business news in context, analysis with attitude

Published on: May 3, 2013

by Kevin Coupe

Sometimes, it takes a story like this one to put all the debate about GMOs, horsemeat in beef dishes, pork in moose dishes, and the national obsession with nutrition and health into some sort of historical context.

Meaning this: Things could be worse. A lot worse.

Reuters reports that the Smithsonian Institution is saying that an excavation at the Jamestown Colony in Virginia - the oldest permanent British settlement in what then was called the "new world" - has proven beyond any doubt that some of the settlers resorted to cannibalism in order to survive the harsh winter of 1609.

According to the story, the colonists apparently ate a 14-year-old girl who, based on their forensic studies, "probably was part of a relatively prosperous household, possibly a gentleman's daughter or maidservant, said Smithsonian forensic anthropologist Douglas Owsley, who analyzed her bones after they were found by Preservation Virginia, a private nonprofit group.

"Her back molars had not yet erupted, putting her age around 14 years, and there was a lot of nitrogen in her bones, indicating she ate a meat-rich English diet ... After her death, in a year when many Jamestown colonists starved, Jane's body was hacked apart by a butcher or butchers who barely knew what they were doing. She may have been chosen because others in her household were already dead and there was no one to bury her, Owsley said."

However, the story also says that "it is not known whether Jane was killed or died of natural causes. The Smithsonian said there is no evidence of murder."

Which, at least from where I sit, doesn't really make things better.

As grossed out as I am, I have to admit that I find myself wondering what they served with the meal.

Fava beans and nice chianti, perhaps?

Published on: May 3, 2013

Business Insider quotes Walmart's CEO of e-commerce, Neil Ashe, as saying that the retailer is "building a global technology platform whose goals are as simple, frankly, as they are audacious. We want to know what every product in the world is. We want to know who every person in the world is. And we want to have the ability to connect them together in a transaction.”

Ashe also says that the company is committed to being as dominant in e-commerce as it has been with its supercenters. "“We started in the discount stores," he says. "We moved into warehouse clubs, we moved into grocery and now international. The abilities that we built in the other waves of retail we’re building at e-commerce now."

The original interview with Ashe appeared in Women's Wear Daily.

Published on: May 3, 2013

Wired has a piece about how, while "the major leap towards ubiquitous access to eCommerce and online shopping has transformed how Americans and much of the world purchases products," the "impending disruption" that will be created by the availability of same-day delivery could, in fact, be even greater.

How this is all going to work, and the impact it is likely to have, is detailed here.

The story concludes that same-day delivery, for many online retailers, is not a matter of "if." It is a matter of when and where, of timing and strategy.

At the same time, Storefront Backtalk reports that Amazon "plans to open eight new U.S. distribution centers between now and the holiday selling season, bringing the total to 54—with almost as many DCs outside the U.S., according to the CEO of e-commerce service provider ChannelAdvisor. The result of the ferocious building spree is that Amazon will then have a DC within five miles of most major U.S. cities. Put another—and more frightening—way: That means Amazon will very likely have a DC closer to your companies than many of your stores." You can check out the story here.

Published on: May 3, 2013

Bloomberg reports that the Ron Johnson tenure at JC Penney cost the company more than $170 million just to hire him and his top three executives. The story says that "the sum covers cash payments and restricted stock offerings to the four executives and outgoing Chief Executive Officer Myron Ullman -- and doesn't include salary or incentive pay, according to public filings.

"Now after less than a year and a half, Johnson and his trio are gone..."

According to the piece, "Johnson's hiring cost J.C. Penney the most. He received $52.7 million in restricted stock in November 2011 to make up for what he had to leave at Apple while Ullman earned $29 million when he left. The board then swapped Ullman for Johnson and gave him a salary of $1 million a year. The company hasn't disclosed Johnson's exit pay."

Here's one example of the kind of executive spending that took place:

"The recruitment of marketing chief Michael Francis is emblematic of what J.C. Penney was willing to spent to attract talent. Francis helped cultivate the 'cheap chic' brand of discounter Target, where he worked with Johnson in the 1990s. To lure him from Target, J.C. Penney gave Francis $12 million in cash and $32 million in restricted stock in November 2011.

"Francis was named president and given the responsibility to lead the overhaul of the company's marketing. The chain unveiled a new logo, television spokeswoman Ellen DeGeneres and themed monthly catalogs. Even as J.C. Penney poured money into brand advertising, sales fell. Francis was fired in June, and Johnson took over his responsibilities.

"Thanks to a termination agreement, Francis received $4.3 million on his way out. So in about eight months, J.C. Penney spent $16 million in cash on hiring and firing Francis, who in December was named chief global brand officer for DreamWorks Animation SKG Inc. Because he left before the restricted stock vested, he kept about 100,000 of the 1 million shares he was granted, the filings show.

"Meanwhile, the company cut its workforce by more than 40,000 people during Johnson's tenure."

Published on: May 3, 2013

The Detroit Free Press reports that Domino's Pizza has created a new website, Domino's Live, that shows the live goings-on at a Salt lake City, Utah, store courtesy of five cameras that have been positioned in and around the kitchen.

According to the story, "It’s not quite reality TV -- there’s only video, no audio and it’s only at one store -- but Domino’s officials said they hope the behind-the-scenes show will be entertaining to watch -- and probably will urge employees to be on their best behavior while stretching dough and adding toppings ... It’s also in keeping with the new store design that allows carry-out customers to peek into the kitchen - and the company’s effort to make pizza making a more transparent process."

Published on: May 3, 2013

• Tesco may be pulling out of the US, but as long as it owns Fresh & Easy Neighborhood Markets, it seems to be intent on promotions that will drive new sales and traffic. The company said yesterday that it is launching something called a TGIF&Easy promotion: "Every Friday in the month of May, customers can receive a special free item to make the start of their weekends even easier. Each week Fresh & Easy will announce the special Friday-only deal on its website, Facebook page and by email to Friends Loyalty Program Members."

Published on: May 3, 2013

• Relay Foods, which allows customers to order online from local farms, artisan producers and grocery stores, said that it is expanding its footprint to the Williamsburg, Virginia, market, beginning today.

Relay Foods is based Charlottesville, Virginia, and serves that market in addition to Richmond, Baltimore, and Washington, DC.

Published on: May 3, 2013

Hy-Vee has announced that Rose Kleyweg Mitchell, the company's senior vice president of governmental affairs, will retire at the end of the fiscal year. A former high school English teacher, Kleyweg Mitchell joined the company in a store-level job in 1978, but soon became a training supervisor and eventually director of training, then assistant vice president of education and training, then vice president of training, and eventually expanded her role to include governmental affairs. She was promoted in 2005 to senior vice president, education and governmental affairs, joined the Executive Committee in 2008 and became a permanent member of the Hy-Vee Board of Directors.

Published on: May 3, 2013

• The Conference Board reports that its Consumer Confidence Index rose to 68.1 in April, up from 61.9 in March. In addition, the percentage of survey respondents who expect business conditions to improve over the next six months went from 15 percent in March to 16.9 percent in April.

However, the Conference Board says it is too soon to tell if a long term improvement in consumer confidence is taking place.


• Consumers Union, the public policy arm of Consumer Reports, has begun running advertisements and social media promotions in Los Angeles, Washington, DC., and Portland, oregon, urging Trader Joe's "to stop selling meat and poultry from animals raised on antibiotics.  The ad highlights how the overuse of antibiotics by the meat and poultry industries on healthy livestock is promoting the spread of drug resistant superbugs that threaten public health."

Consumers Union launched its Meat Without Drugs campaign last year to convince grocery stores – starting with Trader Joe’s – to sell only meat raised without antibiotics. 

According to the announcement of the advocacy ads, "Over 500,000 consumers have signed petitions, postcards, and flyers in support of Consumers Union’s campaign.  However, Trader Joe’s has refused to change their practices or even meet with Consumers Union to discuss the issue.  Trader Joe’s offers some chicken, turkey, and beef raised without antibiotics, but no pork.  While this is a step in the right direction, it doesn’t go far enough, according to Consumers Union."


• Reuters reports that "a shareholder in OfficeMax Inc sued the directors of the company on Thursday, seeking to block its acquisition by larger rival Office Depot Inc , calling the proposed $1.2 billion all-stock deal 'grossly inadequate'. The proposed merger which seeks to help the two suppliers of office goods slash costs amid fierce competition from online competitors, has also been criticized for lacking details and comes at a time when Office Depot is under fire from an activist investor."

Published on: May 3, 2013

• Delhaize Group said yesterday that Maura Abeln Smith has been named the company's Executive Vice President, General Counsel and General Secretary. She will be relocating to Brussels to succeed Michael Waller, who is retiring.

Smith most recently was Executive Vice President, Government Affairs, General Counsel, and Secretary at PepsiCo.


• The Wall Street Journal reports that Starbucks is restructuring its management team, saying that "John Culver, president of the China and Asia Pacific region, will take on Starbucks's global channel development and emerging-brands portfolio as well."

The story goes on to say that "Jeff Hansberry, who was heading up channel development, will now report to Mr. Culver as the new president of Starbucks's China and Asia-Pacific region. He is tasked with leading the region's retail business, and, in particular, its effort to build a major presence in the grocery channel in China, as it has done in the U.S."

Furthermore, "Michael Conway, a veteran of the consumer packaged-goods industry, was named executive vice president of channel development, reporting to Mr. Culver.

"Starbucks also promoted Cliff Burrows to group president for the Americas and the Europe, Middle East and Africa—or EMEA—regions, as well as the recently acquired Teavana brand, which includes about 300 retail stores in the U.S. Mr. Burrows previously headed up the Americas region.

"Reporting to Mr. Burrows, Kris Engskov was promoted to president of EMEA from his post as managing director of Starbucks's U.K. business."

Michelle Gass, who has been running EMEA for Starbucks, is said to be returning to the US "for a role that has yet to be clearly defined."

Published on: May 3, 2013

Yesterday, MNB took note of a Minneapolis / St. Paul Business Journal report that General Mills chairman/CEO Ken Powell has "restated his opposition to mandatory labeling of genetically modified organisms, commonly called GMOs, at a conference in California Tuesday ... Powell said GMOs are safe and they're part of a solution to feeding the world's growing population."

MNB reader Andy Casey responded:

This amazes me not because I disagree with Powell’s position but because this ship has so clearly set sail already.  As Kenny Rogers sang, “you got know when to fold them …” and this discussion has reached that point.  The best he can possibly achieve now is to shape how it will be implemented and continuing to argue against labeling just makes him seem out of touch at best, or hiding something at the worst.

Agreed.

Another MNB user wrote:

How ironic that you began MNB with a discussion on truth and transparency and then later shared the General Mills CEO’s restated opposition to transparency in GMO labeling.

I’m not sure how anyone else feels but a company that is fighting to NOT tell me what goes into their products is basically saying they do not want my business.

I’m not interested in eating genetically modified products and apparently General Mills knows that…otherwise I am sure they would be clamoring to tell me how genetically modified products are so good for me and slapping it on every box they print…Now back to my frosted flakes!

And another:

It seems to me if labeling a food to contain GMOs is such a bad idea that the food giants have to spend millions to defeat it, those who produce non-GMO food products should establish an organization to validate and certify for “non-GMO” content, because it MUST be a marketing advantage.  Obviously General Mills thinks labeling their foods to have GMO content will have a negative effect on sales, so the opposite should prove true, to have NO GMO labeling must be a positive force for sales.

It seems to work for the Rainforest Initiative and free trade in the coffee business.




We've reported on how troubled retailer JC Penney, desperate to figure out what it has to do to make shoppers love it, has posted a new :30 commercial on YouTube and Facebook that apologizes for its recent marketing missteps. The ad, which features gauzy images of Americans in various settings, has the following voiceover:

It's no secret. Recently JCPenney changed. Some changes you liked and some you didn't, but what matters from mistakes is what we learn. We learned a very simple thing, to listen to you. To hear what you need, to make your life more beautiful. Come back to JCPenney, we heard you. Now, we'd love to see you.

I argued that the ad would have been more effective if it had featured the following voiceover:

Oy. Did we screw up. It ends up that comparing the Apple Store to JC Penney is like comparing apples to manatees. And boy, have we become a retailing manatee. So here's the deal. We're going to send you coupons. And more coupons. We're going to have sales and more sales and more sales. And we'll pretty much do anything to create the illusion that we're relevant. Because America needs JC Penney. And more importantly, we need our jobs.

MNB user Anne Stewart wrote:

LOL...and your ad was so much more with the way advertising is successful today, it certainly would have grabbed my attention because that's how we talk, blog, and text. Penney's recent ad even sounds behind the times, which makes me =(.




Yesterday, I took note of an Advertising Age piece about JetBlue, which it said "jumped into the conversation about Jason Collins with posts on Twitter and Facebook on Tuesday thanking the NBA player for coming out." The Twitter post said, "Thanks Jason, today we're all on the same team."

The issue, Ad Age, was that JetBlue had no connection either to gay rights issues or to Collins, and so could be perceived as exploiting the situation.

I wrote:

It is worth thinking about. Part of the challenge and opportunity of instant communication is knowing what to say and when to say it, not to mention knowing how it will be perceived in the marketplace.

One MNB user wrote:

The cynic in you strikes again...  Before I got to your comment,  I thought to myself, "Cool -- must be more than the average number of LBGT folks at Jet Blue.  Good for them."
 
Didn't cross my mind at all to think they were capitalizing on an opportunity to get their name out there.

Actually, in this case it was Ad Age being cynical. Still, I think that companies have to be careful not to appear exploitive. I'm not sure if the JetBlue reaction to the Collins situation falls into this category.

Another MNB user wrote:

One of the key points you're missing about JC Penney is not just the pricing strategy... We have stopped shopping there ever since they ran their Mother's day commercials featuring two mom and Fathers day commercials featuring two dads. The Christian community has backed away from retailers like JC Penney, Home Depot and others that outwardly support gay initiatives. Trust me, my family and I are not alone in our boycotts.

I'm sure you're not.

Must be tough not drinking coffee from Starbucks, not ordering products from Amazon, not watching any network or visiting any theme park owned by Disney, not eating Oreos, not buying Microsoft or Apple products, not wearing Levi's, and not shopping at Nordstrom or Target.

It also must be tough knowing that support for gay rights is increasing, and that in many ways, the war is over, though battles remain to be fought.

But hey ... I've always believed that consumers and investors should support companies that reflect their world view, and not patronize those that do not.




On another subject, an MNB user wrote:

In regards to “Walmart Locks and Loads for Battle with Amazon”..

I think the thing Walmart is missing (and will have a hard time achieving) is that it’s fun to shop at Amazon. I don’t shop at Amazon because I’ve had a bad experience in store where I couldn’t find what I was looking for and was forced to go online.

Amazon has almost every product under the sun, with a great amount of reviews. I also have control because I can select who I am purchasing the product from, with the cost and shipping price very clear (I can also pick new or used, which is great when purchasing books). I’m not a Walmart shopper now and would never even think to shop Walmart online. I think their biggest issue will be if people don’t like shopping at the stores, how do you create an online experience so different that they like shopping at Walmart online?




We had a piece the other day about how Graeter's ice cream has decided not to sell to Walmart because the retailer is not seen as being in synch with its brand equity.

My comment:

Once again, it is the Jurassic Park lesson. Just because you can do something does not mean that you should do something.

Graeter's got it right.

If they'd said yes to Walmart, it inevitably would have strained its production capacity. It would have driven prices down. It would have violated the central brand proposition - that this is something special, worth a little more money. And Walmart, which is only interested in its own core brand values, would inevitably would have hurt Graeter's. It would not have ended well for the brand. People would have made some money, but only in the short-term.

Graeter's did not make the same kind of mistake that almost destroyed Krispy Kreme - expanding so fast and with so little concern for core brand values that the company ended up standing for almost nothing.

One MNB user wrote:

I don’t agree with you that Wal-Mart would have driven prices down and violated the central brand proposition created by Graeter’s. If Graeter’s senior leadership allowed Wal-Mart to hurt or dilute their brand, that’s their fault, not Wal-Mart’s. The bigger question is whether or not Wal-Mart is capable of driving prices down and violating brand propositions? The answer is unequivocally yes, but only to those companies that let Wal-Mart do this to their brand. Do you think P&G would lower the quality of Crest or Tide in order to meet price demands from Wal-Mart? Do you think Wal-Mart has violated Remington’s (the gun maker) central brand proposition? I applaud Graeter’s for their position with respect to Wal-Mart, which to me is simple. It’s not worth the fight.

Actually, it sounds like you agree with me more than you disagree with me. But okay...

From another reader:

Good for them. Not many have the courage to say no to the 800 LB gorilla ... Many CPG folks I’ve talked with tell me that they hate being called in by the buyer or management, to be raked over the coals for an ad price that WalMart has seen in the paper from a competitor...

I don't think there is any question that Walmart's traditional way of doing business means constantly asking for lower prices, which often forces manufacturers to compromise their production values. The problem is that Walmart becomes such a big part of their business that they can't afford to say no. It is a vicious cycle, and I think Graeter's decision to protect its brand equity was a wise one.

Published on: May 3, 2013

Tom Ricketts, the chairman of the Chicago Cubs, said earlier this week that if the city does not approve his plans to renovate Wrigley Field - the second oldest major league baseball stadium in the country - he would be forced to consider moving the team to another venue or city.

Among Ricketts' demands are that the team be allowed to ad advertising signs, as well as a 6,000 square foot video scoreboard/billboard in left field, which would both add revenue and obscure the field from some of the local rooftops where entrepreneurs sell seats from which people can watch games. (The owners of the rooftops have threatened lawsuits if the renovation goes forward.)

BTW ... the Cubs, as of this writing, are in last place in the National league Central Division, with an 11-17 record, and they are tied with the San Diego Padres with the fifth worst record in all of Major League Baseball.

Published on: May 3, 2013

First of all, my thanks to all of you who wrote this week to congratulate Mrs. Content Guy and me on our 30th wedding anniversary. We appreciated your kind words and wishes ... and yet again, it made us realize how lucky we are to have the MNB community as a kind of extended family.



I tasted some lovely beers and wines this week during my trip to Portland, Oregon, and let me recommend my favorites to you...

I particularly loved a couple of terrific Chardonnays ... the 2010 Lange Three Hills Cuvee, and the 2010 Argyle Reserve Series Eola Amity "Nut House" ... which are just bright and mouth-filling and perfect with seafood. And, I very much liked the 2011 Domaine Drouhan Oregon Dundee Hills Pinot Noir, which is yummy. (That's my clinical analysis.)

As for beer, you need to try the Burnside Brewing Co. Oatmeal Pale Ale ... which is probably my favorites of various beers tried this week.

(There are more ... but if I mentioned all of them, you might begin to question my sobriety.)



That's it for this week. I'm going back to Portland next week for the Portland State University Center for Retail Leadership 2013 Executive Forum ... always a great event, and I'm looking forward to participating. If you're there, come by and say hello.

Have a great weekend.

Slàinte!