business news in context, analysis with attitude

Published on: March 11, 2015

by Kevin Coupe

It is of ongoing interest to me when companies decide to color outside the lines of their own businesses, challenging traditions and even taking bites out of hamburgers made from sacred cows.

Which is exactly what happened this week when HBO announced the details of the video streaming service it is about to launch, linking with Apple to initiate the new product. The move, the New York Times writes, serves to unite "two premium brands from the media and technology worlds in a quest to reinvent the way people watch television ... Called 'HBO Now,' the service does not require a traditional TV subscription and will be available exclusively on Apple devices when it makes its debut in early April."

Essentially, what HBO is doing is acknowledging a major shift in consumer behavior away from watching on TV sets hooked up to cable outlets, and toward watching on computers, tablets and other mobile devices - a recognition that has compelled companies like Amazon and Netflix to adjust their own business models.

According to the Times, "The new service is part of a growing wave of offerings this year from media, telecom and technology companies. Dish Network, the satellite provider, recently unveiled a new web-based service that includes ESPN and several other popular networks for $20 a month. CBS and Sony also are starting Internet-only subscription plans.

"The companies are fighting to stay relevant to a generation of so-called cord-cutters or cord-nevers, who pay for Internet access but not traditional TV subscriptions. As its target audience for HBO Now, the network has pointed to the 10 million homes in the United States with web service but no traditional cable or satellite television subscriptions — half of which are estimated to subscribe to a streaming service."

The story goes on to note that "the service will cost $14.99 a month and offer all of HBO’s original programming, past and present, as well as its movie offerings. People who subscribe to the service in April through Apple will receive the first month free ... The exclusivity with Apple lasts for three months. HBO also is in talks with other distributors, including traditional TV providers and digital partners."

The argument here is very simple. The people who are cutting the cord from traditional cable or satellite TV services are almost genetically bred to look for every opportunity to cut the cords that bind traditional consumers to traditional businesses. It would be a mistake - even foolhardy - to think that this compulsion won't impact every part of their consumption experience.

It seems to me that however you are doing business today, you'll be doing it differently - fundamentally differently - in five years time. Maybe sooner.

Consider this an Eye-Opener. A Wake-Up Call. Or whatever it takes.

Published on: March 11, 2015

The Wall Street Journal reports that GNC Holdings is saying that an outside test of nutritional supplements sold by its stores has revealed "no improper labeling."

According to the story, "The Pittsburgh retailer didn’t disclose details of the testing, which was conducted by Eurofins.

"The testing comes as New York Attorney General Eric T. Schneiderman has been investigating several companies, including GNC, regarding advertising and labeling practices."

Schneiderman has demanded that GNC - along with Target, Walmart and Walgreen - stop selling certain supplements because the ingredients inside the bottles did not match the labels outside the bottles.

Published on: March 11, 2015

Advertising Age reports that fast food chain Wendy's, in an attempt to burnish its freshness credentials, "is launching a web video called 'Wendy's Romaine Lettuce Journey,' in which a point-of-view camera follows romaine lettuce from the farm to the restaurant ... The move is part of a larger marketing campaign in which Wendy's is heavily promoting the quality and freshness of its food, starting with its salads."

The story notes that in recent times, Wendy's ad campaigns have focused on limited time products and promotions, the company has come to the conclusion that it needs to tell its brand story more effectively and frequently. In 2015, the story says, Wendy's plans a "more balanced approach to marketing limited-time offers, products and quality-focused brand messaging."

You can see the web video here.

Published on: March 11, 2015

The Private Label Manufacturers Association (PLMA) is out with a new study suggesting that "consumers in the all-important 25 to 45 age group ... are increasingly demonstrating loyalty to the stores they use for household grocery purchases."

According to PLMA, "The study challenges conventional wisdom that consumers regularly shop at anywhere from 3 to 5 stores, chasing after promotions and the lowest prices ... These consumers shop often, but a majority does their regular grocery shopping at only two stores. The rate of shopping trips is high: more than eight in ten of consumers ages 25-45 shop at least weekly. But patronizing just two stores for their regular household grocery needs is by far their most popular shopping regimen and it has been increasing as a habit overall during the past decade."

Because PLMA is releasing the study, there is - naturally - a private label component: "Consumers 25-45, in increasing numbers, are trying store brands for the first time in product categories where they had previously only bought a national brand. Moreover, in overwhelming numbers they report the trial produced a satisfactory experience."

Published on: March 11, 2015

• Business Insider reports that Walmart is trying to shut down a parody site called walmart.horse that, in fact, features a picture of a horse in front of a Walmart.

That's it. No whiny copy. No insults. Just a picture of a horse. In front of a Walmart.

The story notes that Walmart has sent the site owner, Jeph Jacques, a cease-and-desist order, claiming that the site infringes on its trademarks. Jacques, on the other hand, says that the site is parody, and therefore protected.

Published on: March 11, 2015

BuzzFeed reports that Target CFO John Mulligan has called an across-the-board wage increase to match similar moves by Walmart and TJ Maxx "unreasonable," saying that such an increase would reflect “an arbitrary number that’s some flat rate that we’re going to pay across the country.”

However, Mulligan also said that Target "may not have been clear enough in expressing that it intends to 'pay what we need to pay to get a great team'."

Meanwhile, Target confirmed Tuesday "that it is laying off 1,700 workers and eliminating another 1,400 unfilled positions as part of a restructuring aimed at saving $2 billion over the next two years."

According to the BuzzFeed story, "the company’s refusal to set a minimum has drawn the scrutiny of advocacy group UltraViolet. The group’s co-founder, Nita Chadhary, questioned the retailer’s honesty in a statement to BuzzFeed News, accusing the chain of keeping its wages 'cloaked in secrecy'.

"UltraViolet said it took on the cause because nearly two-thirds of minimum-wage workers are women. It’s running online ads in Minnesota, Pennsylvania, and Nebraska."

Published on: March 11, 2015

In the UK, City AM reports that "Tesco has posted its strongest performance in 18 months, with sales up 1.1 per cent compared with 2014, according to industry data for the 12 weeks ending 1 March.

"The latest grocery share figures from Kantar Worldpanel suggest that the major overhaul of strategy at the UK’s biggest retailer by new chief executive Dave Lewis is slowly working."

The story notes that "Tesco’s resurgence has impacted on Asda, which competes for many of the same shoppers and has seen sales fall by 2.1 per cent, taking its market share to 17 per cent.
German discount supermarket chains Aldi and Lidl recorded sales increases of 19.3 per cent and 13.6 per cent respectively.

Published on: March 11, 2015

The Seattle Times reports that Starbucks is going to expand "its mobile-ordering and payment system, currently piloted in Portland, to the rest of the Pacific Northwest," making it possible for "people who have downloaded the Starbucks app into their Apple device ... to place an order and pay from their iPhone or iPad, then walk into one of more than 650 Starbucks stores in Washington, Oregon, Alaska and Idaho to see their latte waiting for them at the handout counter. An Android version of the mobile ordering feature is expected later this year."

The story says that "Starbucks is rolling out the mobile-ordering capability to draw more customers into a digital ecosystem that’s closely entwined with its rewards program, whose users tend to buy more and more often," and that it also "gives the company a tool to manage strong demand for its increasingly complex offerings, which has created waiting lines that, while not Soviet in magnitude, are becoming frustrating to many customers."

Starbucks won't provide specific numbers for the Portland test, except to say it exceeded expectations.

Published on: March 11, 2015

• The Food Marketing Institute (FMI) is out with its annual "Food Retailer Contributions to Health and Wellness" study, concluding that there is "a complex combination of corporate social responsibility and vast business opportunities for food retailers."

Among the findings: "Supermarkets are increasingly identified as a health care destination," with 95 percent of stores employing "dietitians at the corporate, regional and store levels"; 70 percent of those surveyed currently view supermarket health and wellness programs as a significant business growth opportunity for the entire industry in the years ahead;


• The Wall Street Journal reports that "Barnes & Noble Inc. showed hints of progress in its turnaround efforts in the fiscal quarter ended Jan. 31, and even said it would close fewer stores this fiscal year than previously forecast."

The story says that "to attract more holiday shoppers, Barnes & Noble added such products as craft beer kits and portable turntables together with a wide selection of signed books. Those efforts were rewarded, with physical book sales stabilizing during the quarter and both the gifts and educational toys and games categories each showing gains."

While net income for the quarter grew 14% to $72.2 million, from $63.2 million, in the year-earlier quarter, revenue fell 1.7% to $1.96 billion. And in its Nook e-book business, "revenue dropped 51% to $78 million, while digital content sales declined 29% to $41 million."

Published on: March 11, 2015

...will return.