Fortune - 11.2020

NOVEMBER 2020 ■ FORTUNE.COM

The New Face of
Power on Wall Street

INCOMING CITI CEO JANE FRASER IS PART OF A WAVE OF WOMEN
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CONTENTS FORTUNE NOVEMBER 2020 3

Features November 2020 VOLUME 182 • NUMBER 3

GM chairman 42
and CEO
Mary Barra is Keurig Is a
a veteran of Machine
Fortune’s list.
By leveraging its A.I.­
COVER, ORIGINAL PHOTO: KYLE GRILLOT—BLOOMBERG VIA GETTY IMAGES; BARRA: WILLIAM WIDMER 65 78 82 88 fueled growth strategy
during the pandemic, the
The 50 Most The The First Lady Amazon’s beverage giant is closing
Powerful International of Wall Street Ace Engineer in on rivals Coke and
Women List Pepsi. BY SHAWN TULLY
By CLAIRE ZILLMAN By AARON PRESSMAN
It’s far from busi­ Fortune scans 48
ness as usual this the globe to How did Jane Auto­industry
year, and the 23rd highlight the most Fraser, poised to veteran Alicia Boler What Business
edition of Fortune’s powerful business­ take over as CEO Davis helped Needs From the
list is changing, women based of CIti in February, Amazon maintain 2020 Election
too, with a new outside the U.S. break banking’s a record pace
focus on executive highest, hardest during COVID­19. At a crossroads moment
power and how it’s glass ceiling? She won’t be tap­ for the U.S. economy,
wielded in a time ping the brakes Fortune examines the
of crisis. anytime soon. top priorities for both
companies and workers.

BY GEOFF COLVIN
& THE FORTUNE STAFF

94

How the NBA
Kept the Bubble
From Bursting

To save its season, the
league took on a massive
logistical challenge.
The result was a case
study in leadership.

BY ADAM LASHINSKY
& BRIAN O’KEEFE

Cover Image by
TRACIE CHING

4 FORTUNE NOVEMBER 2020 CONTENTS

Departments

Foreword 15 Passions WHAT OUR
EDITORS
6 Change for the 28 The Secret to a 113 A Man and Their Cars: ARE UP TO
Better Better Bottom Line: Matt Hranek Uncovers THIS MONTH
Introducing the Car Owners’ Tales of
BY CLIFTON LEAF Thrive XM Index Automotive Joy BRAINSTORM
TECH
The Conversation BY LANCE LAMBERT BY DANIEL BENTLEY On Dec. 1–2 the
CEOs of IBM,
8 CAROL TOMÉ 31 Stocks for a Ballot- The Cartographer Slack, Google
Proof Portfolio Cloud, and oth-
The new CEO of UPS 116 The Dis-United States ers will virtually
on what it’s like to lead BY ANNE SRADERS of Electricity: The Future convene to dis-
a 113-year-old giant of Power Generation Is cuss innovation
through a pandemic. 37 A Carbon Conundrum: a Solar One. But for the in a time of crisis.
China Aims for Carbon U.S., Not Soon Enough fortuneconfer-
INTERVIEW BY AARON Neutrality, But Its ences.com.
PRESSMAN Dependency on Coal BY BRIAN O’KEEFE
Runs Deep & NICOLAS RAPP FORTUNE
The Brief CONNECT
BY NAOMI XU ELEGANT A membership
15 Are We Better Off community
Than We Were Four for mid-career
Years Ago? professionals
who are eager
BY CLIFTON LEAF to lead in a
purpose-driven
20 Global Giants Getting world. fortune
It Right: The World’s .com/connect
25 Best Workplaces
SMARTER
BY BRETT HAENSEL WORKING
A new weekly
22 A Once Obscure Federal newsletter on
Committee Becomes the evolving
a Powerful Tool workplace,
for Trade Hawks addressing
diversity and in-
BY JEFF JOHN ROBERTS clusion, remote
work, and more.
26 Plastic Surgery Sees fortune.com/
a “Zoom Boom” newsletters

BY RACHEL KING

28 Cheap But Chic(er):
Dollar General
Goes Upmarket

BY PHIL WAHBA

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6 FORTUNE NOVEMBER 2020 FOREWORD

Change for the Better

IT IS HARD to change any institution— digital transformations. Or as Kristen ILLUSTRATION BY SAM KERR
particularly one as revered as Fortune’s puts it, succinctly: “When the pandemic
annual ranking of the Most Powerful Women hit, everybody had to accelerate their five-
in Business. But in 2020, a year unlike any year plans into a week and a half. That’s
other, our MPW team concluded that our what Accenture does.”
venerable list would benefit from a crucial
tweak. It needed a measure of influence and Claire Zillman’s wonderful and timely
power that went beyond the company profile of Jane Fraser (“The First Lady of
P&L—a sense that the women on this Wall Street,” page 82), who in late Sep-
prestigious roster aren’t just great business tember was announced as the next CEO
executives, but also leaders who have used of Citigroup, offers another inside view
of power and influence in action. Fraser’s
their power and influence to shape their power is the ceiling-smashing type—in
companies “and the wider world for the February, she’ll become the first woman
better,” as Fortune’s Kristen Bellstrom to head a major U.S. bank—and her
and Beth Kowitt write in their introduc- career is a model for anyone unwilling to
tion to this year’s package (please see give up their family life in order to pursue
page 65). a blazing rise to the top. It turns out you
can have both.
To be sure, business prowess still takes
a front seat, as it has for the previous To capture this “New Face of Power
22 years we’ve published our ranking. on Wall Street” on our cover, we asked
Witness the fact that the 16 CEOs on our Washington, D.C., artist Tracie Ching
2020 list who run public companies over- to render Fraser in illustration. “Tracie
see businesses with a combined market has this very classic engraving style that
value of over $1 trillion. makes her subjects come alive in vibrant
color, giving her work a dramatic, modern
Which brings me to our No. 1 choice ‘poster’ feel,” says Fortune creative direc-
this year, Accenture CEO Julie Sweet, tor Peter Herbert, whose redesign of our
who just rounded the calendar on her print magazine was recently honored with
first year helming the professional ser- Folio Magazine’s Ozzie Award.
vices giant. And a big year it has been.
The company, which commands a market One of the joys of making magazines
cap of close to $150 billion, brought in is getting a chance to see the words,
$44.3 billion in revenue in its latest fis- photographs, graphical elements, art,
cal year, while profits rose 7% from the and design linger together on the page.
previous year. As the team writes: “Sweet When they interact just right, you can
steered Accenture’s more than half-a-mil- feel a bolt of energy inside. I hope you
lion employees in 51 countries through can feel that, as I do, in the pages of our
the pandemic, a crisis that has made the November issue.
firm’s skills more essential than ever.”
Those skills, in case you’re wondering, CLIFTON LEAF
involve helping much of the rest of the Editor-in-Chief, Fortune
corporate world get through their own
@CliftonLeaf



The
Conversation

CAROL TOMÉ

Carol Tomé expected to be doing a lot more gardening when she retired as CFO
of Home Depot in 2019. But the board of UPS, where she’s served since 2003, had
other plans. So in June, Tomé took off her gardening gloves and took the reins of
the storied delivery company. We talked to the new CEO about what it’s like to lead
a 113-year-old giant through a pandemic. INTERVIEW BY AARON PRESSMAN

T H I S E D I T E D Q & A H A S B E E N C O N D E N S E D F O R S PAC E A N D C L A R I T Y.

FROM CFO TO THE BIG SHOW make some decisions to close stores,
to exit businesses. 3 But what we
“In the second After 24 years at Home Depot, you didn’t do was take anything away
quarter alone, from the frontline associates who
we had to walked into a new job in the middle were in the stores every day. We
hire 40,000 continued to make merit increases,
people just of a crisis. How has UPS been im- we continued to pay a bonus.
to get the
packages pacted by COVID-19? The phrase we used back then is,
delivered.” “A crisis is a terrible opportunity to
TOMÉ: So, unlike a lot of companies, waste.” Which, ironically enough, is
the majority of UPSers get up every what I said when I came to UPS.
day and go to work. You know, they
put on their uniform, right? They I came here at the height of the
can’t work remotely. You can imagine pandemic, and one of the things that
what we had to go through—just was getting in our way competitively
imagine hundreds of thousands of was time in transit. We weren’t as fast
package cars, having to make sure as some of our competitors. We had
that they’re clean. We’ve adapted launched an initiative to tackle that
pretty well based on all the feedback problem, 4 but we weren’t planning
I get. We have had unprecedented to complete it until June 2021. So
demand come our way. 1 In the I asked, What’s getting in the way?
second quarter alone, we had to hire And the team said money. I said,
40,000 people just to get the pack- We’ve got money, let’s accelerate it.
ages delivered. 2 So we will be done this month. Why
waste the crisis, right? Pull forward,
SALLY MONTANA—REDUX You helped Home Depot survive the make the investments now.
2008 recession. Are there strate-
gies you gleaned from those tough While your e-commerce business,
times that you’re applying now? which involves a lot of single deliv-

We had to make some very hard
decisions at Home Depot. We had to

FORTUNE NOVEMBER 2020 9

SHIPPING MAGNATE:
UPS CEO Carol Tomé
oversees the handling of
more than 21 million U.S.

packages per day.

10 FORTUNE NOVEMBER 2020 THE CONVERSATION

eries to homes, has been growing BETWEEN about accelerating that initiative.
during the pandemic, don’t you face THE LINES
a challenge of declining large ship- Not all of your important customers
ments to stores? Those are gener- (1) They’ve got fit into that small/medium size cat-
ally more profitable routes. mail: UPS handled egory. Amazon is a huge customer
an average of 5 but is also becoming a competitor
A lot of what’s happened in this cur- 21.1 million U.S. with its own delivery network.
rent economic environment is that packages per day
business has softened up a bit and in Q2—typically a Amazon’s an important customer,
the pipeline has been filled up with slow period—a 23% but we have so many important
e-commerce. We’re looking at how increase from the customers. And for us, it’s about each
we can pivot our business model over previous year, and customer having a relationship that’s
time to have better balance in the almost reaching the mutually beneficial. Some customers
portfolio. And that balance comes blockbuster 23.1 mil- need us for returns; some customers
by growing small- and medium-size lion packages per need us for end-to-end pickup and
businesses, who really value our day average of the delivery. Some customers want to use
end-to-end network from pickup to 2019 holiday season. our access points. Our job is to un-
delivery. Candidly, we had lost share derstand each customer’s need and to
in the small and medium sizes. Part (2) Parsing the serve them the best way that we can.
of the reason why is we didn’t have Parcel Service:
the fastest time in transit. So you can At the end of 2019, During your tenure as CFO at Home
understand why I was so passionate UPS had 495,000 Depot you worked with five CEOs
employees, more and helped sales increase almost
There are only 37 women CEOs than 1,000 package eightfold to over $110 billion. What
in the Fortune 500 now, counting facilities, 125,000 did you learn that you’re bringing to
you—you increased the total. What delivery vehicles, your new job?
should corporate America be doing and 261 planes.
to increase the number of female I learned that the answer to really
corporate leaders? (3) A different all of the strategic questions facing
sort of renova- a company can be found by listen-
We have to be intentional. I recall, at tion: Home Depot’s ing. In the Home Depot world, that
Home Depot, I had a senior officer revenue plunged meant listening in the stores. So in
opening and wanted to fill it with $13 billion during the my free time, in the evenings, on the
a diverse person. I had a bunch of 2007–2009 reces- weekends, I would put on an apron
amazing candidates, but [they didn’t sion, and it closed 15 and work in the stores. And I really
fit the bill, so] I kept it open for a stores. It cut 2,000 got to understand the experience
year. Ultimately, it happened to be a administrative through the lens of the customer.
woman that took that job, and she’s jobs and closed its
doing an amazing job. But we had to Expo home design I also learned the power of what
have intentionality. centers, laying they called an inverted pyramid,
off another 5,000 where the leadership team is at the
And we need to reach behind us workers. bottom of the pyramid, because we
and pull those people up with us. I bear the weight for the actions that
have done that, and we’ll continue (4) The need for we take and the decisions that we
to do that. The first executive officer speed: Starting in make. We bear that weight so that
I named here at UPS was our chief 2019, UPS added we can free up our associates who
communications officer, Laura Lane. Sunday pickup are at the top of the pyramid, so that
This was an executive vice president and deliveries, they can take care of the customers.
job I created; the first job I created ordered dozens If you bear the weight, you can free
since I joined [went to] a woman. of new airplanes, up people to do the right thing, to
and poured money give the best experience.
into expanding its
ground fleet and PUTTING HER STAMP ON IT
logistics systems.
Now that you’re a few months in,
what are your biggest goals as CEO?

To impact people, help them get to

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12 FORTUNE NOVEMBER 2020 THE CONVERSATION

“I believe the answers to dots. I said: You have to. So we went
everything can be found inside around again, and everybody used
the facility, talking to folks the red dots, which is very helpful,
and talking to customers.” because it allowed us to say this is
not important, right? We can put
their highest potential. I view that (5) Customer and that on the shelf right now.
as job number one. Job number two competitor: As of
is to get the stock price moving. 6 January, Amazon, It allowed us to narrow our focus.
That’s a lot about business model which has its own It’s so critically important. You know,
and capital allocation. And job delivery business, what is Lewis Carroll’s saying? “If
number three is whenever I get ready accounted for you don’t know where you are going,
to retire, that I have CEO succession- roughly 12% of UPS’s any road will get you there.” That’s
ready candidates. revenue. effectively where we were. We’re get-
ting much tighter on what the action
There are several things that (6) UPS stock is that we’re going to take.
should not change, that are super im- performance
portant to who we are as a company. Shares have So we’re looking at how we can
We landed on five. Our values. The doubled since use technology to automate some of
dividend is an important part of the Tomé took over the manual processes in our facilities.
value proposition that we give to our on June 1. How we can introduce technology to
shareholders; we’re committed to OCT. 7, 2020 eliminate the people tasks? A really
paying our dividend and increasing it $174.99 good one is robotic labeling. Rather
over time. Our solid credit rating. Our than people putting labels on pack-
brand relevance—and relevance is OCT. 7, 2015 ages, having robotic arms putting la-
about doing good, be it our approach $102.24 bels on packages. We have that under
to social justice, or philanthropy, or a pilot, and it’s progressing nicely.
diversity and inclusion. And then CAROL TOMÉ
the last is the importance of our dual STARTS As the first outsider CEO, what have
class share ownership. Those are the you noticed so far about the UPS
five things that shouldn’t change. But SOURCE: BLOOMBERG culture—what needs to change?
everything else in our portfolio is
under review. And I mean, everything I knew the company as a board
else is under review. member, but the truth is as a board
member, you fly pretty high. As CEO,
You told the analysts on Wall Street I started to go deep. I’ve been able to
that you want to make UPS “better, spend some time out in our facilities.
not bigger.” Any examples of what I believe the answers to everything
maybe was making the company can be found inside the facility, talk-
bigger—not better? ing to folks and talking to customers.

An example: I had the leadership What I see are some opportuni-
team together and we put all our ties from a culture perspective. One
initiatives up on the wall around the of those is the happiness factor. We
conference room. I gave everybody measure employee satisfaction based
10 green dots and 10 red dots. Green on likelihood to recommend the
were for those initiatives that we company to others. Last fall, in our
thought were wildly important. Red survey, our likelihood to recommend
were for those we should stop doing. score was not good at all: 51%. That
means 49% of UPSers wouldn’t
All the green dots went up. No red recommend us to their friends or
family. Nope, nope. That’s not going
to work for us.

What’s the root cause? It’s a lot
about recognition, celebration, build-
ing financial plans so you can pay
people bonuses; that’s an important
part of it. And I don’t think it’s going
to be that hard to move the needle.

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FORTUNE NOVEMBER 2020 15

THE BRIEF
BUSINESS. DISTILLED.

POLITICS

Are We Better Off
Than We Were Four Years Ago?

The decision voters are facing shouldn’t hinge on personal
pocketbook issues—but rather on how the country as a whole

has changed since the last election.

BY CLIFTON LEAF

PHOTO ILLUSTRATION BY SELMAN DESIGN

16 FORTUNE NOVEMBER 2020

FORTY YEARS AGO, a 69-year-old President’s rating is cur-
candidate for President stood on a rently underwater, and
Cleveland debate stage 15 feet from the particularly so compared
incumbent, turned to the television with previous incumbents
audience, and asked a question that would who won reelection.)
seemingly change the race overnight: “Are
The material question
you better off than you were four years ago?” for voters, then, isn’t “Am I
better off?” but rather “Are
It was Oct. 28, 1980, and opinion they were better off today. we better off?” Indeed,
polls until then had been suggest- Both surveys would seem that was the true focus
ing a close contest between the two to portend good news for of the question Reagan
nominees, former California Gov. President Donald Trump framed 40 years ago, a fact
Ronald Reagan, the Republican, and as he faces off against that has been too often
President Jimmy Carter, the Demo- former Vice President missed. As the candidate
crat—with the most recent of surveys Joe Biden. went on to prompt his TV
splitting down the middle as to who audience in 1980:
had the edge. But the challenger’s Yet here’s a surprise:
question that evening, posed at the The answers tell us little Is it easier for you to
end of a cordial 90-minute exchange, about how voters will go and buy things in the
clarified the choice in a flash. The actually fill out their stores than it was four
American economy was wilting ballots. “We’ve done a years ago? Is there more
under the burden of “stagflation,” a lot of research and have or less unemployment in
portmanteau that roughly translated never really found a link the country than there was
to “everything stinks”—the unem- between people’s own four years ago? Is America
ployment rate was mired at 7.5%, finances and how the vote as respected throughout
inflation was soaring, gasoline prices turned out,” says Jeffrey the world as it was? Do
had climbed by more than a third in Jones, who oversees all you feel that our security
just the past year. Reagan, “the Great U.S. polling for Gallup, is as safe, that we’re as
Communicator,” had framed those including the “better off ” strong as we were four
gloomy circumstances in a handful survey above. “People are years ago?
of words—and one week later he won not really self-interested
the White House in a landslide, car- when they think about U.S. voters today are
rying 44 of the 50 states. how they’re going to vote, facing additional ques-
it’s really sociotropic vot- tions that drive, perhaps,
Four decades later, on the cusp ing: They care more about even more deeply to who
of another presidential election, it what’s going on out there we are as a nation: our
might seem that there’s no ques- as opposed to their own shared sense of purpose,
tion that’s more relevant to voters situation,” he says. our trust in the institu-
than the one Reagan asked—and a tions of government and
few pollsters, as you might expect, Far more predictive of society, even the way we
have already asked it. A September election outcomes, says talk and listen to one
survey by the Financial Times and Jones, are a trio of Gallup another. In every elec-
the Peterson Foundation found that surveys—those measur- tion, of course, voters will
a plurality of U.S. voters, 35%, felt ing Americans’ confidence inevitably make personal
better about their present finan- in the economy overall, choices on the basis of
cial situation, and 31% felt worse, satisfaction with the way ideology, philosophy, or
compared with four years ago; a things are going in the morality—as it should be.
later poll by Gallup painted a more U.S., and presidential This year, though, there is
upbeat picture, with a clear major- approval—that look at one fundamental ques-
ity of registered voters (56%) saying the state of the nation tion that voters of every
as a whole. (In each, the political bent ought to
ask before they cast their
ballot: Is the United States
of America more or less
united than it was four
years ago?

THE BRIEF — POLITICS

ME VS. WE further apart on issues, basic facts” when it comes versus-evil binary.
the bigger concern is not to the views of the other Trump’s rhetoric has
“Human nature really is ideological but personal. side. Dispiritingly, Pew
the fundamental force “Partisan antipathy—this found, huge percentages been an “accelerant” to
that governs politics in is the sense that I not on both sides of the aisle the long-simmering anger
any society at any time,” only disagree with the (53% of Republicans and on both sides, says Drut-
says Mike Leavitt, who opposing party, but I 41% of Democrats) do not man. The fiery invoca-
was elected three times take a rather negative want their leaders to seek tions he unleashed at his
as governor of Utah and view of the people in that “common ground” with campaign rallies didn’t
later served in President party—has been grow- the other party if it means end when he got to the
George W. Bush’s cabinet ing since the mid-1990s,” giving up anything. White House. They got
as secretary of U.S. Health says Carroll Doherty, the louder and fiercer and
and Human Services. “And Pew Center’s director of Doherty emphasizes were echoed on social me-
this division between ‘Am political research. But that Pew’s latest study was dia. Says Alan Abramow-
I better off?’ and ‘Are we in 2016, Doherty says, conducted a year before itz, a professor of political
better off?’ is really the those negative feelings the presidential election— science at Emory Univer-
conflict between (me) began to spike. The share and before the coronavirus sity: “He went from dog
individual liberty and (we) of Republicans who pandemic: “While we can’t whistles to a bullhorn”—
security: We give up one describe Democrats as extrapolate … it’s possible from quietly tapping
in order to gain the other.” more immoral than other that these negative senti- into racial, ethnic, and
Leavitt, a conservative Re- Americans grew from ments could have grown,” partisan resentment to
publican, sees the struggle 47% in 2016 to 55% in he notes. stadium-size chants.
between these two eternal
“There is this existential The high-decibel roar

THERE IS THIS EXISTENTIAL STRUGGLE FOR THE SOUL
OF AMERICA IN WHICH NEITHER SIDE CAN WIN.

goals—liberty and secu- 2019, according to Pew struggle for the soul of of his MAGAphone has
rity—as a legitimate, and research. The share of America in which neither had an effect that goes
even necessary contest. Democrats who describe side can win, and it’s all well beyond “rallying
But he is concerned with Republicans as immoral about the threat of the the base,” says Lilliana
how brutal the battle has rose 12 percentage points, other side,” says political Mason, associate profes-
become, though he con- from 35% to 47%. Nearly scientist Lee Drutman, a sor of government and
tends the vitriol has been two-thirds (63%) of Re- senior fellow in the politi- politics at the University
building for far longer publicans surveyed by Pew cal reform program at the of Maryland, and author
than in just the past four said Democrats are more New America founda- of the book, Uncivil
years. “We’re seeing people “unpatriotic” than other tion. “We have half of the Agreement: How Politics
on both extremes who Americans (23% of Demo- country who’s convinced Became Our Identity. It
seem willing to color out- crats feel the same about that the other half of has encouraged and even
side the lines, to break the Republicans), and the the country—if they got normalized politically
covenant of democracy. share in each party who power—would be ille- based violence, she says—
And that offends us, and it view the other as more gitimate and substantially pointing, for example, to
scares us, because it’s not “close-minded” or “lazy” destructive.” Drutman, the rise in “anti-immi-
consistent with [the pact] than their countrymen has whose book Breaking the grant” hate groups in the
we’ve all entered into.” climbed as well. Over- Two-Party Doom Loop: U.S., which has risen in
whelming majorities in The Case for Multiparty parallel with the anti-
Data from the Pew Re- both parties say the divide Democracy in America immigration rhetoric of
search Center shows how between them is growing, was published in January, politicians. (The number
hardened the divisions with some three-quarters contends that the escalat- of such groups has more
between left and right, of Republicans and ing hyper-partisanship has than doubled since 2014,
Democrat and Republican Democrats acknowledging “simplified” politics into according to the South-
have become. Though the that they “cannot agree on this us-versus-them, good- ern Poverty Law Center.)
major parties are growing

18 FORTUNE NOVEMBER 2020

“There are a lot of people before—Americans must put the millions of people demic and otherworldly
warning about radical, invest in the nation, just who lost their jobs in the to say the solution is
mainly right-wing, vio- as any business needs to wake of COVID-19 shut- innovation,” says Ed-
lence specifically around invest in itself in order to downs back to work (see mund Phelps, winner of
the 2020 election,” says grow. That means funding our election package on the 2006 Nobel Prize in
Mason, “but we’ve already job reskilling programs page 48). It’s no small list Economics and director of
seen heavily armed men and rebuilding critical of must-dos. the Center on Capitalism
walking through Ameri- infrastructure, a sprawling and Society at Columbia
can cities.” To glimpse the mandate that spans from Paying for all of this is, University. “But quite
potential danger, wit- repairing crumbling roads if anything, a more daunt- frankly, I’m not sure how
ness the brazen plot by and bridges to construct- ing challenge: Our spen- far we can progress if we
members of self-styled ing advanced 5G telecom daholic leaders in both don’t get the economy to
militia groups to kidnap networks. The Social Secu- parties have already emp- be delivering better than
Michigan Gov. Gretchen rity system did not get less tied America’s wallet, and it has been for the past
Whitmer, which was wobbly on its own; it will we’re in hock up to our 40 or 50 years.” Phelps
revealed by the FBI in need to be fixed somehow. shorts. The federal debt says he is happy that
October. These are things We still have to rein in held by the public will companies are starting
“we couldn’t even imagine runaway health care costs, reach 106% of our GDP to aggressively push back
in 2016,” Mason says. and get the still-raging in 2023, according to the on Trump administration
pandemic under control, Congressional Budget Of- tariffs as well as on an
A LONG TO-DO LIST to say nothing of prepar- fice (see chart)—and the immigration policy that
ing for whatever outbreaks fever line rises relentlessly is “blocking the talents
As much as this nega- are yet to come. There are from there. We’ll have to that companies need for
tive partisanship has torn even knottier problems be creative and ambitious developing new products.”
America’s social fabric, to contend with—climate in our problem-solving— Phelps is particularly keen
it has made legislating change, criminal jus- and, yes, that means the to see the next adminis-
all the more challeng- tice reform, crafting an warring parties must set tration embrace interna-
ing—particularly at the immigration policy that aside their bitterness and tional trade. “It could be
federal level where “to sustains both industry, work together. a source of new energy
get anything done, you U.S. security, and a sense in the business sector in
have to be able to build of fairness. And ultimately, It also means we’ll this country. That will be
coalitions that to some we’ll have to find a way to have to hot-wire business great for jobs and wage
extent cross party lines,” growth in the U.S. “It
says Abramowitz. Indeed, sounds probably aca-
Drutman says the prob-
lem goes even deeper: FEDERAL DEBT HELD BY THE PUBLIC, AS A SHARE OF GDP
“One of the fundamental
conflicts in the American 200%
system is that we have
political institutions that PROJECTION
are set out to encourage
broad compromise, and 150 COVID-19
we have a party system WORLD WAR II PANDEMIC
that has evolved to make GREAT RECESSION
compromise very difficult. 100
So we have a different set GREAT
of electoral and governing DEPRESSION
incentives from the start.”
The escalation in political 50
vitriol only widens the gap WORLD
between them. WAR I

To thrive over the next 0 1920 1940 1960 1980 2000 2020 2050
century—and in a world 1900
that’s more competitive,
economically, than ever

SOURCE: CONGRESSIONAL BUDGET OFFICE

THE BRIEF — POLITICS

rates and everything else,” seemed to bend to White Finlay. “They’ve exploited Trans-Pacific Partnership
he says. House talking points. “All the divisions. They’ve (TPP) trade agreement,
of these institutions used exploited the technology which was “designed to
Sandi Peterson, a to be neutral arbiters,” says weakness that they’ve implant a countervailing
member of the board of di- New America’s Drutman. seen by convincing our force against an aggressive
rectors at Microsoft and a “And in a political system children that the Wash- China across Southeast
partner at Clayton Dubili- where everybody can agree ington Post doesn’t have Asia,” says Finlay. “Now
er & Rice, a New York pri- on a basic procedural fair- credibility. Our adversar- China has managed to
vate equity firm, is equally ness and can accept the ies have wised up, and turn the scales on us, and
frustrated with Trump’s idea of a legitimate oppo- now they’re attacking our we’re playing small ball
immigration policy. “If we sition, then these institu- elections, which is like on a country-to-country
don’t get our act together, tions can maintain their shooting fish in a barrel. basis. We’re trying to
the innovation engine of independence.” But this They don’t need to send convince the Vietnamese
the United States—where is one more lost treasure, armed combatants to the not to allow the Chinese to
all the smartest people in
the world showed up and IF YOU ALLOW FACTIONS TO FORM, YOU
created all this amazing OPENTHENATIONTO FOREIGNINTERFERENCE
stuff—is gone,” she says.
“People won’t come here BECAUSE WE START FIGHTING OURSELVES.
to study anymore. People
won’t come here to try to it seems, in our era of fe- United States. They can build dams on the Mekong
work anymore, because vered hyper-partisanship. do it from their basement instead of building a coali-
they can’t get visas,” computers.” tion of American interests
says Peterson, who was Such infighting has im- that give us a global trad-
formerly group worldwide plications for our national It is hard enough to ing advantage.”
chairman for Johnson & security, says the Univer- defend against such
Johnson. Luring talent sity of Maryland’s Mason: asynchronous warfare. We also exited the In-
from overseas “is what has President George Wash- It is harder still to do it termediate-Range Nuclear
driven the economy of this ington warned against this without alliances, partner- Forces (INF) Treaty that
country for an incredibly in his farewell address, she ships, and pacts. The U.S. President Ronald Reagan
long time—and we just reminds us. “If you allow has long entered into signed with Soviet Pre-
really messed it up.” factions to form, you open multilateral agreements— mier Mikhail Gorbachev
the nation to foreign inter- to stem Soviet expansion in 1987, and which helped
The challenge for voters, ference because we start and aggression in the Cold to end the Cold War. We
on this front, is to guess fighting ourselves,” says War, limit the spread of abandoned the Open
what’s the best way to fix Mason. “When we create nuclear weapons around Skies Treaty, which had
this: Give Trump another this very deep partisan the world, prevent illegal broad bipartisan sup-
chance or clear the slate divide, it makes us weaker fishing, and naturally, sell port, and Trump yanked
and start over. as a nation, and it makes it more American goods. the U.S. out of the Paris
much easier for other na- Agreement on climate
TRUST AND CREDIBILITY tions to mess with us.” But in the past four change.
years, President Trump
Whoever ends up being in Brian Finlay, president has pulled us away from These are yet more self-
charge on Jan. 20, 2021, and CEO of the Stimson many of these critically inflicted wounds when
will have another urgent Center, a nonpartisan important alliances—even it comes to America’s
task: rebuilding trust in think tank devoted to “terminating” our rela- health, prosperity, and
the institutions of govern- studying global security tionship (in the middle of security—and one more
ment itself. Over the past and other critical issues, a global pandemic) with consideration for voters
four years, agencies that agrees. “We’re now in a the World Health Organi- as they head to the polls.
used to be considered non- world where our adver- zation, an institution that But let’s keep it simple:
partisan and independent saries have identified the U.S. pushed for, and Are we better off than we
from political pressure— the fundamental weak- helped create, in 1948. were four years ago, or is
including the CDC, FDA, nesses of our system,” says He has also scuttled the it time for a change?
and the Justice Depart-
ment—have been viewed
by many with skepticism
and suspicion, as they have

20 FORTUNE NOVEMBER 2020 THE BRIEF

BEST WORKPLACES Millennials, Women, and WORLD’S 25 BEST
Parents lists, as well as WORKPLACES
Global Giants the Best Workplaces in
Getting It Right Technology, tech conglom- 01 Cisco
erate Cisco has ranked
No matter where in the world they’re among the top eight—and EMPLOYEES ................ 79,304
stationed, employees at these it landed at No. 4 on this
25 companies want to stay put— year’s domestic 100 Best 02 DHL Express
and for good reason. Companies list.
EMPLOYEES ............. 104,000
BY BRETT HAENSEL So it should come as
no surprise that Cisco 03 Hilton
THROUGHOUT the year, tops GPTW and Fortune’s
in partnership with World’s 25 Best Work- EMPLOYEES .............173,504*
people analytics firm Great places list this year, for the
Place to Work, Fortune second year in a row. 04 Salesforce
publishes lists ranking
the best U.S. workplaces All 25 companies ap- EMPLOYEES ............... 52,000
across a number of catego- pearing here received
ries. In 2020, on the Best top ratings on GPTW’s 05 Stryker
Workplaces for Diversity, surveys of their employees
in at least five countries. EMPLOYEES ............... 40,000
On average, these firms ILLUSTRATION BY SAM PEET
have offices in 12 differ- 06 Mars
ent countries and employ
88,000 people worldwide. EMPLOYEES ................. 67,784
About half (12 of 25) are
headquartered in the U.S., 07 The Adecco Group
including four of the
top five. EMPLOYEES ............... 45,000

As they did last year, 08 Mercado Libre
technology companies—
either in the IT or biotech EMPLOYEES .................13,058
and pharma industries—
constitute 40% of the 09 SAS
top 25. Dell Technologies
(No. 17) is a newcomer EMPLOYEES ................ 13,000
this year, as are Daimler
Mobility AG (the financial 10 EY
services and insurance
arm of the German auto- EMPLOYEES ..............300,675
maker), Cadence (elec-
tronics), Marriott Interna- 11 Intuit
tional (hospitality), Volvo
Group (manufacturing), EMPLOYEES ...................9,382
and Deloitte (professional
services). 12 SAP

For more on companies EMPLOYEES ................ 95,853
that prioritize employee
satisfaction, social respon- 13 Adobe
sibility, and workplace di-
versity, visit Fortune.com, EMPLOYEES ................22,000
where you’ll also find new
lists of the 100 best small- 14 Admiral Group
and 100 best medium-size
domestic workplaces. EMPLOYEES ..................11,243

15 AbbVie

EMPLOYEES ............... 30,000

16 Daimler Mobility AG

EMPLOYEES ................ 14,000

17 Dell Technologies

EMPLOYEES ..............165,000

18 Cadence

EMPLOYEES ................... 8,674

19 Marriott
International

EMPLOYEES .............. 176,000

20 Volvo Group

EMPLOYEES ............. 100,000

21 Roche

EMPLOYEES ............... 98,000

22 Deloitte

EMPLOYEES ............. 286,200

23 Santander

EMPLOYEES ..............194,000

24 Natura

EMPLOYEES .................. 6,396

25 Scotiabank

EMPLOYEES ................ 97,000

*AS OF JAN 1, 2020

Content by the Buzz Business

CHANGE AGENTS

KEEP ON SMILING

develop. Today, I am proud to say that
many of those talents are some of the
most famous comedians in Saudi Arabia.

What has been the response
from Saudi audiences?
The feedback has been fantastic.
Saudis love humor. Interest in stand-
up comedy is growing all over the
country. Tickets always sell out within
the first few days or even the first hour.

This is the whole idea of Smile—to use
laughter and humor and entertainment
to bring people together. When people
laugh, they are the same. It gives me
overwhelming joy to see Saudis laughing
and chatting together after our shows.

When historians tell the tale of shows, and bringing international What are your plans for the future?
the modern transformation of stars into the country to perform. We are all set to launch a new comedy
Saudi Arabia, they might like While Saudi Arabia may not be the program as soon as the COVID
to start with the story about a first place that comes to mind when restrictions are lifted. Demand is going
night in Riyadh 10 years ago. stand-up comedy is mentioned, to be extremely high. It is an incredibly
the country’s young, internet-savvy exciting time for us. I am confident
On the empty stage of an unassuming population already includes some of that we will be announcing new
cultural center, a young Saudi woman the world’s most voracious consumers comedy venues in Riyadh very soon.
walked up to the microphone and, a little of online comedy content.
nervously at first, began to tell jokes. The future for stand-up, and for
Before long, the Kingdom’s very first Thanks largely to the efforts of Smile, all forms of live entertainment in
female stand-up comedian hit her stride, increasing numbers of Saudis are Saudi Arabia, is very bright.
gained confidence, and made history now experiencing the joys of stand-up
as the audience laughed and cheered. comedy in the real world. Abeer says WE BELIEVE IN THE POWER
that, until interrupted by COVID-19, OF LAUGHTER TO BRING
“It was an unforgettable moment,” comedy events in Saudi Arabia have PEOPLE TOGETHER AND
says Abeer Al-Fouti, who produced expanded rapidly across the country PROMOTE TOLERANCE AND
the show with her husband, Peter. since Smile was founded in 2008. UNDERSTANDING
“Saudis have an extraordinary appetite —
“She did an amazing job, back at a time for laughter, fun, and happiness,” she ABEER AL-FOUTI SMILE
when women were not even allowed to says. “Stand-up comedy is only going ENTERTAINMENT CO-FOUNDER
drive,” she says. Now, many other Saudi to grow even more in the future.”
women are breaking into the comedy
scene, and the sky’s the limit. The pace How has comedy in Saudi Arabia
of change has been unbelievable.” changed since Smile started in 2008?
At the time when my husband, Peter, and
Abeer and Peter’s company, Smile I started Smile, there was practically no
Entertainment, is one of the prime live entertainment anywhere in Saudi
movers behind the new wave of Arabia. Initially, we mainly brought
Saudi comedy, and is supporting international comedians into the country,
the emergence of young comics but we also selected the best Saudi
both male and female, organizing talents and helped them practice and

22 FORTUNE NOVEMBER 2020

TECHNOLOGY THIS SUMMER, when the Trump power and influence in
administration ordered the pop- recent years, as Congress
A Powerful Tool ular social media app TikTok to sell its beefed up its mandate as
for Trade Hawks U.S. operations, it marked a new es- part of a technological
calation in the U.S.-China trade war. arms race with China and
The battle over TikTok has The clash also introduced much of the other rivals. Its widen-
focused new attention on general public, including lip-synching ing ambit could redefine
CFIUS, a secretive federal teens and their parents, to a secretive the relationship between
committee with the power body called CFIUS—the Committee foreign companies and the
to scuttle foreign investments on Foreign Investment in the United U.S. government. But the
in U.S. businesses. Some States—which can block or unwind TikTok saga, which could
critics say that power is being foreign acquisitions of U.S. assets in see a prominent supporter
abused. BY JEFF JOHN ROBERTS the name of national security. of President Trump obtain
CFIUS (pronounced “SIFF-ee-us”) a big stake in the app, is
will have final sign-off on a proposed also stoking a backlash
deal to deliver partial control over among critics who see
TikTok to a coalition of U.S. investors CFIUS as a powerful tool
and companies, including Oracle and for crony capitalism.
Walmart. Once an obscure nook in
Washington’s regulatory labyrinth, CFIUS was established
CFIUS has grown dramatically in in 1975 by President
Gerald Ford to safeguard
strategic industries like oil
and munitions from for-
eign control. For decades it
was rarely invoked: Brian
Fleming, a former national
security lawyer for the
Justice Department who is
now an attorney at Miller
& Chevalier, estimates that
the Obama and Trump
administrations blocked
fewer than one deal a year
between 2009 and 2017.

The pace accelerated,
however, as the Trump
administration adopted a
more bellicose stance on
China—and as lawmak-
ers across the political
spectrum grew more wor-
ried about data, patents,
and tech expertise passing
out of U.S. control. In
2018, CFIUS stopped
China’s Ant Financial from
buying money-transfer
service MoneyGram
and scuttled an effort by
Singapore-based Broad-
com to acquire chip giant
Qualcomm. That same

ILLUSTRATION BY SAM ISLAND

THE BRIEF

year, Congress passed the social media platforms on a planned deal upon TOUGHER
Foreign Investment Risk like TikTok and Tencent’s learning that CFIUS OVER TIME
Review Modernization Act WeChat have been the intends to make a negative
(FIRRMA). That law not most prominent recent recommendation to the Since its creation
only expanded CFIUS’s targets, other industries President. While firms can in 1975, CFIUS has
enforcement powers but are in the panel’s cross- turn to the courts if they slowly evolved from a
also gave it a new mandate hairs. Nevena Simidjiyska, view CFIUS’s actions as regulatory footnote to
to protect U.S. consumer cochair of the international arbitrary or heavy-handed, a trade-war weapon.
data—such as that col- trade group at Fox Roths- this may be a long shot. Some key dates from
lected by TikTok and its child LLP, which has seen Only one company has the pre-TikTok era:
Chinese parent company, an uptick in CFIUS work, gone to court over a CFIUS
ByteDance. says the mobile game order, and the case settled 1988
industry—which has many without a ruling on the GROWING TEETH
The advent of FIRRMA ties to China—is likely the underlying issues. And
has triggered a stampede next to face scrutiny. U.S. judges typically give Concerned over
of CFIUS actions. The the executive branch broad Japan’s tech prowess,
review process is highly Simidjiyska and others deference on matters of Congress gives CFIUS
secretive, but according to argue that CFIUS review national security. the power to reject
the Washington Post, the is highly vulnerable to po- foreign investments.
panel has launched dozens litical influence. Members That deference, along
of investigations this year of Congress who wish to with CFIUS’s growing 1990
alone, aimed primarily at flaunt nationalist creden- scope, has amplified com- THAT DEAL WON’T FLY
plaints that the process
FOR DECADES, CFIUS WAS could be used for nakedly The administration
RARELY INVOKED.BUTA2018LAW political ends. Many China of George H.W. Bush
HAS TRIGGERED A STAMPEDE hawks shared President uses CFIUS to order a
OF NEWINVESTIGATIONS. Trump’s stated concerns Chinese firm to divest
about the influence of MAMCO Manufactur-
companies that received tials can lean on CFIUS TikTok and WeChat. But ing, a Seattle-based
investment from China to block a deal or unwind his open advocacy of an aircraft-parts maker.
or Russia. Some probes it retroactively. And U.S. ownership bid by Oracle—
retroactively examine companies have also urged whose cochairman, Larry 2006
deals completed years ago: lawmakers to demand Ellison, hosted a top-dollar SHAPE UP OR SHIP OUT
The TikTok investigation, CFIUS investigations into fundraiser for the Presi-
for example, rose out of their corporate rivals. dent earlier this year—has The Dubai Ports World
ByteDance’s 2017 purchase raised hackles in Congress consortium strikes a
of a Los Angeles–based In this new climate, and C-suites alike. deal to obtain control
company called Musical.ly. lawyers say, companies are of six U.S. seaports.
increasingly taking steps “Have we broken the CFIUS approves the
CFIUS is composed of to avoid CFIUS scrutiny. fourth wall when it comes plan, but Congress
the chiefs of nine federal Some might structure to CFIUS, and entered a votes to block it.
agencies, headed by the deals in such a way that bold new world where the
secretary of the Treasury. foreign investors have only President can intervene 2012
It can intervene in any deal a passive role, with no and meddle in a way no BLOWING IN THE WIND
involving foreign investors board seats or executive one envisioned?” asks
in which there are national presence; others might Fleming, the former Jus- President Obama
security concerns—a ra- simply decline Chinese tice Department lawyer. orders Chinese-
tionale that can extend investment altogether. And “With this President, all owned Ralls Corp. to
to nearly any transaction, in some cases, compa- bets are off.” It remains divest wind turbines it
lawyers object. While nies quietly pull the plug to be seen whether the acquired near a Navy
TikTok affair is a one-off, site in Oregon.
and whether the enmesh-
ing of geopolitics and 2018
business would continue THE ART OF NO DEAL
under a different Presi-
dent, of either party. President Trump
invokes CFIUS to
bar Singapore-
based Broadcom
from carrying out a
$117 billion hostile
takeover of chipmaker
Qualcomm.

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26 FORTUNE NOVEMBER 2020

TRENDS of complaints from new haven’t had plastic surgery PHOTO ILLUSTRATION BY FORTUNE; ORIGINAL PHOTOS: MIHAIL MOSALOV—EYEEM/GETTY IMAGES; MICHAEL POEHLMAN—GETTY IMAGES; PETE RIDGE—GETTY IMAGES
and returning patients indicated they are open to
Plastic Surgery Sees about imperfections that cosmetic or reconstruc-
a ‘Zoom Boom’ were newly noticed while tive treatment in the near
videoconferencing. Among future. Perhaps not sur-
We’ve never spent so much time the most requested treat- prisingly, many patients
seeing our faces up close, on-screen. ments right now: neuro- have homed in on the area
And it’s leading many to explore going modulars (such as Botox) around their eyes as we’re
under the knife. targeting fine lines and all out and about wearing
wrinkles, platelet-rich face masks. Lisa Good-
BY RACHEL KING plasma (PRP) therapy for man, founder of GoodSkin
stress-related hair loss, Clinics in California, says
EYE BAGS. DOUBLE CHINS. That in- treatment for “maskne,” under-eye fillers, quoted at
explicable crease between your and body sculpting. “More $1,700 per treatment, are
brows. If you are like many Ameri- patients are working from a top draw right now.
cans who have spent hundreds of home and can receive
hours in videoconferences these past procedures that require But it’s also thanks to
few months, your colleagues’ brilliant them to ‘hide at home’ for face masks that cos-
business ideas aren’t the only things a few days,” says Hayag. metic surgery patients are
that have captured your attention Moreover there are few increasingly eager to get
during meetings. if any social obligations work done around their
Marie Hayag, a dermatologist and to bow out of during re- nose or lips—precisely
founder of Fifth Avenue Aesthetics covery time. because they’ll remain
on New York City’s Upper East Side, hidden while bruised and
underscores what she calls “the Zoom A survey of more than discolored during recov-
effect,” explaining she has heard a lot 1,000 consumers con- ery, Hayag says.
ducted in June by the
American Society of Plas- Instead of quick fixes
tic Surgeons (ASPS) found and impulse procedures,
that 49% of those who Lisa Cassileth, a plas-
tic and reconstructive
surgeon in Beverly Hills,
notes that patients are
asking for procedures they
have contemplated for
years: Breast reductions
for 40-plus-year-olds, ab-
dominoplasty on mothers
with teenagers, and breast
implant removals are com-
mon consultation topics.

But not every doctor is
indulging every request,
says Dhaval G. Bhanusali,
a dermatologist and laser
surgeon at Hudson Derma-
tology and Laser Surgery
in Manhattan. “If patients
are being “overly critical of
themselves or unrealistic,
we need to gently let them
know,” he explains. Zoom
meetings “have forced us
all to critically analyze
ourselves, way more than
we probably should.”

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28 FORTUNE NOVEMBER 2020 THE BRIEF

A colorful approach: THE SECRET
Dollar General plans to TO A BETTER
foster a “treasure hunt” BOTTOM LINE
shopping ethos with
95% of items under $5. INTRODUCING
THE THRIVE
RETAIL stores across the U.S. XM INDEX COURTESY OF DOLLAR GENERAL
The company says Pop-
Cheap But Chic(er) C H I E F E X E C U T I V E of-
shelf will target households ficers of major U.S. firms
Dollar General goes upmarket, courting with incomes as high as came together last fall
shoppers with six-figure incomes at its $125,000, well above the to redefine the Business
new Popshelf chain. BY PHIL WAHBA $50,000 mark that is typi- Roundtable’s statement
cal of the Dollar General of purpose for corpora-
DOLLAR GENERAL is taking a new customer. That’s not to say tions: Instead of putting
tack to win shoppers: Go after Dollar General is refash- shareholders’ interests
those with more dollars to spend. ioning itself as a strip mall first, members agreed to
The discount retailer (No. 112 version of Neiman Marcus: prioritize the interests of
on the Fortune 500) is launching 95% of items will be priced various stakeholders—
Popshelf, a chain that caters to a at $5 or less. including employees.
higher echelon of shopper. Two loca-
tions will open near Nashville in late What will be different But how does doubling
fall, followed by 28 more by the end are the products, which down on employee well-
of January 2022. will be more discretionary, being affect the bottom
The idea behind the chain: Offer such as beauty products, line? Pretty well, accord-
colorfully merchandised nonessen- items for the home, Christ- ing to our research.
tial goods like home decor and party mas decorations, supplies
items, while catering to a clientele for crafts, and even some Fortune teamed up
that might balk at shopping at a Dol- food items for parties with Thrive Global, SAP
lar General, the fast-growing deep (think charcuterie plates). SuccessFactors, and
discount chain that now has 16,300 And Dollar General says Qualtrics to build the
Popshelf will offer many Thrive XM Index, a ranking
limited-time items to foster of companies with the best
the “treasure hunt” ethos employee well-being. To
that has served chains create the index, we sur-
like T.J. Maxx so well and veyed more than 20,000
spurred repeat visits by full-time U.S. employees
shoppers. At 9,000 square from over 900 companies.
feet, the Popshelf stores We asked them about
will be slightly bigger than everything: work/life
a typical Dollar General. balance, career advance-
ment, mental health, and
Dollar General, now a company policies.
larger retailer than Macy’s
by sales, has been one of Thrive Global
the biggest winners dur- researchers then applied
ing the pandemic, with a scoring algorithm and
shoppers drawn to its low examined the highest-
prices on a range of essen- ranked companies, which
tials like toilet paper and include Microsoft and
cleaning products. Last Coca-Cola.
quarter, sales rose 24.4%
to $8.7 billion. Now the The top-ranked Thrive
company will find out what XM Index companies—
adding customers who pre- even when factoring in
fer charcuterie plates will industry—saw their stock
add to the top line. gains outperform those of
their peers. What’s more,
the top 10% of Thrive XM
Index companies saw
their return on equity
climb 27.2% in the second
quarter versus 22.6% for
the S&P 500. Profits also
outpaced the S&P 500
average. Maybe stake-
holder capitalism is what
shareholders should
have been pushing for all
along. —LANCE LAMBERT

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Entrepreneur, CEO of Peek.com

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THE BRIEF FORTUNE NOVEMBER 2020 31

INVESTING of a winner and give the bel Quality Growth. (Also
apparent loser ammuni- often exaggerated are the
Stocks for a tion to contest the results. drawbacks of having a
Ballot-Proof Portfolio Markets hate uncertainty, Democrat in the White
and some traders are al- House; for more, see our
Elections have consequences for investors, ready showing how uncer- chart.) “It’s the underlying
too. But these companies should perform tain they feel: Prices have health of the economy and
well no matter who runs the show in surged for November- and corporate profit growth,
Washington next year. BY ANNE SRADERS December-dated futures ultimately, that are going
and options related to to impact stock prices.”
ILLUSTRATION BY AN UNPRECEDENTED pandemic Treasury securities, gold,
MATT CHASE couldn’t keep global stock and the Cboe Volatility That said, the economy
markets down. But some investors Index, all of whose values is far from healthy, and
fear that an unprecedented election could soar if stocks go hay- there remains plenty of
might lead to even rockier times. wire after an inconclusive uncertainty about when
Some of those jitters, of course, Nov. 3 outcome. business will recover from
just represent the usual election- the pandemic. Saira Malik,
season hand-wringing over the For anyone adding this head of global equities at
potential impact of the candidates’ kind of financial fear to Nuveen, believes there’s a
stances on issues like health care, their general anxiety about risk of postelection market
tech regulation, taxes, and trade. But the state of the world, volatility, but for the long
this year, worries about Election Day many pros offer a reassur- term she expects a return
itself are adding edge to the tradi- ing message: Whatever to moderate growth,
tional angst. The disruptive effects of happens in November, it akin to the BC era (before
COVID-19 have prompted millions probably won’t affect your coronavirus). Still, she
of Americans to vote by mail, which portfolio as much as you and most money manag-
could both delay the announcement imagine it will. “I think the ers agree that investors
election impact is gener- should focus on stocks with
ally overexaggerated,” says defensive elements—think
Matt Benkendorf, chief in- shares in companies that
vestment officer at Vonto- can deliver steady growth
and reliable dividend
yields, even if the broader
economy is so-so at best.

Rather than fret about
who wins, Malik notes,
the question now should
be, “What can you own in
either scenario?” With that
query in mind, Fortune
sought out stocks that are
as election-proof as pos-
sible, the kind that might
hold up nicely for the next
four years or more.

WITH MORE people seeking
homes where they can
both live and work, and
interest rates expected
to stick near zero for the
next few years regardless
of who wins the White
House, real estate is likely
to continue booming.

32 FORTUNE NOVEMBER 2020 THE BRIEF — INVESTING

That’s one reason Malik systems like energy-saving ment). The company’s heat than peers like Apple,
favors home-improvement power grids and a nation- wide range of products Amazon, and Google.
chain Lowe’s (LOW, $171). wide 5G network, as well. helps insulate it from Schoenstein says that
A robust housing market Bianco says such plans will down cycles in different the company’s relatively
isn’t the only factor work- benefit utilities in general, sectors, says Eric Schoen- cautious conduct since
ing for the chain: Malik which “will play a big part stein, a managing director its own antitrust settle-
also predicts a boost from in installing 5G cells and and portfolio manager at ment two decades ago has
e-commerce as Lowe’s will receive some rental in- Jensen Investment Man- helped insulate it po-
upgrades its website, as come.” One company well agement, noting that its litically today. And at 32
well as a payoff from cost positioned to profit from businesses “can work hand times estimated forward
controls and supply-chain those trends is NextEra En- in hand to help offset each earnings, its valuation is
improvement. (Housing ergy (NEE, $301), the parent other in tough times.” dwarfed by many higher-
trends are also boosting of utilities Florida Power Yet the stock trades fairly flying peers. Still, the
rival Home Depot, but & Light and Gulf Power. cheaply, at 19 times next company boasts a growing
Lowe’s enjoys a signifi- NextEra has been a major year’s estimated earnings, and stable subscription
cantly lower price/earn- investor in renewable en- compared with roughly 25 software business and a
ings ratio.) ergy—and has grown even for the S&P 500. booming cloud platform
without the full-on clean- in Azure. Schoenstein
Homebuilding isn’t the energy support that might Despite their domi- also notes that Micro-
only construction that come under a Democratic nance, Big Tech compa- soft’s products (including
could surge in 2021. “A lot President. nies have encountered Teams, its business com-
of people think that infra- multiple headwinds lately: munication platform) are
structure is going to be the Investors who feel con- They’ve faced criticism helping people “pivot into
play postelection” no mat- fident about a broader re- from lawmakers over this work-from-home en-
ter who wins, says David covery may want to take a their market power, along vironment”—all of which
Bianco, chief investment look at 3M (MMM, $168), the with a growing conviction should translate to steady
officer for the Americas at industrial behemoth whose among some investors earnings growth.
DWS Group. There’s al- products include compo- that their share prices
ways bipartisan support for nents for aircraft, rails, and have risen too high. But U.S.-China trade ten-
investment in roads and commercial vehicles (not to sions have been a cam-
bridges, but Bianco expects mention Post-it notes and Microsoft (MSFT, $211), paign flash point all year,
funding for higher-tech personal protective equip- and money managers
despite its $1.6 trillion worry about their ripple
market cap, is taking less effects. But few think that
geopolitics will blunt the
BIPARTISAN Since 1980, investors have earned higher returns under Democratic Presidents. momentum of China’s
BENEFITS But with one exception, returns under each administration have been positive overall.
Alibaba Group (BABA, $301),
ANNUALIZED S&P 500 TOTAL RETURN DEMOCRAT REPUBLICAN
which Benkendorf calls a
RONALD GEORGE BILL GEORGE BARACK DONALD “very domestically focused
REAGAN H.W. BUSH CLINTON W. BUSH OBAMA TRUMP business.” The massive re-
tailer has an Amazon-like,
15.0% 14.6% 17.5% 16.3% 13.9% ingrained foothold with
China’s consumers, but its
S&P 500 Ð4.5% shares trade at roughly 29
INDEX times forward earnings,
compared with nearly 89
3,000 for Amazon. Benkendorf is
also bullish about the up-
2,000 coming IPO of fintech Ant
Group, of which Alibaba
1,000 owns roughly 33%—offer-
ing Alibaba shareholders
0 1985 1990 1995 2000 2005 2010 2015 2020 another way to profit from
1981 the rise of China’s con-
SOURCE: BLOOMBERG sumer class.

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CONTENT FROM RYDER

pros, and continuous improvement,

cost savings, and efficiency gains are

regular benefits. To achieve all this,

Ryder engineers a transportation solu-

tion that maximizes a company’s gains

and develops strategies for economic

growth so customers can stay focused

on what they do best. For instance, a

metal manufacturer expanded into

new territories by having Ryder fulfill

its next-day orders with no risk of

carrying long-term fixed costs.

“We’re helping our customers lower

their costs of sale, lower their costs

of delivery, and improve their service,”

says Steve W. Martin, senior vice

president of dedicated transportation

solutions at Ryder.

As companies position freight plans

for today and beyond, adaptability

remains key. Dedicated transportation

allows for dramatic scaling of volumes

up or down on a dime. “If [a company’s]

transportation networks allow them to

DRIVING SATISFACTION increase the amount of orders they can

deliver next day, on time, then they’ll
grow their business,” Martin says.

Ryder’s dedicated solutions are

IN EVERY TERRAIN tailored to drive results. A home
improvement retailer that needed to
cut costs and improve service, for
instance, saw its fuel costs plunge

How dedicated transportation delivers the benefits $1 million in one year, and 98% of
deliveries arrive on time due to Ryder’s

of a private fleet—without having to manage one. expertly engineered routing and
scheduling. And when a national paint

brand was running its own fleet, stores

struggled to track deliveries and invoices

COMPANIES WITH FREIGHT TO SHIP ROUTINELY GRAPPLE took days to generate. After partnering with Ryder for a

with how best to transport it. Those with in-house dedicated solution, the firm saw measurable improve-

fleets must manage everything from maintenance to ments: RyderShare™ technology, a cloud-based platform

hiring and training drivers, routing, scheduling, and for visibility and real-time collaboration across the supply

vehicle disposal. Many would rather focus on their chain network, allowed the firm to track inventory with

core businesses—especially during a pandemic, when precision, generate invoices within seconds, and reengi-

optimizing every asset is critical. neer routes to lower shipping costs by $1.5 million.

In this environment, dedicated transportation Working with Ryder’s dedicated transportation solu-

arrangements that deliver the benefits of a private tions, companies are able to tap into a network spanning

fleet without the management headaches are gaining all 50 states, Canada, and Mexico. They draw on Ryder’s

traction. In fact, they rank among the fastest-growing almost 90 years of experience and versatility in serving

segments of the $680 billion U.S. trucking industry. multiple industries, from construction to retail and gro-

Dedicated transportation solutions offered by com- cery, to name a few. And as Ryder recruits, trains, and

panies such as Ryder System, Inc. provide expert route generously rewards promising millennials, women, and

engineering and scheduling, a right-sized fleet, drivers veterans, driver turnover at the company ranks among

hired and trained for the company, and the ability to the industry’s lowest.

adapt to market conditions. Regulatory compliance, lia- Motoring into a changed world is no time for coasting.

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THE BRIEF FORTUNE NOVEMBER 2020 37

CLIMATE CHANGE ON SEPT. 22, Chinese President Xi on the fringes of the Gobi
Jinping made a bombshell envi- Desert in Inner Mongolia,
A Carbon ronmental declaration to the United hundreds of workers are
Conundrum Nations General Assembly. China, the building two new power-
world’s largest producer of green- generation units to supply
China’s government has house gases, would begin reducing more electricity to the
committed to nationwide its overall emissions after peaking in 2 million–plus residents
carbon neutrality. But the 2030—and by 2060, Xi said, the na- of Hohhot, the regional
country’s dependency on tion would achieve carbon neutrality. capital. The 5 billion yuan
coal runs dauntingly deep. Xi’s pledge broke through the ($735 million) project,
pandemic-dominated news cycle, which broke ground
BY NAOMI XU ELEGANT pitching China as a global leader in May 31, will more than
environmental responsibility. But triple Hohhot Jinshan’s
NI SHAOKANG—VCG/GETTY IMAGES it didn’t affect the goings-on at the energy capacity to 1,920
Hohhot Jinshan power station. There, megawatts once the units
go live in October 2022.
A miner at work in And it will all be fueled
a tunnel in Inner by coal, one of the world’s
Mongolia, one of dirtiest energy sources.

the regions of China The Hohhot project
whose economy is is no outlier. Provincial
governments in China
strongly tied to coal. green-lit more coal-plant
projects in the first half
of 2020 than they did
in 2018 and 2019 com-
bined—17 gigawatts in all,
enough to power several
million homes. That fact
helps illustrate one of
China’s vexing paradoxes:
The planet’s biggest
investor in green-energy
technology is also “addict-
ed” to coal, as Li Shuo, a
Beijing-based policy advis-
er for Greenpeace China,
puts it. Energy security
concerns and entrenched
industrial interests, Li
continues, have made it
“very difficult to get rid of
the dirty little rock.”

It’s a habit China needs
to kick. Since 2006,
when it overtook the U.S.,
China has been the world’s
largest carbon polluter.
A carbon-neutral China
would lower the projected
global average temperature
in 2060 by 0.2 to 0.3 de-
grees Celsius, a meaningful
impact, climate research-

38 FORTUNE NOVEMBER 2020 THE BRIEF — CLIMATE CHANGE

ers estimate. needn’t rely on other coun- COAL PROJECTS ARE A SUREFIRE
But for China to reach tries to meet their energy WAY TO BOOST JOBS IN THE SHORT
demands. By contrast, for RUN: “AS A LOCAL GOVERNOR,
carbon neutrality, coal’s its second-largest energy THAT’S YOUR LEGACY.”
share of its power genera- source, oil, China is highly
tion mix would need to fall dependent on imports.
to 12%, from 62% today, Energy security “tops the
according to energy con- leadership agenda,” says
sultancy Wood Mackenzie. Heggelund.
And China’s quest for a
greener energy economy THE IRONY is that even as it ity, more than any other Mongolia—the home
has repeatedly taken a has nurtured its coal in- nation. (The U.S. invested of the Hohhot Jinshan
back seat in recent years dustry, China’s government $55.5 billion that year.) plant—will face extensive
to maximizing economic has outpaced most others Renewables accounted for job losses and short-term
growth. The country’s coal in promoting renewables. 8.9% of China’s total elec- economic decline. Sharma
consumption declined China is the world’s largest tricity generation in 2018. expects the government
from 2013 through 2017, producer, exporter, and in- Factor in hydropower and will try to preserve mining
during a national cam- staller of solar panels and nuclear power, and China’s jobs by retrofitting coal-
paign to fight air pollu- wind turbines. In 2019, it share of energy from non- fired power plants with
tion—then rebounded, invested $83.4 billion in fossil-fuel sources rises to carbon capture and stor-
as pressure to mitigate renewable energy capac- about 30%. age technology, which less-
an economic slowdown ens the amount of waste
took precedence. Today, WHERE THERE’S SMOKE Impressive as its growth carbon dioxide that enters
large-scale infrastructure has been, however, renew- the atmosphere. But that
projects like coal plants Despite recent progress toward able energy hasn’t reached technology hasn’t yet been
are helping jump-start emissions reduction, many of the critical mass in China—in proven to work at a scale
economic activity that world’s largest economies still part because wind and that can match China’s
slowed early this year be- rely heavily on coal. sunshine are less reliable consumption needs.
cause of the coronavirus. than coal, and in part be-
SHARE OF ELECTRICITY cause the privately owned So how will China
The coal surge also OUTPUT DERIVED FROM COAL enterprises that dominate reconcile its climate goals
reflects a tension between the renewable sector lack with its energy real-
the needs of regional lead- 80% 73% the clout and connections ity? For now, observers
ers and the goals of the CHINA that state-owned coal are looking to the next
Beijing government. Coal giants enjoy. five-year plan, the central
project approvals boomed INDIA 65% government’s latest round
after 2014, when the 60 Tipping the balance in of reforms and economic
authority to permit new favor of green energy will growth targets, which
construction passed from JAPAN 45% require dramatic steps. In will be publicly available
the central government to order to reach the goals Xi in March 2021. Climate
provincial leaders. For the 40 GERMANY announced, China needs activists hope the plan
latter, the projects are a to stop building new coal will include specifics that
surefire way to boost jobs U.S. 32% plants, accelerate the weren’t included in Xi’s
and GDP in the short run. phaseout of existing ones, UN speech. Li, of Green-
“As a local governor, that’s 25% and table the construction peace China, says the
your legacy,” Li says. 20 of recently permitted proj- government needs to set
ects. The most challeng- a “much higher” target
A desire for self-reliance U.K. ing part of the shift will for renewable energy use
also keeps coal paramount be “the social transition and an absolute carbon-
in China’s energy mix, says FRANCE 2% that comes with it,” says reduction target. As for
Gørild Heggelund, a se- 0 Prakash Sharma, Asia- coal-fired plant construc-
nior research fellow at the Pacific head of markets tion, Li says, “This needs
Fridtjof Nansen Institute 2011 2019 and transitions for Wood to be immediately put on
in Norway who studies Mackenzie. Coal-rich prov- the shelf.”
China’s energy and climate SOURCE: WOOD MACKENZIE inces like Shanxi and Inner
policy. China’s huge coal
reserves mean industries

CONTENT FROM THE VOLVO GROUP

PROFILE 2020 | WORLD’S BEST WORKPLACES

Stronger Together opportunities for employees that are
important to their personal growth, and
The Volvo Group’s winning culture thrives on fostering strong engagement at work.”
connections and meaningful work.
The cultural effects are evident at
THE VOLVO GROUP COLLEAGUES AT THE VOLVO GROUP, THE MULTINATIONAL Volvo Group University, an in-house
WORLDWIDE, INCLUDING TEAMS IN transport solution provider headquartered learning center that provides training
BRAZIL (PICTURED), CELEBRATE BEING in Gothenburg, Sweden, an award-winning and career development classes for
NAMED A GREAT PLACE TO WORK. workplace culture rests on five core values: nearly 100,000 employees across 190
customer success, trust, passion, change, markets. Since the pandemic began,
and performance. These values are rooted in the university has offered webinars on
the organization’s illustrious 93-year history. such topics as setting up an effective
Since 1927, the Volvo Group’s workforce home office, practicing better self-care,
has powered its growth from a local diesel- navigating change, and more. “We want
engine company to one of the world’s leading to help employees do their best in an
manufacturers of trucks, buses, engines, environment they’re not necessarily
construction equipment, power solutions for used to,” says Pedroso. “This positively
marine applications, and financial services. impacts our business performance,
It’s a workplace culture that “thrives on open because employees see we care about
dialogue, and where equality and fairness are their well-being. We are also passionate
essential,” says Marcio Pedroso, president about making a difference in com-
for Volvo Financial Services. “This creates munities, which during COVID-19 has
been more important than ever.” The
Volvo Group and its employees support
frontline heroes and others worldwide
in many ways, including producing and
donating personal protective equipment
for health care professionals, providing
free meals for truck drivers delivering
essential supplies, and donating food
and laptops for families and students.

In 2019, the Volvo Group spent
$2.1 billion on R&D, including invest-
ments in transformative technologies
its workforce is using with the goal of
shaping a better world. “All of our 12
great brands share a vision to be the
most successful transport solution
provider in the world,” says Martin
Weissburg, chairman of Volvo Group
North America and president of the
group’s Mack Trucks brand. “Our
employees are developing sustainable
future solutions that are essential to our
societies.”

Weissburg goes on to say, “The bot-
tom line is connections and meaningful
work inspire people to work harder for
their colleagues and their customers.
It’s what motivates them to go that
extra mile.” ■

SPONSORED CONTENT

while also maintaining the flexibility

they need to go to market fast, or to

adapt to new business models and

ways of working.

“Kubernetes is increasingly be-

coming top-of-mind for corporate

leaders looking to accelerate innova-

tion and digital transformation,” says

Melissa Di Donato, CEO of leading

open source innovator SUSE. “It

significantly increases the agility and

efficiency of software development

teams, lets them put new software

into production faster and with fewer

headaches, and helps boost produc-

tivity while reducing cost and risk.”

Just a few ways Kubernetes can

serve as a springboard to innovation

are by speeding up time-to-market

for new cloud-native applications,

introducing enhanced scalability, and

allowing even legacy applications to

easily migrate to public, private, and

hybrid clouds. “As a unifying software

ACCELERATING BUSINESS layer that helps minimize complexity,
Kubernetes allows organizations
to quickly develop and deploy ap-

GROWTH AND plications at massive scale,” says
TRANSFORMATION Priyanka Sharma, general manager
of CNCF. “It frees C-suite leaders to
focus more on strategy and less on
high-tech operations.”

According to Di Donato, custom-
ers are already using SUSE today in

transformative ways. Elektrobit,

Kubernetes can help fast-track the shift to digital a global automotive supplier, is
and online operations by supercharging leveraging SUSE to help develop
intelligent software-driven vehicles

IT development and deployment. powered by open source. Tymlez, a
blockchain solution platform com-

pany, is helping health care providers

boost patient recovery rates with

Kubernetes.

KUBERNETES, AN OPEN-SOURCE PLATFORM FOR To extend their leadership in Kubernetes,

orchestrating containerizing workloads, is gaining SUSE recently announced its intent to acquire

the attention of C-level leaders and development Rancher Labs, developers of the industry’s most

teams worldwide. The efficiencies it creates in the widely adopted enterprise Kubernetes manage-

development, deployment, and management of ment platform. According to Di Donato, “Once the

containerized workloads at scale enables global acquisition closes, SUSE and Rancher together

enterprises to maintain cost-efficient and reliable will be uniquely positioned to help business lead-

operations, regardless of how complex their IT ers worldwide underpin countless innovative new

infrastructure is or how fast they’re transitioning customer experiences and transform themselves

to the cloud. According to a survey from the Cloud to meet the challenges of tomorrow’s market.”

Native Computing Foundation (CNCF), nearly four Concluded Di Donato, “From the CEO and CIO

in five companies are using to operations and development teams, business

Kubernetes to streamline app leaders know Kubernetes is the rising star of IT

development and deployment transformation.” ■

SUSE.com/kubernetes

42 FORTUNE NOVEMBER 2020

KDP’s trucks deliver merchandise directly to store shelves—so the company can see firsthand what is selling.

M I C H A E L R I D D E L L— C O U R T E SY K D P

FORTUNE NOVEMBER 2020 43

KEURIG
IS A
MACHINE

FROM COFFEE PODS TO DR PEPPER,
THE BEVERAGE GIANT HAS LEVERAGED
AN A.I.-FUELED GROWTH STRATEGY
DURING THE PANDEMIC. AND IT’S
CLOSING IN ON COKE AND PEPSI.

BY SHAWN TULLY

F OR DECADES, THE WORLDS OF COLD and hot beverages
in the U.S. have remained separate domains, each
dominated by undisputed champions. In carbonated
soft drinks, Coca-Cola and PepsiCo have long shared
almost three-quarters of the market, while Starbucks
has reigned as the place to go for coffee. None of the
three stalwarts are even lukewarm about combining

hot and cold segments in a big way. But in a beverage

market as roiled as every other part of the consumer economy is

this year, a surprise winner—little-known Keurig Dr Pepper—is

taking gallons of market share.

Though KDP is less than half the size of Coke and Pepsi in

U.S. soft drinks, it is running neck and neck with the two giants in

the share of the extra cans and bottles thirsty stay-at-home Amer-

icans are quaffing versus last year. In the 20-week period ended

July 26, KDP has grabbed 34.1% of the $1.4 billion increase in

revenue for all U.S. carbonated soft drinks, according to Con-

sumer Edge. That boosted its overall market share from 22.7% to

24.0%. “KDP has done the best job of any beverage company in

navigating the crisis,” says Consumer Edge analyst Brett Cooper.

KDP’s rise is especially remarkable because it’s a new enter-

prise formed just over two years ago via the $18.7 billion merger

of coffee purveyor Keurig Green Mountain and soda maker Dr

Pepper Snapple. The deal was a giant bet that by assembling

and promoting a broad portfolio of classic names and high-

growth newcomers in categories much smaller than Coke’s or

44 FORTUNE NOVEMBER 2020

$11,100,000,000

KDP’S REVENUE LAST YEAR

Pepsi’s colas or Starbucks’ coffee brand, KDP could create a a feeling the crisis could work in his favor, but only if the
business more powerful than the sum of its parts. company pivoted fast and accepted that the future would be
different and that what consumers wanted was changing,
That strategy is the brainchild of KDP’s CEO, Bob probably for good. “We didn’t think the world would return
Gamgort, an industry lifer who revived two struggling to normal,” he says. “We forged a blueprint that makes
franchises, Pinnacle Foods and Keurig Green Mountain, disruption our friend.”
but whose ultimate dream was building what he bills as “the
first modern beverage company.” The first signal that we were living in a new world came
in early March from KDP’s “connected panels,” the 10,000
“We backed Bob with a total of $17 billion. First, when at-home brewers linked electronically to its data centers.
we bought Keurig and brought him in as CEO, then when It was Gamgort who introduced the panels as part of his
we bought Dr Pepper Snapple,” says Olivier Goudet, CEO Keurig Green Mountain rescue plan. The connected brew-
of JAB, the Luxembourg holding company that has also ers read the image of every K-Cup pod to identify the brand
assembled a coffee empire in Europe. (It’s backed by the and flavor using visual recognition technology, so that KDP
Reimanns, one of Germany’s wealthiest families, and along sees instantly any change in the daily cups families are
with minority partners holds 44% of KDP’s shares.) “It was drinking, and the names and blends they prefer. “We saw
all a wager on Bob, because he knew choosing hot or cold this minute-by-minute data showing people were leaving
was getting only half of the picture. He sees consumer pat- the cities and sheltering in place and that coffee consump-
terns changing before anyone else.” tion was through the roof,” says Gamgort. That data from
the at-home coffee side also showed what was coming in
Over several long phone conversations, Gamgort de- soft drinks. “We knew few people would be stopping to buy
scribed his blueprint to Fortune. “The industry viewed bev- drinks at gas stations or local stores or in restaurants,” says
erages much too narrowly,” he says. “Over half of Starbucks’ Gamgort. He immediately anticipated that in the stay-
drinks have ice in them. When someone needs a boost at-home economy, families would be stockpiling soda by
in the afternoon, they may choose a coffee, or a Dr Pep- purchasing where they could buy big quantities in a single
per or our Adrenaline Shoc energy drink. Yet the industry trip, at the megastores such as Walmart and Kroger.
and Wall Street looked at hot and cold as two completely
different segments. When we merged, no one got it.” His “We predicted they’d want big packs of cans, because
goal, he explains, was to create the broadest possible lineup. they’re easiest to store in the garage,” says Gamgort. “Cans
“We need to be as important as possible to a Walmart or stay fresher than bottles, and the kids and adults can pull
Amazon, and we get there by offering a portfolio that meets out a can at a time.” The rub was that Gamgort saw no way
every consumer need,” says Gamgort, 58. his domestic can suppliers could possibly make enough
of them. Miraculously, the Mexican government declared
At $11.1 billion in revenue last year, KDP ranked as the beer a nonessential product, shuttering factories and
seventh-largest food and beverage company in America. But leaving the local canmakers with loads of capacity. “We
the company has cornered something that has proved elu- pounced on that opportunity,” recalls Gamgort. “We told
sive to companies in the best of times, but especially during the producers in Mexico, ‘We’ll take all the cans you can
a pandemic: a broad, diversified portfolio that has churned give us.’ Competitors ran out of cans. We got the cans.”
out predictable earnings. For the first six months of 2020,
revenues rose a sturdy 3% to $5.5 billion, while adjusted KDP ramped up production of 12-packs of cardboard-
profits jumped 11.7% to $877 million. By contrast, Coke’s bound 12-ounce cans and cut back on bottles. KDP employs
income dropped 15.4% from January to June, and Pepsi a direct-store-delivery or DSD model, meaning that in
earnings were down 6.0% in the two quarters ending in mid- three-quarters of the nation, KDP’s 6,000 trucks deliver
June. While KDP stuck to its earnings guidance, pledging to shipments from 160 distribution centers directly to stores
meet the 3% to 4% revenue and 13% to 15% earnings-per- as varied as a 7-Eleven to a Kroger. Then, a KDP merchan-
share targets set in early 2020, the fog of COVID prompted diser wheels a “U-boat” cart carrying the brands to the bev-
Coke, Starbucks, and most other food and beverage players erage aisle and personally stocks the shelves. The merchan-
to declare the market too mercurial to forecast. disers often visit a big store several times a week for three

Gamgort was gaining on the giants pre-COVID and had

FORTUNE NOVEMBER 2020 45

34% SHARE OF THE 82% PERCENTAGE
INCREASE OF THE TOTAL
IN OVERALL COFFEE POD
CARBONATED SOFT MARKET
DRINK SALES KDP THAT KDP
HAS CAPTURED CONTROLS

or four hours. They transmit up-to-the-minute updates on SOURCES: THE COMPANY; CONSUMER EDGE
what’s selling and how fast to KDP’s data centers. “If you
just ship to the retailer’s warehouse, you don’t get that kind Once again, KDP greatly increased production of such
of data and don’t realize for another week what’s selling. By staples as Green Mountain, and temporarily halted produc-
then it’s too late,” says Gamgort. tion in niche brands. At the peak, at-home K-Cup pod sales
were running 30% higher than last year, an extraordinary
Other trends were emerging too. Demand for classics number for a product that grows in the mid–single digits.
such as Canada Dry ginger ale and A&W root beer took off.
“We cranked up the bestsellers and made a lot less of the The question now for the self-professed challenger is
slower moving varieties,” says Holand Lujan, who heads how to achieve strong growth in two slow-to-modestly
KDP’s distribution network in the South. Factories cut expanding businesses. So far, KDP has managed to trans-
late revenues waxing at around 3% into adjusted earnings
“WE FORGED A BLUEPRINT gains in the 15% range. But it’s generating those outsize
THAT MAKES DISRUPTION leaps in profits chiefly by lowering expenses and reaping
OUR FRIEND.” big savings from the merger. When cost cutting runs its
course by the close of 2021, Gamgort will need to garner
—BOB GAMGORT, CEO, KEURIG DR PEPPER much higher revenue growth. “He wants sales growth of
5% to 6% a year, not the couple of points a year that are
way back on Cherry 7 Up and Diet Squirt. But the swing to the norm in the business,” says Paul Michaels, a KDP di-
big sellers made the merchandisers more productive. The rector and former global president of Mars, where he was
pallets that used to contain 55 separate items were carry- Gamgort’s boss and mentor in the 2000s.
ing as few as 15, in much bigger quantities, cutting the time
required to stock shelves. In beverages, that’s a high bar. It’s likely that KDP will
give back at least part of the big 1%-plus gain in market
Coffee followed the same pattern. The company’s Keurig share that its jackrabbit moves won in the pandemic, some-
brewers are the bargain “razor” sold near breakeven to lure thing Wall Street anticipates as evidenced by the stock’s
customers to the lucrative “blades,” KDP’s K-Cup pods. flatline performance over the past year.
KDP produces an estimated 10 billion-plus pods a year,
an astounding 82% of the total market. It buys and grinds But looking ahead, Gamgort has several things work-
the coffee, fills the pods, and distributes to stores both for ing in his favor. First, starting around 2021 KDP will have
brands it owns, led by Green Mountain and Original Donut retired enough debt that it can use its formidable free cash
Shop, and under some two dozen names it licenses, among flow for acquisitions. Gamgort proved to be a master at
them McDonald’s McCafé, Newman’s Own, and Krispy purchasing and growing brands in the past; he built Mars’
Kreme (it also packs the pods for Starbucks and Dunkin’ pet food franchise to rival Ralston Purina’s through acquisi-
Donuts). Once Gamgort saw customer pod usage spike, “I tion of Greenies and other names and revitalized Pinnacle’s
turned our factories to maximum output, way in advance tired portfolio with a move into healthy frozen foods via the
of retail orders. We were watching inventories build when purchases of Birds Eye vegetables, Evol natural meals, and
we hadn’t seen any sales yet.” The connected brewers also Gardein, maker of plant-based protein foods.
showed that people were drinking much more premium
coffee, perhaps because when you’re not getting a $3 cup at Second, Gamgort recognized that getting Keurig brewers
Starbucks, you’re fine spending 70¢ on a gourmet K-Cup. in more households was what growing K-Cup pods was all
about. He sharply cut the prices of the cups and machines,
taking a temporary hit to sales to lure more customers,
and in the process doubled the number of U.S. homes with
brewers to the current 31 million, representing about one
household in four. That leaves plenty of room to run: In Eu-
rope, over 50% of all homes have brewers. Here, the changes
in customer tastes in the pandemic are likely to stick.

Third, the “flavors” sector (carbonated drinks that aren’t
colas) is already growing a point or more faster than soft
drinks as a whole. Adding new flavors to old-line brands

46 FORTUNE NOVEMBER 2020

MARKET SHARE 2020 Statement of Ownership, Management, and Circulation
FOR CARBONATED (All Periodicals Publications Except Requester Publications)
SOFT DRINKS
1. Publication Title: ................................................................................................................................................ Fortune
(BASED ON REVENUES)
(B SED ON REVENUES) 2. Publication Number: .................................................................................................................................... 0020-6380

COCA-COLA PEPSICO 3. Filing Date: ..................................................................................................................................................... 10/1/2020
42.3% 29.5%
4. Issue Frequency: ........................................................................Monthly with three combined issues in June, August, and December
OTHER KEURIG
4.2% DR PEPPER 5. Number of Issues Published Annually: .......................................................................................................................... 9

20 WEEKS ENDING JULY 26, 2020 24.0% 6. Annual Subscription Price: .................................................................................................................................. $29.98

SOURCES: CONSUMER EDGE; IRI 7. Complete Mailing Address of Known Office of Publication: 40 Fulton St., New York, NY 10038

can provide an extra lift. Two promis- 8. Complete Mailing Address of Headquarters or General Business Office of Publisher: 40 Fulton St., New York, NY 10038
ing entries off to fast starts are spicy
Canada Dry Bold, and Dr Pepper & 9. Full Name and Complete Mailing Address of the Publisher, Editor, and Managing Editor:
Cream Soda. Publisher: Michael Schneider, 40 Fulton St., New York, NY 10038
Editor: Clifton Leaf, 40 Fulton St., New York, NY 10038
The fourth lever is called Allied Managing Editor: Brian O’Keefe, 40 Fulton St., New York, NY 10038
Brands, which acquires names typi-
cally owned by entrepreneurs or private 10. Owner: Fortune Media (USA) Corporation, 40 Fulton Street, New York, NY 10038, which is a wholly owned subsidiary
players (think Adrenaline Shoc, a sports of Fortune Media Group Holdings Limited, Unit I, J & K, 17/F, Finance and IT Center of Macau, Avenida Doutor Mario
drink invented by beverage legend Soares No. 320, Macao, which is a direct wholly owned subsidiary of True Cosmic Bliss Media Holdings Limited, Vistra
Lance Collins, or Don’t Quit! protein (Cayman) Limited, P.O. Box 31119, Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205, Cayman
shakes from Jake “Body by Jake” Stein- Islands, which is wholly owned by Chatchaval Jiaravanon, House No. 198/9, Village No. 14, Ban Plee Yai Sub-District,
feld). In the past, the old Dr Pepper Bang Plee District, Samut Prakan, 10540, Thailand
Snapple would distribute such brands
but didn’t secure the rights to buy them 11. Known Bondholders, Mortgages, and Other Security Holders Owning or
if they took off, and would often lose Holding 1% or More of Total Amount of Bonds, Mortgages, or Other Securities: ...................................................... None
out to Coke or another big bidder. Once
again, Gamgort broke the mold. He’ll 12. Tax Status (For completion by nonprofit organizations authorized to mail at nonprofit rates). Check one: The purpose,
offer to make a new beverage an Allied function, and nonprofit status of this organization and the exempt status for federal income tax purposes: __ Has Not
Brand only if the owner agrees to give Changed During Preceding 12 Months __ Has Changed During Preceding 12 Months (Publisher must submit explanation
KDP the right to purchase it based on a of change with this statement) Not applicable.
predetermined formula.
13. Publication Title: ................................................................................................................................................. Fortune
But perhaps the best thing Gamgort
has going for him is that he’s embrac- 14. Issue Date for Circulation Data Below: ...................................................................................................... October 2020
ing—rather than dreading—the uncer-
tainty that lies ahead. “Our rivals are 15. Extent and Nature of Circulation
rolling over and hoping that the status
quo returns, and it’s not returning,” he Average No. Copies Each Issue During Preceding 12 Months:
says. That paradigm-busting audac-
ity has given KDP the biggest caffeine a. Total Number of Copies (Net Press Run):................................................................................................. 631,070
buzz in beverages.
b. Paid Circulation (By Mail and Outside the Mail):

(1) Mailed Outside-County Paid Subscriptions Stated on PS Form 3541 (Include paid distribution above
nominal rate, advertiser’s proof copies, and exchange copies): ............................................................. 298,616
(2) Mailed In-County Paid Subscriptions Stated on PS Form 3541 (Include paid distribution above
nominal rate, advertiser’s proof copies, and exchange copies): 0
(3) Paid Distribution Outside the Mails Including Sales through Dealers and Carriers, Street Vendors,
Counter Sales, and Other Paid Distribution Outside USPS: ........................................................................ 8,527
(4) Paid Distribution by Other Classes of Mail Through the USPS (e.g., First-Class Mail®): .................................. 0

c. Total Paid Distribution (Sum of 15b (1), (2), (3), and (4)): ............................................................................ 307,143

d. Free or Nominal Rate Distribution (by Mail and Outside the Mail):
(1) Free or Nominal Rate Outside-County Copies included on PS Form 3541: ..........................................293,435
(2) Free or Nominal Rate In-County Copies included on PS Form 3541: .............................................................. 0
(3) Free or Nominal Rate Copies Mailed at Other Classes Through the USPS (e.g., First-Class Mail): .................. 0
(4) Free or Nominal Rate Distribution Outside the Mail (Carriers or other means): ....................................... 4,277

e. Total Free or Nominal Rate Distribution (Sum of 15d (1), (2), (3) and (4)):.................................................... 297,712

f. Total Distribution (Sum of 15c and 15e): .................................................................................................. 604,855

g. Copies Not Distributed (See Instructions to Publishers No. 4 (page 3)): ..................................................... 26,215

h. Total (Sum of 15f and g): ......................................................................................................................... 631,070

i. Percent Paid (15c divided by 15f times 100): ............................................................................................. 50.78%

No. of Copies of Single Issue Published Nearest to Filing Date:

a. Total Number of Copies (Net Press Run): ............................................................................................... 608,333

b. Paid Circulation (By Mail and Outside the Mail):

(1) Mailed Outside-County Paid Subscriptions Stated on PS Form 3541 (Include paid distribution above
nominal rate, advertiser’s proof copies, and exchange copies): ............................................................. 295,841
(2) Mailed In-County Paid Subscriptions Stated on PS Form 3541 (Include paid distribution above
nominal rate, advertiser’s proof copies, and exchange copies): ........................................................................ 0
(3) Paid Distribution Outside the Mails Including Sales through Dealers and Carriers, Street Vendors,
Counter Sales, and Other Paid Distribution Outside USPS: ........................................................................ 8,774
(4) Paid Distribution by Other Classes of Mail Through the USPS (e.g., First-Class Mail®): .................................. 0

c. Total Paid Distribution (Sum of 15b (1), (2), (3), and (4)): ........................................................................... 304,615

d. Free or Nominal Rate Distribution (by Mail and Outside the Mail):
(1) Free or Nominal Rate Outside-County Copies included on PS Form 3541: .......................................... 277,589
(2) Free or Nominal Rate In-County Copies included on PS Form 3541: .............................................................. 0
(3) Free or Nominal Rate Copies Mailed at Other Classes Through the USPS (e.g., First-Class Mail): .................. 0
(4) Free or Nominal Rate Distribution Outside the Mail (Carriers or other means): ....................................... 2,868

e. Total Free or Nominal Rate Distribution (Sum of 15d (1), (2), (3) and (4)): .................................................. 280,457

f. Total Distribution (Sum of 15c and 15e): ................................................................................................... 585,072

g. Copies Not Distributed (See Instructions to Publishers No. 4 (page 3)): .....................................................23,261

h. Total (Sum of 15f and g): ........................................................................................................................ 608,333

i. Percent Paid (15c divided by 15f times 100): ............................................................................................. 52.06%

16. Not applicable

17. Publication of Statement of Ownership: If the publication is a general publication, publication of this statement is
required. Will be printed in the November 2020 issue of this publication.

18. Signature and title of editor, publisher, business manager, or owner: Melissa Goldman. Date: 9/21/2020.
I certify that all information furnished on this form is true and complete. I understand that anyone who furnishes false
or misleading information on this form or who omits material or information requested on the form may be subject to
criminal sanctions (including fines and imprisonment) and/or civil sanctions (including civil penalties).

CONTENT FROM WEBMD

THE FUTURE OF HEALTH CARE
MAKES ROOM FOR WELL-BEING

What does it mean to be well? For many companies
and individuals, the answer is evolving.

OVER THE PAST FEW YEARS, THERE’S loss and grief. And research indicates
been a growing recognition by employers that common stressors aren’t equal-
and employees alike that wellness ex- opportunity offenders. A recent WebMD
tends beyond traditional health care. The survey of full-time employees at large
pandemic, which has impacted virtually companies found that since the start of
every aspect of daily life, has only em- the pandemic, caregiving has dispropor-
phasized the importance of factors such tionately fallen on women. Meanwhile,
as emotional and financial health, social in a separate WebMD survey, millennials
connections, and a sense of meaning and reported higher levels of social isolation
community. and loneliness than older workers.

“We’ve seen an increase in things like To serve all employees, wellness
stress, anxiety, feelings of isolation, and programs need to be customizable,
depression,” says Christine Muldoon, vice Muldoon says. Many companies are mov-
president of marketing and strategy at ing away from standard, cookie-cutter
WebMD Health Services. “Employees are health-and-wellness solutions. WebMD’s
exercising less, and more of them are wellness platform, for example, allows or-
working from home. They are missing ganizations to personalize their offerings
their coworkers, but they also don’t feel based on an employer’s size, location,
safe returning to work yet.” and the needs of its workforce, including
whether employees are in person or
Just as employees don’t all share the remote. Just as crucially, it enables
same health issues, they don’t all share individuals to determine which wellness
the same life challenges—another reality areas are most important to them and
intensified by the pandemic. For example: build a plan that prioritizes those goals.
A new mother might be overwhelmed by
the dual demands of work and childcare; Muldoon says that employee wellness
an entry-level employee with student programs of the future will be shaped by
debt might have anxiety about money; our expanding cultural understanding of
an employee who recently lost a loved wellness. “It will continue to evolve to be
one might be dealing with feelings of more holistic,” she says. ■

★★★★★★★★★★★★★★★★★★★★★★★★★★★