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    Published on: June 18, 2015

    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here and this is FaceTime with the Content Guy, coming to you this week from somewhere in the vicinity of Dayton, Ohio ... as I continue my driving trip cross-country on my way to my annual adjunctivity at Portland State University in Oregon.

    The relationship between employer and employee is something we talk about a lot here on MNB, in part because I remain completely convinced that companies would be better off in the long run if they moved heaven and earth to treat the people who work for them as if they are assets, not liabilities...as if they are an investment, not a cost of doing business that is to be minimized and reduced at every opportunity. I would argue that for the most part - and there always will be exceptions - employees will respond to such treatment by being willing to move heaven and earth for the companies and people for which they work.

    Sadly, not everybody agrees with me on this. (Then again, not everybody agrees with me on anything.) And usually, when this topic comes up, prompted by some news story that has attracted my attention and gotten my Irish up, I will get emails from some people who feel I am, shall we say, misguided. They feel that a company has just one overriding job - to make money for investors and/or ownership, and that part of that job requires getting as much out of as few employees as possible, and to pay them as little as possible in the process.

    I just cannot accept that, even at the risk of being called misguided. Or worse.

    One of the things I've had a chance to do while here in Ohio is to spend some time with the folks at Henny Penny, the Eaton-based company that is known for making fryers and rotisseries and other assorted equipment largely for supermarkets, fast food companies and fast casual restaurant chains. And I've had a chance to tour their local factory with the company CEO, Rob Connelly. This, I must tell you, was an eye-opening experience. I'm not very mechanically oriented, so it never occurred to me what went into actually building one of these pieces of equipment ... and I found the experience to be remarkable on a variety of levels.

    What really grabbed my attention, though,was the dedication and positive attitude that the employees I met and observed brought to their efforts. And I learned that investing in employees - most recently through an ESOP that gives the people who work there an ownership stake in the company - has long been a guiding principle at Henny Penny. For example, the company never has had a layoff - even in times when business slowed down, the leadership felt that it was best keep everyone employed, and that while this might take a bite out of profits, it would create a more sustainable company over the long term.

    This is the story in which Henny Penny takes considerable, and justified pride.

    And what I walked away from Henny Penny thinking was that it is living, breathing proof that a company can do the kinds of things that I think are important in terms of employee investment and remain a profitable, viable business entity. Sure, Henny Penny is private, which changes some of the rules ... but there are lots of example of public companies (think Costco and Starbucks, for example) that also have focused on investing in rather than exploiting companies as a business imperative.

    It has been an interesting visit to Ohio ... and it has reinforced for me my feelings about the employer-employee relationship. I'm sorry that some don't agree with me ... but I don't think that I'm the one who is misguided.

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

    KC's View:

    Published on: June 18, 2015

    Reuters reports that the tax reform advocacy group Americans for Tax Fairness is accusing Walmart of building "a network of 78 subsidiaries and branches in 15 offshore tax havens to minimize taxes on its operations outside the United States ... Wal-Mart, the world's largest retailer, has assets worth at least $76 billion through shell companies domiciled in Luxembourg and the Netherlands, the report said."

    The report also says that "Wal-Mart does not list these subsidiaries in its annual filings and called on the U.S. Securities and Exchange Commission to require disclosure to make the tax practices transparent to investors."

    Walmart spokesman Randy Hargrove tells Reuters that the methodology of the report is flawed and that "the company disclosed significant subsidiaries in its annual report, in compliance with SEC regulations. Wal-Mart has processes in place to comply with the tax laws of the countries where it operates, while maintaining transparency about its transactions and business structure with the U.S. Internal Revenue Service."

    Reuters notes that the report was produced in conjunction with an official of the United Food and Commercial Workers (UFCW), the union that has unsuccessfully been trying to unionize Walmart employees.

    In laying out the specifics of the accusations, USA Today writes that "the subsidiaries have no Walmart stores, yet own at least 25 out of 27 of the company's foreign operations in the United Kingdom, Brazil, Japan, China and other nations where the world's largest retailer has locations with thousands of employees, the report said.

    "Walmart has transferred ownership of more than $45 billion in foreign assets to a network of 22 Luxembourg shell companies since 2011, the report said. The company reported paying less than 1% in taxes to Luxembourg on $1.3 billion in profits from 2010-2013, the report said."

    Reuters writes that "Hargrove said Wal-Mart paid $6.2 billion in U.S. federal income tax last year, or nearly 2 percent of all corporate income tax collected. He said Wal-Mart also paid more than $10 billion in payroll taxes on its 1.3 million U.S. workers."
    KC's View:
    I'm not saying that this is all on the up and up, but frankly, I almost would've been more surprised if a company the size of Walmart had not been doing something like this. We know that a lot of companies have engaged in such behavior - like Starbucks and Apple, for example - and so none of this should be a surprise.

    The problem, it seems to me, is largely one of perception in terms of shoppers ... if, indeed, Walmart shoppers actually care about this stuff, and I'm not sure they do. The legal stuff is for the countries involved to deal with ... they provided the loophole, and now they have to close it.

    Published on: June 18, 2015

    The Bergen Record reports that the Great Atlantic & Pacific Tea Co. (A&P), "appears to be close to selling off all or part of the Montvale-based supermarket chain, according to the unions representing workers at the company’s stores."

    This could mean that the company's efforts to improve its bottom line as a way of dressing up the company to make it more attractive to an outside entity has been successful, and that one or more of its banners - which include A&P, Pathmark, Food Basics, Waldbaums, SuperFresh and Food Emporium - will end up with new ownership.

    The Record story notes that union locals representing supermarket workers have informed their members that "there is interest being shown by several companies regarding a purchase of A&P in whole or part."

    A&P went private in 2012 after going through bankruptcy. The story says that "sources familiar with A&P’s real estate holdings have told The Record that the company’s real estate is likely to be divided among several interested buyers, possibly as part of a bankruptcy proceeding that allows A&P to exit the supermarket business."

    A&P is not commenting on the rumors other than to say that exploring strategic alternatives has been an ongoing process. The company is part-owned by Ron Burkle’s Yucaipa Cos.
    KC's View:
    The feeling here generally has been that it is hard to imagine that anyone would want to spend money on acquiring stores that are largely depleted, desiccated and depressing. Just wait for the damn company to go belly up and then pick over the rotting carcass. I'm not even sure how much of the real estate is worth paying for.

    But .. it may be that Aldi's aggressive expansion plans and Lidl's ambitious US invasion plans have changed the calculus, at least for smaller stores that would advance their interests ... though I cannot imagine that the unions would be happy about either of these companies being buyers.

    Whatever happens, A&P will remain noteworthy for how over many years ownership managed to drive the company into the ground. This was a company that once had some 15,000 stores and was the Walmart of its time ... and now it is down to something like 300, and is a competitive nonentity.

    There are a lot of good people who have worked at A&P over the years, and they deserved better.

    Published on: June 18, 2015

    The Associated Press reports that "Target is cutting another 140 jobs at its headquarters and eliminating 50 other unfilled jobs," saying that it "is trying to simplify and streamline its organization."

    Earlier this year, Target announced that it would lay off 1,700 employees and eliminate 1,400 open positions, in addition to the 17,000 people who lost their jobs when the company shut down its Canada operations. The goal has been to save the company $2 billion over the next two years through the restructuring.
    KC's View:
    I have to imagine that there will be more cuts when Target completes the sale of its pharmacy and Minute Clinic operations to CVS Health, an deal that was announced earlier this week.

    Wonder if it is hard to keep things cheerful at the company's Minneapolis headquarters?

    Published on: June 18, 2015

    Petco yesterday announced the launch of PetcoNow, described as "the first on-demand delivery service in the pet specialty retail category. Powered by Instacart in a first-of-its-kind partnership, the service gives pet parents the ability to access all of the Petco quality pet products they need, delivered directly to their door in as little as one hour."

    The announcement went on: "Available now in select markets, the service provides customers with a selection of approximately 13,000 Petco products – including all food (dry kibble, wet, fresh, frozen, freeze-dried), treats, toys and supplies for pets ranging from dogs and cats to fish and birds. Accessible through both an easy-to-use web portal and mobile app, PetcoNow currently serves pet parents in: Atlanta, Austin, Boston, Boulder, Chicago, Denver, Houston, Los Angeles, Miami, Philadelphia, Portland, San Francisco, Seattle and Washington D.C."

    Petco is Instacart's first non-grocery retail partner, and the two companies say that delivery services offered since they first teamed up in January have been successful enough to merit this new offering.
    KC's View:
    I may not be an Instacart fan, but I have to give Petco credit for being really aggressive about this stuff. They've clearly decided they are going to carve out a niche in an online segment that, to the best of my knowledge, PetSmart is ignoring.

    Published on: June 18, 2015

    TechCrunch reports that Starbucks is expanding "its 'Mobile Order & Pay' system to 21 more states, including 3,400 individual café locations across the U.S. The feature allows customers to place their order and pay using the Starbucks mobile app, then skip the line when they arrive at the store, as their drink or other item is already being made."

    According to the story, "Mobile Order & Pay first began as a pilot program in Portland in December, and has expanded across Starbucks’ locations in a relatively short time frame thanks to the way it leverages the technology infrastructure Starbucks already has in place. The company said in March the feature was rolling out across the Pacific Northwest, including Seattle, as well as elsewhere in Washington, Idaho, Oregon and Alaska. At the time, Mobile Order & Pay was available in 650 stores."

    Starbucks says that by he end of the year, the program will be available in all of its company-owned stores, and also will be expanded so that it can be accessed by Android phone users. (It currently only is available to iPhone users.)
    KC's View:
    I can't wait to try this, just to see how it works.

    Published on: June 18, 2015

    In London, City AM reports that both Tesco and Sainsbury have "ditched a scheme introduced by Transport for London (TfL) to let shoppers collect their groceries at Tube stations ... The scheme, introduced amid much pomp and ceremony back in 2013 and then expanded in 2014, allows customers to order groceries online, then pick them up at Click & Collect 'hubs' at 10 stations including Osterley, Newbury Park, Rayners Lane, Finchley Central, Arnos Grove and Cockfosters."

    The companies say that experience showed that customers preferred to pick up groceries ordered online at their stores, not at Tube stations.

    A TfL spokesperson tells City AM that Asda, Waitrose and Ocado will continue with the Tube-based click-and-collect program.
    KC's View:
    Not everything is going to work all the time. I wouldn't be concerned about this ... companies have to try different things, test different concepts, and see what plays with consumers and what doesn't.

    Published on: June 18, 2015

    • Call it synergy in the cause of differentiated content.

    Yesterday, the Amazon Appstore began offering an exclusive Washington Post app, specifically designed for Android users, that gives users free access to Post content for six months.

    Amazon, of course, was founded by Jeff Bezos, who bought the Post last year.
    KC's View:

    Published on: June 18, 2015

    Fast Company reports that "Starbucks is closing all 23 of its standalone La Boulange bakeries just three years after bringing the brand into its fold .... Starbucks said that the La Boulange stores 'are not sustainable for the company’s long-term growth'."

    La Boulange pastries will continue to be available at Starbucks locations, the story says.

    Starbucks bought La Boulange and its corporate parent in 2012 for $100 million, and made the company founder, Pascal Rigo, its senior vice president of food. Rigo reportedly is leaving Starbucks as well.
    KC's View:

    Published on: June 18, 2015

    ...will return.
    KC's View: