Mega-mergers, the unintended consequences.....

Given the rising trend of companies combining forces to optimize scale, reduce tax and drive complementary R&D resources, it is perhaps useful to explore some of the unintended results of such moves.

The key issues with mega-mergers apart from economic have to be the impact on trading partners and also the political implications.

Because of competition legislation it is inevitable that the merger process will be delayed while the authorities explore the potential impact on markets.

For instance, the Publicis-Omnicon merger, announced last July with the deal's closing delayed at least six months because of regulatory issues, has already resulted in the loss of more than $1.5 billion of client work and they face a fight to retain billions more, including a huge Samsung contract, just as the two advertising firms struggle to keep their merger on track.

Client losses already include Microsoft, Danone, GSK, Sony, and Marks & Spencer.

Another consequence has to be the inevitable loss of talent, with the usual result of the best talent finding it easier to move...

Again, high US taxation is causing major American firms to combine foreign mergers with relocation of the combined headquarters to more benign tax environments, such as the Pfizer-AstraZeneca, Chiquita-Fyffes, and a host of other similar deals.

The immediate consequence will obviously be the inevitable moves as the US authorities attempt to apply international pressure to frustrate or delay such potential losses of corporation tax, resulting in more delays
Again the unintended consequence of good staff leaving to avoid career uncertainties in what is a short life, after all...

However, for those on the perimeters, opportunities abound...

In other words, apart from the new availability of good talent, such mergers will provide bargains in terms of brands that become a problem in terms of competition legislation, and a sell-off at any price becomes increasingly attractive...

Watch carefully...

Major Customer market capitalisation - what the stock market really makes of the current line-up…

                                                                                                                                 mkt cap 29-04-2014
Given the turmoil in the retail trade, it can be useful to take a City view of the key players via the value placed on their shares…

In other words, whilst most of us merely buy and sell in the retail environment and are mainly concerned with being paid, shareholders have the experience to weigh up all factors in evaluating the real worth of a retail business and are prepared to back that evaluation by investing their (and our) money in the business….

The latest market capitalisation thus represents the market’s best guess as to the value of the business. However, as NAMs are in the comparison business, at least in terms of allocating trade investment funds, it can be useful to compare the major customers on this metric.

Relating the market capitalisation to the retailer’s sales then gives a relative measure of the stock market’s opinion of the company i.e. the greater the Mkt. Cap/sales % the more attractive the company.

For instance, re. the above slide, it can be seen with one exception,at 52.3%, Walmart (and by implication Asda), is head of the table, given its high ROCE and Net Margin performance. At 38.2%, Tesco, despite its current troubles, is still rated No. 2 globally, way ahead of Sainsbury's and Morrisons.

But take a look at Amazon, for a view of the real future...

NB. For UK NAMs: Obviously Waitose/JLP is not a public company so NAMs need a best-guess on how its market cap would compare if it were on the stockmarket (my money is on 38%+). Likewise, the Co-op is not listed, so think south of 25%....

Where next?
Your job is to help the customer increase its market cap by improving its ROCE, in turn driven by net margin and capital rotation...

Application to the day-job? the buyer is a shareholder...

All else is detail...

Facebook targeting of 'lookalike' shoppers – optimising Ansoff online?

News that Facebook is extending its targeting capabilities for advertisers with a lookalike audiences feature that will allow them to reach Facebook users similar to those already shopping on their websites means that suppliers can now tick a major Ansoff box online….

In other words, as per Ansoff, apart from selling more of their current products to current users, and new products to current users, suppliers can now target new users of similar profile with their current products, online.

This can apply to website visitors, users of their mobile apps or those that are connected to their Facebook pages.

For suppliers this can obviously work on three* levels:
- To target potential visitors to their site, based on current traffic
- To target non-users within a retailer’s existing online traffic
- To help retail customers to attract new customers to the site via promotions of supplier’s current products

*At least one additional way to jump the gun on the competition via a real growth opportunity?

Amazon Prime Pantry virtually boxes its way into the supermarket ring...

The new service allows Prime loyalty club members fill up to a 45-pound virtual box with four cubic feet of groceries and get it shipped for a flat rate of $5.99, offering users an expanded selection of items that they usually pick up in grocery stores.

To help you stay within that weight limit, a virtual Amazon cardboard box will show you how much room is left, filling the box as you order. While you could easily fill a Prime Pantry box with your favourite treats, the programme is especially attractive for customers who want to stock up on heavier and bulkier items that don't usually ship free of charge.

Prime Pantry seems designed to help Amazon solve the problem of customers who need smaller items that would otherwise be prohibitively expensive to ship. It would potentially eliminate a need to go to the local grocery store, though a spokeswoman said delivery is only guaranteed within four days.

Although the new US service obviously poses a threat to traditional grocers and will no doubt be fast-forwarded in terms of delivery times and roll-out, the real innovation appears to be the virtual box that fills as you shop, and measures purchases by weight & volume, rather than price....

Another breakthrough for Amazing Amazon, or at least a worthwhile watch?

Waitrose window displays - a test of pulling-power?

                                                                                                                    190 Acton Lane 1914
From their beginnings in 1904, Wallace Wyndham Waite and Arthur Rose took every opportunity to promote their business.  Waite thought window display was a key way to attract customers into the shops and spent a great deal of time creating innovative window displays.

                                                                                                                         Gloucester Road 1928
Often used to promote merchandise from across the British Empire, for which he was awarded the MBE, his window displays were eye catching and changed on a regular basis.

                                                                                Western Rd Brighton 2014

A century later, Waitrose have now obviously reached a point where even a hint of inner delights is sufficient for the UK shopper…

…and who can argue with the results?

Ocado - the real 'backstory' to a home delivery service

According to Graeme Burton of Computing, in discarding the idea of off-the-shelf software from the start, the development of bespoke software has taken Ocado into cutting-edge research into robotics, artificial systems, machine learning, simulation and more, as it bids to perfect its systems – and, potentially, to turn the fruits of this research into a platform that it can use to expand or offer as products or services in their own right.

“We are building an end-to-end platform that starts with the customer placing their order on a web shop or mobile and ends in their order arriving in a one-hour delivery slot at the kitchen table,” says Ocado’s technology director, Paul Clarke.

In other words, there’s much more to Ocado than just vans and warehouses, and it isn’t just implementing technology – it’s inventing it.

The deal they signed with Morrisons [in July 2013] was intended as the first of many. There won’t be other grocery ones in the UK because it’s exclusive, but in other territories and in non-food they say they can and will do others. In fact, work is also under way to “re-platform” Ocado’s non-warehouse technology for the cloud so that it can be rolled out to others, either elsewhere in the world or in the UK for non-supermarket applications.

In addition the vision systems that Ocado has been developing will enable its robots to be able to identify different goods, classify them and deal with them appropriately, all along the supply chain.

See more detail here

Given the above rate of innovation, it may be worthwhile for suppliers to embark on a deeper level of partnership with Ocado, not only to optimise current use of home delivery, but in order to anticipate the potential of the technology and its application both home and abroad…

In other words, an opportunity to help your colleagues in other countries share in Ocado’s leading edge applications, at all levels…

Gibraltar fire hits online gambling...

According to the BBC, an explosion and fire on Gibraltar disrupted a number of online betting operations on Sunday.

Online gambling is an important part of Gibraltar's economy with international companies choosing to base themselves there because of the territory's low taxes. The outage meant many people were unable to play bets online on a busy Easter Sunday of sport.

Given these unprecedented times it is perhaps understandable that even betting organisations were unable to calculate the odds of it happening this weekend....

i.e. according to William Hill, "It's just one of those freak events nobody could have predicted".

Temporary relief to find a windscreen-note on your damaged car?

                                                                                                            Source: HPM