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Beer cans and business lessons

BY Ken Clark

Today’s topic: beer cans. Like many kids in the 1970s—the decade when housing starts soared to their highest peak—I collected beer cans. One day, while traveling through New Jersey on a family vacation, my father and I visited his old friend George, the proprietor of George’s Liquors & Deli in Lyndhurst.

George would later describe the challenges of the mom-and-pop deli in an era of intense competition from larger chains. Case in point: He told us he could walk into the A&P liquor store down the street and buy a case of Budweiser cheaper than he could buy it from his own Budweiser distributor. That arrangement hurt him, but he survived it.

Business lesson No. 1: Keep your competition close, keep your distributor closer.

When my father and I explained that we were hunting for beer cans, George led us into his small, cluttered storage room. There, we made a gigantic discovery: three mint-condition six packs of Krueger Cream Ale, untouched by human hands for at least three decades.

There is no analogy—neither in archeology nor mythology—to adequately describe the magnitude of this discovery. One can of Krueger Cream Ale flattop (meaning a can opener was needed to puncture drinking holes) could be traded for entire collections. And we had stumbled upon three mint-condition six packs, full of beer. Cost to us: $0.00.

Business lesson No. 2: Opportunities tend to pop up when you least expect them. But you have to aggressively look for them, and even then you have to have the relationships firmly in place. (See Carter Lumber profile.)

Back home in Indiana, I told some key collectors about my discovery. Almost immediately several kids I didn’t even know showed up at our house to gaze at our treasures. I vaguely remember that a can-related scuffle broke out in the Clark family laundry room, our gateway to the garage and beer-can gallery.

Around this time, my father gave away some of the coveted cans to people I hardly knew. On one occasion, I returned home from a bike ride to see an older brother of a friend walk away from our garage carrying two cans, while my father waved goodbye to him. I was dumbfounded.

“Why did you give him two Krueger Cream Ales?” I asked.

“Because he asked,” he said.

Business lesson No. 3: Sometimes, when dealing with customers or colleagues, all you have to do is ask.

I have no idea where those cans are now.

Business lesson No. 4: Some of the things that meant so much to us in the 1970s aren’t so important anymore.

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Smith & Hawken to close

BY HBSDEALER Staff

Smith & Hawken, the industry’s first upscale gardening retailer, will close its doors by the end of the year. Although the 56-unit chain had been struggling for months, the announcement by parent company Scotts Miracle-Gro came as a surprise to many employees, according to several media reports.

Store liquidation sales, which are being run by a third party, began yesterday.

“We would have preferred to sell the Smith & Hawken business in order to protect jobs and keep the retail franchise intact,” said Scotts Miracle-Gro CEO Jim Hagedorn in a July 8 filing with the Securities and Exchange Commission. “Unfortunately, the combination of a weak economy and the lack of scale proved too great to overcome.”

The Marysville, Ohio-based company, better known for fertilizers and pesticides than teak benches and English gardening shears, paid $72 million (including $14 million in debt) for Smith & Hawken in 2004. In the ensuing years, Scotts tried to boost revenues by broadening the brand’s merchandise and inking deals with True Value and Target, among other initiatives.

Last year, Scotts brought in Pat Farrah, one of Home Depot’s original founders, to turn the company around. Farrah closed a number of stores and made cuts in staffing and salaries, but the chain continued to lose money. In the fiscal quarter ending March 28, sales at Smith & Hawken fell 23%.

At an investors conference in February, Hagedorn said he was inclined to sell Smith & Hawken for a reasonable offer. But until that point, Scotts intended to “run it hard.” The strategy included job cuts and 25% pay cuts.

At the same conference Farrah talked about the difficulty of selling the business. “We didn’t sell it because we couldn’t sell it,” he said. “And ‘Can’t sell it’ means, I’m not writing a check for someone to take it.”

Scotts expects to incur charges of $25 million in connection to the closure of the business.

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Tomato plants pulled from retail shelves

BY HBSDEALER Staff

Home gardeners may end their tomato-growing season a little early this year, as a deadly pathogen that attacks tomato plants has been found in retail nurseries from Maine to the Carolinas. Home Depot, Lowe’s and Wal-Mart have removed tomato plants from their shelves in several northeastern states, although many consumers may already have infected plants growing in their backyards.

Called “late blight,” the pathogen is not a new disease, according to Meg McGrath, professor of plant pathology at Cornell University. The Irish potato famine of the 1840s was blamed on the same fungal infection. But the cool and wet month of June in the eastern United States created unusually favorable conditions for the organism, which spreads through airborne or waterborne spores. And instead of being contained to commercial nurseries, who typically see it at the end of the growing season, evidence of late blight was detected during late June in a garden center in Ithaca, N.Y.

“As far as we known, it’s never shown up in the retail centers before,” said McGrath. By the first week of July, reports of late blight were coming in from every state between Ohio and Maine, along with Florida, Alabama and the Carolinas. Many of these sightings occurred at big-box retailers, most of whom use an Alabama grower called Bonnie Plants as their tomato plant supplier.

Dennis Thomas, general manager of Bonnie Plants, confirmed that his growing operation supplies tomatoes (along with other containerized vegetables and herbs) to Home Depot, Lowe’s, Wal-Mart and Kmart. The company got word about the late blight case in New York State on June 26, according to Thomas. “As soon as we heard, we asked [state authorities] to inspect us,” he said. Since then, inspectors in New York, New Hampshire, Maine, Pennsylvania and New Jersey have visited their greenhouses; none have found any plants infected by late blight, Thomas said.

“You can’t blame any one vendor,” Thomas said. This pathogen has been around forever.” Other “host” plants that carry the same pathogen — and can spread it to tomatoes — include potatoes, celery, petunias and a weed called bittersweet nightshade.

As a precaution, Bonnie Plants has removed all tomato plants from Home Depot, Lowe’s, Wal-Mart and Kmart stores in New York, New Jersey, New Hampshire, Vermont, Massachusetts, Connecticut and Maine. The grower operates on a consignment, or pay-by-scan arrangement with its big-box customers, so the company is responsible for the merchandise until it is sold.

Wal-Mart is offering customers a full refund on their tomato plants if they return them or their receipts, according to a spokesperson. Home Depot has modified its existing one-year plant return policy, given the situation. “We’re not asking customers to bring the [diseased] plant back to the store,” Sarah Molinari told Home Channel News. The Atlanta retailer will also relax its receipt requirement. “We’ve instructed our store managers to work with customers on this,” Molinari said.

AState of Massachusetts advisory bulletin recommends digging up infected tomato plants, placing them in plastic bags and throwing them in the trash. McGrath, the plant pathologist from Cornell, said that fungicidal sprays might prevent the disease but little can be done once the symptoms — brown lesions or fuzzy white growth on stems — begin to appear.

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