My family has for the last several years opted for a heritage turkey — a Bourbon Red Turkey from Caveny Farm to be specific. While we have found these birds to be much more flavorful and interesting than your typical grocery store gobbler, it also means we pay a significant premium. Today’s New York Times has an article discussing why (Heritage Turkeys Selling Briskly, Even at $10 a Pound, Nov 26).
The bottom line is that both nature and scale matter. On the nature side, heritage breeds grow more slowly. They take 28 weeks to reach maturity. A Broad-Breasted White — the breed of choice for most commercial turkey farms — takes only 14 weeks to be ready for market.
Scale kicks in when on realizes that most heritage breeds are raised in small farms.
It is not clear how many heritage birds are sold each year. A conservative estimate, according to some producers, is 20,000 to 30,000 birds. That is a blip compared with the 273 million broad-breasted turkeys produced annually in the United States (46 million of those are eaten on Thanksgiving).
Just getting a poult (i.e., a baby turkey) costs $9 a pop. Small farms then have to pay for slaughtering and preparing the birds for market. In the words of Frank Reese, a breeder who has championed heritage breeds,
“Our turkeys are very expensive, not because of the turkey but because of the processing and shipping,” he said. “The problem is the infrastructure to support truly honest-to-God sustainable agriculture is not there.”
It’s the week of Thanksgiving and I have been trying to come up with a suitably themed post. I thought of doing poultry production planning (The Turkey-Industrial Complex, Slate Nov 23) but have settled for talking a little football. I am the only American in the Kellogg Ops group. So I am the only one who realizes that Thanksgiving means over-eating and watching football, more specifically, watching the Dallas Cowboys (because it hurts too much to watch the Lions). My colleagues think Roger Staubach is a real estate developer.
Anyway, the Cowboys offer a chance to talk a little supply chain. Unlike every other team in the NFL, the Cowboys handle all of their own merchandising. While every other team counts on Reebok to produce and distribute their jersey and hats, the Cowboys do it all for themselves. The following video gives an idea of the scope of their operations:
Put yourself in the shoes of a young woman who has several weddings to attend one summer. They are all college friends and the same folks will be at all the weddings. How many dresses should she buy? If it were a man instead of a woman, this becomes a much simpler problem. He could get by with a suit or two he already owns for work, and if he needs to be more formal, he can always rent a tux. A handful of firms such as Rent the Runway and Wear Today, Gone Tomorrow are now trying to level the playing field and give women the option of renting designer dresses.
The twist relative to your neighborhood Mr. Tux is that they aim to do this over the web. That, of course, has led to inevitable comparisons to Netflix (Netflixes of Fashion Take Off, WSJ.com, Nov 13 & A Netflix Model for Haute Couture, New York Times, Nov 8). There is clearly a need to be served here; the fashion savvy should be interested in a way that allows them to have up-to-date threads at a significant discount to buying. Rent the Runway charges about 10% of the retail price for a four day rental. Thus our young woman could wear a different $500 dress to each of five weddings for half the cost of buying one. However, the operational model seems so much more complex than Netflix that one wonders whether this is a feasible business. Continue Reading »
Yesterday, I posted about an Indian hospital that has dramatically lowered the cost of heart surgery by operating at very high volume. A related story from NPR discusses how walk-in clinics are likely to benefit from health care reform (Insurance Mandate Could Spur Walk-In Clinic Boom, Nov 20). Walk-in clinics are those practices often within pharmacies or grocery stores that deal with minor ailments like strep throats or ear infections on a walk-in basis. Got a scratchy throat that won’t go away? There’s no need to wait days for an appointment with your physician. You can walk-in at your neighborhood CVS or Walgreens and be seen today.
Why is there a market opportunity here? Because it is way harder than it should be to see a doctor.
The Massachusetts Medical Society recently found that 40 percent of primary care practices are closed to new patients. Meanwhile, hospital emergency rooms are seeing more patients for routine, non-emergency problems. Continue Reading »
The Wall Street Journal had an interesting article today about Dr. Devi Shetty and the hospital he runs in India. They specializes in heart surgeries (The Henry Ford of Heart Surgery, Nov 21). This accompanying video gives the idea:
A closed-loop supply chain approaches being a Platonic ideal for those interested in sustainable operations. In a perfect world, anything a firm sells would be taken back and somehow recycled. It may take energy and effort, but it would still be more efficient in terms of cost and waste output than starting from scratch. Wal-Mart has started taking steps in this direction, recycling cardboard boxes to make boxes for their bake at home pizzas:
Two quick updates on earlier posts. The first is on the impact Indian labor strife on manufacturing. I posted about that a few weeks ago. Today’s Wall Street Journal has an article that discusses how labor unrest has impacted a number of firms (Deadly Labor Wars Hinder India’s Rise, Nov 20). It makes a number of points, including that many factory workers haven’t seen much benefit from the rapid growth in the Indian economy over the last decade or so. It also notes that India’s labor laws have been lagging the development of the economy.
“We can’t be a capitalist country that has socialist labor laws,” says Jayant Davar, president of the Automotive Component Manufacturers Association of India.
The other update relates to rationing products. NPR had a story this morning on Call of Duty: Modern Warfare 2, a video game that has set a new record for sales in its first week (‘Call of Duty: Modern Warfare 2′ Breaks Record, November 20). One the points mentioned in the article is that the game’s publisher ActiVision intimated to retailers that it just might not be able to make enough copies of the game and that retailers should therefore get their orders in early. That then led to a big push to land customer pre-orders from from Amazon and Wal-Mart. This drives home what I have said before (here and here) that allocation schemes are an underappreciated part of the market mix.
I have already post a couple times about tight inventories this holiday season (see here and here) but more examples keep coming. Now the New York Times is reporting that luxury retailers are reducing their inventories (Luxury Stores Trim Inventory and Discounts, Nov 18). While they risk missing some sales, they are happy to be selling at full price:
Saks, the chic Manhattan department store, is a prime example. Its inventory is down by double digits compared with last year. That is partly a response to lower demand, of course, but it is also a business strategy aimed at weaning consumers from deep discounts. By carrying fewer goods and selling them at full price, Saks is essentially telling customers: buy it now or live without it.
“Upscale stores want to train the customer that luxury equals exclusivity and that they cannot assume they can wait and they’re able to buy it on sale,” said William S. Taubman, chief operating officer of Taubman Centers, a mall developer and owner. …
Burton M. Tansky, president and chief executive of the Neiman Marcus Group, says he does not think he is retraining consumers. Rather, he said, he is doing what is best for the health of his company. “We’ve told our customers that the availability is less than they’re used to seeing in the stores,” Mr. Tansky said. “We’ve suggested that it would be prudent to shop early.”
Of course, anyone can say that they are running out of stock. It doesn’t necessarily make it so. Continue Reading »
The New York Times has interesting article today (“Paying More for Flights Eases Guilt, Not Emissions”, NY Times, Nov 18, 2009) about the fact that carbon-offsetting programs offered by airlines and third parties do not seem to work.
The article tells the story of Responsible Travel, which in 2002 became one of the first travel companies to offer customers the option of buying so-called carbon offsets to counter the planet-warming emissions generated by their airline flights. Last month the firm announced that it discontinues the program.
“The carbon offset has become this magic pill, a kind of get-out-of-jail-free card,” Justin Francis, the managing director of Responsible Travel, one of the world’s largest green travel companies to embrace environmental sustainability, said in an interview. “It’s seductive to the consumer who says, ‘It’s $4 and I’m carbon-neutral, so I can fly all I want.’ ”
Never mind spiffy watches, now Eggo frozen waffles are on allocation (Leggo your Eggo: There’s a waffle shortage, CNNMoney Nov 18). Kellogg apparently makes Eggos in two bakeries. The one in Atlanta was damaged by flooding. The one in Tennessee is having a bunch of equipment replaced. The result? Limited waffles until mid-2010. Continue Reading »
