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    Published on: May 21, 2015

    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. And in this case, apologies for some audio that is a little iffy.

    To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, I'm Kevin Coupe and this is FaceTime with the Content Guy...coming to you this week from Boston, Massachusetts ... birthplace of the American Revolution, home to the Red Sox, Sam Adams beer, and Spenser ... and today, where I am visiting the new Roche Bros. store in Downtown Crossing.

    A few weeks ago, I was in Toronto looking at Longo's terrific urban stores, and now I'm visiting the Roche Bros. version of this particular animal. It is an outstanding two-level unit in a fast-growing neighborhood that has no car traffic, but lots of foot and subway traffic...the neighborhood is loaded with office buildings and stores, with more coming.

    The small street level section is essentially a convenience and cold beverages, hot and cold take out foods, and express checkouts to get you on your way.

    Downstairs, Roche Bros. has more of a traditional shopping experience...but this chain, which has long served suburban Boston, seems to have adjusted the mix and look to suit this highly urban environment.  It is very sleek, very modern, very hip. Tons of foods to go, for both office and home, with lots of mainstream and specialty food choices.

    And the store has what looks to be a full selection of fact, with fewer facings and some smart architecture, it may even have more.

    Roche Bros.' Downtown Crossing store seems to be set up to serve people who are going back to their offices, or people who are on their way home from work - you can shop for a quick meal, for the evening, or even for the week (though the lack of a parking lot means the last probably would be impractical). But there's always the subway ... there's a conveniently located T stop right outside its doors.

    I like this Roche Bros. store a just feels like what you'd want an urban store to feel like.  And from all reports, it has gained immediate acceptance,with lots of morning and lunchtime crowds and a sense that this is just what the neighborhood has been waiting for.

    It's ironic.  Just a few blocks from here, on Devonshire Street, was the original J. Bildner & Sons, the first of a chain of stores started by Jim Bildner, son of the longtime Kings Supermarkets CEO,who back in the mid-eighties believed that there was a future for small, foodservice-driven markets that would serve what then were called yuppies.  Well, Jim Bildner was way too early to the party, his stores failed (for a variety of reasons), and Yuppies have gotten old ... but in many ways he was prescient.

    This Roche Bros. urban store is in some ways a descendant of that Bildner store ... and it is one definition of an urban future that I think is very exciting.

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

    KC's View:

    Published on: May 21, 2015

    by Kevin Coupe

    Advertising Age reports that David Callaway, USA Today's editor in chief, made an Eye-Opening prediction the other day ... that the paper could stop being published in print form in the next five or six years.

    According to the story, "The statement about USA Today's future came as the paper's parent company, Gannett, is preparing to spin off the newspaper division on July 1 to focus on its more lucrative local TV stations. Although USA Today and 81 other daily newspapers comprise the bulk of Gannett's revenue, the segment is in decline, with publishing revenue falling 9% year-over-year in the first quarter.

    "USA Today's average Monday through Friday print circulation dropped 17% during the six-month period ending Sept. 30, 2014, compared with the same time frame the prior year, according to the Alliance for Audited Media, which tracks newspaper and magazine circulation."

    Of course, Callaway also says that it could take longer for the print version of the paper to go away ... but the ultimate point is an important one.

    In a digital economy, what makes a newspaper relevant is the news, not the paper. Every business is being affected by this evolution/revolution ... and more than ever, it is important to pay attention to what is relevant, not necessarily what has worked in the past.

    An Eye Opener, indeed.
    KC's View:

    Published on: May 21, 2015

    The Wall Street Journal this morning has a story about an $11.2 million fine being paid by ConAgra Foods "to resolve allegations that the company shipped contaminated peanut butter under its Peter Pan brand and Wal-Mart Stores Inc. ’s Great Value label," but notes that "the fine - the largest ever levied in a food-safety case - marks the latest in a string of successful efforts by the Justice Department to hold food companies or their executives accountable for outbreaks of foodborne illnesses that, added together, have sickened thousands."

    The story notes that "since 2013, the Justice Department has won convictions or guilty pleas in four criminal cases against food companies or the executives that ran them," which is as many as it won for the 24 years previous.

    "In most of the recent cases, the Justice Department has successfully prosecuted defendants for introducing contaminated food into the market even without proof that officials acted with criminal intent—a nuance that has jolted the food industry, given its broad implications.

    "The agency’s actions have sparked greater awareness in corporate boardrooms and many companies have stepped-up efforts to bolster food safety, according to industry executives and lawyers. Some companies have invested in new technologies to prevent the build-up of bacteria in plants and to enhance and speed up data collection and analysis."

    The entire story can be found here.
    KC's View:
    Okay, the world has changed. That's a good thing. There are egg companies, peanut butter manufacturers, and assorted other businesses and business leaders that have behaved in a morally reprehensible way, putting the bottom line ahead of their consumers. These companies deserve to be taken to the woodshed, and there ought to be fines and prison sentences.

    These businesses need to be more diligent in their manufacturing practices, more detailed in their record keeping, more responsive to concerns, and more culpable when they violate the public trust.

    People's lives are at stake here.

    Heads on pikes.

    Published on: May 21, 2015

    Weis Markets announced that "it will increase its starting hourly rate for newly hired Weis Markets' associates to $9 an hour on August 2. On this date, the company will also increase the minimum hourly rate for current hourly Weis associates to $9 an hour. The increase will benefit associates who work in the company's 163 stores."

    This new wage benchmark, according to CEO Jonathan Weis, "will not only benefit a significant number our current associates, but it will also help us attract and retain talented associates to deliver best-in-class customer service every day. It is also important to note this move will have no impact on our prices."
    KC's View:
    "No impact on prices." That's an enormously important commitment ... and it undermines the argument, made by some, that increased wages equal higher prices.

    I'll bet Weis isn't laying people off, either.

    Published on: May 21, 2015

    The Wall Street Journal reports that following Walmart's decision to create an alternative to Amazon's prime program, eBay is making a similar move - though for the moment, it only is doing so in Germany.

    "The offering, known as eBay+, promises free, fast shipping and returns for customers who, according to local press in Germany, pay €15 to €20 (about $17 to $22) a year," the story says. "ay is promising better product placement for sellers’ merchandise, and also discounts on selling fees and a subsidy to help cut the cost of shipping and returns, according to a spokeswoman. Sellers will have to agree to dispatch goods on the day they are purchased and offer free returns within one month."
    KC's View:
    I think you're going to see a lot more of these kinds of programs from a wide variety of retailers, because there is a general acknowledgment that Prime has been a home run for Amazon, building sales and loyalty and being fundamental to build an ecosystem that connects it to its shoppers.

    And if you're not trying to figure out some version of Prime, or at least how to compete with it, then you're making a mistake.

    Published on: May 21, 2015

    The New York Times writes that Target yesterday reported Q1 sales that rose to $17.1 billion, up from $16.7 billion during the same period a year ago, with online sales that were up almost 40 percent, and same-store sales that grew 2.3 percent.

    These numbers, the story says, exceeded analysts expectations and create the perception - and perhaps the reality - that Target "might finally be on more solid footing ... Target hopes the results will be the beginning of a turnaround for the company after a period of turmoil that included a huge data breach in 2013 and an unsuccessful expansion into Canada. The company has also had difficulty in the grocery aisle, where it struggled to compete with discount food giants like Walmart."
    KC's View:
    I find it interesting that Target points to its recent Lily Pulitzer promotion as a high point, with CEO Brian Cornell saying that "things like the Lilly event create the frosting on everything we do." That's remarkable, since the Lilly Pulitzer promotion got Target a lot of lousy publicity, since many of the advertised items ended up being out of stock, creating a social media firestorm.

    I guess that means that while it appeared to be a firestorm from the outside, inside the company they were quietly celebrating.

    Published on: May 21, 2015

    The Houston Business Journal has an interview with Bill Breetz, president of Kroger's Southwest Division, who says that the retailer plans "to spend north of $500 million in just the next three years" to compete in a crowded marketplace against companies that include Wal-Mart, H-E-B, Whole Foods, Trader Joe's, Sprouts and Aldi.

    According to the story, Kroger is "adding five new stores in the Houston area in 2015 — in Katy, Huntsville, Cypress, Clute and Baytown — at a cost of $162 million. The company will add seven more in 2016. There will also be more than 30 remodels of existing stores and 13 new fuel centers in the next two years."

    "We’ve got a very aggressive plan," Breetz says, adding, "That’s a significant investment — that’s unheard of in other markets, those kind of numbers."

    Breetz concedes that one of the toughest parts of the competition is the battle for real estate as "each is vying for space along the Grand Parkway as the third loop starts shaping up."
    KC's View:

    Published on: May 21, 2015

    An organization called TimeTrade is out with a study suggesting that 85% of consumers prefer to shop at physical stores vs. online ... that more than 70% of consumers would prefer to shop a brick & mortar Amazon store versus ... that 90% of consumers are more likely to buy when helped by a knowledgeable associate and that 92% of responding millennials plan to shop in-store in 2015 as often or more than they did in 2014 ... and, finally, that only13% of respondents have previously made a purchase using a mobile device.

    The study does not totally discount the importance of digital - it "recommends that retailers employ a cross-channel strategy that converts an initial inquiry into a high value, in-store experience. Once in the store, retailers must give customers prompt service with a knowledgeable store associate."
    KC's View:
    In a related study, Time Trade has revealed that millennials really prefer to use an abacus instead of the calculator built into their smartphones, because, well, you just can't beat a well-made abacus.

    Bu seriously, folks ... I agree that a cross-channel strategy makes sense, and that having informed, helpful employees is a way to build sales and loyalty.

    But I always worry that there are retailers who see statements like "85% of consumers prefer to shop at physical stores vs. online" and think to themselves, see, we just have to keep what we're doing and we'll be fine.

    You won't be.

    Published on: May 21, 2015

    Re/code reports that for the first time in 15 years, Amazon CEO Jeff Bezos has chosen a woman to serve as "technical advisor to the CEO," better known as a "shadow" who is by his side throughout the day, "serving as a sounding board on big decisions."

    The new "shadow," according to the story, is 15-year Amazon veteran Maria Renz, who most recently was CEO of Quidsi, which Amazon acquired in 2011. The story says that "she has held a variety of other roles at the company, including president of its MyHabit flash-sale business and VP of its physical media business, according to her LinkedIn profile. Renz replaces former Kindle VP Jay Marine, who is moving on after two years as the shadow, or technical adviser, to run the company’s Amazon Instant Video business in Europe."

    The story notes that the appointment "shines a light on the dearth of women in the senior-most roles at Amazon and, more broadly, in the executive ranks of many leading technology companies today. Amazon has seven executive officers in addition to Jeff Bezos and only one, Worldwide Controller Shelley Reynolds, is a woman. Historically, shadows have gone on to run some of the company’s most crucial initiatives after their typical two-year stint is up."
    KC's View:
    Long overdue for a women to have this position, but in the end, it is the idea of having a rotating "shadow" that is such a visionary kind of idea.

    Published on: May 21, 2015

    The Wall Street Journal has a story about the new management philosophy at Zappos, which is described as a Holocracy - "Zappos has zero managers to oversee employees, who are supposed to decide largely for themselves how to get their work done."

    An excerpt: "Employees say the new system has been confusing and time-consuming, especially at first, sometimes requiring five extra hours of meetings a week as workers unshackled from their former bosses organize themselves into 'circles' and learn the vocabulary of Holocracy.

    "Created by a former software executive, the philosophy is spelled out in a 30-page 'Constitution' where doing a job is called 'energizing a role,' workplace concerns are 'tensions' and updates are made at 'tactical meetings'."

    How this plays out at Zappos will be watched closely, the story notes, since the company "has long embraced employee independence even while striving to meet exacting customer-service standards."

    You can read the entire story here.
    KC's View:

    Published on: May 21, 2015

    • Here's an interesting tidbit from Time, which looks at the "oddball assortment of products, places, businesses, and brands that somehow benefited from their association with Letterman and his program—even when Dave was making fun of them."

    In fact, Time has come up with a top 10 list ... and number four is the Best Bagger Championship: "Year after year, the winner of the National Grocery Association’s Best Bagger Championship won a $10,000 check plus, in all likelihood, the opportunity to compete in a grocery bagging challenge against David Letterman on his show."

    • Meijer announced today that "it has signed an agreement to acquire Aureus Health Services, a national specialty pharmacy and health services company based in Pittsburgh, Pa. and a portfolio company of BelHealth Investment Partners, to enhance its customer offerings, particularly to patients with complex chronic conditions." Terms of the deal were not disclosed.

    • Smart & Final yesterday launched a new branding program that focuses on the "&" in its name and logo, saying that the new campaign "aims to tell the story of what the value-oriented food and staples retailer has become through its growth initiatives and will highlight the company's heritage."

    In the case of Smart & Final, it means focusing on things like "business & households," "quality & prices," "traditional & organic products," "convenient & fresh."

    "We are rebranding to ensure customers know who we are, what we offer and what we stand for so that they can choose Smart & Final as their primary shopping destination." says Smart & Final CMO Eleanor Hong.

    Reuters reports that while Tesco's new CEO Dave Lewis has had a tough first six months trying to dig the company out of an enormous competitive hole that was created by predecessors Sir Terry Leahy and Philip Clarke, there was some compensation for his efforts. In this case, we mean "compensation" quite literally - Lewis got paid the equivalent of $6.4 million (US) for those six months of work.

    • The Chicago Tribune reports that "protesters hailing from as far away as Kansas City and New York City participated in a demonstration at McDonald's Oak Brook headquarters Wednesday, urging that hourly wages for the burger giant's front-line workers be increased to $15 an hour ... The Oak Brook police estimated the crowd at about 2,000 people. Organizers had projected that upward of 5,000 would participate in the demonstration."

    The story notes that while McDonald's is raising wages at its corporate stores, "Heidi Barker, a McDonald's spokeswoman, said the company does not have the power to raise wages of workers employed by its franchisees. She said it's possible that franchisees will follow the company's lead and also raise wages of front-line workers."
    KC's View:

    Published on: May 21, 2015

    • The Global Market Development Center (GMDC) announced that it will complete its leadership transition with the stepping down of its longtime CEO, Dave McConnell on June 1, to be succeeded by GMDC's president, Patrick Spear.

    McConnell served as GMDC president and CEO for 15 of his 35-year career with the association. He will remain with the association, consulting on special projects, until the end of 2015.
    KC's View:
    Great guy ... and way too young to retire. At least, IMHO.

    Published on: May 21, 2015

    Regarding the vote by the Los Angeles City Council to increase its minimum wage from $9 to $15 per hour by 2020, one MNB user wrote:

    I think LA has seen the writing on the wall, and that by 2020 there will be plenty of other States/Cities at the $15 minimum.

    In some ways doesn’t this declaration allow businesses to better plan for the future in LA? Forecasting increased costs and deciding what steps to take in advance to offset those costs might just put LA businesses in a stronger position in the future. Businesses that can’t afford this will do the same thing that businesses did in the recession—switch to paying employees as “contractors.” In other words, no health benefits, and no guarantee of steady work—but still in LA, where they have sun, earth and atmosphere, and when you’ve got that, you’ve got weather!

    From MNB reader Tom Herman:

    First of all, I love LA too.  The weather is great and the peeps are wonderful.  I’m more of a libertarian and really don’t believe in a minimum wage, but that ship has left the dock years ago.  Switzerland doesn’t have a minimum wage and they are one of the richest countries in the world.  Why stop at $15, let’s just go all the way to $30 and everyone will be swimming in the dough.  It will be utopia!

    No offense, but that often seems to be the go-to response to an increased minimum wage - if it is $15, then why not $30, or $300 ... as if this reinforces the absurdity of an increased minimum wage. This strikes me as bogus.

    I understand the argument against an increased minimum wage, and can understand why we might want a different level in a rural Iowa community than in New York or Los Angeles. But I also think that because the economy has changed in some sweeping and fundamental ways, we need to find ways for people who work hard at full-time jobs to make enough money to feed and house their families. I think this will be good for the culture and for the economy.

    From another reader:

    That means an average price for a hamburger in Los Angeles will be more than $15.00 in 5 years. That sounds ridiculous to me. Businesses can’t absorb a 67% increase in the cost of labor without offsetting it with higher priced products and services. It will kill their profit margins, especially in those businesses that are labor intense. It will be very interesting to see how Wall Street reacts.

    I think there are a lot of different places in Los Angeles serving hamburgers, so that "average price" prediction is a little ambiguous.

    But I'll tell you this. I'll bet you dinner at In-N-Out for you and three friends and/or family members that in 2020 burgers at that chain won't be anywhere close to $15 apiece...they may be a buck or so more than they are now, but that'll be made up for by high traffic and a motivated, productive workforce.

    MNB took note the other day of anAssociated Press report that the World Trade Organization (WTO) has rejected a final appeal by the US government of an earlier ruling that prohibited country of origin labeling (COOL) of meat sold in the US. The ruling says that any such labels will have to be dropped on the grounds that they put livestock from other countries, including Mexico and Canada, at a competitive disadvantage.

    MNB reader Bob Warzecha responded:

    We read the entire ruling (to ascertain the effects on US companies) and this is basically how the WTO ruled: Canadian and Mexican ranchers ship their livestock to the US for “processing”.  In order to fulfill COOL these livestock have to be segregated from US livestock and processed separately after the facility has been cleaned post US livestock processing.   This has made the cost of Canadian and Mexican livestock much higher than US livestock.  This higher cost, the WTO contends, is a “hidden tariff” which is prohibited under treaties such as NAFTA.  So COOL on meat products have to be eliminated or modified or US beef and pork will be hit with a tariff to match the “hidden tariff” which will make meat products higher for all consumers everywhere.

    From another reader:

    I like knowing where my food and non-food purchases come from.

    I was curious about the “recent report released by the International Food Information Council (IFIC) Foundation [that] shows that only 15 percent of consumers use COOL labels, which has declined considerably from 26 percent in 2014."  Any idea as to why the big decline?

    Is it because people really don’t care?  Or is it, at least in part, because of people like me?  I don’t look at the COOL labels in the grocery-store, meat department.  That’s because I don’t shop in the meat department.  I buy beef by the quarter from a local, organic rancher.  When I don’t have his beef in my freezer, I buy from a local, old-fashion butcher shop.  He is very open about who he buys his beef from.  He even has a detailed brochure with information about the ranch and how the cattle are raised and fed.

    In the seafood section, I definitely look for the labels.  If I don’t like what I see, I have beef for dinner.

    And another:

    Since when did the United States become subordinate to the WTO?

    I can understand an independent arbiter like the WTO on tariffs and the like, but this action seems to be a bit of a stretch.

    I think it probably has to do with signing a treaty and trying to be a responsible member of the international community. Or something like that.
    KC's View: