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    Published on: June 12, 2015

    by Kevin Coupe

    Fast Company reports on a new partnership that makes so much sense that one has to wonder what took them so long.

    The deal is simple: "Marriott has just launched a partnership with Netflix that allows guests to stream Netflix on the hotel's Internet-connected TVs. In the testing phase, Marriott incorporated several different Internet apps on TVs and found that over a quarter of guests logged on to them, with a significant majority using Netflix, which beat out other video streaming services like Hulu and YouTube." The service is expected to be all 300 US Marriott hotels by the end of 2016.

    The impetus for the deal: "Over the past few years, Marriott Hotels has been closely studying how its guests, who are on average 35 years old, use technology during hotel stays.

    "Marriott discovered a few important facts: Guests are no longer keen on paying for the video-on-demand that comes loaded on the TVs in each room. Instead, they come equipped with their own lineup of devices—smartphones, laptops, tablets—that are chock-full of content, from video games to books to movies."

    Only Netflix subscribers will be able to access the service, though trial subscriptions will be available. And while many or most of these subscribers may already be able to access Netflix on their personal devices, Marriott also found out something else in its research - that people like to have multiple screens going at once, and expect to have the same access to technology and content on the road that they do at home.

    As both a Netflix subscriber and a fairly regular Marriott patron, I have to say that I love this idea ... though, as I said before, it seems so obvious that I wonder what took them so long. The growing self-sufficiency of the hotel consumer has been going on for a long time, at the same time as shoppers in general have benefitted from shifts in the balance of power. It is the Eye-Opening thing that every business has to understand - that more than ever, the consumer is the educated, equipped and engaged arbiter of what is acceptable and what is not.
    KC's View:

    Published on: June 12, 2015

    Whole Foods have revealed that its new "hip-cool technology-oriented" - and lower cost - chain will be named "365 by Whole Foods Market," and said that Jeff Turnas, a 20-year company veteran will serve as the division's president.

    The "365" name comes from the company's lower priced private label line.

    The Los Angeles Times writes that "when Whole Foods announced the new chain in May it said stores would be geared toward the large population of 18- to 34-year-olds and offer all-natural food at lower prices." Aside from unveiling the new name and leadership, the company is still playing its cards close to the vest.

    writes that the new chain's development "comes as the grocer has seen an increasing number of competitors try to take a bite out of its turf in the organic and fresh food arena, resulting in lower same-store sales for the Austin-based company."

    "The 365 chain will be able to keep prices lower by building its stores with cheaper materials, operating them in smaller footprints, and offering a smaller, more curated assortment of products," the story says. "The stores will have less autonomy and be more prescribed than the company’s original concept."

    Co-CEO Walter Robb "stressed that 365 will have the same quality standards as its parent brand, such as a list of banned ingredients, and will also emphasize the company’s expertise in perishables."

    In the prepared statement, Turnas said, "We are excited to introduce 365 by Whole Foods Market to bring healthy foods to even more communities with a fresh, quality-meets-value shopping experience that’s fun and convenient. A modern, streamlined design with innovative technology and a carefully curated product mix will offer an efficient and rewarding way to grocery shop.”

    And Robb explained the rationale for the chain in somewhat starker terms: “This is a fundamental strategic decision of the company to say at this fork in the road, as we read the tea leaves and the marketplace, we’re going to go attack. For the last couple of years, we’ve been the hunted. This turns us back into the hunter.”
    KC's View:
    Methinks he doth protest too much.

    There are, in fact, different kinds of hunters. There's Ernest Hemingway, and there's Elmer Fudd. I'm just not sure that this is the best metaphor, simply because there's a level at which it seems more like defensive bluster than strategic thinking. Just like the notion of a "hip-cool technology-oriented" food shopping experience seems maybe a little hollow ... like they needed something to call it that was different, and these are the words that tested best with the target consumer demographic.

    (Is this a value play? A millennial play? Both? Or something else entirely? I am unclear.)

    Count me among the undecided when it comes to believing in the viability of this concept. That, frankly, seems like the only reasonable position, since we don't really know what it is ... yet. (I've seen headlines suggesting that 365 could be a Walmart killer. I've seen others implying that Whole Foods is grasping at straws. I'm doing my best to avoid such hyperbole.)

