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    Published on: April 18, 2013

    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.

    Longtime readers of MNB know that I enjoy the occasional glass of wine. Okay, not so occasional. I've really learned to enjoy different kinds of wine over the years, and will admit that I've at least partially addicted to the romance of it all. Which is why I still tend to prefer corks over crew tops (though I've been persuaded to be less finicky on this point). And why one of my favorite things to do is to hang with friends who own vineyards ... there are few cooler things to do, IMHO, than have a glass of wine with people and do it while looking out over the vineyards that they own.

    I've been fascinated lately to read about how the wine buying process has changed in the US. The Associated Press reported the other day that "online wine options are everywhere, from flash sale sites like Lot18 offering daily deals to Facebook prodding you to send a little something for Aunt Suzy’s birthday. And now there’s a new generation of startups such as Club W, which adds a little algorithm to your albarino, using surveys and ratings to figure out what you might like to drink next."

    I also was interested to learn in that same article that "today, only seven states have an outright ban on direct-to-consumer shipping, though some of the states that do allow shipping have various restrictions, and 89 percent of the U.S. population has access to direct-to-consumer sales," according to the Wine Institute.

    A couple of things occur to me as I read these words.

    One is that this means there is increasing competition out there for retailers that sell wine from their stores, and that they need to be more aggressive in stressing their expertise and selection. I always think that one of the ways to do this is with a wine club.

    I've told this story before on MNB, but in this case, it bears repeating...

    It wasn't that many years ago that I never spent more than $10 for a bottle of wine. I didn't know that much, and the value of spending more just didn't work for me. But then I joined the wine of the month club started by a local wine retailer, Nicholas Roberts, for the past decade or so, every month, we've been sent three bottles of wine. They choose the wines, and their record has been extraordinary - almost always, the wines are terrific, and almost always, they are from vineyards that I've never heard of. And here's the business lesson - these days, I rarely spend less than $15 on a bottle of wine. I've learned, the wine club moved me up market, and Nicholas Roberts has a committed and loyal customer.

    And there's a benefit to you, too ... since Nicholas Roberts powers the MNB Wine of the Month club, which you can sign up for by clicking on the tile ad at left.

    But the other thing that occurs to me is to suggest that retailers ought to look at the stores that do an excellent job with wine, and perhaps consider adapting some of those techniques - offering information, providing tastings, being a resource for knowledge as well as a source of product - to other departments in the store.

    Just an idea. Maybe worth thinking about.

    Or drinking to.

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

    KC's View:

    Published on: April 18, 2013

    by Kevin Coupe

    The Associated Press has a piece about Amazon's foray into television production, which follows Netflix's similar path, and which offers a metaphor for how new approaches to business can supplant old ones.

    Here's how traditional television production works, according to the AP: "Every spring, traditional TV networks such as ABC, NBC, CBS, and Fox order dozens of pilots and show them to focus groups. Executives pick just a handful to make into series. Then, they commission 13 episodes of each promising show, with each one potentially costing a few million dollars. Many episodes won’t ever air if the first few don’t attract big audiences."

    Here's how Amazon is getting into the business: "The online retailing giant will let visitors from the United States, United Kingdom, and Germany watch, rate, and critique 14 pilot episodes the company has bankrolled. Viewer comments will help the company decide which shows — if any — get the green light."

    And, the story goes on: "Amazon.com Inc. is riding a wave of Internet-fueled people power that is transforming the entertainment industry. Crowd-sourcing, the act of soliciting content and ideas from the online masses, is now valued. Online buzz can make or break movies these days. And crowd-funding sites such as Kickstarter help generate fans and start-up capital before would-be producers start filming.

    "Amazon is testing the market with kids’ shows and comedies, each a half hour long. Going into full production will pay off if enough people sign up to pay $79 a year for Amazon Prime, a service that offers free shipping on Amazon orders, an e-book borrowing service, and home and mobile access to movies and TV shows. Members will get access to the full original series when completed. Others get access if they pay."

    This is yet another example of the shifting balance of power, as savvy marketers realize that by moving closer to the ultimate consumer's interests, needs and desires, they can be both more responsive and more economical.

    Some of these efforts won;t work, but some will ... and both the successes and the failures will go a long way toward redefining not just the traditional entertainment industry, but a vast number of industries that will be affected by these changing consumer dynamics.

    It's an Eye-Opener.
    KC's View:

    Published on: April 18, 2013

    Tesco's Fresh & Easy Neighborhood Markets chain, in California, Arizona and Nevada, sent out emails yesterday to its customers in which it addressed the reports about the company's imminent closure/departure.

    The email read:

    As you may have heard or read today, our parent company Tesco updated on the future of Fresh & Easy. We appreciate all the support and love we've received from our loyal customers and even though our parent company plans to leave the US, we're pleased to confirm there are no plans to close any portion of Fresh & Easy. While we don't yet know who our new owner will ultimately be, Tesco announced it has already received interest from a number of parties including groups looking to purchase Fresh & Easy as an operating business.

    "We're focused on continuing to bring you the same delicious, wholesome and affordable food you have come to expect from us. And rest assured, your favorite rewards program has a lot of exciting things in store for you including new Made For Me coupons launching next week, and some enhancements to our mobile apps that are coming soon.

    "We look forward to seeing you in the store on your next shopping trip. Keep an eye out for great new grilling products hitting shelves for summer and some innovative new promotions on some of your favorite fresh&easy products. We're also getting ready to re-launch our Shop for Schools fundraising program for local schools later in the summer with some exciting changes to make the program even more impactful.

    "Thank you for your support and let's keep fighting the good food fight!"
    KC's View:
    There were a ton of stories in the consumer press yesterday and today about how Tesco would be pulling out of the US, though not immediately, and nobody knows at the moment how that escape will be accomplished. Which has been pretty much common knowledge for months.

    At this point, it is a matter of whether Tesco can find a way to sell off all the stores as one package, or whether the sales will be accomplished piecemeal. I'd bet on the latter.

    Published on: April 18, 2013

    CNBC reports that Deloitte's annual American Pantry Study shows that "brand loyalty has dropped for the third year in a row," and that "nearly nine in ten consumers are substituting private-label, or store, brands for national brands they've regularly bought in the past."

    And, "The survey, which was conducted in January, also finds 94 percent of Americans indicate they will remain cautious and keep their spending for food, beverage and household goods at its current level despite the stronger economy and climbing stock market."
    KC's View:
    This is part of a broader shift .... people just generally trust institutions less and less, and national brands are among the institutions feeling the impact, often through no fault of their own. To some extent, as the world becomes more small-d democratic, this is inevitable.

    But it also means that in order to regain stature and relevance, national brands have to find ways to truly innovate. And maybe connect with shoppers in the same way that companies like Amazon do...

    Published on: April 18, 2013

    InternetRetailer reports on a new survey from Integralis revealing that just 24 percent of respondents said they would "trust supermarkets to hold their financial data securely, even though more than half shop online from a supermarket, and only 36% would put their trust online retailers such as Amazon and eBay. That contrasts with the banking sector where, the study found, 63% of consumers trust their bank when it comes to doing financial transactions online."

    The story goes on: "Consumers’ lack of trust also extends to mobile devices, with nearly half concerned that smartphones and tablets are less secure than PCs and laptops."
    KC's View:
    Add this to the list of institutions that people trust less.

    To people who are in the "institution" business, this has to be a troubling trend.

    Published on: April 18, 2013

    The Connecticut legislature is considering a ban on food packaging that contains bisphenol A (BPA), a chemical that has been connected with birth defects, altered brain development, behavioral changes, cancer and cardiovascular disease. The affected containers would include reusable food and beverage containers, baby food jars and infant formula bottles.

    If the legislation is passed, it would take effect in January 2014.

    Despite the best efforts of lobbying groups like the American Chemistry Council, there appears to be a growing wave of opposition to the use of BPA. Last week, California's Office of Environmental Health Hazard Assessment added BPA to its official list of chemicals known to cause birth defects.
    KC's View:
    It was in December 2011 that I first used the term, "dead chemical walking."

    It has taken a little longer than I might have expected, but I still think I'm right.

    Published on: April 18, 2013

    The St. Louis Business Journal reports on four students from Washington University who have launched a website called Farmplicity.com, which "wants to create a marketplace allowing farmers to directly sell their products to restaurants in the St. Louis area.

    "The project started in January in a entrepreneurship course at the university. The team quickly built a prototype and got several local farms signed up.

    "Farmplicity aims to be the missing link for St. Louis chefs and restaurants who want to embrace locally grown food but avoid the hassles of sourcing and paying for small amounts of produce from multiple sources."
    KC's View:
    Smart, on so many levels.

    And a measure of the kind of innovative thinking that college students demonstrate.

    Published on: April 18, 2013

    Reuters reports that the US Senate could vote next week "on legislation that would give states the authority to collect sales taxes from online purchases ... Momentum has been building in the Senate since 75 lawmakers showed their support with a symbolic vote last month."

    To this point, states have only been able to collect sales taxes from online companies with physical facilities within their borders.

    Opinion among internet companies about the legislation is not unanimous. Amazon supports it, while eBay and Overstock are among the companies that oppose it.
    KC's View:
    In the long run, Amazon will use distribution facilities all over the country to offer same-day and next-day delivery and expand its fresh food and grocery delivery services. Which will make the collection of sales taxes a minor issue.

    Published on: April 18, 2013

    ...with brief, occasional, italicized and sometimes gratuitous commentary...

    • "The federal government has launched a new livestock identification program to help agriculture officials to quickly track livestock in cases of disease," according to a story from the Associated Press, which goes on to say that this the second such attempt by the US Department of Agriculture (USDA). The first one failed because it was voluntary; the new one is mandatory and more focused, with a goal of tracking "animals’ movements so agriculture and health officials can quickly establish quarantines and take other steps to prevent the spread of disease."

    It seems to me that as a civilized, sophisticated society, it ought not be that hard to implement such programs, which can be vital in cases of food safety issues. Too bad that the voluntary program did not work ... but this ought to be a bare minimum for our food safety infrastructure.


    • The Grocery Manufacturers Association (GMA) yesterday launched what it called "a simple, interactive and user-friendly web-based tool for consumers that supports the Facts Up Front nutrition labeling initiative launched by GMA and the Food Marketing Institute (FMI) in 2011."

    Facts Up Front puts information from the Nutrition Facts Panel on the back of food and beverage products and displays them in a simple and easy-to-use format on the front of America’s favorite food and beverages. The interactive website (www.factsupfront.org) features facts and interactive tools to educate and empower consumers, including a nutrition calendar, an interactive label, shopping and meal planning tips, and recipes.    


    • In western New York State, Tops Markets has opened its first Orchard Fresh store, described as a 30,000 square foot "unique combination of specialty, upscale and gourmet foods with a focus on natural and organic, a strong emphasis on the health-conscious consumer, and food items sourced both locally and globally."

    The store, in Orchard Park, New York, is said to have "a classically trained culinary team with more than 300 years of collective experience in order to provide the best possible in-store experience."

    “There is both tremendous passion and a real opportunity within our community for authentic, specialty gourmet-inspired food that doesn’t necessarily fit within a traditional grocery store setting,” said Frank Curci, president and CEO of Tops Markets.


    • The Food Marketing Institute (FMI) announced the 2013 recipient of the prestigious state-focused public affairs award, the Donald H. MacManus Association Executive Award - Linda M. Gobler, president and CEO of the Michigan Grocers Association and a 28-year industry veteran.


    • Fairway Group Holdings began trading on the Nasdaq stock exchange yesterday, and the stock price of the company surged 33 percent on day one. The initial public offering (IPO) was priced at $13 per share, and the stock closed yesterday at $17.35.

    "Fairway, which remains controlled by the private equity firm Sterling Investment Partners, is hoping investors will get behind its plans to expand," the New York Times writes. "Once known primarily for its popular market on Manhattan’s Upper West Side, Fairway is now a 12-store grocery chain with ambitions of opening 300 outlets across the country."

    I still find that "300 outlets" projection to be troubling ... because it makes me think that the focus could be on growth that satisfies Wall Street, not retail that satisfies Main Street. This is the impulse that Fairway has to avoid.

    And, investors beware. Because as anyone who owns Apple stock knows, what goes up must come down.
    KC's View:

    Published on: April 18, 2013

    Regarding the travails at JC Penney, one MNB user wrote:

    Kevin, agree with your comments regarding JCP. However, maybe it’s me (an average consumer)
    but I I just don’t get why JCP is in so much trouble.

    When JCP went to EDLP, I thought that was a brilliant strategy – wow, guess I was wrong. Is it really all about perception of the shopper? I am a consumer who works and has a hectic life (like most people I know today), so when I need to purchase anything from appliances to clothing, I don’t want to wait for a sale – I don’t want to search for coupons/deals, etc. -  I want to buy what I want, when I want it and at the best possible price. I got tired of the Macy’s sale strategy. An item on regular price is $219, but on sale Wednesday, it is reduced to $200 or I can wait for to receive a special coupon in the paper or flyer so I get a 20% discount off regular price or I can wait for a Father’s Day sale and get 15% off the regular price! It makes my head pound! Ever go into Macy’s during a sale? The cards behind the cover one which gives current sale price are all different. It’s annoying. BUT, I can go into JCP and buy what I want at the same price on a day that is convenient for me and walk out feeling I have been given a fair deal.  I don’t have to wait for special sales, coupons or whatever. I don’t feel ripped off by JCP – I know they have to make a profit but an EDLP works for me. I guess it’s all about reality and perception.


    I guess you aren't an average consumer. Or at least not JCP's average consumer.




    Some thoughts about Tesco's Fresh & Easy...

    One MNB user wrote:

    Kevin - you have always been Tesco's biggest cheerleader from day one. You were almost certain that they'd get the Fresh & Easy thing right. Many people thought it was DOA. I rest my case.

    Fair enough.

    You're right. I always thought Tesco would get it right. Tesco has always been a great company, and history suggested it had both the wherewithal and the opportunity to do something both different and remarkable.

    And I think the word I've probably used most often about its inability to adapt has been "disappointment."

    Though upon reflection, probably "gobsmacked" would be more accurate.

    Another MNB user wrote:

    You always have great thoughts to start my day:  Here’s one for you...

    What if Amazon Fresh were to buy up the Fresh&Easy distribution center & Kitchen & Produce & Meat companies in Riverside, CA as well as their northern CA distribution investments?

    They would now have more leverage in Southwest USA to do a really big move into grocery retailing.

    I have no insights or inroads or facts into this (even though I once worked for F&E)…just a thought.


    And responding to yesterday's commentary, in which I accused Tesco of being guilty of epistemic closure, one MNB user wrote:

    I think we need a MNB poll on how many retailers know what epistemic closure means.  You can start the count at:  Know: 0, Don’t Know 1!
     
    Well, at least I learned something new today!


    I've used "epistemic closure" at least a dozen times in the past few months, and even devoted an entire commentary to the term - you can read/watch it here.




    We had a piece about rising beer prices in baseball stadiums, which prompted MNB user Steven Ritchey to write:

    When the Nolan Ryan group bought the Texas Rangers 3 years ago, one of the first things they did was reduce the price on many of their concessions by .50 to $1.00, including hot dogs and draft beer.  Now, I don’t drink beer at the ballpark since I’m always the driving the nearly one hour drive back home (I try to be responsible) so I don’t know if they’ve gone back up on their prices or not.  But I do know they did this right before a weekend series with Boston with guaranteed sellouts that weekend.  They also went down on parking prices that weekend on the lots they own.  I know it cost them like a  half million in revenues that weekend, but was a major hit with the fans.




    And regarding the rebranding at IRI, one MNB reader offered:

    As a former employee, IRI is facing the struggles of many companies who have not been able to invest in their business over time, and are now facing the challenge of being irrelevant within their market and customer base.  As new shopper data sources have emerged, IRI has not been able to acquire or digest the meaning of these, which is a gap that is quickly widening.  Additionally, as consumers have become more interested in buying “fresh” product (produce, meat, etc), IRI finds themselves without the ability to measure these growth areas.  IRI walked away from their retailer relationships years ago, to the point where many on the retail side of the business don’t even know that IRI still exists.  It’s best for the industry to have choices for data suppliers, but without the ability to invest, IRI will struggle to work its way back to where it started, much less to where everyone else is today.




    Yesterday, I described the just-departed Pat Summerall has having, with John Madden, "defined Sunday afternoons for generations of Americans."

    To which one MNB user responded:

    For me it was Tom Brookshier with Summerall who meant Sunday football...
    KC's View: