Wagner Group's soldiers for hire, HK versus Singapore as financial hubs and Adidas counts the cost of unsold Yeezy merch
February 2023
Hello and welcome!👋
Sometimes the shortest month of the year can feel like the longest.
February saw a devastating earthquake in Turkey and Syria, intrigue over Chinese weather balloons, a significant election in Nigeria, President Biden’s State of the Union Address, and much more.
This edition of Deep Dive focuses on the mysterious Wagner Group, competition between Hong Kong and Singapore, and the expensive end of Adidas’s Yeezy line.
SOLDIERS FOR HIRE
Ukrainians marked a grim milestone on 24 February: One year since Russia’s full-scale invasion of their country.
The conflict’s anniversary is increasing scrutiny of the Wagner Group, a shadowy mercenary unit with close ties to the Kremlin. Believed to be founded by Yevgeny Prigozhin, an ally of Vladimir Putin, the organisation supplies trained fighters to clients around the world.
Although Russia formally banned mercenary units in 2018, the underground nature of the Wagner Group provides plausible deniability, allowing the Kremlin to “absolve itself of their problematic behaviour, such as egregious human rights violations and abuse of civilians,” notes the Brookings Institution.
Nonetheless, demand for the private army is strong. Wagner Group personnel have been deployed to Syria, Libya, Mali, Madagascar and other locations. Now its contractors are in Ukraine, helping Russian troops on the ground.
But as the war continues, Wagner Group is suffering heavy casualties (recruiting prisoners didn’t have the desired result). Then Prigozhin began a public feud with Russia’s military brass, accusing them of intentionally withholding ammunition for his combatants. Analysts say the spat could either indicate Prigozhin’s waning or growing influence. The jury’s out.
For a summary of Wagner Group’s origins and work, watch Vox’s video explainer below.
RENEWED RIVALRY
Hong Kong versus Singapore. Competition between the two financial hubs has existed for decades, but the battle for dominance is getting heated.
With Hong Kong finally loosening its strict Covid measures, the city’s officials are launching a charm offensive to attract tourists and reverse the talent exodus. Case in point: the “Hello Hong Kong” campaign.
On the dealmaking front, Hong Kong’s leader John Lee visited Saudi Arabia and the UAE in February to tap wealthy Gulf investors. Lee and his team also encouraged Riyadh to consider “Asia’s World City” for oil behemoth Aramco’s secondary listing. That share sale would give momentum to the world’s third-largest fundraising market.
Hong Kong is hoping its reputation as a dynamic international centre can be restored after nearly three years of isolationist zero-infection rules. The question is - can the Chinese metropolis stymie Singapore’s upward trajectory?
Scores of foreign professionals moved to the “Lion City” from Hong Kong in spring 2022, when the Singaporean government axed testing and quarantine requirements. The press jumped on stories of surging air traffic at Changi Airport, the boom in Singapore’s wealth management services, and complaints from expats about soaring rents.
Usually, the East Asian territories play complementary roles due to the structures of their financial systems. But Singapore’s ascendance is a reality check for Hong Kong - a reminder that fortunes can shift quickly and global image does matter.
WHEN A BRAND DEAL GOES BUST
Adidas is reeling from its break up with Kanye West (now known as Ye). The sportswear giant has done some number crunching following termination of the lucrative partnership and the tallies are daunting.
According to Adidas’s forecast for 2023, sales could drop by as much as €1.2 billion if remaining Yeezy stock isn’t sold, and that would cut operating profit by €500 million. Failure to repurpose Yeezy merchandise would widen those losses. Additionally, €200 million is being set aside for a strategic review of the business.
“We are currently not performing the way we should,” said the new CEO Bjørn Gulden. “We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again. But we need some time.”
The stakes are high for Gulden. He joined the company on 1 January after winning plaudits for re-invigorating Puma under his watch. However, Adidas’s problems run deep. Ending Russian operations, troubles in the Chinese market and an over-reliance on celebrity endorsements have triggered four profit warnings in less than seven months.
A damning investigation by the FT describes a toxic management culture, poor decision-making and reduced spending on research & development. Meanwhile, the Wall Street Journal recently reported that Beyonce’s Ivy Park clothing line with Adidas is falling short of revenue projections.
As for the Yeezy inventory, NPR outlines a few options available to Adidas. Changing the design of each pair of shoes is too costly and labour intensive, but selling the merchandise to smaller markets is a possibility. Elsewhere, on social media, the consensus is that Adidas should forget about the money and donate the products to charity.
Thanks for reading! Take care and stay curious, Sara x