The Darkside of Dockside Cranes

Plus: Kicking the habit is hard, but Altria finally quits Juul. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

March 6, 2023

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TOGETHER WITH

Good morning and happy Monday.

Not every pandemic-era food trend has spoiled.

Air fryers are still flying off the shelves. Consumers spent $1 billion buying them in 2022 and now about 60% of all US kitchens have one, making the hot air circulators the fourth most popular cooking appliance nationwide. After watching this boom, major food conglomerates like Tyson and Kraft Heinz are pitching their frozen products to air fryer devotees, even adding air frying instructions on their packaging, a major shift in how staples like hot pockets and chicken strips are marketed and sold.

So, yeah, your bachelor uncle was absolutely right when he called the appliances “a miracle” during lockdowns.

Morning Brief

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The Pentagon fears China’s cargo influence.

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Ripping the Juul apart.

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Native American casinos could see a big expansion.

Defense

US NatSec Officials Say China-Manufactured Giant Cranes Pose Security Risk

First came TikTok. Then came giant weather balloons. Now, the Pentagon has identified another potential Chinese surveillance tool: giant cranes.

As in, the giant ship-to-shore cargo cranes produced by China-based manufacturer ZPMC and employed by many American ports — including some used by the US military-industrial complex. (There is so far no evidence that your “Made in China” electric toothbrush is being used to spy on your dental hygiene.)

The Crane of Our Existence

In fairness, the Pentagon has long warned against possible security risks associated with certain foreign-made products or equipment, such as electrical substation equipment or airport baggage-screening devices. Last year, the US notably instituted a ban on equipment from Chinese telecom companies Huawei and ZTE, citing concerns that it could be used to spy on American customers.

The consternation about cargo cranes comes as China’s influence over the global shipping industry rises, along with its ability to theoretically exploit that dominance for geopolitical gain. The nation has made strategic investments in trade ports the world over, with over 27% of global container trade in 2021 passing through ports at least partially owned by top China and/or Hong Kong firms, according to maritime research firm Drewry. China also produces nearly the entire global supply of shipping containers and controls an important shipping data collection service called Logink, too.

So it was perhaps inevitable that ZPMC cranes have been identified as the next possible US/China troublemaker:

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ZPMC claims to own roughly 70% of the global crane market, with its equipment at work in over 100 countries. They account for nearly 80% of ship-to-shore cranes in US ports, a source told The Wall Street Journal.

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In 2021, a Defense Intelligence Agency assessment found that the cranes could conceivably be throttled or shut down remotely — potentially destabilizing supply chains — and could gather intelligence on equipment being shipped by the military.

National Security officials have not identified any malicious crane behavior, yet. And, crucially, no US intelligence agency is directly responsible for maritime security, meaning ports are left without a spy paddle for guidance and standards.

Tick-Tock, TikTok: Last week the House Intelligence Committee voted to advance legislation that would grant the President the power to end the TikTok dance altogether for its 100 million US users. A total ban is technologically complicated, but could be political gold with beleaguered teachers and parents.

– Brian Boyle

Corporate News

Tobacco Giant Altria Ditches Juul After Investment Plummets

Put that in your cartridge and smoke it.

Altria, the largest tobacco company in the world, just exited its minority stake in Juul, one of the largest electronic cigarette companies in the world, per a report from the Financial Times. In just over four years, the Marlboro maker’s vaping investment nosedived nearly 100%.

On Ploom Nine

In 2018, Altria spent $12.8 billion to grab a 35% stake in Juul, which was at that point a privately-held company controlling one-fourth of the e-cigarette industry, raking in annual revenue of $2 billion. Its marketing, which was heavily based on social media, was cheap and effective at beefing up sales. And while it may not have had many celebrity endorsements, The Wall Street Journal reported that Juul sent highly discounted products to influential stars like supermodel Bella Hadid who posed on her Instagram taking a hit from one of the devices that looked similar to a flash drive.

However, Juul, and the sector as a whole, spent the next few years facing massive legal headwinds. While lobbyists claimed e-cigarettes were always meant to be a (relatively) healthier alternative to cigarettes for established smokers, medical experts said vapes — especially the ones with fruity and sweet flavors — specifically targeted teenagers, creating an epidemic of underage smoking not seen since Joe Camel. In 2019, the US Centers for Disease Control and Prevention found that nearly 30% of American high schoolers reported they vaped.

It wasn’t long before the government stepped in to tighten its grip on Big Vape and Altria’s investment went up in smoke:

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In early 2020, the US Food and Drug Administration banned most flavored e-vape cartridges, and two years later, it disallowed all sales of Juul in the country (the decision was later blocked on appeal). In December, Juul agreed to pay $1.2 billion in about 10,000 lawsuits that alleged it was partly responsible for the surge in youth vaping.

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Altria exchanged its stake in Juul – now worth only $250 million – for a “non-exclusive, irrevocable global license” on some of the company’s intellectual property concerning heated tobacco products. Juul only offers liquid nicotine cartridges and has yet to release a heat-not-burn product that uses actual tobacco leaves.

You’ve Come A Long Way, Baby: With Juul looking to be a lost cause, Altria is setting its sights elsewhere. Last year, the Virginia-based company ended its non-compete agreement with Juul and struck a deal with Japan Tobacco to develop heated tobacco products. Plus, Altria might be closing in on an acquisition of NJOY, a startup vape business, for $2.75 billion. The WSJ reported that NJOY investors had hoped the company would fetch a $5 billion price tag, but they may have just been blowing vapor.

– Griffin Kelly

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Gambling

Native Casinos May Have Just Hit the Jackpot

(Photo Credit: Kaysha/Unsplash)

A corner of cyberspace could soon be federally recognized tribal land.

New federal rules could make it easier for Native American tribes to acquire land and broker deals with states for online sports betting, The Wall Street Journal reported.

A Big Payout

The federal framework that governs gambling on Native reservations was established in 1988 when Congress passed the Indian Gaming Regulatory Act, and Native casinos went on to bring in about $121 million in revenue that year. In 2021, they made $39 billion, which gives you a sense of how things are going for the industry.

The new rules proposed by the Bureau of Indian Affairs could create even greater boons for the Native gaming sector:

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One proposal suggests allowing online gambling under tribal-state compacts, meaning that as long as the server processing remote wagers is on tribal lands, the bet would technically be done on-reservation. This would be a big advantage for tribes as iGaming (which includes online sports betting and mobile poker) generated $5 billion in revenue last year, according to the American Gaming Association.

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Another rule proposes stripping down the arduous land-to-trust process that lets tribes obtain more property and add it to their reservations. In theory, this would provide more space for brick-and-mortar casinos.

Snake Eyes: Unsurprisingly, there’s a whammy of opposition. Native reservations don’t pay federal and state taxes on their gambling revenues, and that’s fine when it’s all physically done on-reservation, but competitors and local governments argue that a tribe having statewide access to mobile betting is unfair. In a letter to the Bureau of Indian Affairs signed by 20 state attorneys general, it said, “The proposed regulations would authorize an unprecedented expansion of tribal casino gaming—and would achieve that outcome by unjustifiably restricting the ability of state governments to adopt and enforce their own policies on gaming matters.”

– Griffin Kelly

Extra Upside

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After four years, the Victoria’s Secret fashion show is coming back.

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If elected, GOP presidential candidate Vivek Ramswamy says he would ban all US companies from doing business with China.

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