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Monday, June 19, 2017

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Monday Morning Eye-Opener: Amazon, Whole Foods, And You

by Kevin Coupe

On Friday, MNB was one of a number of outlets that broke the news that Amazon plans to acquire Whole Foods for $13.7 billion, in an all-cash deal that MNB said would "dramatically increase the online pioneer's bricks-and-mortar presence while providing some relief for the organic grocer, which has been under pressure from shareholders to improve its performance."

You can read our initial coverage and commentary, which includes perspective from Amazon veteran and MNB/Innovation Conversation columnist Tom Furphy - here.

Now, in the interest of providing greater and Eye-Opening perspective for what in newspaper parlance would be called a "second day story," I want to offer some of the observations and points of view of a number of other writers and media platforms, with some italicized commentary from time to time...

• From Dow Jones: "The acquisition, if it goes through, will require Amazon Chief Executive Jeff Bezos and Whole Foods CEO John Mackey to work together to combine Amazon's technology and customer know-how with Whole Foods' brick-and-mortar grocery expertise.

"Messrs. Bezos and Mackey share some traits. The two men -- who only got to know each other a few weeks ago, people familiar with the matter say -- are iconoclasts whose outsize personalities shaped their companies. They pioneered new strategies in their industries -- Mr. Bezos by shifting retail online, Mr. Mackey by popularizing health food -- and they are intensely competitive, say people who have worked with them.

"But the two founders also have sharply different strategies and missions that could prove tough to marry. Mr. Mackey's Whole Foods, whose sales totaled $15.7 billion last year, has catered to wealthier customers with boutique brands and hands-on customer service.

"Mr. Bezos has appealed to the masses with low prices enabled in part by centralization and automation. And Amazon, with $136 billion in revenue last year, has achieved far larger success financially -- putting Mr. Bezos firmly in charge."

In some ways, it seems to me that Bezos and Mackey personified the notion that these days, you're either at the table or on the menu. And I think we know which one was which.

Business Insider writes that Amazon's purchase of Whole Foods "should terrify more traditional brick-and-mortar grocery retailers that are fighting to dominate the online grocery business. Shares of Kroger, Target, Costco, and Walmart all plummeted after the news was announced, with Kroger's shares hitting a three-year low ... With more than 460 stores in the United States, Canada, and the United Kingdom, Whole Foods is not nearly as large as Walmart's 4,692 locations. However, most of Whole Foods stores are in major US cities, providing crucial brick-and-mortar grocery centers for Amazon in these key markets."

I've been writing here almost since the inception of MNB that traditional retailers have been entirely too slow in reacting to the Amazon threat - and by that I mean not just Amazon's specific competitive operations, but the broader understanding of competitive and consumer realities that Amazon reflects. Way too slow. And now, they have no choice but to react ... and I would think/hope that pretty much every food retailer in the country called a Saturday meeting at which he/she said, "A) I want a plan for how to respond by Tuesday, and B) I want to know how we are going to implement that plan before Amazon closes on its purchase of Whole Foods. There are no alternatives, and will be no excuses."

• The Los Angeles Times reports that "Whole Foods' 440 stores gives Amazon access to refrigerated warehouses 'within 10 miles of probably 80% of population'."

That's a lot of access. Yikes.

• The Wall Street Journal speculates: "The partnership with Amazon may mean Whole Foods doesn’t need to rely as heavily on its storefronts. Recently, vendors on Amazon.com have increasingly been filling orders from their own facilities or those of third-party logistics providers, with Amazon never holding that inventory in its own fulfillment centers. Under that strategy, Whole Foods may see many of the products it stocks one day shipped to customers in much the same way, skipping the store stock room entirely and heading directly to customers."

It won't happen overnight, but it would be foolish to think that Amazon can't bring enormous efficiencies to the way Whole Foods operates ... without hurting the brand. Think Zappos.

USA Today writes that the acquisition "could slice into profits for food manufacturers, other supermarket chains such as the nation's largest by market share, Kroger, and behemoths like Walmart, which is currently the biggest seller of groceries in the U.S. with more than one-quarter of the market, according to Euromonitor. It also potentially creates a challenge for companies that deliver groceries such as Fresh Direct and Peapod, and ready-to-cook ingredients and recipes to customers' doors, like Blue Apron and Sun Basket."

"Could" slice into profits? That may be the understatement of the year.

• The USA Today story also says that the move may presage a wave of mergers and acquisitions (not just by Amazon and Walmart), that it establishes Amazon as being able to engage in a wave of "margin-busting negotiations," especially as Amazon continues to grow its private label business with the use of Whole Foods' 365 own-brand as a catalyst.

• From another Wall Street Journalpiece: "The move is already putting pressure on grocery store competitors, such as Kroger Co., Target Corp., Supervalu Inc., Costco Wholesale Corp. and Wal-Mart Stores Inc., which all saw declines in share prices after the deal was announced Friday.

Each of these companies has made significant investments in digital technology in recent years, together transforming the grocery store market."

But Amazon, the story notes, is way ahead ... and Stephen DiFranco, a former vice president at Hewlett-Packard and Lenovo, who founded big-data strategy firm IoT Advisory Group, tells the Journal that “Whole Foods will soon become Amazon’s experimental playground for developing more sophisticated big-data marketing strategies."

There will be no excuse anymore for marketing efforts that do not or cannot drill down to specific consumer behavior and react to it. Again, we've been making that point here for years ...

• Also from Dow Jones: "Mr. Bezos gains more than 460 stores across the U.S., a network that could let Amazon sell its private-label brands and devices in stores, expand its distribution network, and bolster its Prime Now and Fresh delivery businesses.

"Whole Foods gets access to Amazon's data and technology, and the combined buying power of Amazon Fresh and Whole Foods could win better prices from grocery suppliers. Also, Mr. Mackey's new boss has been tolerant of thin profit margins, a welcome relief after activist investor pressure over profit and other issues. Amazon has said Mr. Mackey will remain CEO of Whole Foods.

"Still, Mr. Bezos's team is likely to scrutinize Whole Foods' business practices seeking opportunities for change, former Amazon employees say. To better compete with rivals including Wal-Mart Stores Inc., for example, Amazon likely will push for lower prices, new technology, and more uniform stores to save costs, they say."

I have to wonder if Amazon will have the firepower to make the 365 by Whole Foods concept a lot stronger and more effective ... because Amazon knows how to offer lower prices, it knows how to effectively use technology, and it knows how to appeal to millennials. These are all things that the 365 format was supposed to do, but, in my estimation, did not.

• The Associated Press writes: "Amazon could try to use automation and data analysis to draw more customers to stores while helping Whole Foods cut costs and perhaps prices. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the U.K. could be turned into distribution hubs — not just for delivering groceries but as pickup centers for online orders ... Amazon already offers grocery-delivery services in five markets, but analysts say expansion is tough because its current distribution centers are set up for dry goods, not perishables ... Amazon could use Whole Foods stores as pickup locations for deliveries, an option Amazon already offers in many cities by installing lockers at 7-Eleven and other retailers."

• The New York Times had a piece over the weekend about the potential collateral damage from the acquisition:

"Our mental image of job-killing automation is robots in factories or warehouses. But the next jobs to disappear are probably ones that are a much bigger part of most people’s daily lives: retail workers and cashiers in stores and restaurants.

"For a long time, economists argued that routine jobs like factory and clerical work were vulnerable to automation but that jobs in both the service and knowledge sectors were safer. They require human skills that are hard for machines to imitate, like judgment and adaptability. These skills are useful when an executive makes strategic business decisions or when a chef fries one customer’s egg and scrambles another’s ... But it has become increasingly clear that parts of every job will be automated — and that the service sector is next. Although certain service jobs like health aide or preschool teacher still seem safe, others, like those in retail and food service, are already being displaced. It’s not hard to teach a machine to do routine tasks like scanning bar codes, stocking shelves or dunking fries in oil."

The Times suggests that "companies won’t invest in technology unless it’s less expensive than employing people, and most retail workers make near minimum wage. But in a case study of grocery stores, McKinsey found that the savings from automation were three times the cost, and 68 percent of the savings were from reduced labor costs."

Like I've said here before ... these are the facts of life when it comes to progress, and they require a sophisticated and nuanced public policy approach that includes private enterprise and government in the process. But wailing about this progress as somehow being "evil" is like trying to stop the wind.

Fortune reports that sources inside Instacart believe that despite the purchase of Whole Foods by Amazon, it seems at least possible that it can hang onto the Whole Foods delivery business - in part because there are four years remaining on the contract.

Whole Foods reportedly makes up a bit less than 10 percent of Instacart's annual revenue.

However... the story also notes that Instacart "is doubling down on its anti-Amazon rhetoric. An Instacart representative told Bloomberg that the company’s mission is 'more important than ever given Amazon just declared war on every supermarket and corner store in America'."

I think it is a pretty good bet that Instacart will be sold to a major company - think Walmart, Google or Kroger - before the end of the year.

Wired writes: "The implosion of mainline retailing has multiple causes, but Amazon has clearly been a change agent that has accelerated the sector’s challenges and hastened the demise of some once dominant players. Retail stores are closing at a record rate—as many as 8,000 this year. That’s thousands more than in 2008, the previous worst year on record, which bore the brunt of a whole-scale economic collapse. Those stores employ hundreds of thousands of people, and when those jobs disappear to e-commerce, they don’t come back.

"So does Amazon create value by seamlessly distributing goods, or destroy it by demolishing jobs? The answer, of course, is both. While Washington focuses almost entirely on the last gasps of manufacturing and coal mining employment, e-commerce and Amazon threaten far more jobs. Yet Amazon also offers the potential of far more affordable goods at lower costs. It truly defines creative destruction."

See my comment about sophisticated, nuanced public policy approaches above.

Wired goes on:

"We don’t yet know, of course, what jobs will replace the ones being made anachronistic by e-commerce. We know what is being lost, with only a few inklings of how the gains will be distributed. The promise of a digitally-enhanced, voice-activated home where you only have to say what you need before your accounts are debited and goods delivered is both a utopian and dystopian vision. It is fitting that Amazon is at the apex of those changes, driven both by a utopian ambition and a dystopian drive to dominate competitors.

"The purchase of Whole Foods introduces those divergent urges to a new, intimate arena: food, which everyone needs and everyone consumes. If the company can succeed at the grandest level, it will result in better food for everyone—but it may take an unsavory path to achieving that goal. Amazon’s drive is as fraught with risk as it ever was, but looking a decade ahead, the result is likely to be enhanced quality of life for more people than ever before, even as the changes continue to be unsettling and tumultuous."

• In another piece, the Times posits that the Whole Foods purchase by Amazon puts it "on a collision course with Walmart to try to be the predominant seller of pretty much everything you buy.

"Each one is trying to become more like the other — Walmart by investing heavily in its technology, Amazon by opening physical bookstores and now buying physical supermarkets. But this is more than a battle between two business titans. Their rivalry sheds light on the shifting economics of nearly every major industry, replete with winner-take-all effects and huge advantages that accrue to the biggest and best-run organizations, to the detriment of upstarts and second-fiddle players.
That in turn has been a boon for consumers but also has more worrying implications for jobs, wages and inequality."

CNBC quotes Bill Simon, former CEO of Walmart U.S., as saying that the acquisition is "typical Bezos," and that it "really demonstrates his commitment to get into brick-and-mortar retail and to get into food, in particular, and that can't be good for anyone selling food right now ... if this is an indication of Amazon's commitment to get into grocery and get into fresh in a big way, then I think that will make everybody stand up and take notice."

While Simon says that "for the near-term and probably the medium-term, I think Wal-Mart will be just fine," he also says that it can't be seen as anything other than a "transformational" move, and that " "Wal-Mart needs to watch their flank."

• Even smaller competitors are on alert. NBC News has an interview with five-store retailer Stew Leonard, Jr., who says that "his company has been looking at new strategies like food delivery and having even more take-away options for younger customers."

"We can’t just be focused on the food store now," Leonard tells NBC. "There are a lot of the millennials that want things delivered. They want food that maybe they can just come and pick up ... “I view as a competitor to anyone who has the lights on and sells food."

The thing is, Stew Leonard's is the classic example of experiential marketing ... but Stew Jr. is absolutely right to say that this may not be enough in the current competitive environment.

Fast Company writes: "A decade from now, not only will the way you shop for groceries in the United States have changed, but Amazon could well have begun transforming the way people around the world get their food. Because for Amazon, perishables represents much more than an opportunity to beat this country’s largest grocer, Walmart. It’s an opportunity to rethink the entire process of food sourcing and distribution ... The laboratory for Amazon’s grocery experiment is now global ... In the last two years, Amazon has launched grocery initiatives in the United Kingdom, Spain, Italy, France, Germany, and Japan. These moves are already seeking to upend decades and even centuries of entrenched behavior."

• Food analyst David Portalatin of the NPD Group tells National Public Radio's The Salt that Amazon now has to be considered "a very substantial brick-and-mortar food retailer. I think ultimately, this is good for consumers." Especially, he says, the 24 percent of millennials who bought something from Whole Foods last year. That's an extraordinary penetration for a supermarket chain with just 431 stores," he says. "The deal now gives Amazon control of those 431 stores, nearly all of which are in neighborhoods that are more affluent and younger than America as a whole. Those stores solve much of Amazon's 'last mile' delivery challenge for fresh groceries."

• The AP also notes that "just two years ago, Whole Foods CEO John Mackey told Bloomberg BusinessWeek that Amazon’s foray into grocery delivery would be ‘'Amazon’s Waterloo.' But it was Whole Foods that fell behind as shoppers found alternatives to the organic and natural foods it helped popularize since its founding in 1978."

• One quote that seemed to get a lot of play over the weekend was from Whole Foods CEO John Mackey, who told Texas Monthly recently that "there's widespread distrust with how many big corporations operate: 'It’s the idea that business is about a bunch of greedy bastards running around exploiting people, screwing their customers, taking advantage of their employees, dumping their toxic waste in the environment, acting like sociopaths'."

And, Mackey told the magazine, "“These people, they just want to sell Whole Foods Market and make hundreds of millions of dollars, and they have to know that I’m going to resist that. That’s my baby. I’m going to protect my kid, and they’ve got to knock Daddy out if they want to take it over.”

It should be noted that when Mackey signed the deal, it got Whole Foods' shareholders (including him) a 27 percent premium over its at-the-moment share price.

• In a New York Times column provocatively titled, "In Whole Foods, Bezos Gets a Sustainably Sourced Guinea Pig," Farhad Manjoo writes:

"An Amazon presence in groceries might transform it from a company you shop at every once in a while to one you think about several times a week. This is not a novel idea: It was the key reason Walmart got into the grocery business in the 1980s, a move that accelerated its shift from a regional chain into the world’s largest physical retailer.

"Yet if there’s one thing I’ve learned about Jeff Bezos, Amazon’s founder and chief executive, after years of watching Amazon, it’s that he doesn’t spend a lot of time predicting future possibilities. He is instead consumed with improving the present reality on the ground, especially as seen through a customer’s eyes. The other thing to know about Mr. Bezos is that he is a committed experimentalist. His main way of deciding what Amazon should do next is to try stuff out, see what works, and do more of that.

"So the best way to think of this deal is to look at Whole Foods as a kind of guinea pig for Amazon — a pricey, organically sourced one, perhaps, but a guinea pig all the same."

• The Huffington Post cast a skeptical eye on the deal's implications:

"Our communities and the way we engage in commerce will change. Imagine walking into a Whole Foods store and seeing different prices depending on whether you are a member of Amazon Prime — or seeing different prices depending on any other way that you interact with Amazon.

"This isn’t implausible. It is what the company does when it opens up stores. For instance, Amazon is creating a chain of physical book stores to take the place of the book stores the company destroyed. In these stores, there are no price tags at all: You scan the items with your phone and have a price delivered to you, personalized by Amazon. Why wouldn’t Amazon extend this to Whole Foods?"

The story goes on: "Amazon’s takeover of Whole Foods means that it can target and eliminate regional competitors one by one as it did with its online competitors. When Diapers.com emerged as a competitor to Amazon, Amazon simply sold diapers below cost until the company capitulated and sold itself to Bezos. There’s no reason to assume Amazon wouldn’t bring the same predatory pricing strategy to bear in every city in America. Why wouldn’t it? Even though predatory pricing is illegal, the government hasn’t enforced those laws for decades. Whole Foods tends to source from local farms as part of a commitment to localism; these farms will now be negotiating with a much bigger entity that is committed to a ruthless model of efficiency.

"There is only one force that can stop Amazon from organizing and regulating basically all American retail commerce — our democratic institutions and our political system ... The public should speak out in opposition to this merger. More than that, the government should take this opportunity to reject the entire pro-finance pro-concentration philosophy that has taken hold in this country since the Reagan era. It is no accident that Whole Foods founder John Mackey was forced to surrender his life’s work because financiers looking for a quick buck bought up a large bloc of shares in his company and pressured him to sell the company to Amazon ... This merger should frighten all of us. But it should also embolden anyone who believes that America should not be in thrall to monopolists like Bezos."

I get it. But I also think the argument can be made that Mackey was forced to surrender his life’s work because Whole Foods lost momentum and relevance over time, because it did not adapt to changing consumer demands and realities. Sure, that enabled the financiers to step in and push for a sale ... but Mackey gave them the opening.

• The Times writes in yet another piece, "Unlike almost any other chief executive, Amazon’s founder, Jeff Bezos, has built his company by embracing risk, ignoring obvious moves and imagining what customers want next — even before they know it.

"Key to that strategy is his approach to failure. While other companies dread making colossal mistakes, Mr. Bezos seems just not to care. Losing millions of dollars for some reason doesn’t sting. Only success counts. That breeds a fiercely experimental culture that is disrupting entertainment, technology and, especially, retail."

Go back and read the "Innovation Conversation" I did with Tom Furphy last week, before the deal was announced. You can read it here. Tom's been making this point for years.

However long it takes, Manjoo writes in his Times analysis, "Mr. Bezos and his team will most likely spend years meticulously analyzing and tinkering with how Whole Foods works. They will begin lots of experiments. When something works, they will do more of that, then more, and then even more. They may take over the world all the same — and, in the process, probably usher in big changes to large swaths of the economy, affecting everything from labor to urban planning — but they’ll do it in ways we won’t be able to predict now."

Manjoo goes on: "I suspect that the Whole Foods deal starts less with a strategic end-goal and more with this insight: Shopping for food is broken. Both the in-store experience and the many attempts at online delivery — from Webvan to Instacart to Amazon’s own service, Amazon Fresh — have failed to create the sort of seamless buying experience we enjoy with nonfood e-commerce."

This, he writes, is almost certain to change ... and probably at a far greater velocity than would've been achieved had Amazon remained in its e-segment. "In a single purchase ... Whole Foods gives Amazon a playground to try out lots of ideas. Should stores be laid out more like warehouses, to optimize for online delivery? Could you make grocery checkout lines invisible, the way Amazon is trying to do with its experimental grab-and-walk-out convenience store in Seattle? Or maybe there’s some other innovation lurking in the deal that no one has thought of yet."

• In other words, Today is Day One.

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Walmart Buys Men's Fashion Retailer for $310 Million

Reuters reports that Walmart has finally pulled the trigger on a deal that has been rumored for months, spending $310 million to buy men's fashion retailer Bonobos. Bonobos-branded items will be offered on both Walmart and Jet websites, the story says.

It is Walmart's fourth major e-commerce acquisition in a year, following ModCloth, Moosejaw and Shoebuy - and that doesn't even count its $3.3 billion acquisition of Jet, which has been driving its online strategy.

KC's View: This story almost got lost on Friday amid all the publicity given to the Amazon-Whole Foods deal.

Interestingly, there seems to have been some social media blowback on this deal, with some Bonobos customers saying they see nothing so much as a cash grab on Bonobos' part, and that they have no intention of shopping at Walmart, even if it goes by another name.

This could be a problem for Amazon, too, if Whole Foods customers react the same way. But, I'd be willing to bet that there is a lot more overlap between Whole Foods and Amazon Prime customers than there is between Walmart/Jet and Bonobos customers.

I know what Walmart is trying to do here. I'm just not sure about the long-term effectiveness of the approach.

Wegmans To Begin Grocery Delivery Program

The Buffalo News reports that Wegmans "has partnered with grocery delivery app Instacart to deliver groceries in Northern Virginia and Maryland. Next, the service will roll out in southern New Jersey, Pennsylvania and the Boston area.

"Wegmans does not have any immediate plans to launch the service in New York," the story says.

The story notes that "Instacart deliveries cost $5.99 on orders of $35 or more. Instacart Express membership, which is available for $99 to $149, offers unlimited one-hour deliveries. Wegmans charges an additional amount to cover the cost of gathering the groceries. The first Instacart delivery is free."

KC's View: Bad week to get into business with Instacart, I think, because I think it is entirely possible that it could be owned pretty soon by one of Wegmans' competitors.

I'm also not a fan of the deal on principle. Wegmans is wonderful at owning the customer experience at all levels, and this deal means that it is outsourcing a critical part of it. It may be an easy and fast solution, but I don't think it is the best one.

Winn-Dixie Loses ADA Suit Over Website Inaccessible To Blind And Deaf

The Miami Herald reports that a federal judge in Miami has ruled that Winn-Dixie violated the Americans with Disabilities Act (ADA) "by failing to make its website accessible to blind and visually impaired users. In a landmark win for civil rights advocates on Monday, the Jacksonville, Florida-based grocery and pharmacy chain has set aside $250,000 to revamp its online site and was ordered to pay the plaintiff’s legal fees."

According to the story, "Judge Robert Scola wrote in his ruling against Winn-Dixie that its website is a place of public accommodation because of its integration with its stores, and because it 'operates as a gateway to the physical store locations'."

Published reports say that Winn-Dixie plans to appeal.

A lawyer for the plaintiff said that he had been suing not for damages, but to get them "to follow the laws that have been in this nation for 27 years."

KC's View: Add this to the list of lawsuits that most companies never would've thought they would have to defend as recently as 10 years ago. Just imagine the suits they'll have to defend 10 years from now.

Priceline CEO On The Difference Between Leading And Managing

The New York Times yesterday had an interview with Jay Walker, chairman of Walker Digital and founder of Priceline and Upside, in which he talked - in surprising terms - about his management philosophy:

"I’m not a manager, and you wouldn’t want me to manage anything you were running," he says, explaining that "management is a set of skills and desires, neither of which I’m strong in. Management is the art of accomplishing objectives through others, and that’s different from leadership, which is more the art of inspiring others and getting them to want to do things.

"I’ve never thought of myself as a particularly good manager. A manager’s job is to develop the people they work with. It’s about process. I’m not a strong process person. I’m more an out-of-the-box guy.

"I’ve always hired managers to do the job of management, which is no insult at all. It’s not beneath me in any way. It’s just not my strength. Create things? I’m your guy. Solve unusual problems? Maybe. Dream up whole new ways to approach things? I’m your guy. Manage? Not so much."

And, he goes on:

"My style is not to perpetuate a false illusion that you work for me. You work for you. You get up every day and you come in here because you want to be here. We’re not having a discussion about who’s in charge. If you have a better idea, great. Let’s hear it ... I wouldn’t try to encapsulate a set of rules and regulations to say here’s how I do things. But I will tell you that I’m highly collaborative and interested in the best thinking. If you can express yourself well, that’s good. If you can’t, that’s a big problem."

KC's View: I've been pretty tough on Walker and Priceline over the years, especially when they got (briefly) into the name-your-own-price-for-groceries business. But I love this interview, and what he has to say.

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Craft Brewers Bridle At A-B's Investment In Beer Ratings Site

The New York Times reports that the decision by Anheuser-Busch InBev, the world's largest brewer, to purchase a minority stake in the popular beer review website, RateBeer, has created concerns in the craft beer community, where entrepreneurs feel that the the formerly "objective, consumer-driven" site now has an enormous conflict of interest.

The concerns range "from whether individual ratings will truly be independent, to the potential for favoritism in the placement of reviews on the site, to the lack of transparency about the deal, which was consummated in October but was only recently made public."

Two brewers - Sixpoint Brewery in Brooklyn, NY, and Dogfish Head in Delaware, have asked that RateBeer remove "the reviews and ratings of their beers from its website," the Times writes. "As of Friday, RateBeer had not complied."

ZX Ventures, majority owner of RateBeer, concedes that it should have been more transparent about the investment, but pledges that it will remain independent of A-B's influence.

KC's View: There's probably not much that craft brewers can do about the ratings and reviews; there are lots of companies that, for a variety of reasons, would prefer that they not be reviewed in the media ... but the media has no responsibility to comply with those wishes.

That said, I think that ZX Ventures was completely in the wrong about accepting the investment and then not publicizing it. As a consumer, I would no longer trust anything it says.

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E-conomy Beat

...with brief, occasional, italicized and sometimes gratuitous commentary…

The Street reports that Panera Bread has announced that "it has exceeded $1 billion in digital sales. That means sales by mobile, web or kiosk ... As of the end of the first quarter of 2017, digital sales represented 26% of total company sales, the highest rate in the restaurant industry outside of the pizza players such as Domino's Pizza and Papa John's. According to a press release from the company, some 1.2 million digital orders are placed per week."


• Apple announced last week that it has hired two executives from Sony Pictures Television, Jamie Erlicht and Zack Van Amburg, "to newly created positions overseeing worldwide video programming." The men are "considered among the brightest of a rising generation of studio executives," with credits that include "Breaking Bad" and "The Crown," and the hiring is seen as "a clear message to Hollywood," that Apple is "finally serious about building an original video business."

In other words, serious about developing proprietary content - or, private label programming - to compete with Amazon and Netflix, not to mention the enormous swath of broadcast and cable networks competing for share-of-mind-and-time.

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FastNewsBeat

• Southeastern Grocers announced last week that it has converted seven Winn-Dixie stores in South Florida to the Fresco Y Más format - making it 18 stores in total that have been converted from the Winn-Dixie banner to the Hispanic format.

"“Since opening our doors in Hialeah one year ago, Fresco y Más has seen fantastic success and support from customers in each community we now operate in,” said Winn-Dixie CEO Ian McLeod in a prepared statement, adding, "As Fresco y Más enters its second year we continue to be dedicated to providing our customers with an authentic Hispanic shopping experience and supporting organizations that provide invaluable services to the communities we operate in."


CNBC reports that Nestle "may sell its U.S. confectionery business, which includes brands like Butterfinger, BabyRuth and 100Grand, among others," as it considers " strategic options for its U.S. confectionery business, including a potential sale."

According to the story, "The sale will not include Nestle's Toll House brand, however. Nestle also said that it would continue its U.S. investments in pet care, bottled water, frozen meals, infant food and ice cream."


• For MNB readers who travel for a living ... CNN reports that hotel chain Marriott announced "that customers must give at least 48-hours notice if they plan to cancel a reservation — or cough up a fee equivalent to one night’s stay.

"Up until Thursday, guests were generally allowed to cancel reservations without a penalty up until the day before their visit ... Marriott explained that the change will help out customers seeking reservations on short notice, adding that hotels with a one-day policy were left with 'a significant number of unsold rooms' due to last-minute cancellations."

Executive Suite

...with brief, occasional, italicized and sometimes gratuitous commentary…

• Last week, the Food Marketing Institute (FMI) announced that this year's Robert B. Wegman Award for Entrepreneurial Excellence has been given to Debbie and Rudy Dory of Newport Avenue Market in Bend, Oregon, with FMI president/CEO Leslie Sarasin describing them as being "as colorful as the vision they have for their community and they have kept their shoppers ... guessing since 1991. They are a small operation, but mighty in spirit, and they embolden their industry peers to push boundaries and delight consumers in inventive ways."

Full disclosure: Rudy and Debbie, as well as their daughter Lauren Johnson, are in the top rank of MNB faves. Great family, great store.

• And, FMI recognized Peter V. “Greg” Gregerson, president and CEO of Gregerson’s Food and Pharmacy Inc., for two decades of government relations advocacy with its Glen P. Woodard Award for Public Affairs.

Both awards were handed out at FMI's professional development event, Future Leaders eXperience, in Chicago.

From The H. L. Mencken File

The Washington Post this weekend reported on a new survey saying that seven percent of Americans believe that chocolate milk comes from brown cows.

The story goes on to suggest that while this may be worrisome, it is not as bad as the fact that 48 percent of respondents to the survey "admitted they simply don’t know where chocolate milk comes from."

The Post goes on to note that "sadly, there are numerous far worse examples of public ignorance out there, including many about far more consequential issues. The 7 percent figure pales in comparison with the 25 percent who don’t know the earth orbits the sun, the 66 percent who can’t name the three branches of government, and ... the 80 percent who support mandatory labeling of food containing DNA."

KC's View: It was, of course, the journalist (and professional cynic) H. L. Mencken who once said that "no one ever went broke underestimating the intelligence of the American people." (Or words to that effect. The exact quote has been taken apart and put together in numerous ways. But it still works for me ... he's my kind of guy.)

Your Views: The Untenable Middle

Responding to our Friday breaking news alert about the Amazon-Whole Foods deal, one MNB reader wrote:

The Amazon—Whole Foods deal is HUGE (sorry, couldn’t resist) with the ramifications endless. At $13B, all cash, one would think it would take forever to recoup the investment but I suspect Amazon will earn it back and then some. What I am pleased about is that Whole Foods will be saved which is important to our industry (and my wife). What interesting times. The battle at the lower end of retail and the battle at the upper end. Still, I would rather carve out my place in one of these sectors than be sitting in the middle. I can’t say I am unhappy not having to deal with this as a retailer any longer but I am an avid observer and this is going to be fun.

No question that the middle is a more untenable place to be than ever.

MNB reader Carol Lynn Breedlove wrote:

I think the most important aspect of this acquisition is the possible synergies between a brick & mortar retailer built on the understanding of “shopping as experience” and the premier online retailer.  It will be interesting to see what a deep understanding of price, convenience and pizazz will develop.

I'm sure we're going to hear a lot more about this.

Editorial continues after a word from our sponsor...

Corporate Drumbeat

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 ReposiTrak.com.


Now back to regularly scheduled editorial...

A Brief Personal Note From The Content Guy

One last time, I want to thank you for your patience last week as MNB came out in a somewhat abbreviated form as I focused on family matters in the wake of my dad's passing. I appreciate all your kind words about the obituary and eulogy; it was a tough week, but one that tangibly affirmed much of what we intuitively knew about our Dad.

That said, I was thrilled when the Amazon-Whole Foods news broke on Friday morning. It forced me back into the saddle faster than expected, and I was grateful for the motivation.

Editorial continues after a word from our sponsor...

Industry Drumbeat

"GOOD IS NOT GOOD WHEN BETTER IS EXPECTED"

In this fast-paced, interactive and provocative presentation, MNB's Kevin Coupe challenges audiences to see Main Street through a constantly evolving technological, demographic, competitive and cultural prism.  These issues all combine to create an environment in which traditional thinking, fundamental execution, and just-good-enough strategies and tactics likely will pave a path to irrelevance;  Coupe lays out a road map for the future that focuses on differential advantages and disruptive mindsets, using real-world examples that can be adopted and executed by enterprising and innovative leaders.

"Kevin inspired our management team with his insights about the food industry and his enthusiasm. We've had the best come in to address our group, and Kevin Coupe was rated right up there.  He had our team on the edge of their chairs!" - Stew Leonard, Jr., CEO, Stew Leonard's

Constantly updated to reflect the news stories covered and commented upon daily by MorningNewsBeat, and seasoned with an irreverent sense of humor and disdain for sacred cows honed by Coupe’s 30+ years of writing and reporting about the best in the business, "Good Is Not Good When Better Is Expected" will get your meeting attendees not just thinking, but asking the serious questions about business and consumers that serious times demand.

Want to make your next event unique, engaging, illuminating and entertaining?  Start here: KevinCoupe.com. Or call Kevin at 203-662-0100.

Now back to regularly scheduled editorial...

Editorial continues after a word from our sponsor...

Industry Drumbeat

Good Is Not Good When Better Is Expected

In this fast-paced, interactive and provocative presentation, MNB's Kevin Coupe challenges audiences to see Main Street through a constantly evolving technological, demographic, competitive and cultural prism.  These issues all combine to create an environment in which traditional thinking, fundamental execution, and just-good-enough strategies and tactics likely will pave a path to irrelevance;  Coupe lays out a road map for the future that focuses on differential advantages and disruptive mindsets, using real-world examples that can be adopted and executed by enterprising and innovative leaders.

"Kevin inspired our management team with his insights about the food industry and his enthusiasm. We've had the best come in to address our group, and Kevin Coupe was rated right up there.  He had our team on the edge of their chairs!" - Stew Leonard, Jr., CEO, Stew Leonard's

Constantly updated to reflect the news stories covered and commented upon daily by MorningNewsBeat, and seasoned with an irreverent sense of humor and disdain for sacred cows honed by Coupe’s 30+ years of writing and reporting about the best in the business, "Good Is Not Good When Better Is Expected" will get your meeting attendees not just thinking, but asking the serious questions about business and consumers that serious times demand.

Want to make your next event unique, engaging, illuminating and entertaining?  Start here: KevinCoupe.com. Or call Kevin at 203-662-0100.

Now back to regularly scheduled editorial...

Finally, a word from our sponsor...

Industry Drumbeat

"GOOD IS NOT GOOD WHEN BETTER IS EXPECTED"

In this fast-paced, interactive and provocative presentation, MNB's Kevin Coupe challenges audiences to see Main Street through a constantly evolving technological, demographic, competitive and cultural prism.  These issues all combine to create an environment in which traditional thinking, fundamental execution, and just-good-enough strategies and tactics likely will pave a path to irrelevance;  Coupe lays out a road map for the future that focuses on differential advantages and disruptive mindsets, using real-world examples that can be adopted and executed by enterprising and innovative leaders.

"Kevin inspired our management team with his insights about the food industry and his enthusiasm. We've had the best come in to address our group, and Kevin Coupe was rated right up there.  He had our team on the edge of their chairs!" - Stew Leonard, Jr., CEO, Stew Leonard's

Constantly updated to reflect the news stories covered and commented upon daily by MorningNewsBeat, and seasoned with an irreverent sense of humor and disdain for sacred cows honed by Coupe’s 30+ years of writing and reporting about the best in the business, "Good Is Not Good When Better Is Expected" will get your meeting attendees not just thinking, but asking the serious questions about business and consumers that serious times demand.

Want to make your next event unique, engaging, illuminating and entertaining?  Start here: KevinCoupe.com. Or call Kevin at 203-662-0100.

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