business news in context, analysis with attitude

Published on: March 1, 2023

Today, Tom Furphy & KC are live at the National Grocers Association (NGA) Show in Las Vegas, talking about the risks of "small ball" thinking at a time when economic circumstances  have given big, bold bets a bad name.  They argue, however, that the kinds of bets that independent retailers need to make don't have to be expensive - but they must represent a vision for what food retailing will look like in five or 10 years.  Baby steps are fine, they suggest, but they have to be in the direction of some larger goal.

Note:  The continuing goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive who led the team that developed Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

Also from the NGA Show…

•  NGA announced that Alabama’s Auburn University has won the 2023 Student Case Study Competition.

The annual competition pits students from 11 schools against each other, over multiple rounds, as they deliver "presentations that offered ways to develop a comprehensive strategy for the best combination of internal benefits with competitive corporate positioning.  This year’s case study subject was Dierbergs Markets, which operates 26 stores in the greater St. Louis area and that, faced with “The Great Resignation," is seeking ways in which "they should structure their financial plans and team activities to increase recruiting and retention."

•  The Women Grocers of America (WGA) today presented its Woman of the Year Award, given annually to a "female grocer who displays strong leadership, a passion for the grocery industry and a commitment to her community," to Gwen Christon, owner and operator of Isom IGA in Isom, Ky.

•  The annual Best Bagger Championship this year was won by Karli West of of Macey’s in Utah, who took home a $10,000 cash prize.

Runners-up included JDana Sparks of United Supermarket (Texas), Brennan Davenport of Publix (Georgia), Nathan Brtek of Lou's Thriftyway (Nebraska), and Nolan McGregor of Fareway Stores (Iowa).

Published on: March 1, 2023

The Washington Post reports that "as travelers’ palates become more sophisticated, the airline industry is trying to keep apace, fulfilling fliers’ desires for more plant-based meals, listing purveyors on menus and incorporating the wonders of fermentation. One of the challenges for global catering companies is to incorporate the ingredients and techniques of the moment — and execute that vision in the clouds. The process weaves together art and science, equalizing flights of fancy with the sobering realities of pressurized cabins."

The Post makes the point that this isn't easy.  Pressurized cabins and dry air create problems in terms of taste and texture - some foods taste better in the air (tomato juice!) and some taste worse (fried foods).  And, of course, there are limitations on what can be served since all the food is being reheated, having been made 24 hours in advance.

But here's the bottom line:

“Passengers bring their expectations on the ground to the sky,” Sophitmanee Sukalakamala, an associate professor who specializes in food and beverage management at Johnson & Wales University in Charlotte, tells the Post.

Published on: March 1, 2023

Target reported Q4 same-store sales that were up 0.7 percent, with same-day services (in-store pickup, Drive Up, and Shipt, all of which represent more than 10 percent of total sales), up 4.3 percent.

According to the company, "total revenue of $31.4 billion grew 1.3 percent in the fourth quarter compared with last year, driven by sales growth of 1.2 percent and an 8.4 percent increase in other revenue. Operating income was $1.2 billion in fourth quarter 2022, down 44.7 percent from $2.1 billion in 2021."

For the full year, "sales increased 2.8 percent to $107.6 billion from $104.6 billion last year, reflecting a 2.2 percent increase in comparable sales combined with sales from non-mature stores. Full-year total revenue of $109.1 billion grew 2.9 percent compared with 2021, reflecting sales growth of 2.8 percent and a 9.8 percent increase in other revenue."

CNBC  writes that CEO Brian Cornell said in a prepared statement that "the company performed well, despite 'a very challenging environment,' with groceries, beauty items and household essentials lifting sales as consumers focused on necessities … We know inflation is still high — it’s been very stubborn. It’s still at a very high level. We know interest rates are rising. And we’re going to watch the consumer really carefully'."

CNBC also writes that "Target plans to spend less on capital expenditures than this past fiscal year, when it spent $5.5 billion. Its goal for store projects is also slightly lower compared to the 23 new stores and about 200 remodeled ones it announced for fiscal 2022.

"The investment plans underscore a dilemma that other retailers face, as well: As the economic backdrop remains uncertain and high inflation persists, companies will have to get creative and work harder to win over customers — or risk posting weak sales … Alongside its investment plans, Target said it aims to reduce up to $3 billion in total costs over the next three years, saying it wanted to become more efficient after its revenue grew about 40% since 2019."

Published on: March 1, 2023

Walmart-owned Sam's Club announced that "real-time, intelligently retargeted display advertising is now available across tens of thousands of sites on the open web through Sam’s Club Member Access Platform (MAP). This feature — provided in partnership with The Trade Desk and LiveRamp (RAMP) — leverages first-party member data, advertiser data and AI-powered, real-time behavioral insights from Sam’s Club to make advertising campaigns smarter, more effective and more personalized."

The announcement notes that "advertisers have long been challenged to better optimize retargeting, but often wind up bombarding consumers with repetitive or irrelevant ads due to inaccurate and incomplete data. Sam's Club MAP is uniquely positioned to solve this challenge because it uses real-time, accurate data from registered Sam's Club members, including exact data on purchase history, demographics, recent purchases of similar items and basket size — data not available on other retail media platforms. As a result, MAP campaigns can deliver personalized ads in real time to members who’ve expressed interest in a product but have not yet made a purchase. And MAP campaigns are smart enough to stop serving ads to members — even when they are not on Sam’s Club properties — once the member makes a related purchase."

The announcement goes on:

"MAP retargeting automatically connects ads to membership data and member behavior, delivering tangible results, including incremental ROAS (return on ad spend), all 3rd party verified by IRI. Advertisers are able to track those results, including iROAS, right up to the point of sale, by using MAP’s reporting feature.

"Sam’s Club MAP offers advertisers real-time retargeting for a variety of scenarios, including:  A member has browsed a specific item on samsclub.com, or placed an item in their cart, but did not complete the purchase … A member visited a specific landing page, brand page or shelf page on samsclub.com, but did not make a purchase … A member placed an order online to be picked up in club but still plans to shop the club while they’re there – like many members do.

"MAP’s real-time retargeting allows advertisers with complementary products to deliver relevant ads between order placement and club check out effectively allowing advertisers to 'Win the Second Cart'."

Published on: March 1, 2023

Fox News reports that the Attorneys General of 19 states "warned major retailers against the Food and Drug Administration’s (FDA) attempt to let pharmacies mail out the abortion pill, and said doing so would subject to legal action from the states."

The letter was sent "to companies like Costco, Walmart, Kroger and others with pharmacies to spell out the legal repercussions of following the Biden administration's advice.

"'We write to advise you of why the FDA’s invitation is unlawful and risky and to urge you to continue rejecting it,' the AGs wrote, suggesting that the retailers "may not yet be aware that federal law expressly prohibits using the mail to send or receive any drug that will 'be used or applied for producing abortion'.'"

Earlier in February, the same Attorneys General sent letters to Walgreens and CVS, "pharmacy providers who said they intended to use the FDA’s plan to sell the abortion pill. On Monday, they also sent a letter to RiteAid, which announced they also plan to obtain and sell abortion pills using the mail."

According to the story, "The Biden administration in early January developed a plan to change an FDA rule in a way that would allow companies with a retail pharmacy to apply for a certification to distribute by mail a two-step abortion-inducing drug.

"Prior to the rule change, mifepristone, the first pill used in the two-part abortion process, could be dispensed only by some mail-order pharmacies or by certified doctors or clinics.

"If the FDA grants the certification, the pharmacy will be able to dispense the pill directly to patients upon receiving a prescription from a certified prescriber. But the attorneys general warn this change is an incorrect reading of what the law allows that would not stand up in court."

The Attorneys General are all Republicans, Fox News points out, and are from Alabama, Alaska, Arkansas, Florida, Georgia, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Montana, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah and West Virginia.

Published on: March 1, 2023

From Bloomberg:

"Apple Inc. has a moonshot-style project underway that dates back to the Steve Jobs era:  noninvasive and continuous blood glucose monitoring.

"The goal of this secret endeavor — dubbed E5 — is to measure how much glucose is in someone’s body without needing to prick the skin for blood. After hitting major milestones recently, the company now believes it could eventually bring glucose monitoring to market, according to people familiar with the effort.

"If perfected, such a breakthrough would be a boon to diabetics and help cement Apple as a powerhouse in health care. Adding the monitoring system to the Apple Watch, the ultimate goal, would also make that device an essential item for millions of diabetics around the world."

The story notes that there still are years of work ahead of Apple, but success would be a big deal both in terms of the financial upside for the company and the nation's broader healthcare needs - "roughly 1 in 10 Americans have diabetes, and they typically rely on a device that pokes the skin for a blood sample. There are also patches from Dexcom Inc. and Abbott Laboratories that are inserted into the skin but need to be replaced about every two weeks."

Published on: March 1, 2023

The Seattle Times has an extensive story about how "Amazon is facing workplace safety investigations from the Occupational Safety and Health Administration, Washington’s Department of Labor and the U.S. Department of Justice. Earlier this year, after roughly six months of inspections, OSHA determined Amazon failed to keep its workers safe. It pointed to, among other things, the weight of items handled by workers, awkward motions like twisting, bending and lifting, and long hours."

Here's a passage from the story:

"CEO Andy Jassy told shareholders last year Amazon had created a list of 100 'pain points' to solve. It had to work quickly to adjust to its explosive growth amid the COVID-19 pandemic and a spike in demand for online orders, he said. Amazon’s injury rate is not worse than its peers, Jassy argued, it is just 'misunderstood.'

"That sentiment contradicted an analysis of injury data Amazon had submitted to OSHA that found Amazon accounted for nearly half of all injuries in the warehouse industry and that its warehouses had a higher rate of injury than non-Amazon facilities. The analysis — from the Strategic Organizing Center, a coalition of labor unions — found the rate of injury at Amazon warehouses went up 20% in 2021. 

"The serious injury rate at Amazon warehouses in 2021 was 6.8 per 100 workers, compared to a rate of 3.3 per 100 at other non-Amazon warehouses, according to the study. For workers who were seriously injured, Amazon employees needed an average of 19 more days to recover than workers at other non-Amazon warehouses."

You can read the entire story here.

Published on: March 1, 2023

•  The Wall Street Journal reports that Instacart "generated sharply higher sales and profit in the fourth quarter, according to people familiar with the matter and an internal memo, as the company prepares for its highly anticipated initial public offering of stock.

"The grocery-delivery company told employees on Tuesday that its revenue increased more than 50% in the fourth quarter, compared with the same period a year earlier, while gross profit rose more than 80% … Instacart’s full-year revenue increased 39% to about $2.5 billion for 2022, people familiar with the matter said, as the company reaped the benefits of a push into advertising while it has struggled to increase order volume at the same pace it did during the height of the Covid-19 pandemic."

According to the Journal, "Instacart in 2022 processed $29 billion in overall sales across the platform, a measure known as gross transaction volume, up about 16% from the previous year, the people said. The company in the fourth quarter reported positive net income and generated more than $100 million in adjusted earnings before interest, taxes, depreciation and amortization, the people said … Instacart added more stores to its platform and introduced food-stamp payments last year and its Instacart+ membership grew, according to the memo. The company’s advertising products generate a more than 15% increase in sales for brands and are resonating with companies, according to the memo."

The Journal notes that "by showing it is profitable, Instacart could appeal to more potential public investors," which will be important as it considers timing for an IPO at a time when "the U.S. IPO market ground to a near halt."

•  From the Wall Street Journal:

"Amazon employees will soon be able to use their company shares as collateral when buying homes, under an arrangement with online mortgage lender Better.com.

A new Better.com product, Equity Unlocker, will allow employees to pledge stock for loans for down payments, the companies said, rather than having to sell the stock to raise cash.

"To protect itself from a continued slide in Amazon’s stock price, Better.com will charge a higher rate on the mortgages of employees pledging stock—between 0.25 and 2.5 percentage points above the market rate, depending on how the down payment is structured, the company said.

"However, unlike in stock-based loans that carry the risk of margin calls, requiring borrowers put up more collateral or sell assets to reduce debts, Amazon employees’ loan arrangements would be protected if the stock price slides … An Amazon spokesman said the new service aligns with Amazon’s benefits program that seeks to care for the financial wellness, mental wellness and physical wellness of its employees."

Published on: March 1, 2023

•  The Conference Board Consumer Confidence Index was 102.9 in February, down from the revised figure of 106.0 in January, while the Present Situation Index - based on consumers' assessment of current business and labor market conditions - increased to 152.8 from 151.1 last month.

The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more," said Ataman Ozyildirim, Senior Director, Economics at The Conference Board. "While consumers' view of current business conditions worsened in February, the Present Situation Index still ticked up slightly based on a more favorable view of the availability of jobs. In fact, the proportion of consumers saying jobs are 'plentiful' climbed to 52.0 percent - back to levels seen in the spring of last year. However, the outlook appears considerably more pessimistic when looking ahead. Expectations for where jobs, incomes, and business conditions are headed over the next six months all fell sharply in February."

•  As Commissioner Robert Califf of the US Food and Drug Administration (FDA) has released new details of overhaul the agency's organizational structure to make it more effective, Consumer Reports is arguing that the moves do not address the fundamental problems at FDA.

According to a statement by the consumer advocacy group, "an external review by the Reagan-Udall Foundation … concluded that the agency’s culture, organizational structure and governance model have undermined its effectiveness.

"The Foundation recommended that FDA Commissioner Robert Califf appoint a fully empowered, expert deputy commissioner with direct line authority over all key units of the foods program. Consumer Reports and an unprecedented coalition of organizations representing consumers, food industry leaders, and state regulators have been calling on the FDA to adopt such an approach for the past year. Despite broad support for the report’s central recommendation, Commissioner Califf’s plan fails to unify the entire food program under a single leader."

“It’s very disappointing that Commissioner Califf has rejected one of the key recommendations of the Reagan-Udall report,” said Brian Ronholm, director of food policy for Consumer Reports.  “The FDA’s matrix management plan will simply perpetuate the dysfunctional structure at the agency that has failed miserably in the past and led to its botched response to the infant formula crisis and other food safety issues.” 

•  C-store chain Yesway announced that it has acquired five existing Ranglers stores in the cities of Clifton, Hamilton, and Hico, Texas.  With this latest expansion, plus the opening of its newest Allsup's stores in Ruidoso, New Mexico, and Abilene, Springtown, Snyder, and Whitney, Texas, Yesway now has 435 stores across nine states, with plans to open 28 new stores throughout 2023.

Terms of the Ranglers acquisition were not disclosed.

•  From CNBC:

"McDonald’s will sell Krispy Kreme doughnuts at approximately 160 Kentucky locations starting next month, for a limited time.

"It’s an expansion of the fast-food giant’s initial test with the sweet treats. In October, nine McDonald’s restaurants in Louisville started selling Krispy Kreme doughnuts. The larger test is meant to assess customer demand and to understand how a larger-scale launch would affect restaurant operations.

"Starting March 21, McDonald’s customers at select locations in the Louisville and Lexington areas will be able to purchase Krispy Kreme’s glazed, chocolate iced with sprinkles and chocolate cream-filled doughnuts. The treats will be available all day and can be ordered in the drive-thru lane, in the restaurant, through the McDonald’s app and for delivery."

Published on: March 1, 2023

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•  The International Dairy Deli Bakery Association (IDDBA) announced that David Haaf has been named the associations’ new President and CEO.

Haaf brings over 30 years of retail foodservice and culinary experience to the trade association. Haaf’s most recent position was Vice-President of Foodservice & Starbucks Operations for Abingdon, VA based K-VA-T Food Stores Inc.

Haaf succeeds long-time President/CEO Michael Eardley.

Published on: March 1, 2023

…will return.