Numlock News: July 7, 2021 • Shrinkflation, Iceland, Great Salt Lake
By Walt Hickey
As any start-up or entrepreneur will tell you, one of the hardest things to scale in any rapidly growing business is customer service, which may struggle to keep pace with technical or commercial advances. Anyway, that’s probably happening the REvil ransomware gang, which claimed it hacked 800 to 1,500 corporate customers of software company Kaseya. Initially, they demanded ransoms of $50,000 per victim to unlock the data. That doesn’t seem to have worked, so Sunday they announced they wanted $70 million from all the victims, a substantial price cut compared to what they’d earn ransom by ransom. A few hours later, they dropped it after virtually no negotiation to $50 million. Cybersecurity analysts speculate the gang is having trouble converting this group of ransoms into actual money, with the logistics presenting difficulties.
U.S. sales at sandwich chain Subway have been in steady decline, from $11.3 billion in 2016, then down to $10.2 billion in 2019 and a steep dip to $8.3 billion in 2020. That’s surprising because for its peers in the fast food business, 2020 was a huge year, as demand for low-contact food meant that drive-through and app-based delivery were all the rage. As of last year there were 22,200 Subways in the U.S. — the largest footprint of any restaurant — which was down from a peak of 27,100 stores in the heady days of 2015.
Once Great Salt Lake
The Great Salt Lake in Utah has shrunk substantially after years of drought, with this year’s lake levels projected to hit a 170-year low. The lake is rather shallow in general, about 35 feet deep at most, so when water recedes the lake loses a lot of area pretty quick. The dry lakebed has grown to 750 square miles. Usually the Great Salt Lake gains 2 feet of water from spring runoff, but this year it was only 6 inches. While it’s possible to maintain the lake levels by diverting water into it, Utah is the fastest-growing state in the country, and water priorities in the West tend to be a little more complicated.
Consumer packaged goods don’t like hiking prices on their wares because the sticker shock may push consumers toward rival brands. That’s one reason that larger companies will try to avert price hikes by instead making the volume of goods sold smaller, but holding the price fixed. In one example, General Mills shrunk their family sized boxes of cereal down from 19.3 ounces to 18.1 ounces. That means that for General Mills the situation is the same — the unit cost per ounce of product has increased satisfactorily — but for the consumer, the price remained $2.99 and the amount of stuff in the box looks pretty much the same.
From April to June, Toyota sold 688,813 vehicles in the United States. The second quarter of this year marked a milestone for the company: for the first time ever, and by a margin of just 577 vehicles, Toyota outsold GM. This was and is unusual, and it’s not entirely likely to continue, and is mostly the result of Toyota making earlier bets on the recovery of the American car market than their domestic rivals did. More specifically, using lessons learned from the 2011 earthquake Japan endured, the company eased up on the just-in-time production system, and built up a four-month stockpile of chips and key parts. This let Toyota run their factories at 90 percent capacity this year, while rival brands — the ones who didn’t stockpile chips, and are now limited by the scarce supply — are producing at 50 to 60 percent capacity.
An Icelandic experiment of a four-day work week has turned into an unqualified success. From 2015 to 2019, about 2,500 workers — or 1 percent of Iceland’s working population — was moved from a 40-hour week to a 35 or 36 hour work week while keeping their pay steady. This went over well: workers were less stressed and less burned out, they cited material improvements in time management, and in the vast majority of workplaces productivity remained steady or improved. Following that, unions pushed to make the system expand, and now 86 percent of the Icelandic workforce is on shorter hours with the same pay, or will soon have the right to.
Over the past several years, companies specializing in assembling meal kits that are sold to consumers who want to cook but not really shop have seen rapid growth, but a slowdown is believed to be on the horizon. Coresight Research projects that the meal kit industry will hit $10 billion by 2024. However, the annual growth is poised to slip from 70 percent in 2020 to 18.2 percent in 2021. The big players in the industry have also been changing: Blue Apron, which had 34 percent of the market in 2017, in 2020 had just an 8 percent market share, while HelloFresh commands about 42 percent of sales. It’s important to remember that fluctuations in this market can have wild, cascading ripple effects across the world, mainly as the primary advertisers on most of the podcasts I listen to, so let’s hope they get it together.
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