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Wednesday, April 26, 2017

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Kate's Take: Pink Sprinkles & Mystical Demand

by Kate McMahon

One moment at a suburban Starbucks epitomized the social media and sugar-fueled Unicorn Frappuccino mania that swirled across the nation last week.

While a pair of tween girls giddily posed for selfies with their multi-colored blended crème drinks, another 12-year-old at the counter looked utterly crestfallen when informed the magic had ended. For her, there would be no mystical, color-changing sweet-turning-sour beverage topped with “whipped cream sprinkled pink and blue fairy powders.” The Darien, Connecticut, Starbucks had just completely sold out of the limited edition Unicorn Frap, a mere two days into its supposed five day run.

The irony was that it was the Content Guy and me who caused the girls’ joy and despair, because we were the ones who snagged the last four ounces of the concoction that launched millions of YouTube views, over 150,000 Instagram photos and fiery commentary on Facebook. Not to mention providing fodder for late night talk show hosts and driving normally unflappable baristas to despair. (“Please don’t get it!” one Denver employee pleaded in a Twitter video rant.)

Amid headlines citing Unicorn Frappuccino “insanity,” celebrity author/chef Anthony Bourdain called the drink “the perfect nexus of awfulness.” Late Night’s Stephen Colbert said Starbucks came up with the name because “Sugary Affront to God was taken.” Pop star Katy Perry took a sip and spit it out in an Instagram story.

Even without the sprinkles (sold out), two sips of this Sweet Tart-on-Steroids smoothie were plenty for me. But in Starbucks franchises from coast to coast, customers were clamoring for the drink and were crushed when it was it was unavailable.

This post on Starbucks’ Facebook page was typical:

“That looks so good. Too bad I'll never know because GEE THE STORES IN MY AREA SOLD OUT IN 2 HOURS!!!! That's right. 2 hours. What is THAT about? So stupid.”

Stupid? Or really savvy? Typically I would say brands that misjudge demand and leave their customers frustrated and venting online are not playing it smart. (I've made this argument about Target in past columns.)

But I think there’s much to be learned from this story. First, Starbucks was wise to hitch on the to rainbow/unicorn mantra dominating Instagram – from rainbow bagels to pizza, sushi and grilled cheese – in the same month as National Unicorn Day (seriously).

Second, Starbucks did a masterful job of leaking news of the drink through its barista network on Reddit before it debuted, and then encouraging customers to post photos once they scored the much-hyped frappuccino. The amount of free advertising it generated on social media was pegged in the tens of millions of dollars.

By limiting the availability to just five days, Starbucks created an immediate demand for a product that was picture perfect for Instagram, swirls and sprinkles and all. The hues were so inviting that people overlooked the shockingly high sugar content (59 grams per grande/16 ounce serving), the calories (410) and the price (approximately $5).

But most importantly, the coffee behemoth scored success with a non-caffeinated drink that appealed to non-traditional customers, such as the aforementioned tween girls. Reports said multiple locations were serving people they had never seen before, including younger kids and teens, all in search of the drink.

If Starbucks can retain those new customers and increase its non-caffeinated frozen beverage business and limited-time offerings going forward, then the unicorn frappuccino did indeed deliver marketing magic. But I don’t think the public would be patient with another “sorry, all sold out” scenario.

As for the stressed-out barista with the “unicorn crap all in my hair and on my nose,” Starbucks said he would he would not be disciplined.

Comments? As always, send them to me at .

Wednesday Morning Eye-Opener: Cash-Free Zones

by Kevin Coupe

Crain's Chicago Business reports that Argo Tea there has decided to test a no-cash approach at four of its cafes "in a bid to simplify store operations, speed service and move more of its customers to mobile ordering."

The move is all about efficiency: "Argo said cash transactions comprise between 10 percent and 25 percent of its total transactions, depending on the store." The company estimates that "store managers spend about two hours each day handling cash, including time spent counting cash, making bank deposits and preparing registers for the day. That's time Argo executives would like them to spend interacting with customers and managing staff and other aspects of operations." And, requiring people to use cards provides Argo with "a valuable trove of data on their customers, which allows for tailored direct advertising and promotion and in store planning."

If the four tests work out, Argo may expand it to all of its 49 cafes.

According to the story, "To accommodate customers who may not carry credit cards or have mobile app-equipped smartphones, the chain is considering installing kiosks in stores where customers can load cash onto gift cards. Argo also is loading a $5 credit into accounts of customers who download the company's app to encourage more mobile ordering."

It seems likely to me that this is a trend that we're going to see more of, since it plays both into retailers' desire to cleave away elements of the business that may take up time and effort that could be better spent elsewhere. And, it plays into the broader trend toward electronic and mobile payments.

But ... I have to admit that I'm conflicted about it. I mean, as long as cash is legitimate currency, I think stores ought to accept it. Maybe not in every lane or at every checkout ...

Then again, maybe I'm just being sentimental and not keeping my Eyes Open to the ways of the world.

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From ProLogic Retail Services...

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Raley's Embraces Identity As Wellness Company

The Sacramento Business Journal reports on how Raley's there "is positioning itself as a wellness company ... The grocer's new store at Fair Oaks Boulevard and Howe Avenue offers the chain's largest selection of probiotics, commonly believed to aid the digestive system. As Raley's opens new stores and fine-tunes its existing sites, the company is testing a similar assortment of probiotics at four to five other locations, according to company spokeswoman Chelsea Minor."

But, in addition to probiotics, Raley's is expanding its healthy product selection overall, building its own meal kit business, and offering unique products - such as grilled cheese and sushi burritos - that it hopes will lure millennials into the store. There's also "an organic food bar, and a wellness area with a product selection that's more extensive than other stores," as well as wellness specialists "there to educate people about products such as herbal supplements and protein powder."

KC's View: Stores have to self-identify in a way that distinguishes them from the competition, and this seems to make a lot of sense. Raley's is seeking a differential advantage and, from all appearances, is making a real commitment to it.

Which is what they have to do.

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From ReposiTrak...

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Instacart Expands, Fueled By Investment Dollars

TechCrunch reports that delivery service Instacart is "accelerating its expansion across the U.S., and offering free Instacart Express memberships to entice new users wherever it goes." The company is scheduled to open four new markets - Detroit, Las Vegas, Columbus, Ohio and across Texas’ Rio Grande Valley - this week, bringing to 45 the number of US markets in which it operates.

Fueling the expansion, the story says, is a recently closed "$400 million Series D round of funding at a valuation of $3.4 billion." Now, Instacart has as its goal making "its service available to 80 percent of U.S. households by 2018."

KC's View: I remain unpersuaded that the Instacart business model is going to be sustainable, but the company certainly is making headway in terms of growth and financing. I still think that the long-term goal is to sell the thing to a larger company, which may not serve the retailers in the program particularly well. But for the moment, they're certainly growing.

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From MyWebGrocer...

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Japanese C-Stores Go Without Checkouts

Bloombergreports that an employee shortage in Japan has led 7-Eleven stores there to move in the direction of banning manual checkouts.

Labor issues there, the story says, " is now too acute to waste pricey labor on routine tasks -- like scanning low-value merchandise -- that have proven frustratingly expensive to automate." But now, Bloomberg writes, "an old technology is coming to the rescue." 7-Eleven owner Seven & i Holdings says it will introduce radio-frequency identification, or RFID, by next year.

The story goes on: "To help consumers warm to the technology, Japan's Ministry of Economy, Trade and Industry might offer subsidies ... The government's involvement is understandable. With the unemployment rate at 2.8 percent, and more than two job openings in Tokyo for every applicant, the country needs to extract the most out of a scarce resource.

"Commerce will never entirely move online. But needing a checkout clerk to sell a soda at 7-Eleven is just too expensive a luxury -- both for Japanese society and for shareholders of Seven & i."

KC's View: This seems to be the old technology approach to doing the same thing that Amazon is doing with its new-tech Amazon Go store. I think it is both smart and timely, and we're going to see a lot more of it, even in places with more than a 2.8 percent unemployment rate.

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From Cornell University...

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Apple Stores To Go Through Redesign

CNBC has a story about the next iteration of the Apple Store; the company's senior vice president of retail, Angela Ahrendts, says the goal is to make the Apple Store the next Starbucks.

According to the story, "The new store format will have spaces for classes and meetings, new screens and hardware ... The new educational programming at the stores will be called 'Today at Apple,' and is designed to put Apple Stores on the map as a meeting place for the next generation, akin to the coffee shops that have become de facto offices for many of today's creative professionals, Ahrendts said. While the idea of hanging out in a store may seem like supercharged capitalism, Ahrendts said Apple has always bridged the gap between selling products and creating communities."

From a business point of view, the goal is to make the store better at catering to customers interested in Apple's services business, such as iTunes and Apple TV, in addition to hardware such as the iPhone and iPad.

KC's View: I can understand wanting to reinvent the Apple Store, but I always get a little suspicious when people say they want to be the new version of an existing model. Should Apple Stores be the new/next Starbucks? Maybe, but I'd prefer them to be the next Apple Store.

I will say this, though. Go into even the slowest malls in America, and there generally are two stores that are busy - the Apple Store and Starbucks. S they have that in common...

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From Webstop...

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Worth Reading: New News, Old News

The Motley Fool has a piece suggesting that as much as Walmart seems to be embarking on a new e-commerce strategy these days, it may not be as new as some would think.

Recently, Walmart has been focused on buying smaller fashion brands, but this acquisition strategy " is very similar to its old acquisition strategy with Wal-Mart Labs. Between 2011 and 2014, Wal-Mart acquired 15 small companies tied in some way to e-commerce. The other thing most of them had in common was that they were selling for a bargain after failing to attract a new round of venture funding. None of them managed to significantly accelerate Wal-Mart's growth in e-commerce.

"Will this new strategy prove any more successful?"

The argument is that "Wal-Mart's new acquisition strategy suffers from the same problem that plagued its old one: The companies it's buying don't support long-term growth. Wal-Mart is spending hundreds of millions on companies that could just cause more headaches than revenue growth down the line, especially as it has to manage a growing basket of brands."

You can read the entire analysis here.

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CNBC reports that even as Chipotle reported Q1 revenue of $1.07 billion and same-store sales that were up 17.8 percent, suggesting that it has successfully moved beyond the food safety problems that have plagued it, it also was reporting a data breach of its payment processing network.

According to the story, "The company said that it believes it has taken the proper steps to stop the activity. Chipotle said that it is focused on transactions that occurred between March 24, 2017 and April 18, 2017."

• The Wall Street Journal reports that Coca-Cola plans a 20 percent cutback on its headquarters staff "as the beverage giant battles a slump in soda sales and expands a long-running cost-cutting program."

New CEO James Quincey says that the 1,200 jobs cuts will come from "a global pool of about 5,500 employees who work in or report to headquarters in Atlanta," as the company looks to run a “more focused, lean corporate center.”

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From The Organic Produce Summit...

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Executive Suite

• Albertsons announced that Geoff White, SVP of Marketing and Merchandising for the Northern California Division, has been named to the new position of President of the company's Own Brands organization.

• Albertsons also announced that it has promoted current Jewel Osco Division President Mike Withers and appointed him Executive Vice President, Retail Operations for Albertsons Companies.

Your Views

...will return.

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