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Day: August 3, 2018

    Friday Eye-Opener: Apple’s Big Bite

    Published on: August 3, 2018

    by Kevin Coupe

    Apple yesterday became the first public company in the US to be worth $1 trillion.

    Which is amazing all by itself.

    However, what makes it even more amazing is the fact that in 1997, the company was perilously close to bankruptcy. Steve Jobs, who co-founded the company but was ousted in a boardroom coup in 1985, only to be brought back in 1997 after a decade during which Apple almost completely lost its way, later said that he thought the company was perhaps 90 days away from complete and permanent collapse.

    The New York Times this morning writes that “Apple’s ascent from the brink of bankruptcy to the world’s most valuable public company has been a business tour de force, marked by rapid innovation, a series of smash-hit products and the creation of a sophisticated, globe-spanning supply chain that keeps costs down while producing enormous volumes of cutting-edge devices.”

    When Jobs returned, he “slashed 70 percent of Apple’s product plans, commissioned the company’s ‘Think Different’ ad campaign and reimagined how it put its products together … The focus on simplicity became a hallmark of Apple, from the way Mr. Jobs dressed — jeans and black mock turtlenecks became his uniform of sorts — to the way his products operated to the eventual look of his company’s retail stores.”

    Talking to staff in 1997, Jobs made clear that he was not just thinking differently, but thinking big … even in dire times: “The question now is not: Can we turn around Apple? I think that’s the booby prize. I think it’s: Can we make Apple really great again?”

    But to me, the Eye Opener is how, even has Apple’s value hits extraordinary highs, the story isn’t finished. In fact, it never will be. Because all the same challenges remain - under new leadership (Jobs died of cancer in 2011) and in evolving competitive circumstances, Apple needs to continue to find ways to be innovative, relevant and resonant. It is ironic, I think, that Apple often gets criticized these days for being in a creative lull … it has been a while since it introduced a product with the potential of the iPhone or iPod, each of which changed businesses and lives, ands yet this is the time when the company hits this financial high.

    It makes me think about something that the great Norman Mayne, of Dorothy Lane Markets, told me a long time ago, that a “reputation is something you had yesterday. Today, you have to earn it all over again.”

    Exactly.
    KC's View:

    Health Care Provider Sees Future In Retail

    Published on: August 3, 2018

    Forbes has a story about how Humana, the health care company, has established a partnership with Walgreens to open “‘senior-focused primary care clinics’ inside drugstores in the Kansas City area,” which will “complement Walgreens pharmacy services and Humana’s Partners in Primary Care centers that opened last year in Kansas City.”

    Humana CEO Bruce Broussard says that “this collaboration will establish a senior focus, neighborhood based approach to health, creating unique integration among the primary care physician, the pharmacist, and a health plan navigator under one roof. The two in-store clinics will be complemented by health navigation services offered in multiple Walgreens stores in Kansas City … They will be staffed with Humana employees who will be available to serve both Humana members and any customer who comes into the store.”

    At the same time, Humana is working with Walmart, looking for ways to work together “on a primary care partnership” that could “expand their relationship that began 13 years ago when the insurer began in 2005 putting Humana sales agents for Medicare Part D drug plans in all of Walmart's stores.”

    The bottom line: These burgeoning relationships “are part of an intensifying experiment to make sure patients get the right care, in the right place and at the right time as fee-for-service medicine gives way to value-based care … Humana’s approach is the latest effort to more closely align medical care providers and health insurance companies. The retail approach is also less expensive to build out than building hospitals, surgery centers or new brick and mortar.”
    KC's View:
    On so many levels, what we are seeing is a slow but inevitable merging of the food and health care industries, as well as the health care and retail industries. There is a greater recognition that people’s health - and health care costs - can be positively impacted by how they eat and how services are provided, and we’re going to see new formats (like Hy-Vee’s new HealthMarket, which debuted this week) being tested.

    Despite Protests, Publix Enjoys Strong Second Quarter

    Published on: August 3, 2018

    The Tampa Bay Times reports that Publix Super Markets generated $8.8 billion in sales during the just-ended quarter, up $400 million over the same period a year ago. Net earnings were $616.2 million, compared to $495.1 million over the same period in 2017. Q2 same store sales were up 1.7 percent.

    The story notes that the increases came during a period when “Parkland students and other gun-reform activists encouraged a widespread boycott of the Lakeland-based grocery change due to the company's six-figure contributions to Adam Putnam, a Republican candidate for governor who in a tweet last year declared himself a ‘proud NRA sellout’ … Prior to this decision, Publix had contributed more money to Putnam's campaign for governor than it had ever given to a Florida candidate.” The Parkland students were reacting to the mass shooting at Marjory Stoneman Douglass High School.

    The Times points out that “the protests and boycotts had any bearing on Publix's bottom line, the company didn't say so in the second quarter results posted on Wednesday.  It is possible Publix could have made even more money without the spate of negative publicity. But it seems Florida's largest private company had a rather strong quarter, thanks to the massive tax cuts to corporations approved last year by the Republican-controlled Congress and signed by President Donald Trump.”

    One result of the protests was that Publix said it would no longer make political donations.
    KC's View:
    The Parkland students just learned an important lesson - not every protest is going to have the desired impact. That said, I think it is notable that Publix has backed off some of its political activities, and I continue to admire the students for their passion and dedication.

    Schnuck Markets Launches New App-Based Rewards Program

    Published on: August 3, 2018

    The St. Louis Business Journal reports that Schnuck Markets is introducing a new app-based rewards program that will permit customers who sign up to “earn 10 points for every dollar spent on qualifying purchases. After accruing 1,000 points, which is equivalent to spending $100, customers will earn $2 off a future purchase. Customers can redeem those dollars off as they earn them or they can allow the dollars to accumulate, up to $500.”

    The story notes that “shoppers can participate in the program by downloading the Schnucks Rewards app on the Apple app store or from the Google Play store,” though they also can use existing Schnuck accounts or sign up on their computers.

    “This is a modern way for us to say ‘thank you’ to customers for choosing Schnucks,” says Todd Schnuck, chairman/CEO, in a prepared statement. “Customers will be rewarded for something they’re already doing - buying groceries to feed their families - and Schnucks will be helping them to stretch their dollars even further.”
    KC's View:
    I think this is a good idea, though I must confess that I’m having a little trouble with the word “modern.”

    To me, it is more important to use the data generated and the accessibility of the app to communicate with and market to individual shoppers … not just say “thank you” with discounts. What Schnucks is doing is a good first step, but only a first step.

    Walmart, DOJ Remain At Odds Over Bribery Case

    Published on: August 3, 2018

    Bloomberg has a story about how Walmart remains locked in an eight-month standoff with the federal government over an investigation of allegations that the retailer greased the wheels of growth in foreign countries by bribing local officials.

    According to the story, “The standoff leaves unfinished one of the biggest foreign-corruption probes of a U.S. company in history, a case that put a spotlight on the obscure Foreign Corrupt Practices Act. For six years, U.S. authorities have investigated whether Walmart bribed government officials in countries including Mexico, India and China over the course of a decade to fast-track store openings.

    Walmart’s apparent resistance to a mea culpa isn’t the only obstacle to a deal. There’s also a delay with the Securities and Exchange Commission part of the case. The two sides have yet to exchange critical documents to finalize the deal, another person said. It’s unclear what’s causing the delay, the person said.” And there’s another wrinkle - the investigation started during the Obama administration, and the shift to the Trump administration has slowed things down even more.

    The story notes that “in the closing days of the Obama administration -- as a future President Donald Trump was calling the foreign-corruption statute a ‘horrible law’ on the campaign trail -- Walmart balked at demands to pay more than $600 million in penalties, leading prosecutors to go back to gather more evidence from witnesses, people familiar with matter told Bloomberg in October 2016.”

    Walmart reportedly has set aside nearly $300 million to cover whatever fines it has to pay. But to this point, it hasn’t had to write a check.
    KC's View:

    Worth Reading: Delicious, From Down Under

    Published on: August 3, 2018

    The New Yorker - which has been a source of a number of relevant, entertaining stories this week - has a fun story in its “Annals of Gastronomy” section, by Amelia Lester, about Bill Grainger, who has been as responsible as anyone for bringing Australian cuisine to the world. “Australian,” the story suggests, to some has become “universal culinary code for healthy, hip, and probably with an avocado on it.”

    An excerpt from Lester’s story:

    “On an early spring morning in Tokyo, I had lunch with Bill Granger, the restaurateur who is most responsible for the Australian café’s global reach. The forty-eight-year-old Australian, who now lives in London, owns eighteen eponymous restaurants in Japan, Hawaii, the U.K., Korea, and, of course, Australia. We met at a branch in Ginza, but it may as well have been his Bondi Beach flagship. Nearing noon, diners’ plates were piled high with fried eggs and what Americans would call Canadian bacon. (The rest of the world would call it bacon.) Although we were in a densely populated shopping district, sun streamed in through the floor-to-ceiling windows.

    “Granger is the Platonic ideal of an Aussie bloke: perma-tan, blond, friendly in a low-key way. Even in the middle of the city, his restaurant buzzing around him and a laptop by his side, you half expect to see the cuffs of his linen pants rolled up for a beachside stroll. Granger opened his first Bills twenty-five years ago, in Sydney. An art-school dropout with no formal training in food, he had developed a passion for Mediterranean-style eating while working a job waiting tables. In the nineties in Australia, eating out was for a lucky few, and synonymous with fancy French fare. For the rest of us, restaurants meant Sizzler. Granger wanted to run an establishment that he felt was more in tune with the rhythms of Sydney life: getting up with the sun and enjoying the outdoors.”

    I learned a lot from this piece, including the apparent origin of avocado toast, and you can read it here.
    KC's View:

    Number of Victims In New Chipotle Food Poisoning Hits 683

    Published on: August 3, 2018

    In Ohio, the Columbus Dispatch reports that “the number of victims of a possible food-borne illness outbreak at a Chipotle store in Powell has reached 683 according to the Delaware General Health District,” though officials have not yet determined exactly what made them sick.

    “Initial stool-sample testing done by the Ohio Department of Health came back negative for Salmonella, E.coli, Shigella and norovirus,” the story says. “Tests on food from the store are ongoing.”

    According to the Dispatch, “Customers reported symptoms such as vomiting, nausea, headaches and abdominal pain that lasted several days. The outbreak appears to have affected some of the people who ate food at the store from July 26 through July 29 … The latest illness outbreak for the Chipotle chain began Monday when website Iwaspoisoned.com broke the news of multiple reports of people sickened after eating at the Chipotle.”
    KC's View:
    I think it is fair to say that this is likely to put a dent in the resurgence that Chipotle recently has been enjoying since the food poisoning problems that it experienced just a couple of years ago.

    E-conomy Beat

    Published on: August 3, 2018

    • Internet Retailer reports that Albertsons “has teamed up with venture capital firm Greycroft to create a $50 million fund that will invest in emerging companies and technologies in the grocery sector … The companies say the fund will connect Greycroft’s investment expertise and connections with Albertsons’ knowledge about the grocery and e-commerce home delivery markets.”
    KC's View:

    FastNewsBeat

    Published on: August 3, 2018

    • Focus Brands, a private equity-owned company that has Cinnabon, Schlotzsky's, Moe's Southwest Grill, and Auntie Anne's in its portfolio, has made a $200 million cash acquisition of Jamba Juice, which will continue to operate as a separate, privately held retail brand.

    The deal is expected to close in the third quarter.


    • QSR reports that Subway has announced that “it is updating its food and beverage offerings through its Fresh Now platform. Fresh Now features new sauces, flavors, and beverages available for customers to further customize their Subway meal.”

    The program is bringing new sandwiches and sauces to the fast feeder’s menu, and, according to the story, “was piloted in about 200 San Diego locations and is now in nearly 500 Subway across the country. The company plans to roll it out system-wide by summer of 2019.”


    • CNN reports that Brookstone has “filed for bankruptcy and will close its remaining 101 mall stores. The mall and airport seller, best known for massage chairs, quirky gadgets, and travel luggage, filed for Chapter 11 bankruptcy in federal court on Thursday. It was Brookstone's second bankruptcy round in four years … The company will keep its 35 airport stores and website open and running while it attempts to find a buyer.”


    • The Los Angeles Times reports that “a California produce company has been linked to a multistate outbreak of illnesses from parasites found in wholesale bagged salad mixes, according to the U.S. Food and Drug Administration.

    “Fresh Express, based in Salinas, supplied bagged salad mixes tainted with cyclospora to McDonald’s franchises in the Midwest, where health authorities in two states reported at least 286 customers of the fast-food chain were sickened, the FDA said. McDonald’s was forced last month to halt salad sales at 3,000 regional franchises as a precaution, and changed its supplier.”
    KC's View:

    Executive Suite

    Published on: August 3, 2018

    • Bob’s Red Mill Natural Foods announced that Dennis Vaughn the company’s COO, will become CEO, succeeding founder Bob Moore in the role. Moore will remain as company president, and also will continue to serve as an ambassador for the brand.

    Vaughn was Moore’s choice to succeed him, and has been with the company for almost two decades. Moore was the majority owner of the company until 2010, when he engineered an Employee Stock Ownership Program (ESOP) that gave control to his employees.
    KC's View:

    Your Views: Upsides & Downsides

    Published on: August 3, 2018

    Yesterday, MNB took note of a New York Times report that Australian supermarket chain Coles yesterday “reversed its decision to ban single-use plastic bags after its customers complained, a move that bucked a global trend to reduce plastic bag waste and prompted a social media backlash against the company.”

    I commented:

    I know that whenever this subject comes up, I get email from folks arguing that the whole idea that plastic bags are bad for the environment is a canard.

    I don’t understand this … in the sense that the more that any of us can do to reduce the use of any and all disposables is a good thing. If you have the opportunity to do anything to reduce the impact on the planet, why wouldn’t you do it?

    One MNB reader responded:

    I don’t think plastic bag bans are about reducing the environmental impact on our planet….in the state of California at least, it’s about crony capitalism under the guise of reducing waste. Food retailers in California worked with environmental concerns to pass legislation in the state that bans “single use” plastic bags in food stores. The catch is that these retailers now charge $.10 per “reusable” plastic bag and they keep the revenue…it does not go to the state, or to any environmental concern. What a bunch of hooey. Food retailers were able to turn one of their largest supply expenses into a revenue stream at huge profit. MAYBE these thicker PLASTIC bags cost a nickel….maybe and they sell them for a dime…really? All this overlooks the facts…

    According to Plastic Bags And The Environment:
     
    Plastic bags require 70% less energy to manufacture and consume 96% less water than what is used to make paper bags.

    Once disposed, reusable bags take up 9.3% more spade than plastic bags in landfills.

    American made plastic bags are produced from byproducts of natural gas, not oil.

    Plastic bags account for just half of 1% of U.S. waste. And when banned are replaced with thicker plastic bags.

    Plastic retail bags comprise less than 2% of overall litter.

    Finally…one year after the state wide ban in California, an Ocean Conservancy survey showed a negligible 0.2% decrease in plastic bag litter as a percentage of overall litter.
     
    At the end of the day, single use grocery bags are rarely single use…cat boxes, dog waste…plus one can buy these bags on AMAZON for less that three cents each for a pack of 500!!!! Yeah!

    Even if all that is true - and I’m not sure I accept that it is, since the website cited is owned and operated by Novolex, which manufactures plastic bags - I’ll stick with my observation that it simply makes sense to reduce any and all waste whenever and wherever possible.

    I see no downside.

    Besides, I agree with the Upton Sinclair line: “It's difficult to get a man to understand something if his salary depends upon his not understanding it."

    Kelly Dean Wiseman, General Manager at Community Food Co-op, wrote:

    In our 39 years in business we’ve never used the plastic grocery bags: just good ole paper. And ten cents for each bag the customer brings in, which is very popular. Carrot versus stick, as it were.



    Yesterday’s Eye-Opener focused on an Inc. story about the connection between public transportation and one prominent retailer - Amazon.

    According to the story, “Amazon takes public transportation for its employees very seriously. So much so that the company says it has spent $60 million on public transit in Seattle. And the investment continues: Along with paying $5.5 million toward Seattle's streetcar in 2012, the retailer announced last week that it would invest $1.5 million to increase bus service to its headquarters.”

    Indeed, the Inc. story pointed out that the availability of a robust and accessible mass transit system is one of the things that Amazon has made a centerpiece of its requirements when it chooses a second North America headquarters city (dubbed HQ2), and said that “decent public transportation can make a huge difference to the quality of life in any city.”

    I commented, in part:

    The word “city” is important here, since there seems to be broad agreement on the part of demographers that the US is becoming a more urban-centric nation.

    That’s something that a lot of retailers ought to be thinking about as they make plans and move forward. Many retailers are built to be of greatest service to families in the suburbs with several children, living in a house with a basement for storage, and using a minivan or SUV to get around and do shopping. But what happens to these retailers when people move to the city, have fewer children live in an apartment and don’t even own a car?

    …We know that some people are in denial about all this. One example of this was reported in the New York Times a while back, when it wrote about political efforts around the country to fight against the bankrolling of mass transit systems that have been proposed in order to deal with specific problems including too many cars clogging up city streets, pollution, and even the propensity by an increasing number of urban dwellers not to own cars. The anti-mass transit say that their position is rooted in a desire for smaller government, and government-backed transit systems require bigger government, and a deep-seeded belief that public transit is anti-freedom. Frankly, I think this argument is silly.     And probably self-serving.

    MNB reader Gary Loehr responded:

    KC, you leave out the possibility of privately run mass transit.  I would consider myself to anti big government, but not because I don’t think the services are important.  I just don’t think our government is very good at providing them. Government services tend to have too large an infrastructure, overpay for everything and not be consumer focused.  Other than that they do a great job. Industries with government regulated monopolies tend to have a lot of the same issues, since they get rate hikes anytime they aren’t making enough money (think cable companies).  There needs to be a business model for private companies to provide public services, while maintaining the incentives for great service and efficiency.

    MNB reader Jenny Keehan wrote:

    Of course Amazon is supportive of public transit. More people without cars = more people who need to buy online.

    And, from MNB reader Paul Schlossberg:

    Many of today's emerging generations apparently want to live in an urban area. Many prefer not to own things, like cars. Thus public transportation matters.

    They need stores to be conveniently located where they work and live. Well said about retail brands here being aimed at larger families and suburban locations. Retail brands and CPGs (especially in food and beverage categories) will have to adjust.

    In the last 20 years my work took to Europe where retail store checks were on my agenda. Stores with in-city locations were, as expected, smaller with limited selections. What was always different (from U.S. retail) was that packaging and portion-size was focused on smaller quantities. That was especially true for what is described as meal solutions. Europe was way ahead of us on that one.

    In recent years in the U.S. in-store merchandising has changed. We see an increasing number of conveniently located refrigerated display cabinets with smaller portion meals, salads and desserts.

    The challenge is that the U.S. pipeline, and the center store, is driven by pantry-loading. That means multi-packs and/or multi-portion servings in almost every aisle across the store. Those "big" packages bring in the big tickets at the cash register. Promotions and pricing are targeted at our pantry shelves.

    It's not good for the legacy stores and brands that the next generation of households is so different from the past. Those new shoppers do not want (to waste time) shopping in big stores with 50,000 SKUs. And they will not be doing any pantry-loading.
    KC's View:

    OffBeat: A Sacred Place Of Harvest

    Published on: August 3, 2018










    One of the great pleasures of spending my summers in Portland is the opportunity to try new restaurants that set a high bar for ingenuity and innovation. This year, the standout - by far - is Afuri.

    My first exposure to Afuri was over on the east side, in a beautifully designed bar and restaurant that is quite the hot spot. I did a little research in advance, and learned that this Afuri is the first outpost in the US created by a Japanese restaurant company that located in Portland because the water from Mount Hood closely resembles that from Mount Afuri in Japan, which, it says, “has long been revered as a sacred place of harvest; the unique geography creates ideal spring water, perfect for ramen making … Portland offered us something no other US city could;  soft water from a pure source within close proximity.”

    We found the food to be amazing. Among the varieties of sushi we tried were: snow crab, big eye tuna, kewpie mayo, yuzu, shiso, cucumber, sesame … bluefin tuna, asparagus, ume, grilled scallion, kaiware, sesame seed … and king salmon, snow crab, lemon, avocado, cucumber, kaiware. It was just extraordinarily fresh and flavorful, and required a return visit just so we could have the experience a second time.

    Then, I made the best discovery - Afuri has opened a restaurant on the west side, within walking distance of the apartment I use in Portland (located right in between Voodoo Doughnuts and Stumptown Coffee - talk about all your major food groups!). This version, as I understand it, is much closer to the style restaurants they operate in Japan - you order at the register, find a seat, and they bring you your food.

    I’ve now been a couple of times, just so I can try different things. My favorites to this point - the soft shell crab bun, served with spicy mayo, kimchi and red leaf lettuce … the crispy poke tacos … and the ebi spring rolls, made from shrimp, whitefish, onion, yuzu and sweet chili. (Pics at left. Be still my heart.)

    This Afuri has been running a promotion with local breweries this summer, and during one of my visits I enjoyed a Basecamp Farmhouse Ale, which was perfect with the subtle and tender flavors of the food.

    And one other thing - they make this amazing cocktail called an Endomame, which is made from house snap pea vodka, lemon, egg white, and mint. This is a big Wow.

    Afuri in Portland … pick either version, and you won’t be sorry.



    Some quick movie takes…

    • The Equalizer 2 is a sequel to the Antoine Fuqua-directed, Denzel Washington movie about a former intelligence agent, Robert McCall, who finds himself helping people in trouble without any other recourse. The movies are based on an old late 1980s TV series that starred British actor Edward Woodward in the role.

    The movie versions are considerably more brutal, though I was surprised when some critics wrote the the sequel was more violent than the first one; I had the opposite reaction, though the differences are marginal at best.

    Essentially, these movies belong the movie sub-genre that focuses on aging men who manage to transcend their years while beating up bad guys; they always feature aging actors like Liam Neeson or Kevin Costner or Pierce Brosnan, and, to be honest, I kind of like them, probably because these actors are all about my age, even if I think most of these projects are what used to be called b-movies.

    That’s pretty much what The Equalizer 2 is - not a great movie, but better directed than written, and generally entertaining because Washington is so invested in the role. He’s one of our best movie actors, extraordinary in prestige projects and lifting up movies like this one.


    • Ant-Man and The Wasp is a sequel to the original Ant-Man, starring Paul Rudd and Evangeline Lilly in the title roles, and Michael Douglas, Michelle Pfeiffer, Laurence Fishburne, Walton Goggins and Michael Pena in supporting roles. That’s pretty A-list talent, which is a Marvel hallmark - they get terrific actors to be in movies that often are trifles, and that makes them seem better than they are.

    That's certainly the case here. It doesn’t really break any new ground, and there’s not much plot, though Lilly is terrific and it is nice to see a woman in a superhero role. It’s all fun and harmless and the best moment in the movie comes in the middle of the end credits when we get a sense of how the film is linked to the timeline in which Avengers: Infinity War took place.


    • And … another sequel … let’s sing the praises of Incredibles 2, which comes 14 years after the terrific original film, directed by Brad Bird, though the movie begins just moments after when the first one ended.

    It is just great fun, with Craig T. Nelson, Holly Hunter and Samuel L. Jackson all seeming to have a great time voicing their various characters. There’s a feminist tilt to this one, which seems appropriate for 2018, and once again the animation is extraordinary. One of the best things about the original was that its superhero story seemed rooted in a very specific reality, and this one is as well.



    That’s it for this week.

    Have a great weekend, and I’ll see you Monday.

    Sláinte!!



    KC's View: