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Quest Means Business
Dozens Dead in Nigeria Mosque Attack; Oil Prices in Retreat; Low Prices Threaten US Shale Oil; OPEC Dissension, Dow Ekes Out New Record; Scores Arrested Over Air Ticket Fraud; Lego Expands in Europe
Aired November 28, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Not often you see a day like this. Well, certainly where Santa is ringing the closing bell. But also where the
market barely moves, at zero percent and change on the day. Toys for Tots rang the closing bell. It was a shortened trading session, with it being
the day after Thanksgiving. Either way, it's Friday, it is November the 28th.
Tonight, a black day for US oil. Prices are tumbling after OPEC refuses to budge. We'll be in Texas to get the reaction.
A black market smashed by police. Officers around the world cracked down on air travel fraud and credit cards.
And Black Friday hits Britain. Imagine facing that lot. The shopping frenzy from America has now crossed the Atlantic.
It may be Black Friday. I'm still Richard Quest, and I still mean business.
Good evening. We'll have the day's business news in just a moment, but we must begin with the shocking new video that CNN's just received of a
devastating attack in Nigeria. Police say at least 35 people have been killed and 150 injured after an attack on a mosque in the northern city of
Kano. These are the first pictures from the scene.
At least three men with explosives detonated their bombs during Friday prayers, and then they opened fire with automatic weapons. The attackers
were caught by local people, and then they were killed on the spot.
Reuters News Agency -- I'm going to source it quite clearly to Reuters News Agency -- they have the current death toll as much higher. They
currently say 81 people were killed in the attack, according to their sources from two hospitals visited by Reuters.
The Nigerian president, Goodluck Jonathan, has ordered an investigation into the attack, and we'll obviously bring you the updates as
we get them. We need to get more details immediate to the region, to Benjamin Simon of Agence France-Presse, who joins me now on the line from
Lagos.
Benjamin, thank you, sir. Firstly, do you have any more information on the number of people dead and injured?
BENJAMIN SIMON, AGENCE FRANCE-PRESSE (via telephone): We have reporters in Kano who counted 92 bodies at a specific morgue, at the
Murtala Muhammad Specialist Hospital. He was there, he counted 92 corpses, and he saw the relatives of some of the victims at the hospital trying to
identify their loved ones.
Subsequently, senior rescue officials, who requested anonymity, put the toll much higher. So, while the police official toll may be 35, but
the police in Nigeria do have a track record of giving lower death tolls when other sources are giving a much higher figure.
QUEST: Right. So, what happened here? Why here, why now?
SIMON: That's a good question. This target is -- the mosque is within the grounds of the palace of the emir of Kano, that's Nigeria's
number two Islamic cleric. Now, Boko Haram has a long track record of targeting Islamic clerics in Nigeria. This is not the first time.
The current emir of Kano is someone who spoke out quite aggressively against Boko Haram at a speech last week. He essentially called on
Nigerians across the (inaudible) to take up arms against the Islamist insurgents. And so, it's possible that this was a response to last week's
speech. But it's equally possible that this attack was planned further in advance.
QUEST: And when we factor this -- words almost fail me. So many people murdered whilst at prayer. When we factor this into the other
violence, the other disruption, the other unrest in Nigeria, the Nigerians continue to try to portray a picture that things are under control, but
this would suggest anything but.
SIMON: It would. And the Nigerian narrative that Boko Haram is contained and that it's just a few criminal elements that need to be mopped
up and dealt with, that has been the line that the Nigerian government has been pushing for some time, and I think it's quite clear that there's
mounting evidence that that's simply not the case.
The violence has escalated. It's continuing to escalate, despite the fact that the state of emergency in the northeast is more than a year old.
QUEST: Right.
SIMON: So, whatever military strategy is ongoing has not brought the violence down.
QUEST: And finally, Benjamin, the reaction of President Goodluck Jonathan sets up an investigation, but would you expect a robust military
response from the Nigerians, even though, obviously, as a terrorist act, it's quite difficult to know who you respond against?
SIMON: That's true. And Kano poses particular problems for Nigeria. Going door-to-door and raiding houses looking for suspected insurgents in a
city like Kano could create some backlash. It's -- in a Nigerian context, it's reasonably well developed, and the population would reject that.
President Goodluck Jonathan vows to find the perpetrators after every single one of these attacks. There -- very rarely are people arrested and
brought to court. So, I believe it's something that the government says to reassure the public that they're on the case and they're doing their best,
but Nigerians have heard that kind of promise in the past.
QUEST: Benjamin Simon, please, at any stage that you have more important information on this, do come back to us, and we'll take you to
air immediately. Thank you. Agent France-Presse's Benjamin Simon joining me from Lagos.
We continue our evening discussion on business and economics. And obviously, the moment I've got more to tell you about Nigeria, of course, I
will. But tonight, US oil is in retreat after OPEC's decision not to cut production.
The oil cartel's decision meant a low price is likely to stay for the foreseeable future. But we talk always -- or we continually talk about the
question of Brent Crude. Well, let's look at West Texas Intermediate, which actually is trading lower from Brent. It has done for some while.
Light Sweet Crude, WTI -- that's the main US blend -- has fallen ten percent on Friday. Now, if you look at the close, at its peak, we were
getting sort of up to $69. Now we're down at $66 and a little bit lower than that. They haven't been this low since 2009.
The fall in prices pushed down oil company shares. If you take a look, some fairly dramatic oil company share falls. Halliburton in the US
-- in fact, what you've got here, of course, is exploration and you've got those companies that are oil services, shares of firms that are working in
oil fields doing drilling, supplying equipment.
So, you've got BP down 1.5, you've got Shell down over 2, and you've got Halliburton, the big US company, down 10. And following on from that,
because obviously, there's a feeding effect, down 10.5 percent.
Producers in different parts of the world, it's quite clearly a game of limbo at the moment. This is what it is. I want you to look at this
and you'll see. At these prices -- $73 for Brent, $66 for WTI -- OPEC wants to see how low oil prices must go before the US shale oil extractors
start slowing or dropping production.
So, here's the numbers that you need. OPEC producers -- never mind what the budget for governments require -- extraction and production is
between $10, say for example, of Qatar, to $25 to Venezuela and maybe Nigeria at the top end.
US shale oil vastly more expensive to produce and extract, between $50 and $100. Now, that's a wide range, but you can see it's clearly much,
much higher than the OPEC range. Fracking is more energy and land intensive, you've got to break away the rock, all those sort of things.
Now, OPEC, at $111 in January, everybody's making good money. Go to $70 or even lower than that, and suddenly, the break-even point for shale
in the US is gone, Saudi Arabia's hoping higher cost prices will disappear, and they won't come back.
That's what this is all about in a nutshell. So, what will the US do? Chris Faulkner is the chief exec of Breitling Energy. He's been dubbed the
"Frack Master." He joins me from Fort Worth, Texas. Sir, thank you. The difference here is --
(CROSSTALK)
CHRIS FAULKNER, CEO, BREITLING ENERGY COMPANIES: Nice to be here.
QUEST: Well, let's go through this quite quickly.
FAULKNER: Sure.
QUEST: At the current price, US fracking is uneconomic. Do you agree?
FAULKNER: I disagree and I agree both. I think in certain areas, we are going to have challenges. In areas where it's very expensive, like the
Bakken, because of transportation, we're going to have challenges. In the Permian, where we drill, we can move the numbers sub $60 and still make
money. So, it's going to be a mixed bag, Richard.
QUEST: Right. So, you're telling me that in Texas, you can make money at these prices?
FAULKNER: We can bring oil out of the ground in the Permian Basin between $45 and $55 a barrel, so we have still wiggle room, if you will, at
even $65 oil. Folks in certain areas of Eagle Ford in South Texas, the Bakken, they have challenges at $75 or $70, so those folks will be making
decisions.
My guess, they cut back on cap ex for 2015. Even possibly cut production back, keep oil in the ground until prices can rebound a little
bit.
QUEST: Right. Now, unlike OPEC -- because OPEC, a government, says cut production, and you see a vast cut in production, or you see an
immediate cut.
FAULKNER: Sure.
QUEST: But here, there's no central authority that says cut production.
FAULKNER: No.
QUEST: We're looking at individual producers.
FAULKNER: Correct.
QUEST: Are you hearing producers, say in North Dakota, some parts of Texas, saying we're turning off the tap?
FAULKNER: We were hearing producers talk about cutting production back at $75 oil. If oil gets to $60, we're going to see lots of production
get cut back. We're already seeing drilling rigs curb or slow down, as far as new drilling goes. Production's still going, but it may slow down. We
may see 500,000 barrels a day of new production next year, versus our target was north of a million.
That doesn't mean that things are going to come to a halt. We're hoping that we're at a floor around $65 and oil will rebound, but it's
definitely Saudi saying look, United States, if you want to be the swing producer, than jump in the seat. We're not going to cut. If you want the
price to go up, you guys can cut.
It's a pretty big message. We're in a new era of oil now, Richard. This has not been discussed previously. Everyone thought OPEC would cut,
and they said, look, here's a line in the sand. We're not going to budge.
QUEST: Right. What's your gut feeling, then? Because the US has got investors to consider, both for cap ex and for production and for ongoing
sales. So, if I understand you right, the Saudis -- it may hurt your national pride, sir, to take this onboard, but the Saudis are winning or
likely to win at this game.
FAULKNER: The Saudis have $750 billion in cash in a foreign currency exchange reserve. They've got the money to weather the storm. They have
definitely said, look, United States, we're going to push the price down and find the pain point and slow things down.
We're at 9.1 million barrels a day. They're only at 9.4. We're right on their heels. They want to make sure they can defend their market share.
But I'll tell you right now, Richard, the best fix for low oil prices is low oil prices.
So, I think if prices continue to slide, these wells decline very rapidly, as you know. If production slows, drilling slows, we can see
prices rebound inherently. If we don't drill new wells, these things will continue to decline.
But I think Saudi's made it very clear. This is not going to get fixed overnight. We're not going to cut. You guys want to be the swing
producers, you guys cut. Is America in that position to do that right now? We're on the verge of being the biggest producer on the planet. This may
stall that out for a little bit.
QUEST: Fascinating. Chris, we're so grateful that on Black Friday, Black Oil Friday, whichever Friday you like, you've taken time to come and
explain it to us. Thank you very much, sir.
FAULKNER: Thanks, Richard.
QUEST: Now, it's not just US shale producers who are unhappy with OPEC's decision to keep pumping oil full tilt. Dissent within the cartel -
- John Defterios is in Vienna, where he's been all week.
You've got to admit, before we get to Iran, John, that was fascinating to now see how the US is well and truly the swing producer and has to make
the decisions. And OPEC itself didn't like the decision in some cases.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: No, Richard. In fact, it's starting to sound more and more like a price war here. The US is the
swing producer, Saudi Arabia, with $750 billion in the bank, a war chest, if you will, to kind of fight this out. It's going to be a very
acrimonious six months, no doubt about that.
QUEST: So, as you now look at what happens within OPEC, you've got the difference of opinions. Not everybody was pleased with the result.
DEFTERIOS: In fact, Richard, 24 hours after the decision, I'm hearing from sources that were actually sitting in the room. There was a lot of
dissension in the ranks. Basically, the Saudi proposal had support from Qatar, Kuwait, and the UAE. The other Gulf producers, they collectively
have a war chest of $2.5 trillion, so they can wait this out.
All other 8 producers, it's under my understand, thought this was too risky of a strategy and too aggressive against the United States. But
there's another harsh reality here, Richard. The only producer within OPEC that could have swayed the market and cut enough production was Saudi
Arabia. It didn't want to do it.
So, for the sense of unity, if you will, or a consensus to be able to leave the meeting, they all went along with it. Today, I spoke to the
Iranian energy minister, Bijan Zangeneh, and asked him if the other OPEC producers shared the same concern about the rise of US shale as Saudi
Arabia. Here's his answer.
(BEGIN VIDEO CLIP)
BIJAN NAMDAR ZANGENEH, IRANIAN OIL MINISTER: Some of the OPEC producers think so. It's a very big challenge for OPEC future. And the
shale oil is competing with conventional oil and is reducing the OPEC total market share in the future.
DEFTERIOS: If this is the correct strategy by OPEC, do you think it will actually knock out a lot of the US shale production in the next six
months?
ZANGENEH: Within six months, I don't believe. But some of my colleagues believe so. And they believe that during the next six months,
we will have a significant reduction in shale oil afterwards.
(END VIDEO CLIP)
DEFTERIOS: So, "Some of my colleagues believe that they can knock out the shale producers in six months," that is a reference to Saudi Arabia.
Richard, I am told it was a very passionate plea by Ali Al-Naimi, the Saudi energy minister, to his other 11 members of OPEC.
And he said, "Give me six months. This is a fight against the shale producers," is the quote I got here. "And in that six months' time, but
the next June meeting of OPEC, the prices will be back up to $85, $95 if you follow my script."
So, fairly intense debate behind closed doors before they walked out and decided to go along with the Saudi proposal, Richard.
QUEST: All right. Book your ticket for Vienna in June, were I suspect it'll be a little bit more sunny and a bit more pleasant than at
the moment. John Defterios, who will, no doubt, be in Vienna in June.
You don't often see this. Oh, it's over here. You don't often see this. Naught, naught, naught. And a gain of just half a point.
(LAUGHTER)
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You like that.
QUEST: It's still a record.
KOSIK: Yes.
QUEST: It's still a record.
KOSIK: Sometimes it just takes a little bit, right?
QUEST: Just a little bit. What happened? What happened? What happened?
KOSIK: Happy Black Friday. Well, that little dip, I think, is what you're seeing, some little bit of profit-taking before you see investors
total up their cash before they go shopping for the weekend.
I have a couple points to make on that -- on oil. It really is turning into a game of chicken, and there's a lot of irony here, when you
think about it. American consumers, we're enjoying lower gas prices, especially this time of the year. That extra money means more money we can
spend for the holiday, for our holiday shopping.
But what's ironic is, the oil industry contributes $300 to $400 billion to the US economy and could wind up hurting the US economy if we
see oil prices continue at these lower levels. The oil industry also contributes about 10 million jobs as well, jobs that very well could be
lost.
QUEST: But as you heard the -- Chris Faulkner saying from Breitling Energy in Texas, he basically makes the point that at some point, the
higher cost US producers will drop out --
KOSIK: Right.
QUEST: -- or will stop the -- turn off the taps.
KOSIK: And you could see jobs to away. That could impact the economy. Sure. The US shale industry has become a viable part of the US
economy.
QUEST: Good to see you.
KOSIK: Same here.
QUEST: You've still got time to go and spend some money.
KOSIK: I'll do it online, thanks very much.
QUEST: Are you an online person?
KOSIK: Oh, gosh, yes. Who wants to go battle those crowds? Did you see in London, they were fighting over, what, an Xbox or something? I
mean, come on. No.
(QUEST RINGS BELL)
(LAUGHTER)
QUEST: Don't touch the bell. Thank you.
(LAUGHTER)
QUEST: Still to come, QUEST MEANS BUSINESS, airlines, stolen credit cards, police, and scores of arrests. It's a toxic mix. We'll tell you
about a major international sting to fight crime costing billions of dollars.
(COMMERCIAL BREAK)
QUEST: One hundred and eighteen people, they were arrested. It was a global crackdown on credit card fraud. Now, officers have just wrapped up
a two-day attempt and arresting of criminals. And what's fascinating about this compared to anything else, they were using stolen or fake credit cards
to buy airline tickets.
Europol says law enforcement agencies from all over the world, they all cooperated -- Europol, Interpol, Bogota in Colombia, Ameripol, you name
it. If the were a "pol," they were involved. And there were more than 60 airlines.
Because what effectively happened -- was happening is that cards were being used -- stolen, fake cards were being used to buy airline tickets.
The authorities estimate fraudulent purchases cost the airline industry around $1 billion a year.
What was fascinating about the way they did this, they let the criminals get their tickets, turn up at the airport, check in, and then --
(RINGS BELL)
QUEST: -- arrested them. The director of Europol, Robert Wainwright, joined me from the Hague and told me what the suspects were up to.
(BEGIN VIDEOTAPE)
ROBERT WAINWRIGHT, DIRECTOR, EUROPOL: It was the criminals themselves that were using it. As you say, on an almost industrialized scale as well.
And using these stolen credit cards in particular to arrive at the airports, move very, very quickly to get on the plane, normally before the
authorities can even identify what's happened.
And that was different about this operation, because we could put in place a coordination center to make sure that the police, the airlines
themselves, and the credit card industry were working as one and at speed to do something about this on the spot so that we could apprehend the
criminal when he arrives to check in or, indeed, by the time he arrives at his destination country.
But the important thing, Richard, we found from this as well was that these criminals we're using, it's also to support others types of sometimes
more serious criminal activity.
Many of those people that we picked up, we've identified to be engaged in, many, the drug trafficking world, part of a major cyber criminal ring
in Europe in another case. And also involved in the trafficking of human beings for sexual exploitation.
So, it's revealed the darker side of criminal life and how it operates on a daily scale through our airports in the world.
QUEST: And this is fascinating, because this is hack -- this has got it all, hasn't it, Mr. Wainwright? It's got hacking, it's got theft, it's
got airline tickets, it's got airlines having to recognize the nature of what was going on. It's got police turning up at aircraft doors. It must
have been quite exciting.
WAINWRIGHT: Yes, and it's great to be part of a successful operation, one that depends on a lot of planning and effort. And of course, to
respond to what you've been describing there, which is effectively the way in which our globalized society and economy has a dark side, and is being
manipulated by criminal groups.
The way in which they use the internet in particular, to facilitate new criminal activities, the way in which they moved at speed because of
the transportation links that we have. To exploit society and exploit our economies.
And that's meant that we've had to gear up our response in the international police community in particular, to respond in kind. And it's
quite a challenge. Every day, we're pitting ourselves up against these international criminal syndicates. This week, I'm glad to say, that with
Europol's help, we've scored a few successes.
QUEST: The point is, the good guys won one this time.
WAINWRIGHT: Yes. And it's worth saying that this kind of fraud, in this case, is estimated to be about $1 billion fraud that's affecting the
airline and travel industry. So, that's important of the companies involved, the industry itself.
It's important for consumers and travelers, like you and me, of course, who otherwise have to bear the costs of that through increased
ticket purchases and prices, for example. But also, of course, those who have been the victims of these stolen and hacked credit cards.
So, this operation has helped to protect many, many people, as well as the industry involved. And I think it has been a successful week for us.
(END VIDEOTAPE)
QUEST: The head of Europol talking to me now. Empire-building brick by brick. Where once Lego was putting out fires, now it's expanding. The
chief exec tells me how that could change the Lego workforce.
(COMMERCIAL BREAK)
QUEST: The Lego empire is expanding across Europe. The little plastic building blocks, well, the headquarters is in Billund in Denmark.
And that, of course, where it will remain. But the new major regional strategic office for Lego, that is opening in London in the UK.
And what's interesting about this particular place in the UK, besides, of course, there'll be plenty of Lego, there's no desks for staff, or no
set desks. Instead, Lego's hoping to make it a flexible work space. It's called activity-based working. I think we've been here before.
It means creatives can go to a meeting room if they want to, or find a quiet zone to concentrate. If this concept works in London, Lego may try
it in their other offices, such as Singapore or Connecticut in the US.
I spoke to the Lego chief exec and asked Jorgen Vig Knudstorp why the new emphasis on London when the headquarters is in Denmark.
(BEGIN VIDEOTAPE)
JORGEN VIG KNUDSTORP, CEO, LEGO: If you want to attract a really diverse workforce, you can't bring them to rural Denmark. Even though it's
the center of our universe, it's not really the center of the world.
And here in London, even compared to Paris, Amsterdam, Munich, or Copenhagen, you're finding the opportunity to attract a very diverse mix of
people.
And the reason is quite simply that the education opportunities are there for their children. Their spouse can easily find a job. And
everybody speaks English. So, in that sense, we're finding London is the most multinational metropolitan area of all of Europe.
QUEST: Well, it begs the question, why not move the headquarters of the company there?
KNUDSTORP: Well, that, I'm sure you'll also know, would be the wrong thing for us to do. We're a Danish-rooted company, founded in the town of
Billund. We've been there 82 years. We have a 4,000-people staff there. It has grown 80 percent just in the last five years as the company has
grown very rapidly.
So, I think our Danish roots are also very important to us. So for us, this is a great example of doing both, a both/and decision rather than
an either/or decision. And that's kind of how we like to run the company.
QUEST: Now, today is Black Friday. Just about every shopper in the United States -- I'm sure your Connecticut people are busy even as we speak
trying to make sure there's plenty of product available.
And now, we're seeing, of course, the UK getting in on the Black Friday trend. What do you, as the manufacturer -- because you're obviously
watching what the retailers do -- how significant do you think Black Friday is becoming?
KNUDSTORP: It is quite significant, and I personally look very much at it as a way of seeing what are the major trends for Christmas. We're
obviously ready, and we have the goods, so it's no problem for us. We're very much looking forward to taking in the sales.
But I think more importantly, when we look at it in about a week's time, we will know a bit more about what we can expect of Christmas this
year.
QUEST: And from that, it's not just sales. It's looking at what's selling, what's -- and just as importantly, what's not selling. So, tell
me more about this process that you will go through in a week's time.
KNUDSTORP: So, we will look at what's coming in in terms of data from major retailers, such as Walmart, Toys R Us, but we'll also look at the
trends from Cyber Monday, see what's happening on e-commerce. We'll be very interested to see whether the skew mix that is selling is exactly the
same as we had predicted for the in season. Are there any surprises in what the best-sellers look like?
And also, generally, what does the confidence feel like? Do we get a view here that consumers are going to be spending a lot this Christmas, or
will we get a view that they're a bit more cautious or maybe that they feel that they have already bought quite a bit into the Lego portfolio?
QUEST: And what's your gut telling you, even before you've seen the statistics? Because you've seen the run-up. So, does this feel like it's
going to be a barn-burner holiday season, or are we more like on the back burner?
KNUDSTORP: Well, I think we are on the front burner, and I think we're looking like we're in good shape. As you know, we had a half year
result where we noted about 15 percent growth after another ten years before that, where we were growing every year.
So, I'm very optimistic and hopeful that this is going to be a pretty strong Christmas season. But of course, we have to see how it really works
out. But I'm very hopeful that it's going to work out very well.
(END VIDEOTAPE)
QUEST: If you want to see how it's going to work out, look at what was happening in the United States. As we continue, shoppers hit the
stores - they hit them hard on Black Friday, and the frenzy is going global. "Quest Means Business." (RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network the news always comes
first. And I must update you immediately with our top story. As many as 90 bodies have been seen in one morgue after an attack on a mosque in
Northern Nigeria. That's what the Associated France Press journalist told me - Agence France-Presse journalist -- told me about half an hour ago.
Police say at least 150 people were injured. These are the first pictures from the scene. At least three men set off bombs during Friday's prayers
before then opening fire with automatic weapons. Attackers were caught by local people and killed on the spot. The Nigerian President Goodluck
Jonathan says the authorities will fully investigate.
Pope Francis says Turkey has a great responsibility to bring different communities together and promote peace in the Middle East. The Pope met
with political leaders in the Turkish capital. He's on a three-day visit to the predominantly Muslim country.
The French President Francois Hollande has visited Guinea, one of the main countries suffering from the Ebola outbreak. He's the first Western
leader to go to West Africa since the outbreak began. The outbreak's now killed more than 5 and 1/2 thousand people.
There's some fresh confusion over the fate of Kim Jong-un's aunt. A North Korean defector says Kim Kyong Hui died last year after leader
ordered the execution of her husband who held a senior government position. Korean media reported that she committed suicide. The defector says she
actually died after suffering from a stroke during an argument with Kim Jong-un about the execution.
As we discovered, it's getting nearly as hectic on the other side of the Atlantic as people try to get into Black Friday.
(BEGIN VIDEOCLIP)
(SOUNDS OF CHAOS)
(END VIDEOCLIP)
QUEST: This was the scene at a store in London - yes. Across the United Kingdom police were called to control crowds and there were a
handful of arrests. Stores in other countries like Canada, France and Germany also cranked up the discounts. There were no reports of shoppers
losing their cool. In the U.K., things got so heated, one police sergeant tweeted, "Even on Black Friday, shoving people to the floor so you can get
o20 off a coffeemaker is still an assault."
Here in the United States, shops hoping to cash on the holiday season which started today. For the weeks leading up to the holidays, the U.S.
retail industry's expecting revenues of $616 billion. That's an enormous amount of money. And now the U.K. wants to get involved too to boost their
Christmas sales. Jim Boulden was a very brave man.
(BEGIN VIDEOCLIP)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: This is Black Friday British style. You start with customers lining up outside a store in the
dark early in the morning.
Female: I took a cab up here. The cab driver was actually in the queue with me. He's actually over there.
Male: I didn't know they did it here, but I used to do it in America a few years back, so.
Female 2: The deal is here right now, so take it now.
BOULDEN: Add in the rush through the doors, grabbing $200 LED TVs. ASDA says it sold 8,000 in the first hour. Add in another import - a few
cheerleaders wearing black and white of course, and you have that most American of holidays - Black Friday shopping.
Female: I need the Xbox, where's the Xbox?
NATALIE BERG, GLOBAL RESEARCH DIRECTOR, PLANET RETAIL: Black Friday makes sense in the U.S. because it follows a national holiday -
Thanksgiving. It happens on a day when most people are off from work and it's a chance to really kick-start the Christmas spending. Whereas here in
the U.K., Black Friday is just any other Friday.
BOULDEN: It was started here by the likes of Apple and Amazon. Now retailers like Tesco, John Lewis, Boots -- all have Black Friday deals.
One of the big U.K. retailers pushing up the boat this Black Friday is ASDA. It's owned by Walmart and using its Walmart connections to try to
offer huge discounts. Last year, ASDA ran short of big-screen TVs. Now they're relying on the parent company to fill the shelves as opposed to
local suppliers to sell a lot more 40-inch LEDs for around $200.
AYAZ ALAM, SENIOR DIRECTOR, ASDA: All the TVs that we are selling in Black Friday have been sourced from either relationships that we've got
with Walmart and the brand X suppliers or directly from Walmart factories. Today we'll sell well over 20,000 televisions in Black Friday today.
BOULDEN: Police in Manchester, England said there were similar arrests overnight after being called at seven Tesco stores. The chief of
police there slammed the stores for not having enough security. In London, police were called to three more stores. This trend now flies in the face
of the time-honored British tradition of the January sales.
ALAM: We need to ensure that we can save them money before Christmas rather than discounting them after Christmas when people already spend
their money.
BOULDEN: It doesn't hurt that many people in Britain get paid monthly. So this Black Friday also sees the last paycheck before Christmas
- an early present for retailers perhaps. Jim Boulden, CNN, London.
(CHEERS)
(END VIDEOCLIP)
QUEST: Neil Patel is the founder of KISSmetrics, a consumer research firm who looks into this in great detail. Neil joins me now. It's a very
complex operation this, isn't it? Because for the stores involved -online and bricks and mortar. This is a crucial time from Thanksgiving through to
Christmas - 20 to 30 percent?
NEIL PATEL, CO-FOUNDER, KISSMETRICS: That's correct. They're making a lot of their sales - if you look at it from a yearly perspective - within
this two-month period.
QUEST: So what's the trick now to increase the market share and to increase the revenue?
PATEL: Sure, the big trick that these companies are doing is they're actually starting to collect e-mails, so whether it's in the store or
online, they're trying to give you something to incentivize you to go to a website, click the e-mail address, and then they're actually sending you
specific offers via e-mail. Because it's actually the cheapest marketing channel for them.
QUEST: If you discount now, where have you got to go - where - what's left to do as you get towards Christmas? More discounts?
PATEL: They continually are. Because if you look at a lot of the items that they're discounting, it's already items that they are
overstocked for, and they've written them off because they're not selling a lot of these items. So what they're doing is marketing them off at quite a
bit.
QUEST: But aren't you just - I mean, the thing that's always struck me about the Black Friday - aren't you just shifting the same amount of
money whether it's spent here or spent there? Wait, that's not what I mean - early or later? It's the same money. I can see a market share argument
but they're the same consumers.
PATEL: It is the -
QUEST: They're not going to spend more.
PATEL: They're not necessarily going to spend more, but what's happening is, is when you get them in with some discounts, what we're
seeing is consumers are coming and buying regular-priced items. So you're putting up a shiny object. The shiny object may be something that's 50/60
percent off.
QUEST: But does it - does it - play value? Does it serve their purpose to actually open on Thanksgiving itself? I can see online, yes,
but bricks and mortar.
PATEL: It does. They're making more sales. People are now going to multiple source. Because what's happening is that when they're just open
on Black Friday with bricks and mortars, it's so hard to go through the lines and queues, and there's so many stores you can only get to. Now with
two days, you can actually get to multiple stores versus just a handful.
QUEST: Sir, thank you very much indeed.
PATEL: No problem.
QUEST: Thank you sir. Now, on the "Best of Quest" this weekend. The director-general of the World Trade Organization tells me he's learned new
skills in thinking from Daniel Kahneman best-selling "Thinking Fast and Slow." Now, he just has to win over his family.
(BEGIN VIDEOCLIP)
ROBERTO AZEVEDO, DIRECTOR-GENERAL, WORLD TRADE ORGANIZATION: They always complain that I am absent, that I'm not paying attention, that I'm
not listening, and I just found out with the book that that's normal. When you are concentrated on a task - when you are really rationalizing things,
you forget the world. So that helps me a lot with my family. I explain that this is scientifically proven. That's a good thing actually. So that
is good, but, frankly, what it does tell you is that you should take your time to rationalize things. You should take time to plan, you should take
times to think things through.
(END VIDEOCLIP)
QUEST: You should take time to plan, rationalize, think things through. Now factor that into all those people we saw on Black Friday.
It's the "Best of Quest." It's on Saturday at noon in London and it repeated throughout the weekend. "The Best of Quest" only on CNN. And of
course please make time to join us - you and me - for our nightly discussion all next week. That's "Quest Means Business" for tonight. I'm
Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you next week.
(END QUEST SHOW)
(COMMERCIAL BREAK)
ISA SOARES, REPORTER AT CNN INTERNATIONAL: Hello and a very warm welcome to "Marketplace Africa." I'm Isa Soares. The market for South
African spirits is growing. At the heart of it, is a region that is more than holding its own at home and abroad.
A little more than an hour from Cape Town in the Western Cape lies one of the largest spirits-producing regions in South Africa.
JEFF GREEN, PROCESS MANAGER, THE JAMES SEDGWICK DISTILLERY: It's a great place to be in at the moment.
SOARES: Jeff Green makes whisky at the James Sedgwick Distillery in Wellington.
GREEN: Oh the Western Cape I think's the ideal place to make spirits. We're surrounded by the lovely mountains - we got nature. Next to our site
we've got the Berg River going past here. And it's just an ideal setting to inspire you. If you want come to work, if you want to make a good
product, you want to make a good whisky.
SOARES: The distillery dates back to 1886 and it's known for its famed Cape Town Whisky, the country's first single-grain whisky.
GREEN: Oh, we make whisky the same way as in Scotland, but that's not necessarily the same throughout the world. You can get so many different
flavors and styles.
SOARES: A variety of flavors and styles found across the Western Cape. Our exploration takes us to nearby Paarl, a region that's grown
grapes for centuries. We stopped at KWV - prolific brandy makers.
ILSE DU TOIT, BRANDY MASTER, KWV: Right. In the glass now we've got the 12-year old.
PEADAR HEGARTY, MARKETING MANAGER, KWV: One of my favorites.
DU TOIT: Yes, definitely mine too. Look at the color, it's nice and amber. Got that nice glow to it. Safayer (ph) sniff on the nose. If you
start a bit of way from the glass, you'll find them more wine flavored.
SOARES: Peadar Hegarty is KWV's marketing manager and Ilse du Toit is a brandy master.
DU TOIT: When you move your nose close into the glass, you find the more maturizing flavors. A mellow apricot, --
HEGARTY: Delicious.
DU TOIT: -- dried pear. It's lovely.
SOARES: Though brandy making has been a main endeavor, the company's expanding its focus.
HEGARTY: Brandy in South Africa actually carries a bit of stigma. It's a category that at its peak was 55 million liters. It has declined to
less than 30 million liters, and that falling has practically gone almost completely into whisky. The modern consumer is looking for image, they're
looking for high-quality products, they're not afraid to pay a premium price, and brandy - South African brandy in particular - did not do a good
job of presenting products in that segment.
SOARES: So the company has launched a cognac - a big deal they say considering cognac can only come from France.
HEGARTY: To be called a cognac, your grapes have to be picked in Cognac in the western region of France, and you've bottle and mature in
Cognac. So what we did is we formed a unique partnership with a Cognac huzz (ph), and now we're the first South African company to brand an X.O.
cognac which is I think is nice extension of our story.
DU TOIT: In this room, we've placed out all the cognacs and pick them out -- the best ones - and made blend and then it went back to France,
blended in France, bottled in France and then off into their shipment to where we need it.
ANDRE VAN DER VEEN, CEO, KWV: The skill in making brandy and cognac is actually the same. And our brandy master put together a blend of cognac
bottled by and blended by KWV which we've made available to the public. We've released 30-year-old brandy and a cognac together to tell people that
actually cognac and brandy live together as part of the same family, it's just different experiences.
SOARES: Andre Van Der Veen is KWV's CEO, and he says varying their product line broadens their consumer base.
VAN DER VEEN: I'm standing next to KWV's premium brandy products. It's the oldest 30-year-old brandy blend in South Africa. Or you can start
with a 3-year-old KWV brandy. But you can drink all the way up to a 30- year-old, and then we've got a cognac. And we want to give people an experience for any drinking occasion and - not for every pocket, but for
every occasion there should be a product which you could enjoy.
SOARES: From big established brands to independent producers, spirit makers can be as diverse as the product.
ROGER JORGENSEN, INDEPENDENT SPIRITS PRODUCER: This is nature's gift in the Cape. Coleonema album, otherwise known as confetti bush. It's
warm, aromatic, sexy and a perfect base for Cape liqueurs.
SOARES: Also in Wellington, Roger Jorgensen, part botanist, part foodie and spirit maker through and through. He makes gin, absinthe, vodka
and much more.
JORGENSEN: This is hyssop.
SOARES: He shows us around his organic herb garden.
JORGENSEN: And this is one of the ingredients of absinthe.
SOARES: He mixes and mixes, all in pursuit of his perfect blend.
JORGENSEN: We are here in the Western Cape. We are brimming with wondrous medicinal and aromatic plants and herbs. We are blessed with a
wonderful climate, ample water here in the Western Cape. So it's like a grower's paradise. It's inspiring, it's invigorating. It's almost
intoxicating. So we draw on that, and what we try to do is to allow our products that come through our hands-on process to actually express that.
And we want to represent where we live.
SOARES: And enthusiastic connoisseur. Jorgensen seeks to embody the change the Western Cape is experiencing.
JORGENSEN: We try and keep our offerings fresh and (verit) as we possibly can, and that in itself is a draw. And don't expect the same
thing every time. We have visitors who come and they say, 'But this gin is more citrusy than the previous one.' 'This absinthe is more herby.' Yes,
it will be because it's an evolving process. Everything changes. As the French would say 'tout change'
SOARES: Well ahead on "Marketplace Africa, " we'll have more of that conversation with Jeff Green as we continue to look at the spirits
production in the Western Cape. "Face Time" is next - don't go anywhere.
(COMMERCIAL BREAK)
SOARES: Welcome back to "Marketplace Africa." Now, cognac, whisky and brandy - they all have an important footprint in South Africa's Western
Cape Province. So here's more with Jeff Green. He is a whisky-maker at the James Sedgwick Distillery and they are the producers of the famed
Bain's Cape Mountain Whisky.
GREEN: I think one of the first things that people are surprised about is to hear that it's a South African whisky. People don't realize
other countries make whisky. Whisky is becoming a global product now. Where previously people associated it with Scotland, Ireland maybe a
movement (ph) from America, but every country in the world can make whisky.
I think what people are looking for is something different. With whisky, that's what you want. You don't want to be drinking mass-produced
volume products which all taste the same. What we've done at Bain's is we've done something quite special to bring out flavor into it. Whisky's a
all natural product, so you can't add anything. But we use a special kind of wood in the maturation process to give it it's unique flavor and
characteristics.
The space profile of Bain's also works very well for our climate. It's a sweet, easier-drinking whisky which works well in the heat. As a
versatile whisky, you can mix it, take it on ice, you can have a neat (ph) and I think people are looking at that. The bottle, image, the label -
that's all new for us and we see this as a whisky for future grade (ph).
Traditionally, South Africa used to be brandy, other types of spirits. But over the last few years, whiskies have just grown phenomenally. And in
South Africa since about 2012, whisky sales in total have overtaken brandy for the first time. So the profile of your traditional spirit drink in
South Africa is changing.
I think a lot of it's to do with the big international names. The market the products very well. Whisky's a aspirational drink. So the
marketing they're doing, the image that's been shown for whisky, it's a natural look, it's a healthy product - it's the product to be seen
drinking. And it's one of the few products where the more expensive the whisky, it's associated with being better - it's what you want to be seen
drinking.
Bain's at the moment is quite limited. Obviously the majority we're trying to provide for is South Africa. But we are slowly exporting a bit.
There are quite a few countries we are looking at in Africa. It is quite exciting for us. We see Bain's as having a huge potential there. And we
also are releasing small volumes in Canada and the U.K. But very limited at the moment. For us, South Africa is the priority.
The prices is itself - it is quite complex in terms of what needs to be done. You've got your raw materials, there needs to be malt, you've got
mashing, you've got fermentation, you've got distillation, you've got maturation, you've got blending. So there's a number of steps in the
process. And that's something that has to run on for 24/7. You know, it's not something you stop for. So we've got quite a dedicated team here at
the site. We run day and night, and, yes, to ensure consistent quality, and that's what people expect from us. That is the challenge.
What a lot of people need to realize with whisky is it takes time. The Bain's product that we've got here is five years old. But, you know,
to get your head around that, people are looking for 12, 13, 20, 25-year- old whiskies. But that is the usual amount of time to have something lying there. And our whisky industry in South Africa is quite young, and we
started making whisky in 1977 in South Africa. Bain's we only launched in 2009. So it's a very young whisky for the market. It's the fastest-
growing spirit in South Africa at the moment. But we have put down stock for all the products. And we're looking at the different wood finishes,
all the products, and I think there's quite a few exciting things coming from Bain's.
This is a by in (ph) assessing (ph) your own product, and that's all this product we have. Whereas it's been 15 years in its usual American
oak, and now we've had this now for a year in a Spanish sherry barrel. And you can see the color difference already - you're getting a lovely red
tinge. And, yes, if you just notice this, I think you'd be quite surprised by how it's changing. We have one massive international water veins, and
that really gives us the leverage to tell people this is as good and better than any whisky in the world.
SOARES: And that is it for "Marketplace Africa" for this week. You can find us online at ccn.com/marketplaceafrica. From me, Isa Soares,
thank you very much for joining us. See you next week. 'Bye-bye.
END
