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    Published on: November 6, 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.

    This morning, I'd like to ask for your indulgence as I go a little off the whole news-in-context-analysis-with-attitude reservation…

    So, as many of you know, I had a birthday this week. Sort of a big one. I turned 60. I know you know it because Michael mentioned it in his column on Tuesday, and because I got a staggering amount of email about it, not to mention a bunch of notes from people on Facebook.

    (I know that, doing what I do for a living, I probably should be less amazed by what happens on Facebook. But I still am. I got birthday wishes from Paul Alessi, with whom I went to high school and have not seen since 1972, and from Theresa Gusmorino and Jay O. Sanders, with whom I went to acting school in 72-73. This just totally rocks my boat.)

    I want to thank you all for the notes and good wishes. Being part of the MNB community has been a great gift, and this week served to yet again remind me of that.

    Now, I have to be honest. Hanging out with friends over the weekend, I was in a pretty good mood about turning 60. I figured that it was better to embrace it than moan about it, because, when you think about it, turning 60 certainly beats the only alternative. But on Monday night, during the last few hours of my fifties, I got a little cranky. Not entirely sure why, except that even though 60 is just a number, it is still a pretty big number. And as I think many of us feel that as we get older, for some reason time picks up speed. There are no u-turns, no rest stops.

    I thought about my mom, who only made it into her late sixties, and my sister, who died this summer still in her mid-fifties. I thought of friends of mine who have endured a variety of ailments. I thought of funerals I've been to…yeah, it was that kind of night. I found myself thinking of the old Woody Allen line: "Life is full of misery, loneliness and suffering. And it's all over much too soon."

    That was the night before my birthday. On November 4, I got up and did MNB. I jogged four miles. Had lunch with my kids. Did some more writing during the afternoon. Had dinner and birthday cake with my family. It was a good day, with no time for thinking about rest stops or u-turns or any of that other stuff.

    I did, however, find myself thinking about the lines that Jason Robards, as Ben Bradlee, said to Woodward and Bernstein towards the end of All The President's Men:

    "You guys are probably pretty tired, right? Well, you should be. Go on home, get a nice hot bath. Rest up... 15 minutes. Then get your asses back in gear."

    I think that's pretty smart advice. Because what matters is not rest stops, but staying in gear, staying in motion, keeping momentum.

    There's lots to do. In just a few weeks, I'll be celebrating 13 years of MNB. I'm thinking that it is going to be at least another seven, and maybe another 12. Or more.

    Because the real lesson of turning 60 is that numbers don't matter, or that at least we should delude ourselves on this point. I always say that my dad, who was an elementary school principal, only got old when he retired. Before that, he used to spend lunchtimes on the playground, playing stickball or basketball with the kids while the teachers were eating lunch. Staying in gear, staying in motion, keeping momentum.

    I was talking to my brother, Tim, about how I kind of got morose during my last few hours in my fifties, and he said something that was one of the nicest things anyone has ever said to me. "I wouldn't worry," he said. "You seem like you're always getting your money's worth."

    I like that. I'm not sure it always is true, but it definitely seems like exactly the right goal.

    Staying in gear, staying in motion, keeping momentum.

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

    KC's View:

    Published on: November 6, 2014

    Delhaize Group said yesterday that it is selling its 66-store Bottom Dollar chain in Pennsylvania to Aldi Inc. for $15 million.

    The value-driven chain was launched in October 2010. According to the announcement, "The transaction is expected to result in an asset impairment and other charges for Delhaize Group of approximately $180 million."

    The stores are expected to stay open under the Bottom Dollar banner through the end of the year, and then will be closed and converted to the Aldi brand.

    Frans Muller, president/CEO of Delhaize, released a statement that said, in part, that "the divestiture of Bottom Dollar Food further simplifies our business, increases debt capacity and creates shareholder value. Today's announcement is consistent with our strategy, announced in March, of investing in and focusing on our core markets."

    Delhaize sold off its Sweetbay, Harveys and Reid's supermarket chains 18 months ago for $265 million. And it was just a week ago that the company announced that Beth Newlands Campbell, president of its Food Lion chain, was leaving the company, to be replaced by Meg Ham, who had been serving as president of Bottom Dollar.

    The announcement came as Delhaize announced that its US third quarter comparable store sales were up 5.3 percent because of what Delhaize Group CEO Franz Muller called "both continued good momentum at Food Lion and favourable, albeit temporary, competitive dynamics at Hannaford" (by which he meant the late summer implosion at Market Basket).
    KC's View:
    I have to be honest here - apparently I've gotten Delhaize all wrong. It always seemed to me, as it was opening formats like Bottom Dollar and Bloom, that it made sense for them to try and capture different segments of the marketplace as a way of fending off a variety of competitors. When they closed down Bloom, I figured that they'd keep Bottom Dollar because it would allow them to compete more effectively with the discount stores with which Food Lion - which was built on a low prices promise - no longer was effectively competing.

