Gotta love the corporate mentality. Nearly 12 years increasing profits.... Hey, let's close the factory and discontinue almost everything it makes!
Questions for Leonardw
- Thread starter swan
- Start date
SmokingPipes.com Updates
Watch for Updates Twice a Week
PipesMagazine Approved Sponsor
Site Sponsors
PipesMagazine Approved Sponsor
PipesMagazine Approved Sponsor
PipesMagazine Approved Sponsor
PipesMagazine Approved Sponsor
Does LNF not have Perique? I always found it similar to OGS, which famously has so little perique for years many insisted it was a pure VA
Yeah like okay operating multiple factories is more expensive, then why bother buying another one?Gotta love the corporate mentality. Nearly 12 years increasing profits.... Hey, let's close the factory and discontinue almost everything it makes!
Simple: So that you can shut it down.
Yeah, you did, but…ok
It’s easy to grow profits: cut expenses.
That’s what Mac Baren did at Sutliff (among other things) and it’s what STG is doing to Mac Baren.
I imagine it's complex. If their best selling blend, for example, is just a rebranded STG product, what's the real profit once you start peeling away some of those layers?Gotta love the corporate mentality. Nearly 12 years increasing profits.... Hey, let's close the factory and discontinue almost everything it makes!
The Sutliff division of Mac Baren may have been profitable, we don’t know, but was it profitable enough? Remember, Sutliff wasn’t a public service. It was an investment vehicle. STG has a threshold on ROI, and apparently Sutliff didn’t reach it.
Funny thing. Some people decry “corporate greed”, but then cry bloody murder if the returns on their retirement investments don’t meet their expectations.
Last edited:
Like truth, “real profit” is an elusive concept. In this case the answer revolves around transfer pricing, a surprisingly complex question riddled with legal and accounting requirements that only become more complex when the transfer crosses international borders.
Certainly did not. Because I am not even talking about profitability and volume being related, I am talking about the change in amount of profit over time, which is a very different concept to analyze.
And your simplistic reduction of the growth of profit 11 years in a row with "iTs EaSy To GrOw ProFiTs CuT eXpEnSeS" is so useless to as contribute nothing to the discussion, and neither will further ignorant meta-nitpicking at those attempting to have actual discussion.
Yes, but more precisely I have to believe the math boiled down to the delta between Mac Baren (and its wholly owned subsidiary Sutliff) on a standalone basis and a consolidation that basically transferred all the gross profit with very little of the SG&A. Put more plainly, when you’re already in the industry you’re already incurring all or most of the overhead anyway, so incremental volume yields gross profit that largely translates into profit before tax. This, my friends, is one example of what is called synergy.
And by the way in this case the answer the “math” produced can’t possibly have been anything but clear and compelling.
Let's not get this thread shut down.............
I suppose ceteris paribus that’s true; but as everyone but an economist knows ceteris is rarely paribus in the real world. The fact is mature or shrinking markets are an especially fertile breeding ground for consolidation, and enormous profits can be derived from holding a significant marketshare of remaining demand. It often pays to be the last man standing in dying businesses.
Looked at another way, growth requires investment in product development, marketing, PP&E, and working capital. Very little of that is needed for a cash cow being milked over a number of years.
Amazon didn’t have a profitable year until 2004, a full decade after its founding. Institutional investors hung on because they believed in the long term growth opportunities. No-one seriously feels that way about a pure play in pipe tobacco.
Exactly, which is where STG's move comes in. Buying MB & Sutliff was buying market share. Very different scenario from what Sutliff has been doing for the last 11 years.
Let’s be very clear here. This thread is for questions poised to Mr. W. Please open your own thread to debate economic theory or strut around like some god damned know it all who is going to put everyone else straight. This thread is specifically to ask questions and get answers from an industry insider who apparently is the one who made the decisions to close down the various production lines. Please take your savoir faire else where and proclaim your nonsense to any and all on another thread. I for one, along with a good many others, do not care to see this thread get locked over some fucken nonsense. Please - open your own thread and leave this one as a Q and A for those who really want to get some answers. No one cares what you have to add. We didn’t come here to listen to a cigar smoking asshole. @didimauw , I hope I am not out of line , but if someone is derailing this thread let’s hope they can be exiled from it for a while. Just my two cents. I apologize if I came across too brisk.
Last edited:
Yeah, good point. How much were STG and Mac Baren products driving Sutliff profits? There may have been more than just 507.
Good point. I'm getting sick of closing threads. Next will be bans
Let's keep opinions and feelings out of this, and stick to facts please.
That's an easy answer. Mac Baren was up for sale at an attractive price, so you buy the company, own the catalog of blends, bring in any specialized equipment that you can use, scrap the rest, and sell the property for a profit. Sutliff is collateral damage. STG already owns Lane, which was an operation similar to Sutliff, so no need for two of them, and you still own the catalog which you can use.
It's not like there's anything new about this. K, formerly K&K, bought McConnell in the 1980's, and have added a number of catalogs to their holdings, like Rattray's. Most blends are made by only a few companies who own a pile of IPs. Gallaher bought Cope's way back in 1952.
Dunhill stopped making their own tobacco products around 1981 and licensed Murray's and McConnell to make their blends. Dunhill never made Navy Rolls. That was a Murray's creation.
Savinelli didn't make their blends, Mac Baren did.
The era of dozens of manufacturers making a limited array of blends is long, long gone. It's now just a handful of manufacturers, some of whom own many brand names.
The majority of pipe smokers have no clue what it was like, the level of individuality, and never will. We've been in a consolidation mode for decades.
When you look at a page on an online site with dozens of different brands displayed, it's an illusion.
Leonard, I appreciate the candor, vulnerability, and desire to engage with folks who are deeply passionate about dried leaves and their source/quality. Thank you for posting and answering questions. Sounds like you have been tasked with making some hard decisions that effect peoples livelihood, families, and passions. Best of luck to you in these responsibilities.