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    Published on: December 19, 2013

    This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.by Kevin Coupe

    Hi, I'm Kevin Coupe and this is FaceTime with the Content Guy.

    As we head into 2014, one of the stories that continues to intrigue me is from CNBC, where they are reporting not just on a new "farm to table" salad chain called Sweetgreen, but also on the investment money behind it.

    Sweetgreen was launched in 2007 and currently has 22 locations on the east coast … it was founded by three Georgetown University graduates who source salad makings "from farmers we know and partners we trust, supporting our communities and creating meaningful relationships with those around us."

    These graduates now find themselves on the business end of a $22 million investment from, Revolution Growth, an investment fund headed up by Steve Case, the guy who started American Online.

    The goal, according to Case, is to jump on the bandwagon that is endeavoring to "fundamentally transform food in America." And in a letter on the fund's website, Case compares Sweetgreen to companies such as Starbucks and Chipotle in their infancy … which suggests that if the concept can be scaled up, Sweetgreen won;t be just 22 locations for very long.

    As interested as I am in the gastronomic trend, in some ways I'm more fascinated in the investment … because in the new year, I think it is likely that we're going to see a lot more of these kinds of ventures.

    I've felt for quite some time now that the next big competitor in the food industry probably will be someone or some entity that is not even on most people's radar at the moment. It wasn't that long ago that companies like Walmart and Amazon weren't selling groceries; heck, it isn't even all that long ago that Amazon didn't even exist. Not only can anything happen, but, increasingly, it probably will … ands the result may well be new and effective competition.

    So, the message going into 2014 is a simple one: Invest in your business, and the people who make a difference on the front lines. Find the niches and figure out ways to turn them into big opportunities. Know who and what your competition is, and do battle not just by doing what they do better, but by finding and exploiting point of differentiation.

    And know that this is an ongoing process that must be organic to your business, no matter how big or small you are. I can't help but say it one more time in 2013:

    Compete is a verb.

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

    KC's View:

    Published on: December 19, 2013

    by Kevin Coupe

    Call this a concrete example of what happens when GMO labeling issue is turned into a core value by a retailer.

    Whole Foods, which has announced that by 2018 it will require all of its vendors to label products that contain genetically modified organisms (GMOs), said yesterday that starting in early 2014 it will stop selling Chobani Greek-style yogurt because it prefers to sell smaller, exclusive brands that do not contain GMOs.

    Chobani markets its yogurt - which helped to create the exploding Greek yogurt trend - as being made from natural ingredients, but there company says that there is not enough milk from cows that have not been fed non-GMO feed available to meet its needs. And, Chobani said that Whole Foods does not account for enough business to make the decision significant.

    "Of course I would love to be available everywhere, but it won't hurt our business," Chobani CEO Hamdi Ulukaya tells the Wall Street Journal in an interview.

    It is an interesting case …and not just because Whole Foods is clearly using this case as way of telling its customers and vendors that it is not kidding around.

    But it also speaks to another issue that we've been discussing here on MNB the past few days … that sometimes, to strengthen its own brand, a retailer can decide not to sell a product - even a popular product with a clear constituency.

    In this case, Whole Foods has its eye on the big picture. This may cost short term sales, and it may well require heightened marketing efforts to sell the yogurts that will replace Chobani on its shelves.

    But that's okay, Whole Foods is saying. It's worth it.

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

    Published on: December 19, 2013

    Target confirmed this morning that it is "aware of unauthorized access to payment card data that may have impacted certain guests making credit and debit card purchases in its U.S. stores. Target is working closely with law enforcement and financial institutions, and has identified and resolved the issue."

    Some 40 million credit and debit card accounts may have been illegally accessed between Nov. 27 and Dec. 15, 2013.

    The Chicago Tribune writes that "investigators believe the data was obtained via software installed on machines that customers use to swipe magnetic strips on their cards when paying for merchandise at Target stores, according to the person who was not authorized to discuss the matter and declined to provide further details.

    "Krebs on Security, a closely watched security industry blog that broke the news, said the breach involved nearly all of Target's 1,797 stores in the United States, citing sources at two credit card issuers."
    KC's View:
    Here's the passage from the Tribune story that really grabbed my attention…

    It is not yet clear how the attackers were able to compromise point-of-sales terminals at so many Target stores across the country. Doing so would have required careful planning by sophisticated cyber criminals.

    Nothing like these sorts of sentiments to warm the heart and mind.

    Published on: December 19, 2013

    CNet has a story in which the reporter compares the AmazonFresh shopping experience in San Francisco to going to the local Safeway.

    The conclusion is that the experience is comparable - which may be the best thing that Amazon could ask for, since it suggests that the two companies are competing on a level playing field, offering their own advantages but in many ways interchangeable.

    In the case of Amazon Fresh, the prices are seen as being, in most cases, as good or better than in the local supermarket. Shopping online takes less time, though offering less freedom and less ability to, say, inspect and choose your own bananas. And while there is personal interaction in the supermarket, not of all of it is what Safeway probably would want it to be.
    KC's View:
    The biggest problem with Amazon Fresh, the story suggests, is the high cost of a Prime membership that ensures "free" shipping … though, as the reporter writes, this all depends on how much you value your time. If time is money, then "AmazonFresh is fantastic for those who want grocery shopping to be a quick sport."

    And that, potentially, is a lot of people.

    Published on: December 19, 2013

    Two chicken-related stories this morning…

    • The Los Angeles Times reports that a bipartisan group of federal lawmakers - 12 Democratic and two Republican members of the US House of Representatives - wants to pass legislation that would ensure that "chicken processed in China is not included in the National School Lunch, School Breakfast, Child and Adult Care Food and Summer Food Service programs."

    As previously reported on MNB, the US Department of Agriculture (USDA) has ruled that chicken processed in China can be imported to the US, but only on the condition that the chickens were not actually hatched and raised in China. This led to speculation that chickens from the US could be sent to China to be processed, and then returned to the US to be sold … which in turn led to concerns because of China's recent at-best spotty record when it comes to food safety issues.

    The lawmakers enumerated some of those issues in a letter issued this week: "Consider the impact of China's weak enforcement of food safety laws and regulations; more than 300,000 Chinese children fell seriously ill, with some dying, from melamine-tainted milk powder; dangerously high levels of mercury found in Chinese baby formula; the sale of more than $1 million worth of rat and other small mammal meat passed off to consumers as lamb; and more than 16,000 diseased pig carcasses dumped in a river to rot.

    "Last year China Central Television revealed that a Chinese poultry supplier provided Kentucky Fried Chicken restaurants with chicken fattened by large quantities of illegal drugs. In addition, the U.S. Food and Drug Administration recently announced that, since 2007, pet treats imported from China containing contaminated chicken have killed 600 dogs and cats in the United States and sickened 3,600 more. According to the World Health Organization, so far 45 of the 136 people who contracted the H7N9 bird flu in China this year have died."


    • At the same time, the Los Angeles Times also reports that poultry in the US is "fraught" with food safety risks being insufficiently dealt with by the inspection infrastructure.

    "That’s the view," the Times writes, "of two reports released Thursday. The first, by the Pew Charitable Trusts, examines two recent salmonella outbreaks linked to Foster Farms chicken and concludes the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) lacks the authority to properly protect the public.

    The second, released by Consumer Reports magazine, tested more than 300 store-bought chicken breasts and found bacteria lurking in almost every one.

    "At the core of both findings are calls to strengthen government oversight in the $70-billion poultry industry. Doing so would help reduce incidents of food-borne illness, which sickens 48 million people and kills 3,000 in the U.S every year."
    KC's View:
    So let me get this straight…

    At the same time as there are studies out there suggesting that food safety in chicken ain't what it used to be, the road is being cleared so that chicken can be sold in the US that has been processed in a country where food safety problems are both systematic and systemic.

    Great.

    Retailers especially need to pay attention to these issues, being both vigilant and reassuring (when appropriate), because at the end of the day, consumers are going to hold them responsible. And should.

    Published on: December 19, 2013

    The Wall Street Journal reports this morning how how small, super-regional ground shipping companies increasingly are making deliveries for online retailers this year, evolving into a threat to bigger companies such as FedEx and United Parcel Service (UPS), not to mention the financial challenged US Postal Service (USPS).

    The story says that the regional shippers cooperate to cobble together what essentially is a national network. The Journal writes: "Regional shippers typically can get a package between two points in one region—from New York to Boston, for example—faster than their national counterparts, and they are able to price shipments 20% to 40% below the national shippers because of their lower costs … While the regional shippers’ total market share is only about 3%—total estimated revenues are expected to reach $1 billion in 2013, compared with a total ground package market of about $32 billion—their revenues have more than doubled since 2009, according to SJ Consulting Group, Inc. These companies separately now serve approximately 90% of all U.S. ZIP Codes, buoyed by the increase in parcel volumes from big customers like Amazon."
    KC's View:
    The development of these regional shipping companies means that behemoths like FedEx and UPS will have to develop new approaches that will make them less expensive and more nimble. Yet another case, I think, in which small and fast proves to be more effective than big and lumbering … and it is somewhat instructive that a company like FedEx, that revolutionized the shipping business, now can be considered to be an entrenched behemoth that could be endangered.

    One of the things that companies can do, Mobile Marketer suggests, is to roll out "a new Kindle Fire application that integrates Facebook and the company’s My Choice program to let consumers track and ship packages."

    Speaking as someone who has had a lot of stuff delivered this holiday season, I can tell you that it would be great to be able to know precisely when that truck might be showing up at the house. And I'm sure that if UPS is doing it, FedEx is working on the same sort of application.

    And this doesn't even incorporate the whole drones discussion…

    Published on: December 19, 2013

    Columnist Mark Bittman in the New York Times has an interesting piece evaluating the recent decision by the US Food and Drug Administration (FDA) to curb the use of antibiotics in animal feed.

    He's not impressed. And, Bittman writes, there is plenty of blame to go around.

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

    Published on: December 19, 2013

    • The Chicago Tribune reports that Jewel-Osco will close the four Dominick's stores there that it is acquiring from Safeway for less than a week next month, before reopening them under its own banner.

    However, Jewel-Osco management also said yesterday that it has no plans "at this time" to acquire any other Dominick's locations. Roundy's is buying 11 stores to convert to its Mariano's format. That leaves 57 stores that will either be sold or closed at the end of the month by Safeway.


    • The Des Moines Register reports that "Hy-Vee plans to add its line of Market Grille and Market Café  restaurants to 50 stores around the Midwest next year, including some in Central Iowa.

    "The plans were announced Monday by the Kansas City-based firm Burns and McDonnell, which said it was awarded a $20 million contract to design and build the new restaurants in about one-fourth of all Hy-Vee stores."
    KC's View:

    Published on: December 19, 2013

    More discussion of the issues raised by Target's decision not to carry the new Beyoncé album. Its objection was to the record company's move to release the album for one week exclusively on iTunes, which it said would hurt its sales.

    While other retailers (like Walmart) will carry the album, I said that Target seemed justified, if only because it is looking for ways to differentiate itself, not just carry stuff that everybody else is carrying. (I don't think this is the only approach, but it seems like a reasonable strategic decision to me.)

    One MNB reader wrote:

    Kevin, I don't understand the  vehement criticism of Target for deciding not to carry the Beyonce CD. 

    I think they were looking more at the long-term value of the Target brand than they were for this month's short-term sales. 

    Part of a retailer's brand is its selection, so why should it carry everything that others are also carrying? Where is the brand distinction in that strategy? When you chase everyone, you're more susceptible to price competition. For example, Costco and Trader Joe are both very successful with their limited selections, they're certainly not chasing everyone.

    It's so much more difficult for any brand to choose which customers NOT to pursue than it is to choose their intended audience. There's so much fear associated with that decision, especially with too much emphasis assigned to short-term results and the stock price instead of long-term brand equity.  

    Yes, I understand your readers who say "if you don't have it, then I'll just go to your competitor." But that's ok, as it's better to not chase everyone in the long-term.

    From another reader:

    Several years ago the food and drug retailer that I worked for refused to stock Eveready Batteries because Eveready had an exclusive agreement to sell bonus packs to Costco/Price Club and would not sell the same bonus packs to the traditional retailer.  That retailer is still very much alive and doing reasonably well.  A business can make marketing decisions based on principal and continue to grow.  Target needs to make their decisions on what they believe is the best options to serve their customers and maintain their competitive position if that is demanding equal treatment from vendors in all channels then that is what they should do.

    I pointed out that I'm aware of times when retailers such as Stew Leonard's and Costco have not sold Coke or pepsi products, and explained via signage that they were not able to get what they thought was an appropriate price … and that in my mind, this gave the retailers credibility as being advocates for the customer, not sales vehicles for the manufacturer.

    But MNB reader Ken Wagar disagreed:

    Kevin, I understand your comments above and went through the cola wars years ago and watched various retailers throw out Coke or Pepsi. I can even agree that some of them were doing the “right” thing in terms of trying to get a better deal for their customers. The problem is that we who have been in this business for years and understand these situations are far from “average consumers” and we need to be careful when thinking that the majority of consumers will understand these situations like we do.

    My opinion at the time was that in spite of understanding what they were doing and why, it was still foolish to penalize their shoppers by not carrying such heavily demanded items.


    Another MNB reader chimed in:

    I think Costco had a spate with Apple awhile back…..

    Seems both are doing well without each other, hmmmmm.

    What play do you want to make strategically?

    Sometimes you have to fire a shot across the bow to get the others attention.

    Good for Target, might not make a difference in this case, but others may notice.


    Again, I'll go back to this morning's Eye-Opener … because I think this is exactly what Whole Foods is doing with Chobani yogurt.




    I wrote a piece criticizing Toys R Us the other day, prompting one MNB reader to write:

    Kevin, does it strike you that Toys-R-US is another Blockbuster……or Post Office?  Ironically, they are unlike Babies-R-US, whom I believe is losing their relevance at a slower pace…

    Absolutely.



    And, I mentioned yesterday that a New York Times piece praising Best Buy's recent moves might actually get me to go there, but one MNB reader attempted to dissuade me:

    You may think about going into Best Buy because of the article. Going in you will discover that the sales staff is more interested in socializing with one another, the staff has marginal knowledge and the product selection is poor. Go in and look for a 3.5 mm double male connector (like you need to hook up your iPod to your car radios input) and all they have is 30-35.00 overpriced cables. You can buy what you need for 5.00 at Amazon and have quite a few to choose from.
    KC's View: