Here Come The Girls

It’s a sure sign the country is in trouble when beer sales fall – in fact at a rate faster than the recession itself at -5.1%.

Perhaps a more worrying sign is that loonies other than David Cameron and Nick ‘Who?’ Clegg are lining up to mount bids for leading the country. Harriet Harman has bid to undermine her glorious leader and raise her own importance by organising a Women’s Summit prior to the G20 meeting.

Should we be scared?

Probably. For the cynical chauvinists this is no ladies book club meeting or hen party, this is a serious attempt by someone who really does think she will be Party Leader at least and second Lady Prime Minister at best (or worst) to undermine Gordon’s Browns attempt to augment his position as World Saver.

I can’t say I like her. I like her husband even less. Jack Dromey was the man, who as Treasurer to the Labour Party, claimed he had no idea about the nature of the Party funding. Apart from the fact it was his job to know how the party was funded and manage the finances, it was certainly his job to find out as he was in charge of the coffers. But no, he was whiter than white when it was found that only Tony Blair, and his long-time friend Lord Levy, who knew what was going on. They had obviously taken the passwords to the computers, the ledger books and access to the bank accounts away – hadn’t they? Nor Gordon Brown, who knew a thing or two about economics or so he had us believe, who was Chancellor, had no idea where or why money was being taken in or possibly repaid at some point in the future. No such thing as adding up or keeping the books tidy in the Labour Party despite the fact the Treasurer would have to be aware that there was a serious hole in the finances which needed shoring up.

It’s about as believable as Bernard Madoff having a 'Mom & Pop' accountant or Sir Allen Stanford having accountants with tiny offices and two desks in Enfield. Indeed they did – how convenient?

The Italian Connection

Rather like Tessa Jowell, whose ‘former’ husband has taken the dive on behalf of his alleged briber, Italian PM Silvio Berlusconi, this week, Harriet claims to know about as much as Manuel the Waiter when it comes to her husband’s doings – how very convenient. Jowell reacted very badly to finding out her husband might ruin her career despite helpfully signing forms when their mortgage was remarkably paid off on a house in the Cotswolds from a lovely ‘gift’ by their Italian benefactor's 'people'. Rather like his old friend and holiday largesse receiver Tony Blair, Berlusconi enjoys a life of freedom despite allegations of ‘bribes’; in Tony’s case they were mere peerages for loans. For Berlusconi, it was just a way of life.

Then again, I am sure Harriet has a clear conscience – as does Jack, Tessa, Tony, Gordon, Lord Levy, Silvio et al.

Dodgy Deals Galore

On the subject of dodgy deals, we are told that Jacqui Smith will be hauled up in front of yet another committee with a foregone conclusion over her claiming £116,000 in expenses on her alleged second home – the one she spends most time in no less. According to complaints by neighbours of her ‘primary’ residence which happens to be a room in a house, she spends no more than 2 days a week there despite it being in London where she is supposed to work. No surprises here, I think, as I would imagine this is the thin edge of the wedge of the vast scam that is MP, Civil Servants, National Assembly and Councillor expenses generally and I certainly think she is not putting much effort into her job.

Rising Value

But a lady who is rising in stock value quickly is none other than Secretary to the Treasury, Yvette Cooper. In the skulduggery that is the slow and clandestine preparations to replace Brown as Leader, Cooper has emerged as a viable candidate to at least block Harman’s manic bid. Cooper is the one who has been trooped out to give condescending , ‘Janet & John’ interpretations of high finance so that the public can understand that billions down the toilet is not as bad as we think and the only way to fight the dreaded doom of financial oblivion so neatly masterminded by people like her. I find her obsequious and sanctimonious tones less than credible and if it represents the standard of opposition to Harman then we may as well have ‘Watch with Mother’ rather than Parliamentary Debates and PM Question Times in the future.

And Your Coffee Is Rubbish Too!

After Starbucks's CEO Howard Schultz had said on a TV Show in New York that the UK was spiralling down (faster than his company's profits), Lord Mandelson, ever the true patriot, reportedly used a four letter word in questioning Schultz's knowledge of the UK economy.

Evidently, Schultz had read my blog linking the bursting of the South Sea Bubble and the collapse of the Coffee House Culture in Britain and how his company's decline is similarly linked to the current recession - or at least that was my view.

I think there would be several people who might use several four-letter words to question Lord Mandelson's understanding of any economy let alone the British one.

But that's Mandy for you, all froth and no cappuccino.

From Facebook to Face-ache

On a non-political note, I see Facebook has withdrawn its new Terms and Conditions which would have allowed them to have kept people’s personal information for themselves even if you decided to delete your account. Amid a clamour of complaints euphemistically termed as ‘Questions’, Mark Zuckerberg (the founder of Facebook) has sought to calm his followers by reverting to the old terms until they ‘can figure out’ a way to do it without any legal recourse.

Many lawyers and concerned people who know something about data privacy think this will be the last of the matter but it is really only Round 2 in the journey that is known amongst the Venture Capital glitterati as ‘Monetizing’. Facebook has been pretty much a huge sump for cash since its inception and despite its extraordinary valuation has clocked up no revenue to talk of to date. This is because it has spent its money accumulating vast amounts of data – the latest is the craze for people to admit to 5 or so things that people didn’t know about them which sounds like a recipe for disaster if ever I heard one.

The fact remains that Facebook is on a race to create a credible and sustainable revenue stream for the future and it has just one asset from which to extract this – that’s us and our valuable data. So, if you have Facebook as your home page, think about this for the future – from there you may enter many other applications or websites and even spend money. Imagine being given a Facebook ‘credit card’ or being tracked as you do so with Facebook getting a referrer fee or percentage of spend in exchange for making your data available to others.

Not possible? Just you wait and see.

Hold The Latte!

I have blogged before about the collapse of the Coffee Shop culture around the time of the South Sea Bubble and how last quarter we saw history begin to repeat itself with the Starbucks results. Well, I make no apology for resurrecting the story as Starbucks have just announced their latest figures and the froth is certainly missing let alone the chocolate sprinkle.

Sour Coffee

I have never seen the attraction of the Starbucks brand of coffee. The little shops are nice with their comfy couches but often there is no room to sit down as that sort of seating is limited but it's the coffee I didn't like. It was either overly sour or had silly little seasonal flavours which made me gag. We once bought a pack of their filtered coffee beans and I would never do so again, always preferring a Coffee Direct as being at least equal in quality and a far cheaper product.

But it has become a way of life for lots of people and has sprung a new Starbucks-speak language to describe what people drink - 'Tall, skinny latte to go, please' is just a simple statement, they can be far more complicated.

I had a VP of Sales once who would periodically drop in from the US and he was quirky to say the least but he was the branding executive's dream. He would not go to any restaurant or hotel that was not a recognisable US chain, so he stayed at an expensive London Marriott, ate at McDonalds and drank Starbucks coffee. Our trip to Sophia Antipolis was a nightmare and culminated with me threatening to stop the taxi and make him walk when he complained about the superb French coffee we had drank at a curbside cafe because it did not serve vanilla essence to mix in.

But that was the Starbucks magic. It hooked a lot of people into buying £3-5 buckets of sour coffee with all imaginable options of their choice - everyday.

Changing Times

This time round, things got considerably worse for Starbucks. They announced a 69% dive in profits and that they will cut about 6,700 jobs and 300 stores, making only $64m profit in the quarter to 31 December 2008 down from $208m a year ago.

Around two thirds of the stores to close will be on home turf USA which is a double blow on top of the 660 stores shut there in 2008. Hailing from Seattle, this is a body blow to the West Coast city as two of its other flagship businesses, Boeing and Microsoft, also announced lay offs in the week .

Starbucks revenue fell 6% to %2.6bn.

History Repeating Itself?

The coffee shop culture died roughly around the time of The South Sea Bubble where all the gossip and stock broking activity thrived in the small streets of London. It's a little different this time around but it very much falls into pattern of the boom years we have enjoyed. The coffee shop was not just associated with the market players like stockbrokers or starving writers and artists communing to meet like-minded people - it was the 'to go' culture of popping in and grabbing a $5 cup of coffee. And everyone did it, not just Hi Tech executives or super-rich bankers - it was a defining sign of the times.

In the years of leveraging equity in our homes, such little luxuries became a way of life and a trivial yet essential daily routine. Many new companies sprang up to satisfy the 'fixes' required and we have good alternatives here in the UK in Costa, Cafe Nero and AIM. But in the US there was a strong reposte from the likes of Dunkin' Donuts and McDonalds who had the edge of leading with food and they added in equally good coffee to Starbucks at a fraction of the price - and this has hit hard as everyone starts to look at the cash in their pockets rather than in their equity.

It is very much a sign of the new austere times that small but expensive luxuries are the first things to go - perhaps along with membership to swanky Health Clubs as the next obvious area of concern then maybe regular eating out at middle to high end restaurants and, of course, up market holidays.

Or have we just woken up and realised that we could make a very decent cup of coffee at home, stick it in a thermos and go to work for a fraction of the price. I also think part of Starbucks' vulnerability is that it never had anything more than expensive coffee to sell - it was a model as flawed as the boom itself, just like the South Sea Bubble all those years ago. Personally, I have always preferred a decent cup of tea and you just can't get one outside of the UK.

Perhaps Starbucks has missed a trick all along.

Wake Up And Smell The Coffee

For those of us who have never really seen the attraction of sour tasting coffee, it comes as no great surprise that the recession caught up with Starbucks as their fourth quarter profits 'Hit The Wall'. It's profits in the quarter to 28 September were just $5.4m worldwide down $158.5m from the same period last year on a 3% quarterly rise in revenue to $2.5bn while revenue dropped 8% in same stores from a year earlier.

Is The Coffee Shop Culture Over?

It could be argued that in recessionary times it's those little luxuries that go first, like the coffee on the way to work or at elevenses. If that's the case then this news cannot be good for the High Streets bristling with similar offerings like Costa and Nero for example. Starbucks point out that a good deal of the profit collapse was $105m spent in closing down unprofitable stores - 600 of them in the USA and 61 of them in Australia shedding over 1,000 jobs.

For us in the UK, it's a key indicator that people are watching the pennies. In the same breath, it was announced by the Royal Society for Chartered Surveyors that house sales had slumped to a 30 year low and a report from the British Retail Consortium stated UK retail sales have fallen over a 12-month-period for the first time in more than three years; total sales in October were 0.1% lower than the same month last year.

Gloom & Doom

As we collectively tighten our belts and head toward the worst retail Christmas sales for years, the outcome will be that the lower paid service jobs associated with 'luxury spending' on bespoke coffee and gifts will be lost first. While that seems a minor cut as many of these jobs may get paid the minimum wage but they attract the same state benefits for those who join the unemployment queue. Again, a side concern will be how many of those workers came from abroad and have not long been part of the tax system yet may well now pose a burden?

As tax revenues drop when unemployment rises and consequently there is a heavier burden of tax on those in jobs to pay for it, a vicious spiral begins. Pundits have predicted that in this recession unemployment could rise swiftly to 3m, that's just less than double where we are today - add that to the long term claiming benefits unable to work due to disability and we are well over 4m out of work.

Inflation has risen to 5.2% although with producer prices falling rapidly and oil prices falling, it is assumed that prices will drop particularly as interest rates are so low at 3%. But that's cold comfort for all of us who have seen weekly food bills rise sharply and the price of energy still at high levels, so it will take a while to filter through.

Manufacturing shrank in October for the sixth month in a row as pressure builds in the economy. It is little wonder that interest rates were slashed so dramatically - it was the Bank of England's equivalent of defibrillation on the economy.

But how many jolts will it take? And how long to recover afterwards? And can we afford the 'electricity' to do it?

It's a small parallel, but when the South Sea Bubble popped, coffee houses were at their peak in British cities. It took them an awful long time to be so popular again. Perhaps history is repeating itself.