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    Published on: April 25, 2014

    by Kevin Coupe

    There's a new Nielsen study out saying that "as of Q1 2014, for the first time, a majority of Americans of all age groups own smartphones. In fact, 51 percent of adults over the age of 55 now own smartphones, up 10 percent from Q1 2013, driving the growth in smartphone penetration to seven out of 10 Americans overall (70%). And smartphone penetration continues to grow every day, with 85 percent of recent acquirers picking smartphones when purchasing new handsets."

    The study goes on to say that "the majority of smartphones in the U.S. run Android OS (52%), and more than half of these were made by Samsung (29%). But Apple remains the largest smartphone manufacturer, whose handsets are used by 42 percent of smartphone owners in the U.S."

    The lesson seems pretty clear. If you're not trying to figure out how to use mobile and smartphone technology to communicate with your customers - to create and sustain a relationship with shoppers the same way that Starbucks does - then you may find yourself living and working in the equivalent of the dark ages.

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

    Published on: April 25, 2014

    Amazon has launched its new Prime Pantry service, available to all Prime member/customers in the continental United States and providing delivery of popular household and grocery essentials in regular sizes, as opposed to the large packs that it normally has sold.

    In its announcement, the company explains that as shoppers add Prime Pantry items to their box, the site automatically keeps track of how much they weigh and how big they are - "Pantry boxes are large and can hold up to 45 pounds or four cubic feet of household products. As you check items off your list, we continuously track and show you how full your box is. You can buy as much or as little as you want for a flat $5.99 delivery fee per Prime Pantry box."

    Delivery time is said to be 1-4 business days.

    According to GeekWire, an Amazon spokesperson said "that the shipping fee allows Amazon to carry hundreds of new items, including those that would have been cost-prohibitive to ship for free. Those items include single boxes of breakfast cereal, 'convenience-sized' personal care products and bottled water."

    GeekWire goes on to say that "Prime Pantry is a part of Amazon’s continuing efforts to drive more business by selling household products. The company launched a limited test of a barcode scanner for groceries earlier this month targeted at Amazon Fresh customers in San Francisco and Los Angeles. The Amazon Dash, a new voice-enabled device that automatically adds scanned items to a user’s online shopping cart, seems like it would be a natural extension of the Prime Pantry service.

    "The Seattle-based retailer is clearly hoping that Amazon Prime users will be willing to shell out a little extra cash for the convenience of having household delivered to their door, but that may be a tall order for customers who are already seeing the price of Prime go up by $20, from $79/year to $99/year.

    "But if Amazon can train customers to start buying household goods through Prime Pantry, they may be more likely to spring for Amazon Fresh when that grocery service expands."
    KC's View:
    I went onto Prime Pantry last night, and was amazed how much stuff one can get into one of those boxes. I don't think it is going to be for everyone, and I'm not sure how it'll dovetail with my Subscribe & Save products, but I can definitely see using it.

    You should check it out, and see where the competition is coming from. There is no excuse not to.

    Amazon's strategy is all about smoothing out any wrinkles in the buying experience, and to make the transition between living and buying as easy as possible. Whether it is creating this kind of service, or engineering devices that will facilitate the buying process, it is all about making it easier for people to buy stuff.

    Published on: April 25, 2014

    CNet reports on a new survey by Consumer Intelligence Research Partners suggesting that Amazon Prime customers spend twice as much money on the site as did people without Prime memberships. At the same time, the survey suggests that Amazon shoppers with a Kindle spend 30 percent more on the site than those who do not own a Kindle.

    The story goes on to say that "among those polled, 42 percent of Amazon shoppers subscribe to Prime, while 48 percent own a Kindle tablet, e-reader, or both. Based just on the survey data, CIRP estimated that as of March 31, around 27.8 million people in the US are Prime subscribers and 31.3 million own a Kindle device … CIRP's data indicates that almost one-third of Prime subscribers joined the service over the past year. And despite the recent price hike for Prime, most of those polled by CIRP plan to stick with the service … almost 90 percent of current Amazon Prime members say they will 'definitely' or 'probably' renew their membership, just 5 percent less than the responses…prior to any discussion of a price increase."
    KC's View:
    No real surprise here, but it is important for people and companies competing with Amazon to realize the extent to which it is creating an integrated community of users. All this stuff is connected, and it is all pointed at becoming the dominant retailer in the US and, eventually, the world.

    Be afraid. Be very afraid.

    Published on: April 25, 2014

    Advertising Age reports that Taco Bell is launching a one-store test in California, US Taco Co., described as designed for "consumers who are willing to spend a little more for higher-quality ingredients and better atmosphere beyond what the traditional fast-food chain offers."

    In other words, to compete more effectively with Chipotle.

    CEO Greg Creed says that the company could "spend time and money trying to get these people interested in Taco Bell," but it probably wouldn't work. (In part because they'd be eating at Chipotle.) So he says, because the company "has the talent and the money" to try new things, they decided to create a new brand "to address this opportunity." (And to keep people from going to Chipotle.)

    The emphasis, according to the story, will be on tacos, but the inspiration in part is coming from the food truck culture that has captured the imagination of so many American cities.

    The initial location, in Huntington Beach, won't sell alcohol, but additional locations will. (Just like Chipotle.)
    KC's View:
    Did I mention that this seems to be Taco Bell's answer to the better press that Chipotle has gotten and the better food that it seems to serve?

    I think it is important not to leave Chipotle out of the mix. Because I think it is Chipotle that is very much on Taco Bell's mind.

    Published on: April 25, 2014

    In the UK, Marketing Week reports that Chris McDonough, marketing director for Walmart-owned Asda Group, recently told an industry conference that "one company we have an aspiration towards is Aldi. Some of the cutting edge brutality [of their marketing] really resonates with mums. The comparisons with brands and quality message they deliver in a simple, compelling way.”

    According to the story, "Aldi has seen double-digit sales growth over the past year, with much of that increase coming at the expense of rivals including Asda. Its market share, according to the latest figures from Kantar Worldpanel, stood at 4.6 per cent for the 12 weeks to 30 March, up 35.3 per cent. By comparison, Asda’s sales fell by 0.5 per cent to give it a market share of 17.4 per cent."

    Which, Marketing Week writes, has led companies like Asda and Tesco to invest in price-cutting campaigns designed to compensate for and blunt the impact of discounters like Aldi.
    KC's View:
    Wow. A refreshing moment of honesty in which a retailer expresses genuine admiration for a competitor.

    Be still my heart.

    Published on: April 25, 2014

    Advertising Age reports that Ladies' Home Journal described as "an icon of American publishing and cornerstone of what were once called the 'Seven Sisters' of women's magazines," will stop publishing a monthly publication, effective July.

    Meredith Publishing said that it will become a special interest publication, available only on newsstands.

    According to the story, "Meredith is moving production of those special issues from New York, where Ladies' Home Journal has been based, to its corporate headquarters in Des Moines, Iowa. The entire editorial staff was laid off."

    The company said that its circulation currently is 3.2 million, down from a peak of 6.8 million in 1968, and the story says that "ad pages had fallen 23% this year following several years of double-digit ad declines, including a 17% drop in 2013."

    There now will be only five sisters left. McCall's closed down in 2002. Still alive are the Meredith titles Better Homes and Gardens and Family Circle as well as Hearst-owned Redbook Good Housekeeping, Redbook and Woman's Day.
    KC's View:
    Time for a rousing rendition of "The Old Gray Mare, She Ain't What She Used to Be." Because the world has changed, and the amazing thing is that there actually are five sisters left.

    Published on: April 25, 2014

    • Walmart said yesterday that "CEO Doug McMillon and his senior leadership team will host the company's first ever Sustainability Product Expo where they will bring together buyers, suppliers, nonprofits and government agencies in Rogers, Ark., to accelerate a successful collaboration aimed at using scale to make sustainable products available for all."

    Among the executives promoted as attending the three-day meeting next week are Denise Morrison, president and CEO of Campbell Soup Company; Indra Nooyi, chairman and CEO of Pepsi; John Bryant, CEO and president of Kellogg's; Hugh Grant, chairman and CEO of Monsanto; and Fred Krupp, president of Environmental Defense Fund.
    KC's View:

    Published on: April 25, 2014

    RichmondBizSense reports that Wegmans has signed deals to open two stores in the Richmond, Virginia, market.

    The story says that "the Wegmans stores will be the chain’s first two in Richmond. The grocer currently has six stores in Virginia, with its Fredericksburg location as the nearest to Richmond. A Charlottesville location is also in the works … Wegmans spokeswoman Jo Natale said the grocer liked the two sites because they offered easy interstate access and room for a roughly 120,000-square-foot store."

    • Weis Markets said yesterday that it will invest $101 million in its growth program in 2014.

    Weis Markets president/CEO Jonathan Weis told shareholders at the company's annual meeting, "Since 2008, we have invested more than $500 million in our growth and improvement programs. During this period, we completed more than a hundred projects,” said Mr. Weis.  “This year, we plan to invest $101 million in growth and expect to complete work on 16 projects in 2014 … Over the last year, we have increased our focus on maximizing efficiency by driving millions of dollars of cost out of the system, while maintaining our high standards for store service. This has helped us reduce store level inventories and improve freshness."

    • The New York Times reports that Greek yogurt manufacturer Chobani has taken out a $750 million loan from TPG Capital, a private equity firm, that it says will be used to add new products and expand overseas. The deal includes provisions that would allow TPG to acquire as much as a 35 percent stake in the yogurt maker if Chobani hits certain goals; there also is the possibility that Chobani could go public as soon as next year.
    KC's View:

    Published on: April 25, 2014

    • The Wall Street Journal this morning reports that Scott Price, CEO of Walmart's Asian division, is stepping down from that job to move to Bentonville and will lead the company's real estate, strategy and mergers and acquisitions efforts for Walmart's international unit.

    According to the story, Price will be succeeded by Greg Foran, who joined Wal-Mart in 2011 from Woolworths Ltd. in Australia and currently serves as president of Wal-Mart China. Sean Clarke, Wal-Mart China's chief operating officer, will succeed Mr. Foran."

    The Journal notes that "the executive shuffle in the Asia division comes after years of management turmoil in the region, choppy sales results, and tangles with compliance and government regulation."
    KC's View:

    Published on: April 25, 2014

    We had a link the other day to a New York Times story about a Hawaiian state legislator who decided to try to do some research into GMOs in preparation for a vote that would have banned them there, only to find out that maybe they were not as evil as some would suggest.

    Which led MNB reader Mike Franklin to write:

    Thanks for the link to the article, I too had missed that one…but…after reading it, I felt betrayed…those are minutes I’ll never get back. However, it’s not surprising a High School graduate had a hard time understanding the complexities of GMO…both sides of the issue are presenting alternate views of science. Over the decades, so many toxins have been permitted by faulty science, so many deaths, deformities and altered lives have been the result, and so many years later after the damage had been done and the profits taken, has society finally taken science back to determine the toxins were really harmful. I only wish I had the power of written word to convince you to be skeptical, to understand the scientists on both sides have an agenda and to please keep reading…at some time the truth will come out…but not until the profits have been taken.

    I wrote the other day:

    I continue to believe that GMO labeling seems reasonable, that it doesn't have to be punitive in nature, and that it can actually be a positive for the biotech industry if people actually end up being educated about GMOs.

    Which prompted one MNB reader to ask:

    Do you really consider information that's marketed and perceived as a "warning-label" really qualifies as "education"?  It would be equivalent to qualifications about the veracity of evolution.

    Ah, very clever. Equate a belief in the blanket efficacy of GMOs with a belief in evolution. If I believe in the latter, I have to accept the former.

    Except … I'm not sure that's apples and apples.

    But again, let's be clear. I have been very careful not to be anti-science, and to suggest here over and over (to the frustration of readers on both sides of the issue) that while I believe that people who want not to consume GMOs ought to have that right, I also can imagine circumstances in which GMOs can be a positive force.

    I also don't necessarily think that requiring packaging to say that a product contains GMOs is the same as putting a skull-and-crossbones on the front of the package. How about just including that fact on the ingredient label, with amplification/education available via QR code?

    MNB user Larry Bourland wrote:

    After following this legislation in the state of WA, I understand and support the effort to press this towards the federal level.  It is nonsensical to expect to have 50 potentially different statutes across the country that would challenge any regional or national manufactures to execute.  This definitely points to a one size fits all strategy, otherwise the alternative is way too punitive for all concerned.

    A federal approach would be better. But since the feds seem unwilling to do anything more than rubber-stamp what the biotech industry wants, the states are responding to their citizens.

    Responding to my assertion that it is time for Amazon to collect sales taxes, one MNB reader wrote:

    Great KC....more taxes is what we all need!

    Methinks there is some sarcasm there.

    MNB reader Blake Steen had some thoughts about our stories and links regarding wage disparity:

    The quote from NPR that “These days if you want to be among the biggest winners, says UC Berkeley researcher Bagriel Zucman,…, it helps to be in the 0.1 percent."

    Since when did I need to be a part of the 16000 families that own 12% of America’s wealth to be a winner?  I would call my Grandfather who came out of poverty that I hope and pray my son will never know to become an Art history teacher with his masters.  My grandmother, his lovely wife, to get her masters back when she was the only lady in the classes as an elementary school teacher.  Both of my other grandparents who have their masters one in teaching the other in accounting.  My mother who, when she lost her job as a sales director at a manufacturer of towels and pillows, bought a business she has been running very successfully for 9 years. That business was bought, by the way, by mortgaging their house and from savings. Or my dad who put himself through grad school at night and worked two jobs to pay for it.  He has had success in politics in various ways.

    All those people are winners to me.  And you know who else is a winner.  The single mom who goes to Wal-Mart and works for a wage that we call non-livable when she could be at home living off the “winners” I have mentioned above.  It is unreal how we have killed the American Dream because we “hate” the people at the top.  They didn’t take anything away from any of the people mentioned in this rant.  They are successful.  At what point do we call someone “too successful or too rich?”

    It is interesting how you take the story that points out facts about wealth in this country and make some assumptions about how I feel about them.

    I've gone out of my way to say that I don't think people of great wealth should be demonized, unless, of course, they accumulated that wealth through illegal, immoral or unethical means. And, I've said over and over that I don't think living wage legislation or an increase in the minimum wage will address the serious wage disparity problems that we face.

    This isn't a matter of winners and losers as measured by income. For a lot of people it is a matter of survival. I completely agree with you about your parents and grandparents.

    I would simply make one suggestion. If that single mom working for a retailer on a full-time basis but not making enough to feed, clothe and house her family saw her work valued more, and were paid enough to do all those things, then wouldn't our society and culture be stronger. I think suggesting that her only other option is staying home "living off the winners" is creating a false choice. Most people, I believe, who are struggling, want desperately to work, are willing to work long, hard hours, and just want to feel that they are making progress. They don't want to be on any sort of public assistance.

    To be honest, this is where I get really frustrated with the conversation. Because somehow, people who are struggling - working full time, but unable to live without public assistance as they try to support themselves and their families - are painted as being greedy or needy or selfish because they'd like to make a little more money while laboring for companies where senior executives often make millions. How many bankers still have jobs because the federal government bailed their employers out - offering them, in essence, public assistance - six years ago?

    These are the kind of inequities that don't get resolved by legislation or regulation. They only get resolved when a culture gets its priorities right. And I worry that our culture's priorities sometimes are woefully misguided.

    On the same subject, another MNB reader wrote:

    You hit the nail on the head regarding wealth disparity.  In short, if you are able to save/hold on to what you earn, regardless of how much you initially make, you can get ahead but it takes a lot of discipline to do this.  That means not keeping up with the "Jones's", not driving new cars every year,  not having the latest phone technology,  not being concerned if you are wearing the latest brand or trend and in general having little to no debt.  

    Before you think I'm crazy - 6 years ago my husband and I changed our approach to money management and it has completely changed our lives.  We paid cash for a brand new car last year, we have no debt excluding our house and refinanced that so it will be paid off in less than 10 years.   We increased our savings significantly and today, would be considered wealthy by most standards.  However, we downgraded our approach to money spending - we shop at Walmart, drive one newer and one older car, live in the same house we've had for 13 years instead of moving to something newer, larger, nicer.    In short, we made a decision to live differently today so we have the opportunity to live differently tomorrow.  

    It call comes down to choices you make and dedication to making a change in your life.    Like the gentleman who wrote the message to you, I also have a burning desire to finish my college education as the lack of degree has limited my opportunities over the years.   As such, I've diligently saved up and will go back to school in January.   Anything is possible if you believe and are willing to work hard to make it happen.

    From another reader:

    I am sure you are going to get a lot of complaints that you are devoting too much print-space to the issues of declining middle class, $15/hr minimum wage, etc. My response there would be to suggest that for all of those in our business who are forever concerned with Amazon or the role of odd tweaks to drive brand experiences and increased ROI, this stuff is all a joke compared to the macro-economic transitions going on around us.

    I would suggest that it is useful to start with facts that almost all economists agree upon. Fact: Consumer spending drives economic growth. Fact: Adjusted for inflation, consumer spending has been on a permanent growth trajectory for 100+ years. Fact: Consumers have less disposable income that they did in 1980. Fact: Consumers are devoting much larger percentages of their income to consumer spending. Fact: Credit card and auto loan defaults are at record levels. These things can be supported by references, but if someone doesn't believe them, any further discussion is a non-starter.

    In the interest of transparency, my wife and I are lucky and have a combined household income of nearly $200,000. I must say that I am wholly agnostic on the $15.00/hr minimum wage issue as well as the "declining middle class" issue. I would prefer to outsource the answers to those who know more than us. Namely the economists.

    If someone wants to preach the merits of the Horatio Alger narrative of how they pulled themselves up from working the mailroom to becoming a senior management standout, that's fine. I don't see much of that happening around me. And if it were this easy, one wouldn't expect the middle class to be shrinking at record levels. But whatever, there are plenty of positions we take in the name of politics that prove inefficient in market outcomes. I do know this, my wife and I stand to gain considerably from this position. All around us we watch as mid-level management jobs are now a thing of the past and recent college grads work in their role for 8-10 years with little to no ability for advancement and only minor pay raises. This isn't because they are not motivated or lazy, it's because there are simply no positions for them to move up or in to. And lacking their ability to gain the necessary skills to further their career, our own skills grow further in demand. Hey, lucky me!

    For the record, I have done little of this "pulling myself up by my boots" and a lot more of happening to be at the right place at the right time. It's not clear to me that a wide swath of the people who buy into this story might themselves have an outcome driven by luck as much as hard work and determination.

    So if we decide to take the traditional perspective that folks who are not succeeding are clueless or lazy that works for me. I'll make a hell of a lot more money. But I would implore you to consider the net effects given the preponderance of evidence.

    MNB reader John Domino wrote:

    You are right Kevin.  The prosperity of the US since WW2 has been driven by the growth of and the growing incomes of the US middle class. This has been greatly enhanced by the rise of two-income families.  We have topped out on both accounts.  Why?  Did we become too affluent for our own good?  Too many people believing that going $100K into debt for a BS in Art History or that the high paying job as a toll-taker on the turnpike would last forever?  Too much money being made by corporations or Wall Street buying and selling companies rather than investing in factories, technology and training?   Or as discussed on NPR this morning the diminishing government support for financial aid for higher education and investments in public universities.

    The real legacy of George Bush's tax cuts and the partisan divide in Congress is that the country is not investing in infrastructure, education, and manufacturing and the country's middle class is losing out.  Which in the long run means a drop in overall retail sales and a loss of prosperity for those at the top as well as those in the middle.  Not mention the super squeeze on those at the bottom.

    MNB reader Steven Ritchey wrote:

    You are correct, the disparity can be devastating in the long run.  The middle class is what drives the economy, period.  We buy the houses, the college educations for our kids.  We buy the mass produced automobiles like Fords and Chevies.
    We are the drivers of the economy, not the so called job creators.
    During the depression of the late 20’s and early 30’s, the wealthy were still wealthy.  They still lived extravagant lifestyles, most others were barely scraping by or in bread lines.
    We create the demand for manufactured goods, when the middle class is strong and thriving, the country thrives.  I wish the so called experts would realize  this.

    Regarding the new deal between Amazon and HBO, one MNB reader wrote:

    FINALLY!! My husband and I don’t use our Prime for TV yet, however I am a huge HBO fan and love HBO Go. Every month that we pay our outrageous cable bill I wonder how much longer it will be until I can pick and choose the channels I want and pay just for those. Sports channels and HBO have always been our hold up. However we now have a SlingBox, so my husband can watch all his Chicago Bulls, Blackhawks and White Sox games through his brother’s TV. With HBO going to Amazon, we are one step closer. I’d gladly pay monthly for just HBO GO, with current programs on it. Of course the major online providers like Netflix and HBO will have to combat issues with households sharing IDs, but clearly everything is headed towards streaming.

    If I were a cable company, I’d be very fearful and frantically trying to figure out ways to reduce costs for customers. As a customer, I don’t need a land line and I don’t need to pay for major networks because everything can be viewed online. The value proposition of cable is diminishing quickly. It’s just a matter of time before we can stream everything we want and cut cable out completely.

    It is all about the power of consumers.

    I have to imagine that we are drawing close to the day when cable companies no longer will be able to dictate to us what packages we can buy, how networks are bundled, and how much we are going to have to spend if we want to watch "Game of Thrones" and "Homeland." Everything will be available a la carte, because that's what consumers ultimately want.

    It is all about the power of consumers.
    KC's View:

    Published on: April 25, 2014

    I am more impressed than ever by Jon Stewart.

    Not just because I love "The Daily Show." (Which I do.)

    No, I am impressed by Jon Stewart because of two things that have happened over the past week.

    Stephen Colbert, who got his start on "The Daily Show" before taking on "The Colbert Report" (which Stewart produces), was named to replace David Letterman on "The Late Show." (A brilliant hire, the more I think about it.) In the wake of that decision, Stewart - who might've had some reason to wonder why he didn't get the gig, was nothing but supportive of Colbert and the decision, and Colbert even stopped by "The Daily Show" on Wednesday night to chat with his soon-to-be-ex-boss. And it was a love fest.

    Then, last night, John Oliver made a surprise appearance on "The Daily Show." You may remember that Oliver, a longtime"Daily Show" correspondent, guest-hosted the show last summer while Stewart was making a movie, and got a lot of critical acclaim … enough so HBO offered him his own show, "Last Week, Tonight," which premieres on Sunday. Again, Stewart does not have to be gracious to people who leave his show to work elsewhere … but he seems genuinely thrilled by their success.

    If they do well, he seems to think, it reflects well on him. (He has some experience with this. Steve Carrell used to be on "The Daily Show," and now is a big movie star. And he's never been less than terrific about his friend's success.)

    This impresses me.

    It seems so distant from the Leno-Letterman wars. Or even the more recent Leno-Conan O'Brien wars.

    There is a lesson to be learned from this.

    I also want to refer you to a recent New York Times column by wine critic Eric Asimov, in which he considers the question of personal taste.

    He writes:

    "Heady discussions about the role of the wine critic may strike many people as navel gazing. Yet one issue has bubbled up on social media and blogs repeatedly in the last few months: Should wine critics allow their personal preferences to color their critical views? Or should they remain neutral on questions regarding a wine’s style, regardless of how they feel about it?

    "I find this issue fascinating, and before you dismiss me as one more self-absorbed wine writer, let me say that I think these are important questions for anybody who cares about wine. How you answer them shapes how you think about wine, your attitude toward its aesthetic potential and, indeed, what you expect from critics.

    "Let me not keep you in suspense: I believe a critic’s point of view is crucial. My job is not to act as an impartial arbiter of bottles, but as a guide, leading readers on a quest to explore what is most beautiful, fascinating, distinctive, curious, delicious and moving in wine. I hope to inspire curiosity, promote ease and comfort with wine and provoke discussion and debate. Ultimately my aim is to eliminate the need for wine critics (at least in a utopian sense) by helping consumers become their own best authorities."

    You can read the entire column here.

    I found the column particularly interesting because it never occurred to me that a wine critic - or any critic or columnist, for that matter, would not be writing with a distinct point of view.

    That's what I'm paying for. And a savvy reader learns over time what that point of view is, who which critics to trust when making a decision about a restaurant, a wine, a movie or a TV show. I want passion - not a dispassionate perspective - from critics and columnists.

    I hope that's what people think when reading MNB … that they understand that every choice of story, and every word of commentary - by Michael, by Kate, and by me - reflects a specific and definable point of view, a desire to make people think about issues differently, and some level of passion about the subjects we address.

    Nothing dispassionate here, I hope.

    That's it for this week. Have a great weekend, and I'll see you Monday.

    KC's View: