business news in context, analysis with attitude

Published on: February 3, 2016

by Kate McMahon

The folks at Death Wish Coffee can thank its die-hard fans for catapulting the small upstate New York start-up onto the world’s biggest stage – a 30-second commercial on Sunday’s Super Bowl telecast.

“WE WON! WE WON!” trumpeted the announcement that Death Wish had annihilated 15,000 other small business challengers in a competition hosted by the software maker Intuit.

For Mike Brown, who created the ultra-caffeinated coffee with the black skull-and-bones label in 2012, winning the free commercial valued at a cool $5 million “is beyond our wildest dreams.”

Death Wish currently sells about 1,000 pounds a day of “the world’s strongest coffee” at $20 per pound through its website, Amazon and in grocers near its headquarters in Round Lake, NY. The business plan calls for it to expand nationally through major retailers, and is already reportedly in talks with Target.

Starbucks need not be worried; Death Wish coffee shops are not on the agenda.

Brown and his team of 12 are anticipating a huge jump in sales once the Super Bowl’s 100-million plus viewers see the “Storm’s a-Brewin’ “ ad, which, as you can see above, opens with a fierce Viking ship captain exhorting his men to row through a raging storm. (You can watch the commercial above.)

Intuit, sensing an opportunity, debuted the QuickBooks Small Business Big Game challenge last year. Goldieblox, a toymaker for girls, won the coveted 2015 free ad slot, and saw traffic to its website increase within seconds and sales skyrocket after the exposure.

This year's contest drew 15,000 small biz entrants, and an Intuit panel narrowed the field to 10 based on the owners' passion, authenticity, and other "entrepreneurial benchmarks.”

Enter Mike Brown, whose dawn patrol Saratoga Coffee Shop customers urged him to create a high-octane java to get them through their day. He tested a variety of beans and roasting methods, and with customer approval, began bagging Death Wish Coffee beans in his mother’s basement. Using robusta beans, instead of the arabica beans found in most coffee, Death Wish says its brew contains 200% more caffeine than the average cup of joe. (The Content Guy and I tried Death Wish yesterday. We found it to be a smooth, dark roast that perhaps was stronger than Starbucks ... but it wasn't like it gave us the shakes or had a discernible impact.)

Informed that Death Wish had made the contest’s Top Ten in October, Brown turned to his cult-like followers on Twitter and Facebook for support and they rallied thousands of winning votes. This post from this Death Wish aficionado is typical:

BLACK LABEL BERSERKER NATION!!! KEEP UP THE A$$-KICKING SUPPORT!!! OUR BELOVED DEATH WISH COFFEE FAMILY NEEDS YOUR HELP IN THE VOTING … KEEP CRUSHING IT!!”

The lesson here is clear – Death Wish Coffee’s success transcends its coffee bean/roasting formula. With its edgy humor, clever and packaging and merchandise and killer social media savvy, Mike Brown and his team have fomented a fervent fan base. Some have even posted Instagram photos of their Death Wish Coffee tattoos.

And here’s where the Amazon effect allows small businesses and startups such as Death Wish become disrupters through an international online presence and next day delivery, as well as availability through Amazon's Subscribe-and-Save service.

Appropriately, Mike Brown had creative input into the commercial, which he thinks will be rated as “epic” in real-time online reviews and around the nation’s water-coolers on Monday morning. He and a few of his co-workers will be watching the telecast in San Francisco with the team from Intuit and its creative agency.

And the operation in Round Lake is primed for Monday. “We’re already getting a taste of what’s to come and ramping up inventory,” spokeswoman Thea Teriele said yesterday. “We’re ready. It’s chaos, but organized chaos here.”

Comments? As always, send them to me at kate@mnb.grocerywebsite.com .

Published on: February 3, 2016

The Wall Street Journal reports that Sandeep Mathrani, CEO of mall operator General Growth Properties, said this week that Amazon is poised to open hundreds of bricks-and-mortar stores around the country.

Amazon's "goal is to open, as I understand, 300 to 400" stores, Mathrani said.

The Journal writes that "it wasn’t clear where Mr. Mathrani got Amazon’s store figure, but he could have spoken with Amazon’s real-estate executives about their plans."

Amazon has not commented on the report.

The Journal goes on:

"Amazon opened a physical bookstore in Seattle in November, its first foray into brick-and-mortar retail. The store, in an outdoor mall, sells books and Amazon’s Kindle and Fire devices. Amazon says it stocks the location using data it collects from its website. The store stocks about 5,000 titles at any one time, compared with millions on its namesake website ... While Amazon can overwhelm competitors with its vast online inventory, it still cannot rival the immediacy of shopping at the mall. Not that it isn’t trying: Amazon has begun one-hour deliveries in about 20 cities and same-day drop-offs in other markets. At a handful of U.S. colleges, Amazon has physical locations for students can pick up or drop off merchandise and speak to Amazon representatives."

Of course, even if Amazon were to adopt the plan that Mathrani talked about, it won't happen overnight. "If Amazon were to open hundreds of stores, it would take years to pick locations, reach leasing deals, and hire staff," the Journal writes.

Published on: February 3, 2016

CNBC said yesterday that "federal prosecutors in central California wanted 3 years' worth of information on food safety matters" as they look into a norovirus outbreak there that left 207 people sick.

The embattled restaurant company - which has been dealing with a multitude of food safety crises despite its self-identification as a company that believes in 'food with integrity' - made the revelation even as it announced that its Q4 same-store sales were down 14.6 percent, though profits - down 44 percent to $67.9 million compared with $121.2 million a year earlier - weren't as bad as many analysts expected.

Still, the company has major obstacles to deal with as it attempts to rebuild trust among its patrons. The Wall Street Journal has a story about how, as Chipotle has looked to revamp its safety procedures, it sometimes has come into conflict with federal regulators.

CEO Steve Els "sometimes was at odds with the CDC, which helped investigate the outbreak of E. coli tied to Chipotle that sickened 55 people across America, as well as a smaller E. coli outbreak that sickened five more," the Journal writes. "Chipotle executives publicly complained the CDC was issuing too many updates. The CDC, in turn, bristled at Chipotle’s going public with statements such as Mr. Ells’s mid-January suggestion that the agency could soon declare the outbreaks over.

"Behind the scenes, Chipotle also disagreed with health officials about the E. coli’s likely source, said people familiar with the discussions. Government officials leaned toward produce. Chipotle concluded the E. coli was most likely from contaminated Australian beef."

The CDC has said that the outbreak is over, but that the cause has not been determined.

Published on: February 3, 2016

The Tampa Tribune reports that Publix Super Markets has signed leases for two locations in Virginia where the company plans to open stores - its first stores in Virginia, the seventh state in which it will be doing business.

According to the story, "The company said it will open a 54,000-square-foot store in Bristol in the fourth quarter of 2017, with a 49,000-square-foot store in Glen Allen in 2018." The Glen Allen store is said to be on land originally acquired for a Ukrop's store; Ukrop's was bought by Ahold in 2010

Publix currently operates 1,100 stores.

Published on: February 3, 2016

USA Today reports that the first CVS Pharmacy stores inside Targets are scheduled to open today in the Charlotte, NC, area, the first of "Target’s 1,672 pharmacies in 47 states (that) will be rebranded as CVS Pharmacy within six to eight months as CVS-funded renovations are gradually completed."

For retailers, the story says, "the store-within-a-store concept is enticing because it can generate extra foot traffic for the lessee - Target, in this case - and extra revenue for the lessor. But there are also risks when competitors tie the knot. Loyal customers may defect  or one or both brand identities can get muddied."

Target CEO Brian Cornell says that "Target customers will benefit from access to CVS drugs and clinical services while 'at the same time it allows us to free up our resources' to focus on 'signature categories' such as groceries, baby items and home goods." And while CVS will lose sales of candy, makeup and greeting cards to Target, it believes it can make up the difference on increased pharmacy sales.

Published on: February 3, 2016

• Bloomberg reports that Bernie Sanders, the Socialist Senator from Vermont who is running for the Democratic presidential nomination, said this week that the Walton family is the nation's biggest welfare abuser because it "doesn’t pay its employees a 'living wage,' forcing many workers to turn to food stamps, Medicaid and subsidized housing funded by taxpayers."

Sanders also said the Waltons exemplify a "rigged economy," and that it is "unacceptable that Walton family has more wealth than bottom 40% of Americans."

Sanders made the comments at a campaign event in Keene, New Hampshire.

Published on: February 3, 2016

Content Guy's note: One of the features of this year's FMI Connect Show in Chicago will be the Retail Dietitians Business Alliance (RDBA) Retail RD of the Year Award ... and Phil Lempert, founder/CEO of the RDBA, asked for an opportunity to call for nominations. Which MNB is happy to provide...

Retail dietitians are taking the industry by storm, building successful healthy living programs that also positively impact the retailer’s sales.  From in-store promotions to extensive social and traditional media plays to community partnerships to suggestive selling in the aisles, retail dietitian programs are a success story for retailers as well as consumers seeking to live healthier lives.
 
If you’ve worked with one of these talented professionals, you can recognize her or him by nominating her or him for the Retail Dietitians Business Alliance’s Retail RD of the Year Award.  This award recognizes a professional who shows leadership in utilizing business skills and industry knowledge to positively impact consumer behavior change through the retail sector.  The award will be presented at the FMI Connect show in Chicago from June 20-23, 2016.
 
To learn more about the award’s criteria and application process, please click here. Applications for the award are due by midnight on March 31, 2016.

- Phil Lempert

Published on: February 3, 2016

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

• The Seattle Times reports that the auction for Haggen's core Pacific Northwest stores, originally scheduled for this Friday, has been delayed a week, to February 11.

The story notes that "when it shed most of the stores it had acquired from Albertsons and Safeway earlier this year, Haggen said it would retreat to a profitable core of Pacific Northwest locations. But an agreement with the company’s lenders requires it to explore any opportunities to raise cash by selling those core stores as well."


• The Associated Press, having been chastened by failed attempts to stop a company called Hampton Creek from making an eggless spread and calling it Just Mayo, Unilever-owned Hellman's now is launching its own version.

According to the story, Hellmann's version "will hit shelves later this month under the label 'Carefully Crafted Dressing and Sandwich Spread'." The story goes on to note that "although Unilever ended up dropping its lawsuit against Hampton Creek, the case made the labeling of 'mayonnaise' and 'mayo' a surprisingly contested affair. Soon after the legal tussle made headlines, it was discovered that Unilever was editing own website so that some references to 'mayonnaise' were changed to 'mayonnaise dressing.' It turns out that some Hellmann's own products wouldn't qualify as mayonnaise either under existing guidelines."


• The Financial Times reports that Tesco plans to offer staffers in its UK stores a 3.1 percent raise, which the company said will give "established colleagues" wages that are "significantly more" than those established by a newly established "National Living Wage" that is the equivalent of $10.37 (US).

The new Tesco minimum will be the equivalent of $10.98 (US).

FT writes that "a minority of staff will still lose out, as the double pay they receive for working on Sundays and bank holidays will go, to be replaced by a flat time-and-a-half rate for all staff. But they will be compensated with a lump sum payment that will account for 18 months’ worth of the shortfall..."

Hate to minimize a raise, but I can't imagine that a 61 cent per hour increase is going to make Tesco staffers feel all warm and valued. Then again, maybe "living wage" means something different in the UK than it means here...

Published on: February 3, 2016

• Kroger has announced the retirement of Rick Going, president of the company's Nashville division, after 35 years with the company. He will be succeeded by Zane Day, VP operations for the retailer’s Smith’s division.

Meanwhile, Katie Wolfram, Vp of merchandising in the company's Central Division, has been named president of the division, succeeding Jeff Burt, who recently was named president of Kroger's Fred Meyer division.


• Albertsons announced that Tamara Pattison, the company's Group Vice President of Digital, Loyalty and Customer Analytics, has been named Senior Vice President of Digital Marketing & eCommerce, which includes all aspects of Shopper Marketing, Digital Marketing, Loyalty & Rewards, and eCommerce.

Published on: February 3, 2016

Responding to our piece yesterday taking note of a Vox analysis of Amazon's business plan, MNB reader Anjana Agarwal wrote:

I agree with the Vox article, that Amazon's strategy is clearly to redeploy every dollar back into the company to grow it. That's how Amazon has grown so far, it never did make financial sense, right from the time they offered Free Shipping on orders over $25. But they made it work, and the industry soon followed, to the shopper's advantage. Now I can get free shipping from almost any site, although minimum purchase threshold varies.

Prime Now is already launched in some markets, like Seattle, and it works. My teenager ordered the minimum $20+ worth of products the other day as she wanted her $5 beauty product to arrive in an hour and did not have a car to drive to the store, so she just ordered some junk food to supplement her beauty purchase! I've used it before for last minute party supplies, or for a product that's not available in any store close by and I wanted it at my doorstep in a couple of hours. I also like the fact that Prime Now goods arrive in a little brown paper bag instead of cartons as my house is beginning to resemble a recycling plant with all the Amazon orders I place! I believe Amazon is losing money on Prime Now at this point, but if I plot my purchases from Amazon since 1999, my purchase curve looks very much like the overall company sales curve with a big inflection point at the time the Prime program was launched. (By the way, Amazon allows you to download every transaction ever made on an excel spreadsheet through your account page and I am aghast at how much I've spent over 16 years with Amazon! Way more than the lifetime value I've calculated for retailers, except perhaps, Costco!)

I did a little poll at work and almost every colleague is a Prime member and I bet they've all increased spend since they joined Prime. 40% of Amazon customers were Prime Members in 2015 vs. 25% in 2013. Prime members spend more than double of non-Prime members, about half of them spend over $800 as per a RBC survey. So Prime Now might sound crazy if we try to look at the short term numbers, but Jeff Bezos always has his eye on the very, very long term view and wants to keep adding to the Prime base. Every day is Day One for him!




On another subject, MNB reader Rebecka Rivers wrote:

Really appreciated reader Thomas Palmer’s comments on global warming, but wanted to add my understanding to it—yes, global warming gets us more moisture in the lower atmosphere. The reason this becomes dangerous is that it contributes to lower salinity levels in the oceans, which eventually leads to the stalling of ocean currents. Ocean currents keep climates temperate, or, as my father is fond of saying, “it’s not the global warming that you need to worry about, it’s the global cooling (think: ice age) that comes after it that is really worrisome.”

Of course there are also solar flares, the Earth’s proximity to the sun, human events (rise of industry, motor vehicles and airplanes), volcanic eruptions, meteors and magnetic pole shifts that also can lead to changes in the global weather. Just as in retail, change comes not from the identified threat, but instead the unexpected disruptors!