retail news in context, analysis with attitude

MNB Archive Search

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

    Published on: July 31, 2015

    by Kevin Coupe

    If McDonald's were forced by a minimum wage increase to pay its employees $15 an hour, what would the impact be on the cost of a Big Mac?

    That's the question posed by the Washington Post, which reports on a study by Purdue University's School of Hospitality and Tourism Management, which "used data from both the National Restaurant Association and Deloitte & Touche to estimate how much fast-food companies would need to boost sales given varying changes in the minimum wage. Assuming the industry maintained its current profit margin of 6.3 percent - which, to be fair, is fairly slim - hiking the pay floor at fast-food restaurants to $15 an hour would mean just a 4.3 percent increase in prices."

    Now, to be fair, this is just a rough estimate - the numbers would vary based on location and what the minimum wage is now, just as financial needs vary depend on where the employees live.

    But, the Post writes, essentially the question is whether people would be willing to "pay 17 extra cents for a Big Mc if it meant the person who prepared it could earn a living wage."

    Though I suppose that some might ask whether people should be forced to pay that extra 17 cents for a Big Mac to support a living wage.

    Seventeen cents? To me, that's both a no-brainer and an Eye-Opener.
    KC's View:

    Published on: July 31, 2015

    Politico has a terrific story entitled, "Why President Obama and Congress turned their backs on food safety," which says that "the Obama administration and Congress have all but squandered an opportunity to give the anemic Food and Drug Administration, which is responsible for the safety of 80 percent of the nation’s food supply, a level of oversight the public long assumed it already had.

    "On paper, the law that Congress passed in late 2010 — known as the Food Safety Modernization Act — was bigger than anything since Teddy Roosevelt cleaned up the meatpacking industry. The law mandated more inspections and much tougher anti-contamination standards for everything from peaches to imported pesto sauce, and it placed more emphasis on preventing outbreaks than on chasing them down after people become sick.

    "But almost five years later, not one of the sweeping new rules has been implemented and funding is more than $276 million behind where it needs to be. A law that could have been legacy-defining for President Barack Obama instead represents a startling example of a broad and bipartisan policy initiative stymied by politics and the neglect of some of its strongest proponents."

    The analysis is in-depth, the conclusions may alone may make you sick, and you can read the entire story here.
    KC's View:
    First of all, full disclosure ... ReposiTrak, which offers a trackability and traceability system that will help food industry companies comply with the Food Safety and Modernization Act (FSMA), is a valued and longtime MNB sponsor, and not only have I done a series of videos for the company that highlight the problems and solutions (which you can see here), but I'm working on a new batch.

    So I do have a dog in this hunt. I also would like to think that through my interactions with the folks at ReposiTrak, as well as numerous retailers and manufacturers, and the food safety folks at the Food Marketing Institute (FMI), which includes ReposiTrak in its suite of food safety-related tools, I actually have learned more about the subject than I might otherwise know.

    This much I am sure of ... while it has taken a long time for the new FSMA regulations to be finalized, when they finally are, the implications are going to be serious for the food industry. It will take a year once the new rules are announced for them to be enforced, but it will happen ... and I am persuaded that many retailers simply are not ready.

    But perhaps even more importantly, the people to whom I have spoken who are progressive and committed this issue pretty much all agree that the new FSMA regulations, whatever they are, almost certainly will represent the bare minimum that food industry companies need to do in order to provide their customers with safe and reliable food. FSMA is not the end, but the beginning ... and the bureaucratic nightmare, the breakdown in leadership, and chronic underfunding of this new and, I think, necessary set of rules does not make it any less important for companies to step up and do the right thing.

    Published on: July 31, 2015

    Quartz reports that the World Health Organization's International Agency for Research on Cancer (IARC) is expected to release a report this October that will identify red meat as a carcinogen.

    The story says that "eating too much red meat has been linked to health problems including shorter lifespans, heart disease, and various kinds of cancer. In April 2014, the IARC cited studies linking red and processed meats to colorectal, esophageal, lung, and pancreatic cancer, and called determining the connection a 'high priority.' Since then, the organization has been collecting information to make their final determination," which is expected to be published later this year.

    Meat lobbyists already are worried, and the story quotes Betsy Booren, vice president for scientific affairs at the North American Meat Institute, as saying that "if they determine that red and processed meat causes cancer—and I think that they will—that moniker will stick around for years ... It could take decades and billions of dollars to change that." And she said that her organization will fight any such classification, just as it fought against "the US Dietary Guidelines Advisory Committee’s recent report that said healthier diets are lower in red and processed meats."
    KC's View:
    Not to nitpick, but it sounds like what Booren is saying is that it will take decades and billions of dollars to change the perception that red meat is not carcinogenic ... as opposed to actually changing the degree to which it causes cancer.

    While I recognize that not everyone will agree with me on this, I think it is fair to say that I have a hard time taking seriously any organization that says a healthier diet is lower in red and processed meats. I mean, that just seems obvious to me, and pretty much supported by science. Any argument against that seems to be more about commerce and less about nutrition, though I understand why a meat lobbyist would make it.

    All I know is that I was trying to decide last night between a veggie pizza and a meat lover's pizza. I'm glad I went for the veggie version ... though I recognize that the fact that I was eating pizza instead of a salad probably mitigates against any health advantages.

    Published on: July 31, 2015

    The Seattle Times reports that Haggen - which has been laying off employees and cutting back hours in the new markets where it recently has acquired stores - now "is making major cuts to worker hours at several Seattle area stores it took over from Albertsons and Safeway earlier this year."

    The Seattle market, of course, is one where Haggen has marginally better name recognition than in California, Arizona and Nevada, where it added 146 stores to its 18-unit fleet when it acquired supermarkets that had to be divested because of the Albertsons acquisition of Safeway. The company has been making cuts to compensate for the fact that traffic and sales are considerably below projections and its stores have been unable to get much traction in the new markets.

    According to the story, "A Haggen employee in one Seattle area store told the Seattle Times that the company reduced total worker hours in that store by over 500 hours per week — down about a fifth from the usual pace, meaning less pay for many employees."

    A Haggen spokesperson said that worker hours “have been adjusted to accommodate the natural seasonal summer slowdown,” and could be increased “as sales return in the upcoming back-to-school and holiday seasons.”
    KC's View:
    I guess we're now at the point where it no longer is "Haggen," but "Troubled Haggen" in headlines...

    I got an email yesterday from an MNB reader who wrote in about the story saying that Haggen had also begun laying off developmentally disabled workers. (While I recognize that Haggen was laying a lot of people off, I suggested that this move reflects a certain community tone-deafness that could haunt the company's prospects.)

    While if true your comments about Haggen laying off disabled workers is justified, don’t you think it’s time to give Haggen a break and stop piling on?

    Here’s a company that virtually overnight goes from 18 stores to 164, with an infrastructure to support 18 stores and contractual guidelines on when the newly acquired stores need to be converted…A massive and even perhaps impossible task for any organization.

    Yes, there were some missteps, but given the enormity of the task across many fronts, perhaps looking for the positive (and there is positive) while not compromising your principles on reporting the less than positive would be appropriate.

    And those positives would be...?

    While I appreciate your optimism, I have to say that I think your use of the word "missteps" maybe understates the situation a little bit. While you are right that management took on an impossible task, don't you think that maybe savvy leaders should have known that it was impossible? Because their miscalculation may end costing a lot of people their livelihoods.

    And what do you mean, "if true"?

    Published on: July 31, 2015

    Bidness reports that Amazon has officially begun selling its Dash Buttons, physical buttons that allow customers to instantly order household items like laundry detergent and baby food -- without touching a computer or smartphone. The company notes that the Dash Button "has an adhesive strip and can be mounted to a washing machine or a kitchen cupboard, or anywhere a customer is likely to notice a certain product is running low. The detergent-deficient user pushes the button, which uses home Wi-Fi networks to alert Amazon to deliver the item, saving the customer a trip to the store -- or even a visit to the Amazon app."

    The buttons are now selling for $4.99 apiece.

    Bidness writes that "although each button identifies to a specific brand, the user is given control over quantity and what products from each brand should be ordered, whenever the button is pressed. To prevent accidental orders, the company will dispatch only one order at a time, with users receiving email alerts that can cancel new orders ... Amazon has incorporated 18 brands into Dash Buttons so far, including Bounty paper towel rolls, smart water bottles, Glad bags, and Gerber baby formula."

    • The NY Business Journal reports that "Amazon is on the verge of winning a $30 million contract with the N.Y.C. Department of Education ... once approved, Seattle-based Amazon will engage in a three-year deal to be the official 'storefront' of the department," providing the departments with "a tool for managing and distributing electronic content."

    Internet Retailer reports that the number of Amazon Prime subscribers increased from 40 million at the end of 2014 to 44 million in June 2015, " and the renewal rate was 95% during the second quarter, says Consumer Intelligence Research Partners."

    The story goes on: "CIRP says Amazon converts 70% of consumers who sign up for a 30-day free trial of Prime into paid members, and it is getting better at getting existing paid members to renew their $99 annual membership. From April to June, 95% of Prime customers whose subscriptions were set to expire renewed their memberships, up from 90% during the prior two periods."
    KC's View:
    To me, these three stories simply represent the degree to which Amazon is embracing the ecosystem approach to marketing, working to eliminate every possible reason that would prevent the consumer from going to Amazon first.

    It's working.

    Published on: July 31, 2015

    Fox News reports that "West Michigan McDonald’s franchise owners are helping some of their employees go back to school.  The workers, who all have a native language other than English, are taking a 22 week 'English under the Arches' class."

    “This is a big confidence booster for the employees who tend to shy away from having that conversation with the customer," says McDonald’s Operations Consultant Lance Brewer. "This will give them the confidence and empower them.  Having employees at the front counter who are capable of dealing with everybody is going to be important in improving the customer experience for sure ... We want to make sure they’re equipped not only to serve our customers here in the restaurant, but also to have a good conversation with their teachers, with their college teachers, or the teachers of their children.  So English Under the Arches gives them the confidence to do that at work and their everyday life, and that’s extremely important to us."
    KC's View:
    Interesting timing, since in the marketing class I've been team-teaching at Portland State University, we had a long discussion a few weeks ago about corporate social responsibility ... and the class talked a lot about how - or if - a company like McDonald's could show such responsibility when it serves food that is essentially crap.

    The conversation was so intense that we decided to put the question on the mid-term: if you ran CSR for McDonald's, what would you do? And the response in many of the essays included education - that they would do their best to offer educational benefits to employees.

    I think this is a smart move by the McDonald's franchisees ... it is good for the employees and good for the customers, which means that it will in the long run be good for the business.

    Published on: July 31, 2015

    Internet Retailer reports that "market research firm eMarketer projects e-commerce sales will eclipse $3.5 trillion within the next five years. The web will account for 7.3% of global retail sales this year, growing to 12.4% by 2019, eMarketer says."

    The story goes on to say that the research "projects consumers worldwide will spend $1.672 trillion online this year. That figure represents 7.3% of overall global retail sales, which are expected to be $22.822 trillion this year. By 2019, eMarketer Inc. projects online purchases will more than double to $3.551 trillion, or 12.4% of total retail sales of $28.550 trillion, as more people come online around the world."

    However ... it is worth noting the New York Times story about a Pew Research Center study saying that that the number of Americans who do not use the Internet is 15 percent of the population ... a percentage likely to get smaller because it is largely predicated on age:

    "Those Americans who remain offline, Pew found, do so for a number of reasons: the cost of buying a computer and paying a broadband or cellphone bill, the perceived relevance of Internet content or even the physical ability to use devices. The elderly, for example, face the dual barriers of making less money and having difficulty reading computer text, typing on keyboards and manipulating touch screens."
    KC's View:

    Published on: July 31, 2015

    Kroger announced yesterday the retirement of Lynn Marmer, group vice president of corporate affairs, who will retire early next year after almost two decades with the company. No successor has yet been named.

    The Cincinnati Enquirer notes that "Marmer is the fifth senior Kroger executive among the 18 top managers to announce their retirement since CEO Rodney McMullen assumed the helm in January 2014." Marmer also was the first female officer at Kroger.
    KC's View:

    Published on: July 31, 2015

    • A new study commissioned by the Private Label Manufacturers Association (PLMA) says that "shoppers want more fresh food options and less work in the kitchen. Health also was cited as a high-level concern.

    According to the report, "in deli, convenience was the number-one demand, with four in ten respondents opting for 'more items that can save me time at home.' Following closely, were 'more restaurant quality items' and 'heart healthy items, such as low sodium'." The report goes on: "In the dairy department, a better assortment topped shoppers’ desires, with 35% of survey respondents wanting to see more variety in general, and 38% saying they would like greater variety of cheeses in particular.

    "When it came to the bakery, shoppers had an eye on freshness and health issues foremost, with 31% saying they would like more items baked on-site and 31% likewise opting for products containing 'less fructose, sugar, corn syrup and bad fats'."

    Not surprisingly, considering the source of the study, a major beneficiary of these trends is private label: "More than half of respondents say that they buy more private label now than they did five years ago, and 44% of the survey say that they currently buy store brands either always or frequently. Frequency of buying is even higher in deli, dairy and bakery where it reached 47%."

    Bloomberg reports that "MasterCard Inc. agreed to pay Tesco Plc $61 million as the U.K. retailer reached a settlement as part of a multi-billion dollar lawsuit over credit card fees ... Tesco sued MasterCard in 2014 to 'recover the historic overpayment of anti-competitive interchange fees. These proceedings have now been settled and discontinued on mutually acceptable terms,' a spokesperson for Cheshunt, England-based Tesco said in an e-mail."

    The story goes on to say that "more than 20 U.K. retailers are suing MasterCard in London over the fees charged by the payments company in transactions using its credit and debit cards. MasterCard has filed responses to the remaining retailers’ claims in court."

    Reuters reports that American Express is being sued by one of its shareholders, accused "of blindsiding investors with the loss of a crucial contract with Costco Wholesale Corp after having failed to reveal how significant that business had become.

    In a lawsuit filed in Manhattan federal court, shareholder Plumbers and Steamfitters Local 137 Pension Fund sought class action status on behalf shareholders who suffered losses after the credit card company in February announced the end of its co-branding agreement with the warehouse club retailer."
    KC's View:

    Published on: July 31, 2015

    On the subjects on Amazon's drones, and its hopes for dedicated air space in which to fly them, MNB user Bill Kadlec wrote:

    I happen to live in a neighborhood airport community that is self regulated (meaning unattended for take-offs and landings). There are TONS of these across the landscape. I wonder how this plan of Amazon’s to fly between 200-400 feet could be managed effectively with all the small aircraft communities. That flight height is dead on the take-off and landing elevation and would no doubt encounter conflicts. And I can’t imagine little airports like this having the ability to monitor what could be thousands of these things flying around once this delivery mechanism takes hold.
    There has to be some plan for avoiding major airports in flight paths. I don’t even know if all the small air fields are even cataloged.
    Maybe there’s an answer to this. But, nothing is readily evident to me.

    My assumption is that the skies are going to look like an episode of "The Jetsons."

    MNB reader César González wrote:

    “Get ready to duck”; that’s a very serious joke.  There are so many SAFETY things that must be check and re-checked, prior to seeing these drones authorized.  Once they are approved, who will be responsible for damages that could result from accidents; Amazon, other drones users, NASA, FAA, or none of the above?  How are they going to control traffic in major urban areas, with people and cars in the way?  Please don’t tell us that the drones industry will be “just another industry like the airlines”; it certainly is not.  That’s what’s on my mind today.

    Like I said ... just watch an episode of "The Jetsons."

    On the subject of a possible spinoff of Save-A-Lot by Supervalu, one MNB user wrote:

    Think of Save A Lot as Aldi, but mostly owned by franchisees. They stock almost all private label items, sourced from Save A Lot unique warehouses.  They were founded as an independent company and they operated as an independent company for many years before SuperValu scooped them up from founder Bill Moran.

    I would guess that a sale would be accomplished to generate cash to reduce debt since Save A Lot is a stand-alone Division of SuperValu and the sale could be very clean.  The other reason is not that Save A Lot faces increasing competition from Aldi and Lidl, but SuperValu as a wholesaler has as their base independent retailers that don’t like competing with a discount operation owned by their wholesaler.

    From another reader:

    This idea of spinning off Save-A-Lot as a separate company, whose majority stockholder would probably be SUPERVALU has been kicking around the company for many years.  It is not something new, SUPERVALU always thought that it was undervalued, because the value of SAL was masked by the other slower growth portions of the business.  Prior to 2005, when SUPERVALU was a solid company with a more long term view, it was afraid that actually putting a value on SAL, would attract unwanted takeover bids.

    I see this as a way to raise the stock price and give the stockholders, a large chunk of whom are still Cerberus, a nice big one-time dividend.  This is all about doing what is right for the stockholders in the short term.  It creates extra bureaucracy and expense and in the long term makes the company less profitable.

    From another reader:

    From this  long time Supervalu employee's experience, the announcement is not good news. It seem to be more for the stock holders and for Save a Lot to benefit from the IPO. We will lose some logistics efficiencies and I would not be surprised that if in the name 'getting better' there will be more rounds of layoffs, so they can continue the past trend of awarding large bonuses like the $12 million they gave to Wayne Sales a little over a year ago.

    In talking about the minimum wage debate the other day, I wrote, in part:

    I am extremely sympathetic to the position that increased wages could cost jobs and inhibit an economic recovery. I am less so when it comes to the argument - sometimes advanced here by certain readers - that any minimum wage is socialism, and ought to be disposed of.

    Where I run into trouble rationalizing all this is when it comes to people who may be working 50 or 60 hours a week at minimum wage jobs because that's all that is available to them, for employers who believe it is their mission to keep labor costs as low as possible, and then cut them some more. Those people may not be in a position to get more training or education so they can get better jobs, because they've got to feed their families and pay the rent ... and even if you work 50 or 60 hours a week, if all you are making is minimum wage, it is hard to get by without some reliance on public services, which has its own impact on the economy, not to mention the culture.

    If the two warring factions in this argument could sit down and figure out a nuanced, sophisticated, compassionate and yet economically sound way to address these issues, I'd be all for it. And if it could be done in such a way that state and federal minimum wages laws don't have to be changed, all the better.

    But I don't hear the low murmur of intense and reasonable discussion, but rather the clanging bell of a dissonant and dysfunctional political system that isn't addressing the problem.

    MNB user Joe Davis responded:

    I just wanted to call out that I thought you wrote one of your greatest lines ever today.  I am speaking about this comment:  “I don't hear the low murmur of intense and reasonable discussion, but rather the clanging bell of a dissonant and dysfunctional political system that isn't addressing the problem.”
    So great, in fact, I am ashamed to say I “googled” it as I would a lyric from a song to see if you had perhaps borrowed it from some great body of work.  You got skills, Kevin.

    Thanks. I'm just glad that I didn't steal the line ... I thought I was making it up, but I could've accidentally appropriated it from somewhere.


    MNB user Ken Wagar wrote:

    Very well stated! And the statement applies to virtually every major decision facing this country. All sides are at fault. A new way is required.

    Finally, reacting to our story about Tom Brady of the New England Patriots, MNB user Dan Jones wrote:

    Tom Brady destroyed his digital evidence (his cell phone) and is suspended for four games.  Hilary Clinton destroyed digital evidence (her personal server).  Will she be suspended for the first four primaries?

    Here's the difference. Football, unlike politics, has rules and referees.

    And quite frankly, I expect a higher standard of behavior from sports figures.
    KC's View:

    Published on: July 31, 2015

    Someone once said that there are only seven basic plots, and after a certain point, everything else is just a combination of those ideas. In other words, the whole concept of originality is somewhat limited.

    That especially seems to be the case with movies, where movie studios only appear to be comfortable with a concept if you can say how it is like something else. In some ways, it is hard to blame them - after all, it can cost tens of millions or hundreds of millions of dollars to make a movie. But it also may be the reason why more and more people are staying home to watch HBO or Netflix or Amazon.

    In some ways, the two movies I saw last weekend are perfect examples of formula filmmaking. Except that in one case, exceptionally strong performances make it worth seeing. And in the other, we get to watch a movie star being born in a piece of material that is actually a fresh take on an old idea.

    The first movie is Southpaw, the new boxing movie starring Jake Gyllenhaal as a champion junior middleweight boxer who finds himself down and out through a set of circumstances that would seem wholly unbelievable except for the fact that we've seen such things happen in real life. (I'm going to be careful about not spoiling anything here - I hate it when people do that to me.) Gyllenhaal's Billy Hope has to rebuild his life, career and relationship with his family from the bottom, and he does so with the help of old-time boxing trainer Tick Willis, played by Forest Whitaker.

    The thing about most boxing movies is, they almost have to hit certain beats .. the victories, the defeat, the rehabilitation, the training, etc... (Raging Bull is the prominent exception.) Southpaw follows in the tradition of The Champ and the Rocky movies, to the degree that there are certain moments that you yearn for Bill Conti's iconic theme music instead of Eminem's rap, and you keep waiting for Burgess Meredith to peer around a corner. (It is especially hard for me since I have such specific memories of being in the first audience to see Rocky back when I was a film student ... remind me to tell you that story sometime.)

    But it almost doesn't matter, because Gyllenhaal, Whitaker and Rachel McAdams (as Billy's wife) are totally committed to making their characters real people instead of plot points, and they are so good that you forget that you've seen stuff like this before. I wouldn't say I loved Southpaw, but I did like it a lot, and I can appreciate terrific actors doing solid work. I'm also almost to the point where Gyllenhaal has joined the list of performers who I will see in pretty much anything they do. (As noted earlier this week, Adam Sandler is on the other list...)

    The second movie was Trainwreck, the new Amy Schumer romantic comedy directed by Judd Apatow, and the best thing I can tell you about Trainwreck is that I laughed almost nonstop for two hours. That counts for a lot.

    Trainwreck, to be clear, is a vulgar, seriously R-rated comedy about a woman who is not just incapable of being monogamous, but is actively, almost defiantly promiscuous - utterly convinced that she cannot and should not commit to anyone, and that love is an emotion to be mocked. However, cracks in her facade being to appear when she meets a sports doctor (played with utter charm by Bill Hader), and she has to resolve her feelings with her history.

    Being a romantic comedy, Trainwreck also has to hit certain beats, but it also takes pleasure in subverting a lot of them, which it does with great verve, enormous humor, and a dirty mind. Schumer is utterly fearless in a characterization that she has admitted hits pretty close to home, and she, in my opinion, comes out of the movie as a potentially huge movie star.

    And by the way, the other person who looks like he has a great shot at movie stardom is - go figure - LeBron James, who plays a version of himself as Hader's best friend, and is really, really funny.

    BTW ... thanks to all the MNB readers who showed up last night at Nel Centro in Portland for our little get-together ... it was great fun putting faces with names, and to hang out with people who have become friends via MNB over the years.

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

    Fins Up!
    KC's View: