Philippa Kaur

A good vegan milk needs to look like milk and taste like milk, whether its a fatty version, preferred by bakers, or a skimmed one, favoured by the health-conscious. And, for coffee-drinkers, it should ideally foam like the stuff from a cow. For years manufacturers have had trouble hacking this delicate imitation game. Rapidly rising revenues suggest that they are getting much better at it. In America alone, $2.6bn of plant-based milk was sold in 2021, up from $2bn in 2018. Pseudo-milks are only one category in the growing assortment of passable plant-based alternatives to animal products. There are now convincing versions not just of meat but of cheese, eggs and even prawns. Burger King and McDonald’s sell vegan patties; Chipotle has made a plant-based chorizo. Last year the world’s largest producer of canned tuna, Thai Union, launched a plant-based line. Growing sales show the growing taste for this type of foodstuff (see chart). bcg, a consultancy, reckons that global revenues from alternative proteins could reach $290bn by 2035—and that is a cautious estimate.Eager investors have poured into the business like oatmilk into a latte. Alternative-protein companies lapped up $5bn in investments in 2021, 60% more than in 2020. Oatly, a Swedish firm that makes plant-based milk, raised $1.4bn on its Nasdaq debut last year. Impossible Foods, which makes meatless burgers, raised $500m in November, valuing the firm at $7bn. In February Nestlé, a packaged-goods giant, acquired Orgain, which makes plant-based protein powder, for an undisclosed sum rumoured to be around $2bn. Can the feast last?One reason to be hopeful is that alternative proteins have come a long way since the 1980s, when Quorn, a fungus-based meat alternative, first hit supermarket shelves. Silk, an early soya milk, followed in the 1990s. Unlike those early products, which were neither terribly tasty nor particularly nutritious, the latest crop are often both. Clever processing improves texture, additives boost taste and a pinch of specially engineered peas and beans adds nutrients. Firms are experimenting with ever more novel ingredients in search of meat- and dairy-like properties that will attract ever more shoppers. Terviva, an American startup, is using the oil of pongamia, an Asian tree, to mimic butter. . ChickP, an Israeli firm, is using chickpea extracts to mimic the texture and nutritional value of eggs in mayonnaise. Firms are also getting better at turning such bounty into consumer products. There are now ways of using corn protein to make plant-based cheese alternatives melt and stretch. Better products and lower prices—the result of both improved manufacturing techniques and scale—have coincided with the rise of “flexitarians”, who forgo meat but not always. Some are trying to cut saturated fat for health reasons—a trend fuelled by the pandemic. Fitness fanatics on faddish diets want to develop bulging muscles without building up cholesterol. Concerns about animal welfare and greenhouse-gas emissions from rearing livestock are driving the climate-conscious to limit their animal-derived intake; producing a gram of beef generates 25 times as much carbon as producing a gram of tofu. For all these advantages, making a plant not taste like a plant requires work, and ultra-processed substitutes seldom match animal proteins in nutritional value. Plant-based junk food is still junk. Soya is a common allergen and can have a disruptive effect on hormones. Green-minded consumers are realising that plant-based does not necessarily mean sustainable. Farming almonds to make a milk-like drink, for example, uses huge quantities of water. As inflation rises, even diehard flexitarians may turn into plain old omnivores, and pick either the real deal (which is cheaper than faux animal proteins) or veg (which is cheaper still). Plant-based proteins are also a tough sell in giant markets like India, where diets are already plant-rich, or Nigeria, where meat eating is a sign of wealth. That limits their global appeal. And animal products, including milk, are better for children’s bone development and nurturing gut bacteria, though lab-grown versions of meat and dairy are becoming more nutritious.All this suggests that alternative proteins have far to go to replace the animal kind. The limitations may be weighing on the firms involved. Oatly’s market value has fallen by over 80% since its listing, partly because of production difficulties. That of Beyond Meat, whose burgers feature in McDonald’s McPlant sandwich, is down by a similar amount from its peak in 2019. Sales growth slowed in 2021 and losses widened to $100m in the first quarter of 2022, compared with $27m a year earlier. Plant-based foods may no longer a side dish in diets, but their makers remain one in the food business. ■ More

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The word “brainstorming” conjures up a vision of hell. It is someone saying, “Fire up the brainwaves barbecue.” It is trying desperately to work out where everyone else’s cursors have gone on a digital whiteboard. It is hearing the line “there are no bad ideas” and thinking “how did this get scheduled then?” Yet brainstorming persists, and for decent reasons. Normal routines afford employees precious little time to think. Getting a group of people together is an opportunity to harness disparate viewpoints. Producing, filtering and selecting new ideas in an efficient way is an appealing proposition. So why is brainstorming often so painful? The problem is that brainstorming must strike a balance between a series of competing imperatives. One tension is between creativity and feasibility. A brainstorm is meant to be freeing, a chance to ask out-of-the-box questions (like, “Wouldn’t it be great if people had prosthetic tails?”). But it is also meant to produce suggestions that can actually be translated into reality, which calls for a more pragmatic style of thinking (like, “What are you talking about? We work at a salad chain.”). Research carried out in 2017 found that different types of ideas emerge at different stages of a brainstorm. The most feasible suggestions were generated at the start of brainstorming sessions, presumably because they were also more obvious, and the most original ones came later. Both types risk producing a “what’s the point?” reaction from participants: incrementalism is unexciting, wild schemes are not going anywhere. A second tension is between managers and non-managers. By its nature brainstorming is insiderish. Someone has to arrange the session, and that person is often the manager of a team. If decision-makers are not in the room, then the suspicion will grow that time is being wasted. If they are, then hierarchies easily assert themselves: good ideas can wither with a frown from the boss, and bad ones can survive with a nod. A related issue concerns the presence of outsiders. There is a natural temptation to keep drawing on the same senior people within an organisation to generate ideas: these are the ones who get things done, who understand a company’s strategy. Yet reams of research suggest that outsiders bring a fresh perspective. That might be people from related industries: in an experiment carried out in 2013, carpenters, roofers and rollerbladers were asked how to improve safety gear in all of their fields and the most novel ideas came from people who were not in the area in question. But it might also be middle managers or front-line employees who have direct contact with customers. A third balance to strike is between different personalities and different styles of thinking. A new paper from researchers at Columbia Business School and Stanford Graduate School of Business finds that brainstorming on Zoom comes at a cost to creativity: as people’s visual focus narrows on the screen in front of them, their cognitive range also seems to become more limited. But if in-person gatherings are better, they also do not work equally well for everyone. Some personalities are immediately comfortable saying what they think; others need to be coaxed to share their opinions. These are known problems, and there are plenty of ideas out there to solve them. The trouble is that lots of them feel like they are themselves the product of a bad brainstorming session. “Figure-storming” is a way for people to combat groupthink by pretending to be a famous person (“how would the queen improve cloud computing?”). “Step-laddering” involves people joining a brainstorm one by one, for reasons that are not entirely clear. Breaking the ice by throwing a word-association ball at each other is a brilliant idea, if you are throwing a birthday party for ten-year-olds.Some simpler rules are much more likely to help. Define the parameters of a brainstorming session upfront. Try to make a specific thing work better rather than to shoot for the Moon. Involve people you don’t know, as well as those you do. Start by getting people to write their ideas down in silence, so extroverts and bosses have less chance to dominate. And be clear about the next steps after the session is over; the attraction of holding a “design sprint”, a week-long, clear-the-diary way for a team to develop and test product prototypes, is that the thread connecting ideas to outcomes is taut. All of which would make brainstorming a little more thought-provoking and a tad less heart-sinking.Read more from Bartleby, our columnist on management and work:The woolliest words in business (May 14th)Why working from anywhere isn’t realistic (May 7th)The case for Easter eggs and other treats (Apr 30th) More

American capitalism has a special reverence for large numbers. They can frighten as debt or reassure as backstops. The $260bn raised by special-purpose acquisition companies (spacs) since the start of 2020 lacks the multitrillion-dollar aura of federal debt or America’s pandemic stimulus. It is nevertheless big enough to have become a defining symbol of recent market mania. spacs used to be a curious capital-markets sideshow: complex, obscure, hardly novel. A conventional initial public offering underwritten by investment banks was the marker of corporate maturity; merging with a pile of cash and entering the stockmarket by the backdoor was not. This changed when stockmarkets rallied from their covid-induced lows: more than 800 spacs raised capital between May 2020 and December 2021. Underwriting fees were collected; questionable incentives and complexity remained. This year investors appear to have remembered why some disliked spacs in the first place. Few new blank-cheque vehicles are being listed. Rising interest rates are chipping away at the present value of speculative firms’ future profits and investment banks are pulling back from this kind of faddish financial engineering in expectation of tough new due-diligence rules. At the same time, many existing spacs are having trouble finding merger targets. The big-shots (or “sponsors”) who erect the empty shells are typically given 24 months to find a business to acquire (or to de-spac, in Wall Street lingo). They are struggling: 27 such transactions were announced in the first three months of 2022, compared with 77 during the same period in 2021. Of the 298 spacs listed in the go-go first quarter of 2021, raising $97bn, 196 have yet to announce a de-spacing. In all, more than 600 American-listed spacs are still searching for a target. That is a lot of clocks counting down, and a lot of unspent cash. Where is it all now? Ironically, much of this money, once chasing some of the riskiest tech bets out there, has been parked in finance’s dullest quarter. Approximately $160bn currently sits in trust accounts, invested in risk-free Treasuries. It could be ploughed into the next white-hot tech stocks in early 2023, when the countdowns end and investors’ cash is returned. Until then, being locked up in a spac without the prospect of a merger resembles investing in a money-market fund. Investors profit from the difference between its trading price and the money returned upon its liquidation. At present, the average yield-to-maturity on these blank cheques is above 3%.Astute investors know better than to hang around for the blank cheque to blossom into a real business. After a spac announces a merger, investors are given the chance to redeem their shares and have their investment returned. Average redemptions are running at more than 50%. Excluding additional funding and deals hanging in limbo between announcement and completion, The Economist calculates that less than $40bn of capital invested in spacs since 2020 has found its way onto the balance-sheet of an operating company. That is roughly the valuation at which Grab, a South-East Asian super-app, tied up with a spac in December 2021.Investors in de-spaced firms have fared far worse than those in spacs wanting for a target. One recent study finds that barely more than a third hit their revenue projections. Many are short of cash. Almost half of the companies included in the de-spac index are currently burning through cash fast enough to empty their coffers within two years. This month Canoo, an electric-vehicle maker whose investor presentation benchmarked its valuation to Netflix and Tesla, expressed “substantial doubt” about its future as a going concern. An index tracking 25 large companies which went public through de-spac transactions is down by 52% this year, compared with a 27% fall for the tech-heavy nasdaq (see chart 2). Grab is now worth $10bn. The dilution caused by free shares designed to compensate a spac’s sponsor magnifies the sector’s losses. Unsurprisingly, then, spacs are once again paraded as symbols of market excess, where moonshot assets were pursued at otherwordly valuations. In practice, a stockmarket correction and increased regulatory scrutiny means the majority of spac investors will never see their cash put to work. They are the lucky ones. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Gautam adani is a man of few words but, as Asia’s richest tycoon, plenty of means. On May 15th he agreed to pay $10.5bn for Ambuja Cement, India’s second-biggest cement-maker, controlled by Holcim, a Swiss building-materials behemoth. Mr Adani’s terse statement accompanying the deal belies its significance. It will be the largest outright acquisition of an Indian company since Walmart, an American supermarket titan, purchased Flipkart, an Indian e-merchant, in 2018.Ambuja was founded by Narotam Sekhsaria, a Bombay cotton trader with a degree in chemical engineering but no background in cement. He managed to turn a commodity into a consumer product through a clever slogan (“giant strength”) and an eye-catching logo (a giant clutching a building). After courting Ambuja for years, Holcim succeeded only in 2005-07, as Mr Sekhsaria’s health began to fail. Since then the business has flailed. In the past decade, according to Kotak Securities, a broker, capacity at Holcim’s Indian holdings expanded by less than 2% a year, compared with a rate of 10% for UltraTech, India’s biggest cement-maker, and 13% for Shree Cement, an upstart. Holcim has not disclosed how much it paid for its Indian venture. One analyst puts the figure at around $2bn. Given that it will receive $6.4bn for its 63% stake, this would amount to an adequate but unexciting annual return of perhaps 8%. (The other $4bn or so Mr Adani is paying will go to Ambuja’s minority shareholders.)The deal is more favourable for Holcim in other ways. It fits in with the firm’s broader shift towards a greener, less cement-centric business. In recent years it has sold cement units in Brazil, Indonesia, Malaysia, Russia, Sri Lanka and Vietnam. Critically, it shouldn’t attract antitrust scrutiny, whereas success by one of the two other bidders might well have raised trustbusters’ concerns. UltraTech, controlled by the Birla family, is India’s biggest cement-maker. The Jindals’ jsw Group, a big steel producer, has a growing cement business. The Competition Commission of India has been looking into a possible cement cartel since at least 2010. A case involving Holcim is before the Supreme Court. Another investigation was reportedly launched in 2020. As part of the sale, Holcim will be spared from any judgment, its chief executive, Jan Jenisch, told analysts. But it was not solely because Mr Adani has no existing cement operations that he prevailed in the fight for Ambuja. What he brought also mattered. The Adani Group owns power utilities, useful in running energy-hungry kilns, and India’s biggest network of ports to ship the stuff. Its coal-fired plants provide a by-product, fly-ash, required for cement-making. Most important, the tycoon displays an uncanny ability to raise capital. Paired with vaulting ambition, it is a hard mix to beat. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

America’s clean-energy bosses thought they would by now have more to celebrate. In the presidential campaign of 2020 Democrats tried to outbid one another on climate plans—Joe Biden offered $2trn, Bernie Sanders’s Green New Deal was $16trn—as if the nomination would go to the highest bidder. In the three months after Mr Biden defeated Donald Trump, an index of clean-energy firms jumped by about 60%. Goldman Sachs, a bank, forecast “a new era for green infrastructure” in America and beyond. Though Mr Biden’s infrastructure bill offered some help for clean energy, a giant climate bill now seems fantastical. Worse, green power is not just failing to boom. It is going bust. An array of American solar projects have been delayed or cancelled amid a federal probe into tariff evasion by manufacturers of solar panels and modules. The countries in question—Cambodia, Malaysia, Thailand and Vietnam—together produce about 80% of America’s solar-panel imports. Politics is stymying makers of wind turbines, builders of wind farms and the utilities that buy power from them. The results are stark. So far this year the clean-energy sector has lost about 25% of its market value, compared with an 18% drop for the benchmark s&p 500 index of big American firms. Rystad Energy, a research firm, estimates that two-thirds of its forecast solar installations for this year are in doubt. According to Bloombergnef, a data provider, the capacity of new renewables projects in 2022 looks set to be a tenth lower than in 2020, under the windmill-hating Mr Trump. Two years ago clean-energy enthusiasts were right to feel bullish. In the decade to 2020 the levelised cost of electricity—which takes into account investment in equipment, construction, financing and maintenance—had fallen by 69% for onshore wind and 85% for solar projects, according to Lazard, an advisory firm. With renewables technologically mature and economically competitive, utilities and developers planned to pour money into solar and wind. NextEra Energy, a giant utility that in 2020 briefly overtook ExxonMobil to become America’s most valuable energy firm, said it would spend up to $14bn a year on capital projects in 2021 and 2022, calling it “the best renewables development environment in our history”. In the arduous effort to decarbonise America’s economy, building clean power would be the easy part. Turns out it isn’t. Some problems stem from the pandemic and gummed-up global supply chains. Pricey commodities helped push up the levelised cost of wind and solar in the second half of 2021 (though more slowly than for coal and gas). But many of the current woes are political in nature. Take restrictions on products from Xinjiang. Last year Mr Biden, seeking to limit imports made with forced labour, announced a ban on polysilicon coming from big companies producing in the Chinese region. American importers scrambled to present proof that they weren’t violating the ban. As customs officials pored over suppliers’ lengthy attestations, in Chinese, solar modules languished in ports. A lack of equipment forced developers to delay construction. That problem has now been dwarfed by a bigger one. In March the Commerce Department humoured a request by Auxin Solar, an American manufacturer, to check if Chinese companies were circumventing anti-dumping tariffs. Duties had originally been imposed by Barack Obama, then extended by Mr Trump; Auxin claims that firms are dodging tariffs by making parts in China but assembling modules in their South-East Asian factories.The effect is that a small American firm is obstructing more than 300 projects, according to a tally by the Solar Energy Industries Association, a lobby group. Some developers cannot get their hands on kit. Others find that costlier gear has put their construction deals in the red. NextEra told investors in April that up to 2.8 giga-watts of solar and battery projects planned for this year, equivalent to around a tenth of its intended renewables investments in 2021-24, would be delayed. American assemblers of solar panels, it said, were sold out for the next three years. America’s largest solar project, spanning 13,000 acres of Indiana, has been postponed. NiSource, the utility behind it, will instead delay the retirement of two coal-fired power stations to 2025. The challenges facing the wind industry look less severe only in comparison. Like many capital-intensive industries, the wind sector is grappling with rising costs of steel, copper, resin and other materials needed to craft turbines. Global manufacturers such as Vestas and Siemens Gamesa have seen their margins shrink. In America, rising input costs have unfortunately coincided with declining tax credits. It is possible that Congress could extend those for wind—but improbable given partisan deadlock. In the meantime developers and utilities are delaying new contracts, unwilling to make commitments before knowing the true costs. Politicians may create problems where things have been going well, as with auctions for seabed leases for offshore wind farms. These have attracted ample bids from oil firms and utilities. The House passed a bill in March with bipartisan support that would require the giant boats used to install turbines off America’s coast to replace some foreign crews with Americans. Wind executives note the country lacks enough people with the requisite skills. A high-voltage situationRepublicans, who look poised to control Congress after the mid-term elections in November, remain more hostile to greenery than Democrats. But the renewables industry’s current troubles highlight the contradictions within Mr Biden’s coalition. It wants to build green projects quickly. At the same time, it wants Americans to build them with American inputs. The trouble is that you cannot have both. In a letter to Mr Biden on May 17th, 85 members of Congress argued that the tariff inquiry could cost America’s solar sector more than 100,000 jobs. That is bad for workers, bad for the renewables industry—and terrible for the climate. ■Read more from Schumpeter, our columnist on global business:Activist investors are becoming tamer (May 14th 2022)Facebook’s retirement plan (May 7th)The weird ways companies are coping with inflation (Apr 30th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Walmart went from strength to strength during the covid-19 pandemic. Its years-long investments in online fulfilment finally began to pay off as virus-wary shoppers swapped aisles for apps. As inflation picked up initially, its “everyday low prices” looked even more appealing than usual. And investors appeared to believe that it had the power to make those prices a bit less low, passing its own rising costs without putting off shoppers or sacrificing margins. On May 17th economic reality finally caught up with America’s supermarket titan. The company reported quarterly earnings that fell short of even the most conservative analysts’ estimates, blaming chiefly supply-chain snags and the rising cost of labour and transport. Its share price fell by 11%, a daily drop second only to the one the firm experienced in the trading session before the Black Monday stockmarket crash in 1987. A day later it slid by another 7%. The same day Target, another pandemic retail star, reported similarly disappointing results, wiping out 25% of its market value. The two companies shed a combined $65bn in market capitalisation in the space of two days.Historically, inflation has often benefited big supermarkets. Elevated prices boost the nominal value of sales. As for higher unit costs, these could often be passed on to shoppers, who are likelier to keep needing supermarkets staples and less likely to gripe about higher bills if everything else they buy is also dearer. This time, though, the retailers are finding it harder to offset the steep increase in operating expenses. Target’s chief executive, Brian Cornell, anticipates an extra $1bn in transport costs this year as soaring energy prices dent profits. It is already raising prices in response—evidently not fast enough. Walmart, far bigger of the two, is better placed to absorb some of the higher costs. But even the Beast of Bentonville now expects earnings to decline by 1% this year. In addition to costlier transport, Walmart also reported higher wage costs, not least as a result of a hiring spree to ensure enough workers amid the Omicron wave of covid-19. It stocked too many clothes and home furnishings in order to avert a supply crunch, just as appetite for these products waned. And margins suffered as penny-pinching customers switched away from pricier premium brands to the supermarkets’ less lucrative own labels.Neither firm is about to collapse. Target’s revenues rose year on year, in nominal terms at least. So did traffic in its stores—something that is “rare to find in retail these days”, according to Morgan Stanley, an investment bank. Walmart’s sales were up by 2.6%, to $142bn. Founded by a man who prized frugality, the bigger retailer has an established reputation for good value—a particular virtue in shoppers’ eyes during a recession, which can no longer be ruled out. Its large grocery business offers a hedge against a downturn. And wealthier shoppers with bigger savings may migrate to Walmart from higher-end retailers, which could help pad margins.The question now is who will be the next to face a reckoning. The share prices of smaller retailers like Kroger and Dollar General, which have yet to report their first-quarter results, have been dragged down by association. Consumer-goods giants may be the next in line. Firms like Procter & Gamble (p&g) have been raising the prices of their premium brands to counter their own margin squeeze. Now they may think twice before doing so again, lest they lose sales. Such calculations diminish their pricing power, which markets have tended to reward handsomely. Investors may have taken note. On May 18th p&g’s share price fell by 6%, even more than the wobbly stockmarket as a whole. ■ More