    Some companies can make the bifurcated approach to retailing work, and some can't ... it depends on the clarity of the thinking and the purity of the execution. And, by the way, the vision of the leadership ... and I have no idea if a 20-year company veteran is the right guy to create such a differentiated retail concept. I might've gone with someone who would challenge traditional Whole Foods ways of doing things; then again, what do I know?

    Whole Foods has always been pretty good at both, but the emergence of legitimate competition in its segment seems to have thrown it off its game a bit. But, if you can count me among the undecided, you can also count me among the extremely curious about what they're going to come up with. In the end, I root for innovators.

    Published on: June 12, 2015

    The Wall Street Journal reports that discount retailer Aldi has "detailed plans to grow in the U.S., saying it would invest billions of dollars and create thousands of jobs."

    Included in its growth scenario is a plan to open its first Southern California store in March 2016 and have 25 there by mid-year.

    According to the story, "The retailer, which described its U.S. expansion plans as 'aggressive,' said it would put more than $3 billion behind a previously announced five-year plan to open 650 new stores across the U.S. By the end of 2018, Aldi expects to operate nearly 2,000 stores, or about 44% of rival Wal-Mart Stores Inc. ’s current U.S. store count. The German company already operates nearly 1,400 stores across 32 states."

    The story goes on to say that "Aldi said it would pay starting wages of $13 an hour for store associates, with an opportunity to earn up to $21 an hour. Attention to minimum wages has ramped up in the U.S., with new initiatives in Seattle and Los Angeles, at Wal-Mart and other companies, and some congressional moves on the federal minimum. California’s hourly minimum wage is currently $9, rising to $10 next year."
    KC's View:
    I have to be blunt. This should scare the crap out of some people.

    Think just for a minute about the havoc that Aldi and its fellow discounter Lidl have created in the UK, where the two of them have in fairly short order gone from a 6.3 percent market share in 2013 to a 9.3 percent market share today, with some educated estimates suggesting that they could together have as much as a 15 percent market share by 2020. (I actually think they'll do better than that. Call it an uneducated guess.)

    And think for another minute about how together, Aldi and Lidl have helped turn Tesco from the dominant retailer in the UK that seemed to do no wrong, into one that seems mistake-plagued and unable to capture its past magic. (To be fair, they had help - Sir Terry Leahy's arrogance, and a Tesco culture that grew toxic.)

    And finally, remember one more thing - that Lidl is coming to the US in 2018.

    Forget basketball coaches. FMI should've had a session this week in which they taught retailers how to play defense and offense against Aldi and Lidl.

    Published on: June 12, 2015

    The South Florida Business Journal has a story about how Publix Super Markets management remains skeptical about the ability to make money from online grocery sales.

    The piece was prompted by stories about how Kroger is slowly unfolding an e-grocery service in the Cincinnati market and continues to see success from its Harris Teeter division's online initiative, as well as by Walmart's continued investment in the e-commerce space.

    "Anyone can offer online shopping, even in the grocery business," Publix spokesman Brian West said Wednesday. "The struggle is making it profitable."

    The Business Journal writes that "Publix tried out online grocery shopping in the late 1990s, but the company didn't see the return it expected on the service. Last year, it launched online ordering for deli meats, cheeses and platters and recently expanded that service to include bakery items."
    KC's View:
    I am reluctant to disagree with how Publix does its business, but I cannot help but think that they're getting the online thing all wrong. Hard to make money? Sure, especially in the short term. But it seems obvious to me that the availability of an online shopping option soon is going to be as much a prerequisite for supermarkets to operate as shopping carts and scanning.

    To avoid this inexorable march toward a critical technology capability and solution strikes me as risky. Sometimes, even the most respected and accomplished businesses miss the moment when things changed ... and suddenly, their best days are in the rear view mirror.

    Not saying that this is going to happen to Publix. But I am saying that it - and for that matter, every business - has to operate as if it can.

    What's the line from Bull Durham? "You have to play this game with fear and arrogance..."

    Published on: June 12, 2015

    The Chicago Tribune reports on the expansion of yet another meal delivery service - Sprig, which has been serving San Francisco and Palo Alto, Calif., is open for business in the Windy City.

