Had a big meeting today........(A rant.)

[d-ray657]

When I worked in retail (small department store) the average markup on clothing, shoes, etc, was about 50% (100% depending on how you look at it - half of the retail price). I think it was less on fragrances, because there were more middle levels in marketing that.

Regards,

D-Ray

[BlueStreak]

Originally Posted by HatchetJack

Well we could pull the plug on them by pulling our cash out but we see how
that worked out last time. Hell they spend all their money and ours too and
nothing we can do about it? One thing we don't talk about is the percentage
of profit retailers charge us. It seems no one crys foul over that but they
complain about interest on loans ect..
A tub of Folgers at Ingles is 11.99 right now while at Savelot it's 7.99 and
I assume they make a profit at that. What percentage are they making
off us?

I don't know about retail, I'm talking about manufacturing. And at the moment our profit margin is almost ZERO, at the moment. It's people OUTSIDE the industry that are driving up costs. They didn't make your Folgers. They don't make anything, and most likely employ very few people, if anyone. They're little more than parasites. That's the whole point.

Dave

[piece-itpete]

Dave, I don't blame you, for the record. Obama? Sure, why not

My main product line was decimated (with a direct impact on my pay) last year when a new competitor dive bombed the market. I'm still dealing with the fallout. Tough to have pay shrink.

Pete

[whell]

Originally Posted by CarlV

Coffee prices here have pretty much doubled in the last year and I have not heard of any real causes for this to happen. So price gouging occuring makes a lot of sense. Hope you aren't part of any cost cutting to appease stockholders.


Carl

I think it might be a good idea to check our premises in this discussion. Yes, there has been a rise in food commodity speculation, including coffee.

http://www.espressocoffeeguide.com/2...coffee-prices/

http://www.bloomberg.com/news/2011-0...inflation.html

But there are many reasons to engage in commodity speculation. It is not simply individuals gaming the market. It is producers and food manufactures as well engaging in market speculation in an attempt to lock in prices that are beneficial (manufacturers ), which may ultimately benefit consumers.

Supply and demand are influencing commodity prices as much as anything, and speculators are responding to supply issues. Its a gambit either way for the speculators, particularly if they're buying in a short supply scenario, and then the market changes and the speculators take a beating.

I recall a few years back Post did a good job locking in grain prices when demand (and cost) was relatively low in the marketplace. Kellogg failed to do so, and as a result there was some great pricing competition at the retail level for cereal products that allowed Post of gain market share against Kellogg while creating a lot of value for the consumer.

Its the "bad" speculation (from the consumer perspective) that makes headlines. There are any number of examples that don't get the same press when they actually benefit the consumer.

[finnbow]

Originally Posted by whell

I think it might be a good idea to check our premises in this discussion. Yes, there has been a rise in food commodity speculation, including coffee.

http://www.espressocoffeeguide.com/2...coffee-prices/

http://www.bloomberg.com/news/2011-0...inflation.html

But there are many reasons to engage in commodity speculation. It is not simply individuals gaming the market. It is producers and food manufactures as well engaging in market speculation in an attempt to lock in prices that are beneficial (manufacturers ), which may ultimately benefit consumers.

Supply and demand are influencing commodity prices as much as anything, and speculators are responding to supply issues. Its a gambit either way for the speculators, particularly if they're buying in a short supply scenario, and then the market changes and the speculators take a beating.

I recall a few years back Post did a good job locking in grain prices when demand (and cost) was relatively low in the marketplace. Kellogg failed to do so, and as a result there was some great pricing competition at the retail level for cereal products that allowed Post of gain market share against Kellogg while creating a lot of value for the consumer.

Its the "bad" speculation (from the consumer perspective) that makes headlines. There are any number of examples that don't get the same process when they actually benefit the consumer.

Yep, and Southwest Airlines did much the same with fuel prices. Economic analyses I've read all seem to favor the stabilizing effect of futures markets. I'm not fully convinced (nor am I convinced by any argument in "the dismal science"), but I haven't heard any real convincing counterpoints. Had your coffee company (or anyone else's) foreseen the price upswing and bought futures a year ago at low prices, they'd be bathing in profits.

[HatchetJack]

Dave I don't doubt for a minute those speculators are mostly out for themselves
with some back room deals going on constantly. Whell makes a good point
also. One thing is for certain coffee has always had its ups and downs as
long as I can remember but more often than not it's pretty reasonable.
I bet the price comes down but not before a bunch of iphone golfer
traders allow it to. Dont let those big wigs put their stress off on you, it's
a lot more their problem than yours.
Usually there is a warning before it goes up and I buy a few tubs and stick
it in the freezer to get past the high prices but I got caught with my pants
down this go around. Guess I'm guilty on a smaller scale.

[BlueStreak]

In reference to Whells post, I understand what he's saying, but I don't understand why a manufacturer would try to "lock in" an inflated price. This is raw, green bean I'm talking about, you can't buy it at a low price today, and then hold on to it for a year like you could crude oil, or steel---it's an agricultural product---it rots. Or am I just not understanding how it works? The more I think about it, the more confused I get. Mainly because;

There is one thing I forgot to mention. Our company owns a few plantations in South America and one in Hawaii, that supply our plant. So we do have some control over the cost of that coffee. It's only the stuff we get from other growers that would be affected, I guess. The normal "ups and downs" are usually due to weather conditions during the growing season. This is different. This is sustained increases over the last year, that have nothing to do with weather.

I dunno, maybe Hatchet is right. Maybe I just worry too much. I like my job, and I'd like to keep it. Know what I mean?

One upshot----I get a healthy employee discount on the Hawaiian (Kauai) coffee, 35%. I received a 5lb bag of whole bean in the mail yesterday. Even with the discount it cost me $44 + $12 shipping! Very good coffee, expensive, but worth it.

Dave

[whell]

Originally Posted by BlueStreak

In reference to Whells post, I understand what he's saying, but I don't understand why a manufacturer would try to "lock in" an inflated price. This is raw, green bean I'm talking about, you can't buy it at a low price today, and then hold on to it for a year like you could crude oil, or steel---it's an agricultural product---it rots. Or am I just not understanding how it works? The more I think about it, the more confused I get.
Dave

Dave -

Note a paragraph from the first article I linked to:

"Inflationary concerns have led some countries to hold onto stocks of commodities in anticipation of future higher prices. Brazil has had about 1.2 million bags of Arabica coffee in storage since 2009 which was purchased from Brazil coffee farmers at the beginning of 2010 at a price of about $180 per bag to help boost coffee prices."

If this info is correct, it is quite possible to store coffee for the long haul. Maybe after processing the beans they can be stored.

As to you first question, if there is speculation in the market now, it may be fueled by the belief that prices have not peaked, and theres room left for additional inflation of the price. From what I've read, there's may be some credence to that. Also, since price hikes appear to be fueled by increasing demand, maybe that's good news for you and your employer?

[finnbow]

Originally Posted by BlueStreak

In reference to Whells post, I understand what he's saying, but I don't understand why a manufacturer would try to "lock in" an inflated price. This is raw, green bean I'm talking about, you can't buy it at a low price today, and then hold on to it for a year like you could crude oil, or steel---it's an agricultural product---it rots. Or am I just not understanding how it works?

They (should) buy futures for the commodity when the price is low to lock in the low price down the road. When you buy a future, the coffee doesn't even need to be picked yet. It's an agreement to buy it at a future date at a price fixed today.

Remember the movie "Trading Places" with Eddie Murphy and Dan Ackroyd? It was all about manipulating the futures market on pork bellies and orange juice. Funny stuff.

[BlueStreak]

Originally Posted by whell

Dave -

Note a paragraph from the first article I linked to:

"Inflationary concerns have led some countries to hold onto stocks of commodities in anticipation of future higher prices. Brazil has had about 1.2 million bags of Arabica coffee in storage since 2009 which was purchased from Brazil coffee farmers at the beginning of 2010 at a price of about $180 per bag to help boost coffee prices."

If this info is correct, it is quite possible to store coffee for the long haul. Maybe after processing the beans they can be stored.

As to you first question, if there is speculation in the market now, it may be fueled by the belief that prices have not peaked, and theres room left for additional inflation of the price. From what I've read, there's may be some credence to that. Also, since price hikes appear to be fueled by increasing demand, maybe that's good news for you and your employer?

We are adding five new packaging lines and some departments are going to 12 hour days later this year. That's why I was a bit confused, they present the "price" news as if it's going to be the death of us, but then announce increases in volume and reinstate the intent to spend millions more on expansion. Maybe the scare was just a bit of internal politics meant to motivate people? Anyhow, I do feel a little better about it today. Thanks.

Dave