An Old-School Nursery Goes Digital
The siblings invested more than $2 million in infrastructure, farm expansions, and equipment, and an additional $3 million in marketing, product development, and inventory.
Good Morning!
Here are today’s highlights:
Starbucks’ new CEO says he will spend four hours a month behind the counter.
The owner of a growing podcast business opts for a worker cooperative.
The emerging EV economy is creating both winners and losers.
Does a chew toy shaped like a bottle of Jack Daniel’s violate the distiller’s trademark rights?
MANAGEMENT
The new CEO of Starbucks is a certified barista: “[Laxman] Narasimhan said he plans to regularly work alongside baristas in cafes to understand why it sometimes is so aggravating to get a customer a simple cup of coffee. He intends to work four hours in a different Starbucks store each month, and expects his senior leaders to do the same. ‘We have got to find ways to ensure that we do listen and stay connected,’ Mr. Narasimhan said after working the drive-through earlier this month at a new Starbucks on Chicago’s South Side. Mr. Narasimhan left his CEO role at Lysol-maker Reckitt in September, beginning a six-month immersion into Starbucks culture and operations.”
“He spent 40 hours training to become a certified barista and visited stores and facilities in the U.S., Europe, and Japan. Mr. Narasimhan, who speaks six languages and has lived and worked in many parts of the world, said he was struck by how customers could drink coffee while kneeling on tatami mats in a Japanese store.”
“Mr. Narasimhan said in the interview that baristas have the right to unionize if they choose, and that he will continue Starbucks’ approach to asking workers to directly voice their concerns to the company.” READ MORE
The owner of growing podcast business Maximum Fun has sold to a worker cooperative: “Jesse Thorn has built a sizable audience with his podcast business Maximum Fun. His NPR interview show, ‘Bullseye With Jesse Thorn,’ has brought on guests including Jonathan Majors, Tom Hanks, and Kareem Abdul-Jabbar. But during the last few years, he said, running the MacArthur Park-based business drove him to a breaking point. The father of three young children struggled to balance his work-life and home-life. He suffered from splitting migraines. ‘You have to back off of this,’ his wife, Theresa, told him at their dining room table in 2018. ‘I’m afraid you’re going to die.’”
“On Monday, Thorn — who has co-owned Maximum Fun with his wife since it was incorporated in 2011 — announced his company would become a worker cooperative, a novel business model in the podcast industry, but one that has been tried by many small businesses including bakeries and pizza places. The ownership will be shared equally by at least 16 people, including Thorn, the company said.”
“Thorn said he would receive an upfront sum and a percentage of the company’s revenue for a limited number of years. The company is taking out a loan from a community development financial institutions fund.”
“Employees opt into becoming owners in the cooperative by paying hundreds of dollars, which goes into a trust, and they get it back with interest when they leave the company. Worker-owners also get to vote on the company’s board. The new board oversees the management structure, which is expected to remain the same, Thorn said.”
“Today, Maximum Fun generates millions of dollars in revenue each year, with 37 shows and 24 employees. Financial details were not disclosed. About 70 percent of the company’s revenue comes from memberships, with the remaining amount from ads and live events, Thorn said.” READ MORE
ECOMMERCE
The story of Perfect Plants Nursery shows what it takes for a decades-old, family-owned, wholesale business to reinvent itself: “Alex Kantor and his sister, Natalie Kantor, became co-owners when their father retired in 2020. Their route to e-commerce success meant reinventing not just the in-person experience for online shoppers but also reimagining packaging and shipping. Along the way, it required a $5 million investment and growing the team to 65 employees from 12 employees in 2015, according to Alex Kantor. As for many businesses in the tight labor market, hiring has been hard. ‘Growing plants and farming are not shiny jobs,’ says Kantor, the company's 36-year-old president, who grew up on the farm. Their strategies have included executive recruiters, canvassing the neighborhood, and even offering a scholarship.”
“To expand into e-commerce, the siblings invested more than $2 million in infrastructure, farm expansions, and equipment, and an additional $3 million in marketing, product development, and inventory. They drew on savings and a $300,000 bank loan. The two didn't take a paycheck until 2021.”
“Perfect Plants Nursery posts lighthearted videos showing new plant parents how not to kill a plant, what to do in the kitchen with fruit and flowers from the garden, and little-known but creepy plants. The company has about 30,000 followers on TikTok and 5,800 on Pinterest.”
“Based in Monticello, Florida, the company sells more than 300 kinds of shrubs, rose bushes, houseplants, and fruit and other trees to consumers across the U.S. It pulled in annual revenues of $12 million in 2021, the latest figure available.” READ MORE
THE ECONOMY
Gene Marks says the economic news isn’t as bad as it seems: “I talk to small and mid-sized businesses every day all around the country, and although there’s lots of grumbling, no one’s denying that they’re still making profits. They’re concerned about all the bad economic news they hear. But it’s not all that bad. Here are a few reasons why.”
“Energy costs are declining. According to Gasbuddy.com, gas prices nationally are now at $3.40 per gallon, a 20 percent decrease from a year ago. Oil is now at $66 a barrel, a 37 percent decline from a year ago. Yes, that’s higher than two years ago, but it’s heading in the right direction.”
“Commercial loans continue to rise. You would think with the average bank prime rate increasing from 3.25 percent to 7.75 percent in just a year that the activity of commercial and industrial loans to finance business properties and equipment would taper down. But that hasn’t happened. In fact, loans have increased almost 14 percent during that period.”
“Retail sales are at an all-time high. Meanwhile, and God bless them, consumers keep spending. U.S. retail sales in February 2023 were 4 percent higher than a year ago. Food and beverage store sales were 5.5 percent higher than a year ago. The National Restaurant Association says that the food service industry is forecast to reach $997 billion in sales in 2023, driven in part by higher menu prices.”
“Producer prices, which represent the core costs of materials used to make all the things we consume, are coming down. After reaching an all-time high in June 2022, the commodity index has fallen to March 2022 levels. And although many businesses are dealing with double-digit increases in most of their costs compared to two years ago, they are seeing light at the end of the tunnel as these costs seem to be on the downswing.” READ MORE
On the other hand, it might be an indication of something when recruiting firms are laying off employees: “Austin-based careers company Indeed laid off 15 percent of its global workforce — or about 2,200 people, according to a March 22 memo from CEO Chris Hyams. They were notified early in the day via email, and told that the termination was immediate — but they will be paid for several more weeks. The move comes as the U.S. job market is cooling off, and Indeed has forecast more downward trends in the near future. In his memo, Hyams said it's likely human resources tech businesses will see revenue decline throughout 2023 and potentially next year, too. He said U.S. job openings were down 3.5 percent year-over-year.”
“Indeed is among Austin's most successful tech companies, and its logo sits atop tall buildings in downtown Austin and at the Domain, which is sometimes called Austin's second downtown.”
“The company was founded by Paul Forster and Rony Kahan in 2004 as a search engine for jobs. It was acquired in 2012 by Japan-based Recruit Co. Ltd, which also runs Glassdoor.com.” READ MORE
BUSINESS TRAVEL
Higher fares and tighter budgets are making business travel more difficult: “With ticket prices in the stratosphere and concern about the economy high, cost-conscious road warriors are cheating on their favorite airline, loyalty status be damned. Others are flying to alternative airports and renting a car, booking undesirable flights or driving to their destination. Companies are encouraging travelers to cram more meetings into a single trip to get more bang for their buck, or adding more parameters to their travel policies. Airlines say red-hot travel demand is driving higher prices. The average U.S. round-trip ticket price booked in February was $571, up 23 percent from a year earlier and 8 percent from January, according to Airlines Reporting Corp., which processes travel-agency ticket sales.”
“Brandon Strauss, co-founder of Atlanta-based KesselRun Corporate Travel Solutions, says businesses are committed to work travel after the long pandemic pause, but are carefully scrutinizing the value of each trip in part because of higher ticket prices.”
“‘The return on investment has more focus today than I can remember in the 20 years I’ve been doing it,’ Mr. Strauss says.”
“Another change: limits on one-day business trips. Mr. Kalka points to a ‘significant decrease’ in such bookings at his agency, in favor of longer trips with more on the agenda. ‘They’re saying if we’re going to buy airfare that’s this high, it’s not going to be a one day in and out, or an overnight’ says Mr. Kalka. ‘They’re saying take the second overnight, see more customers.” READ MORE
HUMAN RESOURCES
America’s immigration system is forcing companies to move tech jobs to other countries: “It's no secret that the U.S. immigration system is flawed. The arduous process and limited availability of visas is a hurdle companies and foreign-born workers are constantly dealing with. The tech industry in particular relies heavily on work-based visas, like the famed H-1B, to attract the talent that it needs to fill positions in specialized, competitive fields like engineering and computer science. Tech leaders like Meta CEO Mark Zuckerberg and Microsoft CEO Satya Nadella have long advocated for reforming the H-1B system to allow more of that talent to work in the U.S.”
“In the meanwhile, the difficulties in bringing immigrants into the U.S. is pushing companies to instead hire them to work in other countries. That, in turn, is encouraging those same companies to open branch offices in other countries and recruit there, staffing them with people who might otherwise have come to the U.S. to work, the experts say.”
“Remote work makes it all possible, says Job Van Der Voort, founder of Remote, a startup that helps companies hire workers internationally. His firm has seen a boom in business that's continued even after pandemic restrictions have been lifted.”
“‘Any role that can be done from a computer, it's what we see,’ he told Insider. When he started the company he assumed it would be mainly programmers, but he's found that ‘it really is any role from C level executives to executive assistants, to programmers, to marketers.’” READ MORE
MANUFACTURING
The transition to electric vehicles is creating winners—but also losers: “Early last year, workers at a Jeep factory here hoped their plant would be converted to an electric vehicle facility as the auto industry revamps for a green-energy future. Engineers came to take measurements for a possible retooling, and rumors spread that electric sports cars were on the agenda. But those hopes crumbled last month when the corporate parent company, Stellantis, ended production at the 58-year-old plant and laid off roughly 1,200 workers, ripping the heart out of this small town 70 miles northwest of Chicago.”
“The decision, now causing knock-on layoffs and lost business at local auto-parts suppliers, restaurants, and shops, shows the dark side of the zero-emissions economy the Biden administration is championing with tens of billions of dollars of taxpayer-funded subsidies. Even as many communities will be transformed by the federally backed push to produce electric cars, batteries, and solar panels, some will get left behind.”
“As it embarks on its biggest retooling in a century, the auto industry has announced more than $70 billion of EV investments in the United States alone. That spending is already creating new pockets of prosperity in many parts of the country — and apprehension in the long-standing auto-manufacturing communities whose fates aren’t yet certain.”
“Wrapping up a slow lunch hour at their Mexican restaurant in Belvidere’s quaint downtown, siblings Victor Hernandez Jr. and Iveeth Dominguez worried about losing their weekly lunch order from the factory. Every Friday they would deliver $500 or $600 worth of burritos to the plant: a good chunk of their revenue. Autoworkers have also been regular visitors to the restaurant, El Molcajete, since their father opened it in 1994.” READ MORE
INTELLECTUAL PROPERTY
The Supreme Court debates whether a chew toy shaped like a bottle of Jack Daniel’s violates the distiller’s trademark rights: “In a lively and lighthearted argument on Wednesday, the Supreme Court considered the fate of the Bad Spaniels Silly Squeaker, a chew toy for dogs that looks a lot like a bottle of Jack Daniel’s, with the addition of some potty humor. Trademark cases generally turn on whether the public is likely to be confused about a product’s source. In the Bad Spaniels case, a unanimous three-judge panel of the Court of Appeals for the Ninth Circuit, in San Francisco, said the First Amendment requires a more demanding test when the challenged product is expressing an idea or point of view.”
“‘The Bad Spaniels dog toy, although surely not the equivalent of the Mona Lisa, is an expressive work’ that uses irreverent humor and wordplay to poke fun at Jack Daniel’s, Judge Andrew D. Hurwitz wrote for the panel.”
“The words ‘Old No. 7 Brand Tennessee Sour Mash Whiskey’ on the bottle are replaced on the chew toy by ‘the Old No. 2, on your Tennessee carpet.’ Where Jack Daniel’s says its product is 40 percent alcohol by volume, the Bad Spaniels toy is said to be ‘43 percent poo.’”
“The justices on Wednesday were divided across several dimensions, expressing varied views on whether the toy was a purely commercial product or an expressive one, on whether consumers were justifiably confused about its source, on whether the toy amounted to a parody of the liquor brand and on the role the First Amendment should play in the legal analysis.” READ MORE
THE 21 HATS PODCAST
I Can’t Have a Handle on Everything: This week, Jay Goltz and Laura Zander talk about the limits of their own management. Once a business gets past a certain size, no owner can do everything or even be aware of everything. But where do you draw the line? Does the owner need to be conversant with most aspects of management, marketing, and finance to oversee the business? This came up, in part, because Jay told us recently that his framing shops routinely ask customers how they learned of the business and that a recent review indicated that his social media efforts were not having an impact. But when asked about those efforts, Jay wasn’t entirely sure what they consisted of or if they even existed. Perhaps surprisingly, it also became clear that Jay wasn’t all that interested in learning more. It was working well enough, he’d concluded, and that was all he needed to know. And that’s the starting point for today’s main conversation.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren