retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: May 16, 2014

    by Kevin Coupe

    Interesting story this morning that points to the degree to which consumption behavior has changed.

    The Wall Street Journal reports that Netflix "is becoming an even bigger consumer of the Internet's peak capacity," and that new data shows that "Netflix traffic accounted for 34% of North America's downloads during the busiest hours of the day this year, up from 32% six months ago."

    Those numbers dwarf number two and three: Google's share "fell to 13% from 19% six months ago. Amazon's share of peak downstream traffic ticked up to 1.8% from 1.6%."

    In addition, there is a lot of concentration of traffic on the users' end: "The top 15% of Internet subscribers accounted for more than half of Internet providers' traffic."

    The thing to think about here is that this is all relatively new behavior, and it replaces - or supplements - previous behavior. It is amazing the extent to which Netflix has carved out for itself a differential advantage, and is distancing itself from the competition (though that doesn't mean that the likes of Amazon and Apple won;t be fighting back).

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

    Published on: May 16, 2014

    The Coalition for Safe and Affordable Food yesterday released the results of a Cornell University study saying that "New York’s proposed mandatory GMO labeling bill would cost families an average of $500 per year at the checkout aisle. The study comes on the heels of similar studies in Washington state and California that showed mandatory GMO labels would result in similar increases in the cost of food."

    The study also found that "families forced to buy organic food instead of conventional foods containing GMOs could see their food prices increase as much as $1,556 per family per year. Similarly, such a mandatory labeling law would likely cost the state of New York millions of dollars in revenue to implement the new requirements and to account for a loss in farm income." And, the Coalition press release helpfully points out, the US Bureau of Labor Statistics has just announced that "April was the third consecutive month that American families saw an increase in food prices, rising a total of 3.9 percent since January."

    MNB reached out to the Coalition for Safe and Affordable Food, asking who funded the study and how much money it and its member companies have donated to Cornell. As of this posting, the Coalition has not responded.

    Meanwhile, in Oregon a group called Oregon Right To Know reportedly announced yesterday that it will begin gathering signatures to try to force a statewide referendum mandating the labeling of foods with GMOs.

    It is in for an uphill fight - the organization reportedly has raised about $800,000 to support its effort. In California, anti-GMO labeling forces spent more than $40 million to defeat such a ballot initiative.
    KC's View:
    I may be pro-GMO labeling, but I'm not sure that I would dispute the notion that a single state labeling law could cost consumers more, which is why I support a federal labeling standard. But that's not what the Coalition and certain food industry interests want. No, they want a federal approach, but they want one that essentially says that the Food and Drug Administration (FDA) has determined that GMOs are totally safe, and therefore do not need to be labeled, and that the federal statutes should actually prevent states from passing their own laws.

    Let's be clear. I am anything but reflexively anti-science, and I am hardly across-the-board anti-GMOs. I am pro-information and pro-transparency, and I think the approaches advocated by some in the food industry will end up hurting their organizations and the image of the industry in general.

    Published on: May 16, 2014

    The Wall Street Journal reports that Walmart's US president, Bill Simon, says that the company is "not opposed to minimum wage increase, unless its directed exclusively at us."

    In other words, the company can support an increase in the federal $7.25-an-hour minimum wage, as long as the increase isn't only for certain kinds of retailers.

    The Journal says that the comments represent Walmart's "most explicit comment yet" on the subject.

    However … company spokesperson Brooke Buchanan walked the comments back a bit, saying that the company actually is neutral on the subject: "Just because we don't oppose it, doesn't mean we support it," she said.
    KC's View:
    Walmart has said that this could be a mixed blessing - that its labor costs could go up, but that there could be compensations because its shoppers would have more money to spend in its stores. And the truth is that whatever Walmart's recent challenges, it would be able to absorb these higher costs more easily than a lot of other companies.

    Published on: May 16, 2014

    Albuquerque Business First reports that a new Planet Retail study suggests that the average grocery store size in the US will shrink from 25,500 square feet to less than 24,000 square feet by 2018, and that convenience will become more than location in shoppers' minds.

    “Convenience, convenience, convenience may soon replace location, location, location as the retail mantra. Small-box convenience stores will be among the fastest-growing banners through 2018 with the likes of Walmart Express and Dollar General Market leading the charge,” Sandy Skrovan, research director for Planet Retail, tells the paper, adding, "Everyone covets convenience – shoppers and retailers. Busy lifestyles – two working parents, hectic home and job schedules, lengthy commute times – are driving up demand. Modern meal preparation and eating habits speak to a move toward on-the-run, grab and go consumption.”

    Which means, Skrovan says, that suppliers are going to be pressed to offer more innovative options as they fight for a decreased amount of shelf space.
    KC's View:

    Published on: May 16, 2014

    IGD Retail Analysis reports that Tesco is testing a new service in one of its London stores, called Shop&Go, which gives customers who spend more than a specific amount the option "to leave their groceries at the store and choose a free one-hour slot for them to be delivered to their home. Customers must live within three miles and can currently choose five delivery slots per day between 15:00-22:00."

    Tesco has described the test as "a huge hit," and there are reports that it could be rolled out to other, appropriate stores.
    KC's View:
    This is a very good idea … and I'm not surprised that it has been a hit. If I could just hand my full cart off to someone, knowing that they'd bag it and take it to my house, I think I'd sign up for that in a second…

    Published on: May 16, 2014

    • Walmart said yesterday that in its most recent quarter, total revenues were up by 0.8 percent to $115 billion, but that profit was down five percent and same-store sales were flat … which it blamed on severe winter weather in the US.
    KC's View:

    Published on: May 16, 2014

    LA Weekly magazine reports that the Beverly Hills Whole Foods has been the subject of picketers because of allegations that Millennium Products, manufacturer of Kombucha and Synergy drinks, severely mistreated its workers. There is a lawsuit pending, but the protests apparently were designed to draw attention to the charges.

    Millennium Products has denied the allegations. Whole Foods has said that it is looking into the charges.

    • The Chicago Sun Times reports that A.1. Steak Sauce is dropping the word "steak" from its name, and is launching an ad campaign with the theme, “For Almost Everything. Almost”
    KC's View:

    Published on: May 16, 2014

    • The Food Marketing Institute (FMI) has hired Stephanie Kay Barnes as regulatory counsel. Barnes is the former senior manager, food portfolio and global programs, at the Food and Drug Law Institute, and previously held support positions at the Environmental Working Group, Environmental Protection Agency and the American Beverage Association’s Office of the General Counsel.

    • Daymon Worldwide's CFO and Chief Customer Officer, Rhonda Levene, has sent a letter to supplier partners announcing a company reorganization, including the creation of a new role of Chief Supplier and Category Solutions Officer, a job that she said will be filled by a still-to-be identified outside candidate. Dan Hooker, the company's current Chief Supplier Officer, will depart the company after 14 years, though he will stay through the transition.

    "Under the Chief Supplier and Category Solutions Officer," Levene wrote, "I have asked Alan Landau to take on a new role: Vice President, Center Store. In his new position, Alan will be focused on best practice implementation and enhancing consistency of delivery across our account teams for our supplier partners. This consolidates the jobs currently held by Chris Quinlan and Jerry Lauro, whose positions are being eliminated in the new structure. In addition, we are eliminating the Senior Director position currently held by Jack Locker, who will also be leaving the company."

    And, she said, "I have decided to consolidate the entire private brand field organization in North America under a single leader, and am pleased to announce that Bharat Rupani will serve as Interim President of NAPBD while we search for a longer-term leader. Bharat is a highly-valued Daymon executive, and will remain with the company in a key international leadership role after his successor is on board. As a result of this decision, the positions of Division Vice President are being eliminated and Kim Marsh will be leaving the company after a transition period."
    KC's View:

    Published on: May 16, 2014

    Responding to yesterday's FaceTime about GMO labeling, one MNB user wrote:

    I know I'm preaching to the choir here (i.e. you), but I am absolutely dumbfounded by the ruckus that the GMO labeling has caused within this industry. In a world where folks are busy trying to handle challenges as disruptive as private label, flood of smaller, niche brands, local, online retailing, a flux of smaller format competitors, etc. Do manufacturers really want to bicker about a word on a label?

    I know that you are a fan of the wine industry and I think theirs is an enlightening case study .Despite the complete lack of evidence that sulfites cause any type of allergic reaction, a grass roots movement was able to get rules passed in 1987 requiring the labeling of sulfites. Many in the wine business were aghast at the absurdity of this requirement given the complete lack of science. The problem has become even murkier now that the organic label is involved, as "Organic" wine cannot have added sulfites, though wine made from organic grapes can. Go figure.

    What is clear is that the wine business is healthier than ever, having expanded 20-fold since this "onerous requirement". Likewise, "sulfite-free" wines have never amassed a huge following simply because sulfites are critically important in the winemaking process, and have been so for centuries. Sulfites kill microbes. Only in the hands of a genius are sulfite-free wines drinkable. And I have never, ever, ever found a sulfite-free wine that tasted special. The most common praise I hear is "Not bad for a sulfite-free wine!"

    In both cases, folks within these industries were furious because they were being asked to handle something that wasn't supported by science. But you know what, Who cares?There is no science supporting the idea that bottled water is healthier, but that is a multi-billion dollar industry. And REI is more than happy to help you replace your canteen every year when the folk-science of the day decides that "plastics are evil, aluminum is evil, etc"

    Put this to rest, label the *%&*! danged foods and get on with more important matters.

    From another reader:

    Way to go.   Neat, clean and telling it like it is and, I agree, will likely play out.  Let’s get over the lure of obfuscations and get on with honoring the theoretical intent of our labeling laws and move on without further ado and cost.

    By the way, the first PR out of the mouths of transparency resisters is the cost to those poor consumers who apparently need their championing.  When it is convenient.

    So, why does no one do the math on how much the political lobbying expenses add to the consumer  cost?

    MNB reader Ron Rash wrote:

    We are involved with this issue on a daily basis, and your views are shared by many.  I certainly cannot argue that it is a bad approach.  It is, in fact, quite reasonable.

    However, retailers involved primarily in the organic and natural sector want people to know, with ease of reading, that a product is non-GMO, and I think the fear is that a federal regulation might cave into the larger money interests and prohibit that front panel statement... even if it is not "demonizing."  Call us paranoid, but I believe it is a real fear.

    Regardless of federal standards to come, I believe the natural channel will always look for a way to raise bar when it comes to food sustainability, food safety, health, and other environmental considerations.  So this won't be the end all argument or issue, and I believe we would all be better off if more conventional operators would embrace that.  It is interesting that many, if not most, large scale conventional operators also have substantial organic/natural offerings.  Parting ways with manufacturers may not be that easy.

    As to cost, I wonder if you have ever been involved in changing labels for a private brands program that may have thousands of items supplied by hundreds of vendors?  It is not easy, and it is not cheap, and the decision as to who owns the obsolete packaging isn't made by a giant CPG firm that sees share of market and economic benefit in making a quick label change.  That said, it is the price of keeping up with ever accelerating changes.

    From MNB reader Mike Franklin:

    I would accept that compromise.  Must have been a good panel…

    P.S. If we are concerned about feeding the world’s starving people…tobacco is planted on ~330,000 acres of farmland…which could supply, if converted, approximately 26.4 million bushels of wheat…it could be a start…and wheat is non-GMO…

    MNB user Brian Blank wrote:

    I LOVED your paragraph in today’s Face Time about not wanting to hear any whining about the trouble and expense to change packaging. ( I wish I’d said it.) I’d like to add a real life example to the theoretical one you proposed:  Bonus Packs. CPG manufacturers put out bonus packs seemingly at the drop of a hat—all of which involve special labeling (down to the adjustments made to the servings per container on the nutrition panel), and most of which also require specially-sized boxes/bags/bottles/cans.

    And, from MNB reader Steve Morris:

    I read your thoughts on adding contains GMO’s or Non-GMO’s to the Nutrition Panel.  The Nutrition Panel should stay as a “Nutrition Panel”.  This is more of an ingredient and should be part of the Ingredients.

    I mentioned the other day when writing about speakers at a Portland State University/Center for Retail Excellence conference that, though they both work for Cincinnati-based companies (Kroger & P&G), they both had deep roots in the Pacific Northwest, which I said accounted for the perspicacity.

    One MNB reader objected:

    I do not know how having deep roots in the Pacific Northwest can make one more perceptive but I think I can provide some insight as to the two executives with P&G and Kroger.  I am a lifelong resident of Cincinnati and a past employee of both companies before I help start a research and consulting business.  I don’t think it is just a coincidence that both “new-world” thinkers had a similar message at the same Retail Leadership Forum.  I believe that both P&G and Kroger have benefited from a cross pollination of thinking and learning over the years due to their close proximity.  Their executives serve on the same boards, volunteer for the same charities and play golf at the same country clubs.  Both companies are consumer focused, data driven and excellent marketers that have successfully communicated strong value propositions to their customers.  This is no accident.

    Kevin, please give some props to  Cincinnati.   You don’t have to live or work on one of the coasts to be perceptive.  Remember Cincinnati also gave you Graeter’s Ice Cream.

    For the record, I was mostly joking …
    KC's View:

    Published on: May 16, 2014

    Fed Up is the new documentary that looks at the childhood obesity issue in the US, positing that while the federal government and food manufacturers have taken steps to address the issue, with a much broader focus on reduced fat and low-calories items than ever before, that approach is largely illusory because it has not significantly reduced sugar levels in products. The movie, produced by TV journalist Katie Couric and Laurie David (who also produced ), suggests that when the culture says that if you eat less food in general, eat more low-fat foods, and get more exercise you will lose weight (and if you don't, it somehow is a character failing), it is underestimating the addictive power of sugar and the destructive power of processed foods. And it doesn't just go after the food industry; Fed Up also goes after Michelle Obama, arguing that despite her high-profile efforts to focus attention on childhood obesity, she has allowed herself to be co-opted by big food manufacturers.

    I think that is a fair description of the movie's premise. Also to be fair, the Grocery Manufacturers Association (GMA), which the movie says refused to be interviewed, has quite naturally objected to pretty much everything in the movie - its members make all the products that Fed Up finds so objectionable. It said in a prepared statement that Fed Up "provides an inaccurate view of the packaged food industry.  Rather than identifying successful policies or ongoing efforts to find real and practical solutions to obesity, it adopts a short-sighted, confrontational and misleading approach by cherry-picking facts to fit a narrative, getting the facts wrong, and simply ignoring the progress that has been made over the last decade in providing families with healthier options at home and at school."

    Here's what I think.

    Fed Up is worth seeing. I'm hardly an absolutist on nutrition issues (I munched - somewhat guiltily - on Twizzlers as the movie started, and had a couple of slices of pizza for dinner), but I found many of its arguments to be persuasive, and all of them worth considering.

    I'm not sure that I entirely buy the implication of some sort of conspiracy on the part of the food industry, but the movie is highly effective when its cameras are trained on young people in their early teens who are morbidly obese. Without making a big point of it, we see their parents - also extremely overweight - giving them the worst kinds of fatty foods, with huge bottles of soda on their kitchen counters. There is a suggestion that the parents have less responsibility than food companies for their kids' conditions, and I'm not completely buying that … though there is a high level of ignorance that pervades the attitudes of many of the people portrayed.

    Even if you think that Fed Up is full of it, I think it is worth seeing. Hell, I think DVDs of the movie ought to be distributed to every public school in America. And I have to admit that the next time I think about eating certain foods, I'm going to think twice about it … and I'm very glad that I've totally given up soft drinks.

    The thing about Fed Up is that there will be scientists who will argue both sides of the controversy. But the bottom line argument - that people need to dramatically cut back on the sugar in their diets, eat less processed food and more whole foods - is, to my mind, hard to dispute. And I think Fed Up lays out its arguments effectively.

    I know there are a lot of movie fans in the MNB community, so it may be of some interest to know that Stanley Kubrick's Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb is celebrating its 50th anniversary. (Just recently, we noted that Blazing Saddles is 40 years old … it is almost incomprehensible that these two movies were produced just a decade apart. They seem like they were made on different planets.)

    There is a wonderful essay in The New Yorker about the movie, which is best described as a "nightmare comedy" about nuclear annihilation, starring Peter Sellers (in three roles), George C. Scott (as General Buck Turgidson, who at one point calculates that about in a nuclear war, “I’m not saying we wouldn’t get our hair mussed. But I do say that no more than ten to twenty million killed, tops—depending on the breaks") Sterling Hayden and Slim Pickens.

    The essay can be read here.

    Fabulous movie … and if, for some reason, you've never seen it, you should. It is a seminal piece of moviemaking.

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

    KC's View: