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    Published on: April 8, 2015

    by Kevin Coupe

    Uber, the ride-hailing service that has challenged the traditional taxi industry in numerous markets around the world, reportedly is the service of choice for a lot of businesspeople.

    According to the Associated Press, "A new report by expense management system provider Certify shows that 47 percent of the ground transportation rides by its users in March were through Uber. That’s more than tripled from the 14 percent of rides that Uber had just over a year ago in January 2014. In a few cities, Uber now tops taxi rides for business travelers ... While taxis, limousines and airport shuttles still dominate the ground transportation business, Certify’s report shows ride-hailing services are rapidly on the rise among business travelers."

    The story continues: "In a few cities, Uber beats out taxis by a wide margin for business travelers. In its hometown of San Francisco, 71 percent of rides expensed through Certify during the first quarter were for Uber; 29 percent used taxis. Uber also beat out all other forms of ground transportation in Dallas, accounting for 56 percent of the rides. In Los Angeles and Washington D.C., Uber represented 49 percent of business travel rides."

    Which just shows how a disruptive business model can mess with so-called "normal" businesses. It's an Eye-Opener.

    And let's remember how, when faced with competition from Uber, many taxi drivers and cab companies decided that their best option was to stage mass protests ... as opposed to actually competing and raising the level of their games.

    Because whining is always more effective than competing.
    KC's View:

    Published on: April 8, 2015

    The New York Times is reporting that despite the passage of the Food safety Modernization Act (FSMA), there may be not enough money in the federal budget for the Food and Drug Administration (FDA) to accomplish its assigned mission.

    FDA would need $580 million from 2011 to 2015 to carry out FSMA's mandate, according to the Congressional Budget Office (CBO), but, the Times writes that "Congress has appropriated less than half of that amount, even as the agency is moving to issue crucial rules under the law this year."

    The Congressional Budget Office said the F.D.A. would need a total of $580 million from 2011 to 2015 to carry out the changes required by the Food Safety Modernization Act. So far, Congress has appropriated less than half of that amount, even as the agency is moving to issue crucial rules under the law this year.

    The success of FSMA is "on the line," says Michael R. Taylor, deputy FDA commissioner for foods and veterinary medicine. "We have good plans for moving forward. The problem is we don’t have the money.”

    The Times writes that "an estimated 48 million Americans have food-borne illnesses each year, and agency officials say the funding shortfall could undermine Congress’s intent to make the most significant improvements to the food safety system in more than 70 years."

    The Times story suggests that there two issues affecting funding. One is that the Obama administration originally wanted the FDA's regulatory efforts to be funded through user fees, but Congress rejected that notion at least in part because of lobbying by the food industry. The other is that Congress seems loathe to appropriate more money to the FDA at a time when it really doesn't want to spend more money on anything.

    The Times writes that Taylor says that the FDA "had been able to issue new rules, including those for produce and processed foods, but that funding shortfalls would make it difficult to modernize its inspection processes and retrain about 2,000 inspectors and other staff members for the new requirements. He also said that the agency would have problems providing guidance and technical assistance to the states, which conduct inspections under contract with the F.D.A. In addition, he said, it will be difficult for the agency to properly oversee food imports."
    KC's View:
    First of all, let me be transparent about the fact that ReposiTrak, which has developed tracking technology invaluable in meeting FSMA mandates, is an ongoing and valued MNB sponsor. So I have a dog in this hunt. (Though, to be clear, my opinions as stated here are mine, not ReposiTrak's.)

    It would be just like the US Congress to pass new rules and then not provide the funding to implement them. That way, they can take credit for voting to improve the food safety apparatus, but not actually pick up the check.

    Without putting percentages on it, it seems to me to be eminently fair that industry and consumers share the cost of a better food safety system. Industry makes money if the system is safer, and consumers get safer food. Though, of course, industry is going to pass along as many of those costs along to consumers as it can.

    The problem is that we live in a "we want something for nothing" society. We want all the things that we've grown to expect government or society to provide, but we don't want to pay for them. I have no problem with forcing government to be more efficient, but it strikes me as silly to pretend that the bill won't eventually come due. It always does.

