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    Published on: August 14, 2015

    by Kevin Coupe

    Children looking to make their way to Sesame Street this fall now will find first-run episodes of the iconic 45-year-old program on HBO, rather than on Public Television, where it has been since its inception.

    A new agreement announced yesterday says that PBS will get to run the episodes first seen on HBO nine months later, but that PBS will not have to pay the $11 million licensing fee that its has recently paid to screen "Sesame Street." Rather, the HBO involvement will allow nonprofit Sesame Workshop to increase to 35 the number of new episodes that it produces each year; it currently makes 18.

    Specifics of the financial deal between Sesame Workshop and HBO were not disclosed.

    The New York Times offers the lesson that transcends the basics of the production and licensing deal: "It is an unexpected union: the nonprofit behind a TV show created to teach children in underserved communities matched with the premium cable network that targets affluent adults with innovative programming. But the deal speaks to the digital transformation upending the television business, primarily the explosion of streaming video creating a generation of children who watch shows on demand, often on a mobile phone or tablet, instead of flipping on a TV." And the move also underlines another important consideration - the need to sometimes create new alliances and seek new outlets even for traditional products, simply because the old ways have become untenable and to do otherwise is to risk irrelevance.

    Of course, there are naysayers: "“Kids are getting squeezed in the middle,” Tim Winter, president of the Parents Television Council, tells the Times. “In order to watch original episodes of the most iconic children’s program in television history, parents are now forced to fork over about $180 per year and subscribe to the most sexually explicit, most graphically violent television network in America. I can’t imagine a greater juxtaposition in television than this.”

    Winter has a point. It is hard to imagine "Sesame Street" sharing a network with the likes of "Cathouse" and "Real Sex." But one has to imagine that HBO will be careful not to tarnish the brand that it is spending so much to associate itself with.

    Regardless, the deal is an Eye-Opener - reflecting a greater reality about broader shifts in consumption habits that affect every business and every consumer.
    KC's View:

    Published on: August 14, 2015

    The New York Post reports that the Great Atlantic & Pacific Tea Co. (A&P) has asked the bankruptcy judge overseeing Chapter 11 liquidation proceedings to allow it "to slash employees’ severance by up to 75 percent — so it can pay its corporate creditors more ... If approved, the brutal reduction would result in employees with 40 years of dedicated employment at the once-thriving grocer seeing their severance cut to $3,000 from $12,000, according to a workers’ union rep." Employees with fewer years invested in the chain would get even less.

    According to the story, "A&P also asked Bankruptcy Court Judge Robert Drain for permission to toss so-called union 'bumping rights' - the requirement that companies buying its stores hire employees on a seniority basis. The severance payments and 'bumping rights' (which forces the buyers to hire the most expensive workers) are making it difficult to sell its 300 stores and to pay its creditors what they are owed, A&P said in court papers." Also apparently at risk are employee pensions if the stores are not sold to companies willing to take them on.

    The Bergen Record reports that "after A&P filed for bankruptcy in 2010, the United Food and Commercial Workers union, which represents 26,000 A&P store employees, agreed to wage-and-benefit concessions worth more than $625 million over five years. In return, A&P, according to court documents, agreed to a clause in the union contract that said the company would require any future buyer to assume the labor contract and hire substantially all employees."

    The story notes that "A&P expects to sell 118 stores to Stop & Shop, Acme Markets and Key Food. Another 25 stores will be closed. The remaining 157 stores are to be sold by Oct. 7 — but had no known takers as of Wednesday, according to court papers."

    Indeed, the Consumerist reports that A&P has begun issuing layoff notifications to store employees, in line with federal law requiring that such notices have to be issued with layoffs are expected within 60 days.
    KC's View:
    Here's the first thing I want to know after reading these stories: to what extent are the people in the executive suite having their severance packages reduced so that the creditors can be paid off? I've done a little research and can't find anything specific about that, so if anyone has some inside knowledge about this, I'd love to hear from you.

    If I had to bet, it would be that the c-level folks probably are going to be just fine down the road ... in part because they've been paid enough to put some money in the bank, and in part because their severance packages are protected in a way that those belonging to front line employees probably are not.

    The folks in the stores may be worried, may be disgusted ... but they cannot be surprised. A&P's recent history is replete with examples of not living up to its value proposition ... why should it be any different in death than it has been in life?

    Published on: August 14, 2015

    Advertising Age reports that Amazon has decided to stop selling ads on its site that link to other sites, saying that "by October 31, Amazon will stop running so-called 'Product Ads' that other retailers can use to promote products on that the e-commerce giant doesn't actually sell on its site."

    The Wall Street Journal speculates that the move "may have to do with a handful of blue links found on the bottom of many search results, placed there by Google Inc. Amazon has sought to cut into Google’s online advertising market share, including a program to place more ads on sites other than its own. Google has been able to glean valuable information about Amazon and its users through the text ads, including which products lead them off of the retailer’s site."
    KC's View:
    Most of the folks commenting on this, pretty much all of whom are smarter than I am, seem to believe that at its core, this is a reaction to Google's decision to restructure the company creating a new holding company called Alphabet in which Google will just be a part. At least some of the other parts are likely to be businesses with which Amazon will directly and indirectly compete, and so Amazon is being careful to take steps that won't help the enemy. Which seems sensible to me.

    Published on: August 14, 2015

    The New York Times reported the other day that Coca-Cola is looking to deflect criticism about the role of sugary drinks in exacerbating the nation's obesity crisis by funding so-called research suggesting that exercise is far more important than diet in maintaining a healthy weight.

    According to the story, Coke "has teamed up with influential scientists who are advancing this message in medical journals, at conferences and through social media. To help the scientists get the word out, Coke has provided financial and logistical support to a new nonprofit organization called the Global Energy Balance Network, which promotes the argument that weight-conscious Americans are overly fixated on how much they eat and drink while not paying enough attention to exercise."

    The story goes on to say that "Coke has made a substantial investment in the new nonprofit. In response to requests based on state open-records laws, two universities that employ leaders of the Global Energy Balance Network disclosed that Coke had donated $1.5 million last year to start the organization." And that's in addition to more than $4 million in funding awarded to two of the group's founders.

    While both the group and Coke maintain that Coke has no role in determining the science behind the conclusions, the soft drink company in fact administers the group's website ... though "as of last week, the group’s Twitter and Facebook pages, which promote physical activity as a solution to chronic disease and obesity while remaining largely silent on the role of food and nutrition, made no mention of Coca-Cola’s financial support," the Times writes.
    KC's View:
    I've heard and read a lot about this story since it initially ran, and then general sense seems to be that while Coke is within its rights to support researchers that are in synch with its world view, there are two basic problems.

    One is that there seems to be a deliberate lack of transparency. That'll change now that the company has been caught, but the goal was to not leave any fingerprints. That's really, really hard in today's world.

    The other problem is that basic common sense, plus a boatload of other researchers, would suggest that any findings that put exercise way, way above diet in terms of importance is a crock. Both are important, and moderation is always the best path. But I heard a whole bunch of scientists say that calorie reduction is an enormous factor in any weight loss program, and that to minimize its importance is to not do anyone any favors.

    Sort of in the same way that Coke has not done itself any favors by engaging in behavior that seems entirely self-serving.

    Published on: August 14, 2015

    The Cincinnati Business Courier reports that Kroger is expanding its nascent "ClickList" online grocery offering, "taking its system to order groceries online and pick them up in stores outside its hometown for the first time with a store in Carmel, Ind.

    "While the service is only being offered in one Central Indiana store for now, Kroger officials said they will expand it to other stores in the Indianapolis metropolitan region but declined to say which stores will be added and what the timeline for expansion might be."

    The Kroger e-grocery expansion has been taking place in measured increments, starting with one, two and then four stores in its Cincinnati hometown market, with the company saying it plans to expand this year and next, with a goal of offering the program in as many as 1,200 locations, or about 40 percent of its stores.
    KC's View:
    Slow and steady wins the race. That seems to be the Kroger philosophy in this ... and based on the company's track record, it is hard to argue too much with it.

    Published on: August 14, 2015

    The Minneapolis / St. Paul Business Journal reports that Target Corp. "plans to begin testing a grocery-delivery service soon as retail rivals stake out space in bringing food to customers' doorsteps," and while no time frame has been announced, CMO Jeff Jones says it will be "in the very near future."

    At the company's annual vendors rally, Jones called the concept "on-demand shopping," saying that "I know that term is probably conjuring up images of sitting at home and ordering up movies on your TV — and that’s the point ... For years, we called it omnichannel or multichannel, which are clearly widely used in the industry. But what the guest is really looking for is being able to shop wherever they want, however they want, whenever they want. It’s on-demand.”

    According to the story, "It's not certain where Target would test a delivery service. Several Twin Cities grocery stores already offer online ordering and delivery, including Kowalski's, Lunds & Byerlys, and CobornDelivers, a St. Cloud grocer. Meanwhile, Amazon and Wal-Mart are also experimenting with food delivery in markets such as California and New York, and is partnering with Excelsior, Minn.-based Oppidan about building a drive-up grocery concept."

    It was about sic months ago that Target began "piloting a Curbside mobile app at 11 stores in California, allowing 'shoppers to go to Target to pick up their purchases without leaving the car'."
    KC's View:
    I just love the notion of "on-demand shopping." It is a smart image, and Target has to hope that it helps it jump-start a program that is going to find itself competing with a whole lot of folks.

    Published on: August 14, 2015

    On his "Last Week Tonight" program on HBO last Sunday, host John Oliver noted that Whole Foods has found itself in an "all-natural, hand-picked, locally grown pickle" when it was widely reported that one of its Los Angeles stores was selling asparagus-infused water (essentially jars of water with asparagus in them) for $5.99 apiece.

    As Oliver noted, the consumer backlash occurred because water is free, and a pound of asparagus at Whole Foods only cost $4.99 ... which made it look like the retailer was even more out of touch than usual with how its stores are perceived by many shoppers. (Whole Foods has claimed it was a mistake.)

    Watch the video ... it is extremely biting, occasionally profane, very funny, and hits at some harder truths with which Whole Foods has to cope.

    KC's View:
    I'm beginning to think that Whole Foods may soon be finding itself on somewhat thin ice, because it currently is finding itself to be the butt of jokes ... ands the criticisms are getting harsher even as the competition is getting more savvy. The company seems to be in one of those cycles where everything seems to be breaking wrong for it, and those are tough to emerge from.

    I even saw a piece the other day about how founder John Mackey thinks that "intellectuals hate capitalism," which just struck me as strident and reflective of a person who has been used to getting his own way and suddenly is meeting with resistance. Whole Foods may be coming off the rails a bit, and management has to find a way to recapture the old mojo.

    Published on: August 14, 2015

    The New York Times reports that the US Securities and Exchange Commission (SEC) has approved a new rule that "would require most public companies to regularly reveal the ratio of the chief executive’s pay to that of employees."

    The rule will kick in in 2017. The Times story notes that the rule "does not in any way limit how much a chief executive is paid. Instead, it requires that public companies take their chief executive’s compensation, which is already disclosed annually, and compare it with the median pay figure for all their other employees."

    However, "representatives of corporations were quick to assail the new rule ... saying that it was misleading, costly to put into practice and intended to shame companies into paying executives less."
    KC's View:
    I love this rule. From my perspective, it gives employees and shareholders an important measurement with which they can make decisions about where they are going to invest their time, energy and money. As for complaints about being "shamed" ... well, shame can be a powerful motivator. If you want to avoid it, then don't do stuff that will make you feel ashamed. (If a huge gap in compensation makes you feel shame, the solution is to address the gap, not to hide it so it cannot be easily seen.)

    Published on: August 14, 2015

    Dave's Killer Bread, which started about a decade ago with products tested in Portland, Oregon, farmers markets, said that it has been sold for $275 million to Flowers Foods, the nation’s second largest baking company. According to the announcement, "When the acquisition is complete, Dave’s Killer Bread will operate as an independent subsidiary and is expected to continue expansion of its Oregon operation where more than 300 employees fuel the brand’s success." The company says it also will remain committed to the employment of people with criminal records; Dave Dahl, for whom the brand is named, was in and out of prison for 15 years before joining his family bakery company and launching the brand.

    The family sold 50 percent of the company to a NY-based private equity group, Goode Partners, in 2012; together, they are selling the entire company to Flowers.
    KC's View:
    You may remember that a couple of weeks ago, I did a FaceTime commentary about the strange sort of relationship that folks in Portland have with local companies that make good and expand ... they automatically become suspect, as if they've given up their right to be called "local." While Dave's Killer Bread technically no longer is locally owned, it does have significant local roots of which the community should be proud.

    The good news, at least as far as I'm concerned? Maybe Dave's Killer Bread - especially the Blues Bread variety, of which I am an enormous fan - will get broader distribution beyond the 11 western states in which it currently is distributed, keeping me satisfied until I actually am able to move to Portland.

    Published on: August 14, 2015

    • The Washington Post reports that the National Transportation Safety Board (NTSB) has concluded after an investigation that "the driver of a Wal-Mart tractor trailer was the primary cause of a crash that seriously injured actor Tracy Morgan and killed another comedian last year."

    The NTSB has "largely blamed Kevin Roper, the driver of the tractor-trailer, for the collision. The NTSB determined Roper, who has been charged with vehicular homicide and assault by auto, had driven 800 miles from his home in Georgia to his workplace in Delaware before attempting to drive farther north on no sleep. The resulting crash involved 21 people and six vehicles."
    KC's View:

    Published on: August 14, 2015

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

    • The Seattle Times reports that "after four years mired in a thicket of red tape, Costco Wholesale is getting closer to opening its first warehouse in France, a key building block in its slow but sure-footed global push." However, opening the store will only the beginning, since when Costco eventually gets the store open, "it will land right on the doorstep of some of the world’s most powerful retailers: Carrefour, Auchan and Casino, which run huge hypermarkets selling a dizzying assortment of food and other products."

    While the Costco discount approach has been successful in the US, Canada and Australia, an ongoing price war in France could make its approach there more problematic.

    • The Wall Street Journal reports that "Dr Pepper Snapple Group Inc. is paying $20 million for an 11.7% stake in BodyArmor, the sports drink startup headed by Vitaminwater co-founder Mike Repole and backed by a group of investors that includes NBA star Kobe Bryant.

    "The deal for closely held BA Sports Nutrition LLC helps soda maker Dr Pepper Snapple take aim at the faster-growing $7 billion U.S. sports drink market dominated for years by PepsiCo Inc. ’s Gatorade and Coca-Cola Co. ’s Powerade. It also brings to Dr Pepper Snapple some star power. In addition to Mr. Bryant, BodyArmor’s other investors include National Football League quarterback Andrew Luck and Major League Baseball outfielder Mike Trout."

    • The Washington Post reports that McDonald's "announced it is planning to close 184 restaurants across the United States this year, 59 more than it is planning to open. The scale-back is something of a historic negative milestone, because it hasn't happened in more than 40 years. The last time the company contracted was in 1970."

    • The Associated Press reports that General Mills' Wheaties brand "is teaming with a craft brewery to create a limited-edition beer ... HefeWheaties, in a nod to a German style of beer called hefeweizen."

    The beer will only be available in the Minneapolis-St. Paul market starting Aug. 26.

    Put a lime in it, and it becomes a citrus-based breakfast beverage...
    KC's View:

    Published on: August 14, 2015

    • Daymon Worldwide has announced the retirement of CEO Carla Cooper after seven years at the helm of the company, and the hiring of Jim Holbrook, a former Procter & Gamble and Ralston Purina executive who most recently was president/CEO of Post Consumer Brands.

    Cooper will remain at Daymon in an advisory role until the end of next year.
    KC's View:

    Published on: August 14, 2015

    ...will return.
    KC's View:

    Published on: August 14, 2015

    During the past week, I did get a few emails from MNB readers wondering if somehow I had gotten lost while driving cross-country from Oregon to Connecticut ("I did it in three days," said one fellow, wondering why it took me seven).

    The thing is, I didn't get lost ... but I did take my time a bit. I've been doing this for more than 13 years, and when I got the opportunity to drive cross-country with Mrs. Content Guy in a car that mostly had the top down, I figured that nobody would mind if I actually took an extra week of summer vacation this year. It was nice that you noticed, though ... and I promise that I won't ever get to the point where I am working Johnny Carson hours. (Late in his "Tonight Show" run, Carson would get 15 weeks off a year, work only three nights as week, and made $25 million a year. If you are too young to know who Johnny Carson is, look it up.) Plus, Michael Sansolo and I kept an eye on the news, so if anything critical happened, I was prepared to pull off the road and report on it.

    It was, in fact, an extraordinary week. We took the northern route, which meant that we got the chance to see Little Big Horn, the site of Custer's Last Stand. It is a fascinating place, made just a little spooky when a solitary horse wandered through the veterans graveyard. He seemed gentle, but lonely, as if he was looking for someone. (See the picture at left.)

    We also managed to hit a couple of movie sets ... er, national monuments. Devils Tower, of course, is where the climax of Close Encounters of the Third Kind took place, and Mount Rushmore is the location of the final scenes of North by Northwest. It did not hurt the experience to see that the movie geography of both places, as laid out by Steven Spielberg and Alfred Hitchcock, has little to do with how they actually look ... but we loved them both.

    From there it was on to the Badlands ... through Minnesota and Wisconsin... and down to Chicago ... surrounded at almost all times on the road by the hundreds of thousands of motorcyclists who had attended last week's rally in Sturgis, South Dakota. We visited our son in Chicago, and enjoyed one of the best burgers we've ever had, at a place called Au Cheval ... for me, it was a double cheeseburger with a fried egg, washed down with a Multigrain Zwikel from Motor Row Brewing ... just amazing.

    This was my fourth time driving cross country, and if you've never done it, I heartily recommend it ... it is, I think, the best way to remember what the country really is all about, as one looks at the scenery and thinks about what it must've been like hundreds of years ago, momentarily forgetting about the circus that tends to dominate the political and cultural landscape.

    One other thing, if I may...

    Last weekend, the New York Times had an excellent piece by columnist Frank Bruni about the need for more reality-based education....and one that mentioned Portland State University prominently.

    I've been lucky enough for the past few years to work with Tom Gillpatrick and PSU's Center for Retail Leadership, where the focus on immersing students in the real world and exposing students to reality is a high priority. Tom has done an extraordinary job in connecting students to the local business community, and in connecting businesses to students - not just at the honors level, but throughout the program. The result has been a terrific internship program, an outstanding record of students being hired when they graduate, and a day-to-day program that brings smart and experienced people into the classroom for an ongoing dialogue that makes everybody smarter. (They even let me in. While this could be a momentary lapse in judgement, let's not tell them.)

    More colleges should take note...

    You can read the entire Bruni column here.

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

    Fins Up!

    KC's View:

    Published on: August 14, 2015

    Haggen, the Washington State-based grocery retailer that tried to grow from 18 stores to 164 virtually overnight through the acquisition of stores that needed by be divested when Albertsons bought Safeway, said this afternoon that it will close 27 stores as it looks to reverse revenue and traffic problems that have beset it since the expansion.

