business news in context, analysis with attitude

Published on: November 13, 2018

by Michael Sansolo

I have to imagine there are countless MNB readers who think Kevin and I have fallen into the role of Cassandra of Greek mythology, offering prophecies of doom that no one wants to believe.

We write frequently of the mounting challenges in the industry including competition, changing consumer attitudes and weaknesses in store operations. So ignore us, but consider the words of Fred Morganthall, the recently retired president of Harris Teeter and executive at Kroger. Maybe he’ll convince you and even give you some hope.

Morganthall delivered an excellent keynote address at the Private Label Manufacturers Association (PLMA) convention, currently underway in Chicago. He identified three mounting challenges to the industry that are coming together to form something of a perfect storm.

Start with e-commerce, which, Morganthall explained, may be small today but is growing rapidly and will be fueled by powerful companies and changing demographics. Layer on top of that the growing presence and power of extreme-deep discounters like Aldi and Lidl, with the latter’s arrival making the former tougher than ever. And lastly there is the challenge of prepared meals and meals-away-from home.

All three forces are likely to erode traditional sales in years to come and that means you ain’t seen nothing yet. (Which, as it happens, is the theme of the PLMA show.)

Morganthall wasn’t all gloom and doom. He reminded the audience at PLMA that the industry has been through similar storms in the past, starting in the 1930s when the first supermarkets decimated the traditional industry. Companies like Kroger, Safeway and A&P closed thousands of stores at the time only to bounce back, with two of them still powerful today. Likewise, the industry found ways to evolve and survive changes from combination stores, super warehouse stores, supercenters and more.

But, as he pointed out, survival isn’t guaranteed. To get past the storm companies need to focus heavily on core consumer needs and serve those basics better than ever. That includes understanding that convenience is both location and ease of shopping, it includes making sure stores are operating at peak conditions with an emphasis on in-stock conditions and training managers and teams to be more customer friendly than ever.

In other words, to use a phrase that we’ve been using here on MNB, you have to bring your A-game.

“We need to do what the customer wants,” he said, and that begins with talking to the shopper. Specifically, he cited Amazon Go and its elimination of the checkout. Morganthall cautioned the industry not to simply pooh-pooh the innovation and instead recognize how attractive it is to shoppers and to put emphasis on finding and using the same technology.

The path to the future starts with understanding what these new players are doing so well, and then making sure to match or beat those competitive advantages. For instance, he talked about Aldi and the misunderstood quality of the company’s private label offering, something obviously of interest to the Chicago crowd. Aldi’s own brands, he said, are incredibly high in quality. When combined with the company’s low prices, those private label lines make them a very dangerous competitor. He said that challenge is to both retailers and their national brand suppliers, who also need to recognize the improved quality of private label to make sure they are innovating and improving at a faster pace.

That same emphasis on quality needs be storewide, including produce and meat, which, with price, are the qualities shoppers most evaluate in a store.

In other words, winter is coming. Simply behaving as we always have will not be enough. But first, we have to listen to the words of someone as knowledgeable and experienced as Morganthall to accept that indeed a storm is upon us and then get working.

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Published on: November 13, 2018

by Kevin Coupe

The New York Times reports that some rental car companies, “facing growing competition from ride-sharing apps like Uber and Lyft at their airport locations,” have decided to see if they can eliminate one of the major points in the airport car rental experience - returning the damn things. Avis, for example, will drive renters right to the terminal in the rental cars rather than forcing them to walk to the terminal or, in some cases, take the shuttle.

According to the story, “Avis is among a handful of car rental companies that are trying to take some pain, and time, out of the return portion of the trip by offering a terminal drop-off service. Silvercar by Audi and Budget Car Rental, which is owned by Avis, also have terminal drop-offs.

“Hertz drops off its Gold Plus Rewards Platinum members, and employees drive other customers to their terminals whenever they can, said Charlie Catalano, a spokesman. He said the company was ‘working on initiatives to expand this service further for both drop-off and pickup at select airports’. Fox Rent a Car employees also drive customers to their terminals when they can, a spokesman said.”

It is interesting that the rental car companies, faced with competition, are trying to institutionalize something that has been offered on a casual, need-based basis for a long time. In the case of Avis, at least, they’re charging $25 for the service.

If I’ve made the decision to use Uber or Lyft, I’m not sure this would be enough to change my mind. And I think it points to behavior of which many companies are guilty - waiting too long to address customer pain points, until competitors have started nibbling away at your business.

The return process at the airport never has been pleasant, and it only is now that they do something about it?

That alone is an Eye-Opener, and tells you something about these businesses.

Published on: November 13, 2018

The Washington Post reports that Amazon “has chosen the Crystal City area of Arlington, Va., and the Long Island City neighborhood in New York, both of which boast highly educated workforces and deep talent pools,” to be the split locations of its second North American headquarters. An official announcement could be made as soon as today.

Amazon’s HQ2, as it has been called, is “expected to have a dramatic impact on those regions’ economies, housing markets and transportation,” as the company pledged to invest billions of dollars and hire tends of thousands of employees for whatever location it chose. The selection process has taken more than a year, with hundreds of communities submitting initial proposals; 20 made the final cut … and then there were two.

The Post writes that “Amazon’s decision to split the project rather than open a second headquarters on par with its Seattle campus has angered some who said the company had ginned up competition among cities only to change the rules midstream. Some said it was unfair that the company seemed to be considering only sites in more affluent communities.”

However, “others said a split makes sense for Amazon because of the difficulty of finding 50,000 qualified workers - many of them computer engineers - in a single region. Dividing the project also could ease concerns about the pressure that the company’s growth could put on housing, transportation networks and schools.”

Published on: November 13, 2018

Walmart yesterday announced that it will prioritize the hiring of military spouses, calling them “unsung heroes.” Retired Brig. Gen. Gary Profit, senior director of military programs for Walmart, said in a prepared that “they are tremendous assets to our business. Military spouses bring many of the same leadership qualities we see in veterans, yet they are disproportionately unemployed. We welcome them to Walmart and hope they will consider us for the next step on their career journey.”

Walmart said that the Military Spouse Career Connection complements the 2013 Veterans Welcome Home commitment, enhanced in 2015, to hire 250,000 military veterans by 2020, a goal it is on track to surpass next year.

The Department of Defense Military Spouse Employment Partnership says that “there are more than 500,000 active duty military spouses nationwide. While the U.S. jobless rate hovers at four percent nationally, military spouses face a 26 percent unemployment rate and a 25 percent wage gap compared to their civilian counterparts. A full 77 percent of these spouses want or need work, yet frequent relocation is often a barrier to finding and maintaining a rewarding career.”

Published on: November 13, 2018

USA Today reports that Keith Villa, the brewmaster who created Blue Moon Belgian Wheat more than two decades ago, is coming out with a new beer - Grainwave Belgian-Style White Ale, brewed by his new CERIA Brewing Co.

What makes it different? According to the story, “the beverage has no alcohol and includes 5 milligrams of THC, the high-producing ingredient found in cannabis plants. Made with blood orange peel and coriander, the ale ‘has a richer, deeper orange character and a little different type of bitterness because of the cannabinoids,’ Villa said.”

The beer initially will be available in Colorado, but the company hopes to get distribution soon in California and Arizona. While federal law prohibits using marijuana in beer, the lack of alcohol in Grainwave probably circumvents that particular problem. (Though certainly not others.) The beer will cost $9 for a single bottle and less than $36 for a four-pack.

The story notes that “signs of interest in the marijuana-beer business include Molson Coors’ deal, announced in August, to work with Canadian cannabis company The Hydropothecary Corp. to develop nonalcoholic marijuana drinks for the Canadian market. And Constellation Brands, maker of Robert Mondavi wine, Corona beer and Svedka vodka, last year invested $4 billion in Canopy Growth, a Canadian marijuana firm, with cannabis drinks among future plans.”

Published on: November 13, 2018

USA Today reports this morning that Petco by mid-2019 “will no longer sell cat and dog food filled with artificial ingredients … Petco says that products with those ingredients add up to roughly $100 million in sales, but it believes the healthier foods and snacks that replace them will minimize any financial loss.”

The company says that if brands cannot meet its new standards, they will be culled from the stores’ SKU counts.

"Some may question whether this makes good business sense, but putting pets’ health first has always been the right thing to do for Petco,’' says Petco CEO Ron Coughlin. “We hope the rest of the pet industry will join us on this path.”

Published on: November 13, 2018

Bloomberg Businessweek has a piece pointing out that immigration crackdowns taking place across the US have turned into a good news-bad news story for 7-Eleven.

Here’s how the story is framed:

On a single day earlier this year, “immigration officers fanned out across America, serving inspection notices and arresting suspected undocumented workers at 98 7-Eleven stores in 17 states and Washington, D.C. Since then agents have raided several more, and Bloomberg has learned that ICE and federal prosecutors in Brooklyn, N.Y., are engaged in criminal investigations of multiple franchises. 7-Eleven, an American icon and the world’s largest convenience store chain, has become the highest-profile target of a sweeping corporate immigration crackdown by President Trump.

“It’s a huge headache and a public-relations nightmare for the company and its chief executive officer, Joe DePinto. But the immigration crackdown has also given 7-Eleven something potentially useful: the names of franchisees who might be in legal jeopardy. Store owners found in violation of immigration law could be in breach of their franchise agreements. And as they well know, 7-Eleven has the contractual right to take back a store from someone who’s violated his or her agreement.”

In other words, the bad publicity may be worth it if it allows 7-Eleven to cull its franchisee roster and eliminate players with which it would rather not do business and that it feels are inconsistent with its strategies and tactics.

The story goes on: “As detailed in a series of lawsuits and court cases, the company has plotted for much of DePinto’s tenure to purge certain underperformers and troublemakers. It’s targeted store owners and spent millions on an investigative force to go after them. The corporate investigators have used tactics including tailing franchisees in unmarked vehicles, planting hidden cameras and listening devices, and deploying a surveillance van disguised as a plumber’s truck.

“The company has also given the names of franchisees to the government, which in some cases has led immigration authorities to inspect their stores, according to three officials with Homeland Security Investigations, which like ICE is under the jurisdiction of the Department of Homeland Security.”

You can read the entire story here.

Published on: November 13, 2018

The Washington Post writes about a new study from the Annals of Tourism Research about the likely impact of driverless cars, including the displacement of workers and the reduction of cab fares. In addition, the story says, “Driverless cars could also exacerbate inequality if businesses pay to influence the algorithms that guide them, the authors pointed out: Restaurants that can afford to appear on a tour vessel’s ‘top destinations’ menu would gain a swift advantage over smaller shops.”

Oh, yes. There’s one other thing that the study mentions - that driverless cars are likely to “give people a new place to have sex. Possibly for money.”

If traditional taxis are phased out and replaced by autonomous cars, the story says, “free of driver costs, companies could invest more in the customer experience. Interiors may become more spacious. Cabs could come with bedding or perhaps a massage chair, analysts forecast. Passengers might tap an iPad to hear Marvin Gaye.”

The study says that “it is just a small leap to imagine Amsterdam’s Red Light District ‘on the move’.” And it is worse than that - “Autonomous vehicles could provide cover for a range of illicit activities, including drug dealing or even terrorism in the form of remote-controlled bombs.”

Published on: November 13, 2018

• Amazon continues to exploit its ownership of Whole Foods with a new offer, saying this morning that “starting Nov. 14, all customers will be able to purchase select organic ($3.49/lb) and no antibiotic ($2.49/lb) turkeys, and Prime members will save even more on turkeys ($2.99/lb organic/$1.99/lb no antibiotic). Plus, customers who are not yet Prime members can receive $20 off their next Whole Foods Market in-store purchase of $20 or more when they sign up for Prime at amazon.com/PrimeSavings."

Published on: November 13, 2018

• The Wall Street Journal reports that Kellogg Co. “is considering a sale of its cookie and fruit-snack businesses, including Keebler, Famous Amos and other brands, to focus on products with faster-growing sales … Kellogg said it hadn’t prioritized investing in promotion and innovation for the cookie and fruit snacks brands in recent years. Selling them would allow the company to ‘bring a sharper focus to its core business,’ Kellogg said in a statement. The businesses up for sale have about $900 million in annual sales.”


• CNBC reports that “Campbell Soup has begun the process of selling off a number of its brands, including its Arnott's cookie and crackers business, as it looks to pay down the debt left in the wake of its acquisition of Snyder's Lance earlier this year … Campbell has sent out materials to tease the sale of its Australian Arnott's biscuits business and Kelsen baked snacks that could fetch $2.5 billion to $3 billion from buyers. The biscuit and cracker maker is the largest in Australia and has therefore caught the eye of a number food companies that are eyeing global expansion as challenged U.S. grocers continue to exert their pressure.”

Published on: November 13, 2018

• Stan Lee, who co-created such iconic comic book superheroes as Spider-Man, the Fantastic Four, and the X-Men, as well as writing comic books that featured the Hulk, Iron Man, Thor, Daredevil, Captain America, and the Avengers, passed away yesterday. He was 95.

Lee lived long enough to see the characters he helped create for Marvel Comics, often with artist Jack Kirby, become the stars of a series of big-budget, highly successful films … almost all of which he appeared in, making sly, knowing cameos that were almost Hitchcockian.

Lee’s great gift was understanding that by creating heroes who were complex, troubled, insecure, and flawed, he was providing young readers with characters to whom they could relate.


• Douglas Rain, the Canada-born Shakespearean actor who perhaps is best known for a role in which his face was never seen - he was the voice of the HAL 9000 in Stanley Kubrick’s 2001: A Space Odyssey - passed away on Sunday. He was 90.

Rain’s performance - cold, monotone, unemotional and yet vaguely condescending and eventually terrifying - was extraordinary, and watching it now makes one realize how prescient the film was about Siri, Alexa and other such systems.

Not generally remembered is the fact that Rain also played HAL in 2010: The Year We Make Contact, a rather more pedestrian sequel to the Kubrick film that was directed by Peter Hyams.

Published on: November 13, 2018

Yesterday MNB had a story about how there is an ongoing and pitched battle taking place in Oregon over the legitimacy of a wine brand that claims to be from the Willamette Valley, but is not - withe battles playing out on store shelves and courtrooms.

You can read the story here.

MNB reader Bob Thomas responded:

Obviously Oregon winemakers have invested time money, technology and hard work in their wine. It is obvious that this Wagner guy wants to steal their intellectual property.  A further shame is that Total Wine and More (whose co-founder was just elected to Congress) is assisting Wagner by carrying the brand.  The stealing of intellectual property is usually done by someone wanting to profit by selling at a lower price without using the same quality processes and inputs and by not following the very important quality standards,  Best of luck to the Oregon winemakers.

And, from another reader:

It seems to me that Total Wine has a huge state in this with a possible big down side.  I do shop Total Wine when I am in the area, I live about 150 away from the nearest one and I notice they are pushing private label brands in their stores.  If it comes out, they are selling 100,000 cases of wine, of questionable origin, it would not be good. If the winery is cutting corners eventually it will come out, think Volkswagen’s diesel engines. People would not get mad with some winery they never heard of but the store that has an exclusive right to sell that wine and talking it up as a great quality and value is another matter. No one wants to pay for something to find out they have been had.

Agreed. I don’t shop much at Total Wine, but this certainly will factor into future buying decisions.



The other day, we took note of a CNN story about how Marc Lore, who runs Walmart’s e-commerce business in the US, remains high on a new in-house business called Jetblack, described as “a chat-based personal shopping service targeted at time-strapped moms in New York City … Members can text Jetblack when they run out of Cheerios or toothpaste, or need a last-minute gift recommendation for a kid's birthday. Jetblack promises same or next-day delivery with free returns.”

One MNB reader wrote:

This may end up being a good idea by Marc Lore, and work out well - but Jetblack? Not liking the name at all, KC, and isn't that a big part of marketing strategy?



Walmart also announced the launch of an “Intelligent Retail Lab” inside one of its stores in Levittown, New York, that will be used to test and improve both consumer and employee experiences.

I commented:

I’m always impressed by companies that experiment far from headquarters - it always strikes me as being a greater investment. Levittown is about 1300 miles from Bentonville … that’s far enough, I think.

MNB reader Carol Schnabel wrote:

I for one certainly hopes this works.  Really getting sick and tired of Walmart’s out of stocks in grocery, both online and in stores.  So much so, that I just might become a “valued and regular” shopper for one of the many competitors in my area.

And MNB reader Mark P. O’Brien wrote:

I have to chuckle when I read that Walmart will use an Intelligent Retail Lab to determine when shopping carts are low when their shopping carts are cheap clunkers. I swear 7 out of 10 carts are not worth the effort of dragging them around the store.

Published on: November 13, 2018

In Monday Night Football action. the New York Giants defeated the San Francisco 49ers 27-23.