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Tuesday, June 20, 2017

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Sansolo Speaks: The Other Shoe Drops

by Michael Sansolo

In the explosion of news over the Amazon/Whole Foods purchase, it’s easy to forget that life went on late last week. And boy, did it.

On Thursday, Lidl opened its first stores in the US and, as Arthur Miller wrote in "Death of a Salesman," attention must be paid.

An industry friend traveled down to Kinston, North Carolina, one of seven locations where the German-based discounter opened its doors, and walked away impressed in countless ways. Granted, opening day is hardly an indication of long-term success, but a quick tour of Lidl reminds us that future success won’t come on merely one front. In addition to thinking about the implications of Amazon’s purchase, Lidl’s entry demands serious focus. This is no small invasion either in terms of the number of stores planned or in how those stores operate.

Despite its emphasis on price, the Kinston Lidl comes in a very sleek and modern package. The sleek design continues inside the store with a clean and sharp European look in many refrigerated cases.

There’s a healthy dose of price specials and cut cases to drive home the point that this is a price operation. One section of the store actually features overhead signs proclaiming “surprises” for short-term specials. During last week’s visit the section featured ideas for Father’s Day, including men’s shoes and electronics.

The combination of inexpensive prices and sleek merchandising is one of many balancing acts in the store. Lidl makes no secret of its German roots with displays for products from the home country and even the use of some German phrases such as “Hallo” in signs. Yet other signs emphasize local produce and a commitment to continued sourcing of products as close to the stores as possible.

In many ways these juxtapositions of merchandising styles provide either contradictions or simple recognitions that shoppers are never one-dimensional. Sure Lidl might live on price, but it gives heavy play to organics, perishables, prepared foods and even the store’s environmentally friendly features.

Convenience, health and environmental issues matter to all shoppers, not just those in Whole Foods.

It will be interesting to see how shoppers react to all of this and how Lidl may evolve its operation as it gains more experience with the American shopper.

(The Washington Post this morning has a good piece about the Lidl invasion, which you can read here.)

My colleague made two other fascinating observances. First, directly across the street from the new Lidl in Kinston is its German rival Aldi, so this one location might be ground zero in whatever price war the two are likely to wage.

The second observation might be more relevant to many other operators. Just a few minutes away from the new Lidl my colleague found a local independent operator whose store looks as though it was last remodeled in the 1980s. No doubt, this retailer has long served the community and has a modestly successful business.

The future might not be so kind. And the future may already have begun. There were only two cars in the parking lot.

Whether the news is about Amazon or Lidl the lesson is the same. The world is always changing and of late, it’s been changing a lot faster and that means we all need to get changing as well.

Last week won’t be the last time we get that reminder.


Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Tuesday Morning Eye-Opener: Transparency, Perfectly Clear

by Kevin Coupe

The Washington Post this morning reports on a company called Braskem that "has developed a way to make plastic food or beverage containers change color when they react to the changing pH levels of their contents, a sign that certain products may be spoiling.

"Even though this type of technology has existed in some form for decades, Braskem has certain advantages. The $7 billion plastics and chemical company is the largest producer in the Americas of materials that are molded into bottle caps, jugs, reusable containers, cosmetic packaging and much more. It has production plants in Brazil, the United States, Mexico and Germany."

The Post goes on: "Braskem’s pitch for the technology comes as many consumers continue to be confused about what 'sell by' dates are supposed to mean and typically decide whether to throw out food by relying on what they see and smell — an imprecise practice that could lead to food poisoning or good food being discarded prematurely."

I think that anything that can be done to create greater transparency and clarity for the consumer is a good thing - whether by Braskem or any other company. And I think the retailers and suppliers that embrace such opportunities will be rewarded by the consumer by what essentially is a customer-friendly approach to business.

It'll be an Eye-Opener.

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Whole Foods CEO Speaks Out About Amazon Deal

Whole Foods CEO John Mackey held a town hall meeting with company employees yesterday to address questions about the proposed acquisition of the company by Amazon, and a look at the transcript reflects what was on his mind - mostly, it seems, evolution. And maybe a little romance.

Mackey said that they two companies first met to discuss an acquisition six weeks ago, and that "it was truly love at first sight," describing it as a "whirlwind courtship" that went from "blind date" to engagement incredibly fast. "But like an old traditional marriage, where there are all kinds of rules and chaperones, we can’t consummate the marriage, until we’re actually officially hooked up. This is not— this is not a Tinder relationship."

On cultural change... "It’s gonna change our culture. I mean, it’s the truth. It’s inevitable. But it doesn’t necessarily mean it’s a bad thing. We’re going to evolve. Our culture is evolving all the time. And so we are affected by everything we encounter.And there’s an integrity to our culture. And I think they are gonna respect that integrity ... They’re not stupid enough to go in and trash the very asset that they are spending billions of dollars to acquire. But our culture is going to evolve."

On the Amazon advantage... "One of the things they do better than us, they are more customer-centric than we are. They really are. And one of my takeaways is that, by God, we’re gonna become as customer-centric as Amazon. We’re gonna— we’re gonna— we’re gonna import their passion about that. 

"Because I think, sometimes, our company’s gone a little bit too much team member focus at the expense of our customers. And that’s one definite evolution that’s gonna happen. I love the passion these guys have around the customer. They put the customer first in everything they do and think backwards. And— we— we’re gonna be the same way ... They are a tremendous company that— has so much to teach us. And I’m, for one, gonna be an eager— eager pupil."

On cost cutting... ""We’re gonna evolve.  So I can’t say there’s not gonna ever be any changes. Because you already know we’re evolving. We are— we’ve sent out, publicly, we’re doing category management. We’re committed to putting— launching affinity program. We’re gonna take $300 million out of our cost structure."

On leadership changes... "There’ll be leadership changes at Whole Foods Market. But they’re just not gonna be, I don’t think, forced on us by Amazon. We’re gonna evolve. We need to evolve. We wanna make this deal, because we think they can help us evolve quicker and better than we could do on our own ... I don’t want people goin’ away, thinkin’ that nothin’s gonna change around here. ‘Cause things are gonna change. There’s just no question about that ... I don’t know if they have any plans for, you know, but in a good marriage, you know, we want Amazon people to be here."

KC's View: Mackey, it should be said, brought at least a little bit of realism to his rapture, saying that "there are no guarantees in life. Some marriages end up badly. There are— there’s an industry of divorce out there ... I think we’re choosing very, very well for ourselves ... This partnership’s gonna change the world. And we’re gonna all be part of it. How cool is that?”

There was one reference to Amazon having sprinkled a little "pixie dust" on Whole Foods. Maybe that's what they call it in Austin. But I was born in New York City, and there they call it $13.7 billion dollars.

That doesn't mean I'm pessimistic about the outlines of this deal. To the contrary, I think it reinforces and affirms everything we've been saying here on MNB for years, and that this may be the most important story we've written about since we started almost 16 years ago.

Customer Data Seen As Central Appeal In Amazon-Whole Foods Deal

The Wall Street Journal writes this morning about how Amazon likely sees Whole Foods as an appealing takeover target not because of what it sells, but because of who it sells to:

"Amazon for years has been looking for more ways to gather information about how consumers shop. It has long been rumored to be on the prowl for a breakthrough deal, even as it set up its own much smaller Amazon Go and AmazonFresh Pickup stores as experiments.

"If the deal goes through, the combination likely will be powerful. Amazon and Whole Foods can join their online and in-store knowledge to better predict what goods to carry in each store, said James Thomson, a former senior manager in business development at Amazon and now partner at the brand consultancy Buy Box Experts.

The analysis goes on:

"Amazon likely will implement changes at Whole Foods based on what it finds out about the grocery chain’s shoppers, including changing prices and selection—something right now that can vary widely based on the region, according to the former employees.

"The data Amazon collects will likely help it decide which of its growing roster of private-label brands to expand and which new ones to launch, especially when it comes to consumables and food. Whole Foods already has a large private-label business.

"Bringing together online and offline data can help Amazon learn how to entice customers to make more impulse purchases online, according to analysts and retail consultants."

KC's View: Exactly.

Know this. A comprehensive and intimate understanding of how people shop and what they buy is going to be a basic requirement for every retailer doing business. Putting ads in the newspaper or sending off coupons will be unacceptable in the current environment. You have to be targeted.

To use an example I've often cited here, there will be no excuse for sending cat food coupons to dog people. None.

Challenges Could Remain To Amazon's Whole Foods Bid

The New York Times writes this morning that the immediate aftermath to Amazon's $13.7 billion bid to acquire Whole Foods was that Whole Foods' stock price went up two percent, "implying that some investors think a rival bid could emerge."

The question is, what company might make a move ... and there are no sure answers.

The Times writes: "Whole Foods’ filing suggests it wasn’t shopped around. Amazon became serious only in late April, when the company’s team signed confidentiality agreements. That means some shareholders, notably Jana Partners, an activist owner of an 8 percent stake, could be receptive to a higher price. A grocery industry buyer like Walmart could also cut costs, helping to justify paying more than the 27 percent premium Amazon is offering.

"Then there’s the defensive value. If investors were right to sell off grocery chain stocks across the board in the United States and Europe on news of Amazon’s plunge into the sector, it could be worth keeping Jeff Bezos’ online giant away from Whole Foods."

Walmart is one possibility: "Adding an upscale brand might help Walmart attract new customers and lift its grocery business. Yet that would be a change of direction. Its recent strategy has been to improve its e-commerce offering, including with Friday’s deal to buy the men’s clothing online retailer Bonobos." But, the Times writes, it would be a financial "stretch" even for Walmart, which in addition to topping Amazon's offer would have to pay a $500 million breakup fee.

There also is the possibility that the government could step in and block the acquisition on antitrust grounds, especially because President Donald Trump is no fan of Amazon CEO Jeff Bezos.

The Financial Times is skeptical: "It is, in fact, unlikely to cause alarm in the Department of Justice or the Federal Trade Commission — only partly because Mr Trump’s minimalist approach to government has left the agencies under-staffed. It is mainly because the deal presents no glaring competition concerns. Amazon is a minnow in grocery, with a 0.2 per cent share for its existing Fresh delivery service, while Whole Foods is the 10th biggest in the US with 1.2 per cent, according to GlobalData Retail estimates."

But, FT adds, "Amazon does not feel like a minnow, not to all the bricks-and-mortar retailers who have been crushed by its fearsome price-cutting and logistics prowess, starting in books and expanding inexorably to other goods and services." And, it continues, "Lina Khan, a fellow at New America, a think-tank, argued in January in the Yale Law Journal, that current antitrust policy focuses too heavily on short-term harm to consumers’ wallets and misses the long-term dominance that internet platforms can gain with ultra-low prices."

KC's View: Could there be a competition for Whole Foods? Sure, maybe ... but if people think that Amazon isn't exactly a good fit, I cannot imagine they would think Walmart would be better.

As for a government challenge ... who knows? But Bezos was at the White House yesterday for a meeting of tech CEOs, so maybe he had a chance to do a little lobbying. (Not that it'll necessarily matter. Bezos also owns the Washington Post, which has been reporting aggressively about the Trump administration.) In the end, though, I cannot imagine that this deal could be stopped on competitive grounds. Nor should it.

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Could GrubHub Be Next For An Acquisitive Amazon?

The Chicago Tribune reports that even though the Amazon purchase of Whole Foods has not been completed, there already is speculation about that might be next on Amazon's list - and one analyst thinks Grubhub "could be the next piece of Amazon’s food domination plans."

Aaron Turner, a Los Angeles-based analyst who covers Grubhub for Wedbush Securities, says that "a combination of WFM and GRUB would give AMZN significant competitive positioning on in-home meal consumption regardless of whether the meal was prepared in home or at a restaurant."

Neither Amazon nor Grubhub are commenting on the speculation.

KC's View: This is interesting, but everybody has to take a deep breath. Amazon may go on an acquisition tear, but only if Bezos sees pieces he needs to fit into his idealized ecosystem. Grubhub is an interesting idea, but probably not the only one.

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McLeod Out, Hucker In, As Southeastern Grocers Changes CEOs

The Jacksonville Business Journal reports that Ian McLeod, CEO of Southeastern Grocers - parent company to Bi-Lo, Winn-Dixie and Harveys - is stepping down after less than two-and-a-half years in the job.

He will be succeeded on an interim basis by the company's COO, Anthony Hucker, the former president/COO of Schnuck Markets. Hucker also is a veteran of Walmart and Aldi's UK operations.

The Journal notes that McLeod - a Scotsman who made his reputation in Australia, "led the company in laying off a few hundred workers and then went on to roll out an upscaling strategy," which never seemed to roll out to the extent originally intended. "Other changes followed, though, including some South Florida Winn-Dixies being changed to a new Hispanic banner, Fresco Y Mas. In Jacksonville and elsewhere, several Bi-Lo and Winn-Dixie stores were changed to the Harvey's banner, which focuses on lower prices." The company also announced that it was closing 20 stores, and last year's revenues were down by more than seven percent.

McLeod is said to be leaving for another, as-yet unspecified job, but he said in a statement that "it has been a difficult decision to leave my role as president and CEO of Southeastern Grocers, but I believe the new position will be a positive opportunity for me and in the best interests [of] my family."

KC's View: Whoever the company finally names as CEO, it better be someone who has a vision for how to compete against Amazon on one end and Aldi/Lidl on the other.

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From Webstop...

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UPS Plans To Add Surcharge For Holiday Shipping Services

The Wall Street Journal reports this morning that United Parcel Service (UPS) "plans to charge retailers extra fees to deliver packages during the busiest weeks before Christmas, creating a new challenge for an industry already coping with a shift away from traditional stores," and calls the move "a shot across the bow" for retailers such as Amazon and Walmart that have made last-minute-ordering-and-delivery a key factor in their e-commerce appeal.

The charges "will hit its customers during the busiest shipping weeks and on the most popular products during that time. Between Nov. 19 and Dec. 2—the weeks encapsulating Black Friday and Cyber Monday—UPS is adding a 27-cent charge on all ground packages sent to homes."

According to the story, "The fees will force retailers to decide over the next few months whether to raise shipping prices - something that is difficult to do when online shoppers are reluctant to pay shipping fees - increase the prices of goods or eat the extra costs themselves. Some may seek to avoid the surcharges by spreading holiday deals to other weeks during the season ... For UPS, the move signifies a need to get paid for a service that has become an integral cog in the holiday shopping period, when it must add planes, trucks and thousands of staffers."

KC's View: I don't blame UPS for doing this, and would expect that we'll see FedEx make a similar decision. Twenty seven cents doesn't seem like much, but it could add up pretty quickly.

The question is how retailers handle this. Because as much as they'd all probably love to add 25 cents to every item price, all it will require is for one e-tailer not to do so for everybody else to fall in line.

Coalition Calls For Strengthened GMO Oversight

As the US Department of Agriculture (USDA) and Food and Drug Administration (FDA) close the public comment period on proposed changes to how the government handles GMO oversight responsibilities, a coalition of consumers, farmers and environmental groups is asking federal regulators "to substantially strengthen their proposed rules to better protect farmers, the general public and the environment from harmful GE plants and risky GE animals."

"The haphazard and negligent regulation of agricultural biotechnology has been nothing short of a disaster for the public and the environment. While USDA should be protecting farmers and the environment, it has instead turned a blind eye to the harms that GE crops cause," said George Kimbrell, legal director at Center for Food Safety (CFS).

The statement from the groups says that "while USDA today has more authority to strengthen oversight, its proposed new rules would weaken it. Many GE organisms would be exempted from regulation altogether. Ongoing harms caused by pesticide-promoting GE crops would remain unaddressed. USDA would stop regulating risky GE plants engineered as 'biofactories' to produce experimental pharmaceutical and industrial compounds. Definitional loopholes would permit many novel GE crops to escape all but superficial review. Overall, the USDA’s proposed new rules abandon sound science in favor of promoting the interests of the biotechnology industry."

The coalition also argues that "the lack of regulations specific to GE animals allows the FDA to overlook a host of serious risks posed by the genetic manipulation of animals."

FastNewsBeat

• The New York Times this morning reports that "even as Amazon’s $13.4 billion bid for Whole Foods threatens to shake up food retailing, Blue Apron, a New York-based meal-delivery service, is setting its sights on a stock market debut. The service has begun pitching an initial public offering to raise as much as $586.5 million, joining a growing number of consumer-focused start-ups considering the public markets."

While there may be some skepticism about the IPO seeing as Amazon's bid for Whole Foods may change a lot of assumptions about how the food business works, "Blue Apron is likely to argue to prospective investors that its niche in the food-delivery service is significantly different from the more general service that Amazon offers through PrimeFresh."

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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 ReposiTrak.com.


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Your Views: Taking Stock

Got the following email from a Whole Foods employee about the bid by Amazon:

Gah! This was a crazy shock last Friday and most of us are still reeling. Of course, there have been suspicions for a while as restructuring occurred. Many team members assumed that Whole Foods was trying to make itself attractive to a buyer, but I had trouble believing it, visualizing it. So imagine that!? I guess what I’m most worried about is that Amazon is not known as a great place to work – pretty brutal is how it is portrayed. And I, personally, am no fan of Amazon. I never order from Amazon if I can avoid it. I hate the way they are suffocating and choking off everyone else. I don’t shop at Wal-Mart because of the way they depress wages and push crappy plastic crap, and I don’t shop Amazon for the same reasons. However, I know I am in the minority.  I can’t say I am unhappy about my stock right now though...

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"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...

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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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