business news in context, analysis with attitude

Published on: July 24, 2013

by Kate McMahon

"Kate's Take" is brought to you by Wholesome Sweeteners, Making The World a Sweeter Place.

This is a story about dough, as in pastry and in currency. And about constant innovation.

The newest culinary craze in New York is the cronut, a highly-coveted confection created by the Dominique Ansel bakery. The Soho chef’s trademarked cronut is a flaky croissant-doughnut combo filled with flavored cream, deep-fried in grapeseed oil and glazed to perfection.

Since its debut in May, the $5 cronut has created a foodie frenzy – pre-dawn lines, celebrity fans, TV and social media buzz, a host of imitators and even a “black market” in which scalpers will purchase and hand-deliver a cronut for a whopping $100 each. Or 20 for $3,000, all inclusive.

But underneath the multiple layers of pastry and rose-vanilla glaze there are telling business lessons about creativity and quality.

Ansel, an award-winning French pastry chef who brainstorms new ideas with his staff every week, spent two months perfecting the cronut recipe. One mention of the cronut’s debut on the Grub Street blog led to 140,000 hits and it literally became an overnight sensation.

Ansel increased production from 30 to 50 per day, which sold out in 15 minutes. He has since ramped up to 350 per day, limited the number to two per customer in an attempt to stave off scalpers, and has no intention of increasing production or franchising. “This is a bakery. It is not a cronut store,” Ansel said. He is also known for treating customers who are queued-up at 5 a.m. for the 8 a.m. opening to hot coffee and freshly-baked madeleines.

But not all is sweet. Ansel moved quickly to trademark the name cronut, and on the bakery’s Facebook page he defended that decision against “bullying” and “malicious attacks” by competitors. Naturally, other bakers, restaurants and grocery stores would want to crank out their own version of the cronut. Ansel compared his trademark name to McDonald’s Big Mac and Burger King’s Whopper, and noted neither is preventing the other from flipping a hamburger.

Knock-offs feature names ranging from doissant, dossant, frissant, cronot to crullant. A headline on the blog Eater blared “Here Are Nine Cronut Impostors From Around The World.”

In Norwalk, Connecticut, for example, Stew Leonard’s capitalized on the trend with its new product, the Cro-Do. On a recent Saturday, a bakery rep was slicing warm Cro-Dos for customers and explaining what set Stew’s product apart from Ansel’s -- no cream filling or frosting. Naturally, I tasted and picked up a box of two for $5, much more than I normally pay for 6 ounces of baked goods. (The price is now down to $3.99.) Minimal expenditure for a store with a bakery, maximum marketing opportunity.

While the cronut craze and the 5 a.m. lines will surely ebb, Ansel’s commitment to innovation and quality have not. He is featuring a monthly flavor for the cronut – blackberry for July, coconut for August chosen by Facebook fans – but more importantly has moved on and is marketing his new summer fave, the Frozen S’more.

It features a custard ice cream center that’s covered with crispy chocolate wafer chips, surrounded by a soft marshmallow mixture and frozen in a square mold. It is then blow-torched to order on a smoked wooden stick for a crème-brulee like crust.

Best of all? “This can not be scalped,” Ansel said with a smile. “You have to eat it here.” And it’s already being billed as the Fro-Smo.

Comments? Send me an email at kate@mnb.grocerywebsite.com .

Published on: July 24, 2013

Reuters reports that eBay is expanding its eBay Now same-day delivery service "as the company battles with rival Amazon.com Inc for dominance of the emerging online local commerce market."

eBay Now has been delivering products from retailers such as Walgreen, Best Buy and Target to communities such as Manhattan, San Jose and San Francisco since last year, and now will expand to Brooklyn and Queens, New York, the Bay Area peninsula between San Francisco and San Jose, and Dallas.

According to the story, "eBay's expansion comes as Amazon builds more warehouses closer to customers, which will help the world's largest Internet retailer offer faster delivery.

"eBay, which does not own inventory and mostly avoids running warehouses, is partnering with retailers to create a network of existing physical stores that will, in effect, operate as mini storage and distribution hubs for online purchases."

Published on: July 24, 2013

The San Jose Mercury News reports that Mi Pueblo, the well-known Hispanic supermarket chain in Northern California, has filed for Chapter 11 bankruptcy protection, saying that while it "is current on all obligations to employees, suppliers and all of its creditors, including its secured creditors," it is having trouble with its bank, Wells Fargo, which has been looking to change the terms of existing loans.

Mi Pueblo said that it will keep all its 21 stores open, and will "use the bankruptcy as a chance to reorganize the 22-year-old grocery chain" and find a new bank.

"The bankruptcy filing presents a tough challenge for the company in the unforgiving supermarket industry," the story says, "where few have managed to recover from a Chapter 11 reorganization. Most supermarkets survive on hefty lines of credit and good-faith relationships with food vendors, experts say."

Published on: July 24, 2013

Good piece from Bloomberg Businessweek suggesting that the acquisition of Harris Teeter by Kroger may be just the precursor of deals that will see companies like Gelson's and Ingles Markets swallowed up by larger entities.

Such deals, the story says, will both allow acquisitive companies to grow their sales and profits in a slow-growth business, and reduce costs in an industry "that's needed to be consolidated desperately." In addition, the story suggests, it will better enable these larger companies to compete more effectively against the likes of Walmart.

You can read the story here.

Published on: July 24, 2013

• Drug Store News reports that Sears is using the coming back-to-school season to offer electronic coupons to consumers that can be redeemed online, in store, and using a mobile device.

According to the story, the coupons offerings are "personalized for members of the Shop Your Way loyalty program based on their interests, style preferences and shopping habits. Members can download the coupons at ShopYourWay.com or through the mobile app and receive rewards like 2% back in points when using their Sears MasterCard."

Published on: July 24, 2013

The New York Times reports that Starbucks is teaming up with Danone "to create a line of yogurts that will be sold in the coffee company’s stores and in grocery stores ... To be called Evolution Fresh, Inspired by Dannon, the new products will capitalize on Danone’s long history of making yogurt and the extensive reach of Starbucks, which has grown to more than 10,000 stores in the United States."

As the piece notes, "Yogurt is one of the hottest categories in food today, introducing new brands, flavors and permutations at mind-numbing speed, and shaking up traditional players like Danone and Yoplait, which is owned by General Mills and the French dairy cooperative Sodiaal ... Yogurt sales have grown quickly over the last decade. Packaged Facts, a market research firm, estimates that yogurt sales in the United States grew 6.6 percent, to $7.3 billion in 2012, compared with 2011, driven almost wholly by increased sales of Greek yogurts."

The products will start showing up in Starbucks stores next year, and in supermarkets in 2015.

Published on: July 24, 2013

• In the UK, Marketing Week reports that "Tesco is consolidating the number of Clubcard loyalty schemes by bringing Exchange and Rewards initiatives under one banner - Clubcard Boost - in a bid to make its voucher loyalty scheme 'easier to understand' and to increase redemption."

Tesco says it is reducing its loyalty programs from eight to five and will leave those in place until the end of the year, at which point it will re-evaluate based on customer feedback.

Published on: July 24, 2013

• The Cincinnati Enquirer reports that the move by Kroger to acquire Harris Teeter for $2.5 billion could lead to two very different groups attempting to stop the sale - Harris Teeter shareholders who think they should get more money in the sale, and competitors who could make higher bids for Harris Teeter as a way of preventing Kroger from getting a foothold in Harris Teeter's markets.


• The New York Times reports this morning that even as major food manufacturers are "prodded by consumers, regulators and politicians" to make healthier foods, they also are using the services of trained chefs - in addition to food technologists - to do their best to make sure the food actually tastes good.

Published on: July 24, 2013

• Rick Lenny, the former CEO of Hershey, has been named chairman of the board of Information Resources Inc. (IRI). He succeeds Lawrence Benjamin, who will remain on the board.

According to the company, Lenny also currently serves on the boards of McDonald’s Corp., Discover Financial Services and ConAgra Foods.

Published on: July 24, 2013

MNB took note the other day of a Philadelphia Enquirer report that "Phil Lempert, food-trend observer and chief executive officer of the newly formed Retail Dietitians Business Alliance, estimates that the number of registered dietitians in supermarkets, now 500 to 600, will more than double by the end of 2014."

"We know what to eat, what not to eat, know we need to exercise and so on, but the message is not getting through. We need someone to hold our hand," he said.

One MNB user responded:

Great idea…execution is essential.  Are these dietitians “Factory Farm and Big corporation centric” or “Family Farm and Preventative Holistic Health centric”…they can’t be both or the message gets diluted…

I thought that was an excellent point ... so I asked Phil Lempert to address it:

Actually they are neither - these are (for the most part) full-time and are employed by the retailer. They are working alongside buyers, merchandisers and the pharmacists and add a balance of common sense and sound nutrition advice to their buying selections and programs. They do develop health & wellness programs (in-store as well as in circulars) that brands can participate - but most, in particular Hy-Vee and Wakefern have strict guidelines for the nutritional profile of the products in order to participate. Their objective is simple: to create a relationship with the shopper by offering them wellness solutions whether it is weight loss, diabetes management or prevention or other chronic illnesses which can be improved through good nutrition.

And another reader wrote:

I respect and like Phil Lempert and found this blurb on dietitians interesting. Yes, shoppers need education on quality and value of what they purchase, but I don’t trust most dietitians. If you have ever received a tray of food in a hospital you would be horrified. How are these people trained? If the store dietitians are anything like the ones in hospitals, heaven help the shopper! It’s not just the dietitians but labeling as well. I think a lot of children who have food allergies get them from too much wheat in our foods. A lot of shoppers think that whole wheat bread is better than white bread. It’s all bad! Shoppers need to read labels and balance food selection. The other issue is cost. Buying organic food and real whole grain breads is expensive and most families, in this economy, don’t have the money to purchase these healthier alternatives. It’s not just a matter of increasing dietitians in the stores but better educating these people in budget as well as food selections.

Once again, I turned to Phil for a response:

I agree! But what we are finding is that the vast majority (if not all!) of the retail dietitians are AND (Academy of Nutrition and Dietetics - formerly American Dietetic Association) certified. These are not self proclaimed "nutritionists" who are pushing over priced supplements. They must qualify for continuing education every year and in fact AND is upping their educational requirements.

As far as the cost of food - most of the RDs that I speak with agree with you - they are NOT recommending higher priced foods (or organics which are identical nutritionally), rather they are creating programs and shopping lists for the mainstream shopper who is struggling with the increasing food costs. Love for your to "virtually" meet some of these retail dietitians - just log on to www.retaildietitians.com and check out our interviews with many of them to see exactly what they are doing in store and in the retail headquarters.





Regarding the story we had the other day about how, while Amazon grows its sales, bookstores remain the places where people like to browse and look for books (that they eventually order online), one MNB user wrote:

You're right to observe "somehow bricks-and-mortar stores have to find a way to convert interest into sales" But what if they simply cannot find a way to compete with a company who can always undercut on price, in part because Amazon has never needed to make a profit? You suggest it is up to savvy business people to solve this problem...But if they cannot--or cannot do so well enough, publishers--and the literary world at large--could take a big hit, and supply--and revenue--will dwindle accordingly. This has already happened in the music business, where we've witnessed a dramatic consolidation in labels and publishers with an accompanying  50% revenue drop in the past 10 years. To be certain, revenue decreases appear to have leveled off, but I doubt Amazon would be happy if the literary business lost half of it's revenue...




On the subject of living wage legislation, one MNB user wrote:

Good morning Kevin, I rarely weigh in on political oriented discussions in your column unless the hypocrisy is overwhelming so …

While I definitely believe there should be one minimum wage applied to every business and organization and not a separate one to target a certain business or group of businesses, I'm much more troubled by a full-time worker on a minimum wage job still living in poverty and unable to support a family. Think about it, $7.25 an hour x 2,000 hours a year = only $14,500 before taxes (at least 7.6% for SS and Medicare). Well below the poverty line.

In the pursuit of short-term profits and this week's stock price, businesses pay approximately the minimum wage while their supporters exclaim "free enterprise." This leads to  taxpayers paying more in food stamps and Medicaid (or higher insurance payments from the uninsured who still get treatment at hospitals), which is equivalent to taxpayers subsidizing those businesses who don't pay a living wage. Of course, I expect some will counter this with "let's eliminate food stamps and Medicaid," but that's a short-term solution that would only further deteriorate our society and economy.

We need more businesses such as Costco and Nordstrom and others that have a long-term success perspective and fairly pay their employees, who in turn support other businesses as more active consumers.

Agreed. But I don't think of this as a discussion of politics. It is far more important than that.




On another subject, one reader wrote:

I don't follow your reasoning this morning when you say, in regards to the pending acquisition of Harris Teeter by Kroger, that your question -- as a shareholder -- would be if the sale is to the right company (or not), as opposed to being for the highest price (or not).  "As a shareholder", once the deal is complete, Kroger pays you your $49.38 per share, after which you are no longer a shareholder.  So what, then, is your continued standing on the topic?  Other than, perhaps, simple altruistic themes like general betterment of retail offerings, etc.?

A fair point.



Reacting to our stories last week about Rolling Stone putting the picture of the accused Boston Marathon bomber on its cover, one MNB user wrote:

Why do you assume he was 'normal' and turned into something else?  By portraying him this way you are helping romanticize his character which is precisely what is most upsetting to the victims.  He may have appeared normal and yes, he participated in some normal activities while living his day to day life, but we don't know what may have been lurking in his evil mind.  He may have been just a good actor.  Read what he wrote inside the boat.  I don't think he was brainwashed last week into harboring those deep rooted beliefs.

Rolling Stone has succeeded in portraying this dirt ball as a sympathetic figure. Pathetic.  Apparently they sucked you in. I'm not sure how you are able to determine that he was a normal kid.  I consider him and his family anything but normal, unless they are the norm where they cam from.   Do people subconsciously want to believe that he was normal before his evil brother got into his head?  Does this help them rationalize an irrational act?  Who can say for sure what his character was before the bombing and for how long.  For all we know he could have been the more radical and this lowlife could have been stoking the fire in his brother.  The article was based on interviews with his friends and former acquaintances, anecdotal information at best and spun the way the storyteller wants us to hear it.  I will not rely on a Rolling Stone reporter for an accurate portrayal of this killer.




Commenting on yesterday's story about a study of the worst companies in the US to work for, one MNB user wrote:

Just read your recap on the worst companies to work for.  I wasn't 100% surprised to see my company on that list, NCR, but I do believe that a major change underway in this company is at the heart of much of that discontent.  Our CEO and leadership team have had a major focus on re-energizing the NCR company and brand.  Two major acquisitions over the past 2 years, Radiant Systems and Retalix, have us positioned as one of the leading retail technology firm in the industry.  Innovation is valued now more than I think I have ever seen inside the company and new technology solutions are springing up from what had turned into a largely hardware oriented company.  Change like this isn't easy on everyone in the company, which most certainly results in some discontent.  That said, from my perspective the company is heavily focused on breaking free of the old ways of doing business and embracing new technology directions to insure that we have another 129 years of success.  You can't break out of the mold without making a bit of a mess along the way.




Writing about the video we linked to the other day which showed general bewilderment on the part of children when asked about mixed race marriages (like the one shown in the recent Cheerios commercial that got some people - in this case, really ignorant people - somewhat annoyed), one MNB reader wrote:

Wow!  I’ve been in mixed race relationship for over 30 years.  Thank you.

Recently I took my college aged daughter to dinner when I was in town on business.  Her three girlfriends in attendance were all lesbians.   We had a great time and conversation, and never had the need to speak of their sexuality.  I felt very proud.  My daughter said later that they all though I was pretty cool.  We have to hold ourselves to the highest standards to make progress and ignore the haters.  Thanks again.

MNB reader Frieda Rapoport Caplan wrote:

I hope Cheerios are good for vegans, as I will now buy them!

Thanks so much for sharing. . .we have real hope for our future generations if they are as smart as these kids.

MNB user Lee Ann Lehner wrote:

If all adults were more like children in their love and acceptance, based not on their outside appearances, but on what’s on the inside, this world would be a much better place. We need to learn from our children!

Betsy Folan wrote:

Cheers to all these kids for being role models in our world!  There are still some who have lots to learn from them!  I hope the parents of these kids feel as proud of them as I do!  Thanks.

And, from Frank Fay:

Thanks for sharing!  In the Disney Institute jargon…a Wow moment!  Brilliant kids give hope to the world that one day the thought  process will be that of the “e” word: equality!  A previous Kellogg guy has to say it…”the one and only Cheerios!”  Great eye-opener and way to begin the weekend! What beautiful, intelligent, wonderful kids!