    The value proposition is "healthy, cooked meals in an average delivery time of 15 minutes," with typical meals costing between $10 and $12, with delivery fees ranging from $1 to $4. "Users can also pay a $10 monthly fee for unlimited delivery," the story says.

    The Tribune writes that CEO Gagan Biyani claims that by "using an Uber-like distribution platform and dynamic pricing system, the heavily funded startup steps into a crowded meal-delivery space with some momentum, having delivered more than 500,000 meals since launching in late 2013 ... The company hits the delivery target by using predictive analytics and sending meals out in cars equipped with warming bags."

    Among the investors, the story says, is former White House chef Sam Kass, who has made healthy eating part of his portfolio.
    KC's View:
    Heavily funded is right - they've reportedly got well over $50 million to play with as they expand.

    Is Sprig a long-term player and competitor? Who knows. But so-called traditional retailers need to be looking carefully at these models to see what they can learn, emulate, and then, eventually, surpass.

    Published on: June 12, 2015

    The US House of Representatives this week voted to repeal Country of Origin meat labeling laws, responding to threats of $3 billion in trade sanctions from Mexico and Canada and a World Trade Organization ruling that the laws discriminated against imported meat.

    Reuters notes that "meat labels became mandatory in the United States in March 2009 after years of debate. U.S. consumer groups and some farm groups supported the requirement, saying shoppers should have information to be able to distinguish between U.S. and foreign products."

    Business groups have urged the US Senate to vote quickly and affirmatively on the repeal.

    Food Marketing Institute (FMI) president/CEO Leslie Sarasin said in a prepared statement that the vote "was an important first step towards addressing the WTO’s finding that significant portions of the COOL law violate the United States’ international trade commitments. The Senate must now act expeditiously to take up this legislation and complete the process of reforming COOL.

    "The time has come to stop tinkering around the edges of the law; the WTO dispute settlement process has run its course. The consequences of maintaining the status quo and trying to run out the clock – as some have called for – are clear ... Allowing these tariffs to be enforced would not only damage US jobs and companies that have no stake in COOL, it would also damage the United States’ reputation as a leader of the rules-based international trading system."

    Cathy Burns, president of the Produce Marketing Association (PMA), said in a statement that the vote "shows that members of Congress value the importance of trade and they recognized the potential $1 billion loss in produce exports to Canada and Mexico through tariffs and the uncertainty it would create for long-term contracts. Our industry depends on a fair, transparent and reliable international trading system to supply consumers around with world with affordable fresh produce year-round. As the bill moves to the Senate, we’re asking for their careful consideration and quick resolution.”

    And Peter Larkin, president/CEO of the National Grocers Association (NGA), said, "Aside from impacting supermarket operators' bottom line, should the U.S. remain non-compliant with the WTO's rules, it will cause market and supply dislocations, adversely affect jobs, business operations, and international trade. We commend the U.S. House of Representatives for passing this important legislation to bring the U.S. back into compliance with our international trade obligations and provide regulatory relief to those who produce and sell beef, pork, and chicken."
    KC's View:
    Sometimes, the bear gets you.

    While I understand why the US laws have to be repealed - that's the price of having treaties with other nations - I continue to fundamentally believe in the idea of total, transparent labeling. And I think governments that oppose it are making a mistake, believing that for their own purposes that they can control the flow of information and determine what is important and relevant, and what is not.

    That's a big mistake. Consumers make that decision ... and it is folly to resist that basic tenet of how to do business in 2015.

    Published on: June 12, 2015

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

    Bloomberg reports that Starbucks' Frappuccinos could be affected by a new San Francisco law that would require billboard labels that warn about the dangers of sugary drinks. According to the story, Starbucks could have to change signs and advertising if it is found that the beverage falls within the purview of the regulations ... and that could happen, since "a standard 12-ounce Frappuccino, generally made with coffee, ice, milk and sugary flavored syrup, has more calories than a 140-calorie can of Coca-Cola."

    The law, if finalized, would require the following statement on billboards: “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes and tooth decay.”

    I wouldn't drink these things on a bet, and I'm perfectly satisfied with the notion that any law that applies to sugary soft drinks ought to apply to Frappuccinos.

    • The Food Marketing Institute (FMI) named the best supermarket chef in the country today, along with five category winners who participated in Supermarket Chef Showdown at thew FMI Connect show in Chicago.

    Elizabeth Davis, Hy-Vee, Inc. was named the Grand Champion of the competition for her Yu Sheng Citrus Salad Platter for Chinese New Year.

    The five category winners were Amy Gleason, of Hy-Vee, for her Cinnamon-Scented Farro Breakfast Parfait (breakfast on the go); Elizabeth Davis, of Hy-Vee, for her Yu Sheng Citrus Salad Platter for Chinese New Year (holiday platters); Dustin Miller, Giant Eagle Market District, for his Korean-Braised Short Ribs (ethnic dishes); Jason Miller, of Balducci’s Food Markets, for his Turkey Meatloaf “Provencal” with Sweet Potato Hash and Arugula Salad (family meals on a budget); and Bryan Williams of Hy-Vee, for his Red Curry and Coconut Bread Pudding (dessert).

    Now in its third year, this competition attracted a record 300 recipes from supermarket chefs across the country.

    The lesson here seems clear. Hy-Vee is definitely doing something right.

    • The National Association of Convenience Stores (NACS) is out with its regular survey of consumer attitudes, concluding that "a majority of consumers expect gas prices will continue to rise during June, a period in which gas prices tend to moderate or even fall after the completion of the annual spring transition to summer-blend fuel. Nearly three in five consumers (59%) expect gas prices will go up over the next 30 days, versus just 9% who expect them to fall."

    While gas prices have risen over the past month by an average of 16 cents, the survey says that "consumer optimism about the overall economy is growing. A slight majority (52%) of consumers say they feel 'very' or 'somewhat optimistic' about the economy, up four percentage points from the 48% who said so in May. Consumers ages 18-34 are feeling particularly hopeful, with nearly three in five (57%) saying they feel optimistic about the economy, including 20% who say they are 'very optimistic'."

    Ignorance is bliss. Ah, to be young and ignorant. Again.

    • Interesting note from the Washington Post about how, even as consumers said they were trying to eat healthier and some fast food chains were seeing a resultant decrease in sales and profits, "doughnut sales from quick service restaurants, like Krispy Kreme and Dunkin' Donuts, are up for the third straight year, after several years in decline, according to data from NDP CREST, a New York-based market research firm."
    KC's View:

    Published on: June 12, 2015

    • McDonald's announced that its chief people officer, Karen King, has been named executive vice president and chief field officer, with responsibility for the comp[any's four US divisions and its franchising operations.

    The fast feeder also said that Jim Norberg, chief support officer, was leaving after 34 years. No reason was given for his departure.
    KC's View:

    Published on: June 12, 2015

    On Wednesday, I took note of the sign posted next to a Florida conference room, indicating that a Dunkin' Brands divisional meeting was taking place inside ... which just seemed sort of coincidental considering that CNBC had just reported that Dunkin' Donuts is poised to begin testing a delivery initiative and a mobile ordering app, believing that these are big opportunities.

    Anyway, I saw the sign on the door and couldn't help myself. I suggested that you could write your own caption, and that the best one would win a copy of "Retail Rules!"

    Well, I got a whole bunch of entries, and decided that the winner is this one, from MNB reader Stephen Cordova:

    Dunkin behind closed doors.  Will they deliver?  We doughnut know.

    I do love puns.

    Stephen, I'll be sending along a copy of "Retail Rules!" shortly...

    KC's View:

    Published on: June 12, 2015

    British actor Ron Moody, who was identified with a single role - Fagin, the criminal protagonist in "Oliver!," the musical adaptation of the Charles Dickens novel in which he preformed on London's West End, Broadway, and in the 1969 film version - has passed away. He was 91.
    KC's View:

    Published on: June 12, 2015

    In what has become a familiar refrain for me, I wrote yesterday about how I continue to believe that better paid employees can result in a better motivated and productive workforce that can be good for business in the long run. (Note: Higher wages can't do it alone.) I'd rather that companies do it on their own, but recognize that certain economic realities create pressure for higher mandated minimum wages. (Note: There also are pressures to not raise the minimum wage.)

    MNB user Ed Hamilton wrote:

    Artificial increases in costs lead to one thing ... an increase in prices.  The minimum wage was NEVER intended to provide an income to support a family.  It is an introductory wage, a starting point.  Then as the employee gains experience and skills they progress to better paying positions.

    And no one discusses the escalator effect.  If collecting carts from a parking lot or stocking shelves is a skill worth $15 per hour then what about the jobs that already paid $15 per hour.  Now those workers will want more believing (and rightly so) that their jobs are not “minimum wage” level.

    This is nothing more than a political move centered around gaining votes.  And if hours or employees get cut or prices go up then the employers will be EVIL!

    First of all, I don't think this is a matter of good and evil. And I agree that when the minimum wage was first created - on June 24, 1938, by the way, at 25 cents an hour - it was not designed to support a family.

    But ... can't we agree that we have an entirely different economy now than we did then? That for lots of reasons - some of them structural, some of them technological, some of them cultural - there are a lot of people out there right now who are working full-time in jobs but are unable to feed and clothe and house their families. Those people may be on some sort of public assistance, and they certainly are unable to help create the kind of momentum that helps to strengthen economies.

    I understand the argument against a higher minimum wage, but I just wish we could have a more nuanced discussion that takes into account that the world has changed, our economy has changed, and that we have to figure out how to adjust and compensate based on these changed circumstances.

    And from MNB reader John Lloyd:

    While I agree with your utopian concept,  that’s just never going to happen.

    From my experience, having worked on both sides of the labor/management fence, too many managers see employees as liabilities rather than assets. Until that changes mandates will be essential.

    If it is utopian for me to think that companies would be better off - more productive, more effective, and even more efficient and profitable in the long term - if their employees were treated like an investment and an asset instead of like a liability and a cost ... well, then sign me up.

    Thomas More, who wrote the book "Utopia," once said that "if honor were profitable,everybody would be honorable."

    The playwright Robert Bolt, writing about More in "A Man For All Seasons," had the advantage of being able to elaborate on that line a bit, having More say at one point:

    "If we lived in a State where virtue was profitable, common sense would make us good, and greed would make us saintly. And we'd live like animals or angels in the happy land that needs no heroes. But since in fact we see that avarice, anger, envy, pride, sloth, lust and stupidity commonly profit far beyond humility, chastity, fortitude, justice and thought, and have to choose, to be human at all... why then perhaps we must stand fast a little --even at the risk of being heroes.”

    It may be that it is utopian to believe that a company's people can be its most important asset, and that businesses should celebrate that fact not with lip service but with the real kinds of emotional and financial investments that can make a difference in their lives and engage them in making a difference in a company's life.

    To me, it is just common sense.
    KC's View:

    Published on: June 12, 2015

    So, I want to bring you up to date on a little adventure I'm going to have beginning next week, in part because I can't help but share the fun, and in part because it may have some impact on MNB posting and "Wake Up Call" delivery times.

    As many of you know, I spend my summers in Oregon, team-teaching a summer class at Portland State University's Center for Retail Leadership ... and it is one of the great pleasures of my life. In the past, when we've rented an apartment out there, I've flown out and rented cars when necessary.

    But since I currently am driving a 2014 Mustang convertible, it occurred to me that it did not make a lot of sense to leave the car at home in Connecticut during the summer months (though my daughter thinks it is the perfect place for it, since she's the only one of my kids who can drive stick). So starting early next Monday morning, I'm loading my stuff in the trunk and heading west...

    (I feel a little like Martin Milner. I also realize that there may be three people in the MNB audience who will even get that reference.)

    It won't be a straight shot by any means. I have some speaking commitments during the week that I have to live up to, so there will be certain places I have to be at certain times. It'll probably take me seven or so days to get to Portland, if my calculations are correct. (I just have to be there by Wednesday, June 24 - the first night of class. No problem. I think.)

    I haven't quite figured out how I'm to chronicle my trip, except that I'm sure I'll be sharing the adventure in bits and pieces both here and on Facebook. I may look in on some stores in certain communities (based on the results of the FMI Supermarket Chef Showdown, it probably would be a real mistake to drive through Des Moines without stopping at a Hy-Vee ...), depending on timing. I also figure to eat some interesting food, and maybe even the odd slice of unusual pies.

    I hope you'll be patient with me if MNB's schedule is a little off over the next week or so ... and most of all, I hope you'll go along with me for the ride.

    That's it for this week. Have a great weekend, and I'll see you Monday.

    KC's View: