Accenture buys Work & Co. / Deep Dive: U.S. candy makers face sugar shortage / J&J acquires Ambrx for $2B in cancer drug deal
Inside Business
For January 09, 2024
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* 🤝 Accenture buys Work & Co., a marketing and tech agency
* 🍬 Deep Dive: U.S. candy makers face sugar shortage
* 💊 J&J acquires Ambrx for $2B in cancer drug deal
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Shriram
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1
Accenture Song, Accenture's ($ACN) creative services division, is acquiring digital design and technology agency Work & Co., known for prominent clients like Apple, Google, Pfizer, and the PGA Tour. The anticipated deal, set to close this month, seeks to bolster Accenture's expertise in crafting digital products, including apps, chatbots, and e-commerce platforms.
More:
* Founded in 2013, Work & Co. broadened its scope during the pandemic, concentrating on developing digital goods and revamping customer e-commerce websites.
* A minority interest in Work & Co. was purchased in 2020 by the Carlyle Group's ($CG) Europe Technology Partners and private equity firm Copley Equity Partners.
* This strategic acquisition aligns with the trend that consulting firms have been investing in marketing services to increase the range of services they provide to companies.
* Work & Co. will be integrated into Accenture Song's digital product and design department, with the possibility of a future merger.
* Work & Co. employed about 400 people full-time, generated $146M in revenue in 2022, and recently laid off staff due to difficulties in the digital advertising and consulting sectors.
Zoom Out:
* In 2019, Accenture became more well-known in the advertising industry after acquiring Droga's advertising firm, Droga5.
2
What the numbers say: U.S. sugar futures and U.S. imports of the highest-tax sugar have hit record highs due to extended droughts in key cane-producing areas such as Mexico and Louisiana. Elevated food costs, driven by inflation and supply chain challenges since 2020, have resulted in a 13.4% increase in confectionery item prices, surpassing overall grocery gains.
Relevance: Escalating costs for sugar, a crucial ingredient, are squeezing the $48.8B U.S. confectionery sector just ahead of the holiday season, prompting candy-makers to increase consumer prices. Protectionist regulations in the U.S. sugar market, restricting domestic and foreign supplies, deepen tightness in the sugar market, resulting in elevated prices and the possibility of shortages.
More data: Sugar supply shortages drive reliance on high-tier tariff imports, with record prices predicted by the U.S. Department of Agriculture. Candy-makers, facing challenges, raise prices; larger companies offset costs with revenue growth, while smaller ones struggle, raising concerns about the impact on unit sales if prices persist.
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Radio, one of the oldest media types, has maintained a consistent listenership over the previous 10 years; however, among Americans 12 years of age and older, it has declined by 10 percentage points, from 92% in 2009 to 82% in 2022. On the other hand, there was a notable decline in pay TV penetration of 20 percentage points between 2014 and 2023.
More:
* The resiliency of radio can be attributed to its accessibility and minimal cost barrier since most cars have AM and FM radios.
* Radio is appealing because of its local audience loyalty, recognizable voices, and interactive elements like contests.
* Prominent companies like iHeartMedia have adopted digital formats, including streaming and podcasts, into their business plans.
* iHeartMedia ($IHRT) is the biggest radio broadcaster in the U.S., with 860 stations owned and 250 million monthly listeners on average.
* The media investment group GroupM projects that global TV ad income will decrease by 18% in 2023 compared to the previous year.
4
Johnson & Johnson ($JNJ) intends to purchase Ambrx Biopharma ($AMAM) for $2B in cash, strengthening its presence in cancer treatment, particularly in developing antibody-drug conjugates (ADCs). ADCs, described as "guided missiles," aim to target and eliminate cancer cells with minimal impact on healthy tissue, and the acquisition is anticipated to conclude in the first half of 2024.
More:
* The acquisition is consistent with the growing trend of large pharmaceutical companies to invest in ADCs, such as Pfizer, AbbVie, and Merck.
* J&J's action is part of their plan to close a projected revenue gap in 2025 when generic competition for the company's best-selling medication, Stelara, enters the market.
* J&J is buying Ambrx for $28 a share, double the company's closing price on Friday of $13.63.
* Through this acquisition, Ambrx's pipeline and ADC platform will be utilized to improve the precision of biologics used in cancer treatment.
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5
Duolingo Inc. ($DUOL), the language-learning software maker, is cutting about 10% of contractors, leveraging generative artificial intelligence for more efficient content creation. The company uses AI in voice generation for the app and recently introduced Duolingo Max, a premium tier with AI-generated feedback and conversations.
More:
* CEO Luis von Ahn discussed how generative AI quickly creates content, including scripts for television programs that teach languages.
* The spokesperson clarified that although many employees use technology, the reduction does not equate to AI's direct replacement of workers.
* At the end of 2022, Duolingo employed 600 full-time employees; the contractor reduction had impacted none.
* Concerns over the potential effects of generative AI on employment are developing since there are discussions about the possibility of a labor shortage brought on by automation.
* In response to these worries, businesses like Microsoft and Chegg have addressed staff training and integrated AI into their offerings.
Zoom Out:
* Last month, Microsoft teamed with the American Federation of Labor and the Congress of Industrial Organizations to address AI concerns through training and impact assessments on employment.
6
In 2023, Papa John's International Inc. ($PZZA) experienced a 14% shortfall in restaurant openings, achieving 210 net openings instead of the anticipated minimum of 245, integral to the company's overall growth strategy. The Middle East faced delays in restaurant openings due to the ongoing conflict between Israel and Hamas.
More:
* Unexpected closures in foreign countries, such as the U.K., where the corporation is restructuring its operations, are among the additional considerations.
* Some openings scheduled for 2023 were delayed to 2024.
* By Friday's end, the company's shares were down 8.9% on the year, while the S&P 500 had dropped 1.5%.
Zoom out:
* McDonald's has also seen a "meaningful business impact" due to the Israel-Hamas war, according to Chris Kempczinski, CEO of McDonald's.
* Most McDonald's restaurants worldwide are franchised, including Middle East locations under the company's international developmental licensed markets division, contributing about 10% to its revenue.
7
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Shriram Jeevakumar Freelance Writer
Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School.
This newsletter was edited by Aaron Crutchfield
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