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    Published on: August 7, 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'm coming to you this week from one of my favorite places - the classroom at Portland State University in Oregon, where I've been team teaching a class on Wednesday evenings with Tom Gillpatrick, who heads up the PSU business school's Center for Retail Leadership.

    The class has been focused on CPG and retail marketing, and one of the wonderful things about it has been the participation of so many industry folks who have joined us - not just this year, but every year, coming from as far as Vermont, New Jersey and Pennsylvania to share their knowledge and insights with the class. (If you want to join us next summer, let me know … we'd love to have you.)

    This year, something really special happened a couple of weeks ago. We had two executives join us that night - Lisa Sedlar, the former CEO of New Seasons Market who has launched her own venture, Green Zebra Grocery, and Lauren Johnson, COO of Newport Avenue Market out in Bend, Oregon. They were both terrific, sharing with us war stories about leadership and management.

    Now, among the students in the class is a fellow named Roland Fornataro who had told us of his personal dilemma - he was trying to choose between going to law school and working in a new startup he was part of that makes beef jerky from wine and beer. I'd told him that if he wanted to bring in samples, we'd all be happy to help with his choice.

    Now, the evening that Lisa and Lauren joined us happened to be the night that Roland was bringing samples. Just before class started, we had a brainstorm. I cleared it with Lauren and Lisa and then went to Roland and told him that at some point in the evening, I was going to offer him the opportunity to make a sales pitch for his new product to the executives … and that they were prepared to listen and evaluate his product, which isn't yet in stores. "Just don't screw it up," I told him.

    Talk about pressure. Well, when I turned it over to Roland, he made his pitch, and Lisa and Lauren were magnificent … they were tough but fair, receptive to his pitch but asking him a wide variety of questions about price, promotional support, margin, sustainability, ingredients, transparency, labeling, UPC codes, the whole nine yards. For about a half-hour, all I had to do was hand out beef jerky to the class … and it helped that both Lisa and Lauren said it was some of the best jerky they'd ever eaten. Roland, I have to say, hit it out of the park … he had answers for almost every question they asked, was professional about taking guidance and criticism, and when the evening was over, both Lisa and Lauren had agreed to carry a couple of SKUs of his product.

    When I thought about it later, it occurred to me that there was a lot of learning going on, but very little "teaching." Probably better that way, and I know from reading essays subsequently written by the members of the class, they got a unique view and understanding of the supplier-retailer relationship.

    To me, it speaks to the power of the classroom. This is a wonderful place where lots of interesting things can happen … because we all walk in the door with a completely different mindset. We all learn. If you're ever given the opportunity to spend time in a classroom with a bunch of students, grab it. I can promise you that it'll change you for the better. It has me.

    I'm thrilled to be here, and I'm jazzed that so many of my industry friends keep showing up to help. I'm grateful that Tom Gillpatrick keeps inviting me back, probably figuring that if I keep doing it often enough, eventually I'll get it right.

    Plus, I'll let you in on a little secret: It's enormous fun.

    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: August 7, 2014

    by Kevin Coupe

    There is a piece in Variety this week that grabbed my attention, about an appearance that late night talk show host Conan O'Brien made at a television conference, during which he talked about his brief tenure on the "Tonight Show" (where he succeeded and then was succeeded by Jay Leno, who seemed unwilling to give up the job), and subsequent move to TBS, where he currently hosts a show.

    “I was standing on a fault line,” O'Brien said, noting that on one side was “traditional, old-time viewers”; on the other, “niche, social media driven, very vocal.” He was a guy that didn't even know what Twitter was at that time, but, Variety writes, "that all changed when the younger demographic 'rose up in my defense,' he said. 'I was crippled by my old world view of checking overnight ratings.'

    "During the blackout when he wasn’t allowed to communicate with the press , he was allowed to use social media — 'I sent out one tweet and sold out the comedy tour,' he recalled. 'I didn’t even know what the show was, and we sold out venues across America. To this day, it’s one of the most fun things I’ve ever done.'

