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    Published on: May 5, 2015

    by Michael Sansolo

    Mistakes happen and that’s really not a bad thing. As an ice skating instructor once told me, if you never fall you are never trying anything new or hard.

    So I’ve got no problem with mistakes - provided we learn from them and don’t make the same error over and over.

    But there are mistakes that fall into another category such as the recent kerfuffle over the Bud Light label that strangely seemed to excuse excesses of all kind. That set off an interesting discussion here on MNB about who was missing from the room when that decision was made: women, fathers, husbands, brothers…who? Why was there no voice to articulate the cluelessness of the message?

    I’m going another way on this. It’s possible the right people were present but were overwhelmed by the power of group thinking. We’ve all seen it happen: an idea comes up in a meeting and thanks to the strange dynamics of groups, dissenters get squelched or decide this isn’t the time to make a stand. Don’t we all love team players?

    Breaking the power of group thinking requires something radical and luckily the solution lies in a zombie movie (how do I end up quoting those so often?): World War Z. This isn’t one of my favorite flicks, but I was compelled to watch it by a retailer who saw the lesson on group thinking and knew my interest in business lessons from movies. (In case you missed it somehow, Kevin and I authored a book on the subject: click here)

    World War Z has the usual plot line of zombies taking over the world with one strange exception: the country of Israel was stunningly prepared for the moment. Brad Pitt plays a UN specialist who flies to Israel to learn how that happened.

    An Israeli official explains that his country’s leaders learned a harsh lesson about group thinking when none of them took seriously the threat of war in 1973. At the time all agreed the neighboring Arab states would never attack so soon after the Israeli victory in 1967. The group was entirely wrong. The Arabs attacked and Israel barely survived.

    Following that debacle, a decision was made. Whenever the leadership group of 10 was presented with a potential issue a new rule was enforced: if the first nine people all agreed, the tenth person was required to take the contrary point of view and plan for that outcome. In the case of World War Z, that meant a cryptic warning of a zombie attack was laughed off by nine, while the tenth began preparing for what might, and did, come.

    In business, our zombie problem is group thinking. Imagine if your company had a rule: anytime a decision is unanimously supported by the management team (or whoever else) one person in the room is required to be the contrarian. The crowd could still make the call, but the opposing view would need a vigorous representation, which might cause some reflection and even modification.

    Think of some of the stories we had here last week, whether it was the Bud Light label or Target failing to institute controls on the launch of its Lily Pulitzer line. Isn’t it possible one person in the room might have seen the situation differently, felt differently, but the power of the crowd squelched any consideration of alternative scenarios? Might a simple exercise of contrarian thinking opened some eyes?

    Gathering group support is always important and naysayers are frequently derided. Yet some simple World War Z thinking could be an interesting way to challenge ourselves and stop us from marching in lockstep.

    After all, we aren’t zombies…are we?

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
    KC's View:

    Published on: May 5, 2015

    The New York Times reports that McDonald's yesterday "announced the first steps of a global turnaround strategy, acknowledging that a business that has served up billions of burgers on the cheap was in urgent need of change."

    While the fast feeder has said that it wants to be a “modern, progressive burger and breakfast restaurant," and has been simultaneously simplifying some elements of its menu while also testing, on a limited basis, more customized offerings, the Times notes that yesterday's changes were largely operational.

    CEO Steve Easterbrook said that the company will engage in "refranchising," the sale of company restaurants to franchisees, and also will "reorganize itself into four new global segments, grouping previously separate markets together: 'lead' markets like Britain and Australia; 'high growth' markets like China and Russia; the United States, which accounts for more than 40 percent of the company’s operating profit; and business in the more than 100 other countries where it operates."

    The Times quotes Easterbrook as saying that "these and other changes to the corporate structure would contribute to some $300 million in net savings a year."
    KC's View:
    Ah. I love it when troubled companies decide that the best way to reconnect with consumers and regain sales and profit momentum is to cut costs.

    That may have a short term impact, and it may make investors happy, but it won't solve the essential problem - that McDonald's food and restaurants seem largely out of touch with modern consumption habits. The food is not great (with some exceptions), the restaurants are plastic, the service is largely desultory, and the experience is mediocre at best. They can cut costs, but they probably ought to be investing in efforts that will make them actually competitive.

    Besides, a good rule of thumb is that you cannot cut your way to prosperity.

    Published on: May 5, 2015

    The New York Times this morning reports that Panera Bread has made the decision to eliminate "a variety of artificial preservatives, flavors and colors, as well as different kinds of sweeteners and meat from animals raised with antibiotics, in response to consumer demands for transparency and simplicity in the foods they eat."

    In doing so, the story says, Panera joins a number of other retailing and manufacturing companies - including Chipotle, Tyson, Nestle, Hershey, Kraft, and even McDonald's - that have simplified menus and ingredient lists in response to consumer concerns.

    The Times notes that such moves are harder for big companies than small, because retooling iconic products requires maintaining texture and taste on a broad scale; it is a lot easier for new and smaller brands to make such changes.

    And, the response can be mixed.

    "While most of the companies have been careful to say they are merely responding to consumer demands, not making a value judgment on such ingredients, they often face heavy criticism. Chipotle Mexican Grill’s announcement that it had eliminated genetically modified ingredients from the foods it makes — though, like Panera, not from the sodas it sells — evoked a torrent of outraged responses," the Times writes. The Washington Post editorial board called Chipotle's move a 'gimmick' that was 'hard to swallow,' while NPR’s popular food blog, The Salt, accused the company of having a double standard for adopting sunflower oil, which it said was often treated with a pesticide known for weed resistance."
    KC's View:
    A couple of things here.

    At the most basic level, I think the moves to simplify menus and ingredient lists, in response to consumer demand, reflects a growing desire to know what is in our food. After all, who the hell really knows what "ethoxyquin" is? And do we really want to put it in our bodies?

    And this is why I continue to believe that products with GMOs ought to be labeled as such. It is just a matter of knowing what is in our food.

    Which leads me to my second point.

    I find the criticism of Chipotle to be amusing, since it seems to attack the company for doing its best to eliminate certain ingredients at a time when it is extremely difficult to do so ... and the fact that there are certain compromises even within that commitment is the best possible argument for labeling.

    A suggestion, if I may, to the biotech companies, manufacturers and trade associations who seem to prefer spending time and money whining about labeling legislation and lobbying public officials to make sure that GMO labeling mandates do not become law.

    Here's what you should do.

    Label. Explain. Educate. Illuminate. Repeat.

    And then stop whining about it. In the long run, it'll be better for your business, and better for your consumers.

    Because here's the deal. (I'm going to keep explaining this, if I have to.) I am not anti-GMOs. I think it is entirely consistent to accept the necessity for GMOs and still want them to be labeled and explained. But when companies and trade associations resist such a policy, spending millions to protect and promote their increasingly hardened position, it only makes people like me more suspicious and less trusting.

    Published on: May 5, 2015

    The New York Times this morning has a story about the first Bentonville Film Festival, which, ironically, is taking place in an Arkansas town that has no movie theater.

    The story notes that Bentonville is going through a kind of cultural and economic renaissance: "Cranes are cutting up the skylines, and real estate prices are headed in the same direction. Earlier this year, the northwest Arkansas metro population, which also includes Rogers, Springdale, Fayetteville and other towns, passed the half-million mark.

    "In Bentonville alone, the population jumped 14 percent to more than 40,000 between 2010 and 2013. The rest of the state straggled along at 1.5 percent.

    "Tourists are rushing in, too. About 1.6 million have visited the lavishly Walton-financed and mostly free Crystal Bridges Museum of American Art since it opened in 2011. Last year, visitors came from 30 countries to view a collection reputed to be worth at least a half-billion dollars."

    As for the film festival, "AMC Theatres, Coca-Cola and Walmart have joined to offer distribution on limited AMC screens and via Walmart to the winners. The festival, through its partnership with the Geena Davis Institute on Gender in Media, is open exclusively to female and minority filmmakers, with the aim of igniting careers. Robert DeNiro, Rosie O’Donnell, Soledad O’Brien and other A-listers are said to be attending."
    KC's View:
    Let's be honest. One would not expect to see the words "Walmart," "women," and "culture" in a sentence not having to do with litigation or freedom of speech issues.

    This is, in some ways, the new Walmart ... where executives know that they have to be careful not to disenfranchise so-called traditional customers, but also have to expand the company's appeal so that it can better compete against Amazon.

    But also, to be fair, I think it is important not to paint with too broad a brush when talking about Walmart's traditional shoppers. I think the kinds of cultural shifts that we've seen taking place in the US have taken place not just in places like Massachusetts, but also in places like Iowa and Alabama and yes, Arkansas.

    Published on: May 5, 2015

    D'Agostino's, the New York-based 13-store supermarket chain, announced that its employees, members of the United Food and Commercial Workers (UFCW), have unanimously ratified a new three-year contract.

    The new deal reportedly expands the number of part-time employees guaranteed a 20-hour work week, as well as giving them raises and improved benefits packages.

    The employees' previous contract expired more than a year ago, and they have been working with monthly contract extensions.
    KC's View:
    I hope this is not a case of "the good news is you have a new contract, but the bad news is you're shipping out on the Titanic."

    Published on: May 5, 2015

    Technomic is out with a new study, "Food Industry Transformation: The Next Decade," in which it makes a number of observations and prognostications about the food industry. Among them:

    • "The industry evolution toward fresher, higher-quality products will cause a fair amount of market share shift, including a realignment of the retail food channel.

    "Market share of traditional retailers (supermarkets, mass merchants, supercenters) will fall from 71% of retail-food sales to 62%. Nontraditional retail’s gain from 29% of the market today to 38% in 10 years will be driven mostly by the online and fresh-format channels, each expected to increase their share of the market from slightly more than 2% of retail sales to close to 6% within the decade.

    "In distribution, online distributors’ 20% annual growth will dominate, upping the segment’s share from 1% of distribution sales today to 4% within 10 years.

    "Prevailing trends favor independents, small chains and fresh prepared foods at grocery stores in the share battle within foodservice. Small chains and independent restaurants will grow share by three percentage points; supermarket fresh prepared foods will rise by one percentage point."

    • "Generation Z will be the least likely to view advertising messages on a TV and will opt instead for using tablets and mobile phones. Food manufacturers should view this as an opportunity, not a challenge.

    "The trend opens up dozens of lower-cost, more finely targeted chances to put messages in front of consumers. Manufacturers should start adapting their marketing creative to include shorter videos like 5-second pre-roll ads and banners for mobile screens."

    • "Expect a replay of the popular outcry that purged trans fats from the U.S. food supply— likely directed next at a maligned additive like sodium, high-fructose corn syrup and/or phosphates—in the next 10 years.

    "The supply chain of 2025 will reflect consumers’ growing insistence on foods that contribute to the health of their families, the planet and society. Wellness and sustainability will lose their elitist associations and inform purchasing decisions in all segments of the food industry."

    • "The growth in craft beer’s popularity is perhaps the most salient example in the food industry of a premium product taking market share from mass-market offerings, enticing affluent consumers at both restaurants and bars and in retail aisles. In 2014, craft beer and hard cider posted double-digit gains in volume while domestic light and regular beer shed volume. This trend will accelerate the next 10 years, as craft beer appeals widely to men, Hispanics, and Gen Xers and Millennials."

    • "Staffing models will bow to popular pressure against low wages. Brands will trade higher wages for lower turnover and relief from bad PR ... Progressive investments, like Starbucks’ tuition assistance or Whole Foods’ on- site clinics, will be tools in the contest to attract the best talent ... New technology, from labor scheduling software to digital ordering and fulfillment services, will help contain labor cost inflation as sales increase."

    • "Consumers will be more ethnically diverse but also polarized in terms of age and income. They will be interested in upscale food experiences or in maximized value ... Consumers will value healthful food (fresh, GMO-free, local, organic, minimally processed, etc.) and corporate social responsibility ... Older and younger consumers will drive more urbanization, favoring independents, digital channels for food and specialty distributors ... Consumers (and trade customers) will demand that companies be totally transparent about business practices (not just ingredients)and corporate social responsibility."

    The study is a instructive one, and you can download it here.
    KC's View:

    Published on: May 5, 2015

    • The Puget Sound Business Journal reports that Nordstrom "is testing curbside pickup for online orders at several stores across the country, including the retailer's downtown Nordstrom flagship store. Customers have had the option to select in-store pickup when buying online since 2008. Now customers at the test location can choose the option of calling or texting as they near the store ... The new pickup system could help Nordstrom compete with other online retailers, such as Amazon, which can now get orders to customers hours after they're made."

    Internet Retailer reports that "Wal-Mart Stores Inc. is ramping up its e-commerce operation in China, and that includes offering its first mobile shopping app in that country." CEO Doug McMillon says that "Wal-Mart will soon launch an app that lets Chinese consumers order products, such as foods and household products, and pick them up in the retailer’s stores or have them shipped to their homes or other locations. He also says Wal-Mart will accept a variety of electronic payment methods so that consumers can pay with their smartphones at Wal-Mart stores."
    KC's View:

    Published on: May 5, 2015

    Amazon announced this morning that it is teaming up with JetBlue to bring what it calls "unlimited, on-demand entertainment to airline travel later this year through JetBlue's free high-speed Fly-Fi broadband internet, the industry's fastest complimentary inflight internet service, to create an unmatched entertainment experience in the sky."

    The offering, the announcement says, "will enable Fly-Fi for Amazon Prime members to instantly access tens of thousands of movies and TV episodes, including exclusive Amazon Original Series such as Transparent, Mozart in the Jungle and Bosch, at no additional cost to their membership. In addition, all JetBlue customers will be able to rent or purchase hundreds of thousands of titles in the Amazon Instant Video store, including new-release movies and day-after TV programming, over the free broadband internet."
    KC's View:
    Not necessarily a big deal, but a smart deal ... as Amazon endeavors to expand its ecosystem, even to 30,000 feet.

    Published on: May 5, 2015

    ...with brief, occasional, italicized and sometimes gratuitous commentary…

    • The Phoenix Business Journal reports that "it will only take 40 hours for grocery chain Haggen to take over and rebrand the Arizona grocery stores it acquired from Safeway and Albertsons."

    “It is amazing what we can do in 40 hours,” says Haggen Southwest CEO Bill Shaner. “The FTC has given us 150 days to convert all the stores, so we’ve got a time crunch the FTC drives.”

    And Moran Golan, Haggen director of communications, adds: “This first phase consists of a fresh coat of paint, new signs inside the store, and, of course, the Haggen name, big and bold, on the outside of the building. One of the most important parts of the store conversions takes place behind the scenes, transitioning employees over to Haggen, and educating them about the company’s commitment to buying local, supporting the community and utilizing sustainable business practices.”

    I have to be honest. None of the things that the folks at Haggen describes themselves as doing would necessarily convince me that this would be the place that I'd want to shop. I understand that there is a time crunch, but I continue to believe that the only way for Haggen to make this work is to offer something different to consumers, not just an old store with a new sign and a fresh coat of paint.

    CNBC reports that "as milk falls out of favor with consumers, Dean Foods is determined to make the white beverage sexy again ... a national ad campaign will launch in print and TV for DairyPure, which places all of the milk produced at Dean's 30-plus regional dairies under one label. DairyPure will automatically become a $2.5 billion brand, making it one of the top consumer packaged goods lines in the U.S. "
    KC's View:

    Published on: May 5, 2015

    ...will return.
    KC's View: