business news in context, analysis with attitude

Published on: February 12, 2014

by Kevin Coupe

Apparently, the old saw is true. You can lead a horse to water - or even bring the water to the horse - but you can't make him drink.

National Public Radio's The Salt has a story about a study done by Penn State University and the London School of Hygiene and Tropical Medicine, which looked at shopping habits in a Philadelphia-area "food desert" before and after a new full-service supermarket was built there.

Stephen Matthews, professor in Penn State's departments of sociology, anthropology and demography, says that the results of the study were surprising - there was no discernible impact on consumption patterns.

"Now, to be fair, the time was short," The Salt writes. "The store was only open for six months before residents were surveyed. Matthews says most residents knew that the store was there and that it offered healthy food. But only 26 percent said it was their regular 'go to' market. And, as might be expected, those who lived close to the store shopped there most regularly.

"Matthews says the findings dovetail with other work, and simply point to the obvious: Lots more intervention is needed to change behavior. For one thing, we're all used to routine, and many of us will just keep shopping where we've been shopping, even if a newer, more convenient and bountiful store moves in. But more than that, he says, many people, particularly in low-income food deserts, just aren't used to buying or preparing healthy meals — they haven't had the opportunity, until now."

Alex Ortega, a public health research at the University of California, Los Angeles (UCLA), tells The Salt that "the next part of the intervention is to create demand, so the community wants to come to the store and buy healthy fruits and vegetables and go home and prepare those foods in a healthy way, without lots of fat, salt or sugar."

According to the story, "Ortega directs a UCLA project that converts corner stores into hubs of healthy fare in low-income neighborhoods of East Los Angeles. He and colleagues work with community leaders and local high school students to help create that demand for nutritious food. Posters and signs promoting fresh fruits and vegetables hang in corner stores, such as the Euclid Market in Boyle Heights, and at bus stops. There are nutrition education classes in local schools, and cooking classes in the stores themselves."

So, in other words, it isn't just a matter of making sure that the horse and the water are in the same place. To really have an impact on public health, it is important to employ the exact same marketing and merchandising techniques that are used to get people to buy $5 cups of coffee, luxury automobiles, and high-definition televisions.

Go figure.

Published on: February 12, 2014

Kroger announced yesterday that it has acquired YOU Technology Brand Services, Inc., described as a "Silicon Valley-based leader in digital coupons and promotions."

YOU Tech is further described as a "retailer-centric, cloud-based platform bridges the gap between online engagement and in-store purchases, creating a measurable way for many of the world's largest retailers and brands to drive consumer purchase decisions online, in-store, and on-the-go.  Its network, which includes www.kroger.com/digitalcoupons , has grown dramatically and now includes over 10,000 retail stores representing over $100 billion in retail sales and 100 million US households.  YOU Tech will continue to serve existing and future retail customers."

Terms of the deal were not disclosed.

Published on: February 12, 2014

Chick-fil-A, the fast food chain, said yesterday that it will stop selling chicken products made from fowl raised with antibiotics. Concerns have been raised in the public health community about the use of antibiotics on healthy animals, generally as a way to promote faster growth, would have a negative impact by making animals resistant to antibiotics uses for fighting disease.

The New York Times story notes that the decision "exemplified what Daymon Worldwide, a consulting firm that works with the food industry and others, has identified as 'free-from,' a quest among consumers for pure and simple products, free of preservatives, highly processed ingredients and anything artificial."

And, the decision was applauded by Consumers Union, the public policy arm of Consumer Reports. "Chick-Fil-A deserves credit for taking this important step to protect public health,” said Jean Halloran, Director of Food Policy Initiatives for Consumers Union.  “We need to stop wasting these critical medications on healthy livestock."

It is expected that it will take Chick-fil-A five years to fully implement its new policy.

Published on: February 12, 2014

The Los Angeles Times reports that the US Department of Agriculture (USDA) has opened an investigation into the Rancho Feeding Corp. of Petaluma, California, which has recalled "8.7 million pounds of beef products processed at its plant over the last year and sold in California and three other states."

According to the story, "Federal regulators said that the plant 'processed diseased and unsound animals' without a full federal inspection. As a result, the agency said, the 'products are ... unsound, unwholesome or otherwise are unfit for human food and must be removed from commerce'."

Published on: February 12, 2014

Internet Retailer reports that Home Depot has opened a new e-commerce distribution center in an Atlanta suburb, the first of three such facilities that are part of a $300 million effort to invest in-e-tailing.

The two other warehouses are scheduled to be opened in Ohio and California. Together, the three facilities will represent three million square feet of warehouse space, all designed to handle the e-commerce supply chain with 100,000 SKUs apiece. (The average Home Depot carries 35,000 SKUs, according to the story.)

Published on: February 12, 2014

USA Today has a good story this morning about how Starbucks is a brand that many people love, and that many people love to hate.

Here's how the story frames the situation:

"Starbucks has a problem that every other brand only wishes it shared: It's too damn good. It makes money hand over fist. It turned employees formerly known as counter help into baristas — then slipped them into catchy duds and put some basic benefits into their pockets. It sells the only gift card, that, when given in $5 increments, is still viewed by the receiver as a mini-treasure.

"Oh, did we forget to mention that it makes killer coffee?

"But 43-year-old Starbucks has another problem that few other brands can muster: fear and loathing. Starbucks is everywhere. Its tentacles stretch to 20,184 locations (as of Tuesday) in 60 countries. Some independent coffee shop owners — and their customers — view Starbucks as a pariah. There are gun owners who loathe the fact that they're no longer welcome to waltz into the stores, gun in tow. There are millions who cringe at its sheer audacity to charge up to 5 bucks for a cup of fancy coffee — where folks wait in long lines for it. Then, there's that all-powerful world of social media, where it's always in vogue to Starbucks-bash."

The story suggests that there may be one simple reason for disdain: jealousy.

"There are millions of Americans who hate Starbucks — and its founder, Howard Schultz — mainly because he took a great idea and ran with it, not just down the field, but across the planet. At 60, Schultz not only still has his hair, he has his wits. He has figured out that coffee is just the ground floor. The Starbucks mermaid's mug is appearing on so much stuff these days, you'd think she was a rock star.

"She is, above all else, the symbol of affordable luxury. You may not be able to afford a McMansion — or a Lexus to park in its garage — but millions of us are willing to make that $5 splurge at Starbucks simply because it helps us feel a bit better about ourselves."

Published on: February 12, 2014

Fast Company is out with its annual "most innovative companies" list. In order, they are:

• Warby Parker, the eyewear maker, which has "set the standard for merging online and real-world commerce while maximizing its cool."

• Amazon, "for leaving its competitors in the dust."

• The Legaspi Company, "for rebuilding malls to meet cultural needs … Advertising exec turned developer José Legaspi has resurrected 10 failing properties by turning them into Hispanic cultural centers, incorporating religious offerings in stores, and providing spaces for families to congregate."

• J. Crew, "for meticulously cultivating its brand to become the world’s iconic American clothier."

• Walmart, "for deploying smart mobile solutions to aid its customers. According to Walmart, its app-wielding customers make twice the shopping trips per month and spend 40% more than non-app users. That’s a clear sign that the retail giant’s efforts to use mobile to improve its business in the digital age is working."

• eBay, "for expanding its business model to become retailers’ best friend. In keeping pace with the revved-up world of e-commerce, eBay’s ambitious hyperlocal push has allowed it (and its retail partners) to remain plausible shopping options for consumers spoiled on convenience."

• Burberry, "for upholding its legacy of impeccable design while catering to the digital millennial."

• Zady, which embraces "radical transparency" by telling shoppers "where in the world their clothes are made, along with background information on who makes them."

• Farfetch, which has a website that is a "one-stop shop for browsing high-end boutiques around the globe … Customers can shop the streets of Milan or New York, all from the comfort of their own home."

• Macy's, for mainstreaming the notion of omnichannel retail … it spent the better part of 2013 "completely transforming its supply chain - making an impressive 500 stores perform double duty as fulfillment centers - to ensure customers could order and receive products from any store location, in any variety, and, when possible, on the same day. At last count, 10% of online sales are fulfilled from Macy’s stores."

Published on: February 12, 2014

The New Yorker has a blog posting by James Surowiecki about how "the economic value of brands - traditionally assessed by the premium a company could charge - is waning, diminished by consumers' ability to research and assess brand equity on their own, rather than depending on what marketers tell them.

It is an interesting piece, and worth reading here.

Published on: February 12, 2014

• The Washington Post reports that Whole Foods plans to begin equipping the sandwich counters, pizzerias and coffee, juice, wine and beer bars in select stores with "Square Register, an iPad-based system through which cashiers ring up payments and swipe customer credit cards. Customers can also download Square Wallet, a smartphone app linked to their credit cards, and pay by scanning a QR-code (a unique, square-shaped black and white image) at the counter to instantly pay."


• Bloomberg reports this morning that "the founding family of U.K. grocer Wm Morrison Supermarkets Plc has contacted private-equity funds such as CVC Capital Partners Ltd. and Carlyle Group LP to weigh their interest in taking the retailer private, people with knowledge of the matter said … A buyout of Morrison would exceed 7 billion pounds ($11.5 billion) and require a group of funds to work together, said two of the people. Carlyle and CVC have discussed working together on a joint bid, said one of the people. There is no certainty a deal can be reached, said the people."


• At the National Grocers Association (NGA) convention in Las Vegas, Andrew Hadlock, a bagger from Macey's grocery store in Sandy, Utah, claimed the title of Best Bagger Champion. Contestants were judged by speed of bagging, proper bag-building technique, weight distribution in the bag, as well as style, attitude and appearance.

Hadlock was awarded with the $10,000 grand prize, a "Golden Grocery Bag" trophy, and the Pan-Oston "Best Bagger Golden Lane," a special checkout stand that will be installed in his store. 


• The New York Times reports that "after 13 years, six scientific opinions and two legal challenges, an insect-resistant type of corn is on the verge of being approved by the European Union. It would be only the third genetically modified crop to be authorized for cultivation in the 28-nation bloc," though the story suggests that individual nations will still be able to ban the growing and sale of biotech crops.

The Times notes that "supporters of genetically modified crops argue that they offer an unrivaled opportunity to increase yields, but opponents say they pose unknown health and environmental risks."


• The Lakeland Ledger reports that Publix is phasing out the use of azodicarbonamide in its bakery products. Subway announced a similar decision last week.

Azodicarbonamide, a dough conditioner used in baking, also is found in yoga mats, shoe rubber and synthetic leather.

Published on: February 12, 2014

Robert Hermanns, the longtime supermarket industry executive with Jewel, Lucky, Weis, Associated Grocers and American Stores, and who since 2009 has run the Food Industry Management Program at the University of Southern California (USC), has passed away after a brief illness.

Published on: February 12, 2014

Responding to Michael Sansolo's column yesterday that used an Olympics event as a business lesson, MNB reader Daniel Hariton McQuade wrote:

So us snowboarders look like slackers? First time in 57 years I have been called that for how I look when I am riding....and if it wasn't for those slacker looking riders do you realize how many mountains and related industries would be out of business or significantly impacted.

Don't take it personally. It's just the hair and the clothing …




We had a piece yesterday about McDonald's big problem, which is a confluence of economics and consumer food attitudes that hurts its sales. (I think it is just mediocre food, but that's just me.)

One MNB user wrote:

McDonald's has been and always will be a kids, fast food restaurant.  They tried to change many times in many ways with no success. They take out play yards, added salads and a coffee bar, but little to no change. First they need to be quicker to market with new items,  their R&D  team takes way too long. Also per many many suppliers who I have talked to, trying to get a new item or thought to them is impossible. They just don't give out appointments, what a mistake. Last, they need to get out of the fried / microwave business. In & Out, Five Guys and many others cook theirs, and you can taste the difference, plus they come out with a wrap that has a breaded product vs. a naked version, which is much healthier. Yes, the days of serving billions of burgers may be slowing down.

From another reader:

I could never get why they cannot master a good burger, real fries or even a simple hot dog. Unfortunately, I eat on the run a lot, but they are my last choice as the food simply does not improve!

And another MNB reader chimed in:

I knew you had to take a cheap shot at McDonalds.

Not a cheap shot if it is true.




Referring to a New Yorker piece about Amazon that I linked to yesterday, one MNB reader wrote:

George Packer is another whiny crybaby apologist for whose first reaction to competition is to yell “Not fair!” and then cry and whine and stamp their feet.

His diatribe no doubt entertained the five people still reading The New Yorker.

Boo hoo.

You miss the point, I think.

I didn't read the piece as whining, but as a dissection of Amazon's methods of doing business. It seemed largely fair … and, by the way, I am an enthusiastic Amazon user. And, we've sold a lot of books on Amazon at a time when it was impossible for us to get distribution at places like Barnes & Noble. But I'm certainly willing to consider different points of view about Amazon, because that's part of being an intelligent, informed human being.

One other thing. The New Yorker has more than a million subscribers, and, I think, remains one of the most interesting and best-written magazines out there. And if you look at how it has adapted its content for online consumption, I think it has been remarkable.




Finally, on another subject, one reader wrote:

Great "Field of Dreams" quote.  Makes me hopeful for Spring...which seems like a Dream itself given the weather we have been having in the Northeast.

And from another:

When I read the Terrance Mann (James Earl Jones) quote, I can see  him pacing in front of the diamond and hear that wonderful baritone voice of his.

Good rule of life: You can't quote Field of Dreams too often.