Wake up and smell the Coffee whilst you can

Retailers in the UK are rationing sales of powdered baby milk because of a surge in demand in China.

Danone, the manufacturer of Aptamil and Cow and Gate baby milk powder, said most supermarkets were introducing a restriction of two cans per customer.

It said the limit was to prevent some individuals from bulk-buying baby milk for "unofficial exports".

Danone said in a statement: "We understand that the increased demand is being fuelled by unofficial exports to China to satisfy the needs of parents who want Western brands for their babies."

Supermarkets Asda, Sainsbury's, Tesco and Morrisons said the purchase of certain brands would be limited to two units per customer per day.

Though this may seem an extreme response to a specific issue (the reaction to locally produced contaminated product), there is no denying the potential demand from China for food and agri products.

China will continue to be a major buyer in the international markets in response to demand from its burgeoning middle classes.

 

By 2020 China’s consumers will be spending an annual £ £3,830 billion and their Indian counterpart’s £2,200 billion contrast this with British consumers who spent £937 billion last year.

 

A Chinese person born in 2009 will consume 38 times as much over his lifetime compared to one born in 1960.

 

With a population in excess of 1.3 billion (approximately 20% of the world’s population) imagine the implication for Western consumers should an early morning cup of coffee become the beverage of choice!

 

 

Eurozone- few signs of comfort

 

The rate of unemployment in the Eurozone has hit a record high of 12%, official figures have shown.

The number of people unemployed in the 17 member states rose by 33,000 during February, to hit 19.07 million, the statistics agency Eurostat said.

The Eurozone economy is currently in recession, having contracted for the past three consecutive quarters. Early indications are that there was further contraction in the first quarter of 2013.

The short-term economic outlook remains bleak, given that many governments are cutting spending and raising taxes as they struggle to control high deficits and rising debt levels.

The austerity measures in many countries - mostly in southern Europe - have combined tax rises with cuts in salaries, pensions, benefits and social services.

 

Apart from the social cost the spectre of unemployment represents a major threat to economic recovery within the EU together with all the global implications it brings.

 

 

It’s the same old song

IFormer Goldman Sachs trader Matthew Marshall Taylor has pleaded guilty to defrauding the bank with an $8.3bn (£5.5bn) unauthorised trade in 2007.

Taylor was dismissed in December 2007 after the incident, which resulted in a $118m loss for the Wall Street bank.

Yet again it is the familiar sorry story of a trader exceeding his position limit in pursuit of a large bonus with the management complicit through their own greed or ignorance.

It’s only the “epic losses” which get the publicity but there is no doubt that many similar situations where the financial fall-out has not been so spectacular have been quietly written off.

The banks are keen to talk about cultural change and a back to basics approach.

These statements are meant to allay the concerns of not only the shareholders but also the regulatory bodies.

However there is a world of difference between intent and action and there will undoubtedly be more “spectaculars” reported in the coming months. 

 

The cost of stating the obvious

Having received fines totalling £290m by UK and US regulators for attempting to rig the key Libor interest rate between 2005 and 2009 Barclays appointed corporate lawyer-turned-investment banker Anthony Salz to carry out a review of the Banks operating systems and procedures.

The report’s findings are not surprising, these included an "over-emphasis" on short-term financial performance, reinforced by a bonus and pay culture that rewarded money-making over serving the interests of customers and clients.

Salz also commented that there was a sense that senior management did not want to hear bad news, and that the employees should instead solve problems on their own.

The report is a comprehensive document totalling 236 pages, which cost the Bank almost £18 million in fees (well its only money).

No doubt the present Management of the Bank will take some comfort from the public mea culpa but essentially the report only served to highlight that which was already well known.

In concise terms the failure comes down to short-termism combined with a general failure of management.

Will anything change? The jury is still out.

 

Chill wind blowing through the retail sector

 

Very often the best indicators are the least sophisticated. The UK retail sector remains in a very fragile state – the clearest evidence of this can be seen as you walk down any High Street.

One in 10 retailers are now classified as “zombie” businesses who find themselves in the precarious position of servicing the interest on their debt but unable to repay the capital.

Retailers are struggling against the backdrop of poor Christmas sales and the adverse weather for the first quarter of 2013 which has severely impacted on footfall.

At the same time the rising number and popularity of charity shops tell underscore that many families are struggling. Consumers struggle with debt and job insecurity.

As the knock on effect percolate back down the chain many businesses will suffer.

These conditions will lead to some extreme measures e.g. the recent demand from the owners of Laura Ashley asking for “an immediate price reduction of 10% from suppliers” an action which has been described as tantamount to “killing its own suppliers”.

 External factors by definition are difficult to handle but at the same time in-house disciplines can at least provide some insulation.

Cash-flow will remain difficult to manage so as always strict governance of Debtor and inventory control will provide some measure of comfort.

Do you really know your Customers?

 

In a few short years, rapid advances in technology have transformed the way we all conduct business.

Much of business is today conducted in the so-called virtual world of paperless trading. However, we should never forget that essentially commerce is about people trading together.

Whilst Computer “stop loss” mechanisms are the order of the day for “paper trading” the reality of the real world is that goods need to be moved from point of production to point of consumption and obviously this cannot be achieved via a computer terminal.

There is an old adage “know your customer,” this dictate has never been more important than in these uncertain and dangerous times. One of the biggest problems associated with the rise of e-commerce has been the accompanying lack of personal contact between a company and its customers.

Obviously this is not an issue for an online retailers selling products over the net and being paid via a Debit Card or Pay Pal etc.

However, there is an increasing tendency for B2B sales to be concluded by email or even SMS. The personal element has been lost and so has the identity and customer relationship. The surest way to avoid problems is by knowing your customer and understanding their business.

It is not possible to nurture this relationship and mutual understanding thru a key pad and email ordering system.

 

Time to boost morale

Whilst carrying out assignments for companies ranging from SME’s to publicly listed corporations, I am struck by the poor attitude of many senior managers towards the Company’s most important asset namely its Staff.

Presently we are being bombarded with negative news- failing economies, the squeeze on domestic budgets, the spectre of unemployment as evidenced by latest figures from the ONC showing UK unemployment standing at 7.8%.

This constant drip feed of bad news is having a very negative impact. Morale in the workplace at present is generally at a very low point and yet this seems not to have percolated into the mainstream of management thinking.

All too often the attitude of the management seems to be that the current backdrop will of itself be the motivating factor.

Obviously as companies struggle with their profitability, it is not a question of throwing money at the workforce but what is required is more of an attitudinal change.

Bringing the staff on board may well be as simple as communicating the company’s situation in a clear and concise manner rather than the heavy handed “if you don’t like it there are plenty of others ready to take the job”.

It is no coincidence that the companies who emerge stronger from challenging times have been able to do so largely as a result of the efforts of a committed and diligent workforce.

People are the main asset and as such should be valued accordingly.