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What Business do you admire and why?


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I think it would be great if we all picked one business we admire and discuss the details of why we admire that business.  And I am really referring to how the business is run and attention to customers with products, prices, quality and service.  There are many models out there.  Please ignore stock prices.

 

Details of what the business does better than competitors is really what I think is most interesting.

 

I will pick Aldi.  It is a private German company (with 2 parts, one owns Trader Joes, the other Aldi US) that has been opening up locations where I live.

 

What fascinates me is that they are able to beat Walmart's prices by ~20% in a variety of apples to apples price comparisons I found on the internet.  Think of all the scale Walmart has in purchasing and Aldi still beats them.  Here is what Aldi does better than Walmart from what I can gather.

 

1.  Lower labor costs.  2-3 people operate a smaller footprint store.  Details on how:  you deposit 25 cents to get a cart and get the 25 cents back for returning the cart (less cart moving labor).  Many items are put up in cardboard boxes, less stocking labor.  You bag your own groceries.  No bags provided free.  checkout clerks required to scan 1,000 items per hour.    All these little details add up.  Big bar codes on products for easier scanning.

 

2.  Lower rent.  Much smaller footprint because stock far fewer items.  I am guessing that the super low prices and limited inventory create huge turnover in the items they have so rent/sales is probably less than the competition.  Other fixed costs are probably less as a % of sales. 

 

3.  Items are packed to brim.  Seems like a small detail filling up the cereal box all the way but has clear cost savings in a number of areas.

 

4. Simplification with less items.

 

5.  Minimal advertising.

 

6.  HIgher inventory turns means higher A/P relative to Inventory so profit margins can be lower and still make good ROIC.

 

7.  They also specialize in their own brands which are way above average vs most private label brands. 

 

8.  There are probably tons of things I missed on this one that go on behind the scenes with little details that add up. 

 

Bottom line their cost structure is lower than comps and they can charge a lot less than Walmart.

 

 

 

 

 

 

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Toyota

 

- most admired company for their Toyota Production System. Perhaps the only "system" that has been duplicated across the globe / cultures; Both within Toyota, it's suppliers AND a whole swath of unrelated businesses.

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Google

American Express

 

 

Both have increased my quality of life at limited (or no) cost to myself. Both have great products, great services, and continue to be light years ahead of their competitors in doing this.

 

And today Amex vs Visa & Mastercard?

 

I have both Visa and Mastercard and am indifferent to them. They are pieces of plastic in my wallet - commodities that are to be adopted/dropped based on their rewards programs they offer on their different cards. The benefits I've received from AmEx greatly exceed the number of points I receive on purchases.

 

There's been two occasions where flights I was booked on were delayed/canceled and it was really going to impact my plans. After speaking with airline representatives who said there was nothing they could do, a quick call to AmEx had me rebooked on flights with that same airline. I don't know how they do it - just that they do. This customer service paired with all of the other travel benefits makes travel somewhat enjoyable and has fundamentally changed my travel experience.

 

Other cards have comparable rewards programs. None of them have the comparable customer service or the softer benefits that come along with it.

 

I dont' think Google needs any explanation - Google Search, Gmail/Inbox, Google Maps, YouTube, Android, Chrome, Google Now, etc. etc. etc. All services that have dominated their respective peers and are provided for free to consumers. Google has fundamentally changed my life experience.

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SBUX. There was a good discussion about Starbucks business model and competitive edge.

 

I am not a fan of their coffee but I own some shares.

 

Everyone says starbucks coffee sucks but they still go there.

 

It reminds me of microsoft: such a good business that even though every single person alive has complained about their operating system at some point, they still buy windows. That's a good business.

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If you've never been to a Wegmans you may not understand, but it is the most fascinating company I know of. A little googling will show you the cult-like popularity they hold. I think a MA store opened a few years ago that had over 1,000 people waiting in line for the grand opening. I think they created the mass-appeal and culture in a few ways.

 

1. They are very innovative, especially for a market-leading retailer. They were one of the first grocery stores to use bar codes, windows on refrigerated doors, sell prepared meals and create a restaurant atmosphere, sell gluten-free and organic food. Wegmans had built out an organic store inside their stores before Whole Foods could leave CO. Even the Wegmans private-label foods were ubiquitous before WMT/TGT caught on.

 

2. Anything with the Wegmans name on it is of the highest quality and a lot of their private label items are better than the brand name stuff. I've heard of them holding off or removing a Wegmans private-label option because the quality was inadequate for the Wegmans brand. Wegmans is also famous for selling bread, milk, and eggs at lower prices than any other location (including Walmart). I think Wegmans has been selling milk at a loss for decades just to get people in the door. I can normally buy a gallon of milk, large loaf of white bread, and a dozen eggs for $5 or so.

 

3. Customer service is other-worldly. You can return any non-prepared food item, no questions asked. What's more impressive is folks don't abuse it because they love the company so much. Every cashier has at least 40 hours of training prior to stepping on the floor. Every employee is expected to know the aisle of every item and offer to walk the customer to the location. Employees are always happy and friendly because it is extremely competitive to get these part-time jobs.

 

4. Wegmans makes independent choices. They stopped selling cigarettes in 2008, well before any other stores I now of. They chose to not label GMO foods, which matches the scientific consensus rather than popular opinion.

 

The stores average roughly $88m/year/store, which I think is almost 2x as much as WMT grocery stores. They are able to spread out their stores farther than other grocers because folks will travel longer distances and pass other grocery stores to shop at Wegmans. I'm sure I'm missing some reasons why they are amazing.

 

For a less biased view:

http://www.thekitchn.com/what-happened-when-i-walked-into-a-wegmans-for-the-first-time-204782

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I think I mentioned Wegmans in one of the past threads. Yeah, mostly love it. :) I'll be grumpy old man and complain about some things: (here you go Schwab711 :))

 

- Their prepared food buffet selections went downhill since the store opened.  :'( Indian food disappeared. Fewer veggie options. :( (This might be based on demand - I know I usually like items that are not popular - a bunch of food items that I like have been discontinued in various food stores ... and restaurants  :'( )

- Wife buys fruit tarts - more expensive than in small (chain?) bakery...

- Pretty far away from us (haha, we still go there once a month or so).

- Cheese selection is large, but Romano that we buy elsewhere is either not available or quite expensive.

- They don't stock mini bananas

- Frozen vegetarian dinner selection is not that great. Whole Foods has better though expensive, Trader Joes has better and cheaper, normal supermarkets had pretty good selection in the past but nowadays it's crap here in MA.

- Fever Tree Lemon Bitter was not stocked last time we were there. The guy was helpful, but could not find any. QQ. (BTW, anyone for great and expensive upcoming drinks company: buy FEVR London ... I managed to miss it even though we were drinking the fricking tonic for last 3 years or so... crap).

 

On recent positive notes Wegman's brand sorbet was good.

 

Trader Joes is still great too, although their limited selection means that you have to go elsewhere for a lot of items.

And then we have HMart - Korean supermarket - oh la la. :)

Plus Russian food store down in Boston for Easter European food... but that's OT. :)

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Excellent replies and analysis.  I very much agree with many posts.  If these companies can keep up their performance they should continue to win in the market which also benefits consumers. 

 

I have heard great things about Space X too.  I am in awe of what Musk is doing with that company.  That was after a conversation I had with an ex satellite engineer who told me how well run Space X was. 

 

Would be great to hear from more posters regarding what businesses they admire.

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The topic is kind of ambiguously defined.  For example, I like Star Wars but would not want to own DIS.  You can have a great product and a lousy business.  What I think is of interest to many is the "great business" as defined by Munger, which has a very specific connotation.  You can look up Munger's definition, but I look for conpanies consistently growing their revenues and current assets by 15%+.  As some mentioned, GOOGL fits the bill in most ways except that it is obvious, which invites competition and margin pressure.  WMT used to be one, as was AAPL.  MSFT.  Standard Oil.  KO.  The difficult think is not finding them, but finding them before they are generally recognized and overpriced or mired in competition.

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Business I admire:

 

Nestle: a consumer staples company truly managed for the long term. Focus in innovation and health. AAA balance sheet since forever.

 

Keyence: Japanese company that is the undisputed market leader for optical sensors. Engineers love them. It seems like a company driven by Engineering and pretty successful at that.

 

Fuchs Petrolub: Family controlled business with focus on mundane lubricants. Very systematic approach to gain market share (acquisitions, R&D) and strong long term financial performance.

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