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.
Friday, May 29, 2009
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.
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.
Tuesday, May 26, 2009
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.
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
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
Thursday, April 9, 2009
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.
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
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
Wednesday, April 1, 2009
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
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
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