tv Taking Stock With Pimm Fox Bloomberg May 14, 2014 9:00pm-10:01pm EDT
>> this is "taking stock" for wednesday, may 14, 2014. today's theme is location. liquidspace is a company renting real estate by the hour. the chief executive is going to explain about this market for on-demand office meeting space. plus, sandals resorts offers prime locations for millions of vacationers. the top executive describes the all-inclusive trips that lead to profit. and leinenkugel beer. the family behind a craft brewery tells me how they keep the profit growing and all their
locations. all that and more. but first, let's get headlines. >> leinenkugel. i like how you say that. let's start with seaworld. the company's stock is falling in after-hours trade. the themepark company has come under scrutiny ever since the documentary "blackfish." the reason behind the earnings miss -- seaworld saw a 13% decrease in attendance. cisco third-quarter sales and profit topping analyst estimates driving data traffic from smartphones and traffic fueling demand while the company cut costs. macy's today retained its annual profit forecast. they repurchased $1.5 billion more in stocks than originally planned while raising the company dividend. those are a look at the top headlines. back to you.
>> thanks very much. we begin with the situation in ukraine. as the russian foreign minister said today, the country is as close to a civil war as you can get. with an exclusive interview with bloomberg's ryan chilcote today, he added that sanctions by the west might not reach the desired effect. >> if the west, just for the sake of revenge is ready to sacrifice its reputation for the -- as a reliable partner for the entire world economy, if the united states is prepared to sacrifice its reputation as the holder of the key reserve currency, then it is up to them to decide. >> let's go to washington, d.c., now and bring in the former u.s. ambassador to ukraine, now the new eurasia center director at the atlantic council. ambassador, thanks for being with us.
what do you make of sergey lavrov's comments? >> he has a very difficult job. he has to defend russia against economic sanctions in the face of its aggression in the ukraine. there is not a civil war going on in ukraine. you have a russian-financed and led and supplied insurgency. the united states is responding by sanctioning individual russians and perhaps the russian economy and sending troops. mr. lavrov's job is to try to prevent the west from doing that. >> explain if you can russia's
role in the region, and if you can, the specific. there is crimea but also eastern ukraine. >> russian troops without insignias on their lapels seized crimea. then they held a farce of an election, which according to a russian human rights organization only had 30% turnout, and of that, anywhere from 50% to 60% voted for joining russia. by this data, you have 25% or 35% of the population voting to join russia, yet, they joined russia. in eastern ukraine, you have russian special forces, fsb, which is their post-kgb secret police agents, running and financing a small insurgency involving maybe hundreds of ukrainians. with that, they are able to establish control in some buildings in luhansk, donetsk, and slovyansk. the referendum that was held last week was a complete farce. >> what is vladimir putin and russia's desire? >> i would distinguish between the kremlin and russia and the russian people. the kremlin's desire is to
prevent a ukraine which has an open society, which has democratic and fair elections, which looks to the west for at least economic and political inspiration. this is something which for some reason the kremlin does not want, even though a ukraine which merges with eu -- not necessarily becomes part of the eu but the -- but establishes close relations with the eu would not be good for russia. >> is there a historical precedent for russian behavior in ukraine? >> it is certainly true that for many russians, ukraine is not a real country, that the ukrainian people, to the extent that they have an illegitimacy, are real russians or partners with russia this historical understanding which does not match the reality of the ukraine of the past 25 years, provides some support within russia for mr. putin's progressive policies. >> is there a reaction to russia's activity in other countries of eastern europe? whether it is belarus, poland, or the baltic nations? >> the real focus now is on
ukraine, but certainly poland and the baltic nations and, for that matter, most of the states -- almost all the states of the former soviet union -- are very concerned about russia's aggression in ukraine, and they are concerned that it might apply to them, too. this is particularly true in the country of moldova. >> how would you analyze the future movements that the president of the united states can take based on what russians have so far done? >> i think, in fact, the obama administration has very strong cards to play if it chooses to use them. we have taken economic sanctions and helped persuade europeans to take economic sanctions, although, frankly, they have not been strong enough. if the russians disrupt presidential elections, and i think there's a good chance they will, if we take strong sanctions, it will give mr.
putin reason to reconsider. even if europeans do not want to do this, if the united states wants to take on sanctions with the same determination and the same focus with which we pursued sanctions against iran, europeans would have no choice but to follow us. however important russia is to the european economy, the united states is much more important. >> ambassador herbst, what is the relationship now between germany and russia? >> complicated. i think that there are many businesses in germany that would prefer not to make sanctions against russia. a substantial part -- i would not necessarily say a majority, but a large number of the german public has some sympathy for russia. they just have no understanding of what has happened in ukraine over the past 25 years, but i think chancellor merkel understands the russian seizure
of crimea, the continuing aggression in eastern ukraine is a grave threat to the post-cold war order in europe, and for that matter, a threat to global security. i think she understands the west has to take resolute actions to persuade mr. putin to take a different path. we would all love to see mr. putin go in a different direction so we can restore relations with him and his country. >> you are former u.s. ambassador to ukraine. what would be the current role of the u.s. ambassador in terms of connecting with groups or with parties or officials? where would you get your best information? who would you have a dialogue with right now? >> we have an excellent ambassador in kiev right now, and i'm sure he is pursuing all possible angles. my view is it is important to be in constant dialogue with everyone. that would include some of the separatist groups, though i'm not sure they would want to be in dialogue with the u.s. government, but when need to understand the perspective of
all players in the ukraine, although, again, it is worth noting that separatists are a tiny, tiny fraction of people in the ukraine. according to a poll, 70% want to remain in ukraine. >> one of the comments by sergey lavrov, the foreign minister of russia, today to ryan chilcote was that russians do not feel like foreigners when they go to ukraine. is that a valid assessment? >> i'm not certain what to make of that. you could be positive or deeply negative things in that, but it is true that you crazy and people share the same religion -- you could read positive or deeply negative things in that, but it is true that ukrainian and russian people share the same religion and cultural elements, but there is no question that the ukrainian people consider themselves an independent people and an independent custard -- country. >> i want to thank you for joining me, john herbst,
>> summer -- yes, it is around the corner. it will happen, so, just relax. maybe get a little relaxation at an all-inclusive resort. how does that sound? adam stewart joins me, the chief executive of sandals resorts international. they have 24 locations. good to have you with us. tell people a little bit of history of the sandals resorts business. >> we have an awesome history. my dad founded the company in
1981. he is a caribbean beach bum, and he took his philosophy of going beyond with customer expectations and satisfaction levels. one hotel at a time, we have grown to 24 and are now the caribbean's largest employer. ay, that isals b where it all began. >> that is where it all began. in the early 1980's, he said he did not know what he was buying. he bought a rundown hotel with 99 bedrooms. we kept building, put in new services. we were the first to put hairdryers and rooms in the early service, the first to put a la carte service. we've been voted the world's best 18 years in a row. >> you have a couple of ways to look at holiday making in the sandals resorts group. not only sandals resorts, but you also had beaches and you have adventure holidays. tell us about that. >> absolutely.
all the time, people are coming year after year. we have married over a quarter million people in our 33 years. the customer wanted vacation experience to bring their families, so we founded each is resorts in 1997. we have a partnership with "sesame street." we do microsoft xbox game garages. it is something for everyone. it is an incredible product. you can see big bird up there now. it is amazing. >> what distinguishes something like the grand pineapple resorts versus the adventure resorts? >> the grand pineapple is a more entry-level product. sandals and beaches are full of bells and whistles. scuba diving is included. we have butler services. in some of the hotels, you are
picked up in a rolls-royce from the airport. the list of inclusions is -- we include more quality inclusions than any other resort on the planet. the grand pineapple product is a more entry-level, three-star, traditional family vacation experience. without the bells and whistles of a sandals resort beach. >> give us an idea if you can of the caribbean. economye of the caribbean. >> the caribbean economies are struggling. they have too much debt tied to them. debt to gdp ratios are upside down. we are now the largest employer in the caribbean. we have over 12,000 team members throughout the islands we operate in, and we just tried to do as much as we can to gain foreign exchange and lay a huge economic footprint in our region and the caribbean. >> explain your expansion lands. -- plans. you just opened something in grenada. >> last year, we opened three hotels. we opened in barbados.
we opened a magnificent hotel in grenada on december 21, and we opened a new resort called key west village. 168 new bungalows. it has been a busy few years. >> where is the best ways that adam stewart -- place that adam stewart likes to go? >> we have a beautiful hotel in the bahamas. used to be a four seasons. we purchased the hotel. we spend $40 million on it, putting in huge pools and six additional restaurants. for me, it is only a 40-minute flight from florida, but you feel like you are in the middle of nowhere. you can escape the world and the water is like nothing you have ever seen before. >> all of this does cost money. can you give us an idea of how you are paying for all of this? >> privately held. as a private organization, there are no dividends paid to anyone beyond the business itself.
we reinject literally everything we make in this company back into the business year after year. and of course, we do bank financing, typical bank financing. we have very little debt to asset ratios, and we just keep reinvesting. this is what we do. we roam the caribbean. we know the beaches better than anyone, and our entire life is creating amazing resorts. >> what is the biggest challenge working in a family business? >> i get on amazingly well with my dad. he has been a mentor my entire life. it can be tough when you have differences of opinion. he is our chairman. i am the ceo. you would be amazed how much we work through them together. we have been able to build a family business. the flipside is when it is all working, nothing holds a business better than having the family still involved and having that access at all times. it has made us a hugely strong company. >> is there anything the government in the countries of the caribbean could do in order
to spur further torus -- tourist development? >> you know, some of the governments get it better than others. just understand the business better. you have to be connected, tied into the airlines. you need to take an airplane to get to these islands, and i am promoting the islands. tourism is the number one industry of the caribbean by a long shot. will be the future. >> want to thank very much adam stewart, the chief executive of sandals resorts international, coming to us from los angeles. coming up, i will introduce you to the app that wants to outfox the big wholesale stores. you will never have to physically stock your shelves again. ♪
>> all right, the bulk store brick and mortars such as costco and sam's club may feel threatened by my next guest, but he is a very nice guy. chieh huang is the founder and chief executive of a company called boxed. it allows you to order bulk-sized goods for delivery to your door in one to two business days. unlike amazon's pantry service, boxed membership is free. i want to welcome chieh huang. >> thanks for having me on the show. >> i have to start with the free business. how do you make money? >> there's a lot of retailers out there that do not charge
membership fees and make a decent amount of money. or us, we always felt like there is inherent markup in the goods that we sell, and i think that's good enough. we are building a very light infrastructure so that we can generate profit even though we are not charging $99 for a yearly membership. >> you talk about yearly membership because we know that costco, you have to be a member. sam's club, membership, and so on. that back for a second and tell us how you go from the world of online gaming and the zynga world and the world of -- into the world of online retailing and soap flakes. >> that's the fun part -- marrying the digital world which we know so well in the physical. we are only an app right now, native on android and ios devices. the most mature vertical within mobile is gaming. most apps are actually games. over the last 5, 6, seven years, game makers have realized how people interact with mobile devices, how to build very compelling, beautiful experiences, and we take from that and translated into mobile
commerce. >> into mobile commerce, but you are taking the fun away from going to costco and sam's club, right? the idea is to replace that trip you will get the same stuff, you get the discount, you get the bulk purchase, but you do not have to actually show up at the store. >> that's right, but like you said, i would take a step back -- i don't know about replacing the trip, so if you enjoy that trip, costco and sam's club are great companies. they are not going away anytime soon. for us, we are for people who do not have the time, the means, or the patience to go to one. you grew up in new york, so you do not have the means, usually, to get to a big rocks store. >> they do not exist in many parts of the country. or urban areas, as they say. >> exactly. urban areas do well for us. we are only about six months
old, so as we launched the service, we found incredible what i call heat around people who did not have the free time of the patients. we do very well in the suburbs and do very well surprisingly in rural areas where people literally do not have a costco within an hour or two-hour drive >> would you partner with these companies if they are not getting the traction that they want? >> it is a small world. we all know each other and talk to each other to see how the consumer is reacting. we are finding that our demographic is very different from the usual demographic that goes in clubs. again, people who generally do not have a car or do not have the time or the patience. >> thank you very much for sharing your story. best of luck to you. chieh huang is the chief executive of boxed. coming up, how about renting office space or maybe even a
>> this is "taking stock" on bloomberg. i'm pimm fox. for a look at today's market moving headlines, i want to go to my radio co-host, carol massar. >> citigroup has fired people for failing to prevent or discover loan fraud at the company's mexican unit and said more will face punishment. the dismissal includes two headed business units in mexico. citigroup said the fraud involved 400 million dollars. sears is considering a sale of its canadian stores. the struggling store chain may invest its stake in canada.
sears holdings will hire an investment tanked to study options. check this out -- u.s. crude production climbing to a 20-year high. output rose to eight point 4 million barrels a day, the most since october 1986 according to the energy information administration. back over to you. >> thanks very much. liquidspace is an online and mobile platform, of course, but it is approaching the real estate market in a whole new way -- they allow users to track down available offices and meeting rooms, and then they rent the spaces out by the hour or the day. the marketplace includes more than 5000 workplaces in more than 530 cities. its founder and chief executive, mark gilbreath, joins me now. thank you very much for being here. describe the a-ha moment that might have gone on in your life
that said, "you know what? that office or that cubicle or that conference room is not being used, and someone really wants to use it. we can help them." >> it dates back 15 years ago. it was my first stint as a ceo. i was faced with the proposition assigning a five-year lease for my small but growing company. at the time, it seemed absurd for me to be making such a long-term commitment to space. i had no idea what our headcount was going to be, and that experience, that mismatch between the real estate and model and my needs as a business person stuck with me. six years later, the a-ha happened, looking at this recession with massive amounts of unused real estate out there, and recognizing that there was an opportunity to take all of that inventory and turn it into something that could be put to use, to be tapped into on demand.
>> this is different than, let's say, and office center where it comes equipped with various types of administrative help or various kinds of technological support systems. explain the locations. i know hotels have been very big in this. >> liquidspace is a marketplace that can aggregate work space and meeting places of all types. it has also become an enormous opportunity for major hotel players. marriott is one of our largest artist. they have introduced a program called workspace on-demand build on our platform, and it has over 500 of their properties across the u.s. with meeting rooms and even lobby spaces that can be reserved on demand in real time and tapped into when needed. >> the idea of renting lobby space -- maybe expand a little bit more on that. as part of your information
file, it said that there are -- let's say microsoft employees -- they will meet at a lobby of a hotel because it is convenient, and it is semi-private. >> think about hotels in who their primary customers are today, for major brands like marriott, its business travelers. if you look at the architecture of hotel lobbies and contrast it to what things look like even as recently as five or 10 years ago, hotel environments are looking more and more like this business lounges purposefully. i have become environments to serve the needs of business professionals -- and they have become environments to serve the needs of business professionals. players like marriott, hilton, and others are redesigning their spaces and tapping into liquidspace to be able to connect those two mobile professionals. >> the cost of doing this -- is it based on an auction model, a bidding model? how do you determine how much
something should cost? >> let's contrast to the legacy real estate model as well. we are creating radical liquidity. high-frequency trading for real estate where we are transacting for 15 minutes to a day in length. in our marketplace, real estate owners control the pricing. they control the rates. we present those to the user ahead of time. >> it is all incremental to the operators like the hotel, i would imagine. >> this is perishing inventory. we have this landscape contributed over 50% of our carbon footprint, the second-largest expense for every company. most of it sits idle most of the time. we create incremental revenue streams, whether you are a large employer that has excess real estate, or whether you are in the business of space like marriott or an office center.
>> i mentioned that you have an app for android and apple ios, mobile devices. is that also changing the game that because it is now mobile, things can happen last minute that could not happen that way previously? >> the smartphone has become a portal for goods and services. anything you might need, especially as a professional businessperson, can now be tapped into from your phone. taking a business trip, call uber for a lift to the phone. need some space for a meeting? i would tap into liquidspace. individual consumers are exercising choice, reaching for applications that live on their phone and conducting business transactions that in the past he would have had to go to internal departments for. >> and probably would have cost a lot more money. >> they would have paid more. >> i want to thank you so much for sharing your story with us. mark gilbreath, the chief executive and founder of
>> major players in the beer business have been swallowing up smaller craft breweries in an effort to increase market share. one example is the jacob leinenkugel company, part of miller course -- coors. joining me now, jake and c.j. leinenkugel. great to have you both here. everyone just keeps wants me to saying leinenkugel. >> you are doing a great job. >> tell us about the family. >> it is a long, interesting
story, so i will narrow it for the audience. it hundred 40 seven years ago, our great great grandfather came to chippewa falls, wisconsin, after he and his brothers learn how to brew beer from our ancestors who came from germany. our great-great-grandfather knew that there was all this lumbering going on in the northwestern part of wisconsin. little town called chippewa falls, wisconsin. 25 lumberjacks and no beer. so he said he had an immediate audience. he started to brew along with a partner, and today, sitting here with the fifth and sixth generations, we say thank you, great-great-grandfather, for starting this brewery. >> not such a bad thing. reading a little bit about your
past, not only have you followed in the near footsteps, but also the footsteps of the university of wisconsin-madison, also in the u.s. marine corps, right? >> that has become a tradition. >> what is the link with the beer? what is it that told you to want to be in the family business? >> that goes back all the way through my grandfather and watching him and how passionate he was about the brewery. when you have the family name tied to a product, you cannot be any more passionate about that. then, being able to see my father and my uncle's, and how the brewery means so much to us. that goes back to quality and how you want the community and the people that drink and to think about your product, and that really drives you every day.
>> should we make a distinction -- let's say a company like miller coors or any large beverage company -- they go out and say they hear the craft brewery thing is really big, and need to go out and create their own -- eu would be doing this, whether it is miller coors or not that is really underwriting the thing? >> i believe so. have they helped us in creating different beer and driving us to branch out into different things? most certainly. especially on distributions and scaling our products, absolutely. would we be doing this? yes, i would say so. >> we partnered with miller brewing company over 25 years ago. we are not ashamed to say that. family made the right decision at that time in the late 1980's, and what he did was set up for future success for us to do so many things that we are now doing, and that is making 16 different styles of beer and
then to be able to have the capability to introduce and be the first american brewer of shanty styles of beer is really the big idea that they have allowed us as a family to extend in our brewing. >> explain what makes something a shanty, and how is it made? >> it's very interesting, and i did not know anything about them until i went to germany for the first time and started to see some people drinking a lemonade made -- just poured into a regular beer. i asked what that was, and they said it was a problem -- robler, and that term is the same as shandy. ireland and great britain are putting in ginger ale. they do sprite. they do a lot of different things to lower the calories and make the beer more interesting and flavorful and easier to drink with less alcohol, so that is really what a version of leinenkugel summer shandy is.
a thirst quenching, lighter, crisp great beer. >> canoe shandy? what is this? where do you get these names? a thirst quenching, lighter, crisp great beer. >> canoe shandy? what is this? where do you get these names? >> we were actually looking into that years ago as well, but at the same time we were looking into summer shandy, and we were trying to fill that space. seasonals within the craft brewing industry, very popular nowadays and a huge part of our business. it's really neat with this one because it won gold medal for a german cold style beer at the german beer festival, and that does a lot for our credentials. the neatest part coming out this autumn is going to be three new shandies we are going to release
in a variety sampler pack. if you have ever heard of an old-fashioned or old-fashioned brandy or whiskey, that's going to be one of those coming out this year. we also have a pumpkin harvest. there's a lot of him in beers out there. and then we have a cranberry ginger. that will only be available after the variety pack, on its own and bottles. others, they will only be available in that variety pack. >> how many cases are we talking about? what is the scale of something like leinenkugel? >> just say it's big. i would say that we have seen this grow now at least on shandies double digits every year since 2007 when we first introduced it. as of last year, we begun to scale nationally, and we found
out that our entire distribution network was really excited because they are seeing explosive growth behind leinenkugel summer shandy. you be honest with you, i think we are just at the tip of where we can take this, so i think we could possibly expand in the next few years. >> you will be paddling this for a while. >> jake leinenkugel, president of leinenkugel brewing company, and also c.j. leinenkugel of miller coors tenth & blake. coming up, we will tell you about a 1992 bordeaux. you can buy a double magnum if you have the money. ♪
>> this is "taking stock" on bloomberg. christie's auction house had a record night, propelled to its biggest auction ever by selling -- get this -- $745 million worth of art, and there's a commission in there. here to describe the option is bloomberg's own katya kzakina. explain what was up for sale and what kind of prices did they fetch? >> an iconic painting sold for 84 million dollars and most likely went to an american collection. it is very important historical work, so it was great to see that it became the most expensive lot of the sale. >> probably 94% of all of the loss were sold -- the lots were
sold, so that is good for christie's. he gives them more credibility in the option space, right? >> only 4 lots failed to sell, and there was tremendous bidding from asia, europe, the rest of the world. >> indeed, as part of the reports of the auction itself, apparently christie's asian auctioneer was on the telephone throughout most of the evening, and that's where the bids came in. what about the warhol paintings? there were two in particular that went for high amounts. >> the dealer compare them to some other prices, and it seemed like a great deal, but nevertheless, one of the works was a great painting of race riots. another was a beautiful white marilyn monroe portrait, and that is such an iconic image. >> $41 million for andy warhol's
iconic image of marilyn monroe done after the death of the actress. >> there was a mobile sculpture that actually hung above a lot of the bidders. that most likely went to china. it set an auction record. it was very consciously places lot eight -- placed as lot eight , a lucky number in asia. rex i want to thank you very much, bloomberg's katya kzakina. time to raise another glass to christie's auction house. this time it has to do with fine wine. at an auction tonight and on friday, it features some of the most exquisite and expensive wines in the world. you have brought a very large autoliv wine.
this is a double magnum. >> this is the equivalent of four bottles of wine. 8000 dollars for one bottle. is that a price that you have seen increase? is there any way to benchmark and say the price of similar products has done this? >> we have seen prices destabilize, and now prices have come down, and now they are stabilizing. >> $8,000 -- at least that is the high estimate. >> is there a way to benchmark these products? prices have come down. they are stabilizing. . -- people are reentering the
market. we think that should be a strong sell for us. >> $8,000 -- at least that is the high estimate. you have also brought some -- i think that is a 1995 you brought along as well. >> this is $4800 to $6,000 a case. 12 bottles. it's very rare. they only made 800 cases. >> the third bottle you brought? >> this is from 1921, and it has been reconditioned. it was done by the winemakers and the staff in vegas, so we are very excited to ring that to market -- the winemakers and staff in vega. >> where do they come from? >> a european collector, a swiss collector. >> is there a way to verify that when you open it, it will be good to drink? >> it has been very well curated.
we have the proper nonce of all the lots. we have the invoices where the owner purchased them, so we can follow, we can track it. these have been stored in commercial storage since he received them. >> how can we track the sale? when is it? >> it starts tonight at 6:00. we have the beginning sale, and friday at 10:00 a.m., we have the day sale, the multivendor sale. >> there will be a lot of celebrating? >> there will be that at christie's, yes. it's time for "on the markets" on bloomberg. eight s&p 500 drops