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: July 25, 2016

    by Kevin Coupe

    Agence France-Presse reports that the " first drone delivery on US soil approved by aviation officials" took place last Friday, when drone startup Flirtey and 7-Eleven teamed up to use one to delivery a chicken sandwich, hot coffee, doughnuts, candy and - naturally - a Slurpee.

    According to the story, "The delivery took place in Reno, Nevada, with the items loaded into a special box for hot and cold food and flown to a local family."

    The story quotes Matt Sweeny, Flirtey's CEO, as saying that "this is just the first step in our collaboration with 7-Eleven. Flirtey's historic drone deliveries to date have been stepping stones to store-to-home drone delivery, and today is a giant leap toward a not-too-distant future where we are delivering you convenience on demand."

    And Jesus Delgado-Jenkins, 7-Eleven's chief marketing officer, said that "drone delivery is the ultimate convenience for our customers and these efforts create enormous opportunities to redefine convenience ... in the future, we plan to make the entire assortment in our stores available for delivery to customers in minutes."

    Big plans. Now, neither Sweeny nor Delgado-Jenkins talk about the logistics of rolling such a service on a broad scale, nor what the costs might be - and how those costs might affect the price of a Slurpee.

    But that's not to suggest that such a rollout isn't possible, nor that the cost issue can't be figured out. I actually have every confidence that both can happen, and that over the long term, drone deliveries will eventually be acceptable and commonplace. It even is possible that at some point down the road, people will wonder why we didn't adapt the technology earlier.

    It will take time. There will be bumps in the road. (Or in this case, turbulence.) But it'll happen, and it'll be an Eye-Opener.
    KC's View:

    Published on: July 25, 2016

    As expected, Ahold and Delhaize Group said on Saturday that they "have received regulatory clearance for their merger from the United States Federal Trade Commission (FTC). The companies subsequently completed the merger with the signing of the merger deed."

    The $29 billion merger became effective just after midnight on Sunday, with the new company being called Ahold Delhaize.

    The Wall Street Journal notes that the deal makes the combined the company the fourth largest food retailer operating in the US, after Walmart, Kroger, and Albertsons. The story says that "the company hopes to save €500 million ($549 million) a year by trimming head-office costs and buying goods in greater volumes. But it won’t cut brands or stores unless forced to by antitrust officials. In the U.S., it has agreed the sale of 86 stores, accounting for roughly 3% of sales, to keep the Federal Trade Commission happy."
    KC's View:
    For me, there will be several things that I want to see out of this merger.

    One is that the kind of innovative thinking that has allowed for the creation of bFresh is made a priority. Another is that they find the right way to continue to grow Peapod, Ahold's e-commerce business.

    And finally, they have to leave people like Mike Vail at Hannaford free to run their businesses, and not to make them crazy with too much heavy-handed oversight.

    Find judicious savings, but make sure that increased effectiveness and innovation are the highest priorities.

    Published on: July 25, 2016

    The Ohio State University is out with a study saying that "even though American consumers throw away about 80 billion pounds of food a year, only about half are aware that food waste is a problem."

    The study "found that 53 percent of respondents said they were aware that food waste is a problem. This is about 10 percent higher than a Johns Hopkins study published last year, which study co-author Brian Roe suggests means that "awareness of the problem could be growing.

    "“But it’s still amazingly low,” Roe says. “If we can increase awareness of the problem, consumers are more likely to increase purposeful action to reduce food waste. You don’t change your behavior if you don’t realize there’s a problem in the first place.”

    The study established some of the main reasons for food waste. First, "68 percent of respondents believe that throwing away food after the package date has passed reduces the chance of foodborne illness, and 59 percent believe some food waste is necessary to be sure meals are fresh and flavorful." In addition, "51 percent said they believe it would be difficult to reduce household food waste and 42 percent say they don’t have enough time to worry about it. Still, 53 percent admit they waste more food when they buy in bulk or purchase large quantities during sales. At the same time, 87 percent think they waste less food than similar households."

    However, while "77 percent feel a general sense of guilt when throwing away food," at the same time, "only 58 percent indicated they understand that throwing away food is bad for the environment, and only 42 percent believe wasted food is a major source of wasted money."

    The study recommends getting rid of "sell by" and "use by" dates from food packaging, saying that "only in rare circumstances is that date about food safety." And, it calls for creating greater awareness by improving the collection of data in the area.
    KC's View:
    It does seem like there is a growing awareness of the food waste issue at a lot of levels, though I have to admit I'm not entirely comfortable with the idea of completely getting rid of "sell by" and "use by" dates. I'd like to see some greater uniformity, but I have to think they have some purpose.

    Published on: July 25, 2016

    While digital coupons are gaining in market penetration, paper coupons remain the dominant factor in the segment, according to a story in the Chicago Tribune.

    The Tribune writes that "in 2015, there were more than 289 billion print coupons distributed compared with just 6 billion printed or clipped digital offers, according to a report from Kantar Media. Even millennials reported using paper coupons as often or very nearly as often as older shoppers," the story says, quoting recent numbers from Valassis.

    But, perhaps inevitably, "a growing share of consumers also look for coupons online and brands, retailers, and coupon distributors have been getting behind digital to reach shoppers where they spend their time. Retailers also are trying to be smarter about using deals to drive sales ... According to Valassis, the number of Americans using digital coupons — 68.4 million, compared with 116.3 million paper coupon users — has jumped 27 percent since 2012. But even as people branch out to look for deals online, they're not abandoning paper."
    KC's View:
    For the life of me, I cannot imagine why there is growing use of paper coupons, and I also cannot imagine why the industry wouldn't be doing everything and anything possible to get away from them and move quickly and relentlessly to digital, which can be far more targeted and far less wasteful.

    Published on: July 25, 2016

    Bloomberg has a story about Dunkin' Donuts, and floats the suggestion that by "pushing into tonier offerings, such as espresso, cold brew coffee and Rainforest Alliance-certified coffee beans," it is flirting with a loss of its lowbrow appeal as it tries to go head-to-head with Starbucks.

    "Imitation is the sincerest form of flattery," Bloomberg writes, "and also one of the easiest ways to lose your identity."

    The story notes that "Dunkin’ is having its identity crisis at a time where it is pushing to open more than 400 new U.S. locations this year.

    "As it operates very few of its own stores, its growth relies heavily on whether current or potential franchisees feel jazzed enough to open additional locations. To keep in franchisees’ good graces, Dunkin’ not only has to make the case that opening a location is a good investment — which means keeping both profit and sales growing — but that it has a long-term vision."

    Defining itself as "a cheap alternative to Starbucks doesn’t exactly cut it, in an industry faced with fickle consumers and restaurant players that regularly jiggle prices to attract customers ... As retailers such as Macy’s and the Gap have discovered, the murky middle is never a good place to be when consumers are increasingly choosing either the cheapest option or the one with the highest quality. Unfortunately for Dunkin’, it can claim to be neither."
    KC's View:
    Absolutely true. The so-called mushy middle is a lousy place to be. While there is nothing wrong with trying to stretch one's appeal a little bit and bring in new customers, you have to be very careful not to alienate the old ones.

    Remember ... the middle of the road is where you find roadkill.

    Published on: July 25, 2016

    The Chicago Tribune reports this morning that "restaurants in Chicago are adding bakeries, cafes and markets to fill in the gaps between breakfast, lunch and dinner. The markets, which offer grab-and-go items like gourmet sandwiches, salads and baked goods, are usually housed near (or even in) the restaurant. The stand-up venues aim to tap into a fast-growing segment of the dining industry that is serving up higher-end convenience foods that can be eaten on the go or taken back home or to the office."

    The story goes on to note that "in addition to boosting sales and offering more options to expand down the road, dipping into the grab-and-go food market also lets restaurants home in on a booming sector of the restaurant industry," the fast-casual segment. And, "although chain restaurants have led the way in recent years, more independent brands are now adopting the dual-model approach as well, as a way of catering to young professionals who want healthy, local food they can grab in a hurry."
    KC's View:
    I'm a big believer in the notion of share of stomach, and there is no question that these kinds of marketing innovations - which are playing out in a lot of places around the country - create all sorts of challenges to supermarkets and c-stores.

    One of the really important things that these kinds of formats may have to do in order to compete is make better food. Lots of these restaurant chains simply make tastier, more differentiated food than a lot of supermarkets and c-stores, and now these players are going to have to raise their games to compete. That's not easy when you've been hawking lowest common denominator cuisine for a long time, but it may end up being the cost of admission to the competitive marketplace.

    Published on: July 25, 2016

    • The Associated Press reports that the 8th U.S. Circuit Court of Appeals "has rejected a shareholder lawsuit filed against key directors at Wal-Mart Stores Inc. that claimed they allowed and concealed alleged bribery in the company's Mexico division." The ruling upheld an Arkansas court ruling that the accusations "'did not give rise to a reasonable reference' that the board of directors learned of the suspected bribery while it was being covered up and the internal investigation squashed."
    KC's View:

    Published on: July 25, 2016

    Internet Retailer reports that Safeway's e-commerce site "led the list of the 10 most popular U.S. shopping websites in June as measured by the average number of pages viewed per visit on desktop, according to web analytics company SimilarWeb, which monthly ranks U.S. e-retailers with the longest visitor time on site through desktop visits, mobile visits and apps."

    “Despite the fact that in the recent years, other companies like Amazon (Amazon Fresh) and Walmart entered this niche, Safeway manages to drive the highest engagement when it comes to the online sector,” Pavel Tuchinsky, SimilarWeb’s digital insights manager, tells Internet Retailer, adding that "Safeway also made the mobile engagement top 10 list, placing sixth and 'demonstrating that the mobile experience of their users is on par with the desktop one with an average of almost 10 pages per visit'."
    KC's View:

    Published on: July 25, 2016

    • The Charlotte Observer reports that Wegmans says that it is "considering multiple sites in the Raleigh-Durham area, but is staying mum on whether it is eyeing the Charlotte market." Wegmans reportedly has its eye on two sites in Cary, North Carolina, and "is also considering multiple sites in the Raleigh/Durham market, but until there are firm deals for each site, we are unable to share the locations or other details."

    The story notes that "grocery store competition has been heating up in the Charlotte market, with the entry of Publix stores, new Harris Teeter locations and renovations of Food Lion stores."
    KC's View:

    Published on: July 25, 2016

    • Scottsdale, Arizona-based Republic Services, a waste/recycling company, announced that Sue Klug, EVP and chief marketing officer for Unified Grocers, will be joining it in the same roles.

    Klug is a three-decade veteran of the California supermarket industry, having served as an executive with Safeway, Pavilions and Vons before moving over to Unified Grocers in 2012.
    KC's View:

    Published on: July 25, 2016

    I blew it twice on Friday.

    In one story, I wrote:

    In the movie "Unfinished Business," the central argument is whether it makes sense to be the world's best buggy whip manufacturer in a world that no longer needs buddy whips. Or, for that matter, the world's only buggy whip manufacturer? (The secondary question, one never answered to my satisfaction, is what kind of world do we live in where Danny DeVito gets billing over Gregory Peck? But I digress...)

    The movie, of course, was not Unfinished Business, but Other People's Money.

    I have no idea what I was thinking.

    And then, in "OffBeat," I said that I've had a crush on actress Anna Kendrick since I saw her in The Descendants, a movie she was not in. The movie I was thinking off was Up In The Air.

    In this case, I just got my George Clooney movies confused. But there's still no excuse ...

    Mea culpa, mea culpa, mea maxima culpa.
    KC's View:

    Published on: July 25, 2016

    MNB reader Todd Ruberg had some thoughts about my criticisms of the new "365 by Whole Foods" store in Lake Oswego:

    I agree with you that the new Lake Oswego 365 format has borrowed ideas from TJ and Costco, but I do think they have wound up with a format that has an appealing combo of features.

    Interestingly, I think it has the potential to appeal to BOTH millennials and Baby Boomers. The size of the store is great—not too big, not too small. Plenty of category distribution, but with an edited number of brands/SKU’s per category making it easy to shop, and the potential for inventory cost and return improvements.

    Key to me will be the quality of the 365 brand…..if quality holds up, the prices are relatively attractive to competitive formats. Also, their pricing in general ... I can't help suspecting some of it was “grand opening” pricing, but we shall see.

    I think your C+ is tough!  (God help your PSU students this summer.) I’m more in a B to B+ camp!

    I'm actually a pretty easy grader. My philosophy is that everybody starts with an A. You have to earn a B or a C.

    Also about the 365 store, from MNB reader Randy Evins:

    I love the term “derivative rather than differentiated”. If you don’t mind I plan to use it in further blogs and other…. The original Whole Foods was differentiated, even disruptive but not so much anymore.  I was hoping 365 would be that “disruption” that would spark others to see new possibilities but I also felt that their structure and methodologies today are not what they were 20 years ago and it would be difficult to overcome the “this is how we do business” intellectual constraint. It’s so hard these days to constantly push that envelope. To not fall back on what we always do, to do things completely off the charts to get that change to stick. It’s especially rampant in traditional grocery as you’ve so often pointed out. It’ll be fun to watch.

    Regarding the passing of longtime Walmart executive Don Soderquist last week, MNB user Bob Anderson wrote:

    Mr. Soderquist will surely be missed. He was a great leader and our moral compass. Every time you saw him, he would smile, ask how you were, and shake your hand. Mr. Soderquist and his wife have done so much for the Rogers and Bentonville communities over the years, and touched so many. He will be missed, but not forgotten.

    One MNB user had some thoughts about the Ahold-Delhaize deal:

    With the exception of Aldi, what European grocer has been successful in the US?
    The marriage of these two giants will only bring about higher slotting fees, higher
    ad and participation fees with less volume than others in the industry. The days
    of having more stores means more volume does not necessarily compute.

    Then you have Publix, Kroger, Albertsons with a lot of stores that do it right,
    or one of the smaller chains like Market Basket, Wegmans, HEB and Meijer that
    have fewer stores but do more volume on a per store basis than most.

    From MNB reader Joe Axford:

    To me these companies couldn't be more different.  Stop and Shop is all union, and uses a rewards card.  I can't see them having anything to offer Hannaford, other than economies of scale.  Just look at the many people from Hannaford who have gone on to great success at other companies.  Stop and Shop I can't think of many.

    Hannaford would have been a perfect fit for Kroger,  as they certainly aren't buying Shaws.  Still trying to figure out how Kroger gets into the Northeast,  hopefully  sooner than later.

    On another subject, one MNB user wrote:

    Really appreciate your story on the counterfeiter issue Amazon is facing.  I’m ‘all in’ with Amazon as a shopper, but I have noticed of late that scanning product reviews and checking the name of the seller has become increasingly important after getting burned a few times (fortunately on small purchases or items easily returned).  There seem to be a lot of knock-offs on the site.  And reading your article, I started thinking to myself – this is actually a fair bit of effort I’m having to do in order to build my confidence/trust in the product before clicking.  That’s probably not a good thing for Amazon’s brand, and at some point I could see myself getting really frustrated or lose faith in the sellers.

    And on a related note, I was struck that while Prime Day was very cool – and I took advantage of some great deals – there seemed to be just a huge amount of junk.  It felt a bit like wading through the bargain bin.  On the other hand, for the few items I really had my eye on, it was a total pleasure.  We took advantage of the great Samsung TV deal, and I again thought to myself as I was sitting on my couch at home in total comfort, ‘This is certainly better than recovering from a head wound sustained from a fellow deal-seeker’s pummeling at Walmart on Black Friday in order to get this TV.’

    All this to say – Amazon is certainly cruising along with some mighty momentum, but perhaps should be cautious of the icebergs floating about.

    From MNB reader Chris Utz:

    One thing I like about Amazon is the strength of the customer review process; which can help a buyer uncover problems, such as the counterfeit products mentioned in your post.  If one deep dives into negative reviews, faked or purchased positive reviews can be counter-balanced.

    For instance, I was considering purchasing a high-end Nikon DSLR with mostly glowing reviews.  I read the fairly a small number of negatives and found something very disturbing.  Purchasers complained that the camera, selling only slightly lower than standard retail, was a Grey Market item, which negates Nikon’s excellent US warranty.

    I have also read negative Amazon reviews, where buyers said they returned an item, purchasing the (much better) XYZ brand.  I’m guessing there may also be false negative reviews, placed by competitors as a form of advertising.

    Amazon’s 30 day free return policy is a wonderful safety net.  A bad purchase can corrected with a minimal amount of inconvenience.  If you are good customer, a phone call to Amazon support can sometimes stretch that 30 day limit.
    The bottom line is “Buyer Beware” or more appropriately: Be Aware…

    Regarding my skepticism about the Federal Trade Commission (FTC) approval of Anheuser Busch InBev's purchase of SABMiller, one MNB user wrote:

    The FTC in approving the AB-SAB merger is essentially restraining competition by allowing the creation of a monopoly and at the same time restricting the common competitive practice of offering incentives to distributors to favor Anheuser or SABMiller brands over competing ones.  So all the competing brands have to do is offer no incentives and thereby preclude A-B from offering any incentives.  Seems anti-competitive doesn't it.

    I took beginning and intermediate antitrust law in law school.  I never could reconcile the courts' theories in their seemingly conflicting opinions.
    I decided that taking advanced anti-trust law would only add to my confusion.

    Meanwhile the FTC seems to not be aware that the Robinson-Patman Act still exists.

    In my opinion lack of enforcement of the RP Act over the past 50 years is a major factor in the demise of smaller retailers.

    Regarding Procter & Gamble's test of a program that would essentially disintermediate retailers and create a direct-to-consumer subscription program, MNB reader Ron Rash wrote:

    Sounds to me as if someone in Cincinnati is just in a snit about retailers. Surely this cannot be their dream for the future of building their brands.

    And, on yet another subject, from an MNB reader:

    So, Walmart is going to sell imperfect produce with the brand name "I'm Perfect".

    Will the class action lawyers have a field day with this?

    Maybe "Perfect for You" or "Almost Perfect" were already taken.

    On the same subject, from MNB reader Tim Heyman:

    Seems to me that the way Wal-Mart handles fresh fruit at stores, most of it ends up being ugly fruit….


    And finally, we got the following email from MNB reader Sara Freitag regarding Kroger's recent promotion of three women to various presidencies in the company:

    Full transparency, I am a Kroger associate.

    Kroger has always had a very robust succession plan – it’s great to see the number of female leaders increasing at the highest levels of our organization.  This speaks to our core values and the importance placed on diversity/inclusion.

    For the umpteenth time, I’m proud to work for this awesome organization.

    As you should be.
    KC's View: