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    Published on: January 28, 2015

    by Kevin Coupe

    There is a new, very clever commercial for the new BMW i3 that also is a pointed reminder of how the world is changing, and continues to change, at a pace near impossible to keep up with.

    It starts with a flashback to 1994, when Bryant Gumbel and Katie Couric were hosting the "Today Show" mornings on NBC. They have an exchange immediately following what was the first time that viewers had been invited to email the show ... and neither of them can figure out the whole email protocol. What does the "@" stand for? And how does email work, anyway? It all seems utterly antiquated, and completely familiar.

    Then, it picks up with the two having an almost identical conversation while driving an all-electric BMW i3, which they are having an equally hard time getting their heads around.

    It's very funny ... and also makes a very serious point. in my mind, the very definition of an Eye-Opener.


    KC's View:

    Published on: January 28, 2015

    by Kevin Coupe

    MIAMI BEACH - I mentioned yesterday in this space that I was about to go on stage at the Food Marketing Institute (FMI) Midwinter Executive Conference here to moderate a panel discussion with three very smart guys: Burt Flickinger of Strategic Resources Group, Scott Moses of Sagent Advisors, and Andrew Wolf of BB&T Capital Markets. Our goal was to look at the business pressures facing retailers and CPG companies operating in a fast-paced business environment while working in an industry that often moves at a glacial pace ... and while it is a little difficult to take notes while asking questions, listening to answers and trying to facilitate a conversation that is both enlightening and entertaining, I'll try to summarize the high points as best I can.

    First, we spent some time talking about that word "glacial." There was general agreement that while the word describes how the food industry often operates, especially in comparison to other retail segments, it cannot serve as an excuse - because those who operate in too-deliberate a fashion almost inevitably will be hurt by companies that are constantly innovating, trying new things, even failing occasionally, but always looking to offer new products and services. As Flickinger put it (in a different context, though it is relevant here), "It is okay to be wrong, but it is not okay to stay wrong."

    There was no question that the panel believed that the value-driven segment of the food industry will continue to grow. Moses took note of the impact of the young "lost generation," saddled with $1 trillion in college debt and either unemployed or underemployed. Wolf said that it is critical to be price-competitive, and then differentiate from that base, suggesting that it will be during "our next recession" that investment in price formats will really pay off. (I'm sure that the phrase "our next recession" warmed a few hearts in the audience...and probably sent chills down a few spines.)

    Wolf made the point that Kroger has been extremely fortunate - its shareholders were willing to give it the time and room to invest in price, and there were no vulture-like private equity firms circling it during the transition. Not all companies will be as skilled or as fortunate, he suggested.

    We also spent some time talking about expansion and merger-and-acquisition activity, and I think it is fair to say that everyone agreed that the failures of Tesco in the US and Target in Canada were because of lack of vision, leadership and execution. Flickinger was extremely critical of the boards of those companies, essentially suggesting that they were guilty of a kind of malpractice by not doing the kind of diligence and oversight that they are paid to do.

    I think that one of the more important observations of the session was when Moses offered a critique of Instacart, saying, essentially, that adopting that model means ceding control of the delivery part of the shopping experience to an outside company; he noted that Borders really ran into trouble when it ceded control of its online sales to what was then a little company called Amazon.

    In retrospect, I think that this a critically important point.

    As I think about some of the subjects covered by FMI Midwinter this year, "control" actually was a common thread (even though it was not identified as such). If you are going to talk about allowing shoppers to customize the products they buy to an unprecedented extent (as one speaker did earlier yesterday), you really are talking about ceding control to the shopper. And yet, to maintain any sort of efficiency and effectiveness, retailers and manufacturers have to assert some level of control over the options and how they are presented. It is a delicate balance.

    When you talk about experiential marketing in the store, it is all about taking control of the experience, of controlling the store environment to tell a story to the shopper, as opposed to just offering other people's products and slapping a price on them. If you are going to talk about e-commerce investments, it is all about attempting to take control of how technology is used by shoppers, as opposed to simply letting events take their course.

    It is all about control. About making sure, to the greatest extent possible, that you have some level of control throughout the marketing, shopping, and even consumption experience. At some level, that's what companies like Amazon try to do as they create "ecosystems" in which their influence is felt throughout the home, the office, and beyond. They become the defining, controlling core, while creating a system in which shoppers can take greater (sometimes just perceived) control over their surroundings, their habits, their lives.

    Sure, it is a delicate balance. But companies cannot afford to simply sit on the sidelines to see what other companies do, cannot afford to ponder the possibilities without taking risks, cannot afford to accept that their industry moves glacially.

    Go figure, the playwright Edward Albee actually has a line in his play, "A Delicate Balance," about the high cost of inaction:

    You know it's going on... up on the hill; you can see the dust, and hear the cries, and the steel... but you wait; and time happens. When you do go, sword, shield... finally... there's nothing there... save rust; bones; and the wind.

    A high cost, indeed.
    KC's View:

    Published on: January 28, 2015

    The Federal Trade Commission (FTC) announced yesterday that it has approved the proposed $9.2 billion acquisition of Safeway by Cerberus Capital Management-owned Safeway, with an agreement by the companies that they will sell 168 stores to alleviate concerns that the deal would have created an anticompetitive climate in certain markets.

    According to the FTC decree, "Under the proposed settlement, Haggen Holdings, LLC will acquire 146 Albertsons and Safeway stores located in Arizona, California, Nevada, Oregon, and Washington; Supervalu Inc. will acquire two Albertsons stores in Washington; Associated Wholesale Grocers, Inc. will acquire 12 Albertsons and Safeway stores in Texas; and Associated Food Stores Inc. will acquire eight Albertsons and Safeway stores in Montana and Wyoming.

    "It is expected that Associated Wholesale Grocers, Inc. will assign its operating rights in the 12 Texas stores it is acquiring to RLS Supermarkets, LLC (doing business as Minyard Food Stores) and that Associated Food Stores Inc. will assign its rights in the eight Montana and Wyoming stores it is acquiring to Missoula Fresh Market LLC, Ridley’s Family Markets, Inc., and Stokes Inc.

    "Also under the proposed settlement, the divestitures to Haggen must be completed within 150 days of the date of the merger; the divestitures to Supervalu Inc. must be completed within 100 days of the date of the merger; and the divestitures to Associated Food Stores Inc. and Associated Wholesale Grocers, Inc. must be completed within 60 days of the date of the merger."

    The Wall Street Journal reports that both companies expect the deal to now be closed within five business days.
    KC's View:
    Spend time with high-level, high-powered food industry executives and experts - as I have the last few days at the FMI Midwinter Executive Conference - and you discover that there is a vast difference of opinion about this deal. Some think it will work, though there is fairly consistent expectation that Haggen probably will sell off a few stores down the road as it looks to make the chain more efficient and maybe make back some cash. And some think it will be an utter disaster, and that more than a few of the stores that have been in play will end up being sold off.

    To be honest, I have no idea. Because many of the people espousing either point of view are people I like and respect, people who are a lot smarter than I. I'm probably more skeptical about the long term prospects than not, but hell, I tend to be more skeptical than not about most things.

    Published on: January 28, 2015

    The New York has a story that is an absolute must-read for food executives - a look at the nation's food safety apparatus that includes a profile of Bill Marler, described as "the most prominent and powerful food-safety attorney in the country," who has "filed hundreds of lawsuits against many of the largest food producers in the world. By his estimate, he has won more than six hundred million dollars in verdicts and settlements, of which his firm keeps about twenty per cent."

    "Many people," The New Yorker writes, "who work in food safety believe that Marler is one of the few functioning pieces in a broken system ... Robert Brackett, who directed food safety at the F.D.A. during the George W. Bush Administration, told me that Marler has almost single-handedly transformed the role that lawsuits play in food policy: 'Where people typically thought of food safety as this three-legged stool - the consumer groups, the government, and the industry - Bill sort of came in as a fourth leg and actually was able to effect changes in a way that none of the others really had'."

    Another former food safety official says that the lawsuits Marker files “can be a stronger incentive or disincentive than the passing of any particular regulation," while another says that Marler has become "a central element of accountability.”

    You can read the entire sobering story here, or in the February 2, 2015, edition of the magazine. The story is entitled, "A Bug In The System."
    KC's View:
    I want to venture into delicate territory here - talking about an MNB sponsor from an editorial perspective - but it strikes me in this case as a relevant and appropriate thing to do. (But I also want to be transparent about it.)

    I have been working on a project in recent weeks tied to the fact that new regulations under the Food Safety and Modernization Act (FSMA) - bipartisan legislation, by the way - will go into effect in August 2015. Those regulations, which require a great deal more record keeping on the part of every player in the food supply chain, as well as the ability to produce those records to FDA inspectors on 24 hours notice, put the CEOs of all these companies at personal legal risk if their companies cannot do what the law requires them to do. Think of this as Sarbanes-Oxley for the food safety system.

    I got involved with this because of a company called ReposiTrak, which has developed an efficient and effective way for companies to do the required record keeping. ReposiTrak, as it happens, has been endorsed both by the Food Marketing Institute (FMI) and Retailer Owned Food Distributors & Associates (ROFDA), which are working to make the system available to their members. And, ReposiTrak has been delivering this overall message here on MNB, and will continue to.

    I'm going to put this bluntly. If you read this New Yorker piece and you have anything to do with the food business, it should scare the crap out of you. Because there are so many holes in the system, and business leaders will very shortly be required to plug them up ... or pay the cost.

    Read the story. The legislation is not going away. And I am utterly persuaded - not just by ReposiTrak, but also by FMI and some enlightened industry executives with whom I have spoken - that companies not prepared to comply with its demands are making a serious mistake that could put their businesses in jeopardy.

    Published on: January 28, 2015

    CNet has a story about how "at the end of 2014, Amazon Prime had 40 million US members, up from an estimated 29 million at the end of the third quarter, new data from Consumer Intelligence Research Partners shows. CIRP estimates that the average Amazon Prime customer spends $1,500 per year on the e-commerce site, compared to $625 for nonmembers."

    Amazon Prime guarantees members two-day shipping on eligible products, plus an array of other services, most notably access to exclusive streaming video and music offerings.

    Internet Retailer looked at some additional data about Amazon:

    • "39% of U.S. Amazon customers own Kindle e-readers or tablets (but not those who only use the Kindle mobile apps). Those customers are lucrative given that they spend about $1,450 with Amazon annually compared with $725 for customers without Kindle devices."

    • "7% of Amazon customers own Kindle Fire TV boxes or sticks."

    • "Less than 1% of Amazon customers own Amazon Fire smartphones."

    CNet offers the following analysis: "The willingness of Prime members to spend more heavily perhaps suggests why Amazon is willing to throw so many different services into the offering. Prime started as a way for customers to save money on shipping while getting items more quickly."
    KC's View:
    I fully concur with the CNet analysis ... I'm pretty sure we've been saying similar things here over the years.

    I have always believed and have consistently written that more than anything else, Amazon is one of the biggest loyalty marketing systems ever developed - they track consumer activity, purchases, make moves based all it all, offer dynamic pricing based on what is relevant and acceptable, and then offer rewards to best customers. And Amazon does this all within a pure technology framework that somehow manages to create a sense of intimacy with the shopper.

    Amazon, I believe, will only run into problems when it stops doing things like adding value for best and regular shoppers. Because then it will become just like other retailers.

    Published on: January 28, 2015

    The BBC reports that Facebook went down globally yesterday for about 40 minutes - in the middle of the night for the US, but the middle of the day elsewhere in the world.

    The company downplayed reports that hackers might have brought Facebook, as well as Instagram, to its knees, albeit temporarily.

    "Earlier this evening many people had trouble accessing Facebook and Instagram," a spokeswoman told the BBC. "This was not the result of a third-party attack but instead occurred after we introduced a change that affected our configuration systems. We moved quickly to fix the problem, and both services are back to 100% for everyone."
    KC's View:
    It was a week of trauma-inducing events. A massive blizzard. An asteroid that comes perilously close to the Earth. And then Facebook goes down.

    Which of those do you think caused the most anxiety?

    I know what my nominee would be. After all, if I can't post, do I even exist?

    Published on: January 28, 2015

    The Dallas Morning News has a story about how Costco approaches the finding and bidding on locations for new stores - to put it mildly, it is extremely picky and as frugal as possible. And, the story says, far more so than Walmart.

    "Don’t expect Costco to wage an expensive fight for land the way its chief rival Wal-Mart owned Sam’s Club will do," the story says, which is why Costco may not have a store inside the Dallas city limits in the immediate future, even though the company knows that the demographics are absolutely right for a store there.

    And "if it can’t find the right one, it just moves on to another city, state or even country where the right location is available to it."

    The story also notes that "Costco only has 470 stores in the U.S. Sam’s Club has 645. Costco’s stores generate twice the average volumes of a Sam’s."
    KC's View:

    Published on: January 28, 2015

    • The Washington Post has a blog posting in which it quotes a study from the University of Iowa, University of Virginia and University of Louisville suggesting that Walmart's growth over the past half-century may be connecting with America's obesity crisis.

    Coincidence? Maybe not.

    "“We live in an environment with increasingly cheap and readily available junk food,” says Charles Courtemanche, assistant professor of economics at Georgia State University. “We buy in bulk. We tend to have more food around. It takes more and more discipline and self-control to not let that influence your weight.” And the growth of Walmart - as well as all the other big box stores during this time - has made large sizes of inexpensive processed foods available to more people than ever before."

    • The National Association of Convenience Stores (NACS) is out with its annual NACS/Nielsen Convenience Industry Store Count, revealing that "the U.S. convenience store count increased to 152,794 stores as of December 31, 2014, a nearly 1% increase from the year prior ... Convenience stores account for 33.9% of all retail outlets in the United States, according to Nielsen, which is significantly higher than the U.S. total of other retail channels including drug stores (41,799 stores), supermarket/supercenter (41,529 stores) and dollar stores (26,572 stores)."
    KC's View:

    Published on: January 28, 2015

    • In Canada, the Financial Post reports that "Sears Canada has appointed Ronald Boire as its president and CEO, a position he has held on an interim basis since he was moved in last October by the company’s U.S. parent. Boire had previously been chief merchandising officer and president of the Sears and Kmart stores in the United States."
    KC's View:

    Published on: January 28, 2015

    ...will return.
    KC's View:

    Published on: January 28, 2015

    From MorningNewsBeat, September 15, 2016:

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    KC's View: