Exxon Mobil makes $29B bet on Natural Gas - Buys XTO Energy

The Company that provides the product to fill your car’s fuel tank now wants to provide the fuel to power the electrical production for your home.

ExxonMobil, The world’s largest publicly traded oil company, agreed to buy XTO Energy in an all-stock deal at a 25 percent premium, a $29 Billion move showing how convinced they are that pressure to curb climate change will mean natural gas, abundant in the US, cleaner than coal and suddenly much easier to reach with new technologies — will become a crucial source of U.S. power.

ExxonMobil, a company that is among the most conservative and profitable in a conservative industry is going headfirst into the market for natural gas, this deal suggests Exxon sees change coming for an energy source best known now for heating homes. The drilling and extraction technology to unlock natural gas from tight rock formations has advanced so rapidly that energy experts have raised their estimates of how much fuel is available by 35 percent in just two years. The emergence of the discovery of massive supplies of natural gas in the U.S. coincides with the nation's focus on cutting greenhouse gas emissions.

Largest Energy Deal in over Four Years

The deal announced late Monday was also the largest for the U.S. energy sector in at least four years and Exxon's biggest acquisition since it bought Mobil Corp. for $75 billion in 1999. The natural gas supply increase and coming climate legislation have been cited by utilities this year as reasons as to why they have shuttered old coal-fired power plants and scrapped plans to build new ones. Already in the news with the controversy at the Copenhagen Climate Change Conference this week, climate legislation would put utilities in the crosshairs, and many are seeking new fuels like natural gas to produce electricity to minimize the economic hit. Just this month, Progress Energy became the latest utility to announce it would close its coal-fired power plants in favor of producing electricity using natural gas.

Exxon Mobil expects global demand for gas to grow 50 percent by 2030. "Natural gas is really well-suited to meet that growing power generation demand, both from the standpoint of its lower environmental impact, but also its capital efficiency and its flexibility," Exxon Mobil chairman and CEO Rex Tillerson told analysts on a conference call.

Other Oil Companies look to get into Natural Gas Market

Through August, utilities used gas to generate 23 percent of the nation's electricity. That figure is up nearly three percentage points from last year. Coal's share was down about 13 percent. Takeover target XTO claims about 45 trillion cubic feet of gas, much of it trapped in tight shale formations. Technology developed over the past decade has made it much cheaper to pull natural gas from those formations.
Monday many energy experts were laying odds as to which natural gas companies would be sold next, and which major oil companies might follow Exxon's lead by snapping them up. European oil firm are already cutting deals with Chesapeake Energy, one of the biggest independent U.S. natural gas companies. Companies like Royal Dutch Shell and Statoil want more exposure to supply in the natural gas fields in the U.S. and the technology to extract gas. Potential takeover targets include big natural gas companies like Chesapeake Energy, Devon Energy and Anadarko.

Exxon is also moving beyond the U.S. to increase their natural gas production. Last week, ExxonMobil gave the go-ahead for a $15 billion natural gas project in Papua New Guinea, a nation just north of Australia. That deal positions ExxonMobil to provide energy to a fuel-hungry China.

Once the XTO deal closes, Exxon said it will be establishing a new organization to manage global development and production of so-called “unconventional resources”. XTO's chairman and founder, Bob Simpson, said his company has the capability of developing the unconventional resources that have given North America more than 100 years' worth of natural gas supplies. This is what Exxon is purchasing in the deal.

The deal was valued at about $31 billion based on Exxon's closing stock price Friday Dec 11th. Exxon shares fell nearly 5 percent on Monday, placing the deal's value closer to $29 billion.

McDonald's to roll out breakfast dollar menu

McDonald's has announced will begin selling a variety of breakfast items for $1 early next month, a spokeswoman for the world's largest hamburger chain released the plan Thursday.

The move to add to its already popular dollar menu comes as McDonald's tries to fight a decline in U.S. sales, which have slipped following months of success when its cheap eats were a big draw for recession-strapped diners. November sales were down, and McDonald’s blamed the high jobless rate and the economy in general for the decline.

Dollar breakfast items added

Breakfast items to be added to the $1 menu, which already includes eight items for lunch and dinner time, are the company's Sausage McMuffin, a sausage burrito, a sausage biscuit, a small coffee and a hash brown. Some of the items are already sold for a dollar or less at some locations, although prices vary. Franchisees can set prices within limits, and McDonald’s will take that into account. For instance, a restaurant already selling a small coffee for 89 cents will substitute a larger beverage for its Dollar Menu.

Fast-food restaurant chains, which spent recent years expand their early morning business, have seen declining breakfast sales figures from business diners as unemployment climbs. It means fewer workers stop in for coffee and a breakfast sandwich on their way to the office. NPD Group’s market research has shown breakfast traffic fell 2 percent this summer at the nation's fast food restaurants.

At McDonald's, breakfast business is continuing to increase, although growth has slowed this year. McDonald’s has not publicly provided specific figures on its breakfast sales. Analysts feel that Thursday's move should McDonald's strengthen its breakfast business, in which it is still dominant among fast-food chains.

Fast food breakfast competition heats up

The dollar breakfast menu move will also put competitive pressure on McDonald's competitors, many of whom are also rushing to slash menu prices to keep customers, who are ever more reluctant to open their wallets, happy.

Dunkin Donuts is trying out a 99-cent breakfast menu in the Chicago area. Burger King's already has a nationwide breakfast value menu that includes hash browns, a ham omelet sandwich and a french toast stick 3-pak for $1 each.

The Power to Change…

This was the Feature Article in the Dec 9 Issue of Condevco's "Meter" Newsletter

Last month we talked about Continuous Improvement Process (CIP) in addressing how to approach getting your Chains or Stores ready for the holidays. Can Happy Holidays and Happy Retailing coexist with the current consumer mood and uncertainty facing the US economy? Yes it can, and it’s all about your power to change.

In one of the articles below, McDonald’s experienced only the fourth same-store sales declines in 6 ½ years in November, and they are pointing to overall job weakness as a contributing factor. Chevron is debranding over 1,100 stations in Selected Eastern US markets, and retailers are reporting a mixed bag of results for November sales. Change is occurring all the time.

Really, what this comes down to is this…You have the power to change how your business is doing. For the better or for the worse. The Holidays, whether you celebrate Christmas, Hanukkah, or Kwanzaa at this time of year, tend to reflect one message. The power of change and renewal.

Whether it’s Ebenezer Scrooge in “A Christmas Carol”, George Bailey in “It’s a Wonderful Life”, or Baby New Year, the chance to start over again is what makes the message of these year ending holidays resonate so deeply with people all over the world. This is the time of year that says renewal, redemption, refresh.

“Today is the first day of the rest of your life” is a phrase that popularized that message back in the ‘70’s, although no one seems to know where it first originated. As the holiday shopping season proceeds, and in many parts of the country, the weather gets cold and uninviting, it’s easy to look at this time as just another holiday season to be endured. Continuous Retail Improvement means looking to make a change, whether it’s incremental or sweeping, as soon as you recognize a way to make some aspect of your business better.

Let the Condevco Team help you make a fresh start by instituting Continuous Retail Improvement in your business today. (Click here to Contact us)

Retailers Face the Ghost of Christmas Present -Big Lots Up, Neiman Marcus Down, Others Hurting

January 2nd, 2009, I posted a blog entry to this Blog titled “The Ghost of Christmas (Just) Past as a little play on the dismal sales season. Click here to Read . At that time, one of the points made was trading down is the reality. I’m following it up now with what the retailers are facing at the moment: The Ghost of Christmas Present.

In the new retailing climate you see that in the last week’s worth of results reporting, Big Lots is up, and Neiman Marcus is down. Closeout retailer Big Lots Inc. posted a better-than-expected quarterly profit, aided by lower freight costs, and raised its outlook for the holiday fourth quarter. The retailer, which specializes in sales of excess inventory from home appliances to toys, also said it would immediately start buying back $150 million of common shares.

Conversely, upscale retailer Neiman Marcus Inc. reported sharply lower quarterly profit as worried consumers continued to avoid luxury items amid a slowdown the company expects will last for some time. Sales at its namesake Neiman Marcus and Bergdorf Goodman stores open for at least a year, or same-store sales, continued to fall, dropping 14.9 percent during the quarter. Overall comparable sales, including its direct marketing segment, declined 13.7 percent.

Neiman Marcus, in a regulatory filing on Wednesday Dec 9th, cited "a challenging economic and retail environment" that it said would likely persist for an "extended period of time." The downward sales trend has continued in the current quarter, it said. Last week the company reported same-store sales at its Neiman Marcus and Bergdorf Goodman stores had fallen 12.7 percent in November, a period that includes the busy holiday shopping weekend following Thanksgiving. Those two store chains account for about 83 percent of the company's revenue. Neiman Marcus said it experienced weak demand across all geographic areas and that its apparel and home decor categories were particularly hard hit.

Value Shopping In

Clearly, the trickle to value shopping has become a stampede.

Big Lots, which shut down its small Internet operation during the third quarter, sells merchandise that others cannot. When manufacturers are left with extra inventory due to a discontinued line or a change in packaging requirements, they call Big Lots, which will buy the merchandise and sell it in its stores at discounted rates. Big Lots has been somewhat insulated from the downturn as shoppers seek its low prices on staples like food or paper towels.

The better-than-expected results came a day after many retailers posted much weaker-than-anticipated November sales as shoppers were keenly focused on bargains. While consumers have been "very stingy" on discretionary purchases, the home category is actually one of the best performers so far in the fourth quarter, according to Big Lots.

Big Lots is reaching out to it’s customers by introducing a loyalty-card program to offer discounts to frequent shoppers during the quarter, which more than 600,000 have already signed up for, Fishman said. Early sales of Christmas seasonal merchandise, such as decorations, were tough in October, but sales of those items are up so far in the current fourth quarter, he said.

Big Lots Profit Jumps
Big Lots net income in the third quarter ended on October 31 rose to $30.3 million, or 37 cents per share, from $12.2 million, or 15 cents per share, a year earlier. Big Lots' third-quarter sales rose 1.3 percent to $1.04 billion, while same-store sales, or sales at its locations open at least two years, fell 0.2 percent.

Big Lots, which has been signing deals to open stores in better locations as other retailers close their doors, said it opened 52 new stores this year -- two more than initially planned for. It is also cutting back on closing stores, and now plans to shut just 30 locations this year instead of 40. Big Lots said it plans to keep opening stores in better spots as such locations are now available and the cost has declined. The company expects to once again open more stores than it closes in fiscal 2010 and beyond.

For the fourth quarter, Big Lots expects earnings per share from continuing operations of $1.09 to $1.14, up from its August forecast of 99 cents to $1.04. The company expects comparable store sales to rise between 1.5 percent and 2.5 percent for the fourth quarter, and said comparable sales rose in that range in November.

Neiman Marcus Experiencing Shrinking Sales and Profits
At the Luxury end of the retailing spectrum, Neiman Marcus said revenue in the fiscal first quarter, ended October 31, fell 11.9 percent to $868.9 million. The privately-held company reported a net profit of $8.5 million, down from $12.9 million a year earlier. Neiman Marcus was acquired by an investor group led by Texas Pacific Group and Warburg Pincus LLC in October 2005.

As has been the case with rival upscale retailers Saks Inc and Nordstrom Inc Neiman Marcus has maintained tighter inventory controls to avoid having to steeply discount merchandise to get it off shelves. Last year it was not uncommon to see luxury stores slash prices by 70 percent. Neiman Marcus said its comparable inventories were 22.5 percent lower in the quarter than a year earlier. Neiman Marcus wasn’t the only retailer feeling the holiday pain, though.

Slow Start to Holidays as Many Retailers Post Weak Sales
U.S. retailers from Macy's to Costco posted much weaker-than-expected sales for November as shoppers focused only on big bargains at the start of the key holiday selling season. Some, like department store operator Macy's also forecast quarterly earnings below analysts' estimates.

Out of 15 retailers that reported by early Thursday December 3rd, 11 missed analyst estimates, including Costco Wholesale, Children's Place, Walgreen and Hot Topic, according to Thomson Reuters data.

Over the U.S. Thanksgiving weekend, consumers focused mostly on promotional deals and made few impulse purchases as concerns about the economy remained top of mind, analysts and executives said. Shoppers Targeted the featured promotional Items and stayed away from impulse purchases on “Black Friday” and Cyber Monday. Store chains also blamed warm November weather, which kept consumers from buying winter clothes.
On December 3rd, Macy's shares fell 2.7 percent in trading before the market opened, while Costco declined 2.8 percent. Teen retailers Aeropostale and Abercrombie & Fitch also saw their shares sink more than 7 percent after disappointing November results. The November sales results include the day after Thanksgiving, traditionally known as "Black Friday," when retailers offer rock-bottom prices to kick off the holiday shopping season.

Early data on weekend shopping from the U.S. Thanksgiving Day on Nov. 26 through Sunday showed only a slight increase in retail sales from the comparable 2008 period, when consumers were hammered by a deepening recession and credit crisis. As of Black Friday, analysts had forecast a 2.5 percent rise in November sales at stores open one year, according to Thomson Reuters data. But estimates shrank since the weekend, and as of Wednesday, analysts expected a 2.1 percent increase. That would still be the best showing since April 2008 and compares with a 7.8 percent decline in 2008, the worst drop since data started being tracked in 2000.

Retailers Protecting Profits by Controlling Inventories
Even if sales are flat or rise modestly during the holiday season, analysts said retailers should report improved profits because they have cut inventories and pared back costs to avoid the huge discounts they were forced into last year. For example, Victoria's Secret owner Limited Brands forecast a low-to-mid-single-digit decline in December same-store sales, but said it planned to be less promotional this month. The company also posted "significantly" higher November margins, "driven by improvements in each main business," Amie Preston, vice president of investor relations at Limited, said in a recorded message.

Retail sales data are closely watched as consumer spending makes up roughly 70 percent of the U.S. economy. But the figures also give an incomplete picture because many of the retailers that are key holiday destinations, including industry leader Wal-Mart, Best Buy and Amazon.com , do not report monthly sales. Macy's said on Thursday that same-store sales fell a worst-than-expected 6.1 percent during the month. It stood by its forecast calling for quarterly earnings of $1.00 to $1.05 a share, excluding one-time items, but that was still below analysts' expectations.

Teen Retailers Mixed
Abercrombie & Fitch's same-store sales fell 17 percent, far worse than the analysts' average view of a 9.3 percent drop. Also on Wednesday the 3rd, teen clothing retailer Hot Topic posted a worse-than-expected 11.7 percent drop. Aeropostale sales came in slightly worse than expected, with a 7 percent increase. The company's quarterly earnings forecast also disappointed some investors.

Results Vary by Retailer
Costco said same-store sales rose 6 percent, missing the analysts' average estimate of 8.1 percent. Same-store sales at U.S. locations rose 2 percent.
Children's Place posted a 13 percent drop in comparable sales, including online sales, compared with analysts' expectations of a 1 percent rise. "Customers gravitated towards the sale merchandise," a company spokeswoman said in a recorded message.

Walgreen, one of the largest retailers that reports monthly same-store sales figures, on Wednesday posted a 3.9 percent rise for November, below analysts' expectations. The drugstore chain also said Thanksgiving weekend was "notably softer."

On the positive side, Limited posted a better-than-expected 3 percent increase and home furnishings retailer Pier 1 Imports cited a strong Thanksgiving weekend as it reported a 13.7 percent increase in same-store sales for its third quarter ended Nov. 28.

Chevron Withdrawing Brand from Selected Eastern U.S. Markets

Following the review of its U.S. retail portfolio, Chevron has decided to withdraw its motor fuels operations in some areas of the Eastern United States. As a result, approximately 1,100 independently owned and operated retail stations will be de-branded. They announced this on December 4th. The stations make up roughly 8 percent of its total U.S. sales volumes.

Areas Impacted
Impacted areas include Delaware, Indiana, Kentucky, North Carolina, New Jersey, Maryland, Ohio, Pennsylvania, South Carolina, Virginia, West Virginia, Washington, D.C., and parts of Tennessee, the company stated. Chevron expects to complete the planned market exits by midyear 2010. Chevron expects all of the stations to continue operating under other brands, and has a program in place to assist retailers with the transition, the company stated.

Chevron will continue to supply more than 5,000 Chevron and Texaco branded stations in the Eastern U.S., and will continue to develop and grow its retail presence in other areas of the U. S., according to the company.

Joblessness Hits McDonald’s November Sales in US

The recession has bitten deeper into consumers, and so the jobless rate and consumer confidence here in the US finally caught up with McDonald's Corp. in November; it seems high unemployment ate into sales.

Still doing better than rivals
The world's largest burger chain is doing better than its competitors, Most of them now aggressively pushing value menus and discounts of their own. The U.S. economy needs to pick up before McDonald’s can expect big improvements. Job growth will be the key to McDonald’s sales increasing.

On Tuesday, McDonald's said sales at restaurants open at least a year fell 0.6 percent in the U.S. This was the second consecutive monthly decline for same store sales, an important indicator of a restaurant chain's vitality. In October the same store sales fell 0.1 percent. November's overseas results were better the weakening dollar translated foreign revenue into more dollars. Outside the US, sales in locations open at least a year rose 0.7 percent.

Early Value Strategy adopter
Because of its size and the early adoption of a “Value” strategy with its increasingly popular dollar menu, McDonald's was an early beneficiary of the recession as families and diners in general traded down from more expensive restaurants. At McDonald’s last November, sales in locations open a year climbed 4.5percent in the U.S. and 7.7 globally. The recession’s length is making hard to maintain that momentum Todays reported results were only the fourth U.S. sales decrease in 6 1/2 years.

Increasing competition from rivals trumpeting their own deeply discounted menus as they adjust to the new consumer mood is also affecting McDonald’s. Taco Bell has a value menu that begins with items for 79 cents, and Wendy's is advertising $2.99 combos. Burger King has also heavily pushed a $1 double cheeseburger, against resistance from it’s own franchisees, that it claims as being a bigger and better value than McDonald's $1 McDouble burger.

Overseas Sales Stronger
In Europe, sales in locations open at least a year rose 2.5 percent, thanks to stronger business in the U.K. and France. But the figures were still short of what had been forecast. In other parts of the world, sales in locations open for at least a year in the Middle East, Africa and Asia/Pacific dropped 1 percent. Last year, the figure for these areas rose 13.2 percent.
Meanwhile, McDonald’s system wide sales — a figured based on results at company owned restaurants as well as those operated by franchise owners — climbed 10.1 percent. Adjusting for foreign currency fluctuations, system wide sales were up 2.3 percent. McDonald’s, based in Oak Brook, Ill., runs more than 32,000 restaurants in more than 100 countries.

Burger King and Franchisees brawl over $1 Double Cheeseburger Promo

Burger King franchisees sued the burger restaurant chain this week over its $1 double cheeseburger promotion, saying they lose money on the sandwich deal and the company can't set maximum menu prices. The National Franchise Association, which is a group that represents over 80 percent of Burger King's U.S. franchise owners, said the $1 Double Cheeseburger promotion forces restaurant owners to sell the quarter-pound burger at a 10-cent loss at the minimum.

Too expensive to promote

Costs vary according to location, but the $1 double cheeseburger costs franchisees at least $1.10 typically, said Dan Fitzpatrick, a Burger King franchisee from South Bend, Ind. who is a spokesman for the association. The actual food costs about 55 cents for the meat, bun, cheese and toppings. The balance of the cost is for expenses such as rent, royalties and worker wages.

After the company tested the $1 deal in markets across the country, the discounted burger went national last month, in spite of the fact that franchise owners, which run 90 percent of the company's 12,000 locations, rejected the product twice before when offered, because of the expense.

A spokeswoman for Burger King, the nation's No. 2 hamburger chain, said the Miami-based company believes the litigation is "without merit," particularly after an earlier appeals court ruling this year showing the company had a right to require franchise owners to participate in its value menu promotions.

Restaurants looking to boost business

Restaurants in general, and particularly fast-food chains, have been slashing menu prices because of the poor economy. McDonald’s the nations #1 Burger chain has been aggressively promoting it’s $1 “Value Menu” for some time.

Restaurant executives at both fast-food and casual dining chains are hoping the deep discounts and combo deals will bring in diners who are spending less when they eat out, and lots have just been staying home altogether.

When the $1 double cheeseburger was announced this fall, analysts felt it could increase visits to Burger King by as much as 20 percent. The lawsuit was filed Tuesday in U.S. District Court in Southern Florida.

Continuous Retail Improvement through the Holidays

This was the feature article in the Nov 3, 2009 Issue of Condevco's "Meter" Newsletter.

As we begin to get ready for the holiday season, hope springs eternal, or it should. It’s time to look at what we can do to make these holidays happy, for our customers, Associates and our businesses bottom lines.

As we have been discussing, this hasn’t been a banner years for business in general. In our specific business, gasoline prices are rising again, and there is always the possibility of a price spike shocking customers into not spending inside the store, like in the summer of 2008.

As of Friday October 30th Retail gasoline was at its highest average price in over a year. (See the article below) Using the “Sports quote of 2004” according to USA Today, which has become ubiquitous and irritating in ALL phases of conversation by now in 2009; “It is what it is” Gasoline Prices are what they are… But that doesn’t mean you need to let that affect how you get ready for and operate through the holidays inside your store and on your store site. In other words, the things you CAN control.

Wikipedia defines Continuous Improvement Process (CIP, or CI) is a management process whereby delivery (customer valued) processes are constantly evaluated and improved in the light of their efficiency, effectiveness and flexibility. In other words, “It is what it is, but it doesn’t have to be!”

With the holidays approaching and the big retailers having been in full holiday mode for weeks, it’s time to look at where your stores are now, and make the decision to continually improve the retail offering (the infamous “Value Proposition”) straight through to January.

That means keeping any seasonal decorations repaired and cleaned and looking fresh, perhaps a store mini-reset halfway through the season with some new items, and getting your customer service associates to “Buy In” to the fact that the next eight weeks can be the best eight weeks of the year.

Should you start selling Blu-ray players or flat screen TV’s? Probably not, but making sure you have the holiday-themed candy and drinks in the foreground is good. This is an excellent time for new uniforms, painting the curbs, and making sure those nozzles and hoses are clean and working well.

This is a chance to really make a positive impression on your customers. It doesn’t cost much to make a big difference in how “Jolly” your customer’s perception of your stores is.

This is a great time of year for ice sales and fill-in party supplies. ATM’s and Money orders are big services.

Let Darcee and Ron, the team from Condevco help you on the way to Continuous Retail Improvement (Click To Inquire)

Halloween 2009- Scary news on Retail gas prices

Scary! Retail Gas Prices Hit Highest Level This Year


Retail gasoline prices continued higher Friday to a new peak for the year, forcing consumers to dig deeper into their stretched budgets to pay for fuel.

Natural Gas and Gasoline Higher
Natural gas prices have also been moving up, and have now climbed 16 percent in the past two months — just in time for the winter home heating season to kick in.
Supplies of oil and gas are plentiful, so that’s not why the prices are climbing. Storage points for natural gas are so packed that producers are running out of places to put it. Crude Oil stocks are also well above average levels.

Gasoline prices are now up 17 straight days according to AAA. That is the highest national price average since Oct. 26, 2008. Prices are averaging 5.9 cents higher from a week ago and 14.8 cents from a year ago. The average retail price for gas was $1.686 a gallon last December. Today's price adds about $50 a month on to the monthly gas cost for the gasoline customer compared with then.

Iffy Economic news
This comes at a time when unemployment is at a 26-year high, and consumer confidence is low. The stock market reacted badly to the consumer confidence numbers released on Friday, driving the Dow down almost 250 points on Friday.

Oil prices skyrocketed in July 2008, to $147 a barrel. That helped to put the economy into recession. Economists are worried that high oil prices will put a halt to the budding economic recovery.

Crude Oil and Dollar Trade
The current reason for the increase in pump prices is because crude oil prices have been rising, from $65 a barrel as recently as August to $82 last week. Oil settled Friday afternoon at $77 a barrel.

A year ago, gasoline prices were heading down as the recession kicked in and the implications of the global financial crisis became better understood. Demand for oil and gasoline went down with the economic contraction.

Crude Oil is moving generally higher because there are signs that the economy is improving. The weaker dollar US Dollar is also a large contributing factor, since crude oil’s worldwide price is determined in US Dollars, a less valuable currency leads to higher prices for oil. The US Commerce Dept. said that the U.S. economy grew at a 3.5 percent annual pace in the third quarter on Thursday, the best growth percentage in two years, breaking four consecutive quarters of declines.

Inventory levels of gasoline, heating oil and diesel fuel remain well above normal levels.

As the dollar rose on Friday, crude oil fell sharply. There was also the dour consumer spending report, and doubts about consumer confidence going into the holiday season.

There’s some scary Halloween news!

Stocks Dive as Consumer Spending Worries Mount

Stocks plunged Friday, erasing all of the previous day's big gains, as a drop in consumer spending made investors nervous the recovery momentum can’t be sustained.

Major stock indexes tumbled more than 2 percent in afternoon trading, including the Dow Jones industrials, which gave back all of Thursday's 200-point gain, and dropped an addition 50 points. Big decliners were banks, energy and materials companies. As stocks fell, investors moved to safer assets like the dollar and Treasury bonds. The decline in stocks came after a rally yesterday, based on a 3.5% GDP growth number.

Personal Spending Falls
Investors sold stocks after the Labor Department said personal spending fell 0.5 percent in September. This number was about where the forecasts said it would be, but it was the largest drop in the last three quarters and followed a 1.3 percent jump in August that was led by the government's “Cash for Clunkers” car rebate program, which was very popular.

The report casts doubt on the economy's recovery, which many economists fear has been primarily inflated by government stimulus programs. With no bounce in consumer spending, which makes up a major part of the U.S. economy, investors are worrying the recovery can’t last.

The Dow fell 249.85 points to 9,712.73, led by news of a drop in the mood of consumers. The Reuters/University of Michigan consumer sentiment index fell to 70.6 in October from 73.5 in September.

The Labor Department also reported Friday that personal income, which will drive a recovery by consumer spending, was flat in September compared with the previous month, although this was in line with expectations. A lack of income growth is due, in part, to ongoing high unemployment rates, also a major worry for the market.

Financials Decline
Financial stocks were among the day's biggest decliners. Shares of CIT Group Inc. dropped nearly 15 percent after the commercial lender said Carl Icahn, a major investor in the firm, agreed to support its restructuring plan and provide it with a $1 billion line of credit. CIT Shares dropped 14 cents to 81 cents.

Energy and basic materials producers also fell sharply as the dollar gained ground against other major currencies. On the New York Mercantile Exchange, gold prices slipped about $9 to $1,037 an ounce, and oil prices tumbled $2.85/BBL to $77.02.
Bond prices rallied as stocks fell. The yield on the benchmark 10-year Treasury note fell to 3.42 percent from 3.50 percent late Thursday.

Stocks have has a rough week, but finished the month slightly up from September’s close. Without stronger evidence that the labor market is improving, consumers are not going to feel comfortable about spending. Indications are investors will have trouble extending the market's massive rally into a ninth month. With this week's declines, the S&P 500 index is still up roughly 55 percent since hitting a 12-year low in early March.

Major Economic News Due this Coming Week
Analysts say trading is likely to remain volatile this coming week. There is a large quantity of major economic news coming this week. Two that will be closely watched are sales reports from major retailers and the Labor Department's October employment report — arguably the month's most important piece of economic data. The Fed will also convene for a two-day policy meeting beginning Tuesday.

There were eight losers for every winner on the New York Stock Exchange, where volume came to 791.6 million shares, compared with 852.5 million at the same time a day earlier. Overseas, the averages were mixed, with Japan's Nikkei stock average rising, while European markets in Britain, France and Germany fell.

You Need Customers (and Profits) to Have a Business

Our 1 year Anniversary – The first “Meter” newsletter was published on October 6, 2008, so the one you’re reading now is Volume 2, Issue 1. We’re proud of the fact that we’ve received positive feedback and that you care enough to write us back with comments. We thank everyone for their interest and time. We’ll continue to adjust the format as we move forward.
Darcee and Ron

(This article was the feature in Volume 2 Issue 1 of Condevco's Meter Newsletter)

“You Need Customers (and Profits) to Have a Business”

Well, that seems like a pretty simple statement, doesn’t it? Whether you call it marketing, Sales, Advertising or Promotion, it all comes down to one thing. Getting people to become your customer (purchase from you), and getting them to come in more than once; in other words, customer loyalty and repetitive purchasing. How?

Just cutting price isn’t a competitive strategy

In terms of Convenience Retailing, that means putting customers inside the store. Hopefully they shop there more than one time. In terms of our jobber friends, that means adding dealers to your network, and making sure they want to renew at the end of the Fuel Supply Agreement. In terms of a Refiner/Marketer, that means adding and retaining jobbers, and on and on. But just getting customers by cutting price becomes a losing proposition in the long run, so there’s more to being a good competitor than being low priced.

A simple idea, but a complicated thing to do successfully. Here as we start our second year at the “Meter” we’ve talked about Customer service, we’ve spoken about respecting your customer, and in our two most commented on stories, we’ve spoken about Sprucing up your store and the Value Proposition to your customer. (The Articles are all included in this blog).

In the final analysis, it’s all about getting customers to keep your business going, and retaining them for the long run, whether you’re a multinational refiner or a single store operator. What is the customer looking for? And how do you become the person or business that fulfills that customer need?

Revenue alone isn’t an answer

Just pushing revenue through price cutting and aggressive promotion is NOT the answer to C-Store success. You need to keep margin preservation as a goal when you set your promotional calendar, otherwise, you’re trading dollars for no gain.

In the blog story on Burger King’s new restaurant design, (Article directly below) we discuss the fact that BK hasn’t been a heavy promoter of the “value menu” items, They have them, but BK has always competed on taste -“flame-broiled” and service-“Have it your way” as a primary message, with competitive pricing as a secondary factor. Just driving revenue for revenue’s sake is a feel-good tactic, but in the long run, doesn’t do you any good.

The Future

The NACS (National Association of Convenience Stores) show kicks off in Las Vegas today, where the merchandise and trends for the next year get rolled out. Oil prices are climbing again, and while we’re being told the economy is in recovery, it just isn’t feeling that way to most of us. It’s important to grow top-line revenues, but not at the expense of profit.

A more sophisticated foodservice offering and an emphasis on fresh items is the way to steadily grow revenues in a convenience setting now. Differentiate yourself from the pack in a smart and profitable way, and customers will keep your registers ringing. NPN had a nice article on Loyalty being more than just a Fuel Brand (Click to read) It’s time to think about how to make your business grow in a structured and profitable way. Id like to finish it off with the comment that standing pat is really dropping behind, because everyone else is trying to move ahead!

At Condevco, our business is helping convenience retailers and jobbers grow their business. We develop manuals and administer programs with your staff and provide analysis and input to allow your efforts to become targeted and productive. Contact us TODAY for more information on how we can help your business increase profitability.

New Burger King Restaurant Design Continues Competitive Differentiation

Article Headline / Source Burger King's New Restaurant Design (http://adage.com/globalnews/article/?article_id=139526)
Question With Burger King's (BKC) current sales trend weak and high stakes earnings call coming up at month's end, is the newly announced Burger King restaurant design viable? Is it likely to attain investment payback? Can the franchisees fund it with the tight credit conditions now underway?

This was originally done for Gerson Lehrman Group's News

1) Burger King isn't a big "Value Menu" player

2) Tries to differentiate itself through flavor and selection

3) Unit allows for more upscale uses that QSR's are taking on in recession

The new Burger King restaurant design makes sense and addresses the fact that the fast food “niche” is growing and handling more tasks for differing groups of consumers.

BK hasn’t really played hard in value price arena, so a “weak” sales trend may actually bode well for the bottom line. If they are selling more “standard price” menu items as a percentage than their competitors, is that really weakness?

The new 2020 design is a more upscale look, also showing a commitment to full price items and a different marketing sensibility. The “Whopper Bar” concept and the hi-tech Coca-Cola fountain introduction, if only for tests, shows burger King is looking at other places than a .99 price point to grow sales volumes moving forward. They have always competed on flavor as a prime driver to their marketing campaigns, this is a variant on quality differentiation.

Whether the franchisees can fund the new design build out in times of tight credit is probably the same answer it would be in good times: the strong franchisees can, the marginal ones can’t. You have to think that investment payback may be marginally longer to due to the increased cost of the unit’s build-out, but will the design alone increase sales? Probably not.

In terms of how QSR’s/fast food are being used differently by the consumer during the economic turndown, this could be a winner. Having a nicer, more pleasing looking unit to host fast business lunches or take the family out, instead of an Applebee’s or a TGI Fridays, since budgets are bit tight, cannot be bad.

Cutting Cost Shouldn’t Mean Cutting Service

Newsflash: Business Has Been Tough

Business has been tough for 12 to 18 months in the convenience store business. While Wall Street imploded just over a year ago, gasoline retailers and distributors had been riding a wild rise in supply cost caused by record high crude oil prices in July of 2008, only to followed by a very rapid drop in prices as the rest of the economy “fell off a cliff” to quote a pundit, reducing demand overnight. Volatility of supply costs pushed a lot of jobbers to the brink, and some went over the edge with the rest of the economy.

So, while our stores and chains were ahead of the curve in starting to feel the pain, we were right there with everyone else as consumer confidence shrank, and maintaining business became very, very tough. When the top-line revenues aren’t growing, but actually shrinking, but the expenses aren’t going down, the obvious place to look to get more benefit from the operation is to cut cost.

Cutting Cost Leads to Better Results

And, everybody looked to cut as much as they could and still stay in business as a viable competitor. Both stories underneath this, on Walgreens and Starbucks, are about cutting cost to keep the profits growing. Howard Schultz, the founder and CEO of Starbucks, was on CNBC this afternoon to tout the national rollout of the “Via” instant coffee product; but what he talked about the most was the cost cutting initiatives within the firm allowing them to keep profits near the levels that were expected. Walgreen Corp also attributed better than anticipated results to cutting cost.

“Abandoned Cart Syndrome”

That being said, about a week ago I read an interesting article on the supermarket sector, where they have been aggressive at reducing cost, as they compete in a very tight margin industry. There is more and more of what they are calling “Abandoned Cart Syndrome” where a customer who came in and shopped the store just leaves the full cart and walks out when they see the lines at the checkouts, lengthened by reduced labor allocations. So the question posed was, when does cutting cost become cutting service? And when does that impact your business negatively in the long run? Does that customer come back?

Well, in the case of a Convenience Store, we might not have abandoned carts, but we very well could have cut cost to the point that we have abandoned sites. Customers who came in, and you were out of stock on the need, or they had to wait in line 3-4 minutes to buy a single item. Take a good hard look as you pare those costs, and make sure it’s not service that’s suffering.

Walgreen’s Beats Forecast, Shares rise

Drugstore operator Walgreen Co. (NYSE: WAG) said prescription drug sales rose in the fiscal fourth quarter, pushing the company's results past Wall Street expectations and lifting shares to an annual high. Shares rose on trading today to close at $37.35, a $3.16 per share rise today, putting the stock price 9.24% higher.

Cost Cutting results in Profits

The Deerfield, Ill., company said its "Rewiring for Growth" expense savings plan started to pay off during the quarter, and also indicated the effects of the recession may be easing. Walgreen shares climbed to an annual high on the results.
For the quarter ended Aug. 31, Walgreen's profit fell 2 percent, to $436 million, or 44 cents per share, down from profit of $443 million, or 45 cents per share, a year prior. Revenue rose 8 percent to $15.7 billion from $14.6 billion.

These latest per-share results attribute 7 cents per share in savings from Rewiring for Growth, offset by 3 cents in costs. Analyst’s consensus forecast profit of 39 cents per share on revenue of $15.68 billion.

Walgreen’s said same-store sales, or sales at stores open for more than a year, rose 2.4 percent. Walgreen opened its 7,000th store in September and currently runs 7,042 drugstores, a few dozen more than main competitor CVS Caremark.

Same Store Sales Rise

Same-pharmacy sales rose 4.5 percent in stores open at least a year, while same-store sales of the "front end", or non-pharmacy items, fell 1.4 percent. The company filled 9 percent more prescriptions than it had a year ago. Even though consumers are actively looking for ways to save, Walgreen’s said fewer customers are skipping medications or stretching the terms of their prescriptions.

Walgreen’s also said that patients who receive 90-day orders of prescription drugs through the mail will now be able to pick up their orders at local Walgreen’s pharmacies, matching the features of the CVS program.

For the full reporting year, Walgreen’s earned $2 billion, or $2.02 per share, down from profit of $2.16 billion, or $2.17 per share, in 2008. Revenue rose to $63.34 billion from $59.03 billion. Walgreen’s expects store growth of 4.5 percent to 5 percent in fiscal 2010, which would give it more than 7,300 stores.

The company stated it is looking to save money by cutting back on store openings and carrying fewer products in inventory. They are going to boost sales by improving the layout of its stores in another new initiative.

Starbucks Rolling Out it’s Instant Coffee Nationwide Today

Eight months after Starbucks Corp. began selling its “Via” brand instant coffee, testing it in Seattle and Chicago, today Starbucks will begin a nationwide rollout, offering the instant coffee drink to the rest of the country and in its Canadian stores.

Starbuck’s is running company's first-ever television ads, and also distributing to roughly 1,500 sites outside its stores; this effort for the Via launch shows just how much Starbucks wants to own a stake in the $21 billion worldwide instant coffee market.

"Based on the success we've had, we feel strongly that we're sitting on a very big opportunity," said Starbucks CEO Howard Schultz said during a conference call with journalists. "What's going to sell Via at the end of the day is that (it) delivers in the cup. Most people will not be able to tell the difference."

Instant coffee is popular in Europe, and through the rest of the world — instant brands account for as much as 80 percent of coffee sales in the U.K., here in the US, instant coffee has not won over coffee drinking Americans. Instant is generally viewed as an inferior product here in the US, a knock-off of drip-brewed beverages.

Starbucks executives want that image to change. They are hoping, and betting on, with this high visibility rollout, that the skinny cylindrical 3-packs and 12-packs of coffee that dissolve in water will eventually be as popular with consumers as its packaged coffee is now. The coffee is available in two flavors now, and Starbucks expects to introduce more varieties in the future.

Starbucks is getting together diverse vendors like outdoors store chain REI and office supply chain Office Depot Inc., hoping it will help the company get the product in hands of new customers. Via also will be sold inside general retailers like Costco and Target. The effort to find new customers is also taking to the air, where passengers onboard certain United flights on Tuesday will be able to sample the drinks. United will sell Via packages onboard later in the year.

Next year, Via will appear on grocery store shelves, already a strong market for Starbucks pre-packaged conventional coffees. Introducing Via in such a high-profile way comes at a particularly tough time for Starbucks. Due to the recession and consumer spending cutbacks, Starbuck’s has seen its revenue slide for the last three consecutive quarters, and profits have fallen in five out of the past six quarters. It could use a big new hit product, maybe Via could provide that “Buzz” to get the chain rolling again.

“The Value Proposition – What it means in Convenience Retailing”

In the field of marketing, a customer value proposition consists of the total of benefits which a chain or store owner promises that a customer will receive in return for the customer's business (or other value-transfer- time, loyalty, brand allegiance).

Put simply, the value proposition is what the customer gets (or your store provides) for their money and time. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings. “in ten words or less, why should people be YOUR customer”
Accordingly, a customer can evaluate a company's value-proposition on two broad dimensions, with multiple subsets:

1. relative performance: what the customer gets from the vendor relative to a competitor's offering; How much better is your location than your competitors?

2. Price: which consists of the payment the customer makes to acquire the product or service, since most C-Store items aren’t unique to the location, this is a driver.

The company or Store’s marketing and sales efforts offer a customer value proposition; the Store’s delivery and customer-service processes then need to fulfill that value-proposition, in order to make the customer happy.

How to use developing a Value Proposition as a marketing tool

A value-proposition approach can assist in a firm's marketing strategy, and may guide a retailer to target a particular market segment. Typically, there are three elements that should always be in a value proposition: Convince (who’s our customer?), that (what you want them to believe), because (why they SHOULD believe it). This framework will structure your value proposition in a cohesive manner that makes sense internally and externally
A company should always have the value-proposition of increasing its market share and growing revenue by:
1. providing superior customer service – self explanatory
2. product differentiation – Colder coolers, cleaner store, fresher products
3. operational efficiency – making it look effortless
Strategic analysis and planning for value proposition marketing should contain at least five elements:
1. Your current situation (including problems, causes and effects – need to be honest)
2. target situation – what you would like to achieve
3. How long to reach the target situation – when do you need the new results
4. cost of reaching the target situation and opportunity cost analysis – need to be honest again – a plan you can’t afford doesn’t do you any good
5. the benefits of both the targeting and the achievement phases – what do you (and importantly your team) get for the all the planning and work?

Developing Your Value Proposition

It's important when developing your value proposition that it be clear and concise. It's best to start by brainstorming and focusing on what needs your target customer group have in common. This can be done by some simple market research in your stores. What does your current traffic want that your business can provide? What is important to them?

Once you've found the common denominating need, you can determine what it is that they are in search of in addition to your current lineup and develop your value proposition around that need. If you find a great unmet need, think about adding that product or service to your line-up, and letting people know about it.
Keep in mind that the purpose of your value proposition is to identify and satisfy an unmet or under-met need that your target market possesses.
Why is the development of your value proposition important?

The answer to that question is easy. Your value proposition can equip you with the following benefits to your business:

• Create a strong differential between you and your competitors
• Increase not only the quantity but the quality of your in-store traffic
• Gain market share in your targeted segments
• Assist you in merchandising and store layout that will increase business.
• Improve your operation efficiency

You can get started developing your store’s value proposition today. Just remember that an effective value proposition describes what you do in terms of tangible business results. It draws interest and shares a customer benefit within a few words.

Cash for Clunkers Can’t Save July Retail Sales Figures - Sales Fall 0.1 Percent

Retailers reported a rough month in July, raising concerns for how strong the recovery from the worst recession since World War II. Outside of auto sales figures, boosted by the very popular and well publicized “Cash for Clunkers” program, retailers turned in a disappointing performance in July. The Commerce Department reported retail sales fell 0.1 percent last month, a much worse performance than economists had expected.

Sales unexpectedly lower

Retail sales had been expected to rise in July, boosted by the federal government’s “Cash for Clunkers” program. Most economists expected a very slight increase in non-auto retail for July, so the 0.1 percent drop came as a surprise.

Shoppers still hesitant to open wallets

Reports from the nation’s major chain retailers showed shoppers remained cautious about spending in July, as most consumers aren’t feeling like they’ve seen the last of the recession, and job security fears dominate peoples thinking. The next hurdle for retailers will be whether shoppers will cut back on back-to-school shopping. This could be a indicator of how good the holiday season will be for retailers. Congress approved an additional $2 Billion for “Cash for Clunkers”, and retailers are hoping some of the popularity of that program will spill over into enthusiasm for spending at retail stores. Cars and light truck are selling at the best rate since last September, boosted by the government program.

Unemployment expected to climb

Economists are forecasting that the unemployment rate, which dipped to 9.4 percent in July, will rise to over 10 percent early next year. The Federal Reserve, concluding its first meeting since the economic uptick, held a key interest rate near a record low where it has been since last December and pledged to hold rates at low levels for "an extended period

McDonalds July Sales Sizzling Hot

McDonalds (NYSE:MCD) reported a 4.3% increase in same store sales for July. Same store sales are considered the most important comparison statistic for multi unit restaurant chains and retailers. Here in the US, Same store sales rose 2.6%, which is being attributed to the new line of McCafé Espresso-based coffee drinks. McDonalds stock closed today at $56.02 a share, significantly off the 3 month high of $60.99 on June 3rd.

McDonalds is now switching advertising emphasis back towards value and meal combinations, although the “McCafé Monday” promotion that ran in July through August 3rd, giving away samples of specific coffee drinks on Mondays, turned out to be a good traffic driver, according to anecdotal evidence. The new launch now is 1/3 pound Angus Beef burgers, with a higher price point that McDonalds traditionally hits. The “Any size fountain drink for $1” has been a good component to the value message.

While restaurants overall are struggling in the economic climate, fast feeders, and McDonalds in particular, have acquitted themselves well. Americans love to go out to eat, and it seems that the casual dining houses are feeling the brunt of the crisis in consumer confidence. McDonald turning in a 2.6% same store sales increase in the US market, when the US GDP shrank 1% in the second quarter, shows that the Golden Arches continue to be a family destination and place for value conscious consumers to go.

Coffee Wars: Starbucks Moves into Alcohol

Starbuck’s (NASDAQ:SBUX) is testing serving alcohol at a couple of locations, to try out the idea as a way for increasing the later daypart business. Curiously, they are changing the name of the first outlet to “15th Ave. Coffee & Tea, inspired by Starbucks.” I guess the question remains what has been posed before; how badly do you need to beat a brand to destroy it from the inside?

Are Instant Coffee and Alcohol Brand Builders?

While the expansion of business in a weaker time period is always a bonus, there seems to be less respect for the core brand within Starbuck’s than there is from the outside. First, the instant coffee brand -VIA™ rollout, and now trying to be a limited-option bar in the evening.

Not Addressing Menu Overhaul

Actually the alcohol idea isn’t a bad one, but it would make more sense to include it as an overall remaking of the Starbuck’s menu. They seem to be running from the challenge being put forth by the QSR’s, McDonalds (NYSE:MCD) and Dunkin Donuts (Private), in particular, but all the big chains are jumping on the coffee bandwagon.

The way to get solid revenue increases driving at Starbucks is to commit to providing a viable light meal option to complement the beverage business, and this is something they seem reluctant to do. If Starbucks can’t drive revenue by coming up with a way make going there about more than just a side pastry or cookie, they lose the revenue war to the QSR’s challenge in the long run.

Fast Food Chains Challenging on Coffee

While Starbucks doesn’t need a “Dollar Menu” or to put french fryers in, a feature deli-style sandwich that goes with either a cold coffee drink or the newly-introduced beer or wine would seem to be a smart positioning move, and give them a chance at increasing per-ticket rings and putting more revenue into the later dayparts they are trying to improve.

Starbuck’s is running from what made it a premier brand ands a ubiquitous presence in all but the smallest of markets.

When you have a big ship to steer, you can’t do it with a gentle push, you need to give it a good shove. The QSR’s have issued a challenge to Starbucks, if they don’t make a solid move in response to come up with a light meal alternative, they will lose the revenue war down the road.

Office Depot – NOT Takin’ Care of Business

Office Depot (NYSE:ODP) announced quarterly results yesterday, and losses exceeded estimates by a considerable amount. The other major players in the sector, Staples (NASDAQ:SPLS), and OfficeMax (NYSE:OMX), while being hurt by the current low consumer confidence and recessionary spending patterns, aren’t imploding like Office Depot. Stock prices are down, but the core businesses at the two major competitors seem more stable.

To paraphrase the slogan they used for so long, the management at Office Depot is definitely NOT “Takin’ Care of Business”, at least not theirs. It’s hard to remember when ODP was a savvy, best in the category retailer, because they used to be. They aren’t acting or getting the results like one now.

The latest management trick of getting a capital injection by selling 20% of the company to a UK based firm, after closing 9% of their stores as “underperformers”, show that this is a sad story heading down the same road as Circuit City. Surrendering markets by closing stores, and then having an accelerating sales decline, shows Office Depot is still heading for the same sad end result as Circuit City.

This isn’t an inevitable result, but they HAVE do what they need to do: get back to concentrating on retailing, taking care of the customer they service, and improving in-store experience so that same-store sales aren’t in double-digit declines. Home Depot’s (NYSE:HD) re-emphasis on the customer and store-level service delivery might be a good blueprint for Office Depot to look at. The Microsoft (NASDAQ:MSFT) Windows 7 launch may give them a bump when it occurs, but computers are about to enter a brutal discounting phase as Wal-Mart (NYSE:WMT) ramps up its laptop sales effort.

Retailing is all about customer perception and how they feel when they walk both into, and more importantly, out of your store. Pricing, selection, cleanliness and knowledge are the pillars to increasing sales, or on Office Depot’s case, stopping the declines. Unless management launches a store-level initiative to make the sales experience better, Office Depot will have a tough time surviving the balance of the economic downturn.

Fast Food is a Recession Beater for Families

Source Article: Fast Food Fading? (Forbes) Click Here For Article

Ramifications

1) Fast Feeders branching into less "Traditional QSR" Fare

2) Chains looking to upscale ticket

3) Can entertain a family inexpensively

Analysis:

Fast Food Restaurant Chains are moving through the recession in fine fashion. McDonalds (NYSE:MCD) is in fine shape regardless of what the stock price reacted against.

McDonalds has made a well-publicized foray into Gourmet coffees, stepping on Starbuck's (NASDAQ:SBUX) toes, and had added a $3.99 burger, a premium Angus Beef burger, to the menu. Wendy's (NYSE:WEN) has added "Chicken Bowls" and other chains are trying less traditional QSR items at a higher per unit price point.

The casual dining chains, Friday's and Applebee’s in particular, have aggressively promoted price competition to keep consumers coming through the door, but the QSR's are coming "Up" to meet them. It's going to be hard to break the consumer of the "2 for $20" (Applebee’s) or the $5 Dollar Entrees (Fridays) that were running in heavy rotation through the early summer.

The QSR's recognize that consumers are "Trading down" on entertainment dollars, which is why they are adding "Quality" items at a slightly higher price. They are reaching towards the casual dining houses in menu quality perception, and catering to the spenders in the family, Mom and Dad.

While the value menu is what McDonalds is famous for right now, the advertising is going to the McCafe line of coffees, and they are going beverage promotion with the $1 Fountain drink promo. It's a smart and two tiered approach, and whether the benefits show up right now or a bit later, the entire QSR segment has acquitted themselves well in the recessionary consumer environment.

As long as the economic future remains uncertain, the fast feeders will be the choice for families "Feeling the squeeze" but still wanting to go out,

Home Depot focuses on Retailing

Results Better Than Expected

Home Depot's better than expected results, given the fact that the economy really isn't growing, shows that the management focus on it's core retailing base is starting to pay off. The forays away from the core home retailing business are over.

The home improvement and "DIY" sectors of the economy have taken a big hot, along with the housing market and decrease in home values. People are fixing what needs repaired or replaced, but really aren't, in most markets, making the big home improvement purchases right now.
Lowes and other home improvement retailers and suppliers are all experiencing the downturn in the housing market firsthand.

There's too much uncertainty in the future course and timing of economic recovery for people to feel comfortable about big discretionary expenditures. So, going back to the basics of good service and knowledgeable associates to assist their customers will pay off in the long run. Working on improving the in store experience for their customers is a great strategy.

They have closed the Expo design centers, are serious about cost controls, and management is really concentrating on being the best home improvement retailer they can be. As long as they continue to look at efficiencies and increasing per square foot sales, the things HD’s management can control, it bodes well for future results.

As long as they stay focused on that very worthwhile goal, HD will come through the balance of the recession poised for renewed growth.

Crude Oil flirts with $70 a Barrel before falling back

Done for the Examiner.com Sunday June 7

Crude Oil broke through the $70 a barrel level for a while on Friday, before falling back to $68.44, down 37 cents for the day. Prices are steadily moving higher, and as the economic recovery seems to be taking shape, the market is betting on energy going higher as activity picks up.

Natural gas Futures are up; Heating Oil and Gasoline are heading higher, consumers see first hand when they fill up at the gas pump that the overall outlook for energy prices is bullish. Multiple studies are suggesting we will see $85 a barrel oil this year.

A strong dollar move Friday contributed to Crude prices falling back, but on the whole, it looks as though Crude has plenty of room to move higher. The big question is; what does this do to the potential for recovery, not just here in the US, but worldwide? Most of the “Big Engines” in the worldwide economy are net oil importers, so it’s bound to create a drag on growth.

US consumers were just getting used to lower prices for gasoline, heating oil and natural gas, will the price shock send them back to hiding from all but the most necessary spending? The US economy needs consumers to feel good moving forward to get spending rolling again, while sentiment is up right now, it won’t take many weeks of $3.00/Gal gasoline to end that feeling.

As the summer driving season rolls in, tourism interests have to be feeling a bit nervous. What will increased costs do to traditional “Summer Vacation” destinations like Orlando and Seaside resorts?

Well, Oil seems like it’s going to go higher. Had the worldwide economy not been in a serious recession, it’s wise to think it never would have gone down below where it is right now. As growth picks up, energy costs are bound to rise.

Gasoline up 47 cents a gallon since Easter

Published in the Examiner.com


The report released yesterday by the Energy Information Administration (EIA) shows gasoline, on average, has gone up 47 cents a gallon since Easter. Oil hit a 7 month high at close of trading yesterday. As economic uncertainty recedes, energy prices are heading back up.

While not close to the historic levels of last year, this price climb with the world economy not yet back to growth mode means energy costs to the consumers, and the fortunes of oil and natural gas companies, are going to continue up. OPEC is saying they would be comfortable with $70-$75 per barrel oil, and we are heading back there right now.

US domestic exploration and production had slowed down after the large price drop for Oil and Natural gas last year, but the firming market makes US domestic supply plays look like a good bet moving forward.

For the motorist, this means more expensive fill-ups are going to remain a fact of life. Had the US and worldwide economies not contracted over the last 9 months, the price respite we just received as drivers never would have happened. Heating Oil customers should be budgeting for higher prices over the winter.

The world is still a hydrocarbon based energy consuming system, and it will be for quite some time, so as demand ramps back up with the increase in economic activity, so will oil and Natural Gas prices. Can the fledgling economic growth trend sustain itself in the face of higher prices for Oil, Natural Gas, and Energy in general? How much of the economic slowdown of the last year was caused by higher energy prices?

This summer will an interesting test of those questions, as well as the resiliency of motorists in the face of climbing gasoline prices.

Starbucks asking for Rent Reductions Good First Move

Source Article: Starbucks Pushing Landlords for 25% Cut in Cafe Rents | www.bloomberg.com (view article)

Implications:
1) Cost reductions pay off every month over term of lease

2) Opportunistic move or readying for Market Share battle?

3) Cost Reduction good Defence, what about adjusting to competition.

Analyis:

As reported, numerous landlords have received letters from Starbucks asking for rent reductions of between 20 and 25%. This is a good tactic, and the resulting reduced costs are good for operating results every month.

My question is, is this an opportunistic way to reduce overhead, and admission that they were paying too much for sites when times were better, or are they getting ready to defend market share, as the QSR's lead by McDonald's and Dunkin Donuts, takes a bead on the market Starbucks has dominated for so long? Maybe a combination of the three.

The rent reduction initiative is a good defensive move, but is just another admission that the "Fat times" are over for Starbuck's unless this move is followed up with some "offense."

In other words, pushing back in a big way against the Fast feeders coffee push. Otherwise, at some point, Starbucks will hit the point where a reduced market share cannot be covered by cutting costs.

Innovative advertising, a new food product or two, sharper pricing and promotions, and a real competitive challenge to the upgraded competitors are the real key to long term survivability for Starbucks.

Coffee Wars: Is Starbuck’s in McTroublé?

This article was written for the Examiner.com

Can Starbuck’s maintain in the face of competition from McDonald’s, Dunkin Donuts?

Summer is a great time for a cold coffee drink. This year, consumers have more choices than ever before. McDonald’s (NYSE: MCD) and Dunkin Donuts (Dunkin Brands - Franchisor - Privately Held) pushing coffee products means it could be a long, hot summer for Starbuck’s (NASDAQ: SBUX).

The McDonalds marketing push for the McCafé line of cold coffee drinks, and their upgraded premium coffee program could really cause a shift in served coffee consumption patterns in McDonalds favor. Even more outlets than Starbuck’s and a lower price point could put a real dent in Starbucks revenue.

Starbucks rollout of an instant coffee product this spring is a puzzler to most watchers, and they are really pushing it in stores. This isn’t a competitive response to a larger and deeper pocketed competitor crowding your market. The sputtering food choice upgrade program hasn’t helped Starbucks to craft a response to QSR encroachment into their space.

Dunkin Donuts has been running a campaign featuring cold coffee drinks and also a renewed emphasis on doughnuts. They are a large store count (6,300+) competitor that Starbucks needs be aware of also.

So as the summer coffee war heats up, the question is: Is Starbucks in McTroublé? The consumers will vote with their wallets this summer, and then we will see.

Costco is Rock Solid for the Long Run

Source Article
Costco Net Falls on Litigation, ‘Higher-Ticket’ Sales Decline | www.bloomberg.com (article)

Implications:
1) Costco's results impacted by Litigation settlement

2) Fuel Price declines drove revenue Dip

3) Still a Great Retailer

Analysis:

Costco showed declining profits this quarter, but 40% of the decline was caused by a litigation settlement.

Costco, having the highest member demographic of the warehouse club type retailers, was most affected by the dip in consumer discretionary spending, but it will also be the best positioned to bounce back.

Costco treats its customer-members quite well, has a liberal returns policy, and sells high-quality goods at excellent prices. The fact that income only dropped as much as it did is a testament to this customer friendly philosophy.

Sourcing items at Costco is one of small businesses biggest cost savers, and as has been said many times in the general and business press, small business will lead the way out of this recession.

They are a major volume gasoline retailer now, and the revenue decline is what all the oil companies and distributors (jobbers) experienced, but Costco sells large volumes of gasoline per site, and as prices have firmed back up over the past 6-8 weeks, this bodes well for the revenue bounceback, too. Plus they are ultra competitive in pricing fuel for members, so higher prices help them that way, too.

Sam's Club and BJ's(NYSE:BJ) product mix is skewed more to consumables, so they were better able to get through the quarter, but that is a long-term strength for Costco, not a weakness.

Costco may have had a rough quarter, but they are a model retailer who will only benefit as the recovery starts, whenever that may be.

Carbon Emissions Credits Are Designed to Dampen Fuel Demand

Source Article
Oil Refiners Predict Higher Gas Prices | online.wsj.com (view article)


Implications:
1) Refiners paying for transports share of Carbon output is "De Facto" Emissions tax

2) Higher Carbon Emissions share on Refining, an efficient part of energy supply chain, seems counterproductive

3) Refiners paying price for auto makers lack of progress on efficiency and emissions?

Analysis:

If refiners have to pay for the Carbon output of Transportation, it acts as a "De Facto" emissions tax on prior choices made by the consumer and auto business.

Transportation manufacturers should have to include the projected emissions amount each vehicle will emit over it's lifetime in the initial purchase price; that will give consumers a really clear choice as to why more efficient and cleaner cars are the way to go.

Charging refiners for emissions is like charging farmers for the sewage fees that the people eating the food they produce will eventually use.

The higher carbon emissions share on refining, an efficient part of the energy supply chain, seems like it's more a choice of the best place to "close the barn door after the horses have left" than anything else. The automakers and transport manufacturers should be paying the Carbon Output up front in the sale of the vehicle.

The multiplication of increased fuel prices across all sectors of the economy was clearly seen last year in the fuel price spike. The linkages cause a "ripple effect" of price increases throughout the economy. We saw there is very little elasticity of demand on transport fuels; whether the increase is market driven or government mandated, it still affects all sectors of the economy with higher prices.

There needs to be a direct correlation between the choice of vehicle and the Carbon Output tax, not on usage for a fleet that was built before this was a rule, which is what hitting the refiners does. Capping and eventually reducing carbon emissions is a worthy and necessary goal, the mechanism for getting there needs to be fair.

Home Depot and Customer Service haven't gone together for awhile

Source Article: Home Depot Retrains Cashiers, Shelf Stockers in Turnaround Push | www.bloomberg.com (view article)


Implications:
1) Home Depot grew from it's inception by using skilled associates

2) Service became a lower focus as they grew

3) Focusing on being a retailer again is good long-term strategy


Analysis:

Home Depot focusing on Customer service is a good thing both for the customers and the firm.

As the economy stays in the doldrums, more and more people who wouldn't have dreamed of "DIY" before will be thinking about doing things around the home and garden themselves. A Customer Service emphasis and associates who can provide knowledge for nervous novices is where this company can really take off.

This is where Home Depot originally grew, and where they need to be again to get the business growing in these troubled times.

THD strayed far from it's retailing roots under the prior management, led by Mr. Nardelli. Concentration on doing all the little things right, keeping the stores in stock on promo and fast moving items, making sure there are enough associates with knowledge available to make the customer experience a pleasant one.

Lowe's has been winning the customer in-store experience recently, so to see a momentum swing back to Home Depot, in a tough retail climate, shows the tough initiatives and focus on retailing are starting to bear fruit

Meet the New Boss, Same as the Old Boss - Big Oil and Alt Fuels

Source Article: Oil Giants Loath to Follow Obama’s Green Lead | www.nytimes.com (article)

Implications:

1) World still hungry for Hydrocarbon-based energy

2) Electric Transportation will require new infrastructure

3) Plug-in electrics have technical and cost hurdles to clear before becoming competitive

4) Oilco Capital better spent on immediate consumption needs

5) Liquid Bio (Renewable) hold better immediate promise

Analysis:

The Major Oil Companies apparent reluctance to invest in alternative energy plans to supplant the current dominant product class - hydrocarbon based fuels, is easy to understand.

Look at the ethanol business in the US. With much hype and great hopes going forward, most of the ethanol producers are in bankruptcy, victims of the volatility in Oil prices and the global economic downturn. Valero(NYSE:VLO) purchasing VeraSun's refining capacity after VeraSun filed for bankruptcy, announced a couple of weeks ago, is endemic of this situation.

Valero(NYSE:VLO) has announced they will use this capacity for their own blending needs. Instead of a potential large customer, they are now a producer with captive demand. It lead me to say in a prior article about green energy investments; "Meet the New Boss, Same as the Old Boss".

Valero(NYSE:VLO) will be one of the largest, and for sure the most economically healthy, ethanol producer in the US as of the completion of the sale. AND they got the assets at a large discount vs the development costs.

When it makes economic sense to invest in alternative and renewable energy, the Oilcos will do that. There just isn't a business case for it yet.
BP, ExxonMobil(NYSE:XOM), Total, Chevron(NYSE:CVX) all are doing research, but that's it for now.

While people don't understand why, the answer is simple; the best use of capital for an oil company is to produce more oil at this point in time. The world economy was built for and still thirsts for oil.

Plug-in electrics are a ways from being more than a "Special use" replacement for a conventional vehicle, whether gasoline fueled or some sort of hybrid and alt-fuel powered iteration of it. Electrical vehicles that aren't producing power onboard, like a pure plug-in, will need a whole new transportation "Sub-infrastructure" designed for it.

Liquid renewables seem to have the most development potential for fast adoption and economic viability, but the ethanol wipe-out for the corn-based producers shows there needs to be new technologies and feedstock found to make it a viable long-term model.

Until there are real government measures put in place to protect renewable fuel investments and resources, the Oil companies are better served to watch the "experiments" that are taking place begin to become commercially viable before jumping in.

This may not seem a very "Green" argument to make, but until there's "green (money)" in going green, don't expect more than research from the big Oilcos.

Waitrose brings Upscale Convenience to Hurried Consumers in UK

Source Article: Waitrose to open in motorway service stations | www.retail-week.com (article)

Implications:
1) This format has worked well in the US

2) Foodservice component accelerates consumer acceptance

3) A good way to practice "Brand Extension" without getting too far from core offering

Analysis:

Waitrose testing two smaller-format stores based on Highway traffic / Petrol linked traffic as the primary driver is a very, very good idea. The idea of high-quality prepared foods and better fare than generally found in a "C-Store" setting is a winner when done correctly.

Whether in the US, UK or the rest of the EU, people are in hurry and feel rushed for time. The tradeoff of good quality "home time" with the family can still be a good offset to guide an expenditure decision, even with consumer confidence at a low.

As long as there's no discernable quality drop off in service and merchandise from the "traditional" Waitrose Stores, this should be a real winner.
We helped develop a store and Brand some 15 years ago that worked straight along the same thought processes- High Quality food in an upscale convenience setting, and it worked quite well and was very profitable. We were considered quite groundbreaking at the time with the “NexStore” concept developed and built when I was the COO for Knight Energy in Boca Raton FL.

Great Service, uncommon food offering prepared by Chefs, a few hours a day of full service fuel at no additional cost, selection of mid-priced and fine wines, frozen yogurt, it was a real frontrunner in it’s time and day.

The long-term success of concepts like this by Waitrose are all about execution. You can’t just “talk a good game” or look upscale, you need to deliver on those promises. If you do the payoffs are good and long-lasting. It's a good move fo the Brand

Eight Ways to Freshen Up your Store and Energize your Employees

This was written by Darcee Santicola and was the feature article in Volume 1, Issue 9 of Condevco's "The Meter" Newsletter, distributed on March 28th.

SPRINGTIME… A time reserved for the renewal of surroundings and spirit.

As a residential and commercial designer/space planner, this time of the year has always played an important role in the energizing of our client’s spirits along with their employees’ and customers’ as well. We all enjoy feeling refreshed after the winter months, especially with the economic times we’re living in. Change no matter how small creates excitement.
Here’s eight ways I feel will help start you on your way to achieving this goal.

STORE
1) Painting. A fresh coat of paint works wonders. Then there’s what I consider “creative painting”. Adding color be it to create customers purchasing excitement, enhancing designated areas of the store including restrooms, or to draw attention to specific promotional displays is always an inexpensive solution. Painting of graphics is one of a designer’s tricks in creating an illusion of spaciousness. Also, a change of scenery for employees has been proven to create an increase in productivity. If budget permits, having a professional work out a schematic especially designed for your store is well worth the investment, however if this is not possible, browsing through the trade publications such as Convenience Store News, CSP or NPN with a keen eye for inspiration can be helpful in achieving your goal.

2) Lighting.

A well lit store and canopy is essential. I’ve also found by adding a few specialty fixtures in featured areas creates warmth and a sense of quality for your customers. A wide range of pricing for these fixtures are readily available in accommodating your needs. It’s a quick way to give a modern update to a space.

3) Floor Rearrangement.

Rearranging shelving and cooler space from time to time is so important. Creating a new traffic pattern engages customer interest while providing longer store visits. It also helps to stimulate employee’s interests as well.

4) Special Promotional Decorating.

It’s all about creating excitement. Take full advantage of this opportunity. Have fun with this and really go for it.

EMPL0YEES

5) Employee Image.

Providing new uniforms or uniform shirts is a great morale booster. Sometimes just a change of color or style modification is all that’s needed.

6) Employee recognition and incentives.

Sometimes it’s very easy to become complacent when it comes to our employees. They are the backbone of the convenience store business and needs to be recognized for their efforts. Also, having “fun“ contests is a good way to achieve this.

Here’s one of our favorites: “Boss for a Day” . A contest using management created criteria for customer service personnel runs for a short period of time. Winner is determined by contest rules. He then switches places with the Manager; in which the employee becomes the manager for the day while the manager works employee’s position. This fosters teamwork and an appreciation of each others positions. A win-win situation.

7) Promotional sales leader.

When putting together a special promotion, having a friendly competition among the staff or the staff of other branch stores is an added production achiever. Many options are available to managers as to what the prize and or award could be.

8) Customer service.

Providing a “paid” training session is extremely productive. In these economic times it’s more important than ever to give exceptional customer service especially with your regulars. Having a staff show a special recognition to them means so much. When a customer was greeted by their name or an having their customary purchase remembered they became loyal customers for a long time to the point of making special trips just to receive such treatment. Employees need a refresher on company policies dealing with customer service. Again, there’s added and updated data and manuals available to owners by Condevco and others for just this purpose.

Let’s make Spring a happy, positive and profitable season by using some or all of the above suggestions.

Darcee Santicola

Green Energy Investment is Risky without Government Backup

Source Article
Green energy plans in disarray as wind farm giant slashes investment | business.timesonline.co.uk (article)

Implications:
1) Alternative Energy is not able to compete with "Cheap" oil at this time.

2) Wind and Solar may be able to compete before Biofuels for Transport

3) There is no way to Project Competing Energy (Hydrocarbon) Costs reliably for the length of investment needed for Alternative Energy Infrastructure.

4) Government programs guaranteeing "Floor" pricing for alternatives and renewables only way to attract investment capital

Analysis:
The "Green Energy" movement - Renewables, Biofuels and oil substitutes like ethanol, are subject to energy market price volatility as a whole, and compete for capital with other energy projects.

The rapid spike and decline in oil prices over the last 18 months has shown that there is very little elasticity of demand for hydrocarbon-based energy. The infrastructure the world has invested in for the past 100+ years is based on the availability of hydrocarbon fuels (Coal, Natural gas, and Crude Oil derived refined products) as the primary energy source.

As long as the emerging "Green" energy sources cannot be guaranteed a "floor" price where government will make up the difference between production and market costs while the industry matures and is able to become competitive in the global energy free market, there will be very little incentive for private(NYSE:BBY) investment in these technologies and the infrastructures needed to support them.

The financial collapse of corn-based ethanol producers in the US is a prime example of why alternative and Bio energy will be a hazardous proposition for investors until a way to protect them from the bottom of oil's price swings can be initiated.

Relatively inexpensive oil will always be a threat to Green Energy business plans; they are building against a competitor that has years of investment and operating experience, in addition to loads of capital, with which to compete.

State oil firms pump based on how much cash they need to bring in to support the government that owns them, market lows are of little consequence to their plans. While the State-owned Oilcos love the high prices, the odds of a group of state-owned firms volume discipline being maintained at the expense of a bankrupt government is virtually nil.

The Super Major Multinational privately owned firms have been very selective about competing wit their core hydrocarbons businesses, they understand the economics better than anyone else.

Until some large governments embrace distributed-generation electrical production and the smart grid needed to make that model work, as a national security priority, the odds of significant amounts of electricity being produced by "Green" means is very slim indeed.

Biofuels for transport face an even tougher uphill fight without help to get the industry off the ground