business news in context, analysis with attitude

Published on: July 20, 2012

by Kevin Coupe

Inc. has an interview with Randy Garutti, CEO of Shake Shack, the popular and fast growing burger-and-shake format owned by Danny Meyer's Union Square Hospitality Group that has gone from being a kiosk in a NYC park to a global restaurant chain. There were three passages from the piece that stood out to me and that seemed really worth repeating - one about the importance of challenging conventional wisdom, one about dealing with employees, and one that concerns a very specific piece of wisdom that seems like it ought to be adopted by a lot of companies:

• "We kept asking the question, 'Who wrote that rule?'

"We posed that question on everything we did: Why can't burgers be ground fresh every day from the best cuts of beef? Why do ranchers have to use hormones and antibiotics? Why can't milkshakes be handspun from ice cream, or in our case frozen custard, that is made fresh all day long? Why can't a burger joint have a happy team, one that's well taken care of, to provide the same hospitality you expect from our fine-dining restaurants?

"And so it went. We asked this question about everything we did, and every year, we just got busier, the lines just got longer, and we kept having more fun."

• "For us, it all begins with our concept of enlightened hospitality. Our team comes first. If they feel taken care of, they will do great work caring for our guests, our community, our purveyors, and our investors.

"Once that's established, we do a few things to add to their opportunity. We pay up to 1% of total revenue--top line, not bottom line--as a monthly bonus. We pay employees extra bonuses for things like coming to work 30 days straight without any issues and/or for recommending their friends. We also offer medical/dental/flex spending benefits and a 401(k) to any employees working over 25 hours a week.

"But most important, we give you the opportunity to grow. 'Leaders training future leaders' is how we put it. Nothing matters more than our leaders giving our team a pat on the back. For a lot of our team, this is their first job... or at least it's the first place they've come to work where they've been respected and thanked."

• "A picture hangs on my office wall to remind me and everyone who walks in my door that this is our key: 'The bigger we get, the smaller we need to act'."

Eye-Openers, all.

Published on: July 20, 2012

MNB is reporting exclusively this morning that WinCo Foods, currently with 85 stores in seven western states, plans to open stores in Dallas, making Texas the eighth state in which it operates.

WinCo president/CEO Steven Goddard told the company's employees about the plan in a newsletter now being circulated, saying that WinCo has "completed an in-depth study of the market," and expects to open its first stores there in about two years.

"We have never been in a better position than now to take that plunge," Goddard says.

Sources tell MNB that while WinCo has four distribution centers, none of them are positioned to serve the Dallas market, which makes it probable that the company will use Associated Wholesale Grocers as its supplier there, at least in the beginning.

Published on: July 20, 2012

Reuters reports that Facebook CEO Mark Zuckerberg and his senior management team are traveling to Bentonville, Arkansas, this week for face-to-face meetings with Walmart CEO Mike Duke and his top executives. The sessions, scheduled for today, are aimed at "discussing ways to 'deepen' their relationship," the story says.

According to the story, " Zuckerberg and Facebook Chief Operating Officer Sheryl Sandberg will then speak to hundreds of Wal-Mart employees on Saturday at the retailer's monthly meeting.

"Representatives at both companies declined to discuss the specific agenda for Friday's meeting other than noting that the summit is intended to bolster the relationship between the world's No. 1 social network and the world's largest retailer ... Wal-Mart's Facebook page has more than 17 million fans and the company also pays to advertise on Facebook. Expanding its reach online is key for Wal-Mart as shoppers increasingly shop on their computers, tablets and smartphones."

Published on: July 20, 2012

The Wall Street Journal reports that the US House of Representatives Judiciary Committee will hold a hearing next Tuesday on "giving states the power to force online retailers to collect sales taxes," and Bloomberg reports that Walmart is one of the prime movers behind the bill, throwing a lot of lobbying money at it.

As the Journal writes, "Though the effort still faces hurdles, it is the latest sign of a growing push in Congress to put online and traditional brick-and-mortar stores on equal footing ... Brick-and-mortar retailers have been pushing for such legislation, saying it is a matter of fairness. Though shoppers are supposed to self-report and pay local taxes for online purchases, they frequently fail to do so. The loophole exists thanks to a 1992 Supreme Court ruling that online merchants don't have to collect sales taxes in states where they lack a physical presence."

The story also notes that "it comes as Republican governors have been striking deals with Amazon.com Inc.., under which the world's biggest online retailer will agree to collect state sales taxes."

Published on: July 20, 2012

Ron Johnson, the former Apple Store head honcho who now is CEO of JC Penney, tells Fortune that while "not everything has gone according to plan since he became CEO in November," he plans to stick "to his core plan to win customers back by offering competitive prices every day,' and get away from the sales-and-specials-and endless promotions mentality that characterized the retailer's marketing strategy.

The story notes that JC Penney "angered many consumers when it moved away from its strategy of offering coupons and discounts. Its marketing plan misfired. Traffic to stores declined and sales dropped sharply."

According to the story, Johnson says that the company has "scrapped an outdated technology infrastructure and replaced it with an Oracle-based system. The new technology will allow the company to improve the in-store experience with mobile checkouts, self checkouts and tags based on RFID instead of bar codes, which would speed up purchases. Johnson said that JC Penney would begin launching mini-stores within thousands of its retail outlets in order to offer more compelling shopping experiences intended to bring customers back. But he said the transformation of JC Penney, like any other turnaround, will not happen overnight, and that the company may lose more sales before it starts growing again."

"We are going to treat it like a start up," Johnson says, also noting that "we're in a marathon here."

Published on: July 20, 2012

The Food Marketing Institute (FMI) and Rodale's Prevention are out with their annual "Shopping for Health" study, and this year's 20th edition concludes that "nutrition continues to drive decision making in supermarket aisles across the country."

Some excerpts:

• "For the past few years, shoppers have recognized and increased their purchases of foods containing desirable ingredients including whole grains, fiber, and protein. That number continues to grow, with 32 percent of shoppers reporting that they are buying more foods based on nutritional components versus last year."  

• "Customers are attempting to make more of their calories count for better overall health, with 55 percent of shoppers switching to whole grain bread, 33 percent showing an interest in protein on the label (up 10 points since 2009), and 30 percent switching to Greek yogurt (up 9 points versus 2011)."

• "The desire to eat healthier and the stagnant economy appear to be two drivers that have led consumers to do more cooking at home, with 57 percent of people reporting having tried a new healthy recipe in the last year, an increase of five points from 2009. Shoppers recognize and use a variety of reliable sources when it comes to healthy meal ideas, with shoppers finding recipes through a variety of sources including the Internet (39 percent), cooking shows (37 percent), magazines (34 percent), cookbooks (33 percent), word-of-mouth (31 percent), recipes on labels (26 percent), culinary magazines (12 percent), and supermarket recipes (11 percent)."  

• "With the economy still in a slow growth mode, many of the tactics shoppers started using in 2008 are still in place, with 63 percent of shoppers reported only buying what they need (down 1 point from last year), and 60 percent switching to store brands (up 6 points from last year). While switching to store brands began as a money-saving tactic, improvements to quality, labeling and promotion have strengthened their position versus national brands."  

• "Consumers are aware of their options at the grocery store, as 54 percent of respondents recognized the effort of food manufacturers to reduce sodium level in their foods. Sixty-seven percent of shoppers say that sodium is important to them, with 32 percent of shoppers saying that they are buying more low-sodium products versus 2011."

Published on: July 20, 2012

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

• Western New York-based Tops Friendly Markets announced that it is acquiring 21 supermarkets in upstate New York and Vermont from GU Markets LLC, an affiliate of C&S Wholesale Grocers. Terms of the deal were not disclosed.

According to the announcement, "This acquisition will bring the number of Tops stores to 153 and will expand Tops’ footprint further into areas of northern and eastern New York State and neighboring northern Vermont. The planned acquisition of the 21 stores follows up on the 2010 acquisition of the Penn Traffic stores."

I'm sure it is just a coincidence, but wouldn't it be interesting if C&S were selling off certain assets as a way of generating cash for a possible Supervalu purchase?

• The Los Angeles Times has a piece about how "voters will soon decide whether to make California the first state in the country to require labels on products such as sweet corn whose genes have been altered to make them resistant to pests.

"Proposition 37 promises to set up a big-money battle pitting natural food businesses and activists against multinational companies including PepsiCo,Coca-Cola and Kellogg. Backers and opponents have already raised nearly $4 million combined for campaigns to sway voters, an amount that's likely to swell into the tens of millions of dollars as the November election approaches."

It is worth reading here.

For me, it is all about transparency. I'd rather know than not. And I get concerned when companies and governments don't want me to know something. It is that simple. Except, of course, it isn't that simple at all...

• The Associated Press reports that Safeway said yesterday that its Q2 net income was down 16 percent, which the company attributed to higher ad costs and a new loyalty program.

According to the story, Safeway "is betting that the 'just for U' program, which offers personalized deals based on past purchases, will help build customer loyalty."

In an investor conference call, CEO Steve Burd "noted that the program will also let Safeway more nimbly fend off competitors by tracking customer buying patterns," the story says, and he "expects 35 percent of Safeway’s business will be from customers signed up for 'just for U'" by the end of the year.

• The Chicago Sun Times reports that Target Corp. "will open slimmed-down stores in the Loop, Seattle and Los Angeles on Wednesday in its attempt to woo urbanites, a path already being charted by Wal-Mart with its smaller Neighborhood Market and Express stores. Two additional scaled-back Target stores will open later this year.

"Called CityTarget, the new stores are about two-thirds the size of a typical Target — there’s also no parking — but the merchandise mix isn’t that different. There are fewer strollers, no sofas on display and a downsized children’s and toy section. Still, city dwellers will find the staples that Target is known for: home goods, apparel, beauty supplies and groceries."

• The Chicago Sun Times also reports that "Walgreen took its medicine Thursday, agreeing to rejoin the Express Scripts pharmacy network and end an impasse that has sent customers to rival stores such as CVS.

"Deerfield-based Walgreen Co. and Express Scripts Holding Co. said they signed a multiyear contract. The nation’s largest drugstore chain said it will start filling Express Scripts prescriptions Sept. 15. Terms were not disclosed.

"Walgreen has been out of the network since January and the two companies have had a public spat for more than a year over reimbursement rates."

Published on: July 20, 2012

• Ahold USA announced that Erik Keptner, the company's SVP marketing and consumer insights, has been promoted to the newly created position of EVP marketing. The company, which has decided to split up the two functions, continues to look for an EVP merchandising.

Published on: July 20, 2012

• Sylvia Woods, known as the "Queen of Soul Food" because of the restaurant that bears her name that she founded 50 years ago in Harlem, has passed away at age 86.

Known for its fried chicken, barbecued ribs and chitterlings - as well as lighter fare introduced in recent years - Sylvia's also has become a manufacturer of packaged foods distributed around the country.

Published on: July 20, 2012

More on the Supervalu situation...

One MNB user wrote:

I have to re-iterate what one user commented today regarding the lack of data driven decision making at Jewel.  THIS IS ABSOLUTELY THE PROBLEM AT THIS COMPANY!!!!

Data often paints a dark picture that absolutely threatens the prospects for high ROI and profit margins which is not good for people looking to meet their ROI and project approval targets.

In my view there is a universal LACK OF ACCOUNTABILITY and the rosy outlook on everything is a failure to accept reality.  Leads everybody to continue to say things are good and ‘we are going to meet these targets’ to appease their superiors.

I see the data and it drives me insane that we continue to make decisions that are not in accordance with reality.

And, from another reader:

We have been told in the past that price reductions at our Supervalu stores would take some time to see value because in the first year at least, we would lose money and it’s not until we get our customers back with the lower prices that we could see any benefit. If it’s going to take 1-2 years to complete these reductions, I don’t see how Supervalu can be anywhere but in a worse financial state two years from now. The numbers don’t make sense.

Seems to be a theme...




Yesterday, MNB took note of aChicago Tribune reports that when Dan Cathy, president of the Chick-fil-A fast food chain, said that the company is "guilty as charged" for being anti gay marriage - a position at odds with the company's previously stated stance as not being anti anything - he managed to stir up a controversy that spilled out onto social media networks all over the internet.

I commented, in part:

He can say anything he wants as long as he is prepared to live with the reaction and possible collateral damage to sales. Which I suspect he is.

I personally disagree with his position. Too many people I love are affected negatively by such an attitude, and therefore I'll be avoiding Chick-fil-A for the foreseeable future.

My point is this. When a retailer stakes out a political or cultural position - on either side of an issue - he has to be prepared for the potentially divisive impact. That's not usually what retailers want to do, because disenfranchising a percentage of the potential base is not usually seen as good business.

Lots of reaction, not surprisingly.

One MNB user wrote:

I agree with you position on this issue.  People have the right to their beliefs and choose not to eat there.  The only thing I don’t like is when people of different beliefs are targeted for retribution such as threats and boycotts.  If Chick-fil-A doesn’t match your beliefs, don’t shop there.  I’m glad that is where you kept it.

I'm not sure I entirely agree. My decisions are personal; I tend not to be interested in organized boycotts. Or organized anything, for that matter. (It is the old Groucho Marx line: "I don't want to be part of any club that would have someone like me for a member.")

But that doesn't mean there is never a role for organized boycotts. There are times in our history when that has been the only response to oppression, and thank goodness some were brave enough to organize them and persevere.

Another MNB reader wrote:

I'm with you on the Chick story. I too have never patronized the organization so I can't boycott it. I did, however, sever my connection with Ameritrade after its founder said derogatory and inflammatory things through a superpac about our president. It was a satisfying thing to do, even though I know it had no impact.

From another reader:

If one in five people in this country are gay, then Dan Cathy offended 20% of his employees. I’m not sure that was a judicious thing to do. And I wonder how much of their sales come from the gay population?

We may find out.

And from still another MNB user:

As a long time MNB reader, I totally agree with your comments.  What strikes me as sad, and perhaps frightening, is how much blending of religion/politics and business there now appears to be.  I remember a time, NOT that long ago, when businesses felt no need whatsoever to dive into those social elements, and felt they ran their businesses for ALL of their customers, despite varying beliefs and life styles.  Now, we have to hear about what CEO’s think or believe ... who cares?  It’s their personal business, none of ours, but now they are making it ours.  Like you, I avoid these kinds of businesses as much as I can.  I think it’s a slippery slope, further dividing people in our society.

MNB user Bill Welch wrote:

I can defend your opposition to Chick-Fil-A’s view on Gay Marriage but please do not say that Chick-Fil-A’s Chicken Sandwich is “slightly-better-than-mediocre chicken”.  With that statement, you lose all credibility with your readers that work in the “Quick Service” food industry and most of the customers of Chick-Fil-A. Your bias is showing.

At Chick-Fil-A it is not just the product but the People and the level of service provided make a difference in their Value Proposition.  The culture is different there.  When you say thank you to the person at the drive thru and they say “MY PLEASURE!” with a wide and sincere smile.   At any other fast food joint the typical response is “no problem”.

You mentioned eating at Chick-Fil-A “while traveling on road trips between Mondays and Saturdays” since they are closed on Sunday.  This is evidence of another decision that Mr. Cathy has made based on his values and again this has an impact on sales.  You may disagree with his values but you have to respect a person and a company that stands by their values even when it affects sales.

I guess I have't found my Chick-fil-A experiences to be as satisfying as you have; frankly, I think the people are friendlier - and the food is better - at Burgerville. But that's maybe a matter of taste and timing. And if you think I crossed the credibility line with my "slightly-better-than-mediocre chicken," line, I can accept that criticism.

For the record - I have no problem at all with Chick-fil-A's policy of closing on Sundays. None. I think it is hard to maintain such a policy in these highly competitive days, but I respect the decision and the values behind it.

But another MNB user was even less supportive of my position:

As luck would have it, a new Chick-fil-A is opening down the street from my home. I’ll more than make up for your lost sales.

One MNB user wrote:

Refusing to eat at a restaurant because you disagree with one of the opinions of the owner is just about the shallowest, most-pathetic act of spite I've ever come across.  The only relevant opinion ought to be whether you think the food is worth the price.

What a way to go through life:  Tsk.  Tsk. Tsk!

Does that mean that if you knew a restaurant owner discriminated against African-Americans, or Hispanics, or Jews, or the Irish (a tip of the hat to Blazing Saddles here), it would be petty to not patronize that establishment for that reason?

And just for the record, I am capable of far more shallow, pathetic acts of spite than not patronizing a fast food establishment.

MNB user Gerry Buckles wrote:

For the millions that have been beaten into submission by political correctness to the point they are afraid to say that they are Christians and love God, that they hunt, that they eat meat, that they celebrate Christmas, that they Love the United States Military and a litany of other things, they see Dan Cathy as tremendously courageous and inspirational. Is it still ok to say courageous and inspirational?

I have to be honest here. Maybe it is because I hang out with the wrong folks, but I don't know anyone - anyone - who is afraid to say that they are Christians and love God, that they hunt, that they eat meat, that they celebrate Christmas, that they Love the United States Military. I also don't know anyone - anyone - who thinks people should not be proud to say that they are Christians and love God, that they hunt, that they eat meat, that they celebrate Christmas, that they Love the United States Military.

I don't know where you live, but where I live, all those things are perfectly okay. People on my street do many of those things. Some do all of them. In fact, there are people I love who do many of those things, and are unafraid to do so, or talk about it. I'm happy about that.

Now, I also happen to live on a street that is in a state where gay marriage is legal. That also makes me happy.

I totally get that not everybody feels that way.

But let me be clear. All I was trying to say yesterday that in making his comments, Dan Cathy was taking a risk. This might be a tempest in a teapot, and could go away. Or it might not. And in making those comments, I tried to be transparent about my own feelings, because if I am going to comment on a story, I ought to be clear about whatever opinions I have that frame that commentary.

Here was my favorite email from yesterday, though, from MNB user Dennis Ferguson:

I have enjoyed reading MNB for years, please, as much as possible, keep social views out of it.

I really don't care that you are gay, just keep reporting what is going on it retail.

First of all, I thought I was reporting a retail-related story. As for my social views, which were relevant to issue, I hope I made clear above why I expressed them.

As for your other point ... Mrs. Content Guy was a little surprised when she saw that email. She wanted to know if I had something to tell her.

(For a moment, it was almost like that great scene in In & Out, when all the students, rallying behind their teacher, start jumping up and shouting, "I'm gay!")

Again, in the interest of transparency - and only in the interest of transparency - here is what I think.

I have been in a traditional, heterosexual marriage for more than 29 years. It's been going okay. (You can ask Mrs. Content Guy for a second opinion, if you like.) I'm in favor of traditional marriage for those who want to engage in one.

Ultimately, if I really think about it, it is not so much that I am for gay marriage. It is that I don't think I have a right to judge whether gay people can get married or not. If they want to, let them. If they don't want to, fine. What they do - or don't do - has nothing to do with me. Gay marriage doesn't threaten my traditional marriage, or anybody else's, in my humble opinion. The only thing that threatens my marriage is if one of us does something stupid or careless.

Also to be clear ... I understand that when religion is brought into the picture, things get complicated. I am enormously sympathetic to this, and would never, for example, suggest that any religion should be forced to conduct gay wedding ceremonies. But civil ceremonies, I think, probably should not be subject to religious tenets.

I also want to be clear about something else. I understand that this is a complex cultural and social issue, and hard for some people to accept. I also am pretty sure that I'm not going to convince anyone who disagrees with me to change their mind, and I am equally sure that Dan Cathy isn't going to persuade anyone who disagrees with him to change their opinion. I also understand that I take a little bit of a risk even talking about these issues, but I think they are important and have a connection to business and ought to be discussed civilly and openly ... but I'm in a different business than Dan Cathy.

Dan Cathy made a business decision. Some will agree with it, some won't, and there will be an impact on his business, or there won't, and we'll see what happens next.

And now, I have to figure out how to convince Mrs. Content Guy that I'm not gay. Not that there's anything wrong with it.

Published on: July 20, 2012

I am 17 days into my Pacific Northwest odyssey, and I can say with a great deal of assurance that this has been one of the best summers of my life. Yesterday's "FaceTime" commentary talked about the teaching side of it, but I'd like to take a few moments here to talk about how fun it has been.

First of all, thanks to the dozens of folks who wrote in with suggestions about what to do and see; we did our best, though it would have been impossible for us to hit everything. As I mentioned at the beginning of the trip, for most of the time it has just been Mrs. Content Guy and me, and I wanted very much to show her things in the Pacific Northwest that speak to my soul. She'd never been here before, and I hoped she would love it as much as I do.

So what have we done over the past two-weeks-plus? Well, we went to the Portland Blues Festival. (Twice. One day we saw an amazing Etta James tribute concert, and on the final day we saw the Steve Miller band play the festival's finale.) Traveled to Crater Lake, where we took an amazing boat tour around a deep and gorgeous caldera that was formed more than seven thousand years ago when Mount Mazama collapsed. We took a guided tour of a lava cave, and saw amazing lava fields while driving through the McKenzie Pass. (Mrs. Content Guy teaches rocks and minerals to her third grade class, and is into this stuff.) Hiked to the top of Multnomah Falls. Traveled to Seattle and then took a boat trip to Friday Harbor in the San Juan Islands, and from there took a whale watching excursion and saw orcas swimming just 100 yards off our bow. Went to a Seattle Mariners game and saw the Mariners win, something that does not happen every day.

And this doesn't even touch on the food and beer and wine we've been consuming...

Perhaps the most magical event of the trip was a wonderful tour, barrel tasting and lunch that we had at the Willamette Valley Vineyard - it was extraordinary, delicious, and created an indelible memory. (Thanks to Libby Spencer there for putting it together, and especially to CEO Jim Bernau, who told us some wonderful stories; he truly is a visionary in the world of Oregon winemaking.) Plus, they make fabulous wines ... I recommend two wonderfully seductive Pinot Noirs - the 2009 Estate Pinot Noir and the 2009 Elton Pinot Noir, each of which is distinctive and delicious. And, we got totally turned on to their 2009 Pinot Gris, which just bursts with flavor. (That picture above is me at the Vineyard...there's a good reason I'm smiling.)

In Bend, Oregon, a town we totally fell in love with, we found a fabulous restaurant called Ariana's that, if it were closer to home, would instantly become our favorite place. Mrs. Content Guy had an amazing risotto, and I had elk meatballs that were extraordinary, to say the least. We washed them down with a 2010 Forefront Pinot Noir and a 2010 La Crema Chardonnay. And, we got to enjoy the company of Stephanie O'Brien, who was funny and sassy and goes right into the book as one of the best restaurant people we've ever encountered.

In Seattle, of course, I took Mrs. Content Guy to Etta's - she'd never met Morgan, the estimable bartender who I have labeled here and elsewhere one of the best bartenders on the planet. Well, he charmed her and she charmed him, and in between it all we enjoyed a bottle of 2010 Willow Crest Pinot Gris, along with fantastic tuna sashimi, flash fried calamari and some of the best black bean soup you could ever eat.

And, we went to Serious Pie - the new one in South Lake Union - and it was off the charts good. I had my usual, the pizza with sweet fennel sausage, peppers, and provolone, while Mrs. Content Guy had the pizza with penn cove clams, house pancetta, chilies, lemon thyme. I drank the 2009 Coltibuono Cetamura Chianti, she drank the 2009 Marzo Fiano Avellino, and the evening was so great that she ended up getting a hug from Kelly, who seemed to be managing the place that evening and went out of her way to make sure we had a great time. We did.

It just goes on and on. There was an amazing root hash that Mrs. Content Guy had at the Zeus Cafe in Portland. There was the terrific Session Lager battered wild Alaskan salmon topped with spicy coleslaw, cocktail and tartar sauce that I consumed at the Full Sail Brewery in Hood River, Oregon. (Best beer on the menu, by the way - the Slainte Stout. Go figure.)

It just goes on and on... (There probably are some things I've forgotten. I'll fill in the blanks in coming weeks.)

As you read this, Mrs. Content Guy is on her way back home to Connecticut. There's work to be done, and vacation has to come to an end sometime. I'm on my own here for the rest of the month, and I'm not done yet ... one of the things I am going to try to do is visit some of the stores that people want me to see. (Up to this point, I didn't have the time or the inclination, to be perfectly honest. But I'll try to make up for it in the coming days...)

The Pacific Northwest is a magical place - from the mountains to the vineyards to the beaches, and especially the terrific people who we met at every turn. And I thank you all for making this a tremendous few weeks...

I'm a lucky guy.

Slainte!