Category Archives: Business

IKEA’s dark secret

Ikea

Count me among the group that doesn’t give a tinker’s damn that IKEA is returning to Dartmouth.

Dartmouth, which is part of Atlantic Canada’s largest metropolitan area, has gone absolutely agog since the giant retailer has announced they’re going to set up shop here again after a 25-year absence.

I wasn’t around in the early 60s when The Beatles first came to North America, but I’ve seen video and pictures. Some people are that excited and I guess that’s their prerogative, but the disappointing thing is how some media outlets are treating this like it’s news.

IKEA is the “least sustainable retailer on the planet” says Wig Zamore,  an urban development expert trained at the Massachusetts Institute of Technology. If you look past the thin veneer of their slick marketing campaign, you’ll realize that they are just like Wal-Mart, but without the image problem. That’s right, IKEA is Wal-Mart with a little Scandinavian élan.

The only time I ever shopped at IKEA was when I was a student back in the 80s. I bought a shelf there and I still have it, despite repeated suggestions from people I live with to throw it out. I have refused, a concept which completely undermines their business model that is designed around cheap, throw-away furniture.

My shelf still works. Its pine arms have not gotten tired and it still holds things up in my basement. If I ever need to replace it, I won’t be going back there for a new one after reading this excellent takedown in The Globe and Mail. It’s an excerpt from Ellen Ruppel Shell’s book, Cheap: The High Cost of Discount Culture (Penguin, 2009).

Read it all the way through, and I hope that it makes you think before you decide to shop at IKEA. It’s a free country and I understand the difficulty of trying to make ends meet, but how we shop shapes the world we live in. When you spend your money, you’re voting on the type of economy you want. There is no such thing as cheap. There are always costs, it’s just that some of them are hidden from your view.

Nova Scotia Power parent company doubles in size

The Nova Scotia power generating station at Tufts Cove on the Dartmouth waterfront.

The Nova Scotia power generating station at Tufts Cove on the Dartmouth waterfront.

While most Nova Scotians were getting ready to celebrate the last long weekend of summer, executives at Emera Inc. were stuck in the office working late on Friday.

Don’t feel too bad, though, the hard-working executives at Emera are richly rewarded. CEO Chris Huskilson earned a cool $4.6 million last year, so it’s not unreasonable to expect him to put in a few hours of overtime – even on a Friday before Labour Day weekend.

Emera, which is the parent company of Nova Scotia’s venerable electrical utility, was announcing a bit of a milestone. It had a conference call at 7 p.m. Friday evening, but once that conference call was over, I’m hoping that they popped the cork on a bottle of champagne (or better yet, Nova 7) and celebrated.

On Friday, Emera Inc. doubled in size. It purchased Florida-based TECO Energy Inc. for $10.4 billion, a price that includes $6.5 billion for the company and the assumption of $3.9 billion in debt, according to Bloomberg. TECO investors will receive $27.55 per share – a 48 per cent premium based on the company’s July 15 closing price.

It is Emera’s biggest purchase and means that it will have assets of $20 billion, with U.S. operations making up 71 per cent of its earnings.

Timothy Winter, an analyst at Gabelli & Co. in Rye, N.Y., gave an interesting quote to Bloomberg on Friday.

“It is a healthy price,” he said before adding that Emera, along with other Canadian utilities show a common trait when making foreign acquisitions: They “tend to pay a reasonable price to make shareholders happy.”

Isn’t that nice? Not only does Emera Inc. ensure that its shareholders are happy, they make sure that when they takeover an electrical utility in Florida, their shareholders are happy, too. Print that quote off and when that cold north wind blows this winter, read it to get that nice warm fuzzy feeling you won’t get from your electric baseboard heater.

It’s an amazing move for the once little-holding company that could, so I wondered why they issued their news release at 4:45 p.m. on Friday before a long weekend. This isn’t the sort of deal that gets whipped up in an afternoon or even a week, so I know that the timing of that release was carefully chosen.

Cynical journalists have long suspected that people trying to hide “bad news” always release it on the Friday afternoon before a long weekend. Since I cannot imagine why Emera would want to downplay its purchase of TECO Energy, I am left to assume that this is just another example of Canadian modesty.

Instead of trumpeting their corporate exploit, the demure Emera executives chose to time the announcement for when it would generate the least amount of news coverage. No doubt, they must have been blushing when they still received attention from the CBC, The Chronicle Herald, Bloomberg, and the Tampa Bay Times.

Emera Inc. is an amazing and improbable success story that would make Rumpelstiltskin proud. Rumpelstiltskin, an imp-like creature who could spin straw into gold in the Brothers Grimm fairy tale, would admire Huskilson, the genius who orchestrated the latter stages of Nova Scotia Power’s transition from a money-losing Crown corporation that amassed $4 billion in debt to what it is today, just 23 years after privatization.

Thankfully, Nova Scotian taxpayers were off the hook for that debt as it netted about $4 billion from the sale of Nova Scotia Power in 1992, but wouldn’t it be great if instead of a Florida utility’s debt getting paid off, some of Nova Scotia’s $15-billion provincial debt could have been paid? And wouldn’t it also be great if instead of investing in foreign utilities, Emera would invest in Nova Scotia and accelerate Nova Scotia’s Power’s switch to renewable energy?

There’s no doubt in my mind that unless it was freed from bureaucratic shackles, Nova Scotia Power would not have become the revenue-generating entity that it is today. There is also no doubt in my mind that were it not for legal requirements to generate renewable energy, the utility would have continued burning coal – or whatever fuel was cheapest – regardless of the consequences to the environment and the climate.

So, while global warming forces people in Florida to either crank up their air conditioners or run sump pumps to empty their flooded basements after yet another hurricane, be confident in the knowledge that a Nova Scotia-based company is making money for Emera shareholders off of that. Remember, too, that while Nova Scotia Power’s rate of return is regulated, the effect of carbon dioxide in the atmosphere is not and that global warming continues unabated. While ocean levels are rising, the water in the ocean is getting more acidic because it is absorbing more carbon, and glaciers are melting, the switch to renewable energy lags behind where it needs to be.

Finally, when you get that disconnection notice in the mail this winter, don’t seethe with anger. Suck it up and pay it off, even if it means going hungry or not buying warm winter coats for your kids.

You are supporting that once-little holding company that could. Channel your inner jingoist and revel in the fact that a Canadian-based company has bought a big American utility like TECO Energy and is now one of the 20 largest energy utilities in North America.

I’m sure Emera won’t stop there, either. It is building an empire that could potentially span the globe, or at least the parts of it that don’t have salty fog.

An early autopsy of the newspaper industry

newspaper-2

The newspaper business is slowly dying, but it didn’t have to be this way.

The Poynter Institute reports that 1,300 more newspaper jobs disappeared in the United States in 2013.

In what is surely a most cruel form of irony, the people responsible for running the newspaper business – the suits, the MBAs, the publishers – could have made the decisions to at least soften the decline of the industry if not prevent it, but they failed miserably.

Supposedly, they had all that business savvy, but they proved that they didn’t. They supposedly had the knowledge to read the changing business landscape and the authority to make the decisions to adjust; they did neither well enough to make a difference.

Here’s something you need to know about newspapers. They were never really a challenging business during their prime. In many communities and cities, they were a licence to print money – especially if it was a one-newspaper market. Classified advertising was the huge cash cow for many newspapers and there was also revenue from display advertising that pushed the percentage of revenue from non-subscription sources to upwards of 75 to 80 per cent.

Think about that. The people who got the newspapers at their doorstep paid for 25 per cent of the cost of collecting that news, printing it on newsprint, and delivering the bundled-up dead trees to the homes of subscribers.

Then, along comes a new medium called the Internet that can deliver the news to readers for a pittance. You still need to pay reporters, photographers, designers, and people to upload the news to a website, but you eliminate some huge cost centres. You don’t need to buy newsprint, you don’t need to buy expensive printing presses, or pay the salaries of people to print it and deliver it.

Comparatively, it’s a cheaper, more environmentally friendly way of delivering news to readers. It offered the promise of huge savings if the new medium was embraced, but the industry timidly put one toe in the water instead and continued printing newspapers while paying lip-service to their websites.

Then came the complaints that the Internet wasn’t working for them because they had to give content away because people wouldn’t pay for it. During this time sites like Craigslist and Kijiji siphoned classified ad revenue. Instead of copying their business model to keep those eyeballs on newspaper websites, they continued to charge for classified ads and drove more and more classified ad users to these free websites.

Like anything that has gone extinct, the companies that run newspapers failed to evolve.

If the companies that run newspapers want to exist — and continue delivering news — after the great demographic bubble of the baby boom passes on, they’ll need to get their heads out of their wazoos and stop printing news on dead trees.

Ignore the branding: These are the oranges you’re looking for

Navel Oranges

As a teenager, I worked for a few years at a produce store in Montreal and learned a great deal about fruits and vegetables from my boss, Harvey Levy, who loved to educate his employees.

One day, we got a shipment of navel oranges and they were delicious. Harvey, as he often did, sampled them before buying a few hundred cases of the juicy, seedless citrus fruit that is popular with consumers.

He knew it was good value – a better value than the navel oranges sold by Sunkist which relied on branding to pump up its price and reputation. Yes, pilgrims, Sunkist is not a type of orange, it’s merely one of many companies that grows and sells navel oranges.

Harvey knew that some customers would be skeptical about the oranges because they didn’t have the Sunkist stamp, so he asked us to cut up a bunch of them and offer them as samples.

For many people, tasting was believing and they happily bought the oranges which were on sale. They, like me, learned a valuable, lesson about oranges and branding.

Some people, narrow-mindedly refused to even try a free sample, even though these oranges tasted great and offered all the same health benefits of the name-brand orange.

“I only eat Sunkist oranges,” some said.

After I finish shaking my head, I pity people like that.

How the ocean’s bounty is being wasted

How the ocean’s bounty is being wasted

Reading this story in The Washington Post about bluefin tuna bycatch reminds of a time when I visited Grand Manan Island in New Brunswick and saw some tuna caught in a herring weir. Whoever owned the weir wouldn’t be able to catch the tuna and sell them. The tuna would have to be destroyed — wasted — because of government regulations that require people to have a licence to land the fish.

If you ask me, it’s more of a crime to waste it. Let people land the by catch and pay a fee (based on market weight) for doing so. Although it would be a challenge to enforce, at least this way, the resource doesn’t get wasted.

Telemarketers begone!

Despite adding my phone number to the national do-not-call-list, I’m still getting unsolicited calls from Canada. To circumvent the law, some companies have outsourced the calling to foreign firms.

I have call display, so I don’t answer unsolicited phone calls. Unfortunately, there are limitations and the feature doesn’t reveal the source of some calls from outside Nova Scotia.

Thankfully, many local and overseas telemarketers rely on computers to do the calling and this is a handy way of identifying that it is someone with whom I do not wish to speak.

“Hello,” I say when I answer the phone.

Then, there is a distinct pause while the voice-activation software informs the telemarketer that a human has answered the phone. Usually, I hang up at this point.

If I haven’t hung up, I am sometimes treated to the comedy of the telemarketer saying “hello?” as if they are wondering if anyone is there.

No, there is nobody here. Click.

If a telemarketer is efficient and somehow manages to get to the five-second mark of the call by resembling a person with whom I might want to have a conversation, then I thank my ancestors for giving me a two-word surname.

“Hello, Mr. Horne?” is often the nail in the coffin for these unwelcome intrusions on my work day.

Alexander Graham Bell gets lots of credit for inventing the telephone, but I think that without call display, a telephone is just a nuisance.

Some people are too polite to hang up on unsolicited phone calls, but not me.

I am not a misanthrope, but I do allow myself one this one indulgence and have no qualms about imitating the Grumpy Cat.

So, next time someone calls you while you’re eating supper or putting the kids to bed, embrace your inner misanthrope and end the call quickly.

Don’t give me the excuse that they’re just doing their job. We all make choices in life and anybody can choose not to be a telemarketer.