business news in context, analysis with attitude

Published on: September 18, 2013

by Kate McMahon

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

After a meteoric rise to the top of every hot product list, Chobani Greek yogurt has been brought down to earth - not by competitors Fage or Oikos, but rather its own bloated yogurt cups that hissed, fizzed and made consumers feel sick.

Chobani issued a voluntary product recall on Sept. 5 of approximately five percent of its product, manufactured in its Twin Falls, Idaho plant. Chobani said it traced the problem to a common dairy mold that can cause spoilage like bloating and swelling in yogurt but should not pose a health risk to consumers.

Judging by more than 200 reports filed with the US Food and Drug Administration (FDA) and plenty of belly-aching on Facebook, consumers disagree. There were scores of complaints that the tainted product caused nausea, cramps, headache, diarrhea and trips to the emergency room. One irate mother even started a Chobani Recall page, including a video of her banana yogurt “fizzing” and demanding action from the upstate New York manufacturer.

Initial indications of the problem started popping up on Facebook and Twitter as early as August 19, and Chobani has been criticized for not responding and contacting stores until August 30th.

The FDA told NBC News on Monday it was still investigating and noted that reports filed does not mean the product actually caused illnesses.

I’ve been following the story for two reasons:

1) It’s already becoming a classic case study on damage control, particularly in the dairy aisle.

2) I personally consume Chobani 0% Vanilla at least three times a week. I went straight to my fridge and then my smart phone to notify family when the lot number/expiration dates of the affected yogurt (91 flavors) were released. Happily, we were in the clear.

For Chobani, which prides itself on “delicious, nutritious yogurt made with only natural ingredients," and which quickly became the No. 1 seller of Greek yogurt in the U.S., the recall ended a run of record sales and favorable publicity we first took note of here in April 2011.

Company founder Hamid Ulukaya personally apologized on Facebook, and vowed to make it right. "Everybody in the company took this hard," he told the Associated Press. "It shook us up."

Once the product was recalled, Chobani’s challenge was responding to the thousands of consumer posts/questions/complaints on Facebook. This post was typical:

*“My #chobani yogurt just hissed at me.... And it's fizzy... And I ate some... :/”

Others complained that the bad batches remained on store shelves after the recall and expressed frustration that Chobani had not acted more quickly.

To its credit, Chobani admitted that its response time was backlogged due to calls and emails at five times the typical volume. And in a taste of what is to come in social media engagement, it publicly outlined steps and personnel reassignments to meet the consumer demand within a 24-hour time-frame.

What’s yet to be determined is whether this will threaten Chobani’s No. 1 hold on the Greek yogurt market, particularly with Dannon’s Oikos and a host of other competitors (Stonyfield Farms, the “original” Greek yogurt Fage, private label brands) on its heels.

Will I continue to buy Chobani? For now, yes. Am I a little gun-shy when I peel back the foil? You bet. First sign of fizzing or hissing and I’m a former customer.

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

Published on: September 18, 2013

by Kevin Coupe

It has been widely reported that Gap is launching a new series of commercials, returning to television after four years with new commercials carrying the theme "Back to Blue." And it is doing so with a pair of short musical interludes -featuring Alexa Ray Joel and Dhani Harrison covering songs made famous by their fathers (Billy Joel and George Harrison).

While the campaign has not gotten universally positive reviews, I like it. In part, it's because Gap has a long history of using music cleverly in commercials, and I like the idea that this continues the tradition. But while some people say that seeing the adult children of the icons of their youth makes them feel old, I disagree - I actually think that the commercial connects the dots in a way that is in keeping with the brand's broader identity.

Gap, it seems to me, at its best seems to have one foot in the past and one on the future ... reinventing classic looks for young people. And that's what these commercials do ... the songs are familiar but restyled, while the performers remind us both of the good old days and the fact that those days are in the past. (Did the ads make me feel old? No. My knees remind me that I'm old.)

I also think that it is smart to offer a nod to the past. After all, those of us who listened to Billy Joel and George Harrison back in their primes now are in the position of shopping for our kids at Gap ... and so appealing to us isn't the dumbest idea in the world.

And finally, the commercials have managed to do something that Gap needs, especially in a time when it is faced with more competition than ever before. It's got us talking about the company. Also not the dumbest idea in the world.

So watch the commercial with Alexa Ray Joel at left. It is, in its own way, an Eye-Opener.

Published on: September 18, 2013

Sources at Fresh & Easy Neighborhood Markets - the western US small-store chain that Yucaipa recently agreed to take off Tesco's hands, ending a six-year experiment in which the British company could not seem to solve the challenge of marketing to Americans - tell MNB that headquarters employees yesterday were introduced to Jim Keyes, the former CEO of 7-Eleven, who now will run the chain.

As previously reported here on MNB, Tesco essentially is paying Yucaipa $235 million (US) to get rid of Fresh & Easy, which has been a consistent and annoying drain on its profits.

There have been reports that Yucaipa might use Fresh & Easy as a vehicle to revive the Wild Oats brand, but at this point it is all speculation.

According to Bloomberg Businessweek, "Yucaipa will acquire more than 150 of Fresh & Easy’s near 200 stores as well as distribution and production facilities ... Those outlets not included in the transaction will be closed in the coming weeks, though Tesco reportedly can continue to try to sell them to other companies."

Reports say that if Yucaipa is able to turn Fresh & Easy around, Tesco will have the right to buy into the venture.

Published on: September 18, 2013

The Chicago Tribune reports that Instacart, the San Francisco startup that provides same day delivery of products purchased at area grocery stores, is launching its service in 13 Chicago neighborhoods.

Trader Joe's is the first retailer included in the Instacart offering, with Dominick’s, Whole Foods and Costco expected to be added soon.

According to the story, "Chicago represents one of 10 cities where Instacart is planning to set up operations by the end of next year. Founded last summer by Apoorva Mehta, a former supply chain engineer at Amazon, the company has raised $8.5 million in venture capital to expand beyond its home base of San Francisco. Mehta said he liked that Chicagoans are already well-versed in using grocery delivery services, thanks to incumbents such as Skokie-based Web grocer Peapod, which was founded in 1989 and is now a unit of Dutch supermarket company Ahold."

Published on: September 18, 2013

The Seattle Times reports that Moms for Labeling, a nonprofit group that is supporting a Washington State initiative that would require the labeling of foods containing genetically modified ingredients, is suing the Grocery Manufacturers Association (GMA), "saying the industry group should be disclosing which member companies are giving money to fight the initiative ... The lawsuit says the industry association acted as a political committee to solicit and 'launder' money from others whose identity is 'illegally concealed'."

The Times writes that "for transparency purposes, Washington law requires that an organization register as a political committee if it raises money to support or oppose a particular ballot measure, said Lori Anderson, spokeswoman for the state’s Public Disclosure Commission ... Organizations are not required to register if they contribute money from a general fund — for example, money collected from member dues and used for a variety of purposes — as long as the organization’s primary purpose is not to influence elections. Once registered as a political committee, the organization must file regular reports showing who has contributed more than $25 and how the money is being spent."

According to the story, GMA has not yet commented on the suit, but "has contributed $2.2 million to the campaign opposing I-522. Other major contributors include Monsanto ($4.8 million) and DuPont Pioneer ($3.4 million)."

Published on: September 18, 2013

The Wall Street Journal this morning reports that drugstore chain Walgreen plans to "disclose a plan to provide payments to eligible employees for the subsidized purchase of insurance starting in 2014. The plan will affect roughly 160,000 employees, and will require them to shop for coverage on a private health insurance marketplace. Aside from rising health-care costs, the company cited compliance-related expenses associated with the new law as a reason for the switch ... Under Walgreen's new arrangement, to take effect in 2014, the firm will pay a fixed amount for employees to select coverage options in a private insurance exchange run by Aon Hewitt, a consulting unit of Aon PLC. The exchange will offer up to 25 different plans in some states.

"The options include HMO-style coverage with no deductibles and lower out-of-pocket costs than some plans. Also available are bare-bones plans with higher deductibles and leaner coverage. Workers could have premiums costing as little as $5 a month, Walgreen says, to appeal to the 36% of its employees who are single and under 30 years old."

The company says that it is unclear at this point how much money Walgreen will save over time, nor whether its employees will end up spending more on health care coverage.

It is just the latest case of a major employer making changes in how it is offering health care benefits; in recent months, companies including IBM, UPS, and Trader Joe's have all made changes while citing the expected impact of the Affordable Care Act (ACA), often referred to as Obamacare.

The Journal notes that "like the shift from pension plans to 401(k) plans beginning in the 1980s, the moves mark a transition in which employers are handing their workers more control over their benefits, some experts say. But as companies set their contributions at fixed amounts to limit benefits spending, workers could wind up shouldering a greater share of the burden if health costs increase."

Published on: September 18, 2013

Bloomberg reports that Safeway has adopted a so-called "poison pill" after it was revealed that New York-based Jana Partners has acquired 6.2 percent of the company's stock, saying that "Safeway is undervalued and that it may continue discussions with the company regarding a review of strategic alternatives. Options may include returning capital to shareholders and replacing management, Jana said ... Jana, which manages about $5 billion ... generally invests in companies undergoing changes such as mergers, spinoffs and bankruptcies, and is known for pushing management to consider changes."

Safeway says that the "poison pill" would effectively prevent any single company from acquiring more than 10 percent of its stock, hence allowing management to continue implementing its plans. The retailer said that it is currently engaged in a reshaping of its business - selling its Canadian stores, and spinning off its Blackhawk Network gift card business (in which it still has a 73 percent ownership position).

Published on: September 18, 2013

The Washington, DC, City Council has failed to override Mayor Vincent Gray's veto of a living wage bill that would have required large retailers such as Walmart to pay employees at least $12.50 per hour, above the local minimum wage of $8.25.

Gray vetoed the bill, calling it a "job killer" and saying that it was impractical. Gray also pledged to try to raise the DC minimum wage.

Walmart applauded the vote, and said that it will continue with its plans to build as many as six stores in the District.

Published on: September 18, 2013

Reuters reports that Starbucks is asking its US customers to leave their guns at home, though it is not imposing a blanket ban on weapons in its stores. The request does not apply to law enforcement officials.

While in the past Starbucks has been painted as anti-gun, in fact the company's official policy has been to default to local gun laws. Earlier this year, gun rights advocates decided to hold a "Starbucks Appreciation Day," allegedly to thank the company for its position ... and even planned to stage a demonstration of support at a Starbucks in Newtown, Connecticut, the town where an elementary school was the site of a slaughter late last year of 20 children and six adults. Out of concern for local sensibilities, Starbucks closed the store on the day that the demonstration was scheduled to take place.

The Reuters story writes that Starbucks CEO Howard Schultz "said in an open letter to customers late Tuesday that Starbucks Appreciation Day events 'disingenuously portray Starbucks as a champion of 'open carry.' To be clear: we do not want these events in our stores ... We've seen the 'open carry' debate become increasingly uncivil and, in some cases, even threatening,' Schultz wrote, noting that 'some anti-gun activists have also played a role in ratcheting up the rhetoric and friction,' at times soliciting and confronting employees and patrons. We found ourselves in a position where advocates on both sides of the issue were using Starbucks as a staging ground for their own political position."

Schultz also says that this decision is not a reaction to the mass shootings this week at the Washington Navy Yard.

Published on: September 18, 2013

• The Week reports that Tesco will hold an event next Monday at which it will unveil its own Android-based tablet computer, which is expected to retail for the equivalent of about $150 (US). It is believed that the tablet will have a seven inch screen, 16 GM of memory, and will be geared for online shopping, reading and video viewing - all of which, Tesco, believes, will help it blunt the impact of both Apple and Amazon on its business.

Published on: September 18, 2013

• The Associated Press reports that Coca-Cola and the US Department of Agriculture (USDA) have signed a deal "to restore watersheds that have been damaged or altered by development, wildfires and agriculture as part of an initiative to slow runoff and replenish groundwater on federal lands."

It is part of a broader effort by Coke to address water-related issues in areas where it uses water for production of its various products. According to the piece, "Such efforts are increasingly important to corporations and farmers who rely on water and to tens of millions of people whose drinking water originates in the national forest system, Agriculture Secretary Tom Vilsack said. But federal budget cuts and the wide scope of the problem have the USDA turning to partnerships with nonprofit groups and corporations for help."


• The Denver Post reports that the City Council there has moved a step closer "to approving a fee for plastic and paper bags at grocery and convenience stores, narrowly giving initial approval to the 5-cent fee that would be charged at the register."

The vote was 7-6 in favor of the bill, though Mayor Michael Hancock has suggested that he may veto it if the legislation comes to his desk.

A final City Council vote is scheduled to take place on September 30 after a public hearing.

Published on: September 18, 2013

• Starbucks said yesterday that it has promoted Troy Alstead, its CFO and chief administrative officer and a 21-year company veteran, to CFO and group president, Global Business Services.

Published on: September 18, 2013

Amazing story from MNB reader Glen Harmon:

I was detained at the security checkpoint in Panama City, Panama this morning for carrying a knife.....

Al Kober was an incredible man. He died in 2010 at age 72. I thought of him this morning while the agents were searching me. Al started with Clemens Markets in Philadelphia in 1954. He was just a kid bagging groceries. He didn't drink. He was religious. He had a ton of kids and grandchildren. When I met him years later, he was the Director of Meat & Seafood at Clemens. I heard a story once that he kicked a salesperson out of his office and wouldn't buy from him because the guy had shown up in shorts. After 50 years of working at Clemens, Al resigned. 50 years! He decided he had enough. He wanted to do something new. He went out and got another job and began to lead the sales team at Certified Angus Beef. I see CAB products when I travel internationally. Al made an impact. Al made an impact on me. Al didn't like to go to parties. He was pretty much everything different than I. He gave me advice when I was first starting out. He gave me respect....

Years ago, he gave me a small set of nail clippers with a logo of Hawaii when he went there on vacation.  I had forgotten about them. They were in my bag. The clippers had a small knife tucked away inside. The police took them away this morning... because I had a knife. However, they didn't take away what Al gave me... They let me go.

I remember Al. He was an early MNB reader and a frequent letter writer, and I miss the emails he used to send me. I'm glad you wrote in about him...




Regarding the Walmart Neighborhood Market store that finally has opened in the Los Angeles Chinatown neighborhood, despite many protests, one MNB user wrote:

I remember writing you months ago, this is at best on the edge of Chinatown as you mentioned.  It is much nearer a huge upscale downtown apartment/condo style living community and Hispanic neighborhood.  As you mentioned there s a Subway and a Burger King, and it is more than a mile from the “Chinatown” that most folks would associate with it.  I am not a Walmart supporter, but this is classic politics and nothing else, closest real grocery store is a Vons probably two miles away or more.




And, addressing my recent question about ongoing investigations into charges that Walmart bribed its way onto the fast track in Mexico, one MNB user wrote:

What I think the question of the day is, why have Walmart just not settled with the Government? As the legal fees continue to escalate to the point of continuing to effect their profitability, one’s got to ask why not settle. The only answer I can come up with is, that they know that there will be criminal changes and or such damaging charges to the company and key officials that they must continue to spend millions a month to protect them all?? If not in makes sense to settle and pay the fine and take the hit.




Responding to recent stories about County of Origin Labeling (COOL), one MNB user wrote:

Consumers shouldn’t have to rely on the “glows in the dark or not” test to determine if their recent purchase of catfish is from China.

Agreed.




We had a story the other day about a study saying that alcohol consumption may not be related to depression, which led one reader to wrote:

I think this study misses the obvious. Higher rates of wine, or any alcohol consumption lead to higher rates of depression because the more you drink, the more likely you are to run out, and that’s depressing.




Responding to Michael Sansolo's column this week about learning from the competition, one MNB user wrote:

I am a retired supermarket owner. Always encouraged my folks to always find at least one thing that competing stores did very well/better than we did. Not all that hard if you look.




On another subject, one MNB reader wrote:

Re: the frenzy of speculation around the possibility of Yucaipa resurrecting the Wild Oats banner—I am amazed by the fascination with Wild Oats.  Their stores never really impressed me or seemed to live up to their hype.  Years ago when they first came to Cincinnati, I went in expecting to be absolutely amazed at the selection and quality—especially in produce (the most natural of “natural foods”.  What I saw was a produce department that was smallish and filled with a mundane assortment of the same produce (Dole, Sunkist, etc) available—cheaper—5 minutes away at Kroger, Thriftway or Bigg’s.  Fast forward a few years—my next time in a WO was in West Hartford, CT.  Pretty much the same store that I saw in Ohio, but I discovered the locals actively disliked WO after they had taken over a beloved specialty foods market in Hartford, closed it, and moved to the suburban West Hartford location.   I just bring it up because I question the value of the brand, especially in the face of considerable expansion of competing natural and specialty food retailers.  On top of all that, I seem to recall some mention in all the coverage of the Fresh & Easy trials and tribulations that F&E’s real estate choices had been less than optimal to drive traffic.  I guess we’ll see, won’t we?




Finally, I was raving the other day about Three Days of the Condor, a superior thriller to almost any thriller that appears on the screen these days, which prompted MNB reader Dave Henry to write:

Love that movie. One of my all time favorites. The clarity line is a classic that I have borrowed more than once in presentations over the years. When (director) Sydney Pollack passed away I remember watching many of his films again. A brilliant body of work.

And from Christopher Gibbons:

Loved your Condor reference. I also often use this film as a benchmark for other thrillers; more often than not, they come up short. I watched this with my daughter a few years back (she's 22 now) and she loved it. So many great lines from the film - here are a few of my favourites:

"Boy, have you found a home" is one I use all the time.

My sister used to say "Have I ever denied you anything?" with a mischievous smile.

And perhaps the best of all, "Boy, what is it with you people? You think not getting caught in a lie is the same thing as telling the truth?"

And if you think that Three Days of the Condor is still topical today, watch Enemy of the State again if you haven't seen it recently. Now that's so spot on, it's scary.

Thanks for the great conversation (as always.)