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Monday, October 24, 2016

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Monday Morning Eye-Opener: Out Is In

by Kevin Coupe

Forbes has a story about a new Food Institute report saying that "millennials spend 44 percent of their food dollars – or $2,921 annually – on eating out," a 10 percent increase over the previous year. The numbers include food eaten in restaurants as well as to-go items.

The data comes from the Food Institute’s analysis of the United States Department of Agriculture (USDA) food expenditure data.

What is interesting to me about the story is that it identifies mobile apps such as Grubhub and Seamless as playing an important role in driving this trend. They make it possible for millennials to easily make reservations, place orders and pay for their purchases using their smart phones.

That's an Eye-Opening lesson ... companies like Starbucks and a vast number of restaurants have figured it out. If you want to compete with them, or compete for the same customers, especially millennials, you have to speak their language and approach them on their turf.

The Logic Behind Amazon's Bigger Bet On Bricks-And-Mortar

Forbes has a piece about Amazon's decision, after decades of assaulting the traditional bricks-and-mortar business model, to begin investing itself in the more earthbound/traditional forma of retailing - not just with Amazon Books stores, but also now with what is rumored to be a chain of "grocery stores and drive-in curbside locations for pick-up services."

The question is, "Why would Amazon choose to contaminate its highly efficient high-growth e-commerce model with traditional, scale-bound retail outlets? ... But whatever led Amazon to expand its physical presence offline can’t be incremental revenue alone. Amazon has already developed numerous network businesses over the years, including companies that offer video streaming, enterprise cloud computing (AWS), e-book and audiobook libraries, and in its latest foray, music streaming. What could be a rational justification for Amazon to go brick-and-mortar now?"

The story suggests that Amazon must see Walmart physical presence, especially once combined with the potential offered by its new Jet acquisition, as being a significant threat to its ability to disrupt and dominate the grocery business.

"Amazon’s one-hour delivery service is economically viable only in the denser, urban neighborhood," the story says. "However smart its algorithm is in offering discounts, recommending products, and showing ads, Amazon still lacks knowledge about shoppers’ experience in the grocery aisles. Yet bridging that knowledge gap is becoming increasingly important, as Wal-Mart is blurring the boundary between online and offline.

"To be sure, running physical outlets is not one of Amazon’s core competencies. But neither is running physical bookstores. When the company opened its first bookstore last year, visitors noticed a number of unusual tweaks: each book is positioned with its cover exposed, rather than showing its spine like in a traditional store. In addition, small black cards placed below each book provide customer review data pulled from Amazon’s website."

And so the question remains, what "tweaks" will Amazon apply to any grocery store format it might open ... and how will it look to apply a traditionally algorithm-based approach to retailing in a far more traditional setting.

Stay tuned.

KC's View: I think one of my complaints about the new "365 by Whole Foods" format was that it did not take enough chances ... and that in playing it a little bit safe, it actually managed not to achieve its stated goals of offering a more millennial-friendly experience at clearly lower prices. I mention this here because I think one of the things Amazon has to be careful about is not playing it too safe with these new grocery stores.

Not that this is likely to happen. The Forbes quotes Amazon CEO Jeff Bezos as once saying, “I’ve made billions of dollars of failures at Literally. What matters is companies that don’t continue to experiment or embrace failure eventually get in the position where the only thing they can do is make a Hail Mary bet at the end of their corporate existence. I don’t believe in bet-the-company bets.”

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From ProLogic Retail Services...

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From the National Grocers Association...

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How CVS Became A Purpose-Driven Company

Advertising Age reflects back on the CVS decision two years ago to stop selling all tobacco products "in order to promote better health and ensure fitness," a decision that eliminated $2 billion in sales from its bottom line.

Norman de Greve, CVS's senior VP/chief marketing officer, recently gave a speech to the Association of National Advertisers' Masters of Marketing conference in which he said that this move was consistent with CVS's belief that it had to have a purpose-driven brand and be a purpose-driven company, and "ours is helping people on their path to better health." And, he said, ""Broadcasting our purpose is changing how we work."

And perform, apparently. in his speech, de Greve said that "the rebranding drove results. CVS found that 40% more influencers saw it as a leader in helping to improve overall health in 2015 compared with 2014. The company was listed as one of the most innovative and one of the most admired in various business publications. In addition, more than 500,000 people visited CVS's smoking cessation hub and 260,000 smokers sought advice from its pharmacy on quitting. CVS spent $82.9 million on measured media in the U.S. last year, according to Ad Age's Datacenter."

"Being purpose-driven is much more than a marketing strategy," de Greve said. "It drives our operations, our acquisitions, our budget -- we have embedded it in everything we do."

KC's View: Retailers always would remind me that it is important to remember that tobacco has become a high-maintenance, low-margin category ... and so it wasn't the worst two billion dollars to drop off the balance sheet. (I can't quite believe I wrote that last sentence.)

Still, there is a lot to be said for the notion of purpose-driven marketing ... and by that I mean a purpose beyond the bottom line. Making money is important, but to have a message that resonates with consumers, it helps if there is something more.

REI To Shut The Doors On Black Friday Again This Year

The Associated Press reports that sporting goods retailer REI will once again this year remain closed on Black Friday, the day after Thanksgiving that marks the traditional beginning of the end-of-year holiday shopping season.

And, once again, the company will again "pay employees for the day off in a campaign that encourages people to spend time outdoors." The only way you'll be able to shop at REI on Black Friday is online, though no orders will actually be processed that day.

The story quotes CEO Jerry Stritzke as saying that "the company's move last year, which it dubbed #OptOutside, gained momentum on social media from various outdoor groups. He said he saw more than 20,000 social media posts from REI's 12,000 employees. Many had their first Black Friday off in more than 20 years, he said."

And REI, "which has 149 stories, is now working with more than 200 organizations from the nonprofit, private and public sectors, including the National Parks Service, to push the idea," AP reports.

KC's View: This is about leading with values ... and another example of purpose-driven marketing. REI knows who its customers are, and knows that they will respond positively to this approach. It certainly makes me want to shop there.

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Boston Beer Co. Sees Its Sales Go Flat Even In Craft Beer Boom

Barron's had a story over the weekend about how the Boston Beer Company, maker of Samuel Adams, is facing some tough times - its last quarter showed a 14 percent sales decline.

The irony, the story says, is that Boston Beer "has become a victim of the very industry it helped create: craft beer. The once-small company now brews over four million barrels of beer annually. Craft beer fans have moved on to smaller breweries."

Chairman/founder Jim Koch said that the decline in sales was part of a "slowdown in growth across the craft brewing industry," and CEO Martin Rober said that the company is "conducting a comprehensive review of our brand strategies."

There is speculation that one new strategy could be to sell the company.

KC's View: I hope they don't sell the company, but I also would tend to think that maybe Boston Beer Co. has perhaps gotten a little too big. Not in terms of sales, necessarily, but maybe in terms of product. I've just had the feeling lately that there were too many SKUs in the line, which diluted the brand image ... and made it seem just like any other big beer company.

Pass me a Full Sail. Or maybe a Fat Tire.

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From MorningNewsBeat, September 15, 2016:

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Advocacy Group[s Take Aim At Influencer Advertising

The Washington Post reports that a coalition of advocacy groups - including the Center for Digital Democracy, Campaign for a Commercial-Free Childhood and Public Citizen - is urging the Federal Trade Commission (FTC) to "crack down" on companies looking to use digital tools to market their products to children.

According to the story, the advocates are "asking the agency to take enforcement action against Google, Disney’s Maker Studios and three other companies for what they alleged was the 'unfair and deceptive practice' of aiming influencer ads at children. The advocacy groups ... also urged the federal agency to issue policy guidance on the matter."

"Influencer advertising" is defined as paying YouTube and Instagram personalities "for using or talking up a product on their social-media channels." The story notes that it is "a multibillion-dollar industry, and it is used to peddle all sorts of products, including fashion, beauty and cooking items. But advocates say these tactics are problematic when they are used to market toys, snacks and other goods to children."

The Post reports that "the FTC has taken several actions recently to try to bring more transparency to influencer marketing. Earlier this year, Lord & Taylor settled FTC charges that it had engaged in deceptive advertising. In 2015, the department store chain ran a social-media campaign in which 50 influencers were paid between $1,000 and $4,000 each to post photos of themselves wearing the same paisley-print dress. However, none of the influencers disclosed the sponsorship, as the law requires. This summer, Warner Bros. settled FTC charges that in an ad campaign for its 'Middle Earth: Shadow of Mordor' video game, it did not go to great-enough lengths to ensure that influencers were disclosing that they’d been paid for their social-media posts."

KC's View: I'm not exactly sure where the regulatory line should be, though I do think that children have to be protected from predatory companies who would take advantage of them. When I was a kid, my parents had a rule - at Christmas, we'd never get toys advertised on TV. (It stopped a lot of begging.) That's a harder rule to enforce these days, simply because there are so many media influences. But as much as federal regulations might be able to do to help, it remains up to parents to be the last line of defense.

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From iControl...

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Worth Reading: Why The Echo Is A Trojan Horse

I've been writing about this a lot lately, but just is case some folks didn't believe me, here is a Los Angeles Times story arguing that the Amazon Echo/Alexa system - and, by extension, all voice-activated computers - serve as "important bridges for the average consumer between today’s 'dumb' homes and a Jetsons-like future.

"With tech firms and appliance makers betting that everything in our homes eventually will get connected, the key, analysts said, is to help consumers feel comfortable with the idea now so they can be nudged along to make bigger investments in the future."

Now, there is a certain irony to this story since it was just last Friday that there was a massive online attack that essentially shut down access to many popular websites such as Twitter, Spotify, Netflix, Tumblr, Reddit, PayPal - and Amazon. The attacking software "The software uses malware from phishing emails to first infect a computer or home network, then spreads to everything on it, taking over DVRs, cable set-top boxes, routers and even Internet-connected cameras used by stores and businesses for surveillance. These devices are in turn used to create a robot network, or botnet, to send the millions of messages that knocks the out victims' computer systems."

But the fact remains that there is an equally massive effort on the part of companies like Amazon, Google and Apple to wire the world and make it easier for people do to pretty much everything through the use of technology. One of those "everythings" is shopping ... and so retailers have to figure out, to use the line coined by my friend Craig Ostbo, whether they are going to be at the table or on the menu.

You can read the entire LA Times story here.


• Here's a remarkable number for you.

The Daily Meal reports that Starbucks' growth plans for China mean that the company will have to open one store a day there for the next five years - which will, by 2021, give it more than 5,000 coffee shops in China.

Starbucks CEO Howard Schultz says that one of the major changes that the company has seen in its 17 years of doing business in China - a notion that was once seen with a certain degree of incredulity - has been in the nature of its customers. "If you look five years ago, most of our business, believe it or not, was expats and tourists in China," he says. "Today, it's mostly Chinese."

• The Wall Street Journal reports that "Walgreens Boots Alliance Inc. and Rite Aid Corp. pushed out the deadline to close their $9.4 billion merger to next year amid delays in selling stores the two sides have to divest to get the deal past federal regulators.

"The companies now expect to close the deal in early 2017, as the previous timetable of completing the transaction by the end of this year is no longer feasible. The companies expect to agree to sell between 500 and 1,000 stores by the end of 2016, though any transactions will also require approval from the Federal Trade Commission."

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From Webstop...

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Tom Hayden, who went from the 1960s counterculture, where he was a radical leader in both the civil rights and antiwar movements, to the California state legislature, where he worked on what he called "modern, workplace, neighborhood issues," has passed away at age 76. He had been suffering from heart problems.

Hayden's evolution was marked by a marriage to fellow activist Jane Fonda from 1973-1990, and a philosophical mellowing. The New York Times reports that "in a memoir, 'Reunion' (1988), he described himself as a 'born-again Middle American' and expressed regret for 'romanticizing the Vietnamese' and for allowing his antiwar zeal to turn into anti-Americanism."

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From the Western Association of Food Chains (WAFC)...

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Your Views: Rights & Wrongs

Last week, there was a digression in which I was challenged about the protests taking place in the National Football League, and I wrote:

It always kind of bothers me more when folks who normally embrace the notion of freedom of speech have a problem when folks with whom they disagree actually practice it.

MNB user Pat Albani wrote:

I think he has every right to make his statement, just as I have every right to not like it.  I also have the right to not support something I don’t believe in, like his protest.  While I don’t agree with him I understand his right to do this.   So do I bother you?

Absolutely not.

My issue is with the people who say they have no right to protest.  I’m a child of the late sixties and early seventies.  I believe in protest.

Another MNB user wrote:

Nobody said they had a problem with people practicing free speech. We just have a problem with their position. Taking the position that the U.S. suppresses people is taking the position that the people of the U.S. suppress people. Since these people make up a large portion of NFL viewers, it makes them customers of the NFL and many of us find offense in being accused of racism, so we exercise our freedoms to spend our time and money elsewhere.

As is your right.

I can't help but think, though, that what you say may seem a lot less persuasive to someone who sees himself or herself, and people who may share their skin color, as the supressees.

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Stater Bros. Adopts ReposiTrak Food Safety Compliance Management Solution

SALT LAKE CITY - Stater Bros. Markets announced today that it has chosen ReposiTrak, Inc., the leading provider of Compliance Management and Track & Trace solutions for food and dietary supplement safety, to manage regulatory and business documentation compliance within its supply chain.

“Our top priority at Stater Bros. is to provide the safest and highest quality products for our customers,” said Dennis McIntyre, Executive Vice President of Marketing at Stater Bros. “ReposiTrak’s automated system will enable us to better manage our growing list of documents we require from our approved suppliers in order to verify their good business and safety practices.”

ReposiTrak, a wholly owned subsidiary of Park City Group, helps manage regulatory, financial and brand risk associated with issues of safety in the global food, pharma and dietary supply chains. Powered by Park City Group’s technology, the platform consists of two systems: Compliance Management, which not only receives, stores and shares documentation, but also manages compliance through dashboards and alerts for missing or expired documents; and Track & Trace, which quickly identifies product ingredients and their supply chain path in the unfortunate event of a product recall.

For more information about how to join the rapidly expanding community of retailers and suppliers using ReposiTrak's robust safety and compliance solutions, go to

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From The MNB Sports Desk

In game Six of the National League Championship Series on Saturday night, the Chicago Cubs beat the Los Angeles Dodgers 5-0, winning the best-of-seven series four-games-to-two. The win sends them to the World Series for the first time since 1945, where they will try to win their first championship since 1908. They'll face off against the Cleveland Indians, who haven't won a World Series since 1948, though they went to the Fall Classic in 1995 and 1997.

Somewhere, Jake Taylor, Ricky Vaughn, Roger Dorn, Pedro Cerrano and Willie Mays Hayes presumably are smiling...though probably not entirely happy about having to face off against the Cubs, who won 103 games during the regular season this year.

In Week Seven of the National Football League...

Giants 17
Rams 10

Vikings 10
Eagles 21

Bills 25
Dolphins 28

Browns 17
Bengals 31

Ravens 16
Jets 24

Buccaneers 34
49ers 17

Saints 21
Chiefs 27

Colts 34
Titans 26

Redskins 17
Lions 20

Raiders 33
Jaguars 16

Chargers 33
Falcons 30

Patriots 27
Steelers 16

Seahawks 6
Cardinals 6

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