    "That crash course in social media revolutionized his perspective — and what would become his late night show on TBS. “I now live in a world where some of my most ardent fans don’t own televisions,” he said. “At first I was upset by that, and then I realized I had this freedom to reach them in new ways … Now when people get excited about something, they make it their own. They grab it, they share it with their friends. It’s a much more intimate experience."

    Which speaks volumes, I think, about so much other than late night television talk shows. We live in a world where traditional expectations simply don't mean as much as they used to, and we all have to find new measurements for what is successful, what is meaningful, and what moves the needle in significant ways.

    We're all standing on fault lines.

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

    Published on: August 7, 2014

    Amazon announced yesterday that it has expanded its same-day delivery service to "customers in Baltimore, Dallas, Indianapolis, New York City, Philadelphia and Washington DC metro areas, with more than a million eligible items now available for same-day delivery." Amazon said that "customers can order as late as noon, seven days a week and get things like popular movies, video games, last-minute travel needs, back-to-school supplies and family necessities delivered to their home the same day."

    The "Get It Today" service has to this point been offered only in Los Angeles, Phoenix, San Francisco and Seattle metro areas. (Ironically - or maybe not - three of those four test markets also offered Amazon Fresh.)

    Amazon said that its Prime members "pay only $5.99 for all the same-day delivery items they can order. Pricing for non-Prime customers remains unchanged, with a $9.98 fee for the first item and $0.99 for each additional item."
    KC's View:
    Ironically, this expansion comes just a week after Amazon said that it was actually willing to pay Prime customers to accept slower deliveries, saying that it is offering a $1 credit to go toward Prime Video to shoppers to choose the "No Rush" shopping option, which gets the item/items to them in five to seven days.

    Which essentially means that once I pay Amazon for the privilege of Prime membership, to get me products faster, they're willing to then pay me to get my products slower?

    That's an interesting approach to take, especially at a a time when it is both emphasizing same-day delivery to an expanding customer base and slowly raising prices on Prime membership.

    I've gotten a number of emails from readers decrying the whole "speed matters" approach to shipping, wondering why we all can't be more patient and stop demanding near-instant gratification. And while I can appreciate their yearning for less-demanding times, there are two basic facts here. One is that Amazon has trained us to expect - and even pay for - faster deliveries. (Hell, they've even floated the idea of using drones!) The other is that e-commerce companies, if they want to compete with bricks-and-mortar stores that offer instant gratification, have to figure out ways to meet that challenge.

    It seems to me that there are a few things going on here. Amazon - pushed by analysts and investors to start showing profits rather than just reinvesting the money makes into new services (such as same-day delivery) - has realized that it has to find ways to a) play with consumer expectations, and b) get people to pay for expanded services, rather than just expect them to be value-added.

    This may be a tougher tightrope to walk than Amazon expected, especially because of the appearance that it is sending mixed messages. Some of the moves that it is making seem focused investor-focused rather than customer-focused, which seems antithetical to the company's culture and longtime value proposition. There's nothing wrong with making money, but Amazon has to be careful about disenfranchising longtime customers, especially those who have believed what it has told us - that Amazon is different.

    Published on: August 7, 2014

    The Boston Globe has a story about James Gooch and Felicia Thornton, the new co-CEOs of Market Basket, who find themselves in the middle of an epic battle between cousins representing two sides of the family that owns the company, and between the board of directors and employees almost fanatically loyal to the previous administration … while all the while trying to run a company that seems to have almost completely gone off the tracks.

    As often noted here … The longtime family feud boiled over with the move by Arthur S. Demoulas, to oust CEO Arthur T. Demoulas due to a conflict over the company’s finances. The fight is characterized differently by the two sides. The Arthur S. Demoulas faction argues that Arthur T. Demoulas spends money irresponsibly and refuses to take direction from the board. The Arthur T. Demoulas side maintains that his cousin is fueled by greed, only interested in raising prices, cutting employee compensation, and threatening the formula that has built the company to a New England success story.

    The new Globe reports that "Gooch and Thornton still have to figure out how to enforce a deadline they set for employees to get back on the job. While most full-time workers have continued to report for duty — protesting on their own time — hundreds of others have been staying away from the stores and ignored Monday’s deadline to return. Some are showing up for work, but openly encouraging customers to boycott Market Basket.

    "Meanwhile, Gooch and Thornton’s positions appear just as unstable. Market Basket’s board of directors is mulling offers to purchase the majority shares controlled by Arthur S. Demoulas, Arthur T.’s cousin and rival. At any moment, the board could pull the trigger on a sale that almost certainly would mean pink slips for the executive tandem."

    Whatever happens, Gooch and Thornton will be well-compensated for their efforts: "Two store-level managers who attended question-and-answer sessions with Gooch and Thornton shortly after the leadership change said they were open about having guaranteed contracts that will pay them for three years, no matter how long they survive. Chief executives at a company the size of Market Basket would typically command annual salaries of between $1 million and $3 million, said Clark Waterfall, managing director of BSG Team Ventures, an executive search firm in Boston."

    There also have been questions raised by Market Basket employees about the co-CEOs' backgrounds:

    "Gooch stepped down under board pressure as chief executive of Radio Shack in 2012 after failing to turn around the troubled electronics retailer," the Globe writes, while "Thornton cited personal reasons when she resigned in 2011 as chief executive of Knowledge Universe, a Portland, Ore., company that runs classroom and online courses from pre-K to graduate school … Thornton served as chief financial officer of supermarket operator Albertson’s between 2001 and 2006, a period when the grocery chain closed 165 stores and laid off about 20 percent of its managerial and administrative staff."
    KC's View:
    The tenor of many of the comments seems to be that Gooch and Thornton are hired guns with limited resumes who have little or no sense of the Market Basket culture … but to Arthur S. Demoulas and his supporters, that likely is seen as an advantage.

    I will tell you this. Since Gooch and Thornton were named co-CEOs, I've gotten a lot of email attacking them as being incompetent and totally out of their depth at Market Basket. I haven't run the emails because they seemed so personal … but I think it's fair to report on them and characterize their content.

    In other Market Basket news, BTW, the Boston Globe reports this morning that an unidentified supermarket company has made a bid to acquire the retailer.

    "The bidder," the Globe writes, "whose identity was not revealed, would at most be able to buy only a slim majority interest of the grocery chain — the 50.5 percent that is owned by Arthur S. Demoulas — because Arthur T. and his side of the family have declined to sell their 49.5 percent.

    "The unidentified potential buyer has expressed a willingness to acquire part or all of the 71 store chain, according to people briefed on the offer. In such a sale, an outside buyer would be forced to deal with Arthur T. and the thousands of employees who have rallied on his behalf in recent weeks."

    It seems to me that it would be very interesting if an outside supermarket retailer bought Market Basket and instantly struck a deal with Arthur T. to get the company back on track … and, as part of the deal, tried to work out ways in which to export the value-driven format to other parts of the country. It would make very little sense to buy the company, absorb all the headaches and try to force-feed a resolution to an employee and consumer base that seems recalcitrant at best.

    One other thing. An MNB reader passed along to me a piece from Slate that seemed to crystalize the divide between the two factions of the Demoulas family. The piece read, in part:

    "An ugly legal battle raged last year in which Arthur S.’s side of the family, who control 50.5 percent of the company, tried to grab some $1.5 billion in payouts on top of the $500 million they’d made in the past decade … the generosity of Market Basket’s profit-sharing program particularly irked some board members. In one instance back in 2008, Arthur T. made sure the company made up for a loss of $46 million that the profit-sharing fund suffered during the economic crisis."

    No wonder the employees feel so passionately. Arthur T.'s side of the family make them feel like assets, not costs … and people can respond passionately when they feel they have skin in the game.

    Published on: August 7, 2014

    There is story worth reading, or listening to, if that is your preference, from "Marketplace" on National Public Radio (NPR), about whether or not the public should know how much money retailers take in through the federal food stamp program:

    "Here’s the background: Last year we spent $76 billion tax payer dollars on the food stamp program (officially known as the Supplemental Nutrition Assistance Program or SNAP). The money goes to about 47 million low-income Americans, who use it to buy food at more than 250,000 retail stores across the country.

    "But … exactly which stores and which companies benefit most from those food stamp dollars is something the federal government has never disclosed. Officials have long argued they are required by law to keep the information secret, in order to protect retailers."

    That may be changing … though it is the US Department of Agriculture (USDA) that seems to be okay with greater transparency, and retailers that are resisting, at least for now.

    Check out the story here.
    KC's View:
    How public dollars are spent deserves maximum transparency, I think, except when it comes to national security issues. I'd frankly like to know how much food stamp money is going to which retailers … among other things, it might put into context requests for other things like tax abatements, or the expressed desire to move a headquarters abroad to avoid paying taxes.

    Published on: August 7, 2014

    The Wall Street Journal has an interview with David Cheesewright, CEO of Walmart's international division, in which he "outlined how he plans to jump-start the flagging international business."

    Excerpts:

    • "I have four specific initiatives. First, create a platform for sustainable growth in China because based on where growth is coming from, if you get it right there, life becomes a lot easier. Second, turn around our operations in Brazil. We've talked about that for a while but I think we've got some high caliber people there and we're encouraged by recent results there.

    "Third, we have to rejuvenate Mexico. Some of it has to do with cyclical economic issues, but some of it is self-imposed [as the company tries to improve the quality and price gap versus competitors]. I don't think we'll get back to the high growth levels from years past, but there's a lot we can do to help them become a more mature business.

    "And fourth, we have to drive e-commerce."


    • "There are two key trends we see in every country. First, a rapidly changing customer that is rapidly moving online. Second, declining growth rates.

    "Looking at any metric, whether it's gross domestic product or retail sales growth, virtually everywhere we are seeing a slowdown. The nice thing about international is that there are still markets with pretty good growth rates, including Brazil, China and Mexico.

    "If you look at the countries we currently operate in and look forward to the next 10 years, we have access to more than 50% of the growth that's going to occur on the planet. That's pretty good coverage versus our competitors and the biggest chunk of that will be outside the U.S.

    "Once you know which countries you're going to focus on, then you have to think about whether you have the right formats. E-commerce is going to be incredibly important to us and it doesn't matter which market we're in. We have to excel at the fundamentals of e-commerce and then the big advantage for Wal-Mart will be the intersection between online and the physical stores. No one else has the portfolio of assets that we have to do that."
    KC's View:

    Published on: August 7, 2014

    The Washington Post reports on a new BI Intelligence report saying that "women control about 80 percent to 85 percent of household spending, but they account for a much lower proportion of online spending … Although 57 percent of U.S. women and 52 percent of men made a purchase online in 2013, men tend to make more purchases on their smartphones and tablets than women."

    And, the story says, "22 percent of men bought something on their phones while 18 percent of women did; 20 percent of men made purchases on their tablets, compared with only 17 percent of women."
    KC's View:

    Published on: August 7, 2014

    Bloomberg Businessweek reports on a new Nielsen survey saying that "91 percent of people said they snack daily, including 25 percent who snack three to five times a day and 3 percent who are 'always snacking.' About 8 percent say they 'always' binge snack, and another 31 percent do so occasionally."

    In addition, the survey says, "Nearly one in four women … said they snack three to four times a day. A little less than one in five men do." And, while "both men and women reported satisfying hunger and cravings as their top reason for snacking," the survey also says that "a greater share of women report snacking for stress relief, because of boredom, or as an indulgence."


    • In Minnesota, the Star Tribune reports that Target Corp. "is adding its name to a legal defense of gay marriage, joining other large companies that are taking a stand, just four years after the retailer came under criticism for supporting a strident opponent of same-sex unions.

    "Target said it has signed a court brief backing marriage equality in a pending court case and publicly declared its support of gay marriage, a move similar to those taken by Starbucks, Intel and Apple."

    The story goes on to note that "Target has come under fire in the past from gay rights activists who threatened boycotts after the retailer — along with Best Buy and 3M — donated hundreds of thousands of dollars to an organization that supported Republican Tom Emmer, a vocal opponent of gay marriage, in the 2010 Minnesota governor's race."
    KC's View:

    Published on: August 7, 2014

    …will return.
    KC's View: