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    Published on: March 13, 2014

    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.

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

    I've had a chance to watch the first few episodes of "Farmed and Dangerous," the original series on Hulu that satirizes industrial farming, and that has been underwritten by Chipotle in an effort to present its position on industrialized farming vs. sustainable agriculture. It is yet another entry in what I think is a pretty ingenious approach by Chipotle that is almost anti-advertising … it presents its message in a way that tries to position the company as being above all that crass advertising stuff.

    The Chipotle names gets mentioned, but only in the bumpers. Other companies - including Kellogg's and Chase - have commercials on the program. And the story of the video never refers to Chipotle.

    Now, let me be clear. I'm sympathetic to Chipotle's position on sustainable agriculture. I'm not inclined to paint with a broad brush and characterize all industrial farming as evil incarnate, but I think that products from local, small scale producers almost always taste better than the alternative … at least, that's my experience.

    The problem with "Farmed and Dangerous" is that it does paint with a broad brush and a heavy hand, to the point where I'm not sure it will have sufficient appeal to do what it needs to do. "Satire is what closes on Saturday night," the playwright George S. Kaufmann once said, suggesting that it is hard to strike the right balance that allows satire to also be entertaining. It requires some subtlety, I think … and 'Farmed and Dangerous," I'm afraid, doesn't have much of that.

    The performances are decent, especially that of Ray Wise, who plays the PR guru trying to position industrial farmers - who want to stop feeding cows actual food and replace it with a petroleum-based pellet that has the unfortunate result of causing cows to explode. He's appropriately smarmy … though it tells you everything you need to know that one of his more recent roles was as Satan on the TV series "Reaper." The writing is okay, but not exactly subtle … it is like the writers prefer to use a sledge hammer rather than a laptop.

    One other thought. For messages like these to be really effective, they can't just preach to the choir. You have to be able to at least engage in a conversation that will have people who don't agree with you, or haven't made up their minds, to come to the table and talk, or at least listen. There have been plenty of newspaper and magazine stories about members of the industrial agriculture community who feel they are being unfairly smeared. Methinks they doth protest too much, but I also think that the "Farmed and Dangerous" approach allows for some legitimate criticism.

    I do think that there is a really good TV series out there that could be made about this issue, but "Farmed and Dangerous," at least so far, ain't it.

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

    KC's View:

    Published on: March 13, 2014

    by Kevin Coupe

    Call it yet more evidence that when Amazon CEO Jeff Bezos talked about investing in drone technology as a way of potentially delivering products to shoppers, he wasn't just blowing smoke.

    The Fresno Bee reports that it is "testing a small drone aircraft that could possibly be used for news reporting purposes." The idea is that the drones, which typically cost about $500, could be employed "for aerial photography of accidents, fires, farmland and waterways."

    There are limitations, the story says: "The drone can stay in the air for only 20 minutes, and the paper would also have to take into account other restrictions imposed by the Federal Aviation Administration."

    Not to mention that the paper would have to teach staffers how to operate them remotely.

    But it seems remarkable how fast the testing of drones for civilian/business purposes, which seemed like a joke when Bezos first unveiled Amazon's plans on "60 Minutes," has become commonplace. A couple of months ago, it seemed like a fantasy, and now it seems like everybody is doing it.

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

    Published on: March 13, 2014

    The New York Times reports that Toms, the company that was built "selling one pair of inexpensive shoes and giving another pair away to a needy person," is expanding into the coffee business.

    According to the story, Blake Mycoskie, the founder of Toms, "has developed a line of coffee, the sales of which will be used to provide clean water for cooking and drinking as well as for sanitation to the more than two billion people around the globe the United Nations estimates lack such essentials."

    The Times writes that Mycoskie "unveiled Toms coffee, packed in blue-and-white bags mimicking Toms shoe boxes, on Tuesday at South by Southwest, the annual event in Austin, Tex., that brings together filmmakers, tech enthusiasts and musicians and serves as a showcase for new products and ideas. Every bag of coffee Toms Roasting Company sells will finance a week’s worth of clean water for one person, Mr. Mycoskie said. Cups of coffee, which will be sold in what he hopes will be a string of Toms cafe-stores, could provide a day of clean water each … The company plans to work with Water For People, a nonprofit group that works to develop sustainable water systems around the world. The group might use financing from the Toms coffee venture, for instance, to build tanks to collect rainwater or develop piping systems to get water from hard-to-reach places to the people who need it."

    Toms also sells eyeglasses, the sales of which "help underwrite surgical operations and other eye health care" services for the needy.

    Mycoskie, the story says, was moved to expand into this area by criticisms that while Toms was good at addressing specific needs, it was not doing anything to address the underlying causes of poverty.
    KC's View:
    Companies like Toms move the world forward a little bit at a time, making progress and changing the way people think about important issues that might not otherwise be on their radar.

    I'm told that Toms has a flagship store, where they sell their shoes (which my daughter loves) as well as their glasses and coffee, in Venice, California, not too far from where I am. I may have to stop by, because I don't mind helping the cause. It'd be foolish not to.

    Published on: March 13, 2014

    The San Antonio Express News reports that "H-E-B is unveiling its own line of hundreds of organic products Wednesday in hopes of making the healthy items more affordable to customers in its stores across Texas." The "H-E-B Organics" label, the story says, "will include hundreds of food items including: canned vegetables, cereals, condiments, chips, breads, butter, fresh fruits and vegetables, cheese, lunch meats, bacon, beef, pork and chicken."

    According to the story, all the products in the line are "USDA-certified organic, which prohibits the use of genetically modified foods and the produce must come from farms that practice sustainable soil-management methods and be grown using only organic-compliant materials….Pantry staples meet those standards as well as no artificial colors, flavors or preservatives. The fresh meats and dairy items promised that animals will be raised on organic feed with no added growth hormones or antibiotics and that they will be processed in certified-organic facilities."
    KC's View:
    Companies that can address both the real and perceived problem of organics being more expensive than conventional foods will, I think, have for themselves a real differential advantage.

    Published on: March 13, 2014

    Reuters reports that at a retailing conference in the UK, Tesco CEO Philip Clarke said that he is trying to be philosophical about the fact that the company's UK market share has dropped to 28.7 percent, its lowest since 2004, as the company feels increased pressure from both discounters like Aldi and more upscale stores like Waitrose and Marks & Spencer.

    Clarke said that he doesn't feel pressure from investors: "I don't feel it at all. What I feel is a much greater responsibility to the company and the stakeholders … It's not a question about discounters or something else, its about doing the right thing for our customers."

    The story notes that "Tesco is 22 months into a turnaround programme under Clarke, but sales are still falling at its 3,150 British stores despite spending on refits, more staff and new product ranges."

    Reuters also reports that Tesco, which is sourcing an increasing amount of clothing from Ethiopia, is trying to be proactive about making sure that the factories there do not fall victim to the same levels of negligence that have caused disasters at factories in places like Bangladesh. Tesco is calling for strict regulation and vigilant inspection of facilities there.

    According to the story, "Tesco is among 150 clothing brands and retailers working together to improve safety in the Bangladesh garment industry, with initial inspections published this week revealing serious safety problems at many factories."

    Trying to be proactive about safety issues in Ethiopia is seen as making sense since there is a belief that "Ethiopia could blaze a trail in Africa in garment production," following the same model that has turned manufacturing into a major driver of economic development in Asia.
    KC's View:
    I thought it was interesting that in an interview with Reuters, Clarke said that he has no intention of being in the job as long as his predecessor, Terry Leahy, who did it for 13 years. In his mid-50s, Clarke says that he's not a young man.

    I have two thoughts about this. One is that if things don't get better at Tesco, he may not have a say in how long he stays. And two, I suspect that it is like Indiana Jones says: "It's not the years, it's the mileage."

    Published on: March 13, 2014

    The United Fresh Produce Association is out with its 2013 Year in Review, concluding that the average supermarket produce department saw sales last year that were up 4.8 percent over the previous year, and that "the growing demand for organic produce resulted in dollar and volume increase, roughly 20 percent for both organic fruits and vegetables overall."

    In addition, the report says that:

    • "Over the past year, all of the top 10 fruits posted volume increases."

    • "Fruits’ average weekly dollar sales increased 4.5 percent versus 2012."

    • "All of the top 10 vegetables posted increases in weekly dollar sales."

    • "Among value-added fruit categories, value-added fruit and fresh-cut fruit both posted increases in weekly dollar sales," while "packaged salad and tomatoes, the two top-selling vegetable categories in 2013, increased dollar sales 6.7 percent and 3.4 percent."

    • "Avocadoes posted the highest growth in the fruit category, with dollar sales increasing 11.7 percent and volume increasing 10.3 percent."
    KC's View:
    So if I'm going to be perfectly honest here, my first reaction when reading this report synopsis was: Avocadoes are a fruit?

    And my second thought was, I thought that the plural of "avocado" was spelled "avocados".

    Not deep thoughts, but my own.

    Published on: March 13, 2014

    McDonald's CFO Pete Bensen told a Bank of America Merrill Lynch conference in New York yesterday that "there is no silver bullet" that will help the company solve its short-term performance problems in the US, Germany and Japan.

    According to the Chicago Tribune story, "McDonald’s new efforts include having consultants work with U.S. restaurants on basics such as staffing and scheduling, Bensen said. The world’s largest restaurant company is putting an intense focus on service during the first six months of the year in the United States, he said. It is also testing mobile ordering and payment and considering a loyalty program, he added.

    "One new product being rolled out in the United States is a Bacon Clubhouse burger with Big Mac sauce, white cheddar cheese and applewood smoked bacon on a new roll, Bensen said. In Germany, the chain is selling some items at a mid-tier price to close the gap between the brand’s lower priced foods and extra value menu items, he said."

    One problem not likely to go away: “The competitive environment has gotten much more aggressive,” Bensen said.
    KC's View:
    I'm not picking on McDonald's when I say that I am not surprised by its problems since there are other fast feeders - In-N-Out, Fatburger, and Burgerville immediately come to mind - that serve a vastly superior, less mass-produced tasting product. For me, that's what it comes down to … just make a better burger.

    (And maybe get rid of a few marketing consultants and hire some better cooks.)

    Published on: March 13, 2014

    • Ahold USA said yesterday that "as part of its ongoing efforts to be a responsible retailer … its private label teas now feature the Rainforest Alliance Certified seal and its private label coffees are now UTZ Certified. The farms that Ahold USA sources its Simply Enjoy teas from have met the rigorous sustainability standards of the Sustainable Agriculture Network for Rainforest Alliance certification."

    And, Ahold said, the farms it sources its Simply Enjoy coffees from "recently met the strict compliance requirements needed to receive UTZ certification," which means that "the product has been produced to meet standards that protect the environment and promote good social practices.

    • The Chicago Tribune reports that Mondelez International wants to put some of its best-known snack foods "on a diet, with a goal of having "25 percent of its revenue come from what it says are "better choice" products, up from 20 percent currently … Another 2020 goal is to increase the number of individually wrapped packages of foods that come in at 200 calories or less by 25 percent. The company also plans to put calorie information on the front of packages globally by the end of 2016."

    Mondelez said that its goals also include "increasing the amount of whole grains it uses by 25 percent and reducing levels of sodium and saturated fat in its products by 10 percent by 2020."

    • Supervalu announced that all of its retail banners will "require reports from its pork suppliers  regarding their progress in  producing pork without the use of gestation crates. These cages used to confine breeding pigs are so restrictive, the animals can’t even turn around for years on end." The company has asked suppliers to end the use of the gestation crates by 2017, and now is asking for a progress report to be delivered this year.
    KC's View:
    There's a theme in these three developments, and it is all about doing better by doing good. Kudos.

    Published on: March 13, 2014

    • The National Grocers Association (NGA) announced that Matthew R. Ott, the organization's vice president of Membership and Information Technology, has been named vice president of Operations.

    In addition, NGA said, Greg Ferrara, vice president of Public Affairs, has been appointed as head of government relations and communications.

    • Daymon Worldwide has announced that it has hired Ross Kavanaugh, most recently the vice president of Procurement, Supply Chain and Merchandising at Office Depot in Europe, to the newly created position of Chief Sourcing and Trading Officer.
    KC's View:

    Published on: March 13, 2014

    …will return.
    KC's View:

    Published on: March 13, 2014

    Amazon customers who are a member of its Prime program - guaranteeing two-day shipping on products bought from and shipped by Amazon - this morning received emails saying that the price will go up this year from $79 to $99 annually. The increase will take place on the individual customer's renewal date.

    The text of the letter that I received reads as follows:

    Dear Kevin Coupe:

    We are writing to provide you advance notice that the price of your Prime membership will be increasing. The annual rate will be $99 when your membership renews on December 11, 2014.

    Even as fuel and transportation costs have increased, the price of Prime has remained the same for nine years. Since 2005, the number of items eligible for unlimited free Two-Day Shipping has grown from one million to over 20 million. We also added unlimited access to over 40,000 movies and TV episodes with Prime Instant Video and a selection of over 500,000 books to borrow from the Kindle Owners' Lending Library. For more information about your Prime membership, visit our Prime membership page.


    The Amazon Prime Team

    KC's View:
    There had been reports that Amazon was considering a price hike to as much as $129. Analysts have estimated that a Prime price increase could drive as much as $360 million in new revenue for Amazon, which famously has been unable to generate much in the way of profit even as sales numbers rose, largely because it has to keep investing in new initiatives as a way of maintaining e-commerce dominance.

    Of course, it us hard to know exactly how much money will go to Amazon's bottom line because it is unknown how much churn the price increase could create; most estimates suggest that Amazon could lose between one and five percent of its Prime members with the move.

    It is tough to know exactly what the impact will be because Amazon does not release specific numbers about Prime memberships. And there also is an argument, I think, that potentially Amazon could lose the most profitable of its Prime members with this price increase - the ones who spend the $79 a year but don't use it very much as opposed to people like me, who use it several times a month, and more when birthdays and holidays come around.

    If I had to guess, though, it would be that this price increase won't have any sort of prolonged negative impact on Amazon, and could have the opposite. I'm certainly willing to pony up the extra $20 a year, knowing that I can extend my Prime membership to my kids and that, if Amazon holds true to form, it will continue to add value to the program. (It makes me feel better that they decided to fund "Bosch," a new Amazon TV series that recently had its pilot shown on the site, with members able to vote on whether it and others could go to series. I liked the pilot, based on the Michael Connelly books, and like the democratic feel of the process.)

    That said … I'm a little surprised that the email from Amazon this morning wasn't a little more personal … saying things like "we're working every day to increase the value of your membership" or maybe even announcing some new goodie. (We're a long ways away from the late nineties, when I remember getting a coffee mug from Amazon one Christmas to thank me for my business!)

    I also think - as one MNB reader already has written to me this morning - that Amazon is going to have to make sure that its shipping partners (FedEx, UPS and especially the USPS) are able to live up to the promises it is making. It may only be $20, but it will make people a little more unforgiving … especially because Amazon knows what it has to fix. And, by the way, if some "experts" are to be believed, one of the ways that Amazon will do this is to take much greater control over the distribution system, expanding Amazon Fresh rapidly (some say by 20, 30 maybe even 40 markets this year, though I have to believe that these projections are wildly inflated) and using its own trucks when and where it makers sense. Maybe. We'll see. The one thing I think we can take to the bank is that Amazon is analyzing the problem from every angle, looking at it though every prism, and bringing a chess-like precision to the decision-making process.

    The one thing I'm not going to do is take any of the stock analysts very seriously on this one. Their opinions will diverge wildly, and all they're interested in is the investor class and their own bank accounts. Amazon, I believe, will remain steadfastly focused on the customer.

    As one of those Amazon customers, I have faith. As a pundit, I'm by nature cynical, but I tend to give Amazon and Jeff Bezos the benefit of the doubt, because they keep getting it right.

    The bottom line, I think, is this: Any competitor that thinks this somehow is the beginning of the end for Amazon and that suddenly roses will bloom around all the nation's brick-and-mortar stores while clouds form over the e-commerce sector, should forget about it. Right now. Because that's not happening.