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    Published on: September 30, 2013

    by Kevin Coupe

    The Wall Street Journal has an interview with Starbucks CEO Howard Schultz in which he discloses that he is in the middle of drafting an end-of-year memo to the company entitled "Playing the Long Game," which is designed to make sure "that we don’t get seduced or intoxicated with either short-term results or short-term wins and that we’re in this to build a great, enduring company."

    Schultz says that he's writing the memo because he is concerned that the company's growth - not just in terms of global locations, but also in terms of products that are sold both in Starbucks stores and supermarkets - could have the same impact as it did less than a decade ago, when he believes that it suffered from "hubris and a sense of entitlement."

    He also says that "he doesn’t see the spate of high-quality coffee concerns such as Stumptown and Intelligentsia as competition. Still, Starbucks (traditionally known and at times criticized for its darker roasts) released a new lighter-roasted coffee called Blonde to appeal to the same customers. 'I think there’s a really important role for these independent coffee stores,' he adds. 'It creates jobs for people, and I think it raises the quality of coffee for the most part in America…and the more people who are exposed to better quality coffee is good for Starbucks'."

    While I have not always been Schultz's biggest fan - I think he has a bit of a messiah complex - I do think that this is very smart. It falls into the category of not breathing your own exhaust, not believing all your own press clippings.

    Or, as a friend of mine likes to say, it doesn't matter how iconic or legendary you are, because you actually were legendary and/or iconic yesterday. Today, you have to earn it all over again.

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

    Published on: September 30, 2013

    The Detroit Free Press has a story about how companies like Walmart, best Buy and Gap are, "instead of fulfilling Web orders from warehouses hundreds of miles from shoppers' homes," are shipping products from stores to cut down on the transit time and to make customers happier. According to the story, "The trend, known as Ship from Store, saves money through shorter delivery routes. More important, it speeds deliveries, avoids costly markdowns and recoups sales that have been lost to Amazon, the world's largest Internet retailer."

    The story notes that "a network of large stores — with high overhead costs — has become a liability rather than an asset in recent years. Amazon, which has no stores, won market share with lower prices and huge selection. But retailers have begun fighting back by using technology to get more sales out of stores — and ship-from-store is a big part of the effort ... Already, 10% of the items ordered on Walmart.com are shipped from stores and the majority of those packages are delivered in two days or less, according to the company. Two-thirds of the U.S. population live within five miles of a Wal-Mart store, so the company is using these locations as 'nodes' in a broader distribution network that includes storage warehouses and specific fulfillment centers for online orders.

    One consequence of the shift has been the creation of start-up companies that can help enable it. An example: a company called Shutl, which the story says "helps retailers deliver online orders from stores. Shutl's service covers most shoppers in the U.K., where the firm partners with retailers including Argos, Oasis and Karen Millen. The start-up is also in Manhattan and plans to expand soon to other big U.S. cities including Los Angeles, Miami and San Francisco."
    KC's View:
    It always has seemed to me that smart bricks-and-mortar retailers will always try to build on their strengths ... and if you have actual stores, that means that you actually have to turn those stores into compelling shopping experiences that compete effectively with the advantages of online retailing. That means, I think, often embracing the notion of omnichannel retailing ... and these days, it means competing with Amazon's expanding network of distribution centers, which increasingly will offer next-day and same-day delivery to much of the US.

    Published on: September 30, 2013

    Advertising Age has a story about a new report from researcher Sanford C. Bernstein that concludes that e-commerce is "fast becoming a significant market that could shift market share to smaller players and disrupt pricing and other key parts of the industry's business model ... The Sept. 25 report estimates e-commerce sales have risen to 9% of category sales for health products, 5.9% for beauty care and 5.7% for pet care. Those numbers are all up substantially and, in the case of pet products, more than double levels of five years ago, according to estimates developed using Bernstein consumer surveys and proprietary programming tools.

    "For much of the category, e-commerce still accounts for 1% or less of sales. But Bernstein predicts online sales will reach $222 billion -- or around 25% of U.S. consumer-packaged goods spending overall -- within five to 10 years."

    One interesting byproduct of the disruption has been the way in which some small brands are able to do better online than in stores:

    "The top five sellers in manual toothbrushes and breakfast cereals are widely different at Amazon compared to store-based retail, according to the report, based on July 25 sales at Amazon and Nielsen data for the four weeks ended June 7. The niche Radius Totz and Dr. Collins Perio toothbrushes cracked the top 5 at Amazon, but Colgate and Procter & Gamble Co.'s Oral-B products dominated in stores. Bob's Red Mill Gluten-Free Whole Grain Rolled Oats were the top seller on Amazon, while General Mills' Honey Nut Cheerios were the top seller in stores. 'E-commerce seems to be democratizing 'shelf space' as top brands do not dominate the e-commerce channel as much as they dominate brick-and-mortar retail,' the Bernstein report said."
    KC's View:
    I love the idea of the democratization of the store shelves, as enabled by e-commerce.

    The numbers are eye-catching, but I don't think you necessarily have to believe the 25 percent prediction to accept the idea that e-commerce is changing the game for retailers and manufacturers.

    Published on: September 30, 2013

    The New York Times reports that Interbrand is out with a new study this morning saying that Apple is the world's most valuable brand. Coca-Cola, which was number one for 13 years, falls to number three.

    Google, which last year was number four, has jumped to number two.

    IBM is number four, followed by Microsoft, GE, McDonald's, Samsung, Intel and Toyota.

    Amazon is ranked at 19. Other retailers in the top 100 include H&M (21), IKEA (26), eBay (28), Starbucks (91) and Gap (100).
    KC's View:
    It is interesting that Apple, which has been the subject of so much second guessing and criticism in recent months, seems to be having a kind of consumer-driven rebound lately, selling far more new iPhones than expected and now being rated as the globe's most powerful brand.

    Published on: September 30, 2013

    • The Huffington Post reports that Walmart is "railing against" Bloomberg News because of a story the news service ran last week about how the retailer was cutting Q3 and Q4 orders as a way of compensating for too much inventory on hand.

    According to the piece, "Renee Dudley of Bloomberg News reported on Wednesday that Walmart was cutting orders to suppliers for the current quarter and in the coming months because the retailer's inventory currently outstrips demand for merchandise. The story followed on several reports from Bloomberg that have tracked Walmart's struggling sales ... Investors took the latest Bloomberg report as a sign that Walmart was still having trouble, and shortly after the story was published, Walmart’s stock tanked.
    After Walmart rebuked Dudley's report on CNBC on Wednesday, the retailer's share price recovered about 3 percent."

    Walmart has called the reporting "thin," and suggested that the reporter has an agenda in writing about the company. Bloomberg says it stands by Dudley's reporting.
    KC's View:
    I tend to believe the reporter. But that's my bias.

    Published on: September 30, 2013

    The Huffington Post reports that Trader Joe's - which just last month announced that part-time employees working less than 30 hours a week no longer will be offered company-sponsored health coverage and instead will be given "a check for $500 and nudged into state-run insurance exchanges created by the Affordable Care Act" - now is inviting these same part-timers "who may face higher premiums on the Obamacare insurance exchanges to apply for additional subsidies from the company."

    Here's how HuffPost frames the story:

    "Trader Joe's decision apparently infuriated its part-time employees, many of whom wrote to HuffPost describing the move as a betrayal by a company that had been seen as worker-friendly. It's uncommon for retailers or grocers to offer affordable health care to non-union workers, and many employees said they had worked at the grocer in large part because of the generous coverage.

    Trader Joe's, a privately held chain based in California, argued in a followup memo to workers that it simply couldn't match the deals to be found under Obamacare, especially when the subsidies for low-wage earners are factored in. The company, however, acknowledged there would be winners and losers on the exchanges, as some workers face higher premiums, depending on their household income.

    "According to a Sept. 13 memo from Laurie Mead, vice president of human resources, some of those losers may get an additional parachute. The company told workers it would consider increasing the subsidy beyond $500 to employees facing unique circumstances as they seek out coverage on the exchanges."
    KC's View:
    It will be interesting to see how all this plays out, especially with all the political intrigue taking place. It seems likely that, whether the government shuts down or not, the health care exchanges will begin operating tomorrow ... and we'll begin to get a better sense of the impact that the ACA will have on health care delivery and health care costs.

    Published on: September 30, 2013

    There is a nice piece in the about Mary Ellen Burris, senior vice president of consumer affairs at Wegmans, who has helped to champion the goal of selling local foods in addition to her portfolio of being responsible for food safety and quality assurance, community relations, public relations and sustainability.

    It's pretty simple: every company should have a Mary Ellen Burris. (Which is tough, because there's only one Mary Ellen Burris.

    You can read the entire piece here.
    KC's View:

    Published on: September 30, 2013

    Mobile Commerce Daily reports that Wanda Young, vice president of media and digital marketing at Walmart, recently told a conference that "consumers who download the retailer’s application not only spend more, but also shop in-store twice as much as the average shopper."

    The story goes on: "Fifty-five percent of the retailer’s shoppers come into the store with a smartphone, which has paved the way for how Walmart uses its mobile app to connect with consumers in-store.

    "Walmart’s in-store mode within its mobile app not only helps consumers, but also helps employees since they are able to mix up the specials and offers that shoppers are served at a store-specific level. The app also leverages geo-location to detect when a consumer is nearby to a store and automatically prompts the user to flip the app into store mode."
    KC's View:

    Published on: September 30, 2013

    Crain's Chicago Business reports that Instacart, the personal shopping service that delivers products to San Francisco consumers from retailers that include Safeway, Whole Foods and Costco, and recently expanded to Chicago, has said that it won;t be delivering orders from Trader Joe's as promised.

    "Instacart has temporarily stopped making deliveries from Trader Joe's while we work out a more formal relationship with the company," an Instacart spokeswoman wrote in an e-mail this morning. "In Chicago, we've now got Dominick's (with more to come) and in San Francisco we've got Safeway, Whole Foods and Costco."

    Instacart traditionally does not represent retailers in the e-commerce space; rather, it shops for consumers and charges its own prices.


    • Last week it was reported that McDonald's will offer fresh vegetables and fruits in addition to french fries in its Value Meals, and now Advertising Age reports that the fast feeder "will only list water, milk and juice as beverage options for Happy Meals on menu boards, in-store and external advertising. It will also utilize Happy Meal and "other packaging innovations and designs to generate excitement for fruit, vegetable, low/reduced-fat dairy, or water options for kids."

    The move is part of a commitment that McDonald's has made to the Alliance for a Healthier Generation, a non-profit founded by the Clinton Foundation and the American Heart Association to reduce childhood obesity.


    • The Wall Street Journal reports that "Shuanghui International Holdings Ltd. intends to quickly ramp up pork exports from the U.S. as its top priority after Thursday's closing of its $4.7 billion acquisition of Smithfield Foods Inc., senior executives said.

    "Shuanghui and Smithfield—whose tie-up marks the largest Chinese takeover of a U.S. company—already have begun integrating their international sales staffs. The global trading unit, centered in Hong Kong, will seek to expand sales of Smithfield's pork in China and other markets by leveraging Shuanghui's distribution network, executives said."
    KC's View:

    Published on: September 30, 2013


    • Kroger has announced that Steve McKinney has been promoted to be the president of its Fry's Food Stores division, succeeding Jon Flora, who recently passed away unexpectedly. McKinney has been vice president of operations at the company's Ralphs division since 2007, and has been with Kroger for 31 years.
    KC's View:

    Published on: September 30, 2013

    • Dave Nichol, who during his time at Loblaw Cos. helped to pioneer the concept of upscale private label products with the introduction of the hugely successful President's Choice line of foods, has passed away of undisclosed causes. He was 73.

    Nichols also served as Loblaw's longtime television spokesman. He left the company in 1993 to join Cott Corp.
    KC's View:

    Published on: September 30, 2013

    We had a story last week about how Barilla, the pasta manufacturer, is facing threats of a boycott because of comments its chairman, Guido Barilla, made on an Italian radio program.

    According to various translations, Barilla said that his company would never feature gay couples in advertisements "not for lack of respect but because we don't agree with them ... Ours is a classic family where the woman plays a fundamental role ... I have no respect for adoption by gay families because this concerns a person who is not able to choose ... Everyone has a the right to do what they want without disturbing those around them."

    And he said, if gay people don't agree with him, "they can go eat another brand." Which is precisely what LGBT activists now are suggesting, though Barilla has tried to back off his comments a bit.

    My comments:

    People - even senior executives - have a right to their opinions, and even have a right to make statements like these. But they have to know that if they make comments that a segment of their customer base will find demeaning, there likely will be consequences. Especially these days, when comments made on an Italian radio show can find their way onto websites all over the world.

    Do I personally find these comments to be offensive? Sure. Will it affect what pasta I buy? Probably. I don't use Barilla pasta much (these days I'm using Colavita because they are an MNB sponsor), but next time I see Barilla on the shelf, I'll bypass it because of these comments. And there will be plenty of people like me ... just as there probably will be folks who will buy Barilla now because they approve of his position. Though, to be fair, most people probably won't know or care.

    Poor Guido. I feel bad for him, in part because his 19th century sensibilities just got exposed to the harsh light and cold air of 21st century realities. It isn't only gay people who ought to be annoyed at him. He also seems to think that women ought to be home making pasta, and that runs counter to the way much of the world works these days.


    One MNB user responded:

    I am sure that if Guido is Chairman he knows that his comments will be aired. Not unlike (Starbucks CEO Howard) Schultz sharing his opinions about homosexuals or restricting guns from being brought into Starbucks stores. When Barilla says that those who disagree can “go eat another brand”, it’s obvious he’s standing up for what he believes instead of catering to a minority. Good idea? The market will decide, but the market rewarded Mr. Cathy (Chic-Fil-A) for standing up for his beliefs.

    It’s interesting that with a global brand, he shares a view more closely related to traditional Italian culture. Many of his consumers long for that Italian culture and are motivated to buy Barilla pasta.


    MNB user Brian Harper-Tibaldo wrote:

    I’m a gay man who’s married to an Italian.  A fair amount of pasta is consumed in our home and we too have no plans to buy from Mr. Barilla in the future.  Strangely though, the controversy left me thinking about Paula Dean.  When Ms. Dean similarly “stepped in it” I was also appalled, but at some level I could see how she was a sad product of the time and place where she grew up—that somehow her naiveté made the misstep understandable, if not forgivable.  Could the same be true of Mr. Barilla?  I suppose it could.  In the end, despite being offended by Ms. Dean’s actions, I felt a little bad for her.   I’m struggling to extend the same shade of sympathy to Barilla, and that feels hypocritical.  Granted, I’ll never buy Paula Dean cookware, but if I see it on a shelf it isn’t going to raise my blood pressure the way Barilla will.   I suppose when we speak with our wallets we’re doing so through the lens of the people we are and the lives we’ve lived, and that sort of emotion can never be equalized.

    From another reader:

    Thanks for bringing this to my attention…Barillo is my brand…but I’ll switch to Colavita…even if I have to order $99 at a time for free shipping from their online store.

    And another:

    When I shopped today, I noticed Barilla sauce was on sale for an appealing price and I reached right past it because of the story I read on Facebook. I didn't really know their brand before, but now I do for the wrong reasons.

    MNB user James Bingham wrote:

    Just wanted to quip in here – I think the comment “I feel bad for him, in part because his 19th century sensibilities just got exposed to the harsh light and cold air of 21st century realities. It isn't only gay people who ought to be annoyed at him. He also seems to think that women ought to be home making pasta, and that runs counter to the way much of the world works these days" is a little over the top.  Everyone is entitled to their own opinion (and the consequences that follow).  What we are seeing is someone with enough integrity to state his opinion.  He didn’t give it spitefully – he merely stated his opinion and he had the courage to say and live by what he believes to be true.  It is my opinion that regardless of the view taken – we need more people to stand up for what they believe – that is how discussions start and problems are solved (I think y’all would agree with that statement being in the business of providing opinions).  The will only way we can get more people to speak up is if we stop belittling others when they do take a stand.  We should applaud the courage needed.  Just my thoughts.
     
    And MNB reader Herb Sorensen wrote:

    Far more people agree with him than disagree with him, so the more this is published, the more Barilla wins.  That's just business, where people vote with their money.

    And from yet another reader:

    How can you be offended by someone expressing their own personal religious beliefs?  He is not advocating any discrimination or persecution.  How liberal is it when we all have to share the same personal beliefs and the thought police need to enforce the “enlightened doctrine” anytime someone’s personal beliefs go against their own.  I really enjoy your writing and you don’t need to change a thing.  Just thought I would throw in a little challenge to your thinking.
     
    MNB user Steve Kneepkens wrote:

    Really – your offended by the fact that Guido wants to have a family with an actual man and woman? Really – see this is exactly what happens when society is about to crumble – “What is good is now bad – what is bad is now good."

    Scary – that having a wife and children in Holy Matrimony is 19th century thinking – man you have it so wrong it is really sad.. Sad because you have carved out a niche of readers that actually listen to you.

    Sweet Cakes By Melissa – a bakery in Oregon was shut down because they would not make a cake for a gay couple. Hands on Originals in Kentucky is losing t-shirt contracts because they would not print an anniversary shirt for a gay organization.  Both companies offered competitive companies to go and have the work done. BUT NO – that is not good enough for the intellectually superior. All of you enlightened 21st century savants get what you want while those who believe in the truth are burned at the stake.

    Now Oregon has changed the marriage certificate to say PERSON A AND PERSON B instead of man and woman. Next stop – PERSONS and A and PERSONS B…. Next Stop.. ENTITY A and ENTITY B OR POSSIBLY ENTITY C.
     
    By the way truth is constant – the truth is not defined by you – or any of the other 21st century cultural relativists. Truth is light – and light does not dissipate.
     
    That is your eye opener…


    And, from MNB reader John Kopecky:

    It is clear what your opinion is regarding this issue.  Be careful which side you take.  Remember what happened with Chick-fil-A?  There are still many, many people out there with conservative attitudes when it comes to what makes a family unit.

    First of all, let's be clear about something.

    The day when I start to be careful about which side I take - because I may be expressing an unpopular sentiment, or one that is considered politically incorrect - is the day I stop writing MNB. You are welcome to disagree with me, and I will be rigorous about posting emails that challenge me, castigate me, correct me and even convince me when I'm wrong or have made a mistake or misjudgment. But "be careful which side I take"?

    Don't think so.

    Now, in this case it so happens I don't think I'm expressing an unpopular point of view. In fact, while some folks may think that more people agree with Barilla than disagree with him, but I'm not buying that. In fact, I think for many people the whole issue of same sex marriage is a no-brainer ... and the vast majority of people under 25 or 30 wonder what all the fuss is about.

    Still, this is a fun discussion to have from time to time, simply because it shines a spotlight on a very real business issue.

    I would point out to those who disagree with me that in my original comments, I went to great pains to say that Barilla certainly has the right to say whatever he wants, just as now other people have the right to make buying decisions based on his statements. Those are called consequences.

    I also think that one point made above needs to be reiterated - that Barilla is a global brand, and whatever the prevailing attitudes may be in Italy, any savvy CEO needs to understand that any statement he makes pretty much anywhere potentially can reach a global audience. You're right that he did not advocate discrimination ... but his statement reflected a world view that does think that certain kinds of discrimination are okay. (I've thought about it, and I do think, in retrospect, that saying I found those comments to be "offensive" may have been language that was less precise than I'd like it to be. I do find discrimination and intolerance - whether implicit or explicit - to be offensive. And please spare me that old argument that it is intolerant for people to be intolerant of the intolerant, that even the intolerant deserve tolerance. It gives me a headache, and it strikes me as specious.)

    I never said that marriage between a man and a woman is a 19th century construct. I said that seeming not to be aware of how cultural attitudes have changed in this regard struck me as very 19th century. I'm hardly anti-traditional marriage - I've been married to the same woman for more than 30 years - and I've said before, I simply don't think I have the right to tell anyone else who they can or should marry. That would be arrogant on my part. And these days, even the Pope is saying that people should look at other people - even gays and atheists - the same way that God would, and God almost certainly looks on everyone with love.

    I was interested in the case cited about Sweet Cakes by Melissa, and saw one story in Willamette Week saying that yes, the bakery had been the target of protests, but in fact had seen an uptick in business from people who supported the company's position. The owners apparently have not shut it down, but rather have simply closed the storefront, and remain in business. I also was amused by this paragraph from the story:

    To test out which religious convictions would cause the shop to refuse business, Willamette Week called up the shop and asked them to make cakes for divorce, out-of-wedlock children, human stem cell research and a pagan solstice (with a pentacle design requested for the cake). All requests were responded to positively, with price quotes.

    That's pretty funny. My compliments to the editor or writer who thought up that little exercise.

    The Hands On Originals case is an actual one, and the t-shirt maker was found guilty of violating an ordinance that prohibits discriminating against people because of sexual orientation. To be honest, I'm not sure how I feel about this one. I think companies ought to have a right to not do business with people and/or organizations with which they disagree, but it gets dicey when political and cultural issues are involved. I do think this is an interesting discussion, worth having, and I don't have a knee-jerk reaction to the judgment one way or the other.

    You're certainly right when you say that I pretty much wear my beliefs on my sleeve, and I do it because that's the best way to generate discussion and debate. But to wrap this up, let me get back to the core of my original argument...

    People are going to believe what they believe. But when you lead a company - especially a company with a global brand - you need to be aware that you are speaking to a global audience, and one that has evolved to a point beyond which you may be uncomfortable. So you have to be careful about what you say.

    Unlike me. Because while in this case you want to sell pasta, my goal is to sell provocative discussion.




    We had a story last week about Bi-Lo Holdings considering an IPO, which prompted one MNB reader to offer:

    With Randall Onstead, of the Randall’s Food and Drug of Houston family, heading up Bi-Lo Holdings this may be a better bet than you have suggested. Bi-Lo, Winn Dixie, Sweetbay, Harveys and Reid’s now have a direction and that will only have a positive effect on these companies.

    But there is disagreement in some quarters, as expressed in this email:

    I am curious to know about the person who looks at the Bi Lo IPO and says to him/herself, “this is a good way to invest my money.”




    Had a story last week about Patagonia selling used clothes as part of its campaign to get people to actually buy less.

    MNB reader Mike Franklin wrote:

    Unlike most companies that market clean and green only to the extent of IRS allowable tax write-offs…Patagonia has always, in my eyes, been the only practitioner of “Natural Capitalism” Chouinard has always said, staying true to the mountaineer & climber was more important than profits and growth, Now Patagonia (Sheahan) is carrying on the vision, by taking responsibility for their products, even after they have sold them…Patagonia is my ideal company…they truly understand that customers, the environment, their people, and natural resources are intrinsically intertwined into one ecosystem. KUDOS!

    Another reader was less impressed:

    My boyfriend sold his 7 year old barely worn fleece to Patagonia in Seattle.  We were expecting maybe $10.  They gave him $30.  Meaning they were going to sell it for $60.  $60 for a 7 year old fleece?!  We went to browse the Worn Section when it opened.  Items were priced way too high.  They were asking the same price for items I can buy at their twice a year 50% off sale..... Umm no thanks.  I'll go on eBay (which they also have a "store" on).
    KC's View:

    Published on: September 30, 2013

    In Major League Baseball, the playoff picture has been settled ... almost.

    Tonight, the Tampa Bay Rays and the Texas Rangers will play a one-game tiebreaker to see which one will advance to play a one-game wild card playoff against the Cleveland Indians for the right to advance to the American League Divisional round of playoffs.

    And on Tuesday, the Pittsburgh Pirates will play the Cincinnati Reds in a one-game wild card playoff to see which one will advance to the National League Divisional playoff series.

    The various divisional winners are:

    • NL East: Atlanta Braves
    • NL Central: St. Louis Cardinals
    • NL West: Los Angeles Dodgers

    • AL East: Boston Red Sox
    • AL Central: Detroit Tigers
    • AL West: Oakland Athletics



    In Week Four of the National Football League:

    Baltimore 20
    Buffalo 23

    Cincinnati 6
    Cleveland 17

    Chicago 32
    Detroit 40

    Seattle 23
    Houston 20

    Indianapolis 37
    Jacksonville 3

    NY Giants 7
    Kansas City 31

    Pittsburgh 27
    Minnesota 34

    Arizona 13
    Tampa Bay 10

    NY Jets 13
    Tennessee 38

    Dallas 21
    San Diego 30

    Philadelphia 20
    Denver 52

    Washington 24
    Oakland 14

    New England 30
    Atlanta 23
    KC's View: