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Tuesday, September 23, 2014
by Michael Sansolo
Given the enormous implications of the event, it’s amazing that September 15th passed last week without much fuss or reflection. While nothing compares with the tragedy and national wound remembered each September 11th, the 15th is a day business need reflect on annually…at least now.
September 15, 2008, was the day Lehman Brothers failed. It was hardly the first time a financial institution went belly up and certainly wasn’t the last, but somehow it was still different. Within two weeks of Lehman Brothers’ demise the entire global economy went into free fall. Major stock exchanges around the globe lost about one-third their value within one month of Lehman’s bankruptcy.
Just as the after effects of September 11 linger to this day, so too does the legacy of September 15 and in many ways it impact you more directly because of the way it continues to impact your shoppers.
Think for a second about the powerful implications of the student loan debt crisis that Kevin wrote about the other day. We know have a generation entering the usual retirement years under a massive economic cloud. According to some estimates about one-quarter of Boomers have no assets, the average net worth of the generation is under $150,000 and now we find that some are still under the cloud of student loans that are eating away at Social Security payments.
It makes you appreciate again the long ago words of The Who: “Hope I die before I get old.” Maybe they understood we couldn’t afford to age.
Kevin made a great point in his article: the people in this pickle didn’t deliberately go there. Yes we can question if we lived beyond our means, if we wrongly believed our houses could serve as a bank account and believed in investment scenarios that seemed to defy gravity. Then again, when this generation first entered the work force they had no idea that their careers would witness the end of lifetime employment supported by benevolent companies where benefits would extend well beyond careers.
As Kevin also astutely pointed out, we can only wonder what the future holds, with a new, large generation emerging into adulthood burdened by even larger student loans and facing the prospect of tough global competition forever. How will they ever buy homes, save for retirement or even consider educating their children?
Of course, things might change again. For better, or for worse.
This much we do know. We know that in many ways, shopper frugality is a reality in 2014 just was it was in 2008 when the Great Recession exploded. That’s why there is so much interest in whatever happens with Family Dollar and Dollar General. It’s why companies like Aldi and Canned Food Outlet are so compelling. It's why, as the Cincinnati Enquirer reports, "Kroger executives say its private label business now accounts for one quarter of all its sales excluding gasoline and pharmacy receipts – approaching $20 billion annually." It’s why shopping apps that allow easy comparison of pricing loom so large. And it’s why private label continues to grow in importance and influence.
Inside your companies and with your trading partners, you need to ask, “How have we changed since 9/15/08.” And as you think about those stories on long-overdue student loans, ask yourself also how you should continue to change, because the pressure on consumers shows no signs of easing.
The reality is the global economy changed and with it your shoppers changed their habits, their purchases and their aspirations.
Things changed. Did you?
Michael Sansolo can be reached via email at email@example.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
by Kevin Coupe
I was interested to read yesterday a piece in the New York Times by Margaret Sullivan, the paper's Public Editor, who serves as an ombudsman for reader concerns. The piece had to do with a column that was written last week by the paper's TV critic, Alessandra Stanley, about Shondra Rhimes, the creator of "Grey's Anatomy" and "Scandal," and now the producer of the new TV series, "Getting Away With Murder."
Stanley generated some controversy by suggesting in her lede that "when Shonda Rhimes writes her autobiography, it should be called 'How to Get Away With Being an Angry Black Woman'." That struck some readers - and Sullivan - as being offensive and borderline racist, playing into stereotypes.
Now, to be fair, I didn't have the same reaction when I read the story; I saw it more of a column about how Rhimes challenges stereotypes and expectations rather than reflects them … but I was taken aback by Stanley's lede. It just struck me as distasteful. But then again, I'm not a fan of Stanley's writing, so I sort of dismissed it.
But a lot of people didn't, and the Times was swamped with email.
If you're interested and want to make up your own mind, you can read the original column here and the assessment of it here.
But here's the passage from Sullivan's assessment that I thought was most interesting:
"The Times has significant diversity among its high-ranking editors and prominent writers, but it’s troubling that with 20 critics, not one is black and only two are persons of color."
And it grabbed my attention because of something else that happened yesterday.
As you may have read on MNB yesterday, Albertsons named the leadership team that will run the company once its merger with Safeway is completed, probably in the fourth quarter.
I got a lot of email yesterday observing that virtually all the people named to the top leadership team were from Albertsons, making the point that the deal is less a merger than an acquisition. (We all knew that. "Merger" was just the polite term.)
But the bigger issue, for some folks, seems to be what was described as a startling lack of diversity in the top leadership team. Every one of the people named to the group is a middle-aged white guy. (Though actuarially, they probably at best are in late middle age, unless they live to be 100 or more.) In the ranks, there is a concern that this new company - which will have 2,400 stores, 27 distribution facilities, 20 manufacturing plants and between $55 billion and $60 billion in annual revenue - may not have the kind of diversity necessary to be really successful in 2014 and beyond.
Here is a typical email:
It was hard not to notice as a Safeway employee that 13 of the 13 top jobs (including the president and chief executive officer) announced in the merged company will be filled by white males. This was very evident at the Town Hall meeting when pictures were shared of the new team. At Division President level, there are 2 women out of 14 and one minority male. In an era when our customer base is incredibly diverse and our workforce similarly so, the lack of diversity at the senior leadership level is nothing short of stunning. In total , the top 27 positions include only 2 women and one minority. Safeway has made a lot of progress in this industry creating a diverse leadership team, and we can only assume from the recent announcement that diversity is not a priority for Albertsons.
I'm not saying that the combination of Albertsons and Safeway, led by this management team, cannot be successful. And since Albertsons is, in fact, the acquiring company, it was to be expected that it would have the upper hand in developing its leadership structure.
But I do think that companies of this size have to be cognizant of the need to reflect the nation's changing demographic reality.
The New York Times appears to have come up short. The same could be said of Albertsons.
It is an Eye-Opener.
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The BBC reports this morning that Tesco's new CFO, Alan Stewart, will join the company immediately, instead of waiting for another two months as originally planned.
The move comes as Tesco has admitted that its first half profit projections had been overstated by the equivalent of more than $400 million (US) because of what the company acknowledged was "early booking of revenue and delayed recognition of costs." The financial misstatements were revealed by an internal whistleblower, and now are being investigated.
It was reported yesterday that four company employees - including Chris Bush, who runs Tesco's UK business - have been suspended, though not disciplined, pending an investigation. The BBC is now saying that "Tesco is also believed to have suspended its UK finance director Carl Rogberg, its food commercial director John Scouler and the head of food sourcing, Matt Simister."
It took a little negotiation to get Stewart, who has been CFO at Marks & Spencer, over to Tesco early. Tesco's previous CFO, Laurie McIlwee, departed about a week ago, the story says, and the early move "came after a direct appeal from Tesco chief executive Dave Lewis to his counterpart at Marks and Spencer, Marc Bolland, who 'graciously' allowed Mr Stewart to leave early."
I have to wonder if guys like Lewis and Stewart are shaking their heads, wondering what the hell they've gotten themselves into. Tesco, while it needed new leadership, starts to look like a much bigger mess than they likely expected … and it may take a lot of heavy lifting to get it on track.
The New York Times reports this morning that the US Department of the Treasury will institute new rules "aimed at making it more difficult for American companies to lower their tax bills by relocating overseas and that would wipe out the benefits for those that do … The changes will only affect deals that were completed starting Monday. But they could include pending inversion deals, like the one involving AbbVie, an Illinois-based pharmaceutical company that is in the process of acquiring its smaller British rival, Shire, or the Minneapolis medical device maker Medtronic, which is acquiring Covidien in Ireland."
The Times explains the changes this way:
"The guidelines use existing Treasury regulations to crack down on complicated transactions like internal loans, stock purchases and sales that such inverted companies use to substantially reduce the tax they owe in the United States. They would short-circuit so-called hopscotch loans — when an American parent company uses its foreign subsidiary’s earnings without paying United States taxes — making the loans count as American property.
"The rules also prevent inverted companies from taking advantage of a strategy known as decontrolling, when an inverted company essentially has its foreign entity buy enough stock from the American parent that it has access to earnings from the overseas branch without ever paying United States taxes on them. They could still make the stock purchases, but the tax benefit would vanish. And inverted companies could no longer transfer cash or property from an overseas entity to the new foreign parent company without paying taxes in the United States."
The moves by the Obama administration follow the decision by Burger King to buy Tim Horton's and move its official domicile to Canada, and the speculation that Walgreen would move its HQ to Europe following its purchase of the Alliance Boots shares that it did not own.
According to the Times, Treasury Secretary Jacob Lew says that the administration would have preferred to deal with the problem through comprehensive tax reform legislation, but pre-election gridlock made it unlikely, if not impossible, that a politically polarized Congress would address the issue.
As I understand it, these new rules only serve to make it harder for companies to do inversions. Actual legislation is needed to prevent it.
But, as we all know, Congress seems institutionally adverse - or even incapable of having a reasoned debate, coming to a compromise, and passing legislation. Heck, this is a governing body that at what essentially is a time of war, decided to go home to campaign … because, let's face it, getting re-elected is a lot more important than actually doing your job.
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Kantar Retail is out with a new pricing study, focusing on Target vs. Walmart in Canada, and concluding that "Target Canada is aggressively repositioning to drive its price value."
According to the study, "Kantar Retail assessed a basket of 33 national brand items from edible grocery, non-edible grocery, and health & beauty aids (HBA) at competing Walmart and Target stores located within five kilometers of each other in the Greater Toronto Area to conduct a follow-up pricing analysis of the initial study conducted in March 2013." While the earlier study showed Target and Walmart to be essentially even in Canada, the new study indicates that "Target Canada’s overall basket was 3.9% less expensive than Walmart’s."
In addition, the study says, "Target’s basket achieved its position through temporary price cuts (TPCs) as 36% of its basket was on sale. In contrast, Walmart’s basket recorded only one Rollback." And, "a majority of items were very closely priced with 67% of the basket items priced within 3% of each other."
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...with brief, occasional, italicized and sometimes gratuitous commentary…
• Published reports say that General Mills this week will have to deal with a shareholder proposal that would require it to eliminate GMOs from all the products it manufactures. The proposal is being opposed by an organization calling itself the National Center for Public Policy Research, which calls it a "junk science proposal."
• Advertising Age reports that Hormel Foods is launching a new campaign to support its Skippy peanut butter brand, which it acquired last year from Unilever.
The tagline is "Skippy Yippee," and is the first ad campaign supporting the brand in five years.
Maybe it's just what one is brought up eating. But every once in a while, I just crave a peanut butter and jelly sandwich on white bread … and it has to be Skippy peanut butter and Welch's grape jelly. It's what my mom made, and I'm a product of my environment.
• The Wall Street Journal reports that PepsiCo has said that it "plans to phase out equipment with hydroflourocarbons, as part of its effort to fight climate change.
"The snack and beverage giant said it has a goal for all of its future point-of-sale equipment purchased in the U.S.--such as coolers, vending machines and fountain dispensers—to be HFC-free by 2020. HFCs are a commonly used chemical coolant that is considered a potent greenhouse gas."
• CNN reports that UPS "announced plans Monday to bring in-store 3-D-printing services to nearly 100 stores across the country, billing itself as the first national retailer to do so … With the UPS system, customers can submit their own designs for objects like product prototypes, engineering parts and architectural models that are then printed on a professional-quality 3-D printer made by Stratasys."
According to the story, "The program started as a pilot at six locations last year, and UPS says those stores 'saw demand for 3-D print continuing to increase across a broad spectrum of customers'."
• Worth noting that Fresh Thyme Farmers Market will be opening two stores in Indianapolis this Thursday - the sixth and seventh store opened by the company, which positions itself as "a new full-service specialty retailer focusing on fresh, healthy, natural and organic offerings, all at amazing values."
Fresh Thyme says that its goal is to have 60 stores open by 2019.
Just another example of a company that believes that while Whole Foods has opened the door on a specific market, it also has created opportunities for other companies to come in and undercut it on price.
• The National Football League (NFL), embattled by accusations that it has been insensitive to cases of spousal and child abuse by some of its players, yesterday said that it has hired Dawn Hudson to be its new Chief Marketing Officer.
Hudson most recently was with The Parthenon Group, a strategic consulting firm. Before that, she was at PepsiCo, including a stint as CEO of Pepsi-Cola North America.
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MNB has learned that Rick Tilton, the former and longtime president/CEO of what then was called the General Merchandise Distributors Council (GMDC), has passed away. Tilton was just days shy of his 80th birthday, and had only recently been diagnosed with esophageal cancer.
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Regarding the Chinese e-commerce behemoth Alibaba, MNB fave Glen Terbeek had some thoughts:
Alibaba’s rapid growth in China may be because they have skipped the store based development phase of the retail industry and went right to the virtual world. It is like many developing nations that have skipped land line based telephone investment and when directly to cellular phones.
Like Amazon, Alibaba doesn’t have to protect a real store investment while they can get instant access to shoppers almost anywhere.
In my opinion, any U S retailer that depends only on selling (or should I say distributing) national brands should be concerned. The economics for both retailer and supplier around a non store virtual shopping model are far superior than today’s model, particularly in marketing spend effectiveness, reduction of redundant inventories and logistics systems, and easy and logical shopping for the individual shopper.
Wonderful real (small) store retailing will exist in the future but only if it creates a value above and beyond a self serve distribution function. (Ideas, solutions, information, social, come to mind) I would guess that retailers like Walmart will have a difficult time converting to a true virtual retailer, due to their financial and cultural investment in the big box stores that got them to where they are today. Size and buying power will not be the formula for the future, in fact it may be a hinderance. In fact, in a virtual world, the buy for resale model doesn’t make sense. It will be about who can win the individual shopper, one by one.
Everybody in retail should go back and read Glen's email again. Slowly. And then maybe circulate it to your co-workers and business partners.
On the subject of college loans, one MNB user wrote:
Your user who is critical of students who graduate with loans they either didn’t anticipate or are greater than anticipated is clearly out of touch with how schools/universities work these days.
I recently graduated with just under 20K of debt after going to school for 4.5 years. I would of graduated in 4 years with no debt but due to select students (athletes primarily) getting preferred scheduling and 1 professor’s decision to leave the university, around 60 kids became forced to take one course the following fall.
In my case, my tuition credit cost went up due to going from a full time student to part time. I also lost my on campus job as a Student Supervisor of the cafeteria. Sometimes, things are just out of your control.
The sad thing was, I had a friend in the course and it was always half full because some of the students who had less stake in the course didn’t show up. (still couldn’t get added in even with prof. request)
Ill be interested to see if your reader’s expectations on the loan system change as his kids go through school. Because, as I know you know it is not the same now as when you graduated.
And from another:
My husband is now 73, and until 2 years ago, when he was declared disabled and unable to work (at 71, mind you), we were still paying off a $20K student loan taken out in the mid 80s, and had finally gotten the balance was down below $10K.
I think it would be a great idea for someone to write a piece about paying off student loans while on Social Security - I wonder how many people are doing that. We were…
MNB user Rich Barle wrote:
The cost of college topic is an interesting topic to discuss and could not be accomplished over email.
I wish I had the time to debate this one with you, although we’re probably like-minded on most of it.
I try to keep things simple: Yes, the cost and system has to change, but people have to take responsibility, and there’s nothing wrong with starting out at community college.
As for corporate and foreign country loans, don’t get me started.
To be clear, I'm uncomfortable with the notion that people would just be able to bail out of financial obligations created by college loans. And y'know something else? I actually think that most people don't want to do that - they took out the loans, and they want to pay them back.
(This is in contrast to some people who think that most people being crushed by college debt are just out to game the system. I simply cannot buy into that level of cynicism.)
But we live in a society - in a world - where a college education is enormously important. A great education is one of the things that will make our nation competitive in an increasingly flat world. And yet, access to the great schools and the great teachers, which can result in the best opportunities, is limited by financial realities, or comes with crushing debt that seems way out of proportion.
We can't have it both ways. We cannot hope to be competitive and innovative as a nation and then treat our students this way. It only deepens the chasm between the haves and have-nots. It is bad for the economy, and bad for the culture.
I have no idea what the solution is. But I do know there is a problem. Just continuing down the same road makes little or no sense.
In Monday Night Football action, the Chicago Bears defeated the NY Jets 27-19.
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