Costco Dumping Coca-Cola

Costco customers looking for “the real thing” now have to look elsewhere: The warehouse retailer said on Monday that it’s no longer buying Coca-Cola (KO) products. Once stores run out of their dwindling supplies, they won’t be restocking.

Costco is playing hardball; negotiations between the two companies to reach a recession-ready wholesale price have apparently broken down. Costco acknowledges this problem on its Web site: “Costco is committed to carrying name brand merchandise at the best possible prices. At this time, Coca-Cola has not provided Costco with competitive pricing so that we may pass along the value our members deserve.”

Narrow Margins

It’s an uncommon move for Costco, but not a surprising one. Consumers are looking for ways to squeeze their budgets, and retailers are trying to increase profits while cutting prices. That’s been a hopeless quest for Costco this year; the 3% pretax profit margin it posted between 2004 and 2007 is now just 2.5% — a net profit margin of somewhere around one cent on the dollar after taxes, overhead, and other incidentals. With such a narrow margin, the slightest uptick translates into a major value shift.

Every 0.01% the company ekes out on its pretax profit margin translates into a one-cent increase in earnings per share, and a likely 0.5% uptick in its stock value. The superthin profit-margin model, and its major influence on stock value, follows Walmart’s (WMT) example; Walmart, with its 3.3% net profit margin, regularly strong-arms its suppliers into deals that guarantee its famously low prices.

Complicit Coke

Coca-Cola may seem like the wronged party here, but it’s complicit in its own undoing. Coke, after all, caves in to Walmart’s demand for a razor-thin profit margin by slashing its products’ prices, in return for Walmart’s massive distribution — and swamping not only Coke’s smaller competitors but Walmart’s smaller, higher-priced, higher-profit rivals.

The result of recession, unemployment, and an increasingly desperate push for profits have left Walmart, Costco, Coke, and thousands of other companies in a cannibal buffet. Having feasted on the easy pickings offered by smaller chains, these companies now find themselves eyeing each other. With unemployment still rising, retail sales won’t be getting fatter anytime soon.

In Other News: Suit Charges Coca-Cola With Profiting From Seizure of Jewish Property in Egypt

Lawyers for the Bigio family, Jewish Egyptians whose property was seized by the Egyptian government in a 1960s program to rid the country of its Jewish population, are demanding summary judgment and a jury trial to establish damages against Coca-Cola for exploiting “for immense profit” property that Coca Cola has been occupying since 1994 with the knowledge that the property was taken unlawfully from the Bigios. In a brief filed today in federal district court, the Bigios – responding to the Court’s request for supplemental briefing – spelled out the extensive web of international laws violated by the Nasser regime’s anti-Jewish campaign which included the nationalization of the Bigios’ property in 1962.

The Egyptian government has acknowledged that the property was seized illegally and rightfully belongs to the Bigios. A federal court of appeals has twice rejected technical jurisdictional contentions made by Coca-Cola. The case has been before the courts for 12 years.

“Coca-Cola is the occupier of stolen property,” said attorneys for the Bigios. “Coca-Cola has been stonewalling for years, hiding behind a veil of artificial and inapplicable legalisms and it will now be able to respond to our latest brief only by denying that Egyptian Jews were persecuted by the Nasser regime. If it makes such an argument, Coca-Cola will be engaging in the same conduct as Holocaust deniers. Such flagrant behavior will not hold up in the court of public opinion. It is time for Coca-Cola to acknowledge that the property belongs to the Bigios, was unlawfully confiscated from them, and compensate them for its occupancy and use.”

Coca-Cola was aware that the Bigios owned the land, buildings, business and machinery involved in this case because the two companies did business together for more than 20 years prior to the seizure of the properties under the ethnic cleansing campaign of Egyptian president Gamal Abdel Nasser. In 1965, the Bigio family, left destitute by the seizure of their property and business, immigrated, as stateless persons, to Montreal where they now reside.

In 1994, after it was informed by the Bigio family of the Egyptian government’s determination that the family owned the property, Coca-Cola took control of the property under various forms of ownership of Egyptian companies bearing the Coca-Cola name.

The Bigios filed a request for summary judgment September 14. Oral arguments were heard November 10. The letter brief responds to the judge’s request for legal authority demonstrating that the Egyptian government’s nationalization of the disputed property in 1962 violated international law.

Related links

IBISWorld Industry Reports
-Soft Drink Production in the U.S.
-Big Box Retail Stores in the U.S.

IBISWorld company profile
- Coca-Cola Company
- Costco Wholesale Corporation

Record-Breaking Halloween: Sales To Reach $6 Billion

Despite economic gloom casting a spell on consumer confidence this year, America’s darkest holiday is looking bright for retailers.  According to industry research firm IBISWorld, Halloween sales are expected to reach a record-breaking $6 billion in 2009, up 4.2 percent from the $5.77 billion generated last year. That’s contrary to the National Retail Federation’s prediction, which forecasts sales will decline to $4.75 billion.

“Economic recovery appears to be around the corner and consumers are enthusiastically looking to escape their recessionary woes,” said Toon van Beeck, senior analyst with IBISWorld.  “Even last year, when the outlook was much worse, the Halloween spirit remained unhindered as we saw total sales actually jump 5.1 percent from 2007.”

Halloween retail sales are comprised of a wide range of consumer goods, aimed at adults, children, and even pets.  These goods include costumes, scary make-up, wigs, Halloween decorations for inside and outside, and of course, pumpkins and candy, among other things.

In projecting this year’s total sales, analysts at the Los Angeles-based firm aggregated the retail-dollar performance of the following four traditional Halloween categories:

Category	2008 Revenue (Billions)	2009 Revenue(Billions)	% Change
Candy	$1.77	$1.89	6.8%
Decorations	$ 1.58	$1.65	4.4%
Costumes	$2.07	$2.12	2.4%
Greeting Cards	$0.35	$0.35	0.0%

It appears an increasing number of people are buying treats this year, making candy the fastest growing holiday category. The average person is estimated to spend about $22.50 on Halloween treats in 2009.

It appears an increasing number of people are buying treats this year, making candy the fastest growing holiday category. The average person is estimated to spend about $22.50 on Halloween treats in 2009.

Also fuelling this year’s record-breaking sales is the demand for holiday decorations.  With Halloween falling on a Saturday this year, more adults are expected to join the fun.  In fact, 32 percent of people celebrating the holiday will either host or attend a party. For this reason, IBISWorld expects decorations to reach its highest level yet at $1.64 billion.

“Halloween-related festivities are a growing trend and this is driving sales of decorations and candy,” adds van Beeck.  “Dollar and variety stores stand to benefit from the 4.4 percent increase in decoration sales, as consumers look to purchase cheap and disposable thrills to make a memorable evening.”

Call it escapism or just good, old-fashioned fun, Americans of all ages show the desire to go all out when it comes to dressing-up.  Costumes are expected to generate the greatest amount of revenue this Halloween, but growth is slight (2.4 percent) as consumers will apply more frugal but creative approaches when shopping.

”Despite more people participating in festivities, money is still tight and consumers will look to cut corners when it comes costume purchases,” said van Beeck.  “Instead of buying a packaged costume, which can cost up to $60 on average, people will get more eclectic and opt for cheaper individual items.”
But given the lack of growth for the card category, not all cheaper items will fare well this year. While cards did well last year, as consumers chose to cut back on pricier categories, 2009 expenditures will revert back to traditional shopping habits.

“Although unemployment is still very high, the overall outlook is far rosier today than it was this time last year,” adds van Beeck.  “For this reason, IBISWorld expects the upward trend in Halloween expenditures to continue its course for 2009, which despite economic conditions will prove to be the best year yet.”

The 2009 Verdict

America’s largest retailer of party goods, today announced its retail sales results for the five-week Halloween season ended November 7, 2009. Amscan’s retail sales include sales under its four retail banners, Party City, Halloween USA, Party America, and Factory Card & Party Outlet.

Retail sales for the five-week period ended November 7, 2009 totaled $257.4 million and were $11.6 million or 4.7% higher than the retail sales for the five-week period ended November 1, 2008, principally due to the growth and performance of the Company’s network of temporary Halloween USA stores.

During the five-week period ended November 7, 2009, the Company operated 247 temporary Halloween USA stores, as compared to 149 in 2008. In addition to its network of temporary stores, the Company operated 387 Party City and Party America “Big Box” retail stores (stores generally greater than 8,000 square feet), 59 smaller outlet stores and 161 FCPO stores during the 2009 Halloween season, as compared to 391 Big Box, 86 outlet and 171 FCPO stores during the 2008 season.

During the five-week Halloween season of 2009, the average sales for temporary Halloween USA stores increased by 7.5%, while the same-store net sales for the Company’s Big Box stores decreased 1.5%. Same store net sales at FCPO stores decreased 1.2%.

Commenting on these results, Gerry Rittenberg, Amscan’s Chief Executive Officer, stated: “In light of the current economy, the dire pre-Halloween predictions of the National Retail Federation and aggressive competition from other temporary Halloween stores, we are extremely pleased with these key holiday results.”

Additional links 
Candy Production: http://www.ibisworld.com/industry/retail.aspx?indid=234&chid=1
Gift Shops & Card Stores: http://www.ibisworld.com/industry/retail.aspx?indid=1099&chid=1
Greeting Cards & Other Publishing: http://www.ibisworld.com/industry/retail.aspx?indid=1235&chid=1
Formal Wear & Costume Rental: http://www.ibisworld.com/industry/retail.aspx?indid=1369&chid=1

More Than Half of U.S. Workers Say Their Jobs are ‘In Limbo’

More than half of employed workers surveyed (1,000 employed US workers across industries throughout the country) said their jobs are stagnant, according to Development Dimensions International’s 2009 Pulse of the Workforce survey.

What makes their jobs stagnant? When compared to those who don’t think their jobs are stagnant, those who answered “yes” to this question are twice as likely to say they:

-Had no room to advance (32% of those who said their jobs are stagnant vs. 18% who said they aren’t)
-Are less likely to be asked to do more (14% vs. 27%)
-Are given fewer exciting challenges (3% vs. 26%)

Companies trying to grow again will feel the impact of this dissatisfaction. “The economy has forced organizations to focus on profits and the bottom-line, but this data tells us they’ve forgotten about the importance of also focusing on their people–putting their organizations at risk for high turnover, poor performance and low engagement,” said Jim Davis, vice president of workforce development for DDI.

Flight risk

Workers who don’t feel they’re being used to their full potential and have no place to go are more likely to leave–the only thing stopping them now is the economy (26% of those who said their jobs are stagnant vs. 9% who said they aren’t). Half of those who said their jobs are stagnant plan to look for another job when the economy improves and are more than twice as likely to move to another company if given the opportunity (77% vs. 32%).

“Companies that have taken their eye off of the ball when it comes to their employees will lose good people to other organizations and even competitors,” Davis said. In fact, 10% of stagnant workers will only wait another month before they make a change and 1 in 4 said they’ll wait no more than 90 days.

In a slump

The slumping economy has resulted in labor lethargy. Forty-six percent of workers who said their jobs are stagnant were twice as likely to “just do their job and go home” (versus 20% of those who don’t feel stagnant). They’re also less interested in what they do, and one-third as likely to say they’re excited to go to work.

Many of today’s workers are mentally checked-out of their jobs–their workloads are increasing, but they aren’t getting interesting challenges or opportunities to learn new skills. “This mentality is putting stress on the organization now, but will be even worse as the economy improves and as companies start to bring new employees in through the front door, their current employees will be walking out of the back door,” Davis said.

A place to grow

More than half of workers did not feel stretched outside of their comfort zone with their development or job opportunities–two areas where companies could be providing their workforce with experiences to keep them engaged. This is proven by the fact that 24% of people who are being asked to take on new challenges that stretch them are also more excited to go to work.
People who said their career is stagnant also were half as likely to be recognized for their efforts (56% vs. 27%). “For most people, the paycheck isn’t enough. They need to feel valued and challenged,” Davis said.

Summer slacking

So what are people doing pass the time at the office? Workers were just as likely to check their Facebook page during work hours (15% everyday) as they were to help a co-worker meet a deadline (14% everyday) and more likely than they were to ask for or take on an extra assignment (9% everyday).
And many chose to skip the office trip altogether, as 1 out of every 5 workers played hooky (called in sick when they weren’t) up to 3 times this summer.
“Look at the people who sit around you in the office–one has probably called in sick, skipping the water cooler to go to the pool instead, another is more likely to update their Facebook status than take on a new assignment,” Davis said. “People are just trying to get by in their jobs and companies aren’t taking measures to re-engage their workers and improve productivity.”