    I've also heard from some within the food safety system that even if funds are not ample, one of the weapons the FDA has is the ability to hold c-level executives responsible if they don't meet the federal mandates. If they can't inspect everything they're supposed to, the FDA will just pick on a company they know is vulnerable. There's the possibility of a high-profile perp-walk.

    Then watch everybody rush to fall in line.

    Published on: April 8, 2015

    Forbes reports that there is a difference between how Baby Boomers and Millennials rate companies in terms of customer service - though Amazon and Nordstrom seem to provide some sort of common ground for both generations.

    A new ranking by Prosper says that Millennials believe that the best customer service is offered by Amazon, followed by Victoria's Secret, Best Buy, Nordstrom and Macy's.

    Baby Boomers, on the other hand, put LL Bean first, followed by Amazon, and then by Kohl's, JC Penney and Nordstrom.
    KC's View:
    The analysis seems to suggest that there is a "vast disparity" between the two generations' preferences, but I don't think it is as wide as all that. After all, one of the things that almost all these companies share is a commitment to omnichannel retailing - that's certainly an enormous priority for LL Bean and Nordstrom ... and while Amazon isn't omnichannel, it may be the outlier in this area simply because of its disruptive essence. LL Bean probably only outranks Amazon with Baby Boomers because people my age are highly aware of its "you can return anything, anytime" guarantee.

    Published on: April 8, 2015

    The Wall Street Journal reports that "food pantries, where students in need can stock up on groceries and basic supplies, started cropping up on campuses in large numbers after the recession began in 2007. More than 200 U.S. colleges, mostly public institutions, now operate pantries, and more are on the way, even as the economy rebounds.

    "Among factors driving the trend: Tuition has soared 25% at four-year public institutions since 2007, according to the College Board, and costs such as housing, books and transportation have also risen significantly in recent years."

    The Journal notes that "the stigma attached to receiving free food has diminished among students as so-called food security - a term used by the U.S. government to describe reliable access to a sufficient quantity of affordable, nutritious food - is regarded on campuses increasingly as a right ... About 14.5% of U.S. households experienced some form of food insecurity in 2013, according to the Department of Agriculture’s latest data."

    The Journal writes that "the extent of the problem at colleges is unclear, but it is a growing concern among educators since it can affect academic performance and attendance. Janet Napolitano, president of the 10-campus University of California, which enrolls 188,300 undergraduates, recently launched an initiative that includes assessing student hunger."

    Many of these campus pantries are being run in partnership with local food banks, supermarkets, restaurants and farms, the story says.
    KC's View:
    This strikes me as yet another example of how the higher education system in this country is completely broken. College costs so much that many of these kids can barely afford to live ... and they accumulate so much student debt that it cripples them - and the economy - once they get out of school. And I see very little evidence that anybody in the public or academic sector is doing anything about it.

    I know a guy who told me recently that he got a letter from his kid's university saying that tuition is going up next year by several percentage points, and that in the second paragraph of the letter, the university said that it remains highly sensitive to financial pressures on parents and students. The word he used to characterize this so-called sensitivity cannot be repeated here ... but I totally agree with him.

    At a very basic level, a kid who doesn't eat can't study and can't excel ... and therefore cannot achieve the kinds of things that we as a society need him or her to achieve if we are going to continue to be a relevant society. This is insanity.

    By the way, my self-interest here has nothing to do with my kids. We've been lucky. If all goes well, by this time next year we'll be preparing for our third and final college graduation, and we've been able to help our kids avoid almost all college loan debt. It hasn't been easy, but in my view that's one of the most important gifts we can give them. But I also recognize that we've been extraordinarily lucky in this regard, and it isn't like the system has made it easy.

    Published on: April 8, 2015

    Reuters reports that the Kantar Worldpanel is saying that during the past three months, Tesco's market share in the UK rose 0.3 percent, which "helped the supermarket to almost halt its market share decline. Its share was down only two tenths of a percentage point to 28.4 percent compared with last year."

    The story goes on: "Of Tesco's major rivals, Sainsbury's saw a sales increase of 0.2 percent in the three-month period, its first growth since August 2014. However, Asda and Morrisons recorded sales declines of 1.1 percent and 0.7 percent respectively."

    Perhaps more significantly, "Aldi and Lidl's sales rose 16.8 percent and 12.1 percent respectively, taking their market shares to 5.3 percent and 3.7 percent." Aldi's improvement propelled it past Waitrose, making it the UK's sixth-largest supermarket by sales.
    KC's View:

    Published on: April 8, 2015

    Bloomberg has a story saying that Americans are laboring under the illusion that the federal government has established and is enforcing tough product safety standards for consumer products. Simply put, this is not true.

    An excerpt:

    "Almost seven years after children’s deaths and injuries from collapsing cribs and defective toys led to new standards for consumer products, the rarity of inspections -- as well as loopholes in the law -- are undermining its effectiveness. As a result, both companies and the government can fail to protect families.

    "The U.S. Consumer Product Safety Commission, which regulates 10,000 products ranging from apparel to household appliances, inspects less than 1 percent of imports under its jurisdiction. With the odds stacked against being detected, cost-cutting foreign manufacturers continue to supply dangerous goods to U.S. retailers.

    "While Dollar Tree has the most violations of any retailer cited by the safety commission, Target Corp. and Zulily Inc. also rank among the top 10 companies failing to meet standards for flammability, lead content and other criteria, commission data show."

    It is an informative, even scary story, and you can read it in its entirety here.
    KC's View:

    Published on: April 8, 2015

    • AT Kearney is out with its 2015 Global Retail E-Commerce Index, reporting that "after placing third, behind China and Japan in 2013, the United States takes over the top spot, due to continued growth, an improving economy, and higher consumer confidence. U.S. e-commerce growth in 2014 rose by 15 percent.

    The new report also "identifies four overarching themes that color this year's Index findings as they relate to business strategy, customers, and channels including: Internationalization; the rise of e-commerce IPOs; the continuously connected consumer; and the need for omnichannel strategies.

    The index ranks the "top 30 countries based on nine variables, including select macroeconomic factors as well as those that examine consumer adoption of technology, shopping behaviors, infrastructure, and retail-specific activities," AT Kearney explains in its press release.
    KC's View:

    Published on: April 8, 2015

    ZDNet reports that Walmart is the biggest corporate spender on IT, followed by Bank of America, Citigroup, AT&T and JPMorgan Chase.

    The story says that a new analysis by IDC "breaks IT spending down into five technology categories: hardware, software, IT services, telecom services, and internal IT spend.

    On average, these companies allocate about one-third of their technology spending to internal IT and telecommunications staff salaries and benefits ... IDC did not include the exact amount Walmart or the other top spenders dished out on IT during 2014. But in general terms, the report indicates that nine out of the top 10 companies wound up increasing their IT spend from 2013 to 2014."
    KC's View:

    Published on: April 8, 2015

    Nashville Scene reports that Kroger is taking over the Nashville operations of its Harris Teeter division, closing three temporarily so they can be re-branded as Kroger, and closing one permanently.

    Kroger acquired Harris Teeter last year for $2.5 billion.


    • The Associated Press reports that "McDonald's says it's introducing a trio of "Sirloin Third Pound" burgers for a limited time starting later this month, the latest sign the chain is pushing to improve perceptions about the quality of its food. The sirloin burgers would have the biggest beef patties on the chain's menu and come after McDonald's dropped its Angus Third Pounders in 2013 ... McDonald's says the sirloin burgers will cost around $4.99, although franchisees can determine their own prices."


    • The Wall Street Journal reports that "retail sales of specialty food, a category that includes items from imported cheese to top-quality coffee beans, rose to $51.23 billion in 2014.
    That brought its share of retail U.S. food sales to 15%, according to an estimate scheduled for release on Wednesday by the Specialty Food Association, a trade group ... Shifting consumer tastes toward foods that are perceived as more natural, less processed or locally produced has encouraged grocery store chains to seek out new, smaller brands." Which means that while specialty foods may remain special, they are becoming less of a niche market.
    KC's View:

    Published on: April 8, 2015

    • Kroger announced yesterday that it has named Marlene Stewart, currently vp of merchandising at its QFC division, to be the new president of its Dillons division. She succeeds Joe Grieshaber, who was recently named president of Kroger's Columbus division.
    KC's View:

    Published on: April 8, 2015

    Following up on an email earlier this week that talked about how the phone message at A&P headquarters talks about, shall we say, relaxed workplace hours, one MNB user wrote:

    The phone message at Montvale is no surprise. When I worked there in 1980's the 8:30 start was followed by 45 min of coffee and bagels. Only then did the day begin. Add to this, many execs would get up and leave the monthly sales meeting or pre-Board meeting (while Sir James
    Woods, RIP) was speaking, so they could "Catch the train" back home to Long Island or other points. For a "Hardscrabble" guy from the Midwest, it was quite a shock. The only real shock to me is that they are still in business."


    Y'think they have voice mail at A&P headquarters? Or are they still using answering machines?

    Either way, it seems like A&P sends a message with everything it says and does. The message ain't a good one.




    This week, we took note of an Advertising Age report that the introduction of the new Amazon Dash - a button with an adhesive strip that can be mounted on things like cupboards and washing machines, allowing people to press it and order with one click when they see that they are running low on specific products - could be a boon to major CPG companies, which ""could give big packaged-goods brands the edge they've been looking for on a playing field where the industry's traditional behemoths have been getting pushed around by smaller players ... Amazon hasn't said exactly how the model would work, but Dash could easily become a conduit for trade-promotion funds as brands bid for buttons, which would be like miniature end-caps in millions of homes."

    I commented, in part:

    I always get a little nervous when I hear about retailers angling for more trade promotion funds, since when I hear those words I tend to think about slotting allowances, which have been an enormously corrupting influence on the supermarket industry, compelling retailers to make money on the buy instead of the sell.

    MNB reader Bill Bishop responded:

    Think you’re right to be nervous about this being another way to increase manufacturer promotional support.  Shouldn’t expect that Amazon would provide more sales driving execution for a brand without a charge and this opens up two questions:

    For manufacturers, will the benefit justify the incremental spend?
    For retailers, will customers see this as an easier way to shop?
     
    This is all about the increasing competition between channels for both manufacturer support and the customer’s purchases, and deserves careful attention regardless of how unusual it may appear.





    One MNB user wanted to comment on the annual Consumer Reports ranking of the nation's best supermarkets:

    Don’t know how you can take a Survey like this and be accurate since most of these stores are not in the same area and the shoppers who shop them have no idea how well Publix’s or HEB service their areas. Doesn’t work for us and we have been in all stores (agree with Publix). Walmart being on the bottom strikes us funny since all stores in this area are packed…which goes to show that price shopping will always win out over upscale offerings every time… especially when money is tight.

    Agreed. I've never liked this survey, even if I don't have much argument with how good some of these stores are. But I can name a half-dozen retailers who are as good or better as serving their individual markets, and they didn't even make the list.




    Regarding the power of Amazon Prime, one MNB user wrote:

    Had to respond to your piece on Amazon Prime.  I am a loyal Amazon Prime member, I use Amazon for probably 90% of my online shopping I’d say (except for clothing).  But I think it’s WAY too early for anyone to count any retailer out of the game right now.  The thing I find amazing is that I shop solely on price and speed to ship when shopping online. So if Target and Amazon have the same item, same shipping speed, I will go with the cheaper option.  I found last Christmas, Amazon often wasn’t the cheapest option so if shipping speed didn’t matter, they didn’t win my shopping trip.  The big issue and opportunity is that store experience doesn’t matter here.  I tend to avoid shopping a Toys R Us at all costs…but when it comes to online shopping, they often win due to a special they are running.

    So while I think the article got it right that Prime shoppers are loyal, I’m only loyal because it’s easy.  Other retailers will figure this out, it may take a while, but I truly believe this war is far from over.




    MNB reader Kenneth Todd took notice of our Sports Bureau report...

    All is back to normal when baseball is back!
     
    Go Cardinals.  Nice Showing by your Mets yesterday!


    And, from another reader:

    When opening day has a Mets 3-1 win, and Yankees 6-1 loss, it is a GREAT day to be a Mets fan such as yourself.
     
    My Red Sox had a good day yesterday too!!
     
    Thanks for an awesome MNB!!


    My pleasure.
    KC's View:

    Published on: April 8, 2015

    In the NCAA women's college basketball championship, the University of Connecticut defeated Notre Dame 63-53. The win meant that Coach Geno Auriemma and the Huskies are 10-0 in championship games, and 3-0 over the past three years.
    KC's View: