business news in context, analysis with attitude

Published on: April 23, 2015

This is going to be one of those times when I'm not going to provide a text version of this video commentary - just because I think it is better for seeing and hearing it.

The general subject is the importance of operating multiple formats - that while one does not necessarily have to shed one's skin when trying different formats, one should be something of shape shifter if one is going to be relevant to often wildly different customer bases.

The cool thing - the roughly three minute video was shot in four different stores, all on location in Toronto.

Enjoy.

To see past FaceTime commentaries, go to the MNB Channel on YouTube.

Published on: April 23, 2015

by Kevin Coupe

The Chicago Tribune reports on how the online dating site OKCupid actually experimented with its customers' profiles as a way of testing its algorithms and making sure they actually worked. Among its tactics was the deliberate suggestion of bad matches to make sure it really understood what factors went into good matches, and to see how people would behave.

"We wanted to make sure fundamentally the thing our site is based on actually worked,” company co-founder Christian Rudder said this week at an event in Chicago, noting that "various patterns go into match-making," including "common interests, mutual recent breakups and the idea that opposites attract." Rudder said that nobody complained about the experimentation ... though, of course, they did not actually know that they were being experimented on.

Rudder also said this week that "the site since 2011 has provided data to universities for their research projects." Among that information: "women on the site were attracted to men their own age while men ages 20 to 50 generally were attracted to 20-somethings."

To be completely transparent about this, I have to concede that I'm a little out of touch with the whole dating scene. After all, I haven't gone out on a first date with anyone since 1979. (Wow. That's an Eye-Opener...)

But I do think that the story and Rudder's admissions point out how careful companies should be with the data of their customers. We're in a data-driven culture, but I think even 50 year-old guys who are happy to provide their own data if it will help them meet available 25 year-old women might have a problem with having their data manipulated so the company can figure out whether its own algorithms are viable ... and worth charging for ... even though they're already charging for it.

I'm not saying it is necessarily wrong. I am saying that companies have to be careful, lest they be proven to be untrustworthy.

(By the way ... I know I am not in my fifties anymore, but it wasn't that long ago, and I cannot even imagine what I'd talk to a 25-year-old woman about if we were out on a date. Of course, that wouldn't be a problem, because there aren't enough algorithms on the planet to get a 25-year-old woman on the planet to even consider going out with me...)

Published on: April 23, 2015

NBC News reports that the "outbreak of listeria linked to Blue Bell ice cream products has been going on quietly for as long as five years," according to officials with the Centers for Disease Control and Prevention (CDC).

"It is not the biggest outbreak, not by any means," says the CDC's Dr. Robert Tauxe, an expert on foodborne diseases. "But it is probably the longest outbreak of listeria."

According to the story, "Genetic tests link Listeria bacteria from two separate Blue Bell factories to at least six cases of listeriosis dating back to 2010 ... Tauxe says disease detectives discovered this when they were investigating the three deaths from listeria in Kansas."

The current outbreak, which has killed three people and hospitalized seven others, now is believed to have been caused by two distinct strains of listeria, which investigators found when obtaining cultures from tubs of Blue Bell ice cream; the genetic sequence from one of them matched six old cases of listeria dating back to 2010.

"CDC recommends that consumers do not eat any Blue Bell brand products, and that institutions and retailers do not serve or sell them," the agency said, building on a voluntary total recall announced by the company.

Published on: April 23, 2015

We're fond of saying here that Amazon is looking to create a path of least resistance between consumers and the products it sells, as it tries to develop an all-encompassing ecosystem in which shoppers make Amazon the first, best choice for pretty much anything.

Now, it may be going from a path of least resistance to a road of least resistance.

The New York Times reports this morning that German automaker Audi plans to "begin testing a system in Munich next month that would allow people to order goods from Amazon and have them delivered by DHL, the German package delivery service, to the trunk of their parked car ... Customers who wanted to use the service would agree to allow their cars to be tracked by GPS. The DHL delivery worker would then receive an electronic authorization that could be used to open the trunk to deposit a package. For security reasons, the authorization would work only once and be valid for a limited time ... Customers would also be able to leave letters and packages in their trunks for pickup by DHL, a unit of Deutsche Post DHL, which also operates the German postal service."

The test is not the first of its kind. Volvo conducted a similar test, but has not yet said whether it will roll the concept out. (So to speak.)

The Times writes that "the pilot project is the latest attempt to improve delivery of products ordered online, which still depends on fleets of trucks and armies of workers ringing doorbells. Both Amazon and DHL have floated the idea of using aerial drones for delivery. By comparison, delivery to car trunks seems relatively low-tech.

"Still, there are some obvious problems. Cars do not stay in the same place. So packages could be delivered only to vehicles that are standing for a period of time in a driveway, street or parking lot." But, if it works, "the service would be a way for carmakers to help ensure that automobiles remain a central part of people’s lives."

Published on: April 23, 2015

The Associated Press reports that the Vermont Attorney General's office "has formally adopted the regulations implementing a state law requiring the labeling of food produced with genetic engineering," which means that the new regulations will take effect on July 1, 2016.

It was about a year ago that Vermont legislators passed the law, and it was signed into law by Gov. Peter Shumlin.

The story says that "Attorney General Bill Sorrell said with the formal adoption of the rule, the state is giving ample time for food manufacturers and retailers to prepare for the law to take effect."

Published on: April 23, 2015

There is a fascinating piece in Tech Crunch in which food historian Robyn Metcalfe writes about the possible bubble that is being created by massive investments into food industry start-ups that aim to disrupt traditional methods of doing business.

Metcalfe writes that a kind of recklessness is "creeping into the food industry, as we rush to embrace a new surge of food-related startups. A bubble is coming. Unfortunately, venture capitalists may not be subjecting food startups to the same due diligence that they do for non-food-related startups."

According to the piece, "Money is flowing into the food sector; VCs raised $48 billion for food startups in 2014, the highest amount since 2000. We’re facing an oversupply of capital even as water and arable land are in short supply." However, Metcalfe also writes that "the food bubble is nested and expanding within a general tech startup bubble. Delusions tend to be infectious, infusing the over-valuations of general tech startups into the food community, making it difficult to discern whether a food-delivery service has a solid value proposition or if the technology itself is overhyped."

Provocative piece ... and you can read it in its entirety here.

Published on: April 23, 2015

• The Wall Street Journal reports this morning that Walmart this year has set a policy that ties executive bonuses to the company's sales as well as its operating income; in the past, operating income was the primary benchmark against which bonuses were set.

The retailer said in a Securities and Exchange Commission (SEC) filing that the change was made “to emphasize the importance of sales growth as a priority for our company."


• Walmart-owned Sam's Club said this week that it is embarking on "a major expansion of its service offerings that could save members up to $2,300 per year on service solutions for business and personal needs ... The five new services range from protecting members’ personal data to giving a small business new resources to grow its customer base, and round out an extensive suite of solutions that help redefine the value of Sam’s Club membership."

Among the offerings is the Sam’s Club Business Lending Center, described as "a simple digital platform for business members to gain access to responsible capital – from $5,000 to $350,000 - through Lending Club business loans and SmartBiz 7(a) SBA Loans."

Published on: April 23, 2015

The St. Louis Business Journal reports that Starbucks CEO Howard Schultz has promised to open a store in Ferguson, Missouri, the community that has faced enormous racial strife following the killing last year of Michael Brown, a black teen, by a white police officer, and the subsequent decision by local and federal criminal justice officials not to file charges in the case.

The announcement comes following last month's much-criticized attempt by Starbucks to promote a discussion of the nation's racial issues and divisions by having baristas write "Race Together" on coffee cups and engage in conversation about the subject with customers.

Published on: April 23, 2015

• The Wall Street Journal reports that "Sysco Corp. has filed a memorandum opposing the U.S. Federal Trade Commission’s attempt to block its proposed $3.5 billion merger with US Foods." The memo, according to the story, "claims that the merger, which the FTC has said might violate antitrust regulations, actually makes the food-service industry more competitive."

The story notes that the FTC "claims that the combined company would control all the market share in San Diego," but Sysco says that "more than 24 companies compete in the area."



• California-based Unified Grocers announced that it has reached "a definitive agreement with New York-based AmTrust Financial Services, Inc. to sell Springfield Insurance Company, Unified Grocers Insurance Services (UGIS) and their related insurance operations.

"We believe this transaction to be in the best interests of clients of both Springfield Insurance Company and UGIS as the businesses have been sold to a forward-looking, successful company that can apply a dedicated focus to their clients, said Bob Ling, President and Chief Executive Officer of Unified Grocers.

Published on: April 23, 2015

We had a story the other day from Bloomberg about how people were spending more money in restaurants than in supermarkets, which prompted an email from MNB reader Brian Todd, who also is president/CEO of The Food Institute:

Need to opine a bit on the Bloomberg item:

Americans are not spending more dining out than for groceries, contrary to the report by Bloomberg. They are, however, not always doing so at their local supermarket. We have been tracking retail sales of food for decades and restaurant and bar sales in March did outpace sales at grocery stores by about $2.54 billion. However, consumers spent about $25 billion more for groceries at other retail venues selling food and consumable products that were not included in the numbers used by Bloomberg.

Breaking it down, The Food Institute estimates $17 billion more was spent for groceries at warehouse clubs and supercenters, another $6 billion at other food retailers like butchers, bakers and specialty food stores, approximately $1.5 billion at drug stores, and nearly half a billion online.

Adding the above into the mix puts actual grocery sales at around $75 billion in March - 42% more than eating and drinking place sales. And that doesn’t even include groceries sold at mass merchandisers like Walmart and Target’s traditional locations.

From another reader:

One contributing factor to this spending, I suspect, is that March is a big month for restaurant week(s), in New England at least.  I definitely go out to eat more often during this time period, to experience a new restaurant or to enjoy a prix-fixed menu at an oldie but goodie.  I live just outside of Portland, Maine.  I think at one point, and this may still hold true, Portland was determined to have the most restaurants/bars per block than any US city out there.  Anyway, even with the great deals available during restaurant week, I spend more going out in March than any other month of the year.  I know the same for many of my friends and family in the area also.  We very much look forward to this month!
 
Just a thought…guess we'll see what April and future months bring.
 
On a broader (and more important) note, I very much agree with you that stories should not 'over-characterize generations.'




Regarding the decision by Walmart to close five stores because of "plumbing problems," and accusations by labor that this is actually a move to crack down on pro-union employees, one MNB user wrote:

In the past it's had to do with bad construction issues.

Don't have five bad plumbing issues across the U.S. at the same time and take that long to fix.

Last time they had this in a store in Texas they did same thing then had to tear it down do to wall roof separation.

From another reader:

I work about 3 miles from the Wal-Mart that closed in Oklahoma.  The local news cited plumbing problems, but the buzz around the office is that the level of theft in the store and most importantly, the criminal activity in their parking lot is astounding!  Many Tulsans will not shop there for fear of being robbed in the parking lot.  Don’t you find it odd that they closed a group of stores simultaneously, in different states, all citing plumbing problems?  Oh yea, and the local Health Department contact knew nothing about plumbing issues in their store.  Go figure!

Meanwhile, 6-7 miles to the south at another Wal-Mart a corpse was just discovered in an SUV that allegedly had been parked in their lot since February!

And another:

You don't have to be in the amen corner of the UFCW to have a gut feeling that this just wrong!




I went off on an anti-FSI rant the other day, and it prompted more than a few emails...

One MNB reader wrote, in response to my comment that FSIs would die because newspapers are dying:

There are no newspapers delivered to my home or office. However, every week my mail boxes are full of the FSI's from the local supermarkets and drugstores and other retail establishments. No newspapers required.

Fair enough. But another reader chimed in:

I'm always tickled every other Thursday when there is a happy confluence of the recycling pick up with the FSIs in my morning Star Ledger. When I walk out my driveway and pick up the paper I can immediately deposit the waste in the recycling bin.

MNB reader Joseph Barbara wrote:

Been a fan and daily reader of MNB for 4 years now.  My wife, 37 years old, grocery shops for our family of 4, and 2 dogs.  She is technically savvy with her iPhone and uses digitally downloaded coupons frequently for odd, non-grocery, one-off stuff, usually for dining out.   We are not big fans of our local newspaper, but we still subscribe for Sunday’s edition for one reason, the FSIs.  In the digital age, I know this seems counter-intuitive, and I get your prognosis on FSIs being a “dead-man walking”, but they still work.  Yes, they are a little labor intensive, but when actually planning the shopping list, and then executing those purchases, paper is just easier than mobile phones.  It’s tough to utilize 6, 10, 12 coupons from your phone on a  shopping trip, but handing them to the cashier for scanning is easy.  Just my 2 cents…

From another reader:

As long as the cents-off coupon markdowns, mfg. coupon processing and FSI ad space non-sales revenue generators are subsidized by CPG companies those who make the money will keep snapping those buggy whips... and paying for studies like the one to which you refer.

From MNB reader Matt Nitzberg:

I’m writing with regard to the insights from GfK and News America on paper coupon usage. I haven’t seen the full report, so my views are informed by what was selected for inclusion in the press release.

While the release seems to have a clear communication objective (something like “FSIs remain important”), I agree with your stance that newspaper-driven executions are going to decline over time as circulation and impact fade. At the same time, this report raises some additional considerations about shopper behavior and smart marketing:

Being shopper-centric means avoiding a channel-centric model. Some valuable shoppers still prefer paper coupons, and they should receive them when aligned with the marketing, financial, and operating strategies of the business. That’s because personalization shouldn’t just include personalized product content, but also a personalized contact strategy including channel (driven by individuals’ media engagement and response rates), frequency (driven by shopping patterns and other factors), and personal value drivers (coupons vs. recipes, for example).

Targeted and relevant paper coupons work better than non-targeted paper offers. The press release is not clear on whether all of the data is from FSI usage. At several points, it seems to broaden the universe, using language like “print-based coupons such as those in free standing inserts (FSI) typically found in Sunday papers,” and “traditional paper coupons.” If “print-based” includes reference to a wider range of non-FSI paper coupons (including precisely-targeted and personalized content), this may blur the lines and conclusions. Redemption rates are dramatically higher on relevant content and offers, compared to FSIs and other non-personalized offers. And these highly-targeted printed offers don’t depend on newspapers.

While the press release referred to better redemption rates for paper vs. digital offers, redemption rates climb quickly on digital offers when they are (1) made available to digital-desiring consumers via their preferred touchpoints (personalized website content, smartphone app, CRM communications, etc.), (2) highly personalized, and (3) supported by a learning mindset which drives continual improvement. However, many businesses are primarily focused on the low cost of digital distribution, and the resulting executions emphasize efficiency vs. effectiveness. This can lead to a proliferation of irrelevant offers which may maximize reach and frequency but undermine brand equity and sales results. In today’s context – a sea of undifferentiated promotional offers – it’s not surprising that redemptions for many digital offers can be low. I expect this will change as more marketers and their agencies master the elements required to engage grocery shoppers in a digital context, and as more shoppers opt out of weaker programs.

Looking to the future: As digital capabilities become more integrated in the shopping and consuming experience, and as digital natives begin to represent a larger share of grocery shoppers, getting digital right will be even more important for retailers, brands, and their partners. New shopper expectations will emerge, and success will be won by marketers who anticipate, create, and deliver on the new normal in ways that improve shoppers’ experience and earn their appreciation.




On the subject of Chipotle's continued success, MNB user Anjana Agarwal wrote:

One of the reasons the restaurant does well is that millennials/ teenagers love it.

They use fresh ingredients, offer a choice in putting together your food, and offer low-carb version - the burrito bowl which incidentally is even more popular than the wrap. They also have an order ahead app which my high-schooler and her friends use religiously to order food, and pick up instead of eating their school cafeteria food (Juniors and Seniors are allowed to step out for lunch). Due to the fast and casual ambiance and food, it's become a hangout for after sports, during school and college lunch times, in addition to the usual customers. The menu is simple and the pricing is simple too - most items are the same price, which takes the math out of ordering lunch.

Even my gluten-free health nut friends dine there with their kids, as it offers them choices. Their low-key advertising with their blend of humor helps too!




Finally, on an other subject, from MNB reader Elaine Howard:

Thanks for this most interesting article on D’Agostino’s.  My grandmother, an English immigrant, shopped at Gristede’s and I recall going to both stores when visiting her as a child. My mother dated Bill Wrightson who was a VP at A&P under the Hartford era.   I am not surprised that the heyday for D’Agostino’s is over, but the change in  store counts are shocking.