Ford’s sales growth is proving that competitively priced, well-designed products that are more sustainable will outsell less-sustainable products. Ford’s line-up of fuel-efficient cars and trucks that deliver lower tail pipe emissions are selling at a record pace. In June 2013, Ford achieved a year-over-year 13 percent sales increase. That is Ford’s best sales performance since 2006. How hot is Ford? They have captured the number one position on the BrandIndex with more buzz than Amazon, YouTube or last years’s champ, Subway!
Ford’s sustainability commitment
Ford is a corporate leader in designing sustainable products and has pioneered vehicle designs that align with scientific analysis on the reduced level of greenhouse emissions required to address climate change. This commitment begins with Chairman Bill Ford and CEO Alan Mulally who have made sustainability one of Ford Motor Company’s four corporate attributes. Their commitment to fuel economy and reduced emissions now permeates Ford’s product offerings. From small cars to hybrids to electric cars to full size trucks, Ford is winning customers by selling solutions to pump price pain and climate change.
Imagine running an oil company where only one or two of the directors on your board have oil industry experience. Imagine running a computer company where none of the board uses a computer, tablet or smart phone. Now imagine corporate America running their businesses where less than 15 percent of their boards are women.
Women are not a minority except in terms of their parity with men on corporate boards. While women account for over 50 percent of college graduates and they dominate economic power in our economy with $8 trillion of annual buying power, they still account for less than 15 percent of S&P 500 boards of directors. Three percent of Fortune 1000 companies have no women on their board of directors. For the next tier of 1,000 midsize companies the level of ZERO women representation on the boards jumps to 30 percent.
The business case for women directors
Women serving on the board of directors is a best practice for winning business success. Research by Catalyst documents that Fortune 500 companies with women on their board of directors achieve the following superior business results:
Please repeat the words “more oil, higher prices” as you stand at the gasoline pump. These four words are key to solving your pain at the pump because they underlie oil price reality. “Drill, baby, drill” through hydraulic fracturing is pumping out more oil. It will not deliver sustained lower pump prices.
Why gasoline prices are high, going higher
There are two reasons why more oil does not mean lower pump prices. The first reason is that oil is a global commodity and its prices are a result of global supply and demand. Oil prices are higher because the incremental growth of global demand continues to exceed the incremental growth of global supply. More oil production does not lower prices if the rate of demand for oil rises faster than the rate of new supply.
Supply chain risk is the second reason for higher pump prices. Middle East unrest restricts supplies. Oil refineries are highly complex and they will have serious breakdowns that restrict supplies. Oil pipelines will leak, oil tankers will run aground and rail lines will have accidents. The fact that the world is pumping more oil than ever before in its history, also means it is more at risk. Higher risks and larger scale disruptions will generate higher prices at the pump.
Your gas pump reality is that the price will not go down and stay down. It is very likely you will be paying even more for gasoline five years from now. The only sustainable cost saving alternative is to use less gasoline.
New research documents that green products and meaningful brands deliver increased sales plus financial performance that outperforms the stock market. Havas Media just released an analysis on the financial performance of their top twenty global meaningful brands. The stocks for this portfolio of companies outperformed the stock market by 120 percent! The 2013 Small Business Sustainability Report just released by Green America, Association For Enterprise Opportunity and EcoVentures International reports that for small businesses defined as having five or fewer work associates (representing 88 percent of all U.S. businesses) the sale of green products outpaced their sale of conventional products.
Here are three compelling examples that selling green products is a path for winning superior revenue growth:
- Organic food sales grew 238 percent during 2002-11 compared to a 33 percent growth in overall food sales
- From 2006-11 the green building segment grew 1,700 percent while overall construction shrank 17 percent
- Renewable energy sales grew 456 percent from 2002-2011 while non-renewable fuel sales fell 3.2 percent
The bottom line is that 75 percent of the businesses that sell green products (as surveyed through the 2013 Small Business Sustainability Report) achieved an increase in sales during the 2008-11 economic recession.
The restaurant industry is in a crisis as customers, most especially moms and the millennial generation, question the source and impact of its products. The industry’s core revenue growth strategy of serving fast foods promoted through dollar menu pricing is now linked to the national obesity epidemic. Moms are increasingly viewing sodas and french fries, the profit margin champions of fast food, as a health threat to their loved ones.
The millennial generation is also shifting away from cheap fast food. The proven path to successfully selling the millennial generation is to be “cool with a purpose.” The fats, sugars, salts and chemicals contained in fast food and sodas are definitely not cool to this generation. And beyond a cheap meal, they question how the restaurant chains provide solutions to their concerns about community, the environment and their future.
Libby Auld: Successful entrepreneur pioneering the meaningful restaurant
Libby Auld, owner of Elote and The Vault restaurants in Tulsa, Oklahoma, is an example of a new generation of restaurants emerging across the U.S. These restauranteurs grow revenues by developing a meaningful connection with customers based on affordability, authenticity and purpose.
The revenue growth of the restaurant industry has hit a “sustainability wall” as it confronts a sea-changing shift in consumer expectations. Consumers are increasingly viewing food as a hazard loaded with sugar, salt, chemicals and fat.
Led by moms, consumer outrage is growing over their weight gains and increased health risks that science is tying to the American fast food diet. The food industry is now naked before the blogs, tweets and videos posted by consumers exposing unhealthy business behavior toward people, animals and the environment. The result is a sea-changing search by consumers for affordable and authentic foods.
The strategic conundrum facing the food industry is one of mixed messaging. Consumers now view industrial food as a commodity. They buy at the chain restaurant offering the lowest price. The chains are attempting to offer healthier food but their brand positioning is limited by their failure to execute an enterprise-scale shift to affordable and sustainable foods. This fifth article in my “Re-thinking Restaurants” series profiles how enterprise-scale strategies in the food service industry grow sustainable revenues.
Sustainable enterprise-scale strategies are creating competitive advantage
Companies that include Chipotle, Panera Bread and a rapidly growing number of local restaurants are taking advantage of their competitors’ marketing conundrum through an enterprise-scale approach to selling healthier food. Their marketing advantage is as clear and succinct as Panera Bread’s marketing slogan: “Live Consciously, Eat Deliciously.” These companies are winning new customers, growing their customer loyalty programs and achieving industry-leading growth of same-store sales through their enterprise-scale strategy built upon sustainable best practices.
Food sales are in a crisis. Chain restaurants’ growth formula of selling hamburgers, fries and soda at promotional prices has hit a profitability wall. Promotional pricing continues to spike sales but at the cost of eroded profit margins.
Another part of the chain restaurants’ revenue crisis is that they are having limited success selling healthier food. McDonald’s points to the successful launch of “Premium McWraps” as causing a slight uptick in same store sales. However, McDonald’s eliminated Chicken Selects and Fruit & Walnut Salads due to poor sales results. Industry-wide, research by the Hudson Institute found an increase in sales of low calorie menu items at chain restaurants during the same five year time period that higher calorie menu items suffered decreased sales. But the sales growth in healthier foods is not sufficient to compensate for lower margins created from selling higher calorie items at promotional prices.
Healthier chain restaurants are industry’s revenue-growth leaders
Chipotle and Panera Bread are two national chains that have figured out how to achieve sustained sales growth by convincing customers that their food is healthier and that their businesses are operated in a more sustainable manner. Chipotle points to the sourcing of half of their beans from organic farms and their implementation of a buy local plan as two examples of their growing adoption of sustainable best practices. This commitment has successfully connected with the millennial generation most especially through Chipotle’s award-winning short movie called “Back To The Start” that has over 7 million YouTube views. This success connecting with the millennial generation has enabled Chipotle to triple sales since 2006. One Chipotle executive summarizes their sales growth strategy as “Good Food Wins!”
“Living in the United States of Food Waste” is how Bloomberg Businessweek defined the scale and cost of food wasted annually. America wastes 40 percent of its food supply at an estimated cost of $250 billion annually. It is a cost that is unsustainable in the low margin food service industry. Professional estimates are that a restaurant can achieve at least a 10 percent cost savings from implementing a food waste management system.
Restaurants are also the most energy-intensive commercial buildings in the United States. It is estimated that the restaurant industry consumes three times the energy of an average commercial building. Cooking equipment, refrigeration appliances, HVAC systems and lighting are restaurant cost centers and a major element of their environmental footprint. It is estimated that the bottom line profit for a restaurant that reduces energy costs by $1 is equal to selling $12.50 in food at an 8% profit margin.
Moms’ focus upon restaurant air quality
There is also an emerging awareness over chemical use by restaurants and their impacts upon indoor air quality led by Concerned Caregivers. The top five things these EcoAware Moms are using more of are:
A food revolution is being led by the millennial generation and moms in rebellion against the growing health impacts tied to eating industrially manufactured food. The millennial generation was born into a national obesity and diabetes epidemic. Today, one-third of millennials are overweight. In response, they are rejecting McDonald’s and patronizing Chipotle and Panera Bread. While McDonald’s is the largest U.S. restaurant chain, they do not even rank in the top ten chain restaurants for millennials.
Moms are also revolting against chain restaurants due to their health impact fears tied to fast foods. Research by the Center For Science In The Public Interest (CSPI) found that 97 percent of the nearly 3,500 chain restaurant meals they offer do not meet the CSPI’s nutrition criteria for four- to eight-year-olds. A viral mommy-blogger posting, Empty Calories = Empty Messaging, summarizes their outrage at Coca-Cola.
One demonstration of children’s activism is when nine-year-old Hannah Roberson, along with her mother Kia Roberson, attended the McDonald’s 2013 annual shareholders meeting where she confronted McDonald’s CEO Don Thompson saying, “It would be nice if you stopped trying to trick kids into wanting to eat your food all the time.”
Affordable authenticity: Cancun Sabor Mexicano Restaurant
Jorge Saldana is the owner of Cancun Sabor Mexicano Restaurant in Berkeley, CA. His restaurant sets the performance bar for affordable, tasty and authentic food. He brings organically farmed produce and eggs harvested from his farm that morning to the restaurant every day. He proudly (and justifiably) lists his fresh ingredients on a chalkboard that hangs above his serving line to enable his customers to choose the freshest ingredients.
The restaurant and food service industry is in crisis. Fifty-five percent of consumers believe American food production is on the wrong track. The chain restaurant business model has hit a wall of flat revenues with evaporating profit margins as these chains battle for market share through price wars. The industry’s revenue growth challenge is tied directly to the desire held by more than 80 percent of consumers for companies to sell healthy food that tastes great and fits into their budget.
A growing nexus of restaurant and food service entrepreneurs are filling this gap between chain restaurants’ product offerings and consumer expectations. These pioneering restaurants, caterers and bakeries are winning customers and maintaining profit margins by offering food that is both authentic and affordable. This is the first of a six article series profiling examples of these pioneers and their best practices.
Ford CEO Alan Mulally defines business sustainability as “…your company continues.” The restaurant and food service industry confronts a sustainability crisis defined by these five trends:
Property Assessed Clean Energy (PACE) financing of clean technologies is making a comeback by targeting commercial properties. At the end of 2012, San Francisco became the first city to finance a project using commercial PACE. In conjunction with San Francisco’s milestone financing, 14 California counties and 126 cities have launched the nation’s largest commercial PACE program called CaliforniaFirst.
PACE is a financing program where cities or counties allow property owners to pay the financing cost for upgrading their building with clean technologies through property taxes. Qualified improvements covered by PACE include installation of efficiency lighting retrofits, energy/water saving systems and clean tech onsite generation including solar and fuel cells.
PACE was a hugely successful residential program before it was stopped in its tracks when the Federal Housing Financing Authority, along with the Office of the Controller Of The Currency, issued guidance that a PACE program was an involuntary subordination of a mortgage. This guidance effectively threatened the mortgages underwritten by the FHFA for homes that also had PACE financing.
Investing in clean tech – successfully – is still a work-in-progress. Numerous publications have recently pronounced clean tech investing in renewable energy, bio-fuels and green chemistry to be dead due to a 34 percent decline in venture capital investments in solar and clean tech.
But, the growing price competitiveness of clean tech suggests that such declarations are off base. If the price of oil had dropped at the same rate that solar panel prices have fallen since 2007, we would be paying $10 per barrel of oil! Similarly, higher efficiency lighting continues to win price competitiveness due to manufacturing economies of scale and technology improvements. Re-lamping a building with higher efficiency lights offers returns on investment of two years or less. But even with clean tech winning price competitiveness, the investor path to monetizing clean tech investments remains challenging. The successful IPOs of ENOC, Tesla and Solar City are still more the exception than the norm.
While the horsepower buzz at the North American International Auto Show was the absolutely stunning Corvette and the Cadillac ELR all-electric coup was standing room only for the press, I thought the most important vehicle was hidden in the far corner. It was Via Motors’ cargo van built for Verizon Wireless. What made this van unique was that it is an electric plug-in with extended range achieved through a gasoline motor that is a generator to the van’s battery system. Think Chevy Volt for a business van that is primarily driven in a lot of stop and go urban traffic.
Business van solution to higher (and higher) diesel and gasoline prices
At every business coaching session I have facilitated over the last two years, at least one business owner has asked me for a sustainable solution to higher pump prices. There are two ways this van can save a business owner money:
Imagine cars as “cool” as an Apple iPad or iPhone where you play games that generate real cash rewards or that can connect you with that hot-looking person driving next to you. That is the future I saw at the 2013 North American International Auto Show (NAIAS). Almost every manufacturer at this show was launching new cars equipped with electrification technologies that will turn driving into a digital engagement delivering value by saving money at the pump, reducing tail pipe emissions and potentially hooking you up with your future significant other.
Farmville for a dashboard?
Unlike past car shows, the biggest trend at the NAIAS wasn’t about horsepower. It was about morphing the dashboard into a game center experience. Think Farmville or Angry Birds next to your digital speedometer. This digital engagement will influence how safely or fuel efficiently you drive, rewarding your efforts with real money saved through lower fuel consumption and, probably some day soon, insurance rates. Or even imagine driving by your favorite retailer and having your car search for special offer sales!
Find me someplace romantic
How far could this go? Ford is now following the digital mobile world and opening their SYNC® central-console computer to third party app developers. Beyond today’s GPS map displays, this screen will offer voice-activated app searches. “The future has arrived” with enabled Ford car owners now being able to perform searches like “What are some good date ideas nearby?” through a third-party-developed app called BeCouply.
KPMG’s recent research, tellingly entitled The Transformation of the Automotive Industry, observes that, “The global automotive industry is undergoing a fundamental transformation due to increasing consumer preferences toward vehicles with a lower carbon footprint.”
This growing consumer focus upon carbon emissions is now being reported from Beijing to the Jersey shore. China has seven of the top ten most polluted cities in the world because of their growing fleet of fossil fueled urban vehicles and their use of coal to generate 75 percent of their electricity. A reported dark joke among Beijing citizens is that the measure of a day’s air quality is whether you can see your feet when you step outside.
American consumers are increasingly linking weather volatility events like Hurricane Sandy to the higher air and ocean temperatures created by human emission of green house gases. Today, approximately 65 percent of citizens between the ages of 18 and 65 view climate changes as a serious or somewhat serious problem. In search of solutions, governments and consumers are looking at automobile manufacturers for answers.
Auto industry climate change strategy
The auto industry is pursuing the following three-part strategy for making price competitive, lower emissions cars and trucks: