business news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: January 23, 2015

    by Kevin Coupe

    I'd like to be a little self-serving this morning, if I may, about a couple of appearances I have coming up that I think you may find interesting...

    On Sunday afternoon, while at the Food Marketing Institute (FMI) Midwinter Executive Conference in Miami, I'll be serving as anchor and facilitator at an industry briefing from the Network of Executive Women (NEW) designed to serve as wake-up call for business leaders about what women bring to the table in terms of expertise, experience, instincts and a unique understanding of the marketplace. There will be brief presentations from Ahold USA's Amy Hahn, PepsiCo's Lisa Walsh, and NEW CEO Joan Toth ... as well as the opportunity for what I think will be some eye-opening discourse about the business case for creating a new corporate culture with the audience. And then, if you are not attending FMI Midwinter, there will be a New webinar on the same subject on Monday afternoon, and I'm also pleased to be part of that.

    Then, on Tuesday morning, I'll be moderating the closing panel discussion of the FMI Midwinter meeting - a fast-moving and, I hope, illuminating conversation with three expert industry observers about how the retail and CPG businesses are changing, affected by the economy, technology, competition, and culture. The panelists are Burt Flickinger of Strategic Resources Group, Scott Moses of Sagent Advisors, and Andrew Wolf of BB&T Capital Markets. I've talked to all three of these fellows to prepare for the session, and I have to tell you that I'm really excited about it; their observations are Eye-Opening and provocative, and I think there is the potential for making everybody in the room just a little uncomfortable about the future.

    If you're there, I hope you'll join me at both events and stop by to say hello. if not...well, I'm sure I'll be writing about them next week on MNB.
    KC's View:

    Published on: January 23, 2015

    Family Dollar shareholders yesterday voted to approve an $8.5 billion acquisition of the company by rival Dollar Tree, spurning a $9.1 billion offer from larger rival Dollar General.

    According to the Associated Press story, "Family Dollar said it rejected Dollar General's bids because it expected that it would be harder to get regulatory approval for the deal even though Dollar General was willing to sell as many as 1,500 stores.

    A combination of Family Dollar and Chesapeake, Virginia-based Dollar Tree will create the largest dollar store company in the nation, with more than 13,000 stores. Dollar General, based in Goodlettsville, Tennessee, has more than 11,000 stores."

    The transaction still has to be approved by the Federal Trade Commission (FTC), but that is expected to happen before the second quarter.

    In related news, Dollar General Corporation announced that Rick Dreiling will continue as chairman and chief executive officer through January 29, 2016 or, if earlier, the appointment of a successor. Dreiling had previously announced his retirement, but delayed it through the attempt to acquire Family Dollar.
    KC's View:
    Experts say that the Dollar Tree-Family Dollar combination, creating a stronger competitive threat to Dollar General, also could create problems for the mainstream supermarket industry, since the dollar store chains have been looking to drive greater traffic and sales through higher grocery penetration. Which sounds very likely to me.

    Published on: January 23, 2015

    Bi-Lo Holdings announced yesterday that it has hired Ian McLeod, former CEO of the Coles retail group in Australia, as the new CEO of the company, which includes Bi-Lo stores, Winn-Dixie, and Harveys.

    The Sydney Morning Herald writes that McLeod, "who was replaced by John Durkan as Coles boss last year, is widely credited with leading a five-year $1 billion profit turnaround at supermarket chain Coles where he earned almost $55 million under a private equity-style pay deal."

    However, the story also notes that "an admission by the food and liquor giant in December that it engaged in unconscionable conduct with small grocery suppliers may have taken some of the shine off Mr McLeod's track record.

    "Coles faces penalties of $10 million and may have to pay as much as $16 million in refunds for its dealings with suppliers after reaching a historic settlement with the Australian Competition and Consumer Commission."

    McLeod, who was born in Scotland, has more recently been working at Coles' parent company, Westfarmers, where he has been spearheading "international expansion plans in a newly created commercial director role."

    In its announcement, Bi-Lo said that McLeod "is a proven leader with more than 30 years of expertise and a strong track record of driving profitable growth. In his time running over 2,200 Coles food, liquor and convenience stores, which employs 100,000 associates across Australia and includes over 760 full-service supermarkets, he led a major turnaround in that business, improving the quality and value of products as well as the service and store standards offered to customers."

    McLeod will be replacing Randall Onstead, who recently announced his departure. The company has said it had a replacement chosen, but only made McLeod's name public yesterday.
    KC's View:
    This would seem to suggest that rumors about Kroger buying Bi-Lo are just that...

    Published on: January 23, 2015

    Boomerang Commerce is out with a report that, while in some ways states the obvious, is worth considering because its recommendations run counter to how many retailers operate.

    Because pricing is "a key weapon to increase market share and disrupt the market," many retailers believe that price-matching is the best way to compete in a dog-eat-dog marketplace. But, the report suggests, it is not always the best way...

    "Having a low price on a product will help you nab a transaction," it says. "But, having a low price 'perception' will net you the customer. Your goal is to consistently build and maintain a 'perception' that makes your website the go-to website in the customer’s mind for all his purchases. Price perception is a measure of how high (or low) your customers see or 'perceive' your prices to be. 'Everyday low price' and 'New low price' are examples of retailers building price perception in their stores. So, how can you build, manage and measure price perception in a digital world where the customers have limited attention span and easy access to competition?

    "To enjoy a good price perception in the market, the key decision is – identify products which 'influence' perception. At a high level, the strategy is very simple – price competitively on these products and drive up margins on the others. Achieve the opposing goals of achieving great price perception without sacrificing profits."
    KC's View:
    It always has been the belief here that too many retailers chase the lowest price strategy, which generally is a mistake because you cannot always be the lowest price on everything ... somebody can always undercut you on something.

    I also think that one of the best examples of the price perception strategy can be found online, where retailers like Amazon can engage in dynamic pricing that is literally pegged to what people are looking at and how often, and what they seem willing to pay. It is all done by algorithm, but companies like Amazon know precisely which items that they have to be price-sharp on, which ones they do not. That's a powerful tool...

    Remember ... it is the companies with the most actionable data that then actually act on it that tend to be the winners in the new economy.

    Published on: January 23, 2015

    The Wall Street Journal has a very funny piece about the art and science of disclaimers, which are those phrases that essentially protect them from legal challenges to advertising claims and representations. "Companies are supposed to avoid depicting their products in ways that are potentially misleading to consumers, but in some cases, their disclaimers seem pretty silly," the story says ... and they've got that right.

    It is a very funny piece ... and you can read the whole thing here.
    KC's View:

    Published on: January 23, 2015

    CNet reports that Amazon is ending its Amazon Wallet experiment just six months into the test, which was designed to allow users "to store and manage gift, store and loyalty cards for in-person and online transactions involving the cards. However, unlike its competitors in the mobile payments niche, the app could not be used to manage credit or debit cards."

    According to the story, Amazon "began informing users by email on Tuesday that it is shutting down the beta and removing the app from app stores. The beta's closure comes as Silicon Valley companies struggle to expand beyond their roots selling products or services and into the lucrative financial industry ... Amazon did not address whether or when Amazon Wallet would return. Users will still be able to use any gift, loyalty or membership cards store on the app, but wallet balances will no longer be updated after Wednesday, meaning users will have to track their own balances."

    The story goes on: "The promise of turning smartphones into true digital wallets -- including the ability to pay at the register -- has been hyped for years. By 2019, consumers are expected to use mobile-payments services to conduct $142 billion in transactions, up from $52 billion in 2014, according to Forrester Research. But so far, it's been more promise than results."
    KC's View:
    Anyone else get the sense that Amazon may be a little faster these days about clearing out the dead wood and focusing on the stuff that makes it money?

    Published on: January 23, 2015

    Reuters reports that Amazon is acquiring Israeli chipmaker Annapurna Labs for its cloud computing unit, Amazon Web Services. The deal is said to be costing Amazon in the neighborhood of $370 million, and is likely to lead to Amazon opening a research and development facility in Israel.
    KC's View:

    Published on: January 23, 2015

    • Nielsen is out with a Global Health and Wellness Survey, which USA Today says "offers compelling statistical evidence that younger consumers worldwide are far more concerned about everything from food ingredients to genetically modified food to organic foods than are their parents and grandparents, according to the survey of 30,000 consumers in 60 countries.

    "The most health-centric are Generation Z — consumers under age 20 — with 41% saying they would willingly pay a premium for 'healthier' products. That compares with 32% of Millennials (ages 21 to 34) and about 21% of Baby Boomers (about 50 to mid-60s)."

    The story also says that "consumers aren't just saying that health matters — but also acting on those beliefs. Globally, nearly 80% say they're actively using foods to forestall health issues and medical conditions such as diabetes, obesity and high cholesterol."
    KC's View:

    Published on: January 23, 2015

    • Starbucks announced that it has hired Kevin R. Johnson, the former CEO of Jupiter Networks, as its new COO, replacing Troy Alstead, who is going on an unpaid sabbatical. Johnson has been a member of the Starbucks board since 2009.

    The move is seen as yet another affirmation of Starbucks' evolving view of itself as a technology company; earlier this week, the company said that 16 percent of its store transactions are being processed via mobile devices, and that the company has more than 13 million active mobile app users.

    Advertising Age reports that fast feeder Chick-fil-A's vp-customer experience, Jon Bridges, has been promoted to chief marketing officer, succeeding Steve Robinson, who is retiring after 30 years running the company's marketing department.

    According to the story, "Other executive changes for the chain include a shift for Andrew Cathy, son of president and CEO Dan Cathy, who was promoted to senior VP-chief people officer, a new position. Brent Ragsdale, another longtime Chick-Fil-A exec, was named chief financial officer."
    KC's View:

    Published on: January 23, 2015

    Got the following email on a familiar subject from MNB reader Peter H. Grimlund:

    I don’t get the whole anti-GMO thing.  Having a BS in Microbiology from a reputable university that included genetics in the base curriculum, I have a difficult time seeing the difference between new varieties of plants being created using more traditional cross breeding techniques to select for specific traits versus directly splicing into the genome the desired trait.  What takes decades or even centuries to accomplish with the former can be accomplished rapidly with modern technologies.  Isn’t that good?  Both processes can result in the same variety, the latter is just a more direct route to the desired outcome.  And if you can create the new variety by both methods with the only differentiation being the time it takes to accomplish it based on different methodologies than why is one labeled as being a GMO and the other not?  Doesn’t make sense to me.  I would rather have the benefit of new variety sooner rather than later.  Wouldn’t everyone?

    I think the simple and obvious answer to your last question is "no."
    Think of this as an absence of trust in the companies in the GMO business. Think of it as a desire for transparency on the part of people who want to know what is in their food.

    Because here's the deal. Even if someone accepts everything you said as being accurate, that someone could also say that they'd like the presence of GMOs in their food to be labeled and explained.

    That doesn't strike me as too much to ask for. Though I concede that not everybody feels that way.

    Responding to the story about the US Supreme Court refusing to hear a retailer-funded appeal of Federal Reserve rules that some feel make swipe fees for debit card payments too high, MNB reader Andy Casey wrote:

    Interesting case which can be expected to continue to develop over time as technologies and options come into play.  One thing which hasn’t happened (or at least I haven’t noticed) is any reduction of retailer prices which can be attributed to the up to 50% reduction in fees which the Fed did put in place.

    You're right.

    I've been disappointed that this story has played out largely in the business pages of newspapers and websites. I think more retailers should have made this case part of their marketing efforts, which might have created some consumer pressure on the Fed to lower swipe fees.

    I said from the beginning of this case that retailers ought to make the case that lower fees equal lower prices, and if they didn't, shame on them.

    MNB reader Michael Phelan had a different take:

    Swipe fees, much like payroll, benefits and gasoline up-charges would take care of themselves if retailers trained, empowered and recognized their people.

    The smart retailers – names we know who consistently show up on the “Best Companies To Work For” lists - are rarely seen publicly griping about the expenses brought about by the inconvenient problem of customers handing them credit cards and employees looking to advance in their careers.

    On another subject, MNB reader Craig Espelien wrote:

    I am a big PayPal fan – hassle free (and easier) compared to entering a credit card number and an extra layer of protection should something go awry with the purchase.  This week, however, I had something happen that had never happened before.  I was buying a product from a web site that offered PayPal as a payment option and when I selected it, there was a 24 cent surcharge for PayPal.  This was a site/business located in the UK – and the price on the item I purchased was so good that the extra 24 cents (1% of the purchase price) did not matter.  A bit of an Eye Opener – as this, to me, is sort of like getting charged a surcharge when using a credit card (another interesting fact is that the Minnesota DMV adds a surcharge if you pay by credit card – no extra fee if you pay by cash or check).
    Thought you might find that interesting.

    I do. Everybody wants to wet their beak. It is a short path, apparently, from Johnny Sack to the Minnesota DMV.

    On the subject of Amazon at least temporarily getting out of the private label diapers business, one MNB user wrote:

    I would offer another eye opener for Amazon. When moving into your own brand, ensure that you populate your sourcing team with individuals who have expertise in the product line(s) that you plan to source. Private brand diapers are available throughout the retail universe with high levels of consumer acceptance.

    Whether diapers or any other consumer product, the indisputable fact is that price + quality = value!

    And from another:

    I agree that the credit should help some, but parents of babies in general are very protective. I didn’t try the diapers (no babies or grandbabies) so I don’t know the issues, but sore, irritated bums and messy clothes or blankets are a big deal to babies and their parents. It would take a very convincing sales pitch to get me to try them again and probably someone else’s child as the guinea pig.

    And still another:

    The very best retailer in the business is Costco. If they are going to put their Kirkland Signature name on a product, the quality has to be equal to or better than a national brand, to go along with a great value to their Costco Club member.
    Evidently, Amazon has a little ways to go to understand PL branding for some products, especially items that have to do with babies and personal hygiene.

    I continue to get email about the Seahawks-Packers game. One MNB reader wrote:

    I am a Packer fan and felt that, while the Seahawks (as you so correctly noted) never gave up and kept the pressure on (and also tried multiple things to disrupt the game), the Packers started playing to “Not Lose” in the first half.  This mentality – rather than playing to Win – is what I feel cost them the game.  Never ever let up – imagine what would have happened if the Packers had scored two touchdowns instead of field goals and if the one interception the corner back had not slid but had kept running?  In the regular season running up the score is frowned upon – but in the playoffs, if your foot is on the opponents through – keep pushing!

    And another:

    Think about it. The game was over, so many thought. The Seahawks and the coaches never gave up. The Fat Lady was humming, but not singing. The Hawks got a TD, an on side kick that they recovered, scored another TD,  a fake field goal, great call by Carroll, as nobody on the Packers saw that one coming, TD. OT, the Hawks and Carroll said, :Let’s put the nail in the coffin against Green Bay. The call, a pass into the end zone, result the winning TD, and the Fat Lady was singing to the top of her lungs.
    The Seahawks won the game, because of their players attitude, a little luck on one play, but won the game because they believed they could still win. Green Bay and Seattle players and coaches are professionals. One team was outplayed and outcoached, and the result was one team lost and one team won. Nobody gave the game away.
    FYI, I have been a lifelong Packer fan, but I will always root for any west coast team when it comes to the big games.

    I got a lot of email responding to a couple of stories yesterday in which I commented about an improving economy.

    One MNB user wrote:

    I take some what offense to the statement that, and I'm paraphrasing, companies that raised prices during the high gas periods should lower their prices now.  That, sir, is extremely simplistic and very misleading.  There are so many factors that contribute to the cost of goods for a product that, just focusing on transportation, is narrowing the perspective.  For example, coconut oil and products.  They are widely used components of many products.  The tragic events in the Philippines, a major supplier of this product, had nothing to do with the fluctuation of gas prices. But yet the cost of this product continues to rise due to lack of supply.  Cost of grains, weather, wages, benefits, cardboard, etc. all affect cost of goods. Oh, how about rising margins in the grocery industry. 
    I value your opinions and comments, but please, don't just look through the peep hole, when the entire door must be open to see the room.

    From MNB reader Mark Heckman:

    Kevin, the so called “Great Recession” was officially over when the current administration took office and bailouts for the major financial players were already in place.  However, this has been the most anemic and lethargic recovery of any modern day recession.  We can argue why that is and what policies and practices are perpetuating the economic malaise, but it is clearly about more than “perceptions”.  People are actually being pinched.  While some aspects of the economy have improved marginally, household income remains lower today than it was in 10 years ago.  Most of the job growth has been either part-time or in lower paying service industry jobs.  Further, the latest weekly filing for unemployment benefits was over 300,000, far from the kind of numbers that an improving economy would yield.  A record number of people are now using Food Stamps and while the unemployment % is coming down, the labor department is showing workforce participation remains in the low 60% range…again the lowest rate in decades.  Despite world wide demand for oil has driven prices at the pump down, food inflation is still tracking at 3-4% annually and some commodities like beef are up in price nearly 20% over last year.

    I do not see the Republican Congress and the White House agreeing on much over the next two years.  That means little or no change to the current economic realities.   This translates into deals and promotions remaining necessary for most retailers to maintain market share. Margins will remain tight, especially in certain food categories.   While perceptions sometimes do not reflect reality, with respect to the U.S. economy for most Americans, they are mirror images of each other.

    And from another reader:

    Kevin, you commented, “But I'm not surprised that people aren't spending away ... the depth and length of the Great Recession has a lot of people figuring that it ain't permanent.”
    I cringe every time I hear about how the economy is improving and wonder, “for whom is it improving?”  I just had lunch yesterday with two friends that I have known for a couple of decades.  Of the three of us, I’m the only one fully employed.  One has been out of work for the better part of two years and does temp work to survive.  The other has been out of work for a year and has a grand collection of rejection letters.  Both are educated, professionally experienced, bright, capable women.  Neither show up in unemployment statistics because they are “expired.”  All of us are over 50.  They don’t feel that their employment prospects are good because of their ages.

    I’m afraid that if I were to ever lose my current job, I wouldn’t find another job either.  (Fortunately, I work for a good company, like my job, and it’s going well – knock on wood.)  And even though all of us have contributed to retirement accounts for decades, we all worry about having enough money to live on in our old age.  The statisticians may be able to manipulate the numbers to make it look rosy; but for a lot of us, we feel the Great Recession IS permanent.

    I don't think most people would argue with the notion that the economic recovery has been thin, that middle class salaries have remained stagnant, that too many people are under-employed, and that there remains much economic uncertainty out there - hence the fact that people are being careful with the extra cash in their pockets that they are saving on gasoline.

    That said ... it seems patently unfair to suggest that there hasn't been a recovery and that the economy hasn't gotten better in the last six years. It has. Not for everyone, certainly, but there are a lot of people doing a lot better today than six years ago.

    Let's forget the political aspect for a moment. (I have as big a problem with Democrats who refuse to give Republicans any credit for anything as I do with Democrats who won't give members of the GOP any credit for anything.) It seems to me that a lot of the economic problems we have can be traced to the fact the the world has changed. Technology has replaced people in many cases, or made them more productive, which results in job loss. The whole outsourcing, the-world-is-flat trend adds to the problem ... everybody is competing with everybody, which drives down costs and wages. And this doesn't even factor in all the geopolitical issues such as terrorism that can and do impact our economy.

    Fixing these problems and winning the game isn't as simple as deflating a few balls to give yourself a competitive advantage ... it requires strategic thinking and tactical moves that the political establishment in this country is not equipped to address.

    In many ways, economic advances are probably illusory, and certainly cyclical. You take your advances where you can get them try to be realistic about how deep they are and what caused them, and meanwhile try to figure out how to rejigger the world economy to reflect 21st century realities. (And by the is now 2015. It may not be too early to start thinking about 22nd century realities...)

    I wrote yesterday about how dangerous I'm going to find the soon-to-come limited edition Red Velvet Oreos to be, which prompted one MNB user to write:

    Are you kidding? I would be very surprised if “red velvet” didn’t contain red dyes, which are linked to ADD and other ailments, and “cream cheese flavored” sure doesn’t sound like food to me – what is it with the “food” industry anyway??

    First of all, I probably already have ADD. (They just didn't call it that when I was a kid. Rather, the nuns, brothers and priests would just call me incorrigible and/or a hooligan, and then hit me.) So how much worse can red dye make it?

    It is a basic fact, I think, that an Oreo is one of the most addictive substances on earth. At least for me. (Twizzlers would be the other.) And I'm reasonably sure that whatever is in the Red Velvet Oreos, they're going to hit the Limbic system of my brain like a freight train.
    KC's View:

    Published on: January 23, 2015

    A movie that did not get nearly as much attention as it deserved last year and is completely worth seeing for its noirish view of the Los Angeles media underbelly is Nightcrawler, written and directed by Dan Gilroy and starring Jake Gyllenhaal in what easily was one of the best movie performances of 2014.

    Gyllenhaal plays Lou Bloom, a petty thief and borderline sociopath in Los Angeles who finds himself attracted to the often bizarre world of the "nightcrawlers" - television cameramen who troll the streets of LA at night looking for accidents, crimes and other gaudy events that they can videotape and sell to local TV stations, which are hungry for footage and ratings. Bloom's pathology means that he's willing to go places and do things that others are not, which means he gets great footage and the ability, perhaps for the first time in his life, to be upwardly mobile; there are times when the cadences of his speech reminded me of a bit of Tony Robbins, and the effect is truly frightening.

    It also is frightening to realize that the media that feasts on Bloom's efforts may be as sociopathic as he is. Personifying the slippery slope upon which the media finds itself is the terrific actress Rene Russo; she's better known for tough-woman roles in movies like Tin Cup and the remake of The Thomas Crown Affair, but here she is a remarkable combination of bravado and insecurity.

    Find a way to see Nightcrawler if you can. It is terrific.

    Speaking of noirish loos at the Los Angeles underbelly, the new Michael Connelly novel, "The Burning Room," continues his long-running saga about LA detective Harry Bosch, and does so in fine and compelling fashion. In this one, Bosch catches a murder case that has enormous political and social implications, which gives him the ability to rage against the entrenched interests of the establishment. The Bosch books (this is the 19th in the series, which began with "The Black Echo" in 1992) has positioned their protagonist as nearing retirement from the LAPD, but his passion for justice seems not to be flagging at all. In this case, Bosch's mantra - "everyone matters or no one matters" - is put on full, entertaining and illuminating display. Great stuff.

    BTW...the Amazon streaming series "Bosch," starring Titus Welliver as the title character, will be made available online on February 13. Can't wait. (The pilot already is online and it looks great.)

    Two TV notes, if I may...

    The final season of "Justified," the FX series about Elmore Leonard's estimable US Marshal Raylan Givens, has begun, and it looks like Givens, played by Timothy Olyphant, and his criminal nemesis Boyd Crowder, played by Walton Goggins, are headed for a High Noon-style showdown. As always, Olyphant and Goggins are mesmerizing, the show captures Leonard's cadences and idiosyncrasies in near perfect fashion, and I already know that I'll miss "Justified" when it is gone.

    I've always like Larry Wilmore in his "The Daily Show" appearances, and he seems ready for bigger and better things now that he is headlining his own "The Nightly Show" on Comedy Central, taking over the timeslot recently vacated by the great Stephen Colbert. Designed to have a distinctly black point of view on the events of the day, "The Nightly Show" already in its week has shown a willingness to talk about difficult subjects and take aim at targets such as Bill Cosby and Al Sharpton. Designed as a little bit like "The Daily Show: and a little bit like the old "Politically incorrect," it isn't as good as "The Colbert Report," but it is early, and I like its chances. Besides, they've already come up with one defining "bit" - at the end of the show, each of the panelists is hit with a question and challenged to "keep it 100," which is street slang for "keeping it real" - no BS allowed. The results can be startling and sometimes unexpected, but it makes for great TV. (And I may steal the idea for panel discussions I run in the future...)

    That's it for this week. Have a great weekend ... and I'll see you Monday.

    KC's View: