Wine country goes back to basics — and online — as pandemic upends business


Selecting a bottle of wine to share over dinner was easy enough before the pandemic. Anyone might worry about paying too much or sounding silly when ording a fancy-sounding choice, but the ritual of picking a bottle to share, or glass to sip, had a way of making any meal out feel special.

That was until about five months ago. Now the idea of ordering wine, dining out or engaging in routine social gatherings, like birthday parties or anniversaries, involves weighing the potential risk of a run-in with the novel coronavirus, which the U.S. still struggles to tamp down.

The crisis has led U.S. households to rein in spending, hobbled entire industries and threatened the ruin of jobs. In other words, it’s the kind of public-health and economic shock that’s one for the history books. It might even be driving Americans to drink more.

The problem is they’re drinking more at home. And that’s had a sobering effect on much of the U.S. wine industry, which after a near quarter-century of growth, saw domestic wine sales drop 5% over the past 12 months to about $48 billion in June, according to data from industry research firm bw166.

Experts singled out March 20 as the day everything changed, when California, Illinois, New York and other states issued stay-at-home orders that came thundering down across the nation, forcing bars, restaurants and wine-tasting rooms and other nonessential businesses to shutter as authorities raced to control a wave of COVID-19 infections.

“When you add both the shutdowns of tasting rooms and closures of restaurants, 44% of sales fell out from underneath the wineries in one night,” Rob McMillan, an executive vice president and founder of Silicon Valley Bank’s wine division, told MarketWatch.

“It was a bad day to wake up.”

Like many other industries, wineries remain in the midst of an upheaval sparked by a global pandemic that’s been brutal on lower-income workers, but sparing Wall Street, where U.S. stock benchmarks, including the S&P 500 index,
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-0.20%
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trade near record territory.

It’s not that consumers stopped drinking wine. Rather, diners who might in better times split a bottle at a restaurant, suddenly were rushing their carts through big-box stores and grocery aisles to fill up on necessities, including wine.

“Nationwide, retail sales blew up,” said Gary Obligacion, the general manager at the Post Ranch Inn, a luxury resort in Big Sur, Calif., that overlooks the Pacific Ocean, of the shift to at-home wine drinking at the onset of the pandemic. “People were in panic mode,” he said.

Post Ranch and its Sierra Mar restaurant recently reopened after a nearly three-month shutdown. For now, that still means only serving guests staying at the resort, who can order meals in their rooms or book at the Sierra Mar’s outdoor deck. But the restaurant’s thick, multipage wine book has been replaced by iPads that, like any wine bottles purchased for a table, are sanitized within view of diners.

“It’s all being done in a format for peace of mind around health and safety,” said Mark Buzan, Sierra Mar’s wine director, of the new protocols that make “any romantic notion about bringing a dusty, old bottle up from the cellar to present to a guest” a thing of the past.  

Two U.S. wine industries

The puzzle for smaller, premium winemakers to solve has been how to reach customers when retail sales have been booming, but mostly benefiting the nation’s wine Goliaths.

“There’s two wine industries,” McMillan said. “Roughly 75% comes through the largest 13 wineries,” he said, pointing to top sellers that include the E&J Gallo Winery, The Wine Group and Constellation Brands STZ. “They make wine, sell it to wholesalers, restaurants or grocery stores, and then it goes to the consumer,” he said. “The smaller wineries don’t get much wholesale attention.” 

What has been working, for some smaller producers, has been efforts to reach customers directly to spur sales, including online through their own websites, instead of relying on restaurants and others to create a buzz.

That’s meant repurpurposing staff and going back to the basics, including hitting the phones to drive sales. “It’s not like small wineries figured out overnight how to do outreach for online retail,” McMillan said. “For some, the only thing on their website was a shopping cart icon.”

This chart breaks down how sales have shifted at many U.S. wineries after shelter-in-place orders took hold, as producers ramped up business through wine clubs, online and over the phone.

Wine buying shift in 2020


SVB

Further into summer, as more restaurants reopened under new social-distancing rules, off-premise alcohol sales remained robust.

Spirits have led the charge higher, with sales jumping 29.3% for the week ended July 18, versus a year prior, while wine sales rose 19.7%, according to the latest data from Nielsen.

“A lot about wine is the story,” said Russ Colombo, a senior vice president at Baker Boyer, a lender in Walla Walla, Wash., focused on financing smaller wineries in the region. “The first bottle you sell or place at a restaurant is difficult enough,” he said, but after that “it’s all about momentum.”

For winemakers able to drum up their own support and sell directly to customers, a bonus is that they don’t have to pay a middleman, which can mean about twice as much profit for a producer when compared with wholesale transactions, Colombo said.

On the other hand, Colombo also called wineries “one of the toughest things to finance,” not only because of the fierce competition, but also because winemaking takes talent, a long view and probably luck.

“Winemakers are good at agriculture,” he said. “But for higher-end red wine, even before it hits the market, it could be two years. And in those two years, the world changes a lot.”

Wine Facts

One boon for smaller producers during the national tug of war over reopening, face masks and social-distancing restrictions has been visitors flocking to nearby wineries and vineyards for a bit of respite.

“Most high-end wineries that have tasting rooms are going to the reservations system,” Colombo said, adding that catering to fewer customers due to health-and-safety rules has been a positive for sales. “Winemakers, they find they can spend more time with their customers, tell their story and establish a personal relationship.”

And yet, there’s plenty of uncertainty. The earliest part of the 2020 harvest has kicked off in California’s wine country, while the state on Thursday reached the grim milestone of becoming the first state to report 600,000 COVID-19 cases since the pandemic was first detected in the U.S. earlier this year.

“What I can tell you is that it’s been an excellent growing season. The crop loads look average to high and you have to find homes for all of that fruit,” said Jennifer Putnam, chief executive at Napa Valley Grapegrowers. “But it’s a pretty intricate dance we do. You have to have a healthy workforce, good weather and people supporting Napa Valley agriculture and wines.”



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Cisco looking more to software but road is slower, due to the pandemic


Cisco Systems Inc.’s earnings had a bright spot Wednesday, but the giant shadow of coronavirus blotted it out.

Cisco
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+1.92%

collected more revenue from software and services than hardware for the first time in its just-completed fiscal year, a milestone in the company’s transition from its legacy hardware business to a tech company suited for the new era. That transition means much less in the age of COVID-19, however, as the pandemic is accelerating the downfall of the biggest sales drivers for Cisco and putting even more pressure on the company’s newer assets.

Cisco reported that revenue dropped 9% in the fiscal fourth quarter to $12.2 billion, and predicted that sales would continue to decline at an equal or greater rate in the current period. In response, Cisco plans to cut $1 billion in costs, a supersized return to Cisco’s previous pattern of a large restructuring at the end of a fiscal year.

Chief Financial Officer Kelly Kramer revealed to MarketWatch in an interview Wednesday afternoon that Cisco’s cost cuts would start with a voluntary retirement offering, and mentioned research and development as an area that would be targeted while declining to provide a target for job cuts. Kramer also announced her voluntary retirement Wednesday, an unrelated move that will allow her to move on to more board seats (she currently has two) and investing.

Cisco’s revenue decline was led by its older networking products, with total product revenue down 13%, and declines across switching, routing, data center and wireless driven primarily by weakness in the commercial enterprise markets. Pockets of strength included the company’s more recent network and software-as-a-service offering, the Catalyst 9000, and double-digit growth in its WebEx video platform, which is seeing a surge of usage with many people working from home.

Cisco unveiled the Catalyst 9000 in 2017 as part of its strategy to become more of a software and service provider, with a subscription model that offers networking software that helps companies automate more of their IT departments. And if a company is looking at modernizing its network, with everyone working from home, they are often looking at the CAT 9000, Chief Executive Chuck Robbins said.

“Some of them are using this opportunity, with no one in their campus environments, to upgrade,” he told analysts on the company’s conference call.

The revenue from these service-focused deals is more lucrative for Cisco, Kramer told MarketWatch.

“You don’t recognize it for three years, but you are getting the revenue,” she said. “You get even more when they renew.”

But with the pandemic hurting many of its other product areas, especially its sales to large corporate customers, it’s going to be a longer, slower road to transition to even more software sales. One analyst said that he believed the company should become more aggressive in M&A to fill in the gaps, just a few days after Cisco closed its purchase of ThousandEyes. Robbins said the company will continue to be disciplined, but that it is open to ideas and has a list of potential acquisition targets that Cisco maintains on a regular basis.

Cisco indeed may have to speed up its moves to become more software- and services-focused, and could use the pandemic to score some deals. Fortunately, Kramer said she will stick around for the transition, but the restructuring may take up more focus before Cisco can start adding new entities.



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Vaping makes teens up to 7 times more likely to catch COVID-19: study


Here’s another cloud on the horizon for e-cigarette companies.

A new Stanford study links vaping to a “substantially increased risk” of COVID-19 in teens and young adults. The national sample of more than 4,000 participants conducted in May found that people who vaped were five to seven times more likely to become infected with the novel coronavirus, compared with those who did not vape.

Among the subjects tested for COVID-19, those who had ever used e-cigarettes were five times more likely to test positive for the virus than the non-users. And those who had used both e-cigarettes and conventional tobacco cigarettes within the last month were 6.8 times more likely to be diagnosed with the disease.

Teens who smoked and vaped were also five times more likely to report coronavirus symptoms, including coughing, fever, tiredness and difficulty breathing, compared with those who never smoked or vaped. And this same group was about two to nine times more likely to get tested for the virus than non-vapers and non-smokers, probably because they were more likely to exhibit symptoms.

“Young people may believe their age protects them from contracting the virus or that they will not experience symptoms of COVID-19, but the data show this isn’t true among those who vape,” the study’s lead author, Dr. Shivani Mathur Gaiha, wrote in a statement. “This study tells us pretty clearly that youth who are using vapes or are dual-using [e-cigarettes and cigarettes] are at elevated risk, and it’s not just a small increase in risk; it’s a big one.”

Some limitations include the fact that the study relied on self-reports from online surveys, and it also didn’t offer a reason why vaping would make young people more susceptible to the virus that has infected at least 20 million and killed 743,599 and counting worldwide as of Wednesday morning.


“It’s not just a small increase in risk; it’s a big one.”


— Study author Dr. Shivani Mathur Gaiha

A recent University of San Francisco report did suggest that smoking, including e-cigarettes, doubled the risk of young adults (ages 18 to 25) getting severely ill from COVID-19, however. “A key finding is that the most prevalent factor conferring medical vulnerability to severe COVID-19 illness among young adults is smoking,” the authors wrote.

And previous research has suggested a link between vaping and both lung and heart disease. The American Heart Association also recently recommended that people “not smoke or vape any substance, including cannabis products, because of the potential harm to the heart, lungs and blood vessels.”

Research has also warned that e-cigarettes actually encourage teens to try traditional cigarettes, even though the products are often marketed as an alternative to cigarettes and a means to quit smoking. In fact, the odds of ever smoking a cigarette were four times higher if the teenager used an e-cigarette as their first tobacco product, one study of 6,000 young people found.

Read more:Vaping may be more harmful to teens than we thought

Theories for why vaping could leave adolescents more susceptible to COVID-19 include the potential damage that it does to the lungs and immune system, the Stanford study noted, or the possibility that the aerosols emitted from an electronic vaping device could include droplets contaminated with COVID-19.

What’s more, the researchers wrote that COVID-19 is known to spread through respiratory droplets, and repeatedly touching your mouth and your face — which is a habit common among cigarette and e-cig users. Perhaps worse, teens often share their vape pens and other e-cig devices with each other, which could also possibly spread the virus.

Related:Dr. Fauci recommends wearing goggles to prevent catching the coronavirus

Rep. Raja Krishnamoorthi (D-Ill.) sent a letter to the FDA on behalf of the House Subcommittee on Economic and Consumer Policy on Tuesday calling for vaping products to be temporarily removed from the market. He noted that he had warned the FDA about a potential link between vaping and COVID-19 in April, but the agency cited the need for more evidence that vaping was a risk. “That failure to act cost us four months of harm to Americans that we cannot get back,” Krishnamoorthi wrote.

“I respectfully reiterate my call on FDA to clear the market of all e-cigarettes for the duration of the coronavirus crisis. It is the only responsible path forward,” he added.

The FDA was not immediately available for comment. Its COVID-19 FAQ warns that people who smoke traditional cigarettes may be more vulnerable to respiratory illness, including COVID-19, as smoking causes lung disease and can also create inflammation and cell damage throughout the body. But it has less to say about e-cigarettes. For now, the FDA warns that vaping tobacco or nicotine can expose the lungs to toxic chemicals. “Whether those exposures increase the risk of COVID-19 or the severity of COVID-19 outcomes is not known,” the FDA site says. Indeed, COVID-19 is a never-before-seen virus that health experts are still learning about.

E-cigarettes were a $25 billion market last year, dominated by Juul, which is 35% owned by Altria Group
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Juul did not immediately respond to a MarketWatch request for comment about the new study or Krishnamoorthi’s call to temporarily suspend vaping products.

But the industry came under fire last year after a mysterious illness called E-cigarette or Vaping Product Use-Associated Lung Injury (EVALI) sickened Americans, with the CDC reporting 2,807 hospitalizations for the vaping-related illness as of late February of this year.

The surge in teens and tweens vaping also became a cause for concern before the pandemic, as 5 million high school and middle-school students reported using e-cigarettes in the FDA’s 2019 National Youth Tobacco Survey, including one in four high schoolers.

In January, the Trump administration banned fruit, candy, mint and dessert e-cig flavors popular with teenagers to deter them from vaping. But menthol and tobacco flavors were allowed to remain on the market. “We have to protect our families,” Trump said at the time. “At the same time, it’s a big industry. We want to protect the industry.”

Keep up with MarketWatch’s ongoing coronavirus coverage here.



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Oil prices boosted by expectations for fall in crude inventories


Oil futures traded higher Wednesday, buoyed after an industry trade group reported a fall in U.S. crude supplies.

West Texas Intermediate crude for September delivery
CL.1,
+1.63%

on the New York Mercantile Exchange gained 68 cents, or 1.7%, to reach $42.29 a barrel, after WTI finished Tuesday’s session down 0.8%. Meanwhile, the global benchmark, October Brent crude
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+1.57%
,
traded 67 cents, or 1.5%, higher at $45.17 a barrel on ICE Futures Europe, following a 1.1% decline in the previous session.

The American Petroleum Institute reported late Tuesday that U.S. crude supplies dropped by 4.4 million barrels for the week ended Aug. 7, according to sources. The API data also showed gasoline stockpiles declined by 1.3 million barrels, they said, while distillate inventories were down by 2.9 million barrels. Crude stocks at the Cushing, Okla., storage hub, meanwhile, edged up by 1.1 million barrels for the week.

More closely followed inventory data from the Energy Information Administration is due Wednesday at 10:30 a.m. Eastern Time. The EIA data are expected to show crude inventories fell by 4.7 million barrels last week, according to analysts polled by S&P Global Platts. They also forecast supply declines of 2.1 million barrels for gasoline and 100,000 barrels in distillates.

Some analysts were unimpressed with crude’s gains following the data.

“We should have seen a more significant bounce on the inventory data and favorable bend in some of the COVID-19 curves,” said Stephen Innes, chief global markets strategist at AxiCorp, in a note.

The “big elephant in the room” remains the global COVID-19 case count, he said, with the number exceeding 20 million on Tuesday.

“It’s worth highlighting that it took six months for cases to reach 10 million after the first infection surfaced in China while the second 10 million took only six weeks,” he said.

In other energy trading, September gasoline
RBU20,
+2.31%

was up 1.9% at $1.2271 a gallon, while September heating oil
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+1.38%

gained 1.1% to $1.2522 a gallon.

September natural-gas futures
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-1.01%

lost 1.5% to trade at $2.138 per million British thermal units.



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When are people with COVID-19 at their most contagious?


The coronavirus pandemic hit another unwelcome milestone this week as the number of COVID-19 infections hit 20.1 million globally, according to the latest data aggregated by Johns Hopkins University’s Center for Systems Science and Engineering.

But the actual number of cases is likely much higher, health authorities say. The Centers for Disease Control and Prevention estimate that 40% of people with COVID-19 are actually asymptomatic, which makes it difficult for health professionals to trace transmission.

Other data have suggested that 16% of coronavirus transmission is due to carriers not displaying symptoms or only showing very mild symptoms who, while they’re contagious, may not believe they have the disease.


Knowing when an infected person can spread SARS-CoV-2 is just as important as how the virus spreads so rapidly.

One case study of the quarantined Italian town of Vò published in the peer-reviewed journal Nature in June revealed more than 40% of COVID-19 infections had no symptoms.

With a population of approximately 3,200 people, Vò reported Italy’s first COVID-related death on Feb. 20. As a result, the residents of the town were placed in quarantine for 14 days.

Some 2.6% of the town tested positive for SARS-CoV-2, the virus that causes COVID-19, at the beginning of the lockdown, but that figure fell to 1.2% after a couple of weeks. Throughout this time, 40% of those infections were people who displayed no symptoms. The researchers also concluded that it took 9.3 days for people who tested positive to be virus-free.

“Someone with an asymptomatic infection is entirely unconscious of carrying the virus and, according to their lifestyle and occupation, could meet a large number of people without modifying their behavior,” found the study, which was carried out by researchers at Imperial College London and the University of Padua.

“If we find a certain number of symptomatic people testing positive, we expect the same number of asymptomatic carriers that are much more difficult to identify and isolate,” according to Enrico Lavezzo, a professor in the University of Padua’s department of molecular medicine.

Related: Was COVID-19 made in a lab? Will a vaccine protect you forever? Does the sun help? Coronavirus myths are spreading in 25 languages — here are the most popular

That, health professionals say, raises questions about how contagious they are after contracting the virus, and for how long they remain so.

Knowing when an infected person can spread SARS-CoV-2 is just as important as how the virus spreads so rapidly. WHO recently published a scientific brief on how the virus spreads, particularly among those who don’t show symptoms.

The virus can be detected in people one to three days before their symptom onset, with the highest viral loads around the day of the onset of symptoms, followed by a gradual decline over time. This level of contagiousness appears to be one to two weeks for asymptomatic persons, and up to three weeks or more for patients with mild to moderate disease.


The virus can be detected in people one to three days before their symptoms, with the highest viral loads on day one.

“Transmission of SARS-CoV-2 can occur through direct, indirect, or close contact with infected people through infected secretions such as saliva and respiratory secretions or their respiratory droplets, which are expelled when an infected person coughs, sneezes, talks or sings,” the WHO said. This makes asymptomatic transmission all the more prevalent, scientists say.

However, all studies on asymptomatic people have limitations, the WHO added: “For example, some studies did not clearly describe how they followed up with persons who were asymptomatic at the time of testing to ascertain if they ever developed symptoms. Others defined ‘asymptomatic’ very narrowly as persons who never developed fever or respiratory symptoms, rather than as those who did not develop any symptoms at all.”

The U.S. COVID-19 death toll could reach nearly 300,000 by Dec. 1, but consistent mask-wearing beginning today could save approximately 70,000 lives, according to the Institute for Health Metrics and Evaluation (IHME) at the University of Washington’s School of Medicine.

“It appears that people are wearing masks and socially distancing more frequently as infections increase, then after a while as infections drop, people let their guard down and stop taking these measures to protect themselves and others,” IHME director Christopher Murray said.

Dispatches from a pandemic:Ireland says people must wear masks in stores to stop COVID-19 — but why did it take so long?

COVID-19 has now killed at least 738,668 people worldwide, and the U.S. ranks 15th in the world for deaths per 100,000 people (49.5), Johns Hopkins University says.

California Gov. Gavin Newsom, a Democrat, last month announced a rollback of operations statewide at restaurants as well as bars, zoos, wineries, museums, card rooms and movie theaters. “This is in every county in the state of California, not just those on the watch list,” he said.

The shutdown also affected indoor operations of gyms, places of worship, offices for non-critical sectors, hairdressers, beauty salons, indoor malls and other places of businesses in 30 counties on California’s ”monitoring list,” which represent 80% of the state of California.

On the anniversary of the 1918 flu, health writer Ed Yong warned of another pandemic and now says the U.S. must learn the lessons from the past seven months, adding, “COVID-19 is merely a harbinger of worse plagues to come.”


New York City, the epicenter of the pandemic in the U.S., was a case study in how the virus is transmitted.

“Despite ample warning, the U.S. squandered every possible opportunity to control the coronavirus. And despite its considerable advantages — immense resources, biomedical might, scientific expertise — it floundered,” he wrote in the September issue of The Atlantic.

While South Korea, Thailand, Iceland, Slovakia, and Australia acted “decisively” to flatten and then bend the curve of new infections downward, “the U.S. achieved merely a plateau in the spring, which changed to an appalling upward slope in the summer,” he added.

Yong said he had spoken to more than 100 health experts since the pandemic began and sums up the U.S.’s mistakes this way: “A sluggish response by a government denuded of expertise allowed the coronavirus to gain a foothold,” compounded by “chronic underfunding of public health.”

“A bloated, inefficient health-care system left hospitals ill-prepared for the ensuing wave of sickness. Racist policies that have endured since the days of colonization and slavery left Indigenous and Black Americans especially vulnerable to COVID-19,” he added.

New York City, the onetime U.S. epicenter of the pandemic, was a case study in how some Americans fared better than others and how the virus is transmitted. Black and Latino people were hospitalized at twice the rate of Caucasians during the peak of the crisis, data released in May by the city showed.

Black New Yorkers were hospitalized at a rate of 632 per 100,000 people, while Caucasians were hospitalized at a rate of 284 per 100,000 people. Black and Hispanic residents were dying at a rate of 21.3 per 100,000, while non-white races were dying at a rate of 40.2 per 100,000, according to the data.

One theory: More foreign-born Americans are likely to live in multi-generational households, and Asian and Hispanic people are more likely than white people to be immigrants, according to the Pew Research Center. People of color are more likely to work in frontline jobs that carry a greater risk of contracting COVID-19.

Dispatches from a pandemic: A letter from Chennai as India tops 2 million COVID-19 cases: ‘In the midst of so much death, despair and depression, life does go on’

President Donald Trump on Saturday bypassed the nation’s lawmakers as he claimed the authority to defer payroll taxes and replace an expired unemployment benefit with a lower amount after negotiations with Congress on a new coronavirus rescue package collapsed.

However, the executive order and memorandums ostensibly providing relief amid the intractable pandemic don’t seem feasible or legal, analysts said, adding that the wording of the orders raised more questions than answers.

The U.S. has the highest number of COVID-19 deaths of any country (164,480), followed by Brazil (101,752), Mexico (53,003), the U.K. (46,611) and India (45,257). The virus has infected least 5,094,565 people in the U.S., the most of any country.

Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases and a member of the White House coronavirus task force, has been optimistic about a vaccine arriving at the end of 2020 or in early 2021, and says people must continue to practice social distancing and wear masks.

Fauci has said he is hopeful that a coronavirus vaccine could be developed by early 2021, but has previously said it’s unlikely that a vaccine will deliver 100% immunity; he said the best realistic outcome, based on other vaccines, would be 70% to 75% effectiveness. Other epidemiologists are even more circumspect on a vaccine wiping out transmission of the virus anytime soon.

The Dow Jones Industrial Index
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-0.37%
,
S&P 500
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-0.79%

and Nasdaq Composite
COMP,
-1.69%

was ended lower on Tuesday as investors awaited progress on round two of a fiscal stimulus during the coronavirus pandemic.

Related: Feeling lax about masks? Think again. Here’s how many lives could be saved if everyone wore a mask — starting today




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