(long post ...) Why KREM will go MUCH higher in price :
The very first day in an introductory accounting course I took in college, the professor had the class (who knew more or less nothing about accounting) look at a balance sheet for The Coca-Cola Company.
The direction we were being "herded" towards was :
Look at that book value (or shareholder equity) as reported on the balance sheet.
Notice how low it is in relation to the current share price of KO.
How can this be possible ?
We were eventually convinced that with certain businesses (like Coca-Cola), there is a great deal of value that is built up, but never has any logical way of showing up on a balance sheet (unless the company is purchased by another company, and then you get into an irritating accounting concept called "goodwill").
This extra (but un-quantifiable) value is a result of things like :
years of successful advertising
years of good customer service
free "advertsing" as a brand starts being mentioned in things like movies, literature, "popular culture," etc. -- at no cost to the company
(I still remember a scene in Stanley Kubrick's Dr. Strangelove where (the character) Colonel Bat Guano says to Peter Sellers : "You're going to have to answer to the Coca-Cola Company." (after Peter Sellers decides to fire a gun into a Coke vending machine to get some coins ...))
Most of the above can (possibly) be summed up by a single word which was used repeatedly by the "main man" of Lettuce Entertain You Enterprises Inc. (the hugely successful restaurant management company, which is partnering in a big way with Krispy Kreme).
The word is "icon."
From page 11 of the 2000 Krispy Kreme annual report (the page devoted to the Lettuce Entertain You Enterprises Inc. people) :
"Our Company, Icon LLC, was established to form partnerships with companies that own bonafide icon brands whose names represent "best in class" and then develop those brands in selected markets."
and ...
"Krispy Kreme, the brand, the product, and the experience, are a phenomenon in the industry."
Another story ...
I once read that part of the brilliance and hard work of Harry Oppenheimer of De Beers was getting the concept that diamonds should be part of one's life ... ingrained in peoples' collective consciousness.
One way this was done was through pre-arranged "product placement" (as it is now called) of diamonds in Hollywood movies.
This was (initially) astounding to me.
But, upon further thought ... of course there must have been a time when most people would never have thought : "Gee, I guess I really ought to spend a LOT of my hard-earned money on a diamond."
And, of course -- something must have started molding minds to make this common accepted behavior.
The thing which I find fascinating is : at some point, De Beers did not have to pay money to get diamonds into the scripts of movies.
The topic of diamonds just "comes up" now, but it obviously did not, maybe 50 or 60 years ago.
Last story : I was reading something about this business of McDonalds being in places like Moscow, and ... the whole strangeness of some of the customers of McDonalds in Moscow spending a very large portion of their take-home pay on a McDonalds meal.
One woman was quoted as saying (if I remember correctly) : "My son is very smart and does very well at school. Some day, I hope maybe he could go to Harvard Law School in America. I come here this one time with him, and we both eat at McDonalds. Maybe this little bit of familiarity with American culture will help him get into Harvard Law School when he is older."
My first reaction to this was : "This is very strange."
But then I thought : "There is at least some element of logic to what she is saying."
The thing that strikes me now is : the American fast food chain she was talking about was ... OF COURSE ... McDonalds.
It would make no sense at all to think her thoughts about lots of other fast food restaurants.
McDonalds is the "icon."
If it were soda, I assume the choice would be Coca-Cola.
For doughnuts (in a few years), it is entirely possible that the choice would be Krispy Kreme.
(I think there is ZERO chance it would be Dunkin Donuts).
Krispy Kreme is "all over the place" with product placement, "buzz," good public relations, etc.
This is worth a fortune.
I think people are starting to figure this out.
Jon. |
