Posts tagged with "Supply chains"

The music industry is an unexpected victim of a plastics shortage

November 15, 2021

Many artists in the music industry are having a tough time “getting into the groove,” according to a recent report by The Economist.

The publication cites the case of Green Lung, a London heavy-metal act with a cult following who were about to go on their first American tour after producing their premiere album when COVID-19 shut it down.

The band used ensuing lockdowns to produce a second album, “Black Harvest.” By December 2020, it was recorded and ready to be mastered and pressed onto 5,000 gold-vinyl records. Given pandemic disruptions, Green Lung gave itself lots of time, fully nine months, to make these in time for a tour this past September. “We were fairly comfortable,” says Tom Templar, the lead singer.

Instead the first pressing of the record, which is sold out in pre-orders, will not be available until October. The band could have launched on a streaming service like Spotify. But it wanted to wait for the LP, which generates far more money in the short run. “The vinyl sales prop up the U.S. tour,” Templar told The Economist.

In the end, Green Lung played its album-launch gig on September 1 record-less. The band thus became the latest, unexpected casualty of upheaval in global supply chains.

First CDs, then digital downloads, and now pvc streaming have made vinyl records look like a vintage curiosity. In recent years, however, sales have soared, as fans have taken to owning their favorite bands’ music in physical form (waxing insistent about its supposedly better sound quality). In March vinyl sales in Britain reached highs last seen in 1989.

“Every artist in the world has spent 18 months twiddling their thumbs, so they are making records,” says Ed Macdonald, the manager of 100% Records, which represents artists such as We Are Scientists, an indie rock band. “Vinyl is such an integral part of our turnover,” he says. Mainstream artists are increasingly involved. Taylor Swift’s album, “Evermore”, first released digitally in December, broke a 30-year record for vinyl sales. Albums are expected to be released soon by Ed Sheeran, Abba, and Coldplay.

Unfortunately for musicians, getting them pressed is becoming close to impossible. In the late 1990s and early 2000s most vinyl-pressing factories closed. As COVID-19 raged, the biggest remaining ones—in America, the Czech Republic, Germany, and Poland—had to shut temporarily, creating a backlog. Now demand from musicians is outstripping capacity.

On top of that, the price of PVC the plastic used to make LPs, has surged after Hurricane Ida knocked out 60% of America’s production in August, while demand has boomed from firms that use the stuff in cars, pipes, and many other types of goods.

Dirk van den Heuvel of Groove Distribution, a distributor of dance music in Chicago, says that the big labels created the crisis by closing their own pressing factories in the 2000s. If they had kept these running, he grumbles, the majors would have been ready for the demand and smaller musicians would not now be so squeezed. It is true that big labels can often secure priority on the presses. But not always.

It may be cold comfort to van den Heuvel or Green Lung, but Taylor Swift’s fans had to wait months for their LPs, too.

Research contact: @TheEconomist

Consumer wallets ‘spring a leak’ as prices soar on diapers, kitty litter, and toilet paper

February 12, 2019

Most of us cut back on everything but the essentials when household prices go up, but our budget remains the same. However, according to a February 10 report by The Wall Street Journal, the cost of staples—including such fundamentals as diapers and cat litter—is expected to increase in 2019, leaving us little choice but to ante up.

Producers of household products, from toilet paper to bleach, are set to raise prices again this year after already hiking prices in 2018, hoping to offset higher commodity costs and boost profits, the financial news outlet says.

New Jersey-based Church & Dwight already has increased prices for about one-third of its products, including Arm & Hammer cat litter and baking soda, and some OxiClean cleaning products.

“The good news is that competitors are raising [prices] in those categories as we speak,” Church & Dwight CEO Matthew Farrell said on a conference call last week, during which the company reported higher quarterly sales and lower profits.

What he left out of that statement to financial analysts was that it was good news for the company and its stockholders—but not for America’s consumers.

The company is now discussing more price increases with retailers, including for personal-care products, Farrell told analysts Tuesday. Those brands include Nair, Arm & Hammer Toothpaste, Orajel, Simply Saline, Waterpik, and Viviscal, among others.

Other household names that are planning to release similarly “good” news, according to the Journal, include Procter & GambleColgate-Palmolive, and Clorox, which are raising prices in response to higher costs of raw materials and transportation, as well as unfavorable foreign-currency swings.

For much of the past decade, the Journal notes, price cuts have been far more common than price increases as U.S. companies were mostly reluctant to test consumers’ spending power and brand loyalty in a fragile economic recovery.

When companies tried to raise prices, “they better have had a uniquely strong innovation or be willing to lose market share to competitors,” Sanford C. Bernstein analyst Ali Dibadj told the news outlet.

Adding to the challenge of raising prices is that more shoppers have been switching to store-branded paper towels and discount detergents, or opting for online upstarts such as Dollar Shave Club.

Traditional brands also have been under pressure from big-box retailers such as Costco and discounters like Walmart Inc. and Amazon to keep prices low—pushing the manufacturers to focus on lowering costs in their supply chains or pare back advertising.

Finally, after failing to see success when they tried to combat weak demand by lowering prices, the industry’s biggest player, P&G, shifted its course last summer, announcing it would charge more for several of its brands—and several rivals followed suit, the Journal reports.

The recent price increases are largely playing out in the companies’ favor, Wells Fargo Securities analyst Bonnie Herzog told the Journal. Sales volumes of household and personal products in the United States. declined 1.4% in January, according to Bernstein’s analysis of data from Nielsen. Dollar sales of those products rose 0.7% in the period, Bernstein said, indicating that the price increases, on balance, are padding the bottom lines at consumer-goods companies.

How consumers will deal with the price hikes long-term remains to be seen.

Research contact: