Almost Nixon To China

Plus: Thanks to India, Airbus is flying circles around the industry. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 20, 2023

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TOGETHER WITH

Good morning.

No one’s cheering the news out of the United Kingdom.

In the latest example of shrinkflation, UK brewers are cutting back on the alcohol content in their beers but still charging the same. CNN reported that Greene King reduced the ABV of its Old Speckled Hen pale ale from 5% to 4.8%. And earlier this year, Shepherd Neame slashed the ABV of its Spitfire and Bishops Finger ales from 4.5% and 5.4% to 4.2% and 5.2%, respectively. The moves come as the industry still deals with high costs for energy, ingredients, and packaging in the UK. So basically, you’re going to have to spend and drink more to feel whatever your version of good is.

Morning Brief

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Mr. Blinken goes to Beijing.

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It’s wheels up on another big Airbus sale.

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AI is more cultured than you think.

International

Blinken and Xi’s Meeting Signals Calming of US-China Relations

(Photo Credit: Henry Chen/Unsplash)

It was easily among the most important visits to Beijing by an American official since Richard Nixon stunned the world with his quick get-together with Chairman Mao in 1972.

This week, US Secretary of State Antony Blinken visited China to meet with President Xi Jinping and discuss mounting geopolitical tensions between the two countries. It appears the meeting was amicable as Xi said friendly US-China ties have a great “bearing on the future and destiny of mankind.”

Trading Blows

The US and China were never on the best of terms, but what was once a heated rivalry became an all-out trade war during the Trump administration, and it’s continued into the Biden years with sanctions, tariffs, and chest-pounding from each side.

Any time tensions seemed to be easing, they’d quickly ramp back up. Last summer, Congresswoman Nancy Pelosi went on a diplomatic visit to Taiwan and China’s response was to dispatch warships and fighter jets to the waters around the island nation as a “military exercise.” Blinken was supposed to visit China earlier this year, but those plans were postponed in the wake of February’s spy balloon debacle when the US shot down what China claimed to be a weather balloon blown way off course.

But the two nations might be willing to look past their differences for the sake of their economies, and let’s be real, national securities. While some details on exactly what Blinken discussed with Xi and other senior Chinese officials are still minimal, Xi did say that the two sides “made progress and reached agreements on some specific issues.” Rather ambiguous, but hey, we’ll take it:

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Last fall, the US imposed export restrictions that cut China off from certain semiconductor chips made anywhere in the world with US equipment. The Netherlands and Japan joined in too, which has delivered a major blow to China’s tech manufacturing sector and its ability to trade with countries like Taiwan and South Korea.

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The Trump administration’s objective with the trade war was at least in part to reduce the US trade deficit with China — which totaled roughly $375 billion in 2017 — but by 2022, the deficit had grown to $383 billion. And even as the Biden administration pumps hundreds of billions of dollars into domestic manufacturing while tossing around buzzwords like “decoupling” and “de-risking,” it’s clear that the US and Chinese economies are integral to one another.

Our Paths Will Cross Again: Blinken’s successful trip to China could be setting the stage for another meeting between Biden and Xi. The two world leaders had a face-to-face chat during a G20 summit in Bali, Indonesia, last November. It went… OK, with Biden calling it “very blunt” yet “in-depth, candid and constructive.” They had obvious differences when it came to China’s forced labor camps and its decision to continue a strong trade relationship with Russia despite Putin’s war on Ukraine. No one’s giving an inch on Taiwan, but at least they’re talking. However, this week, he said he’s “hoping that over the next several months I’ll be meeting Xi again.”

– Griffin Kelly

Aviation

Airbus Lands Biggest Sale in Aviation History

Airbus has landed its most lucrative deal ever.

On Monday, the world’s largest aircraft manufacturer secured the biggest deal in industry history: a 500 narrow-body plane order from Indian airline IndiGo. The reportedly multibillion-dollar deal places on full display the South Asian subcontinent’s status as a massive and rapidly emerging market.

