Volume 1, Number 2 December 31, 2001
Recent Events:
Industry A is a model
of…coopetition? Only two companies
compete in all markets. Everyone sold
100% of inventories and ended the year with money in the bank. There are no major standouts in pricing,
advertising, or sales forces. And yet
the differences, however slight, are starting to show. Three companies are at full capacity, and
three companies saw their stock prices go up.
NOMAS now leads the field, almost doubling their stock
price to $21.35, but with unmet demand growing universally, there is room for
real competition.
Phoenix, one of the two teams in all markets, still seems
to be testing the waters. Prices
remained more or less the same, while management boosted advertising across the
board. The strategy paid off, as Phoenix now owns 20-25% of every market.
However, Phoenix is one of two companies running only 2.3 shifts,
and investors, though they seem to like to company, don’t have a lot of
confidence that Phoenix can remain strong in all markets without more
stuff to sell. Stock price and credit
improved a bit, now we need to see some momentum.
NOMAS expanded into the West with Product Y, capturing a
third of that market. They also lead
the field in capacity, cash on hand, quality/awareness, and, no surprise, stock
price and credit rating. NOMAS
seems poised for acceleration here, and has a formula that customers and
investors seem to like. With a stock
price more than 3 times the nearest competitor, no doubt they will be a target
in the coming year. But that’s a good
thing, right?
Like Phoenix, LATINOS continue to compete in all four markets. Unlike them, however, LATINOS saw their stock price fall in 2002.
Their credit rating also dropped from A to BBB. What happened? They increased shifts worked from 2.3 to 3.0, and sales revenues
increased correspondingly. However,
their operating income decreased by over $7 million and their bottom line shows
a loss of $12 million, tripling the previous year’s loss. In addition, the company increased its stock
outstanding by 20% and sold over $15 million of new long-term debt. Brand
awareness and quality remain respectably high, but the market is looking for
the new management to produce some profits.
SHAZAM worked some real magic last year, selling only one
product in one market, landing 25% of that market share, and improving stock
prices modestly. Clearly the smallest
company in the industry, (with the smallest losses in net income!) SHAZAM has found a niche of sorts. So
far the SHAZAM team has made a go of it, but analysts are
skeptical that as bigger companies like NOMAS start throwing their
weight around, customers may change allegiance. Others say size doesn’t matter.
The crew at SAGECRU, was in the West with Product Y and now they’re out. SAGECRU’s prices remained stable, but their commitment to
advertising and sales seemed downright anemic compared to the other
companies. Still market share for
Product X stayed more or less the same, though losses in the profitable Product
Y (in the East) hurt SAGECRU last year.
Quality/awareness slipped a bit in 2002, pretty much the way their stock
price did. They have good credit, and
good capacity. We want to know what
they’re waiting for.