A recap of the week’s events

This week was shortened by the Labor Day holiday.  On Tuesday and Wednesday, I went back to work and closed out some important action items.  I was so busy at work that I had to write an article for a local English-language newspaper on Monday night when I got home from our trip to Seoraksan National Park.  On Thursday, I went with a colleague to Daejon and Cheongnam and visited some Americans there.  I also met a very nice Korean man who spoke to me in Korean.  He said my Korean wasn’t too bad, although I think he was being a bit generous with his compliments.  We feasted on spicy fish soup, a dish that my colleague maintains exemplifies the epitome of Korean cuisine.  Frankly, I didn’t think it was anything special, because I had to pick through a landmine of fish bones to enjoy the soup.  I suppose that I am a pampered American who expects to either eat boneless fish or to be able to easily extricate fish bones.  I never got the hang of chewing fish bones, separating them in mouth, and disgorging them.  My colleague and I talked about how to experience all that Korea has to offer.  I mentioned that I had not yet tried bosingtang (보싱탕), better known as dog soup.  They told me they would take me sometime for bosingtang.  While dog soup does not sound particularly appetizing, I’m the type of person who wants to experience the fullness of the culture, even delicacies.  I hear that it tastes pretty good when prepared properly.
I took a day off on Friday and had a much needed rest.  I didn’t really do much yesterday other than resting and finishing up some miscellaneous tasks at home.  We had planned to travel to Odaesan National Park and Yongpyong Ski Resort this weekend, but I needed to stay in Seoul so that I could emcee a community event today.  Today was much livelier than Friday.  In the morning, my family and I went to Gyeongbok Palace so my sister-in-law and nephew could tour the former Korean royal palace.  While they went on a Chinese-language tour of the palace, my wife and I took my son to nearby Kyobo Bookstore, the largest bookstore in Korea.  Even though most of the children’s books are in Korean, my son loves looking at book in Kyobo’s huge children’s book section (since he doesn’t read and looks at the pictures, it doesn’t matter).  On the way to the Kyobo Building, we walked past a large demonstration happening just south of Gyeongbok Palace.  I did not know the target of the demonstration, but judging by the heavy security, I ascertained that it was an anti-American demonstration.  Policemen far outnumbered protesters.  Just outside the Kyobo Building, we saw a sidwalk photo exhibit with very graphic photos depicting scenes of violence and victimizations allegedly perpetrated by U.S. Forces Korea, the U.S. miliitary presence in Korea.  The photos were very disturbing, especially if true as alleged.  Still, they also made me think of the 33,651 Americans who gave their lives during the Korean War.  I thought that the exhibit would be more appropriate put in the context of the sacrifices U.S. Forces Korea made in the past 60 years on behalf of the Republic of Korea.  Not once during the protests did I feel that my family was at risk while we walked near the demonstrations.  They were very peaceful.
Tonight I served as emcee at our community association’s all-members’ meeting.  The theme was a crab and beach fest, complete with festive decorations such as artificial crabs and fishing nets.  The board chair was absent, so I agreed to host the event.  Although we ran out of catered food early, it was still a success.  Several members of the community volunteered many hours to prepare the food and decorations, and the results were fabulous.   I’m not a natural public speaker, but people said that I did well.  I kept the meeting under half an hour, including time for a prize giveaway.  I spent a bit of time preparing for the event yesterday.  I also drank a delicious margarita to help soothe lingering nervousness.  I enjoyed the experience, but I’m glad it’s over.  I will probably run for board chair later this month.  Tonight’s event was a great prelude to taking on more responsibility for managing the community association.

Seoraksan (part 3)

This is the final entry of three about our trip last weekend to Seoraksan National Park.  It would be more aptly entitled, "Sokcho and the Drive Home," because last Monday (Labor Day) we didn’t spend much time in the park.  In the morning, after we checked out of the Kensington Stars Hotel, we immediately drove back to Sokcho, a city on the coast.  I had tried to convince my wife to take an extra two hours to drive north along the coast to the end of the road, where we could visit the Unification Center and the Unification Tower overlooking North Korea.  Sokcho is about an hour south of the border.  Although I’ve already been to the DMZ and Panmunjom truce village, I wanted to see North Korea from the eastern side of the country.  It was a clear day, and I’d heard you can see into North Korea as far as Goseong, a town south of Wonson.   My wife argued that North Korea does look much different than the south, a point well taken.  No one else wanted to go, so I lost.  Instead, we drove into Sokcho and stopped by a couple of waterfront areas in town.  The first was Sokcho Park, a rocky waterfront south of town.  There wasn’t much to see other than a few interesting statues.  Sokcho has its own version of "The Little Mermaid," the famous bronze statue dedicated to Hans Christian Andersen in Copenhagen, Denmark.  Entitled "Asian Mermaid Lovers by the Sea," the statue depicts a male and female mermaid sitting on a rock, holding a dolphin.  I was unaware that male mermaids exist, but the statue was quite nice.
 
We drove a bit further to the outer harbor of Sokcho.  The city has two harbors; one flows into the city and forms a cove; the second is a cove surrounded by rock barriers.  The town is still a major fishing town in Korea, but in recent years Sokcho’s tourist industry has become even more important.  Sokcho annually draws thousands of visitors, primarily Koreans who come to visit Seoraksan National Park or eat at Sokcho’s famous waterfront seafood market.  We didn’t stop at the market.  It appears to be much livelier in the evening, and our kids are not big seafood eaters yet.  Instead, we went to Lotteria, the Korean fast food bulgogi burger joint.  After lunch we drove home.  This time I took the southern route, driving along Highway 7 to Highway 44, which runs along the southern boundary of Seoraksan National Park.  The highway outside Yangyang on Highway 44 is very windy with many hairpin turns, but there are far fewer turns than we encountered on our way to the park last Saturday.  The area near Osaek Hot Springs is especially windy, but the view is amazing as your car winds between sharp granite peaks.  My nephew still got car sick, but the drive was decidably much better.  About 50 kilometers of the highway are being upgraded to freeway and still resemble a goat trial, but otherwise the drive home was short and sweet.  We pull in at home a little less than four hours after we leave Sokcho.  The day was gorgeous and Labor Day is not a holiday in Korea, so traffic was light.  I’ve heard horror stories that it can take up to 11 hours to get home from Seoraksan when the traffic is congested.  I definitely recommend visiting Seoraksan during the Korean off-season.  The best times seem to be in late April, early May, or in September.  In October, the leaves turn color, and Seoraksan turns into the Korean equivalent of a New England fall.  At that time the park is unbearably crowded.
 
On our way home, I found a place where I would live if I were to live permanently in Seoul–Wabu, a suburb situated on Highway 6 along the Han River to the east of the city.  The area around Wabu is very beautiful, mountainous, with a much cleaner-looking Han River than what you find closer to Seoul.  Best of all, you can own a house.  After the high-rise apartment, concrete jungle of Seoul, the houses I saw near Yangpyong were a welcome sight.  I don’t think I would want to retire in Seoul, but if I did, I would live there.  Most Koreans I talk to prefer living in apartments, but not me.  I’ll take a house or a townhouse over a condominium or apartment any day.  Koreans tend to believe that apartments are easier to manage than a house and that owning an apartment is more prestigious than own a home (unless you own a very expensive home in an elite part of town).  Many basic homes available in the greater Seoul area are older, because most new housing being built is apartment-style.  Most homes still available in Seoul are further out of town, because as homes are torn down, apartment buildings rise in their stead. 
 
Owning a home is more work than renting or owning an apartment, but as an American who values space, nothing beats having a yard and no neighbors living above or below you.  Owning the piece of ground underneath your domicile is also valuable in a high-price real estate market like Seoul.  I would much rather own the land under my home than live in a homogenous, high-rise apartment built and owned by a Korean chaebol (conglomerate) on land parceled out by the government at a subsidized rate, enriching the chaebol, which then build even more apartment buildings.  It is a vicious cycle that reinforces concentration of real estate wealth in the hands of the chaebol.  The structure of the Korean housing market actually works to the disadvantage of individual investors.  Individual investors who try to profit from speculation can face criminal charges if they try to turn a quick profit on buying and selling apartments in overpriced areas.  What often happens in the U.S. real estate market (flipping homes) can be criminal in Korea.  No, thank you.  I’d rather own my own home.

Can Caribou sell coffee?

I want to take another break from Seoraksan tonight to talk about an upcoming initial public offering that caught my attention yesterday.  Caribou Coffee (proposed symbol, CBOU) will go public in a traditional public offering in the next few weeks.  The IPO date has not yet been set.  The company filed its intention to go public with the Securities & Exchange Commission on Monday.  Caribou Coffee is one of many gourmet coffee and coffeehouse companies chasing market leader Starbucks.  The company operates 337 establishments in 14 states (primarily in the Midwest) and in the District of Columbia.  If you live in the Midwest, you’ve probably heard of Caribou Coffee or visited one of its stores.  The company’s business model closely parallels Starbucks’ model–it offers gourmet coffee and related products in its company-owned stores. 
 
Starbucks Coffee is an amazing success, no doubt about it.  The stock has richly rewarded investors through the years, and it will likely continue to shine.  Will Caribou Coffee succeed too, or will it fail as a Starbucks copycat?  I must admit that this IPO is intriguing to me, and I am considering putting in a bid for shares at a price above the expected $13-$15 per share.  Here are what I see as Caribou Coffee’s positives.  First of all, it is a small-cap stock with a small, 5 million share float.  This means CBOU will be a closely held stock.  Its majority shareholder, Arcapita Investment Management, Ltd., holds 85% of the company.  Although Arcapita will cash in some of its initial investment, it will likely hold on to a large stake in Caribou as it continues to grow.  Fewer available shares should translate into a higher share price.  Secondly, Caribou’s target market is large enough and growing fast enough that it has plenty of room to grow, so long as it manages growth properly.  It currently operates in just 14 states, so it has plenty of room to expand throughout North America.  Moreover, many people don’t like Starbucks’ coffee.  They think Starbucks serves overpriced, bad-tasting coffee.  Personally, I like Starbucks coffee, but my dad, an avid coffee drinker, thinks it tastes burned (of course, he is just fine with coffee straight from the can).  I’ve tried Caribou’s coffee, and I liked it.  Seattle’s Best Coffee, which happens to be owned by Starbucks, also thrives on being a palatable alternative to Starbucks coffee.  Starbucks knows this, so it keeps the SBC brand alive.  In addition, Caribou avoids franchising, and like Starbucks, it owns all of its stores.  This is one reason why Starbucks has been so successful.  Franchising makes it much more difficult for the corporate parent to manage stores and provide consistent products.  Finally, Caribou Coffee is one of the few investment opportunities in a hot market one can pursue without buying Starbucks stock.  Peets Coffee & Tea, the Bay Area original that inspired Starbucks, is another option.  Peets’ stock debuted in 2002 at about $9 per share.  It is now at $30.72 after peaking at $37.28 earlier this year.
 
The Caribou Coffee business model is also fraught with risk.  For one, it can’t escape the fact that it operates just 337 stores, while Starbucks boasts over 10,000 worldwide.  Starbucks has economies of scale and efficiencies that Caribou cannot match.  Caribou will also compete with a multitude of coffee-hocking vendors, ranging from supermarkets to espresso stands to direct competitors such as Tullys Coffee.  Still, Starbucks has proven that you can take a commodity such as coffee and turn it into a differentiated, high-margin product.  Secondly, Caribou’s hunting lodge theme may not sell well in some markets.  Starbucks’ Italian espresso theme plays well worldwide; a coffeehouse decorated like a Minnesota hunting lodge will not.  That will hinder its expansion, and Caribou may have to soften its rugged image.  Thirdly, although it is now growing at 30% per year, Caribou Coffee is currently unprofitable.  Expansion is fine as long as it is well managed.  Krispy Kreme Donut, once a Wall Street darling, turned into a stock to shun because it overexpanded and engaged in shady accounting practices to cover its growing pains.  I think Caribou Coffee’s expansion is in line with its loss, indicating that it is not expanding too fast.
 
In the coming weeks, I will likely bid on some CBOU shares in the hope that it will be a promising growth stock.  I’m optimistic that Caribou Coffee’s stock will perform well in the next few years.  I may wait to buy some after the post-IPO fire sale, because as Peets’ IPO showed, the price will likely drop after the stock rises on the first day.  Peets IPO’d in 2002 at about $9 per share, rose to about $17, and dropped to $7 per share in the same month.  I anticipate that CBOU’s price will fluctuate after its IPO.  I’ll keep an eye on it and will let you know what I do.