CREDIT CRUNCH: BIG 3 DEALER CONSOLIDATION

The Wall Street Journal has an interesting story on how the Credit Crunch is squeezing car dealerships.

Tight Credit Puts Squeeze
On Big Three Auto Dealers
By JOHN D. STOLL
August 28, 2008

The credit crunch squeezing Detroit's Big Three auto makers is now spreading to some of their dealers, adding financial pressure to a group already strained by this year's big drop in auto sales.

Takeaway:

• The Big 3 are seeking to consolidate their dealer networks
  
• It will be costly to buy dealerships out
• The credit crunch will squeeze and consolidate car dealers
  
• Strategy and tactics are critical dealer survival
  
• No longer is size and scale a winning combination

This is a story to track closely for the next 6 months and out to 5 years from now. There will be tremendous change.

What are your thoughts?

CAREER OPPORTUNITY IN SKILLED TRADES

Interesting article in the Wall Street Journal this morning. There are some smart alternatives to college. Read the article and evaluate your situation. If you know someone who might benefit from reading it, pass it on.

A snippet of the column is below. The full article can be accessed at the link in the post title above or the article title below.

CAREERS

Contractors, Unions
Try Web, Schools;
A 'Dirty Jobs' Role

By ANTON TROIANOVSKI

Even as the economy slumps and unemployment rises, strong demand for power plants, oil refineries and export goods has many manufacturers and construction contractors scrambling to find enough skilled workers to plug current and future holes.

With the shortage of welders, pipe fitters and other high-demand workers likely to get worse as more of them reach retirement age, unions, construction contractors and other businesses are trying to figure out how to attract more young people to those fields.

Their challenge: overcoming the perception that blue-collar trades offer less status, money and chance for advancement than white-collar jobs, and that college is the best investment for everyone.

Takeaway:

• Choosing a path [Goal] and perusing it is important
• Being a price maker [skilled / talented] is better than being a price taker [unskilled / commodity]
• Aging of the work force is happening in most areas of the employment. Maybe even more so for skilled trades as there is probably a limit to how many people will work past 60, 62, 65 in blue collar career. Knowledge workers do not face the physical toll 40+ years of labor places on the body. They will work past retirement in some capacity. [consulting, part time, special projects etc]
• Skilled trades are valuable. There is a strong financial reward for people with the right skills / talent.
• College and university are not the only path to prosperity.
• The trade associations need to do a much better job communicating that their career opportunities are competitive with those being pushed by "Big Education."
• Dusty Henry has the right attitude and he will be successful [Step #1 Find a goal Step #2 pursue goal]

What are your thoughts?

THE US$

Interesting article on the US Dollar in the LA Times.

Resurgent dollar slams Americans' foreign stock holdings
The once-struggling U.S. dollar suddenly is the strongman of the world’s major currencies. That’s great for Americans’ purchasing power -- but if you’ve noticed, it’s a heavy blow to the foreign stock holdings in your portfolio.

Takeaway:
As the Dollar strengthens foreign holdings are reduced in value upon currency conversion. People/investors appear to be buying US Dollars to invest in safer US based investments.

As the Dollar becomes more in demand its value increases and commodities priced in Dollars become cheaper for people using the US$. This may be part of the reason oil has been dropping. The current price of NYMEX oil can be found on Bloomberg

Hostilities between Russia and the Republic of Georgia may halt or reverse the recent price drops if tensions further increase. Keep a close eye on the situation for signs of further escalation.

CVS TO ACQUIRE LONGS DRUG

CVS Caremark to Purchase Longs Drug for $2.7 Billion (Update3)

By Lauren Coleman-Lochner

Aug. 12 (Bloomberg) -- CVS Caremark Corp., the second- biggest U.S. drugstore chain, said it would buy Longs Drug Stores Corp. for $2.7 billion to expand its reach in the western U.S., closing the gap with larger Walgreen Co.

Longs Drug has 521 locations in California, Hawaii, Nevada and Arizona, giving CVS about 6,800 stores, in line with Walgreen, the Deerfield, Illinois-based chain with 6,849.

TAKEAWAY:

• CVS has been on a acquisition tear for quite a few years
• Walgreen's and CVS will have essentially equal number of locations if this dal happens.
  
• They seek to grow their store count
  
• This will allow for more efficient use of existing assets. Trucks, warehouses, distribution centers etc.

It will be interesting to see if there is antitrust scrutiny on this deal. CVS could make a strong case that all the supermarkets [most of which have in store pharmacies] that there will still be strong competitors after the deal.

What are your thoughts?

RUSSIA VS GEORGIA

There are currently military hostilities between Russia and the Republic of Georgia.

Why is this important?

There is a major oil pipeline in Georgia that transports "1.2 million barrels a day." There are reports that Russia has attacked the pipeline.

"Azerbaijan, which borders Georgia, announced Saturday it had halted oil exports via the Georgian ports of Batumi and Kulevi due to the fighting between Georgia and Russia."

Bloomberg has the Nymex Crude Future at $116.40 [retrieved Sunday 8/10/08]

If the hostilities reduce the world oil supply the price of oil, which has been steadily falling, may begin to climb upwards as a result of new tensions, hostilities and uncertainties.

Where do you think oil prices will be in a week, month, and 60 days?

REUTERS: Folgers says it decreased coffee canister weight

"NEW YORK, Aug 7 (Reuters) - Procter & Gamble (PG.N: Quote, Profile, Research, Stock Buzz) has decreased its Folgers canisters to 11.3 ounces from 13 ounces, reducing the company's green coffee purchases, a spokeswoman said on Thursday."

"Each can will still make 90 cups of coffee, as the weight reduction is the result of an enhanced roasting process that the company has been working on for more than 10 years. The new technique produces a richer taste, Becker said."

"The 11.3 ounce canisters have been on retail shelves since early August and there is no change to the price, she said."

THOUGHTS:
The problem with saying that the consumer will get the same 90 cups is...
People measure out the amount of coffee per serving. For each "cup" one table spoon of ground coffee is used. For people who measure coffee out this will actually result in fewer cups per container.

As for the price not changing...
a drop of 1.7oz from 13oz to 11.3oz is just a hidden price increase.

Walgreens is selling the 13oz for $4.99.
Price per ounce for the 13oz size is 38.38¢
Price per ounce for the 11.3oz size is 44.15¢
Change in price is 5.77¢
Increase in unit price is 15.03% [5.77/38.38 Change in price / original price]
A 15% increase in unit price seems very high. Wonder if consumers will notice and make different choices.

QUESTIONS:

• What are your thoughts on this price increase tactic?
• If you are a buyer of coffee, will this information change the way you shop the category?

Business Week: Facebook's Fire Sale

Top execs at the social network are selling shares—at prices far lower than the site's once-vaunted $15 billion valuation

Insiders at Facebook are selling stock in the social networking company, and the prices they're getting for their shares suggest the sky-high valuation backers once placed on the company may prove unrealistic.

My Take:
It's interesting that folks are cashing in now instead of waiting for the eventual IPO or buyout. Perhaps even a $1 billion valuation is high for the amount of revenue and profits that Facebook is making.

Lock in Gains
Some people would rather take smaller gains than risk major losses if the stock flounders upon going public or being acquired.

Indicator
It may be worthwhile to keep an eye on this story to see if this movement is indicating there are problems just over the horizon.

Time will tell.

What do you think?

CHRON.COM: "Starbucks offers afternoon drink deal nationwide "

By LAUREN SHEPHERD AP Business Writer © 2008 The Associated Press

Aug. 4, 2008, 11:23PM

NEW YORK — Looking to bring more value-seeking consumers through its doors for a late afternoon caffeine fix, Starbucks Corp. said it will now offer its morning customers any iced grande beverage for $2 after 2 p.m.

The price is a big cut from the normal price of most grande-sized iced drinks. A grande iced latte, for example, costs about $4. To get the discount, customers must present a receipt from their morning Starbucks visit.

MY TAKE:

Traffic has been declining at Starbucks. Even if customers keep dollar ring size the same, any reduction in transactions will reduce store revenue. It is interesting that Starbucks is taking action to entice morning customers to visit in the afternoon. Nice way to get folks who may have curtailed their second visits to come again in the same day. The discounted price will allow people to justify a second trip.

For Starbucks one of the key strategies that will go along with this is selling more items per ring for these customers. Margins are being reduced to entice people into traffic building visits. Once you get them in the door... sell, sell, sell! Be nice about it. The success of the enterprise depends on increasing the cash flow and profits from every store, every hour and every opportunity.

For more on this story you may want to check out the Starbucks Gossip blog.

If you are one of the customers taking advantage of this promotion...

• How was your experience?
• Did they push other items during your visit [cookies etc]?
  

NYMEX CRUDE FUTURE PRICE

Bloomberg 8-5-2008

Nymex Crude Future $120.38
Change -1.03
% Change -.85
Time 00:38

MSNBC: "June consumer spending falls as prices surge"

Biggest increase in prices in nearly three decades as gas prices climb

WASHINGTON - Consumer spending, after adjusting for inflation, fell in June as shoppers were hit with the biggest increase in prices in nearly three decades.

So, after removing inflation, consumers spent "0.2 percent" less in June?


Question:

• If you got a rebate check, what did you do with it?

Advertising Age: 'Mad Men' as Fashion Muse

Television is driving some fashion trends.

'Mad Men' as Fashion Muse
AMC Hit Has Brought Back the Skinny Tie, Slim Suits and Pearls -- and Inspired a Michael Kors Line

Published: August 04, 2008
NEW YORK (AdAge.com) -- "Mad Men" has conjured up nostalgia, hostility and more than a few Emmy nominations. And now the slick world of Sterling Cooper is inspiring fashionistas everywhere.


This trend shaping has gone on for a long time. People follow the looks that are hip from movies and television. A few programs that shaped how some segment of how the population dressed are...

• Sex and the City
• Beverly Hills, 90210
• Miami Vice
• Etc.

What shows and movies would you add to the list?

It is interesting that Mad Men, a program that most people are unfamiliar with, may become a major driver of fashion. Under the radar to most consumers. It will sink or swim based on being a good look.

NYT: "Shipping Costs Start to Crimp Globalization "

From the New York Times:


"When Tesla Motors, a pioneer in electric-powered cars, set out to make a luxury roadster for the American market, it had the global supply chain in mind. Tesla planned to manufacture 1,000-pound battery packs in Thailand, ship them to Britain for installation, then bring the mostly assembled cars back to the United States."

Higher transportation costs are changing the game for global business. The increasing costs of movement [shipping/logistics] are reducing labor cost savings. Those saving are being reduced, reversed and offset by increasing shipping costs.

Tesla is a great example of this. They were going to reduce costs by manufacturing in lower cost locations. The rapid increase in oil prices has made transnational shipping more expensive. Expensive enough to bring manufacturing back the the United States.

What are your thoughts?

MAIN TOPICS / FOCUS OF THIS BLOG

Within the past week I began to think about creating a blog that was more in line with with my knowledge and interests.

Major Topics

• Food
• CPG
• Retail
• Business
• Economy

Areas of focus within the topics above...

• Information
• News
  
• and Analysis