business 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 23, 2014

    by Kevin Coupe

    There are certain words that I love to find an excuse for writing or saying, probably because I'm a 12-year-old kid at heart.

    "Fart" would be one of those words. It is just a funny word.

    Which is why I love talking and writing about the "Old Fart's Rule," which says that the likelihood of an innovation succeeding usually is in direct relation to the number of old farts who say, "This will never work,"

    Not only is this demonstrably true, but it also allows me to work the word "fart" into the conversation.

    Which is why I was thrilled this morning - it is Friday, after all, and has been a long week - when I saw in the Chicago Tribune that "Farts Candy has won the Most Innovative Product Award for novelty/licensed treats at the National Sweets and Snacks Show in Chicago,"beating out more than 250 other products for the honor.

    The story says that manufacturer Leaf described Farts as similar to a Nerd, but chewier and with "more intense flavors." And, the Tribune writes, "Farts are available in four varieties – Fruity, Sour, Pure, and ‘Almost No Sugar.’"

    Pure Farts?

    I couldn't resist.
    KC's View:

    Published on: May 23, 2014

    The Baltimore Business Journal reports that at a London investor conference this week, Kroger CFO J. Michael Schlotman said that the company's new Harris Teeter division gets a little more credit for pricing than it deserves: "The actual pricing at Harris Teeter, going into the time of the merger, was a little worse than the customer’s perception of the pricing,” he said, noting that Kroger knew it would have to invest in lower prices for the chain.

    "At the time of the merger," the Journal writes, "Kroger said it expected to achieve cost savings of $40 million to $50 million from the deal, largely from enhanced scale and other efficiencies, within the next four years. Those synergies will allow it to reinvest in Harris Teeter, including pricing, Schlotman said.

    In addition to investing in lower prices, Schlotman told the conference, the company also "sees opportunities to grow Harris Teeter's footprint in the Washington, D.C., and Baltimore markets." It currently has more than 230 stores in eight states and the D.C. area."
    KC's View:
    I will be very interested to see if Kroger/Harris Teeter see real opportunities to move up the east coast into places like New Jersey, New York and New England. They're not there, and I wonder if Harris Teeter could be an engine of growth for Kroger in the region.

    Published on: May 23, 2014

    Internet Retailer reports on how Walmart "plans a national rollout starting this week of electronic receipts that the retailer will text to customers. That will enable the big retail chain to accumulate large quantities of data about what a shopper buys and send personalized offers to shoppers who opt into the program … Wal-Mart will mine the data to provide new services for shoppers, Thomas says. For example, it could analyze the items a Wal-Mart shopper buys each week and provide her with a shopping list of items she may want on her next trip to a Wal-Mart store. Or, if a consumer regularly buys cereal, Wal-Mart can send her a coupon for her favorite brand."

    The story quotes Gibu Thomas, Walmart's senior vice president of mobile and digital media, as saying that this opt-in program "it will produce a fire hose of transactional data.”

    In addition, Internet Retailer writes, "Thomas says the e-receipt initiative is somewhat similar to the Savings Catcher program Wal-Mart rolled out last month. A consumer who signs up is alerted when an item she bought is offered at a lower price by a Wal-Mart competitor in the same market. When that happens, Wal-Mart refunds the consumer the difference in the form of a mobile gift card she can use on her next shopping trip." The Savings catcher program has been successful in test, and a national roll-out is planned, Thomas says.
    KC's View:
    This is a very savvy use of technology, and will allow Walmart to target customers to a degree it never has before. This is a company that has done very little in the area of loyalty marketing, and this could open a door for the company to explore a lot of new territory.

    I say this a lot - retail success in the modern world depends on having actionable data and then actually acting on it.

    Published on: May 23, 2014

    Costco said this week that some of its Seattle-area stores will begin phasing out tobacco sales, having already - and quietly - eliminated them at more than 50 percent of its US stores.

    The company said that more than 90 percent of its tobacco sales are to small businesses such as convenience stores, and a spokesman said that "selling such a regulated product directly to consumers" just did not need to be part of Costco's portfolio.
    KC's View:
    Good for Costco (even though there probably won't be much impact from getting out of a declining category). Said it before and I'll say it again - there is a special circle of hell reserved for tobacco marketers.

    Published on: May 23, 2014

    Bloomberg has a story the premise of which seems to be self-evident - that Sprouts Farmers Markets is undercutting Whole Foods on price - by about 13 percent - an approach that could focus some strategic adjustments by Whole Foods in affected markets.

    The story says that Sprouts' price advantage generally is in the area of promotional discounts, and that when those are factored out, the price differential is much lower, about two percent.

    According to the story, "As natural and organic foods go mainstream, Whole Foods has already been lowering its prices to appeal to more value-conscious shoppers. The Austin, Texas-based grocery chain is especially focused on reducing the costs of fruits and vegetables. Still, concerns about mounting competition from both organic-food sellers and traditional supermarkets have taken a toll on the company’s stock."
    KC's View:
    No question in my mind that competition from Sprouts, not to mention Walmart and Target in the organic segment, means that there's going to be greater pressure than ever on Whole Foods. Now we're gonna find out how good the folks at Whole Foods really are...

    Published on: May 23, 2014

    The New York Times reports that when Sears Holdings announced its Q1 results yesterday, its loss was $402 million (compared to $279 million during the same period a year ago). Revenue was down 6.8 percent. And the company said it will close at least 80 Sears and Kmart stores this year, in addition to the more than 100 that were closed a year ago.

    "Sears has been trying to transform its traditional retail business to a store that focuses on selling products to members, and the membership is growing," the Times writes. "Members of its Shop Your Way rewards program accounted for 74 percent of eligible sales at Sears and Kmart stores in the first quarter. But many analysts doubt the program’s worth, as it essentially gives discounts — and margin — away for nothing."

    Sears already has spun off its Lands' End business, and reportedly is looking into selling off its Canada business.
    KC's View:
    Gee, it was just a month ago that in his annual shareholder letter, Sears chairman/CEO Fast Eddie Lampert said that "2014 may well be a year in which Sears Holdings begins to clearly demonstrate the advantages" of its transformation to an integrated retail platform, and that "the entire retail industry is headed to where we already are."

    The traditional retail industry better hope not. Because that sound you hear is this big, lumbering retail boat hitting an iceberg … and it isn't going well for the boat.

    Published on: May 23, 2014

    • Walmart said this week that it will host its first "Made in the USA" event for suppliers on July 8, in Bentonville, Arkansas. It is an "open call" event, with any and all manufacturers able to attend.

    During the event, Walmart says, "suppliers will have a chance to meet with senior leaders, buyers and the company’s merchant leadership about products that have the potential to end up on Walmart’s shelves." The company has committed to spending an additional $250 million on US-made products in the coming decade.
    KC's View:

    Published on: May 23, 2014

    The Food Marketing Institute (FMI) has announced "the inception of new and original resource for senior merchandising executives throughout food retailing, the Senior Merchandising Executive (SME) Forum." The SME Forum will debut at the Association’s annual event, FMI Connect, next month in Chicago.

    The SME is described as designed "to provide chief merchants from food retail in the U.S. and Europe, and interested non-food retailers around the globe, a meeting place and virtual network to address key issues that impact their individual and company’s performance in a unique, non-competitive environment."

    Mark Baum, senior vice president of industry relations and chief collaboration officer, says that "the SME Forum will become a part of a collaborative group of food retail and manufacturer leaders, to tackle industry-wide challenges and initiate large-scale transformative change.”
    KC's View:

    Published on: May 23, 2014

    Bloomberg reports on a real shocker - that Tesco CEO Philip Clarke and other top executives at the embattled retailer "will miss out on their annual bonuses for a second year running after failing to reverse falling profit at Britain’s largest grocer."

    The story notes that a lack of bonuses seems to be hitting top execs at a number of British retailers: Clarke and outgoing Chief Financial Officer Laurie McIlwee are not the only U.K. retail bosses not to receive bonuses. Dalton Philips, CEO of William Morrison Supermarkets Plc and Marks & Spencer Group head Marc Bolland are also losing out.

    • Unilever said yesterday that it will sell two sauce brands - Ragu and Bertolli - to Japanese sauce company Mizkan Group. The cost: $2.15 billion.

    Unilever said that the move was part of an overall effort to sharpen its focus on core businesses.
    KC's View:

    Published on: May 23, 2014

    • Natural Markets Food Group, parent company to of the Mrs. Green’s Natural Markets, announced that Robin Michel is stepping down as CEO of Mrs. Green's after less than two years in the job that resulted in considerable labor tumult. She now will serve as an advisor to the parent company, and a search is being conducted for a successor at Mrs. Green's.
    KC's View:

    Published on: May 23, 2014

    Bill MacAloney, a longtime food industry executive as president and CEO of Jax Markets in California, as well as a constant and dedicated presence in a wide variety of industry roles for more than a half-century, has passed away after a long battle with cancer. He was 79.

    MacAloney began his career in the food industry unloading boxcars in a Mayfair Markets warehouse, and founded Jax Markets in 1970. MacAloney served on the Food Marketing Institute (FMI) Board of Directors from 1984-2013, and at various times held the positions of Vice Chairman of the Board for Public Affairs and FoodPAC Committee Chairman.

    In 1999, MacAloney was the recipient of the Glenn P. Woodard Public Service Award for his outstanding leadership in the area of public affairs, and in 2013, he was awarded the distinction of FMI Distinguished Industry Leader for his longtime leadership and commitment to FMI and the food industry.

    MacAloney also served on the boards of Western Association of Food Chains, Unified Grocers, California Grocers Association and as President of the Food Industries Circle for the City of Hope. Active in politics and in his local community, he served as Mayor of Villa Park, California.

    MacAloney is survived by his wife of 47 years, Gwen, as well as by numerous children and grandchildren.
    KC's View:

    Published on: May 23, 2014

    Responding to yesterday's FaceTime about GM and the business lessons from the carmaker's debacle, one MNB user wrote:

    Although not involved in the automotive industry, I recently spent 4 years living in Suburban Detroit.  As a result, many (most) people that I associated with in the neighborhood, sports, school and church worked in leadership positions in the auto industry.  I can attest that the attitude of people from GM, and the auto industry in general, is that quality and safety are someone else’s problem down the line.  Products with known issues go out all the time, with the idea that the car can be fixed by the dealer later when the customer brings the car or truck back with the problem.  It really is a crazy culture.  The worst part is that no one in the Detroit area pays anything like the rest of the country for vehicles, since almost everyone qualifies for some kind of employee discount even if the dealer has to be really creative, so people lease vehicles on the cheap and view them as disposable.  If you are in management, you get a different free vehicle every so many months, so you never have to deal with the issues a regular customer would have to deal with.  It is true that one should never buy the first year after a model change since the cars go out with so many known issues—and the management just shrugs and makes plans to fix the issues in future production years.

    From another:

    Great commentary around GM. My family has close ties to Toyota and it sickens me that GM has been fined $35MM, with so many people dead and Toyota was fined $1.2B. I guess it doesn’t make sense for the government to fine a company that they just recently bailed out. Oh well, Toyota’s $60B+ in cash reserves still means they could probably buy out the big three if they wanted to. I take poor treatment of Toyota very personally, obviously. It’s just frustrating because they treat their employees (and their families) and the communities they are in so well. Also, the comment from John Oliver had me nearly fall out of my seat laughing.

    Just as a side note, John Oliver's "Last Week Tonight" on HBO has become appointment television for me. It is terrific…

    And another:

    Couldn’t agree more and moral compass is a very apt choice of words.  Imagine if we, in the food industry, behaved in this manner.  Yes, we do know that some have and it is deplorable.  We take food safety pretty damn seriously; why wouldn’t an auto manufacturer.

    I took over my dad’s 2007 Chevrolet Cobalt, last year, when he no longer could drive it.  My son now does.  Sure enough, we received the recall notice for the ignition issue.  However, to add insult to injury, the vehicle, which only has 37,000 miles had its engine blow a few weeks ago.  My mechanic tells me that it is nothing that we have done; it just ‘went’.  Do you think GM is interested in helping me out?  Ha!  I am putting in a used engine for $2000 and then taking it in for the recall work.

    I was a GM guy for well over 20 years (6 GMC Safaris).  In my driveway now are a Honda, Toyota, Nissan, Mazda and one broken GM!

    They’ve earned this reputation and if they go bankrupt again, so be it and no amount of bailouts should apply.

    Please sign me an unhappy GM customer in Canada.

    And still another:

    I laughed out loud at your line this morning about GM, “Here's the lesson, for all of us. Next time you have to make a business decision with any financial or ethical considerations, think to yourself, what would GM do? And then do the opposite.”

    Just one question - does Johnny Case (Cary Grant) know that you borrowed his line from “Holiday”?

    Extra credit for the movie reference!

    On the subject of Trader Joe's being ranked as the nation's favorite grocery store, MNB reader Jennie Palluzzi wrote:

    I shop almost exclusively at Trader Joe’s and my local farmer’s market, and I run a food blog. You can shop there if you cook, and you know everything doesn’t have HFCS (a huge concern of mine) and is relatively cheap compared to your local grocery store (mine is Ralphs.) I think it is always about WHAT you’re buying, not WHERE you’re buying it from.

    And from another:

    In my mind Trader Joe's is well deserving of the title of America's favorite grocery store.

    Of course we can challenge the report's methodology, and we can question what the label "favorite"l means. But I will submit to you that I have never, ever encountered a retail store - in any category - whose arrival is met with as much fanfare and passion. People from all walks of life and all manner of backgrounds can barely contain themselves when learning of a new Trader Joe'Wegmanss coming to their neighborhood.

    Wegman's is up there, but there aren't yet enough differentiating features to make the average CONSUMER take note. And as to the argument about private label, any analyst who speaks of Trader Joe's with words like "private label" is demonstrating that they don't understand the consumer. Trader Joe's is no more a private label retailer than Abercrombie & Fitch or J. Crew are private label retailers.

    The beauty and power of Trader Joe's is that people are shopping Trader Joe's products not because they think of them as less expensive or higher quality substitutes for traditional brands. They are shopping them because they are Trader Joe's products! Thinking about things this way, it's easy to see that Trader Joe's has no real direct competition, much like the Apple stores.

    KC's View:

    Published on: May 23, 2014

    I know from experience that we have a lot of movie fans reading MNB, and a subset of this group includes people who love The Shawshank Redemption, a movie that is much-loved by filmgoers in general (and one of the chapters in "The Big Picture: Essential Business Lessons from the Movies").

    Well, if you fall into any of these groups, I'd recommend you read a story in this morning's Wall Street Journal entitled "The Shawshank Residuals," which looks at the movie's enduring popularity, how its profitability reflects the changing realities of movie economics, and examines the irony of the fact that when Shawshank was released, it underperformed.

    It is a fascinating story, and you can read it here.

    As mentioned here a few weeks ago, Reed Farrel Coleman will be taking over authorship of the Jesse Stone series of novels, which were begun by Robert B. Parker and, after his death, continued by Michael Brandman. The Brandman novels were okay, but betrayed the fact that the author's roots were in TV and movies, having written, produced or directed the Jesse Stone TV movies that starred Tom Selleck. Writing a movie is a very different talent than writing a novel, and Brandman never quite made the leap; if the books succeeded at any level, it was because Jesse is a character with enduring audience appeal.

    I'd never read any of Coleman's work, though he is an accomplished novelist, so I downloaded a copy of his "Redemption Street," which takes place in 1981 and features a former street cop named Moe Prager, who has retired from the force because of injury and now helps his brother run a Manhattan wine shop. It is an excellent piece of work, dark in all the right places and featuring a main character who, in the best tradition of the genre, has to face the mysteries of his own life while trying to bring some sort of resolution to a long-festering crime. Coleman's a real novelist, and I'm looking forward to seeing what he brings to the Jesse Stone series. (I met him recently, and he told me that while he respects Parker's work, he is not reverent about it … and so he's almost certain to put some spin on his fastball. Which the series needs.)

    Neighbors struck me as emblematic of the state of the US film comedy. It has a good set-up (what happens when a frat house moves into a nice middle-class neighborhood), and strong actors (Seth Rogan and Rose Byrne, playing thirtysomething new parents who are not quite comfortable with their new identities as nice middle-class suburbanites). But beyond that, it is a ramshackle affair - funny in spots, very funny in others, but seeming to lurch into raunchy humor whenever things get slow.

    I like raunchy humor just fine - Animal House and Blazing Saddles are two of my favorite movies, though I'm aware that they are 36 and 40 years old - but Neighbors doesn't seem to have any sort of guiding intelligence. It could have been much, much better…
    KC's View:

    Published on: May 23, 2014

    Monday, May 26, is the annual Memorial Day national holiday here in the US, a day upon which we memorialize the sacrifices of our Armed Forces, as well as celebrate the unofficial beginning of summer. MNB will be taking the day off, and will return on Tuesday morning.

    Have a great weekend.

    KC's View: