Welcome to the Nov. 16 Monday Business Briefing, your private business intelligence digest from Insider Louisville.
Humana co-founder predicts Aetna deal will get regulatory approval
Humana co-founder David Jones Sr. says Aetna’s proposed acquisition of Humana will — and should — receive federal approval.
Jones, 83, told Insider Louisville that while he has not been involved in Humana’s day-to-day activities since he retired a decade ago, he believes the merger will benefit the city.
IL spoke with Jones after a speech he gave at the University of Louisville Thursday evening.
Aetna, based in Hartford, Conn., wants to buy Louisville-based Humana for $37 billion. Shareholders of both companies have approved the deal, but it is being scrutinized by the U.S. Department of Justice over antitrust concerns.
In 1961, Jones — an accountant, lawyer and U.S. Navy veteran — co-founded a nursing home company that in 1974 became Humana Inc.
While some people inevitably will lose their jobs as a result of the merger, Jones said, most of Humana’s Louisville employees will be protected.
Jones also expects the merger will infuse the community with a “tremendous amount of capital,” which will be invested in Louisville.
And, he said, Aetna CEO Mark Bertolini is “about as down-to-earth as anyone I’ve ever met. I think (the merged company) will be in good hands.”
However, a consumer advocate group isn’t so optimistic about the deal, and last week the group issued a statement saying mergers of large health care companies should be challenged because they will lower consumer choices and increase prices.
The Coalition to Protect Patient Choice said the health insurance industry is already highly consolidated, with only five national competitors: UnitedHealth, Anthem, Cigna, Aetna and Humana.
“Studies have shown previous health insurance mergers resulted in increases ranging from 7 percent to nearly 14 percent,” the organization wrote on its website. “The argument that health insurers drive down health costs has no impact on consumers — historically, no savings are passed along to consumers. Instead, insurance costs rise for employers, individuals and families.”
Information on the CPPC’s website was spotty, however. The site says the CPPC “is a group of consumer advocates uniting to fight these big mergers,” but none of the advocates was listed. Its press release quoted officials from the Consumer Federation of America, Consumer Action and DC37, a New York City public employee union.
CPPC did not respond to an email inquiry.
The proposed mergers also have drawn stiff opposition from the American Medical Association and the American Hospital Association. —Boris Ladwig
Former exec: For pricing, Electrolux looked only at GE, Whirlpool
A former AB Electrolux executive testified last week that the appliance maker looked only at two competitors when it set prices – bolstering the case of federal regulators who have sued to stop the Swedish company from acquiring GE Appliances on antitrust grounds.
GE had announced in September 2014 that it agreed to sell its Louisville-based appliances business to Electrolux for $3.3 billion. But the U.S. Department of Justice filed a civil suit in July to block the deal, saying it would lead to less competition and higher prices.
Electrolux disagrees with the DoJ’s assessment, saying this summer that “the acquisition will increase competition.”
In the days leading up to the trial, which began Nov. 9 in Washington, D.C., actions by both the company and regulators indicated a modicum of irritability. A high-level Electrolux executive said the DoJ had an “incomplete understanding” of the appliances industry, while a source familiar with the government’s case said the DoJ is dismissing some of the company’s arguments as “not … useful.”
A report by Bloomberg indicates the sides differ starkly on what would be needed to allow the deal to proceed.
Electrolux said the DoJ wants the company to sell its entire U.S. business, according to the report, while a government lawyer said “We’re on earth, and they’re on Mars.”
Feds have said they oppose the merger in part because it would give Electrolux and Whirlpool control of more than 90 percent of the market of lower-priced ovens and ranges. Electrolux execs have countered the market is seeing lots of competition from LG, Samsung and startups from China.
Testimony last week from Jack Truong, the former head of Electrolux North America, bolstered the government’s case, according to a report from Law360.
Truong said that when Electrolux set its prices in North America, it looked only at GE and Whirlpool – not at any other competitors.
“For free-standing (ranges,) cooktops and wall ovens, there are just three players that really manufacture those products,” Truong said, according to Law360.
The Wall Street Journal also reported that Justice Department lawyer Ethan Glass said Whirlpool is offering “unprecedented” support of the merger of its two biggest competitors – because Whirlpool “benefits when prices go up.”
Whirlpool told the Journal it is not involved in the lawsuit and had no comment on a case involving its competitors.
The Journal also said the outcome of the Electrolux/GE Appliances case could affect the proposed merger of Aetna and Louisville-based Humana.
“A court win could give the Obama Justice Department additional momentum as it enters a final, and perhaps pivotal, year of reviewing mergers. The department has several other major pending transactions on its plate, including two mergers involving four top U.S. health insurers,” The WSJ wrote.
Cobalt Marketplace building for sale: Take 2
In the event any readers are in the market for a prime piece of commercial real estate, we wanted to be sure you saw that Todd Blue of Cobalt Ventures is selling one of his downtown buildings — Cobalt Marketplace, to be exact. Due to the listing agent initially posting the wrong Cobalt building online (oops!), any early-bird readers of The Closing Bell Friday morning likely saw a version of the story that listed the incorrect address.
So here are all the correct details, ICYMI, plus some additional info on the building:
Cobalt Marketplace is a restored 130-year-old building on the corner of Market and Jackson streets, on the edge of NuLu and near the Central Business District. The 36,500-square-foot structure is visible from I-65, providing “tremendous signage opportunities,” according to the listing, which called the style “Refined Industrial.”
It’ll set you back a cool $8.5 million.
The primary tenant of the building is Wild Rita’s restaurant, which takes up nearly 4,000 square feet. Other tenants include AAA and Genscape.
Here’s a link (with snazzy photos) to the correct listing on the Kentucky Commercial Real Estate Alliance. —Sarah Kelley
Farm to Fork catering company adding daily carryout service
Starting this week, catering company Farm to Fork will begin the gradual roll-out of a new carryout service at its facility near the University of Louisville.
Owner Sherry Hurley decided to add carryout as a way to keep employees and create a new revenue stream.
“It is a way for us to help retain staff because catering can be very seasonal,” she said. “We want to be able to have work every day.”
Her business earned enough money to support the staff year-round, Hurley said, but some employees have left Farm to Fork during down times of the year because of a decline in work.
Carryout service also will allow people who can’t or don’t want to spend the minimum $500 on catering to taste her food.
“We are really excited. We love feeding people,” Hurley said.
Previously, Farm to Fork did not have the space to handle carryout orders, but Flour de Lis Bakery, which subleased part of its kitchen at 502 Warnock St., is moving to the Highlands.
Farm to Fork will start taking phone orders on Tuesday, Nov. 17, and will require a minimum of 48 hours notice. Hurley said they are still working on prices but initially will offer popular party trays such as its Kentucky Proud cheese tray with grapes and strawberries and its mini-biscuit sandwich trays.
Hurley will add three part-time workers to help in the kitchen and process carryout orders, with the possibility of making those positions full-time.
Come January, Farm to Fork also plans to add online ordering and payment as well as carryout meal options for individuals. Hurley said she is considering offering a daily soup, biscuit sandwiches and salad.
Farm to Fork regionally sources many of its ingredients, including cheeses from Kenny’s Farmhouse Cheese and meat from Col. Bill Newsom’s Aged Country Hams. That same commitment to regional food will carry over to carryout, Hurley said.
“This is gonna be the same locally sourced, sustainable, community-raised animals and pesticide-free fruits and vegetables, so it is the same quality of ingredients we have been using.” —Caitlin Bowling
Westport Whiskey & Wine faces the Pappy problem openly and honestly
Although the world rejoices and angels sing when Pappy is released each year, it’s not as joyous a time for liquor store owners, who have to decide how to best allocate their supply. Some just put it on the shelf and watch the sharks dismantle their lot. Some hold auctions for charities and sell tickets to people who have never stepped foot inside their stores. Others hold onto it for their most faithful, regular patrons whose names and preferences they know.
Westport Whiskey & Wine took to Facebook last week to ask clients for suggestions on what to do with their highly coveted Pappy allotment. Owner Chris Zaborowski relayed that according to Republic National, its distributor, the Pappy supply is 74 percent less than what was released a year ago.
“I know that we, along with others, will be blasted on the web, and I truly would welcome suggestions on a better way to offer the few bottles we will have to offer. At least there will be Van Winkle to taste in the bar,” he wrote. “A toast to all who love to drink bourbon and who successfully manage to score a bottle at a reasonable price. Those of us who work in the industry will toast you with some other fine bourbon. Cheers!”
Zaborowski tells Insider that this is, indeed, a frustrating time of year. “We will still get beat up on the bourbon sites, no matter what we do with it,” he says.
He plans on holding back at least one of each release — the 10-, 12-, 13-, 15-, 20- and 23-Year — for his tasting bar. And after that, he’ll review his customer list and do his best to meet requests. He’ll also consider which customers got bottles in the past, and which have never had the opportunity to purchase one — so that it’s not always his “top-dollar customers” who get first dibs.
Zaborowski prefers being upfront about the store’s process and understands he can’t please everyone.
“I do not believe in lotteries in the form where we have hundreds camped out, giving everyone a coupon, etc.,” he says. “It may be an event at some places, but it is ultimately a gathering of those who will never shop in your store over the course of the year.”
What he can do, he says, is provide customers in search of the Pappy Holy Grail alternatives that are available and just as quality as the bourbon they covet. His store also has two Whiskey Treasure Sales a year where customers get the opportunity to purchase a maximum of two rare bottles of bourbon or whiskey in a limited shopping experience (10 people in the store at a time). The next one will be held on Small Business Saturday, which is Nov. 28. —Sara Havens
GE completes demolition of warehouse, office damaged in fire
General Electric recently completed the demolition of a warehouse and office building damaged during a massive fire on April 3. The company has not yet decided what it will do with the space, GE spokeswoman Kim Freeman tells Insider Louisville.
At the time of the fire, the warehouse was being used by Derby Supply Chain Solutions to ship raw materials for use in GE’s production facilities at Appliance Park. Freeman said Derby is still supplying GE, but from a different location.
Getting the fire under control in April required 100 firefighters. Authorities say the cause of the blaze remains “undetermined” but that faulty equipment, including old sprinklers, made it worse. GE has said it disagrees with that assessment and that sprinklers worked properly.
The company initially thought it could save the brick office building attached to the warehouse, Freeman said, but both had sustained too much damage. Crews began demo this summer.
Locally owned blowout bar expanding into second location
Primp Style Lounge is growing after finding a solid customer base of “women who have a busy schedule (and) love to outsource” their style needs, according to Shannon Kessler.
Kessler, a Louisville resident, co-owns the blowout bar with her husband Dan Kessler. They opened their first store at 3917 Chenoweth Square, near Trinity High School, in 2014 and had been looking to add an East End location as part of the company’s five-year growth plan.
Primp will open its second store at 13301 Shelbyville Road in Middletown Commons in January or February, Shannon Kessler said.
“It just felt like it was time,” she said, adding that Middletown Commons leasing agents reached out to them. “They really felt like our brand meshed with what they are trying to create.”
Kessler declined to say how much she and her husband were investing to outfit the 1,648-square-foot storefront. Tennessee-based GBT Realty, which built and manages the shopping center, also will cover some of the build-out costs.
The Middletown location will allow Primp to capture business it might be missing out on, Kessler said. The new store will include a salon space that a full-service stylist can rent, enabling customers to get their hair cut, too; the St. Matthews location doesn’t offer that service.
The Middletown store will employee six “primpers” to style hair, one aesthetician and one licensed cosmetologist, Kessler said.
In addition to styling hair and doing makeup, Primp offers wardrobe consulting services to help women find new outfit combinations using the clothing they already own. Costs for different services range from $15 up to $50.
Primp has cultivated list of regular customers. Kessler said some clients have stopped washing their own hair and visit the store two or three times a week.
Katrina Gallager to leave LCVB after nearly six years
Katrina Gallagher, communications manager and conventions specialist for the Louisville Convention & Visitors Bureau (LCVB), sent out an email to her contacts last week letting them know she’s leaving her post and beginning a new job as senior account director at RunSwitch PR. Gallagher has worked for the LCVB for nearly six years, and her last day will be Nov. 18.
“Kat has been an amazing asset to tourism in the six years she has been with the LCVB,” Karen Williams, president and CEO of LCVB, tells Insider. “Starting on our sales team working to book meetings, she was promoted to a newly created role at the time of a marketing and PR position that would solely support the meeting’s clients. Louisville was a trend setter with this position, and Kat laid the groundwork for its success. We are thrilled she is staying in our city to take advantage of a wonderful new opportunity and know she will continue to showcase her passion for Louisville.”
In her email, Gallagher said she has enjoyed working for the organization and is looking forward to a new chapter in her life. A replacement has been selected but won’t be put in place until next month. —Sara Havens
Do not watch this hungry …
You’ve been forewarned.
Prima Supply, a local restaurant supply service, recently filmed a mini-documentary about Grind to feature on their website and in social media. The “Taste of the Town” episode features Grind owners Liz and Jesse Huot talking about the evolution of their business from food truck to Preston Highway brick and mortar to the soon-to-open bigger and snazzier NuLu location.
In the end, though, it’s all about the burger. The video made me realize one of the many reasons I like Grind burgers so much is that, as Liz points out, the cheese overlaps the burgers.
The mini-doc was filmed by Kha Do of Leaf & Pine. —Melissa Chipman
Alltech, the international biotechnology company that owns Lexington Brewing and Distilling, recently conducted a Global Craft Beer Survey, reporting that more than 10,000 craft breweries are in operation worldwide, with 86 percent of those in North America and Europe.
The United States recently surpassed 4,000 breweries, representing a 20 percent growth in the last year, according to the study, a rate well ahead of any other country.
“The rise of craft beer as a beverage of choice is indicative of consumers’ demand for differentiated, interesting and quality products,” Aidan Connolly, chief innovation officer of Alltech, said in a press release.
The report suggests craft brewing booms could be on the horizon for China and India, which rank among the top 10 countries for population and GDP, yet have 60 breweries or fewer each. China rivals the U.S. as beer drinkers with close to a doubling in terms of population, the report states.
The survey used information obtained through local beverage associations and Alltech’s sales force, which operates in 128 countries. Overall, Connolly estimates the craft beer industry’s net worth at $50 billion. —Kevin Gibson