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    Published on: July 13, 2015

    by Kevin Coupe

    Fortune just ran an interesting piece by Rick Wartzman, executive director of the Drucker Institute at Claremont Graduate University, suggesting that "purpose, goals, and autonomy don’t mean much for American workers if they can’t earn a living wage." And, the fact remains, that too few do.

    The article hinges on some very specific numbers. For one thing, while the unemployment rate has fallen to 5.3 percent, hourly wages remain stagnant - so while more people are working, even in an improving economy when many corporations are generating record profits and greater productivity, they aren't making more money. (Almost nobody argues that the unemployment rate is a completely accurate assessment of the nation's unemployment and under-employment situation, as many people simply have stopped looking for work and no longer are counted. Figure that in the coming election Democrats will say the "we can do better," and that Republicans will say "we can do much, much better.)

    At the same time, Wartzman writes, " the ranks of Americans who are truly engaged at work are low, according to surveys. Gallup says that only about 30% of U.S. workers 'are involved in, enthusiastic about, and committed to' their jobs." (Wartzman notes that while other research and polling companies slice and dice the numbers differently, most of them tend to reach the same general conclusion.)

    "Surprisingly," he writes, "few have connected the dots between stagnant pay and people muddling through work with little energy or passion. Instead, experts tend to focus on other ingredients that drive engagement: employees having a well-defined sense of purpose, enjoying ample autonomy and responsibility, finding ongoing opportunities to learn and develop, and being put in a position to use their strengths ... Some, however, are starting to assert that the stall in compensation is dragging down workers’ attitudes."

    Here's what I take from the piece (and it reflects an argument I've been making here on MNB for a long time, though it does so with greater precision, as one would expect from a guy who runs the Drucker Institute).

    Three of the nation's largest occupations are "retail sales clerks, cashiers, and food service workers," and many of the people occupying these jobs are customer-facing - meaning that they largely are responsible for the experience that patrons have in their places of work. And yet, these often are the folks who are not seeing their wages go up, which is why we are seeing a surge in organized efforts to increase the minimum wage at both the state and federal level, as well as to get companies to raise wages regardless of what the politicians do. (Some, of course, are doing this.)

    I have a sister-in-law who likes to joke that "it is all about the Benjamins." And she's right, in that how one is paid reflects how one is valued. People can talk about corporate culture all they want, but that tends to ring hollow when people can't house and feed and clothe and school their children despite working 40 or 50 or 60 hours a week.

    I know people continue to argue that many or most people who work as retail sales clerks, cashiers, and food service workers don't need to support anyone on their pay because these are not career jobs, but it also seems clear that the structure of our economy has changed to the point where there are many people who have to do just that. And I happen to think that the culture is stronger when people who work 40 or 50 or 60 hours a week are able to house and feed and clothe and school their children, and that the culture is weaker when they cannot.

    But I also continue to believe that the companies that hire these consumer-facing retail sales clerks, cashiers, and food service workers will do a better job, be more productive, have a greater sense of ownership, and create an environment that brings customers back if they have a sense that the business is investing in them, not just viewing them as a cost. It is about creating an environment - including an economic one - that helps them feel involved in, enthusiastic about, and committed to their jobs.

    The long term net, I think, will be positive for companies that take this approach.

    Wartzman's column was an Eye-Opener. And I was glad to read it as one of the first things I saw upon returning from vacation.
    KC's View:

    Published on: July 13, 2015

    The Wall Street Journal reported late last week that the US Food and Drug Administration (FDA) has decided to give "restaurants and other food purveyors an additional year to comply with new rules that require calorie counts on menus, a response to concerns by some food establishments that the requirements are confusing and broad." The new deadline is now December 2016, and FDA said it "would post a draft guidance document in August to answer some of the frequently asked questions from the industry."

    The Journal quotes Michael Taylor, deputy commissioner for foods, as saying that the agency “will work flexibly and collaboratively with individual companies making a good-faith effort to comply with the law.”

    According to the story, "The rules, which had been delayed for several years in part because of heavy lobbying by some food purveyors, require restaurants and other food establishments to list calorie counts on menus or menu boards, and to advertise the availability of other nutrition information.

    "The rules apply to all food outlets with at least 20 locations - which encompasses such products as movie-theater popcorn, gas-station burritos, and grocery-store baked goods."

    Upon release of the new deadline, the Food Marketing Institute (FMI) released the following statement from its president/CEO, Leslie Sarasin: "We’re encouraged that FDA’s commitment will give us more time to at least garner some clarity and answers without feeling rushed to make difficult business decisions in an attempt to comply by December 1, 2015 with regulations that are unclear.” 

    And Greg Ferrara, vice president of Public Affairs at the National Grocers Association (NGA), said: "Independent supermarket operators work hard each and every day to build and maintain their consumers' trust by providing information and transparency on the food products they serve. While NGA appreciates the FDA recognizing the need for a delay, there are still are concerns surrounding implementation of the law. We will continue to work with our champions in Congress, Reps. McMorris Rodgers and Sanchez, to pass H.R. 2017, which reduces the burdens of this regulation and provides the necessary reforms and flexibility to our members."
    KC's View:
    I get that some food industry segments would prefer less restrictive laws, but I also think it is interesting that supermarkets want to be seen as competitive with and comparable to restaurants, except when it comes to following the same menu rules, in which case they want to be seen as a different class of trade.

    My feeling is that the more information the better for the consumer, and that the rules ought to apply to everyone, because consumers don't walk into a supermarket or convenience store and suddenly think to themselves, "I need less information from these folks."

    In fact, if you believe the study that we report on below - saying that "40 percent of consumers have lost enjoyment of the foods they eat due to safety and quality concerns" - it can and would be argued by me that the best way to alleviate these concerns is to provide as much information with as much transparency as possible.

    The businesses and organizations that resist this trend, I think, are making a mistake in terms of consumer trust and credibility. That said, the rules should be fashioned in such a way that they can be adopted by business in as painless a way as possible. But, no pain...no gain.

    Published on: July 13, 2015

    In Santa Barbara, California, KEYT-TV News reports that Haggen - the 18-store Pacific Northwest-based supermarket chain that acquired 146 former Albertsons and Safeway stores that need to be divested when those two companies merged operations - has begun reducing hours and laying off employees as it experiences some significant growing pains.

    According to the story, Bill Shaner, CEO for Haggen's Pacific Southwest operations, issued the following statement:

    “As we introduce Haggen throughout Southern California, Arizona and Nevada, our challenge is to establish and grow the brand in new markets, while transitioning former Albertsons/Vons customers.  The competitive activity launched in response to our entry into the marketplace – while expected – has been unprecedented.  To ensure we’re operating as efficiently as possible, we have made the very difficult decision to temporarily cut back on staff hours at our stores. Reductions will vary by store and will be made in the best interest of the business, our associates and our guests.  We have thoughtful plans in place to generate excitement and traffic into our stores.  We will continue to closely monitor performance with the goal of restoring hours as we build customer affinity for Haggen and establish ourselves in the competitive grocery space.”
    KC's View:
    I don't want to be mean about this - after all, I'm still basking in the mellow glow of two weeks off - but you could see this coming from a mile away.

    I have to believe that Haggen, in its efforts to establish as efficient a business model as possible, may well be sacrificing some degree of effectiveness ... and to my mind, that's the one thing it cannot and should not do at this point. If it doesn't have the resources to wow the customers in the early going, then it strikes me as unlikely that it will even get the opportunity to do so down the line.

    You don't compete better, create customer affinity and establish yourself as competitive by cutting back on employees.

    This is not looking promising.

    Published on: July 13, 2015

    The New York Times had a terrific story over the weekend about CVS and its evolution from chain drug store to one of the nation's most significant health care institutions.

    An excerpt:

    "With 7,800 retail stores and a presence in almost every state, CVS Health has enormous reach. And while shoppers might think of CVS as a place to pick up toothpaste, Band-Aids or lipstick, it is also the country’s biggest operator of health clinics, the largest dispenser of prescription drugs and the second-largest pharmacy benefits manager. With close to $140 billion in revenue last year — about 97 percent of that from prescription drugs or pharmacy services — CVS is arguably the country’s biggest health care company, bigger than the drug makers and wholesalers, and bigger than the insurers."

    A critical part of its philosophical and economic transformation, the story says, has been its decision first to stop selling tobacco products, and then become an anti-tobacco advocate. There's no question that there were two rationales at work - to begin with, tobacco sales were dropping and becoming less profitable, but company leadership also saw the category as inconsistent with its long-range plans and broader message.

