Monday Business Briefing: GE-Electrolux postmortem, Brown-Forman to ‘vigorously’ contest lawsuit, Hyatt renovation follows new hotel openings, and more
Welcome to the Dec. 14 Monday Business Briefing, your private business intelligence digest from Insider Louisville.
What’s next for GE Appliances? Plus a postmortem on a failed acquisition…
Now that General Electric’s Louisville-based appliance division is effectively back on the market after breaking things off with Electrolux, maintaining a high level of quality and productivity is paramount in order to remain attractive to potential buyers.
And that likely means business as usual for local employees.
GE wants to get a good price for the appliance business from a new buyer, of course, so it has an interest in making sure the division runs with great efficiency and profitability, said Jose Fernandez, associate professor of economics at the University of Louisville.
The appliance unit employs about 12,000, including about 6,000 at its Louisville campus, which produces household products including dishwashers, refrigerators and hot water heaters.
GE last week had terminated its agreement to sell the appliance division to Sweden-based AB Electrolux, which was trying to expand its U.S. presence.
Federal regulators had sued to stop the $3.3 billion acquisition because they feared consumers would see higher prices. U.S. Department of Justice lawyers had said that if the merger proceeded, the appliance market would have been dominated by two major players: Whirlpool and Electrolux.
Fernandez said local employees do not have to fear any immediate negative repercussions now that the Electrolux-GE deal is off the table.
“In the short run, I don’t expect any major changes,” he said.
The company has said it believes the division remains an attractive buy. Third-quarter revenues increased 10 percent from a year earlier, about double the industry average.
The local union president in a letter last week asked union members to continue to stay focused and work hard. “Our best job protection is continuing to come to work daily, building quality appliances that we can all be proud of,” said Dana Crittenden, president of IUE-CWA Local 83761.
Now back to that failed acquisition…
Though the government’s lawsuit to stop the acquisition became moot with GE terminating the deal, a DOJ official said government lawyers had confidence in their case.
The government’s testimony showed that General Electric and Electrolux were competing head to head in the U.S. market, and that prices were likely to increase significantly if the merger had been allowed to proceed, said David I. Gelfand, deputy assistant attorney general for litigation for the department’s Antitrust Division.
Gelfand said in a conference call last week that Electrolux’s defense relied largely on the fact that the merger between Whirlpool and Maytag did not lead to higher prices. However, Gelfand said, that case was “irrelevant” to the GE deal.
The Whirlpool-Maytag merger occurred just before the recession and covered a different time, different products and different companies, Gelfand said.
The Electrolux acquisition “would have been a bad thing for consumers,” he said. “I think we made a very compelling case.”
While he said that he did not want to speculate on why GE killed the deal as the trial was about to move into its fifth week, he said GE exercised the termination — and asked for the $175 million termination fee from Electrolux — on the first day allowed under the agreement.
Meanwhile, GE Appliances’ would-be new owner announced some bad news only two days after GE terminated the acquisition: Electrolux said it would implement restructuring actions, “including staff reductions and downsizing of activities, mainly in the U.S., Sweden and China.”
The company said it is taking the actions because of “unfavorable currency movements” and because sales have fallen in some key markets.
Electrolux also said that transaction and integration expenses will cost the company about $21 million in the fourth quarter. That’s in addition to the $175 million termination fee the company said it will pay GE.—Boris Ladwig
Jerry Acy talks challenges of River Ridge Commerce Center development
The U.S. Army has transferred the majority of the 6,000 acres that formerly made up the Indiana Army Ammunition Plant off State Road 62 to River Ridge Development Authority for development, but the land is by no means pristine, said Jerry Acy, executive director of River Ridge Commerce Center.
Challenges with developing a 6,000-acre behemoth of a business park are dealing with decades old infrastructure and buildings, Acy said during an update on the development to attendees of the quarterly Real Estate Venture Exchange luncheon. REVE connects real estate developers, property owners and investors.
While the army cleans up the property to make sure no explosive devices or harmful chemicals remain, it doesn’t demolish any existing structures, many of which have been around since World War II, Acy said. River Ridge leaders estimate that building removal will cost about $28 million.
The total estimated development cost for River Ridge, including new roads and new sewer and water systems, is $300 million. River Ridge did receive about $6 million in stimulus funding from the federal government to help update the water and sewer systems, which also were more than 70 years old.
About 1,000 acres of River Ridge property already is sold or was gifted to local municipalities, Acy said. Another 300 acres is “in play” and could be sold between now and the middle of 2016 pending positive negotiations. In that mix are two potential large developments — one that includes a 1.5 million-square-foot facility and another that includes 1.6 million square feet of buildings.
Around 2 million square feet of facilities are currently under construction at River Ridge.
Interest in the business park has picked up momentum since the East End bridge became a reality and a portion of River Ridge was certified as a megasite.
When Acy first arrived at River Ridge in 2008, he said, “I like to say we had 6,000 acres, and we didn’t even have a weed eater.” The authority’s annual budget was less than $1 million.
Jack Daniel’s sued over cinnamon-flavored whiskey
Feel the burn: Spirit maker Sazerac has sued Jack Daniel’s, accusing its rival of trademark infringement and unfair practices over the two brands’ cinnamon whiskeys.
Sazerac, based in Metairie, La., said Jack Daniel’s, a division of Louisville-based Brown-Forman, is infringing upon Sazerac’s Fireball Cinnamon Whisky trademark by confusing consumers with online ads for its Tennessee Fire whiskey.
Sazerac, in a suit filed in U.S. District Court in Louisville, said Jack Daniel’s is deliberately trying to confuse consumers by using the “Fireball” trademark as a Google AdWord to trigger advertisements for its Tennessee Fire product when people are searching for Sazerac’s Fireball whiskey.
“Even more troubling, Jack Daniel’s appears to be deliberately associating its competing … product with Sazerac’s … whisky by prominently featuring ‘FIREBALL’ and ‘FIRE-BALL’ in the header and text of those advertisements,” Sazerac wrote in a cease and desist letter sent to JD’s chief trademark counsel.
As evidence, Sazerac included in its court filing screenshots of Google searches for “fireball jack daniels” that show an advertisement at the top of the page that reads “FireBall – jackdaniels.com.”
Sazerac is understandably concerned: It’s long-established Fireball has seen recent spikes in sales, and the company is worried about losing sales to a rival’s new product. Fireball sales spiked about 32-fold within two years, going from $1.9 million in 2011 to $61 million in 2013, according to Bloomberg.
Meanwhile, Jack Daniel’s launched its cinnamon whiskey this year. Brown-Forman said this month the new item’s continued rollout helped boost domestic sales in the first six months of the year.
“Tennessee Fire continues to enjoy broad consumer and trade acceptance, helping drive 3 percentage points of underlying net sales growth” in the U.S., the company said.
Brown-Forman, which has not yet filed a response to the lawsuit, told IL that Sazerac is complaining about common digital marketing practices.
“We will contest this legal action vigorously,” spokesman Phil Lynch said.
Sazerac told IL via email that it does not comment on pending litigation.
Hyatt Regency Louisville rooms get $14 million facelift
Occupancy rates at the Hyatt Regency Louisville will drop into the mid-60 percent range this year, but general manager Donna Márquez isn’t sweating it.
The reason behind the below average occupancy rates is that some of the South Fourth Street hotel’s rooms are offline as they undergo an extensive $14 million renovation to bring the old-school rooms into the 21st century. The Hyatt’s occupancy rate typically ranges from high 70s to low 80s, Márquez said.
The rooms last underwent a “soft renovation” in 2005, she said. Each room got new beds and furniture. However, the bathrooms, she said, haven’t been updated since the 1970s.
“It’s just old,” Márquez said.
The Hyatt has been closing three floors of rooms at a time for renovations, starting with the 16th, 17th and 18th floors. Workers with Floyds Knobs, Ind.-based Koetter Construction already have completed 100 of the hotel’s nearly 400 rooms, Márquez said, and expect to finish the project in mid-March.
The remodel is a complete modern makeover, with new floors, furniture, wall décor and a completely new bathroom. The new look is “creative” and “high energy,” she said.
Bathtubs were taken out of the bathrooms and replaced with a shower with glass doors. Each room now has a 65-inch television and horse-head wall hooks. The closets with mirrored doors were replaced with a simple open wood closet with drawers.
The renovation is to “try to make other hoteliers jealous,” Márquez said half-jokingly.
Talk about room renovations started in 2012, she said, after the lobby, bar and restaurant areas were renovated. At the time, she said, they did not know about all the hotel projects, including the Hilton Garden Inn, Aloft, Embassy Suites and Omni Hotel, that would be coming online in the subsequent five to six years in Louisville.
But it was inevitable that more hotels would come to town, she said.
“It was eventually going to happen,” Márquez said. “(The Hyatt renovations) fell in line really, really well.”
The Hyatt saw a temporary and small drop off in occupancy when the Hilton Garden Inn opened in last year, Márquez said, but it was not impacted by the Aloft opening or the new Embassy Suites.
Although the new hotels are technically competition, she believes more hotels will actually help the Hyatt because more hotel rooms downtown opens the city up to larger conventions. (When the Omni opens in 2018, downtown Louisville will have about 1,200 more hotel rooms than it did in 2013.)
Industry’s largest Archery Trade Show returns to Louisville
In January, thousands of Katniss wannabes will descend upon Louisville for the annual Archery Trade Association (ATA) convention and trade show. Last time the show was here, in 2013, the members-only event sold out. This year’s archery extravaganza, which will be held Jan. 5-6, is expected to draw more than 10,000 retailers, buyers and exhibitors and have an estimated economic impact of $6.9 million.
That’s one bull’s-eye of a trade show for the Kentucky Expo Center. So why us?
“Louisville is a vibrant, accessible city that’s well suited to handle our national and international companies and their staff,” said Jay McAninch, ATA president and CEO, in a press release from the Louisville Convention & Visitors Bureau. “The Kentucky Exposition Center offers abundant floor space and, for us, that’s invaluable. Our show is growing, and this show floor will allow for that growth.”
McAninch also added that Louisvillians are just cool, down-to-earth people.
“Every city has buildings, hotels and restaurants, and all can roll out the red carpet,” he said. “Few cities have the warm, inviting nature of a town like Louisville.”
So far, more than 620 exhibitors have signed on for the show, which will feature 76 shooting lanes for people wanting to try out new equipment. And ATA already has agreed to return to Louisville in 2019 — post convention-center expansion, which will begin this summer.
Center for Nonprofit Excellence launches ‘Destination Excellence’
Are you an executive director or other senior leader for a nonprofit? Then the Center for Nonprofit Excellence has a new leadership training program for you. Destination Excellence is a six-month learning forum that will provide training that is usually only available for high-level executives in a corporate setting.
The program meets once a month for a full day on a Friday (including lunch). Only 12 people will be selected and applications are due Jan. 15. Tuition is on a sliding scale depending on the annual revenues of your organization, and there are a limited number of scholarships available.
The CNPE received support from the C. E. & S. Foundation for this program.
Topics include: board governance, staff and volunteers, marketing and PR, fund development and program outcomes.
More information and applications for the program and for scholarships here. — Melissa Chipman
Two Kentucky products land in the Top 5 of ‘Jim Murray’s Whisky Bible 2016’
Whiskey expert Jim Murray releases a highly touted guide each year in which he tastes and ranks bourbons and whiskies all over the world. Titled the “Whisky Bible,” the latest edition features more than 1,000 new whiskies. We’re happy to report that two Kentucky-made brands landed in his top 5, which is quite a feat considering the stiff global competition.
Heaven Hill Brands’ Pikesville Straight Rye Whiskey took second place, while Buffalo Trace‘s William Larue Weller bourbon came in fourth. If you’re wondering how the rest shakes out, Crown Royal’s Northern Harvest Rye “narrowly eclipsed” Pikesville for the No. 1 spot, while Ireland’s Midleton Dair Ghaelach whiskey took third, and Japan’s Yamazaki Mizunara, which won first place last year, rounded out the Top 5.
Pikesville Rye hit the market only five months ago, so the fact that experts like Murray are raving about it is definitely a good sign. The whiskey also was named “Rye of the Year” and won a Double Gold Medal at this year’s San Francisco World Spirits Competition.
“Heaven Hill reclaimed the past with Pikesville Straight Rye Whiskey,” said Max L. Shapira, president of Heaven Hill Distillery, in a press release. “Pikesville is a brand with a storied history and one that we are proud to revamp and offer as an ultra-premium offering. We are excited that Pikesville is recognized as one of the leading brands worldwide.”
Pikesville Rye is distilled from at least 51 percent rye, with corn and malted barley as the “small” grains at Heaven Hill’s Bernheim Distillery. It’s aged for six years in Bardstown, Ky., and bottled at 110 proof.
Calling all culinary women
The prestigious James Beard Foundation is accepting applications for the 2016 Women in Culinary Leadership Grant program, which pairs aspiring chefs and restaurateurs with female mentors who can help them develop leadership skills that will help them succeed in a male-dominated field.
This year, there are 18 six-month mentorships and three year-long mentorships available. Applicants must be 21 years old and have at least two years experience in hospitality.
Those chosen will receive a $500 a week stipend and be mentored by one of 19 mentors. Mentors include Louisville’s own Sarah Robbins, senior vice president of operations at 21C Museum Hotel; April Bloomfield, owner of The Spotted Pig, John Dory Oyster Bar and The Breslin in New York City; and Stephen Starr, owner of STARR Restaurants in Philadelphia.
“The WICL Grant was created to break through the barriers of what I call the ‘gastro ceiling’ – a paucity of women as executive chefs and even fewer as leading restaurateurs,” Rohini Dey, a James Beard trustee and co-head of the program, said in a news release. “This program is about building women’s operational skills, financial literacy, confidence and networks in the field.”
The deadline to apply is Jan. 20. To see the other mentors and apply for the program, click here. —Caitlin Bowling
Where Opportunity Knox hires Regional Veteran Coordinator
Where Opportunity Knox, an initiative to transition nationwide veterans and their spouses to jobs in the Greater Louisville area, has hired Ann Reiter as its new regional veteran coordinator. She will provide vets and their spouses with personal assistance with transitioning to civilian lives.
Where Opportunity Knox is an effort out of Fort Knox, Ky., with the goal of connecting 10,000 people to regional employers by the end of 2017. It marked its first year in September by announcing 1,500 veterans and spouses had been connected with employers.
Reiter is currently an HR officer in the U.S. Army Reserve. She and her family have lived in Fort Knox since early summer 2015. Prior to moving to Kentucky, Reiter worked with transitioning veterans and spouses in Washington state.
“We are fortunate to have someone with Ann’s experience relocate to Fort Knox and join our team as a next Regional Veteran Connector. “She will be a great asset to our program as she helps connect employers seeking talent and Veterans seeking opportunities,” said Beth Avey, Where Opportunity Knox executive director.
Read more about the program here. —Melissa Chipman