retail news in context, analysis with attitude

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KC has talked about it here before - the dangers of epistemic closure.  But in a recent New York Times piece, columnist Jane Coaston doubled down on the concept, talking about how "knowledge bubbles work against us."  The example she cited - a well-known broadcaster named Paul Finebaum (who KC concedes he's never heard of before now).

The New York Times has a long piece this morning that suggests Amazon's dominance and size may be turning into a kind of vulnerability.

Here's how the Times frames the story:

"Amazon’s online store has surpassed Walmart, making it the largest retailer outside China. By delivering essentials and luxuries to those stuck at home during the pandemic, it helped many people navigate a bleak moment. Shipping times that used to be measured in days are now counted in hours. It is one of the few companies valued at more than a trillion dollars.

"For all that success, however, Amazon is under pressure from many directions."

People selling on Amazon's Marketplace increasingly describe it as having a "Wild West atmosphere" that hurts them.  There also are "regulators, who are taking a closer look at Amazon’s power; unhappy warehouse employees, who would like a better deal; and lawmakers, who want Amazon to disclose more about its third-party sellers. There are also the devious sellers themselves, whom Amazon says it is having a hard time eradicating.

"All of these critical groups could perhaps be dealt with. But there is one more that presents a much bigger risk: customers. As Jeff Bezos, Amazon’s founder, once noted, customers are 'divinely discontent.'  Last quarter they got fickle about Amazon. After years of meteoric growth, its e-commerce revenue barely budged.

"Maybe it was a blip. Or maybe shoppers are shutting their wallets in frustration … The bookstore is the oldest part of Amazon, still central to its identity but no longer to its bottom line. It feels like where every Amazon shopping experience could be heading — immense, full of ads and unvetted reviews, ruled by algorithms and third-party sellers whose identities can be elusive."

You can read the entire story here.

KC's View:

It seems to me that Amazon often tends to get defensive about stories like these, arguing that they are based on misperceptions and errant observations, more a result of the enlarged target on Amazon's back than an accurate portrayal of reality.

I get that.  It is hard to hear such things - even for one of the world's biggest and most influential companies.

But I would argue that Amazon really needs to create a kind of ombudsman position whose job is making sure that these criticisms are not just taken seriously, but dealt with transparently.  There is no shame in saying, "We tried to do our best.  We fell short.  We're going to do better."

The entire company is founded on the premise that established business models can be disrupted and made obsolete, but it seems to me that new CEO Andy Jassy needs to put less of a premium on disruption and more of a focus on living up to the value proposition that it has sold to both customers and vendors.  There will remain plenty of room for disruption in both new and existing businesses, but somebody has to recognize that there is a broader narrative playing out, a narrative that may be spinning out of Amazon's control.  And so, Amazon has a choice - write the next chapters itself, or let them be written by others.

I know which one I'd choose.

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BoiseDev reports that Albertsons is working with self-driving vehicle company Waymo to test "autonomous grocery delivery early next year in San Francisco, involving Albertsons’ Safeway stores.  A single store test will be followed by a broader rollout in the market, the story says.

Some context from the story:

"It’s the latest project for Albertsons, with announcements coming fast and furious. BoiseDev has reported on scores of projects, including an AI-powered grocery cart, app-based checkout, membership program, robotic delivery carts, automated grocery pickup kiosks, robotic aisle scanners, small fulfillment warehouses, and more.

"The company has trialed most of the experiments either in the Boise market or in the area surrounding its secondary headquarters in Pleasanton, California. It’s been working to make major adjustments in recent years as consumer behavioral habits have changed. Amazon, Inc. has disrupted most retail segments but for the most part, has not cracked grocery delivery. Albertsons, along with traditional competitors like Kroger and Walmart have amped up activities over the last five to ten years in an effort to keep their businesses intact."

KC's View:

I love that list

"…an AI-powered grocery cart, app-based checkout, membership program, robotic delivery carts, automated grocery pickup kiosks, robotic aisle scanners, small fulfillment warehouses, and more."

I'll betcha the "more" could be even more interesting and impactful on the company's future.

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Kroger CEO Rodney McMullen, after yesterday's release of Q3 results, said that he believes that cook-and-eat-at-home habits created during the pandemic are sticking.

“An awful lot of customers learned how to cook and they really enjoy it,” he told CNBC.  “What they’re telling us is they like to eat healthy and they feel like they can eat healthier by cooking at home. They also like to show off their new skills.”

At the same time, Kroger CFO Gary Millerchip told Fox Business that the company is managing inflation with selective price increases.

"We are being disciplined in managing these increases. Our teams are doing an excellent job working to minimize the effects on our customers and our financial model by using our data and working closely with our suppliers," he said.  "We are passing along higher costs to the customer where it makes sense to do so. In some key areas, we are choosing not to pass through cost increases and continuing to invest in value for the customer."

KC's View:

These two items actually point to an overarching strategy on which Kroger (and every retailer) needs to focus - being on the consumer's side.

Whether creating eat-at-home offerings that appeal on nutritional or economic grounds (or both), or keeping prices in check in segments where it matters, that appears to be what Kroger is doing.

It is all about defining - and continuing to redefine - "essential" for tumultuous times.

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The Information reports that Amazon is looking to expand to Europe a program that trains entrepreneurs "to launch their own trucking businesses exclusively transporting freight for Amazon."

The move, which initially will focus on Germany, Spain, Poland, France and Italy, is prompted by the fact that Amazon has been "bogged down by ballooning shipping costs at home and abroad."

The Information notes that Amazon is a little behind schedule with the expansion;  it originally hoped to have it rolled out by the end of this year.

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In Colorado, the Daily Camera reports that the Kroger-owned King Soopers store in Boulder, Colorado, that was the site of a mass shooting last March, will reopen on January 20 after an extensive remodeling.

According to the story, "The store plans to release more information about the redesign and reopening soon. In previous interviews, King Soopers representatives have said the redesign will include changes to the interior and exterior of the building as well as a redesign of its parking lot."

Ten people died in the mass shooting, including five customers and three employees, and King Soopers has been consulting with both employees and community members in making changes to the store.

The suspect in the case, who was arrested on the scene, has been hit with multiple felony charges.  He currently is undergoing psychological evaluation to determine if he can stand trial.

“We’ve always known that Boulder was a special place, but you’ve proven through your empathy, your strength, help and support that Boulder is so much more than a place; it’s more than a community; Boulder is our family,” Joe Kelley, King Soopers president, said in a prepared statement. “We know that the building is just part of what makes this store so special and that restoring it is another step in the journey as we continue to rebuild and heal.”

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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…

•  Here are the US Covid-19 coronavirus numbers:  49,716,825 total cases … 806,398 deaths … and 39,389,646 reported recoveries.

The global numbers:  264,620,488 total cases … 5,253,411 fatalities … and 238,639,788 reported recoveries.   (Source.)



•  The Centers for Disease Control and Prevention (CDC) says that 75 percent of the US population age five and older, and 70.6 percent of the total population, has received at least one dose of vaccination.  The CDC also says that 63.4 percent of the five-and-older population, and 59.6 percent of the total population, has been fully vaccinated.

According to the CDC, 23.3 percent of the US population are 18 and older, and 21.7 percent of the total population has received the vaccine booster dose.



•  Bloomberg reports that "the risk of reinfection from the omicron coronavirus variant is three times higher than for any previous variant, according to a South African study of infections since the start of the pandemic.

"The finding provides evidence of omicron’s 'ability to evade immunity from prior infection,' according to the authors, Juliet Pulliam of the South African Center for Epidemiological Modelling and Analysis and Harry Moultrie of the National Center for Communicable Diseases.

"The study was based on data collected through South Africa’s health system on about 2.8 million confirmed coronavirus infections between March 2020 and Nov. 27, the authors wrote in an emailed statement. Of those, 35,670 were suspected reinfections."



• From USA Today:

"The first known case of the omicron variant was been detected in the U.S. on Wednesday, in San Francisco, California. Since then, the heavily mutated COVID-19 variant has been identified in at least five other U.S. states.

"By Thursday, the omicron variant infected at least five people in the New York City metropolitan area, plus a man from Minnesota who had attended an anime convention in Manhattan in late November … Officials reported another case in a Colorado woman who had recently traveled to southern Africa. The variant was also confirmed in an unvaccinated Hawaii resident with no recent travel history, state health officials said."



•  From the Wall Street Journal this morning:

"The U.S. has plenty of Covid-19 vaccines but retail pharmacies are struggling to quickly administer them in some places.

"Vaccine seekers in some states face waits of days or weeks for doses as local health officials hustle to improve access to meet surging demand. CVS Health Corp., Walgreens Boots Alliance Inc. and Walmart Inc., which are facing staffing shortages, now say they may not be able to accommodate people without appointments.

"Millions of Americans are newly eligible for booster shots, and federal health officials in November recommended the vaccine for use in children as young as 5 years old. Concerns about the risks posed by the new Omicron variant also are driving more people to get vaccinated, health officials say … There are 100 million Americans eligible for boosters who have not yet gotten them, the White House said Thursday, adding that retail pharmacies are providing about two-thirds of the nation’s Covid-19 vaccinations.

"The U.S. has increased its reliance on those operations for nationwide Covid-19 testing and vaccine distribution through a federal partnership with nearly two dozen chains.

"The chains, particularly CVS and Walgreens, have embraced the responsibility as vaccines generate profits, bring customers into stores and as both companies look to expand deeper into healthcare. But the pharmacies have also struggled with staffing their locations amid a national labor shortage, which has caused some locations to limit hours or close drive-throughs as the companies work to hire thousands more pharmacists and pharmacist technicians."



•  Also from the Journal, a story about how the Biden administration "announced plans to tighten up Covid-19 testing timelines for travelers entering the U.S. and extend a mask mandate on airplanes and other public transportation as part of a broad administration effort to combat the Omicron variant.

"International travelers coming to the U.S. will have to test within a day of departure, regardless of vaccination status, rather than the 72 hours currently required for vaccinated travelers, Mr. Biden said. The new testing rules will take effect on Monday, Dec. 6, at 12:01 a.m. ET, according to a senior administration official who said airline industry representatives were notified of the timing Thursday. The requirements apply both to U.S. citizens and foreign nationals flying into the country.

"The administration will also require travelers to wear masks through mid-March on planes, buses and trains, and at domestic transportation hubs such as airports and indoor bus terminals, rather than allowing the requirement to expire on Jan. 18 as planned. Fines will continue to be double their initial levels, with a minimum fine of $500 for noncompliance and up to $3,000 for repeat offenses."



•  Walmart announced that "our COVID-leave policy, which was implemented in March 2020 to support associates during the pandemic, remains in place and has been extended through March 31, 2022. The policy provides up to two weeks of paid time off

"if an associate contracts COVID-19, if a facility is part of a mandated quarantine or if an associate is required to quarantine by a health care provider, government agency or Walmart. This is in addition to our standard PTO options.

"We’re continuing to waive the co-pay for medical and therapy services through Doctor On Demand’s virtual doctor visits for associates on a Walmart medical plan."



•  The Associated Press reports that "Germany is bringing in tough new restrictions on unvaccinated people in a bid to control the rapid spread of COVID-19.

"Chancellor Angela Merkel said that unvaccinated people would be barred from several public places such as non-essential shops and events. The only exemption would be if they have recently recovered from COVID-19."

According to the story, unvaccinated people will be allowed to go to supermarkets and drug stores, but will be prevented from engaging in so-called discretionary pursuits.

•  The Associated Press reports that "the number of Americans applying for unemployment benefits rose last week even though the US job market has been rebounding from last year’s coronavirus recession.

"Jobless claims climbed by 28,000 to 222,000 from the previous week’s 52-year low 194,000, the Labor Department reported Thursday. The four-week average of claims, which smooths out week-to-week ups and downs, fell below 239,000, a pandemic low.

Since topping 900,000 in early January, the weekly applications — a proxy for layoffs — have been falling more or less steadily."



•  From the Wall Street Journal this morning:

"The U.S. economy added just 210,000 jobs in November, a slowdown in hiring that clouds a recovery amid new Covid-19 uncertainties.

"The slower pace of hiring last month—the smallest monthly gain since last December—followed an upwardly revised increase of 546,000 jobs in October, the Labor Department said, and comes as employers face a persistent shortage of available workers. The unemployment rate fell to 4.2% as more people joined the labor force, the department added."



•  The Washington Post writes that "as prices creep higher for food, gasoline and other necessities, nearly half of U.S. households say they are feeling the financial strain, according to a Gallup survey released Thursday.

"The effects were most acute in lower-income households, with 71 percent of those making less than $40,000 a year saying they experienced hardship, compared with 47 percent for middle-income households and 29 percent of those considered upper-income."



•  National Public Radio reports that "the Kellogg Company and the union for roughly 1,400 of its cereal plant workers have reached a tentative agreement on a new contract, ending a nearly two-month strike.

"The food giant and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union announced the deal on Thursday, with workers set to vote on the proposal on Sunday … Kellogg workers walked off the job on Oct. 5 at four plants in Battle Creek, Mich.; Lancaster, Penn.; Memphis, Tenn. and Omaha, Neb. The company and the union were unable to reach consensus on the terms of a new contract after the previous one expired, and the union claimed Kellogg threatened to send jobs to Mexico, but company officials denied that."

According to the story, "The tentative five-year agreement announced this week would include a 3% wage hike for long-time legacy employees, as well as increases for newer, "transitional" workers and new hires based on years of service.

It would also give those newer workers a defined path to becoming higher-tiered legacy employees. Current 'transitional' workers with at least four years at the company would automatically become legacy employees, and each subsequent year of the contract would see 3% of the plant's headcount move up."



•  Published reports say that Kellogg's will team up with Tesco in the UK to test the use of recyclable paper liners in cereal boxes, a move that would all the packaging more environmentally friendly.

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•  GeekWire reports that REI has hired Cameron Janes, most recently a vice president at Amazon working on its physical retail businesses, including Amazon Go, as its new senior vice president, chief commercial officer.

The story notes that "Janes previously spent more than 14 years at Amazon … He departed last month.  Janes, a competitive cyclist and son of a former park ranger, will take up a newly-created executive role at Seattle-based REI, a retail giant in the outdoors industry. He starts Jan. 3."



•  The Wall Street Journal reports that ride-hailing firm Lyft has hired Elaine Paul, most recently CFO and vice president of finance at Amazon Studios, to be its new CFIO, succeeding the retiring Brian Roberts.  Paul, the story notes, "previously served as CFO of video-streaming service Hulu and before that spent nearly two decades at Walt Disney Co. in senior finance, strategy and business development roles."

Her move to Lyft means that Paul "joins a growing club of finance executives who previously worked as divisional CFOs at Amazon and have left the retail giant to take on the top finance job at another company," the Journal writes.

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Got a number of emails responding to Instacart's plans to test 15-minute delivery, and my criticism of the idea as being not just a likely violation of most laws of physics, but also an example of making promises to consumers that are likely to disappoint them and hurt client retailers.

MNB reader Lynn Olsen wrote:

IMHO, this is ridiculous on the face of it. Even in a society and economy driven by relentless consumption. The laws of both physics and economics work against this premise, as those investors foolish enough to buy into this will find out. 

One MNB reader wrote:

Can we Americans just take a chill pill and wait for our food to be delivered?  I can only imagine the pressure on the Instacart gig workers!  I’m sorry, but this seems unseemly and selfish.  Geez.

MNB reader Dale Tillotson wrote:

15 minute delivery is what is making instacart a dangerous operation to be near. Their shoppers charge through stores, interrupt associates waiting on other customers and have no qualms of pushing customers aside to get what they want. Then this carries out on to the roadway where they drive the same way with no care of anyone. Bottom line see an instacart shopper due everything you can due to slow them down to prevent them from killing someone. Of course that is the same attitude of  many in the general public. Slow down take it easy.

And, from another reader:

I think the April Fools' headline ought to be, "Instacart to pilot 'standing outside your bathroom door to hand you the roll of TP when you run out...' program.

Now, that's a commercial I'd like to see.



The other day we had a piece about companies creating Chief Customer Officer positions.  MNB reader Tom Murphy observed:

I get a big kick out of this movement…really, in the last 5 years this has become a trend?  Remember what happened to Efficient Consumer Response (ECR) in the early-mid 1990’s?  It was never about the customer, it was about lowering costs, creating efficiencies and squeezing the hell out of the manufacturers.

Which, in turn, earned this response from MNB reader Tom Ewing:

I spent two years working on the ECR Category Management group and we focused directly on the consumer in everything that we did, approaching every aspect of merchandising from how the consumer viewed shopping and how retailers could best align their processes to consumer satisfaction.  Now not every retailer implemented ECR Category Management the same way and some may have used it as Tom Murphy describes, but the actual work we did was very consumer focused.

I'm not questioning your experience, but … I think it is fair to say that a prevailing point of view within the industry is that the word "consumer" was the least important part of the ECR movement, which was far more focused on retailer-centric efficiencies than on customer-centric effectiveness.



I also got this email yesterday from an old friend and longtime MNB reader Richard Kochersperger:

Your conversations with Tom Furphy are insightful, thought provoking, and effective. Every retail food executive should be tuning in! They would learn much about where the industry is going and what issues they should focus on. Well Done!!

There are two points that you should share with your audience about Amazon that most people do not understand:  1) how it focuses on the customer and 2) uses manufacturer monies to fund the operation.

Focusing on the customer…

Amazon is focused on the consumer with the goal of servicing the customer more effectively that anyone else can. From day one Bezos understood that ‘owning’ the customer was an unwavering commitment no matter what!

Although they have made many mistakes and bad decisions, he never lost sight of the primary objective. Most retail food executives ‘talk’ about the customer, but they waffle as the world/economy/issues/competition evolves.

The original design for Amazon was to outsource most activities. Bezos had to learn the hard way as his third-party supply chain, USPS, FedEx and UPS, continually failed to live up to his standards, especially at Christmas time. Bezos had to experience failure to change his model. As a result, Amazon invested heavily in logistics and supply chain systems so that they could ‘own’ their supply chain from manufacturer to consumer. In short, they will become the largest supply chain operator in the world capable of delivering almost anywhere, on time, in perfect condition. This investment has enabled them to experience tremendous growth which will continue indefinitely.

Using manufacturer funds to manage the business:

The second strategy that Bezos employed was effectively using payment terms to fund his company. Amazon’s model is clearly distinct from other retailers.

Amazon operates with a negative position meaning they use ‘manufacturer’ money to manage his multi-billion $$ company. Amazon is generating revenue from customers before it must pay its suppliers. An interest free way to finance operations that can be used for the company’s growth initiatives. The average payment cycle is almost 80 days while the average US grocery retailer pays within 30 days.



On the subject of the Major League Baseball lockout, one MNB reader wrote:

It’s hard to have any sympathy for either party in this dispute, nether the billionaire owners nor the multi-millionaire players.  Max Scherzer just signed a contract that will pay him $43M per year to throw a baseball.  The Mets' owner, Steve Cohen, can easily afford to pay the freight because he made billions of dollars manipulating stocks as a hedge fund manager.  As a Mets fan, I will be excited to see Scherzer don the orange and blue (if the 2022 season isn’t cancelled, that is), but find the numbers staggering and more than a bit repulsive.

My daughter, like her mother before her, is an intensive care nurse.  I am somewhat embarrassed that she gets paid a fraction of what I earn as a real estate executive given the relative value of our work to society as a whole. That being said,  Scherzer’s annual salary is over 400 times higher than hers.  While his haul is record-setting, the “qualifying offer” amount this year (the average of the top 20 salaries) is still more than 200 times higher and even the major league minimum is multiples of what she earns to provide life-saving care.  Look in the mirror fellas and be grateful.

I completely agree with you that people who throw (and hit and catch) baseballs for a living earn salaries completely out of proportion when compared to the wages of people who contribute far more to society.  But that's actually an old argument that can be applied to many industries.  I would argue that a lot of CEOs are way overpaid when their remuneration is compared with that of people on the front lines.

The opposite argument is that Scherzer isn't just being paid to throw a baseball.  How many more tickets will be sold to games when he pitches?  How many more tickets will be sold to all Mets games if he helps the team compete and go to the playoffs?  How much more can be charged for ballpark advertising and TV commercials if he makes the Mets a better team?  How much more team merchandise will be sold?  In the end, how much more value will the team have if/when Steve Cohen decides to sell the Mets?

The Mets may be able to make the argument that Scherzer, in the end, is a bargain … if things work out.  Because, as Robert B. Parker once said, "Baseball is the most important thing that doesn't matter."

Of course, all of this pales when compared to the labors of intensive care nurses and special education teachers and all the other people who work incredibly hard and are incredibly underpaid.

MNB reader Bill Spoehr weighed in:

MLB needs a salary cap, just like every other major league sport in the USA.    Without one, it’s just the Dodgers, Mets and Yankees outspending everyone else and paying ridiculous amounts for marginal players.   Misguided Mets fans like you may enjoy that, but most do not.  Sadly, I don’t see a salary cap as an issue in this round of negotiations.   MLB lost me as a fan for a couple of decades after they cancelled the 1994 World Series – they’re playing labor games again, and with attendance down across all sports, they are once again messing with the people who pay the rent. 

I wonder how people in the business world would respond if their industries had a salary cap, which would prevent them from negotiating for higher salaries at competitive companies?

However, if MLB were to impose one, they also ought to have a salary floor.  It is patently absurd that the Cleveland Indians have a total payroll of about $23 million, and that the five teams with the lowest payrolls in baseball - the Indians, Pittsburgh Pirates, Baltimore Orioles, Tampa Bay Rays and Miami Marlins - together have a total payroll that is roughly approximate to that of the Los Angeles Dodgers, which had the highest payroll in baseball in 2021.  (Though give the Rays credit - they get a lot of bang for their limited expenditure of bucks.  Be nice if people actually showed up to watch, though, in the fans' defense, they are playing in one of the crappiest ballparks in baseball.)

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Michael Connelly is just out with his new novel, "The Dark Hours," and once again he has delivered a terrific narrative with solid plotting, sharply drawn characters, and a perspective on the shadowy aide of Los Angeles' geography and institutions.

The protagonist of "The Dark Hours" is Detective Renée Ballard - this is the fourth Connelly novel in which she plays that role - with an assist from Connelly's iconic creation Harry Bosch, now retired from the LAPD but still working as a private detective.  Ballard, who works the midnight shift (the dark hours of the title), finds herself deeply involved in two cases.  First, there is her pursuit of a pair of rapists dubbed the Midnight Men, while also working to solve a murder that took place moments after midnight, on January 1, 2021.

That's an important date, because Los Angeles (like everywhere else) was in the middle of the pandemic.  The LAPD, as described by Connelly, was dispirited and feeling hopeless about the city's future;  Ballard, however, much like Bosch, is deeply committed to justice.  (She never actually says, "Everybody counts, or nobody counts," but that's the subtext.)  And so, despite pushback from department bureaucrats who have other priorities, Ballard pushes and digs and refuses to back down as she works her cases.

Connelly is a meticulous craftsman, using Los Angeles in much the same way that Raymond Chandler so many decades ago.  But the most compelling things about his Bosch and Ballard novels is the sense that there are people out there with a strong moral compass and personal ethics that go beyond the transactional.  And the best thing about them is that they are terrific stories and propulsive reads.

Go get "The Dark Hours."



I watched Red Notice on Netflix the other night - it is the new action comedy starring Dwayne Johnson, Ryan Reynolds and Gal Gadot that found its way to streaming when the pandemic thoroughly disrupted the movie theater business.

It was funny enough, almost in spite of itself … but in the end, it would've been nice if they'd spent some of the millions they invested in the three stars in another draft or two of the script.  

Red Notice ended up being pretty much a waste of time.



MNB readers  know that I have become disenchanted with the recent Jack Reacher novels, as creator Lee Child has turned over the reins to his younger brother, Andrew Child.  The books are just not as good.

Lee Child, it has been reported, now is spending more time working on a Reacher TV series, scheduled to debut on Amazon Prime Video in February … and a trailer dropped yesterday.

All I can say is, this seems more like it.



Tried a new beer recently - Highland Brewing's Cold Mountain, a rich and filling concoction that seems just about perfect as the evenings get colder.  



That's it for this week.  Have a great weekend, and I'll see you Monday.

Stay safe.  Be healthy.

Sláinte!

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