Making America Great Again, T+3 -- January 24, 2018

Updates

Later, 4:17 p.m. CT: beating a dead horse (the Campbell Soup story below). Don sent me another article on this story. My thoughts, not ready for prime time:

I'm beginning to think that this was more about good-old fashioned consolidation.

Four plants with excess capacity. Close one plant and consolidate to three plants. Just closing one-fourth of all your plants and still meeting supply/demand seems to be the right thing to do. Folks are simply buying less Campbell Soup.

Campbell Soup is pretty old school. I doubt millennials are buying it. I still enjoy Campbell soup but I'm probably a dying breed. But I find Campbell Soup incredibly expensive -- I remember cans used to be below a dollar. Now they run about $1.79 here; occasionally go on sale to $1 if bought in bulk.

Making Campbell Soup is actually rather time-consuming -- generally it has to be cooked on the stove after scooping it out of the can; alternative like ramen can be microwaved. Clean-up is a pain if cooked on the stove; microwaved ramen container can be thrown in the trash.

The Toronto was targeted for closure as far back as 2015, I think the article said. If I were to re-do the post, or update the post, I would say that this has nothing to do with energy or taxes or healthcare, per se. Simply consolidating from four factories to three factories because way too much capacity. 

But why did they consolidate by closing that Canadian store? Ask Trump.

Original Post

 

From Bloomberg, Campbell Soup is shifting Canadian production to its US factories. When I saw this I immediately thought that it was due to a) energy; and/or, b) taxes.

But I'm not exactly sure how taxes for a company headquartered in the US with production facilities elsewhere are affected by the Trump tax bill. So, for now, let's call that a wash.

But energy: that's a no-brainer. Anyone following the blog knows that Canada has a huge energy problem despite being energy-rich. (Venezuela is the best example of an energy-rich poor country.)

But there needs to be something else.

Let's look at an earlier WSJ headline/story that I posted earlier today:

ObamaCare: healthcare premiums rise well ahead of healthcare costs for employer-provided health insurance. Huge story over at WSJ. 

One would think that socialized medicine in Canada would be a better deal for corporations but one wonders if corporations in Canada don't pay a disproportionate cost of health insurance premiums for their employees. I don't know.

On the other hand, the shift in production may have absolutely nothing to do with energy, taxes, or healthcare premiums.

Most likely it is simply over-capacity. The article suggests that US facilities can easily make up the difference caused by shifting production from Canada to the US. But it is noteworthy, they didn't close a US factory (due to over-capacity) and shift that production to Canada.

All one can say for certainty about this is this: it's less expensive to make soup in the US and then send it to Canada.

Gee, I wonder if Trudeau might put a 50% tariff on US soup? LOL.

By the way, speaking of energy, if your business has a high-energy requirement, where in the US would you rather be?

That's a troubling trend in southern California, by the way.