Pretzels Are Hot

Big players like Hershey are buying up boutique operations that feature innovations like fresh flavors.

Good morning!

Here are today’s highlights:

• This may be an especially bad time to force your suppliers to wait for payment.

• Have you considered ways to make your workplace more accessible to disabled employees?

• EV charging stations have a chicken-or-egg business model problem.

• John Y. Brown bought KFC in 1964 for $2 million.

PURCHASING

Gene Marks says there are better ways to manage vendor relationships: “I’ve been sharing this article from the Wall Street Journal with my clients. It’s about how Walmart is warning its suppliers not to raise prices. The article says Walmart’s chief executive Doug McMillon ‘delivered the warning in person last month in an appearance before companies that produce products sold by the company’s Sam’s Club chain. Inside a hotel auditorium, he said Walmart would be pushing back against suppliers’ efforts to raise prices, according to people familiar with the situation.”

• “My clients chuckled along with me when they read this story. ‘Wow,’ said one who echoed the sentiments of most others. ‘Must be great to be Walmart, don’t you think?’”

• “But there are plenty of things we can do to minimize price increases and maximize the relationships we have with our vendors and suppliers, particularly in these difficult times of high inflation and supply-chain challenges.”

• “For example, I’ve seen many companies step up their vendor communications over the past few years. They’ve doubled down on their customer relationship management platforms by scheduling updates, reminders, alerts, and workflows to automatically send emails and texts to vendors about open orders, lead times, and delivery dates.”

• “And you know what my best clients also do? They pay their vendors on time. Please don’t listen to the consultants and ‘experts’ who advise you to ‘squeeze your suppliers’ and ‘leverage them for financing.’ This is not how you build a successful relationship.’” READ MORE

FOOD & BEVERAGE

Suddenly, pretzels are hot: “​For a category that hasn’t seen much innovation during the last few decades, pretzels may seem like an unlikely place for Hershey to place a billion-dollar bet as it aims to solidify its presence in salty snacks. The confection giant did just that when it announced last November it was buying fast-growing Dot’s Homestyle Pretzels and its Midwest co-manufacturer Pretzels Inc., for $1.2 billion — a combined deal that would be the second-largest deal in its history. But Dot’s was unlike few other pretzel brands.”

• “The family-owned North Dakota business was single-handedly upending the pretzel category with bold flavors like Southwest and Honey Mustard and eye-catching packaging. Hershey wanted in.”

• “Smaller pretzel makers say Hershey’s purchase of Dot’s has provided a lift to the broader pretzel category. The expansion of the brand has raised consumer awareness about the snack segment and opened up new opportunities for mom-and-pop businesses that have been toiling for years.”

• “For much of Suzanne Foley’s life, pretzels were an extraneous part that she never gave much attention to after first trying them at a family function three decades earlier. But all that changed six years ago when Foley lost her job as a business manager.”

• “She expanded Port City Pretzels into a 10,000-square-foot manufacturing facility and now has outgrown that space too. Sales are forecast to double to $3 million next year, and Foley, who has two shifts of workers making pretzels with flavors such as Tasty Ranch Dill and Tangy Mustard ’N Honey, would expand to three if she could find enough workers.” READ MORE

HUMAN RESOURCES

Here’s how to make your business more accessible to disabled employees: “Remote work has helped Americans with disabilities find employment as never before. A record 5.9 million disabled men and women ages 16-64 were employed in October, according to the U.S. Bureau of Labor Statistics—up almost 25 percent from February 2020, before the start of the pandemic. Advocates are hoping that they’ll continue to find work opportunities, even as managers bring staff back to the office. For employers, disabled people have filled essential roles and helped diversify their workforces. Here are eight ways to make sure your company is inclusive and accessible.”

• “Clarify job descriptions: Does a person really need to be able to lift 40 pounds to do a certain job? Or have a driver’s license? Some qualifications listed in job descriptions can be inherently exclusionary to people with disabilities.”

• “Invest in technology: As workplaces become more digital, technology is more important than ever to connect workers. A visually impaired employee may need software that can read aloud what’s on a screen.”

• “Call the experts: Whether it’s contacting an accessibility consultant or connecting with the Job Accommodation Network, many public and private resources are available. That applies to employers, jobseekers and employees alike. Several companies also enlist specialized recruiters to source, on-board and retain diverse talent.” READ MORE

When tech companies lay off employees, recruiters are among the first to go: “Recruiting is a bellwether occupation: Demand goes up as companies expand hiring in good times and typically falls before employers begin cutting jobs in other departments. Many recruiters also work as contractors, who are often the first to be cut as companies trim costs, though some full-time staff recruiters have also reported losing jobs recently. The current boom-bust cycle has been especially extreme, says Julia Pollak, chief economist at hiring platform ZipRecruiter.”

• “Last April, companies were advertising more than 10,000 openings for tech recruiters, more than double over a year earlier, according to ZipRecruiter—even as rising interest rates, inflation and other signs of slowed growth were emerging. By October, the number of tech-recruiter postings had fallen to about 2,500, ZipRecruiter data show.”

• “The recruiters who’ll be staying on are likely to be busier than ever, she adds, since companies still need to fill jobs when people leave. ‘Companies that do lay off lots of recruiters are very quickly going to find themselves with not enough recruiters just to replace turnover,’ she says.” READ MORE

BUSINESS MODELS

Even now, there are good reasons not to invest in EV charging stations: “The government is pouring billions of dollars into developing a national highway charging network. But businesses aren’t sure how they will make money, and the nascent industry looks messy. Utility companies and gas stations are at war with each other over who will own and operate EV chargers. Rural states say some charging stations could operate at a loss for a decade or more. New companies that provide charging gear and services are contending with the equipment’s spotty reliability. The network’s build-out has a chicken-or-egg quality: EV advocates say many drivers will only be comfortable purchasing vehicles if rapid charging is as easy as using a pump at a gas station. Yet businesses interested in offering charging say they can’t make money until more EVs are on the road.”

• “Many monopoly utilities want to own and operate chargers, extending electricity sales into a new market. They have a competitive edge because, with the approval of state utility regulators, they can pass on the cost of infrastructure and power to all ratepayers, as they do for wires or new power generation.”

• “In Minneapolis, Channing Smith, who owns a gas station and convenience mart called The Corner Store, said a utility proposal threatens to squeeze out charging competition. Xcel Energy has asked regulators to let it build, own, and operate 730 fast-charging sites by 2026—about 45 percent of Minnesota’s’ projected fast-charging market. The $193 million cost would be paid for by its ratepayers.”

• “‘For them to take taxpayer money to create a network removes the private sector completely,’ Mr. Smith said. He said he would like to install fast chargers, but not if he has to compete directly against the company selling him electricity.” READ MORE

THE ECONOMY

That yield-curve inversion is getting extreme: “Yields on longer-term U.S. Treasurys have fallen further below those on short-term bonds than at any time in decades, a sign that investors think the Federal Reserve is close to winning its inflation battle regardless of the cost to economic activity. A scenario in which short-term yields exceed long-term yields is known on Wall Street as an inverted yield curve and is often seen as a red flag that a recession is looming.”

• “At a basic level, an inverted curve means that investors are confident that short-term rates will be lower in the longer-term than they will be in the near-term. Typically that is because they think the Fed will need to slash borrowing costs to revive a faltering economy.” READ MORE

ECOMMERCE

Do you ever wonder where all of the cardboard comes from? “Most of us have a relationship with cardboard that ranges, depending on the day and our Amazon Prime membership status, from reluctantly reliant to fully subservient. Precise household metrics are hard to come by, but the Fibre Box Association, a trade group, says that American factories generated more than 400 billion square feet of cardboard in 2020, a leap of 3.4 percent from the year prior. Cardboard-box consumption spiked in the early days of the pandemic, when everything we needed arrived at our homes swathed in brown-paper packaging; astonishingly, the trend lines have never really reversed course.”

• “In Georgia and Alabama, family operations have given way to small empires of tree plantations, built largely on private land, and largely by planting pines in a region where other types of trees — or other varieties of crops, like cotton — once grew.”

• “‘Corrugated packaging has a Goldilocks quality to it,’ says Tim Cooper, a project director for the market-research and testing firm Smithers. ‘It’s easy to produce, it’s strong and it’s sustainable, because unlike plastic, it comes from a renewable resource.’”

• “‘I’m hesitant to call anything recession-proof,’ Cooper added, ‘but corrugated packaging is close. Pretty much everyone — manufacturer and consumer — has come to see it as vital to their lives.’” READ MORE

RETAIL

Your Christmas tree is likely to cost more this year (surprise!): “Americans bought 21 million real Christmas trees in 2021. According to a survey of 2,000 people conducted by the National Christmas Tree Association, a trade group that represents growers and sellers of real trees, the median cost of a tree was $69.50 (half cost more, half less), and the average buyer was 40 years old living in a household of more than three people.”

• “[Trevor] Lord, of South Philly, and his business partner of 18 years, start lining up trees to buy wholesale in July. Sales for Trev’s Trees culminate during the holiday season from five [Philadelphia-area] locations, including Wynnewood, Gloucester Township, Cherry Hill, and Haddon Township.”

• “We buy about 8,600 trees for the year,” Lord said. “We get them from all over — Western Pennsylvania, North Carolina, Quebec. We buy from different farms, and we have a relationship with all our farmers. We pick and choose from five different trees we sell.”

• “Fresh cut Christmas trees are harder for retailers like Lord to get this year for multiple reasons, and wholesalers say their costs have gone up dramatically because of inflation, so people can expect to pay on average $5 to $10 more for a tree this year.” READ MORE

OBITUARY

John Y. Brown helped Col. Sanders build Kentucky Fried Chicken: “Mr. Brown had his first success as a door-to-door salesman. In selling encyclopedias, he strove to meet moms rather than dads at the front door. He asked whether they had an educational system for their children. If they admitted to lacking such a system, he had the perfect opening to propose a set of encyclopedias. ‘I really don’t know how I ever passed the bar [exam],’ he told Nation’s Restaurant News much later, ‘because all I did in law school was play poker and sell encyclopedias.’ After completing his law degree in 1960, he joined his father in a law practice. One early client was Harland Sanders, the founder of KFC, who wanted tax advice.”

• “Col. Sanders had a recipe and a chicken-cooking technique but hadn’t developed a systematic expansion strategy. He sometimes slept in his car while on the road selling his ideas to restaurant owners. Mr. Brown had no restaurant experience but saw the potential for expanding and franchising more aggressively.”

• “With partners, he agreed in 1964 to buy KFC for $2 million. The company went public two years later. While the number of KFC restaurants soared, efforts to diversify into roast beef and fish-and-chip outlets fizzled.”

• “After hitting a peak in 1969, KFC stock began to fall steeply. In 1971, Mr. Brown sold the company to Heublein and stepped down as chief executive. He had been worn down by professionals recruited to bolster the original small management team.”

• “‘You never saw a more negative bunch,’ Mr. Brown said. ‘Those guys came in with textbooks under their arms telling us all the things we weren’t supposed to be doing. If I’d have listened to them in the first place, we’d never have started Kentucky Fried Chicken. It got to be no fun, so I got out.’” READ MORE

THE 21 HATS PODCAST

This week, in episode 134, Shawn Busse, Jay Goltz, and Laura Zander talk about buying and selling businesses: Laura thinks her recent purchase of a small distribution business could change the trajectory of her whole company, helping her finesse the challenge of selling wholesale products to retail competitors. Jay, meanwhile, has been trying to help an aging business owner sell the kind of business that too often just fades away. Underlying both discussions is an intriguing question: While it’s common practice for owners trying to sell a business to keep the potential sale a secret, is that really the best approach? Or is it actually a betrayal? Plus: We answer a listener's question about finding the right balance between being a kind boss and being a pushover. And we play a quick game of Who Said It: Elon Musk or Mr. Burns?

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren