Rodney Durham stopped working in 1991, declared bankruptcy and lives on Social Security. Nonetheless, Wells Fargo lent him $15,197 to buy a used Mitsubishi sedan. ... “I am not sure how I got the loan,” Mr. Durham, age 60, said. ... Mr. Durham’s application said that he made $35,000 as a technician at Lourdes Hospital in Binghamton, N.Y., according to a copy of the loan document. But he says he told the dealer he hadn’t worked at the hospital for more than three decades. Now, after months of Wells Fargo pressing him over missed payments, the bank has repossessed his car. ... This is the face of the new subprime boom. Mr. Durham is one of millions of Americans with shoddy credit who are easily obtaining auto loans from used-car dealers, including some who fabricate or ignore borrowers’ abilities to repay. The loans often come with terms that take advantage of the most desperate, least financially sophisticated customers. ... Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, with roughly one in four new auto loans last year going to borrowers considered subprime — people with credit scores at or below 640. ... While losses from soured car loans would be far less than those on subprime mortgages, the red ink could still deal a blow to the banks not long after they recovered from the housing bust. Losses from auto loans might also cause the banks to further retrench from making other loans vital to the economic recovery, like those to small business and would-be homeowners. ... In another sign of trouble ahead, repossessions, while still relatively low, increased nearly 78 percent to an estimated 388,000 cars in the first three months of the year from the same period a year earlier, according to the latest data provided by Experian. The number of borrowers who are more than 60 days late on their car payments also jumped in 22 states during that period.
Few things are more American than Coca-Cola. ... But bottled water is washing away the palate trained to drain a bubbly soda. By the end of this decade, if not sooner, sales of bottled water are expected to surpass those of carbonated soft drinks, according to Michael C. Bellas, chief executive of the Beverage Marketing Corporation. ... “I’ve never seen anything like it,” said Mr. Bellas, who has watched water’s rise in the industry since the 1980s. ... Sales of water in standard lightweight plastic bottles grew at a rate of more than 20 percent every quarter from 1993 to 2005, he said. The growth has continued since, but now it has settled into percentages within the high single digits. ... If the estimated drinking of water from the household tap is included, water consumption began exceeding that of soda in the mid-2000s.
The global obesity epidemic and related nutritional issues are arguably this century’s primary social health concern. With breakthroughs in the field of medicine, huge leaps in cancer research and diseases such as smallpox and polio largely eradicated, people around the globe are, on average, living much longer and healthier than they were decades ago. The focus on well-being has shifted from disease to diet. The whole concept of healthy living is a key pillar of our Credit Suisse Mega - trends framework – themes we consider crucial in the evolution of the investment world. In this report, we specifically explore the impact of “sugar and sweeteners” on our diets. ... Although medical research is yet to prove conclusively that sugar is in fact the leading cause of obesity, diabetes type II or metabolic syndrome, we compare and contrast various studies on its metabolic effects and nutritional impact. Alongside this, we question some of the accepted wisdom as to what is perceived as “good” and “bad” when it comes to sugar consumption, namely as to whether a calorie consumed is the same regardless of where it is derived from – sugar, fats, or protein – and whether solid foods are “nutritionally different” to liquids. ... What can we expect in the future? What should investors focus on? Although a major consumer shift away from sugar and high-fructose corn syrup may be some years away, and outright taxation and regulation a delicate process, there is now a trend developing. From the expansion of “high-intensity” natural sweeteners to an increase in social responsibility mes - sages from the beverage manufacturers, we see green shoots for dietary changes and social health advancement. Ultimately, we expect consumers, doctors, manufacturers and legislators to all play a crucial role in changing the status quo for sugar.
- Also: Financial Times - Sugar as the new tobacco? 5-15min
- Also: The Atlantic - The Power of Sugar < 5min
- Also: Wall Street Journal - Cheaper Sugar Sends Candy Makers Abroad < 5min
- Also: Wall Street Journal - Sugar Processors Seen Defaulting on Federal Loans < 5min
- Also: Financial Times - London’s commodity lawyers hit by sugar rush < 5min
From 1980 to 2013, vast markets opened around the world while corporate-tax rates, borrowing costs, and the price of labor, equipment, and technology all fell. The net profits posted by the world’s largest companies more than tripled in real terms from $2 trillion in 1980 to $7.2 trillion by 2013,1 pushing corporate profits as a share of global GDP from 7.6 percent to almost 10 percent. Today, companies from advanced economies still earn more than two-thirds of global profits, and Western firms are the world’s most profitable. Multinationals have benefited from rising consumption and industrial investment, the availability of low-cost labor, and more globalized supply chains. ... But there are indications of a very significant change in the nature of global competition and the economic environment. While global revenue could increase by some 40 percent, reaching $185 trillion by 2025, profit growth is coming under pressure. This could cause the real-growth rate for the corporate-profit pool to fall from around 5 percent to 1 percent, practically the same share as in 1980, before the boom began. ... Profits are shifting from heavy industry to idea-intensive sectors that revolve around R&D, brands, software, and algorithms. Sectors such as finance, information technology, media, and pharmaceuticals—which have the highest margins—are developing a winner-take-all dynamic, with a wide gap between the most profitable companies and everyone else. Meanwhile, margins are being squeezed in capital-intensive industries, where operational efficiency has become critical. ... As profit growth slows, there will be more companies fighting for a smaller slice of the pie, and incumbent industry leaders cannot focus simply on defending their market niche.
Some aches and pains are constraining the global economy, with more severe strains occurring in the emerging world. We believe contagion to the US and Europe will be limited in 2016, and expect their consumer revivals to continue, courtesy of low inflation, low commodity prices, central bank intervention and reduced fiscal austerity. However, above-average equity valuations, peaking corporate earnings momentum and stagnant productivity growth will likely result in a year of modest single- digit returns on diversified portfolios. ... This year’s cover art transforms some well-known aches and pains: exhaustion, tinnitus, periodontitis, bronchitis, acid reflux, hangovers, restless leg syndrome, appendicitis, conjunctivitis, anemia, mononucleosis, E. coli infections, iron deficiency, narcolepsy, macular degeneration and altitude sickness. These aggravating but generally not life- threatening conditions are meant to convey a slow growth world, but not one on the precipice of collapse or recession. Competitive devaluations are unlikely to alleviate these aches and pains; successive rounds of currency depreciation in Europe and Asia mostly redistribute income across countries, rather than boost aggregate demand. ... Most of these conditions are homegrown: Latin American and Australian overexposure to commodity prices, weak consumer activity in Japan, economic dissonance across countries in the Eurozone, a surge in dollar-borrowing emerging economies and slowing corporate profits growth in the US. However, some conditions are the result of contagion: “ECBotulism” refers to the impact of ECB policy on countries like Sweden that are forced to engage in destabilizing quantitative easing, or lose export market share (see page 15 for more details). As for Canada, there was no need to transform the name of an illness for our cover: “Dutch Disease” refers to an economic condition in which one sector of the economy (in this case, oil and gas) drives the currency to such a high level that it causes medium-term damage to the rest of the country’s export sectors.
Until the turn of this century, population growth generated more than half of all global consumption. But between 2015 and 2030, three-quarters of global consumption growth will be driven by individuals spending more. This shift has profound implications for companies. What’s now important are emerging demographics: the latest report from the McKinsey Global Institute (MGI) finds that nine groups will generate three-quarters of global urban consumption growth to 2030, and just three of these will generate half of consumption growth and have the power to reshape global consumer markets over the next 15 years.
1. The retiring and elderly in developed economies
2. China’s working-age population
3. North America’s working-age population
Tracking consumer attitudes and behavior is not sufficient if companies are going to capture key consumer markets. They need to understand the core drivers of consumption such as income and age, characteristics such as ethnic mix and education, and the timing of key decisions such as getting married, having children, and buying a house.
Mark your calendar: January 1, 2020. ... As this future year unfolds, the gap between how much cocoa the world wants to consume and how much it can produce will swell to 1 million metric tons, according to Mars Inc. and Barry Callebaut AG, the world’s largest chocolate maker. By 2030, the predicted shortfall will grow to 2 million tons. And so on. ... Because of disease, drought, rapacious new markets and the displacement of cacao by more-productive crops such as corn and rubber, demand is expected to outstrip supply by an additional 1 million tons every decade for the foreseeable future. Here, now, as you read these words, the world is running out of chocolate ... Last year, we again consumed more cocoa than we were able to produce. This year, despite an unexpected bumper crop, supply barely kept pace with the recent upswing in demand. From 1993 to 2007, the price of cocoa averaged $1,465 a ton; during the subsequent six years, the average was $2,736 -- an 87 percent increase. ... The world’s most universally delectable treat has begun a journey from being very loved and very common, like beer, to being very loved and a good deal less common, like Bordeaux. Unfortunately, that is the least of the confection’s problems. ... Efforts are under way to make chocolate cheap and abundant -- in the process inadvertently rendering it as tasteless as today’s store-bought tomatoes, yet another food, along with chicken and strawberries, that went from flavorful to forgettable on the road to plenitude.
Nordstrom is beefing up its department store portfolio at a time when we are constantly being told the department store is dying. This summer, Macy's announced it was closing 15 percent of its American stores after six straight quarters of declining sales. Since 2014, J.C. Penney has closed 80 locations; Sears closed nearly 300. According to the US Department of Commerce, department store sales have declined 30 percent from $87.46 billion in 2005 to $60.65 billion in 2015. ... Department stores face a grim future, and it gets even gloomier when Amazon, which is set to outpace them in apparel sales, is factored into the equation. Yet Nordstrom is envisioning eight stores in Canada and three more new stores in the US by 2019, including a flagship in New York City. ... This focus on shoppers starts first and foremost with its generous return policy — or generous lack thereof. ... In addition to transparent customer relations, Nordstrom stocks an impressive mix of higher- and lower-end brands, without managing to alienate anyone. ... The changes are small and incremental, and yet they complete a larger picture for the Seattle-based brand. They don't just give the store a contemporary, boutique-y feel — they're clear indicators that Nordstrom has put a whole lot of thought into what a department store should look like in 2016 and beyond.
It was in an earlier work, 1759’s The Theory of Moral Sentiments, that Smith put his finger on the social and psychological impulses that push people to accumulate objects and gadgets. People, he observed, were stuffing their pockets with “little conveniences,” and then buying coats with more pockets to carry even more. By themselves, tweezer cases, elaborate snuff boxes, and other “baubles” might not have much use. But, Smith pointed out, what mattered was that people looked at them as “means of happiness." It was in people’s imagination that these objects became part of a harmonious system and made the pleasures of wealth “grand and beautiful and noble." ... This moral assessment was a giant step towards a more sophisticated understanding of consumption, for it challenged the dominant negative mindset that went back to the ancients. ... Rather than being passive, the consumer is now celebrated for actively adding value and meaning to media and products. ... there have been many prophecies and headlines that predict “peak stuff” and the end of consumerism. ... Such forecasts sound nice but they fail to stand up to the evidence. After all, a lot of consumption in the past was also driven by experiences, such as the delights of pleasure gardens, bazaars, and amusement parks. In the world economy today, services might be growing faster than goods, but that does not mean the number of containers is declining—far from it.
Hundreds of shopping centers across the U.S. are facing obsolescence, abandoned by shoppers who are going online or getting choosier about where they shop. ... in its combination of novelty, technology, and customer pampering, Roosevelt Field embodies the strategy that has helped its owner, Simon Property Group, navigate retail’s crisis to stay on top of the mall world. ... Its U.S. portfolio includes 108 malls, most of them high-grossers like Roosevelt Field, and 72 discount outlet centers. ... including the Forum Shops at Caesars Palace in Las Vegas, King of Prussia outside Philadelphia, and the huge high-end New York outlet mall Woodbury Common ... The key to that success: constantly adapting to figure out what sells, at a time when many of the businesses that fill its malls—especially department stores and apparel retailers—aren’t selling. ... Simon dominates the so-called A-malls, those with the highest sales per square foot. To win in that category, Simon has been diligent about staying ahead of trends and modernizing its centers, and quick to replace struggling brands with those on the upswing. ... acknowledge the risk posed by the wave of store closings. ... Analysts generally believe America is “overmalled” to begin with: There are 2,353 square feet of space of shopping centers in the U.S. for every 100 Americans, compared with 1,636 in Canada and 458 in Britain ... From the 1960s through the 2000s, developers built hundreds of malls per decade. But since 2010, only nine new ones have been built ... the typical anchor store pays around $4 per square foot in annual rent; the average non-anchor tenant paid $42.22 per square foot a year as of the third quarter of 2016
Smoking rates were in decline among well-educated consumers in developed economies; to make up for slipping sales, the companies were raising prices, which they could do for only so long. Meanwhile, a growing number of customers were switching to e-cigarettes in the hope of escaping their addiction or preserving their health. The devices, which use battery-powered coils to vaporize nicotine-infused solutions, had leapt on the scene seemingly out of nowhere. One of the first commercially available e-cigarettes had been created circa 2003 as a smoking cessation device by a Chinese pharmacist whose father had died of lung cancer. By 2013 the e-cigarette market had $3.7 billion in annual sales, according to Euromonitor International, and was expanding rapidly. ... Philip Morris International scrambled to fashion newfangled nicotine-delivering devices that would catch the wandering eye of the restless tobacco consumer. ... Everywhere you look in the industry, companies are pouring money into product development while borrowing liberally from the style of Silicon Valley. ... Tobacco executives often sound like media owners talking about content. That is, they’re open to delivering their drug via whatever pipe the consumer chooses—be it e-cigarettes, heat-not-burn devices, gum, lozenges, dip, or some medium that hasn’t been invented yet.