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    Published on: February 2, 2015

    by Kevin Coupe

    The Wall Street Journal wine columnist Lettie Teague had a piece over the weekend about wine clubs. She started off by conceding that she'd never considered joining such a club, since she likes to either pick out her own wine or trust a local retailer. But for the purposes of this column, she decided to join several ... and, to be fair, found them to be a mixed bag.

    "Although I have to admit it was fun not to know what sort of wine would show up in the post, the only great deals I found were from the Virgin club," she writes, referring to a club launched by Virgin Enterprises. " And yet I don’t think I’d like to belong to a club that only specialized in cheap wine - shipped in bulk. Or wine that’s cleverly packaged but not particularly - or reliably - good.

    "For someone who is just learning about wine, the instructional nature of the clubs - the notes, the range of wines - certainly seemed useful. As for me, I’d still consider joining a club, but it would have to deliver consistently great wine every time - with handwritten notes."

    As someone who actually belongs to three different wine clubs, I pretty much agree with her ... and think my experience offers an Eye-Opening insight into intelligent retailing.

    The main wine club to which I belong is actually operated by my local wine guys, Nicholas Robert Ltd., providing me with three new wines each month. I can choose red, white or mixed boxes ... but beyond that, I have no choice in what I get. That's the lure, to be honest - the folks at Nicholas Roberts pride themselves on choosing unusual wines often from an unheard-of vineyard, and sometimes the selection will focus on a single country, or a single variety, or a single vineyard. But I've generally found that the choices are excellent, the notes (though not handwritten) are extensive, and I learn a lot about what I like. (Many of the wines that I write about in OffBeat on Fridays are culled from wine club selections.)

    I also belong to a couple of Oregon-based wine clubs. One is the Carlton Cellars club; I belong because I know the owners, Dave Grooters and Robin Russell, like them and their wines a lot, and know that they do not yet have distribution in the northeast US, where I currently live. So this is a way of keeping in touch.

    And, I belong to the Willamette Valley Vineyards wine club - while they do distribute to the northeast US, the club gives me access to wines that often don't make it this far east. Plus, I've made the acquaintance of a young woman who works there, Wende Bennett, who has declared herself to be my wine ambassador ... I talked more extensively about how this works here.

    I've made a point here about wine clubs that I'd like to repeat: properly conceived and executed, they can get people to raise their spend in this category. Before I joined these clubs, I rarely spent more than $10 on a bottle of wine - I simply did not know enough to spend more with any degree of intelligence, so I went cheap.

    Now, because they've improved and educated my palate, I think less about the cost of the wine than about what I like ... and, to be honest, this usually results in spending more. Which I'm sure they're all happy about, and I get to drink great wine.

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

    Published on: February 2, 2015

    There were a couple of interesting stories over the weekend about Shake Shack, the upmarket hamburger-and-shake chain that went public last week and, at least in the short term, exceeded investors' expectations. Both pieces looked at an issue for Shake Shack that faces most companies - how much growth is too much.

    Danny Meyer, the New York-based restaurateur who is the founder and CEO of Shake Shack, always has talked about his aversion to growth for growth's sake. The Washington Post writes that "Meyer's approach to growth so far gives a sense of how he and his team might manage it in the future. Yes, the prospectus outlines that Shake Shack plans to open 10 new locations each year in the United States, to reach a total of at least 450 domestic outposts. But it's also telling to examine the way Shake Shack has been expanding abroad. Of the 63 current Shake locations, 27 are already overseas in cities like Dubai, London and Istanbul." By not bunching up locations in cities around the US, the company manages to keep its units as "something of a novelty."

    The Post goes on: "Meyer has already instilled the go-slow approach into one of the company's standing mantras. At four places in the company's prospectus, and hanging on the wall of executives' offices, is this line: "The bigger we get, the smaller we need to act." This speaks well to the company's awareness that, if left unchecked, getting big can be the enemy of the kind of community-minded, employee-driven, hospitality-focused business they want to run.

    "Staying true to a brand's roots, and saying no more than yes, just gets harder and harder after going public. By baking that stay-small mentality into the way Shake Shack talks about its culture, its decisions and its approach to customers, Meyer has at least given the company a shot at avoiding the overexposed, mission-drifting fate of too many companies."

    To be fair, not everybody agrees. The Los Angeles Times has a column suggesting that "it's not especially comforting that Shake Shack's explanation of what makes it 'special' is written in corporatized New Age gibberish. The principles of business 'championed by Danny Meyer,' according to its public prospectus, include recruiting and developing "a team with the innate 'personality to please' that cannot be taught. We look for people who are warm, friendly, motivated, caring, self-aware and intellectually curious team members.... Our team is trained to understand and practice the values of Enlightened Hospitality: caring for each other, caring for our guests, caring for our community, caring for our suppliers and caring for our investors."

    The LA Times puts it in stark terms, at least from an investment perspective - Shake Shack has to be careful not to allow itself to become Krispy Kreme or Crumbs; and instead needs to follow the path taken by Chipotle.
    KC's View:
    I tend to share the Washington Post view of Shake Shack ... if I were going to invest in the company, it would be with an eye to the long-term, not short-term profits. I don't see their statements of principle to be "corporatized New Age gibberish." (I feel bad if we've gotten to the point that statements of principle are seen in such harsh terms. And I'd feel better, for example, about Haggen's growth from 18 to 164 stores if they were saying similar things...)

    Is it hard to grow such a chain and culture? Sure. But it is a step in the right direction that the folks at Shake Shack at least seem to understand that.

    Published on: February 2, 2015

    Good column in the Washington Post by Barry Ritholtz about disruption:

    "There are many lessons to be learned from Uber, the taxi- and car-hailing start-up that came out of nowhere and is valued at $41 billion," he writes. "Less than three years ago, Uber had zero drivers. Now it has more than 160,000 active drivers who have collected $656.8 million in net fares (net of what they pay Uber).

    "Among the lessons, some point to the rise of the sharing economy, which also includes firms such as Airbnb, Snapgoods, RelayRides, TaskRabbit and Lending Club. Others talk about the 'on-demand economy,' which creates a new class of labor that straddles the line between being self-employment and working for a firm.

    "I prefer a Big Picture view to get the proper perspective on these start-ups. From this 30,000-foot perspective, we see what all of these newcomers have in common: They attack an existing market dominated by entrenched incumbents that are inefficient, expensive or both."

    And, Ritholtz writes: "No one saw taxis as an industry ripe for disruption, and I bet that lots of other markets we hardly even think about are similarly ready for competition. I have no idea which market the next generation of disruptive technology will focus on. Whether it's the college admission process or virtual reality or 3D printing or advanced robotics and drones or autonomous vehicles or next-gen genomics is almost beside the point. The one thing you can be assured of is that no industry is safe from disruption."

    You can read the entire column here.
    KC's View:
    I guess this suggests one question that everybody in every industry should ask themselves...

    Are we in an existing market dominated by entrenched incumbents that are inefficient, expensive or both?

    Because if you are, you'd better start rethinking the way you do business.

    Published on: February 2, 2015

    Bloomberg has a long story about Whole Foods, noting that founder and co-CEO John Mackey "is in the awkward position of having to explain why Whole Foods can thrive in the very world he created. Which is why he’s eager to tour the fruit and vegetable aisles of his Austin store. Dangling over the displays are a series of SALE! placards in red letters. The company was once reluctant to compete with rivals purely on price, but here are signs proclaiming that organic broccoli is marked down to $1.48 a pound and two boxes of Driscoll blackberries are $3."

    The story goes on: "A libertarian with a hippie streak, who rails against creeping nanny-statism (Obamacare, minimum-wage laws) and the soullessness of corporate America, Mackey is challenging some of his own cherished beliefs. He’s down with advertising now. For the first time in Whole Foods’ history, the chain is running national ads: It’s spending $15 million to $20 million on a campaign that features rugged-looking farmers and fishermen vowing that 'values matter.' And the company’s finally using one of the oldest tools in the supermarket toolbox, which Mackey resisted for years: a loyalty program.

    "It’s too early to determine how these changes will play with consumers, but at least one constituency is enthusiastic: the competition." That's because the competition sees Whole Foods coming back to the pack, losing some of the differential advantages that would separate it from other chains (Sprouts, for example) with similar value propositions.

    One of the interesting lessons that the story says that the company has learned is that when Mackey gives full voice to his politics - like during a recent book tour - the company's sales tend to go down. Co-CEO Walter Robb tells Bloomberg that "Mackey has been properly humbled: 'John has realized he needs to cork his own politics. He’s been spanked enough'."

    You can read the entire story here.
    KC's View:

    Published on: February 2, 2015

    The New York Times has a story about GMO labeling, noting that "few industry debates are as heated these days as the one about labeling foods that contain genetically modified ingredients.

    "And while interest groups and advocates wage war in state legislatures, on ballots and in Congress over what should be disclosed on product labels, products certified as containing no genetically modified organisms are proliferating on grocery shelves without any nationwide mandatory regulations.

    "Moreover, many manufacturers are nodding to the public debate, adding the phrase 'non-G.M.O.' to their packaging without a verification process ... The shift toward voluntary labeling has also led to a lot of consumer confusion, as different labels, organizations and agencies issue seals or stamps that attest to compliance with few, if any, uniform standards. In addition, food companies are tacking the words 'non-G.M.O.' on items that would never be considered in need of such labeling."

    Here are some other interesting passages from the Times story:

    • "The Non-GMO Project, the leading certification group in the United States, has verified more than 24,500 products, while the average grocery store contains 40,000 to 50,000 items, some of which are not food, according to the Food Marketing Institute."

    • "Nielsen, which conducts consumer research and analysis, said sales of non-G.M.O. products exceeded $10 billion last year and grew at a faster pace than sales of gluten-free items over the last four years."

    • "Research by the Hartman Group found that 52 percent of consumers said they knew what genetically modified organisms were but less than a third could identify the crops that now are grown using genetically modified seeds."

    • “'There’s no doubt that the industry is fighting a rear-guard action on this and trying to put it to rest,' said Carl Jorgensen, director of global consumer strategy for wellness at Daymon Worldwide, a consumer research and consulting firm. 'But there’s an aura of inevitability about it now'."
    KC's View:
    I think there needs to be an adequate national system that certifies non-GMO products ... and, ironically, I think that companies fraudulently claiming non-GMO status could be a big problem for those who think that such labeling is needless.

    Published on: February 2, 2015

    Bloomberg reports that "Costco Wholesale Corp., the largest U.S. warehouse-club chain, plans to return $2.2 billion to shareholders through the payment of a special dividend after its cash hoard swelled. The $5-a-share distribution will be funded from existing cash and additional borrowings, the Issaquah, Washington-based company said Friday in a statement.

    "The move underscores Costco’s success in weathering a shaky retail industry over the past year."


    • The Des Moines Register reports that "Dahl's Foods Inc., a Des Moines institution for 84 years, was auctioned off piece by piece to the highest bidder Friday morning ... Associated Wholesale Grocers Inc. of Kansas purchased seven of the company's 10 remaining stores for $2.45 million. Those locations will continue to operate as grocery stores, only under a different name.

    "Details on the new name likely will be announced in the next few months, AWG officials said.
    The company's other three locations will be closed.

    "Dahl's filed for bankruptcy Nov. 9. The company reported $41 million in debts and about $45 million in assets."


    Reuters reports that the Campbell Soup Co plans to "reorganize its business into product divisions, instead of geographies or brand groups, as it focuses on growth areas in the face of cooling soup sales.

    "The company said the reorganization would shift its 'center of gravity", a reference to its troubled soup business that has managed to boost sales only twice in the past five quarters.
    The world's largest soup maker said it would now have three divisions - Americas simple meals and beverages, global biscuits and snacks, and packaged fresh products, which include seasoned baby carrots. Currently, the company has five divisions."
    KC's View:

    Published on: February 2, 2015

    • Weis Markets announced that it has hired Rick Bhandari as its new Director of Pharmacy Operations. Prior to joining Weis Markets, he worked as a Regional Pharmacy Manager for Bi-Lo Holdings.
    KC's View:

    Published on: February 2, 2015

    On the subject of GMO labeling, one MNB reader wrote:

    Thanks to internet sites and more transparency outside the company claims, consumers are able to research the ethics and integrity of companies.  For example, many brands put on a “small, family owned” feel but are actually owned by a large group that is against labeling of GMO’s in the USA.  For those of us that think labeling of GMO ingredients is important, we seek out and support those companies that DO support labeling.  It’s very easy to find who is who.  I vote with my dollars, even if it costs a little more.
     
    There are lists of companies on either side, very easy to find.  (Eden Foods, Amy’s Kitchen, Nature’s Path,  Bakery On Main – from CT no less! – are 4 of the many honest good ones!!!)
     
    We are also not being fooled by the “high fructose corn syrup” being re-named fructose.  The companies that are trying to dupe the consumers will keep finding, the internet has leveled the playing field.  We’re not as stupid and naïve as they wish we were.





    Regarding McDonald's trying to gain traction in a consumer market that seems to have left it behind to some extent, one MNB user wrote:

    McDonald’s to its employees.. “Sorry for the layoffs, restructuring, reapplying, shifting resources etc…still, we at the Corporate  Headquarters have already decided we are still planning on spending millions and millions of dollars on Superbowl commercials this coming Sunday, look for them they will be great!”
     
    Perhaps shifting priorities within the corporate headquarters would help reduce/eliminate some layoffs.


    From another reader:

    When I was a child, albeit almost forty years ago, McDonald's (to me,anyway)  was a magical experience. From the commercials with all the characters such as Grimace and the Pirate and others that now escape my memory, to Happy Meals with REAL toys in them, not the movie themed crap that somehow took over. That's my two cents.

    And another"

    I was attending an E*TRADE seminar last year that they occasionally hold at the Hamburger University on the McDonald's corporate campus.  The food served for lunch was both creative and very exciting.  At the afternoon break, they brought out platters of McDonald's cheeseburgers.  You could hear from the crowd, "boy, I cannot believe how bad these things taste.". I have to admit that I took a bite and tossed the rest.  I agree with you, the hamburgers do not taste right.



    And responding to my piece on Friday comparing the GoDaddy TV ad to the Budweiser ad, MNB reader Andy Casey wrote:

    Can’t believe you don’t like puppies …

    I love puppies. I'm less enchanted by emotional manipulation.

    From another reader:

    I totally hear you on people needing to have a sense of humor. But I see this as just another in a series of tone-deaf moves by GoDaddy. First they launch themselves with a series of obnoxiously sexist commercials, so I see they don’t have much respect for women. Then their founder and CEO explodes the internet by videotaping himself killing an elephant while on an African safari, so I see he has no respect for the environment. They get a new CEO, and the first Super Bowl ad the company puts out under his leadership is not only unoriginal, it’s built around a joke about treating puppies as commerce. I’d be a lot more prone to cut Go Daddy some slack if they didn’t have such an ugly track record.

    I didn't know about the elephant.

    MNB reader Lee Smith wrote:

    Sorry, I find no humor in this ad. Can’t say I even cracked a smile.

    I totally get that some folks don't find this ad funny, and that for them, puppy mills are nothing to laugh at.

    But I still would argue that the use of the puppy in the GoDaddy ad is more germane to the product than in the Budweiser ad.




    Finally, a comment on last week's FaceTime commentary from an MNB reader:

    I thought that it was some of the best Catholic programming in the 1960-80 timeframe.  It provided a positive theme material that was not preachy at all.  My question was "Where did they go?". I look at their station listing and there are a good number of diocese where they have no radio presence.

    I think this is a classic example of how the media world has changed. "Christopher Closeup" was most seen, I think, in an environment where there were three networks and big markets had maybe two or three local independent stations - and all of them were required by FCC regulations to run public service programming, which usually got relegated to early Sunday mornings. "Christopher Closeup" had strong production values, it was free to stations, and was positioned not as Catholic programming, but as being oriented toward public service and a more ecumenical spirituality.

    Ironically, there is far less room for such programming at mainstream media outlets these days, though the proliferation of new outlets - the internet, podcasts, etc... - makes it possible for programs such as these to be seen/hard in different iterations and in other places.
    KC's View:

    Published on: February 2, 2015

    by Kevin Coupe

    It was interesting to me how two different commercials used the same theme - fatherhood - and came up with such different results.

    The Dove Men + Care ad was terrific ... simple, direct, and with a relevant punch line that had added resonance because of the NFL's problems with domestic violence.

    But I had a real problem with the Nissan commercial that showed a race car driver essentially ignoring his son because of his career ... to the music of Harry Chapin singing "Cat's in the Cradle." I couldn't help but remember that Chapin died in a car accident ... and somehow, the whole thing rang rather hollow to me.

    And that ad for Nationwide that had as its punchline a little kid telling the camera all the things he never had a chance to do because he died in a household accident? Way to throw a wet blanket on a party, guys. Well-intentioned, but a total miss.

    Liked the Coca-Cola ad about bullying ... and the McDonald's ad about paying with love was okay.

    I really liked the Always ad about how to "throw like a woman" ... it wasn't new, but it is a terrific message, well-delivered.

    I also enjoyed the Brady Bunch-themed ad for Snickers ... and one of my favorites was the Viagra-themed ad for Fiat.

    And the Jeff Bridges ad for SquareSpace just made me scratch my head.
    KC's View:

    Published on: February 2, 2015

    • Last night, in Super Bowl XLIX, the New England Patriots scored a stunning 28-24 defeat over the Seattle Seahawks, winning the franchise's fourth championship in the Tom Brady-Bill Belichick era.
    KC's View:
    I was honest on Friday that I was rooting for the Seahawks, and so to say the least I was stunned by the end of the game - that the Seahawks put themselves in a position to win with the most improbable of catches, and then lost the game with the most improbable of throws. There are all sorts of business metaphors here, I think, like about always going with your strength (arguably the best rusher in the league when you only have a yard or two to go to take the lead).

    In the end, it isn't enough to just put yourself in a position to win the game. You actually have to win. That's what the Patriots did, and the Seahawks didn't do.

    So, they'll be parading through the snow in Boston, and looking out the windows at rainy streets in Seattle. Lesson learned.