The Increasingly Friendly Skies

The deal is the second landmark Airbus sale to an Indian airline this year. In February, Air India placed an order for 470 new passenger jets — though that deal was split roughly 50-50 between Airbus and Boeing, with each supplying 250 and 220 aircraft, respectively. This time, Airbus is taking home all the booty and bolstering a homegrown Indian supergiant in the process. After taking flight as a scrappy startup in 2006, IndiGo quickly ascended far higher than its domestic carrier competition. Today, the airline controls more than 60% of India’s market share, according to the nation’s Directorate General of Civil Aviation. For reference, industry runner-up Air India holds just under 10%.

It’s no secret why Western manufacturers are so eager to crack the market. The nation just surpassed China to grab the top spot on the world’s most-populous rankings list, and creating a homegrown aircraft manufacturing industry from scratch can take years if not decades (just ask China). In the meantime, Indian air travel both domestic and international is set to fly even higher:

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India’s gross domestic product is projected to grow nearly 6% this year, more than any other major emerging or advanced economy, according to the International Monetary Fund. That’s minting a fresh new middle class, and, ergo, a new class of first-time flyers. In the first quarter this year, passenger numbers surpassed 37 million, up roughly 6% compared to pre-pandemic 2019 levels, according to official government data.

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In March, India’s government announced it would pour $12 billion into airport infrastructure projects, with Prime Minister Narendra Modi aiming to turn the nation into both a destination and a global connecting hub. Meanwhile, IndiGo plans to double in size and scale by the end of the decade. Its fleet currently contains 300 aircraft.

Grounded: Don’t get too excited too quickly. Airbus is still beset by production line issues, and earlier this year said its 75-planes-produced-per-month target now won’t be reached until 2026 — months after its original target. It’s why IndiGo won’t be receiving its new planes until… at least 2030, with the last of the order delivered by 2035. As 30 Rock’s Liz Lemon reminds us, a pilot’s promise of a half-hour delay “means forever.” The same logic applies to airplane manufacturers.

– Brian Boyle

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Tech

AI Could Give Yogurt Companies A New Edge

Do you have the guts for AI?

A profile in Bloomberg details how Danone, the French yogurt giant (branded as “Dannon” in the US) behind Activia and Actimel, is using sophisticated AI to enhance its products’ probiotic properties. Side effects include: handy marketing tools.

Mmm, AI

While the current AI hype cycle is laser-focused on whether algorithms will take our jobs, the use case for various types of AI in R&D is a fairly well-established one. In the field of oncology, for example, AI tools have proven themselves extremely useful, and have the potential to significantly speed up diagnosis and treatment.

In Danone’s case, it’s using AI to analyze the health benefits of various bacteria so it can more effectively engineer yogurts that promise to super-charge consumers’ microbiomes, a.k.a. the smorgasbord of bacteria that live inside your body:

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Dairy R&D is a serious business; Danone spent $100 million on a new research facility that opened in February. The high-tech yogurt laboratory features an artificial human stomach so top-secret that Bloomberg’s reporter wasn’t allowed to take photographs or even make a rough sketch.

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The human microbiome is so complex it’s like a rainforest in your gut, so using AI to crunch the multitudes of data could yield huge benefits for Danone. “It’s a hugely complex ecosystem that we can only understand by measuring a lot of things, and then we have to make sense of all these data,” Jan Knol, senior director of research and innovation at Danone, told Bloomberg.

The Ice Cream Man Cometh: While Danone pumps capital into making its yogurts as biologically optimized as possible, a new big player is entering the market — quite possibly at the other end of the health scale. Häagen-Dazs announced two weeks ago that it’s bringing a new line of luxury yogurts to market for summer called “Cultured Crème.” It’s uncertain whether it’ll ever be able to corner a market as lucrative as the one it already dominates: consumers in need of post-breakup consolation food.

– Isobel Asher Hamilton

Extra Upside

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Royal marks: Spotify exec/Boston Sports Guy Bill Simmons calls Meghan and Harry ‘grifters’ after multi-million dollar podcast deal ends prematurely.

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Not in my store: NYC could ban shop owners from using facial-recognition tech to track thieves.

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Just For Fun

Perfect trick shot.

Tour de Big Wheel.

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