Counterparties: The hourglass economy
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Whatâ€™s a retailer to do with a wideningÂ gapÂ between rich and poor customers?Â StarbucksÂ is the latest chain to target Americaâ€™s â€śhourglass economy.â€ť By cutting 10% off its grocery-store coffee bags while keeping in place the price hikes it put in place in its cafĂ©sÂ last year, Starbucks is simultaneously pushing both its discount and premium products.
Itâ€™s a sensible strategy: low-wage occupations haveÂ dominatedÂ new jobs in the last few years, even as high-earnersÂ captured 121% of the income gainsÂ of the economic recovery. In 2011, the WSJ notedÂ Procter & Gamble’sÂ â€śhigh and lowâ€ť approach to consumers by promoting its expensive Olay and Gillette products, while introducing a bargain dish soap for the first time in 38 years. The shrinking of the middle class â€śrequired us to think differently about our product portfolio and how to please the high-end and lower-end markets,” a P&G executive told the WSJ. “That’s frankly where a lot of the growth is happening.” Frito-Lay, Anheuser-Busch InBev, and ConAgra have also developed or expanded their offerings at both ends of their product lineups, according toÂ LEK Consulting.
This is a strategy recently-ousted JC Penney CEO Ron Johnson would have been wise to pay attention to, writesÂ Rita McGrath. Johnsonâ€™s goal of turning the retailer into â€śBloomingdaleâ€™s for the mass marketâ€ť was a non-starter â€śbecause the mass market is gone.â€ť
Which isnâ€™t to say this approach works for everyone. After trying to go high end with smoothies and salads,Â McDonaldâ€™sÂ has now reverted to emphasizing its Dollar Menu more aggressively this year after promotions of its more expensive menu items failed to Â â€śresonat[e] with consumers,â€ť in the words of CEO Don Thompson. â€“Â Peter Rudegeair
On to todayâ€™s links:
Warren Buffet on gold: bandwagon investors Â ”create their own truth â€“ for a while” â€“Â Ivan Hoff
Five reasons that might explain the yellow metal’s price collapse â€“Â Matt Phillips
Elizabeth Warren’s statistically savvy dismantling of regulators’ $9.3 billion foreclosure settlement â€“Â Lisa Pollock
More people doesn’t necessarily equal higher land prices â€“Â Noah Smith
The terrifying, self-perpetuating reality of long-term unemployment â€“Â Matthew Oâ€™Brien
“If youâ€™ve been out of work for more than six months, youâ€™re essentially unemployable” â€“Â Brad Plumer
Goldman Sachs may have just inadvertently strengthened the case for breaking up the big banks â€“Â Simon Johnson
The full GS research report on the Brown-Vitter bill â€“Â Hamilton Place Strategies
Already overpaid board members get a $75,000 pay raise â€“Â DealBook
And, of course, there are many more links atÂ Counterparties.