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Newports and Camels are a smoking combination

Fri, 2014-07-11 13:07

The second-largest cigarette maker in the U.S., Reynolds American, is trying to acquire the third-largest cigarette company in the U.S., Lorillard. The deal speaks volumes about the current and future state of the tobacco industry.

While smoking has declined in the U.S. (18 percent of adults smoke here), the U.S. remains a major profit center for the tobacco industry – while it accounts for only 5 percent of volume, it produces 14 percent of all revenue globally. Tobacco firms have been raising prices to offset declining demand. Consolidation helps cut costs, and a duopoly could make raising prices in the future even easier.

Also factoring into the deal: Lorillard owns Blu e-cigarettes, a market leader in a small but persistent cigarette alternative. Finally, Lorillard also owns menthol-flavored Newports. Premium menthol-flavored cigarettes like Newports are the one area of the industry where sales are flat or barely declining, and Newports have very strong brand loyalty.

If the cigarette industry is slowly burning out, Reynolds is buying a few extra years on its life.

Graphic by Shea Huffman/Marketplace

The U.S. Highway Trust Fund is running low on cash

Fri, 2014-07-11 12:49

The federal Highway Trust Fund runs out of money at the end of the month. It's been paid for by gas taxes since 1993, but raising taxes is a tough political sell, and right now Congress can't agree on what to do about it.

Meanwhile, Jersey City, NJ is in the middle of a construction boom.

Those two things may seem unrelated, but Jersey City Mayor Steven Fulop says if the fund runs out of money, it could put the kibosh on the growth.

And to understand, it’s important to take a look back at the recent history of Jersey City.

“If you go back two decades, this was an example of urban decay,” Fulop says. “Most of downtown was rail yards. And if you go back twenty some odd years, they were giving these brownstones away. This was actually the most financially and economically challenged portion of the city that we're standing in right now.”

Now, construction cranes tower above the city in almost every direction.

 “We're going to overtake Newark as the largest city in New Jersey, and I can comfortably say that the 20 largest buildings in the state will be in Jersey City in the next four years,” Fulop says. “We're building 54 stories, 60 stories, 70 stories, another 55 story, I mean I could go on and on. And if you walk down here you'll see the cranes, and activity, and people working … those are generally concentrated around mass transportation.”

Building around mass transit has been a cornerstone for Jersey City. And a good portion of the money that goes towards mass transit in the state comes from the Highway Trust Fund. In New Jersey, the average person pays about $600 per year in those taxes.

Fulop says if that money were to dry up, then contractors, developers and others in the building industry would lose faith in future funding and slow down – or stop – ongoing projects.

“And once they stop, they’re hard to get back started,” Fulop says.

The Highway Trust Fund was created in 1956. It's been funded by gas taxes, but the tax isn't tied to inflation, so it's gotten less bang for its buck since the 90s. And like many things in Congress, the trust fund is a fight. Conservatives say the program is bloated, and needs to be reformed. But Mayor Fulop, a Democrat, doesn't see it that way.  

“At the end of the day, it's a partnership between federal, state and local,” Fulop says. “And anybody who says that government doesn't have a role in building infrastructure is an absolute moron. I don't know how else to say it.”

Right now, there are a couple plans to pay into the fund lasting until next Spring, but no long term solutions have been agreed upon.

I Can't Believe I Bought That: Cat edition

Fri, 2014-07-11 12:47

This story comes from our Tumblr museum of regret: I Can't Believe I Bought That

I HAVE A BLACK BELT IN THE ART OF BUYER’S REMORSE

For me, the statute of limitations on not feeling stupid about a purchase is never. Many is the time I have ordered plumbing parts online or electronic do-dads on Ebay, only to find out they were close but not, in fact, compatible. One purchase, however, soars high above the rest in provoking a shattering sense of self-loathing, buyer’s remorse to the twelfth power, or as Edith Piaf never sang, “Oui, je regrette.”

Back when Otis was a little kitty, my spouse Mary and I were wandering a pet store when a curious contraption caught our eyes. It was a kit that promised to teach the cat to use the toilet, meaning the actual toilet bowl. If this thing worked there would be no more cat litter, no more scooping, just a dainty flush now and again. This, of course, would be the answer to a dream.

I remember Mary being appropriately skeptical but game to give it a shot. She figured at $19, or whatever it was, the purchase would be worth the risk. I, by contrast, was all in, fully convinced this was the $19 that would change everything.

Inside the plastic wrap of this kit we found two items: a step-by-step instruction sheet and a stiff piece of cardboard the size of a toilet seat, embossed with a series of concentric circles like the elevation lines of a low-resolution topographical map. The concept was this: we were to lay the cardboard flat on the toilet and in the initial phase of training, place a cluster of kitty litter in the middle of the platform so Otis would get the idea. Over time, once the cat got used to doing his business on this cardboard and porcelain perch, we would tear out the inner-most circle of cardboard to make a hole. Next, we waited a few more days and as kitty got more comfortable, we were to progressively enlarge the hole by stripping out ever-widening rings of the cardboard. Eventually, like the grin on the Cheshire cat, all the cardboard would be gone, leaving just the maw of the toilet upon which kitty could balance, let ‘er rip and be done.

Here was the problem: The cat was having none of this. When we tried to gently place him on the cardboard, he flailed in that "Are you out of your freaking mind?" way that cats get. When we finally lulled him into giving it the old college try and he accomplished the initial leg of his mission, we celebrated. This just might work.

Then I made an error that put the word “cat” into “catastrophic.” With Otis still nosing about the bathroom, I hit the handle on the commode. It was one of those high-pressure, low-flow toilets that goes beyond flushing and seems to detonate with pyrotechnic ferocity. The cat was alarmed. I was alarmed. The cat would forever associate the toilet with the explosion of flushing and that was that.

Perhaps with a different toilet, different humans or a different cat, the experience would have been different. I sincerely hope that others have found success with the kitty kit. But to this day and every single day, we are reminded of this one purchase. The memory is triggered every time we clean a cat box, enveloped in the acrid stink of buyer’s remorse.

Weekend Brunch: CYNK, the Fed, and potato salad

Fri, 2014-07-11 12:22

This week, Lizzie O'Leary sits down for brunch with New York Magazine contributing editor Jessica Pressler and Business Insider's Executive Editor Joe Weisenthal to discuss the economic news of last week and what's on their plate this week (get it?).

Topics:

Forbes: The meteoric rise of penny stock CYNK

Time: What the minutes of the last Fed meeting say about the economy

The Daily Beast: How one man raised thousands of dollars in the quest to make potato salad

The explosive birth of the bikini

Fri, 2014-07-11 11:26

Had “Sports Illustrated” existed in 1900, its swimsuit issue would not have been especially titillating. Back then, the standard lady’s swimsuit wasn’t much different than her everyday clothes. It was basically a dress, plus a hat and even shoes.

By World War II, with fabric in short supply, slightly more revealing two-piece numbers were considered okay. But even they didn’t expose anything so scandalous as a — gasp! — Belly button.

But post-war? A couple of Frenchmen sensed the world was ready to loosen up. The first of them — one Jacques Heim — designed a two-piece so tiny he called it “l’atome.” The Atom.

But Heim was one-upped by his countryman, Louis Reard. On July 5th, 1946, he unveiled an even tinier suit: “The Bikini.” Named after a Pacific island atoll where, four days earlier, an atomic bomb had been tested. Reard claimed he had “split The Atom.”

Public reactions were … extreme. Reard got 50,000 fan letters thanking him for the invention. Mostly from men. But in some countries, shocked lawmakers instated bikini bans. Reard happily embraced the controversy. In ads, he said bikinis were small enough to be "pulled through a wedding ring."

Soon, the anti-bikini lobby collapsed as the suit became popular on beaches all over Europe and finally — in 1960 — in the U.S.A.  The same year singer Brian Hyland scored a number-one hit about a girl too embarrassed to be seen in one.

This story comes to us courtesy of our friends at Dinner Party Download.

Country in revolt? Hire a PR firm.

Fri, 2014-07-11 11:14

It’s been three months since the Islamist group Boko Haram kidnapped more than two hundred  schoolgirls in Nigeria. The Nigerian government has yet to free the girls, and it’s come under criticism for its handling of the crisis. It’s also been shamed by the global campaign #BringBackOurGirls, which even Michelle Obama got in on.

So what’s a country with a bad rap to do? Get some PR, of course.

“I think there is a narrative that the government was not doing enough,” says Mark Irion, president of the public relations firm LEVICK, which signed a $1.2 million contract to galvanize support for the Nigerian government and its fight against terrorism.

LEVICK’s motto is "Communicating trust." Irion says much of the storyline about Nigeria’s tepid response to the crisis “is not true.”

“There are things that are underway and are public,” he says. “And there are things that, of course, cannot be publicly discussed. But, yes, there is a false narrative that we intend to correct.”

It’s no coincidence the Washington Post recently ran an op-ed from Nigerian President Goodluck Jonathan. “My silence has been necessary,” he wrote, “to avoid compromising the details of our investigation.”

(Here’s a tongue-in-cheek response to that piece.)

 J. Peter Pham directs the Africa Center at the Atlantic Council. He says the fact is Nigeria has failed to deal with Boko Haram over the years.

“You cannot spin that reality any more than you can spin the fact that there are more than two hundred schoolgirls still missing and Boko Haram continues to attack with impunity throughout northeastern Nigeria,” he says.

Now, trying to improve the image of foreign governments is nothing new. It’s big business for PR firms like Ketchum Inc., which made more than $10 million from its foreign clients last year, including the Russia Federation and Gazprom. (You can see that tabulation here, via the Sunlight Foundation.) Ketchum continued to represent Russia through the turmoil in Ukraine.

Still, part of this business is knowing who to represent and when to stop.

“You know everyone has their own litmus test,” says Toby Moffett, a former Congressman who used to run The Moffett Group. That was the M in the PLM Group, the trio of firms that lobbied and did communications for Egypt under Hosni Mubarak and the military council that replaced him.

That representation continued until Egyptian police raided U.S.-backed NGOs and barred some Americans from leaving the country.

“I did receive a call from a friend who happened to be President Obama’s Secretary of Transportation Ray LaHood,” Moffett recalls. “And Ray was not happy, to put it mildly.”

LaHood’s son was one of the Americans who was temporarily trapped in Egypt. Moffett says he would’ve dropped the Egypt account anyway. Still…

“You know there was that kind of gentle persuasion, shall we say,” he says.

When it comes to foreign governments, it turns out gentle persuasion can run both ways.

One postscript: In October, Egypt signed a new contract with another communications firm, The Glover Park Group. That representation will cost the country $250,000 a month.

Host: It’s been three months since the Islamist group Boko Haram kidnapped hundreds of schoolgirls in Nigeria. The Nigerian government has yet to free them … it’s also been shamed by that global campaign … hashtag-bring-back-our-girls. Even Michelle Obama got in on that. So what’s a country with a bad rap to do? Get some PR, of course. Kate Davidson reports.

 Here’s what Nigeria’s image problem sounds like:

News montage: The authorities had no number for how many girls were taken/The country’s first lady expressed doubts that there was any kidnapping./A government with no idea where they are – We want our girls back now. Now.

That … is a PR nightmare. Which is why someone in Nigeria called in the image pros.

Irion: I think there is a narrative that the government was not doing enough.

Mark Irion is president of the public relations firm Levick, which signed a 1.2 million dollar contract to galvanize support for the Nigerian government and its fight against terrorism. Levick’s motto is communicating trust. Irion says much of the storyline about Nigeria’s tepid response…

Irion: …is not true. There are things that are underway and are public. And there are things that, of course, cannot be publicly discussed. But yes, there is a false narrative that we intend to correct.

It’s no coincidence the Washington Post recently ran an op-ed from Nigerian President Goodluck Jonathan. “My silence has been necessary,” he wrote, “to avoid compromising the details of our investigation.” J Peter Pham directs the Africa Center at the Atlantic Council. He says the fact is Nigeria has failed to deal with Boko Haram over the years.

Pham: You cannot spin that reality any more than you can spin the fact that there are more than two hundred schoolgirls still missing and Boko Haram continues to attack with impunity throughout Northeastern Nigeria.

Now, trying to improve the image of foreign governments is nothing new. It’s big business for PR firms like Ketchum … which made more than ten million dollars from foreign clients like Russia last year. Ketchum continued to represent Russia after it annexed Crimea. Still, part of this business is knowing who to represent and when to stop.

Moffett: You know everyone has their own litmus test.

Toby Moffett is a former Congressman who used to run The Moffett Group … one of the firms that lobbied and did PR for Egypt under Hosni Mubarak, and the military council that replaced him. Until, that is, Egyptian police raided US-backed NGOs and barred some Americans from leaving the country.

Moffett: I did receive a call from a friend who happened to be President Obama’s Secretary of Transportation Ray LaHood. And Ray was not happy, to put it mildly.

LaHood’s son was one of the Americans who was temporarily trapped in Egypt. Moffett says he would’ve dropped the Egypt account anyway … but …

Moffett: You know there was that kind of gentle persuasion, shall we say.

When it comes to foreign governments, it turns out gentle persuasion can run both ways. I’m Kate Davidson, for Marketplace.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Good weather drives corn prices to record low

Fri, 2014-07-11 11:09

Corn prices fell to a record low; it hasn’t been this cheap in almost four years. Weather conditions are favorable for the crops at this point, and that means surpluses. But with so much corn, can farmers sell it all?

"There are still real nice markets out there," says Keith Alverson, a sixth-generation ethanol corn farmer in Chester, South Dakota. "It’s just a matter of what price point you want to market it at."

Alverson says although there's huge demand for corn, there's still an abundance of it that needs a home. So what does an ethanol corn farmer do with all of their extra corn?

"We are gearing it up for storage," says Alverson. They’ve added more bunker storage to hold the corn and are preparing for a big harvest.

Over the past few months, Alverson says he's seen a big change in corn prices. A bushel is going for about $3.50 now, about $1.00 to $1.50 less than it was a year ago.

But Alverson says he's confident he will still sell his corn and manage his profits accordingly.

"Just like any other business, you try and lock in your margins," says Alverson. "We made some grain sales ahead of time at nice profitable levels, and we try to manage out costs wisely."

A Venezuelan airport is charging for air. Yes, air.

Fri, 2014-07-11 10:49

Those various and sundry airport taxes may have finally jumped the shark.

Outbound passengers at the international airport in Caracas, Venezuela will now have to pay 127 Bolívar - about $20 at the official rate of exchange - to breathe.

The government apparently needs it cover the cost of a newly-installed system that uses ozone to purify the air conditioning system.

No word on what happens if you don't pay.

PODCAST: Making money off Instagram

Fri, 2014-07-11 07:59

Economist Chris Low discusses interest rates with Marketplace Morning Report host David Brancaccio.

Big brands are adding social media to their advertising budgets, often placing ads directly with individuals who've built large followings on sites like Instagram, YouTube, and Vine. But how do companies and these influencers hook up

What's it worth to be in on the joke?

Fri, 2014-07-11 07:24

How much is it worth to you to be in on a joke?

Nothing? $10? How about $40,000?

We’ve been contemplating that this week because, of course, of the remarkable story of what has to be the world’s most expensive potato salad

Short version: Guy makes a kickstarter to make potato salad, puts it on internet, it goes viral, and explodes in a hail of dollars.

What is it about things like this that makes us want to buy in?

New York Magazine’s blog The Science of Us wrote about the transitive property of internet humor - that these moments of virality bind us together in some type of hypermodern experiential campfire. I think that’s true, in part. But they also hit a sweet spot between cynicism (the modern world has ruined everything) and joy (we can contribute to something silly and whimsical). There is originality and connection in the world and we’re constantly discovering new ways to find it.

In our brunch segment this week on Marketplace Weekend, our contributor Jessica Pressler reminded me of the New York bus monitor whose video bullying by students went viral. That incident tapped into our altruistic financial impulses and she received some $700,000 in donations via Indiegogo.

Maybe I’m too optimistic, but I have this hope (stoked by our other bruncher, Joe Weisenthal), that someone will go looking for the potato salad, and stumble onto other Kickstarters. Maybe fund a classroom computer. Someone’s medical treatment. Food for a shelter. A pet rescue. Something else that binds us together when we are otherwise fragmented, pixilated, and far apart. 

Weekly Wrap: The most interesting man at the Fed

Fri, 2014-07-11 07:07

Felix Salmon from Fusion and Jo Ling Kent from Fox Business sat down with Kai Ryssdal to recap the big events from this past week.

A major Portuguese bank is in trouble and while Kent believes the “U.S. market doesn’t seem to mind,” Salmon would argue, “ a big bank failure is always a problem.”

Plus, with dueling speakers at the Federal Reserve, Salmon believes we should listen to Ktochelekova. Why? Because: “he’s by far the most interesting guy,” at the Federal Reserve.

Listen to their full conversation in the audio player above.

Why you might seeing English subtitles on Spanish-lanuguage TV ads

Fri, 2014-07-11 05:13

If you've been following the World Cup you may have seen Spanish language TV ads with English subtitles.

Coca Cola tried an ad using different languages during the Super Bowl earlier this year. It didn’t go over so well. But for advertisers the World Cup is a whole different ball game.

“One extreme is the Super Bowl, another extreme is the World Cup," says Mauro Guillen, a professor of international management and Director of the Lauder Institute at the Wharton School. He says one reason we’re seeing ads with English subtitles on American TV, from companies like Hyundai, Dish and JC Penney, is becasue of the growing economic clout of the Hispanic community in the U.S. 

JC Penney says it's received such a positive response to its commercial, "Pulse" that it's decided to air the spot, in Spanish, with English subtitles, on primetime networks, NBC, ABC and FOX for the duration of this week.

While Hyundai has been airing its Spanish language ad, "Boom", on ESPN.

The World Cup, notes Guillen, "is a unique opportunity. To experiment and to try out new things. Because not everybody is watching.”

Viewers, he says, are young and cosmopolitan -- they understand bilingual ads -- literally. 

Luis Miguel Messianu, president and chief creative officer of Alma, a multicultural advertising firm in Miami, says advertisers are smart to speak Spanish during the World Cup.

“Everybody realizes the power of having a SuperBowl that lasts one month,” he says. 

Soccer in America, notes Messianu, is no longer a niche sport. Instead, it’s alive and kicking. 

But sports aside, for advertisers, notes Marlene Morris Towns, a professor of marketing at Georgetown’s McDonough School of Business, "it really is a wise business move to look at who your audience is and speak to them, not just in terms of their lifestyle and culture, but litearlly in terms of their language." 

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