Discover more from The 21 Hats Morning Report
In the face of the Delta variant, the fires in the Northwest, the labor shortage, the ongoing supply-chain issues, some businesses are just taking a break.
Here are today’s highlights:
Everybody’s trying to raise prices.
GM shuts down its most profitable lines.
A possible breakthrough for renewable energy.
In Philadelphia, some restaurants are just going on vacation: “Once the domain of small, often family-run businesses, the concept of a closing for a week has been embraced this year by larger restaurants, including at least one group in the Philadelphia region. These restaurateurs taking time off are confirming at least part of the results of a recent Inquirer survey about the labor shortage and other problems roiling the restaurant industry — that found benefits, including paid vacation, are crucial to a happy workforce.”
“Anecdotes paint a picture of owners’ trying to stave off burnout, as workers can take only so much stress after 16 months of pandemic restrictions and long, often arduous days heightened by short staffing.”
“Instead of advertising a dinner special, Kitchen 519 in Glendora took to Facebook on July 11 to announce its first vacation since its 2014 opening. ‘We will be camping, with little to no service,’ the post read.”
“Closings do nothing, of course, to help the money issues that have beset many restaurants.” READ MORE
THE COVID ECONOMY
GM will stop making most of its full-size pickup trucks for a week: “Large pickups and SUVs are automakers' best-selling and most profitable vehicles. GM and other automakers have tried to keep making them, shifting their supply of available chips away from less popular vehicles. But as the Delta variant takes hold across the globe, shutdowns and restrictions are coming back, throwing the supply chain into more chaos.”
“‘These most recent scheduling adjustments are being driven by temporary parts shortages caused by semiconductor supply constraints from international markets experiencing Covid-19-related restrictions,’ said GM. ‘We expect it to be a near-term issue.’” READ MORE
With electronics demand high and the Delta variant disrupting supply, tin prices surge: “The rally highlights investor bets that there won’t be enough tin supply moving forward. Tin is used to produce solder, a melted metal that connects computer chips to circuit boards, so demand has skyrocketed alongside purchases of consumer electronics during the pandemic. Some investors are also speculating that consumption of tin and other industrial metals like copper will rise in the coming years as renewable-energy projects and 5G technology become more widespread.”
“As the Delta variant of the coronavirus spreads in Asia and Africa, prompting economic shutdowns and travel restrictions, traders are betting the metal will remain in short supply.”
“Climate issues are also contributing to supply bottlenecks, the latest example of extreme weather roiling commodity supply chains.” READ MORE
Lumber prices are headed back up: “Forest fires raging in the West are threatening an important swath of the U.S.’s wood supply, pinching output that has been under pressure since the Covid-19 pandemic touched off home buying and remodeling booms and sent lumber prices soaring. Canfor Corp., one of North America’s largest lumber producers, said that starting Monday it would cut back output at its mills in British Columbia because of hundreds of blazes that have broken out in the Canadian province and challenged its ability to shuttle wood to and from its facilities. The company expects to reduce output at its 10 operating mills there by a total of about 115 million board feet during the quarter.”
“Lumber prices topped out in May at more than four times what is typical for two-by-fours, which helped reduce demand, particularly from the more price-sensitive DIY market that buys wood from retailers such as Lowe’s and Home Depot. Wood is now piling up at mills.”
“The same heat and drought that set the stage for an unusually early and intense fire season in the West have dried up hydroelectric power output and increased air-conditioning demand in the region, which has helped push natural-gas prices to their highest summer levels in seven years.” READ MORE
The median U.S. home price hit a new high in June: “Existing-home sales rose 1.4 percent in June from the prior month to a seasonally adjusted annual rate of 5.86 million, the National Association of Realtors said Thursday. June sales rose 22.9 percent from a year earlier. The median existing-home price rose to $363,300, in June, up 23.4 percent from a year earlier, setting a record high, NAR said, extending steady price increases amid limited inventory.” READ MORE
The Wall Street Journal talked to about a dozen large companies and most said they have succeeded in raising at least some prices but are unsure whether they can continue to do so: “Fastenal charged its customers enough extra in the first half of the year to offset its own higher product costs. But the company warns its ability to keep pace with costs could lag in coming months, in part because customer contracts put limits on price increases. ‘In an environment where inflation continues to rise quarter after quarter after quarter, there are certain sticking points within our ability to push it through,’ said Fastenal finance chief Holden Lewis. ‘Inflation in the marketplace can rise at a much more methodical and smooth pace than our ability to change prices can.’”
“Conagra, which makes Birds Eye frozen vegetables and Slim Jim meat snacks, among hundreds of other food products, couldn’t raise prices enough in the most recent quarter to make up for its own rising costs, including for cooking oils, packaging and transportation. It expects price increases and other measures to offset its costs later this year, and said it might need to raise prices further.”
“‘We still think our products’ price points have room to move north based on the quality that we offer,’ Chief Executive Sean Connolly told investors last week, noting that widespread increases across grocery aisles seem to leave consumers more willing to pay so far. ‘You don’t generally get a customer to accept inflation-justified pricing until they’re confident it’s not transitory inflation,’ he said.” READ MORE
FOOD & BEVERAGE
The flavor of your food is likely determined in New Jersey: “There are, by most estimates, only about 500 flavorists in the U.S., and if you have eaten food from a box in America, you have certainly tasted their work. Flavorists are responsible for the end of the ingredients list, the mysterious ‘natural and artificial flavors’ that make ketchup taste ketchup-y and imitation meats meaty. And many of them happen to work in New Jersey, which has become a hub of American flavor. The Swiss giant Firmenich, for example, has its U.S. headquarters in Plainsboro, and Symrise is in Teterboro, as is Takasago, and a Givaudan outpost is in East Hanover. There is Robertet in Piscataway, International Flavors & Fragrances in South Brunswick, Brookside in Branchburg, Flavor Dynamics in South Plainfield, and Signature Flavors in Freehold.”
“This partly has to do with location and price: New Jersey is close to the area’s ports but with cheaper land than New York.”
“At play, too, is the Silicon Valley principle: It’s good to be near competitors because that means you’re near clients (and future hires).” READ MORE
Form Energy’s iron-air batteries could have a big impact on renewable energy sources: “Form Energy Inc.’s batteries are far too heavy for electric cars. But it says they will be capable of solving one of the most elusive problems facing renewable energy: cheaply storing large amounts of electricity to power grids when the sun isn’t shining and wind isn’t blowing. The work of the Somerville, Mass., company has long been shrouded in secrecy and nondisclosure agreements. It recently shared its progress with The Wall Street Journal, saying it wants to make regulators and utilities aware that if all continues to go according to plan, its iron-air batteries will be capable of affordable, long-duration power storage by 2025.” READ MORE
THE 21 HATS PODCAST
Episode 69: “I Didn’t Look Like Them, But I Could Act Like Them” This week, we introduce a new regular on the 21 Hats Podcast team. Her name is Diana Lee, and she’s the founder of a digital marketing agency. In a conversation with Jay Goltz and Stephanie Stuckey, Diana explains how she got her business off the ground by helping car dealers target diverse communities within their markets, how she bootstrapped her business by convincing those car dealers to prepay 50-percent upfront, and how her first attempt at building a software platform ended with her spending $1 million on a platform that no one wanted to use.
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If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren