business news in context, analysis with attitude

Published on: May 13, 2013

by Kevin Coupe

Marketplace, on National Public Radio (NPR), had a story over the weekend about how Jack Ma is stepping down as CEO of Alibaba, the world's largest e-commerce website.

The reason? Ma says he is "a bit too old for the internet."

The eye-opener? Ma is 48 years old.

Marketplace observes: "The idea that a man who is not yet 50 could be 'too old' for any leadership position may strike some as laughable but some analysts say tech entrepreneurship is often a young person's game."

Yikes.

This is a little scary.

I have no ideas if Ma is too old to run Alibaba effectively. That's up to him.

But I do think that it is incumbent on 21st century leaders to be careful not to allow themselves to be beholden to old ideas, old "core values," and old methods of doing things.

Published on: May 13, 2013

The San Jose Mercury News reports about the departure of Safeway CEO Steve Burd this week, and offers this assessment:

"He shepherded the grocery retailer through its most tumultuous period, and the company now bears little resemblance to the floundering operation he took over in 1993.

"Some say the road to this transformation was paved with innovative ideas and calculated risks, while others criticize Burd for cost-cutting tactics that alienated employees and customers. Where labor relations, customer service and health care are concerned, Burd has a mixed record, according to interviews with analysts, grocery industry leaders and labor advocates.

"But where they all agree is this: Burd took a company on the brink and turned it into a formidable supermarket giant, made a profit while dozens of other grocers succumbed to bankruptcy and kept thousands of workers employed in union jobs."

The whole story can be read here.

The story goes on to say that "perhaps where Burd distinguished himself the most is in the final years of his career as he focused on reforming the nation's health care system. Under Burd's leadership, Safeway health care benefits were converted to an incentive-based plan to encourage healthy habits like losing weight and exercising. Workers who smoke, are obese or fail to meet other standards of health pay more ... But many health care advocates say Burd's plan passes the cost of health care onto employees who need it the most. Morgan Downey, editor of the Downey Obesity Report, which publishes research and news on public health, says Safeway employees could end up paying up to $1,500 a year more for failing to meet what he calls arbitrary health targets."

Published on: May 13, 2013

The Cincinnati Business Courier reports that Kroger is evaluating "six innovative ideas for downtown stores."

Ed Hudson, senior director of strategic insights for Kroger, says that in addition to working on new urban store designs, "Kroger is experimenting with grocery delivery. He said technology has changed to the point where it would make more sense to deliver goods to customers, or have drive-thru options or personal shoppers. The technology is changing to make this a possibility, Hudson said."

Published on: May 13, 2013

The Food Marketing Institute (FMI) is looking for the Obama administration to intervene with the US Food and Drug Administration (FDA) before it implements new rules that are part of the Affordable Care Act (ACA) - better known as "Obamacare" - that would mandate providing calorie information for every product sold in the store.

According to Bloomberg, "The proposed rule is unpopular among some restaurant chains such as Domino’s Pizza Inc. that complain about the cost of new signage and grocers that say the diversity of their products creates a logistical nightmare. The industries have backed legislation that would limit the rules to only provide the data online in some cases, and apply the labeling only to stores with more than half their revenue from food prepared on site."

That legislation, the Common Sense Nutrition Disclosure Act, appears to have bipartisan support in Congress. In the meantime, FMI is looking for the Obama administration to use the standard review process by the Office of Management and Budget (OMB) to curtail what it sees as potential overstepping by FDA.

Published on: May 13, 2013

"A new study out Monday from Merrill Edge shows that Gen Y, defined by the study as those 18-34, is starting to save for retirement earlier than any other generation," USA Today reports. "Many are investing by age 22, compared with Baby Boomers who started on average at age 35."

In part, the story suggests, this may be because this generation is increasingly skeptical about the long-term viability of Social Security: "The survey shows that just under half of Millennials indicated plans to rely on public programs for retirement, down from 63% of Millennials who said the same in 2011."

Published on: May 13, 2013

Green Zebra Grocery, the mini-grocery store concept created by Lisa Sedlar, former CEO of New Seasons Markets, is said to have identified three locations for its initial stores - North Portland's Kenton neighborhood, Southeast Portland's Woodstock, and now, Southeast 50th Avenue and Division Street.

The Kenton store is scheduled to open this fall, according to the Oregonian, with the other two to open next year.

The Green Zebra stores are described as offering "fresh, local and healthy wares and feature produce sections, deli counters and butchers."

Published on: May 13, 2013

The Seattle Times profiles Pascal Rigo, the founder of the San Francisco-based bakery chain called La Boulange, which he sold to Starbucks last year for $100 million.

Now, Rigo is "charged with transforming the Starbucks pastry case over five years. He has a large budget at his disposal, although the exact size is confidential.

"Rigo, who does not speak so much as he effuses, is excited to be well ahead of schedule and under budget.

He is on track to improve not just the pastries at 8,000 U.S. Starbucks, but also — within two years — their sandwiches, salads and other food." The goal is to improve existing favorites as well as to roll out an array of "new goodies" that will begin rolling out in Seattle next month and will be nationwide within a year or so.

"Good taste is going to be the driver. If you make them pay (too much) for that, I don’t think it works," Rigo says. "It’s not very exciting if it’s just for people who travel and have a lot of money."

Among the innovations that Rigo is said to be bringing to Starbucks' food operations are a fast reaction time, finding ways to eliminate the use of preservatives, and training commercial bakeries to follow Starbucks' recipes in a way that will guarantee the taste on a national level.

Starbucks' food products generates about 19 percent of total company sales, double that of a couple of decades ago, but not where the company wants it to be.

Published on: May 13, 2013

Nice little piece in the New York Times the other day about the growing appeal of albariño, the Spanish white wine that comes primarily from Rías Baixas, on the Atlantic coast of Galicia, and that "has become as much a brand name for Spanish whites as pinot grigio has for Italian."

For people who enjoy wine, it is worth reading here.

Published on: May 13, 2013

• USA Today has an interview with computer scientist Jaron Lanier, who has written a new book entitled, "Who Owns The Future," in which he suggests that there is an "underlying worldview permeating tech culture that he believes is wrong on both a technical and spiritual level. It's a way of looking at the world, he says, in which the information gathered from people is more valuable than the people themselves."

He says: "If you design machines for the sake of making sort of an ascendant global brain, it's natural enough that all glory goes to the central computer, and people don't get paid for what they contribute to, because you don't value people. And the more you pursue that dream, the less people will be advantaged in that system...and oh, by the way, the people who run those big central brains that are supposed to be autonomous, they are the richest people in the world."

The story says that "from Lanier's perspective, we have a choice. We can either find a way to fairly compensate people for their contributions to computer networks or face a future in which most people are poor, and the only people who have money are the ultra-rich tech barons who run the 'siren server' networks."

Published on: May 13, 2013

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

• Bloomberg Businessweek reports that Whole Foods "accidentally switched the labels of its real chicken salad and its vegan 'chick’n' salad in 15 of its stores in the Northeast on Tuesday and Wednesday ... Lifestyle choices aside, the mix-up could have posed health problems for shoppers (and a big mess for Whole Foods). The Food and Drug Administration noted the vegan salad contained soy, while the chicken salad was made with eggs—both serious allergens for some people.

"Whole Foods said no illnesses were reported and quickly issued a recall."


• Salon reports that Europe could be facing yet another food-related scandal - the continuing sale of salmon caught in the Baltic Sea, which was banned in 2002 because salmon caught there were found to be heavily contaminated with dioxins, which can be carcinogenic. Some 200 tons of these fish have been sold since then in France, Denmark and the Netherlands, the story says.


• The Boston Globe reports that in a keynote address to the Front End of Innovation conference there, Campbell Soup CEO Denise Morrison said that her goal is "to double the rate of innovation, while halving the cost and time spent cultivating new product ideas," to look to partners and vendors to help generate innovative ideas, and that sustainable innovation must be connected to how consumers are changing, not what an organization's internal needs happen to be.

One of the innovations that Morrison points to as a game changer is Coke's Freestyle vending machine ... and there is almost the intimation that Campbell could come up with a version of that concept that vends soup. Which strikes me as potentially a very, very good idea.


• The Chicago Tribune reports that "the U.S. Postal Service lost $1.9 billion in its second quarter, an improvement from a $3.2 billion loss a year earlier. In the latest quarter, the agency cut employees' work hours while struggling with an ongoing decline in mail volumes ... The Postal Service, which lost nearly $16 billion in fiscal year 2012, is also buckling under the weight of massive payments into its future retirees' healthcare fund, which were mandated by a 2006 law."


• The Associated Press reports that PepsiCo plans to test a new fountain machine at five Denver-area restaurants that will allow people to customize their soft drink flavor combinations - a concept that follows on the example set by Coca-Cola's Freestyle vending machine, which was unveiled in 2009.

The "Pepsi Touch Tower 1.0," Dow Jones writes, "is a small counter-top unit with a touch screen that offers nearly 100 different combinations for up to eight brands and four flavor shots."


• The Asahi Shimbun reports that "Starbucks Corp. is going from a grande to a venti-sized operation in Japan, as the number of outlets is expected to exceed 1,000 this year ... Starbucks has a total of about 18,000 outlets throughout the world. Following the United States and Canada, Japan will become the third country with more than 1,000 outlets."


• The University of Southern California (USC) has announced that for the first time, its "Marshall School of Business Food Industry Executive Program (FIEP) will be offered in Chicago, Illinois, on October 14 – 17, 2013. Kraft Foods, in Northfield, Illinois, will host the session, which will be limited to 50 industry participants.

The announcement notes that "taught by the renowned USC Marshall School of Business professors and food industry 'subject matter' experts, the FIEP is designed for food industry executives, managers and high potentials from retail / wholesale and consumer packaged goods companies seeking to enhance their leadership and strategic thinking skills. This four (4) day program integrates lectures, group work, experiential projects, presentations and guest speakers. Focusing on leadership development, FIEP engages attendees by strengthening skills that can be put to use immediately in the workplace."

Registration is open now.

I'm not sure I qualify as a "subject matter expert," but I've had the privilege of teaching at USC's programs in Los Angeles, and I am consistently impressed by the curriculum, the level of instructor expertise (myself excluded), and the engagement of the participants. Check it out.

Published on: May 13, 2013

Got the following email from an MNB reader:

I began following your site after I left Walmart (13 years) and joined the Supplier community now calling on this giant.

I saw the erosion of their culture 6 years ago and decided to make a change.

When I first began reading your editorials, you took every chance you could to applaud almost everything Walmart, six years later, just the opposite.

While they obviously have their flaws, for the most part they are on the right track under their new leadership ( which now reflects most of the old culture) over the past couple of years. I believe you would be better served to show some balance regarding Walmart.

While I am a conservative, I enjoy listening to both sides including the most liberal and Fox TV news broadcasts understanding that the truth typically lies somewhere in between.

That is why I continue to read your commentary daily, not for your balance, but to hear the liberal view and consider your points.

Lastly, I have a brother that is 8 years older and when I was growing up called me a punk kid and had the same type of sarcastic humor as you.

One of the phrases he used to say to me then that now applies to you is " if you we're half as cute as you think you are, you'd be pretty funny".

I'll continue to read, but mainly to get exposure to the opposing view on social issues.

I'm not sure I agree with your observations, but that's okay. As long as you keep reading...

I actually think I've been pretty consistent on Walmart. I think it is a great American success story, but hardly an uncomplicated one. If I've seemed more negative lately, it may because I am galled by the Mexican bribery story - in part because it seems to blatantly violate the law, in part because it suggests a certain hypocrisy within the company, where anything that even suggests bribery is a firing offense. And, there is a certain holier-than-thou mentality in some quarters that I find irritating.

But that's their fault. not mine.

As for my biases, one way or the other, some of them are in the eyes of the beholder. But I'm pretty much an open book on most issues.




On Friday, I took note of the internet firestorm taking place over comments made by Mike Jeffries, CEO of Abercrombie & Fitch: "In every school there are the cool and popular kids, and then there are the not-so-cool kids. Candidly, we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong. Are we exclusionary? Absolutely."

Sex appeal, Jeffries said, is "almost everything. That’s why we hire good-looking people in our stores. Because good-looking people attract other good-looking people, and we want to market to cool, good-looking people. We don’t market to anyone other than that."

And, in fact, they don't even make large sizes, because they don't want large, unattractive people wearing their labels on their large, unattractive bodies.

I wrote that there are a couple of lessons to be learned from this story.

One is that even if you think something and believe something, sometimes it does not make sense to actually say it out loud. Especially not to a reporter. And if you are asked a question that forces you to address such issues, it is critical to have crafted a less obnoxious way to say it that won't offend people.

To be fair, A&F is only doing something that a lot of retailers do: niche marketing. (After all, is A&F being any more exclusionary than, say, Casual Male XL?) But there are ways to say something, and there are ways not to say something. (Besides, sometimes not-so-attractive people actually buy stuff for attractive people, and A&F has just become a less appealing option. I'll just wander over to J. Crew.)

But here's the other lesson:

Mike Jeffries' comments were made in an interview conducted in 2006.

That's right. Seven years ago. But they've surfaced to the top, because that's what can happen on the internet ... Nothing goes away. Ever.

One MNB user responded:

A&F clearly hasn't paid a price for those 2006 comments -- and likely never will. I know you're offended that your fat ugly body can't fit into their clothes, and so am I.

But nobody wants to see either of us in their teeny-bopper clothing, believe me.

I'd say A&F hit the nail, and you're totally wrong. Again.

Well, that seems a little harsh. And personal. But if you want to say I have a fat and ugly body, that's your privilege. (I'm back to jogging four miles a day, four days a week, by the way, and I got my front tooth fixed. So I'm doing my best...)

But I'm not sure I'm wrong.

I said that the CEO's comments were inelegant. (Anybody want to disagree with me there?) I said he was practicing niche marketing just like a lot of other people, and that this can be a good idea, though you have to be careful with how you explain it, especially to a reporter. And I said that the internet makes it possible for comments to live in perpetuity.

Not sure where I was wrong.

Another MNB user wrote:

Obviously the company has a target consumer, we all do. However, when you exclude everyone else especially for trivial reasons, well you get what you pay for. I did read they closed a few stores recently…might be related.

I just think that you can practice niche marketing without sounding obnoxious.

BTW... extra credit to all of you who got the Animal House reference in the headline.




Regarding the decision by Wrigley to stop selling its caffeine-infused gum while it is part of a probe into caffeine consumption by kids being conducted by the US Food and Drug Administration (FDA), one MNB user wrote:

As a pharmacist, I find it incredible that FDA allows the sale of the "morning after" drug to 15 year olds over the counter (no prescription required), but gets concerned about 40mg of caffeine in a stick of chewing gum.

I'm okay with the caffeine probe, but I get your point - and generally agree with it - about the morning after pill.

Though I also recognize that I've worked very hard with my daughter to have the kind of relationship where if she felt the need for that solution, we could talk about it. (It wouldn't be an easy conversation, but I think there would be a conversation.) I'm not sure that every family dynamic works that way, and there may be daughters out there that, for whatever reason, may feel trapped, abused and without options.

I'm uncomfortable with the notion that the morning after pill could be made available to virtually anyone over the counter, without question. But I'm not sure my comfort ought to be the issue.




Regarding the decision by Supervalu to pay its departing CFO, Sherry Smith, a $300,000 retention bonus to stick around for two extra months while it looks for a replacement, one MNB user wrote:

New CEO - same old culture. They pay the execs al lot of money, they they pad each others pockets for nothing. Many of us at lower still have jobs, but the leadership show they have little concern for anything else than helping each other.




Responding to last week's piece about leadership lessons from LL Bean, one MNB user wrote:

Absolutely a good lesson.

Being somewhat of a perfectionist and goal oriented, in my early career as a meat department manager for privately held company based in Grand Rapids, I tried to create the “perfectly managed” department, never satisfied with the results.  I did not interview for and even turned down offered opportunities, because I felt that  I was not ready to leave my “less than perfect” department behind, and unwilling to risk my reputation on a position where I had limited experience.  Well fortunately, their business model changed and was not aligned with my beliefs so I decided to move on to a new company.  While at this new and current company, I quickly learned to manage through my perfectionism, also realizing how it had held me back previously.  I’ve been with the company now for 13-years this month, and have held 8-positions over that time.  Almost every interviewer inside and outside the company has remarked positively about my continued progression in the industry…the experiences really do matter.

My advice along those lines:  It’s not necessary to be subject matter expert in every area of your employment and career.   There are SME’s in every corner of the company.  Learn to listen to those with the expertise, then use that information to develop strategic vision and aid in problem solving, and your value will quickly be recognized within the organization.  It’s not enough to only be good at one thing.




Regarding the internet sales tax issue, one MNB user wrote:

There are an estimated 6500 local tax ordinances that an internet company would have to manage.  No mom & pop shop is subject to such complexity.  Further, they are now subject to audits from up to 500 different agencies, tribes, states etc.  This is a horrible way to get an economy moving.

Again, I go return to the fact that internet businesses do not need their sidewalks maintained, do not require police and fire protection, etc.  If anything, there should be a lower tax (say 2%) collected at a national level.  Anything else is chaos.

I would point out that the trucks that deliver their products do travel on public roads, and will call the police if they are robbed or involved in an accident, and will call the fire department if their engine catches on fire. So it is not like they are insulated from all local issues.

I'd be okay with a national collection of sales taxes, with a distribution back to the states, depending on consumption. But it doesn't look like that is an option.

From another reader:

Many opponents of the proposed new federal law contend that the customers should be reporting these purchases and pay the sales/use tax.

Ohio has recently put some pressure on businesses to do that - offered an amnesty program if they fess up.  But the ordinary consumer is not likely to do so for various reasons.

I think the main reason is that the individual consumer assumes (correctly I believe) that the nonpayment of this tax is so widespread that they would feel like a sucker if they did so.  I think this is the problem in many foreign countries.

Added to that is the fact that many consumers would have only a small amount to report - and the burden of keeping records etc.  Also, it is not always clear if the purchase is taxable. Ohio exempts "casual sales", e.g. not from a business such as tag sales, garage sales, via an ad on Craigslist etc.   The proposed federal law exempts businesses with less than $500,000 gross sales.  We have companies that currently provide software that handles a complicated mix of federal, state and city taxes.  I am certain that software developers could create software that did the same for sales tax.  It might not be 100% accurate, but it will be very close.

And from yet another reader:

Hardly anyone gets it, we don’t have a tax problem, we have a spending problem.

Liberals love all this focus and discussion new revenues.  No need to fix spending.

I think anyone who says we don't need to fix the way we spend money at the federal level in this country is an idiot.

There is way too much inefficiency and ineffectiveness in how money is spent at the federal level.

Now, I'm not sure that this means blanket, across-the-board cuts ... because there are areas where we're probably underspending, or not getting sufficient bang for our buck.

But it has long been my opinion that everything has to be on the table. But we don't seem to live in a political environment where that can happen, and where mature, non-ideological conversations and negotiations can take place.