business news in context, analysis with attitude

Published on: March 25, 2015

by Kevin Coupe

There was an intriguing story the other day on National Public Radio's great Marketplace broadcast about the minor resurgence taking place in the world of cassette audio tapes.

According to the story, "some big players are getting into the cassette game. Disney sold about 2,500 copies of the Guardians of the Galaxy soundtrack on tape, according to Nielsen. Then, there are indie labels like Burger Records, which claims to have sold more than 300,000 cassette tapes since 2007." And that does not even count the small and quirky artists who continue to put out cassette recordings that one expert describes as "more weird and creative" because it is a niche business seen as a place to make low-risk gambles.

As an alternative to digital storage and streaming technology, cassettes are seen as being tangible and higher quality than digital. And "that tangibility also has some data geeks are clamoring for these cassettes, as well," Marketplace reports. "That’s because Sony, IBM and other hardware companies have developed tapes that aren’t your grandma’s tapes. They can store about 185 terabytes of data, the equivalent all the printed collected works in the Library of Congress times 18.5."

Now, even cassette enthusiasts concede that this probably is more fad than trend ... but it is interesting to watch as a business segment that seemed relegated to the scrap heap sees a but of a revival.

It is all about defining a differential advantage.

As it always is.

Next thing you know, we'll see a VHS and Betamax tape revival. That'll be an Eye-Opener.

Published on: March 25, 2015

Kraft Foods Group and HJ Heinz Co. announced this morning their plan to merge, creating the world's fifth largest food and beverage company with combined annual revenue of roughly $28 billion.

Heinz is owned by 3G Capital and Berkshire Hathaway Inc.; Reuters reports that the deal "will bring Heinz back to the public market following its takeover two years ago.

According to the story, "Kraft shareholders will own a 49 percent stake in the combined company and Heinz shareholders 51 percent ... The combined company will have eight brands worth more than $1 billion each and five worth $500 million-$1 billion each, the companies said."

The new company will be called the Kraft Heinz Co.

Published on: March 25, 2015

California-based Bristol Farms said yesterday that Adam Caldecott, an 18-year veteran of the company who has been its executive vice president for retail, has been named president/COO.

“In order to further prepare Bristol Farms for the growth and opportunity we anticipate in the coming year and for many more years to come, I am pleased to announce this significant and well deserved promotion of Adam Caldecott,” says Kevin Davis, who will remain in his role as Bristol Farms' CEO. “In his newly expanded capacity, Adam will retain responsibility for all facets of Bristol Farms marketing and merchandising, as well as store operations. In addition, Adam will oversee sales and advertising, communication, signing and visual merchandising, and product demonstration functions within the company."

Bristol Farms operates thirteen specialty grocery stores throughout California and is an equity partner with Endeavour Capital.

Published on: March 25, 2015

The Seattle Times reports that Paul Misener, Amazon.com’s vice president of global public policy, told a US Senate subcommittee yesterday that the type of drone approved for testing last week by the Federal Aviation Administration (FAA) is an "older design" that already is outdated.

Amazon has "innovated so rapidly that the (drone) approved last week by the FAA has become obsolete,” Misener testified to the Senate Subcommittee on Aviation Operations, Safety, and Security. “We don’t test it anymore. We’ve moved on to more advanced designs that we already are testing abroad ... “Nowhere outside of the United States have we been required to wait more than one or two months to begin testing, and permission has been granted for operating a category of UAS, giving us room to experiment and rapidly perfect designs without being required to continually obtain new approvals for specific UAS vehicles."

The Times writes that "Misener used the example to make the point that U.S. regulators are moving too slowly in the rapidly evolving commercial development of drones, which he called UAS, or unmanned aircraft systems. Amazon has said it’s testing drones in countries such as the United Kingdom, where governments have quickly created rules to allow it to conduct extensive research and development."

The story also says that "Misener’s written testimony also offered a few new details about Amazon’s drone development. The drones, first revealed by Chief Executive Jeff Bezos in late 2013 in an interview on CBS' '60 Minutes,' will fly below 500 feet and 'generally above 200 feet,' except for takeoff and landing. The craft will weigh less than 55 pounds. And Misener said the company will be able to operate it from distances of 10 miles or more."

Published on: March 25, 2015

In Arkansas, City Wire reports that Walmart recently "began offering deeper discounts to consumers willing to try the online grocery-pickup experience. Using targeted emails to Walmart.com customers in the test areas like Northwest Arkansas, Wal-Mart agreed to give a $10 discount on a user’s first $50 order. This offer went out to proposed customers on Monday (March 24) and is good through March 26. The offer supplies an eVoucher code that can be used at checkout. This offer comes on the heels of a $5 discount voucher offered in recent weeks to the same potential shoppers."

According to the story, Walmart is testing click-and-collect in several markets, and it several iterations: "The stand alone format in Bentonville opened in September, and since that time the retailer has opted to expand the Pickup Grocery option to stores for fulfillment adding Sam’s Club in Bentonville, Walmart Stores in Huntsville, Ala., and the Phoenix market as of February.

"The retailer is also featuring its Pickup Grocery in a multiple platform media campaign from Internet banner ads on Yahoo! to local billboards in markets where the tests are underway.
Wal-Mart could have put its Pickup Grocery format anywhere but likely chose to build it close to its Bentonville headquarters for easier access and hands-ons experiments and ongoing tweaks that come from customer feedback."

Published on: March 25, 2015

Yesterday, MNB took note of a Chicago Tribune report that "sales of low calorie soft drinks in the United States have tumbled by almost 20 percent over the past five years, according to data from market research firm Euromonitor. This year, diet soda sales are on pace to drop another 5 percent. By 2019, they are projected to have fallen off by roughly a third since their peak in 2009."

Well, the following isn't going to make things any better for the soft drink business...

Mother Jones reports on a story in the Journal of Public Health suggesting that "researchers have found a link between regular soda consumption and premature aging ... a study of 5,300 adults compared the cells of people who drink soda every day to those of their non-soda-drinking counterparts. In the soda group, the ends of the chromosomes - known as telomeres - were shorter, a sign of their cells' diminished ability to regenerate. Our telomeres naturally shorten as we age, but scientists have discovered that a few behaviors - including smoking - can shorten them prematurely."

This research comes as soft drink companies look to establish their products as healthy snacks, often using social media to create momentum.

Just the other day, the New York Daily News reported that Coca-Cola "is working with fitness and nutrition experts who suggest its cola as a healthy treat. In February, for instance, several wrote online pieces for American Heart Month, with each including a mini-can of Coke or small soda as a snack idea."

The story went on to say that Coke hardly is alone in this effort: "Other companies including Kellogg and General Mills have used strategies like providing continuing education classes for dietitians, funding studies that burnish the nutritional images of their products and offering newsletters for health experts. PepsiCo Inc. has also worked with dietitians who suggest its Frito-Lay and Tostito chips in local TV segments on healthy eating. Others use nutrition experts in sponsored content; the American Pistachio Growers has quoted a dietitian for the New England Patriots in a piece on healthy snacks and recipes and Nestle has quoted its own executive in a post about infant nutrition."

Published on: March 25, 2015

In the UK, the Guardian reports that "Tesco is facing a new threat of legal action as a US law firm asks British shareholders to join a group seeking billions of pounds in compensation for losses relating to the supermarkets’ profits overstatement last year."

The argument is that when Tesco overstated its profits and understated its expenses, it created "a permanent destruction of value to shareholders."

The Guardian writes that "The potential legal battle comes after Tesco’s admission last September that first-half profits had been artificially inflated by £250m because income from suppliers had been mis-stated. The grocer later raised that figure to £263m and admitted the accountancy problems went back at least two years after an internal investigation led by accountancy firm Deloitte.

"The overstatement combined with poor performance in Tesco’s stores at home and abroad to prompt a sharp decline in the market value of Britain’s biggest retailer. Tesco’s share price dived to a 14-year low as the Serious Fraud Office and the Financial Reporting Council both launched investigations into the accounting scandal. The grocery industry watchdog, the Groceries Code Adjudicator, is also investigating the firm’s relations with its suppliers."

Published on: March 25, 2015

MarketWatch reports that Toys R Us "tries to turn around its U.S. business, where comparable sales fell for the fourth straight year in 2014," CEO Antonio Urcelay says that "the company is now designing new formats for both its Toys R Us and Babies R Us stores so that they become places kids will leave with 'unforgettable' experiences. He declined to offer details or say when the company will roll out the prototypes."

The company reportedly also is looking for ways to cut costs - including possible vacating the Time Square flagship store in New York City that, at 110,000 square feet, features an indoor ferris wheel and an updated version of the floor piano on which Tom Hanks and Robert Loggia danced in Big. (Though they danced in an FAO Schwarz store, which is owned by Toys R Us.) The retailer is said to be looking for a rent concession for the high-profile space.

Urcelay also is quoted in the story as saying that he's not overly concerned about declining market share: "It’s not sustainable to gain sales at cost of margin. Market share isn’t the only name of the game.”

Published on: March 25, 2015

• The Grocery Manufacturers Association (GMA) yesterday "praised the House Agriculture Committee for holding a hearing today examining the costs and impacts of mandatory biotechnology labeling laws."

“There’s no question that a patchwork of state food laws across the country with different labeling mandates and requirements will create confusion for consumers, cause significant new costs for Americans, and lead to critical problems for our nation’s grocery supply chain,” said Pamela G. Bailey, president and CEO of the Grocery Manufacturers Association.  “Congress must pass a bipartisan bill this year to ensure Americans continue to have access to consistent science-based standards for food labeling, and today’s hearing  reinforces the need for a federal solution.”

Published on: March 25, 2015

• The Modesto Bee this morning reports that Bob Piccinini, described as "the congenial and savvy chairman of the board and majority shareholder of the Modesto-based Save Mart Supermarkets empire," died yesterday after a two year illness. The cause of death was said to be congestive heart failure. He was 73.

The story notes that Piccinini "purchased Save Mart from the Piccinini and Tocco families in 1985 after working his way up through the ranks – box boy, truck driver, store manager, Vice President of Real Estate and on to President and Chief Executive Officer. He is credited with taking Save Mart from a homegrown, Central Valley chain to the regional competitor it is today."

Published on: March 25, 2015

The other day, Reuters reported that the International Agency for Research on Cancer (IARC), which is an arm of the World Health Organization (WHO), said 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 U.S. government has said that the herbicide is considered safe. And Monsanto responded 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."

One MNB user wrote:

If there is ANY evidence of glyphosate is carcinogenic, why would any conscionable human, corporation, or governmental entity proceed with large scale plans for use on a food supply chain?  Isn’t human life and suffering and the species more important and not worth some risks

Err on the side of caution? I guess it depends on whose life that matters…   It is one thing to do what farmers have done for centuries, picking the best of plants to hybridize and grow a sweeter or plumper or mildew resistant, stronger food plant. That is just assisting natural selection processes.  It is quite another thing to engineer food crops with the express purpose to be able to have poisons applied on it.   Have we become sheep or so beaten down by the bullshit that we have given up our outrage?  How is it we all sit by mildly when it is suggested we find a way to freely spray our FOOD plants with a substance whose household garden label reads like a manual for dangerous toxic waste handling and we even CONSIDER applying this near, much less right ON our foods? Why do we not scream, NO WAY and are you insane? If it reads “poison” and “hazardous to humans and animals” and “do not reuse container” and “do not pour down drain” and it is prudent to wear gloves and a mask to handle the product, what makes eating it ok?  HELLO!  This GMO insanity to be free to apply ROUNDUP to food plants seems to me to be a case of money steering the brain and it has long left the pecker in the dust as imprudent judgements go.  I think this is this is a case of First class, highest order of greed and I might go as far as to say, true evil.




On another subject, an MNB user wrote:

While I agree that $9/hr is not enough to support a family, especially when these workers usually given less than 40 hours per week, this is a good step in the right direction.  The benefits from reduced turnover are huge.  However, we as customers have to put our money toward the things that we value.  If we value retail employees that are friendly, knowledgeable and focused on their job, then we need to make sure that they are paid in a way that allows them to support themselves.    If we value clean floors, if we value friendly service, if we value fully stocked shelves, then we have to understand that it will take more than $9/hr.  For stores like Target, their employees can buy most of their needs in the store, so higher employee wages, will likely mean more purchases in the stores and ultimately higher sales.  These are good first steps, but country needs to make more progress.  Retail employees are no longer high school kids working after school, or college kids home on break; these are people trying to support a family and they need to be paid in a way that allows them to do it.




On the subject of Louisville Slugger baseball bats now being owned and manufactured by a Finnish company, though the company says it will still manufacture bats, made from hardwood trees in Pennsylvania and New York, in its factory in downtown Louisville, MNB reader Jim Martin wrote:

This makes for great marketing, unfortunately, anything goes after the sale date…




Regarding fraud problems that may be connected to Apple Pay, MNB user Nick Arlt wrote:

The article you cited from the Washington Post talked about an issue with Apple Pay. You said it in your comments that this is a serious issue, but the attention is being paid to the wrong area. To say this is an Apple Pay issue is only addressing a small aspect of the problem. The primary issue is that thieves already have stolen credit card data. Without Apple Pay would they give up and not use the cards to buy things on the internet or other places? Apple and competing services, could do more to help protect stolen data, but the main issue is the weakness of the current system.

Also, the security analyst using percentages is taking advantage of the law of large numbers. 6% of Apple Pay transactions are from stolen cards, 60 times that of plastic swipe. Should we flip that and say that nearly 100% of stolen credit card data is from plastic swipe cards? Why isn’t that in the report?

These types of reports scare people away from a technology that is unquestionably better and more secure. The information portrayed may be accurate, but the way it is communicated blames Apple Pay for issues of our outdated system.

All fair points.

MNB reader Scott Burrill chimed in:

I have three cards set up in ApplePay.  Each respective bank put me through the grinder to activate them.  When I complete entry in ApplyPay a bank telephone number was provided for me to call to complete the activation.  Once on the phone they put me through the usual proof of identity questions.  So I feel like this article is pinning the blame on Apple unduly.  Apple clearly has created the mechanism for banks to require final authorization.  Ultimately it is up to the issuing bank whether a card can be cleared for use in ApplePay and clearly some have done there due diligence while others have not.
 
I have used the service and find it really convenient and it has actually increased my propensity to purchase things here at work.  Our vending machines are ApplePay enabled and often in the past I would never have cash or change to grab a seltzer water.  Now I simply swipe the phone by the reader and POOF!,  out comes my seltzer followed by a confirmation alert on my phone confirming the transaction within seconds.  Gives me geeky shivers…..
 
Me, too.




And on still another subject, MNB reader Jim DeJohn wrote:

I had to reply to your FaceTime while you were in Manhattan Beach about getting out and about while traveling.  I have the benefit of being able to travel for work, and have had the privilege of traveling to Australia.  Like yourself, I really enjoy getting out and seeing the area, meeting people, experiencing the local activities.  On my first trip to Melbourne, I planned a few activities outside of my working hours – one being a wine tour through the Yarra Valley.  On this tour, I met a lovely couple with a daughter that was my daughter’s age.  After the tour, they invited me to dinner with them, which I was happy to accept and had a wonderful time.

Through emails and skype, we became good friends, as well as our daughters.  On my next visit to Melbourne, they took me around and we spent the weekend after my week of work – really getting to see true Australian life.  They then visited us here in NY for a week, while on a US tour.  We were able to show them our local life, and visit places like Ben and Jerry's and Niagara Falls.  This extended to this past trip to Australia I took this past January – I was able to bring my daughter (who is 10) along and we spent time with our friends there (in fact my daughter stayed with them all through the time I was working).  We added a weekend on each end of the work week and visited so many areas within and outside of Melbourne.  Truly a wonderful experience for a 10 year old from upstate NY.  And all this started because I love to get out and about while traveling for work! 
 
As always – keep up the great work you do and I really enjoy reading MNB every day!

Thanks.

I envy your travels to Australia. I've been there once - for a speaking gig - several years ago, and I was only able to spend a few days in Sydney. But I have to tell you that climbing the Sydney Harbor Bridge is one of the coolest things I've ever done in my entire life ... especially because heights terrify me. I hope it reflects a general willingness to embrace the world whenever I can, however I can.