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    Published on: February 3, 2014

    by Kevin Coupe

    Bloomberg Businessweek has an excellent story about Facebook and Mark Zuckerberg, each of which is celebrating a significant birthday this year. Here's how the story begins:

    "Mark Zuckerberg doesn’t usually observe sentimental anniversaries. This year he’s confronted by three of them. On Feb. 4, Facebook (FB), the company he co-founded in a Harvard University dorm, turns 10 years old. The prodigy himself turns 30 in May. It’s also been a decade since his first date with Priscilla Chan, now his wife, whom he first met in line for the bathroom at a Harvard fraternity party.

    "So last fall, Zuckerberg began typing up dozens of pages of musings, often pecking out the words on his phone. He shaped his thoughts into 3-, 5-, and 10-year plans. He also gave himself a specific goal for 2014. He’s fond of annual challenges, and in previous years he’s vowed to learn Mandarin (2010), to eat only animals he slaughtered himself (2011), and to meet someone new each day (2013). For this year he intends to write at least one well-considered thank-you note every day, via e-mail or handwritten letter…"

    Aside from the fact that it is startling that Facebook has only been around for 10 years … this story is worth reading, in large part because Zuckerberg comes across as a fascinating and maturing business leader, interested in challenging himself and his company, willing to disrupt orthodoxies whenever and wherever he can.

    You can read it here.
    KC's View:

    Published on: February 3, 2014

    The Associated Press has a piece about how changing American shopping habits became "evident during the pivotal holiday shopping season, a time roughly from November through December when many retailers can make up to 40% of their annual revenue. Overall, government figures show that spending during October through December rose at the fastest clip in three years … Online shopping rose 10% to $46.5 billion in November and December, according to research firm Comscore. Meanwhile, sales at stores rose just 2.7% to $265.9 billion, according to ShopperTrak, which tracks data at 40,000 stores in the U.S. And the number of customers in stores dropped 14.6%."

    What's interesting is that at least partly as a result, Walmart has said that it expects disappointing Q4 results. "On Friday, the world's largest retailer said its fiscal fourth-quarter and full-year adjusted earnings from continuing operations may come in at or slightly below the low end of its prior forecasts." (Walmart also is experiencing problems linked to a decrease in federal Supplemental Nutrition Assistance Program benefits, which affected low-income shoppers who shop at its stores.)"

    Amazon is having the opposite problem … but a problem nonetheless. "Amazon said late Thursday that its profit and revenue both grew in the latest quarter," the AP writes. "Still, the world's largest online retailer said its results fell below what Wall Street was expecting as costs rose in tandem with revenue. But Amazon faces different problems than its bricks-and-mortar peers. Amazon's results were hurt because its costs are rising along with its meteoric revenue growth."
    KC's View:
    When I read stories like these, I'm always intrigued by the suggestion that some of the analysts seem to think that the cake is fully baked, and that they can now judge whether it is any good or not.

    It seems to me that that cake is far from being fully baked. Not only that, companies like Amazon and Walmart are still trying to figure out the recipe. They've got some of it figured out, but the market keeps changing, consumer tastes keep shifting, technology keeps improving, and hitting home runs (if I can change my metaphor) is never easy. Sure, Walmart had a tough quarter and will have more of them, but I'm not sure I'm willing to suggest (as some headlines have suggested) that this is a company in permanent decline. And absolutely, Amazon has been profit-challenged because of its approach to the business, but history suggests that it will figure things out.

    I even think it is risky to suggest that the consumer shifts inherent in the numbers are permanent, because nothing is permanent these days … there is only constant change.

    In the end, I'd put my money on the companies that are most willing to disrupt their business model from within, and are most able to adjust to changing consumer tastes because they have more actionable information about their shoppers and then actually act on it. Some of those companies will be bricks-and-mortar retailers, and some will be e-commerce companies … but all of them will have clearly defined and evolving differential advantages.

    Published on: February 3, 2014

    Acosta is out with its bi-annual "The Why? Behind The Buy" study, which purports to identify top trends affecting the supermarket industry, concluding that there is a growing "intersection of eating in and eating out" and that people increasingly are seeing the grocery store as a restaurant, or “grocerant.” Millennials, the study suggests, are prime adopters of this trend, "eating out by actually eating in as they take advantage of ready-to-eat foods and meal solution offerings from grocery stores, quick-serve restaurants, food delivery and take away."
    Among the other study conclusions:

    • Seventy-seven percent of total U.S. shoppers reported eating out in the past month.
    • Sixty-six percent brought home prepared foods.
    • Sixty-five percent bought food at a restaurant drive through.
    • Sixty-four percent ordered food from a restaurant for pick-up/carryout.
    • Breakfast and snacking has seen the most growth in away from home eating.
    KC's View:
    Y'know what would be an encouraging trend? It'll be when a large percentage of consumers say that what they are really looking for is great-tasting food that challenges and satisfies their palates, and that they don't give a damn where it comes from.

    Published on: February 3, 2014

    Reuters reports that "food transportation companies will be required to adhere to certain sanitation standards to prevent food from becoming contaminated during transit under a new rule proposed by the U.S. Food and Drug Administration. The rule would require shippers and carriers to properly refrigerate food, clean vehicles between loads and protect food during transportation … Excluded from coverage will be shippers, receivers or carriers whose operations generate less than $500,000 in annual sales. The rule also excludes food that is fully packaged and stable, and live food animals and raw agricultural commodities transported by farms."

    According to the story, "The rule is the seventh and final plank of the 2011 Food Safety Modernization Act, a sweeping initiative designed to reduce food-borne illnesses by giving the FDA greater powers to intervene before an outbreak occurs."
    KC's View:
    Wow. Shippers now are required to properly refrigerate food, clean vehicles between loads and protect food during transportation. What's really amazing about this is that such a rule didn't exist before, and people and companies shipping food didn't feel the moral/ethical responsibility to properly refrigerate food, clean vehicles between loads and protect food during transportation. I mean, doesn't that sound like it should be the bare minimum for what all companies shipping food should do? As opposed to something that needs to be required in 2014?

    Published on: February 3, 2014

    shopping service Instacart has of bering successful down the road.

    Instacart's premise is that it shops at stores for consumers, but is not part of the stores' infrastructure … it makes its money on fees charged to the consumer.

    The story notes that Instacart is "powered by a twenty-something who practices extreme ocean sports" and "hopes to dominate in the grocery aisle by using computer systems founder Apoorva Mehta built from his San Francisco apartment." It operates in several markets, plans to expand to 10 major US markets this year, and is funded in part by the same private equity group that funded Webvan, the high profile e-grocery failure that collapsed under the weight of its own unfulfilled ambitions in 2001.

    The Mercury News writes that "Mehta, 27, left his job as a supply-chain engineer for Amazon and came to San Francisco, where he found people using Craigslist and TaskRabbit, a website to outsource errands, to get groceries delivered. He said he knew he could come closer to solving the delivery puzzle than his old boss Jeff Bezos did with AmazonFresh.

    "Amazon uses a massive network of warehouses, distribution centers and trucks to store and move groceries, and requires that customers order several hours in advance of their delivery.

    "Instacart doesn’t own warehouses, and instead contracts drivers — similar to a ride-sharing service — to shop at local chains for items customers have ordered and paid for online, and can deliver within an hour and late into the night."
    KC's View:
    Here's what I think. Instacart is going to get some traction in enough markets to be interesting, and then somebody like Google or eBay is going to buy it, because its business model is going to work a lot better as part of another company's offering. Guys like Mehta are more interested in building software than actually delivering groceries or anything else - and I say that as a compliment, because it is guys like him who push the industry forward, sometimes against great resistance.

    Published on: February 3, 2014

    The Associated Press reports that a Minnesota craft brewer, Lakemaid Beer, recently tested a drone delivery system "by flying a 12-pack of its brew to anglers on central Minnesota's Lake Mille Lacs. A video of the experiment posted online showed a small unmanned aerial system, or drone, not much bigger than the beer it carried flying over the head of a curious onlooker, landing on an iced-over lake and setting the beer down in front of a fishing shanty."

    Jack Supple, president of Lakemaid Beer, tells the AP that he was inspired to test the system by recent statements by Jeff Bezos, chairman of Amazon, that his company was investing in drone delivery technology. And, he said, a frozen lake in the middle of winter seemed like an ideal place to to test it.

    However, with the test on the frozen lake came media attention: "Supple said an FAA inspector heard him talking about his delivery plan on the radio and soon a stack of regulatory information arrived, including a document titled 'Integration of Civil Unmanned Aircraft System in the National Air Space System Roadmap.' The Federal Aviation Administration has barred drone use for commercial purposes since 2007."

    The FAA has authorized six sites around the country to test drone delivery systems. But Lake Mille Lacs was not one of them.
    KC's View:
    C'mon … who doesn't like the idea of going on a laptop or smart phone, ordering some beer (and maybe some chips) and having them quickly delivered via drone?

    Published on: February 3, 2014

    • The Chicago Tribune reports that "Whole Foods Market Inc. is buying as many as 7 Dominick's locations in the city and surrounding suburbs, according to sources." Safeway closed the 72-store Dominick's chain in late December, and has been selling off stories piecemeal.

    Roundy's, for example, has acquired 11 stores that it is converting to the Mariano's format. Joe Caputo & Sons Fruit Market, which owns three grocery stores in the northwest suburbs, has acquired four stores; Tony's Finer Foods, which has about 10 locations in the Chicago area, bought one in Lincoln Square.

    Whole Foods is not commenting on the report.

    • The Dallas Business Journal reports that WinCo Foods is preparing to open its first two Texas stores, in Fort Worth and McKinney, this Thursday.

    The story suggests that WinCo is looking at other Texas locations for its price-driven, 85,000 square-foot-plus stores.

    If you've never been in a WinCo Foods, you need to rectify that situation. Because there is a reason that it is one of two companies that keeps Walmart executives awake at night. (The other is Amazon.)

    • So, let's get this straight.

    Jos. A. Bank tried to acquire the much bigger Men's Wearhouse and got rebuffed. Then, Men's Wearhouse made an offer to acquire Jos. A. Bank, and got rejected. And now, Jos. A. Bank reportedly is interested in acquiring Eddie Bauer, which is owned by private equity firm Golden Gate Capital.

    Yippee! If this happens, it'll mean that it won't be long before Eddie Bauer will be offering "buy one winter parka, get three free" promotions. Which, the way this stupid winter is going, seems like a really smart purchase…
    KC's View:

    Published on: February 3, 2014

    • Austrian-born actor Maximilian Schell, who won a Best Actor Academy Award for his performance as an unsuccessful defense attorney in Judgment at Nuremberg, has died. He was 83.

    Schell was also well known for roles in films that include The Man in the Glass Booth, The Young Lions, and Julia, but he also was an accomplished writer/director.

    • Philip Seymour Hoffman, the Oscar winning actor for his title role in Capote, as well as a much-lauded actor in films such as Boogie Nights, The Talented Mr. Ripley, Almost Famous, Red Dragon, Charlie Wilson's War, Doubt, The Ides of March, Moneyball, The Master, and The Hunger Games: Catching Fire, died of an apparent drug overdose yesterday. He was 46, and police reportedly found him with a syringe in his arm and packets of what was believed to be heroin around the apartment.
    KC's View:
    I saw Hoffman once on Broadway in "Death of a Salesman," and it was an extraordinary performance.

    I've been lucky enough to see three actors as Willy Loman on Broadway - the others were Dustin Hoffman and Brian Dennehy. If you want to use any role in the American theater as a benchmark for greatness, it is that one…

    However, greatness on film or on stage is not the same thing as being great at life.

    I am struck by the juxtaposition of these two lives, and deaths. One man comes from an family that had to survive the Nazis, and spent a long life being creative in a variety of ways. The other, also supremely creative, cannot survive the scourge of drugs and dies at an early age.

    Published on: February 3, 2014

    I love it when MNB readers are smarter and funnier than I am.

    Last Friday, we took note of a Bloomberg Businessweek report that "President Barack Obama said Wal-Mart Stores Inc., Apple Inc. and Ford Motor Co. are among about 300 companies that have pledged to take part in an initiative to help the long-term unemployed find jobs … The administration and the companies will 'establish best practices' for hiring that 'do not screen people out' because they’ve been unemployed for an extended time, Obama said in an interview with CNN."

    I didn't comment on the story. Because I didn't connect the dots the way I should have.

    But a number of MNB readers did. Here is a typical email, one of many that made the same point:

    Walmart donates $10 million to a initiative to create jobs in the US. Then, a week later, Sam's Club announces it is laying off 2,500 workers. And then, a week later, Obama praises Walmart for helping the unemployed.


    Very. There does seem to be a disconnect here somewhere. Or maybe it is just more proof - as if we needed it - that there is a difference between how companies donate money and how they actually do business.

    Some irony, huh?

    MarketWatch reported last week that Starbucks, which has been enormously successful in getting customers to use applications on their smartphones as prepaid cards with which they pay for coffee, is considering a tweak to the app that would allow customers to order and pay for their coffee before actually getting to the store.

    My comment:

    This strikes me as an option that seems better in concept than it might be in practice. I'd rather wait the few minutes in the store than have cold coffee.

    Not everyone agreed. One MNB user wrote:

    I love the idea of adding this feature to the Starbucks app. I will use the feature any time I'm ordering Jimmy John's or Chipotle at lunch, and it's great being able to bypass the line to get my food that is ready to go. I think if Starbucks adds a proximity feature, so your order doesn't get sent until you're in the parking lot, or at least close to it, most instances of cold coffee could be avoided.

    From another:

    I'd use the app to order from outside the store if there was a really long line like there usually is at one of my favorites. Seem logical…

    Fair enough. If Starbucks offers it, I'll certainly try it. I'm willing to be converted.

    Finally, we took note the other day of a story in the Irish Independent about Chris Martin, CEO of Musgrave, the company that acquired the iconic Irish supermarket chain Superquinn in 2011 and currently is in the process of rebranding its stores with the SuperValu banner. While eliminating the Superquinn name has been seen as being a controversial decision, Martin says that it was both inevitable and necessary - that Superquinn was expensive to run, had niche appeal, and of a different time and place.

    Which prompted MNB reader Steve Methvin to come up with the following terrific line:

    Some Irony? The last chapter of (Superquinn founder Feargal Quinn's book) "Crowning the Customer was “Don’t let the Accountants Win!”

    Yup. Some irony.
    KC's View:

    Published on: February 3, 2014

    In Super Bowl XLVIII, played at Met Life Stadium in East Rutherford, New Jersey, the Seattle Seahawks dominated from the first play of the game and delivered an epic 43-8 beating of the Denver Broncos.
    KC's View:
    Pretty satisfying weekend for me, since not only was I rooting for the Seahawks, but I also had them in my football pool. (I had a terrible season, but rallied during the playoffs and finished the season with a flourish.)

    As for the ads … my personal favorites were the Budweiser "Puppy Love" ad … the Radio Shack "the Eighties called" ad (though I hope that the company is ready to deliver quickly on its promise) … the "24: Live Another Day" ad (Jack is back!) … the Cheerios "Gracie" ad … the Doritos "time machine" ad … the Bob Dylan ad for Chrysler … and, finally, the Seinfeld reunion spot (which wasn't really an ad for anything, but made me laugh … you can see the longer version by clicking here and going to Seinfeld's terrific "Comedians in Cards Getting Coffee" site.