Business Observations

The LA Times Interview With Paul Buchheit

2010-11-13T17:42:00.001-05:00

Facebook's Paul Buchheit talks about Facebook, Google and his new gig

November 12, 2010 | 5:53 pm

Earlier today we reported that Paul Buchheit, who created Gmail and founded FriendFeed,was leaving Facebook to join Y Combinator. We caught up with Buchheit on his last day at Facebook.

It’s interesting that Paul is leaving Facebook before an IPO (Initial Public Offering) happens. There is more to life than money when you have enough to walk away from what might be a huge payday.

On a somewhat related note, the EconTalk podcast did an interview with Paul not long after Facebook acquired his startup Friendfeed. You can find the episode on EconTalk here.

UPS delivers 'amore' - WSJ.com

2010-09-13T02:01:00.001-04:00

Third-party logistics is a growing area at a time of globalization and cost-cutting of in-house supply-chain operations, said Kevin Sterling, senior transportation analyst at BB&T Capital Markets.

via online.wsj.com

*Possible area for students to study and become experts in. How to integrate complex supply chain distribution channels.

Posted via email from admore's posterous

New Technology to Lure Shoppers - WSJ.com

2010-08-25T22:52:00.001-04:00

Some of the most sophisticated in-store technology is tied to consumers' mobile devices, ad executives say. Marketers are experimenting with ways to use mobile phones to provide customers with services and promotions as they shop. These range from truck reviews at car dealerships to allergy information tied to certain foods at supermarkets, Mr. Ross says.

via online.wsj.com

Sounds like Location Based Services (Foursquare etc) are on to something here. Who can get the first score?

Posted via email from admore's posterous

Ford to End Mercury

2010-05-28T02:10:00.001-04:00

via online.wsj.com

The pace of change has quickened during the recession. This will reduce the friction caused by marketing support (ad money and dealer marketing) required for weak and dying brands.

This consolidation may lead to more models per company. This might occur to differentiate a firms model lineup against its competitors.

Marketers may find more niches to target against. Single firm car manufactures can more readily make positioning moves to serve the unmet needs of unique markets.

Posted via web from admore's posterous

Meijer's new small-store format in Niles, Illinois, could open door into urban neighborhoods | - MLive.com

2010-03-08T00:12:00.001-05:00

For those consumers who can’t find what they are looking for, there is a kiosk online where they can order from meijer.com for home delivery.

via mlive.com

Meijer would be wise to consider free ship-to-store as an option. People could order online, have it shipped to the store, pick it up and buy other merchandise while they are there. This would expand the inventory offered without having to carry it on shelf. Consumers will also like saving on shipping costs.

Large items could be shipped direct to consumer to save them the hassle of transporting. This would be especially useful to urban dwellers that use public transportation.

Posted via web from admore's posterous

Snack Firm Diamond Foods to Buy Kettle - WSJ.com

2010-02-28T15:10:00.001-05:00

Diamond Foods Inc. said Thursday it has agreed to acquire Kettle Foods from Lion Capital LLP for $615 million, a move that gives the snack-nuts producer a much bigger bite of the premium potato-chip market.

via online.wsj.com

*Sold for approximately 2.5 times sales.

Posted via web from admore's posterous

Fewer homeowners falling behind on mortgage payments - latimes.com

2010-02-20T00:45:00.001-05:00

We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007 [and] continued with the meltdown of the California and Florida housing markets due to overbuilding and the weak loan underwriting that supported that overbuilding," Jay Brinkmann, the group's chief economist, said in a statement.

via latimes.com

It's good news that signs of improvement are becoming visible. Consumer confidence should begin to rise and take hold as the mole hill of positive economic data becomes a small skill hill. There are still risks out there, but it appears that the worst is behind us.

Businesses are cautiously looking forward to the future. We should see the total number of people employed rise even as the unemployment rate increases.

Why would the unemployment rate increase if the economy is recovering?

The way unemployment is measured, people become so discouraged that they stop looking for work and are no longer counted as being part of the labor force. If one is not considered part of the labor force one cannot be officially unemployed.

As the economy appears to be entering a recovery stage people regain the optimism that there are job opportunities to be had. These formerly discouraged people will then be counted as unemployed because they are looking for a job again. It would not surprise me if the unemployment rate jumped a bit in the coming months. Government hiring for the 2010 census may reduce or prevent the anticipated jump in the unemployment rate.

Unemployment will remain at elevated levels for the short and intermediate term. There are opportunities out there. It is advisable for people to start getting their resume and network in order. As Harvey Mackay would say, dig your well before you're thirsty. Starting preparation today will bring job offers sooner when the right job opportunity arrives. Be ready for that opportunity when it's right in front of you.

Posted via web from admore's posterous

Wal-Mart Spices Up Private Label - WSJ.com

2010-02-09T02:12:00.001-05:00

Private label is growing in dollar sales in the United States. When consumers need to do some belt tightening they look to store brands (Typically lower priced, there are some premium PL brands that sell at higher price points).
A strong brand differentiation is a solid strategy to neutralize consumer private label substitution.

Posted via web from admore's posterous

Radical Shifts Take Hold in U.S. Manufacturing

2010-02-03T02:36:00.001-05:00

via online.wsj.com

Specialty (unique) vs commodity (general).

Posted via web from admore's posterous

The Economy 2007-2009 / GDP / Wall Street Journal

2010-01-29T15:08:00.001-05:00

GDP has gone up two straight quarters, rising 2.2% in the third quarter after a year of contraction. In all of 2009, GDP fell 2.4%, the biggest drop for an entire year since 10.9% in 1946. GDP rose 0.4% in 2008 and 2.1% in 2007.

via online.wsj.com

Interesting to see that both 2007 and 2008 had positive GDP growth. The 2009 GDP drop seemed a lot deeper than 2.4%. The employment situation certainly was a lot worse for people that lost their jobs or had hours reduced.

Posted via web from admore's posterous

Bloomberg: "Does the Apple iPad Make Strategic Sense?"

2010-01-28T09:37:00.001-05:00

It's hard to bet against Apple. The two things I admire most about the company are its ability to think holistically about business models (iPod + iTues, iPhone + the App store, iPad + iBookstore) and its willingness to keep innovating. Imagine how different it would have been if Apple stopped at the first generation iPod, or just rode the iPod for as long as it could. Its willingness to step out and enter into new categories is an important lesson for all companies.

via bloomberg.com

Apple is certainly one of the five most innovative companies today. They make consumer friendly products that do new as well as old tasks (email etc) for consumers. They have been seemingly able to raise the bar continually.

If one is not risking failure, one is not making the movements that lead to innovation. For the most part, it looks like Apple got past most of the challenges they came across in the development of the iPad.

Posted via web from admore's posterous

Startups In The News

2010-01-28T02:50:00.001-05:00

In a sign that 2010 really is a new year, several new start-up "incubators" are slated to pop up around Silicon Valley in the next few months.

Incubators typically help nurture small businesses by providing space, services and mentorship to entrepreneurs, often for a fee or an equity stake in their business. Well-known incubators include Y Combinator and Plug and Play Tech Center, with many venture-capital firms also incubating start-ups.

via online.wsj.com

As the economic recovery becomes more apparent, more people will be reporting on startups. Certainly business publications such as the Wall Street Journal and Business Week will feature them prominently in the near future.

It was not too long ago where the Wall Street Journal had a graphic indicating that every quarter about 200,000 new businesses are launched in the United States.

Link to startup graphic

Posted via web from admore's posterous

Coca Cola Bottle Innovation

2010-01-26T00:23:00.001-05:00

Coca-Cola Co., under fire from environmentalists for using plastic bottles, has introduced a new packaging material made partly from plants. The container has "the same weight, the same feel, the same chemistry, and functions exactly the same way" as a regular plastic bottle, a Coke spokeswoman says.

via online.wsj.com

Beverage manufactures are under pressure on multiple fronts.

Environmentalists want things like carbon removed from the CPG supply chain. According to the article plastic (PET) is not recycled at a high rate. Here in Michigan there is a ten cent deposit on beverages that are carbonated. The redemption rate on recyclable containers, including cans, is reported as between 95% and 99%.

The lighter beverage makers can make containers, the more that is saved on fuel costs that are part of distribution. It's a delicate balancing act. Strength must be maintained and the package must protect the contents from changing when exposed to environmental conditions that vary. Heat and light being two that may affect the contents.

Posted via web from admore's posterous

Harley-Davidson: Tough Economy & Entry To India

2010-01-23T01:38:00.001-05:00

One bright spot for Harley-Davidson has been its performance in international markets, where its brand has strong appeal. Last year, it announced plans to enter the fast-growing Indian motorcycle market and will introduce 12 models there this year.

via nytimes.com

Premium products were hit hard in the '07-'09 recession. Harley-Davidson is a premium product. It's rather amazing that HD was able to retain profitability for much of the recession.

It will be interesting to track how the HD entry to India progresses. The economy in India is growing very rapidly.

Posted via web from admore's posterous

The Wall Street Journal Reports on Foursquare

2010-01-22T02:18:00.003-05:00

Tristan Walker, the head of business development for Foursquare, estimates current Foursquare app users to be around a quarter of a million. He says the company hopes to make money by working with “local mom and pop shops” as well as mid-sized retailers. For instance, he said, Tasti D-Lite recently launched a Loyalty Program on Foursquare, through which customers can earn and redeem points by tweeting or checking in on Foursquare while stopping by the ice cream chain.

via blogs.wsj.com

Interesting article. Gaining the support of small establishments on the ground is hard. Perhaps they will have the mayors and super-users (currently there are three super-user levels) spread the word on how Foursquare can help.

Three forces for local to harness.
Visits - Who When and Where?
Loyalty - How often?
Word-of-Mouth - Is the message being spread? New levels of awareness are critical for sales growth.

Posted via web from admore's posterous

Digital Content Moving From Free To Fee?

2010-01-21T22:21:00.001-05:00

Many media analysts expect that Comcast Corp.'s plan to buy a controlling interest in NBC Universal would give it a significant say in the future of online video -- and accelerate Hulu's move to a subscription service.

via latimes.com

It appears that we may be near an inflection point for online digital media. New powers seek to tilt the field in their favor (content creators and content distributors). You can't blame them for trying to get the full price the market is willing to pay.

Questions
What content has value?
What is the value of that content?
Is there a mix that increases total profits even if the most valuable content is seemingly under priced?

What is the optimal price to maximize profits? This is currently unknown and may remain that way for several years.

Posted via web from admore's posterous

U.S. Economy Is Recovering

2010-01-21T16:52:00.002-05:00

Jan. 21 (Bloomberg) -- The index of U.S. leading indicators rose more than anticipated in December, a sign the economy will keep growing through the first half of the year.

The New York-based Conference Board’s gauge of the outlook for the next three to six months climbed 1.1 percent, the most in three months, after increasing 1 percent in November. The gain exceeded the median forecast in a Bloomberg News survey for a 0.7 percent rise.

via bloomberg.com

This is good news. The economy is finally picking up speed and showing signs of forward progress. There are nice GDP estimates at the end of the full article on bloomberg.com.

Posted via web from admore's posterous

Kraft Foods & Cadbury Reach a Deal

2010-01-20T02:49:00.001-05:00

After months of talks and stalled negotiations, Kraft and Cadbury finally make a deal.

Wall Street Journal:

On the takeover front, Kraft persuaded Cadbury to accept its sweetened $19.4 billion takeover offer.

Hershey made some movement to reach a deal with Cadbury while the initial gestures by Kraft were rebuffed. Perhaps the involvement by Hershey further emboldened Cadbury to hold out for a better deal longer than they might have have without Hershey’s interest.

The talks with Hershey provided Cadbury with extra leverage in negotiations with Kraft. Hershey may have been successful in getting Kraft to pay more then they wanted to. This deal will be worth revisiting several times in the next five years. Suggested time frames after the deal closes.

6 months
1 year
2 years
5 years

Questions

Are there reduced costs as a result of the merger?

Are there greater economies of scale in commodity purchasing (reduced costs/greater buying power)?

Are Sales increasing slower, the same as, or faster than competition?Are sales growing slower, the same or faster than category growth?
Are categories expanding or contracting?
Are new markets being entered?

BLOOMBERG OIL PRICES 10/21/2009

2009-10-21T01:24:00.001-04:00

Bloomberg.com: Energy Prices: "PETROLEUM ($/bbl)

PRICE* CHANGE % CHANGE TIME
NYMEX CRUDE FUTURE 78.68 -.44 -.56 00:57
DATED BRENT SPOT 75.93 .25 .33 01:07
WTI CUSHING SPOT 79.09 -.52 -.65 10/20

Oil has gone up quite a bit in the past month or so. Here we are in the early stages of an economic recovery and oil is again climbing in price.

RETAIL NEWS WEBSITE

2009-07-04T22:37:00.001-04:00

If you are looking for news and information about retail you should visit RetailingToday.com.

The article that caught my attention in an email was “Meijer to open smaller, grocery-focused store in Chicago suburb”. Chicago has been generally opposed to large retailers locating in the city limits. Both Walmart and Target have generally been opposed when they sought entry to the Chicago retail market.

Apparently Meijer will be making a much smaller store, “102,000 square feet,” then their typical supercenter. Meijer is a mostly unionized company and they may find it easier to cut red tape as a result. The Wikipedia entry for Meijer notes that they have nonunion employees in several states as well as in Traverse City, MI.

Gas Pricing Analysis

2009-06-06T20:07:00.001-04:00

Bloomberg has NYMEX Crude at $68.44 per barrel. There are 42 gallons per barrel.

Cost per gallon of NYMEX crude is $1.6295.

The futures price of gasoline is 1.9546 per gallon.

NYMEX RBOB GASOLINE FUTURE 195.46

NYMEX CRUDE FUTURE 68.44

Here we have $1.9546/$1.6295 = a 19.95% premium. Previous analysis has pegged the nominal pricing premium as a 15% premium for gasoline.

Either crude is selling for less, gasoline is selling for more or some combo of both.

Things are a bit more interesting with pump prices jumping so much in the past month or so. Typically there is about a 60¢ higher cost for gasoline at the pump versus the futures price. The 60¢ is made up of taxes, distribution and profits.

A fueling station near me has 87 unleaded at $2.959. Currently there is a larger than normal spread between futures and retail pricing. The spread is now 100¢. We are in a recession and miles driven has been declining for some time as a result.

Takeaway:

These prices are not sustainable. There are tankers full of oil parked out in the ocean. As the economy recovers, there will be a rush of oil to market to meet growing demand. Prices should be relatively stable during the growth phase. If growth is slow as expected it is not unimaginable that crude and gasoline prices will drop considerably.

Crude Oil & Gas Prices: Futures Prices Equalized

2009-03-11T01:45:00.001-04:00

A barrel of oil is 42 gallons.

Bloomberg has oil prices as “NYMEX CRUDE FUTURE 45.76” dollars/barrel

Bloomberg has Gasoline as: “NYMEX RBOB GASOLINE FUTURE 128.54” cents/gallon

The conversion of oil is to divide price 42 gallons to get the dollar price of oil. Doing so we get a price of $1.0895238. The conversion to cents per gallon is accomplished by dividing by 100. Doing so we get 108.95 cents per gallon of NYMEX Crude.

NYMEX CRUDE FUTURE price is = 108.95 cents per gallon

NYMEX RBOB GASOLINE FUTURE price is 128.54 cents per gallon

There are two ways of looking at this. Either gasoline is more expensive or oil is cheaper. The one that is probably more correct is gasoline as % more than oil. This is likely the case because gasoline is refined from crude oil. The price of gasoline reflects the cost of refining into a product that has few end uses. Crude oil can be made into many different products.

Moving on… Formula: Change in price / base.

RBOB Gasoline is 17.98% more than crude oil on a per gallon basis.

NYMEX Crude oil is 15.24% less than gasoline on a per gallon basis.

SOURCE: Bloomberg Retrieved: 3/11/2009

TV SALES JANUARY 2009

2009-02-02T00:07:00.004-05:00

Bloomberg has an interesting article on TV sales.

Jan. 30 (Bloomberg) -- With her new 46-inch flat-panel television mounted above the fireplace, Theresa Nelson is ready for the big game.
“I wanted a new TV before the Super Bowl,” said Nelson, a 45-year-old brewery engineer at MillerCoors LLC. She paid $1,499 for the Samsung Electronics Co. TV at the Best Buy in Greensboro, North Carolina. The TV, which replaced her 10-year-old set, was $600 off and better than Circuit City’s price, she said.

For the full article visit Super Bowl May Spur Fewer TV Sales as Retailers Fight Slump

THOUGHTS:

Demand is falling
Prices are falling to match lower demand with the hope of increasing unit sales
If sales fall too much, capacity utilization at plants will break below the profitability point
Expect retailers to push computers to try to stem revenue losses from slowing television sales
Retailers will push more netbooks and second computers as well as accessories that enable consumers to do more.

KROGER PRIVATE LABEL PUBLICATION

2008-12-10T17:27:00.006-05:00

Mail Call via the United States Post Office

In today's mail was a publication from the Kroger Company. Kroger is our main supermarket. The publication is called "mymagazine™", "exclusive extras for our best customers"

What is so remarkable about this?

All products are private label [available exclusively at Kroger]
12 coupons
20 pages including front and back cover.

Main themes

Indulgence [vanilla cream puffs / Chocolate Oranges]
Holiday [stuffed olives / Black Tiger Shrimp Ring / spiral sliced ham]
Commodity products [frozen fruits / cheese]

Takeaway

These private label brands are only available at Kroger
Kroger wants to drive traffic to their stores. To drive occasion sales would increase sales at competing retailers. Using products and brands only available at Kroger accomplishes the former rather than the later.
Calling something "exclusive" increases the consumer interest [consumers like to be on the inside / special]

What are your thoughts?

GASOLINE PRICE DROP

2008-12-09T02:41:00.006-05:00

Just saw this data from Bloomberg.

Retrieved on 12/09/2008

PETROLEUM (¢/gal)

	PRICE*	CHANGE	% CHANGE	TIME
NYMEX HEATING OIL FUTURE	149.39	.35	.23	01:52
NYMEX RBOB GASOLINE FUTURE	95.38	-.80	-.83	01:10

The futures price of gasoline is less than $1. Most states have fuel taxes of between roughly 30 and 50 cents per gallon. Figure in about 10 cents a gallon for marketing, distribution and profits.

UPDATE: from API

Some facts: As of October 1, 2008:
The nationwide average tax on gasoline is 48.4 cents per gallon as of October 2008, down 1 cent from July 2008.
The nationwide average tax on motor diesel fuel is 53.6, a decrease of 2.8 cents from the July 2008 study.

Graphical representation of fuel taxes in July 2008.

The price of gas is going down, down, down. This is an amazing turn of events from June when prices were spiking at above $4 as a national average.

QUESTIONS FOR DISCUSSION

What are your thoughts?

What price do you think the national average price will ultimately fall to?

What month will the lowest average price occur in?

OUT-OF-STOCKS

2008-11-30T22:16:00.003-05:00

Kroger has both Coke and Pepsi two-liter bottles on sale. Three times in less than a week there was an out-of-stock [OOS ] on the product I was seeking to buy.

Day one had and OOS on the floor.
This situation had me asking a customer service manager to check the back room. Product was found. Two units purchased.

Day two had an OOS on the floor.
This time I ask the manager on duty if he would kindly check the backroom This time there was a store OOS. Since this brand and type was what I wanted I went to another Kroger location less than a mile away. They had it in stock. One unit purchased.

Day three OOS after a partial selection.
Went to the second Kroger that had preferred product in purchase number two. This time my goal was to buy two units as today was the last day of a 4/$5 sale. This time there was only one unit left of the preferred product. Bought that one and also bought a similar product from the other guy.

Consumer Behavior: Sometimes the consumer will...

Flavor Shift
Store Shift
Brand Shift
Not Buy

The Bottom Line
Coca-Cola, CCE, and Pepsi, PBG, need to do a better job on in stock and availability for their products.

What has been you experience with out-of-stocks on food, beverages and consumer packaged goods products?

What did you do?

BLOOMBERG: "OPEC Defers Decision on Output Cut, Seeks $75 Oil "

2008-11-30T12:53:00.004-05:00

OPEC has deferred a decision on reducing output quotas. Oil is in the low $50 range right now. This past summer it nearly hit $150 a barrel.

The United States, the largest economy in the world has entered a recession. Since the U.S. is such a large part of the world economy the rest of the world suffers as a result. The U.S. is a major consumer of other nations exports.

One of the best things to happen in the past four months has been the rapid decline in the price of gasoline. Oil is a major component in the price of gasoline. The reduction in gas prices has left more money in household budgets.

As oil falls, gasoline falls, consumers have more money to spend. As consumers resume spending the recession will slowly end and the economy will begin growing again.

Consumers need lower prices to restore their confidence in the economy and in their financial position. If OPEC were to cut output to increase prices in the short term, it is likely that the recession would linger for a longer period of time. At the same time many of the people calling for alternative energy sources will have the ears of more people. Investment in alternatives will likely increase thereby reducing demand for OPEC oil.

OPEC should hold output steady and allow prices to fall. This will get the world economy back up to speed faster. Output cuts only delay this recovery. Any production or quota reductions make OPEC look bad and gives those opposing them greater power, force and leverage. Taking action to increase prices is the wrong decision for OPEC to undertake.

What are your thoughts?

Sources for you to explore

Bloomberg: Energy Prices
Bloomberg: OPEC Defers Decision on Output Cut, Seeks $75 Oil

INCOMPLETE ANALYSIS: WHOLE FOODS

2008-11-14T10:41:00.007-05:00

When you look at only a few metrics and make analysis from that, you have a higher risk of being wrong. It may well turn out that Whole Foods is really struggling, unfortunately the analysis in the article is incomplete.

Whole Foods in a Whole Lot of Trouble
November 13, 2008

Whole Foods (NASDAW: WFMI) is the worst performing supermarket chain in 2008, according to Geezeo’s Main Street Spending Index.
Whole Foods has had a cult like following amongst upscale urban professionals. Aspirational shoppers even mocked their own spending by nicknaming Whole Foods: “Whole Paycheck”. Given the economic instability though, customers are staying away from Whole Foods in droves.
The table below compares the drop in average consumer spending per visit at major retail grocery chains year-to-date. Whole Foods spending dropped 19% from January to October 2008. The winner was value-branded Stop & Shop (AHONY.PK) . Stop & Shop had a slim 1.54% decrease in customer spending. Not bad for an economically volatile year.

Statement: "Whole Foods spending dropped 19% from January to October 2008."

Did the total revenue of Whole Foods really fall that much? No, basket size fell.

The article also indicated that Whole Foods has a small basket size in relation to other grocery chains. Why might that be? Whole Foods shoppers may have smaller basket sizes [average transaction] because people buy fresh products more frequently. The more times a customer is in your store the more opportunities you have to gain incremental [unplanned] sales.

The real question is... What is happening to shopper frequency? The article did not address this metric. This is a critical measure in food retail. If visits increased, it is possible for basket size to shrink but for total sales to increase.

Traditional Grocery

The typical shopper at Safeway and Kroger is a once a week shopper who is hurried for time and shops there to get it all done at once. This means the visits are stable and basket sizes are typically larger. If a customer decreases frequency at these chains there is the possibility that sales will be pinched.

Increasing & Maintaining Store Visits

Typically you can only sell to customers that are actually in your store. The Internet is changing this to some degree, this is minuscule at present [for supermarkets, grocery]. Many food retailers have created email newsletters to spur visits thereby getting a customer into a store where they will make actual purchases.

PRIVATE LABEL POWER

2008-11-05T22:21:00.004-05:00

The Wall Street Journal has an interesting story about store brands and consumers increasing acceptance of them. The United States has a relatively small percentage of private label market share. Many nations in Europe purchase private label [store brands] at double or triple the U.S. rate.

NOVEMBER 6, 2008

At the Supermarket Checkout, Frugality Trumps Brand Loyalty

By ELLEN BYRON

When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses.

"I thought I'd be able to tell the difference, but I couldn't -- I looked at the ingredients and they seemed almost the same," says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, "I'm going to buy the store-brand moisturizer and cleanser -- it's less money."

A few things to think about

Food prices have been inflated by rising grain prices as well as fuel transportation costs
Consumers are feeling a pinch from higher fuel prices that have only recently pulled back
People are cutting expenses where they can
Unemployment was most recently reported as 6.1% in Sept.
More firms have announced layoffs or initiated them since then
People are tightening their financial belts

Benefits to Retailers of Private label brands

Compare favorably with major competitors such as Walmart.
They are hard to directly compare with Walmart bands and sizes
Reduce comparison to prices in other stores as the items are different
If a consumer falls in love with a particular item, it is not available at any other retailer, this increases store loyalty
Loyalty increases store visits
Loyal customers spend more because some quality outweighs potential costs savings from a less respected brand or a less expensive private label

Takeaway

If current economic conditions persist major branded goods producers will come under increasing pressure. This pressure will come from retailers and consumers. Even the stock market will make demands if performance of branded items slips.

It is critical for branded goods makers to create a compelling case to consumers why their product is worth a premium price. If U.S. unemployment hits 8.5% or higher branded goods firms will be under major strains.

Consumers are becoming more comfortable with private label. The longer consumers are under strain and purchasing them, the stronger their loyalty will be when things get better. It may be tougher to get up sell people in the future. The case will have to be stronger and more compelling.

What are your thoughts?

INDUSTRY CONSOLIDATION: SPARTAN BUYS VG'S

2008-10-14T01:28:00.005-04:00

One of the last sizable family owned supermarket chains in Southeast Michigan is being bought by Spartan. This should allow them to better compete with larger rivals...

Kroger
Meijer
Walmart

Spartan has been on an acquisition tear the past few years. Chains they have acquired include...

Spartan Stores: 'Very little will change' when Fenton-based VG's Food and Pharmacy comes under new ownership

FENTON -- A staple in the community and one of area's last independent family-owned chains, VG's Food & Pharmacy has been bought up by the Spartan Stores chain.

The move helps the hometown chain compete with supermarket bigwigs -- including Meijer and Wal-Mart stores that also have been expanding in Genesee County, said David J. Livingston, a supermarket industry analyst...

What are your thoughts on supermarket industry consolidation?

WSJ: "Study Suggests Fan Use Cuts SIDS Risk in Babies"

2008-10-06T22:03:00.006-04:00

Questions

Will fan sales increase in the coming days and weeks? Most stores have cut back on fan inventory already [Summer is over].
Will they be able to respond quickly if demand increases rapidly?
Will they make signs pointing to where fans are in the store?
Will they just sent an email to department managers or will store managers work to drive sales of fans?
What training and information will they provide fro front line employees?

Part of the Wall Street Journal article is excerpted below. Full article should be available by clicking on the headline for this post.

Using a fan while a baby is sleeping appears to significantly cut the risk of Sudden Infant Death Syndrome, or SIDS, according to new research.

Researchers at the Kaiser Permanente Division of Research in Oakland, Calif., compared 185 babies who died from SIDS in 11 California counties between May 1, 1997 and April 30, 2000, with 312 normal infants from similar socioeconomic and ethnic backgrounds living in the same counties. Mothers were asked several questions about fan use, pacifier use, room location, sleep surface, the type of covers over the baby, bedding under the infant, room temperature and whether a window was open.

TAKEAWAY: Stores with baby sections should use this new information as a communication opportunity. Deliver actionable and important information to consumers that will respond to it. There are so many lost selling opportunities, it makes zone/district/etc managers sick.

Department managers should consult with category managers on which fans are tops with parents with infants. This might be obvious already. Being proactive is important. Order top selling fans today so weekend sales do not lead to Out-Of-Stocks that kill profits and destroy customer satisfaction.

What are your thoughts on how businesses will/should respond to this new research?

MORE GOVERNMENT RED TAPE

2008-09-28T13:33:00.006-04:00

Opinion: The government is creating more hoops for food service operators to jump through. It should be acceptable that calorie and nutrition information be available on a standard sheet of paper or in a digital kiosk. Some supermarkets and fuel centers have computer kiosks for placing orders. Have seen these at Wawa fuel stations and at Ukrop's supermarkets in Virginia. The nutrition information could be part of this system. Might cost big money to have the system upgraded. Just another additional cost of doing business thrust upon the business enterprise.

Washington News

U.S. Sens. Tom Carper (D-DE) and Lisa Murkowski (R-AK) introduced the Labeling Education and Nutrition Act, which would require restaurants and grocery stores that serve prepared foods and have 20 or more locations to disclose calories for each menu item. Under the bill, calories will be posted directly on the menu, menu board or in one of the approved alternative ways, such as a menu insert or a sign directly next to the menu board. Full Story

WSJ: "WALGREEN TOPS CVS OFFER FOR LONGS"

2008-09-13T14:17:00.004-04:00

DRUG RETAIL WARS

The Wall Street Journal has an article about Walgreen made an offer for Longs Drug Stores. CVS has previously made an offer to buy the Longs Drug Store chain. This offer was accepted and the deal was nearly completed.

NEW YORK -- Walgreen Co. made an offer late Friday to buy Longs Drug Stores Corp. for $2.8 billion, hoping to unseat a rival offer from CVS Caremark Corp. that Longs had already accepted.

Walgreens said it would pay $75 a share in cash to buy the California-based Longs, besting CVS's price of $71.50 per share, ...

Takeaway
Walgreen made this offer to force CVS to pay a higher price. This may or may not happen. The cost of this move is limited for Walgreeen. The more money CVS pays the less they have for remodeling and competing.

CVS may have to match the $75 a share offer. There is little possibility that Walgreen actually thought their offer could, would or will go through.

This move is intended to slow their fiercest direct competitor. Both Walgreen and CVS are in a battle against Walmart, Target, COSTCO, Kroger etc.

CREDIT CRUNCH: BIG 3 DEALER CONSOLIDATION

2008-08-28T00:10:00.005-04:00

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

2008-08-19T11:17:00.005-04:00

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$

2008-08-14T23:16:00.003-04:00

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

2008-08-12T22:16:00.004-04:00

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

2008-08-10T23:27:00.003-04:00

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

2008-08-09T01:31:00.006-04:00

"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

2008-08-06T01:14:00.004-04:00

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 "

2008-08-05T01:26:00.004-04:00

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

2008-08-05T01:19:00.002-04:00

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"

2008-08-04T13:01:00.005-04:00

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

2008-08-04T12:18:00.005-04:00

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...

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 "

2008-08-03T20:24:00.003-04:00

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

2008-08-03T18:36:00.000-04:00

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