Sunday, March 14, 2010

Profit in a Bottle - do you really need to buy that?

"The Beverage Industry". Those words should make you stop and think before you spend any money on their products.

Have you ever thought what the difference is between a mere "business" and an "industry"? A business makes its customers happy and by doing so, reaps enough financial reward to pay employees, pay the owner, keep the regulators at bay, and hopefully, have enough profit left after all that to develop a new and better product or service to make customers happier.

When the business morphs into an industry, it now has to satisfy an entire panoply of others - more regulators, of course, more taxing authorities, the Equal Employment Opportunity commission (small businesses have to obey the rules - when you're over 50 employees you need to hire a manager to handle the paperwork to prove you are obeying the rules). And stockholders. Oh, that's the final problem - satisfying customers and satisfying stockholders require very different behaviors. And, if you plan to be a well-served customer, you want to to business with businesses that don't have stockholders. And that means spend your money on the small guy.

Industries pay money for political action committees, they pay lobbyists, they have their own trade associations. A trade association? This is where a bunch of big busiensses in the same industry get together to trade tips and tricks on how to grow their businesses...and nary a single customer is present. Succeeding in business, once you're large and in an "industry" is no longer about simply making customers happy. Customers fall way down on the list!

So, do you WANT to support "The Beverage Industry"?

Look at the products that have come out of "The Beverage Industry".

First, coffee. Oh, I love the smell as it brews. My favorite is dark roasted and full-bodied, the kind you can only get with very fresh, oily beans, recently-ground and made one cup at a time through a cone filter with 180 degree (not boiling) water. For years, it was hard to get this kind of brew, as the canned pre-ground coffee industry surged ahead with lots of names advertised on television. Oh, there's another clue - if they have nationwide TV ads, they're not the kind of business you really want to do business with.

And, as always happens with an industry, they forgot the customer. The most famous of all big-chain coffee shops is Starbucks, of course. They're not about coffee at all! The corporate charter is "to become a household name", not "to offer the best tasting coffee". Serious coffee drinkers don't go to Starbucks. Not just because they're big, but because their coffee is terrible. They don't make money on coffee. They have ruined coffee, by up-trending it with Italian words. Instead of "small, medium and large" you have words I don't remeber including Vente and Grande, whatever they mean. "I want eight ounces of strong black coffee" is usually responded to by a lecture on what to call it. Look, you want my money, you sell me what I asked for, you don't instruct me on how to do businesss. Instead, Starbucks is trying to create a new culture where people pride themselves on being able to say things like "Mocha carmelatto, full whip, no room, grande" as if it's a household word. You see their patrons reciting corporate product names quickly, with enthusiam, and then handing over cash - lots of cash. The "beverage" they receive in return has a smidgeon of coffee in it, and an ingredient list more akin to a candy bar than a beverage.

That's a "business model" which is good for industry but not the consumer.

Nutrionally, such "beverages" are junk food. If you really wanted a shot of carbs, keeping a jar of sugar with a teaspoon around might be more satisfying and is most certainly more cost-effective.

I find the best coffee is made when I purchase beans roasted near where I live. None are grown in my state - the climate is not suitable. I buy them by the pound and then grind just prior to usage. No sugar, no cream, no caramel, no high fructose corn syrup, just a heavenly, thick, strong brew.

David Bach made famous the phrase "The Latte Factor". It refers to the notion that you ruin yourself financially not by purchasing a too-large car, but by the daily seemingly small expenses that, over a year, add up to a lot. A $5 latte, once per workin day, totals up to $1250 by the end of the year. In addition to lattes, many are duped by ads claiming "for only a few dollars a day, you can enjoy..." and we see all manner of high monthly expenses for things that, ten years ago, most people would have considered extravagant. Face it - call waiting has not yet saved anybody's life.

Ah, but coffee...it's not the start of it, is it? Exactly what nutritional value is there in a can of cola? And you spend how much for it?

In my capacity as a personal financial consultant, I've been able to look at the "food" expenses of many families. If a family is routinely spending more than $200 per person per month on food, and not going out to eat frequently, I will always find a "bottled beverage" habit. I'll find that they're buying bottled fruit juice (fruit juice is fruit with most of the good parts removed, and the cost per calorie tripled), bottled water (why anybody would consider paying that much for something that the earth provides for free is beyond me), and usually, lots and lots of carbonated, sweetened beverages.

Americans are really weird

Did you know that sweet beverages are uncommon all over the world except for North America and Europe? The rest of the world satisifes itself with water (usually heated) and tea for the most part. Bits of Scandanavia have discovered coffee, but it is thick, almost goopy stuff, not at all like the sugar-infused "candy bar in a cup" beverages that popular American coffee shops dish up.

For most families with a "food expense" problem, when I counsel them to purchase no pre-made beverages, the "food expense" problem generally goes away. If the family has small children, they'll still need milk - whole milk please, the child's brain literally needs saturated fat for normal development. But past adolescence, milk is no longer a good source of protein. The blend of amino acides is intended to bulk up the fat cells in the body, which is "just right" for a newborn. It is not a coincidence that breast milk is loaded with fat and cholesterol...and you wean a child from it after a while. The calcium in milk is not partiularly absorbable, so women seeking a good calcium source should look elsewhere. Yes, I know, the USDA says otherwise, but they've been paid to do so by the dairy industry. Oh no, another industry - see the things they do? You really want to support them?

An indulgence, not an addiction

Now, a certain amount of indulgence isn't a bad thing. I indulge. In addition to my coffee habit, I enjoy beers and wines. As with coffee, I find the best beverages come not from the larger provides in the "industry" but rather the smaller family-run places. This is more true of beer than wine. But, these are things one consumes in moderation, therefore by that fact alone, they won't become a large part of a reasonable budget. Certainly, purchasing reasonable quanties of the most expensive micro-brewed beer I know if, costs less than a $5 latte per day. And is ever so much more satisfying.

Just say no to the beverage industry. You do not need them.

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