Economics in the News – Aug. 26 – Sept. 2, 2024
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o The competition is heating up for traditional chains, such as Starbucks and Dunkin. Café’s specializing in coffee and tea drinks are one of the fastest-growing segments of the restaurant industry. These coffee shops, big and small, are racing to build the latest popular sweet, caloric intense drinks that hardly resemble an ordinary cup of coffee. That is where these cafes are seeing their sales growth and one of the few ways to differentiate from the competition.
After its success through the COVID-19 pandemic, Starbucks has struggled. The stock price has declined 30 percent in six months and locations are experiencing a decline in traffic. While the giants are not worried in the short term about the up-and-coming competition, they are adapting to it. While Starbucks has a firm grip as the dominant player in the coffee space in the United States, it’s competition is strategically expanding its business to locations that Starbucks is less dominant in – the Midwest and South. [The New York Times]
o DirecTV pulled the plug on ABC and ESPN on Saturday, blacking out the US Open tennis tournament and the opening weekend of college football. The blackout impacted roughly 11 million DirecTV subscribers. It’s the latest of disputes that Disney has had with television programming companies, who are fed up with paying high fees for channels like ESPN when Disney is spending lavishly for shows on Disney+ and its other streaming services.
The contract dispute between a television programming company and its distributor that results in a blackout are unprofitable for both sides in the long-term and usually get resolved quickly. In the streaming era, customers have more options at their fingertips to access their favorite shows or events. [The New York Times]
o The Argentinian province of La Rioja created its own currency – the chacho. La Rioja is located in the northwest of Argentina, bordering Chile. The province has struggled financially since President Javier Milei slashed the cash transfers from the federal government to the provinces in a bid to tame rampant inflation. As a result, La Rioja has fallen into a deep recession and defaulted on its debt in February.
La Rioja governor Ricardo Quintela – a critic of President Milei – created the province’s own currency – the chacho. Fresh off the press, the chacho was dispersed to government employees as a bonus, helping people to buy more essentials. Shop owners have been strongly encouraged to accept chachos, which has an equal exchange rate to the peso. It’s not the first time that Argentinian provinces have printed their own currencies. Back in the early 2000s, numerous provinces created their own currencies due to similar policies to Milei’s today. The country fell deeper into crisis before all of the currencies were swapped back to pesos. [Bloomberg]
o Youth sports have become expensive. The days of parent-coached recreational leagues are dwindling. They are increasingly being replaced by travel leagues and organizations, with kids as young as age six playing on teams with paid coaches, year-round schedules, multiple practices per week, and long-distance travel. The goal of the intense competition is to prepare kids to play at the collegiate level and beyond, but they come at a expensive cost.
In the chase for limited scholarships, kids are specializing on a single sport at younger ages. Parents are spending at least $30 billion per year on youth sports, according to the 2022 research by the Aspen Institute, to give their kids an edge with equipment, training, and coaching. That $30 billion equates to roughly $900 per child per season. The setup pushes away those who come from low-income backgrounds and single parent homes. Enter private equity companies, who are investing into youth sports, turning complexes into training centers for young, aspiring athletes. [Bloomberg]
o Grocery prices have increased 21 percent since July 2020, frustrating millions of Americans. According to the USDA, 11.2 percent of consumers’ disposable income in 2023 went to groceries, compared to 8.6 percent in 2020. The issue has gained wide appeal in the November Presidential election.
Independent grocery stores have higher up-front costs than the major chains. While larger chains get better deals on supplies from wholesalers, the smaller shops try to get by on smaller margins. The big-box stores are able to leverage their size and influence to dictate the price they pay to suppliers, while wholesalers and producers make up the difference on the smaller stores. Independent grocery stores are often integral parts of rural America, making a big impact in their communities. Whether its hosting cookie drives, community events, raising money for families in need, they often serve as an anchor of the communities they’re in. [The Washington Post]
