Saturday, October 31, 2009

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!

Friday, October 30, 2009

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.

Tuesday, October 20, 2009

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.

Monday, October 19, 2009

New Burger King Restaurant Design Continues Competitive Differentiation

Article Headline / Source Burger King's New Restaurant Design (
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.