business news in context, analysis with attitude

Published on: February 24, 2014

From The Hartman Group, an MNB Editorial Partner...
MNB has never really offered infographics in the past, but they are a succinct and relevant way of communicating information. Plus, our friends at The Hartman Group are really good at putting them together and so, here is the first of a planned series of infographics for your reading pleasure.

In this case, we offer it because how and when and why people eat is constantly changing, and so, therefore, should the ways in which businesses sell food.

You can dig down a little deeper by clicking on it and going to The Hartman Group website, where you can get insights on this and a lot of other issues. Nobody does it better:

Published on: February 24, 2014

The Wall Street Journal reports that the American Academy of Pediatrics (AAP) is officially saying that people should not use retail health clinics for children's primary medical care needs, that they work against the concept of having a personal physician with a sense of medical history, and "don't provide the continuity of care that pediatricians do."

The Journal writes that some of these clinics have "expanded beyond treating sore throats and giving flu shots to offer sports and school physicals and treat chronic diseases, setting up more direct competition with doctors.

"Retail clinics also are generally open seven days a week, don't require an appointment, accept more types of insurance than doctors do and charge 30% to 40% less for similar services, studies show. Costs vary widely by region and service offered, but getting a common ailment treated at a retail clinic, without insurance, typically runs between $50 and $75.

"After plateauing in recent years, the numbers of these outlets are once again expanding, as retailers bet that the Affordable Care Act will bring longer waits at doctors' offices and drive more patients their way."

The Convenient Care Association (CCA), the trade association that represents the retail clinic industry, responds to the criticism by saying that they are responding to consumer demand, are open at times when traditional doctors are not available, and more and more are partnering with health systems so that patient information is being shared, with a goal of greater efficacy.

Published on: February 24, 2014

The Oregonian reports that the U.S. District Court in Oakland, California, has ruled that the US Food and Drug Administration (FDA) must submit final rules under the Food Safety Modernization Act (FSMA) by specific dates: "It now has to submit the final rules on processors and animal food by Aug. 30, 2015. Next up are the rules on imports, produce and auditors, due Oct. 31, 2015. The transport rule, considered less crucial to stemming illnesses, is due March 31, 2016, and the rule on intentional contamination has to be submitted by May 31, 2016."

The ruling comes as a result of the fact that the FDA "blew" the original deadline - July 2012 - for submitting rules that were established by the FSMA, which was designed to significantly upgrade the nation's food safety infrastructure. That resulted in a successful suit against the FDA, filed by the Center for Food Safety and the Center for Environmental Health.

Published on: February 24, 2014

Bloomberg reports that Cerberus Capital Management LP - which owns the Albertsons chain of supermarkets - is said to be the lead bidder for Safeway, which said last week that it is in talks to sell the company.

According to the story, "Cerberus, which owns the Albertsons chain of grocery stores, has been talking to Safeway for months about buying pieces of the retailer or the whole business, said the people. None of Safeway’s other suitors have shown a willingness to pay as much as Cerberus, one of the people said. The New York-based firm can afford to pay more than the other private-equity bidders because it would be able to put the retailer together with Albertsons and get cost savings, the person said."

The story says that at this point, Safeway and Cerberus are "haggling over the price," while other companies - including CVC Capital Partners Ltd. and Leonard Green & Partners LP - are deciding whether to get in to a bidding war.

Published on: February 24, 2014

The Christian Science Monitor reports that Amazon has raised its Prime membership fee - in Europe.

According to the story, "An annual subscription in the UK jumped from £49 to £79 ($131) and from €29 to €49 ($67) in Germany. The ostensible reason for the overseas hikes is that Amazon has bundled Lovefilm, a previously stand-alone video-streaming service, into Prime and thinks it adds enough value to warrant a higher cost.

"Since these price hikes are tied to the combining of services and, in the US of A, we already have our video bundled with our Prime, we should be safe from any price hijinx, right? Well, perhaps. Amazon's domestic video streaming options are generally considered to be scant and/or unsatisfactory, but if the site super-charged the content so that it's as good as Lovefilm supposedly is, Amazon may similarly feel that the service is worthy of a higher cost."

Published on: February 24, 2014

• 24/7 Wall Street reports that Walmart is putting a major push behind its "made in America" strategy, as it argues that it creates jobs by hiring US suppliers and buying made-in-the-USA goods. Walmart has committed that it will buy $250 billion in such products and services over the next decade.

The strategy is being communicated via social media, with stories emphasizing American jobs and demonstrating "how Walmart helps the jobs economy in America company-by-company, person-by-person. The promotion goes further to describe factories and companies which have been re-opened as part of a renaissance of American industry."

Published on: February 24, 2014

MarketWatch reports that ground beef prices went up five percent during 2013, and that "climbing beef prices are here to stay."

According to the story, "The USDA’s Economic Research Service projects that beef prices will rise faster than almost anything else this year. Don Close, a cattle economist with Rabo AgriFinance says he thinks prices this year could rise 7-8% and roughly the same amount in 2015. Kevin Good, a senior analyst at cattle research firm CattleFax, says that “higher prices will continue through 2015 or 2016 … Good says that ground beef may see especially steep price hikes. He thinks that while steak retail prices could climb 5-10% in 2014, ground beef could climb 10 — 15%."

The piece suggests that cattle herds are at a 63-year low while US demand is declining … but that global beef demand is increasing, which means that prices inevitably will go up.

Published on: February 24, 2014

Chicago Magazine has an interview with Robert Mariano, CEO of Roundy's, which has been engaged in some fast expansion of its Mariano's chain of fresh food stores.

Excerpts:

• "When I left [Dominick’s in 1998], I worked for a while to try to put a European food hall at the corner of Randolph and State, because Mayor Daley wanted it. In doing the homework for that, I traveled all over Europe, looking at food halls, food stores, and I got a lot of great ideas. Buying and eating food [in the same place] is very normal there. So if I didn’t have that experience, I’m not sure [Mariano’s] would be all that it is … [I was surprised by] the amount of food people will sit down and consume inside the store. [Our revenues from] total perishables [including in-store dining] are 50 percent. [In most supermarkets] it’s 30 to 35 percent. [The typical Mariano’s store makes $1 million a week in revenue.]"

• "I didn’t realize the level of dissatisfaction [shoppers] had with their [supermarket] choices. I knew they weren’t satisfied, but the intensity—it was almost like Jewel had broken a bond with them. I think it refreshed in my mind the notion that food retail is extremely neighborhood oriented. People look at these stores as theirs. And you better take care of my store. It’s very personal."

• "I think today people try to decide, What am I going to eat today? They’re not making lists [anymore]. We’re trying to plug in to today’s customers—where those millennials are, what are they looking for—and cater to their lifestyle and their food needs … We see a broad range of shoppers. The reason I call out millennials is that they are the early movers. There’s a very economical lunch you could eat here. Soup and a sandwich, salad, which costs about $8. And you make it yourself, you manage how much of each item. There are a lot of choices."

Published on: February 24, 2014

Slate reports that in addition to the impact on drinking water and agriculture, the "ongoing and devastating drought" affecting California may have another victim - local breweries.

The problem is that local brewers - such as the Lagunitas Brewing Co. - depend on local river water supplies, and are nervous about what shortages could mean for taste and availability. Using ground water from wells, which tends to be heavier in minerals, could have significant impact on beer taste and quality.

Published on: February 24, 2014

The New York Times reports on the coming legal battle over the rights of businesses to deny service to people with whom they disagree on religious grounds - specifically, people engaged in same-sex relationships and marriages - and when this becomes the kind of discrimination forbidden by the US Constitution.

There have been highly publicized cases when businesses have denied service to gay people in New Mexico and Colorado, and in Arizona, Gov. Jan Brewer has on her desk a bill "that would allow business owners to cite religious beliefs as a legal justification for denying service to same-sex couples." Brewer has not taken a public position on the legislation.

The story is worth reading here because, in an increasingly polarized political environment, this shows signs of being an issue that could find its way to front pages and front ends in a growing number of states around the country.

Published on: February 24, 2014

...with brief, occasional, italicized and sometimes gratuitous commentary…

• The Chicago Tribune reports that G Asset Management, a private investment company, has offered to acquire 51 percent of Barnes & Noble in a pitch that values the entire company at $1.32 billion. The offer is contingent on due diligence and the ability to get financing for the deal.

In addition, the investment group said that if such a deal could not be completed, it would like to buy 51 percent of Barnes & Noble's Nook e-reader business.

Can't imagine why anyone would want to buy a buggy whip manufacturer….er, bookstore chain.


• Interesting piece from the Daily Financeabout how daily deals site Groupon has achieved "scale and brand recognition that is unparalleled among its competitors," with "44 million customers and almost 70 million app downloads to date." However, the company continues to suffer from one basic problem - it doesn't make any money.

"The problem that Groupon has not been able to solve is the management of its selling, general, and administrative expenses (including marketing expense but excluding stock compensation)," the story says. "While these expenses improved as a percentage of revenue from 58% a year ago to 47% in  the fourth quarter of 2013, this is still far too high a percentage for the business to ever turn a consistent profit. "

In addition, Groupon's decision to go beyond the daily deals business and try to make its site a go-to site for anyone looking to buy anything from a computer to a vacation package puts it in competition with companies that have been a lot more successful and have considerable brand equity.

Our experience with Groupon has been largely positive … only once, when Mrs. Content Guy tried to buy lawn seeding services via the site, was it a disaster … and that wasn't Groupon's fault, but rather that of the company, which didn't have the ability to live up to its promises. But when it comes to things like restaurant discounts, it is a great service. Though how it makes money long term is a good question…

Published on: February 24, 2014

Regarding the FaceBook acquisition of WhatsApp, one MNB user wrote:

I first got exposed to WhatsApp in my travels to Africa, where it is used extensively, even more than BBM, which is saying a lot since Blackberry is dominant and growing in Africa. Given my frugal nature, WhatsApp is a natural for me. I introduced it to my Son (by showing him the benefit of free texting, important since he has a pre-paid mobile plan). He liked it until he realized I could tell when he had read my messages to him (and he hadn’t followed-up). Then, he shamelessly announced that he preferred the old technology that didn’t disclose “received / read” details. Can you imagine such treasonous behavior?

Seriously, what’s exciting in our economy is the disruption of old businesses with completely new businesses.  I’m fascinated by yesterday’s $19 billion Facebook/WhatsApp transaction as it is 5-years old,  55-people business.  Profitable and adding + 1 million new customer/day by not focusing on advertising revenue.  Could be only the second business to ever directly serve 1-billion customers after Facebook.  WhatsApp disrupted the phone carriers texting business with unlimited international texting for $1/year.

Other disruptions coming are equally as exciting:

• Netflix challenges HBO.  YouTube challenges Netflix.  A new wireless technology called pCELL might disrupt the entire cell phone industry including Verizon and AT&T.

• It’s likely some form of BitCoin will disrupt the Visa/MasterCard transaction duopoly.  Don’t know if the bank conglomerates can survive without the 3% transaction revenue (unless they lay off thousands of employees).

• Back to Facebook … the WhatsApp ($19b) and recent Instagram ($1B) purchases suggest that Facebook is out of innovations and has to buy the next-big-thing.  For all the smart people at Facebook, it takes a (now very rich) immigrant on Food Stamps to build WhatsApp.

• Google lost to Facebook on a bidding war.  Google+ doesn’t  do much for me, but figuring out how to get cable TV costs down keeps me interested in Google.

• Elon Musk is one of the most interesting business people out there with SpaceX, Tesla, and Solar City.

• Walmart grinding out the next 2-3% gain; let’s not discount how hard this is for a $475B company that realizes smaller stores are its future.

• Google/eBay made newspapers smaller, less significant (in US, less so in other places in world).  Pandora, Spotify, XM and iTunes significantly downsized the AM/FM business.

• Dwolla and international players like M-Pesa are faster / cheaper mobile money alternatives to MoneyGram.

• Online bill paying gutted the Post Office of its cash cow: first class mail delivery.

• Cell phone cameras forever changed Kodak & Polaroid.

• Document storage – from file folders to cloud storage.

More is needed and will come … in health care, finance, and every logistics channel you can imagine. To me, it’s exciting. For my Parents, they think things were better back in the 70’s & 80’s. They say this as they call me on Skype from their mobile phone, with XM playing in the background. To which I reply “so, you’re telling me that things were better back when things were worse? And, that this phone call is not occurring on a 4 family party line (which is what we had growing up in Kansas) at a cost more expensive than Skype?  Really Dad?"

We really need some disruption in tort reform / legal system, one of the single biggest cost impacts in health care reform that no one is talking about. This will be hard since most lobbyists and those in Congress are lawyers. A lawyer once told me that US is the second most litigious country in the world which might be a good indication as to where my Son should focus his energy (instead of deleting WhatsApp).

Isn’t business disruption wonderful?  Unless you’re a vendor grinding out 2-3% comp growth at Walmart; though for some that’s job security. Since Wal-Mart is most likely a vendor's most profitable customer, they can’t afford to replace Wal-Mart either.




On another subject, one MNB user wrote:

In response to your Friday Morning Eye-Opener about the employee sharing pictures of messy JC Penney displays, I have had what seems to be the exact opposite experience than the general public when it comes to the changes at JC Penney. South Burlington, Vermont’s store used to look like every other tired downtrodden department store. Hard to navigate, didn’t have options that I or my teenage son wanted, coupons galore (I’m not a clipper, just give me the real price don’t mark it up just to put it on sale)….we hadn’t been to Penney’s in years. Once the changes were made, we ventured back in. We encountered space to walk around the displays and racks, clear and fair pricing, friendly (and happy!) and knowledgeable staff, and plenty of items that both my son and I wanted to buy. Needless to say, we’ve been back several times. Perhaps too many employees are taking pictures of the mess when they should instead be cleaning it up? Ron Johnson was steering that boat in my direction and had differentiated Penney’s (in a good way) from the Kohls and Sears in the area that feel more like rummage sales. Now I’m curious where they’re steering next?

From another:

It seems to me that the JCPenney employee submitting photos to the Huffington Post, is part of the problem. That person is obviously in the stores on a daily basis.  What were they doing to correct the situations they observed?   Seems to me, their time could have been better spent coming up with solutions to these problems, rather than taking photos and submitting them to the Huffington Post and ultimately tearing down the hand that has fed him/her for the last 17 years.   Sounds like the work of a disgruntled employee to me with an ax to grind, for sure.

We have several revamped JCPenney stores in the Twin Cities and they are impressive.  It's beyond me to understand the cheap shots being taken at JCPenney.

And another:

Like you, I am uncertain that this is not something different than as portrayed.  I have to ask if it is after a busy day?  Is it staged?  Is it factual?

I was in a JC Penney store this week and saw that it was the exact opposite of the story.  The store I was in was in magnificent shape and would rival its high end counterparts.

And still another:

The pix of Penny's do remind me of those of some  of the current Sears stores being circulated.    Sears began its downward spiral many years ago and it is now considered a dinosaur.   IMO.   Late husband used to work part time for Sears after he retired.   He quit when the management changed ( in the early 2000's) and mentioned that the atmosphere was quite low once the commissions  were taken away from various sales people.

And another:

If the employee had time to go around and take pictures of problems he had the time to start work on solving the problems…out of stocks are probably out of his control, but he could have easily straightened out the merchandise displays. Once again easy to blame others rather than take personal action.

Published on: February 24, 2014

Wholesome Sweeteners is headed to Natural Products Expo West on March 7-9 with two brand NEW products!

Organic Sweet & Lite, a Sugar and Stevia Blend
Organic Sweet & Lite is the first-ever organic sugar and stevia blend, made from the current #1 Organic Stevia brand in the country! With ½ the calories of sugar, Organic Sweet & Lite is a multipurpose, low calorie sweetener perfect in anything from cupcakes and cookies to teas and tartlets.

Stevia-based baking blends are quickly becoming the low calorie baking preference for consumers according to SPINS. These blends garnered a 34% growth in the natural channel and a 30% growth in the conventional channel during 2013’s busy holiday baking season. Consumers are quickly trading up to natural Stevia and Sugar Blends instead of Sucralose.

Organic Pancake Syrup
For the breakfast fans, Organic Pancake Syrup, a first-of-its-kind syrup made from organic sugar rather than high fructose corn syrup, will be a must-have for their favorite flapjacks! Kids love the taste and moms love the clean ingredient statement.

For more information about adding these new sweeteners to your set, please contact: (800) 680-1896 or CS@OrganicSugars.biz