business news in context, analysis with attitude

Published on: February 17, 2016

by Kate McMahon

Chipotle found out the hard way that hell hath no fury like a burrito lover denied.

Free burrito rain checks were a key ingredient in Chipotle’s $50 million campaign to regain consumer confidence after its recent multi-state food poisoning outbreak. The fast casual chain closed all of its 2,000 outlets last Monday for a four-hour food safety virtual meeting for its 50,000 employees. To compensate for messing up patrons’ lunch plans, Chipotle offered a free burrito to those who texted “rain check” to a six digit number.

That’s when a hailstorm of complaints hit Chipotle’s Facebook page and Twitter feed. Customers fumed that their texts were rejected by the system or went unanswered. Though there was fine print saying “limited quantities” on a first come, first serve basis, even more folks were furious that the online click response they got was “Darn, you just missed it.”

In the meantime, Chipotle’s competitors looked to capitalize on the category leader’s woes. Moe’s (that’s an acronym for Musicians, Outlaws and Entertainers) Southwest Grill took out a full page ad in USA Today that read, “We’re open, especially on February 8th” and continued its Moe Monday "buy one burrito, get one free" promotion. On Twitter, DosToros featured the hashtag #NoDaysOffHere and Qdoba chimed in with “Hunger Doesn’t Accept Rain Checks.” Freshii offered 50% percent off all “Mexican-inspired menu items,” complete with the hashtag #chipotfrii.

In an unanticipated turn of events, Maryland lawyer Henry Levin’s cell phone was flooded with 300 “rain check” texts from Chipotle customers who added an extra 2 to the six digit number and reached him. He did his best to respond. Chipotle reportedly was not interested in reaching out to those who texted the wrong number, but did offer Levine four free burrito vouchers.

For Chipotle founder Steve Ells and his team, the burrito brouhaha overshadowed the firm’s other efforts to prevent a repeat of the e. Coli and norovirus outbreaks that sickened 500 people last year. For a company that prided itself for serving “Food with Integrity,” the string of illnesses and eatery closings damaged its image and the bottom line. Profits plummeted in the fourth quarter compared to the previous year and wary diners stayed away.

Promising customers a free burrito to get them back was a smart move. Failing to deliver on that promise was a stupid mistake. I think Chipotle should have honored every “rain check” request, even if it came in after the small print 6 p.m. deadline. At MNB we often say you only get one chance to make a good first impression. You’re lucky to get any chance to restore a damaged reputation, and in my mind Chipotle bungled that well before 6 p.m.

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

Published on: February 17, 2016

by Kevin Coupe

Okay, here's an Eye-Opening number for you.

Giesecke & Devrient, an automotive security firm, is projecting that three-quarters of all new cars shipped in 2020 will be equipped with integrated connectivity technology - an enormous jump from 2014, when just 10 percent of new cars were.

The company says that there will be roughly 1.1 billion cars on the road in 2020, of which about 20 percent will have integrated connectivity technology.

"Vehicles of the future will be fully networked, independent, mobile ecosystems with specific services,” says Stefan Auerbach, a group executive with the company, adding that "consumers increasingly demand connectivity services such as Wi-Fi for passengers and external internet connections for music streaming, navigation, and other applications. We are seeing a range of new services in this sector, including pay-as-you-drive insurance, location- or context-related services, pay-per-use for additional functions, and customized driver features."

Which gives marketers an expanding new field on which to play.

It is an Eye-Opener.

Published on: February 17, 2016

Haaretz, an Israeli news site, reports that US retailer Kroger "may be coming to Israel as a partner with Yossi Sagol and Eran Meital, two investors bidding to buy food retailer Mega," which has 127 stores there.

The story notes that Kroger would become the operating partner of the chain and that its "entry would be the first by an overseas player in the Israeli supermarket sector. Unlike in other retail sectors such as apparel and furniture, foreign companies have been deterred by obstacles like kashrut and low profit margins.

"Tamir Ben Shahar, CEO of the retail consulting firm Czamanski & Ben Shahar, said Kroger would shake up food retailing by bringing in American management practices and service."

Published on: February 17, 2016

EcoWatch reports that Veganz, a Berlin-based vegan grocery store chain, plans to open an outpost in Portland, Oregon, later this year ... its first in the US.

Veganz stores import products from approximately 30 countries, and typically offer as many as 6,000 vegan SKUs. The story says the company has stores in Berlin, Frankfurt, Hamburg, Munich, Essen, Cologne, Prague and Vienna, with another to open shortly in London.

In addition to the supermarket, EcoWatch writes, "Veganz also plans to open a shoe and clothing store and restaurant in Portland."

Published on: February 17, 2016

The Seattle Times reports that Amazon is adding restaurant meal delivery to its Prime Now service in San Diego, following similar launches in Austin, Baltimore, Los Angeles, Portland and Seattle.

According to the story, "The restaurant service falls within Amazon’s tradition of adding perks to its $99-a-year Prime membership. That steps up pressure on competitors ranging from Netflix, which has a video-streaming service that rivals the one that comes with Prime, to Peach, a Seattle-based lunch-delivery start-up founded by Amazon veterans.

"The restaurant delivery service remains free, for now, Amazon says. The company promises to bring the food within an hour, and it says that so far it’s delivery times average 39 minutes."

Published on: February 17, 2016

The NPD Group is out with a new report suggesting that "a confluence of changing demographics, economic pressures, and evolving consumer attitudes and behaviors" has forced major food companies - dubbed "Big Food" - to struggle "to find growth in a changing marketplace where legacy brands are ceding share to smaller, new entrants and the store perimeter is outperforming center of the store."

The report goes on: "Among the contributing factors to Big Food’s current dilemma is consumers’ increasing demand for purity in their foods and beverages. Consumers are avoiding adulterated elements and looking for natural and fresh food and beverages at grocery stores, and avoiding the processed foods on which many major food companies base their business. Fresh, limited processing and natural are desired characteristics particularly among Millennials.

Two other trends affecting Big Food's sales:

• "The number of food and beverage occasions consumed by the average American is flat, according to NPD. The number of dishes and ingredients used to prepare meals continues to decline as more one-and-two dish meals grow at the expense of the traditional 3-part meal. Consumers are also relying more on 'healthy' portable snack foods to be a part of their breakfast, lunch, and dinners. Dinner has seen the greatest contraction in dishes and ingredients while breakfast has actually gotten a little more involved with the popularity of eggs."

• "Generational and multicultural attitudes are also influencing U.S. consumer consumption patterns and the business of food. Millennials are more diverse than the generations that preceded them with 44 percent being part of a minority race or ethnic group. Even more diverse are those Americans younger than 5 years old with 50 percent being part of a minority race or ethnic group. By 2044, the U.S. Census Bureau projects that more than half of all Americans will belong to a minority group."

“The bottom line is that major food companies and retailers are faced with meeting changing consumer needs with processes and infrastructure that were built for the mass produced foods consumers craved a decade ago,” says David Portalatin, a vice president and food analyst with NPD. “It’s now a battle for share of stomach but through acquisitions and American ingenuity, food companies have made progress over the past few years in finding white space, growth occasions, and new products.”

Published on: February 17, 2016

The Los Angeles Times reports that Dollar Shave Club has finally responded to Procter & Gamble's Gillette brand's December 2015 lawsuit against it, which charged that it had stolen patented technology for use in its own available-by-subscription razors.

"The company fired back at Gillette, issuing a statement and filing a counterclaim in U.S. District Court in Delaware," the Times writes. “'Dollar Shave Club does not infringe on any valid and enforceable claim of the Gillette patent,' the company said. 'We will vigorously defend ourselves and our three million members against these meritless claims ... We prefer to have the Dollar Shave Club experience speak for itself in the marketplace, and we are not intimidated by Gillette's attempts to thwart competition with litigation'."

The Times writes that "since launching in 2012, Dollar Shave Club has turned the razor blade industry on its head, offering cheaper prices online and building a lifestyle brand around its tongue-in-cheek culture. Gillette started its own online subscription service in 2014, calling it Gillette Shave Club."

Dollar Shave Club reportedly has a 50 percent market share of the online razor market. The Gillette Shave Club has about 18 percent.

Published on: February 17, 2016

The Wall Street Journal has an interesting story about a growing trend in restaurants - serving gourmet meals to staffers during off-hours.

"Countless staff meals are eaten by kitchen and front-of-the-house workers around New York City every day, but the tradition is taking on greater importance as restaurateurs and chefs increasingly see it as a way of setting the tone for service that day and keeping morale high among employees," the Journal writes. "Gone are the days of, as one restaurant veteran called it, 'gruel in the basement,' when a kitchen assistant would take scraps from the refrigerator and try to fashion something edible."

The story goes on: "The trend has evolved in the past few years for a variety of reasons, industry insiders say. Part of it is a reflection of the changing ethnic makeup inside many kitchens ... And as competition has heated up among chefs, the staff meal has become a testing ground for junior-level cooks looking to impress their bosses and move up the food-world ladder. They are encouraged to get creative, but they also must confront some of the time-honored challenges of the meal, which is typically prepared quickly and tends not to feature high-ticket items—part of the reason so many of the meals are built around chicken."

Published on: February 17, 2016

• The Wall Street Journal reports that food delivery startup Door Dash is about to close on $700 million in investment capital - short of the $1 billion valuation that it was looking for when it began this round of fundraising.

According to the story, "DoorDash’s inability to raise funding at a higher valuation than its previous round, as first reported by The Wall Street Journal last month, is the latest sign of a broader retreat by venture-capital investors, who have grown more cautious in recent months. The so-called flat round could be detrimental to DoorDash in its effort to attract and retain top talent, as it points to lower expectations for growth."

Published on: February 17, 2016

• KIVI-TV News reports that Albertsons has announced that it "has entered into an agreement to purchase and rebrand four Idaho-based Paul’s Market stores ... Albertsons will be rebranding the Paul’s Market stores at 20 East Wyoming in Homedale, 700 East Avalon in Kuna, 10565 Lake Hazel Road in Boise, and 132 East Lake in McCall."

Albertsons also will be acquiring three Paul's stores in Caldwell, Mountain Home and Nampa that will be closed. Terms of the deal were not disclosed.


• The Chicago Daily Herald reports that the Joe Caputo & Sons grocery store chain there has closed the third of three former Dominick's stores that it acquired when Safeway pulled out of the market saying that that three new stores put a "large and unexpected financial burden" on its operations.

The company closed its Elk Grove Village store this week, and the stores in Arlington Heights and Northbrook late last year; its original three stores in Des Plaines, Algonquin and Palatine remain open and "strong," the company said.

The story notes that "Anthony Marano Co., a Chicago-based produce wholesaler, is suing the grocer, accused of failing to pay for $3.6 million in produce."

Published on: February 17, 2016

• Sobeys Inc. announced that Yves Laverdière, the senior vice president, Merchandising, for the company's IGA banner, has been named president of its Quebec business unit.

Published on: February 17, 2016

...will return.

Published on: February 17, 2016