economics

March 14, 2010

Sugar Gains Favor on Labels Despite Costs, More Packaged-Food Producers Replace High Fructose Corn Syrup

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Many consumers worry that HFCS is worse for them than sugar. Some critics call high fructose corn syrup an artificial sweetener, as it is heavily processed, even though many experts say there is little nutritional difference between it and sugar.

The move away from HFCS, combined with lower consumption of soft drinks, has weighed on U.S. sales of the sweetener at manufacturers such as Archer Daniels Midland Co. and Corn Products International Inc.

Archer Daniels Midland, which declined to comment, doesn’t break out sales of U.S. high fructose corn syrup. On a recent conference call, however, the company said U.S. volumes for the corn-sweetener industry have been lower, reflecting a drop in consumption of carbonated soft drinks. ADM said on the call that it is counting on better sales in markets such as Mexico to help offset declines in the U.S.

Corn Products International didn’t respond to calls on this subject.

Consumption of high fructose corn syrup fell 1.3% in 2009 in the U.S. from a year earlier, according to research firm Euromonitor.

The Corn Refiners Association has been running television ads that try to counter the perception that the syrup is inferior. On its Web site, http://www.sweetsurprise.com, the association says high fructose corn syrup “is simply a kind of corn sugar. It has the same number of calories as sugar and is handled similarly by the body.”

Audrae Erickson, president of the Corn Refiners Association, said, “This is nothing more than a marketing gimmick,” referring to packaged-food companies that switch ingredients. “They’ve switched from one sugar to another,” Ms. Erickson said. She argues that eventually consumers will end up paying more.

Sales of high fructose syrup have been pressured for some years as many Americans have moved away from sodas, which are heavy users of the sweetener. But experts say that the sweetener’s prices have now also come under pressure in the U.S. amid the recent shifts by branded food and beverage makers. In the Midwest, high fructose corn syrup has been selling for 16.75 cents a pound on average, said Ron Sterk, editor of trade publication Milling and Baking News, down three cents from last year.

As they try to hold onto market share, companies shifting to sugar from HFCS say they aren’t raising prices for consumers despite their higher costs for raw materials.

Early this year, the price of sugar in the U.S averaged over $1,000 a ton compared to about $695 a ton for one variety of high fructose corn syrup, LMC International economist Nick Fereday said. He puts annual consumption of sugar at nine million tons in the U.S. and corn syrup at seven million.

In 2009, use of sugar in canned, bottled and frozen foods was flat from a year ago at 427,000 tons in the U.S., according to the U.S. Department of Agriculture.

Years ago, high fructose corn syrup got some bad press. One piece of research in 2004 from the Pennington Biomedical Research Center, Louisiana State University and University of North Carolina raised questions about whether the syrup was playing a role in the national obesity epidemic.

One of the authors of that study, University of North Carolina professor Barry Popkin, said that since then he and other researchers have concluded that regular sugar and high fructose corn syrup “have the same exact effect on obesity and diabetes and on heart disease. It’s not that one is better.”

More consumers are paying attention to sweeteners. Laurie Ledgard, a stay-at-home mother in Suffield, Conn., said she does look at the sugar contents and tries to avoid the syrup.

“If I have to have sugar, I’d rather have the natural sugar than high fructose corn syrup,” she said. Still, she acknowledges that “there is a devil in sugar as well, and you don’t want a lot of that either.”

Soft-Drink Sales Drop in Schools, Group Says

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Sales volume of beverages shipped to schools from bottlers fell 72% between the first semester of the 2004-05 school year and the first semester of the current academic year, according to the report, which was compiled for the American Beverage Association by economic research firm Keybridge Research LLC. The report showed a 95% decline in sales volume of full-calorie soft drinks, such as Coca-Cola and Pepsi-Cola, and a 94% decline in juice drinks. Full-calorie soft drinks accounted for just 6.8% of beverage volume shipped to schools last semester, while they made up 40% of the product mix in 2004.

[SODA]

Shipments of most other types of drinks also fell significantly. Volume dropped 77% for bottled tea, 67% for sports drinks and 47% for diet soda. Even sales of bottled water and flavored or fortified waters, the most popular drinks now sold in schools, slid 15%. The result was an 88% decrease in beverage calories shipped to schools, the ABA said.

January 6, 2010

Will the Tories tackle supermarkets?

Filed under: Uncategorized — ktetaichinh @ 12:49 am
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Everyone knows what the problem is, but no one, until now, has been prepared to act. The supermarkets enjoy what economists call a monopsony: excessive buying power caused by market dominance. Governments have dithered and filibustered, frightened away by the force they should be curbing. Decades of regulatory failure have made the supermarkets so powerful that few politicians will stand up to them. The Competition Commission proposed a supermarket ombudsman almost two years ago, but the government dealt with this request by ignoring it.

The Conservatives are promising action not because they want to fight the supermarkets but because they want to defend their members. Much of the core membership of the party consists of rural landowners, many of whom own farms. They don’t rank among the world’s most deserving causes, but in the pecking order of vested interests they are lesser bastards than their customers. They deserve more support in the battle with the superstores than any government has so far given them.

The supermarkets have used their buying power to shift the money that farmers might have made into their own accounts. Once farmers become dependent on them, they bring down the prices they pay, sometimes to below the cost of production. They demand that their suppliers carry all the expense of packaging, labelling and transporting their goods, and sometimes change the specifications without notice. The cost of any discounts the supermarket offers must be borne by the supplier, not the shop, and the supermarkets will suddenly alter the terms of the contract, knowing that the farmer’s only alternative is to let his crops rot in the field. Some chains demand a “rebate” from farmers at the end of the year: a tax that they must pay if they’re to get another contract. It’s the kind of predatory relationship you would expect between an Indian landlord and his tenants: total exploitation unimpeded by government.

Very small farmers have the option of selling their produce through farmers’ markets, farm shops and box schemes. It’s a hard grind, and it doesn’t work for everyone. But above a certain size, you need retailers to shift it for you. The big chains’ capture of the grocery market means that producers have nowhere else to go.

The supermarkets claim that they treat their suppliers like this for the benefit of their customers. But their mark-ups are astonishing. A friend of mine found his organic beetroot on sale for £1.80 a bunch. He had been paid 14p for it: a fraction more than the cost of production. The superstore awarded itself £1.66 for the labour of putting it on the shelves and ringing it through the tills.

Differentials like this explain why fruit and vegetables sold by market stalls and independent greengrocers, which have no buyer power, no economies of scale and much higher labour costs in relation to turnover, are often cheaper than the same items in supermarkets. They also explain the superstores’ profits. Last year, for example, Tesco made over £3bn, even as it spent lavishly on new land and new stores. Such is the size and power of the chains that they have captured the market at both ends: they are both monopsonists and monopolists.

An ombudsman is part of the solution, but only part. One of the problems is that farmers who have become dependent on the supermarkets for their survival are too frightened to complain. Plenty of suppliers have been delisted for the crime of speaking out. This is why the new Groceries Supply code of practice, which comes into force in this country next month, will be all but useless. To be effective, the ombudsman would need to be proactive, demanding documentation from the superstores showing how much they pay and how much they charge. The system won’t work if it relies on farmers to come forward.

But a fair grocery market demands much more than this. The only lasting solution to monopolies and monopsonies is to break them up, stimulating competition by forcing the big corporations to sell off many of their outlets. Do the Tories have the guts to do this? I doubt it.

December 26, 2009

Airlines in Asia Resist the No-Frills Trend

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Outside of mainland China, Asian airline passengers expect top service because it is part of the region’s cultural makeup and because no-frills, budget carriers are not as established here yet. For many carriers, the top end of the market makes up a huge part of revenue, and none can afford to be the first to cut corners when it comes to service levels.

“Asian airlines have been very reluctant to start going down the track that the Americans have gone,” said Peter Harbison, chairman of the Center for Asia Pacific Aviation, a consulting firm based in Sydney.

Alex McGowan, product manager at Cathay, said: “When the financial crisis overwhelmed the industry a year ago, we took a decision that maintaining that premium service was vital to our future. So whatever cutbacks we made, we did not make any to the areas our customers value.”

Singapore Airlines is installing new seats in the premium cabins on some aircraft and has improved in-flight entertainment systems. Like Cathay, it is based in one of Asia’s financial hubs and was hit hard by the turmoil in the banking industry. But about 40 percent of its revenue comes from its premium classes. That may explain why it has not only maintained its annual wine budget for first class — 10 million Singapore dollars, or $7 million — but also has introduced new meals for first-class passengers on Chinese routes, specially created by a leading Chinese chef, Zhu Jun.

Qantas, the Australian carrier, canceled orders for several aircraft in June. But it has pressed ahead with a program devised to cut check-in times in half on domestic flights by allowing members of its frequent-flier program to check in with a membership card fitted with a special chip.

Asian airlines’ obsession with service shows through in the quality rankings of Skytrax, a consulting firm based in London. Five of the six airlines in Skytrax’s five-star category are based in the Asia-Pacific region, as are nearly half of the 27 carriers that hold four stars.

By contrast, only a few four-star carriers are North American and fewer than 10 are European. Carriers in Europe have started to move down the road of charging for extras and easing back on some services. But the practice is not nearly as entrenched in Europe as it is in the United States, where a recent survey by J.D. Power & Associates showed that customer satisfaction with North American airlines had declined for the third consecutive year as airlines added fees for items like drinks, baggage and even pillows.

For no-frills carriers like Easyjet or Ryanair in Europe, fees for drinks and headphones make sense, said Mr. Harbison of the Center for Asia Pacific Aviation, as the airlines are charging only for what the passenger wants.

“But when you are posing as a full-service airline and are trying to show that you’re not just a commodity carrier, you risk undermining your image and passenger loyalty if you start charging for add-ons, or cutting back on established services,” he said.

Asia’s low-cost carriers have mostly expanded the pie, rather than intensifying the squabble over an existing market. Their fares draw in many passengers who could not afford to fly with traditional carriers.

And Asian low-fare airlines, like their full-service brethren here, often have a higher service mentality than their counterparts elsewhere. AirAsia charges for meals and drinks, for example, but its new aircraft have leather seats, conveying an aura of luxury.

Jetstar, another low-cost carrier, is testing a technology that will transmit boarding passes by text message to any mobile phone — whether it is Internet-enabled or not.

All that means that flying in Asia is likely to remain more pleasant than in Europe or the United States for the foreseeable future — and not necessarily at outrageously higher prices. For although the higher service levels come at a premium, that premium pool has shrunk, as carriers rush to entice travelers with lower ticket prices.

December 15, 2009

Coca-Cola takes on climate change

Filed under: Uncategorized — ktetaichinh @ 9:58 pm
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Coca-Cola CEO Muhtar Kent

By Marc Gunther, contributing editorDecember 15, 2009: 1:46 PM ET

COPENHAGEN (Fortune) — Polar bears have been featured in Coca-Cola’s holiday advertising for nearly a century. Last month, Muhtar Kent, the company’s CEO, traveled to the Arctic to see the furry creatures up close.

It must have been cold up there, I remarked.

//

coke_polar_bear2.03.jpg
Coca-Cola CEO Muhtar Kent observed that lack of ice is affecting polar bears’ ability to feed.

“Not cold enough,” replied Kent, who has emerged as a prominent corporate advocate for a global treaty to curb climate change.

“There were a lot of hungry polar bears waiting for the ice,” he said. “They were coming out of hibernation, they’d been on land for months, and they can’t feed unless they are on ice. The ice was late in forming, and we saw that with our own eyes.”

Kent sat down with Fortune in Copenhagen, where he spent the weekend. He was one of a handful of Fortune 500 CEOs to come to Denmark to throw his support behind a global agreement to regulate carbon emissions.

“It is absolutely imperative that our commitment to a low-carbon future be fully understood,” Kent said. “We’re here to lend a Coca-Cola voice to the public and political debate on getting to a fair framework, an inclusive framework, an effective framework so that we can achieve climate protection.”

Six weeks earlier, Kent had traveled to Churchill, Manitoba, on the shore of the Hudson Bay, to see the effects of climate change for himself. The 57-year-old executive timed his trip so that he could take a turn carrying the Olympic torch, which is making its way to Vancouver for the winter games in February. He was accompanied by Carter Roberts, the president of the World Wildlife Fund, one of the nonprofit partners helping Coca-Cola (KO, Fortune 500) find its own way toward a more sustainable business model — one that pollutes less, recycles more, requires less water, and holds down its greenhouse gas emissions even as the business grows.

For Kent’s predecessor Neville Isdell, who grew up in Africa, nature and conservation were a lifelong passion. By contrast, Kent’s focus on sustainability is a matter of business. Global warming creates business risks for Coca-Cola, and not merely because it wants to preserve the tradition of light-hearted advertising with polar bears.

Over the weekend, the company released a report with the World Environment Center (an Indian advocacy group led by Nobel Prize winner R.K. Pachauri) to call attention to the effects of climate change on water. Some scientists project that 75 to 250 million people in Africa will live under “water stress” by 2020.

“Water is where climate impacts will be most acutely felt,” Kent said. Even now, he noted, “lack of clean water kills more people in Africa than malaria and AIDS combined.”

The climate-water issue also threatens Coca-Cola’s reputation, particularly if the company is seen as taking water from arid areas to make soft drinks. Coke and rival PepsiCo (PEP, Fortune 500) have been targets of protests in India that have aroused activists in the west. A Coke insider says its bottling plants have not taken water from people who need it, but added that the company is trying to do a better job of engaging with communities where it operates.

The water issue is key to Coca-Cola’s sustainability efforts, which also focus on carbon emissions and packaging. Some highlights:

– Coca-Cola has pledged to be 100% water neutral by 2020, meaning that it will return as much water to water systems as it takes. The company is upgrading technology in its more than 900 bottling plants, recycling and treating more of its wastewater, and replenishing freshwater systems in India, Africa, and elsewhere. The company uses about 300 billion liters of water a year, roughly half the amount used in the entire Atlanta metropolitan area, where it is headquartered.

–This winter, Coca-Cola introduced a new package called the PlantBottle, made of PET plastic, 30% of which is sourced from Brazilian sugarcane waste. It’s available in parts of the United States, Canada, and Denmark. The company is trying to incorporate more renewable and recycled content in its packages, in part to defuse controversy over the waste associated with soft drinks.

In Copenhagen, Kent held up a plastic bottle made up of 50% recycled content and 15% renewable sugarcane waste.

“That’s 65% that is decoupled from fossil fuels,” he said. “And there are no issues with performance — the same clarity, the same shelf life, and yes, a little bit higher cost. But as we scale this up, we know that the cost is going to be competitive and perhaps even less as the price of oil inevitably goes up.”

–This month, Coca-Cola and its bottling partners announced that 100% of their new vending machines and coolers will be hydrofluorocarbon-free (HFC-free) by 2015. The company has worked with Greenpeace since 2000 to phase out HFCs, a potent greenhouse gas, from its cooling units, investing more than $50 million in research and development. It has about 10 million cooling units worldwide. “Refrigeration is the biggest piece of our carbon footprint,” Kent said.

Where’s the business payoff? Kent said while the HFC-free coolers will cost more, they use less energy; major retailers like Wal-Mart (WMT, Fortune 500) and Tesco, a British supermarket chain, are pressuring their suppliers to be more energy-efficient and sustainable. Coca-Cola also hopes its so-called climate-friendly coolers will enhance its image with consumers and the distributors — colleges, movie theaters, and sports arenas — who can choose between Coke and Pepsi.

Increasingly, customers in the United States, Europe, and emerging markets are paying attention, Kent said: “They vote for products based on a company’s character.” To top of page

Kraft Foods challenges Cadbury over its hostile bid defence

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Cadbury's Dairy MilkKraft appeals to investors to choose between the ‘certainty’ of its offer and the ‘risk’ of continuing to hold Cadbury shares. Photograph: Graham Turner

Kraft Foods today turned the tables on Cadbury claiming there were major uncertainties surrounding its ability to deliver on the long-term growth targets promised to shareholders as part of its defence against the American group’s £10bn hostile bid.

Kraft said Cadbury’s investors had to choose between the “certainty” of its offer and the “risk” of continuing to own the shares: “Cadbury is asking its shareholders to put their faith in long-term targets, never before achieved by Cadbury.”

On Monday, the British confectioner, which makes Dairy Milk chocolate and Halls throat sweets, launched its formal defence by presenting a revised business plan to the City. In it, the Bournville-based company promised to exceed previously stated sales and profit goals and flagged the potential to push through substantial dividend increases starting next year.

In a statement today, Kraft reiterated its view that its cash and shares offer was pitched at a “substantial premium” to the Cadbury share price before its interest was made public. It also said a takeover would deliver “substantially more value than Cadbury could achieve on its own”.

The world’s second largest food group, which owns the Milka and Toblerone brands, questioned Cadbury’s ability to achieve annual sales growth of 4% to 6%, arguing that kind of momentum had not been in evidence in the past year. The Illinois company asked how Cadbury intended to hit its new operating margin target of 16% to 18% by 2013 without incurring more restructuring costs – Cadbury has already spent £1bn revamping its supply chain – or increasing price rises.

Comments made by Kraft chief executive, Irene Rosenfeld, also suggested the group did not intend to raise its offer, promising to maintain a “disciplined approach” to the acquisition. Cadbury’s shares are now trading above the current value of the Kraft offer which is 729p. Cadbury has been contacted by US counterpart, Hershey, as well as Italy’s Ferrero International over potential counter bids but Kraft is thought to be convinced none will emerge.

Cadbury issued a withering response to the Kraft attack, arguing the company had “run out of ideas” and was using “smoke and mirrors” to cover up the fact its offer was “derisory”. “Neither our shareholders nor the market as a whole seem to have had any problems understanding the detail in our business plan,” said a spokesman. “We will continue to communicate directly with our shareholders about the significant value in their business.”

On Monday, Cadbury chairman, Roger Carr, insisted the company was not seeking “independence for its own sake”, but that Kraft was trying to buy Cadbury “on the cheap”.

Some analysts agree that the new targets set by the British confectioner are stretching and will be tough to achieve alone, although Carr appeared to leave the door open to some kind of tie-up.

Charles Stanley analyst, Jeremy Batstone-Carr, said that while Kraft was questioning the credibility of Cadbury’s defence strategy, investors could do the same of the Illinois-based company’s recent record. He said: “In the absence of a rival offer … we believe that the prevailing balance of probability strongly favours Cadbury’s continued independence.”

December 13, 2009

Restaurant of the Future?

Filed under: Uncategorized — ktetaichinh @ 3:21 am
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The Bazaar by José Andrés, a Beverly Hills, Calif., bar and restaurant, cost more than $12 million to build. It serves no appetizers or entrees: All meals are made up of tapas, and signature items include drinks and canapés dipped in vats of liquid nitrogen. First-time visitors might wander the ground floor of the SLS Hotel looking for the restaurant—and not realize that they are already standing in it. A palm-reader roams the floor, offering predictions.

This restaurant—packed at a time when many others are discounting or closing their doors—may be the future of fine dining.

A tapas-style menu, a hotel location and a major focus on the bar scene are hallmarks of restaurants around the country that are best surviving the economic turmoil of the past year. These components are also likely to be the defining traits of the next generation of high-end restaurants, say many leading restaurateurs, and are already being deployed in cities across the country.

Darko ZagarThe Bazaar’s salt-air margarita.

Future

Future

Since opening a little over a year ago, the Bazaar has grossed $13 million, says Sam Nazarian, the chief executive of SBE Entertainment Group, the hospitality company that owns the restaurant and the SLS Hotel. Only 50 restaurants in the country grossed more last year, according to data from Restaurant & Institutions, a trade publication. That makes the restaurant a bright spot for Mr. Nazarian, whose company has recently made significant investments in hotels, several of which carry large debt loads, only to face a steep downturn in the luxury hotel business.

Prime-time reservations in the 417-seat restaurant are hard to land, and Natalie Portman and Salma Hayek are regulars, the restaurant says. David Beckham was there on a recent Sunday night. (Representatives for the celebrities declined to comment or didn’t respond to requests for comment.) Mr. Andrés, the chef, was recently chosen as one of GQ Magazine’s Men of the Year.

Meanwhile, the $8 billion fine-dining business—the category of meals costing $70 and up—has been the hardest-hit sector of the struggling restaurant industry. Nearly every city has lost one of its most famous restaurants in the past two years, from the Striped Bass and Susanna Foo in Philadelphia to D’Amico Cucina in Minneapolis to Boston’s Icarus and New York’s Chanterelle.

Darko ZagarThe Bazaar’s mussels in escabeche.

Future

Future

In this atmosphere, “a hundred percent of people told us this was crazy before we started,” Mr. Nazarian says. The restaurant is a collection of spaces, with kitchens, tables and lounge chairs spread over 12,500 square feet. A large, dark bar anchoring the space is flanked by two dining areas—one decorated in white, the other in black with red accents—and a pastel-accented dessert area, called the Patisserie. The bar area gets so packed that the hotel sometimes puts up a velvet rope at the entrance to the Bazaar to control the crowd.

The menu is Spanish, divided into dishes that are traditional and “modern”—the unusual creations of Mr. Andrés, who in his youth cooked at Spain’s El Bulli, where chef Ferran Adrià pioneered the field of molecular gastronomy. A mobile cart of liquid nitrogen wheels up to tables that order a $20 Brazilian cocktail, which is dipped and instantly frozen in the steaming brew. Another cart offers “Cotton Candy Foie Gras,” a block of rich paté that a waiter twirls in spun sugar. A third cart serves “caviar cones,” fish eggs served in paper-thin pastry cones. The average check at the Bazaar is $96.44 a person.

Here are some of the strategies behind the Bazaar’s success, and a forecast of how they might shape the fine-dining landscape in the near future.

Snacks Replace the Meal

THE BAZAAR: Serves only tapas, or small plates, which can be ordered a la carte or as part of a multicourse menu.

Darko ZagarThe Bazaar’s ‘modern olives,’ made from olive oil inside a thin membrane of oil.

Future

Future

THE FUTURE? Small-plates restaurants have been growing throughout the decade, but in the past year have made a quantum leap in popularity as restaurateurs look for ways to offer customers cheaper food without appearing to discount.

In November, New York’s Tabla restaurant, from restaurateur Danny Meyer, scrapped its mandatory $89 tasting menu in favor of an a la carte menu with many small plates. Popular new small-plates restaurants from top chefs around the country range from Michelle Bernstein’s Sra. Martinez in Miami to Ginger Park, with chef Patricia Yeo, in Boston to Samar by Stephan Pyles in Dallas. Over the past four years, Philadelphia chef Jose Garces has built a small empire of five small-plates restaurants and plans to open three more next year.

The small-plates format is a clever way around consumers’ psychological barriers to restaurant spending. Consumer research shows that patrons order more when individual dishes are priced fairly low, and they don’t spend time adding up the costs. Especially while the economy is soft, many fine-dining restaurants will offer a small-plates menu, either as a bar menu or instead of a traditional menu.

OR A FAD? Tapas are a Spanish tradition but not all food works tapas-style, and some diners will be reluctant to give up the familiar appetizer-entrée-dessert approach to a nice dinner out.

Darko ZagarThe Bazaar’s steamed bun with caviar.

Future

Future

It’s in a Hotel

THE BAZAAR: On the ground floor of the trendy SLS Hotel

THE FUTURE? Hotel restaurants have long been associated with mediocrity, but these days, hotels are among the only investors willing to bankroll big, splashy new restaurants. Restaurateurs say fine dining will largely migrate into hotels, resorts and some commercial developments in the coming years.

Some of the most notable restaurant openings in recent months have been in hotels, including Mr. Meyer’s Maialino, which opened in November at New York’s Gramercy Park Hotel. Chef David Chang, who rose to fame through his Momofuku restaurants, plans to open his first hotel restaurant, Má Pêche, in New York’s Chambers Hotel in the first quarter of next year. Wolfgang Puck’s company is in negotiations to open a restaurant at the Ritz Carlton in downtown Los Angeles.

Three years ago, restaurateur Stephen Starr raised $15 million to build Buddakan and $11 million for Morimoto, both non-hotel restaurants in New York. “Getting that kind of money today for restaurants is impossible. It’ll never happen in our lifetime again,” Mr. Starr says.

OR A FAD? Even marriages between stylish hotels and famous chefs can go wrong. British celebrity chef Gordon Ramsay recently transferred interests in his restaurants in Los Angeles and New York back to the hotels in which they are located, amid rocky performances. Jean-Georges Vongerichten, who has expanded aggressively in hotels around the world, recently separated from the Chambers Hotel in Minneapolis, which chose a local restaurateur, Richard D’Amico, to open a restaurant there instead.

The Bar Is the Focus

THE BAZAAR: The Bazaar’s Bar Centro is located in the middle of the restaurant. About 35% of the Bazaar’s gross sales are from alcohol, easily beating the 25% fine-dining industry standard.

THE FUTURE? All restaurants aspire to high alcohol sales, because the margins are better than on food sales. In the past, fine-dining restaurants relied mainly on selling wine for liquor revenue. But during the recession, many have gambled with their haute images and gotten more aggressive about selling cocktails and beer. Some have ripped out dining room tables to expand their bar areas, and many have launched bar menus. Even the famed New York restaurant Per Se rolled out a lounge menu where diners can order a la carte (the dining room is strictly prix fixe).

OR A FAD? An oversized bar area can strip a high-end restaurant of its classy image—and take the focus off a chef’s handiwork. “Turning into bars is a terrible thing for our industry,” says Joe Bastianich, partner with Mario Batali in 20 restaurants. Many restaurateurs will focus on boosting bar sales as a temporary survival strategy, until the economy picks up.

Rejecting Tradition

THE BAZAAR: With no white tablecloths in the main dining areas—once the ubiquitous symbol of fine dining—and some food served in tin cans, the restaurant keeps things casual, even though the average check is nearly $100.

THE FUTURE? White tablecloths are practically a relic. At City Center, the $8.5 billion Las Vegas development that started opening venues this month, only two restaurants out of 28 currently plan to use white linen. Most restaurateurs say that at least for the next two or three years, they will be opening more casual places.

OR A FAD? As restaurants increasingly go downscale, a handful of restaurateurs see an opportunity to grab the fine-dining spotlight. Mr. Bastianich has eliminated a casual side room off the expensive Del Posto restaurant in New York. The goal: To distinguish Del Posto as more luxurious and special. “It’s our couture line,” Mr. Bastianich says. High-profile openings for next year include Patina Restaurant Group’s restaurant slated for New York’s Lincoln Center, with chef Jonathan Benno, and Twist, a luxurious white-tablecloth restaurant opening at City Center. Of note: Both of these projects were planned well before the recession struck.

The Restaurant Is the Entertainment

THE BAZAAR: Mr. Nazarian first made his name in the hospitality business opening Los Angeles nightclubs, and a nightclub atmosphere permeates the restaurant. Theatrical touches include a palm reader on weekends and a velvet rope on nights when the bar is at capacity.

THE FUTURE? Mr. Chang predicts that in the future, more fine-dining chefs will replace waiters and serve the food themselves, as they do at his Momofuku Ko in New York. D’Amico Kitchen in Minneapolis splashes a live streamed video of the action inside its kitchen on an outside wall. Several restaurants, from Oliveto in Oakland, Calif., to L20 in Chicago, publish elaborate blogs about their ingredients and cooking.

OR A FAD? Restaurateurs see theatricality as increasingly important, but most say they are wary of crossing the line into a nightclub atmosphere. More restaurants will find ways to exploit the public’s interest in food culture with blogs, kitchen visits and face time with chefs, but few will go as far as the Bazaar does.

Wild Cuisine

THE BAZAAR: Half the menu belongs to the category of avant-garde cuisine, or molecular gastronomy, which uses advances in culinary science to create new flavors and textures. Mr. Andrés’s “olive oil bon bon,” for example, looks like a tiny glass sculpture but is in fact olive oil encased in solidified sugar; bite down and it bursts flavorfully in the mouth.

THE FUTURE? Avant-garde cuisine has transformed fine dining in Europe. American avant-garde chefs, from Grant Achatz of Chicago’s Alinea to Wylie Dufresne of WD-50 in New York, are heroes to many young chefs.

OR A FAD? Chefs and food writers have embraced molecular gastronomy as the future, but restaurant history is littered with failed avant-garde restaurants, from Atlanta’s Blais, which lasted six months, to La Broche in Miami, a short-lived outpost of the well-regarded Madrid restaurant.

Restaurateurs predict that molecular gastronomy will keep growing—in the future, every major city might have one place serving it—but that most restaurant fare will remain conventional.

The Open Floor Plan

THE BAZAAR: The restaurant is spread out over 12,500 square feet of hotel lobby, divided into two distinctly designed dining areas, a tasting room, a dessert area, a bar and lounge and a retail shop.

THE FUTURE? Fine-dining restaurants of the future will likely have free-flowing floor plans that are loosely divided into distinct areas, several restaurateurs say. The goal is to get diners to come back more often, offering them a different ambience each time. Many restaurants will eliminate separate private dining rooms, particularly in cities like New York and Los Angeles, where real estate is especially expensive. These rooms were built throughout the decade as corporate dinner parties boomed, but sat empty during a steep decline in corporate entertaining this past year.

OR A FAD? Once the economy bounces back and companies return to spending on dinners and entertainment, many restaurants will court their lucrative business aggressively and again offer private dining rooms.

U.S. and Japan Reach Deal for More Open Air Traffic

Filed under: Uncategorized — ktetaichinh @ 12:04 am
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The United States and Japan reached a landmark agreement Friday to relax limits on flights between the two countries, opening up the possibility of broader cross-border airline alliances and more options for air travelers.

Under the agreement, which still must be finalized by both governments, airlines from both countries would be allowed to select routes and destinations based on consumer demand for both passenger and cargo services without limitations on the number of United States or Japanese carriers that can fly between the two countries or the number of flights they can operate.

It would remove restrictions on capacity and pricing, and provide unlimited opportunities for cooperative marketing arrangements between American and Japanese carriers.

The agreement is expected to prompt Japan Airlines and All Nippon Airways to seek joint ventures with United States airlines.

The agreement also would provide opportunities for growth of United States carrier operations at Narita Airport near Tokyo and ensure fair competition regarding the new opportunities at Haneda Airport, which is close to Tokyo’s center, according to a statement from the Transportation Department.

American Airlines has a code-sharing agreement with Japan Airlines, while United Airlines has a code-sharing agreement with All Nippon Airways. Delta Air Lines is seeking to lure Japan Airlines away from American and into Delta’s SkyTeam alliance.

A joint venture allows airlines to share costs and revenue on certain flights regardless of which airline owns or flies the aircraft. It differs from a simple code-sharing agreement in which one airline bears all the cost but another airline might get a share of the revenue for booking a customer on a flight.

The Transportation Department said the text of the so-called open-skies agreement between the United States and Japan had been set, although there was no specific timetable on when the agreement would take effect.

The United States has other open-skies agreements, including deals with the European Union and Australia.

“Achieving Open Skies with Japan, a major U.S. transportation and trade partner, has been a long-standing U.S. goal and is good news for air travelers and businesses on both sides of the Pacific,” Ray LaHood, the secretary of transportation, said in a statement.

“Once this agreement takes effect, American and Japanese consumers, airlines and economies will enjoy the benefits of competitive pricing and more convenient service,” he said.

December 10, 2009

Tiger Woods’ transgressions take a toll on his brand

Filed under: Uncategorized — ktetaichinh @ 2:06 am
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Tiger Woods’ transgressions take a toll on his brand

December 9, 2009 3:00am

Tiger Woods’ personal crisis shows little signs of receding – fresh revelations about his “transgressions” keep on being published and his mother-in-law was briefly taken to hospital on Tuesday. So it is not surprising that there are hints of his sponsors’ support wavering.

Although companies that have affiliated themselves with the golfer’s name – including Nike, EA Sports, Gillette and NetJets – insist they still have faith in him, PepsiCo has dropped a Gatorade drink named after him.

PepsiCo insists that the decision to drop Gatorade Tiger is unrelated to the recent scandal but sponsors must wonder when the scandal engulfing their brand partner will recede.

In theory, of course, none of Woods’ transgressions have any bearing on the golfing achievements for which he is best known and which attracts these sponsors. In practice, however, they do tarnish his image and present his partners with tough choices.

Take Accenture, the accounting firm, which has an extensive branding relationship with Woods. It is difficult to pass through an international airport without seeing Accenture posters featuring Woods and bearing gnomic mottos about how its clients can “be a Tiger”.

The trouble is that some of these posters can now be read with a double meaning relating to Woods’ personal travails, which is a problem. Even if a company tries to stand behind an errant star, there comes a point when its own brand gets affected.

The bigger point is that global sports stars such as Woods and Roger Federer have brands that extend beyond  sporting prowess to their personal qualities. That brings them money from companies with no attachment to sports, but it also makes them financially vulnerable to scandal.

December 7, 2009

Slow start to holidays, but consumers are spending

Filed under: Uncategorized — ktetaichinh @ 1:24 am
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MarketWatch consensus
date report ACTUAL previous
Dec. 7 Consumer credit -$9.5 bln -$14.8 bln
Dec. 10 Jobless claims 450,000 457,000
Dec. 10 Trade balance -$36.6 bln -$36.5 bln
Dec. 11 Import price index 0.9% 0.7%
Dec. 11 Retail sales 0.5% 1.4%
Dec. 11 Retail sales ex-autos 0.4% 0.2%
Dec. 11 Inventories -0.2% -0.4%
Dec. 11 Consumer sentiment 68.0 67.4

/conga/economy-politics/calendars/preview widget.html 45289

WASHINGTON (MarketWatch) — The hesitant improvement in the U.S. economy will undergo another test in the coming week, with key data on the consumer sector, including reports on retail sales, consumer sentiment and consumer credit.

The figures on November retail sales will be the most closely watched of the week. November is a key month for retailers, who hope consumers will be more willing to spend on holiday presents now that the economy appears to be slowly mending.

The November employment report showed a healthy increase in working hours in November, which should translate into a bit more cash in consumers’ pockets. But consumers are trying to reduce their debt levels, and cutting back on non-essential spending is one way to bring the household budget back closer to balance.

“The holiday shopping season is off to a slow start,” wrote Nigel Gault and Brian Bethune, U.S. economists for IHS Global Insight. “With job losses continuing, consumers are focused on value shopping, which is benefiting wholesale clubs, discount chains, and drug-store chains.”

Retail sales

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Early details on retail spending in November are mixed. Auto sales saw another sizable gain, evidence that the cash-for-clunkers program in late summer didn’t lump all of this year’s sales into a few weeks. But chain stores reported disappointing sales for the month.

Retail sales likely rose by a seasonally adjusted 0.5% in November, according to the survey of top economists conducted by MarketWatch. Sales excluding autos probably rose 0.4%. The numbers will be released Friday morning.

About half of the expected 0.5% gain is simply due to higher prices, including higher prices for gasoline. Real (inflation-adjusted) spending probably increased about 0.2% or 0.3%, not a gangbuster number, but not horrible either.

Spending on autos and gas increased, but “the underlying details of the report will reveal weaker spending momentum,” wrote David Resler, U.S. economist for Nomura Global Economics. Chain-store sales were “quite poor.”

Chain-store same-store sales fell 3.5% in November, the largest decline since December 2007. The International Council of Shopping Centers attributed some of the decline to warmer-than-usual weather early in the month, which hurt sales of winter clothing and gear. It’s hard to get in the Christmas mood when it’s 70 degrees.

Core retail sales (excluding autos, gas and building materials) were “somewhat soft,” economists for Barclays Capital said. They probably rose just 0.1% in the month, the weakest since July.

Stronger sales after Thanksgiving, especially electronics and at on-line stores, gave retailers some hope that the holiday season wouldn’t be a bust.

“Retailers are trying to put a positive spin on these grim numbers by pointing out that their inventories are far leaner,” wrote John Silvia, chief economist for Wells Fargo Securities, who’s predicting a second straight decline in holiday sales.

“Last year, consumers were shell-shocked and simply too scared to shop like they normally would,” Silvia said. “Fears have subsided somewhat this year, but economic conditions are far worse,” with higher unemployment and lower income from wages. “Shoppers will be more pragmatic.”

Other data

Consumer moods have improved since the dark days earlier this year, but consumers are still apprehensive about their jobs, their incomes, and their homes. The consumer sentiment index probably gained only slightly in early December to 69 from 67.4 in December, economists said. The University of Michigan and Reuters will report the numbers on Friday.

Consumers have reduced their outstanding credit balances in 12 of the past 14 months, and economists expect another sizable reduction of about $10 billion in October. The Federal Reserve will release the data on Monday.

Rex Nutting is Washington bureau chief of MarketWatch.

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