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Yep, food as well
Global food prices have just hit a new high, as the food price index from the UN Food and Agricultural Organization rose 12.6% in a single month to notch its highest ever recorded level.
Food prices were rising before Russia's invasion of Ukraine, and the disruption has only compounded the problem as both countries are a key source of supply in a number of food markets. Between them Russia and Ukraine account for around 30% of global wheat exports, and 20% of global maize, while Ukraine is also the world's biggest supplier of sunflower seed oil.
All told the supply disruptions have meant the sharpest rises in global cereal and cooking oil prices, with both indices rising 17% and 23% respectively in the last month. The price rises are expected to hit poorest countries hardest, where food makes up a larger proportion of individual spending.
A "boring" business, worth billions
This week Costco, the membership-only big-box retailer, announced that the company's revenue had jumped almost 19% in March, relative to the year before. That's fast growth for a sleepy retailer that doesn't pay for advertising and is most famous for huge no-frills warehouses and $1.50 hot dogs.
Technically, Costco is a private club. It's just not a very stuffy one. Shopping at Costco requires a membership, which starts at $60 a year. Once a member, Costco will pretty much sell you anything, at cut prices and preferably in bulk. That means that, like most retailers that compete on price, Costco lives with a slender profit margin, which last year was just over 3%.
That margin doesn't leave much room for error, but Costco has a secret: it almost doesn't care about making money on its merchandise sales. Although small in absolute terms, Costco's membership fees are almost pure profit. That smooths things out big time for a business that could otherwise be a bit of a roller coaster.
Indeed, if you assume Costco's membership fees are pure profit then they've accounted for 65-70% of the company's total operating profit over the last 20+ years.
Hot dogs for $1.50: always
The epitome of Costco's no-frills strategy is their $1.50 hot dog, which is a staple of the Costco experience and has been keeping customers coming back for 35+ years, charging $1.50 the entire time. Presumably at some point they began losing money with every hot dog sold, prompting the CEO to approach the founder, suggesting they raise the price, to which he was told "if you raise the [price of the] effing hot dog, I will kill you. Figure it out." — they figured it out.
The ongoing global energy crisis is giving countries a different perspective on how they plan to provide energy into the future.
The UK has decided that nuclear will play a bigger role, as the UK government announced yesterday that it plans to build up to eight new nuclear reactors, as the country aims to have 25% of its projected electricity demand supplied by nuclear by 2050. That's a substantial increase on the six reactors that are currently in use and a substantial turnaround on the last 20 years of nuclear output decline in the UK per data via Carbon Brief.
Nuclear, back in vogue?
At the global level nuclear power generation has been broadly unchanged in the last 15-20 years, accounting for only around 10% of total electricity generation. Furthermore, only a few countries, most notably France where 70%+ of electricity comes from nuclear, have gone "all-in" on the technology that's now been around for 60+ years — despite it being reliable and low emissions.
In the US nuclear power accounts for about 19% of all electricity generated, a number that's fallen slightly over the last few years as low-cost natural gas has marginalized nuclear. With gas prices soaring, that could change.
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