of China shut down in early 2020. In a March 24 earnings call focused on the company’s 2019 performance, executive director Ma Xiangjie said WH Group planned to make up for the loss of Chinese production by ramping up pork imports from abroad.
Ma said the firm faced “great challenges” in delivering products at the beginning of the outbreak, but it eventually resolved those issues and the company didn’t expect the coronavirus to have a “serious impact” on the Chinese business.
On the same call, CEO Kenneth Sullivan of the Smithfield division said that up to that point the company’s first-quarter results were looking “strong.”
That was before Smithfield shut the three U.S. facilities.
Those closures pose a brand-new threat. In a public statement, the company said the South Dakota plant alone accounts for 4% to 5% of U.S. pork production. Even amid the trade war in 2017, Smithfield exported 17.6 million kilograms of pork to China, making it the largest U.S. supplier for the Chinese market. (The WH Group did not respond to Fortune’s requests for comment.)
Smithfield isn’t the only meat producer contending with the coronavirus crisis. On Monday, JBS S.A., based in Colorado, announced the closure of a Minnesota pork plant due to a COVID-19 outbreak. Combined, the facility shutterings leave little slack in U.S. hog slaughtering capacity; it’s now running at 90%.
Indeed, the latest hurdle for WH Group represents a looming crisis for the U.S. In a statement, Sullivan said the South Dakota closure alone was “pushing our country perilously close to the edge in terms of our meat supply.” He said Smithfield considered itself obligated to keep plants open if possible. “We have a stark choice as a nation: We are either going to produce food or not, even in the face of COVID-19,” he said.
More coronavirus coverage from Fortune:
—The trillion-dollar question: How far will GDP fall?
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—Thermal-imaging tech is on the rise. Can it help fight the coronavirus?
—Privacy concerns split Europe’s push to build COVID-19 contact-tracing apps
—5 veteran investors on how to approach the coronavirus stock market
—More surveillance and less privacy will be the new normal after the coronavirus
—Looking for a travel refund? Here’s what airlines, hotels, and theme parks are offering
—PODCAST: COVID-19 might have upended the concept of the best companies of the year
—VIDEO: 401(k) withdrawal penalties waived for anyone hurt by COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-04-21--‘In light of the attack from the Invisible Enemy:’ Trump vows to suspend immigration to U.S. over co

‘In light of the attack from the Invisible Enemy:’ Trump vows to suspend immigration to U.S. over coronavirus

President Donald Trump said he’ll sign an executive order temporarily suspending immigration into the United States as the country tries to contain the spread of the coronavirus.
Trump made the announcement by tweet late Monday night, and did not offer specifics, such as the time frame or the scope of who would be affected. The White House did not immediately respond to a request for comment.
He tweeted that he made the decision, “in light of the attack from the Invisible Enemy, as well as the need to protect the jobs of our GREAT American Citizens.”
In light of the attack from the Invisible Enemy, as well as the need to protect the jobs of our GREAT American Citizens, I will be signing an Executive Order to temporarily suspend immigration into the United States! — Donald J. Trump (@realDonaldTrump) April 21, 2020
It’s the latest measure taken by Trump and his administration to restrict the U.S. border amid the pandemic. Trump has imposed broad travel restrictions on China, Europe, Canada and Mexico to curb the virus’s spread, and the State Department last month temporarily suspended routine visa services at embassies and consulates.
The U.S. Citizenship and Immigration Services has also already suspended routine in-person services, but is still offering some emergency services.
At the same time, the White House has ordered federal agencies to begin preparing to return workers to offices and begun to reopen parts of the country, despite a widespread shortage of testing and warnings of a second wave.
The president has often said the pandemic has strengthened his desire to further restrict access to the U.S., and even to manufacture certain products on home soil.
Cracking down on illegal immigration and a promise to erect a wall at the Mexican border formed the centerpiece of Trump’s election campaign in 2016.
His Gallup approval rating slipped six points last week as scrutiny of his handling of the outbreak has intensified, and the U.S. leads the world in total reported cases.
Congressman Joaquin Castro, a Texas Democrat and chairman of the Congressional Hispanic Caucus, wrote on Twitter that the suspension was “not only an attempt to divert attention away from Trump’s failure to stop the spread of the coronavirus and save lives, but an authoritarian-like move to take advantage of a crisis and advance his anti-immigrant agenda.”
This action is not only an attempt to divert attention away from Trump’s failure to stop the spread of the coronavirus and save lives, but an authoritarian-like move to take advantage of a crisis and advance his anti-immigrant agenda. We must come together to reject his division. https://t.co/wYEai4rYVY — Joaquin Castro (@JoaquinCastrotx) April 21, 2020
Since becoming president, Trump has sought to curb immigration and migration widely — restricting travel from certain majority-Muslim nations, pushing to erect the wall, striking deals to almost immediately deport asylum seekers from certain countries and moving to slash the number of refugees that the U.S. accepts. He’s also repeatedly criticized leaders of so-called sanctuary cities and mused about trying to end automatic citizenship for people born in the U.S.
His previous travel restrictions have been swiftly met with legal challenges.
More politics coverage from Fortune:
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—American companies laid off 22 million in the past month. Europe chose a different path
—To fight tomorrow’s pandemic, we need to think like the military today
—If you’ve been a little busy lately, here’s what’s going on with the 2020 election
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: As unemployment skyrockets, the labor market’s future looks grim
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