Help a grower out


July 15, 2019

Today, Ikea closes its US factory and Microsoft disrupts the Slack-tory, but first…
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A tale of 2 coffees: Prices are at all-time highs, yet growers continue to struggle 

The coffee biz is worth over $100B globally. Baristas are considered artists, Starbucks is so influential it breeds quasi-presidential candidates, and consumer coffee prices are at all-time highs ($5 Joe, babayyy). It practically fuels the universe.

But, for the talent behind this whole java frenzy — the bean growers — realities are less flashy, more desperate, and a whole latté more expensive to make than what they sell for.

A different side of the coffee coin

For decades, coffee growers, arguably serving across the broadest range of consumers in all of the food and beverage industry, have suffered from low prices — mainly due to overproduction from the world’s top producers like Brazil and Vietnam.

In the ’60s, growers from around the world tried to police their production addiction by forming the International Coffee Agreement (inspired by OPEC 2 years earlier), in hopes that it would better control prices.

And, for nearly 30 years, it helped…

Until the late ’80s, when the US withdrew from the coffee club. 

And ever since, the price balance of consumption and production has been almost nonexistent. Earlier this year, some farmers in Ethiopia were earning less than a cent per cup as global consumption continued to grow.

Now, the coffee police are back

In May, the price of beans dropped to 87 cents a pound — 33 cents less than the average $1.20 it cost to produce. It has since risen to $1.06, but, to growers, it’s still a matter of caffeine or death for the industry.

Growers met in Brazil last week to try to brew up a plan to climb their way out of their financial black hole, but historians and officials believe the roast is still lookin’ a little dark.

Coffee growers could use some cream
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Ikea moves its production from the US to Europe to meet US demand

Ikea announced last week that it will shut down its only US factory in Danville, Virginia. The closure of the facility, which has been in operation since 2008, will result in the loss of 300 jobs.

Why is Ikea leaving the US?

Counterintuitively, Ikea is shifting production from the US to Europe to meet American demand.

The costs of raw materials Ikea uses to manufacture its furniture is substantially lower in Europe than the US, so Ikea decided to shift production out of the US in order to keep prices down at US retailers. 

Management was just following instructions…

“We made every effort to improve and maintain the competitiveness of this plant,” Danville Ikea site manager Bert Eades said in a statement. “But unfortunately the right cost conditions are not in place.”

Just 6 months ago, Ikea laid off 60% of the workers at the facility. At the time, Eades told local reporters that production at the facility was 25% lower than forecast.

Production at the Danville facility will continue through the rest of 2019 to give employees enough time to find new jobs.

» Ikea says see-ya

In a surprise to Slackheads, Microsoft pulls ahead of most workplace message services

Microsoft revealed that its workplace messaging tool, Teams, has 13m daily users — more than its flashy rival Slack, which only had 10m users as of this past April.

Slack is hot at startups, Teams is doing better among big businesses

Although surpassing Slack in user count is a big win for Microsoft, Slack still has more clients than Microsoft — 600k vs. Teams’ 500k. 

This divide shows that Microsoft is doing well among companies with large numbers of employees while Slack reigns supreme among startups and their Google doc-using employees. 

How did Microsoft grow Teams so fast?

Microsoft launched Teams 3 years after Slack, but managed to get tons of users by offering free trials of Teams to users of Microsoft’s other products — Excel, Word, Outlook, Skype, etc.

When it comes to the workplace-messaging war, Microsoft doesn’t mess around: Internally, Microsoft put Slack on a list of “prohibited and discouraged” software to prevent employees from Slacking. 

The battle rages on: Both Teams and Slack are rolling out new features constantly to out-optimize each other, and — to make matters more insane, Facebook Workplace is also gaining steam.

» Whatever works, right?

Will the streaming bubble burst with too many platforms?

Netflix reportedly put out some 90k minutes of original programming in 2018. That’s a lot of content — 9 weeks’ worth of binging actually. 

But when does it all become too much?

*Spends 40 minutes scrolling, falls asleep choosing* 

A recent Nielson survey found that US adults typically spend a little over 7 minutes perusing content aisles across multiple streaming services. 

And that’s before media giants like Disney, NBCUniversal, and WarnerMedia squeeze their multibillion-dollar-sized bodies into the already at capacity streaming market, starting in 2021.

Soon, consumers won’t have anxiety over content, because they’ll be too busy stressing out over which subscription to pick — an outcome that, according to Axios, could potentially hit the industry’s growth where it hurts. 

Especially for Netflix…

21% of survey respondents said if they can’t make up their minds, they generally choose to watch nothing, and more than half of users said they were more likely to switch back to traditional TV — a medium that Netflix and Amazon Prime have absolutely no footprint in. 

What’s worse, Netflix is preparing to lose its two most popular showsthe Office and Friends — to the series’ original owners.

Bottom line, as more streaming platforms hit the market, the platforms doubling down on original content may struggle to compete for consumer spending budgets. Because all anyone really wants to do is watch Michael Scott say something inappropriate.

» When the stream turns into a waterfall
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