retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: June 8, 2015

    by Kevin Coupe

    "The past was filling the room like a tide of whispers." - Ross Macdonald

    There were two stories that have emerged over the past week or so that demonstrate the degree to which past deeds can back to haunt people of perceived good character, and illustrate the reasons that so many people - especially young people - have lost faith in a variety of institutions.

    There was the story of the Duggar family, stars of a reality television program called "19 Kids and Counting," which apparently was best known for having many children and espousing Christian values.

    I say "apparently" because I have no first hand knowledge of this family. In fact, I'd never heard of them or their program until it was revealed that one of the sons had molested five girls, including some of his sisters, in his youth ... actions for which he had never been held legally - or even by many assessments, morally - accountable.

    To be honest, I'm reading as little about this case as I can get away with. It isn't that I'm not a little curious, but I have a busy life, and pretty much every time I read anything about these people I feel the urge to take a shower.

    For the moment, let's put the specifics of the case aside. Whether or not the criminal justice system can do anything will have nothing to do with whether these people are able to still command attention via reality TV. (Some of these clowns would give Charles Manson an hour in prime time if they thought it would generate decent ratings.)

    What I simply cannot understand is how any of these people thought for a moment that the facts of this case would remain unknown, and that they would not be called to account for their actions. It strikes me as the ultimate hubris, a pervasive arrogance that somehow they would be the last people on earth who would be able to keep secrets.

    Which is probably what Dennis Hastert thought, too.

    Hastert, of course, is the former Congressman and Speaker of the House of Representatives who is accused of agreeing to pay more than three million dollars in extortion money to someone who - if reports are to be believed - knew that he'd had inappropriate sexual conduct with a student at a high school where he'd served as a wrestling coach before beginning his political career. While Hastert has not yet been arraigned, it likely will be hard for him to defend himself, since he actually appears to have paid the money and even reduced the amounts he took out of the bank to avoid drawing regulators' attention.

    Again, let's put aside the crime. (Though I really don't want to. Both these cases are about child molestation. They don't come much lower than child molesters.)

    Like the Duggars, Hastert probably thought he could avoid or at least survive the past and that the transparency that has turned so many lives, businesses and institutions into open books would not be his problem.

    But to adopt the phrase coined by Ross Macdonald, the tide of whispers overtakes everyone. You can't avoid it. The results almost always are Eye-Openers.

    It seems to me that both these stories serve to remind us that it is folly to believe that one can always control the narrative and obfuscate reality.

    In the modern business environment, especially for so-called "big food" companies that seem increasingly mistrusted, it is important to embrace transparency, not resist it. Be upfront and honest, not deceitful. Be humble, and not arrogant. And do everything possible to engender trust, not give consumers a reason to doubt it.

    "They don't need to know that" rarely is an appropriate response. Because "they" will almost always end up knowing it.

    Deal with it.

    I have to admit that what really worries me about all this stuff is that we may be losing our capacity to be shocked. Things that used to shock us now merely surprise us. Things that used to surprise us now merit a mere raised eyebrow.

    Pardon me while I go take another shower.
    KC's View:

    Published on: June 8, 2015

    Walmart hosted its annual shareholders meeting last week in Arkansas, and...

    • Walmart's board announced the election of Greg Penner as the company's new chairman, succeeding his father-in-law, Rob Walton, who is the son of founder Sam Walton. Penner, who has been serving as vice chairman of the company, is just the third chairman in the company's history.

    Investors Business Daily reports that Penner's chairmanship of the board's technology and e-commerce committee no doubt was part of the strategy behind his new role, since it "comes as Wal-Mart navigates the shift to online shopping and plans to roll out a new unlimited online shipping service that will challenge Amazon's Prime service."

    • The New York Times reported on the challenge this way: "With less than one-sixth the online sales of Amazon, Walmart has been repeatedly outgunned and outsmarted by Amazon’s price-matching, robot-utilizing, competition-crushing machine.

    "And now that sluggish sales are persisting at its supercenters, and with consumers spending more and more time shopping online, Walmart’s need to play catch-up in its online business loomed large at its annual shareholder conference on Friday. Doug McMillon vowed to tackle that quandary as part of the changes he outlined as the company’s relatively new chief executive."

    • MNB fave Burt P. Flickinger III, managing director of the Strategic Resource Group, tells the Times that Walmart needs to make up for lost time:

    “ has been severely mismanaged,” Flickinger says. “Walmart would go a few years and invest strategically and significantly in e-commerce, then other years it wouldn’t ... Meanwhile, Amazon is making moves in e-commerce that’s put Walmart so far behind that it might not be able to catch up for 10 more years, if ever.”

    • It's only been two months since Walmart began raising wages for its employees, but the company says that it already has had an impact on employee retention, Reuters reports. The company says that turnover is down and applications are up, though it did not provide any details beyond that.

    According to the story, "McMillon said the company would look to raise wages in the future beyond next year's $10 minimum rate to stay competitive in attracting and retaining workers. He did not provide a timeframe or other details."

    Reuters notes that "Wal-Mart increased its minimum pay to $9 an hour for its U.S. staff in April, providing a raise for half a million workers, and promised to hike it again to $10 an hour next year. The federal minimum is $7.25, though some states impose higher minimums."

    • And, in a metaphor that warmed my heart, CEO McMillon urged the company's employees "to summon their inner Hans Solo, Chewbacca, and Princess Leia to fight the evil empire of stagnation and help the world’s largest retailer resume faster growth," according to the Fortune story, which went on: "McMillon said the retailer’s No. 1 enemy, ahead of rivals, was its own bureaucracy, and he called on store workers to take more initiative on their own. 'The truth is the real villains are lurking within the company,' said McMillon. 'Our real villains are things like bureaucracy, complacency, a lack of speed, or a lack of passion'."
    KC's View:
    If McMillon wanted to generate sympathetic coverage from MNB, the best way to do so was to start using movie metaphors. Though Reuters did fairly note that he seemed to be "unaware of the irony of the world’s largest company by far, with 2014 sales of $482 billion, one seen by many as the empire that needs to be fought against, is trying to position itself as the underdog." But hey...a movie reference is a movie reference.

    (BTW...I have no illusions that McMillon cares one bit about getting favorable coverage from MNB. But I'll tell you this. I'm sending him a book.)

    I do think that Burt Flickinger is absolutely right that Walmart has to make up for lost time in the e-commerce arena. While much has been made of the fact that the Waltons have kept the power in the family, I think that in many ways this meeting reflects an embracing of future challenges, not just a celebration of past victories. And that is critically important.

    One other thing. It is really, really good for a behemoth like Walmart to adopt an underdog mentality. That's what Amazon does with its "today is day one" philosophy, and that's what companies have to do if they are going to be nimble enough to survive modern competitive realities.

    Published on: June 8, 2015

    Kroger announced on Friday that Fred Morganthall, the president of Harris Teeter Supermarkets since 1997, has been named senior vice president of retail divisions for the parent company.

    Morganthall will be succeeded at Harris Teeter by Rod Antolock, the company's current executive vice president.

    Kroger acquired Harris Teeter for $2.4 billion in a deal that closed in January 2014.

    "Fred is an exceptional leader who is respected throughout the industry," said Mike Ellis, Kroger's president/COO, in a prepared statement. "We continue to learn a lot from Fred about building even stronger connections with our customers. We are delighted that he is taking on this broader role at Kroger."
    KC's View:
    One always gets the sense that Kroger is one of the companies that gets the whole merger thing right - it understands that you have to learn more than you impose, because it is the stuff that you learn that made the company worth acquiring in the first place.

    I have to wonder if one of the things Morganthall brings to Kroger is his understanding of how Harris Teeter has been successful in the e-commerce business, something with which Kroger has uncharacteristically struggled.

    Published on: June 8, 2015

    The Daily Meal< reports that while "the cappuccino, one of the most classic espresso beverages, has been a mainstay on the Starbucks menu since 1986," the company seems to be slowly phasing it out. The drink no longer is on the menu boards of many Starbucks locations, though one can still order it.

    The reason? Well, it ends up that many locations have conflated the latte and the cappuccino. A latte is "one part espresso with two parts steamed milk, but a cappuccino combines equal parts espresso, steamed milk, and frothed milk." And, when "the flat white drink, of Australian origin, was added earlier this year, it made things even more complicated."

    Starbucks spokespeople say that the cappuccino "will appear on menus later this year when menu boards begin to change again. According to Starbucks, menu boards switch out at least six to seven times a year, which explains the cappuccino no-show."
    KC's View:
    Two things.

    One, I think the willingness to put aside, even temporarily, a drink that one might consider foundational to the company is a sign of corporate maturity. No sacred cows! (Remember the Mark Twin admonishment: "Sacred cows make the best hamburger.") is sort of interesting that Starbucks' solution to the conflation of two drinks is to delist one of them, as opposed to working to get the training right.

    Published on: June 8, 2015

    The Washington Postover the weekend had a story about how we may be seeing the end of a business institution - office voice mail.

    "Recent reports show that companies such as Coca-Cola and JPMorgan Chase are disconnecting voice mail from their workers' office landlines as employees increasingly rely on email, instant messaging, cell phones and even text messages to reach the people they need at work," the Post wrote, noting that "some unfortunate employees, such as those in client-facing jobs, will be keeping it."

    Citigroup and Bank of America are said to be considering a similar move. "While JPMorgan said that nixing voice mail will have real cost savings for the company — eventually some $3.2 million a year — a Coca-Cola spokeswoman told Bloomberg the savings would be minimal. Their decision, she said, was more about simplifying the way people work."

    MIT research fellow Michael Schrage recently wrote in the Harvard Business Review that voice mail is "a communications medium that was once essential has become as clunky and irrelevant as Microsoft DOS and carbon paper."
    KC's View:
    I had this old hulk of a fax machine in my office that I finally disconnected the other day ... it just was taking up space, gathering dust.

    It is another reflection of how things continue to change and evolve, and how even recent innovations quickly are biting the dust.

    Published on: June 8, 2015

    In the UK, Retail Week reports that Tesco has conceded that it breached the grocery sector's code of practice by "mistreating and delaying payments to suppliers."

    Accusations that Tesco violated these rules were leveled earlier this year by the UK's Groceries Code Adjudicator (GCA).

    “Regrettably, we have concluded that there have been a number of instances of probable breaches of the code which fall short of the high standards we expect to uphold in our dealings with our suppliers," Tesco says in its annual report. “We are taking effective action to prevent this arising again. We are fundamentally changing the way we work with our suppliers to deliver a more sustainable and collaborative business model for everyone in the supply chain.”

    While the GCA's enforcement powers currently are largely symbolic, the story notes that its charter is being strengthened so that in the future it will be able to fine up to one percent of their UK revenue.
    KC's View:

    Published on: June 8, 2015

    • The Triad Business Journal reports that it appears that the Winston-Salem region may be home to at least two Lidl locations, in addition to its exploration of the possibility of opening "a major distribution hub in Alamance County. Lidl operates nearly 10,000 stores globally and is a direct rival to fast-growing Aldi."

    • Reports out of the Netherlands say that Frans Muller, the Dutch CEO of Delhaize Group, is most likely to be CEO of the combined companies if Ahold and Delhaize are able to conclude a now-being-negotiated merger. The stories all suggest that Dock Boer, CEO of Ahold, probably would become chairman of the new company's supervisory broad.
    KC's View:

    Published on: June 8, 2015

    Apologies to those of you reading this early in the morning and who may find this to be gastronomically upsetting...

    Bustle reports that "Taco Bell Cap’n Crunch Delights doughnut holes are making their way to the masses. Much to the delight of dessert lovers everywhere, the fast food giant took to Twitter on Friday (which, appropriately, happened to be National Doughnut Day) to confirm that it’s officially adding the sweet, cream-filled pastry to its nationwide menu.

    "Taco Bell has been testing the warm doughnut holes, which are coated with the childhood favorite Cap’n Crunch Crunch Berries cereal, and filled with creamy, sweet milk icing, in various locations in Bakersfield, California since February. But it seems the Delights were too, well, delightful to keep away from the rest of the America."
    KC's View:
    Yuck. Yet another reason to avoid Taco Bell.

    Published on: June 8, 2015

    ...will return.
    KC's View:

    Published on: June 8, 2015

    • American Pharoah won the Belmont Stakes on Saturday, earning racing's Triple Crown and becoming the first horse to win at Belmont, the Preakness Stakes and the Kentucky Derby since 1978.

    • Stan Wawrinka of Switzerland won his first men's singles French Open title with a 4-6, 6-4, 6-3, 6-4 victory over Novak Djokovic on Sunday, denying a frustrated Djokovic a title at the only Grand Slam tournament he has yet to win.

    • On the women's singles side, Serena Williams defeated Lucie Safarova 6-3 6-7 (2) 6-2 to win the French Open on Saturday. It was her 20th major title.
    KC's View: