Is now a good time to eat more chocolate?

It’s Easter weekend and in many countries around the world people celebrate by giving each other chocolate Easter eggs.

There could be some worrying news though for people who enjoy eating these chocolate eggs as well as anyone who enjoys eating chocolate in general.

chocolate-pricesThe price of chocolate is rocketing and in the last year alone cocoa prices have risen by 20% and it seems that the price rises will continue.

So, what is causing the increase in chocolate price?

The answer is that it is a simple case of supply and demand.

In December, the International Cocoa Organisation said there could be a 150,000 tonne deficit in the amount of cocoa beans produced in 2014.

There is a significant lead time in cultivating cocoa crops so the supply of cocoa will remain relatively static. In addition, the supply problems are being compounded by prospects of an El Nino weather pattern which can result in crop damaging dry winds in some of the leading cocoa growing countries in West Africa such as Ghana and the Ivory Coast.

Demand on the other hand is surging.

According to Euromonitor the value of chocolate consumption in major emerging markets such as Asia and Latin America will grow at more than double the rate of the world average in the next 5 years.

It’s estimated that consumers in the Asia Pacific region will eat 1.096 million tonnes of chocolate by 2018. This represents a 27% increase from 2013 and compares to a 5% increase in Western Europe (the biggest current buyer of chocolate) over the same period.

So in conclusion, there are supply problems, rocketing demand and higher chocolate prices seem inevitable.

What better excuse therefore is needed to buy that extra chocolate bar now before prices rise?

It looks like Saturday could be a record day…

When I was younger I can remember queuing with friends to get the latest album by my favourite group. At the risk of showing my age though it’s been a long, long time since I last did that.

It’s not because I don’t like music anymore but rather that it’s now so much easier to buy music online.

PrintThings have changed quite dramatically for the music industry when it comes to their distribution methods.

In my youth it was pretty simple. Record companies would distribute the albums via the record shops.

Fast forward several years and over the last decade music has been increasingly distributed online via platforms such as iTunes and Amazon. There’s also the not insignificant impact of illegal downloads of music.

Even if you still want to buy the more traditional CD versions of the albums rather than the digital version, then supermarkets such as Tesco sell the leading CDs at very cheap prices.

The high street music shops have struggled to stay alive. Several high street music shops such as Virgin Megastores, Our Price and Zavvi have all gone out of business.

Students of strategy though would not really be surprised by this as according to Michael Porter’s generic strategies there are two main ways of competing. Namely, cost leadership or differentiation.

In simple terms, cost leadership is where a company can produce something at a lower cost than its rivals whilst differentiation is where an organisation can charge a premium for its product as it’s “different”.

A high street chain of music shops is going to have a significantly higher cost base compared to companies that sell music over the internet. Property costs are going to be significant and will make it impossible for high street record chains to ever win the cost leadership battle.

Whilst it’s not looking good for the big chains of record shops what about the smaller independent record shops? Clearly they could never compete via cost leadership so what about differentiation?

On Saturday the seventh annual UK Independent Record Store Day will be held.

More than 240 stores have signed up to this year’s Record Store Day and tomorrow’s event is aimed at reinvigorating interest in the independent music stores.

At last year’s event people were queuing to get into the shops. Not to buy the cheap music but to savour the atmosphere, talk to people who were interested in similar types of music and to buy some of the more unusual music.

Hopefully this differentiation approach will work as in my opinion it will be a sad day if all the independent music shops disappear and we can only buy the music online or at a supermarket when buying our weekly shop.

The Chief Economist or the Chief Escaper?

It looks like whoever was in charge of recruitment at this Museum didn’t do their job properly. The end result is that the museum is now worse off by $500,000.

cheif economistWhen the National Agriculture Museum in the Czech Republic was looking for a new Chief Economist they interviewed Vladimir Prokop. The interview obviously went well as Mr Prokop was offered the job and accepted it to become the new Chief Economist of the museum.

One of the key things that should always be done when recruiting people is to ensure that suitable references and background checks are made.

It looks like in this situation though the reference checks weren’t done properly as Mr Prokop had applied for the job with a fake name and far from having a perfect background for a career as a Chief Economist, his background was that he was a convicted fraudster who was on the run from prison.

He had in fact escaped from prison last year whilst he was serving a sentence for stealing 10 million Czech crowns from the Evangelical Church of Czech Brethren.

He continued this approach to life in his new job and stole $500,000 from the museum.

That was not part of the job description of a Chief Economist.

In fact, far from being a Chief Economist he was more of a Chief Escaper as when the police came to arrest him at his office he managed to avoid arrest by running through the museum exhibition halls, jumping down an emergency exit staircase and then hailing a taxi before escaping.

My guess is that when the museum looks to recruit the next Chief Economist they’ll pay more attention to getting the proper references.

100,000 thanks plus your chance to win a free ACCA or CIMA course.

Wow – it only seems like yesterday that we started our blog and Facebook page and yet here we are this week celebrating 100,000 fans on Facebook so a big, big thank you to all of you that read the blog and follow us on facebook.

free-acca-cima-coursesOur blog readers really do come from all around the world. Our latest readership report showed that our blog has been read in 180 countries in the last 30 days!

So, thank you, dankie, shukran, do jeh, grazie, gracias, asante, merci (in fact sorry but we can’t do 180 languages but thank you all anyway!)

We’ve also got a little something to give back to you. We’ve got a short 2 minute survey and 5 people who complete it will be selected at random to win a free online ACCA or CIMA course.

If you’ve passed all of your exams or aren’t studying for them then don’t worry as if you are lucky enough to win the free ACCA or CIMA online course prize draw you can transfer the course to the person of your choice.

To complete the 2 minute questionnaire to stand a chance of winning a free ACCA or CIMA online course click here.

Thank you again for all the nice messages you’ve sent us over the years and here’s to the next 100,000 Facebook fans.

Good luck in the draw for a free ACCA or CIMA online course.

Are Manchester United getting it wrong?

Manchester United are dropping down the table.

Now, I’m not talking about the Premier League table where at the time of writing they are 7th in the League and are guaranteed to obtain their lowest points total in a season in the Premier League era. No, instead I’m talking about the Deloitte Football Money League.

man-utd-financesDeloitte are arguably the top accounting firm when it comes to dealing with UK football teams and each year they profile the highest earning clubs in the world.

The 17th edition of their report highlights the financial results from the 2012/13 season and it seems that Man Utd falling down league tables isn’t restricted to the Premier League table.

For the first time since the Deloitte Football Money League began they have fallen out of the top 3 big earners in the world. European champions Bayern Munich from Germany, leapfrogged Man Utd into third place behind Real Madrid and Barcelona.

Like most clubs in the top 20, Man Utd did generate more money than the previous year and the financial position going forward in the short term should be ok as there is a new Premier League television contract as well as some lucrative commercial deals present.

The problem could come though if they fail to qualify for the Champions League over the next few seasons. Dan Jones, partner in the Sports Business Group at Deloitte, said: “Consistent non-qualification for the Champions League would be a problem because, in round number terms, it is worth circa €50 million”.

So, it’s potentially a rough couple of years ahead for United.

The top 10 earners according to the Deloitte report are:

1. Real Madrid: €519 m
2. Barcelona: €483 m
3. Bayern Munich: €431 m
4. Man Utd: €424 m
5. Paris Saint Germain: €399 m
6. Manchester City: €316 m
7. Chelsea: €303 m
8. Arsenal: €284 m
9. Juventus: €272 m
10. AC Milan: €264 m

A copy of the full report can be seen here.

Things will now be different for you if you eat chocolate…

Sometimes it’s the simple ideas in business that work.

24 years ago in April 1990, the retailer Poundland was set up. On the face of it their approach was pretty simple – all the items in their shops would retail at £1 (hence the name “Poundland”).

tobleroneThey now have over 500 stores and sell 3,000 different products which all retail at £1.

They have been incredibly successful and the company has just been floated on the London Stock Exchange with a value of £750 million.

Whilst the concept of everything in the shop being on sale for £1 has advantages such as creating a “value image” which has been successful in the recent economic downturn, there are clear challenges when it comes to what £1 can buy today compared to 24 years ago and importantly what £1 will be able to buy in 24 years time.

Looking at the 4Ps model then it’s clear that the Price has to remain at £1, Promotion is minimal with word of mouth being the preferred method and Place needs to be in the right location as people will not travel a long distance to buy something for £1.

That leaves Product.

People are attracted to Poundland because it sells recognised brands at a discount price so they can’t really switch to unknown brands. They have however identified an approach to maintaining their margins on well known products including the chocolate bar, the Toblerone (the chocolate bar with the hidden logo shown here).

Poundland have agreed with Kraft that a smaller Toblerone is produced. It is only slightly smaller than the standard bar – about one triangle shorter.

Importantly though, by reducing the size of the bar it enables the price to be held at £1.

It’s not just at Poundland where chocolate bars have been changing.

The chocolate industry as a whole is currently facing a number of challenges with Cocoa prices being very high.

So what do chocolate manufacturers do? Do they increase the prices to keep their margins or do they amend the product?

Well it seems that both Nestlé and Cadbury have been quietly shrinking the size of some of their chocolate bars on the market whilst at the same time pushing up some of their prices to maintain their profit margins.

A couple of years ago, some chunks of Cadbury’s famous Dairy Milk Bar were removed and the bar was reduced in size from 140g to 120g

Now whilst on the face of it some consumers may feel a bit cheated by this move it could arguably prove beneficial for waistlines.

Interestingly as well, will we see Poundland stocking a one chunk £1 Toblerone in a few years time?

What could possibly go wrong?

Ethics are seen as one of the core attributes of an accountant.

Let me ask you a question though – based on the following information do you thick Mr Darren Upton was an ethical accountant?

fraudMr Upton was in business with his wife and they ran Upton & Co, a firm of accountants based in England with over 800 clients.

Mr Upton decided that he wanted a bit of excitement in his life and after going onto an internet dating website and pretending to be single, the married father met a part-time model and started seeing her as his girlfriend.

Did he tell this lady that he was marred?

No, he didn’t tell her that he was married but what he did do was to buy her lots of presents.

Now, I’m not talking about the odd bunch of flowers or box of chocolates. No, I’m talking about gifts including a Mercedes, lingerie from Ann Summers, clothes from Harvey Nichols and he also rented an £800 a month flat for her.

In fact, he spent on average £10,000 per month on his girlfriend over an 18 month period.

So picture the scene.

He’s in business together with his wife. He meets another woman and starts spending significant amounts of money on her. How can he fund these gifts without his wife finding out?

Well, put it this way. There are some clever frauds and some pretty stupid frauds that have been used to fund unethical activities over the years.

Mr Upton’s money raising attempt fell well and truly into the “stupid fraud” category.

Mr Upton looked after the tax affairs of a number of clients. After the tax they owed had been calculated he told the clients to pay the tax but instead of giving the bank account details of the tax authorities he gave the clients his own personal bank details.

It doesn’t take a genius to notice that the fraud will be spotted as soon as the tax authorities send a late payment notice to the clients.

So, having an affair behind his wife’s back, not telling his girlfriend he was married, defrauding his clients and taking money that belonged to the tax authorities.

What could possibly go wrong??

Mr. Upton was jailed for 6 years so he’ll have plenty of time to think about that question.

Not the best thing to post on Facebook…

Some things just shouldn’t be posted on Facebook.

Confidentiality agreements are regularly seen in business. At the risk of stating the obvious, these agreements are set up to ensure that whatever was agreed between 2 parties remains confidential.

confidentiality agreementUnfortunately for a gentleman called Mr Snay, he broke a confidentiality agreement and as a result is now $80,000 worse off.

The background to the story is that Patrick Snay sued his former employer Gulliver Preparatory School in Miami for age discrimination. He won an $80,000 settlement from them.

There was a condition attached to this though and that was he had to keep it secret (or using business terminology, he had a “confidentiality agreement” with the other party).

Whilst Mr Snay was no doubt feeling very pleased with himself and his $80,000 award he’s probably regretting telling his daughter or to be more precise, he’s probably regretting telling his daughter not to post about it on her Facebook page.

Yes, his daughter Dana told her 1,200 Facebook friends about the news.

She posted that “”Mama and Papa Snay won the case against Gulliver,” and “Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.”

As a result of this post the school didn’t pay the $80,000 settlement. They argued that Mr Snay had broken the confidentiality agreement. The Florida Appeals Court agreed with them and stated that the settlement does not have to be paid.

So, that one particular Facebook post by Dana cost her parents $80,000. Somehow I don’t think “Mama and Papa Snay” hit the like button on their daughters post.

Are things looking up after this advert?

The advertising profession is consistently under pressure to come up with new ways of promoting a product.

British Airways PlcOgilvy, a global creative agency, has recently developed a pretty impressive advert for British Airways.

These adverts utilise interactive digital screens and are located in certain areas in London including Piccadilly Circus. The nice thing about these advertising boards is that they interact with the British Airways planes flying overhead.

The system on the advertising boards tracks British Airways planes as they fly above the boards and interrupts the display to show a child on the screen pointing towards the actual plane flying above. The screen then shows details of where the plane is flying to.

The aim of the promotion is to remind people how magical flying can be by looking at it from a child’s perspective. Richard Tams, a British Airways spokesman was quoted as saying “we’ve all had conversations with friends and family wondering where the planes are going and dream of an amazing holiday or warm destination and this clever technology taps into that and reminds people how accessible the world can be.”

A video of the board in action can be seen below.

This got me thinking though and whilst the technology is certainly very impressive and the creative brains that thought it up deserve a round of applause, I do wonder whether all the rain we’ve had in the UK recently will result in the child on the digital screen merely pointing towards a dark raincloud with a plane nowhere to be seen.

After 118 years Barclays are saying farewell to pwc.

After getting to know each other 118 years ago in 1896 it’s looking like pwc’s relationship with the Barclays banking group is coming to an end.

barclaysBarclays has just released their 2013 Annual Report and the Report highlights that they are putting their audit out to tender and pwc will not be invited to tender.

They put this down to several reasons including being “mindful of investor sentiment regarding external audit firm tendering and rotation” and the fact that “2014 is likely to see new regulation in this area both from the UK Competition Commission (implementing its decision to mandate tendering at least every 10 years) and the European Union (requiring audit firm rotation at least every 20 years).”

Barclays is one of pwc’s major clients and the fees received by pwc were pretty significant.

In 2013 the total audit and non-audit fees paid to pwc by Barclays amounted to £45 million.

Interestingly, the non-audit fees paid to pwc represented 28.5% of the audit fee.

Allowable non-audit services are pre-approved up to £100,000, or £25,000 in the case of certain taxation services. Any proposed non-audit service that exceeds these thresholds requires the specific approval from the Chairman of the Audit Committee before pwc can be engaged.

Barclays said that during 2013 the Chairman of the Audit Committee scrutinised all such requests for approval, particularly those that concerned taxation-related services, and two requests for approval were declined.

Whilst losing the Barclay’s audit is no doubt a £45 million disappointment to pwc, it’s fair to say that the other accounting companies are looking forward to the opportunity of tendering for a £45 million audit.