I’m not a cat person. While I think they’re fun creatures, I’ve never felt the urge to live with one.
Plenty of my friends are cat people and they all tell me one thing. Never, under any circumstances, abruptly change brands of cat litter.
Cat litter is mostly made of clay. It’s highly absorbent. Gas stations use it to soak up spills that would otherwise wash into the sewer system.
Clay has limitations. It doesn’t do much to prevent foul odors, doesn’t clump well, and needs frequent changing. Innovative cat litter companies started adding things like baking soda to help with odors. Silica clumps better than pure clay. One by one, brands made themselves unique. Once a cat gets used to one particular formulation, forget about changing it.
Cat expert Pam Johnson-Bennett, author of Think Like a Cat, agrees. Even if you’re sure the cat will love the change, unfamiliar litter is a no-fly zone.
While this might seem like common sense pet care, cat litter is big business. Grand View Research puts the market for kitty litter at ~$15 billion per year. The U.S. market makes up almost one-third of total volume growing at ~4% per year.
U.S. companies compete fiercely for market share. 14lbs of Fresh Step Multi-Cat Clumping litter runs $30.81 at Wal-Mart. I’m sure the margins are good. But cat owners buy other items while at a store. Ideally, the cat stays loyal to Fresh Step and the owner stays loyal to Wal-Mart.
That makes shelf space a turf war. Litter producers win over cat owners spending millions on marketing. It’s all part of grabbing a piece of the ~$15 billion they’ll spend each year.
Massive Loss of Market Share
It takes years to build brand loyalty. The Clorox Company (CLX), known for its bleach, is also a trusted name in cat litter producing premium brands like Fresh Step and Scoop Away.
However, late this summer the Clorox-owned litter brands suffered a blow to credibility they might not get back. It cost the company billions in market value. And while nothing happened to the actual kitty litter, the company lost standing in the cat business almost overnight.
Loyal users of its litter flooded message boards desperately searching for answers. Facing hostile cats who refuse a litter change, they needed help fast.
The Reddit page r/CatAdvice is where many turned. Notice this post mentions other litter brands fully stocked on shelves, apparently unaffected by the rogue wave that took down the Clorox litter factory.
Clorox suffered a massive cyber attack in August. The breach took down many of its supply chain functions. Workers apparently resorted to ordering essential ingredients with hand-written purchase orders.
Initially, no one outside of company insiders knew about the hack. Store shelves ran low, trucks didn’t show up with more inventory. Retailers offered the space to competing brands. Research analysts covering CLX stock say the $17 billion company might not recover the lost market share.
Earlier this month CLX announced its Chief Information Security Officer left the company. She no doubt took the blame for the costly breach. Every major company now has or will have a cyber chief. It’s an entire division that didn’t exist just a few years ago.
The Cost of Not Protecting
The cost of being hacked in a cybersecurity breach has never been higher. In the case of CLX the cost might be as high as ~$6 billion of market cap. That depends on how much brand loyalty the company recovers. Either way, it’s a problem companies don’t want.
Consumer brands are the tip of the iceberg. Citrix Systems recently suffered a massive hack exposing unsuspecting corporate users to a notorious hacking gang.
Citrix is a private company producing virtual networking technology major firms need to stay connected. I use Citrix to access Bloomberg Professional while traveling. If I don’t download and use the company’s connection portal, the Bloomberg doesn’t work.
Yet Citrix fumbled when it failed to find, fix, and protect its network before hackers could attack. It’s the equivalent of turning out the lights at the end of the day but leaving the front and back door of the shop open. Not just unlocked, wide open.
While you might think this doesn’t affect you, it touches every part of your life.
Most people feel they interact with the online world through their smartphone. That’s their portal. Everything beyond that is some unknown company’s problem.
The issue with digitized life is everything gets exposed.
$26 Trillion U.S. Treasury Market Frozen
In the old days, traders showed up in person to buy and sell stocks and bonds. You’ve seen it in the movies, they shout across a busy floor, paper strewn about.
Once the shouting traders agree on a price, they stamp a ticket and send it upstairs. Over the next two days for stocks or one day for treasuries, the upstairs staff settled the trade.
Settling means the buyer and seller allow a neutral third party to handle the bookkeeping. Each of them agrees with the bookkeeper they’ll turn over the money, or the asset being sold.
Today this process is exactly the same, only at lightning speed. Thanks to digitization, the shouting traders can sit in a comfortable office chair, or at home. The upstairs bookkeepers need a lot less people as they scan over automated spreadsheets instead of written ledgers.
That is, if the system works. Just this month, notorious hacker gang Lockbit attacked one of the largest financial firms you’ve never heard of. The hacked firm, ICBC, settles a large chunk of daily trading in U.S. treasuries.
With its systems disabled, it had no way to settle. Buyers couldn’t pay sellers; sellers couldn’t turn over the sold assets. Everyone sat idle.
The massive firm sent runners across lower Manhattan with physical copes of trade data to settle up in person...like the old days.
This is totally impractical. Once you digitize, you can’t go back. There’s no way to go back to paper. That means the cost of digitization is more than just the software.
A New Cost of Doing Business
The early days of the technology era meant huge spending on infrastructure. Computers, servers, routers, switches, and miles of wire went into service worldwide.
The next phase of the tech era was all about the cloud. Amazon’s Web Services division, known as AWS, led the way with server space offered to companies remotely. It saved time, eliminated equipment upgrade cycles, and eventually proved a safe, low-cost alternative. On-site tech infrastructure is largely a thing of the past.
Today, workers login from home. They use company-issued laptops, personal cell phones, Wi-Fi, or cellular connections. It all adds up to sensitive data flowing across an endless array of connection points. Each one presents an opportunity for loss.
Spending on cybersecurity is still in its infancy. Research firm Gartner notes a 10.6% growth rate in 2022, 14.2% in 2023 and predicts 14.3% next year.
I looked over the Gartner report. It’s too conservative.
For instance, it notes:
“Gartner predicts that by 2025, 75% of the world’s population will have its personal data covered by modern privacy regulations.”
Spending on privacy alone might soon dwarf current cybersecurity costs. Across the western world, privacy is a hot issue.
As people demand privacy regulation, companies interfacing with consumers will see increased costs adhering to those new regulations. Regulation shifts the burden of privacy to companies.
Privacy regulation means failing to uphold the privacy standard exposes the company to potential liability.
Gone are the days when a major hotel chain can lose everyone’s information, blame it on the hackers, and simply ask customers to change passwords as a fix.
Gartner notes Data Privacy spending grew 18.5% this year. That’s ~27% faster than overall cybersecurity spending. It expects 24.6% growth in 2024. That might be wildly conservative.
The other major growth area is Cloud Security. People accept the cloud as a useful tool for business connectivity. Consumers think it’s about document safety. Companies realize they can soon access advanced quantum computing power, AI chip capabilities, and advanced tools with the right cloud network connection.
This means Cloud Security demand growth of 24% in 2022, 25.2% in 2023 and an estimated ~24.7% in 2024 might be just the beginning.
As companies and consumers shovel everything into the cloud for convenience, cost savings, and a desperate need to keep up with efficiencies, we can expect new vulnerabilities.
Cybersecurity Stocks – The One We Want
It’s a complex industry. Each piece of the security industry has a unique role in creating safety. There are select parts growing faster than others.
The table below highlights six cybersecurity stocks worth knowing about. Today, we’ll add one of them to the Trustee Portfolio. However, it’s important to know about all six.
Listed by size in the table below, each has its price, market cap, segment and what we might expect in the next wave of cyber attention.
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