Tuesday, October 9, 2012 | Edited by Daniel Moores
||After Long Downturn, Beer Sales Are Back
Helped by Craft Brews, Shipments in the U.S. Are Up So Far in 2012, Breaking a Three-Year Decline
Brewers are no longer crying in their beer.
Shipments of Americans' long-standing go-to alcoholic drink are rising for the first time since 2008 in another sign that consumers -- particularly young men -- are slowly but surely emerging from the recession.
Much of the rebound is being driven by small-batch "craft" brewers, reflecting shifting tastes and forcing dominant players Anheuser-Busch InBev NV and MillerCoors LLC to increasingly borrow from upstarts' playbooks. Big brewers also are rolling out alternative malt beverages after liquor companies swiped drinkers.
Beer shipments in the U.S. rose 1.9% to 141.4 million barrels in the first eight months of 2012 after falling three straight years, according to the Beer Institute, an industry group. Beer sales had fallen 1.5% in 2011. Americans are drinking more beer even though brewers increased prices through the recession, unlike wine and liquor companies.
Beer has struggled in recent years partly because its key customers, blue-collar males in their 20s, were battered by an economic downturn that hammered industries such as construction.
"If they're hit, we're hit disproportionately," said David Almeida, vice president of sales at AB InBev's U.S. unit, which has nearly a 50% market share, much of it on the back of its Budweiser and Bud Light brands.
Job numbers are still much worse than before the downturn, but improving. The unemployment rate for males 20 to 24 years old stood at 15.2% in August. The rate for men 25 to 34 fell to 8.3% in August, from 11.7% in 2009, according to the Bureau of Labor Statistics.
To see the correlation, look at beer sales in North Dakota, where an energy-sector boom is fueling lots of blue-collar jobs. The state's overall unemployment rate is 3%, the lowest in the country. Beer shipments in North Dakota are up 18% through August.
Americans are branching out from traditional American lager to sample ales, porters and wheat beers from fast-growing small brewers.
The number of breweries in the U.S. topped 2,000 earlier this year for the first time since the late 19th century and another 1,300 are in planning stages, according to the Brewers Association, which represents craft brewers.
Craft beer sales rose 12% in volume terms to 6 million barrels in the first half of 2012, according to the Brewers Association. The association estimated craft beer represented 6% of U.S. beer market by volume and 9% in dollar terms last year.
Lagunitas Brewing Co. more than doubled its brewery's capacity in Petaluma, Calif. to 600,000 barrels after completing a $19 million expansion this spring. Its sales are up about 40% this year and the company is spending another $25 million to convert a 300,000 square foot steel fabrication plant in Chicago into a second brewery scheduled to open next year. Its best seller is a hop-heavy India pale ale, a category often called IPA.
"There's a shift in the palate," said Tony Magee, founder and part owner of Lagunitas, which began brewing in 1993. IPAs, for instance, are heavier and more bitter.
Even the White House is getting into the act after President Barack Obama bought a home-brewing kit last year. Staffers have made honey brown ale, honey porter and honey blonde, sourced from a beehive on the property. It is believed to be the first time alcohol has been brewed or distilled inside the White House.
The move to craft-style beers could limit consumption even though it lifts profits in the $100 billion beer industry. In addition to charging higher prices, many specialty brews have a heavier taste and higher alcohol content than mainstream beers, making them less likely to be guzzled in rapid-fire.
"People will go out and pound Coronas or Miller Lites, but they'll sip craft beer," said Mike Mazzoni, a longtime beer-industry consultant.
MillerCoors is posting healthy growth in its biggest-selling brand, Coors Light. But it also has broadened distribution of small brands such as Henry Weinhard's, a Northwest brewer it owns, to tap growing thirst for IPAs and other niche beers. It recently rolled out Redd's, an apple-flavored ale, and Coco Breve, a malt beverage containing coconut water, in some markets.
"I think it's woken up a lot of folks who have not considered beer and is bringing them into the category," said Tom Long, chief executive at MillerCoors, which controls about a quarter of the U.S. market and still derives the bulk of its sales from Miller and Coors lagers.
Shipments of AB InBev's Bud Light, the country's top-selling beer brand, are rising for the first time in four years, lifted by the launch of Bud Light Platinum and Bud Light Lime-A-Rita to compete against liquor. Platinum is sweeter and has higher alcohol content than regular Bud Light. Lime-A-Rita tastes more like a margarita than a beer.
Big brewers are increasingly working the craft-beer craze. Anheuser-Busch's Goose Island (acquired last year) and Shock Top are both posting double-digit growth, as are Blue Moon and Leinenkugel's at MillerCoors.
(Source: The Wall Street Journal, 10/03/12)
||Outlet Stores Are In: How They Went from Overstock Bins to Au Courant
Grant analyst Cheryl Guilford shops at the Nordstrom Rack in Manhattan's Union Square about every two weeks.
"You can always find some great bargains there that are more my budget, which is below," Guilford said -- although her tastes run high. Some of her favorite brands: Dolce & Gabbana, Stewart Weitzman and Calvin Klein.
While the Brooklyn resident figures that most of the store's merchandise is a season behind, she relishes the fact that the same UGGs she spotted at Nordstrom's full line store for $295 were selling for $199 at the Rack, she said.
Little did Guilford know that most of the merchandise at the Rack has never seen the inside of a Nordstrom store.
Contrary to popular belief, the bulk of goods sold at outlet stores today -- be they from retailers like J. Crew and Saks' Off 5th or designer brands like Kate Spade -- are new.
No longer mere repositories of last season's cast-offs, outlets -- or "factory stores" -- are hawking in-season, trendy merchandise made expressly for these lower-priced spin-off stores.
The makeover dovetails with the recession whetting consumers' appetite for outlets, which have been one of the fastest growing retail sectors in a down economy.
They've become an even bigger draw for shoppers like New York University student Annie Young, 20.
Rent and books alone are enough to sap the journalism and drama major's budget, so in addition to thrift stores, Young shops the outlets where she can find "fun and different things," she said, eyeing a purple Free People dress at Nordstrom Rack.
The dress was marked down to $44.97 from $110, which "I would never pay," she said.
A sea change in outlet sales
"Outlets always saw an upswing during tough times. But something fundamentally changed with this downturn," Carrie Geldner, senior vice president and chief marketing officer of Tanger Outlets, told DailyFinance. "The whole value equation is really embedded in the way consumers shop today and will be in our future."
Even well-heeled consumers.
Tanger's average shopper, for one, has a household income of $69,000, way above that of the average American family, which takes in about $48,500 a year.
It has become chic to shop at the outlets, and to say, 'I got this (designer) shirt for $49 instead of $100.'
In turn, retailers ranging from Nordstrom Rack to the Gap are now opening more outlets than main-brand stores, just as chains like H&M and Under Armour spread their outlet-store wings.
At the same time, outlet malls, once to be found primarily in far-flung places, are ramping up their presence where more of us live -- closer to traditional shopping malls.
Tanger, for one, is penetrating big cities and larger markets; CEO Steve Tanger believes the company is in a better position than ever to compete with traditional malls. It will open outlet malls near Phoenix, Houston and Washington, D.C., late this year or early 2013.
And just as "people are looking for value, outlets are giving retailers great returns," Paul Swinand, equity analyst with Morningstar, told DailyFinance.
Overstock drought changes outlet experience
Go back 10 years or more, and the outlet store mix was primarily overruns from department stores, discontinued merchandise, goods from prior seasons and irregulars.
Overstock goods can still be found at outlet stores, but there's a lot less of it these days.
While retailers are increasingly looking to offer outlet shoppers new merchandise -- "I don't want them bringing stripes in the stores if stripes are last year's idea" -- Gap's CEO Glenn Murphy said last year during an investor conference -- they've had little choice in the matter.
After the economy tanked in 2008, department stores as well as apparel retailers and wholesalers began keeping their inventory levels tight, so there hasn't been much in the way of surplus goods.
"At the same time, brands continued to see strong profits and consumer traffic from their outlet center channels, so they started creating merchandise exclusively for their outlets to fill the void created by lack of excess inventory," Geldner says.
Coach's outlet stores, for example, used to serve as a "disposition channel for product overruns," says Andrea Shaw Resnick, a spokeswoman for the high-end handbag company. Today, a whopping 85% of the merchandise is made specifically for factory consumers featuring current-season merchandise.
Meanwhile, Nordstrom Rack which will double its store base by 2016, calls on the same clothing suppliers that can be found at its tony department stores -- be it Hugo or Vera Wang -- to "deliver on-trend fashion for the Rack" at prices 30% to 70% below those of the parent chain, although the apparel might not be the precise color and design available at the mothership, according to Kendall Ault, a spokeswoman from the retailer.
The Rack has been ahead of the outlet-only-merchandise trend, she said, having always carried exclusive goods.
(While outlet stores have adapted to the dearth of overstock goods, closeout retailers such as Daffy's and Filene's Basement did not: The shift contributed to Daffy's and Filene's filing for bankruptcy, then shuttering their stores for good this year and in 2011, respectively.)
Tarnishing the brand?
But as more and more outlet merchandise is made exclusively for the channel, the stores run the risk of nullifying their signature appeal to shoppers: The promise of an upscale, designer frock for a fraction of the full price.
"The customer wants to think that they got the deal and there's no difference" between the quality of the merchandise sold in both places, Swinand says.
"They want to say that they got the same $500 designer bag or pair of shoes for $300...If somebody perceives that brand to be different, you're going to run into trouble. The big concern is that the merchandise is not the same level of quality."
Indeed, the quality of outlet-only merchandise can sometimes be a notch below what's sold at brands' full line stores -- a difference that can be seen by taking a close look at the fabric, stitching, lining and buttons of a garment, experts say.
Will shoppers become hip to the fact that much of their outlet finds these days aren't upscale items that just didn't sell? And if they do, will they care?
Shoppers interviewed at the Nordstrom Rack store, admittedly a self-selecting group, didn't know that the merchandise was, by and large, new for the store.
Landing deeply discounted designer duds from upscale stores is the thrill of the outlet shopping hunt for Meera, a consultant who declined to offer her last name.
"I prefer overstock from designers like Calvin Klein, Tahari and Diane Von Furstenberg," versus the idea of outlet-only finds, she said.
And "I don't care if merchandise is two seasons old," added NYU student Young.
But overall, the news that these bargain spin-off stores are selling more of their own fare than overstock goods was mostly greeted with a shrug.
Guilford, for one, actually likes the idea that outlets are now churning out brand-new fashion. "I do like that it's current," she said. "I want to be up with the style."
(Source: DailyFinance.com, 10/01/12)
||Health Care Law's Impact on Businesses Varies
Companies specializing in driving down spending on health care, whether through electronic records, preventive care or consolidating services, are turning out to be the biggest winners from the 2010 health care law.
Investors, analysts and policymakers say any business that can help health care providers cut costs or keep patients from being readmitted to the hospital soon after an in-patient visit is attracting more customers and seeing more investment.
"We must drive down the cost of, or maintain the cost of, health care," said Albert Waxman, co-founder of Psilos Group, a health care venture and growth equity fund. His firm is investing in companies specializing in controlling administrative costs for health care providers.
He has company: Investing in health services rose from $261 million in 2010 to $368 million in 2011; second-quarter 2012 investments are up $11 million from second-quarter 2011 investments, says the National Venture Capital Association.
Health care information technology spending for the second quarter hit $293 million, up from $86 million for the same period last year, according to Mercom Capital Group, a market research group that looks at health care technology. Those deals included telehealth technology, as well as mobile devices that providers carry to keep tabs on patient data.
Several businesses traditionally associated only peripherally with health care providers may also profit, because the law is forcing change in the way the medical field operates.
There are now 221 accountable-care organizations made up of hospital and physician groups, as well as insurer-based groups, according to a Leavitt Partners report issued in June. Technology, administrative and home care providers that help the ACOs save money stand to do well.
Any preventive-care organization that can help employers or insurers cut costs by lowering rates of diabetes, heart disease and respiratory issues -- such as fitness plans or smoking-cessation programs -- could also see a sudden surge in customers, says Kenneth Thorpe, who co-directs Emory University's Center on Health Outcomes and Quality.
Waxman invested in a company that uses information technology to monitor employees' health habits and to reward them when they go to annual health exams, get checked for chronic diseases and work to take care of any potential health issues.
"We're very excited about the future," said Martin Watson, CEO of SeeChange Health. "Without health reform, we figured we'd get to the $800 million mark (in earnings) by 2016. With health reform, it looks like we'll hit $1.5 billion by 2016."
SeeChange works with clients such as UnitedHealth by providing technology to cut premiums for beneficiaries who engage in healthy behaviors, tracking claims data to see which areas might need improvement, or adding cash to a health benefits account if a person stops smoking or begins a weight-loss program.
Cigna health insurance began moving toward accountable-care organizations in 2008, long before the law took affect. But Matt Manders, who heads Cigna's accountable-care initiatives, said the law has worked as an "accelerant." Cigna has 32 "collaborative accountable-care" organizations and plans to have 100 by 2014.
"It takes some time to have demonstrated results," Manders said. "But more than half (of the 32) have seen significant improvements in quality and cost reduction."
While many for-profit organizations will benefit, non-profits could do well, too. "In 2014, insurers can't profit by denying coverage anymore, so they need to keep people healthy," said Thorpe. That could mean prevention efforts, such as the YMCA's diabetes prevention program, could see an influx of cash.
Investors also see potential in accountable-care organizations, which are included in the Affordable Care Act. Private businesses have been working toward them for a few years.
ACOs gather providers, insurers and pharmacists, as well as home health care and palliative care providers, into a team. Those teams share data to avoid errors and duplication of tests and procedures.
Michael Sparer, health policy chair at Columbia University, cited Montefiore Care Management, a not-for-profit health organization in New York's Bronx, as a good example of a group that began making changes before the law started taking effect.
Henry Chung, Montefiore chief medical officer, said the group decided years ago to be paid by patient, rather than service, to cut costs. Now, it's one of 32 Medicare pilot sites.
As health care continues to change, Chung said, he sees several financial winners. In a non-fee-for-service system, primary-care physicians have an opportunity for greater reimbursement. There will be a greater need for care coordinators who keep patients well and out of the hospital. There will also be a need for palliative and home care services, and for community doctors to make sure they reach everyone in the community who might use their hospital.
"The spotlight will be on plans like ours," Chung said.
(Source: USA Today, 09/24/12)
Daily Sales Tip: Relinquishing Control
The majority of buyers become more optimistic about the possibility of doing business once they feel they're the ones controlling the process.
In that spirit, it may be a good idea to relinquish a certain amount of control, allowing the prospect to dictate a timeline for the sale, as well as how and when the two of you will meet to discuss each step.
It's an ideal way to let the buyer know you're both on the same page, while putting him or her at ease about the risk of being pushed into an unwise buying decision.
Source: Mark Ingwer, founder of Insight Consulting Group