business news in context, analysis with attitude

Published on: March 23, 2015

by Kevin Coupe

Seeking Alpha has an interesting piece about how Netflix is trying to change some of the rules that govern its supply chain - that is, its relationship with content providers and filmmakers.

Traditionally, studios and production entities have given filmmakers a piece of the back end - if the project makes money, then the artist makes money. Traditionally, the debate has been between net and gross - major players (think Steven Spielberg) make money on the gross, while lesser players get their points on the net. (This has led to a vast number of lawsuits over the decades, with people complaining that the studios juggled the books so that the "net" is a lot smaller than it should be.)

Rather, when Netflix underwrites movies that will first be released in theaters, it will pay filmmakers on the front end - guaranteeing them a paycheck, though not a big check if the project is a hit.

Which means, the story says, that "filmmakers could be put in the position of weighing audience volume (Netflix) and up-front dollars against the potential for a box office jackpot and back-end bonanza."

What I find interesting about this is the idea that one of the companies that is disrupting so much about the content consumption process also is looking for ways to change the supply chain rules - believing that this might give it access to talent and material they might not otherwise have access to. I think that all companies have to do this ... every assumption has to be challenged, every rule has to be questioned, and every sacred cow has to be considered as a potential hamburger.

One again, Netflix provides us with an Eye-Opener.

Published on: March 23, 2015

Fresh & Easy Neighborhood Markets announced that it plans to close 50 of its stores, 30 of them in Southern California. Management says that Yucaipa Cos., since acquiring the chain from Tesco, had determined that the units were underperforming, sometimes because of physical limitations like the size of the parking lot.

CEO Jim Keyes made the announcement in a video circulated to store employees last Friday. Most of the stores are slated to be closed within a few weeks. The closures represent close to one-third of the chain's entire fleet.

The expectation is that with the store closures, ownership now will have more capital to put against other initiatives - a single store test of the Wild Oats banner in Scottsdale, Arizona ... a click-and-collect initiative being tested in Las Vegas ... and a fresh food-driven concept that it is designing with the same firm behind the Apple Store.

Published on: March 23, 2015

The Wall Street Journal reports that Starbucks has brought to an end a much-discussed, oft-criticized initiative that had its baristas writing "Race Together" on its coffee cups, with the intention of creating discussion about racial issues in America.

According to the story, CEO Howard Schultz, "in a letter to employees, said that as of Sunday they would no longer be asked to write 'Race Together,' or place similar stickers, on cups given to customers. He said that discontinuing that element of the Race Together initiative was part of Starbucks’s plan from the beginning."

The Journal story notes that the "timing wasn’t mentioned in materials Starbucks put out publicly in the past week to trumpet the campaign. But Jim Olson, a Starbucks spokesman, said that March 22 had been communicated to its stores previously as the planned last date for the cup-writing part of the campaign, and that Sunday’s change wasn’t a response to criticism."

In the letter, Schultz wrote, "“While there has been criticism of the initiative—and I know this hasn’t been easy for any of you—let me assure you that we didn’t expect universal praise,” and he said that the company “believed that starting this dialogue is what matters most. We are learning a lot. And will always aim high in our efforts to make a difference on the issues that matter most.”

Published on: March 23, 2015

Reuters reports that the International Agency for Research on Cancer (IARC), which is an arm of the World Health organization (WHO), said Friday that "glyphosate, the active ingredient in the Monsanto Co herbicide Roundup, was 'classified as probably carcinogenic to humans'. It also said there was 'limited evidence' that glyphosate was carcinogenic in humans for non-Hodgkin lymphoma."

The story says "glyphosate is mainly used on crops such as corn and soybeans that are genetically modified to survive it ... Concerns about glyphosate on food have been a hot topic of debate in the United States recently, and contributed to the passage in Vermont last year of the country's first mandatory labeling law for foods that are genetically modified.

"The U.S. government says the herbicide is considered safe. In 2013, Monsanto requested and received approval from the U.S. Environmental Protection Agency for increased tolerance levels for glyphosate."

Responding to the IARC findings, Monsanto says that the science does not support them and called on the WHO to explain: "We don't know how IARC could reach a conclusion that is such a dramatic departure from the conclusion reached by all regulatory agencies around the globe," the company says.

Published on: March 23, 2015

The Wall Street Journal reports that the US Food and Drug Administration (FDA) has "signed off on genetically modified varieties of apples and potatoes, and for the first time suggested the products might need to carry a label to inform consumers about the ways in which they’re different from conventional varieties ... Both the apple and the potato differ from the existing roster of genetically modified crops in that they provide benefits to consumers. Other modified crops, like corn and soybeans, are made to withstand certain pesticides, making them easier for farmers to grow."

The story goes on: "The FDA said Friday that it didn’t think the Arctic apple or the Innate potato posed a risk to human health, concluding that 'these foods are as safe and nutritious as their conventional counterparts.' The FDA is still deciding whether to require labels on the apple or potato, alerting consumers to the traits that make them different from conventional varieties. The agency is unlikely to require a label that identifies the products as being modified."

The apple has been designed to resist browning when cut open, while the potato "is designed to have fewer black spots from bruising and produce lower levels of acrylamide, a potential carcinogen that forms in potatoes when cooked at high temperatures."

Consumers Union issued the following statement: "These new varieties covered by FDA's announcement today all use a new form of genetic engineering, called RNA interference, also called RNAi.  The safety of this type of engineering, which works by shutting down the ability of RNA to translate DNA into protein in a cell, raises many new, unanswered questions.

"An EPA scientific advisory panel on pesticides issued a report in 2014 that stated this technology needs further evaluation in terms of its use for pesticidal purposes. The panel recommended further study of this topic, particularly in people who are sick, immune compromised, children or the elderly.

"Consumers Union is also concerned that FDA has not required labeling of this apple, which is engineered to sit around for significant periods of time without turning brown.  Consumers could easily be deceived about the freshness of slices of this apple.  FDA says companies should 'consult' with them about labeling, but like with all other genetically engineered food, requires no full disclosure to consumers."

Published on: March 23, 2015

The New York Times had an interesting piece over the weekend about how Kodak is trying to rescue itself from the rubble of its own managerial incompetence and innovative ineptitude.

An excerpt:

"What happens after a tech company is left for dead but the people left behind refuse to give up the fight? At Kodak the answer is to dig deep into a legacy of innovation in the photography business and see if its remaining talent in optics and chemistry can be turned into new money in other industries.

"Once a household name as big in its day as Apple and Microsoft have been for later generations, Kodak was part of everyday life, its film — sold in a yellow box — recording births, vacations, weddings. And then Kodak became a cautionary tale about what happens when a tech company is slow to change."

You can read the entire story here.

Published on: March 23, 2015

• The Denver Business Journal reports that Colorado-based Natural Grocers has made a deal with personal shopping service Instacart to provide grocery delivery services in the Denver area. A successful test could lead to Natural Grocers rolling out the service to its 94 stores in 16 states.

The story says that "Instacart has been operating in the metro Denver since June, when it launched in partnership with King Soopers and Costco."


• In the UK, the Telegraph reports that discounter Aldi is plotting an e-commerce initiative, though no specifics are available and the company itself dismisses the reports as speculation.

An Aldi spokesman says that "e-commerce is not an immediate focus for Aldi as we currently have the best performing business model in the grocery sector. However, it is an area we monitor as part of our customer-focused approach.”

According to the story, Aldi, "which has long avoided online sales as they are not profitable enough, has offered online delivery of alcoholic drinks in Australia since 2013 but the UK launch would be its first foray into e-commerce in Europe."

Published on: March 23, 2015

• Reuters reports that "Wal-Mart Stores Inc shareholders will vote in June at the company's annual meeting on electing an independent board chairman, after U.S. regulators rejected a request by the retailer to block the proposal.

"Efforts the past two years were unsuccessful to unseat current board Chairman Rob Walton, scion of the billionaire family that founded the world's largest retailer. Because the Walton family controls more than 50 percent of the retailer's shares, outside proposals generally have little chance of passing. Wal-Mart had argued that the proposal, submitted by the International Brotherhood of Teamsters General Fund, should be omitted because it was vague in its standard of independence."

The story goes on: "The Teamsters fund has argued that a chairman without ties to the Walton family and who was independent of management would help improve oversight. It cited ongoing investigations into allegations of bribery in Mexico among the issues that illustrated the need for change."


• The New York Times reports that Walmart has agreed to settle litigation brought against it by the children of comedian James McNair for $10 million.

McNair was killed last year when the van in which he was traveling with comedian Tracy Morgan was hit by a Walmart truck on the New Jersey Turnpike. The story says that "Mr. Morgan and two others injured in the crash also have sued Walmart. The truck driver, Kevin Roper, has been charged with death by auto and other offenses in New Jersey state court but has not yet been indicted, a spokesman for the Middlesex County, N.J., prosecutor’s office said."

The settlement had previously been reported, but no figure had been disclosed.

Morgan, who reportedly is suffering from brain injuries making it impossible for him to perform, also has sued Walmart, but that case has not yet been resolved.

Published on: March 23, 2015

• USA Todayreports that a new study by Technomic concludes that "Starbucks has passed Subway to become the No. 2 restaurant chain in U.S. sales — second only to McDonald's ... With almost $12.7 billion in U.S. sales in 2014, Starbucks pulled away from Subway and claimed the No. 2 slot for the first time, according to the report. Subway, which is privately held, does not generally report its U.S. sales, but it informed Technomic that its 2014 U.S. sales were $11.9 billion. McDonald's remains far-and-away No. 1, with U.S. sales of $35.8 billion in 2014."


• The New York Times reports that "the real estate investor British Land and the British supermarket operator Tesco said on Friday that they had agreed to swap properties worth 733 million pounds, or about $1 billion. Under the terms of the deal, Tesco will regain sole ownership of 21 superstore supermarkets that it jointly owned with British Land.

"In exchange, British Land will acquire Tesco’s 50 percent interest in three shopping centers and three retail parks that are anchored by Tesco stores and three stand-alone stores."

According to the story, Tesco CEO Dave Lewis said in a prepared statement that "this transaction with British Land allows us to increase our ownership and thereby insulate more of our businesses from indexed rent reviews. We have a long way to go, but it’s a transaction which takes us in the right direction. This agreement makes our business simpler and stronger.”

Published on: March 23, 2015

Had a piece last week about how public libraries are trying to compete in the digital age, a time when many local coffee shops have replaced libraries as community centers.

MNB reader Linda Yordy wrote:

It’s not just the public libraries . . . I teach a business communication course as an adjunct at the local university.  I require my students to research a topic and give a presentation at the end of the semester.  Last week, I assigned them to collect their sources and create a bibliography.  One of the sources had to be a real book – I wanted them to actually walk into the library.  I had to explain that the large building in the center of campus contained more than a Starbucks.  They argued that they could download any book they needed.  You would have thought I had told them there was no Santa when I explained that not every resource is digital.

MNB reader Glenn J. Rosati wrote:

Given your penchant for tying in movies with business lessons, I was surprised that you didn’t mention Desk Set, especially in light of Audrey Hepburn’s character, Bunny Watson, the ultimate incarnation of an “information retrieval specialist”.




On the subject of the sandwich chain, Which Wich, that makes peanut butter and jelly sandwiches for the needy (an effort that was on display at last week's IGA Global Summit), MNB user Steve Pivec wrote:

Kevin, thanks for sharing your thoughts concerning the making and sharing of the thousands of PB&J sandwiches. As I ponder my own blessings on the past almost 42 years as a Broker, I remember the days of eating these same sandwiches although my stories shared with my own family were of baloney and cheese on white bread.
 
I can’t help but think of the teaching lesson these families had in doing this event together and what those children will tell their children. Teaching by example is a powerful tool and is everlasting.

From another reader:

Your article about making pb&js for homeless people reminded me that in my neck of the woods, the front-end employees can be from those exact circumstances. I suspect that is true in many places, since entry-level supermarket jobs are low-pay and often one of the few employment alternatives for unskilled young people. I remember recently chatting with a cashier while she was checking out my stuff. She asked me how I was, and that day I think I said something like, "It hasn't been a great day." Then she said, "I know what you mean. My foster mother committed suicide last week, and I've been feeling bad." Wow! I was very concerned for her, and asked if she had any kind of support system. It didn't seem like she had much, especially if she was telling me -- a complete stranger -- about it. I mentioned it to the manager at the Service Desk, so they would keep an eye on her, and the manager thanked me and said she had had no idea.



We had a piece last week about Kevin Westley, a man on Long Island who, feeling that local Walmarts were selling St. Patrick's Day-themed t-shirts that stereotyped the Irish as drinkers, went out and bought hundreds of the shirts, only to return them the day after the holiday - his way of protesting and taking at least some of the products off the market.

One MNB user wrote:

I found the comments on the stereotyping of the Irish to be right on target.  I have observed that some people think it is clearly inappropriate to make comments about some groups but perfectly fine to make comments about others.  How often do we see the media portray the bumbling white father in a way that would never be tolerated if he were a different color?  How many times have we seen disparaging comments about company leadership or political groups being “old white guys” and no one speaks up?  I am also not trying to be humorless but let’s all work on being respectful to everyone, as I know you are.

Don't give me too much credit. I've taken my share of shots at old white guys.

I also got an email from Kevin Westley, who started the whole discussion:

I have been working with AOH National Anti-Defamation Chairman Neil Cosgrove this year.  He found out last week: "During the 2014 Halloween season, Cosgrave noted Walmart was "very proactive in addressing the concerns of Muslim Americans regarding their distasteful Pashtun (Afghan) Papa and Arab Sheik costumes. At that time Walmart pulled these offensive items immediately and Senior Director of Walmart Corporate Communications Brooke Buchanan issued an apology."
 
Pax et bonum...

I do want to be clear about something. I am not humorless about this kind of stuff ... I sort of think that we ought to be able to make fun of most things without fear of politically correct blowback.

That said, it doesn't seem fair that certain kinds of ethnic stereotyping are considered okay, and others are not. It is just something of which we should be aware.

I may be of Irish heritage, but the last day on which I'd make a big deal of it is March 17. That's for amateurs and wannabes. And in general, I try to behave in a way that doesn't reinforce stereotypes, which seems to me to be the best response to this kind of stuff.




Finally, last Friday we had a story about how A&P is testing a relationship with Instacart, which led me to comment:

Wow. A&P is taking orders online? I'd heard they'd just taken their first delivery on a shipment of fax machines....

One MNB user wrote:

In this case, stereotypes can keep someone from filling an open position at A&P…….

(Not that I would go to work there, but at a very lighthearted level, you picked on A&P as those shirts picked on the Irish…..)

But another reader wrote:

Some people may call you snarky….but this is the type pf humor I love seeing from you. LOL.

Thanks.
 

Published on: March 23, 2015

“For grocers, the most important number is the average number of Top Shoppers per store. For most US food retailers, that means those spending an average of $50 week or more.”…… Brian Woolf - Supermarket Loyalty Expert