Archive for » October 14th, 2017«

Steering a Leaky Boat in the Consumer Value Chain

The stakes are high. And, becoming higher.

While Amazon dominates the news, the shifts in the consumer value chains are fundamental. The redefinition of shopping–an explosion in new formats and alternate means of delivery–is redefining the market. The pace is fierce. In the face of change, consumer product companies, once the brand captains and marketing darlings of the industry, are slow to rethink business fundamentals.

Tensions climaxed last week with Trian’s argument that Mr. Peltz should have a board seat at the iconic firm of Procter Gamble. PG, a 65.1B company is actively fighting against Trian getting a board seat despite the 3.5B investment for a 1.5% share. As a past PG employee, daily, I received digital ads to vote against Peltz’s seat on the board. The pressure is fierce. More than 400 people showed up for the shareholder meeting at PG’s Cincinnati headquarters, filling an auditorium and spilling into two overflow rooms. Retail investors own roughly 40% of the company, compared with an average of 12% at the SP 500. PG shares over the past decade have lagged behind competitors’ and the SP 500.

The fight at PG is not unique to Procter. It just has more fanfare. The issues are systemic and across the value chain. Companies are attempting to steer a leaky boat at the intersection of the “Amazon Effect”, the “3G Effect” and digital transformation. Growth has slowed in traditional retailing and consumer manufacturers were slow to aggressively embrace new business models. In most manufacturing companies, to counter attack, the back office groups of supply chain and operations are being asked to cut costs and divert the money into sales and marketing tactics. The goal is to drive growth. The problem is that the boat is not able to steer to better serve the market. It has lost its rudder. Consumers want goods that are fresh, local, and healthy. They have lost faith in big brands. The supply chain today is focused on global and efficient. Cutting costs in the back office to attempt to drive revenue through traditional marketing programs is not the answer.

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Driving A Leaky Boat

To make the argument, let’s examine some of the trends at retail.

  •  German Retailers Redefine Formats for a Simpler Grocery Experience. Aldi and Lidl are evolving in the US as masters of store efficiency. While the traditional grocery store has over 20,000 items in more than 250 categories, these German retailers have 80-90% fewer items with ½ the categories. The impact is far fewer line extensions on the shelves. Simpler shopping. If this is the case, why have consumer products companies added 38% more items to  item masters over the course of the last five years? Most were brand extensions not successful product launch adding to costs and driving complexity.
  • New Services/Solutions. Albertson’s recently purchased Plated to try to bring cooking to the home. Families want healthy, value-based meals. Many don’t know how to cook. The company is attempting to redefine omni-channel meal service. One might ask, “Why is this not happening under the direction of McCormick or Conagra? Or General Mills?” Why are consumer products companies slow to bring new models to market?
  •  Decay/Distrust of Big Brands. The introduction of Honest and Brandless as successful start-ups is a megaphone for customer sentiment. The names, by definition, defy big brand power. In parallel, private label often termed retail house brands are growing in the basket. Private label is currently 18% in the United States. It is 45% in Switzerland. Big consumer brands are shrinking. The center store of a grocery store is moving online. Why are Unilever or PG not leading this effort to take their brands into eCommerce? Why did Unilever have to buy Dollar Shave Club versus invent it?
  • The Amazon Effect. As Amazon extends its tentacles, stretching into supply chain crevices, and redefining capabilities, many boards are waking-up to question tomorrow if they don’t act now. I would argue that PG should have acted faster. With brand power and brand insights, why were they so slow to move into eCommerce? Why were they not Amazon?

Big brands are out of step. Shoppers want local along with fresh and personalized products. They want locally sourced goods, convenience and product quality. Shoppers want smart labels to see country of origin. In the last decade, as consumer packaged goods companies drove global growth strategies, the focus was on supply chain efficiency and the delivery of a standardized products. Leaders of functional organizations within these companies see no reason to change. Most are getting their bonuses, reward systems are moving along and change is risky.

MA is not the answer. Mistakenly, consumer products companies  attempted to grow through acquisition. MA deals in the first quarter of 2015 rose by 14% and 25% year-over-year respectively making it the largest deal quarter since 2007. In Figures 1 and 2, the decay in business results speak for themselves.

Figure 1. Year-over-Year Shifts at the Intersection of Operating Margin and Inventory Turns in Consumer Goods Nondurable Companies

If you like the ocean and solitude, this land sale in Maine has lots for $20000




The real estate venture sounded promising.

More than a decade ago developers from outside Bar Harbor, Maine, subdivided a vast, oceanfront property in the fishing community of Steuben and started to sell lots.

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Sales began in 2004, the town said, with the first buyer paying $343,000 for a little more than six acres. A few more lots sold, but then the recession hit. Subdivision sales came to a standstill. Over 13 years, just two homes were built.

“This was intended to be an upper-scale neighborhood and marketed like that. It just didn’t happen,” said Julie Ginn, the town clerk and tax collector in Steuben, a community of about 1,100 residents. “People here can’t afford waterfront property. We are not Bar Harbor or Mount Desert Island. We have the beauty of it but we don’t have the economy.”

Now 40 to 50 lots on the 600-acre site are going on sale Saturday at deep discounts in a liquidation event that has been heavily marketed to residents in Massachusetts and nearby states.

The advertisements include mailings and Facebook posts featuring a sunset view over a pristine shoreline. The sale is billed as a “one day only” opportunity offering lots with ocean access starting at $19,900, oceanfront tracts of up to 52 acres from $79,900, and a 5-acre, shoreline plot plus building materials for a 2,000-square-foot cottage for $119,900.

The catch? You’ve got to enjoy solitude.

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“That’s the drawback of Steuben,” said Ginn. “We have no business to speak of. The closest Dunkin’ Donuts is 30 minutes away. Starbucks is even further away, and forget that because none of us know how to order at Starbucks.”

The fire sale prices are symptomatic, economists said, of Steuben’s location and a real estate market in northern Maine that hasn’t experienced the post-recession rebound seen in other parts of the state.

The largest nearby tourist attraction is Acadia National Park, which drew a record-high estimated 3.3 million visits last year, but Steuben has the misfortune of being located about an hour beyond the popular vacation spot. From Boston, it’s about a five-hour trip by car.

“It’s past the point where many tourists go,” said James Breece, an associate professor of economics at the University of Maine in Orono. “It’s not as desirable as Camden or Boothbay or Bar Harbor.”

Figures from the Maine Association of Realtors show home sales jumped in Maine by more than 6 percent between August 2016 and August 2017, but sales in Washington County, where Steuben is located, fell by nearly 4 percent.

“Talk to anyone in the real estate business — the market is gone,” said Kevin Barbee, one of the developers of the for-sale subdivision, called The Preserve at Dolly Head. “I’m sitting on a lot of lots.”

Barbee said he tried listing the property with local realtors for years before he enlisted help from two North Carolina companies that organize land liquidation sales.

Land records show the site isn’t in foreclosure, but Barbee said he wants to sell.

“I’m not in any kind of financial problems,” he said.

Art Secor, managing partner at LW Land, a Charlotte, N.C., firm helping with the sale, said he expects that all the lots will sell on Saturday because demand for ocean-side property is so high. The marketing effort, he said, has targeted people who live within four to five hours from Steuben by car and may want a retirement property or second home.

“There are people . . . who don’t want to spend $1 million on Bar Harbor, but they can afford a $200,000 lot 45 minutes away, where the land is really lovely,” said Secor. “We try to have a price point for all buyers. There’s going to be a lot in there for every economic status.”

Kevin Barbee

An aerial view shows the secluded, tree-lined area

But where will buyers get basic necessities or medical care? Secor pointed to Ellsworth, about 25 miles away, where there is a hospital, a Walmart Supercenter, and the Maine Coast Mall.

Steuben also has The Aerie Restaurant, which seats up to 72 guests for dinner following concerts at the Eagle Hill Institute, a scientific organization specializing in the natural history sciences. A violin and piano concert is scheduled for Saturday evening.

Crews have been preparing the subdivision for the sale by cleaning and installing a boat ramp and gate, Secor said. About half of the property will be set aside as conservation land and won’t be sold.

Despite the activity, some residents said they weren’t aware of the sale.

“It’s really remote even compared to the rest of Steuben,” said Steven Carter, a boat builder and owner of Maine’s Own Blue Bay Boat.

Carter, 56, said he moved to Steuben from Tremont on Mount Desert Island five years ago, building a home and boat shop on 1.5 acres he purchased for $8,500. His hometown, he said, had become too busy.

“It’s not the same place where I grew up,” Carter said. “I like to try to keep it as quiet as I can around me.”

Ginn, the town official, said she has high hopes for the sale.

“I’d love to see our tax base grow. I would love to see full-time residents come and put some kids in our school,” she said. “We here definitely want it to succeed.”

Laura Crimaldi can be reached at laura.crimaldi@globe.com. Follow her on Twitter @lauracrimaldi.


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Miller Boat Line has been lifeline to lake for more than a century

PUT-IN-BAY — He calls himself “the highest paid dock boy.”

Billy Market’s tongue-in-cheek assessment of himself is much like the humor a lot of us use as icebreakers when we engage in conservation with people we’ve never met before. In this case, Mr. Market was about to launch into a telephone interview about his family’s iconic company, Miller Boat Line.

Yet in a way, Mr. Market’s quip also explains why Miller Boat Line has worked as a family operation for 112 years now. The down-to-earth personalities of him and his two siblings, sister Julene Market and brother Scott Market, have made them part of South Bass Island’s close-knit fabric for years, as has their lack of pretentiousness and ability to avoid stepping on each other’s toes.

“I call it kissing babies and shaking hands,” Mr. Market said of the role he has assumed as Miller Boat Line ambassador and all-around troubleshooter, explaining that Julene’s strength is in promotions and advertising, while Scott’s is as a handyman in charge of maintenance and upkeep of the vessels. “I’m sort of the front-of-company guy.”

Miller Boat Line didn’t start with the Markets. According to records, the company got its name from a Put-in-Bay man named William M. Miller, who in 1905 started a local ice business with another South Bass Island resident, Harry Jones. The ice was harvested from Put-in-Bay’s harbor during the winter, stored in an ice house that was insulated with sawdust, and then sold in the summertime to sailors aboard yachts moored in the bay or to island hotels and restaurants.

Mr. Miller, appropriately, had an 18-foot delivery boat called Iceman. He eventually expanded his service to six charter boats, including a 50-footer called Avon. He also had a water-taxi service.

His son, Lee Miller, skippered the Avon on its 3-mile runs between South Bass Island and Catawba Point. To serve as a ferry, the Avon would be attached to a scow. That allowed it to carry up to eight cars at a time, according to the company’s website.

More boats and services were added by the company, known as Miller Boat Livery during its early years. Because regular air service didn’t begin until 1929, the Millers held the contract for mail service between South Bass and the mainland for years.

Those early boats were wooden and were outfitted with metal sheathing nailed on to help the vessels withstand jagged ice. But there were no guarantees those strips of metal would be enough to help the wooden boats withstand the elements.

“It was commonplace for a paying passenger to have to help shove and maneuver the boats across the ice,” according to the company’s website.

By the mid-1940s, Miller Boat Livery purchased the Catawba Dock Company stock of boats. Lee Miller took control of the company in 1945 and had the all-steel automobile-passenger ferry, South Shore, built by Stadium Boat Works of Cleveland. The 65-foot enclosed vessel could carry up to 12 cars. Soon, more vessels followed, and Miller Boat Line became the main water connection between Catawba Point and the Lake Erie islands.

The company might have stayed in the Miller family longer if it hadn’t been for the accidental drowning of Lee and Mary Miller’s son, Bill Miller, at age 28 in 1959. 

In 1971, Bill Market, father of the three Market siblings who own the company today, was appointed by Lee Miller as manager. Mr. Market, a fourth-generation islander, had worked for the Millers as a purser and deckhand since 1954. He captained the vessel William M. Miller. When Lee Miller died in 1973, his widow, Mary Miller, asked Mr. Market to take over all of the company’s day-to-day operations.

In 1978, Bill Market and his wife, MaryAnn Market, also a native islander, purchased the boat line from Mary Miller. The Market family has owned and operated the business since then.

A more in-depth look at the company’s history can be found at bit.ly/2yAZ8M1.

The three siblings who own Miller Boat Line today inherited the company from their parents. Their father died in 2006, and their mother died in 2010.

They lavishly praise their parents for instilling in them a solid work ethic.

“Pride and determination have been hard wired into us by our parents,” Julene Market said. “It’s the way we were brought up.”

The Markets said on their website they have continued to use the Miller name as “a salute to the Miller family, our island heritage, and goodwill the company has cultivated over the past century.”

Research shows that only 30 percent of all family-owned businesses survive into the second generation, only 12 percent will survive into the third generation, and a mere 3 percent operate at the fourth generation and beyond, according to JSA Advising of Edina, Minn., in making its point that fourth-generation family-owned businesses are “very rare.”

In addition to lessons passed on by their parents, the three Markets work well together because they communiate well and understand each other’s roles, Billy Market said.

“We respect each other’s areas of expertise. I’m not going to tell Julene what billboards and social media should look like. We all know we’re fairly good and competent in our own areas. We don’t step on each other’s toes and micro-manage,” he said.

They’ve also been known to help out the Coast Guard in a moment’s notice if it needs assistance on a rescue mission, and they are among Lake Erie’s fearless ambassadors.

Their biggest fans include longtime South Bass resident Dave Fredericks, 73, whose wife grew up on the island.

“They are one of the most accommodating and benevolent families on the island,” Mr. Fredericks said. “They are very service-minded. It’s not the average business smile. It’s very social and heartfelt.”

Although the Jet Express also provides passenger ferry service, the majority of freight hauled by large trucks is ferried over by Miller Boat Line, Mr. Fredericks said.

“They couldn’t be more helpful to the island and the community,” he said of the Market family, beginning with their parents. “That whole family has been that way. There couldn’t be a more wholesome family. They bend over backwards for the island community.”

Although western Lake Erie’s chronic algae doesn’t appear to be slowing down passenger sales, Julene Market is a strong advocate for a cleaner lake and said she supports an impairment declaration, explaining it could “help gain the much-needed attention and funding that is so badly needed from the federal government.”

“The alarms have been sounded. We absolutely have to have the funding and the backing of legislators [to combat algae],” she said.

Dan Savage, director of the Lake Erie Islands Historical Society director, described Ms. Market in 2014 as “very much an ambassador for the islands.”

“She is sort of remarkable, very much like her mother was in that she has this deep love for the island and everything about this place,” he said in a 2014 intervew. “She’s a tireless promoter of the lake and the islands, and there’s a lot of energy and enthusiasm that goes into whatever she is involved with.”

The Rev. Mary L. Staley of St. Paul’s Episcopal Church in Put-in-Bay said the Markets are more generous than people may realize, from their support of athletics to sizeable donations to the local food pantry.

“They’re just wonderful people who’ve been good to this island,” Reverend Staley said. “They do stuff they don’t want credit for sometimes. Stuff just happens. We’re grateful.” 

The Markets have several children in their teens and early 20s, which allows for the possibility of Miller Boat Line staying in their family’s hands when Julene, 61, Billy, 56, and Scott, 54, get too old to keep running it. 

Three of their children are already working for the company.

“We can already see the next generation getting ready,” Billy Market said.

The company has four vessels in operation now and is having a fifth built to begin operations in 2019, he said.

“There is a huge amount of satisfaction because we’re sort of the lifeline to the islands,” Billy Market said. “Anything that is consumed we haul. There are a lot of people who count on us to get stuff to them.”

All three Miller Boat Line owners grew up on and are raising their families on South Bass Island. They are among the island’s 550 year-round residents.

“It definitely has so many advantages,” Billy Market said, adding that stocking up on food — especially during the coldest time of the year when the ferries aren’t operating from early January to mid-March — becomes almost second-nature to island residents. “I think any island is an attraction in itself, whether it be in Lake Erie or the Caribbean, or Alaska.”

Miller Boat Line employs 130 people during its peak summer season. Many have been with the company for years.

“Everybody that works for us is part of the family,” Billy Market said.

Contact Tom Henry at thenry@theblade.com, 419-724-6079, or via Twitter @ecowriterohio.


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