Wednesday, February 3, 2010

The Indicators of Recession....or Not

UPS: CEO declares an end to the recession

UPS's chairman and chief executive officer Scott Davis declared an end to the recession Tuesday morning, after the company said earnings for the fourth quarter and 2009 were better than expected.

"It looks like this recession is finally over and believe it or not, that makes 21 that UPS has successfully managed through," Davis told analysts.

The company, which was founded in 1907, will restore raises to about 40,000 managers at a cost of $100 million, chief financial officer Kurt Kuehn told The Atlanta Journal-Constitution.

Still, the company is proceeding with a plan to eliminate 1,800 positions, in part by asking 1,100 management and administrative employees to retire early.

The move will cost the company about $80 million in the first quarter of 2010, but produce annual savings of about $160 million to $170 million, starting in 2011. The benefit won't be felt in 2010 as employees are moved and retrained, Kuehn said.

"The constraint in employee hiring has been a part of our reaction to the challenges of the recession," Kuehn said. "Our overall employee headcount is down about 4 percent year over year."

UPS currently employs 408,000 worldwide, of which 10,000 are in metro Atlanta, including package operations and the Sandy Springs corporate headquarters.

The fourth quarter is typically UPS's strongest due to the holiday shipping season.

As it turns out, holiday shipping exceeded the company's conservative predictions and led to more seasonal hiring.

UPS is considered an economic bellwether because it moves the goods that manufacturers, retailers and shoppers consume. The company still has the largest U.S. share of the express and ground market compared to rivals FedEx and the U.S. Postal Service, according to SJ Consulting Group Inc.

Tough Economy Spurs Shift To Cheaper Liquor

Americans' love affair with top-shelf booze cooled last year as the recession took a toll on high-priced tipples.

People drank more liquor but turned to cheaper brands, according to a report by an industry group. They also drank more at home and less in pricier bars and restaurants in an effort to save money.

Industry growth slowed in 2009, with the amount of liquor sold by suppliers up 1.4 percent. That's the smallest increase since 2001 and below the 10-year average of 2.6 percent.

The lowest-priced segment, with brands such as Popov vodka that can go for less than $10 for a fifth, grew the fastest, with volume rising 5.5 percent, after edging up 0.6 percent in 2008. Meanwhile, the most expensive brands, priced roughly $30 or more for a 750 ml bottle (think Grey Goose, owned by Bacardi), fell the most, tumbling 5.1 percent.

Liquor suppliers reported flat total revenue of $18.7 billion last year, the Distilled Spirits Council of the United States said in its report Tuesday. Sales in stores -- which make up three-quarters of liquor sales -- rose about 2.1 percent, while sales in restaurants fell 3 percent.

"People still want to entertain themselves, they still want to get together with family and friends, so a lot of people will move from a restaurant to their living room," to save money, council President Peter Cressy said.

Vodka remained Americans' favorite liquor. The $4.56 billion spent on vodka accounted for almost a third of all spirits sold.

Sales volume for the cheapest versions of tequila rose 21 percent, the fastest of any type of spirit. That's most likely because entertainers are using pre-made margarita mixes to serve at home, said David Ozgo, the council's chief economist. Plus you can mix it before guests arrive, so they don't know what brand you use, said Joan Holleran, director of research at research firm Mintel.

Cressy said the fact that people were still drinking more spirits bodes well for the industry, still recovering from a long decline from the 1980s through the mid-'90s, when liquor sales fell by a third as drinkers turned to beer. Since then, an ever-increasing array of expensive liquors have fueled rapid growth.

The industry's goal to keep people drinking spirits -- no matter the price -- and it can then get them to pay for higher-priced drinks when the economy recovers. Most major liquor manufacturers make brands in a variety of price ranges. For example, industry giant Diageo plc, based in London, makes vodka brand ranging from cheap Popov to midpriced Smirnoff to expensive Ketel One and Ciroc.

Mintel's Holleran expects people to start going out more this year, as they get bored staying home and want to treat themselves to little luxuries -- like a night out. "You want to go out and have someone do all the work for you," Holleran said.

Of course, switching brands isn't the only way to economize. You could always buy bigger bottles.

Distilled Spirits Council of the United States; AJC; Mintel.

No comments: