Food portion cuts to increase profits?

[HM Spectre]

I disagree. I think Disney guests are actually quite sensitive to price increases, and moreso, the answer that McCarthy gave actually betrays their belief in such.

In context the question was asked regarding inflation, which is now at a record high. Prices are going up everywhere and that will absolutely impact Disney. McCarthy's answer indicated (to me at least) that Disney is unwilling to just unilaterally raise prices to offset their own losses. That they would examine other options such as cutting portion sizes and swapping vendors in order to maintain their current pricing (which let's be honest, is probably maxed out anyway).

Disney's business is historically very sensitive to inflation and especially rising gas/travel costs. If they start to see a decrease in their business due to inflation, rising prices is the last thing they will want to do.

Based on how they're currently operating their business, they're making a bet on their brand being so incredibly strong that guests will pay whatever it takes for the Disney magic. And for those who won't, there will be others lined up to replace them. There will always be guests who are price sensitive but Disney is betting that there are enough who aren't that they can get away with this.

The only challenge to "value engineering" like this is how quickly you can cut and increase prices. That's where inflation is an issue right now. It's rising so quickly on top of the price increases they've already implemented that it's tough to pass it directly to customers without it being blatantly obvious. And clearly, based on the number of these threads that pop up, it's getting blatantly obvious.

And yet they persist. Which tells me they don't think guests are sensitive enough to what they're doing that it'll hurt their bottom line. And until we raise a stink and hit them in the wallet where it hurts, it'll continue.

 

[Lilofan]

And Chapek and Iger were paid 14million and 21 million last year....
that's a year...
Now lets think where could we shave some money to keep profits up?

The work contracts of Bob&Bob including bonus incentives were set up by the company board of directors

 

[eliza61nyc]

And Chapek and Iger were paid 14million and 21 million last year....
that's a year...
Now lets think where could we shave some money to keep profits up?

And??
Are you implying that is they cut their salary, stockholders would not try to increase profits?

 

[dreday3]

Yeah but this goes both ways. If customers want to listen in on the calls, and try to glean some nugget of information, they should know the audience these calls are meant for, and have some basic understanding of what they are for.

People often try to remind the fans that Disney is a business, but judging from some of the comments here, that isn't really something the fans are ready to understand. Everyone who has an interest in Disney, whether it's executives (thru compensation), Investors (thru dividends), Cast Members (thru wages), or customers (thru services) has a say in where the money needs to go, and if you're not ready to have a conversation with the investors seeking to have more of the money flow their way, then do yourself a favor and skip listening to the investor calls.

The CFO of a major company should have known better than to make a "Joke" about weight in this world today where people may (or may not be) sensitive to it. Especially being aware non-shareholders are listening.

PR 101. End of story.

And honestly after listening to it, didn't sound so much a jokey-jokey, but rather judgey-judgey. If she was trying to be funny, she should have said "could improve MY waistline"...but she didn't.

 

[eliza61nyc]

pssssssst, this literally happened all over the job spectrum for the past almost 2 years. 401K matches were halted. Raises were postponed. Salaries and hours were indeed cut. And this impacted people making a hell of a lot less than $1M, much less 10x more.

That's a bit different, at most large companies 401k matches are considered benefits that can be changed. Huge example would actually be pensions that were changed and morphed into 401k's. Same with raises. Most standard contracts do not guarantee raises every year. Now unions generally have a bit more protection (generally, I'm sure there are exceptions) you negotiate a 3 year deal and the company cannot go back and say "hey were cutting your salary by 10%).
Not really sure how hourly folks handle it, most hourly positions around here get zip benefits and very few raises.

 

[Ayla]

The CFO of a major company should have known better than to make a "Joke" about weight in this world today where people may (or may not be) sensitive to it. Especially being aware non-shareholders are listening.

PR 101. End of story.

And honestly after listening to it, didn't sound so much a jokey-jokey, but rather judgey-judgey. If she was trying to be funny, she should have said "could improve MY waistline"...but she didn't.

I agree. Actually hearing what she said vs reading it was so much worse. Her entire portion of the clip posted above is just ~ wow. Eye opening, and not in a good way.

 

[UNCgolf]

For a Fortune 500 company, it’s shocking to me that they don’t have someone training these people in the art of talking to the public. I work for a large organization (though nowhere near as large as Disney) and everyone who speaks to the press, the public, etc. is coached on what to say and how to say it in an uncontroversial way.

I could get behind smaller portions if prices are adjusted accordingly (they won’t be). I also wouldn’t mind them bringing smaller plates of food at the family style restaurants, as the amount of food I’ve seen wasted there is astronomical. Still let it be “all you care to enjoy” but bring less of it out each time.

Companies usually spend weeks coming up with specific answers to every possible question they think an analyst might ask on these calls. There are dozens of draft versions with input from legal, PR, etc. -- I've been digging through some of these drafts for another major company this week.

I can't imagine Disney doesn't do that, so either she went off-script or everyone was on board with the comment and didn't anticipate any backlash.

 

[DisneyCane]

Not to defend Disney too strongly here but food companies have been doing this for quite some time. There's a reason that Blue Bell ice cream says "still 1/2 gallon" on the container. Have you seen the size of the other brands?

Also, things like canned tomatoes that used to be 15 oz cans are 14.5 oz cans now. Off the top of my head because I recently got food from there, the portion size at PF Chang's China Bistro have shrunk significantly in the past few years.

 

[MickeyLuv'r]

The smell that doesn't leave you is when some yak after riding Rockin Roller Coaster at DHS outside in the courtyard in front of you.

Ooh, I was once in the yak splash zone exiting Mummy. The smell and the sensation absolutely sticks for a very long time!

 

[dreday3]

Not to defend Disney too strongly here but food companies have been doing this for quite some time. There's a reason that Blue Bell ice cream says "still 1/2 gallon" on the container. Have you seen the size of the other brands?

Also, things like canned tomatoes that used to be 15 oz cans are 14.5 oz cans now. Off the top of my head because I recently got food from there, the portion size at PF Chang's China Bistro have shrunk significantly in the past few years.

Yes they have. It's an unfortunate part of reality with every company. Even restaurants we frequent have cut portions, but price stayed the same.

For me, it's more of her "Marie Antoinette" style of delivery....complete disdain for the customer/consumer.

 

[ImperfectPixie]

Who wants to be on a full stomach then walk in 95-100 degree heat then ride Space Mountain?

Our last trip, we had a huge breakfast and I went on ToT immediately after. Zero issues.

(We're big breakfast and dinner with light snacks during the day people)

 

[el_super]

pssssssst, this literally happened all over the job spectrum for the past almost 2 years. 401K matches were halted. Raises were postponed. Salaries and hours were indeed cut. And this impacted people making a hell of a lot less than $1M, much less 10x more.

Is Chapek being paid the same amount as Iger was? Even while technically doing the same job?

 

[el_super]

Customers have the right to do their due diligence to avoid making a bad investment aka consumer decision as any investor. If a company is going to be so blatant about how they view their customers and how they manipulate their product in a public format than they should expect whatever fallout comes.

There will be no "fallout" from this. Overall, joke aside, it was a smart answer and shows how Disney understands their theme park business.

It still in the company’s best interest to not say the quiet parts out loud. A customer has no obligation to forget they are the customer when they hear something that is intended for another audience. Customers have a right to fight for their best interests at all times too.

The company needs to assure investors that they still have their interest in mind. That's not something that needs to be kept a secret. Certainly not during an Investors Call. In fact, there might be ACTUAL laws against keeping these things "quiet."

Customers definitely have the right to fight for the interests too, but if the question was whether they would accept a lower portion size or a radical increase in price, which one do you think they would choose? Disney feels pretty confident they know the answer.

 

[FantasiaMickey2000]

Oh I didn't hear it like that. I see how it can read that way in the transcript, but I didn't hear it like "our guests are fatties," I heard it like "haha wouldn't it be good for all of us if portions were smaller?"

That’s because that’s exactly how she meant it. The comments on here are beyond insane. She made a lighthearted joke that almost all of us can relate to. People are acting like she killed their first born. Lighten up people. Yeesh.

 

[Dead2009]

Who wants to be on a full stomach then walk in 95-100 degree heat then ride Space Mountain?

Yeah its common sense not to ride a roller coaster after eating dinner....

 

[King Panda 77]

That’s because that’s exactly how she meant it. The comments on here are beyond insane. She made a lighthearted joke that almost all of us can relate to. People are acting like she killed their first born. Lighten up people. Yeesh.

You can't kill your firstborn. You will need that to pay for Disney in the future.

 

[UNCgolf]

Customers definitely have the right to fight for the interests too, but if the question was whether they would accept a lower portion size or a radical increase in price, which one do you think they would choose? Disney feels pretty confident they know the answer.

Based on the current trajectory, I think Disney's version of the answer is "both".

 

[VJ]

Walt wanted to make money too. And he made lots of it. But he wanted to remain respectable while doing it.

Let me show you the difference between Walt and someone like Chapek.

Genie+ makes Chapek's eyes light up, which is something that's evident in these investor calls. Money makes him happy and the prospect of making more excites him.

Walt, well... is very different. I'll let him tell you himself:

“Money is something I understand only vaguely, and think about it only when I don’t have enough to finance my current enthusiasm, whatever it may be. All I know about money is that I have to have it to do things. I don’t want to bank my dividends, I’d rather keep my money working. I regard it as a moral obligation to pay back borrowed money. When I make a profit, I don’t squander it or hide it away; I immediately plow it back into a fresh project. I have little respect for money as such; I regard it merely as a medium for financing new ideas. I neither wish nor intend to amass a personal fortune. Money—or rather the lack of it to carry out my ideas—may worry me, but it does not excite me. Ideas excite me.” -Walt Disney

And a few more quotes while I'm here:

“Disneyland is a work of love. We didn’t go into Disneyland just with the idea of making money.” -Walt Disney

“Biggest problem? Well, I’d say it’s been my biggest problem all my life. MONEY. It takes a lot of money to make these dreams come true. From the very start it was a problem. Getting the money to open Disneyland. About seventeen million, it took. And we had everything mortgaged, including my family. But we were able to get it open and in the ten or eleven years now we have been pouring more money back in. In other words, like the old farmer, you have to pour it back into the ground if you want it to grow. That’s my brother’s philosophy and mine, too.” -Walt Disney

“I’ve always been bored with just making money. I’ve wanted to do things; I wanted to build things, to get something going. What money meant to me was that I was able to get money to do that for me.” -Walt Disney

“Some people forget that you can still do good work even though you work with dollar bills. We took almost nine years to make Fantasia, and if we had to do it again I’d take a long hard look at it, because today it would cost us fifteen million dollars. At some stage or other I have to walk in and tell the boys, ‘O.K. Start wrapping it up.’ If I didn’t, we’d never get the work finished. But that doesn’t mean we pull back on quality.” -Walt Disney

And finally, my favorite Walt quote (and one that excellently shows the contrast between Walt and a money guy like Chapek):

“Well, I think by this time my staff, my young group of executives, and everything else, are convinced that Walt is right. That quality will out. And so I think they’re going to stay with that policy because it’s proved that it’s a good business policy. Give the people everything you can give them. Keep the place as clean as you can keep it. Keep it friendly, you know. Make it a real fun place to be. I think they’re convinced and I think they’ll hang on after…as you say…well…after Disney.” -Walt Disney

 

[corran horn]

Based on the current trajectory, I think Disney's version of the answer is "both".

They make meal (and bank) out of Disney 'magic' and they must have data that shows that the perception of 'magic' can still be a driver no matter how they treat people. (so far)

 

[VJ]

Chapek didn't say this. The CFO said it, who became CFO under Iger.

Chapek isn't much better. I haven't even heard the call and just by the quotes I can tell talking about Genie+ and how successful it was (and how much money it made) was his favorite part. He doesn't even try to hide it.