Private Equity Vultures, the Looming Napkin Crisis, and Addiction Support for Restaurant People

Get the Oxford Morning Report every day. Click here for a free subscription.

FINANCE

The Deadspin revolt is the latest clash between digital media and private equity: “Their employees call them ‘soulless’ and ‘vultures.’ Their focus on cost cutting has sparked newsroom rebellions. And they are snapping up more and more of the media landscape. These days, whenever there is an uprising in the media business, the chances are that a private equity firm is involved. The latest clash happened this week at the sports website Deadspin, where the interim editor in chief said he was fired for refusing to limit the site’s focus to sports coverage. Afterward, at least eight journalists resigned in protest, including more than half of the site’s writers.

“‘A metastasizing swath of media is controlled by private equity vultures,’ Megan Greenwell wrote in August after resigning. She said they ‘genuinely believe that they are rich because they are smart and that they are smart because they are rich, and that anyone less rich is by definition less smart.’ … Private equity’s growing influence over the journalism industry is a reflection of the broader economy. Since the financial crisis, private equity funds have acquired a wide range of struggling businesses, including doctors’ practices, pet stores and retailers, typically with the goal of fixing them up then selling them a few years later at a profit. There are now more than 8,000 companies backed by private equity firms.”

HUMAN RESOURCES

Steve Palmer manages Indigo Road Hospitality Group, which has 20 restaurants and 1,000 employees, but what really gets him excited is talking about Ben’s Friends, an addiction support group he started after one of his colleagues took his own life: “Ben came to South Carolina to help us open this restaurant. I hadn’t seen him in a long time and he walked in and said, ‘Hey, I’ve cleaned up my act.’ I didn’t ask a lot of questions because, let’s be honest, in the restaurant business there’s a pretty wide range of what that could mean. He looked good. Depression was not a word that I would associate with Ben. We were in the kitchen 18 hours a day from seven in the morning to midnight. I never saw Ben take a drink in the kitchen. On opening night, there were three chefs in recovery with five years or more of sobriety, so any one of those guys, myself included, would have done anything to help Ben if he would have just said, ‘Hey I can’t seem to stay sober.’ We didn’t even know he was struggling. I was so struck by that when I found out he shot himself in that hotel room. I was dumbfounded that this guy was struggling at that level and nobody knew. That was the moment for me. I was like, we have to start talking about this.”

In October, small businesses reported slow and steady job growth: “Labor markets remain especially tight in manufacturing and construction. And across all industries, it seems that labor markets are getting even tighter. NFIB finds that 60 percent of surveyed firms hired or tried to hire during October, a monthly increase of three percentage points. Future hiring plans increased as well. A seasonally-adjusted net 18 percent plan to create new jobs, up 1 point,’ reports Mr. Dunkelberg. He adds that the limited supply of workers is naturally forcing employers to raise wages to satisfy their demand for labor.”

THE ECONOMY

Downturns in these four countiesRobertson County, Tenn.; Pontotoc County, Miss.; Boone County, Ill.; and Elkhart County, Ind.have predicted every recession since 1975: “What can we learn from them today? Our most recent numbers, from early this year, show them bending south, but not cratering. Each enjoyed a strong recovery after the Great Recession. Officials we spoke with often said anyone who wanted a job could get one. Employers expanded and there was more hiring on the horizon. But there are reasons for concern. The products they build—furniture, appliances, jeeps, motor homes and boats—are the types of products that get hit first when consumers tighten their wallets. In Robertson, losses in manufacturing have been partially offset by strong seasonal hiring at warehouses. Pontotoc has flatlined since its 2016 peak, but hiring seemed to recover slightly early this year. RV woes are pummeling Elkhart. It lost about 5,000 jobs between late 2018 and early 2019. A key factory in Boone laid off a shift earlier this year but we don’t yet have enough data to evaluate whether it slowed the county’s rapid growth.”

Farm bankruptcies have leapt to their highest level since 2011: “‘Farmers and ranchers struggle with a prolonged downturn in the farm economy that’s been made worse by unfair retaliatory tariffs on US agriculture as well as two consecutive years of adverse planting, growing and harvesting conditions,’ said John Newton, the chief economist at the federation. Ahead of the 2020 elections, the president has increasingly attempted to placate farmers who helped elect him in 2016. The Trump administration has announced nearly $30 billion in bailout programs designed to mitigate losses from the trade dispute. But the unprecedented amount of government aid has raised concerns about misuse of funds and drawn backlash from agricultural groups and bipartisan lawmakers. Roughly 40 percent of farm income is expected to come from government aid, according to Department of Agriculture data analyzed by the federation.”

STARTUPS

Startups are offering parents a safe digital space for their internet-surfing children: “One of the fastest-growing to date, a reading-focused app called Epic, was co-founded by former YouTube executive Kevin Donahue in 2014 and has raised over $50 million in venture funding. … Epic is unabashed in its use of data. Using its proprietary information on what children are choosing to read, listen to, and watch, the company started creating its own original content nine months ago. On average, Epic publishes a new book every week. … Over in London, a startup called SuperAwesome is pursuing the even more ambitious strategy of constructing a ‘kid tech’ version of the internet. Under the hood of websites and apps catering to children, like those of toy companies, SuperAwesome powers kid-safe advertisements, comments, and videos using a combination of human oversight and artificial intelligence. In other words, SuperAwesome is an adtech platform that happens to be compliant with children’s privacy laws.”  

REGULATION

New York’s City Council has passed a ban on foie gras that its producers claim is unconstitutional: “Sponsored by Manhattan councilwoman Carlina Rivera, who called foie gras ‘the most inhumane process,’ the ban would affect New York State producers Hudson Valley, La Belle, and D’Artagnan. Violations would be punishable by a $2,000 fine. Over the summer, Henley testified against the ban and told a Wall Street Journal reporter that if it passed, Hudson Valley would ‘lose jobs’ and ‘maybe the business.’

“Specifics of the lawsuit are still being determined, including who the plaintiffs will be, but Hudson Valley, La Belle, and the Quebec farms are working with three different law firms to fight the ban. They’re not yet certain of when they can file the suit—whether it has to be a year and a half after the ban goes into effect or if they can, as they hope, file immediately. The farm has an agricultural marketing cooperative, Catskills Foie Gras Cooperative, with La Belle Farms, and Henley says the two farms employ 400 people. ‘That’s what’s at risk here. It’s 400 families, …’ According to Henley, Hudson Valley will fight the constitutionality of the ban. ‘Under the New York State constitution, cities are able to enact local laws—local laws,’ he says. ‘If the state has issued regulations about the sale of poultry products, then a municipality cannot do that.’”

RETAIL

JC Penny’s comeback plan involves styling and yoga classes: “Chief Executive Jill Soltau, who took the reins just over a year ago, also is focused on getting back to basics. She is making stores easier to shop by removing piles of excess goods and getting out of less profitable categories such as appliances. And in about 10 percent of its stores, she is grouping products by lifestyle; rather than display all women’s tops together, for example, they would be categorized by activity: work, active, casual and dress. … The Hurst store, about 45 minutes from Penney’s headquarters in Plano, offers a blueprint of Ms. Soltau’s vision for the company. Its wide aisles and bright lighting make it easy to shop. It is loaded with interactive experiences, including demonstrations of the latest cooking gadgets and makeup and hairstyle workshops. A large room situated in the activewear section will host yoga, boot camp and other fitness classes. Children can watch movies at the clubhouse, which hosts arts-and-crafts days. Shoppers can relax in 11 lounges, grab a bite to eat at a cafe, or ask the concierge for help with just about anything, including restaurant recommendations.”

If you were forwarded this newsletter, click here for a free subscription.

MARKETING

As Millennials turn away, paper napkins are facing an existential crisis: “From a high-rise building in downtown Atlanta, a team of five strategists works around the clock to rescue the paper napkin from extinction. The group, dubbed the ‘napkin team,’ is part of the strategy arm at Georgia-Pacific, a paper manufacturing behemoth that owns a host of napkin, paper towel, toilet paper, and tissue brands. Its mission is to rebuff criticisms of paper napkins as an extra expense or a needless source of environmental waste. …

“Two decades ago, 60 percent of American households regularly purchased paper napkins; today that figure has plummeted to 41 percent, according to Georgia-Pacific statistics. … As a series of doomsday headlines have warned, consumers—especially young people—have made the simple decision to cut down on their number of purchases by substituting paper towels for paper napkins. … On Valentine’s Day 2018, Vanity Fair also partnered with Match.com to launch a marketing campaign, #DateANapkinUser, whose poster features a coiffed white man with a napkin pressed to his lips. The company even commissioned its own study that claimed napkin users are ‘statistically less likely to have broken up with someone over DM.’”

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

BECOME AN OXFORD MEMBER