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Thursday, July 31, 2014

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FaceTime with the Content Guy: Losing Zip Off Your Brand Fastball

This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

Hi, I'm Kevin Coupe and this is FaceTime with the Content Guy.

I've been a Zipcar customer for a number of years. Especially when I'm in Oregon, teaching at Portland State University - what I like to call my "adjunctivity" - it is enormously convenient to use a Zipcar, since there are many of them parked near both my apartment and the campus. Plus, I love the idea that Zipcar is a disruptive influence, renting by the hour, offering cars that are out of the ordinary, and challenging the traditional rental car business.

Except … it was just a little over a year ago that Zipcar was acquired. By Avis. A traditional rental car business.

This year I've found that the Zipcars that I've used have been a little bit dirtier than they used to be. I've found that there are more Fords than Minis … in fact, there are no Minis in the fleet anymore, and one of the real pleasures of using Zipcar used to be able to occasionally rent a mini convertible for a few hours. And, when I called Zipcar at one point to complain about a particularly dirty car, leaving a message that I wanted them to call me, and leaving my number, they never called back.

I could just smell Avis screwing up a good thing.

The other day, I decided to stop by the local Zipcar office in downtown Portland to chat about what I felt was a slackening in the company's brand promise. It was interesting … they said that as far as they knew, cars were no dirtier than in past years … they explained that Minis had been purged from the fleet because they were high maintenance … maintained that there had been no change in Zipcar management since the acquisition by Avis … and suggested that if my call had not been returned, it was because, well, I left it on the wrong voicemail.

But, they put a one hour credit on my Zipcar account. For which I am grateful.

But … while I'm willing to give Zipcar the benefit of the doubt, I have to admit that I'm not completely persuaded. This is a slippery slope … and there are an increasing number of alternative services to choose from. Zipcar has to be careful not to lose whatever advantage it may have.

I'm not confident, because the fellow I talked to at Zipcar seemed to miss something very important. I could've sent an email. I could've made another phone call. But I cared enough to go out of my way to visit the office … which means that I'm way more than just a dissatisfied customer.

Customers only do what I did when they care. Businesses that miss that signal simply don't.

That troubles me.

That is what's on my mind this Thursday morning. As always, I want to hear what is on your mind.

Brian Cornell, Former Walmart Exec, Named Target CEO

Reuters is reporting this morning that PepsiCo exec Brian Cornell, who formerly worked at Sam's Club, has been named CEO of Target.

As of now, Cornell's bio is still up on the PepsiCo site, saying that "prior to his current position, he was president and CEO of Sam’s Club, a division of Wal-Mart Stores, Inc., where he also served as an executive vice president of the company. Prior to joining Sam’s Club, Brian held the position of executive vice president and chief marketing officer for Safeway and had responsibility for the company’s marketing, merchandising, manufacturing, distribution operations as well as the company’s on-line home delivery business … Earlier in his career, Brian held several general management positions at PepsiCo, including president of Tropicana, president of PepsiCo beverages for Europe and Africa, and president of PepsiCo North America Foodservice."

KC's View: When Cornell went to PepsiCo in March 2012, if I recall correctly, there was some scuttlebutt that CEO Indra Nooyi might not be around much longer, and that Cornell's recruitment from Sam's was a way of deepening the bench and setting up a potential successor. Maybe Cornell got tired of waiting, or maybe he just missed retail. But from what I know of him, Target just landed a big fish, and the retailing waters just got a little more interesting.

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Whole Foods Plots New Marketing Efforts To Goose Sales And Profits

The Associated Press reports that Whole Foods is preparing a national marketing campaign that "will explain to customers what makes it different and why it's better than other supermarkets," which is also designed to reassure investors worried about the company's growth prospects in an increasingly crowded organic and natural foods segment.

In addition, co-CEO Walter Robb said in a conference call with analysts and investors, Whole Foods plans to partner "with third parties to offer home delivery in 12 to 15 major markets, with plans for a wider rollout over time." The company did not identify the markets where it would test the concept.

Robb also said that Whole Foods will shortly begin testing a new loyalty program, "with plans to roll it out widely in time for the winter holidays next year."

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Journalists Subpoenaed Over Pink Slime Coverage. That's Right, Pink Slime Coverage.

Reuters reports that five food writers have been issued subpoenas by Beef Products Inc. which wants to see any and all communications they may have had with ABC News regarding so-called "pink slime." The story says that "Beef Products Inc. sued the network in 2012 seeking $1.2 billion in damages for the coverage of the meat product the industry calls 'lean, finely textured beef,' which critics dubbed 'pink slime.' BPI said ABC's coverage misled consumers into believing the product was unsafe and led to the closure of three plants and roughly 700 layoffs."

Attorneys have responded to the suit by saying that ABC always said in its stories that pink slime had been declared safe to consume by the US Department of Agriculture (USDA) and, besides, since pink slime is actually pink and slimy, the suit is "overreaching."

The reporters facing subpoenas are New York Times reporter Michael Moss, food writer Michele Simon, and Dan Flynn, James Andrews, and Gretchen Goetz, who wrote for Food Safety News.

In addition to ABC, Reuters writes, people named in the lawsuit are "ABC news anchor Diane Sawyer, correspondents Jim Avila and David Kerley; Gerald Zirnstein, the U.S. Department of Agriculture microbiologist who named the product pink slime; former federal food scientist Carl Custer; and Kit Foshee, a former BPI quality assurance manager who was interviewed by ABC."

KC's View: First of all, I have to admit that I'm a little relieved here, because I actually wrote more than 40 stories during 2012 that used the term "pink slime." I can also say categorically that I had no correspondence whatsoever with ABC News or any other ABC-related organization during that time.

Still, I'm a little confused about what the suit is alleging. Is it that ABC News instigated and coordinated a multi-platform slander of BPI, influencing people with whom it did not work to report on the pink slime story and use the offending term (which, as a matter of public record, was coined by a fellow from the USDA)?

Because if that's true, the folks at BPI and their attorneys are delusional. (I wanted to put it a different way, but this is a family blog.) It sounds a lot more like they are engaging in some sort of intimidation game, and I don't see what it is going to get them except a lot more stories that are going to use the term "pink slime" and point out that the problem was never safety, but the fact it was not labeled, which some people found unacceptable. How keeping this story alive in the media by attacking the media makes sense is beyond me.

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Amazon Primes Customers To Accept Slower Deliveries

Time reports that "Amazon really wants its Prime members to stop using its speedy shipping service, so much so that the company is willing to pay customers to accept slower deliveries.

"The online retail giant is now offering a $1 credit toward Prime Video to customers who choose 'No-Rush' shipping for their deliveries. Instead of arriving in two days, items are delivered in five to seven days. The credit can be used for TV shows and videos on Amazon’s download service, though certain Prime Instant Video titles are excluded, including HBO titles. The offer will be available for a limited time."

The story goes on to say that "the deal may be an effort by Amazon to lower expenses after the company posted a larger-than-expected loss of $126 million in the second quarter. The company spent $2.4 billion fulfilling deliveries during the quarter, up from $1.8 billion in the same period a year ago."

KC's View: So let me get this straight. I pay Amazon for the privilege of Prime membership, which will get me products faster, and they're willing to then pay me to get my products slower?

Do I have this right? Because if this is what is happening, while it may reduce costs, I'm not sure how it makes sense from a customer service point of view. We all want things faster, not slower … and part of the reason is because Amazon helped condition us to think that way.

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Market Basket Management Sets Deadline For Protesting Employees To Return To Work

The Boston Globe reports that Market Basket co-CEOs Felicia Thornton and James Gooch have issued a statement saying that employees protesting the removal of their predecessor, Arthur T. Demoulas, must return to work by Monday, August 4, or face replacement by new employees. The company said it will shortly conduct a job fair to get replacements lined up.

The statement reads:

“We want Market Basket associates back to work and reiterate that they can return without fear of penalty. We again acknowledge and understand how difficult this situation has been for associates. However, we also need to have associates working to support stores, customers and vendors. We need associates to return to work on Monday August 4th. We understand that some associates may choose not to return, consequently we will begin advertising for employment opportunities. Our hope and strong preference is to have Market Basket’s incredible associates return to work. Again, any associate that wants to return will be welcomed and not penalized.”

The Globe notes that "employees have thus far stayed adamant in their demand that Arthur T. Demoulas be reinstated as CEO, shrugging off previous calls from management to return the business to its normal operations … Most store managers have signed a petition saying they will resign if Demoulas is not ultimately brought back as the chain’s leader."

(Just to reiterate, in case you are just joining us … The longtime family feud boiled over with the move by Arthur S. Demoulas, to oust CEO Arthur T. Demoulas, his cousin, due to a conflict over the company’s finances. The fight is characterized differently by the two sides. The Arthur S. Demoulas faction argues that Arthur T. Demoulas spends money irresponsibly and refuses to take direction from the board. The Arthur T. Demoulas side maintains that his cousin is fueled by greed, only interested in raising prices, cutting employee compensation, and threatening the formula that has built the company to a New England success story. To be fair, though, this is a battle that goes back decades, and that is beginning to resemble the Hatfields and the McCoys .. except in this case, the townsfolk - meaning the vast majority of employees - have sided with Arthur T., responding with protests and systematic slowdowns of shipments to the company's stores, which have left many of the units almost empty of both food and customers. Got it?)

KC's View: There was, by the way, an interesting column in the Wall Street Journal op-ed section yesterday by Holman W. Jenkins, Jr. in which he suggested that the news media might have over-romanticized this battle as good vs. evil, which I think may have some merit to it. It is possible, as Holman suggests, that Arthur T. Demoulas is not as blameless in this story as some would suggest, and that the board is behaving quite properly.

But, if this is the case, then the board and Arthur S. Demoulas need to get better advice on the public relations front. Because in the court of public opinion, they are getting a good old-fashioned whipping.

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Amazon Pushes Back In Hachette Dispute By Getting Specific About Dollars And Cents

Business Insider reports that in a blog posting, Amazon has gotten specific about its rationale in picking a fight with publisher Hachette over costs, saying that it wants a system in which 35 percent of all e-book revenues go to authors, 35 percent to publishers, and 30 percent to Amazon.

The statement contradicts a rumor that Amazon was looking for a 50 percent cut when it decided to slow down the shipment and availability of Hachette-published books until the pricing dispute was settled.

According to the story, "In its post, Amazon makes a mathematical plea for why most e-books should be priced at $9.99, instead of $14.99 or $19.99, given that they don't require printing, storage, or transportation. The company says it's found that e-books priced at $9.99 sell 1.74 more copies than when they're priced at $14.99. If you carry that factor to an instance of selling either 100,000 books at $14.99 or 174,000 copies at $9.99, total revenue increases 16%, and authors get an audience that's 74% larger."

In other words, authors who have sided with Hachette in this dispute need to think again.

"Keep in mind," Amazon writes, "that books don't just compete against books. Books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive."

KC's View: Of course, the real argument that Amazon is making is that traditional big publishing houses may have outlived at least part of their usefulness in a publishing world where technology has allowed a kind of democratization of content availability. Publishers no longer serve as the gatekeepers when it comes to what gets published and what does not, and therefore they ought to take a haircut when it comes to revenue.

Which is a pretty persuasive argument, I think.

Worth Reading: Who Will Be The Starbucks Of The Pot Industry?

Ad Week has a long piece about the commercial opportunities being created by what appears to be the legalization of marijuana around the country.

An excerpt:

"Industry watchers predict that 14 states are likely to adopt some level of legalization in the next five years. (The New York Times over the weekend even came out in favor of legalization.) They have powerful incentives to do so. Not only do most Americans favor legalization (58 percent, according to a 2013 Gallup Poll), but legal cannabis amounts to tax revenue for cash-starved municipalities. Colorado, for example, is on track to collect $134 million from its first year of legal pot sales. And while the DEA still publicly pledges to eradicate marijuana, a growing number of elected officials, including President Obama, are of the belief that the feds have better things to do than go after stoners. If the legalization trend continues at a pace many expect it to, the legal marijuana market—worth an estimated $2.57 billion today—will hit $10.2 billion by 2019.

"It translates to a veritable gold rush for pot startups ('ganjapreneurs,' as they’ve been called) - companies that market everything from vaporizers to fashion-forward receptacles for your stash … There are a handful of brands out there, and they’re growing. And that has raised some questions among traditional marketers. We all know that every category, from European imports to beauty products, has its leading brands, so which are the brands shaping up to dominate cannabis? Is the day coming when we could see a Marlboro (or Starbucks, or Mercedes-Benz) of pot?"

You can read the entire story here.


• The Albany Times Union reports that New York State-based Price Chopper has been named in a class action suit filed by a former employee who charges that the company "misclassified workers as supervisors to avoid paying them overtime. The suit was filed "on behalf of all Price Chopper’s team leaders and department managers."

Price Chopper replied that its lawyers had not yet seen the suit, but that it takes its legal obligations to its employees "seriously."

• The Associated Press reports that Cargill will shut down a Milwaukee beef processing plant, saying that a shortage of cattle has made the move necessary.

According to the story, "the meat producer says a Midwest drought in 2011 and 2012 hurt cattle levels … Cargill says US beef cattle herd is at its lowest level since 1951."

• The New York Times reports that Square "plans to introduce a new version of its credit card reader hardware next year, a device that the company hopes many small and medium-size businesses will quickly adopt … Square’s new reader will be compatible with microchip-enabled credit cards. The microchip technology, commonly referred to as E.M.V. (short for Europay, Mastercard and Visa), communicates with payments processors to determine whether the card is counterfeit every time it is used to make a purchase."

• The International Business Times reports that new data from Kantar Worldpanel suggests that during the most recent quarter, Aldi and Lidl grew their UK market shares, "with Aldi now holding 4.8% of it, up by 32.2% on the previous year, and Lidl gaining 19.5% more than the same quarter in 2013, as it sits pretty holding 3.6% of the market."

Meanwhile, the story says, "Tesco's unrelenting descent shows no signs of coming to a halt as, although it still holds the majority of the market with 28.9%, it was down by 3.8% … Asda took second place with 17% and Morrisons experienced the exact same decline as Tesco, as its market share dropped to 11%."

• In Minnesota, the Pioneer Press reports that "Hy-Vee said Tuesday it plans to open a supermarket in Oakdale, as its initial expansion into the Twin Cities metro area unfolds … That store would be the second Hy-Vee in the metro area, and the company plans to open more supermarkets in the Twin Cities in the coming years."

Hy-Vee said several other store sites "are in various stages of research and development."

• The Conference Board says that its July consumer confidence index hit 90.9, up from 86.4 in June and the highest since October 2007, before the recession hit.

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Your Views

The Los Angeles Times reports that Vin Scully, the 86-year-old voice of the Los Angeles Dodgers for the past 65 years, has decided to return to the broadcast booth for the 2015 season. Scully makes these decisions on a year-to-year basis, and his decision was broadcast during the second inning of Tuesday night's game at Dodger Stadium.

"Naturally there will come a time, when I will have to say goodbye, but I’ve soul-searched and this is not the time,” Scully said in a statement.

KC's View: He's my hero.

One of my favorite Scully quotes is this: "Good is not good when better is expected."

And I loved it when he once said that Andre Dawson "has a bruised knee and is listed as day-to-day." And then he paused, and added, "Aren't we all?"

Thankfully, Vin Scully is proving that he doesn't seem to be.

PWS 28