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In the Headlines-March 20th, 2015

In The Headlines

Miller Lite Attributes New Success To Retro Design

It is not easy being the first sometimes. Consider Miller Lite. It was a phenomenon, surging from its 1975 debut to annual sales that foamed above the 10-million-barrel level within a few short years. People loved the ads: retired jocks like Bubba Smith and Dick Butkus “arguing” in bars over whether the brew’s chief appeal was that it “tastes great” or is “less filling.” That juxtaposition was inscribed in the memories of an entire generation of TV watchers.

Lite accomplished what was then seen as an impossible feat—selling a diet beer to men—thereby creating a whole new category: reduced-calorie brews. That sort of epic success spawns imitators, and soon Budweiser and Coors were selling their own Light lagers. Miller Lite’s sales topped out at 19 million barrels in 1990, bumped up and down for a couple of decades, and eventually went flat. By 2008, after Miller Lite and Coors Light were gathered under the same corporate roof in the joint venture known as MillerCoors (which handles the U.S. markets of products from SABMiller and MolsonCoors), the original faced a new indignity: It was not even the top-selling light beer at its own company. Add the incursions by craft breweries, which made national brands seem hopelessly dull to many, and the return of hard liquor—beer dropped from 56% of alcohol consumed in 1999 to 48% in 2014—and it made for a depressing picture for mainstream giants like Miller Lite.

But now, after decades of stagnation and seven straight years of decline, Miller Lite is on the upswing: The company sold 43 million more cans of Lite in the second half of 2014 than it did in the equivalent period of 2013. Shipments have been steadily ticking up a few percentage points each week during that time, relative to their 52-week average, according to MillerCoors.

Six months is far from enough time to declare the fizz restored to the brand. But observers are positively bubbly. “The swing that Miller Lite has enjoyed the past two quarters is almost astounding,” says Harry Schuhmacher, editor of Beer Business Daily. “It is like turning the Titanic. I think they finally cracked the code.” If Miller Lite continues at this pace, he says, it will pass Budweiser and become the third-highest-selling beer in the U.S., after Bud Light and Coors Light.

So what was the brilliant insight that cracked the code? It was a seemingly modest change—and it happened more or less by accident. Long’s team discovered that indirectly. Last year the company began offering beer in Lite’s original can as a short-term promotion. Sales were so strong that MillerCoors quickly switched to white labels on all bottles, cans, and coasters, ditching the blue it had used for more than a decade. That was the breakthrough, and now the retro look is here to stay.

Craft brewers have mocked the taste of Lite and its ilk, and clearly drinkers have become discerning. Yet the market is moving toward light varieties and many microbrews are now making lower-alcohol, reduced-calorie brews. (They avoid the “light” taint by labeling them “session” beers—an industry term for somewhat reduced alcohol.) In fact, three-quarters of the U.S. beer market qualifies as light or session, says Bart Watson, chief economist of the Brewers Association.

The new packaging has created the opening for Lite to recapture former fans and new ones as well. It is resonating with men above 45 who remember Lite from their youths, but also millennials. Lite’s market share has risen from 6.2% to 7.5% in one year among 21- to 27-year-olds who drink at least one beer a week, according to MillerCoors data.

GE Goes to the Ocean Bottom to Find Oil Equipment Profits

Not long ago, oil looked like a black gold mine for General Electric (GE). The company known for toaster ovens and lightbulbs wrapped up a three-year, $10 billion buying spree in 2013 to bolster the growing oil and gas equipment unit that helped GE recover from the financial crisis. The company bulked up with the expectation that crude prices would remain at about $100 a barrel for years.

These days, with the price of oil 40% lower than six months ago, energy companies are buying less drilling and processing equipment. The industry plans to slash spending by $40 billion and cut 100,000 jobs globally. GE’s oil unit is cutting costs and laying off employees, too. In December the company warned investors that the oil and gas division in 2015 could face its first sales decline—of as much as 5%—in five years. “I am not being Pollyannaish in any way,” says Jeff Bornstein, GE’s chief financial officer. “It’s going to be a very tough orders year, and we’re going to see an impact.”

How GE’s oil division navigates the choppy market will determine the company’s fortunes for years to come. The $19 billion oil division, now GE’s third-largest manufacturing division, accounts for 12% of GE’s revenue and almost 20% of industrial sales, up from only 4% a decade ago. Oil and gas became a centerpiece of a massive portfolio restructuring following the financial crisis, when the company sold portions of its finance arm and the consumer unit that made appliances. GE looked to industrial sales to boost shares that fell 30% in the past decade—the only Dow Jones industrial average stock that is down in that time span.

Given the challenges, the oil unit is trying to grab market share as it introduces more technologically advanced products and attempts to buy weaker competitors. “A lot of people are saying, ‘This is a hard time’ and ‘What’s going to happen?’ ” says Lorenzo Simonelli, president and chief executive officer of GE Oil & Gas. “This is an opportunity.”

GE soon plans to announce an $850 million equipment order from customers led by Eni Ghana Exploration & Production that will supply Offshore Cape Three Points, an underwater oilfield development off Ghana’s coast. The company is also developing environment-friendly technology with Norway’s Statoil, bolstering its relationship with a longtime buyer of GE’s subsea and other equipment and keeping pace as the industry adopts better energy-efficiency standards. “For us, this is about competitiveness fundamentally,” says Eldar Saetre, Statoil’s president and CEO.

Simonelli, 41, a possible successor to chairman and CEO Jeffrey Immelt, sees the downturn as an overdue chance for the industry to improve the efficiency of its products. His division is investing in new technologies, including sensors that allow users to monitor and maintain equipment remotely. With the resources of GE behind it, the oil division will continue to pursue acquisitions.

GE’s best hope in oil and gas may be at the bottom of the ocean. It already has a sizable presence providing flow control valves, wellheads, and other equipment for deep-water drilling work. But sales were hampered by the high cost of getting products to market and other problems. “There’s an opportunity for the industry to be much tighter with respect to executional efficiency,” says Rod Christie, CEO of GE Oil & Gas Subsea Systems. Simonelli is leading an effort to modularize components for subsea production to improve compatibility of the products, reduce costs, and improve flexibility in offshore production. This might generate a windfall for GE, says Nick Heymann, an analyst with William Blair. “It could be the most massively disruptive thing in one of the biggest markets,” he says. If Simonelli can pull it off, “he’s going to look like the guy who piloted Apollo 13 back home.”

1. http://for.tn/1FeHfMn – Fortune
2. http://bloom.bg/1MB6Inu – BusinessWeek

The Good News Is . . .

• The small business optimism index edged 0.1 higher to 98.0. The strongest component right now, and the one that gained the most in the latest report, is ‘job openings hard to fill.’ The gain here points to a tightening in the jobs market, at least for skilled workers. The second strongest component, ‘plans to increase capital outlays,’ shows no change but the level does point to business confidence and the need to hire in future months.

• TJX Companies, Inc., the leading off-price apparel and home fashions retailer in the U.S. and worldwide, reported earnings of $0.93 per share, an increase of 14.8% over year-ago earnings of $0.81. The firm’s earnings topped the consensus estimate of analysts by $0.03. The company reported revenues of $8.3 billion, an increase of 6.3%. Management attributed the company’s results to increased customer traffic and strong merchandise margins.

• Domino Printing Sciences said that Brother Industries of Japan has offered to acquire the printer maker in a deal that values the company at $1.55 billion. The deal will expand Brother’s industrial printing. Domino faces increased competition, especially in digital printing, from companies with greater scale and financial strength. Domino, founded in 1978, manufactures and sells industrial inkjet, laser and bar code printers, and employs 2,300 workers.

1. http://bloom.bg/1Dl6vPO – Bloomberg
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://bit.ly/1FshurJ – TJX Companies, Inc.
4. http://nyti.ms/1Ef2P0Y – NY Times Dealbook

Planning Tips

Tips for Evaluating Travel Insurance

As summer approaches, many Americans will start making their vacation plans. Part of your travel planning may include travel insurance. Travel insurance is becoming increasingly popular, but in many cases it simply duplicates coverage you already have. So, if you think you may travel insurance, consider the factors below before making your purchase.

Understand what travel insurance includes – Travel insurance can include trip cancellation, trip interruption, accidental death or dismemberment, medical and dental care, transportation to medical facilities, loss of luggage or personal possessions and protection against the bankruptcy or default of your cruise line or tour operator.

Determine whether you are already covered – Many homeowners’ and renters’ policies provide coverage for theft and other losses away from home. Your medical and auto insurance may be valid in other countries. Your life insurance policy should cover you and your family while you travel. And airlines must reimburse you if they lose your bags.

Buy through a third-party insurer – Travel agents, tour operators and cruise lines sell travel insurance, but your safest bet is to obtain coverage through an established insurance company. This way, your coverage will not disappear if your travel company goes bankrupt. Also, avoid flight insurance sold in vending machines. The least expensive way to insure your life is through a term life insurance policy, which you may already have. And your credit card may provide such coverage as well.

Determine whether you need trip-cancellation coverage – Even in the case of natural disasters and other dramatic events beyond a travel provider’s control, you are likely to get a refund if your trip gets completely canceled on you. In case you have to cancel your trip, many cruise and tour operators offer cancellation waivers for about $40 to $60 as coverage. While the waivers provide some protection, they often have many restrictions and are not regulated.

Consider extra coverage – If you must travel with expensive electronic equipment, sporting gear or jewelry, you could consider a floater for your existing homeowners’ or renters’ policy. This could be a relatively low-cost way to insure those items. Also evaluate the value of emergency medical assistance coverage. This would cover you if you must be airlifted off a mountain, receive prolonged treatment in a foreign hospital or be flown home because of serious sickness or injury. Before you buy, find out whether your health insurer would cover you overseas and pay for your flight home if an emergency strikes. If you have Medicare, this coverage could be valuable because you are probably not covered outside the United States.

1. http://bit.ly/1xnFaJe – US News & World Report
2. http://bit.ly/ZLvYUj – RickSteves.com
3. http://on.today.com/1Ef2USz – Today Money
4. http://tandl.me/18p8r05 – Travel & Leisure
5. http://bit.ly/18p8xVp – TravelSense.org

Please don’t hesitate to give us a call if you need help with any component of your financial planning.

In the Headlines-March 27th, 2015
In the Headlines-March 13th, 2015

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