business news in context, analysis with attitude

Published on: June 27, 2022

I'm back … and today have the first in a series of business lessons that I want to share based on experiences during my time away.

Published on: June 27, 2022

by Kevin Coupe

The ruling by the US Supreme Court last week to overturn Roe v. Wade and end the federal constitutional right to abortion has the potential of creating enormous pressure on US businesses who may be expected by their employees to take a stand.  It is, to be sure, yet another case in which business leaders are being forced by circumstances to take positions and create policies that could threaten their companies.  And yet, reticence is not an option.

The New York Times wrote that the decision "sent business leaders and employees across the nation scrambling for answers about how to react, what to say — or what not to say — and the immediate practical implications of the ruling.

"For U.S. businesses, there are pressing issues that demand fast answers, starting with: What will this mean for employees’ health care coverage?  'I guarantee you that there are teams of lawyers trying to figure this out right now,' said Tom Baker, an insurance law expert at the University of Pennsylvania’s law school.

"Businesses have already been battered in political and social fights in recent years and are reeling from competing demands from stakeholders — including activists, clients, consumers, shareholders and elected officials — about how to respond to the country’s bruising culture wars.

"Some executives are already starting to focus on the potential for other shoes to drop: Justice Clarence Thomas’s concurring opinion raised questions about what other rights could soon disappear. The rationale that the Supreme Court used to declare that there is no right to abortion, he argued, should also be used to overturn cases establishing rights to contraception, consensual same-sex relations and same-sex marriage.

"Local officials in states that restrict abortion are already threatening to punish businesses that help employees gain access to it elsewhere; activists who support abortion rights are calling on businesses to cut campaign donations to officials who oppose abortion."

From the Wall Street Journal:

"Thorny benefits issues pose a fresh challenge for many companies already struggling to navigate divisive social and political issues.

"Companies that choose to cover abortion - and any travel necessary to get one - have to balance alienating employees agitating for their employers to take a stand versus the risk of legal attacks or political blowback in states that have banned the procedure.

"'Benefits are suddenly starting to become very political, and it’s forcing employers to take a position,' said Michael Turpin, executive vice president at USI Holdings Corp., an insurance brokerage."

A number of companies, some of them without specifically taking a stand on the propriety of the Supreme Court ruling, have said that they will cover travel expenses for employees who need to avail themselves of reproductive health services.  They include Starbucks, Tesla, Yelp, Airbnb, Netflix, Patagonia, DoorDash, JPMorgan Chase, Levi Strauss & Company, PayPal, Reddit, Goldman Sachs, Disney, Meta, Dick’s Sporting Goods and Condé Nast.

This is just a small sampling, however, of the companies likely to be affected by the ruling.  Numerous stories over the weekend pointed out that companies may well be asked or forced to allow employees to relocate based on the policies of the states in which they are based.

The Journal writes:

"As it became clear that the Supreme Court would overturn Roe, many other businesses have been working quietly behind the scenes to have a response ready to roll out when the court acted, according to benefits consultants.

"Some 14% of large employers surveyed beginning in early June said they had a travel benefit in place, while another 25% said they were considering it, according to responses from nearly 300 employers to a survey being conducted by benefits consultant Mercer LLC.

"Employers with at least 20,000 workers were the most likely to provide a travel and lodging benefit for employees traveling to receive an abortion, the survey said.

"Major insurers that administer health benefits for big employers, including UnitedHealth Group Inc.’s UnitedHealthcare, Cigna Corp. and CVS Health Corp.’s Aetna, had been confirming to self-insured clients they can likely facilitate travel offerings, benefits consultants say.

"Cigna and CVS said they are looking to support the coverage needs of their clients and customers. UnitedHealth Group said it remains committed to helping members and patients get access to their benefits and services."

Again, from the Times:

"Some business leaders said they were concerned about how abortion restrictions will affect their ability to recruit workers, especially those whose companies are based in the 13 states that will ban abortion immediately or very quickly with Roe overturned. Those states include Texas, where tech companies have flocked in recent years.

"Research commissioned by the Tara Health Foundation found that two-thirds of college-educated workers surveyed would be discouraged from taking a job in Texas because of its restrictive abortion law and would not apply for jobs in other states that passed similar laws."

The Times also notes that "a 2020 working paper published in the National Bureau of Economic Research comparing economic outcomes for women who were able to access abortions with those who weren’t, found those without access experienced 'a large increase in financial distress that is sustained for several years.' It also concluded that women who were denied abortions had substantially more public records, which include events like eviction and bankruptcies.

"For companies that don’t want to weigh in on political or social issues, Sarah Miller, an assistant professor at the Ross School of Business at the University of Michigan and a lead author of the paper, said being reticent could impact their labor cost since 'at some point in the pandemic, women crossed the 50 percent threshold for the work force'."

However companies respond, and whatever they say, "employers will likely be careful in how they communicate about their plans, and how they design any new travel benefit," the Journal points out.  "They will have to navigate various wrinkles, including that a generous travel benefit might result in taxable income for patients.

"Also, to avoid estranging anyone, companies may structure the benefit to be broader than abortion, benefits experts said … Companies that say they are committed to providing such benefits say the legal complexities of ensuring coverage are fraught.

"Yet covering abortion for employees who live in states where it is banned, and particularly facilitating access with services like travel, could create legal jeopardy for employers and the insurers that administer their health plans—and even potentially for individual employees, corporate officers or directors, legal experts said."

The extent of the concerns are made clear in an Associated Press story about how "four Democratic lawmakers are asking federal regulators to investigate Apple and Google for allegedly deceiving millions of mobile phone users by enabling the collection and sale of their personal data to third parties.

"The decision Friday by the court’s conservative majority to overturn Roe v. Wade is expected to lead to abortion bans in about half the states. Privacy experts say that could make women vulnerable because their personal data could be used to surveil pregnancies and shared with police or sold to vigilantes. Online searches, period apps, fitness trackers and advice helplines could become rich data sources for such surveillance efforts."

One Eye-Opening fact seems clear.  The tumult that envelopes the nation's political, cultural and social debate seems likely to have an ever-increasing impact on the nation's businesses, and retailers will not be immune.  They have to start fashioning internal and external policies and responses now, and so so with the full knowledge that they are almost certainly going to make someone unhappy.

But reticence - and denial - are not legitimate, viable options.

Published on: June 27, 2022

The Wall Street Journal this weekend wrote that Amazon's annual Prime Day promotion "appears to be losing some of its momentum" - "Amazon’s sales are projected to reach roughly $7.76 billion in the U.S. from Prime Day."

That's only 17 percent more than last year's Prime Day event, far lower than the 65 percent growth that earlier Prime Days typically generated.

The Journal goes on:

"Sales growth for the online shopping extravaganza has slowed and consumers aren’t purchasing orders as large as they once did, data show. Amazon doesn’t appear to be investing in the event as it has in the past, and many of the deals have been focused on the company’s own products. Excluding electronics, the discounts on many items don’t surpass those on other days at Amazon, data show.

"The online commerce giant plans to hold Prime Day this year on July 12 and 13, continuing a recent trend of holding the event longer than a day to maximize its revenue."

Published on: June 27, 2022

From the New York Post:

"Costco was slapped with a shareholder lawsuit alleging the popular low-cost rotisserie chickens sold by the wholesale club are subjected to cruel deaths in violation of several state laws.

"The chickens are bred to grow quickly, eventually becoming too fat to stand on their own and 'slowly die from hunger, thirst, injury and illness,' according to the complaint filed earlier this month in state court in Seattle on behalf of two shareholders.

"Costco executives and directors are abandoning their fiduciary duties by allowing this practice to continue, the suit alleges, naming each director and C-suite executive as defendants.

"Costco, which has its headquarters in Issaquah, Wash., did not immediately respond for comment."

Published on: June 27, 2022

The Seattle Times reports that Starbucks has said it will "reimagine three of its highest-profile Seattle stores — including the cafe at Pike Place Market popular with tourists … As part of of the company’s 'Heritage Market' initiative, the Pike Place store will be themed the 'past,' while the one at First Avenue and Pike Street will be 'present' and another at First Avenue and University Street will be 'future.' 

"The Heritage Market push adds to the portfolio of stores that break from the Starbucks norm, like the Starbucks Reserve stores and 'Stealth Starbucks' — stores that do not look to be part of the Starbucks brand."

“These three stores will offer an elevated experience,” the company said in a press release.

Published on: June 27, 2022

Two stories in the news that look at issues facing Amazon, and how it is dealing with them…

•  From Vox:

"Amazon is facing a looming crisis: It could run out of people to hire in its US warehouses by 2024, according to leaked Amazon internal research from mid-2021 that Recode reviewed. If that happens, the online retailer’s service quality and growth plans could be at risk, and its e-commerce dominance along with it.

"Raising wages and increasing warehouse automation are two of the six 'levers' Amazon could pull to delay this labor crisis by a few years, but only a series of sweeping changes to how the company does business and manages its employees will significantly alter the timeline, Amazon staff predicted.

"'If we continue business as usual, Amazon will deplete the available labor supply in the US network by 2024,' the research, which hasn’t previously been reported, says.

"The report warned that Amazon’s labor crisis was especially imminent in a few locales, with internal models showing that the company was expected to exhaust its entire available labor pool in the Phoenix, Arizona, metro area by the end of 2021, and in the Inland Empire region of California, roughly 60 miles east of Los Angeles, by the end of 2022. Amazon’s internal report calculated the available pool of workers based on characteristics like income levels and a household’s proximity to current or planned Amazon facilities; the pool does not include the entire US adult population."

Vox writes that "in the past, that churn wasn’t a problem for Amazon — it was even desirable at some points. Amazon founder and former CEO Jeff Bezos saw his warehouse workforce as necessary but replaceable, and feared that workers who remained at the company too long would turn complacent or, worse, disgruntled."  But now, But now, "some inside Amazon are realizing that strategy won’t work much longer, especially if leaders truly want to transform it into 'Earth’s best employer,' as Bezos proclaimed in 2021."

And, Vox goes on:

"The research provides a rare glimpse into the staffing challenges that Amazon is now facing behind its slick veil of one-click online shopping and same-day Prime delivery. And it pointedly reveals how much of Amazon’s business success and its longtime position as a darling of Wall Street investors is dependent on its workforce of more than 1 million people who pick, pack, and ship its customers’ orders nearly 24/7.

"The leaked internal findings also serve as a cautionary tale for other employers who seek to emulate the Amazon Way of management, which emphasizes worker productivity over just about everything else and churns through the equivalent of its entire front-line workforce year after year."

•  Bloomberg reports that for the past three years, Amazon has been "searching for property in key U.S. markets such as Southern California, Texas, Illinois, Florida and the Bay Area. Between 2020 and 2022, Amazon tripled the amount of built industrial space it owns in North America, according to company filings. Sometimes Amazon buys existing buildings, such as defunct call centers, but it also purchases bare land, of which the company acquired about 4,000 acres in the same period, says real estate researcher CoStar Group. Amazon plans to use much of the real estate for a new generation of towering fulfillment centers that can store a wide variety of products close to customers in populous areas, according to people familiar with the strategy.

"Buying land is a major shift for Amazon, which historically relied on a handful of developers to find property, build fairly simple warehouses and rent them back to the company. Now Amazon is increasingly taking parts of the development process in-house, often bidding against longtime partners for the best space.

"It’s a potentially risky strategy that exposes Amazon to the vagaries of the industrial real estate market. The company also overbuilt during the pandemic and is saddled with too much warehouse space now that the surge in online shopping has decelerated. As a result, Amazon is looking to sublease space it doesn’t need and has slowed its warehouse expansion."

The story goes on:

"Amazon had historically preferred not to tie up money in real estate. (Founder Jeff) Bezos, keen to run the business like a startup for as long as possible, always had other plans for the cash, the people said. He liked to invest in potentially transformative, long-term bets — cloud-computing, the Alexa voice-activated platform, building a movie studio.

"Bezos’ aversion to buying property confounded some Amazon real estate executives, especially as the company matured and its needs shifted, according to people familiar with the matter, who requested anonymity to discuss an internal matter. Retail competitors like Walmart own most of their U.S. stores, giving them more control and assets that appreciate. A real estate portfolio can be sold and leased back to help a company get through lean periods without giving up the use of the land. There were also concerns that Amazon sometimes left money on the table in its dealings with developers. Once Amazon signs a long-term lease, the property typically surges in value; the company often gets none of the upside despite paying rent for 20 years."

Published on: June 27, 2022

Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

•  In the US, there now have been a total of 88,794,286 Covid-19 coronavirus cases, resulting in 1,040,805 deaths and 84,513,615 reported recoveries.

Globally, there have been 594,084,900 total cases, with 6,351,106 resultant fatalities and 524,148,620 reported recoveries.

•  The Centers for Disease Control and Prevention (CDC) says that 78.1 percent of the total US population has received at least one dose of the Covid-19 vaccine, with 66.9 percent being fully vaccinated.  The CDC also says that 47.3 percent of the US population has received the first vaccine booster dose;  26.1 percent of the population age 50 and older has received the second booster shot, with 32.7 percent of the 65-and-older population having received that second booster.

•  From the New York Times:

"A panel of independent experts advising the Food and Drug Administration will make its recommendation on Tuesday on whether to update existing Covid-19 vaccines to target a newer version of the coronavirus in a booster shot that Americans could get in the fall.

"The federal government is hoping to improve the vaccine to better boost people’s immunity before a likely resurgence of the virus this winter. But in order for it to move that quickly, it may need to abandon the lengthy human trials that have been used to test coronavirus vaccines over the past two years in favor of a faster process that relies more on laboratory tests and animal trials.

"The most recent trials with human volunteers have taken five months, even using relatively small groups. But the virus is evolving so quickly that new vaccine formulations are out of date before such trials are even finished."

•  From the Tampa Bay Times:

"Since COVID-19 vaccines first became available, Publix has played a major role in tackling the public health emergency in Florida by offering vaccines to adults and, later, children as young as 5.

"But the Lakeland grocery company says it will not offer the vaccine approved for children ages 4 and under 'at this time.'

"Spokesperson Hannah Herring said Tuesday that Publix will not release a statement explaining its decision. The company’s website indicates that it is still accepting COVID-19 vaccine appointments for children ages 5 and up.

The company still offers other child vaccinations, including the flu shot for babies as young as 6 months.

"The vaccine rollout for the nation’s youngest children has been complicated in Florida, where state leaders have questioned the effectiveness of COVID-19 vaccines, going against the recommendations of the nation’s top health regulators and medical associations.

"Florida Surgeon General Joseph Ladapo recommended against giving vaccines to healthy children, contrary to Centers for Disease Control and Prevention guidelines. Florida was the only state in the nation not to preorder doses of the under 5 vaccine, which the White House said could delay delivery to medical providers in the state. Parents of children under 18 months must rely on pediatricians, medical clinics and children’s hospitals to get their kids vaccinated."

Published on: June 27, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  Published reports say that Amazon is developing a new Alexa feature that would allow it to mimic people's voices, which could conceivably allow the smart speaker to do things like "read" children's stories in the voices of deceased parents and grandparents.

"While A.I. can’t eliminate that pain of loss, it can make the memories last,” says Amazon’s senior vice president and head scientist Rohit Prasad.

Digital Boom suggests that this could be "problematic," since it also could be used "for deepfakes, criminal scams, or other outrageous purposes."

Forgive me, but this sounds deeply creepy on a variety levels.

Published on: June 27, 2022

•  MarketWatch reports that Walmart has taken an 11.1 percent stake in AI supply chain company Symbotic.

The story notes that Walmart had previously disclosed that it is "adding Symbotic warehouse robotics to all 42 of its regional distribution centers … Retrofitting all 42 facilities is expected to take more than eight years. The technology aims to speed store orders by moving merchandise in a more orderly fashion and increase inventory accuracy. Symbotic went public via a merger with a SPAC in early June."

Published on: June 27, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  From CNBC:

"Kellogg is planning to separate into three independent public companies, sectioning off its iconic brands into distinct snacking, cereal and plant-based businesses."  The decision last week came "a decade after Kellogg’s $2.7 billion purchase of Pringles, which signaled the company’s shift to focusing on the global snacks business with people increasingly eating more often between meals. Kellogg, along with rivals like Frito-Lay-owner PepsiCo and Oreo-cookie owner Mondelez, have leaned into the trend by introducing more snacks and snapping up smaller brands … Cereal sales, by contrast, have stagnated in the U.S. as people eat on the go and reach for a greater variety of options in the morning. Brands including Special K, Froot Loops and Rice Krispies had for decades been a foundation of Kellogg, but are no longer seen as key growth drivers for the company."

The names of the three companies haven't been announced yet, and CEO Steve Cahillane has conceded that the iconic Kellogg's may not survive as a corporate name, though it certainly will remain a brand name in the cereal category.

Much that I've read suggests that Kellogg's is making this move proactively, to avoid being forced to make the same moves by some activist investor.  The other suggestion that I've seen is that it seems likely that at some point one or more of these companies could be absorbed into a larger entity … but that speculation never seems to focus on the cereal business.  I wonder if that's a certainty;  GE doesn't make appliances or light bulbs anymore, and so there's no reason that Kellogg's, however it is structured, has to sell cereal.

•  From the New York Times:

"A federal appeals court on Friday granted a temporary reprieve to Juul Labs that will allow it to keep its e-cigarettes on the market, pending further court review of a decision just a day earlier by the Food and Drug Administration to ban sales of the company’s products.

"The United States Court of Appeals for the District of Columbia issued a temporary stay that had been sought by Juul. The brief order by the appeals court cautioned that the stay was “ should not be construed in any way as a ruling on the merits.”

"The stay involves the F.D.A.’s order on Thursday, when the agency said Juul had to stop selling its products because it had provided conflicting and insufficient data that prevented the F.D.A. from assessing the potential health risks of its products."

• From Fox News:

"Kraft Macaroni & Cheese is dropping three syllables from its name.

"The world-famous instant noodle company announced it has shortened the brand’s name to Kraft Mac & Cheese after 85 years of business.

"The macaroni and cheese giant revealed … that the name change is part of a 'new brand identity,' which includes a redesigned logo and a 'noodle smile' illustration … Kraft Mac & Cheese explained that the name change was made to reflect the way customers 'organically' reference the brand."

Published on: June 27, 2022

•  Amazon announced last week that on July 1, Doug Herrington will replace Dave Clark as head of the company's retail business.

The Information reports that CEO Andy Jassy announced the move comes along with a "name change for the organization, formerly known as Amazon’s worldwide consumer business, which is now called the worldwide Amazon stores business."

At the same time, CNBC writes, "Amazon is losing two top executives who lead warehouses and transportation.

"Alicia Boler-Davis, senior vice president of global customer fulfillment and a member of the company’s leadership team, and David Bozeman, VP of Amazon Transportation Services, are departing the company, according to people familiar with the matter. Both were among the company’s few top Black executives. Amazon has made progress on diversity in its executive ranks in recent years, but still only 5.5% of its senior leaders were Black as of the end of 2021, according to company data."

•  SpartanNash announced last week that Jean-Paul “JP” Calabio, most recently the company's Senior Director, CISO, has been promoted to the position of Vice President, Chief Information Security Officer.

•  Stater Bros. announced the promotion of Bertha Luna, the company's Vice President Retail, to the position of Senior Vice President Retail Operations.

Published on: June 27, 2022

•  From Reuters:

"Apple Inc accepts the outcome of a vote by Maryland store workers to become its first U.S. employees to join a union and is ready to bargain with them, a person familiar with the matter told Reuters on Friday.

"Apple is one of several major American companies whose workforces have moved to unionize, with workers at some Starbucks Corp. and Amazon Inc. locations also voting to join a union in recent months.

"Nearly two-thirds of the employees at the Apple store in Towson, Maryland who organized as the Coalition of Organized Retail Employees (CORE), voted to join a union last week. The store is the first of Apple's roughly 270 U.S. outlets to do so.  The successful vote came after another planned vote in Georgia was called off earlier this year.

"Apple intends to participate in the bargaining process in 'good faith,' the person familiar with the matter said."

Published on: June 27, 2022

Before I went off to the islands, I wrote about the senior software engineer at Google named Blake Lemoine who came to the conclusion that artificial intelligence (AI) developed by the company is, in fact, sentient.  Meaning, "responsive to or conscious of sense impressions," and/or "having the capacity to have feelings."

And so what did Google do when presented with this conclusion?  It placed Lemoine on paid leave.

Google said that Lemoine violated the company's confidentiality policy by handing over documents to a US senator, and argued that the AI "imitated conversational exchanges and could riff on different topics, but did not have consciousness."

I wrote:

I have no idea if Lemoine is right nor not … but I also have a question:  If, in fact, Google created AI with sentience, would it tell us?

I don't have a lot of confidence that it would … the idea that a technology company could create a kind of life would have the potential of rocking our culture to its core, creating a broad philosophical debate that I'm not sure we're capable of having.

Still, the whole thing is fascinating, and makes me think that if AI has not achieved sentience yet, it is inevitable that it will happen.  Some day.  And it will be Eye-Opening.

It is the placing of Lemoine on leave that strikes me as offering a business lesson, because it seems to drip with denial and epistemic closure - two things that no business should practice.

 The subject prompted MNB reader Bob D’Amato to write:

Twenty First century job title: Computational Ethicist.

Seriously, if a machine develops sentience think of the moral issues this presents. Does the machine become a being with all the rights and privileges of a living being? How do you shut it off or terminate its’ existence? Really troubling is contained in the ScienceDirect definition: “having the capacity to have feelings”.

Hopefully the machine develops feelings of love, kindness, and empathy instead of suspicion, anger, and hate.   (Free movie reference: “open the pod bay doors HAL.” “I'm sorry Dave, I'm afraid I can't do that").

FYI … in the sequel to 2001, 2010: The Year we Make Contact, it was revealed that HAL actually was following covert orders programmed into it by the National Security Council without the knowledge of the crew.  So the problem wasn't that HAL was suspicious, angry and hateful … it was that human beings were.

Go figure.

BTW … 2010 isn't a great movie, but it has its moments, especially because one of the plot drivers is escalating tension between the US and Soviet Union.  (The movie came out seven years before the dissolution of the USSR … but the tensions described seem very familiar.)

MNB reader Mark Heckman had some thoughts about my conversation with Sterling Hawkins about his book, "Hunting Discomfort."

Kevin, I enjoyed your web interview with Sterling.  I have known Gary Hawkins for years and believe both he and Sterling are exceedingly forward thinkers and somewhat of a rarity in our industry.  Embracing discomfort is sometimes the only way to escape the inertia in retailing that has kept many from delivering a a better customer experience and financial success.

Kudos to you for a great interview and your own insights…By the way, I am not a big fan of heights either!  LOL

And finally, this note from MNB reader Rich Heiland about my time away: 

Good for you - taking off.

One of my consulting pals and his wife have a program called "Clarity." It has to do with finding what lights you up in life, then focusing on it. And, it's OK, in fact great, if what lights you up is what you do for a living.

But, and this is a big 'but,' you also need to practice what they call "sacred selfishness." We are told most of our lives that we have to do for others. But, we too rarely are given permission to do for ourselves.

Sacred selfishness is simply taking time to take care of you, to tend the body and soul. The premise is that if you burn out, if you have little left in the tank, you can do no good for anyone. So, sacred selfishness is that time you take to recharge the batteries not just for yourself but for what you are able to offer others.

And, it is based on the premise you alluded to. The world will continue to spin while you are away from it and you will be better suited to spin with it when you return.

Enjoy. Assume good beer, good wine, good food are involved!

Absolutely … plus a lot of excellent rum and an inordinate amount of conch, grouper and mahi.

Published on: June 27, 2022

• The Colorado Avalanche defeated the Tampa Bay Lightning 2-1 in game six of the Stanley Cup finals last night, capturing the National Hockey League championship in the best-of-seven series.

It is the third title for the Colorado franchise, and its first since 2001.