The Week Coming Up - GDP and PCE, Subleasing Warehouse Space, Supplier Concentration, Halloween and who are Veronica and Miguel Garza?
The Week Ahead
I usually regurgitate what happened in the past week, but I think what’s more important is what is happening this week.
GDP for the third quarter comes out this week.
That’s gross domestic product for you non-econ majors. It is essentially a measurement of what the entire country produces each quarter.
To compare it to your business, it would be similar to total sales less the cost of goods sold. Except for the entire country.
Q1 came in with growth at 1.6% and Q2 grew at 3%. Q3 is expected to come in at 3.2%.
That’s good. Look to see what comes out on Wednesday.
PCE for the month of October comes out this week.
As many of my readers know, that is the Personal Consumption Expenditures Index, another measurement of inflation.
That’s very similar to the CPI, the main difference being that this is the index that the Fed put’s most of their money on.
While CPI measures goods and services, PCE also includes goods and services purchased by employers on behalf of consumers, like health insurance.
The PCE is expected to come in at 2.1%, down from the previous month of 2.2%.
Core PCE (taking out food and fuel costs) is expected to be 2.6%, down from 2.7%.
This comes out on Thursday, All Hallows Eve. Let’s hope it’s a treat for the Fed and not a trick for the stock market.
The jobs report comes out on All Saints Day/All Souls Day/Dia de los Muertos. We’ll see which of those monikers is appropriate.
Extra Space
Remember during the pandemic, everyone was buying stuff, having it delivered and it was all about the supply chain?
Well, not so much anymore.
Home Depot is sub-leasing four buildings and getting rid of 4,700,000 square feet of space, including a building in Riverside, California.
The inventory and supply chain crunch is pretty much done, and deliveries are back to normal, it you consider normal various worker strikes at the ports and one or two manufacturers.
Companies are right-sizing what they need to have.
Apparently, Home Depot is not the only one. There is 199,000,000 square feet of space available for sublease in the U.S.
That’s more than what was available in 2009. Ouch.
Supplier Concentrations
Who knew that 60% of all intravenous (IV) fluid production in the USA is in one facility in North Carolina? Well, a lot of people do now.
Baxter International’s plant in Marion, North Carolina was contaminated by flood waters from Hurricane Helene and production will not be able to re-start until the end of the year.
It is currently able to supply 60% of the product it used to provide by flying in 200 plane loads of IV fluids through the year end. That means we are still at only 76% of demand.
That’ll impact elective surgeries.
Instead of IVs, hospitals are asking patients to drink water or Gatorade. Really.
Halloween Mixer Conversation Piece
Total consumer spending per the (National Retail Federation) on Halloween for the last five years is as follows:
2019 - $8.8 billion
2020 - $8.0 billion
2021 - $10.1 billion
2022 - $10.6 billion
2023 - $12.2 billion
Consumers spent the most on costumes, followed by candy, decorations, and greeting cards.
Sorry, this is only good for killing 3 minutes at your mixer this week, but I felt I had to put something in on Halloween.
Who are Veronica and Miguel Garza?
They are third generation Mexican Americans living in Laredo, Texas, with five other siblings.
As a teenager, Veronica discovered she could only eat gluten-free food. That eliminated eating tortillas. At family barbecues, she would bring her own lettuce wraps.
So, she started experimenting with almond flour and after a year of recipe adjustments, she tried it out on her family. And they all loved it.
She began selling them at the family cross fit gym and they were a hit.
She found a need in an unserved market – check that box. But it wasn’t enough to quit her job teaching at a community college.
Miguel was going to law school in Austin, Texas and found a food co-op named Wheatsville Co-op that took a chance on them. In May, 2014, they stocked the shelves at $12/dozen – not inexpensive. They sold out in a day. In six months, they were the best-selling item in the entire refrigerated section. Check that box.
They found a gluten free commercial kitchen in Austin; Veronica would leave work on Friday, drive 3 hours and spend the weekend pressing tortillas. She quit her job at the end of the year and moved in with Miguel in Austin. They asked anyone they knew to help them out. Check that box.
They raised $1,000,000 from angel investors to buy equipment to automate the pressing. Check that box.
And they didn’t pay themselves a penny. Check that box.
Then they got into Whole Foods. Check that box.
They didn’t stay comfortable with one product. They branched out into more and more gluten-free products. Check that box.
A private equity firm got to know the family over two years and invested $90,000,000 in 2018.
Miguel told investors “I want to build a billion-dollar, better-for-you, Mexican American food brand.”
From the PR Newswire: PURCHASE, N.Y. and AUSTIN, Texas, Oct. 1, 2024 /PRNewswire/ -- PepsiCo, Inc. (NASDAQ: PEP) ("PepsiCo") today announced that it has entered into a definitive agreement to acquire Garza Food Ventures LLC, dba Siete Foods ("Siete") for $1.2 billion.
Forget the box, cash the check!
Siete Foods. Named after the seven siblings that started the company 10 years ago.
I hear from people all the time that tell me they want to start a company and how can I help them with financing. The fact that they haven’t started tells me they really don’t want to, right now. That doesn’t mean they won’t, it just means they are not ready at this point in time. When they have found something more important than the fear of doing it, that’s when they will start it. And the best time to start is now.
In one of my previous blog posts, I talk about Athletic Brewing. Both companies have virtually the same blueprint and both are phenomenally successful. They have given you the outline, you just have to create the path.
Just do it.