    Oh, well. What do I know?

    One thing that seems clear is that Delhaize is cutting out anything that doesn't seem "core." But there remain people within the organization who are wondering with a sense of vague disquiet how deep the cuts will go.

    Published on: November 6, 2014

    by Kevin Coupe

    Variety reports that Netflix has signed a deal to produce an original series based on the popular children's book franchise, "A Series of Unfortunate Events” by Lemony Snicket.

    Describing the books as "unique, darkly funny, and relatable," Netflix said that the series - like the books - will be designed to appeal to both parents and children. No word on when the series will debut.

    The books are written by Daniel Handler, who says he is “often mistaken” for the books’ author, Lemony Snicket.
    This strikes me as a smart move from the people who brought us decidedly adult entertainments such as "House of Cards" and "Orange Is The New Black." The goal, as we've suggested before, is to as much as possible create a competitive ecosystem that makes Netflix the best, first option for entertainment.

    By optioning the Lemony Snicket books, Netflix is trying to get customers while they're young … making sure that people will turn to Netflix as often as they turn to iTunes and Amazon.

    It is a good lesson for any marketer. And an Eye-Opener.
    KC's View:

    Published on: November 6, 2014

    Kantar Retail is out with a market basket analysis of Amazon's Prime Pantry service, which it has used as an alternative to Subscribe & Save, providing delivery of popular household and grocery essentials in regular sizes, as opposed to the large packs that it primarily has sold. (Products are shipped in boxes that are four cubic feet in size, holding up to 45 pounds, for a flat $5.99 fee.) The conclusion: Prime Pantry is not the threat to membership club stores that some believed it would be. "In comparing items available in club with those on Prime Pantry, Costco beats Pantry on a price-per-unit for all but two items, 93% of the basket - and Sam's Club was not far behind," the study says, also noting that "items cost an average of 25%–30% more on Pantry when compared to in-club items on a price-per-unit basis."

    Prime Pantry's "merchandising approach, unique business model, and pricing strategy have little in common with clubs and that the new program does not pose a direct threat to clubs today," the study says.

    Sara Al-Tukhaim, director of Retail Insights at Kantar says that Prime Pantry "cannot leverage the physical space that the clubs use to offer members the biggest pack sizes available at the lowest prices. And, clubs are able to further differentiate their products with unique private label offers and in-club experiences that keep members coming back. Pantry's threat is more centered on the convenience of online and Prime membership growth than on its merchandising strategy."

    However, the study also notes that "there is a strong overlap between club shoppers and Amazon Prime members. Kantar Retail ShopperScape® data reveals that 49% of club members have a Prime membership, and 24% of Prime members have a club membership."
    KC's View:
    The real problem with Prime Pantry, I believe, is that it really has been badly marketed. I'm a big Amazon shopper, and they've done almost nothing to bring me into the Prime Pantry fold, even as product availabilities in the Subscribe and Save service seem to be diminishing. I'm really surprised by that … it seems out of character, and not a sustainable way to grow sales and profits.

    Published on: November 6, 2014

    BostInno reports that in addition to opening its third Massachusetts store last week - a unit in Burlington - Wegmans also has "added its own grocery shopping app to the Apple and Android stores as well … The app lets you build a shopping list by searching for items, scanning the bar codes of items you still have at home or browsing the virtual aisles programmed on the service, which correspond to the layout of whichever location you choose. Wegmans' original recipes are stored in the app, so you can add complete recipe ingredients to your list; users can also share their list with family members to make sure everything they need is there. Other features include an estimated bill total for budgeting, cooking videos, sale items, a Fresh Stories blog, and pharmacy services."

    The story also says that "the Wegmans app, unlike local grocery apps and services like Peapod and Instacart that deliver from a variety of nearby stores, doesn't deliver food to shoppers' homes (yet)."
    KC's View:
    When Wegmans makes the commitment to online shopping - as it seems to me it inevitably will - it will be interesting to see how it translates the Wegmans in-store experience to a virtual world. This is an interesting first step … and you should download it to your smartphone, just to see what Wegmans is up to.

    Published on: November 6, 2014

    The Wall Street Journal reports that Amazon has been testing "package delivery by licensed cab in San Francisco and Los Angeles using taxi-hailing mobile app Flywheel," and that "Amazon is studying the broader use of taxis as delivery vehicles."

    According to the story, "Taxis represent Amazon’s latest experiment to speed package shipments to compete more directly with brick-and-mortar retailers, and to seek alternatives to United Parcel Service Inc., FedEx Corp. and the U.S. Postal Service after shipping delays last Christmas.

    "Since then, Amazon has tested its own delivery service, broadened its use of regional couriers, teamed up with the Postal Service to deliver fresh groceries and is expected to open a Manhattan storefront for returns, pickups and same-day dispatch. Amazon also is developing aerial drones for package drop-offs."

    Here's how the test played out, according to the Journal:

    "For its recent test, the people familiar with the matter said, Amazon joined with Flywheel Software Inc., whose cab-hailing mobile app competes with Uber Technologies Inc. and Lyft Inc. Amazon summoned cabs through the Flywheel app to mini-distribution centers before loading them with as many as 10 packages bound for a single ZIP Code, paying about $5 per package for delivery within one hour, according to the people.

    "With taxis, Amazon also may be seeking to contain shipping costs, which have risen annually as a percent of sales, to 8.9% last year from 7.2% in 2009. Amazon in October posted its biggest quarterly loss in 14 years amid a 32% jump in shipping expenses.

    "The Flywheel deliveries were typically done in the early morning when the cabs had fewer fares and were less likely to be noticed by customers and competitors, said the people familiar with the matter."
    KC's View:
    It is interesting to read this story in the context of a different story in Newsweek about the new challenges being faced by Amazon, as it experiences bigger losses than ever and competitive missteps like the Fire Phone.

    "These things aren’t happening because Amazon is screwing up," Newsweek writes. "It’s one of the best-run and most-admired companies in the world. These things are happening because the environment Amazon came to dominate is profoundly shifting. The Internet era of laptops and browsers is giving way to the cloud era of mobile gadgets and apps. And that’s changing the dynamics of retail.

    "There are a couple of things about consumer desires in the new cloud era that Amazon wasn’t built to handle: We now want stuff now, not in a day or two, and we increasingly want to rent instead of buy. That’s why there’s a race on to do instant delivery. Google sees it as a way Amazon can be beat, as do a flurry of upstarts like Instacart, Delivery.com and Drizly."

    The theme is expressed in the headline: "Amazon May Be Sunk By The Need For Instant Gratification." (Which I find amusing, because the need for instant news gratification is part of what has afflicted Newsweek in recent years.)

    Listen, there's no doubt that Amazon is facing disruptive influences from the technology sector in much the same way that it disrupted so many traditional businesses. But I suppose it is fair that this when and where we find out how great a company Amazon is … because I think that real greatness comes when companies continue to innovate, disrupt and adjust as the world around them changes.

    Cabs are one possible solutions. Warehouses in virtually every major market are another. And there likely are tons of other options in between, and it will be as interesting to see how Amazon adjusts as it will be to see the new disruptors that aren't even on our radar yet.

    Published on: November 6, 2014

    The Los Angeles Times reports that the plastic bag industry, stung by California's statewide ban on plastic bags, "is now gearing up — and spending heavily — to place a referendum on the November 2016 ballot that would overturn California's bag ban. It has until Dec. 29 to collect the more than 500,000 signatures needed to put the matter to voters."

    Indeed, the story says that "plastics companies recently contributed about $1.2 million toward the referendum campaign, according to public records. All but $50,000 came from companies based outside California. The largest donation — $566,666.67 — was made by South Carolina's Hilex Poly, one of the country's largest plastic-bag makers and the main provider of funds for Daniels' American Progressive Bag Alliance."

    Those supporting the ban say that it is good for the environment and that the plastics companies are just trying to protect their bottom lines. The anti-ban forces, however, call it "another job-killing, big grocer cash grab masquerading as an environmental bill."

    One interesting note from the story: "About 60% of voters said they support the statewide bag ban, according to a USC Dornsife/Los Angeles Times poll released Friday."
    KC's View:
    I suspect it doesn't matter at all how many Californians may support the statewide bag ban. This is about bottom line dollars, and how many of them interested parties will spend to overturn the ban.

    Best democracy money can buy.

    Published on: November 6, 2014

    Advertising Age reports that "voters in Berkeley, Calif. approved a tax on soda and other sugary drinks, while a similar proposal aimed at reducing obesity and diabetes in San Francisco fell short of a higher bar for passage.

    "The Berkeley initiative, which required a simple majority to enact a 1-cent-per-ounce tax, was approved by 75% of voters with 32% of precincts reporting … San Francisco's measure to impose a 2-cents-per-ounce tax was backed by 55% of voters, but required a two-thirds vote to pass."
    KC's View:
    What has to scare some of the anti-soda tax forces is the possibility that it could go statewide at some point. Expect lots of debate, and lot of money spent on lobbying and TV commercials.

    Published on: November 6, 2014

    Reuters reports that while "this year’s wheat harvest was the biggest ever," the durum crop, which is used in pasta, "was the smallest in 13 years. As a result, pasta makers face the highest costs in four years, which will probably be passed on to consumers in the form of higher prices."

    However, US consumers are not likely to feel anything close to the pain that will be felt by Italians. According to the story, "they eat an average 55.8 pounds of pasta per year, compared to 19.4 pounds in the United States."
    KC's View:

    Published on: November 6, 2014

    • The Milwaukee Business Journal reports that while Roundy's seems to have been focusing a majority of its attention on its growing Mariano's Fresh Market chain in the Chicago market, resulting in total Q3 sales that grew 16.4 percent, the company saw a net loss of $249.9 million, or a loss of $5.19 per share, in the third quarter, compared with a net income of $3.2 million, or 7 cents per share, for the same period in 2013."
    KC's View:

    Published on: November 6, 2014

    • Tops Markets LLC said yesterday that its V.P. & Chief Accounting Officer, David Langless, has been promoted to the role of CFO.
    KC's View:

    Published on: November 6, 2014

    MNB reader Kevin Davis had some thoughts about my continued call for GMO labeling, which I equate with transparency:

    Kev, it seems you keep arguing in favor of the GMO Bills as if the question is whether or not “transparency” in food labeling is the issue.  It is not.  There is little argument that consumers deserve a right to know what’s in their food. The actual question is,  how to provide this information to those customers who want to know.

    There is currently no requirement to post the words SUGAR on the front of everything that has sugar in it, even though everyone acknowledges the health risks related to over-consumption of sugars. Likewise products that contain SALT, or GLUTEN, or FAT, or CAFFEINE for example, are not required to put warning labels on the face of the products, even though these ingredients have known side effects for some people. GMO’s on the other hand, have no known side effects for anyone, ever, and have for decades been verified by the federal governments agencies to be safe and just as healthful as their non-GMO counterparts.

    Why then should GMO’s be labeled on the front of the products, like a warning sign, when in fact there is nothing to warn about? The fact is that every Certified Organic Product is GMO free by definition, and every one of them could simply label their own products as “GMO Free” if they so choose, right on the front, or on the back, or wherever they think it most impactful and most visible to those customers who are looking for GMO free products; just like SUGAR free products, GLUTEN free products, SALT free products, or NO MSG products and on and on have done for decades. The issue is not really transparency or information for consumers, or the GMO bills would have all passed. The question is, why do products that already have the right to put “Certified Organic” or  “GMO free” on their own labels as a positive attribute, want the other products to have to state that they contain GMO’s? It is obviously to create a negative attribute perception on the GMO products, so that consumers will pay a higher price for the Organic and GMO free products, when the GMO  derived alternative is generally much (much)  less expensive for the consumer ( and in all honesty, just as nutritious).


    And MNB reader Bob Bartels wrote:

    At the risk of being Johnny one note, there is a simple path to everyone getting their own way.  Label GMO free products.  It works for gluten free products.  Those who want GMO free will reward those suppliers making it a market driven solution at a reasonable cost.  Let’s all take a deep breath.

    From another reader:

    Just maybe the people are tired of thinking we need big government protecting us on all fronts. Maybe we can think for ourselves.

    And another:

    We continue to see states trying to enact legislation that only makes sense on the federal level.  To ask national CPG companies to have different labeling guidelines by state in nonsensical and definitely cost prohibitive.  This effort, as noble as it may be, should be handled by the FDA not the state and local level.  We need to differentiate between those issues that lend themselves to local jurisdiction, i.e. plastic bag bans, etc. and national guidelines such as minimum wage. 

    But, another MNB reader - from my soon-to-be-adopted home state of Oregon - wrote:

    Very disappointed with my fellow Oregonians choice last night regarding “Right to Know” what’s in our food…but at least I can now resort to Oregon’s new comfort food… marijuana…I only hope it remains GMO-free…but then how would I know…but then I probably wouldn’t care! One door closes…another opens…

    And a very funny note from another reader:

    Their best move would be to run away from the term "genetic-modification," which clearly is a magnet for demonization by modern-day Luddites.  Labelling the process "Intelligent Design" would put a pre-emptively positive spin on the whole concept.




    On the subject of removing antibiotics from fresh meat, one MNB user found a connection to the GMO issue:

    I think that if, a couple of years ago when antibiotic issues first surfaced, there had been referendums on labeling whether antibiotics were in the meat, it would have fallen to defeat.  I think the closeness of the vote in Oregon points the way to a growing-but-not-yet-there critical mss of consumer demand.  My guess is if there were voluntary but enforceable standards for non-GMO labeling so consumers could buy what was promoted as GMO free, the market will respond, demand will grow, and this will become a viable and acceptable market segment.  Who would have thought a few years ago that Tyson would be promoting “Anti-biotic FREE” meat products, after all?
    KC's View: