> For example, Ferrari is famous for making luxury cars that only a few of
> the richest people in the world can afford to drive. Ferrari is
> currently owned by Fiat, famous for making shit cars that no sane person
> in their right mind would want to drive, never mind own. So... how the
> hell did Fiat manage to afford Ferrari?

Because there are 2 million Fiats sold each year, yet only 5000 
Ferraris.  Which brand would you rather own?  Hint: if you choose 
correctly you could buy the other one with about 2 weeks of profit :-)

> Similarly, Cadbury, maker of fine chocolates, was recently bought by
> Kraft foods, makers of naff cheap crap. How the heck did /that/ happen??

They offered a high enough price that was acceptable for the company, 
much like any other trade.

> Uh... I'm not sure that (say) Tesco's own cornflakes are made by the
> same people as Kellog's cornflakes.

Maybe not that exact example (I have no idea who makes Tesco's 
cornflakes), but plenty of companies make their own brands and also the 
stuff for supermarket brands.  They already have all the equipment and 
logistics in place, plus a reputation with the supermarket, it will 
benefit both companies in the end.

Post a reply to this message

On 11/04/2012 02:43 PM, scott wrote:
>> For example, Ferrari is famous for making luxury cars that only a few of
>> the richest people in the world can afford to drive. Ferrari is
>> currently owned by Fiat, famous for making shit cars that no sane person
>> in their right mind would want to drive, never mind own. So... how the
>> hell did Fiat manage to afford Ferrari?
>
> Because there are 2 million Fiats sold each year, yet only 5000
> Ferraris. Which brand would you rather own?

On the other hand, the profit on selling one Fiat pales into 
insignificance compared to the profit on selling a single Ferrari. So 
you don't need to sell anywhere near as many to make the same yearly 
profit. It /should/ be a no-brainer; Ferrari /should/ be making vastly 
more money than Fiat will ever own. So...???

>> Similarly, Cadbury, maker of fine chocolates, was recently bought by
>> Kraft foods, makers of naff cheap crap. How the heck did /that/ happen??
>
> They offered a high enough price that was acceptable for the company,
> much like any other trade.

My question was more "how the hell can they afford that?"

>> Uh... I'm not sure that (say) Tesco's own cornflakes are made by the
>> same people as Kellog's cornflakes.
>
> Maybe not that exact example (I have no idea who makes Tesco's
> cornflakes), but plenty of companies make their own brands and also the
> stuff for supermarket brands. They already have all the equipment and
> logistics in place, plus a reputation with the supermarket, it will
> benefit both companies in the end.

I'm just trying to visualise the conversation though: "Yeah, we can sell 


that wouldn't be laughable.

Post a reply to this message

>It /should/ be a no-brainer; Ferrari /should/ be making vastly
> more money than Fiat will ever own. So...???

The more people there are that think like that, the easier it is for me 
to make money!  Here, let me give you my precious expensive Ferrari 
company, and in return you give me all your cheapo Fiat factories and 
brands :-)  Sound like a good deal to you? OK let's go!

> My question was more "how the hell can they afford that?"

The real question is, will Kraft be able to get more value from Cadbury 
than everyone else thought?  If not, then it was a waste of money to buy 
them, but if Kraft can do something with the company to make it more 
valuable (restructuring, new products, whatever) then it was a good buy. 
  Only time will tell.

> I'm just trying to visualise the conversation though: "Yeah, we can sell


> that wouldn't be laughable.

That's exactly how it works (maybe not as extreme difference in price, 
and the company will print the packaging/label too).  The supermarkets 
know that consumers want to buy expensive Kellogs cereal and cheap 
own-brand stuff, it will work out better (=more profit) for the 
supermarkets and the suppliers (Kellogs) if they supply both products, 
given how similar they are.

Post a reply to this message

Le 11/04/2012 15:59, Invisible nous fit lire :
> 
> I'm just trying to visualise the conversation though: "Yeah, we can sell
> you our brand for £8/box, and then we can sell you the same thing for
> £0.0017/box and let you print your own label on it." I'm not seeing how
> that wouldn't be laughable.

Well, the difference might be in the recipe too.
The brand box might use a recipe with 19 ingredients and butter. The
supermarket box might use palm oil and less expensive ingredients.

Of course, there is also the brand starting to cheat on reputation: "new
taste", "light" ... usually happen when the old makers get a check from
the money people (as buying the company at retirement time). Instead of
continuing the old expensive way, they now put pressure to get a better
return on investment (ROI). The head of the company switched from "a
company for a purpose" to "a company to make money".

Sciences without consciences...

Post a reply to this message

> I'm just trying to visualise the conversation though: "Yeah, we can sell


> that wouldn't be laughable.

Actually a similar thing happens in my company.  We make TVs and phones 
etc that are generally quite expensive.  Yet we also make the internal 
components of TVs and phones that are sold to other companies that make 
much cheaper TVs and phones (of course the spec is not exactly the same, 
but it's the same factories and processes).  It makes us more profit 
than if we refused to do such business.

Post a reply to this message

>> I'm just trying to visualise the conversation though: "Yeah, we can sell


>> that wouldn't be laughable.
>
> That's exactly how it works (maybe not as extreme difference in price,
> and the company will print the packaging/label too). The supermarkets
> know that consumers want to buy expensive Kellogs cereal and cheap
> own-brand stuff, it will work out better (=more profit) for the
> supermarkets and the suppliers (Kellogs) if they supply both products,
> given how similar they are.



for the first box again??

Post a reply to this message

On 11/04/2012 4:25 PM, Invisible wrote:


> for the first box again??

Because high cost equals quality in most peoples mind. Or, it is cheap 
therefore it must be inferior.

-- 
Regards
     Stephen

Post a reply to this message

On 11/04/2012 2:59 PM, Invisible wrote:
>
>>> Similarly, Cadbury, maker of fine chocolates, was recently bought by
>>> Kraft foods, makers of naff cheap crap. How the heck did /that/ happen??
>>
>> They offered a high enough price that was acceptable for the company,
>> much like any other trade.
>
> My question was more "how the hell can they afford that?"

The get loans for the money used to buy the company and when the company 
is theirs they asset strip to pay back the loan. I believe that this is 
also done with football companies.

-- 
Regards
     Stephen

Post a reply to this message

> for the first box again??

It's not necessarily the exact same content, just made by the same 
company in the same factory (as already pointed out, it might use 
cheaper ingredients, not be subject to the same level of quality 
control, etc.).

In some cases though it is exactly the same content.  Just look at Tesco 
20x 500mg paracetamol for 18p or whatever it is today, and some other 
branded version for at least 5x that price.  Yet it still sells.  Even 
right next to the Tesco one on the shelf.  People are happy to pay extra 
purely for the brand, this is nothing surprising or new.

Post a reply to this message

On 11/04/2012 04:32 PM, Stephen wrote:
> On 11/04/2012 4:25 PM, Invisible wrote:


>> for the first box again??
>
> Because high cost equals quality in most peoples mind. Or, it is cheap
> therefore it must be inferior.

I was thinking more why the /supermarket/ would pay more for the same 
product...

Post a reply to this message