business news in context, analysis with attitude

Published on: May 26, 2015

by Kevin Coupe

The Washington Post reported over the weekend that France, "in an effort to reduce food waste," has made it illegal for supermarkets to throw out food "considered edible," forcing them instead to donate it to charity or make sure it is used for animal feed.

Food waste is believed to account for about one-third of all food produced worldwide. In the US, as much as $160 billion in food never gets eaten each year.

The Post writes that "the law, as written, is one of the most stringent attempts to cut the amount of edible but unbecoming produce tossed out every day. As of July 2016, large supermarkets in France — those approximately 4,300 square feet and larger — will face fines of up to $82,000 for failing to comply.

"France's pivot comes on the heels of a pledge by the European Union to reduce food waste by 50 percent by 2025. But it also follows a number of other forward-thinking measures in France, aimed at halting the practice of tossing out food because of overly conservative expiration dates. In 2013, for instance, the country pushed forth legislation that forced food sellers to label foods in a way that more closely reflected their true shelf life."

Not sure we'd ever have such legislation in the US ... or even that we should ... but I think this is at least an acknowledgment that this is a serious problem that need to be addressed. (Add it to the remarkable coexistence of obesity and starvation as food-related problems that affect our culture.)

It is an Eye-Opener.

Published on: May 26, 2015

Reuters reports that "a proposed $19 million settlement between MasterCard Inc and Target Corp over the retailer's 2013 data breach fell through after not enough banks accepted the deal ... The agreement, announced in April, would have provided up to $19 million to banks and credit unions that sued Target in federal court in Minnesota over the breach."

The story notes that "the settlement was contingent on banks that issued at least 90 percent of the MasterCard accounts signing on to the agreement by May 20. Any bank that accepted the settlement was required to drop further claims against Target." That threshold was not met, MasterCard announced late last week.

The Reuters story notes that "lawyers for the banks have estimated the total losses at more than $160 million, with approximately half that amount lost to fraud and half to the cost of reissuing nearly 9 million credit cards." A number of banks had tried to block the deal in the courts, arguing that it was designed to undercut their claims; while the judge in the case had rejected the suit, it appears that by simply refusing to sign on to the agreement, they have achieved much the same result.

Published on: May 26, 2015

In Arkansas, City Wire reports that Walmart's Sam's Club division is engaged in a reinvention process as it attempts to reverse a trend of disappointing same-store sales comparisons and profits, with CEO Rosalind Brewer saying that "this year is one of investment and testing, and we’re very focused on strengthening our foundation for business improvement in the longer-term. We’ve been focused on four initiatives designed to improve our foundation.”

Those four initiatives are merchandise assortment, which is focusing on "newness and differentiation," with a greater emphasis on organics ... membership and decision sciences, with a greater focus on exploiting data through better analytics ... "new programing to enhance member value" ... and a greater investment in e-commerce, especially a click-and-collect function.

Published on: May 26, 2015

There is a terrific piece in the June 1 edition of Fortune that looks at how "the top 25 U.S. food and beverage companies have lost an equivalent of $18 billion in market share since 2009," at least in part because these "big food" companies are also losing relevance with consumers who are interested in authentic companies that make real food rather than behemoths that manufacture products loaded with ingredients that few people can pronounce.

These companies are losing sales because they are losing the hearts and minds of their customers, but also because there are new companies emerging - especially because of a new interest in investing in the food industry - that are offering alternatives.

"In some ways it’s a strange turn of events," the story says. "The idea of 'processing' - from ancient techniques of salting and curing to the modern arsenal of artificial preservatives - arose to make sure the food we ate didn’t make us sick. Today many fear that it’s the processed food itself that’s making us unhealthy."

The story goes on: "It’s pretty simple what people want now: simplicity. Which translates, most of the time, to less: less of the ingredients they can’t actually picture in their head.

"While consumers have long associated the stuff on the labels they can’t pronounce with Big Food’s products—the endless strip of cans and boxes that primarily populate the center aisles of the grocery store—they now have somewhere else to turn (more on that in a bit). And that has brought the entire colossal, $1-trillion-a-year food retail business to a tipping point.

"Steve Hughes, a former ConAgra executive who co-founded and now runs natural food company Boulder Brands, believes so much change is afoot that we won’t recognize the typical grocery store in five years. 'I’ve been doing this for 37 years,' he says, 'and this is the most dynamic, disruptive, and transformational time that I’ve seen in my career'."

What takes the story most interesting is not just how it frames the issues, but illustrates how "big food" companies are trying to solve the problem. One example: Campbell Soup Co., where CEO Denise Morrison has been trying to "shift the center or gravity" with the acquisition of companies such as Bolthouse Farms and Plum Organics. While these acquisitions have been important, equally critical has been Morrison's decision not to impose Campbell's DNA on them, but rather learn from them and their leaders - while at the same time not losing focus on the engine that drives the business (also known as its core soup business).

Fascinating piece, and you can read the entire story here.

Published on: May 26, 2015

In the UK, the Guardian reports that Tesco has adopted a new policy that would enable it to "claw back" bonuses from senior executives for five years if it is discovered that they have misstated financial results or done anything damaging to the company's reputation.

The policy, the story notes, is a response to the company having to pay out the equivalent of more than $3 million (US) to its former CEO and finance director and then finding out that a $400 million (US) accounting scandal had occurred on their watch, subjecting Tesco to a series of investigations into its practices.

The story says that "Tesco, which tried but failed to withhold the payments while it carried out an investigation into the accounting scandal, said it would seek to recover the payments if either was found to have been guilty of gross misconduct."

Published on: May 26, 2015

• Bloomberg reports that Walmart is overhauling its automobile maintenance centers, looking to "improve the experience and entice more customers" by "dedicating staffing and training programs to the department" and hiring assistant managers with responsibility for the category.

Burt Flickinger, managing director at Strategic Resource Group (and someone who MNB views as being the ultimate authority on pretty much all things retail), notes that by doing a better job of marketing the centers and then providing a higher service levels, Walmart not only will be able to get more revenue out of the category, but also get more sales out of people who shop the stores while waiting for their cars.

“It’s shocking that prior Wal-Mart leadership didn’t identify this as an opportunity to capitalize on, especially since they’ve invested in all the other key captive consumer areas -- from vision care to pharmacy,” Flickinger tells Bloomberg.


• Crain's Chicago Business has a story about how "a small move from Wal-Mart Stores is giving packaged-food companies a big headache. The retail giant has tweaked its promotional strategy, ditching some in-store product displays that put popular brands in front of consumers at the end of aisles and near cash registers. In turn, Wal-Mart is asking suppliers to take money they would have invested in displays and promotions and instead pour it into cutting the cost of their products as the company reverts to its 'everyday low prices' mantra."

Some suppliers are fighting back, the story says. Mondelez, for example, "has been in discussions with Wal-Mart to come to a compromise and promised to plow more money into its marketing support teams that work with Wal-Mart on in-store displays and promotions."

The suggestion is that while Walmart is making these moves in order to reverse a slow but immutable decline in sales and profits, CPG companies can argue that their presence on Walmart's shelves and in promotions drives traffic and sales ... and that Walmart should be careful about taking a cavalier attitude toward them.

Published on: May 26, 2015

The New York Times reports that while ride-hailing services such as Uber have largely been banned from picking up passengers at airports throughout the country, drivers for these services have found surreptitious ways to operate there, making it look like they are family or friends rather than paid drivers.

Now, "American airports, aware that the tidal wave of acceptance of the ride-hailing phenomenon will not recede, are gradually rewriting regulations to welcome all manner of cars."

While there are issues that need to be resolved - such as fees that need to be paid to the airports, traffic flow, and insurance - the rules are being rewritten for a simple reason, the story says. Travelers no longer just want access to Uber and its brethren at airports. They expect it.

Published on: May 26, 2015

• The New York Times reports that "in a move that could put pressure on its rivals to follow suit, Amazon will start paying taxes in a number of European countries where it has large operations, instead of funneling nearly all its sales through Luxembourg, a low-tax haven that is the home base in the region for Amazon and many other large tech companies."

Companies such as Amazon and Google have been criticized by some EU countries because of their tax payment policies, and the European Commission is investigating "whether Apple and Amazon receive unfair state support through low-tax agreements in Ireland and Luxembourg, respectively, where the companies run their European operations."


• Latin Post reports that Pepsi is launching a new flavor, Pepsi Limón, which "has real lime juice and real sugar in it, giving it a popular tart taste familiar among Latinos ... It is now available in 20 oz. bottles in select markets throughout California, Arizona, New Mexico, Texas and Chicago."

The story notes that the goal is to "reach out to Latino consumers since they make up almost one-sixth of the U.S. population."

Published on: May 26, 2015

• Apple Inc. announced that Jony Ive has been given the new title of Chief Design Officer, with responsibility not just Apple's suite of hardware and software products, but also for the fleet of Apple Stores and the company's new campus in Cupertino, California.

Published on: May 26, 2015

• Anne Meara, who with her husband Jerry Stiller created one of the most successful male-female comedy teams in history, passed away over the weekend. She was 85.

Stiller and Meara were not just fixtures in clubs and on television, but also did commercials for products such as Blue Nun wine; they also produced a son, Ben Stiller, who has forged a successful career in films such as Zoolander, Meet The Parents, and Tropic Thunder. Anne Meara also was an accomplished actor in her own right, appearing in everything from "Rhoda" to Reality Bites to "Macbeth," and had forged a late-in-life career as a playwright.

Published on: May 26, 2015

Michael Sansolo is off this week. "Sansolo Speaks" will return.

Published on: May 26, 2015

...please drop me an email. Depending on schedules, Michael Sansolo and I may try to put together a little get-together during FMI Connect in Chicago, which is taking place from June 8-11. Let me know if you'll be there, and we'll be in touch...

Published on: May 26, 2015

Got a number of reactions on Friday to the "Millennial Mind" guest column written by Chelsea Ware, a student at Portland State University, who talked about what she believes McDonald's needs to do in order to regain relevance with her generation.

One MNB user wrote:

It was great to read the commentary from your “guest blogger” Chelsea Ware on Friday.  I was reminded of a couple of things.  First, how Chelsea’s generation lacks the patience in terms of getting what they want quickly (as compared to my own generation).  It’s interesting to read how her generation makes assumptions about Brands based on a couple of experiences, rather than to understand what these Brands might be testing around the world. The other thing I was reminded of in reading Chelsea’s post is that I need to figure out millennials better / faster as they are (at a rapidly increasing rate) contributing to our Social Security system, from which I’m suppose to benefit in another dozen years.  (Or not.)

McDonalds was written about twice in your Friday posts, which hit a particular nerve for me.   I’ve been traveling throughout southern Spain this past week. On Wednesday, I had the opportunity to do a cooking class with Dani Garcia just west of Malaga.  Dani is well-known in Spain and had a couple of restaurants in New York City (Manzanilla; closed after one year in business) and participates in the "Iron Chef" type competitions in Spain.  During the cooking class, Dani made mention of the fact that he had recently assisted McDonald’s –Spain by adding another burger to the menu.  He offered that McDonalds-Espana  needed to improve the taste of their burgers in Spain and felt that a boost from a well-known chef might help.  He said the item was only available in the Spain McDonald’s stores.

On Thursday, I made a trip to a local McDonalds to sample exactly what Dani had created.  There was absolutely no in-store marketing of the new burger, called “Extreme DG”. The burger sold for 5,00 on the menu but they were offering a “two for one” promotion.  The comparable cheap cheeseburger (identical in every way to the Dollar menu in USA) was 1,30.  The comparison of the buns showed a difference; the Dani Garcia item definitely wins on “looks”. However,  the taste of the hamburger patties was virtually the same. The Extreme DG item was swimming in a special sauce that wasn’t available in a condiment pack. The sauce on the Extreme DG burger definitely tasted more upscale than conventional mustard / ketchup on the “Dollar burger” equivalent.

There was no “supersize” messaging on the menu board, either online when one orders or when awaiting the order to pick-up.  In countries outside the US, “supersizing” (or even free refills) often leads to “ selling less”.  Giving away more French fries or soft drinks doesn’t work for many international franchisees.

Wifi was easy to access; one-click and it was “on” which is very quick vs the multitude of options one encounters if they frequent US McDonald’s locations.  The eating area (booths and seating) were nearly full and all was remarkably clean and well kept.  Consumers of all ages were enjoying their food.  Bathrooms were superbly clean; this is clearly a point of difference in Spain vs. competition.

Interestingly, McDonald’s Spain offers beer for sale (at least in the location I was visiting) but doesn’t allow for soda refills of any kind.  The order taking process is completely automated.  This made the purchase of the Extreme DG burger harder as one really has to look closely through the online menu to find it.  Most other aspects of a US McDonald’s were similar to what you find in the US, including the kids play area.

What’s this have to do with Chelsea’s guest column, you might ask...

McDonald’s is experimenting, albeit in countries like Spain, with how to improve the taste and localize.  Chelsea, don’t assume that because what you see in the US is the way it is everywhere.  There are some innovations being tested somewhere else that might be exportable.  The bigger question your generation needs to resolve is the appetite for risk; Brand localization costs more, at least in the short term.  And, in the case of McDonalds, are franchisees willing to invest in new concepts?  Any MNB viewers who have been involved in franchisor: franchisee business models know how hard / slow change is to implement, despite a shared objective to “sell more”.

“Ditching the clown” (as Chelsea suggested) is one of the key points of difference that got McDonald’s to the size / scale it is today.  That, itself, isn’t reason enough to keep the play area. In South Africa, McDonald’s doesn’t have the gym play areas, instead having a play area that includes electronics.  “Evolving the clown” makes sense; after all, many of us want to associate with different things than we did growing up.

As much as I hate to say it publicly, Chelsea’s comments will have more meaning to me when she gets away from academia and develops her own viewpoint based on her work experience. I appreciate reading her views; they are not unlike what I hear in my own household.  My own son, who is 20 and attends University, reminds me often of how much more he knows than I do, until it comes time that some real work needs to be done.  Faced with a lack of operational experience, he reluctantly migrates from advocacy to curiosity to deal with the task at hand – then becoming grateful for the scholarship that allows him to remain in University for another 24 months!

While his Dad keeps his fingers crossed the coming 24 months come / go quickly….. real world experience / understanding seems so under-valued / appreciated to him.

Similar to how I read Chelsea's commentary.  But, I need them to be successful so that my Social Security is safe(r).

I get your point, but...

It is critical to an understanding of Chelsea's point of view - or your son's, for that matter - that they are not necessarily taking an operational point of view. Like many consumers, they may not give a rat's rear end about the operational issues ... and yes, they want what they want, when they want it, how they want it.

Marketers can say things like, the clown helped make McDonald's what it is today. And that's not wrong. But ... most people, when they go to McDonald's, don't think about the company's international presence. They think about the unit in which they're buying their hamburger and fries. And what matters not is the issue of franchisee relationships, or whether beer is available in Spain, or what initiatives may be exportable to the US. What matters is whether that store and those burgers and fries are tasty and relevant to that consumer.

Furthermore ... it would be my argument that while millennials may not know everything, and may not know as much as they think they know, they also know a lot of stuff that I don't know ... and I'm better served by listening than dismissing.

Regarding the same column, MNB reader Mitch Hill wrote:

Can you please make Chelsea Ware a semi-regular contributor? She says what many in our business don’t want to hear, but need to.

MNB reader Clay M Whitney wrote:

The millennial I sit next to is not very forthcoming; please feature more of these insights.

From another reader:

Loved this article.  But I think that the real issue that McDonald’s has to address is what demographic they want to focus on. It has always been families but families are changing.  So do they want to be a hangout for millennials, families, baby boomers, etc?

From MNB reader Bryan Silbermann:

Brilliant! That’s both your decision to feature Chelsea Ware’s comments on McDonalds as well as her insight and clarity of thought.  Steve Easterbrook ought to hire her as soon as she graduates.

MNB reader Carl Jorgensen wrote:

Bravo (or brava?) to Chelsea Ware for a most trenchant analysis yet of McDonald’s problem and the way forward. I hope she stays in our industry, because she is exactly what we need in the next generation of business leaders.

FYI ... this is one the reasons I love being an adjunct faculty member at PSU's Center for Retail Leadership. The folks there - especially Tom Gillpatrick - turn out smart, thoughtful graduates who are a lot of fun to hang out with. That's why I'm going back this summer, for my fourth year of team-teaching a class with Tom. (As always, we bring lots of industry execs into class to talk to our students ... if you're interested in joining us, let me know.)

And MNB reader Doug Morales wrote:

Great read, solid comparison to what once was and what might be with the right direction. Very good Chelsea, best of luck to you.

Kevin, the force is strong with your young padawan.

Boom! Extra credit for a great movie reference! (And I should be so lucky to have her as my padawan...)