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Activist investor Carl Icahn lost his proxy fight with McDonald’s on Thursday.
Icahn only owns about 200 McDonald’s shares, a tiny stake that didn’t give him much influence over votes.
The proxy fight centered on Icahn’s criticism of McDonald’s and its suppliers over the treatment of pregnant pigs.

Carl Icahn speaking at Delivering Alpha in New York on Sept. 13, 2016.
David A. Grogan | CNBC

Activist investor Carl Icahn lost his proxy fight with McDonald’s on Thursday, signaling that shareholders weren’t swayed by his animal-welfare concerns.
Preliminary counts of votes during the company’s annual shareholder meeting showed that Icahn’s board nominees only received votes from about 1% of outstanding shares, McDonald’s said.

“Moving forward, McDonald’s Board and Leadership Team remain focused on continuing to take actions that uphold and advance our values while committing to serve the interests of all our shareholders,” the company said in a statement.
Icahn only owns about 200 McDonald’s shares, a tiny stake that didn’t give him much influence over votes. And, as the results show, he failed to win over his fellow shareholders with his criticism of McDonald’s environmental, social and corporate governance commitments and calling out large Wall Street firms for “hypocrisy.”
McDonald’s chairman Enrique Hernandez, Jr., said in prepared remarks obtained by CNBC that Icahn was invited to speak about his nominations at the meeting but he withdrew two days ago. Icahn did not attend the meeting.
A representative for Icahn declined to comment to CNBC.
Icahn’s proxy fight kicked off in February when the billionaire publicly criticized McDonald’s for failing to meet its original deadline for eliminating its suppliers’ use of gestation crates for pregnant pigs. He also claimed the company was supposed to ban the use of crates entirely but has since changed the scope of its commitment.

For its part, the Chicago-based company has blamed the Covid-19 pandemic and African swine fever outbreaks for pushing back the original deadline of 2022 that it set a decade ago. By the end of this year, McDonald’s now expects 85% to 90% of its U.S. pork supply to come from pigs that aren’t kept in gestation crates if they’re confirmed to be pregnant. McDonald’s has said that eliminating the use of the crates entirely would raise its costs and higher prices for customers.
McDonald’s said in a filing in early April that it expected to spend roughly $16 million in the proxy fight with Icahn.
The Humane Society of the United States had put forth a shareholder proposal echoing Icahn’s criticisms but withdrew it. The proposal asked the company to confirm it would reach its prior goal of eliminating the confinement of gestating pigs by 2022. Otherwise, the organization asked McDonald’s to disclose more information about its pork supply chain. Such shareholder proposals are nonbinding but can send a message to corporate boards about public support for company practices.
Josh Balk, the vice president of farm animal welfare for the Humane Society, said in a statement that the group withdrew the proposal because McDonald’s finally acknowledged that its suppliers are still confining pregnant pigs in crates.
Icahn is waging a similar proxy fight at Kroger, the largest U.S. supermarket chain operator in the U.S. Kroger’s annual meeting is scheduled for June 23.

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Some people can move back in with mom and dad if they have to, or at a minimum, crash on their aunt or sister’s couch until they get their priorities in order. That provides a cushion. But that was never a possibility for me.
I didn’t have a strong support system growing up. I always knew that if I ran into trouble while building my career, I might have to sleep in my crappy car with a broken windshield.

That never happened, thankfully, but the possibility was always in the background as I started my journey to becoming an entrepreneur and building Skinnygirl Liquor, which I sold for $100 million in 2011.
I had to be proactive, and I had to work hard. I believe that success is achievable for anyone who wants to put in old-school effort and hard work.
Here are some key mindsets that have helped me get to where I am today:

1. You have to do the work

Billionaire entrepreneur Mark Cuban actually used the expression “do the work” when I talked to him about what success means.
He told me, “People ask me: ‘Mark, what business should I start?’ And I say, ‘If you don’t know, I can’t tell you. But what I can tell you is that you have to do the work. You have to learn.’ One of the greatest assets you have is excitement about learning. It is the only constant in this life. Especially with all the changes we’re going through right now. There are new things to come and you can’t be ignorant to it. If you want to be successful you have to put in the time to learn.” 

2. Stay enthusiastic

TV producer and host Andy Cohen embodies enthusiasm. I think it’s one of his secret ingredients to success. 
His dream was to be in television news. After college, he moved to New York. “I thought, I’m going to wait tables until I can get a job. Something has to open up,” he told me. “Weirdly, a nighttime desk assistant left a morning show shortly after I moved to New York, and I got that job.”
He loved it.
“I was working 70 hours a week, but I didn’t care. I worked so hard and I felt so successful because I was getting checks that said CBS on them. I just thought I was the sh**. I thought I was amazing,” he said. “It’s such simple advice, but I always say to people that if you are passionate about something, you should be able to succeed because the passion will drive you.” 

3. No one is going to give you anything for free

Don’t be the person who wants a promotion or raise just for showing up. That’s entitlement. Earn the elevation by working harder and smarter than everyone else. It doesn’t matter what level you’re at: If you’re working to succeed, you can’t rest on your laurels.
Today, I have a strong team, which I’ve worked diligently to curate. One of my assistants in particular will do amazing things in her career, because her work ethic is so strong. She’ll say to me: “I want you to feel supported, I will travel with you. What else can I do? How can I make this easier?”
That means everything to me. And because she approaches the job with such vigor, loyalty and enthusiasm, I’m careful about not letting herself burn out.
But I also see a lot of me in her, and I know that if she sustains this attitude toward work, she’ll be a success as she goes forward.

4. Make the call

Understanding that you’re on your own in your efforts doesn’t mean you can do it all alone. I’ve never been shy about finding experts, asking questions, and getting my ideas to the right people. 
Years ago, when I was working on my BethennyBakes business, I would watch Food Network shows and wait for the credits to roll at the end. I wrote down the names of production companies and producers, then try to find their contact information. Generally, companies are more than happy to provide the right phone numbers or email addresses.
I’d bake cookies, pack them up and send them to the producers and executives at their offices along with a handwritten note. I’d follow up with a phone call, and oftentimes, land a meeting with them. It didn’t result in a cooking show, but I built important connections that helped me along the way.

5. Let your work speak for you

People ask me about being a woman in a man’s world all the time. But I don’t look at the world that way; I think about being strong and pushing through.
For instance, had I thought about the fact that I was a woman in a business that is dominated by men, where men are the power behind and in front of the brands, maybe I wouldn’t have gone into the spirits industry with my Skinnygirl margarita. It never occurred to me that some doors might be closed to me because I’m female.
Whatever I’ve wanted to do, I have just gone in and fought to do it. I’ve fought to be better than the men, better than the women, to just be better than.
Don’t get me wrong: Inequity does exist, and it’s a problem. But when I am doing something, I am focused on the task at hand. I’m not self-conscious. I believe that is the best way to reach goals.
I also believe that thinking of yourself in terms of your identity can hold you back. It can lead you to make assumptions about what other people may be thinking about you, like “he doesn’t want to work with me because I’m a woman” — but it’s sometimes not the case.
And even if it is, I don’t believe that focusing on that is not going to be helpful to you or your aspirations. That thinking is coming from a place of “no,” rather than from a place of “yes.”
Bethenny Frankel is an entrepreneur, TV producer, podcaster, and author of “Business is Personal: The Truth About What it Takes to Be Successful While Staying True to Yourself.” She is also the founder and CEO of Skinnygirl. Follow her on Instagram @bethennyfrankel.
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Asians comprise about 7% of the U.S. population, but make up 11.9% of Costco shoppers, according to market research firm Numerator.
Asian Americans are the fastest-growing demographic in the U.S.
The untapped sales potential of Asian American consumers tallies to $13 billion, according to NielsenIQ.

Durian at a Costco Wholesale location in Woodland Hills, California. April 24, 2022.
Wendy Leung

Wendy Leung rarely saw durian in grocery stores growing up in Los Angeles, but the 45-year-old nonprofit worker found the fruit at her local Costco Wholesale in San Fernando Valley this April. Durian is used in Southeast Asian cuisines and is known for its strong scent. 
“When I saw it in Costco, it just made me laugh that durian has gone mainstream,” said Leung, who was born in Hong Kong. “I’ve definitely been noticing more Asian products at Costco lately.”

Asian Americans are the fastest-growing demographic in the U.S. They’re also a disproportionate number of Costco’s customers. Asians comprise about 7% of the U.S. population, but make up 11.9% of Costco shoppers, according to market research firm Numerator.
Costco’s dominance among Asian American consumers bodes well for the warehouse retailer’s longer-term growth trajectory — and carries implications for other retailers as the industry evolves alongside a diversifying United States.
“There’s opportunity to take what were once held as niche or minority markets and put them central to U.S. trends,” said Kymberly Graham, head of diversity initiatives at consumer intelligence firm NielsenIQ.
“For Asian Americans, their rate of population acceleration certainly lends to this idea that … they’re going to be creating major market shifts. If their needs are being served, it inherently becomes very profitable for anyone that’s serving them,” Graham said.

A $13 billion opportunity

The rapid growth and purchasing power of Asian Americans make the group a formidable consumer base for retailers. The Asian population in the U.S. jumped 81% from 2000 to 2019, compared with the overall population’s 16% growth, according to the Pew Research Center. Asian Americans have the highest median household income in the U.S. — though the demographic also has the greatest intragroup economic disparity in the country.

The untapped sales potential of Asian American consumers tallies to $13 billion, according to NielsenIQ.
On average, Asian Americans exhibit some shopping habits that differ from those of other consumers, NielsenIQ found. Households of Asian descent tend to be larger than those of the overall U.S. population. Asian Americans are more likely to buy in bulk and seek bargains. As a result, Asian consumers are more than twice as likely to shop at warehouse clubs than the average U.S. consumer.
Costco declined to comment directly on inventory and consumer strategy as it relates to Asian shoppers. “Regardless of the products we sell, Costco’s buying philosophy is the same: Research the marketplace, determine the variety of products our members are interested in, and negotiate an exceptional value on quality products and services,” Costco management told CNBC in an email.
The warehouse retailer famously does not spend any money on advertising, but word of mouth can cultivate brand affinity among different communities, said Marshal Cohen, chief industry analyst for market research firm NPD Group.
“Every once in a very blue moon would you hear about a major retailer focused in on the Asian community,” Cohen said. “Word of mouth and the influence of the community spreads, and that’s what helps elevate a business. So if a business like a Costco caters to the Asian community, they share that out and that multiplies out.”
Cindy Zhou, 50, first heard about Costco from a friend who is also an immigrant from China. Zhou became a Costco member around 2013 and now shops weekly for food, household products and gas at her local warehouse in greater Cleveland.
“Almost all my friends have Costco memberships,” said Zhou, who works in information technology. “I like Costco because they have very good quality at a much lower price than other grocery stores.”
Zhou and other Costco shoppers noted their local stores have added specialty Asian items such as boba ice cream bars, lap cheong and oyster sauce to their rotating inventory in recent years. She recalled seeing displays for Chinese holidays Mid Autumn Festival and Lunar New Year at Costco in the past year. Leung’s warehouse in California sells poke bowls.
Asian American consumers can find food products of their diaspora at local ethnic grocers and Asian supermarket chains such as H Mart, 99 Ranch Market and Patel Brothers. But seeing those products at one of the largest retailers in the world is rare.
With a market value of $185 billion, Costco reported $195.93 billion in total revenue in 2021, up more than 17% from the prior year. The company is scheduled to report its latest results after the market closes Thursday. Its shares are down more than 20% so far this year.
Zhou said when she or a friend spots an Asian product at Costco that they would normally see only at an ethnic store, they tell others about it in group chats on Chinese messaging app WeChat. 

‘A lot of Costco love’

Jing Gao, founder of hot sauce brand Fly By Jing, is a big Costco fan as a consumer, so when she got the opportunity to pitch to Costco buyers, she jumped at the chance.
“I’m obsessed with Costco. I go any chance I get,” Gao said. “There’s just something great about discovery … not knowing what deals you’re going to find.”

Fly By Jing at Costco Wholesale
Fly By Jing

Fly By Jing started as an online-only direct-to-consumer business before expanding to retailers such as Whole Foods, Target and now Costco. The brand launched its Sichuan chili crisp product in Costco stores in the Los Angeles and Hawaii region in February. Just months later, Fly By Jing has already expanded to, or is in the process of entering, the Northeast, Bay Area, Pacific Northwest, San Diego and Texas markets. The company plans to roll out its Zhong dumpling sauce at Costco as well, starting in LA later this year.
An Instagram video announcing the Costco launch has become Fly By Jing’s highest performing post on the social media platform. The video currently has roughly 85,000 views, almost 7,000 likes and nearly 600 comments.
“Clearly there’s a lot of Costco love,” Gao said.

One customer who bought Fly By Jing at Costco is Leung.
“I would give kudos to Costco for thinking about what young people want, what’s in,” Leung said. “You start developing a loyalty.”

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Macy’s on Thursday reported fiscal first-quarter profits and sales ahead of analysts’ expectations.
The department store chain, which also owns Bloomingdale’s, reaffirmed its fiscal 2022 sales outlook and raised its profit guidance, expecting stronger credit card revenue for the remainder of the year.

A person walks past a Macys store in Hyattsville, Maryland, on February 22, 2022.
Stefani Reynolds | AFP | Getty Images

Macy’s on Thursday reported fiscal first-quarter profits and sales ahead of analysts’ expectations, as shoppers returned to malls to shop for new outfits, luggage and luxury goods in spite of decades-high inflation that has threatened to curtail consumption.
The department store chain, which also owns Bloomingdale’s, reaffirmed its fiscal 2022 sales outlook and raised its profit guidance, expecting stronger credit card revenue for the remainder of the year.

It joins Nordstrom in bucking a broader trend in the retail industry of downbeat forecasts and warnings of a consumer pullback on discretionary spending. In recent days, companies including Walmart, Target, Kohl’s and Abercrombie & Fitch have cautioned that higher expenses on logistics and labor will continue to eat into their profits in the near term.
Macy’s shares climbed around 13% in premarket trading on the news.
The retailer still expects 2022 revenue to be flat to up 1% compared with 2021 levels, which would be a range of $24.46 billion to $24.7 billion.
It now projects earnings, on an adjusted basis, between $4.53 and $4.95 per share, up from a prior range of $4.13 to $4.52.
“While macroeconomic pressures on consumer spending increased during the quarter, our customers continued to shop,” Chief Executive Officer Jeff Gennette said in a press release. He added that the company saw a shift among consumers back into stores and toward clothing for special occasions such as women’s dresses and tailored men’s items.

Here’s how Macy’s did in its fiscal first quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

Earnings per share: $1.08 adjusted vs. 82 cents expected
Revenue: $5.35 billion vs. $5.33 billion expected

For the three-month period ended April 30, Macy’s reported net income of $286 million, or 98 cents per share, compared with net income of $103 million, or 32 cents a share, a year earlier.
Excluding one-time items, it earned $1.08 per share, topping analysts’ expectations for adjusted earnings per share of 82 cents.
Revenue grew nearly 14% to $5.35 billion from $4.71 billion in the year-ago period, also topping analysts’ forecast.
Digital sales climbed 2%, representing 33% of net sales for the quarter. The retailer said it had 44.4 million active customers, up 14% from the prior year, aided by Macy’s loyalty program that helped to draw more people online and into stores.
Same-store sales for both its owned and licensed stores grew 12.4% compared with the prior year. Analysts polled by Refinitiv had been looking for a 13.3% increase.
Gennette told analysts on a post-earnings conference call that high-income consumers have so far been less impacted by inflation, lifting sales of more expensive goods at Macy’s Bloomingdale’s business.
Consumers who make less than $75,000 in annual income were more likely to frequent Macy’s off-price Backstage business and appeared most affected by rising prices, but they still spent more money, Gennette said.
“We operate across the value spectrum from off-price to luxury,” the CEO said on the call. “This, coupled with our wide assortment of categories, products and brands, gives us the ability to flex with consumer demand.”
The company also saw international tourism pick back up in the quarter, according to Gennette, driving traffic at Macy’s department store locations in bigger cities including New York. There was a noticeable uptick in tourism from Central and South America, as well as Europe, he said.
Macy’s reported inventory levels as of April 30 that were up 17% from the prior year and down 10% compared with 2019 levels.
Macy’s said those levels were somewhat inflated as shoppers shifted away from buying active and casual wear, as well as home goods. Supply chain constraints also loosened over the quarter, it said, resulting in a higher percentage of inventory receipts than the retailer had expected.
However, Gennette said there is still significant uncertainty around the retailer’s supply chain amid continued pandemic lockdowns in China and ongoing labor negotiations at the port in Los Angeles.
“Factors like these drive us to continue taking a prudent and disciplined approach with our lead times and forecasting,” he said.

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Justin Timberlake is the latest music star to sell the rights to his songs for a huge sum of money.
He sold the rights to his song catalog to Hipgnosis Songs Capital, a fund backed by private equity firm Blackstone.
Timberlake’s hits includes “Cry Me a River,” “SexyBack,” “Can’t Stop the Feeling” and NSYNC songs such as “Bye Bye Bye.”

Recording artist Justin Timberlake performs onstage during the Pepsi Super Bowl LII Halftime Show at U.S. Bank Stadium on February 4, 2018 in Minneapolis, Minnesota.
Christopher Polk | Getty Images

Buy, buy, buy.
Pop superstar Justin Timberlake, who got his start in the boy band NSYNC, has sold the rights to his song catalog to Hipgnosis Song Management, the British firm announced Thursday.

The deal was completed on behalf of Hipgnosis’ partnership with private equity firm Blackstone, Hipgnosis Songs Capital. It is said to be valued at more than $100 million. The Wall Street Journal, which first reported the news, added that the agreement does not cover future releases from Timberlake.
The superstar said he is “excited” about the partnership. “I look forward to entering this next chapter,” he said in a release.
Timberlake’s hits include “Cry Me a River,” “SexyBack,” “Can’t Stop the Feeling” and NSYNC songs such as “Bye Bye Bye.”
Timberlake, 41, is the latest music star to sell the rights to his songs for a huge sum of money.
In December, Bruce Springsteen sold his catalog to Sony for $550 million. A month later, in January of this year, Bob Dylan sold his catalog of recorded music to Sony, as well. That came after Dylan sold his songwriting catalog to Universal Music Publishing Group in December 2020. Tina Turner sold her catalog for about $50 million to BMG in October.

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A market downturn is a good time for buyers. Look at the tech industry. The Nasdaq, a tech-heavy index, has fallen by 30% from its peak in November and a flurry of deals are under way. Microsoft is working on the $69bn purchase of Activision Blizzard, a videogame maker. Since March, Thoma Bravo, a private-equity firm, has spent $18bn on two enterprise-software firms. Elon Musk is—perhaps—about to purchase Twitter, a social network. The latest big tie-up looks unusual. On May 22nd Bloomberg reported that Broadcom, predominantly a semiconductor maker, worth $214bn, is planning to buy vmware, an enterprise-software firm. If the deal goes through, it could be worth $60bn. A chipmaker buying a software firm may seem strange. But Broadcom has done the same thing in the past with striking success. Can it repeat the trick?Broadcom is an odd beast. It started life as Avago Technologies, a chipmaker based in Singapore. That firm bought a number of other chipmakers, including Broadcom, from which it took its name. In 2018 it tried to buy Qualcomm, a rival semiconductor firm, for $130bn. That would have been the biggest tech acquisition of all time. Donald Trump, then America’s president, eventually quashed the deal on national-security grounds because Broadcom was a foreign firm (even though it was in the process of moving its headquarters to America). After that, Broadcom changed tack. Later in 2018 it surprised the industry by buying ca Technologies, a software firm, for $19bn. The following year it snapped up Symantec, a cyber-security outfit, for $11bn. The motivation was not to link its semiconductors to its new acquisitions, but to run the software firms more profitably. Cost-cutting at both firms hurt future growth prospects but helped profits. Operating margins at Broadcom’s software units ballooned from about 30% before the takeovers to around 70% today.This private-equity-style approach has transformed Broadcom into a tech conglomerate. Today 26% of its revenue comes from software. With vmware that figure could grow to 45%. The shift into software has also boosted Broadcom’s overall operating margins, which have grown from 15% in 2016 to 32% today, among the best in the semiconductor industry. Investors seem pleased. Broadcom’s share price has nearly doubled over the past two years, compared with a 60% increase for the phlx, an index of chip manufacturers. In many ways Broadcom’s most recent target resembles its previous success stories. Like ca and Symantec, vmware sells infrastructure software and controls a large share of that market. According to Gartner, a research firm, the company holds about 72% of the server-virtualisation market, a technology that it helped to pioneer. Another similarity is that its services are “sticky”, notes Stacy Rasgon of Bernstein, a broker. It is hard for existing customers to switch away because they are reliant on vmware’s software to run their server infrastructure.But Broadcom may struggle to repeat its past successes. Antitrust regulators are ever more wary of big tech mergers. And even though the two firms do not compete directly, America’s Federal Trade Commission is already investigating whether Broadcom forced customers into exclusive agreements that make it difficult for them to shop around. Another risk is a cultural clash. Last year sas Institute, another enterprise firm, rejected Broadcom’s takeover bid. Part of the reason was that employees worried that its cost-cutting strategy would put an end to their office perks.And some worry that Broadcom’s pursuit of profits will mean that vmware misses out on a bigger prize. It is in the middle of its own pivot, planning to grow its subscription and cloud arms from 25% of sales today to around 40% by 2025. In doing so, vmware “has a shot at being the layer on which most companies use the cloud”, argues Patrick Moorhead, a chip-industry analyst. Cutting investment and marketing would stifle such efforts just as cloud computing is booming. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

The annual meeting of the World Economic Forum (wef) is a study in contrasts: business and politics, East and West, north and south, a few insiders cloistered in wintry Davos and the billions of outsiders on whose fate they pontificate. This time around, as thousands of the world’s movers and shakers belatedly descended on the Swiss ski resort between May 22nd and 26th, the big disparity was between the gloom about the state of the world and the joy of shoulder-rubbing in person (minus the snow) after a two-year pandemic hiatus. The macro mood was sombre for good reason. High inflation doesn’t feature in the Bible but other than that the list of ceos’ top concerns currently reads like the Book of Revelation: war (in Ukraine), pestilence (particularly China’s destructive effort to stamp out covid-19 at home), famine (everywhere, if war and pestilence aren’t staved off). On top of that, one Western boss after another got an earful from their emerging-market counterparts about the global knock-on effects of the American-led sanctions against Russia on food and fuel prices.This apocalyptic backdrop helps explain why companies reined in the pizzazz. JPMorgan Chase, an American bank, cancelled its hot-ticket party. The one thrown by Salesforce, a business-software giant, was as raucous as ever but some other corporate dos looked virtually empty. The boss of one giant firm noted the lack of “vibrancy”. Attendance seemed down on previous years—by half or so, chief executives reckoned. Several American regulars were kept away by prior engagements (Amazon, BlackRock, ExxonMobil and Meta all hosted their annual shareholder meetings this week). Russians were uninvited; Russia House became Russia War Crimes House, displaying images of atrocities committed by Vladimir Putin’s troops. The absence of China, whose representation fell from hundreds to a handful owing to President Xi Jinping’s zero-covid policy, made the talking shop less global—and less useful—than usual. But not useless. This year’s worthy panel discussions will not fix globalisation, avert climate catastrophe or foster inclusive growth. At the same time, in no small part because things were less hectic, attendees reported enjoying the frank back-room chats that are the wef’s main draw more than ever. Individually, these are about corporate self-interest. Collectively, they can add up to something meaningful. Davos needs the world more than the world needs Davos. That isn’t to say there are no mutual benefits.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

There is no better place to experience German efficiency than at Ludwigshafen, a site operated by basf, the world’s largest chemicals company, an hour’s drive south of Frankfurt. Everything is joined together in this city-sized cluster of dozens of plants connected by 2,850km of twisting pipes, from two steam crackers, industrial cathedrals where a hydrocarbon mixture called naphtha is split into its components, to an immense incineration facility, where residues are put to rest. Despite the vast scale of Ludwigshafen everything is accounted for. Reuse and recycling ensure that barely a molecule is wasted. According to basf’s proud tour guide, 94% of the chemicals that enter this system make it into one of the firm’s 45,000 products. Yet basf’s success is not entirely home-baked. Another essential ingredient is cheap Russian gas, reliably delivered via pipeline. The complex in Ludwigshafen is Germany’s biggest industrial consumer of the stuff, piping in about 4% of the country’s total annual gas consumption, enough to heat millions of households through the coldest of winters. basf uses about half to produce steam, the other half as feedstock. “There is no question that low-priced energy has brought wealth to Germany,” says Martin Brudermüller, basf’s chief executive. “If prices had been higher, maybe parts of our production would already be gone.”Now this energy dividend is set to be curtailed, even if the war in Ukraine ends soon. For a generation at least, Germany’s leaders will look to end their country’s dependence on Russian gas and oil. As a result, Europe’s largest economy not only faces a rethink about how much it needs to invest in defence, but an equally difficult economic reckoning. Its industrial titans have started to reconsider their finely tuned business models. basf offers a revealing case study of this shift.How severe a blow Germany’s economy takes will depend on how quickly it can adapt to doing without Russian gas. A group of economists led by Rüdiger Bachmann of the University of Notre Dame recently estimated that the hit from a sudden halt of Russian energy imports would be “substantial but manageable”, causing a decline in gdp of between 0.5% and 3%. That is less severe than the damage done by the coronavirus. But in some locales, such as Ludwigshafen, the shock of shunning Russian gas could be far more dramatic. If pressure in the pipeline that feeds the giant complex drops below 50% of its normal flow, the whole place will have to shut down. That in turn will cause chaos further down the chemical-industry supply chain. “When Ludwigshafen stops,” warns Mr Brudermüller, “there will be no more cars, no more pharmaceuticals and no more many other things.”basf’s boss says that he will try to keep the chemicals flowing by doubling down on the firm’s existing plans to do away with hydrocarbons, hoping that he has time before a European gas embargo takes hold or Russia elects to cut off supply. The firm already aims to achieve net-zero carbon-dioxide emissions by 2050. As part of that process, last year it bought part of the world’s biggest offshore wind farm, off the Dutch coast. It plans to acquire stakes in other such projects. That electricity will replace the gas that powers its steam crackers. Green hydrogen and heat pumps will be added to the mix in Ludwigshafen and at five similar sites that basf operates around the world. As for the gas it needs as a feedstock, much will arrive in ships as pricey liquefied natural gas.The second part of Mr Brudermüller’s strategy is more surprising. The economic repercussions of the war in Ukraine are pushing his firm eastwards. Higher energy costs and stricter environmental regulations in Europe make China look ever more attractive, he says. Having lived in Hong Kong for a decade, he has long admired what he describes as the country’s pragmatic authorities and dedicated workers. The firm’s future looks less firmly planted in Ludwigshafen than in Zhanjiang in southern China, where it is investing $10bn in a state-of-the-art site. The German titan has no alternative to continuing to expand in China if it wants to remain the world’s biggest chemicals-maker. Greater China already represents about half the world market for chemicals and will account for more than three-quarters of its global growth in the next few years, he reckons. “Everything we know about how to make things with less CO2 will be applied there,” says Mr Brudermüller, adding that “the money we will make in China will be needed to pay for the green transformation in Ludwigshafen.”Chemistry lessonsThe risks of such a strategy are clear. Although basf has, in Mr Brudermüller’s words, “never seen a theft of technology” since it started production in China in the late 1960s, few would be surprised to see the firm’s know-how trickle into the Chinese chemicals industry. More importantly, the economic decoupling between China and the West may yet go beyond some elements of high tech, such as semiconductors, and reach areas in which basf specialises. The danger is that, in trying to wean itself off one kind of dependency—on Russian energy—basf may simply strengthen another. Relying on China might not pose such an obvious danger as a Russian finger on a gas pipeline’s off switch, but banking on it for a big chunk of profits still leaves the firm vulnerable.Mr Brudermüller looks like the most energetic of Germany’s big bosses in his drive towards China. But many others are said to be tempted to turn more decisively towards the east. They should think twice before embracing a greater reliance on China and instead try to rekindle the spirit of Teutonic thrift and inventiveness that made possible the industrial wonder that is Ludwigshafen. basf has done it before, albeit for a more dubious purpose. When the British navy blockaded Germany during the first world war, the firm built a new plant to make nitric acid without imported ammonia, thus ensuring the resupply of explosives. Necessity, after all, is the mother of invention.■Read more from Schumpeter, our columnist on global business:Why America’s clean-energy industry is stuck (May 21st)Activist investors are becoming tamer (May 14th)Facebook’s retirement plan (May 7th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More