Business News Weekly Roundup: April 24, 2015

By Tim Dhoul Updated Apr 24, 2015

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Introduction
Alipay denotes China’s e-commerce evolution
BrewDog launches UK’s largest crowdfunding campaign
An end to the fall of US federal deficit?
Record losses for Tesco PLC

Mobile payment services in China and Alipay

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Alipay denotes China’s e-commerce evolution

Mobile payment services are gathering pace in China. This week, Alipay - launched by Jack Ma’s Alibaba Group just over a decade ago - announced that users in 12 Chinese cities would now be able to take care of municipal matters, such as paying utility bills and booking doctor’s appointments, with the service. The move mirrors the one made by the popular messaging service, WeChat, last year.

Neither application profits directly from these ‘city’ services, they simply want users to engage with their applications more – which, in turn, should lead them to services that do bring in revenue for the company. Alipay’s announcement is the kind of move that is held up as an example of how the use of internet technology in China is evolving independently of global trends.

As of October 2014, Alipay had around 300 million registered users in China, with a further 17 million based overseas. Since 2011, Alipay has been incorporated as a separate company from Alibaba and its significance to China’s e-commerce (or e-tail) market – expected to equal that of the US, Japan, UK, Germany and France combined by 2020 - was discussed earlier this year in the MIT Technology Review.

BrewDog launches UK’s largest crowdfunding campaign

An independent Scottish craft beer maker, BrewDog, has launched the UK’s largest crowdfunding campaign in search of £25 million in a deliberate attempt to pour scorn over the traditional mechanisms through which companies raise capital.

In explaining the move in a Guardian report, BrewDog’s cofounder James Watt, drew parallels between his company and Guy Fawkes’ thwarted attack on the English parliamentary establishment over 400 years ago:

“We are not the Rockefellers. We are Guy Fawkes,” Watts said, adding, “By making profit king, the financial institutions of the City gave rise to the bastardisation and commoditisation of beer. We are burning the established system down to the ground and forging a new future for business from the flames.”

This grandiose vision translates to the sale of around 500,000 shares in BrewDog through the use of its very own crowdfunding platform, named ‘Equity for Punks’ - just in case the company’s opposing stance towards the status quo was still in any doubt.

Launched in 2007, BrewDog’s beer has now spread to 55 countries, aided by the opening of 27 bars worldwide since 2010. It posted sales of just under £30 million in 2014 – a 64% rise on the year previous - and the company is expecting to bring in £50 million this year. The money it raises via the crowdfunding campaign will be put towards a new brewery that will be three times as big as its existing site.

Craft beer and ale has become so popular in the UK that its number of independent brewers is now higher than it’s ever been since the end of WWII. This year, craft beer/ale was added to the list of everyday consumer items from which UK inflation is determined.

Read about the job opportunities for MBAs with the world’s largest brewing company, AB InBev.

An end to the fall of US federal deficit?

Federal deficit in the US may no longer be on the slide, according to an analysis in the Washington Examiner, pointing to figures from the Congressional Budget Office which show that federal deficit was US$17 billion higher in the first half of fiscal year, 2015 (October 2014 to March 2015) than it had been a year previous.

In 2009, the deficit went as high as US$1.4 trillion and was just shy of 10% of the country’s GDP, but following falls in each of the past three years, the deficit dropped to 2.8% of GDP in 2014. A further small decline, to 2.7%, had been anticipated this year.

Although federal deficit in the first half of the fiscal year is often larger than in the second half, opinion is divided as to what the state of play may be by the year’s end – historically, such predictions are said to come with a, not insignificant, US$150 billion margin of error.

However, it is thought that the US’s ageing population might yield a bigger long-term impact on federal deficit, as increasing numbers of the baby boomer generation retire and put the strain on Social Security and Medicare benefits.

Record losses for Tesco PLC

This week, grocery and retail giant, Tesco PLC, posted one the largest losses ever seen by a company in the UK.

A pre-tax loss of a staggering £6.4bn for 2014/15 (to the end of February) is also a new record loss for Tesco PLC, a company with almost a century of history behind it.

The loss is all the more dramatic in its reversal of fortunes from last year’s figure, when Tesco reported a pre-tax profit of £2.26billion. The year 2011-12 saw the company report a record profit of £3.8 billion. The blame has largely been attributed to a huge decline in the property value of its stores, but changing shopping habits and the growth of competitors are also named as factors.

A trading expert told the BBC that the loss was worse than the City had anticipated and that Tesco PLC’s numbers were ‘deteriorating’ from ‘disastrous’.

Tesco PLC’s losses of £6.4 billion are the sixth largest seen from a UK company, marginally lower than Cable & Wireless’ loss of £6.5 billion in 2003, but some distance behind the current leader - Royal Bank of Scotland, which posted losses of £24.1 billion in 2008.

Written by

Tim Dhoul

Tim is a writer with a background in consumer journalism and charity communications. He trained as a journalist in the UK and holds degrees in history (BA) and Latin American studies (MA).