    Now, this strategy has led to the company's decision to resign from the US Chamber of commerce following what the Times describes as "revelations that the chamber and its foreign affiliates were engaged in a global lobbying campaign against antismoking laws."

    These moves have had their challenges, primarily the issue of consistency. The company says that when it decided to take an anti-tobacco position, it immediately raised the stakes in terms of credibility, with customers increasingly wondering how a company that does not sell cigarettes can justify selling candy, potato chips and soft drinks. And one might infer from the story that while CVS has no immediate plans to exit these categories, such items may be de-emphasized in marketing and merchandising efforts, and indeed, management likely has begun to at least consider what a future without them might look like.

    It is a great piece - and you can read it in its entirety here.
    KC's View:
    I think this is valuable reading because it addresses how a very big company engineered a major shift in company direction by seeing where the customer and the business was going, and then making the sometimes dramatic moves necessary to be at the nexus of where customers and business trends meet. I'm still not the world's biggest CVS fan, but I do like their Minute Clinics a lot ... and I particularly like the anecdote in the Times story in which a young Manhattan professional with health care coverage but no doctor goes to a Minute Clinic and gets competent, effective treatment for a sore throat in less time than it took him to buy a bagel that morning. That's the future ... and CVS seems ready to embrace it.

    Published on: July 13, 2015

    Reuters had a story late last week about how Walmart was hosting a meeting last week of some 2,000 executives from US manufacturing companies who journeyed to Arkansas "to huddle in tiny conference rooms with Walmart buyers and present products made in the US.

    "Walmart's 2015 U.S. Manufacturing Summit," the story went on, "was advertised as a chance for goods producers to pitch American-made products to the retail giant. They would also get advice from Walmart executives on how to take advantage of the company's recent efforts to support more U.S. manufacturing jobs and reverse the trends its purchasing strategies and demand for low prices have driven."

    However, even as Walmart was convening the meeting, there were questions raised by a self-styled "advertising watchdog" called Truth in Advertising, which said that "a number of products on Walmart’s website were accompanied by 'Made In USA' stickers despite being manufactured in foreign countries like China. The non-profit found that products including eye liner, beauty wedge applicators, and tooth whitening supplies had been labeled as 'Made in the USA' despite coming from other countries.

    Kory Lundberg, Walmart's director of National Media Relations, has been quoted as saying the mistakes were the result of coding errors, not intent to deceive.

    “We are undertaking a more extensive quality assurance review to help eliminate these coding errors,” he said. “Based on our initial internal review, we believe these errors are limited to a small percentage of items and we are confident in the overall integrity of the information on our website.”
    According to the Truth in Advertising website, "Walmart uses a number of similar stickers for its USA products. They include Made in the USA, Made in the USA with over 90 percent parts, over 75 percent parts, over 50 percent parts and Assembled in the USA. Other companies have similar labeling ... The Federal Trade Commission (FTC) has strict laws for companies that use the 'Made in USA' label. It requires that all or virtually all of a product be made in the USA to use that claim without a qualifier."

    The Reuters story notes that "Walmart’s 'Made in the USA' efforts go back to 2013, when the company came under increasing pressure from unions and other critics who said its drive for low cost goods was undermining American jobs. Walmart says it wants to spend $250 billion on American-made products by 2023, and says buying from U.S. producers is good business."
    KC's View:
    The fastest way to sink a Made in the USA program is to not be 100 percent accurate about the products that boast this attribute. Damned right that Walmart - and every other company - ought to have an extensive quality assurance review that guarantees accuracy. If they don't, why bother? It'll just look like so much blarney to the shopper.

    Published on: July 13, 2015

    Fortune reports that as Albertsons prepares for an initial public offering just six months after its primary parent company, Cerberus Capital Management, acquired Safeway and combined the two retailers' operations, the primary goal seems to be a reduction of the groups heavy debt load.

    According to the story, the move to go public is the first step as Cerberus prepares to exit the grocery business and "bag a tidy profit on its wheeling and dealing," but that for the moment, it is not planning to sell any of its shares in the combined companies. Rather, it seems focused on "attracting new investors with the intention of cutting the group’s relatively heavy debt load. The company itself said the size of the IPO isn’t yet determined, and gave no details of its structure."

    The Wall Street Journal writes that "if investors value Albertsons similar to how Kroger is currently valued in the public markets, at about seven times its past-year earnings before interest, taxes, depreciation and amortization, the company would have a market capitalization of about $16.5 billion. That would be a substantial return for the Cerberus-led consortium. All told, Albertsons was assembled from parts with equity value of about $9 billion at the time of the deals."

    The Fortune story notes that "filings show the land owned by Albertson’s alone is appraised at $10.5 billion, implying that the actual grocery and drug business–under pressure from well-documented trends in the retail industry–commands a pretty modest valuation, despite having sales of over $57 billion (on a pro rata basis) in the year to Feb 28."
    KC's View:
    The sense I'm picking up is that there continues to be concern at some levels that Albertsons is seen as a mainstream grocer, and, as Fortune writes, "mainstream grocers are increasingly (being) pinched from both high-end stores catering to the growing consumer preference for fresh and natural items, like Whole Foods Market Inc., and discount operations like Wal-Mart and Trader Joe’s." Now, Albertsons says that "its localized structure, giving regions flexibility on what foods they stock and the deals they offer, helps it deal with the growing trend toward fresh and organic food" ... but I'm not sure that this is a characterization that would be accepted by most expert observers and competitors.

    Published on: July 13, 2015

    Daymon Worldwide is out with a new study concluding that "40 percent of consumers have lost enjoyment of the foods they eat due to safety and quality concerns, and many are actively seeking stores that offer product alternatives. Nearly twice as many parents as non-parents report these anxieties, according to the study."

    The study goes on to say that "53 percent of respondents said that their heightened fears are driving greater demand for food and personal care products with fewer ingredients and stricter safety guidelines," and that "one third of respondents are more concerned about food product safety and quality today than a year ago, and 50 percent are more concerned than five years ago. Specifically, consumers are fearful of the perceived harmful effect on their children’s development due to the presence of MSG, high mercury levels, GMOs, dangerous bacteria, fertilizers and other additives."

    Not surprisingly, considering Daymon's primary business, there is a private label hook to all this. Janet Oak, Daymon Worldwide’s Head of Global Advisory & Custom Shopper Insights, says that the study "found that only 22 percent of consumers believe national brands to be healthier than Private Brands. This presents significant business potential for retailers ready to invest in their Private Brands to surprise and delight their consumers by delivering high quality, cleaner Private Brand offerings that also provide savings.”
    KC's View:
    I said it above and I'll say it again ... that if you believe this study, the best way to alleviate the concerns that it raises is to provide as much information with as much transparency as possible. Now, I suppose it also could be argued that consumers have too much information, and this is what is scaring them. But I think in a world that is increasingly transparent and information-rich, this is a dangerous road on which to travel.

    Published on: July 13, 2015

    Amazon has announced that it plans to celebrate its 20 years of being in business with what it is calling "Prime Day," which it describes as "a global shopping event, offering more deals than Black Friday, exclusively for Prime members.

    "On Wednesday, July 15," the company says on its website, "new and existing members will be able to shop thousands of Lightning Deals, Deals of the Day, and will receive unlimited Free Two-Day Shipping. Members will find deals starting at midnight PDT, with new deals starting throughout the day, as often as every ten minutes ... Prime members can find deals on products across categories including electronics, toys, video games, movies, clothing, patio, lawn and garden, sports and outdoor items and more. Members will enjoy deals on items perfect for summer adventures, their to-do list, family road trips, back to school supplies, and everyday essentials. Prime members can shop on any device, including smartphones and tablets and enjoy deals anytime, and anywhere."

    Money notes that "for those who aren’t currently Prime members — and don’t want to pay right now — they can still participate by signing up for free, 30-day trial membership and gain access to all of the deals, then cancel before the trial is up."

    But Money also thinks that while Prime Day is in part aimed at enrolling as many more people as possible in Amazon's Prime program - which typically offers two-day shipping for a $99 annual fee, plus access to ever-expanding streaming offerings - as a way of creating an ecosystem of consumers who think of Amazon first for almost everything, "it’s also about picking another online retail fight." In this case, the competition is a company that is very familiar with how it operates.

    "Jet.com is a members-only special deals club (think of like an online Costco, without the food samples or famously affordable hot dogs) that users pay $50 per year to gain access to, Money writes. "The site is currently in private beta right now, but set to launch publicly later this year. Members can buy items on Jet.com for 5%-6% lower than anywhere online, and if users are willing to hand over their email address, pay with their debit card, or agree not to return an item, then the price could drop even lower.

    "Jet.com’s founder Marc Lore clearly knows what he’s up against. A few years ago he started Diapers.com, then got into pricing war with Amazon’s diaper sales, which resulted in Amazon buying Diapers.com parent company, Quidsi, for $550 million." Lore's non-compete against Amazon has finally ended, and he's back in business.

    "According to The Wall Street Journal, prices on Jet.com are cheaper than on Amazon, although Jet doesn’t have as many items as Amazon right now. And as Jet.com’s launch looms, Amazon is taking notice. Jet’s business is a bit different than how Prime works, but for Amazon it’s likely a little too similar. While Amazon’s Prime Day event may not be entirely focused on competing with Jet.com’s deals (considering the site is still in beta) ... it’s a way for Amazon to get online users think of Amazon — and only Amazon — as the best place for online deals."
    KC's View:
    This strikes me a reasonable logic - Amazon is working to create an ecosystem that creates a path of least resistance between it and the shopper, making it the best and first option ... and the company is not known for complacency.

    The biggest surprise about Prime Day, in some ways, is that Amazon actually has been in business for 20 years. Founder Jeff Bezos is fond of saying that "today is day one," and keeping a startup and entrepreneurial mentality alive in a company that now has some miles on it ... and he's to be congratulated for doing so. Though, I suspect, he would even take notice of the congrats because he's more important things to do.

    I shouldn't have been surprised by the 20 year anniversary, I suppose - my first purchase from Amazon was in the spring of 1997 (pre-Prime, pre-Kindle), and was of the Peter Marshall book, "Now I Know Why Tigers Eat Their Young/How to Survive Your Teenagers-With Wisdom and a Little Humor." Which tells you a little about what I was thinking back then...

    Published on: July 13, 2015

    Bloomberg reports that Taco Bell has begun offering online ordering and delivery "through the DoorDash website or apps in more than 90 cities across California, as well as in Dallas. Delivery costs $3.99 ... After customers place an order through DoorDash, the app will send a driver to the nearest Taco Bell among more than 200 locations in California and Dallas to pick up the food. In tests, deliveries took about 38 minutes. DoorDash also works with smaller restaurant chains, including California Pizza Kitchen and the Cheesecake Factory."

    “We have really been talking about delivery for a while because it's been the No. 1 most requested thing from our fans,” says Tressie Lieberman, Taco Bell's vice president of on-demand services.

    Taco Bell says that it plans to roll out the program as DoorDash adds markets, and DoorDash has said that with the help of almost $60 million in investment capital, it plans to be in 500 cities by the end of the year.
    KC's View:
    First thing they should do is team up with Walgreen or CVS, so the drivers can make a side run and pick up antacids or some Pepto.

    Published on: July 13, 2015

    • The New York Times reports that Instacart, the personal-shopping-service-turned-delivery-company, has added Manhattan's iconic specialty food store Zabar's to its list of partners in the city.

    "Instacart customers can already order from Whole Foods, Fairway, Costco, Petco and, in Brooklyn, Greene Grape Provisions, depending on the neighborhood," the Times reports. "Armed with the customer’s online grocery list, the Instacart shopper gathers the goods and delivers them ... Instacart promises delivery within two hours for most items."

    Instacart also announced that it is expanding its Chicago presence, "now delivering from Jewel-Osco and Petco for the western suburbs of Chicago ... Customers in these suburbs can now order from Whole Foods Market, Jewel-Osco, Costco, Standard Market, and Petco stores and have everything delivered by Instacart in as little as one hour.   Instacart also added the suburbs of Lisle and Elmhurst to its delivery map."

    It was just a couple of weeks ago that Instacart had announced that it had added Mollie Stone's to the roster of San Francisco stores for which it makes deliveries, joining in that market the likes of Whole Foods, Smart & Final, Costco, and Safeway.


    • The Financial Post reports that "Walmart Canada is launching a grocery pickup service for online orders at 11 Ottawa area stores."

    According to the story, Walmart Canada "has hired a team of dedicated grocery shoppers to hand pick perishable and non perishable grocery items such as meat and fruit for consumers who place online orders at the participating locations on Walmart.ca. The service takes orders up to 21 days in advance and carries a pickup fee of $3. A dedicated waiting area for pickup orders will debut at six locations on July 7, followed by another five locations on July 21."

    The move is seen as a kind of pre-emptive response to Loblaws, which launched a click-and-collect test in Ontario earlier this year. However, Walmart Canada is making this point that this is the beginning of an eventual national rollout, not a test, and that expansion will be keyed to consumer demand.
    KC's View:
    Like lemmings headed for the cliff, retailers keep following Instacart. Next thing you know, the company will be offering shares in a bridge linking Brooklyn to Manhattan, and some retailers will be snapping them up.

    Published on: July 13, 2015

    • The New York Times reports that Procter & Gamble plans "to sell its portfolio of 43 beauty brands to the beauty products maker Coty for $12.5 billion ... Included in the deal are professional salon and retail hair products, like Nice & Easy and VS Salonist, as well as cosmetics and fine fragrances from Gucci and Dolce & Gabbana."

    The story notes that "the deal is part of P.&G.’s efforts to shed more than 100 brands and focus on about 10 core product lines, like Tide."


    • The Los Angeles Times reports that General Mills has pledged "to use only cage-free eggs in its products as part of an updated animal welfare policy released Tuesday," though no timeline for the shift has been divulged. "The changes follow General Mills' announcement last month that it's dropping artificial colors and flavors from its cereals."
    KC's View:

    Published on: July 13, 2015

    • The Chicago Business Journal reports that Walgreens Boots Alliance has named Stefano Pessina, who has been serving as acting CEO of the company, to take on that role on a "permanent" basis.

    Pessina, who had been CEO of Alliance Boots before it merged with Walgreen, is described as the new company's biggest single shareholder. And James Skinner, chairman of the company, described the 73-year-old executive as "the very best person to achieve our vision to be a truly global health care champion."


    • Sprouts Farmers Market announced last week the addition of two new executives to its team, as it named Shawn Gensch, a former marketing executive at Target, as its chief marketing officer and Dan Sanders as executive vice president of store operations.

    Sanders is a former Supervalu division president as well as the author of two business books, "Built to Serve: How to Drive the Bottom Line with People-First Practices" and "Equipped to Lead: Managing People, Partners, Processes, and Performance."
    KC's View:
    If you've never read Dan Sanders' books, you should ... he makes the case for why servant leadership can create the best kind of business sustainability. He is a great get for Sprouts ... and another reason why Whole Foods should be nervous about how this company is growing.

    BTW...you can get a copy of Sanders' first book from Amazon here.

    Published on: July 13, 2015

    from the Content Guy...

    There were a few stories that broke during my vacation that I thought worth noting and commenting upon...

    • There was the raid by Indiana State Police on the home of Jared Fogle, the longtime spokesman for sandwich chain Subway, during which they apparently removed electronic equipment from the property. No charges have been filed, but the Chicago Sun Times noted that the raid came "two months after the then-executive director of Fogle’s foundation was arrested on child pornography charges."

    Subway has removed all references to Fogle from its website, and said that the two parties “have mutually agreed to suspend their relationship due to the current investigation.”

    Short of a total and unambiguous clean bill of health from the Indiana authorities, it seems like a pretty good bet that Fogle's spokesman career is over. Just the words "child pornography" are enough to make most people's blood boil, and even a tangential relationship with it is enough to wreck a career. And should be.


    • Ahold USA announced that Bhavdeep Singh, Executive Vice President of Fresh Formats, had resigned from Ahold USA.

    Singh had been at Ahold USA since 2011 leading the Human Resources, Operations, and then the Fresh Formats teams.

    I don't know the precise circumstances surrounding Singh's resignation, or if the coming merger with Delhaize had any role. But I feel bad about it - mostly because I had a sense that maybe Ahold was onto something special and different with Fresh Formats ... and that Singh was part of the brain trust leading the charge into unfamiliar and potentially exciting territory. Leaders are hard to replace ... and I guess I would urge Ahold to make sure that they find a leader for Fresh Formats, and not a manager who will be too beholden to how things have been done in the past.


    • Kroger president/COO Mike Ellis retired after 40 years with the company, in a move that seemed to catch many observers by surprise coming just 18 months after he took the job. Ellis, who had been president of Kroger's Fred Meyer division here in Portland, Ore., was said to be resigning for personal reasons.

    The Cincinnati Business Courier wrote that in its regulatory filing, Kroger said that it had reached an agreement with Ellis that called for his "'fulfillment of certain confidentiality, cooperation and other restrictions.' In return, Kroger considered all of Ellis’ granted but unvested stock options to be vested. Those options are exercisable in two years."

    I have no real insight on this, except to say that it seemed like a move that in some ways was not very Kroger-like. On the other hand, somebody suggested to me that it actually was extremely Kroger-like ... whatever the reason for the break-up, it is not a company that dithers. Which seems like a very reasonable assessment.


    Mashable reported that "Oahu has just joined the rest of the Hawaiian islands in enforcing a ban on plastic bags, making Hawaii the first state in the union to fully prohibit them ... businesses in Oahu will no longer be allowed to offer plastic or other non-recyclable bags to customers. That applies to any carryout bag given out by retailers to customers that is made from non-compostable materials and not specifically designed for re-use."

    The story noted that "the plastic bag ban first hit the Hawaiian islands when Maui implemented a ban in 2011, quickly followed by Kauai in the same year, and Hawaii County in 2013. California is considering a similar ban, which is already in effect in cities such as San Francisco. A law to outlaw plastic bags in the Golden state has been put on hold pending a ballot measure in November 2016."

    The first state. Probably not the last.


    • Whole Foods co-CEOs John Mackey and Walter Robb posted a two-minute video in which they apologized for overcharging customers, a practice that came to light after an investigation by the New York City Department of Consumer Affairs (DCA) found what it called "the worst case of mislabeling" that its inspectors ever had seen.

    Salon wrote that the two executives "explained that the errors were due to the 'hands-on approach' to selling fresh food. To combat the discrepancy, the chain will be instituting more thorough training and also encourage customers to ask their cashier to double check items’ weights." In other words, they blamed Whole Foods employees.

    It seems like the apology may have been more a matter of damage control than anything else, since an internal memo was still saying that the company disagreed "with the DCA’s overreaching allegations and we are vigorously defending ourselves. We cooperated fully with the DCA from the beginning until we disagreed with their grossly excessive monetary demands. Despite our requests to the DCA, they have not provided evidence to back up their demands nor have they requested any additional information from us, but instead have taken this to the media to coerce us. Our customers are our number one stakeholder and we highly value their trust in us.”


    The Charlotte Business Journal reported that "Lidl has selected Alamance County (in North Carolina) for a regional headquarters and distribution hub as it works toward expansion into the U.S. The German discount grocer is expected to invest $125 million and create 200 jobs during the next three years."

    Just a bit of advice to every value-driven US food retailer. Be afraid. Be very afraid. And if you're dubious, take a look at what Lidl and Aldi are doing to the the UK marketplace.


    The New York Times reported that the Obama administration announced "that it would update the way the government regulated genetically modified crops and some other biotechnology products, saying that the nearly 30-year-old system had become outdated and confusing and did not foster public confidence ... The existing system — known as the coordinated framework — was announced in 1986 and updated in 1992, at a time when genetically modified crops were not yet being marketed. The framework parceled out responsibility for regulating crops and some other products made by genetic engineering among three agencies — the Agriculture Department, the Environmental Protection Agency and the Food and Drug Administration."

    Needless to say, GMO critics say that the regulations are way too lax. GMO supporters say they are way too tough. Politics being politics, and lobbyist being lobbyists, it seems like a pretty good bet that nobody is going to be happy, consumers may end up being ill-served (especially compared to the companies throwing around big lobbying bucks), and the GMO debate will persist. And that's if things go well...
    KC's View:

    Published on: July 13, 2015

    Back before we went on vacation, there was a lot of discussion here on MNB about Walmart's decision - ill-considered, in my view - to start charging slotting allowances to manufacturers.

    One MNB user seemed to agree:

    I worked as a food category merchant for Wal-Mart when Sam Walton was alive.  It was actually a great place to work, and I felt that doing the right thing for associates and vendors was very much part of our culture.  We had common sense guiding principles that we were to use in our decisions.  One of my favorites was we were to always ask “does that drive value for our customers.”  The idea was that revenue like slotting fees,  ad fees and contests do not drive value for the customer, so we did not do them.  At that time the rule was that everything from a vendor had to go into the cost of goods, and we were to pass through every cent from the vendor.  The idea was that suppliers would have confidence that if they brought us funding, that they would see the direct benefit.  After the passing of Mr. Sam, everything began to change.

    There was a time when supermarkets used very high margins in some categories (insult pricing?), and combined with Wal-Mart’s focus on having lower prices than anyone on just about every item drove Wal-Mart’s growth as the price/value equation worked for many people when the price difference was 15% or more.  What we have seen from Wal-Mart is a steady decline the in quality of store operations and the steady increase of prices.  In many places, they are becoming  irrelevant simply because they provide the lowest customer experience without any real price advantage.

    Kevin, you may be surprised to know that many of the views you hold were core to the incredible growth of Wal-Mart.  The most important position in the company was the store manager, and the most important group was the front line associates.  Everyone else existed only to support those who worked directly with the customer.  We worked hard, and expectations were high, but we felt good about what we were doing and how we were doing it.  It will someday make a great case study of a company grew fast and then turned its back on everything that made it great, leading to decline or worse.


    From another reader, on the same subject:

    Seems to me that the focus of management at Walmart should be on engaging their employees.  The typical Walmart employee is not engaged, when as a customer you ask for an item that is OOS/unavailable their typical response is that it is probably on the nightly truck.  They do not put in any other effort beyond this response, they feel that corporate controls everything, so it is out of their hands.  I will look for a particular HBA item and 4 out of 5 times they are OOS, this says to me there is something else going on.  Maybe the inventory is incorrect, the item does not have enough shelf space in that store, etc.  If you ask for an item they do not carry the typical employee will state that Bentonville makes all the decisions.  The grocery part of the store is littered with OOS, poor looking produce in empty black crates, marked down meat and an overall poor presentation. It is hard to find an employee on the grocery side of the sore.

    Local grocery competitors in New England check price but worry little about anything else as they have Wal-Mart beat on customer service, freshness, presentation, variety, stock levels and sometimes price.  I agree that rising wages is a good first step but employees must feel that their opinions count and that they can speak frankly about ways to improve their departments/store, and relay customer concerns.  The typical daily rally secessions to pep up employees no longer work. It’s time for Wal-Mart to return to their roots and engage employees at all levels like Sam Walton did.


    And from another:

    For shoppers, its simple.  Stay in-stock.  One doesn't need to find as many blue vests (employees) when the shelves actually have product on them.




    On another subject, I got the following email from MNB reader Gail Nickel-Kailing:

    I live in Seattle and have been using Starbucks’ mobile ordering program and love it. Here are a couple of scenarios that work for me:

    I live just a few blocks from a small-ish Starbucks store (café?) in a wonderful walking neighborhood (Magnolia). I can place my order for a beverage, beans, or sweets before I leave my door, and pick the order up when I get to the counter, if I stroll.

    I often meet people at the U-District Starbucks (definitely one of the larger stores) and it is almost always packed with a line to the door. That’s a lot of people in line because there are 2 cashiers and 3 baristas in action most of the time. And it’s so frustrating to stand in line and watch tables open up and get taken before I get to place an order. So instead, I find a seat, wait for my appointment, and then place my/our order(s) on the phone. That way we can be using our time effectively, not standing in line.

    I love the system except for one thing: it cuts off all contact with real people. There was a neighborhood coffee shop across the street from the Starbucks for years (now replaced by one not so friendly) where I became friends with all the baristas. That disappears with the mobile app...


    I've been in Portland for several weeks now, and the Starbucks a couple of blocks from me in the Pearl District has mobile ordering. Now, normally when I'm in Seattle I go to Stumptown - I think it is important to patronize a locally owned business - but Mrs. Content Guy was with me for a few weeks, she prefers Starbucks, so that's what I got.

    I agree with you about the ease of ordering. I'd place the order before walking out the door of the apartment, and it was just being made as I walked in the door. (I love city life!) And I actually had time to chat with the baristas, so I didn't suffer from the lack of human contact. (And, by the way, they told me they love the mobile ordering system, too.)
    KC's View:

    Published on: July 13, 2015

    At Wimbledon over the weekend, Novak Djokovic beat Roger Federer in the men's singles final by a score of 7-6, 6-7, 6-4, 6-3, earning his third Wimbledon title and ninth Grand Slam trophy overall.

    And, in the women's singles championship, Serena Williams beat Garbiñe Muguruza 6-4, 6-4 ... giving her the first three major championship wins of the year (Australian, French and now Wimbledon) and putting her in the position of getting a Grand Slam if she can win the US Open later this summer.
    KC's View: