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Monday, May 02, 2016

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Monday Morning Eye-Opener: Digital Peanuts

by Kevin Coupe

The Chicago Tribune reports that PepsiCo-owned Cracker Jack "is replacing what have lately been crummy little trinkets like temporary tattoos with crummy little matrix bar codes for things you can play with on your phone."

"The new Prize Inside allows families to enjoy their favorite baseball moments through a new one-of-a-kind mobile experience, leveraging digital technology to bring the iconic Prize Inside to life," says Haston Lewis, the company's director of marketing.

Now, the story notes that Cracker Jack, in part because of concerns about public safety (at one time, the prizes were actually made out of lead), has gradually lowered the quality of the prizes. This new move is part of an ongoing effort to make Cracker Jack seem more contemporary ... though having the Tribune suggest that the digital prize is just as "crummy" as a temporary tattoo probably wasn't in the game plan.

The Eye-Opening lesson, I think, is that just making something digital doesn't necessarily make something modern, or relevant. Products actually have to be relevant.

Dietitians Emerge As Force For Better Nutrition, Higher Sales

The Chicago Tribune has a story about how "grocery stores are investing in health and wellness professionals, including registered dietitians, to help customers navigate the myriad decisions on each shopping trip," believing that such investments can help them generate more sales and profits.

The story notes that there are some 11,000 US grocery stores currently served by dietitians, though many of those companies use corporate dietitians and some dietitians cover multiple stores. Increasingly, however, these nutrition professionals are being deployed in stores "to engage with customers."

The Tribune writes that "about 96 percent of grocery stores are committed to expanding health and wellness programs, according to a 2014 report by the Food Marketing Institute, which surveyed 29 grocery chains estimated to represent about 6,800 stores. And 62 percent of stores surveyed employ store dietitians to help them achieve that goal."

KC's View: It was a few years ago that my friend Phil Lempert founded a trade group called the Retail Dietitians Business Alliance, which is designed to help enable this trend as well as provide continuing education for the dietitians. Smart move, I think, because it puts a broader and more vivid face on a trend that otherwise might be marginalized by some in the food business.

We've had some discussion here recently about retail jobs that go away as some functions become more mechanized and consumers move toward e-commerce. But not all the jobs have to go away ... dietitians can be hired and people can be educated to do these jobs, which at their core are customer service roles that can create relationship with shoppers that can transcend technology. To reiterate a phrase I seem to use a lot, it is about not just being a source of product, but evolving into being a resource for the shopper.

Editorial continues after a word from our sponsor...

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Walgreens Seeks Higher Ground in Cannabis Discussion

MarketWatch reports that Walgreen - while not a licensed provider of medical marijuana - has been using its blog to write about its benefits, while advising readers to consult their physicians.

Dahlia Sultan, a pharmacy resident at the University of Illinois and Walgreens, used the company blog recently to cite studies from the National Cancer Institute and the National Center for Biotechnology Information, writing, “Research has ... shown marijuana provides pain relief in ways traditional medicines don’t. Medical marijuana can improve appetite and relieve nausea in those who have cancer and may help relieve symptoms such as muscle stiffness in people who have multiple sclerosis.”

The MarketWatch story notes that "few national brands have openly discussed legal cannabis, though that may change, experts say, as demand increases for it. Twenty-three states have legalized marijuana for medical use, and four states and the District of Columbia have legalized recreational cannabis." The legal marijuana industry is expected to continue growing, with legal sales in 2016 projected to reach $6.7 billion, up from $5.4 billion in 2015.

KC's View: To be honest, I haven't made up my mind how I feel about recreational marijuana legalization, but I do think it'll be interesting to see how major retailers deal with it if it happens on some sort of broad scale. It won;t just be the product itself, but the accoutrements; will we see bong sections at Walmart or Walgreen?

I'm guessing that whatever the reservations may be, companies may find the millions of dollars that can be made to be too hard to resist.

Editorial continues after a word from our sponsor...

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Discord At The Top, As Tumulto Comes To Wisconsin

USA Today has an interesting piece about Federica Marchionni, described as "the glamorous, Italian-born New Yorker, brought in from luxury fashion house Dolce & Gabbana" to be CEO of Lands' End after it was spun off from Sears, which followed a period of time during which its sales dropped precipitously.

What becomes clear from the story is that there is a culture clash taking place at Lands' End - some folks there think she is tough, visionary and persistent in her efforts to challenge the status quo, while others think she is divisive, polarizing, self-aggrandizing and imperiously reminiscent of the Meryl Streep character in The Devil Wears Prada.

Marchionni describes herself as tough, but fair, saying, "When people talk to me, I challenge them. They used not to be challenged. And I strive for the excellence."

The culture clash may in part be caused by the fact that English is Marchionni's second language, and there have been misunderstandings. But there also has been a geographic issue.

The story notes that "her employment agreement specified that she would not have to move to the southwestern Wisconsin city of 4,700 residents, nor would she be required to perform most of her duties there. Her principal workplace, the agreement said, would be in metropolitan New York ... But while Marchionni may not be a regular at Bob's Bitchin' BBQ downtown, there's no doubt who's in charge at the sprawling complex at the north edge of Dodgeville, where most of the company's roughly 4,000 Wisconsin employees work."

And, USA Today points out that Marchionni may be losing critical board support; James Gooch, the former CEO of RadioShack and DeMoulas supermarkets, has been named the company's new CFO/COO. Gooch, the story notes, is moving to Wisconsin.

KC's View: I'm totally cool with the idea of bringing in outsides to shake up corporate cultures that have gotten stale, especially when those cultures are generating decreasing sales and profits.

That said ... I tend to be extremely skeptical about any retail move engineered by Fast Eddie Lampert, the Sears Holdings chairman who has driven both Sears and Kmart off a competitive cliff, and who still owns more that 53 percent of Lands' End stock. Fast Eddie reportedly loves the idea of turning Lands' End into more of a fashion brand, which is why he hired Marchionni.

But as they say, culture eats strategy for breakfast ... and Marchionni may just have been a poor cultural fit for Lands' End, regardless of whether the strategy made sense. Either way, the guess here is that Lands' End is likely to end up being yet another monument to how tone-deaf Lampert is.

Editorial continues after a word from our sponsor...

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Now back to regularly scheduled editorial...

Justice Department Probes Dole Handling Of Listeria Outbreak

The Wall Street Journal reports that the US Department of Justice "has launched a criminal investigation into Dole Food Co. over a listeria outbreak linked to four deaths in the U.S. and Canada and multiple other illnesses."

At issue is a Dole plant in Springfield, Ohio, that earlier this year "voluntarily removed products from stores in 23 U.S. states and three Canadian provinces after salads it produced were tied to fatal illnesses." However, there are suspicions that Dole may have known about the potentially dangerous bacteria a year before shutting down the facility, and conducted testing in areas of the plant where it was less likely that listeria would be found.

The Justice Department is not commenting on the investigation, but Dole said that it has been contacted about the listeria outbreak and is cooperating.

KC's View: Just another example, I think, of why companies not only have to do the right thing when it comes to food safety, but also have to be sure to have all their records in order. For lots of very good reasons, the government - and the consuming public - are going to have less and less patience for companies that aren't doing things right.

Editorial continues after a word from our sponsor...

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From MyWebGrocer...

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E-conomy Beat

Bloomberg reports that Amazon "will bring free same-day delivery to the Bronx -- the only New York City borough now excluded -- following criticism from elected representatives that the company’s data-driven service boundaries unfairly left out minority communities."

The announcement follows its decision last week to also offer same-day delivery to Roxbury, Massachusetts, where similar charges had been made about it avoiding minority neighborhoods. Perceived racial disparities in Amazon's service levels had been identified in markets that included Atlanta, Boston, Chicago, Dallas, New York and Washington.


• The Boston Herald reports that Dunkin' Donuts is expanding its delivery service test in the Boston area "to about 200 metro-Boston stores on Monday, with a coverage area that extends as far north as Winchester and Wakefield, west to Wellesley and part of Natick, and south to Braintree. Its full menu will be available.

"Dunkin’ has partnered with delivery companies Favor and DoorDash, both of which say they try to deliver orders within an hour." Customers will be paying six bucks for the delivery of coffee and doughnuts.

Editorial continues after a word from our sponsor...

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Now back to regularly scheduled editorial...

FDA Releases Final Menu Labeling Guidance

The US Food and Drug Administration (FDA) last Friday released a "final guidance" document related to menu labeling, saying that the same standards applied to chain restaurants should apply to grocery stores, essentially not drawing any distinctions between a McDonald's and the deli counter or salad bar at a supermarket.

Enforcement will begin in May 2017.

Food Marketing Institute (FMI) CEO Leslie Sarasin released a statement decrying the FDA move:

"“The guidance is largely a reprint of the draft guidance the agency released in September 2015 and did not incorporate the critical flexibility requested by the supermarket industry to make chain restaurant menu labeling regulations more practical in a grocery store setting for key areas, including signage at the salad bar or hot foods bar.

“While we are pleased to have any type of guidance to assist with our challenging efforts to comply with a rule and a structure written for chain restaurants – as opposed to one that contemplates the operations of supermarkets with large and varied produce departments evolving to salad bars or seafood departments evolving to hot foods bars – the supermarket industry still seeks flexibility from FDA. Specifically, food retailers wish to preserve their opportunity to sell locally produced foods that are sold at only one or two locations as well as their ability to use one sign/menu/menu board in a prepared foods area or next to a salad bar."

Having not gotten that flexibility, FMI - and other trade associations - will push for legislative redress.

Editorial continues after a word from our sponsor...

Industry Drumbeat

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FastNewsBeat

• The New York Times reports this morning that "a lawsuit seeking to be certified as a class action has been filed on behalf of consumers in New York and California against the owner of Quaker Oats after testing found traces of the pesticide glyphosate in some oatmeal ... While the level of glyphosate, the active ingredient in the popular weed killer Roundup, detected in the oatmeal falls well below the limit set by federal regulators for human consumption, the lawsuit accuses Quaker of false advertising because it markets the oatmeal as '100% natural'."

Quaker has responded by saying that "it did not add glyphosate during any part of the milling process but that it might be applied by farmers to certain grains before harvest ... The company said it puts the oats it receives through a cleansing process. 'Any levels of glyphosate that may remain are trace amounts and significantly below any limits which have been set by the E.P.A. as safe for human consumption,' the company said."


• The Cincinnati Business Courier reports that Aldi has said it will stop selling foods raised using eight major pesticides - Deltamethrin, Chlorpyrifos, Clothianidin, Cypermethrin, Imidacloprid, Thiamethoxam, Sulfoxaflo and Fipronil - in its European stores.


• The Seattle Times reports that "nearly 30,000 grocery store workers in the Puget Sound region agreed on a labor contract with several employers including Albertsons, Safeway, Fred Meyer and QFC as well as some independent stores ... The contract guarantees raises above the current minimum wage and requires employers to better fund pension and healthcare plans."

The story notes that it is the first time in 15 years that management and labor have agreed on a contract before the existing deal ends.

RIP

The Rev. Daniel Berrigan, who with his brother Philip was a leader in the radical antiwar movement during the late sixties, has passed away after a long illness. He was 94.

The Berrigans were part of what came to be known as the Catonsville Nine, protestors who entered a draft board office in Catonsville, Maryland, in 1968, removed draft records of boys about to be shipped to Vietnam and then burned the files in garbage cans. They were later convicted and sent to prison; asked in 2009 if he would have done anything differently, Berrigan said he should've done them "sooner," and he always said his pacifist roots could be found in his sense of spirituality.

Your Views: Experiential Marketing

I raved last week about Northgate Gonzales Market, prompting one MNB user to write:

I couldn't agree with you more. I first experienced Northgate when I was part of the USC FIM program in 2009. We toured all of the different grocery formats and Northgate was my favorite.

As a SoCal native I had never ventured into any of the non-traditional stores but if they built one in my part of Orange County, I'd rarely set foot in Ralphs down the street again!

I'm in my 30th year in the warehouse retail business and often refer to the atmosphere Northgate has created for its customers and the importance of creating that type of feel/relationship with our members in all areas of the operation. Northgate has a village market/square atmosphere with an experiential feel... something I want my team to be intentional about when working in the building and engaging our community of people coming through the store.

They also have a fantastic shrimp ceviche and the restaurant and bakery and fresh tortillas are amazing!


In the end, great food usually wins.




Which leads me to another discussion we've been having, prompted by Kate McMahon's column last week contrasting the sensory appeals offered by the new Broadway musical "Waitress" to the often sterile environs of food stores. Our argument is that while sensory appeals often are lost to concerns about efficiencies, the problem is that such stores also are abandoning what should be a core advantage.

One MNB user agreed:

I couldn't agree with you more, the labor cuts in the northeast chain I work for do absolutely nothing for the store, just the bottom line. The only thing baked fresh in my store are muffins and cookies, everything else is just baked off or yes even thawed out, already in its for sale container. Where is the differentiation in that?



We also had a story recently about how projections are that a lot of department stores are going to be shut down as consumer demand wanes, leading MNB reader Jessica Duffy to write:

For me, going to a Department Store is very uncomfortable….usually there are not very many people there and you kind of feel “watched” (but maybe I’m paranoid). Plus, you make the time and effort to actually go to a store to shop and they usually don’t have anything you like or are looking for anyway…so then you trek back home and order it online. I miss “shopping”, but department stores are not fun. Just uncomfortable and stressful.




We had stories last week about how Walmart was dropping the Wild Oats and Price First brands for different reasons, leading one MNB user to write:

I am a former member of the Walmart local merchandising team that assisted in executing the launch of these brands.  These 2 brands had strong sales where the stores executed the strategy and the demand planners kept the stores in stock.  For the stores that meant executing the planograms containing these brands, keeping up the shelf flags calling out the location of these products on the shelf, keeping their shelves stocked, and selectively building supporting displays in stores where the demand of these products was higher.  For Wild Oats, that meant higher income and more college-educated consumer stores.  For Price First, lower income and high SNAP customer stores that were competing closely with dollar stores.  Neighborhood Markets in particular were utilizing these products strategically in the product mix to ensure they were merchandised to their communities.  They also did not support these brands with the marketing required to get them fully established.

I see this move primarily happening due to new senior merchandising leadership in place at Walmart, along with the shifting of a strategic focus different from previous leadership.  These 2 brands were brought in during Duncan MacNaughton’s merchandising leadership, which was deep rooted in food store merchandising knowledge.  Eliminating this 3-tier private label strategy is short sighted, especially without a replacement for these products to serve a strategic and customer demand need.  This move will quickly impact customer relevancy, and will manifest itself in lower sales and category margins.

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Kevin Coupe uses his unique perspective as MorningNewsBeat "Content Guy" and more than 30 years writing about business, marketing and innovation to identify the ways in which consumers are changing, the reasons behind these changes (technology, the economy, culture, demographics), how new and unorthodox competitors are altering the marketing landscape, and what companies need to do to find and exploit differential advantages.

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Start here: KevinCoupe.com. Or call Kevin at 203-662-0100.

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