business news in context, analysis with attitude

Published on: April 26, 2018

This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

Hi, I’m Kevin Coupe and this is FaceTime with the Content Guy.

So, I know I talk a lot about Amazon Go and the siren call of the checkout-free shopping experience. Some of you think that I talk about it ad nauseam. (I know this because I read my email.)

The reason that I like the checkout-free experience so much is because most checkouts simply aren’t very pleasant experiences. Not only do you have to spend money, but the people who work the front end often are brusque and more interested in talking to each other than in chatting with the customer.

Today, though, I’m in a store where the checkouts are staffed by people who are happy, pleasant, informative, and engaged with shoppers - Dorothy Lane Market, in Dayton, Ohio.

Here, the checkouts aren’t a gantlet to be endured between the store and the car. They are an extension of the wonderful shopping experience that is Dorothy Lane Market. Here, not only don’t they offer checkout-free shopping, they don’t even have self-checkout. They want you to interact with their people, because that is part-and-parcel of the experience.

That’s the point. Not every retailer can or should chase the Amazon Go business model. But if you have checkouts, it seems to me that you should do everything you can to make it a pleasant, helpful part of the shopping trip. This isn’t about money - it is about attitude and commitment.

Dorothy Lane Market gets it right … as it almost always does.

That’s what is on my mind this morning and, as always, I want to hear what is on your mind.

Published on: April 26, 2018

by Kevin Coupe

Axios reports on a new survey saying that millennials, “beset by big college loans, inheriting two wars, and facing an uncertain future of work, blame Baby Boomers for making things worse for them.

And, go figure, a lot of Baby Boomers agree.

According to Axios, “The poll found that 51% of millennials (18- to 34-year-olds) blame boomers (51- to 69-year-olds) for making things worse for their generation. Just 13% said boomers had improved things. Generation X wasn't pleased with the boomers, either.
Boomers were split on the issue: 30% said policies created by their generation had made things worse, 32% said they had made things better, and 34% that they had done neither.”

Anecdotally, millennials had a variety of suggestions for how to make things better, including:

• ”Remove all old government officials and term limits for the House and Congress.”

• ”Impeach Trump.”

• “Vote.”

One respondent said that people should "sleep more because you will be less sensitive to negative emotions.”

This isn’t just a nice-to-know survey, Axios writes: “If it persists, the generational divide could turn into political rivalry as the generations compete for limited tax dollars - millennials seeking government help as automation takes hold, and boomers insisting on promised levels of Social Security and Medicare.”

In other words, another generation gap that could persist for decades and result in unhealthy, unproductive recriminations.

It’s an Eye-Opener.

Published on: April 26, 2018

Amazon announced yesterday that it is introducing a new Alexa-powered Echo Dot for Kids that not only comes in different colors, but also includes access to a number of child-friendly features including parental controls, filtering of explicit content, the ability to disable voice purchasing, and even offer positive reinforcement when people say “please” when making requests.

The retailer says that it also is offering FreeTime Unlimited on Alexa, described as “an all-new content subscription service just for Echo devices” that “includes access to over 300 Audible kids’ books; kid-friendly, ad-free radio stations and playlists; character alarms; premium Alexa skills from Disney, Nickelodeon, National Geographic, and more - starting at just $2.99 per month for Prime members, and no additional cost for existing FreeTime Unlimited members.”

Dave Limp, Senior Vice President, Amazon Devices and Services, says that “with Echo Dot Kids Edition and FreeTime on Alexa, parents can have peace of mind knowing their kids are getting age-appropriate content, while they listen to music, ask questions, enjoy Audible books, use Alexa skills, and more.”

Published on: April 26, 2018

The Los Angeles Times this morning reports that the US Centers for Disease Control and Prevention (CDC) has updated information about the E. coli outbreak, saying that “a virulent E. coli strain tied to romaine lettuce has now sent 42 people to hospitals in 19 states,” which adds “31 people to its tally of victims in the outbreak. The agency has linked the outbreak to the Imperial Valley growing region centered around Yuma, Ariz., where more than 90% of the nation's winter lettuce is cultivated.”

According to the story, “The worst hit states include Pennsylvania, with 18 cases, and California, with 13, according to the CDC. Idaho had 10 cases, while the remaining states had 7 or fewer: Arizona, Alaska, Washington, Montana, Colorado, South Dakota, Missouri, Louisiana, Illinois, Michigan, Ohio, New York, Connecticut, New Jersey, Virginia, and Georgia.”

The CDC’s advice remains the same: “Do not eat or buy romaine lettuce unless you can confirm it is not from the Yuma growing region. Product labels often do not identify growing regions; so, do not eat or buy romaine lettuce if you do not know where it was grown.”

Published on: April 26, 2018

There is a terrific piece in the Wall Street Journal this morning about the changing nature of the convenience store:

“Convenience stores, or c-stores, as they’re known in the trade, have traditionally been defined by size; the classic one is 2,400 square feet (versus a conventional supermarket’s 40,000 square feet). America’s 150,000-plus c-stores are typically understood as places you go for Slim Jims and cigarettes, not delicious (let alone vegan) food.

“Yet new upstarts like Choice Market, Green Zebra Grocery in Portland, Ore., Foxtrot in Chicago, the Goods Mart in Los Angeles and Amazon Go in Seattle are open long hours (if not 24) and use the same small spaces to offer a wider range of options. You could meet a friend for coffee, pick up a few reasonably wholesome items for dinner or even fill up a growler of beer.”

You can read the story here.

Published on: April 26, 2018

Reuters reports that lawyers representing Toys R Us in its bankruptcy proceedings say that the retailer will put aside $156 million “to pay vendors for toys and merchandise shipped” after the company’s Chapter 11 filing last September.

The story says that “the vendor reserve fund will be carved out of a broader budget meant to cover some expenses as the retailer winds down its business in the largest-ever U.S. retail liquidation.”

There’s a problem, though, according to lawyers for some of those vendors: “The amount fails to cover total trade claims worth roughly $760 million.”

The story goes on to say that “many vendors believed that payment for shipments after the Sept. 18 Chapter 11 filing would be covered by a $3.1 billion bankruptcy loan, but that loan gives priority to lenders and other expenses such as legal fees.”

Published on: April 26, 2018

The Associated Press reports that Chipotle CEO Brian Niccol, who until recently was the CEO of Taco Bell, “plans to make ‘simple menu tweaks,’ redesign its restaurants and expand its delivery service in the coming months.”

In addition, Niccol says, drive-thrus are an "interesting proposition for Chipotle.”

However, Niccol also says that “changes to the menu wouldn't divert much from Chipotle's brand, which promotes its use of ‘real ingredients’ and ‘responsibly raised’ meats.”

Published on: April 26, 2018

• Bloomberg reports that Subway has as goal of closing more than 500 franchised locations this year, following the closures of more than 800 stores during 2017. At the same time, the story says, the sandwich chain plans to open more than 1,000 new locations outside North America.

CEO Susanne Greco says that store count has become less important to the company than “growing the business.”

“We want to be sure that we have the best location,” she says. “We focused in the past on restaurant count. We're focused now on strengthening market share.”


• The National Retail Federation (NRF) says that consumers are expected to spend almost $23.1 billion on Mother’s Day this year, which would be close to a record; NRF says that 86 percent of Americans will celebrate the holiday and spend an average of $180 per person.

Published on: April 26, 2018

• The Global Market Development Center(GMDC) has named Tom Duffy - former executive vice president of industry affairs at Acosta and, before that, vice president of industry services at Nielsen - to be its new vice president of member development, helping to expand the association’s reach within the retail and consumer product industry in the health, beauty, wellness and general merchandise value chain. 


• Albertsons Companies today announced that Sean Barrett, Group Vice President Innovation, Product and Brands on the company’s Own Brands team, has been promoted to Senior Vice President of Advertising and Marketing.

Published on: April 26, 2018

I did a FaceTime piece last week in which I used Graeter’s ice cream as an example of a product that, if retailers are going to offer it, they actually should try to actively sell - informing consumers, offering tastes, and being aggressive.

One MNB reader, Holly Aglialoro, responded:

Your commentary on Graeter’s Ice Cream was interesting; I work in the Frozen Department at Wegmans where we carry a few flavors of Graeter’s Ice Cream, as well as some other regional and gourmet ice creams.

Regarding your view that it is the retailer’s responsibility to generate enthusiasm and sample the product, I disagree.  At Wegmans, companies with new products on our shelves are encouraged to demo their products, but Wegmans employees only sample and demo Wegmans products.  This weekend we will be sampling Wegmans Organic Vanilla Ice Cream, paired with Wegmans Organic Raspberry Jam.

The reality in the grocery business is that the profit margins are paper thin, and the workforce chronically understaffed.  Getting the products off the trucks and onto the shelves is the priority.  If Graeter’s or any other company want to occupy the coveted shelves of a high-volume grocery store, the onus is on the company to show that its product merits the prime “real estate” of a Wegmans shelf.

From another reader:

Thinking about your MNB commentary on Graeter’s Ice Cream – and considering  your thinking from a couple of views:

On one hand – retailers love differentiation and selling profitable brands not available elsewhere.  Those suppliers most often have some trouble scaling “demand creation” for that retailer, instead, leaving it up to the retailer to decide. The euphoria often dwindles after the initial stocking order is received (on both sides). 

Not specific to perishable (but will be soon) any retailer that thinks they can continue to keep high prices and take a 50% retail margin is in for a big surprise.  Branded, standardized, utilitarian merchandise will soon be in the domain of internet retailers. And, small niche brands (like Graeters) can follow suit.  Some would argue they should focus through online.
 
There’s nothing wrong with selling high margin stuff but  1) Standardized order systems; 2) shorter pipelines; 3) better warehouse/shipping processing; 4) overnight delivery, and 5) consumers shopping with smartphones and making this harder to do over the long term. 
 
On the other hand – it’s so easy to shop online – or, with a little more effort physically, shop but compare online and one-click ordering.  Why bother going to retailers – who charge slotting, high Ad fees, issue deduction paperwork that’s sometimes not supported. Smaller retailers are notorious for making money on the “buy” – not the “sell”.  
 
Specialty retailers like Bed, Bath & Beyond ... luggage retailers, office supply retailers, perhaps soon liquor stores will suffer online disruption.  Soon, even some basic categories inside the big box stores will be disrupted.   How about diapers (oh, Amazon bought that shopper).  How about HBA?  Laundry supplies? Home & Garden items? Toys? (Recall that Amazon played a pretty significant role in destroying Toys R Us.)

From MNB reader Joe DiVincenzo:

In Face time with the Content Guy you state in part:
 
“I think that it is the manufacturer’s job to make the best product possible, to position it in the marketplace, and to promote it via advertising and marketing to the item’s target consumer. But in the store? I think that it is the retailer’s job to explain products, to sample products, to create enthusiasm for products, to generate sales for products.”
 
I completely agree with your first statement.  The second I believe requires a big “it depends.” 

With tens of thousands of items on the typical retailer shelves and thousands introduced every year, a retailer must be very selective of those items they feel they have a role in explaining, creating enthusiasm, and generating sales.  Furthermore, if a retailer has a well-respected and differentiated Private Label portfolio with constant innovation, I’m not sure why they would want to spend resources creating demand their competition could capitalize on and not be differentiated when those resources are better spent promoting the things that actually do set them apart.  Unless it is my Brand that is unavailable elsewhere, or I have an exclusive on a truly innovative or superior branded product not available elsewhere, I feel it’s up to the manufacturer to create the awareness and demand.  My job is to be the retailer of choice to purchase those products.

And, from another reader:

I think you are living in a dream world.  There are lots of Graeter type products (loyal local following).  But, when you want to expand you have to be able to play with the big boys.  Kroger put Graeter’s into Fred Meyer and I think it lasted about a year.  There were other popular brands (Talenti, Tillamook) vying for the same warehouse slots and customer’s wallet. I think there are other local brands deserving to be on the shelf ahead of the “out of towner” unless they are truly unique.

From another reader:

As a Cincinnati girl living in the relative wilds of New Hampshire, I was THRILLED with our local Price Chopper started carrying Graeter’s.  Having spent the better part of my life in retail, and now wholesale, I realize the tenuous hold Graeter’s has on that shelf space.  Every time I am at that store, I talk to the other shoppers looking at ice cream and tell them they will never regret giving it a try.  We are in the thick of Ben & Jerry’s land out here, so getting someone to swap a pint is hard.  But it’s in my best interest to keep some Graeter’s on the shelf, so I do my best to make more fans out here.  Now if we could only get some Skyline out this way….

A question here. If I follow some of the logic here, it seems to me that it would then make sense for companies like Graeter’s to focus more on alternative channels - like Amazon, say, or its own e-commerce site - and go as directly to the consumer as possible. Bricks-and-mortar retailers then can focus only on private label and the “big boys” who are able to pay their way.

Okay, if that’s what you want.

It doesn’t sound like a long-term and viable business model to me.

But maybe I’m wrong.




On another subject, from Jennifer McEntire, Ph.D., VP Food Safety & Technology with the United Fresh Produce Association:

I wanted to follow up on your comment about Blockchain’s utility in the current outbreak.
 
The challenge is not that there are no records, or even the speed of going through records (although there are definitely opportunities to speed things up). The problem is that the source of contamination—the “problem”—is not known. FDA and states begin at the point of sale or service- the grocery stores and restaurants, in MANY locations, looking at products received over the course of  a few weeks, which, in all likelihood, come from several sources, all of which need to be traced back to their suppliers over a window, and you can see how things keep expanding and snowballing in terms of the records. United has been involved in blockchain discussions and will have a webinar on the topic next week. Having worked extensively in traceability I am not yet convinced that blockchain has the ability to reveal a source of contamination. Certainly, once known, it facilitates traceforward to the outlets of the product. Or if testing a finished or intermediary product with a known identifier, it facilitates getting back to potential sources. Just my thoughts.