business news in context, analysis with attitude

Published on: July 22, 2015

by Kate McMahon

There’s no shortage of irony that the name of the Official Whole Foods Market blog is Whole Story.

Customers outraged about the most recent Whole Foods overcharging tempest claim the high-end grocer is telling them anything but the whole story.

To recap: New York City consumer officials on June 24 accused Whole Foods of “systemic overcharging for pre-packaged foods” in eight stores -- ranging from an overage of 80-cents for a bag of pecan panko to a whopping $14.84 for a package of coconut shrimp. Inspectors called it “the worst case of mislabeling they have seen in their careers” with 80 tested packages showing incorrect weights. (Costco was slapped with $800,000 in fines after similar charges in California last year.)

In a strident, defensive statement to the media, Whole Foods called these latest allegations “overreaching” and criticized the NYC Department of Consumer Affairs of “grossly excessive monetary demands” and using the media “to coerce us.”

Consumers lit up social media, ripping the grocer frequently referred to as “Whole Paycheck” for ripping them off at the register for such in-store, pre-packaged basics as chicken tenders, nuts, fruits and vegetables.

"Shame on you, Whole Foods! I was aware that your prices were ridiculously high but to lie to your customers & blatantly rip them off, shame, shame," wrote one Facebook user.

Five days later it was time to cue the spin control team. Whole Foods co-CEOs Walter Robb and John Mackey posted a calm, contrite two-minute video on Whole Story and YouTube, changing the corporate tune.

"Straight up, we made some mistakes, we want to own that, and tell you what we’re going to do about that," said Robb, standing alongside a similarly casually-clad Mackey.

He said the errors were inadvertent, sometimes in the customer’s favor and occurred “because it's a hands-on approach to bringing you the freshest
food." After placing the blame on employees, the pair said increased training and third party oversight would remedy the problem.

The statement didn’t quell the criticism, and the thousands of views on YouTube generated comments such as these:

• “So basically, ‘We were greedy and now really sorry that we got caught.’ "

• “Consultant-speak like ‘Straight up, we’re gonna own that’ doesn't reassure a doubting customer like me. And it embarrasses your employees. Try saying the words ‘We're sorry,’ you over-managed pair of idiots. Until then, I'm shopping for my family elsewhere."

Not surprisingly, the comments on the Whole Story blog page were more supportive of the company’s response than elsewhere on social media. Whole Foods does have a devoted following in its 400 stores across the U.S., Canada and U.K., and the blog openly says it will edit comments deemed off-topic, hostile or insulting (we presume that would including calling the co-CEOs an “over-managed pair of idiots”).

Mackey and Robb closed the video by saying any consumer who found a package mislabeled “not in your favor” would receive a refund and the item for free, and they promised to read all of the customer feedback on the issue.

This much-publicized New York brouhaha comes at a critical time for Whole Foods, which just announced plans to launch its new lower-cost chain of stores “365 by Whole Foods” in 2016.

The smaller “365” stores are aimed at the Millennials, who are not long-time Whole Foods devotees and are both price-conscious and social media savvy. In short, their target audience is the most likely to read snarky comments about the pricey grocer gouging unsuspecting customers.

To get beyond this, I think it is incumbent upon Whole Foods to get its weights-and-measures house in order and its whole story straight before reacting. One more perceived “thumb-on-the-scale” incident could lead to a whole exodus by customers who can now find quality organic products at their local supermarket, Sprouts, Target, Walmart, Trader Joe’s or Amazon. For a whole lot less.

Comments? As always, send them to me at kate@mnb.grocerywebsite.com .

Published on: July 22, 2015

As has been documented here and elsewhere, Jet - the new e-commerce site being launched by Marc Lore, the Quidsi founder who sold that company to Amazon for $545 million in 2010, and is launching his new site with $225 million in venture capital funding - launched this week.

The site is worth checking out here.

One of the more appealing facets of the site is a video, hosted by Kumail Nanjiani, a Pakistani-American stand-up comedian, in which he explains how Jet works and what the advantages are for shoppers who choose it (rather than Amazon, though this is more implied than stated). The video is cheeky, irreverent, and uses words like "transformationalizing," "technomological," and "shopping sorcery." (It also uses an actual big word - "algorithms" - to explain how Jet is able to drive down prices based on how much one buys.

You can watch the video above ... and it is worth doing so.

In its coverage of the Jet launch, the Washington Post explains that "Jet is taking a new approach to pricing. Its algorithm doesn't simply look at the price of each individual item in your online shopping cart. It looks at all the items you want to buy, as well as your Zip code, to determine which retailer or warehouse can ship that unique combination of items to you the cheapest. Shoppers can only buy things on Jet if they've signed up for a $49-per-year membership."

The Post goes on: "This gets at the heart of how Jet is trying to distinguish itself in a crowded retail marketplace. Jet believes there are plenty of shoppers — millennials, in particular — who are very value-conscious and aren't having their needs met by the current shopping options. The bulk format of items in the warehouse clubs, Jet argues, is not great for people who live in small spaces or who don't have big families.
The site also offers additional ways to help you save, knocking additional pennies or dollars off your order if you pay with a debit card or waive the right to return an item."

In essence, the bet seems to be that Jet's target audience will be anyone who is not a Prime member., with Re/code reporting that Jet will compare its prices to Amazon's on virtually every product screen.

Published on: July 22, 2015

by Michael Sansolo

Bob Bartels once described himself as a flea on the tail of the slowest dog in the pack. Self-deprecating humor, as you can tell, was one of Bob’s best features.

And believe me, he had many.

Bob took over as chairman of the Food Marketing Institute (FMI) soon after I joined the organization and I enjoyed every moment I worked with him. His teachings were non-stop and constantly mixed with his wry humor and quick smile. He talked about the importance of both enjoying one’s work and co-workers. He talked about principles and about recognizing the challenges of the future. He was a regular writer to us at MNB, especially when he felt commentary was moving in the wrong direction.

Once he told me a story about the folly of getting overly satisfied with his company’s performance. The tale was so compelling that five people sitting near us in a conference actually changed seats to hear more. (It felt like the old EF Hutton commercials and, being no fool, I included that story in my book, "Business Rules!")

But mostly, Bob taught us all about courage. For decades he lived with multiple sclerosis, realism and optimism. Though he struggled to walk at times, he flew his own plane and occasionally went downhill skiing. He always reminded people that every day was his best day because he would be less healthy tomorrow. And he lived today fully.

Bob passed away last Friday at age 78, leaving behind Martin’s, the company he grew from a single-store into a regional power around South Bend, IN. He’ll be missed and remembered by family, friends and an entire industry that was lucky enough to know him.

His family, including son Rob who now runs Martin’s, asks that in lieu of flowers, donations for multiple sclerosis research, can be made to: University of Texas HSC Houston, care of Lucie Lambert, Department of Neurology, 6431 Fannin St., Suite 7.044, Houston, TX 77030.

Published on: July 22, 2015

The Omaha World Herald reports that Hy-Vee has launched "a new online grocery service in its Nebraska and Council Bluffs stores," offering customers there the option of either delivery or click-and-collect service.

According to the story, Hy-Vee says that "online sales so far have met expectations ... Called Aisles Online, the service launched in Des Moines in April and in Nebraska and Council Bluffs this month. It is coming soon to stores in Kansas City, Illinois, Minnesota and elsewhere in Iowa. All Hy-Vee stores will offer the service, which is accessed by a website — not an app — by fall."

The World Herald writes that at least the way it is priced now - $4.95 for home delivery and $2.95 for store pickup - this e-commerce effort won't make any money for Hy-Vee. "Instead, Hy-Vee is trying to retain and gain customers in the face of competition from all corners: convenience, dollar and club stores; other grocery chains that are opening and remodeling stores in Omaha; and online services such as Amazon, which doesn’t offer its Amazon Fresh grocery delivery service here but does provide its Amazon Prime Pantry dry goods shipping service.

"Hy-Vee also is trying to pre-empt future competition. Walmart, for instance, has a large grocery presence in Omaha. It’s testing a grocery-delivery service in other markets."

Published on: July 22, 2015

The Chicago Tribune reports that McDonald's may roll out its all-day breakfast menu as soon as October, after a short period of resting in select markets.

According to the story, "Currently, most McDonald's restaurants stop offering breakfast options around 10:30 a.m., and the chain has said there were operational issues to maintaining a kitchen that prepared breakfast items along with burgers and fries.

"It would be one of many changes being undertaken by the Oak Brook-based burger giant, which is looking for ways to rebound after a prolonged sales decline."

Published on: July 22, 2015

• The Washington Post reports on how Walmart - driven by a need and desire to attract younger employees who have a desire to live and work in an environment more sophisticated than they think Bentonville, Arkansas, is - has kicked in many millions of dollars to urbanize the area.

Now, the new employee can find gourmet restaurants, brewpubs, a world class art museum, bike trails and other assorted amenities necessary to lure young people with a taste for the kinds of things that are found in many cities. In fact, the story says, the Walton family "even fought for residents’ rights to party: Two Walton grandsons heavily financed the successful 2012 campaign to reverse Benton County’s longstanding ban on retail alcohol sales."

The upshot, according to the story, is that recruiting talent has gotten easier for Walmart.

Published on: July 22, 2015

• Bloomberg reports on a new analysts report predicting that "Amazon will become the No. 1 U.S. apparel retailer by 2017, comfortably passing Macy's within two years." One note: while Amazon is 20 years old, it did not even get into the apparel business until 2002.

Published on: July 22, 2015

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

• Bloomberg reports that United Natural Foods Inc. (UNFI) has announced the early termination of its contract with Albertsons, which had it providing products to, among others, Albertsons and Safeway. The end of the deal comes 10 months before it was scheduled to end; the relationship has been worth about five percent of UNFI's total revenue, or more than $400 million a year.

“We are disappointed to end our existing relationship with Albertsons,” UNFI CEO Steve Spinner said. “We plan to utilize the capital freed up from the termination of our Albertsons relationship to further pursue our strategic objectives, and we believe this will provide greater value for our shareholders long-term.”


• In the suburbs of New York City, the Journal News writes that declaration of bankruptcy by the Great Atlantic & Pacific Tea Co. (A&P), and the certainty that it will be selling many of its stores to competitors, "has sent ripples through affected communities as supermarket operators evaluate their options and municipal officials and small business owners wonder if all of the locations will find new owners or be forced to close."

The story notes that "A&P's cache of retail stores represents one of the biggest collections to recently be placed on the market all at one time, industry insiders said. In Westchester, Putnam and Rockland counties alone, A&P and its affiliates, including Pathmark and Waldbaums, own 31 stores -- 20 of which the supermarket chain officials said they had received sales bids and 11 others, including Valley Cottage, they were trying to find new buyers."


• Publix announced this week that its 970+ in-store pharmacies now are offering biometric screenings that "will help patients understand their risk for developing chronic conditions, such as diabetes, high blood pressure or high cholesterol." The cost is $20-$45, depending on the test and the "results are provided within minutes of taking the test(s) and a pharmacist consultation is provided. Results from the biometric screenings will be kept on file so that the Publix pharmacist may refer back to previous screenings to identify changes and trends in the patient’s overall health."


• Fortune reports that Dick's Sporting Goods next month "will open two new, female-focused apparel and footwear stores. It is the latest effort to target growing interest in athletic gear, which is being worn not just at the gym and during athletic pursuits, but also increasingly incorporated into casual, everyday attire," making it "the latest mainstream retailer to jump on the 'athleisure' bandwagon for women."

The store, dubbed Dick’s Chelsea Collective, "is starting out with a fairly cautious rollout. The retailer is opening just two stores to start, one in Virginia outside Washington, D.C., and the other in Pittsburgh."

I love the idea of creating new formats to appeal to different customers ... and the inherent acceptance that a more targeted experience, properly implemented and delivered, is more likely to appeal to specific consumer bases.

Published on: July 22, 2015

• Variety reports that Gerry Lopez, the former Starbucks and Procter & Gamble executive who has been president/CEO of AMC Theatres since 2009, is stepping down from the job. He is moving to Extended Stay America as president/CEO, where he will succeed Jim Donald, who once was his boss at Starbucks.

Regarding his new role, Lopez said, “Strategically transforming companies and brands is what I love to do. And we do it by building teams, focusing on the guest experience, innovating, redefining the business model and finding growth. There are a lot of parallels between my prior position and the one at Extended Stay America, and I am thrilled to lead an organization with so much potential. Over the last four years Jim Donald set a firm foundation, with investments in people, training, buildings and systems. We are well poised to build on that foundation, and I look forward to a bright future ahead."

Published on: July 22, 2015

Lots of reaction to Michael Sansolo's wonderful column this week about how the Church of Jesus Christ of Latter Day Saints has begun advertising its religion in the Playbill for the hit musical, "Book of Mormon," with an argument that essentially says, "if you liked the play, try the actual book."

MNB reader Chris Connolly wrote:

Thanks for your outstanding observations about your trip to Broadway.

We just saw “The Book of Mormon” on Saturday afternoon at the Eugene O’Neill Theater.   While there were not any songs in the show that were memorable enough to motivate us to purchase the soundtrack, the quality of the singing and dancing was outstanding!   Having two sons that are college students, we had been given full disclosure about the creation and history of the musical and found it to be hilarious.

My wife was born in the small Illinois town where former Mormon leader Joseph Smith was murdered in 1844 while imprisoned in the county jail.    The old jail facility was purchased by the Church of Latter-Day Saints and fully restored as a Mormon shrine. The jail and nearby Mormon Temple are easily the two largest tourist attractions in the area……yet another example of turning lemons into lemonade!

From another reader:

Not all observation generates insight – and this time you did. Good stuff, Michael!

I have maintained a healthy respect for the business acumen of the LDS organization ever since attending business school at Kellogg with several members. As you point out, this is a brilliant example of using every situation to your best advantage.




On another subject, MNB reader Joe Petrucci wrote:

Looks like at last the inevitable is taking place at A&P. It might make sense for A&P and Sears to band together and sell off stores in a buy on get one free promotion. It would be reminiscent of the many BOGO’s A&P ran on slow moving, unpopular products over the years. A fitting final chapter to the A&P story.

From another reader:

Anyone who has been in the retail food business more than a week has a collection of A & P stories describing the debacle.

In Feb 1971 I started in the Management Training program for Kroger in Nashville.  The first store I worked in was a couple of blocks from a 12,000 sq ft +/- A & P.  I thought that since I was in the food business I should check out the local competition.  One Thursday afternoon around 4:00 I strolled in and was the only non-employee in the store.  Actually, the only employees there were the Manager and a checker.  The Manager’s wife was there as well but she wasn’t on the clock even though she was stocking shelves.

I started talking with the Manager and discovered that he and his wife were doing stocking while the checker managed the front.  He said they only got about half a pallet on their latest truck, ordered about three pallets of grocery so he couldn’t afford a stocking crew.  We walked into the back room and there was nothing there.
 
About five years later,,I was involved in a competition check and hit that A & P again.  Different Manager but same store conditions.




Regarding Haggen's travails, one MNB user wrote:

What a great soap opera that is going on with Albertsons and Haggens.

Rambling thoughts ...
 
I have said from day one, “Stick a fork in Haggen’s sometime within 24 months”, especially in So Cal. Many bigger retailers have made runs at the So Cal market and have failed miserably over the past 20+ years. The players are set and with the diversity and the large geography, I do not see room for another me, too player.  The So Cal market is one big tough nut to crack. I still believe that Bob Miller has designs on buying back several of the Albertsons and Safeway stores that were divested to satisfy the FTC.

I think Haggen’s still has some traction for success in some of their NW store locations. The one thing that I see and hear from several major DSD vendors is that their business is off 20%-30% in the Oregon stores. I have also heard that the original quick hit makeover is just phase one, with major interior makeovers in 18-24 months to make the stores look more like the ones in the Puget Sound area.
 
Time will tell if they will be successful.

One consumer with I chatted told me that when she went into a newly converted Haggen store and found "nothing special" and apparently higher prices, she walked out and had no plans to return. I'm not sure that Haggen has 18-24 months to recover from what seems to have been a disastrous conversion process.




One MNB reader has a comment about the pro-GMO story we posted earlier this week:

Thank you for the Slate article on GMOs. That article is eye-opening. 

One of your readers commented "I would argue that the main case against GMOs is putting the control of our food supply in a few hands - those of multi-national corporations.” The Daily Show had an excellent segment on GMOs which addressed this issue as well. Because of the increased regulatory costs involved in trying to get a GMO product approved, only the corporations with deep pockets can afford to bring new seeds to market. The higher costs are driven by the slew of lawsuits filed by the anti-GMO lobby on any new GMO application.

But, another reader disagreed:

Maybe I just got baited into an argument because no one can honestly believe labeling is over reaching…but here goes.

How can anyone support the argument that the government forcing labeling of GMO’s is overreaching?

Seriously?.... No!!...You can’t actually believe that or defend it? ..can you

What argument possibly would convince anyone that consumers KNOWING WHAT IS IN THEIR FOOD should not be MANDATED by law?

I am serious…convince me- send Kevin an email – what’s your rational for not legislating labeling?

What is the good that comes from consumers NOT KNOWING what is in a products they buy? Especially those that we consume.

If no labeling should apply to GMO food products then why label OTC products? Why monitor energy drinks or diet products? Why force toothpaste manufacturers to disclose the whitening ingredients in their toothpaste..let the consumer beware… damn the government ….
I mean in the end bleach will sure as hell whiten your teeth but I’d kind of like to know it’s in there.
Who are these people?



And finally, one MNB user had another thought about a brief throwaway line I used the other day:

How can it be that NO ONE had a shout out in the "Your Views" section about yesterday's reference from "The Prisoner"?

Wonder what Patrick McGoohan would've thought of Facebook, Twitter and Amazon.com with all the info and insights it has collected on us and our habits....would make a very interesting episode.

Actually, I did get a couple of notes about my "Prisoner" reference. I just didn't post them ... which apparently was an oversight I hope I've now corrected.

By the way, if you're interested, a version of the original "The Prisoner" opening credit sequence can be seen here. It remains, after all these years, one of the most imaginative, innovative and prescient TV series ever produced.

Published on: July 22, 2015

I've gotten numerous requests from folks living in the Portland, Oregon, area for one of those casual MNB get-togethers that we occasionally do when I'm visiting a city. And so, we're planning one for next week...

Let's plan on meeting at 5 pm on Thursday, July 30 at Nel Centro, located at 1408 SW 6th Ave, in Portland. I'll plan on being there for a couple of hours - if the weather holds, on the outside patio - and I hope that any MNB readers who'd like to stop by will do so.