You could be forgiven for thinking that Starbucks has reached its saturation point. It seems like just about anywhere you go — city, suburbs, airport, train station, or college campus — there's a location to meet your caffeinated needs.
Starbucks locations are popping up around the world, like this one in Leeds, England. Photo: Onar Vikingstad, via Wikimedia Commons .
So why is the company spending so much money on capital expenditures? Over the last twelve months alone, $1.2 billion has been spent!
Now that it's approaching "stalwart" status, shouldn't Starbucks be focusing on juicing profitability and increasing its dividend? The answer to that question is "no," and investors should be excited about why.
Spending more than ever Here's a peek at Starbucks' history when it comes to capital spending. As you can see, the current pace is far beyond anything seen in the company's recent history.
The big question beginning investors need to know the answer to is: why? Why is the company spending 170% more than it was just four years ago?
The answer can be found in Starbucks' annual report, where the company states that capital expenditures are, "primarily for store renovations and new stores, as well for other investments to support our ongoing growth initiatives."
In plain speak, this means that the company believes some of its best growth days are still ahead.
That might be hard to believe for the average American, but that's because much of the growth ahead is going to come from abroad — especially in China and the Asia-Pacific region. Just look at how the overall store count has grown both domestically and abroad over the years.
Taken together, store counts in the Americas, EMEA, and APAC regions have increased by 13%, 22%, and 57%, respectively. It's important to remember, as well, that the "Americas" includes both North and South America — so there's still plenty of room to grow in that category as well.
What this means for investors Obviously, Starbucks believes that it has huge opportunities in front of it. The store's concept has already proven very popular in Asia. Seoul, South Korea is home to 284 Starbucks' locations, while Shanghi has around 256 stores to meet customer demand, and Beijing can lay claim to 137 sites.
The company understands that the Asian consumer may also be more predisposed toward tea than coffee. That's why the company bought Teavana back in 2012 for $620 million. This approach is working: during the last quarter, sales at comparable stores were up 7%.
Even more impressive is the loyalty that Chinese customers have toward their caffeine fixer: almost 40% of all transactions taking place in the Middle Kingdom are with a My Starbucks Rewards card, and Starbucks recently opened its first 24-hour store in Beijing that's been so successful that it is already looking to open more.
During 2015, Starbucks plans on opening 1,600 new stores: 650 in the Americas, 150 in Europe, the Middle East, and Africa, and a whopping 800 in China and the Asia Pacific region. If the Starbucks concept continues to prove as popular with investors as it has in the recent past, this will no doubt be money well spent for investors.
So is the stock a buy? Currently, Starbucks trades for about 29 times earnings, but only about 22 times normalized free cash flow. Both of those numbers are expensive — though the free cash flow number is exorbitantly high.
Without a doubt, high expectations are already baked into Starbuck's price. But that doesn't mean the stock isn't worth buying today. Investors who truly believe in the company's plans to expand abroad and are willing to hold the stock over the long-run would be well served to initiate a starter position in Starbucks, and add to that position as time goes on at better and better value points.
$19 trillion industry could destroy the internet One bleeding-edge technology is about to put the World-Wide-Web to bed. And if you act right away, it could make you wildly rich. Experts are calling it the single largest business opportunity in the history of capitalism... The Economist is calling it "transformative"... But you'll probably just call it "how I made my millions." Don't be too late to the party— click here for 1 stock to own when the web goes dark.
Brian Stoffel owns shares of Starbucks. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Under Armour's shares have soared 50% so far in 2014, as the company continues to deliver quarter-after-quarter of expectation-crushing sales growth. But has Under Armour's share price come too far, too fast? Well, we're not short-term market timers here at The Fool, so while Under Armour's stock can certainly pull back sharply in the days, weeks, and months ahead, Fools are more focused on where this business can be 5-10 years down the road. And on that scale, Under Armour's future looks very bright indeed.
What's happened so far in 2014? Under Armour started its 2014 fiscal year on the right foot, with first-quarter revenue surging 36% year-over-year to $642 million. Gross margin improved to 46.9% from 45.9% in Q1 2013, and operating margin rose to 4.2% compared to 2.9% in the prior year period. Management also raised its 2014 full-year revenue guidanceto+24% to +25%, and then more than delivered on that promise in the second quarter.
Second-quarter revenue growth surged 34% to $610 million, making it the 17th consecutive quarter of at least 20% sales growth. That's more than 4 straight years of revenues up 20-plus percent, which is exactly the type of strong and steady growth that can deliver market-crushing returns to long-term investors -- something that UA has definitely delivered.
Helping to fuel that growth are five major catalysts: footwear, women's, direct-to-consumer, international, and connected fitness. Footwear sales leapt 34%, led by the successful launch of new running shoes. Under Armour's direct-to-consumer revenue -- an important, high-margin segment, particularly as e-commerce becomes a larger proportion of global retail sales -- grew 38% year-over-year and accounted for more than 30% of UA's total revenue for the second quarter. And maybe most excitingly, international revenue, which represented only 8% of total revenue in the second quarter and remains a multi-decade growth opportunity, grew 80% year over year.
Under Armour doesn't break out the revenue from its "Women's" segment, but CEO Kevin Plank mentioned on the conference call that it's already a $500 million business that's been consistently growing at a rate north of 20%. Plank also stated that he believes Under Amour's Women's business can be as big if not bigger than its Men's segment. Towards that goal, Under Armour has launched a new campaign featuring ballerina Misty Copeland to help reach "both the consumer who sees herself as a female athlete and the one who describes herself as an athletic female."
Another area of future growth for Under Amour is in what the company calls "Connected Fitness." This segment is spearheaded by UA's recent acquisition MapMyFitness, a fitness technology company with popular mobile apps such as MapMyRun and MapMyRide, which allow users to map, record, and share their workouts. At the time the acquisition was announced, MapMyFitnesswas already one of the world's largest digital fitness communities, reaching over 20 million registered users and integrating with more than 400 fitness tracking devices. Plank has since stated thatthe company expects to sign up more than 10 million new users in 2014 and finish the year with over 30 million users. I believe proactive health and wearable technology will be a major trend in the years to come, as governments, corporations, and individuals all seek to prevent injuries and disease and lower healthcare costs, and Under Armour's connected fitness platform positions the company well in this area.
Is Under Amour still a buy? Under Armour is a business firing on all cylinders. The hard-charging company has a massive opportunity in international markets, long runways for growth in key segments like footwear, women's apparel, and direct-to-consumer, and a promising early stage business in connected fitness. Steady, high sales growth should continue for many years, given the company's low penetration in the enormous global sports apparel market. All told, Under Armour — led by its tenacious founder, chairman, and CEO, Kevin Plank — continues to stay true to its brand by "bringing performance innovation to the consumer and maintaining a premium position wherever we do business." As long as that remains the case, this Tier 1 enterprise should continue to deliver long-term market outperformance for patient investors.
Apple Watch revealed: The real winner is inside Under Armour already sells its wearable fitness device and Apple recently revealed the wearable product of its secret-development "dream team" -- Apple Watch. The secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see where the real money is to be made, just click here!
Joe Tenebrusois portfolio manager of Tier 1 Investments, a Motley Fool Real-Money Portfolio. You can connect with him on Twitter @Tier1Investor. Joe has no position in any stocks mentioned. The Motley Fool recommends Under Armour. The Motley Fool owns shares of Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Among top-yielding dividend stocks, Windstream Group currently holds the crown, with a higher yield than any other stock in the S&P 500 . The rural telecom company has defied skeptics for years by sustaining its quarterly dividend payments at current levels, despite the fact that peers Frontier Communications and CenturyLink have both made reductions to their dividends over the past several years. Nevertheless, with major changes to its corporate structure in the offing, Windstream will look a lot different to dividend investors in the near future. With that in mind, let's look more closely at two things every dividend investor should know about Windstream Holdings.
1. Windstream expects that its total dividend will fall following its split into two companies. Back in July, Windstream announced that it would spin off its telecommunications network assets into an independent, publicly traded entity. The new entity will qualify for favorable tax treatment as a real-estate investment trust, enabling it to avoid paying income taxes at the entity level in exchange for taking on the obligation of paying out substantially all of its income to shareholders.
Reorganization chart. Source: Windstream.
Windstream CEO Jeff Gardner praised the deal, arguing that it will "make Windstream a more nimble competitor in today's increasingly dynamic communications marketplace and accelerate our deployment of advanced communications services." The company sees the spinoff as lowering Windstream's debt by $3.2 billion, boosting cash flow.
Windstream also said that the new REIT will pay "an attractive dividend to shareholders," alleviating some concerns among dividend investors about what the new corporate structure will mean for their stream of income. Nevertheless, Windstream expects that its total payout to investors will drop following the REIT spinoff. The REIT will likely pay annual dividends of $0.60 per share, maintaining a yield consistent with what Windstream currently pays. But the ongoing operating company will pay a much smaller dividend of just $0.10 per share annually, which will almost certainly result in a much lower yield for those who retain their Windstream shares.
One positive from the transaction for dividend investors is that Windstream expects the REIT to have the opportunity to pay higher dividends in the future, which is something that many current shareholders had given up on from the existing corporate structure. Executives noted that the REIT will have escalation clauses in its leases with the operating company, with initial estimated rent payments of about $650 million potentially climbing over the course of the term of their lease. As net income rises, the REIT should pay more to its shareholders in order to comply with IRS regulations governing real-estate investment trusts. Nevertheless, the move will result in a division between the high-growth portion of the business and the income-producing portion.
2. Windstream's dividend payout ratios can be confusing if you're not looking at the right numbers. Many dividend investors judge stocks based on how much they pay out in dividends compared to their earnings. On the surface, this makes sense, as a company can presumably only pay out as much money as it consistently brings in. But in the telecom industry especially, the disparities between accounting-based earnings and actual free cash flow lead to confusion about what a stock's actual dividend payout ratio is.
With Windstream, if you look at GAAP earnings, you'll see a dire picture of the health of the telecom's dividend. Currently, Windstream has generated just $0.29 per share in earnings over the past 12 months, making its $1.00 per share annual dividend translate to an earnings payout ratio of 345%. That obviously looks unsustainable.
But when you look at Windstream's actual free cash flow, you can see the huge disparity between it and accounting-based measures of earnings. According to S&P Capital IQ, free cash flow of $761 million over the past year is actually greater than the $598 million in dividends Windstream paid out, leading to a free cash flow-based payout ratio of less than 80%.
The question investors always have to ask is whether earnings or cash flow is the better measure of what a company can afford to pay in dividends. For Windstream, its ability to keep paying dividends despite huge earnings payout ratios shows that the free-cash-flow model is more realistic.
Assuming Windstream's REIT spinoff goes forward, the telecom will look a lot different to dividend investors in the near future. Nevertheless, it could continue to be a solid dividend investment depending on how the transaction pans out and how well the operating company does at capturing the full potential of its growth initiatives.
Top dividend stocks for the next decade The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
NEW YORK -- The U.S. stock market moved quietly higher Monday as investors decided to step back into a market that was rattled by white-knuckle turbulence last week.
It was a rare move upward for a market that, for the most part, has been moving lower for the past month.
The Standard & Poor's 500 index (^GPSC) rose 17.26 points, or 0.9 percent, to 1,904.02 and the Nasdaq composite (^IXIC) gained 57.64 points, or 1.4 percent, to 4,316.07.
The Dow Jones industrial average (^DJI) did not fare as well, and wound up essentially flat for the day. The 30-stock index rose 19.26 points, or 0.1 percent, to 16,399.67. The main reason the Dow did not perform as well as the other two indexes was IBM (IBM).
IBM fell $12.95, or 7 percent, to $169.10 after the company reported earnings that missed Wall Street's expectations. The company also missed on revenue and warned that it may not meet its profit goals for the foreseeable future. IBM was the biggest decliner in both the Dow and in the S&P 500.
The Dow is what's known as a price-weighted stock index, which means more expensive stocks like IBM tend to have an out-sized impact on its movements. Without the effect of IBM's decline, the blue chip index would have been up 102 points.
The quiet trading on Wall Street on Monday came after a wild ride last week, when the Dow moved between triple-digit losses and triple-digit gains. Investors remain concerned that economic weakness in Europe could spread to the U.S. Many investors remain bullish on the U.S. stock market over the long term, especially considering how well the U.S. economy has been doing.
"I think we are having a modest correction and I don't think this is a new bear market," said Scott Clemons, chief investment strategist for private banking at Brown Brothers Harriman.
The calm can be seen in the decline in the VIX, Wall Street's so-called "fear index." The VIX fell 15 percent to 18.7, closer to its recent average of 15. It went as high as 30 last week, but before this market volatility started, the VIX had been trading near record lows.
Many market watchers expected more volatile trading in the days and weeks to come. The S&P 500 is down just 5.3 percent from its mid-September high, even with the concerns about Europe and Asia. Also the market has had four straight weeks of declines.
"When a market gets as fully-priced as this one, it doesn't take much for things to go wrong," said Wayne Wilbanks, chief investment officer of Wilbanks, Smith & Thomas Asset Management. "This market is just shifting back to more normal market behavior after being in a low-volatility period for much longer than it should have."
This is one of the busiest weeks for company earnings. A total of 130 companies in the S&P 500 index will report their quarterly results, including big names like American Express (AXP), Cola-Cola (KO) and AT&T (T).
U.S. government bond prices were mostly unchanged Monday. The yield on the 10-year Treasury note held steady at 2.19 percent.
One symptom of the concerns over the global economy has been the sharp fall in oil prices in recent weeks. The price of oil fell slightly Monday, remaining near its lowest level since June of 2012. Benchmark U.S. crude fell 4 cents to close at $82.71 a barrel on the New York Mercantile Exchange.
Brent crude, a benchmark for international oils used by many U.S. refineries, fell 76 cents to close at $85.40 on the ICE Futures exchange in London. Wholesale gasoline fell 3.3 cents to close at $2.200 a gallon.
Gold rose $5.70 to $1,244.70 an ounce. Silver rose two cents to $17.35 an ounce and copper fell two cents to $2.99 a pound.
What to Watch Tuesday:
The National Association of Realtors reports existing home sales for September at 10 a.m. Eastern time.
These major companies are scheduled to release quarterly financial results:
Shares of SodaStream , known for its home carbonation systems, have been decimated over the past year. After reaching a high of $64 per share last October, the stock had been cut in half by the beginning of this October. It then fell further, to around $20 per share, after the company warned earlier this month that its third quarter would be a disappointing one.
It's clear now that SodaStream is probably not the growth story that many investors believed it to be back when the stock was trading at more than three times the current price. Cracks began to emerge back in January, and I wrote then about some serious issues the company was facing, and it now appears those cracks have only grown larger. While an investment in the company made at peak prices is unlikely to be salvaged any time soon, a few important lessons can be gleaned from the SodaStream stock disaster.
Don't take management's word as gospel It's often hard to tell whether a product will have staying power or peter out after a period of popularity. SodaStream does have history on its side, with the company being founded over 100 years ago, and its machines are extremely popular in certain European markets. In Sweden, for example, 20% of households owned a SodaStream as of 2010.
But the United States, which is the key to SodaStream's growth story, is an entirely different beast. SodaStream admitted in its recent warning that things have not been going as planned:
We are very disappointed in our recent performance. Our U.S. business underperformed due to lower than expected demand for our soda makers and flavors, which was the primary driver of the overall shortfall in the third quarter. While we were successful over the last few years in establishing a solid base of repeat users in the U.S., we have not succeeded in attracting new consumers to our home carbonation system at the rate we believe should be achieved. -- CEO Daniel Birnbaum
Management's expectations turned out to be woefully out of touch with the actual demand for the company's products. The case laid out by the company in a presentation from March 2014, predicting 15% revenue growth this year while calling the margin pressures facing the company temporary, turned out to be completely wrong.
It's management's job to paint a rosy picture of a company's future, and it's an investor's job to determine how realistic that picture is. SodaStream is a perfect example of the troubles that can be caused by taking management's predictions as fact.
The product needs to make sense There are three reasons a consumer might buy a product like a SodaStream machine:
To save money.
To eliminate an inconvenience or solve a problem.
Novelty.
On the first point, SodaStream machines don't offer much of a value proposition, if any, for consumers in the United States. The syrups required to make soda with the machines are priced as low as $5.99, with each syrup making about 12 liters of soda. Making the equivalent of a 2-liter bottle, then, requires about $1 worth of syrups. The machine also requires carbonators, which cost about $15 when exchanged with a used carbonator. The carbonator adds another $0.25 per liter, bringing the total cost per 2-liter bottle to $1.50. This doesn't even include the cost of actually buying the machine, with prices starting at around $70, and already it's right around the typical price of name-brand sodas like Coca-Cola, and significantly pricier than store-brand sodas.
In addition to not saving consumers money, SodaStream machines don't eliminate any inconveniences. Soda can easily be tacked onto a grocery trip, and the choice is between having soda already on-demand and taking the time to make it yourself. If anything, SodaStream machines actually create a new inconvenience, adding time to something that typically takes no time at all.
SodaStream's recent warning seems to point to novelty being a big driver of sales of the machines in the United States, and for a company that depends on syrup and carbonator sales for its business model to work, this doesn't bode well. Simply selling machines isn't enough; SodaStream needs to ensure that people continue to use them, and it seems the company hasn't been able to do that.
Before investing in any company that makes a consumer product like SodaStream, an evaluation of whether the product actually makes sense is crucial. Does it save consumers money? Does it eliminate an inconvenience? If it does neither of those things, it's probably best to avoid investing in the stock, especially when it's priced optimistically.
Don't get carried away with optimism It's easy to come up with overly optimistic arguments for investing in SodaStream. Here are two examples:
The global soft drink and bottled water market is worth about $250 billion per year. If SodaStream can capture just 1% of this market, that's $2.5 billion in revenue annually.
SodaStream has a double-digit household penetration rate in some European countries. If the company achieved just a 10% penetration rate in the United States, which has about 115 million households, that's an install base 11.5 million machines. Americans drink 165 liters of soda per year per capita; even assuming this amount is per household, that would be potential revenue of about $1.4 billion annually from syrups and carbonators alone.
These arguments sound great, but they ignore the issues with SodaStream mentioned above. Without a strong value proposition, the number of potential customers is severely limited.
SodaStream's revenue is stagnating at less than $600 million per year. The company has guided for just $125 million in revenue in the third quarter, a decline of nearly 14% year over year. Profits are also drying up, with operating income expected to be just $8.5 million in the third quarter, down from $18 million during the same period last year.
This is what happens when a product ends up being more novelty than anything else: an initial period of optimism, with strong sales growth, followed by the realization that the market for the product isn't nearly as large as first assumed. Can SodaStream return to growth? Sure, but it sells a niche product, not one that will be in every home in the country. Investors' expectations need to be reset, and the recent crash in the stock price appears to have done just that.
Top dividend stocks for the next decade The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here.
Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and SodaStream. The Motley Fool owns shares of SodaStream and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
You may want to think twice before filing a claim on your homeowner's insurance policy. According to a new study from insuranceQuotes.com, filing just one claim -- even a small one -- can send your premium soaring. Of course, the increase depends on a number of factors, including where you live, insuranceQuotes.com said.
The average premium increase is 9 percent for the first claim. Homeowners in Texas are lucky, their state prohibits a premium boost for the first claim. But if you're a homeowner in Wyoming, file a claim and prepare to pony up an additional 32 percent for your policy. Ouch.
Homeowners also face soaring premium increases after filing a single claim in Connecticut (21 percent), Arizona (20 percent), New Mexico (19 percent) and California (18 percent). The lowest increases (2 percent to 4 percent) are in New York, Massachusetts, Florida and Vermont.
More Factors Involved
Homeowners need to be really careful when filing claims," Laura Adams, insuranceQuotes.com's senior analyst, told CBS MoneyWatch. "Even a denied claim can cause your premium to go up. Make sure to know your policy's specific guidelines and only file a claim when absolutely necessary. Winning a small claim could actually cost you money in the long run."
InsuranceQuotes.com said premium increases can change drastically from year to year, depending on a number of trends, including weather and natural disasters. Another factor that affects premium increases is the type of claim you file. Liability claims are the most expensive at 14 percent, followed by theft (13 percent) and vandalism (13 percent).
If you thought the premium increases were bad after filing a single claim, you really won't like what happens if you have to file a second claim. The average premium increase -- which varies by state -- is 20 percent.
If you're not careful, your favorite diversion could hurt your credit score. Below are four popular pastimes that could put your score in jeopardy if you make the wrong moves.
1. Traveling
Plotting where to go, finding the best deal on a flight and learning about the local culture of the destination you're headed to are all great ways to while away the hours after work.
When it's finally time to take off on an adventure, the temptation to forget about life back home is hard to overcome. This is why a case of wanderlust can potentially hurt your credit score: It's easy to neglect a bill payment when you're out of your usual routine.
Since payment history makes up 35 percent of your FICO credit score (the score most widely used in the United States), failing to pay your bills on time could cause it to drop substantially. To avoid this fate, it's wise to set up email or text reminders for your billing due dates so that you'll know when it's time to pay, no matter where you are in the world. You could also opt into automatic payments.
2. Shopping
Fashionistas agree: Shopping for a funky new outfit and then scoring a great deal on it provides a lot of satisfaction. And with online shopping, it's easy to engage with this hobby whenever the urge strikes.
But this can be a blessing and a curse when it comes to your credit. Thirty percent of your FICO score is determined by amounts owed, and your credit utilization heavily influences this category. Your utilization is calculated by dividing the outstanding balance on your cards by the total amount of credit you have available. Most personal finance experts recommend keeping it below 30 percent.
If you're doing so much shopping with your credit cards that your credit utilization ratio meets or exceeds this threshold at any point during the month, your credit score could take a hit. Your best bet is to monitor your balance carefully and make a payment if it's getting too high.
Another option is to spread your monthly spending between a few cards so that your utilization on each one stays low. Pay them all off in full by their billing due dates to avoid interest charges.
3. Reading
Getting lost in a good book is a popular pastime for many. And if you're in the habit of borrowing your weekly read from the local library, good for you - you're saving a bundle on book purchases.
Just be sure to return your books on time. It has become common for libraries to turn large, unpaid overdue fees over to collections agencies. If this happens, there's a good chance that the collector will report your lack of payment to the credit bureaus. (Most credit scoring models ignore collections accounts less than $10.) This will put a black mark on your credit report that could affect your credit score for up to seven years.
4. Gardening and Home Improvement
If working on your home or garden is your favorite way to relax, you're probably making frequent trips to major home improvement warehouse stores. If so, you might have considered applying for the retail credit cards offered by these big-box merchants. While in some cases it might make sense to do so, it's a bad idea to finance a big project by opening several cards at once - this could spell trouble for your credit.
Ten percent of your FICO score comes from new credit applications. Too many in the span of a few months is problematic because it's perceived as a signal you're in financial trouble. Waiting about six months between credit card applications is wise for most people. If your score isn't in good shape to begin with, you might be better off putting as much as a year between new requests. Follow this guideline to keep a kitchen remodel or a backyard overhaul from demolishing your credit.
Getty Images
Your 30s are likely to hold plenty of exciting life changes, such as advancing in your career, getting married and starting a family. As other aspects of your life evolve, your your financial habits should keep pace. Here are five tips to keep in mind.
1. Aggressively Pay Down Debt
The longer you hold onto debt, of any kind, the longer you keep yourself in shackles that prevent you from working toward your other financial goals.
In your 20s, it can be hard to pay down debt very aggressively; you're often working an entry-level job, struggling just to pay the bills and find your footing. But now that you've settled into your career and gotten some of the preliminaries out of the way, it's time to clear the stage for the rest of your life.
If you have student loan debt, credit card debt or a car loan you're paying off, throw everything you can at paying those balances down pronto. Every extra month you make payments, you're accruing interest and tying up money you could be spending on other goals. Get debt off your back as soon as possible.
2. Revisit Your Budget
You should be reviewing your budget regularly to ensure it's aligned with your priorities. Now's the time to do some serious tweaking to make sure you're budgeting for what matters to you now.
You may have new costs like raising a baby or renovating your first home, while other costs may no longer be relevant.
You may not care as much for eating out or bar-hopping as you used to; perhaps now your favorite weekends might be spent curled up on the couch with your partner or playing with your kids. (Or you might be bar-hopping more than you did at age 22.)
You may start trying out recipes, realize you love cooking and stop relying on takeout to fill you up most nights.
Your budget will only work if you keep it in line with your needs and wants, and when those change, your budget should change with them.
3. Get Specific About Savings
In your 20s, you should be working to build an emergency savings fund and putting money aside toward any short-term goals, like saving to buy a car. As you get older, savings goals emerge that are bigger than anything you've saved up for previously -- like getting married, buying a house, starting a family or building your children's college fund.
Goals this big need a specific game plan, so start including a line in your budget for them. Do your best to estimate how much you'll need for each of these things and when you'll need it by. If you can't quite squeeze saving for these goals into your current budget, you may need to cut other budget areas, find a new income stream or postpone the goal (like buying a house) until you can save up more.
4. Check Your Insurance Coverage
You have more assets, and you may also have more people financially dependent on you. Make sure you have the coverage you need to protect you and your loved ones should the unexpected happen.
This includes health insurance, auto insurance, life insurance and renter's/homeowner's insurance. You may also want to look into disability insurance, which covers if you get injured or fall ill and are unable to work for an extended period.
5. Get Serious About Retirement
As your salary increases over the years, the amount of money you're putting aside toward retirement should also increase. You should be putting away at least 15 percent of your income into accounts like a 401(k) or Roth individual retirement account.
If you receive a raise or move to a new job with a higher salary, bump that percentage up, and consider earmarking any other windfalls for retirement, too. The more money you can put aside now, when you're in your prime and bringing in a steady income, the more secure your retirement will be. Rather than falling prey to lifestyle inflation, use any boosts in income to shore up for the future.
Paula Pant ditched her 9-to-5 job in 2008. She's traveled to 30 countries, owns seven rental units and runs a business from her laptop. Her blog, Afford Anything, is a gathering spot for rebels who want to ditch the cubicle, shatter limits and live life on your own terms -- while also building wealth, security and freedom.
Lynne Sladky/AP
NEW YORK -- Staples (SPLS) is looking into a potential credit card data breach and has been in touch with law enforcement officials about the issue.
The office supplies retailer said Tuesday that if it turns up any data discrepancies during its investigation, customers won't be responsible for fraudulent activity on their credit cards as long as it is reported in a timely manner.
"We take the protection of customer information very seriously, and are working to resolve the situation," spokesman Mark Cautela said in a statement.
Earlier this month Sears Holdings (SHLD) reported a breach at its Kmart stores that started last month, saying some customers' credit and debit cards may have been compromised. Other breaches have occurred at retailers including Target (TGT), Supervalu (SVU) and Home Depot (HD).
Shares of Staples, based in Framingham, Massachusetts, slipped 3 cents to $12.27 in midday trading. Its shares have fallen 23 percent during the past year.
CHICAGO -- Package delivery company United Parcel Service (UPS) said Monday that rates for its services within and between the United States, Canada and Puerto Rico will rise by an average of 4.9 percent as of the end of the year.
The Atlanta-based company said the rate changes for its ground, air, international and freight services would start Dec. 29.
Last month, the company's main rival FedEx (FDX) announced a similar rate increase of 4.9 percent, which also includes shipments between the United States and Mexico, plus within Mexico. FedEx's rate increase will take effect Jan. 5.
Fabrice Dimier/Bloomberg via Getty ImagesChristophe de Margerie, CEO of Total SA, photographed in 2012.By LYNN BERRY and LORI HINNANT
MOSCOW -- Christophe de Margerie, the charismatic CEO of Total SA who dedicated his career to the multinational oil company, was killed at a Moscow airport when his private jet collided with a snowplow whose driver was drunk, Russian investigators said Tuesday.
Three French crew members also died when the French-made Dassault Falcon 50 burst into flames after it hit the snowplow during takeoff from Vnukovo airport at 11:57 p.m. Monday local time.
Tatyana Morozova, an official with the Investigative Committee, Russia's main investigative agency, said investigators are questioning the snowplow driver, who was not hurt, as well as air traffic controllers and witnesses.
"At the current time, it has been established that the driver of the snowplow was in a state of alcoholic intoxication," Morozova said.
NTV television showed the charred plane lying on a grassy field. Though it had snowed earlier Monday in Moscow, it was unclear how much snow remained at the airport at the time of the crash.
Vnukovo is the airport used by Russian government officials, including President Vladimir Putin, and visiting foreign leaders. It also handles commercial flights from a separate terminal.
De Margerie, 63, was a regular fixture at international economic gatherings and one of the French business community's most outspoken and recognizable figures. His trademark silver handlebar earned him the nickname "Big Mustache."
A critic of sanctions against Russia, he argued that isolating Russia was bad for the global economy. He traveled regularly to Russia and recently dined in Paris with a Putin ally who is facing EU sanctions over Russia's involvement in the crisis in Ukraine.
According to the Kremlin, Putin sent a telegram to his French counterpart Francois Hollande, lauding de Margerie for being at the "origins of the many major joint projects that have laid the basis for the fruitful cooperation between Russia and France in the energy sphere for many years."
Hollande expressed his "stupor and sadness" at the news. In a statement, he praised de Margerie for defending French industry on the global stage, and for his "independent character and original personality."
De Margerie started working for Total in 1974 after receiving his degree because it was close to home. It was a difficult time to join the firm as the oil embargo, which led to a fourfold increase in prices, was coming to an end.
Rose Through the Ranks
"I was told 'You have made the absolute worst choice. Total will disappear in a few months,'" he said in a 2007 interview with Le Monde newspaper.
De Margerie rose through the ranks, serving in several positions in the finance department and the exploration and production division before becoming president of Total's Middle East operations in 1995. He became a member of Total's policy-making executive committee in 1999, CEO in 2007, before adding the post of chairman in 2010.
He was a central figure in Total's role in the United Nations oil-for-food program in Iraq in the 1990s. Total paid a fine in the U.S., though de Margerie was acquitted in France of corruption charges.
Under his leadership, Paris-based Total claims it became the fifth-largest publicly traded integrated international oil and gas company in the world, with exploration and production operations in more than 50 countries.
On Monday, de Margerie took part in a meeting of Russia's Foreign Investment Advisory Council with members of the Russian government and other international business executives.
Jean-Jacques Guilbaud, Total's secretary general, said the group would continue on its current path and that the board would meet in coming days to discuss who will succeed de Margerie. Total planned a minute of silence in its offices worldwide at 2 p.m. Paris time.
After falling slightly early Tuesday, Total's (TOT) share price closed 3.5 percent higher, even more than the 2.3 percent rise in the main Paris stock index.
-Hinnant contributed from Paris. Iuliia Subbotovska in Moscow and Angela Charlton in London contributed to this report.
Richard Levine/Alamy
Vermont-based ice cream maker Ben & Jerry's has decided to keep the name of its new ice cream flavor, Hazed & Confused, according to Bloomberg. The company had considered a change in response to the complaint of a couple whose son, Harrison Kowiak, died in a fraternity hazing incident in 2008. The parents said that the name was insensitive and belittled a dangerous campus practice.
Ben & Jerry's, which is owned by Unilever (UN), initially released the flavor in February 2014, reported Franchise Herald. The name is a reference to the phrase "dazed and confused," which is the name of a Led Zeppelin song and a 1993 coming-of-age move, according to Bloomberg. The ice cream contains chocolate and hazelnut, the latter being the source of the "hazed" part.
Lianne and Brian Kowiak took notice in September and complained to the company. The website StopHazing.org urged its readers to send protests to Ben & Jerry's. The company said that it had only received a handful of comments, but would consider a name change in its October management meeting.
Harrison Kowiak had a golf scholarship to Lenoir-Rhyne University. When a sophomore in 2008, he had pledged the Theta Chi fraternity, as the Tampa Bay Times reported. A lawsuit filed by the Kowiaks claimed that their 160-pound son and another boy had been put through a gauntlet line, where they were pushed, shoved, and tackled by fraternity members who weighed as much as 250 pounds and were on the school's football team.
At some point Kowiak could no longer stand. Instead of immediately calling 911, the lawsuit says, the fraternity brothers told him to get up and walk - which he did, until he collapsed.
Finally, the brothers loaded him into one of their cars and drove them to Frye Regional Medical Center. Kowiak, the lawsuit says, suffered seizures along the way.
Allegedly, the fraternity members told the hospital that Kowiak was hurt in a sports accident. The injuries were serious enough that he had to be airlifted to a major medical center, where he died the next day from blunt trauma to the head, according to a medical examiner.
Ultimately, Ben & Jerry's kept the name, with a corporate spokesperson telling Bloomberg that nothing in its marketing "condoned hazing, supported hazing, or even inferred hazing." In September, the company released a statement that said, "The flavor Hazed & Confused and Ben & Jerry's as a company in no way condone -- nor support in any manner -- the act of hazing or bullying. Ben & Jerry's believes that hazing and bullying have no place in our society."
The Kowiaks said that Ben & Jerry's had "completely avoided ... the unintentional implications of this chosen name," according to the blog GrubStreet.com.
It's not the first time Ben & Jerry's has faced controversy over its ice cream. In 2012, the company got into hot water over including fortune cookies in a flavor named for Jeremy Lin, a Harvard graduate who became a big professional basketball star, according to Boston.com.
NEW YORK -- McDonald's CEO Don Thompson said Tuesday the company hasn't been keeping up with the times and that changes are in store for its U.S. restaurants.
Starting in January, Thompson said McDonald's will "simplify" its menu to make room for restaurants to offer options best-suited for their regions. He also said the company planned to expand its "Create Your Taste" offering that lets people pick the buns and toppings they want on burgers by tapping a touchscreen. The program is currently being offered in Southern California.
"We haven't been changing at the same rate as our customers' eating-out expectations," Thompson conceded during a conference call outlining the changes.
The remarks came after McDonald's (MCD) said its profit sank 30 percent in the third quarter, with sales at established locations down 3.3 percent globally and in its flagship U.S. market. In the division encompassing Asia, where a major McDonald's supplier was shown on TV repackaging expired beef, the figure sank 9.9 percent.
In the U.S., McDonald's is fighting to hold onto customers amid shifting tastes toward food people consider more wholesome. A day earlier, for instance, Chipotle Mexican Grill (CMG) said its third-quarter sales at established locations surged 19.8 percent. Steve Ells, Chipotle's co-CEO, said the results show people are realizing "there are better alternatives to traditional fast food" and that he expects the trend to continue.
McDonald's, meanwhile, has already started trying to improve its image.
Last week, the company launched a social media campaign inviting customers to ask questions about its food. It began with frank questions like, "Why doesn't your food rot?" and "Is the McRib made from real pork?" showing just how bad some of the perceptions about McDonald's food can be.
In China, an undercover TV report this summer showed one of its major suppliers repackaging expired meat. The plant stopped operations and many of McDonald's restaurants in the country were left unable to sell burgers, chicken nuggets and other items. The chain's reputation took a hit as well.
McDonald's, which has more than 35,000 locations around the world, said it expects its challenges will continue into the current quarter, with global sales down for October as well.
For the quarter, revenue declined to $6.99 billion, short of the $7.23 billion Wall Street expected. Net income declined to $1.07 billion, or $1.09 a share. Adjusted for one-time costs, earnings were $1.52 a share. Analysts expected $1.37 a share.
Shares of McDonald's were down 59 cents at $91 in midday trading.
NEW YORK -- Coca-Cola said it plans to slash costs by $3 billion a year after the world's biggest beverage maker reported disappointing sales on flat soda volume.
The Atlanta-based company said it will reach its cost-cutting goal by 2019 through a variety of measures, such as restructuring its global supply chain. The maker of drinks including Powerade, Sprite and Diet Coke said the savings will help fund the marketing that's needed to drive up sales.
As sales of their drinks have slowed, Coca-Cola (KO) and rival PepsiCo (PEP) have both sought to improve their financial performance by trimming costs. In the U.S., they're also trying to boost sales by pushing "mini-cans" that are positioned as a way to control portions.
For the quarter ended Sept. 26, Coca-Cola said global beverage volume rose 1 percent, as an increase in non-carbonated drinks lifted soda volume. In its flagship North American market, the company said soda and non-carbonated drinks each fell by 1 percent.
Earlier this month, PepsiCo said soda volume for the region fell 1.5 percent for the quarter, while non-carbonated drinks rose slightly.
Although Coca-Cola and PepsiCo sell a variety of other drinks, both are trying to figure out how to turnaround their flagship soda businesses. Americans have been cutting back on soft drinks over the past decade, in part because of concerns about sugar. More recently, executives have blamed concerns about the artificial sweeteners for even steeper declines in diet sodas.
In the latest quarter, Coca-Cola said its focus on smaller sizes helped lift revenue for North America, even though volume declined.
Coca-Cola is also increasingly looking elsewhere for growth, and has acquired stakes in single-serve coffee maker Keurig Green Mountain and energy drink maker Monster Beverage.
Coca-Cola said profit nevertheless fell 14 percent, dragged down by unfavorable currency exchange rates. The company said it expects this year's earnings per share to miss its long-term target of high-single-digit growth. It also lowered the low end of its long-term revenue target, and its stock tumbled more than 6 percent.
Coca-Cola Co. said it earned $2.11 billion, or 48 cents a share. Adjusted for one-time items, it earned 53 cents a share, topping the 52 cents a share analysts expected, according to Zacks Investment Research.
Revenue was $11.98 billion, which missed Street forecasts for $12.14 billion.
Coca-Cola's shares fell $2.43, or 5.6 percent, to $40.86.
cbs.com
Time Warner's (TWX) HBO and CBS (CBS) last week become the latest networks to announce plans to reach consumers who aren't interested in traditional cable and satellite TV packages.
CBS is charging $5.99 a month for CBS All Access, a digital platform that provides streams of current seasons of 15 prime-time shows the day after the episodes air. Past seasons will be available for eight shows, and several CBS classics including "Star Trek" and "CSI: Miami" will be in the mix. There is also live streaming of more than a dozen local CBS TV stations, but "some sporting events, including NFL coverage, are not available," CBS says.
HBO wasn't as forthcoming with details on pricing and availability, but the leading premium movie channel did back reports that in 2015 it would be rolling out its first domestic service that doesn't require a pay-TV relationship. HBO tested an HBO Go-like platform in Scandinavia last year as a stand-alone offering.
Nothing but Net
It's not just HBO and CBS joining Netflix (NFLX) and Amazon.com (AMZN) with what the industry calls "over-the-top" streaming platforms, which don't require contracts with satellite and cable providers.
Earlier this month Disney's (DIS) ESPN turned heads with a new deal for pro basketball. The sports programming leader struck a deal with the NBA that includes the ability to stream out-of-market games to folks who don't have existing pay-TV arrangements. ESPN -- just like HBO -- had previously limited streaming access to those who could verify cable and satellite subscriptions that include the respective channels.
Disney, CBS and HBO have been served well by the service providers that bundle channels together at high costs to consumers. However, they also realize that younger consumers are cutting the cord -- or never paying for cable or satellite TV because they believe everything that they want to watch is online. "There is a millennial consumer out there who has a different approach to the traditional cable or satellite package," NBA commissioner Adam Silver said in response to the new ESPN deal.
The Future Will Get Complicated
Consumers are generally fed up with paying for a ton of channels that they don't watch, but this doesn't mean that the future will be cheaper. The more popular channels will want to charge more for direct access.
Media-research firm SNL Kagan finds that consumers are paying a median monthly cost of just 14 cents per channel, but that goes as high as $6.04 for ESPN. You can be sure that ESPN will charge more than $6 for monthly access to its content.
Cord cutters may be able to cherry-pick from among more channels, but things will add up in a hurry as the streaming services pile up. Another concern is that the same companies that provide pay-TV providers often control online connectivity. The country's two largest cable providers account for 33 percent of the pay-TV market, and they also command 36 percent of the broadband audience.
Motley Fool contributor Rick Munarriz owns shares of Netflix and Walt Disney. The Motley Fool recommends and owns shares of Amazon.com, Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. Check out our free report on high-yielding dividend stocks.
WASHINGTON -- U.S. homes sold in September at their fastest clip this year, a sign that the housing market is shaking off a slowdown that began in the middle of 2013.
The National Association of Realtors said Tuesday that sales of existing homes rose 2.4 percent from the previous month to a seasonally adjusted annual rate of 5.17 million. Still, the sales rate has dropped 1.7 percent over the past 12 months.
Investors have retreated from the market over the past year. Their departures are being offset by existing homeowners who are upgrading to more expensive properties or downsizing after having raised their children. First-time buyers comprised just 29 percent of sales, well below their historic average of roughly 40 percent.
The figures suggest that the sales decline that began last year has ended, although home-buying is unlikely to surge back to their historic averages.
"The worst is over, but don't expect a rapid rebound in activity or prices," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Rising prices through much of 2013, weak income growth and tighter credit standards have priced out many would-be buyers. Median home prices rose 5.6 percent over the past 12 months to $209,700.
Many homeowners are still coping with the fallout from the meltdown in home prices that began roughly seven years ago. And prices continue to recover from the depths of that housing bust, although that growth has slowed after climbing at double digit levels in many cities last year.
Median household incomes have yet to completely rebound and remain below their 2007 levels after adjusting for inflation. Limited income gains have cut into the cash flow and down payment savings needed to purchase a home. The federal regulator overseeing mortgage giants Fannie Mae and Freddie Mac is considering an option for lower down payments, so that more people can qualify for a mortgage.
Lower Rates Draw Buyers
More buyers may also return the market after the average 30-year fixed rate mortgages dropped below 4 percent last week, down more than half a percentage point from the start of 2014. Still, average rates were as low as 3.34 percent In January 2013, and there are few signs that home sales will surge any time soon.
September sales improved in the South and West compared to the prior month, ticked up slightly in the Northeast and fell in the Midwest, according to the Realtors' report. The share of purchases by investors fell to 14 percent from 19 percent a year ago.
The Realtors have projected that 4.94 million existing homes will be sold this year, down 3 percent from 5.09 million in 2013. Analysts generally associate sales of roughly 5.5 million existing homes with a healthy market.
A separate Realtors index tracking the number of signed contracts to purchase a home slipped in August, falling 1 percent compared with the prior month to 104.7. Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.
Construction data suggests a shift away from home ownership toward renting.
The Commerce Department reported last week that housing starts rose 6.3 percent to a seasonally adjusted annual rate of 1.017 million homes, with almost all of the gains coming from the building of apartments.
Apartment construction has surged 30.3 percent over the past 12 months, almost three times the rate of growth for single-family houses.
Dish Network has stopped carrying Turner Broadcasting's channels, including CNN, Cartoon Network and Adult Swim, as the companies failed to renew their distribution deal.
Turner Broadcasting, a unit of Time Warner (TWX), said Tuesday it worked for months to come to an agreement with Dish and accused the satellite TV company of "operating in a disruptive manner."
"We regret the service disruption to our customers, and remain committed to reaching an agreement that promptly returns this content to Dish's programming lineup," Warren Schlichting, Dish's senior vice president of programming, said in a statement.
We are hopeful our counterparts will return to the negotiating table, and we'll get a deal completed.
Turner and led Dish, which is led by media mogul Charlie Ergen, didn't disclose if higher carriage costs led to the breakdown of the talks.
Dish Network (DISH) shares were up 2.5 percent at $60.17 midday Tuesday on the Nasdaq.
"We are hopeful our counterparts will return to the negotiating table, and we'll get a deal completed," Turner said in a statement.
Analysts said dropping of channels by satellite and cable operators was routine.
"It is not like you are dropping ESPN or some of the other widely watched channels ... [the Turner channels] are not game changing," ISI Group analyst Vijay Jayant told Reuters.
Dish has in the past blacked out channels of networks over price increases.
AMC Networks, home to popular shows such as "Breaking Bad," "The Walking Dead" and "Mad Men," was dropped from Dish's network in 2012 after its contract with the satellite TV company expired without a new agreement.
Dish, the second-largest satellite TV provider behind DirectTV, had dropped AMC for about three months because it was charging fees that were too high.
"I think these deals tend to get resolved. It's pretty customary to play hardball. Programming expenses have been a problem for a lot of companies," Macquarie Research analyst Amy Yong told Reuters.
-With additional reporting by Supantha Mukherjee in Bangalore.
October is a great time to show off your creativity with a festive Halloween party, but the expenses can add up. Here are a few great ways you can host your fete while avoiding scary high costs.
First, adding a bit of tonic water to your Halloween punch will give your drinks a ghoulish glow under a black light. This can work for other recipes that require a little water, like Jell-O.
To add a fiendish flair to ordinary white candles, melt a red candle over them and let the wax drip down the sides. This easy trick will add a ghostly flavor to any party!
Another crafty way to light up your Halloween is by making your own creature cup-lights. Start by drawing some creepy faces onto upside-down colored plastic cups with a black marker. Once you have your designs, simply place some LED tealights underneath to bring your monsters to life. For safety, remember to only use LED tealights, not the regular ones.
Lastly, your smaller pumpkins can still get some big scares with this easy trick: Carve out a space for the mouth, add a pair of plastic fangs, push in few pins for the eyes and you'll have some scary squash to decorate the house with.
Plastic fangs also make clever napkin rings. Try putting them around the dinner table to add a some extra "bite" to your meals.
If you're thinking of throwing a Halloween party, keep these tips in mind. You'll see that you can keep it fun and creepy without it costing frightening fortune.
Step out of your car in front of Tabasco's manufacturing plant on Louisiana's Avery Island and the first thing you'll notice is the sweet smell of pepper in the air. It dances on the wind, tickling your nostrils and helping to clear your throat.
The island, home of Tabasco since 1868, is only a two-hour drive west of New Orleans, yet feels like another world with its lush greenery and tranquil inlets, just 14 miles from the Gulf of Mexico. And then there's the scent of those peppers that seem to draw you to the pepper sauce factory.
In the plant's mixing room, the red-orange liquid that becomes Tabasco fills wooden drums two stories high where it is stirred consistently for 28 days before bottling. Here, the sweet pepper smell takes on a more sinister incarnation. The tickle becomes a burn. Every breath you take brings a cough. You'll look around in distress and notice that while you are struggling for air, the employees tending to the tabasco seem unharmed. They walk among the vats breathing easily.
The cliched explanation for this phenomenon would be to say that the spice is in their blood. But here cliche is not far from truth. While Avery Island is the longtime home of Tabasco, it's also home to 180 people, many who are part of the company's 200-person workforce. For some, their families have lived on this island for almost as long as Tabasco has been made.
Credit: Man Made ContentChapter 1: Recipe for Success
To understand the story of Tabasco, you need to understand the sauce. Read the ingredients on the bottle and the product seems overly simple, almost unimpressive. But don't let the mere three ingredients of vinegar, salt and tabasco pepper fool you. The thousands of miles and hundreds of hours that go into making one bottle is staggering
Let's start with the peppers themselves. They're grown from heritage seeds that share the same genetics as that first pepper plant grown beside a chicken coop on Avery Island around the time of the Civil War. The seeds have never been genetically altered and are so precious that a sample of them are under lock and key in a safe on Avery Island.
All tabasco peppers used for the sauce start as seedlings in the spring and must be hand-picked at precisely the right time, in the early fall, when the peppers reach that perfect shade of red. If the pepper is picked too early or too late, the taste is compromised.
Although the company would like to grow all peppers on the island, the sheer quantity they need, coupled with the plant's volatility, makes that impossible. So over the past hundred years, the company has branched out, working with 400 small farmers across the globe to help grow the plants that start from seed plants grown on the island. The tabasco plant is susceptible to all sorts of diseases, so in order to reduce the risk of losing an entire year's crop, each farm -- from South America to Africa -- only grows about two to three acres.
Once the pepper crop is picked, it's mashed at the farms and then sent back to the tabasco plant. There, it's mixed with salt from the island, which geologically is a salt dome at the edge of the Louisiana bayou and the Gulf of Mexico. The mash mixture is then placed in oak barrels and aged, like a wine or whiskey, for three years. Finally, the mash of pepper and salt is brought to the mixing room, where extra liquid is strained out, vinegar is added and the 28-day mixing process begins. After that, it's strained and bottled.
Despite some changes to the supply chain and physical plant, that's the way Tabasco has been made since Edmund McIlhenny invented the sauce in the 1860s. Five generations later, the McIlhenny Co. -- the official corporation behind Tabasco -- is still and always has been run by a direct descendant of the inventor.
Credit: Man Made ContentAnthony "Tony" Simmons, president and chief executive officer, McIlhenny Co.
Anthony "Tony" Simmons, the current president and chief executive officer, is the seventh McIlhenny in a chain of direct descendants to keep his family's business thriving. Like most of his family, he feels a deep connection to the business and the island that's been its home for almost 150 years.
Growing up in New Orleans, Simmons spent the summers on Avery Island, hiking and fishing with his cousins and employees' children. But for 25 years, Simmons worked in the heavy equipment business, living in as diverse places as Houston, Texas, Singapore, and Charlotte, North Carolina. When Simmons sold his business in the late 1990s, his cousin Paul, who was taking over as McIlhenny's chief executive officer at the time, offered him the chance to move back to Avery Island and join the family business as an executive vice president.
"The first thing that crossed my mind was whether my wife was going to be willing to agree to leave Charlotte, because we'd been there for 10 years," Simmons remembers. "But she did agree to move, to come to Avery Island to do this for my family."
In fact, it's the connection the McIlhennys have to this little slice of the Louisiana bayou that Simmons attributes to the company's stability and success. The island has been jointly owned since the early 20th century by two sides of the same family -- the McIlhennys and the Averys -- through a land corporation. The business arrangement ensures the island will always be owned by them as a whole entity.
"I think part of the reason we've been able to stay family owned and operated is because of Avery Island," Simmons says. "This sense of place, I think, has as much to do with the family's unwillingness to sell out. The two are interrelated."
Chapter 2: Yo Quiero Tabasco?
It's not uncommon to see Tabasco bottles on diner tables across the United States, but you're just as likely to find a bottle on a street cart in Taipei or in a Parisian brasserie. Or as Simmons found it, in a lodge outside of Cordoba, Argentina. There on a hunting trip, Simmons was seated next to another guest, a man from Mexico. "When he sat down, there was some Tabasco on the table," Simmons says. "And the man goes, 'Oh this is wonderful that they have Tabasco!'"
When the lodge owner told the Tabasco fan who Simmons was, the man left the table, promising to be back momentarily. When he returned, "he had a little bubble-wrapped thing in his hand," Simmons remembers. "He popped the wrap off and it was a two-ounce bottle of Tabasco! He said, 'I never go anywhere without Tabasco. It's my favorite product in the world.' "
Indeed, the spicy sauce has found a global fan base, and is sold in 186 countries. But for a brand with an iconic worldwide status, the McIlhenny Company is tiny compared to other American companies with global appeal, such as Coca-Cola and Levis.
While those brands have global advertising and operations, Simmons attributes Tabasco's success to word of mouth. In the company's vaults is a letter sent by a British soldier serving in India during the 1880s to his mother back home. In the note, the soldier tells his mother of an amazing sauce he's encountered and asks that she search for it to send to him. At that time, Tabasco was not being exported out of the United States, but Simmons says customers had started sending the sauce around the country and the world.
Simmons also believes its appeal comes from Tabasco's ability to mesh with any culture's food. "One of the nice things about the sauce is that it tends to enliven the flavor of the food, not change it," he says. Unlike other condiments like ketchup or mustard, which overwhelm or mask food flavors, Tabasco adds to it. "It works with everybody's food," he says. "That's why it's been so well-received around the world."
Credit: Man Made ContentChapter 3: More Than Saving Soil
The McIlhennys and their peppers may have found global success, but that doesn't mean they rest on that history. Both the business, and the island that houses it, must be constantly cultivated. Today, those responsibilities are increasingly in the hands of Simmons' cousin Harold "Took" Osborn.
Born in Canada and raised in New York City and Connecticut, Osborn -- like many members of the McIlhenny clan -- spent his summers on Avery Island. The Southern lifestyle agreed with him, and after high school up North, Osborn returned to the bayou to work in the oil fields of Louisiana and attend the University of Southwestern Louisiana, just up the road from Avery Island in Lafayette.
He left for a time to explore the world, but 15 years ago returned to the island to work with his cousins. Despite his admittedly restless spirit, the vibe of Avery Island has kept him settled, "I've always loved it down here," Osborn says.
Perhaps that love of the island itself was the reason Osborn was given the job of overseeing the conservancy of this two mile-wide piece of Louisiana. "We own a lot of marshland and have done a lot of saving and protecting it," he says. "All of the channels here allow for a lot of salt water to enter the environment. The salt water comes in and scours the channels -- the marsh starts falling in and the land erodes very quickly."
Credit: Man Made ContentHarold Osborn, senior vice president at McIlhenny Co.
To combat this erosion, Osborn has come up with creative solutions to save the island, such as planting native grasses in marshes that have begun to disappear. He's also using another American-made product to protect the marshes -- Hesco baskets -- named for the company that makes the expandable wire baskets that can be filled with sand or dirt to protect areas from flooding or erosion. "They're really just hogwire baskets and we'll put mud and grass in it and place in those areas that have really large waves, or in little areas -- anywhere that needs protecting," he says.
Every marshland acre of the 50,000 that make up Avery Island is equally significant to Osborn -- and with good reason. "It's important to protect this island, which has really kept my family together through salt and oil and Tabasco and everything else," Osborn says, mirroring the sentiments of Simmons. "It's the feeling that the land has been good to you, so you're good to it."
But Osborn's job doesn't stop with saving the island, but also looking outside of it to keep the Tabasco brand relevant and growing globally. "I'm trying to find new ways of getting people to use the product," he says.
"A lot of people [around the world] already understand spice, so you don't have to be squeamish about showing them a product with heat," he says. Instead, Osborn is working on how people can use Tabasco differently from country to country.
Chefs are his new brand ambassadors. "We're spending a lot more time in food service and getting involved with chefs," Osborn says. "The Tabasco chef schools we put on are getting these young chefs who are just learning how to use the sauce. It helps them and it helps us. We just want people to be creative with the product."
"Like in Japan," Osborn continues. "We've never been much a part of traditional Japanese food, but the younger generation seem to be much more willing to experiment. There's a lot of food modernization or fusion that's going on. They'll take Japanese food and mix it with Mexican!"
For a man who's lived in New England, the Deep South, and a few places in between, doing many different jobs in the family company has been satisfying and grounding to Osborn. "This definitely isn't corporate America," he says. "It's a happy product and fun to be associated with. You're proud to do what you do here. It's hard to find that kind of job anywhere else."
www.starbucks.com
These are hard times for the soft drink industry, but no one seems to be telling Starbucks (SBUX). The java giant introduced Fizzio this summer, serving up three flavors of handcrafted carbonated beverages.
It's an odd time for Starbucks to be rolling out new soft drinks. Consumption in this country is waning. We saw that earlier this month when PepsiCo (PEP) posted quarterly results that were more flat than fizzy, with carbonated-soft-drink volume declining 1.5 percent in North America compared to the same period a year earlier. The Pepsi provider saw soda sales in North America slip 2 percent the quarter before that.
We also saw that on Tuesday morning when Coca-Cola (KO) reported fresh financial results. Sparkling-beverage sales in North America declined by 1 percent, and that was with the company gaining market share on the heels of the relatively successful Share a Coke campaign, in which cans and bottles were emblazoned with names and terms of endearment.
(Star)Bucking the Trend
The world's two largest pop stars are faltering when it comes to carbonated drinks in this country, and they're not alone. Industry trade watcher Beverage Digest reports that overall soda volumes have fallen for nine years in a row. Sales plunged 3 percent in 2013, with diet sodas suffering an even bigger decline.
Starbucks can always suggest that its foray into premium soft drinks is about more than what the masses are sipping. It's focusing on high-end root beer, ginger ale and lemon sodas that are made at the store just as they are ordered. Baristas mix up all-natural ingredients. The spiced root beer soda, for example, combines cane sugar, cinnamon, nutmeg, clove and star anise to flavor carbonated water. It's made with the same handcrafted detail and human theater as Starbucks' signature brews.
The early results have been encouraging, and not just because it gives Starbucks yet another product line to sell.
"Consumer response to Fizzio has been strong," Starbucks noted in July's conference call, pointing out that after introducing it through 3,000 stores in the Sun Belt a month earlier, successful tests in Japan and Singapore mean Fizzio will be added to select international markets in the coming quarters.
It's not just about giving non-coffee drinkers something to do while their friends are sipping on their vanilla lattes and mocha cappuccinos. Starbucks hopes that these handcrafted beverages will attract customers during the afternoons and evenings, when things typically slow down for their coffee orders. It is also hoping that it results in a spike in food orders to go alongside the refreshing beverages.
A Latte Potential
Starbucks is trying to do for soda what it did for premium coffee. Starbucks was inspired by the artsy European coffeehouses, but it was ultimately about taking a throwaway morning beverage that consumers associated with greasy-spoon diners or caffeinated fuel to accompany the morning drudgery and transforming it into an aspirational product.
It worked, of course. Starbucks serves 70 million customers a week through its growing empire that currently consists of 21,000 stores in 65 countries. It doesn't matter if soda sales have been slumping for years. Coffee wasn't very exciting until Starbucks made bean-water fashionable.
Growing Fizzio's success both here and abroad won't be easy at a time when the fizz has gone flat for the carbonated beverage industry, but Starbucks knows a thing or two about turning a tired drink category into something that's relevant again. Coca-Cola and PepsiCo had better hope that Starbucks succeeds, because clearly they can't turn things around on their own.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, PepsiCo, and Starbucks. The Motley Fool owns shares of PepsiCo and Starbucks and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola.Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.
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