Weekly Thoughts

Here are three things that caught our eye this week:
 

Media Consumption

We recently read a ZenithOptimedia report that shed some light on the state of global media consumption. In the aggregate, media consumption takes up a disproportionate amount of our collective daily activity, and its share is only set to increase as the global average is predicted to exceed eight hours by 2017. Moreover, the breakdown of this consumption, both geographically and by type, provides a fascinating window into where growth areas might be in the future.

For example, we were unsurprised to find that the United States leads the OECD with regards to total television viewership. At five hours daily, Americans watch significantly more television than other developed countries such as Canada (257 minutes), Germany (238 minutes), and France (240 minutes). However, despite the iconic status of the television in American culture, we found there are a few other countries that watch even more TV. According to recent surveys, Saudi Arabians watch the most, averaging 409 minutes per day, followed by Croatians (377 minutes), Romanians (340 minutes), Lithuanians (325 minutes), and Serbians (300 minutes).

While these numbers seem high, total television consumption has actually decreased over the past five years as internet media consumption, particularly mobile media, has become more popular. In fact, since 2010 almost all other forms of media have felt the negative effect of a 105% surge in internet media consumption, a trend that is unlikely to abate.

Finally, when aggregated, the figures for total media consumption are staggering. According to ZenithOptimedia, Latin America leads the globe in this metric, clocking an average of 765 minutes per day (13 hours), driven primarily by high consumption of radio programming content (Latin Americans spend almost three hours a day listening to the radio, in addition to average television and internet consumption). In contrast, Asia-Pacific consumes the least amount of media, averaging 310 minutes a day, significantly below the global mean of roughly 500 minutes.

While we frequently enjoy a good show, we have always opted for quality over quantity, a preference that apparently puts us in the global minority! That said, the macro trends in media consumption are important, as the way in which the global population receives and interprets information ultimately shapes belief systems and worldviews. In addition, the captive eyeballs of the world’s media consumers means the war for users amongst content providers will only become more intense. As such, this rapidly evolving landscape will have a significant impact on our economic, political, and cultural realities.

Quartz, Quartz 2, ZenithOptimedia
 

Online Lending

Over the past couple of months, we’ve spent a significant amount of time investigating small business financing options. In addition to traditional lending sources, we have observed an explosion of financial technology ( “fintech”) firms which aim to disrupt the small business financing landscape with high-tech, streamlined, and affordable lending offerings. Industry experts have posited that these fintech companies will help alleviate many of the frictions small business owners face when seeking financing. As explained by Jim Salters, CEO of The Business Backers:

“There is just a tremendous amount of investment and innovation in serving this sort of non-bank or sort of beyond the traditional credit models, and business models, and capital structures that existed in the past. So we’re seeing a lot of non-bank companies that are seeing increasing amounts of investment from venture capital, private equity, and lending capital funds. This investment and innovation is increasing available funding supply.”

On the surface, given today’s zero interest rate environment, smaller scale loan issuance should be significant. However, while the supply side of such financing has been greatly increased, the demand side of that equation is still lacking. According to a recent LendingTree survey, only 1 in 4 small business owners go online to research loan options, and only 42% of the cohort who applied for a loan in the past year went through the exercise of comparison shopping during their application process. Instead, the majority of small business owners (61%) refer directly to traditional banks or credit unions to research financing options.

Assuming that traditional banks provide the best rates and lacking awareness of the ease and convenience associated with online lending, the majority of small businesses are likely missing out on financing options that may be more attractive. According to Doug Lebda, CEO of LendingTree:

“‘Many assume that the bank or lender they work with will always give them the best rate, and while that may be the case sometimes, it doesn’t hurt to see what options are available. Lenders compete with one another to earn trust and earn market share by offering better rates, terms and service just like any other business.'”

Building on this idea, LendingTree noted that 51% of owners listed trust as the primary factor when choosing a business loan, followed by ease and convenience of application (30%), and interest rate and costs (27%). We suspect that demand for online financing may increase as awareness grows. However, to us, the LendingTree survey provides a valuable insight that, in the psyche of small business owners, trust can (perhaps irrationally) trump convenience and cost. As such, online lenders may have more work to do before they are broadly accepted by the market.

Morningstar, LendingTree
 

Meet The Resnicks

This week we learned the unlikely story of Lynda and Stewart Resnick, co-founders of Roll Global, a relatively low-profile company with a surprisingly far reach. Last year, Roll’s products generated approximately $3.8 billion, and today, almost 50% of American households purchase Roll products, which include top-selling brands such as Pom Wonderful (pomegranate juice), FIJI Water (premium bottled water), Teleflora (flower delivery), Wonderful Pistachios (pistachios), Sweet Scarletts (grapefruits) and Wonderful Halos (mandarin oranges).

The couple, who have an estimated net worth of $4.1 billion, made their first move in 1979 by purchasing Teleflora, and introducing the hit marketing concept of “Flowers in a Gift,” where flowers are delivered in a keepsake container. Subsequently, the couple bought home alarm and security company American Protection Industries, collectibles manufacturer The Franklin Mint, and assembled the portfolio of agricultural businesses for which they are best known.

The foundation of their approach has been the combination of highly effective marketing with a willingness to make bold, opportunistic, and slightly unorthodox bets. For example, in 1996 the Resnicks spent $211,000 at an auction for fake pearls worn by Jackie Kennedy. The Franklin Mint then copied the pearls and sold $200 reproductions, grossing $26 million in all. More recently, Roll Global (recently re-named The Wonderful Company) now controls 10 top-selling brands, taking items as diverse as pomegranate juice and pistachios from obscurity to must buys. The key, according to David Krause, President of Wonderful subsidiary Paramount Citrus, is that “Stewart and Lynda Resnick have pioneered a new approach to agriculture by transforming commodity goods into some of America’s most trusted household brands.”

There is plenty of controversy surrounding the couple, from excessive water usage in their California agriculture operations to research funded in an attempt to protect their domestic pistachio market share. That said, the bigger picture of the Resnicks’ life story is one of incremental opportunism combined with long-term vision. We’d guess that before they were billionaires, many likely scoffed at their unconventional business decisions. However, over the years, the Resnicks have been incredibly creative with the opportunities that were presented to them, something we aspire to ourselves.

Forbes, Washington Post, Wikipedia 1, Wikipedia 2, The Packer
 
Have a great week,

Your Chenmark Capital Team