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
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