Friday 31 January 2014
Ten fastest growing jobs in US at risk from automation
The Atlantic reports a recent Oxford University study by Carl Benedikt Frey and Michael A. Osborne that calculated the odds of "computerization" for the 600+ jobs that the US Bureau of Labor Statistics tracks. They range from 96% automatable (office secretaries) to 0.9% (registered nurses).
Here are the ten fastest-growing jobs and the odds that robots and software will replace them:
1) Personal care aides: 74%
2) Registered nurses: 0.9%
3) Retail salespersons: 92% i.e. shop-workers
4) Combined food prep & serving workers: 92%
5) Home health aides: 39%
6) Physician assistant: 9%
7) Secretaries and admin assistants: 96%
8) Customer service representatives: 55%
9) Janitors and cleaners: 66%
10) Construction workers: 71%
Obvious food for thought, given that NAMs do not feature on the list....
In fact as Derek Thompson points out in The Atlantic article, computers are historically good at executing routines, but they’re bad at finding patterns, communicating with people, and making decisions, which is what managers are paid to do. This is why some people think managers are, for the moment, one of the largest categories immune to the rushing wave of AI.
Time for emphasising your skills at finding patterns, communicating with people, and making decisions, and above all, avoid allowing the job to become dull, boring and repetitive, just in case...
Hat-tip to Andrew Sullivan
Here are the ten fastest-growing jobs and the odds that robots and software will replace them:
1) Personal care aides: 74%
2) Registered nurses: 0.9%
3) Retail salespersons: 92% i.e. shop-workers
4) Combined food prep & serving workers: 92%
5) Home health aides: 39%
6) Physician assistant: 9%
7) Secretaries and admin assistants: 96%
8) Customer service representatives: 55%
9) Janitors and cleaners: 66%
10) Construction workers: 71%
Obvious food for thought, given that NAMs do not feature on the list....
In fact as Derek Thompson points out in The Atlantic article, computers are historically good at executing routines, but they’re bad at finding patterns, communicating with people, and making decisions, which is what managers are paid to do. This is why some people think managers are, for the moment, one of the largest categories immune to the rushing wave of AI.
Time for emphasising your skills at finding patterns, communicating with people, and making decisions, and above all, avoid allowing the job to become dull, boring and repetitive, just in case...
Hat-tip to Andrew Sullivan
Thursday 30 January 2014
Self-checkout rage: Nearly one in five self-checkout shoppers steal goods at the bagging area...
In a survey of 2,664 people by VoucherCodesPro, reported in the Telegraph, one in five admit that self-checkout rage causes them to steal an average of £15 of mainly fruit & veg per month, although toiletries account 26% of items stolen.
The results suggest people steal regularly once they realise they can get away with it – with 57% of the thieves admitting they first took goods because they couldn’t work the machines, and 51% believing they are less likely to be caught.
Given that retailers introduced self-scanning/checkouts to reduce labour costs, it obviously negates the advantage to add a team of one-on-one 'helpers' to the self-checkout area...
One solution might be to try the Costco idea of spot-checks of bags vs. receipts which does not appear to cause offence...?
Alternatively, why add this new 'route to theft' to 'grape-grazing', aisle-snacking and other methods that regular shoppers use to help retailers maintain high shrinkage levels...?
The results suggest people steal regularly once they realise they can get away with it – with 57% of the thieves admitting they first took goods because they couldn’t work the machines, and 51% believing they are less likely to be caught.
Given that retailers introduced self-scanning/checkouts to reduce labour costs, it obviously negates the advantage to add a team of one-on-one 'helpers' to the self-checkout area...
One solution might be to try the Costco idea of spot-checks of bags vs. receipts which does not appear to cause offence...?
Alternatively, why add this new 'route to theft' to 'grape-grazing', aisle-snacking and other methods that regular shoppers use to help retailers maintain high shrinkage levels...?
Wednesday 29 January 2014
US shops that only offer food past its sell-by date
According to today's news in the Guardian that a man is to be put on trial in February after he was allegedly caught stealing from the bins behind an Iceland store in London, it appears that Freegans, or bin scavengers, are becoming a feature of the current flatline environment.
Paul May, a freelance web designer, is expected to argue in court that he does not consider taking the mushrooms, tomatoes, cheese, and cakes from the garbage outside of Iceland as illegal, because the food was going to be disposed of and he needed it to feed himself, the Guardian reported.
Given that the Freegan movement started in New York a decade ago, it follows that the US should be first in opening stores that only offer food that is past its sell-by date.
Doug Rauch’s new venture The Daily Table, due to open in May, in Dorchester, Massachusetts, will be part grocery store and part cafe, specializing in healthy, inexpensive food and catering to the underserved population in Dorchester, Mass. What makes it controversial – at least at first glance – is Rauch’s business model: His store will exclusively collect and sell food that had crept past its “sell-by” date, rendering it unsellable in other, more conventional supermarkets.
But the real challenge, in Rauch’s vision, isn’t just getting that excess food to the people who need it. It’s convincing them that it’s worth eating.
Rauch is looking for a market-driven solution to food waste. The store will be a non-profit, but after an initial round of funding gets it started, he intends for it to be self-sustaining.
Interesting to see how long after the Freegan Garbage theft trial, the UK follows the US example with shops offering past sell-by food...
...and as an extension of consumers' tendency to 'make do', how much demand will be taken out of the market...
NB Update on Iceland Three case:
Following an outcry on Twitter and questions about the public interest value in pursuing a prosecution – with even bosses at Iceland expressing doubts – the Crown Prosecution Service today announced that it was dropping the case.
Paul May, a freelance web designer, is expected to argue in court that he does not consider taking the mushrooms, tomatoes, cheese, and cakes from the garbage outside of Iceland as illegal, because the food was going to be disposed of and he needed it to feed himself, the Guardian reported.
Given that the Freegan movement started in New York a decade ago, it follows that the US should be first in opening stores that only offer food that is past its sell-by date.
Doug Rauch’s new venture The Daily Table, due to open in May, in Dorchester, Massachusetts, will be part grocery store and part cafe, specializing in healthy, inexpensive food and catering to the underserved population in Dorchester, Mass. What makes it controversial – at least at first glance – is Rauch’s business model: His store will exclusively collect and sell food that had crept past its “sell-by” date, rendering it unsellable in other, more conventional supermarkets.
But the real challenge, in Rauch’s vision, isn’t just getting that excess food to the people who need it. It’s convincing them that it’s worth eating.
Rauch is looking for a market-driven solution to food waste. The store will be a non-profit, but after an initial round of funding gets it started, he intends for it to be self-sustaining.
Interesting to see how long after the Freegan Garbage theft trial, the UK follows the US example with shops offering past sell-by food...
...and as an extension of consumers' tendency to 'make do', how much demand will be taken out of the market...
NB Update on Iceland Three case:
Following an outcry on Twitter and questions about the public interest value in pursuing a prosecution – with even bosses at Iceland expressing doubts – the Crown Prosecution Service today announced that it was dropping the case.
Tuesday 28 January 2014
When online meets real world - how import restrictions are raising the bar...
With different motives, some governments are trying to slow down the development of imported online purchases.
As reported in the Financial Times, Russia, one of the world’s fastest-growing e-commerce markets, has imposed new customs regulations - submission of some original documents and credit card payment records - to hinder courier deliveries to private customers. DHL and FedEx are reported to have suspended express deliveries from abroad to individuals in Russia because of extra paperwork on all parcels for personal use, regardless of shipment value.
Currently just 2% of Russian retail sales are conducted online, but that is expected to rise to 5%, more than tripling the size of the online retail market by 2015, according to Morgan Stanley.
Incidentally, if you think the Russian restrictions are bad, Argentina goes one better, albeit in an attempt to cope with falling levels of foreign currency reserves… Under the new rules, shoppers can make just two purchases each year from foreign online and mail-order companies. Any purchases beyond that will be treated as imports, and will require extensive paperwork such as a signed declaration to the customs office in advance, before they can collect their packages, for each international purchase.
Given their pragmatism, it is probable that Amazon will escalate their operation in Russia to restore the simplicity of its business model, and possibly an aggregator role to provide an Amazon route into Russia for those who cannot, or will not, play in the customs ball-park…
…while the authorities have full access to internal traffic for tax purposes…
As reported in the Financial Times, Russia, one of the world’s fastest-growing e-commerce markets, has imposed new customs regulations - submission of some original documents and credit card payment records - to hinder courier deliveries to private customers. DHL and FedEx are reported to have suspended express deliveries from abroad to individuals in Russia because of extra paperwork on all parcels for personal use, regardless of shipment value.
Currently just 2% of Russian retail sales are conducted online, but that is expected to rise to 5%, more than tripling the size of the online retail market by 2015, according to Morgan Stanley.
Incidentally, if you think the Russian restrictions are bad, Argentina goes one better, albeit in an attempt to cope with falling levels of foreign currency reserves… Under the new rules, shoppers can make just two purchases each year from foreign online and mail-order companies. Any purchases beyond that will be treated as imports, and will require extensive paperwork such as a signed declaration to the customs office in advance, before they can collect their packages, for each international purchase.
Given their pragmatism, it is probable that Amazon will escalate their operation in Russia to restore the simplicity of its business model, and possibly an aggregator role to provide an Amazon route into Russia for those who cannot, or will not, play in the customs ball-park…
…while the authorities have full access to internal traffic for tax purposes…
Optimising your next conference call
These conferences call experiences will probably strike a chord...
Given the potential savings on travel time, conference calls are worth getting right so why not check out Seth Godin's seven key principles?
And with a bit of the correct practice, perhaps even worth experimenting on the buyer?
Monday 27 January 2014
Hedge Funds move on Major Multiples Store Portfolios
According to reports in The Sunday Times (p1 Business section, 26-01-2014) hedge funds have taken stakes in Tesco, Sainsbury’s and Morrisons with a radical plan to hive off their property empires. In other words, American activist investors (Elliott, and apparently other activist funds have acquired small stakes in the three retailers) believe that, especially following disappointing Christmas results, the stock market undervalues the properties and that hiving off and flotation of the new property companies would release some of that value by appealing to a new type of ‘property-focused’ investor..
The plan is based upon a similar move last year by Loblaw.
(Morrisons are already exploring some property release, and Dalton Philips includes Loblaw on his CV...)
The ‘hidden’ value:
Retailer Market capitalisation Estate value 'Surplus'
Tesco £26bn £38bn £12bn
Sainsbury’s £6.9bn £11.5bn £4.6bn
Morrisons £5.7bn £9bn £3.3bn
More details are available in The Sunday Times article.
Incidentally, for those in H&B, Elliott recently forced US drugs distributor McKesson to raise its bid for Celesio, in a deal now concluded.
Whilst the activist-investor route may well be resisted by the retailers, the idea of releasing value that could be part-returned to shareholders might appeal, thus propping up the share price…
However, in doing so, the retailers would lose some control, and also pick up an additional KPI based on maintaining the value of their retail properties, at a time when all three are focused on optimising like-for-like sales… However, if the hedge funds increase their stakes, then increasing shareholder value moves up the agenda, along with the aggravation...
For NAMs, all of this means that a renewed emphasis on financial performance, the value of trade investment and especially the ability to calculate and demonstrate the impact of all supplier-support on the retailer’s share price, becomes a critical requirement in the day-job…
The plan is based upon a similar move last year by Loblaw.
(Morrisons are already exploring some property release, and Dalton Philips includes Loblaw on his CV...)
The ‘hidden’ value:
Retailer Market capitalisation Estate value 'Surplus'
Tesco £26bn £38bn £12bn
Sainsbury’s £6.9bn £11.5bn £4.6bn
Morrisons £5.7bn £9bn £3.3bn
More details are available in The Sunday Times article.
Incidentally, for those in H&B, Elliott recently forced US drugs distributor McKesson to raise its bid for Celesio, in a deal now concluded.
Whilst the activist-investor route may well be resisted by the retailers, the idea of releasing value that could be part-returned to shareholders might appeal, thus propping up the share price…
However, in doing so, the retailers would lose some control, and also pick up an additional KPI based on maintaining the value of their retail properties, at a time when all three are focused on optimising like-for-like sales… However, if the hedge funds increase their stakes, then increasing shareholder value moves up the agenda, along with the aggravation...
For NAMs, all of this means that a renewed emphasis on financial performance, the value of trade investment and especially the ability to calculate and demonstrate the impact of all supplier-support on the retailer’s share price, becomes a critical requirement in the day-job…
Saturday 25 January 2014
Friday 24 January 2014
Amazon Anticipatory Shipping, before you order...
Following their Christmas drone-delivery idea, Amazon gained a patent last month for what it calls "anticipatory shipping,'' the Wall Street Journal reports.
Amazon, the Journal reported, says it may box and ship products that it expects customers in a specific area will want, based on previous orders and other factors it gleans from its customers' shopping patterns, even before they place an online order.
Among those other factors: previous orders, product searches, wish lists, shopping cart contents, returns and other online shopping practices.
Once in transit, the packages would theoretically wait at the shippers' or Amazon's warehouse hubs or on trucks until (and if) an order arrives. In some cases, partial street addresses or zip codes will be filled out with the remaining pertinent details — name, rest of address — completed once the order arrives.
Amazon has worked to cut delivery times as a way of encouraging more orders and satisfying customers, such as by expanding its warehouse network and making some overnight and even same-day deliveries.
Amazon didn't estimate how much delivery time it expects to save, or whether it has already put its new system to work, but the initiative clearly provides a new hurdle for those who regard Amazon as competition – and anyone who thinks that they are in the game by simply setting up an online service…
Tuesday 21 January 2014
Tesco eyes Mothercare, and more?
Tesco is eyeing up Mothercare after its shares took a tumble following a shock profits warning, according to City sources quoted in the Sunday Times. It claims that Tesco had already examined a bid six months ago.
Such a move would bolster Tesco’s plan to turn its out-of-town shops into destinations. This has seen the nation’s biggest grocer buy the Giraffe restaurant chain and take a major investment in the start-up Harris + Hoole coffee business.
The key issue for Tesco is to ensure that any such acquisition would help to optimise space in their large space formats, not only generating incremental traffic, but also equaling or exceeding their average selling intensity levels of £1,000/sq. ft. Apart from the incremental traffic/sales, by taking well known retail brands in store, Tesco will dilute the 'Tesco domination' effect, rather in the way Aldi makes itself look like a 'normal' retailer through the use of surrogate labels...
Making acquired categories work to these levels means reconfiguring the category's original offer to focus more precisely on consumer-shopper need, fully factor in online potential and piggyback on supply chain efficiencies... In doing so, Tesco will so enhance category performance that they will draw share from independent, specialist retailers...
Taking these possibilities into account, NAMs in all categories not currently optimised by Tesco now need to assess the potential for similar acquisitions, and the consequent impact on their retailer portfolio balance...
Also bearing in mind that Tesco is in no mood to take prisoners...
Such a move would bolster Tesco’s plan to turn its out-of-town shops into destinations. This has seen the nation’s biggest grocer buy the Giraffe restaurant chain and take a major investment in the start-up Harris + Hoole coffee business.
The key issue for Tesco is to ensure that any such acquisition would help to optimise space in their large space formats, not only generating incremental traffic, but also equaling or exceeding their average selling intensity levels of £1,000/sq. ft. Apart from the incremental traffic/sales, by taking well known retail brands in store, Tesco will dilute the 'Tesco domination' effect, rather in the way Aldi makes itself look like a 'normal' retailer through the use of surrogate labels...
Making acquired categories work to these levels means reconfiguring the category's original offer to focus more precisely on consumer-shopper need, fully factor in online potential and piggyback on supply chain efficiencies... In doing so, Tesco will so enhance category performance that they will draw share from independent, specialist retailers...
Taking these possibilities into account, NAMs in all categories not currently optimised by Tesco now need to assess the potential for similar acquisitions, and the consequent impact on their retailer portfolio balance...
Also bearing in mind that Tesco is in no mood to take prisoners...
Monday 20 January 2014
Lidl switches from hard to soft discounting in France - an inevitable move in the UK?
With increases in outlet size from 6,000 to 12,000 sq. ft., Lidl is offering a new range of regional products and extending its offering to include many more national brands to attract a wealthier clientele.
This is a real breakthrough for the French subsidiary of Lidl in its second largest market. According to Deloitte, it is the world's seventh largest distributor, with an estimated $87.8 billion in 2011 sales and 12,000 stores worldwide. In Germany, it has 3,300 stores and achieved a turnover estimated at €16.2 billion in 2012.
Lidl has operated their classic German model in France since 1988, and grown to 1,500 stores. It is the largest of the hard discounters (Netto, Leader Price, Aldi, Dia). But, like its competitors, it has stalled for four years in overall seventh place with a market share of 4.6%.
Whilst this Lidl move in France will provide useful insights on priority brands and eventual brand/surrogate-label balance, it gives time for UK suppliers to explore their options as Lidl UK, and possibly other discounters, embark on the next evolutionary stage in order to capitalise on the continuing flat-line conditions in retail.
Time for ALL NAMs – and retailers – to pop into a local Lidl, and reflect on where the offering – and their brands – could go, as they follow the French lead…?
Might also be worth dusting down your EU network and monitoring progress via your French colleagues....
(Thx Joe)
This is a real breakthrough for the French subsidiary of Lidl in its second largest market. According to Deloitte, it is the world's seventh largest distributor, with an estimated $87.8 billion in 2011 sales and 12,000 stores worldwide. In Germany, it has 3,300 stores and achieved a turnover estimated at €16.2 billion in 2012.
Lidl has operated their classic German model in France since 1988, and grown to 1,500 stores. It is the largest of the hard discounters (Netto, Leader Price, Aldi, Dia). But, like its competitors, it has stalled for four years in overall seventh place with a market share of 4.6%.
Whilst this Lidl move in France will provide useful insights on priority brands and eventual brand/surrogate-label balance, it gives time for UK suppliers to explore their options as Lidl UK, and possibly other discounters, embark on the next evolutionary stage in order to capitalise on the continuing flat-line conditions in retail.
Time for ALL NAMs – and retailers – to pop into a local Lidl, and reflect on where the offering – and their brands – could go, as they follow the French lead…?
Might also be worth dusting down your EU network and monitoring progress via your French colleagues....
(Thx Joe)
Thursday 16 January 2014
Generic prescription medicine in Ireland - impact on all CPG brands?
The inevitability of the growth of generic medicines in Ireland moving from the current 5% to the UK 80% of prescriptions is being brought forward by market forces…
A Dublin pharmacy is to sell generic prescription drugs at Northern Ireland prices by introducing a radical business model likely to be closely watched by other pharmacies.
Healthwave, a recently opened Dundrum pharmacy, is promising to match cross-Border prices for generic medications. Under its scheme, people availing of the savings will have to join a subscription service with an upfront fee of €25 a year. The pharmacy will charge €4.95 for a 28-day supply of Atorvastatin, a generic cholesterol medication, which generally costs more than €10 in pharmacies in the Republic.
The scheme is aimed at the private market but could also save the State money. For instance, a customer with chronic obstructive pulmonary disease who pays €170 monthly for drugs currently has to pay the first €144, with the Government covering the rest. Under the new system the drugs would cost €100 per month, saving the patient €44 per month and the State €26.
With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest that change is inevitable. See here
However, adding the fact that Hickey's pharmacy group latest results earlier this week warned of 'excessive' rent levels adding to the pressure on pharmacies in Ireland (some leases upward only, based on Tiger valuations) and possibly higher import prices on many CPG brands vs. UK trade prices, means that the Generics initiative will draw attention to net margins in Irish retail pharmacy and retailing generally.
Over time, media and consumer pressure, combined with the economic downturn we believe will eventually cause the government to legislate for increased use of generics.
However, the real issue will be a renewed focus on the overall cost of trading in Ireland... In other words, an opportunity for all branded goods suppliers to examine potential or actual disparities in their pricing structures between the UK and Ireland, and take appropriate steps, now...
A Dublin pharmacy is to sell generic prescription drugs at Northern Ireland prices by introducing a radical business model likely to be closely watched by other pharmacies.
Healthwave, a recently opened Dundrum pharmacy, is promising to match cross-Border prices for generic medications. Under its scheme, people availing of the savings will have to join a subscription service with an upfront fee of €25 a year. The pharmacy will charge €4.95 for a 28-day supply of Atorvastatin, a generic cholesterol medication, which generally costs more than €10 in pharmacies in the Republic.
The scheme is aimed at the private market but could also save the State money. For instance, a customer with chronic obstructive pulmonary disease who pays €170 monthly for drugs currently has to pay the first €144, with the Government covering the rest. Under the new system the drugs would cost €100 per month, saving the patient €44 per month and the State €26.
With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest that change is inevitable. See here
However, adding the fact that Hickey's pharmacy group latest results earlier this week warned of 'excessive' rent levels adding to the pressure on pharmacies in Ireland (some leases upward only, based on Tiger valuations) and possibly higher import prices on many CPG brands vs. UK trade prices, means that the Generics initiative will draw attention to net margins in Irish retail pharmacy and retailing generally.
Over time, media and consumer pressure, combined with the economic downturn we believe will eventually cause the government to legislate for increased use of generics.
However, the real issue will be a renewed focus on the overall cost of trading in Ireland... In other words, an opportunity for all branded goods suppliers to examine potential or actual disparities in their pricing structures between the UK and Ireland, and take appropriate steps, now...
Setting the correct objectives?
Two hunters in the jungle were spotted by a hungry leopard.
One hunter immediately sat down, took a pair of running shoes from his pack and began to put them on. His partner challenged the move saying no one could possibly outrun a leopard, and was answered with:
"I don't have to outrun the leopard. I simply have to run faster than you...."
One hunter immediately sat down, took a pair of running shoes from his pack and began to put them on. His partner challenged the move saying no one could possibly outrun a leopard, and was answered with:
"I don't have to outrun the leopard. I simply have to run faster than you...."
Tuesday 14 January 2014
McKesson says Celesio takeover offer has failed
Last night’s news by McKesson that their 3 month offer to purchase Celesio had failed to secure the 75% of the shares they deemed necessary to complete the purchase raises several issues for suppliers, retailers and wholesalers…
Apart from the disruption and uncertainty of the past three months and its impact on staff, possibly resulting in some of the good guys leaving, and key suppliers reverting to short term strategic mode, Celesio’s profile as a takeover prospect has invariable attracted the attention of other players such as McKesson’s closest U.S. rivals AmerisourceBergen and Cardinal Health, which between them account for 95% of the U.S. market, are, like McKesson, all looking to grow abroad to gain purchasing power with drug makers.
At a market capitalisation of €4.11bn, Celesio is within the reach of each of the companies.
Celesio Chief Executive Marion Helmes has said that an alliance or tie-up with a U.S. partner could help win steeper discounts, mainly for the generic drugs it buys but also for non-prescription medication and skin care products.
Celesio, owner of Britain's Lloyds pharmacy chain, is suffering from a price war that has all but erased its profits from the crowded German drugs wholesale market. Healthcare budget cuts across Europe, its main market, add to its woes.
In response, CEO Helmes is centralising procurement to cut costs, as well as widening and standardising the offering of its pharmacies across Europe under the Lloyds brand.
The mooted offer would value Celesio including its debt at close to 9.9 times expected earnings before interest, taxes, depreciation and amortisation (EBITDA) for this year, roughly in line with the 9.8 multiple its U.S. suitor is trading at. That compares with a multiple of about 11 times EBIDTA that U.S. drugstore chain Walgreens paid for a stake in Alliance Boots last year.
And speaking of which, Celesio wholesaling would add to the combined muscle of Walgreen and Alliance Boots, thereby frustrating the obvious appeal to A.S. Watson in completing a global structure that might help it keep pace with Walgreen Boots globally…
Meanwhile, back to the short term initiatives for NAMs…
Apart from the disruption and uncertainty of the past three months and its impact on staff, possibly resulting in some of the good guys leaving, and key suppliers reverting to short term strategic mode, Celesio’s profile as a takeover prospect has invariable attracted the attention of other players such as McKesson’s closest U.S. rivals AmerisourceBergen and Cardinal Health, which between them account for 95% of the U.S. market, are, like McKesson, all looking to grow abroad to gain purchasing power with drug makers.
At a market capitalisation of €4.11bn, Celesio is within the reach of each of the companies.
Celesio Chief Executive Marion Helmes has said that an alliance or tie-up with a U.S. partner could help win steeper discounts, mainly for the generic drugs it buys but also for non-prescription medication and skin care products.
Celesio, owner of Britain's Lloyds pharmacy chain, is suffering from a price war that has all but erased its profits from the crowded German drugs wholesale market. Healthcare budget cuts across Europe, its main market, add to its woes.
In response, CEO Helmes is centralising procurement to cut costs, as well as widening and standardising the offering of its pharmacies across Europe under the Lloyds brand.
The mooted offer would value Celesio including its debt at close to 9.9 times expected earnings before interest, taxes, depreciation and amortisation (EBITDA) for this year, roughly in line with the 9.8 multiple its U.S. suitor is trading at. That compares with a multiple of about 11 times EBIDTA that U.S. drugstore chain Walgreens paid for a stake in Alliance Boots last year.
And speaking of which, Celesio wholesaling would add to the combined muscle of Walgreen and Alliance Boots, thereby frustrating the obvious appeal to A.S. Watson in completing a global structure that might help it keep pace with Walgreen Boots globally…
Meanwhile, back to the short term initiatives for NAMs…
Monday 13 January 2014
Helping major retailers to help themselves cope with 2014
Given that the Christmas trading results were merely the latest in a succession of indicators that all is not well in retail land, it should come as no surprise that the major players are taking steps to keep the stock market happy.
In the absence of real sales growth, and apart from Debenhams’ request for more direct help via additional discounts, the key alternatives available to retailers are sale & leaseback, and taking longer to pay, in order to improve financial results.
Sale & leaseback:
As you know, this means selling their shops to a finance institution and leasing back the premises, which means there is technically no change from a trading point of view, except that significant quantities of cash are released from the assets. The only difference is the retailer is now paying rent, which comes off the bottom-line, and can hit their net margin.
This is why Morrisons still own 90% of their real estate in that Sir Ken was always unwilling to cede control to a landlord. However, most other retailers have gone halfway over the years, to say 50% on sale & leaseback, using the released funds to buy more property and finance takeovers. It can also be used to pay back to shareholders in order to ease pressure on the share price.
This is why over the weekend it emerged that Morrisons may sell & leaseback 10% of their estate for £800m, pay it back to shareholders to compensate for the recent fall in share price. This will still leave them owning 80% of their estate, conservative compared with their peers…
However, the real problem in UK retail is the redundancy in large space caused in part by the growth of online. This means that finance houses will want to reflect the resulting fall in value via a lower purchase price for the property.
Hence the major retailers will need to try additional means of raising cash, the ‘simplest’ being taking longer to pay
Extended credit periods
In general, a decade ago the average credit period for retailers in the UK was approximately 30 days (compared with 45 in France, 95 in Italy and 150 in Greece). The UK period has now crept out to approximately 45 days, a 50% increase while few suppliers were ‘minding the store’, as least as far as creeping credit was concerned...
Given the ‘impossibility’ of achieving any real reduction in ‘normal retail practice’ all a supplier can do about this new ‘norm’ is refuse to allow any further increase for those customers at 45 days and checking which customers are paying faster, inadvertently…
It is therefore key that a NAM be able to calculate approximate time taken by a retailer to pay all suppliers, and then re-negotiate any difference on their part. Essentially, this means taking the end of year Trade Creditors from the customer’s balance sheet, and given that most retailers are getting average gross margins of 25%, divide the Trade Creditor figure by 75 and multiply it by 100 to get a sales equivalent of the amount outstanding. Dividing this like-with-like figure into the annual sales figure on the P&L will tell you how often the retailer pays their invoices per annum, and this figure divided into 365 will give the number of days the retailer takes to pay suppliers (check the logic with your finance department for reassurance).
If suppliers had monitored and resisted these retail moves over the years, the latest 45 day ‘norm’ might not have been as easily achieved….
Anyway, here and now it means that the NAM can be in a position to go for fair share, at least…
Welcome to the realities of 2014!
In the absence of real sales growth, and apart from Debenhams’ request for more direct help via additional discounts, the key alternatives available to retailers are sale & leaseback, and taking longer to pay, in order to improve financial results.
Sale & leaseback:
As you know, this means selling their shops to a finance institution and leasing back the premises, which means there is technically no change from a trading point of view, except that significant quantities of cash are released from the assets. The only difference is the retailer is now paying rent, which comes off the bottom-line, and can hit their net margin.
This is why Morrisons still own 90% of their real estate in that Sir Ken was always unwilling to cede control to a landlord. However, most other retailers have gone halfway over the years, to say 50% on sale & leaseback, using the released funds to buy more property and finance takeovers. It can also be used to pay back to shareholders in order to ease pressure on the share price.
This is why over the weekend it emerged that Morrisons may sell & leaseback 10% of their estate for £800m, pay it back to shareholders to compensate for the recent fall in share price. This will still leave them owning 80% of their estate, conservative compared with their peers…
However, the real problem in UK retail is the redundancy in large space caused in part by the growth of online. This means that finance houses will want to reflect the resulting fall in value via a lower purchase price for the property.
Hence the major retailers will need to try additional means of raising cash, the ‘simplest’ being taking longer to pay
Extended credit periods
In general, a decade ago the average credit period for retailers in the UK was approximately 30 days (compared with 45 in France, 95 in Italy and 150 in Greece). The UK period has now crept out to approximately 45 days, a 50% increase while few suppliers were ‘minding the store’, as least as far as creeping credit was concerned...
Given the ‘impossibility’ of achieving any real reduction in ‘normal retail practice’ all a supplier can do about this new ‘norm’ is refuse to allow any further increase for those customers at 45 days and checking which customers are paying faster, inadvertently…
It is therefore key that a NAM be able to calculate approximate time taken by a retailer to pay all suppliers, and then re-negotiate any difference on their part. Essentially, this means taking the end of year Trade Creditors from the customer’s balance sheet, and given that most retailers are getting average gross margins of 25%, divide the Trade Creditor figure by 75 and multiply it by 100 to get a sales equivalent of the amount outstanding. Dividing this like-with-like figure into the annual sales figure on the P&L will tell you how often the retailer pays their invoices per annum, and this figure divided into 365 will give the number of days the retailer takes to pay suppliers (check the logic with your finance department for reassurance).
If suppliers had monitored and resisted these retail moves over the years, the latest 45 day ‘norm’ might not have been as easily achieved….
Anyway, here and now it means that the NAM can be in a position to go for fair share, at least…
Welcome to the realities of 2014!
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