Archive for February 4th, 2010

More government employees … standing united: 37.4% unionized.

February 4, 2010

Bottom line: Two related articles with a combined chilling effect: Once government gets big (bigger ?), there’s no turning back … especially if the government employees are unionized.

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Excerpted from Washington Times: Largest-ever federal payroll to hit 2.15 million, Feb. 2, 2009 

The era of big government has returned with a vengeance, in the form of the largest federal work force in modern history.

The Federal government will grow to 2.15 million employees this year, topping 2 million for the first time since President Clinton declared that “the era of big government is over”.

Most of the increases are on the civilian side, which will grow by 153,000 workers, to 1.43 million people, in fiscal 2010. From 1981 through 2008, the civilian work force remained at about 1.1 million to 1.2 million, with a low of 1.07 million in 1986 and a high of more than 1.2 million in 1993 and in 2008. In 2009, the number jumped to 1.28 million.

“When you talk about big government, you’re talking about a big employer.”

Full article:
http://washingtontimes.com/news/2010/feb/02/burgeoning-federal-payroll-signals-return-of-big-g/

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Excerpted from WSJ: The Public-Union Ascendancy, Feb. 3, 2010

Unions once saw their main task as negotiating a bigger share of an individual firm’s profits.

Now the movement’s main goal is securing a larger share of the overall private economy’s wealth, which means pitting government employees against middle-class taxpayers.

It’s now official: In 2009 the number of unionized workers who work for the government surpassed those in the private economy for the first time: 51.4% of America’s 15.4 million union members, or about 7.91 million workers, were employed by the government in 2009.

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Overall unionism keeps declining, however, with the loss of 771,000 union jobs amid last year’s recession.

In 2009 10.1% of private union jobs were eliminated, which was more than twice the 4.4% rate of overall private job losses.

Only one in eight workers (12.3%) now belongs to a union, with private union employment hitting a record low of 7.2% of all jobs, down from 7.6% in 2008.

In government, by contrast, the union employee share rose to 37.4% from 36.8% the year before.

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“The problem for democracy is that this creates a self-reinforcing cycle of higher spending and taxes. The unions help elect politicians, who repay the unions with more pay and benefits and dues-paying members, who in turn help to re-elect those politicians.”

Full article:
http://online.wsj.com/article/SB10001424052748703837004575013424060649464.html?mod=djemEditorialPage_h

Posted in Jobs - Unemployment, Unions - UAW | 1 Comment »

Google looks for new ways to keep its lights on

February 4, 2010

Takeaway: In an unexpected move, Google has gone offline in an attempt to diversify its business. The company recently started an energy subsidiary with the goal of making renewable energy more affordable.

Taking such a large step away from its core business to enter a highly capital intensive industry will likely leave analysts wondering what Google’s ROI projections look like for its new division.

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Excerpt from FastCompany, “Google Expands Its Empire With Energy Subsidiary” by Ariel Schwartz, January 7, 2010.

It’s no secret that Google is interested in clean energy technology. The company has previously invested in enhanced geothermal technology, smart grid ventures, electric cars, and wind power. Now Google is forming its own energy subsidiary called Google Energy. The Delaware-based company was quietly formed in December, and earlier this week it put in a request to buy and sell electricity on wholesale markets. What, exactly, is Google up to?

The search giant is hoping to use its new venture as an aid in its quest for carbon neutrality. Presumably, that means Google Energy will help Google offset its power use by buying clean energy credits and selling excess power off to the grid. Google already has a 1.6 MW solar array at its Mountain View headquarters.

Knowing Google, however, the new energy subsidiary might be more than meets the eye. Company reps admit that there aren’t any concrete plans for Google Energy yet. That means Google isn’t ruling out the possibility of becoming a utility sometime in the future. It wouldn’t be all that surprising–Google has already stated its plans to make renewable energy cheaper than coal. The company says that its “over-arching vision is that one day a large portion of the world’s vehicles will plug into an electric grid fueled by renewable energy,” so why wouldn’t it also want to be in charge of doling out that energy?

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Full Article:

http://www.fastcompany.com/blog/ariel-schwartz/sustainability/google-expands-its-empire-energy-subsidiary

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Posted in Corporate Strategy | 2 Comments »

Price hikes cause an avalanche in the U.S. beer market

February 4, 2010

TakeAway:  Despite significant volume declines and loud protest and cries for help from retailers, the biggest U.S. beer brewers continue to increase prices. 

It could be that the big brewers are trying to capitalize on the fact that consumers seem willing to pay higher prices for beer (evidence:  craft beers, typically the more expensive beers, posted great numbers).  However, the value proposition of craft beers is very different from that of mass market beers, and consumers are willing and able to pay a premium for the added benefits that craft beers offer. 

What benefits have mass market brewers added to their value proposition to close this gap and warrant price increases?

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Excerpted from WSJ, “Slump Has Beer Makers Over a Barrel,” By David Kesmodel. January 21, 2010

U.S. beer sales volumes fell 2.2% last year, the highest rate since the 1950s, with demand worsening late in the year … The decline, the industry’s first since 2003, raises demands for industry leaders Anheuser-Busch InBev and MillerCoors to come up with better advertising and to rethink recent price increases …

But they must tread carefully, balancing price moves against a need to drive profits in the wake of the mergers that created the two.

The two giants increased prices by about 5% last year, fresh off InBev’s acquisition of Anheuser-Busch and the move by SABMiller and Molson Coors Brewing to combine U.S. operations. Those increases, along with a weak job market and lackluster advertising, contributed to the sales drop …

Some retailers are pushing back against the industry’s price increases and calling for a new approach to marketing. “We need cost decreases or we think there will be declines in domestic beer purchases in total,” said a 7-Eleven spokeswoman. 7-Eleven unsuccessfully has sought lower prices from Anheuser and MillerCoors …

Anheuser and MillerCoors, which control nearly 80% of U.S. beer sales, posted strong profit gains in the first nine months of 2009, buoyed by higher prices and cost cuts that followed the 2008 mergers.

But longer-term, they’ll need to restore sales-volume growth because cost cuts and price hikes will be harder to come by …

“When you raise prices that much, there are going to be consequences,” said an analyst with Deutsche Bank. He said brewers failed to come up with a blockbuster new product akin to Anheuser’s 2008 success with Bud Light Lime.

While the U.S. economy showed signs of improvement in the second half of 2009, beer volumes cooled further. SABMiller said Tuesday that unit sales from distributors to retailers fell 3.6% in the fourth quarter, the weakest result since MillerCoors was formed. SABMiller cited a “challenging industry and economic environment.”

Anheuser, the No. 1 player in the U.S. by sales, and MillerCoors, No. 2, have signaled price increases this year in the range of 2% to 3%, said editor of industry newsletter Beer Marketer’s Insights.  Deutsche Bank analyst’s say they expects large retailers to insist that brewers offer more promotions to spur demand, resulting in pricing not “much better than flat.”

Anheuser posted a 2.1% decline in shipments last year, its biggest drop since 1976 … MillerCoors … had a 1.9% drop. Large suppliers specializing in imported beers fared worse, with Crown Imports showing a 5% drop. The small-batch “craft” beer industry continued to represent an industry bright spot, with the biggest among the craft brewers, Boston Beer, showing a 1.7% increase.

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Full Article
http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=114556

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Posted in Mktg - Pricing | Leave a Comment »