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    Published on: March 26, 2015

    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here. This is FaceTime with the Content Guy.

    No question: Numbers are important to understanding how businesses work, how consumers think, and how to make strategic and tactical decisions.

    But they don't always tell the whole story.

    I recently saw a presentation by a demographer who argued that math tells us everything we need to know about consumer trends. Part of his schtick was to explain how, if you just look at the numbers, you can immediately deduce that China is in big trouble, the US is ascendant, and that all you have to do to understand where the world has been, where the world is going, and how to do business is to be able to do simple math.

    Well, I'm with Jimmy Buffett on this one: Math sucks. (Actually, it is not that math sucks so much as it is that I suck at math. Always have.)

    One of the things this demographer talked about was how Levi Strauss ran into business problems because it could not or did not do the math. The idea is that it had a very successful business selling jeans to a specific demographic, but that when we got to the point where there were a lot fewer people in that age range, jeans sales went into the toilet...and they could not understand why. Well, this fellow said, it was all math.

    Well, he was right - it is all about math. But not just the math of demographics.

    There also was the addition of lots of new manufacturing competitors. I happened to work my way through high school and college in the men's clothing business, and one of the things we sold lots and lots of were jeans. There was a time when Levis were the dominant name in the jeans business, and then suddenly everyone and their brother and sister was in the jeans business. I remember being shocked in college when the store where I worked - it was called the British Stock Exchange, it was in Marina del Rey, California, and it was a yuppie store before the term had even been created - sold Britannia patchwork jeans for $25 apiece. That just seemed so extravagant...

    And, there was subtraction ... when Gap decided to stop selling Levis and get into the private label business. That move gave Gap a very clear identity - it was no longer just that place to go for Levi jeans - but it had to take a toll on Levi Strauss's bottom line. (in case you missed it, we had a story the other day about how Gap is trying to reinvent itself for something like the third time ... think of it as the circle of life.)

    And, there was multiplication ... because not only were there more jeans labels to choose from, but there also was one might call the "cool" multiplier ... jeans weren't just for one kind of wearing, but for a wide variety of occasions ... even to work at the office, depending on where you worked and what day of the week it was ... and I'm not sure Levi Strauss was ever able to take advantage of that shift to the extent it needed to. Which made them, in some cases, less cool ... and even when they were able to stress their cool with an origin story second to none, they weren't able to regain earlier market dominance.

    They probably never will. The numbers are against them.

    But the point is that demographic numbers aren't the only numbers that one has to count. Marketing is all about context, and I think when you decide only to look at one set of factors or another, you leave yourself open to the possibility that you're going to miss something very important, or deny yourself the option of competing. because you didn't see the whole picture.

    Or "the big picture."

    Maybe I'm not as bad at math as I think. Because in this case, I think I can do the addition, the subtraction and the multiplication...

    Just don't ask me to do fractions. Or calculus. My dad was an elementary school math teacher, and he always said that in all his years, there was just one person he couldn't teach math to ... and you're looking at him.

    Anyway, that's what is on my mind this Thursday morning ... and as always, I want to hear what is on your mind.

    KC's View:

    Published on: March 26, 2015

    by Kevin Coupe

    Sweden, the country that brought us August Strindberg, Alfred Nobel, Ingmar Bergman, Stieg Larsson, Tetrapaks, Spotify, Volvo, and, last but not least, Ingrid Bergman and Greta Garbo, now can boast of its latest cultural innovation.

    McDonald's pajamas.

    Advertising Age reports that in Sweden, McDonald's is hoping to translate its popularity as the nation's favorite hamburger to a broader lifestyle business, and is introducing a collection of bedding, wallpaper, long underwear, pajamas and even pet supplies that bear its logos.

    The company says that profits from sale of the lifestyle items will be donated to the its Ronald McDonald charity.

    I'm not sure what is harder for be to believe - that people would want to put McDonald's wallpaper in their homes, or that the Big Mac is actually the country's favorite burger.

    Somebody needs to open a Shake Shack or In-N-Out there. Quickly. It'd be an Eye-Opener.

    (And maybe get one of those two companies a Nobel Prize for burgers. Which strikes me as a perfectly legitimate category...)
    KC's View:

    Published on: March 26, 2015

    Amazon announced this morning that it is expanding its Prime Now service, providing one-hour delivery service on selected items, to Dallas. It was just a week ago that the company announced its expansion from Manhattan and Brooklyn to Baltimore and Miami.

    Amazon has committed to rolling the service out to additional markets throughout the year.
    KC's View:
    None of this should be a surprise. Amazon has been opening distribution centers all over the country with precisely this intent, and it is not a big leap to think that it won't be long before many of them also have the ability to provide Amazon Fresh service, when the company decides that it is time to begin that rollout.

    Published on: March 26, 2015

    As the US House of Representatives sees the introduction of The Safe & Accurate Food Labeling Act, which its sponsors say would establish a federal labeling standard for food and beverage products made with genetically modified ingredients (GMOs), numerous special interest groups weighed in on the legislation.

    From The Grocery Manufacturers Association (GMA):

    “The entire purpose of food labeling is to provide consumers throughout our nation with clear and consistent information. Congress must pass a bipartisan bill this year to ensure Americans continue to have access to consistent FDA-approved and science-based standards for food labeling.

    “It’s important to know that this technology has been around for the past 20 years, and today, 70-80 percent of the foods we eat in the United States contain ingredients that have been genetically modified.

    “The overwhelming scientific consensus is that GMO ingredients are as safe as any other food. The Food and Drug Administration and major scientific and health organizations such as the American Medical Association, National Academy of Sciences and World Health Organization all have found GMOs are safe for humans and positive for the environment. More than 2,000 studies show a clear consensus among the world’s leading scientific organizations that GMO ingredients are safe.

    “A single federal labeling standard for non-GMO and GMOs that is based on science would ensure that America’s farmers and food manufacturers work under a uniform standard across all 50 states and that consumers receive uniform, consistent information on GMOs. The alternative – a patchwork of state and local food laws across the country with different labeling mandates and requirements – will create confusion, cause significant new costs for Americans, and lead to critical problems for our nation’s grocery supply chain."

    From the American Frozen Food Institute (AFFI):

    “AFFI commends Reps. Pompeo and Butterfield for leading efforts to create a federal program for the labeling of foods containing genetically enhanced ingredients. AFFI supports a responsible and effective federal labeling program that prevents the creation of a complicated patchwork of state-based labeling rules that would increase, rather than reduce, consumer confusion and food prices.

    “A voluntary program, administered by FDA, to evaluate food labels that claim the presence, or absence, of genetically-enhanced ingredients will bolster consumer confidence, while giving frozen food and beverage makers the certainty they need to meet the needs of America’s consumers."

    From the Consumers Union:

    "Consumers Union, the public policy and advocacy arm of Consumer Reports, is urging Congress to reject the proposals contained in the misleadingly named 'Safe and Accurate Food Labeling Act of 2015' ... The bill would prohibit states from establishing or carrying out mandatory labeling of genetically engineered (GE) food, and would explicitly allow GE foods, known as GMOs, to be labeled 'natural'.

    “'Consumers have a right to know if their food has been genetically engineered,' said Jean Halloran, Director of Food Policy Initiatives at Consumers Union. 'States should not be prohibited from requiring GE labeling' ... Consumers Union senior scientist Michael Hansen, Ph.D. said, 'The new status of glyphosate, so widely used on genetically engineered crops, as a probable carcinogen, heightens consumer concern and increases consumer support for mandatory labeling'.

    "The vast majority of Americans want labeling of genetically engineered food: Polls, including one conducted in 2014 by Consumer Reports, have consistently found that more than 90 percent of consumers support mandatory labeling."

    An organization called Just Label It! sent an email to members saying, in part:

    "This bill would not only block ALL states from labeling genetically engineered foods, but would make it much harder for the federal government to ever mandate national labeling – despite the fact that over 90 percent of Americans support it!

    It would also make permanent the failed voluntary system that has been in place the past 14 years, which not a single company has used to disclose the presence of GMOs in their products.
    That’s why Just Label It! is joining forces with EWG Action Fund and Food Policy Action to rally our troops and make it crystal clear to Congress that we MUST protect the right to label GMO foods. We need you to join us too! ... Monsanto and others have already spent millions fighting to keep consumers in the dark about GMOs. And with so much more at their disposal, you can bet that Big Food will be pulling out all the stops to get the DARK Act passed this year. If the DARK Act passes, the fight for GMO labeling is over. It’s that simple."
    KC's View:
    This would appear to be a pretty black-and-white case of industry wanting one thing and consumers wanting another ... both special interest groups, to be sure, but I wonder if the best interests of industry are being served by opposing something that shoppers seem to desire.

    If I had to bet, I would not want to put any money on consumers' ability to fight this legislation successfully. After all, there are a lot of deep pockets devoted to preventing GMO labeling on a state and national level ... and when it comes to legislation, deep pockets tend to take the day. We tend to get the best government that money can buy ... and this is likely to be yet another example of this cold, cruel reality.

    Published on: March 26, 2015

    The Washington Post reports on how deep discount promotions "have become a mainstay at major e-commerce sites and brick-and-mortar stores since the economic downturn, when deep discounts seemed to be the only way to get anxious consumers to make a purchase. For years after the recession ended, the promotions bonanza didn’t slow down as retailers realized that shoppers had become hooked on deals and weren’t ready to give them up."

    But now, the story says, "as the economic recovery strengthens, some retailers are trying to put the brakes on their years-long promotional ride in hope that they can retrain shoppers to buy things at full price. Retailers from Neiman Marcus to Vera Bradley have said they will be offering fewer promotions this year so as to improve their profit margins and inject more exclusivity to their brands, a move that will require some deft maneuvering in an era when these discounts have become routine."

    It is this simple: “They have to differentiate their brand in other ways, because otherwise, it’s a race to the bottom,” said Marcie Merriman, a consumer-engagement consultant at Ernst & Young.

    It is this difficult: Weaning consumers off behavior that retailers have encouraged isn't going to be easy.

    You can read the entire story here.
    KC's View:
    This has been something we've been arguing for a long time here on MNB - that retailers engaging in a price-driven strategy are likely to have a hard time veering away from it ... that even in times of recession, most retailers have to create other differential advantages that can appeal to core shoppers. The simple truth is that you can always be undercut on price ... depending on low the competition is willing to go.

    Published on: March 26, 2015

    In the UK, the Telegraph reports that Amazon has approached the British government about "test flights of its Prime Air service which plans to use small unmanned aircraft to get purchases into customers’ hands in 30 minutes or less." The request was made, the story says, "because regulations in the US are too onerous."

    Robert Goodwill, the British transport minister, told a conference there that "Amazon came to see me to ask about starting drone trials in the UK because regulations in the UK were too restrictive.

    “So much for the land of the free."

    Goodwill said the UK "is very interested in how the country can be at the forefront of drone technology and development. 'We're working with Amazon ... on the whole issue of drones ... We're meeting with the British Airline Pilots Association and we're both keen to innovate'."
    KC's View:
    In the UK, do drones have to fly on the left hand of the sky? Just curious...

    Published on: March 26, 2015

    The Chicago Tribune reports that Walgreen has decided to no longer require its checkout personnel to send off customers with the phrase, "Be well."

    According to the story, Walgreen launched the "be well" initiative several years ago, and is saying now just that the program ran its course and is giving no specific reason for ending it.

    "It's accomplished its goal of reinforcing our branding," spokesman Michael Polzin tells the Tribune. "We'll continue to build our relationships with customers in other ways."
    KC's View:
    I'm not as regular Walgreen shopper, but I probably go into its stores easily a dozen or more times a year. (It is more a location issue than anything else.) To be honest, I cannot ever remember any checkout person at any Walgreen ever saying "be well" to me once the transaction was completed. Maybe I just missed it ... or maybe the policy was a lot more hit-and-miss than the company would have preferred.

    Of course, it could've been a lot more complicated. Walgreen could have required its checkout folks to say, 'Be well. Also, by the way, what do you think about racial tensions in America?"

    Published on: March 26, 2015

    The Wall Street Journal reports that the Brewers of Europe, described as "a trade body representing beer makers across the continent," is saying that its members - including Anheuser-Busch InBev, SABMIller, Heineken, and Carlsberg - will begin listing calorie counts in their products sold in Europe ... the new plans commit the companies to providing uniform breakdowns for all products sold in the European Union, including calorie, fat, carbohydrate and salt content per 100 milliliters of liquid."

    The story suggests that the companies' American counterparts could soon begin the same practice, with experts saying that it is only a matter of time.

    "Alcohol producers are coming under pressure to follow the food industry by providing more detail on nutrition, especially in developed markets where consumers increasingly make health-based decisions," the Journal writes. "In 2014, 71% of Americans said 'healthfulness' was a consideration when buying foods and beverages, up from 58% in 2010, says the International Food Information Council Foundation."
    KC's View:
    Transparency is a good thing. I think this applies to beer makers as well as to every other food and beverage manufacturer.

    Published on: March 26, 2015

    USA Today has a story saying that Hostess Brands "is back" just two years after the Twinkie manufacturer looked like it could go out of business completely. The company said after a corporate restructuring, performance has exceeded expectations. Standard & Poor's, in upgrading the company's corporate rating, said that Hostess "has re-established its brands and regained good market share."

    • The New York Times reports that American Express is seeking "a stay of a ruling that could ban a longstanding Amex practice: prohibiting merchants from encouraging customers to pay with lower-cost cards.

    "Amex does not allow merchants that accept its cards to recommend paying with other cards, like Visa or MasterCard, which charge the merchants lower fees. A federal judge had ruled last month that the practice violates United States antitrust laws. Amex had already said it would appeal the decision, which stemmed from a suit filed in 2010 by the Justice Department and attorneys general in 17 states."
    KC's View:

    Published on: March 26, 2015

    • The Irish Times reports that Tesco is losing yet another Phil Clarke.

    According to the story, "Phil J Clarke, who was appointed chief executive of Tesco Ireland less than two years ago, is leaving the company. He will be replaced next month by Andrew Yaxley, currently the managing director of Tesco’s London business."

    Clarke is not related to Philip Clarke, the former Tesco CEO who named him to the job and who himself left the company last year under a cloud.

    Phil J Clarke previously served as CEO of Tesco’s stores in Slovakia, the Czech Republic and Japan.
    KC's View:

    Published on: March 26, 2015

    Regarding the drone delivery debate, MNB reader Randy McAdam wrote:

    Have you ever heard a drone? They emit a high pitched whine from their high velocity rotors.  I can just imagine swarms of drones delivering all types of goods in metropolitan areas.  Maybe Amazon will offer free ear plugs.  I wonder  why no one is talking about the noise pollution from these devices.

    The Heinz-Kraft merger generated some emails. Among them, MNB reader Jerome Schindler wrote:

    Another American icon bites the dust.  Was Kraft in that bad of shape?  My cynical view is that a bunch of older guys with a lot of Kraft stock options quickly decided this deal was just too good to be true - for them anyway.

    They will get a big capital gain on those options (no FICA tax on those gains either) and at least a silver parachute.   They can retire as well off as if they worked another 5-10 years. It is the younger workers that will be suffering the layoffs etc.

    And, from MNB reader Monte Stowell:

    Warren Buffett strikes again!!!

    On another subject, an MNB user wrote:

    The article on how soft drink makers are trying to position their products as healthy when research is clearly mounting to show they are not reminds me of another industry that has been found on the wrong side of history. If only I could recall what they made…I fear it may have gone up in smoke. It sounds like the are asking for a similar fate.

    Regarding the small cassette tape resurgence that we wrote about yesterday, MNB reader Jackie Lembke wrote:

    Great, another thing I can feel guilty for giving away when I could have sold them to some collector for big bucks, just like my 8 track tapes and Barbie dolls. I am going to hold on to my LPs, I still might find someone interested in my Captain and Tennille LP with Muskrat Love .

    From MNB reader Mike Moon:

    Now I have a new reason to hold on to that fully-loaded faux-leather-bound, red-velvet-lined 8 track tape carrier with the busted lid that my wife has been wanting me to throw away for 30 years.

    Good luck with that.
    KC's View: