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    Published on: December 5, 2014

    by Kevin Coupe

    It was just a year ago that Tesco sold its Fresh & Easy chain in the western US to Ron Burkle-controlled private equity firm Yucaipa Cos., essentially conceding that the American experiment was a failure. (Though Sir Terry Leahy, who was running Tesco when it decided the US venture was a winner, continues to believe that it would have worked given more time.)

    Now, Fresh & Easy has announced that it will begin testing a new format in seven Las Vegas locations. Calling the format a "Smarter Market," Fresh & Easy says that the stores will feature "a new 'Fresh To Go' hot food bar … a much more open, modern feel and layout … and a revamped product selection with lower fixtures and a more abundant selection of fresh food."

    The announcement also said that the new Fresh & Easy stores will feature artisan sandwiches, fire oven pizzas, an espresso bar, a homeopathic & natural-remedies section with health kiosk, and a natural baby section.

    “We’ve evolved Fresh & Easy by constantly innovating to improve our stores and our products,” said Mike Evans, Fresh & Easy Vice President of Marketing, in a prepared statement. “The company has been reinvigorated and we are now using Las Vegas as a test market to implement even more new ideas and concepts. As with all the changes we have made, we are going to constantly evaluate and fine-tune our ideas to bring our customers something exciting and new.”

    Y'know something?

    For some reason, this announcement made me smile. I'm glad that the Fresh & Easy concept is getting another chance (though it still remains for the brand to convince people to allow it to make a second first impression).

    One of the problems with the Tesco version of Fresh & Easy was that it never seemed very evolved.

    Like I said, I hope that the new evolution works out.

    It'd be an Eye-Opener.
    KC's View:

    Published on: December 5, 2014

    CNBC reports that Amazon is getting into the private label business.

    "Called Amazon Elements, the line of diapers and baby wipes will only be available to customers who belong to the Amazon Prime membership program, adding another item to the growing list of membership perks," the story says. "By working directly with a manufacturer, Amazon will be able to price the brand aggressively, with a 40-count package of diapers starting at $7.99. That works out to about 19 cents a diaper, compared to competitor prices that mostly range from 24 cents to 34 cents."

    The new private label line means that Amazon "is building a direct relationship with a supplier that allows it to undercut some of its own partners in a more significant way."

    Two other points about the private label brand:

    "Elements product pages will also include information about the materials used in the diapers and wipes and from where they are sourced. This level of transparency seems to be aimed at appealing to customers of the fast-growing diaper brand Honest, co-founded by the actress Jessica Alba, which prides itself on making safe, eco-friendly baby products. Honest does not sell its goods on Amazon, instead opting this summer for a distribution agreement with Target. Now it finds itself with a target on its back."

    "The launch also underscores Amazon's increasing focus on building more value into its Prime membership program, which costs $99 a year. What started essentially as a $79 shipping membership, providing two-day delivery on a big catalogue of products for no extra fee, has grown to encompass access to free streaming and downloads of TV shows, movies and music … Now, Amazon is adding a layer of exclusivity into the program. An Amazon spokeswoman declined to say whether the Elements baby products will eventually be available to non-Prime members."
    KC's View:
    I've been predicting for years that eventually Amazon would get into the CPG private label business on a selective basis, and I continue to believe that this makes an enormous amount of sense from a customer point of view … though it almost certainly could be problematic for its supplier partners. And I think using it as a Prime incentive does something that most retailers can't or won't do - create a clear level of preferential treatment for best shoppers.

    The fact that this could improve Amazon's shaky margins only makes this more appealing as a tactic.

    And by the way, remember one thing …Amazon already sells more diapers than anyone else. So it is working from a position of strength and enormous data knowledge about who buys what, and when, and often why.

    I have to believe that private label companies like Daymon have to see the Amazon ecosystem as fertile ground in which to grow their businesses.

    Published on: December 5, 2014

    The Seattle Times reports that Starbucks today will open a new, 15,000 square foot emporium in the city's Capitol Hill district that the story says is "a hybrid of a roastery and a cafe, where some of the world’s most exclusive beans will be roasted right in front of the eyes — and noses — of customers."

    According to the story, "The store represents the latest move by the Seattle coffee empire to upstage competitors in the raging market for super-high-quality coffee. It also underscores how Starbucks needs to relentlessly tweak its offerings to fuel growing at the breakneck pace investors have come to expect of it.

    "Over the next five years, the company aims to nearly double its annual revenue to about $30 billion. That growth target comes at a challenging time as retailers have seen foot traffic decrease in the U.S. as shoppers migrate online. So the company needs to diversify its offerings and lure customers not only during the morning but throughout the day."

    Here's how the story describes the new location:

    "The space is divided into several areas.

    A main bar will be where most people will get their coffee; it’s lower than seen in many Starbucks stores, giving customers a view of the preparation methods for espresso and other drinks, said Muller.

    There’s a second coffee-sipping area dubbed the 'Coffee Experience Bar,' where more experimental methods — from pour-overs to siphons — will be used, and where Starbucks 'coffee masters' will give classes. That area can also be reserved for events.

    There’s also a 'scooping bar,' where customers can buy fresh beans.

    For the hungry souls, sharing the same cavernous space, there’s a new, 50-seat incarnation of Tom Douglas’ pizzeria, Serious Pie. There’s also a library with a meeting table and more than 200 books related to coffee."

    The New York Times writes that "with this new venture, Starbucks has signaled that it intends to lure aficionados of high-end coffee, as it eyes the growing market for rare coffees, those beans grown in small quantities that sell for as much as $45 for less than a pound.

    "But it already faces considerable competition from boutique chains like Stumptown Coffee Roasters, Dillanos Coffee Roasters and Blue Bottle Coffee that have already developed thriving businesses in what are known as single-origin coffees and microlots. Such coffees come from a single farm or small collective, typically hard to reach and fickle, so that production is limited and often available only at specific times of the year. Their customers tend to shun the sort of big-business ubiquity that a mass-coffee purveyor like Starbucks embodies."

    The Times also writes that the new store "is rumored to have cost more than $20 million. Part retail store, part manufacturing facility and part theater, the store intentionally evokes the chocolate room where Augustus Gloop met his fate in Willy Wonka’s candy factory. See-through tubes snake up out of the floor and under the ceiling, ferrying green coffee beans to copper-clad roasters and roasted beans to the coffee bars scattered like islands around the 15,000-square-foot space."

    In other Starbucks news…

    • At the company's annual Investors Day yesterday in Seattle, CEO Howard Schultz took the opportunity to criticize the nation's governmental and political classes: "The country is definitely not going in the right direction. There is a significant void of leadership in America and around the world … I strongly believe that businesses and business leaders have a significant responsibility to do all we can to bring our people along with us and share our significant success...and not wait for Washington because the void of leadership is getting bigger and bigger."

    • The Wall Street Journal reports that Starbucks "plans to dramatically expand its evening food-and-alcoholic beverages program. It now has 32 cafes with such offerings, and plans to increase that over the next five years to more than 2,700 - equal to nearly a quarter of its more than 11,000 current U.S. stores. Some Starbucks cafes in Chicago, Seattle, Portland, Ore., and Los Angeles offer small plates of cheese, vegetables and flatbread pizza, along with desserts, wine and beer after 4 p.m." The opportunity, the company says, is even bigger than expected.
    KC's View:
    Just a few thoughts here…

    Given a choice in Portland, I always go to Stumptown, not Starbucks … even though in most markets, Starbucks usually is the easy and first choice. Stumptown just seems more authentic to me. That's something that I think is important. The Willy Wonka metaphor was used in a lot of stories, and I'd be careful about that if I were Starbucks … there is a plasticity to that image (IMHO) that could undermine its efforts.

    As for Howard Schultz's political activism, here's my question: Could a guy like that mount a legitimate independent campaign for the presidency? I'm not sure that's what he has in mind, and I've certainly had my moments when I've been critical of Schultz. But … there is a part of me that would love to see someone like that running the country.

    Published on: December 5, 2014

    National Public Radio has a story about how small online retailers are embracing the subscription model as a way of driving new business.

    The subscription model - in which retailers "bundle up boxes or groups of products and ship them off to loyal customers," has become "hotter than ever, for products including picture books, handmade soap, dog treats and date-night tickets."

    According to NPR, "The success of companies like Birchbox and Dollar Shave Club has captivated venture capitalists, who've poured nearly $1 billion into subscription e-commerce in the past five years, according to CB Insights, and spawned hundreds of imitators. Amazon, Target and also Wal-Mart have gotten into the action, launching subscription services for groceries and cosmetics. In the latest evolution of the trend, mom and pop shops are jumping in."
    KC's View:
    To make this work, consistency is key. I would suggest that Amazon, which has had a very successful Subscribe & Save program, has lost something off its fastball in this segment … in part, I'd guess, because it is not as profitable as it would like, and in part because it has gotten some pushback from suppliers who see their own margins eroding.

    I still love Amazon, but some of the stuff they've done in Subscribe & Save - canceling some standing orders because of "out of stocks," which seems to have no credibility at all considering the nature of the products - has left a slightly bad taste in my mouth.

    That way danger lurks, me thinks.

    Published on: December 5, 2014

    NBC News reports that Walmart said yesterday that it will re-edit a commercial in which a father gets such a good mobile plan through the retailer that he gives his daughter her own phone, prompting her to hug his neck. "I can't breathe," he says.

    The "I can't breathe" line has become a common refrain of protestors in New York and elsewhere who have been outraged by the refusal of a grand jury to indict a New York City policeman who killed an African American suspected of a petty crime by using a chokehold. There is a video of the incident taken by a civilian in which the man, Eric Garner, is heard saying, "I can't breathe."

    Walmart said that it is making change when customers told it that the wording made them uncomfortable.
    KC's View:
    Smart move. There's a lot of unrest in America right now, and I suspect that it won;t be waning anytime soon.

    Published on: December 5, 2014

    In the UK, the Guardian reports that Tesco "is facing fresh embarrassment after it emerged its website has been unable to cope with the number of orders placed on Black Friday last week. Customers are complaining of long delays on click-and-collect orders or missing out completely because products ordered during the promotional extravaganza have sold out … Angry customers have taken to social networking sites including Facebook and Twitter to complain about their experience."

    Tesco's website is apologizing: “We are really sorry, but due to unprecedented demand we are currently unable to provide next day Click+Collect for Tesco products. We are doing our very best to provide you with the best possible service.”
    KC's View:
    I just can't get past the fact that the Brits have embraced the Black Friday concept, even though they don't celebrate Thanksgiving (which was sort of the beginning of the end for the whole empire thing...).

    Published on: December 5, 2014

    Bloomberg reports that "holiday shopping on the Web rose 17 percent in the U.S. to a record $2.04 billion on Cyber Monday, researcher ComScore Inc. said, as consumers took advantage of online deals. Dec. 1 -- this year’s Cyber Monday, so named because of a surge in online retail sales the Monday after Thanksgiving -- remains the busiest Internet shopping day so far this year, topping Black Friday’s $1.51 billion in desktop Web sales. Still, growth on Cyber Monday is slowing as consumers spread out their purchases to other days."
    KC's View:

    Published on: December 5, 2014

    • The Cincinnati Business Journal reports that "Kroger surprised analysts and the stock market with a 21 percent leap in third-quarter profits," saying that earnings reached $345 million, up from $299 million during the same period a year ago. Q3 sales were up 11 percent to $25 billion.

    The story also notes that "Kroger extended its industry-leading streak of same-store sales growth to 44 quarters. It posted same-store growth, excluding fuel sales, of 5.6 percent."

    • The Charlotte Observer reports that Dollar General "reiterated its commitment" to acquiring Family Dollar, even as the company said that its Q3 net income dropped less than one percent to $236.3 million, from $237.4 million during the same period a year ago.

    Dollar General has made a $9.1 billion bid to acquire Family Dollar, and has said that it is prepared to divest as many as 1500 stores if the Federal Trade commission (FTC) insists; Family Dollar has said that far more stores would have to be divested to satisfy regulators, and that it prefers an $8.5 billion offer from Dollar Tree, which it says creates fewer competitive issues.

    • The New York Times reports that Barnes & Noble is buying out Microsoft's stake in its Nook business for about $120 million. That's considerably less than the $300 million that Microsoft invested in the Nook business back in 2012.

    According to the story, "The Nook, which once looked like Barnes & Noble’s best shot at adapting to the digital retail landscape, has become a drag on its bottom line. Barnes & Noble reported on Thursday that revenue for the Nook segment in the most recent quarter fell 41 percent, to $64 million, compared with the period last year. Sales of e-books and other digital content fell 21 percent, to $45 million."

    Reports suggest that the deal makes it more likely that Barnes & Noble will spin off the Nook business into its own entity.
    KC's View:

    Published on: December 5, 2014

    • Walgreens said yesterday that it has hired Linda Filler, most recently president of Claire’s Stores, as president of retail products and chief merchandising officer, effective Jan. 1.
    KC's View:

    Published on: December 5, 2014

    Responding to yesterday's piece about the importance of constant renewal - whether you are in retailing, urban planning or comedy - MNB user Andy Couch wrote:

    I really enjoyed your column today. Your note on renewal was very good. I think it's not just renewal on a business basis, but on a personal basis and it is something I embrace. Reading your note made me realize that any reference I make to something like “that thing sings like Aretha Franklin” really doesn't resonate too well today and I need to switch it up.  Fortunately, I read a lot every day and stay current on technology and transformation in retail.  I'm reading a really good book right now called “Physics of the Future” that you may find interesting.  It talks about how we will see things change in the future with medical diagnostics, robotics, and other aspects of the world.

    I talked yesterday in "FaceTime" about being asked a question during a Q&A - what kind of store would I open if I actually were going to be a retailer?

    One MNB user had an answer:

    What a GREAT question…..wish I had asked it as (IMHO) few people have the depth of knowledge of the industry and store formats that you have.   I find myself thinking that this is a question that more retailers should be asking themselves.   The follow-up for those retailers would be, “if the store you are currently running doesn’t match the store you would open, what are you doing about it?”   Would you (or could you) change your store----or change your career?

    Other than that you're overestimating my depth of knowledge, I agree with you.

    From another reader, David Tuchler:

    If we're lucky, we learn something every day.

    In your piece about what sort of store you would open, 2 thoughts…

    You stated "the competition with which I'd be going to the mattresses" and the schoolmarm in me gleefully thought it was a misstatement of "going to the mats" (a wrestling reference).

    It turns out both phrases, which are almost identical, mean the same thing - but for different reasons.

    "Going to the Mattresses"  (according to Urban Dictionary):  "Going to war with a rival clan or family. Used in the mafia. Its when a mafia family sends someone out to get someone apartments and some mattresses for the soldiers of the family to sleep on while they hide out in safety, waiting for a call to do something. The phrase wasn't well known outside of the USA and Italy prior to the Godfather movies. It was used there, and later in The Sopranos television series, to mean 'preparing for battle'." 

    "Going to the mat" (from "To fight; contend mightily : They soon stopped sparring and went to the mat"

    Of course, seeing now the Godfather/Sopranos references, I now know that questioning that phrase was like bringing a knife to a gunfight.

    Second … In describing the 'model store', you said "I'd probably go small rather than big. I'd want to curate the item count to keep it manageable. I'd focus on fresh foods and specialty items as much as possible".

    I just had the pleasure of visiting a Heinen's which recently opened in Glenview, IL (Chicago suburb).  It seemed to fit all of those descriptions, and was squeaky clean, impeccably stocked and had over-the-top service as well.

    On another subject, Lindsay Felderman wrote:

    I have been a fairly newer reader of your blog as I have only been in the CPG industry for the past year.  I first want to say that I appreciate your commentary and progressive thinking on many issues, even outside of the food industry.
    Today, I felt compelled to respond to your story with your family and Wegmans.  I too, am a huge fan of Wegmans, but unfortunately do not live near one currently.  I first encountered Wegmans when I was a Freshman at Syracuse University.  I heard many fellow students talk about Wegmans and how amazing it was.  Knowing it was just a grocery store, I thought it couldn’t possibly be that amazing.  However, I was wrong. Dead wrong. 
    Going into Wegmans for the first time with my parents to stock up on food for my dorm room was magical.  I can’t honestly explain to you what it was that was so magical, but I remember thinking “This is the best store ever!”.   Keep in mind I mainly grew up in CT, just 20 minutes away from another amazing store, Stew Leonard’s.  But I would still put Wegmans on top, and also keep in mind, I haven’t stepped foot in a Wegmans store since 2006. 
    It goes to show what they are doing is so completely working that even those of us out of touch with Wegmans are still loyal to their company and their brand.  If Wegmans opened in my town tomorrow, that is the only place I would shop.  How many grocery stores let alone companies have as much loyalty as that?
    Just felt like sharing with you today.  Thanks for being an interesting part of my day, every day.

    And thanks to you for making it even more interesting.
    KC's View:

    Published on: December 5, 2014

    In Thursday Night Football action, the Dallas Cowboys defeated the Chicago Bears 41-28.
    KC's View:

    Published on: December 5, 2014

    The Theory of Everything, the new bio pic about physicist Stephen Hawking and his wife, Jane Wilde, is, I think, a mostly traditional treatment of a highly unconventional subject. Hawking, as most people know, contracted Lou Gehrig's disease while in college and was given two years to live; instead, he's lived into his seventies and has enjoyed a robust intellectual and romantic life, in no small part because of his wife's dedication and strength. I'm not going to lay out the plot for you, mostly because there are a few twists that are better enjoyed if you don;t know about them going in, but I will say that it a straightforward - which is not to say uninspiring - telling of the story.

    But if the filmmaking is fairly traditional in nature, the performances - by Eddie Redmayne and Felicity Jones - are remarkable. Redmayne has tons to work with, and has the tougher physical role, but Jones is no less impressive, seeming to reach deep into her soul to capture both the strength and frailties of this woman. If you see the movie, watch their eyes … there is so much going on there that I found myself profoundly moved.

    One other comment. When Mrs. Content Guy and I were coming out of The Theory of Everything, we agreed that we actually would have liked to seen more about the science, and learned more about the intellectual passions that drive Hawking's life. (And neither of his are physicists.) And I'm actually thinking that I may want to read his book, "A Brief History of Time."

    Movie lovers would be well advised to go to Netflix and stream a new documentary called Altman, which is about the life and career of film director of Robert Altman. It doesn't reveal anything particularly new or profound, but it does offer some fascinating film clips of Altman talking about his movies over a period of years.

    And what movies they were. M*A*S*H. McCabe and Mrs, Miller. California Split. Nashville. The Player. Short Cuts. Gosford Park. And my personal favorite Altman work, The Long Goodbye.

    One of the nicest, most revealing and, yet, smallest pieces of the movie are brief snippets when actors from Altman movies describe what "Altmanesque" means. He famously was a director who loved actors, and actors loved him, and so when people like Julianne Moore, Robin Williams, Keith Carradine and Elliot Gould talk about him, it is with real affection and admiration.

    I've watched two other movies in the past week, both oldies and both goodies. First, there was The Princess Bride, which I've always loved. (Though I've been making my kids nuts this week by walking around as if fencing and repeating the line, "My name is Inigo Montoya. You killed my father. Prepare to die.") And then, because I for some reason needed a William Holden fix, I watched Stalag 17, the great Billy Wilder flick from 1953. Great stuff. (Though I now am getting a craving for The Great Escape and The Dirty Dozen…)

    I think that in 13 years of doing MNB, I've never written about a wine from the Hamptons. (I mean that both ways.)

    But this week, that's exactly what I'm going to do.

    The 2012 Wolffer Cabernet Franc, from the eastern end of Long Island in New York, is a really good, just-rich-enough red wine that tastes like it somewhere in between a big west coast wine and a more delicate French wine. Which, when you think about, makes geographic sense as well.
    I recommend it. Highly. And I'm thinking that maybe a drive out to the Hamptons to do a bit of wine tasting may be in order. (Though I may wait until the weather improves to the point where I can put the top down on the Mustang.)

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

    KC's View: