Booming industry and plantbased murders. The market darling of sparkling water is losing ground. Jason joel weber is with us on why he put we wanted to do this story in a summer issue. It is the zeitgeist of summer. One thing that has happened is consumers have shifted away from soda and embraced sparkling waters. They have encapsulated that and boomed. All of a sudden it has gotten competitive. Lot about learned a their competitors, mainly pepsi and cocacola. They are owned by national a beverage and out as part of their portfolio. But going against cocacola or pepsi, once they opened their war chest and looked at sparkling water, they can say we know how to put that in a can. Jason that is coming in from the top, then you have craft beers and food, now it is sparkling water. It is what they introduced the marketplace. Category and the rejuvenated it, and they are met on both sides. Taylor we learned as well about the founder and ceo, what is he like . This is a person who came into his own and saw an opportunity, then has ridden this bloom. He is idiosyncratic. Jason we will hear more on that later on. Thank you so much. We turn now from bubbles to recessions. Taylor after the yield curve inverted, warnings of a looming recession. Inverted yield curve mean recession is coming . That is what it has historically meant. Records going back to the 19th century, it is a reliable precursor of recession. Curve inverted briefly, then stopped inverting and came back again. It is an often on kind of thing. The yield curve does not mean what it used to mean. That is because even in normal times it is flatter than it used to be. It is flat to start with. Tick down likely a into inversion. In thetalk about this broader economic landscape. One thing we saw and talked a 10 about on the rayleigh show radio show is a concern we may be talking ourselves into recession at a time when things are going well. Bloomberg had the ceo of bank of america saying that, echoing franklin roosevelt, the only thing we have to fear about recession is faring recession. It is is fearing recession. Thing,son said the same he is optimistic and yet he is helping the fed will cut a half percentage point in september just to get ahead of the recession talk. Taylor when we talk about the , you know inflation more than anyone else. Is that part of what is driving that curve flatter . Curve is reflecting not just the actual outlook for inflation, but the uncertainty about the inflation outlook. If you think inflation will be 2 , but in the back of your mind it might jump to 4 , you will pay less for a longterm bond and make its yield higher. If you are confident that inflation is not a problem, if you are worried about deflation with 16 trillion of negative yielding debt around the world, it might be that we want a lower yield. Jason thoughtprovoking as always. In a pod. Two peas will Boris Johnson try to out trump trump in france at the g7 summit . Taylor we break it down. This is Bloomberg Businessweek. Jason welcome back to Bloomberg Businessweek. I am jason kelly. Taylor i am taylor riggs. Join us every day on the radio. And listen to our podcast on Apple Podcast and soundcloud. Jason find us online at businessweek. Com and our mobile app. President trump and other World Leaders are set to meet in france to discuss major global challenges at this years g7 summit. I spoke with the executive editor and bureau chief craig gordon on what to expect. The most interesting thing we the be watching for, sitdown between donald trump and Boris Johnson. Two peas in a pod. This is johnsons first g7 since minister. Rime they are likeminded and have the same politics. We will be saying the first time if johnson tries to outshine donald trump who tries to make a big figure at these events. Europeaking a trip to and will meet the rest of the g7, that will be what everyone is watching. Johnson, the throwdown. Jason trump literally elbowed somebody out of the way. The g7 has been lively as of late. He pushed aside the Prime Minister of montenegro who later ind the president should be the front row, not meet. The g7 last year was where they signed a communique, and the famous picture of merkel glaring at him. Trump gets on air force one to tweets, i withdraw my support for the communique because he was mad at justin trudeau. These tend to be moments of high drama. There are only seven of them, and they are in a room and take up a lot of oxygen. On the substantive side, what great timing, the World Economy is starting to slow down and germany gearing on recession, the u. S. Still has strong numbers. What a great time to get the leaders of the seven most important economies together to talk about it. Will they do anything to solve it or put stimulus in there . We do not think so. This may be a squandered opportunity. Can they do anything to put the brakes on this slowdown in the Global Economy . Jason you wrote it is a complicated relationship, and there is a great story about this relationship between the crown and merkel macron and merkel. An enema crown is the host of this, and angela this is an uneasy alliance. The summits tend to be six versus one, the one being donald trump. Have five versus two. Trump and johnson may make common cause on some issues. Unifiedhe five or six european leaders, big fractures. Macron wants to be the king of europe, and Angela Merkel does not like that. They sparred over that but held rand. Ether on the trump has pulled out of it. Boris johnson is not a fan of it although he reaffirmed support for it. Merkel and macron have held together. France and germany would love to do more business with iran. Trump tends to be the main storyline, so you have intriguing subplot. Where does abe fit in . Be fun to watch, especially the european unity that they have held together, i do not think they will do it a third time. Jason you mentioned brexit, that will be top of mind. Will Boris Johnson start to negotiate in public with the eu leaders about what the elements are . For a noo be heading deal brexit, and that is coming up at the end of october. Much like the seven most important people talking about the economy, you also have the same to talk about exit. As an american watching from afar, it feels like the u. K. Leaders are playing like it pair of threes, but they act like they had a royal flush. Europeans are tired of this conversation, boris is not offering them anything different. Out. Es look like crashing they will have a chance to talk about it, but hard to see substantive progress being made. Taylor turning to politics in the u. S. , on the campaign trail democrats are in a heated debate about how to do achieve their goal of universal health coverage. They have coalesced around a basic visible they want universal health care coverage. The United States is not there yet, but in terms of how to get there, there are differing opinions and deep divisions ranging from the idea of singlepayer health care where the government is the only insurance company, that is supported by Bernie Sanders and elizabeth warren. Then the more moderate democrats want to make substantial changes. Joe biden supports adding to obamacare a government run insurance option that people can look at the menu of private plans or if they want a public option. That is the debate now, and it has sparked intense rivalries and intense battling as they try to convince voters they have their finger on the pulse of what to do. Taylor from your conversations and reporting on the ground, what plans seem most likely to go forward . Answers. Are different one isashiest medicare for all. That is the Bernie Sanders singlepayer plan. Obstacles inunting congress. Have the senate, it is highly unlikely to get through because democrats oppose it as well. On the joe biden side you have the public option that obama tried to get into thousand 910, and this will be difficult because it faces a 60 vote threshold in the senate were republicans could block it, and based on my reporting they have no intentions of going along with that. Even the most modest democratic proposals face difficulties in congress. And a Health Industry that is determined to kill them. They do not want a government run option to compete with private insurers because they would have to lower cost to compete. They are working to kill this thing. Jason still the calm, protests in hong kong, what is underneath this era of rage. Taylor hong kong businesses are caught in the crosshairs. This is Bloomberg Businessweek. Jason welcome back to Bloomberg Businessweek. I am jason kelly. Taylor i am taylor riggs. You can also listen to us on the radio. In london on dab digital. Economicn this weeks section, all eyes are on hong kong. In june demonstrations were triggered by a government proposal that would allow china to extradite those accused of crime. The protests include a broader set of demands. Jason what is behind the antigovernment protests that continue to rock that city . The protesters have limited their specific demands to Political Goals like universal suffrage. Both feeding into this anger and inest is growing inequality hong kong, and the sense that you do not have equal opportunity. This is a place that has had huge divisions between the house and havenots tween the haves and havenots. Taylor one of the Key Statistics that stuck out to me, hong kong comes back to the property market, and median property prices have climbed 21 times median household income. People can barely afford their homes. I think people do not understand what that means. We have this great graphic. Francisco are under 10 of those ratios, and we think of those as pricey. People live in these gerrymandered subdivided apartments. We interviewed some of them and there have been some young people who have good jobs. Youth unemployment is not an issue. People are thinking about moving to taiwan and other places where they have more opportunity. Jason what happens next . Protests aside, what are the economic challenges that could change or not change in the near term . , the chiefam executive of hong kong, has to think about what she can do to. Ppease these movements that potentially is a problem for the people and hong kong who became rich from property, and that is almost every important billionaire in the territory. Because the island has a system it inherited from British Colonial rule where land is leased for long periods of time from the government, it has constrained supply and driven up prices. Ado not think we will see wholesale dismantling of the system, but the government has been toying with the idea of taking back some of the land they have given to developers who have not developed it. Jason these stories remind us of the economic might and importance of hong kong in the broader world the. This is not an isolated story. Founder of the biggest conglomerate, almost half of that companys revenues come from europe, and this week they bought a restaurant in the u. K. That is one thing, it will hurt less if the government moves against the conglomerates now than 20 years ago, because they have become so diversified. Taylor this brings us nicely to another story, some of the Property Developers walking that fine line between needing help from beijing but not wanting to. Istract the protests how are they walking that line . They have stopped short of backing lam, and say they have backed her calls for calm. Semantics are important. Economically it hurts them. Gdp will be shaved by 0. 3 this year, and property prices could fall 10 in 12 months because of the protests because it is hitting economic production. Tourists are not visiting. Stores are having to shut down along the routes of the demonstration. Jason the protests present a new reality for businesses as well. Taylor the cautionary tale of chinas crackdown on Cathay Pacific. They are caught in the middle, and it is a lesson for other companies who do business in china about the dangers of being caught in this tugofwar. Squire is the company who has a big stake in Cathay Pacific. Theas been in china since 1800s, so it knows its way around and has different businesses. River travel, shipping, whatever, big business. It owns cocacola franchises in 11 provinces. They also own 45 of cathay. They were good knowing how to play the game in china. In the 1990s, they decided the way to stick around was sell a piece of company to china to stay in beijings good graces. They did that, and today they pacific, andthay air china owns 30 . That supposedly will keep you safe. When the protests came up, a lot of cathay employees were sympathetic, and that has sent the government off the rails, and they have used all the pressure that they can to make sure the company behaves. Said, all thend employees who participated should be banned from working in china. All of your employees who go in our airspace, you have to provide their names. You will also have a safety inspection. How tong is they know make it difficult to do business if you do not do business the right way. It is also a sign that china says you can play in our markets but you play by our rules. Resignationing the of the Cathay Pacific chairman is one sign they sent that you have to play by our rules. It is a strong sign, but it is enough is it enough . One paper is saying they should do more because they have renegade employees. This is showing other companies that do business in hong kong, it is part of china and do not forget that. We have seen other companies pulled into this, Luxury Brands that had tshirts and apparel that suggested hong kong was its own country. They have been forced to apologize. There is a lot of backandforth, and on the opposite Side Companies are saying, we think the government is great. Has the protesters say hsbc gone too far and is defending the government against demonstrators, and that has gotten them in trouble in the local market. Behind you are falling beijing, then the locals are angry at you. Jason still ahead, troubled waters. Taylor battling it out to make the best plantbased burgers. We size up the competition. Jason this is Bloomberg Businessweek. Jason welcome back to Bloomberg Businessweek. Taylor still ahead, in the year that saw ipos from uber, lyft, pinterest, the breakout star is a Company Making fake burgers. Jason and a former Venture Capitalist bridging personal and professional wellness. I sat down with the founder of reset. Russo and how ralph has become the choice for billionaires and royals around the world. Jason but first, this weeks cover story is lacroix. It used to fly off the shelves but today is struggling in a crowded market. Shareholders are concerned about corporate mismanagement. Lacroix is the brand of sparkling water that most people have known and loved for many years. For the past three years, the brand has essentially had a lock on the market. Years in the past year and a half, there have been a number of competitors from the biggest soft drink companies in the world like coke and pepsi. They have introduced their own sparkling waters to compete, and as a result, they are under tremendous pressure to retain its status as a leader in the market. They have had a little bit of trouble doing that. That is essentially where we are now. Taylor and before we talk about some of the competition, take me behind the company that is lacroix. Arguablypoignantly, that would be the founder behind that. What is he like . The ceo and founder of lacroix is a man named nick. He is the ceo of the company which holds many beverages, it is called National Beverage corporation. They started off as a soda company. Over the years, they acquired multiple brands and finally lacroix in the 90s. It was kind of a sleeper for a long time, they did not do much with the brand. Nobody drank that much sparkling water. Starting around 2010 four 2011 at times when americans stopped drinking as much soda, they turned to alternatives like sparkling water. Old andwho is 83 years who started this company in 1985 , he suddenly found himself the steward of what became an amazing brand and the leader of the sparkling water market untransformed the entire category. And transformed the entire category. Jason to his credit, he really saw something. He took a personal interest to the point where he considers this his baby in the words of some of the folks you interviewed. What did he do that was different from others . , he recognized that the brand had potential because of its healthfulness. It did not have any sugar, it had no additives that really. Additives, really. When soda consumption fell and ,mericans started drinking less he was one of the first brands to start transitioning and the market. He saw lacroix as an alternative. 2006, he partnered with the Breast Cancer foundation to sponsor these walks. Spotcame sort of an early in the Health Market as an alternative to soda. So he did see the potential of the brand. Taylor so what happened since then . Early are a big leader on, you have to constantly work to maintain that lead. When did they peek, and what happened to contribute to the decline we have been seeing . Its a really interesting business story. The brand really started growing. It started pretty gradually, actually, when you look at the company. 20112012, the stock increased a little bit. 20142015, it started gaining momentum. There was a Critical Team inside lacroix working with nick that really shaped the position of the brand. They decided to go after diet soda, they decided to really use social media at a time when that was not as prominent. The started trending on instagram and twitter and showing up in all kinds of photos in that kind of thing. It just gained steam. As a gain steam around 2015 or 2016, internally, there were already there was already friction. As the brand became more popular, he became more involved. His do