    The stores being closed included 16 in California, five in Arizona, five in Oregon and one in Washington. This follows a period during which Haggen has been reducing employee hours and laying off some staff because of what some of its suppliers have said privately are enormously disappointing results.

    The stores will either be closed or sold in 60 days.

    "Haggen’s goal going forward is to ensure a stable, healthy company that will benefit our customers, associates, vendors, creditors, stakeholders as well as the communities we serve ... By making the tough choice to close and sell some stores, we will be able to invest in stores that have the potential to thrive under the Haggen banner,” Haggen Pacific Southwest CEO Bill Shaner said in a prepared statement.

    “We’re grateful to have an outstanding team along with the support of our vendor partners, financial backers and friends in the community as we take our next steps forward,” wrote John Clougher, Haggen’s CEO of the Pacific Northwest. “Looking ahead, we will work hard every single day to earn the trust and business of our guests."

    Even as Haggen tried to find some competitive equilibrium, it has been hit with two lawsuits - one from Albertsons, which said that Haggen owned it more than $36 million for inventory it got as part of the sale, and one that accused the company of discriminating against developmentally disabled employees during the recent layoffs.
    KC's View:
    Is this the beginning of the end for Haggen, or just the end of the beginning?

    Hard to know. But a few things seem likely.

    One is that these almost certainly will not be the end of the closures. Right now, they're trying to stop the bleeding by closing the stores that are performing the worst. But there are still plenty of other stores that are not meeting expectations, and management is going to have to look hard at them fairly quickly.

    Just think how awful the morale must be at those remaining stores. Employees have to be wondering if they're next, which means that they may be more engaged in writing resumes than in taking care of customers and running shipshape departments. Customers are going to be aware of the problems ... and if they've been willing to overlook what has been described to me as consistently high prices and out-of-stocks (which many haven't), they're certainly not going to be enticed by the image of a company in serious trouble. (Haggen isn't just heading toward the iceberg ... it appears to already have smashed into it.)

    One has to imagine that suppliers are taking notice, and are wondering, if Haggen's troubles continue, if they're going to get paid for goods delivered. The guess here is that the out-of-stocks problems are going to get worse before they get better.

    I have no idea if this company can be saved. If I were in charge, the first thing I'd do would be to look for a retailing superstar who could come in immediately and address both the financial and morale issues, and at least create a little breathing room for the company to get back on its feet. (And he or she would run the whole damned company, not just part of it.) And I'd be aggressive to talking to consumers in every possible venue, explaining that Haggen bit off more than it could chew, is choking as a result, but has a plan to emerge a stronger (and much leaner) company. And these statements would have to be convincing, as opposed to the platitudes I'm hearing now.

    Let's be clear, by the way, that the demand by regulators as part of the antitrust decisions that Haggen had to take ownership of these stores and begin operating them in fairly short order probably created this mess. But if someone offered me a bet that hinged on me getting into a boxing ring with someone a lot more talented than I, and then fighting with one hand tied behind my back, I'm not taking that bet. No way. (I'd probably lose the fight anyway, even I got into the ring with both hands fee and one of them holding a gun ... and maybe Haggen would have, too. But this fight wasn't even fair.)

    I'm not sure what will happen to these stores, though I would imagine that there may be some opportunities for retailers that could come in, not face the same kinds of time constraints, and then create memorable and differentiated store experiences in some of these units. I'm thinking companies like New Seasons, Metropolitan Markets, Sprouts, and maybe even Whole Foods' new 365 concept. (Maybe WinCo could come up with a small-store format? Or Aldi or Trader Joe's could figure out a way to use footprints that are a little bigger than they usually like?) But when and if this happens, the folks who said they believed in the wisdom of the Haggen expansion deal - people who appeared to be breathing their own exhaust - will be left to ruminate about what went wrong in one of the retail business's fastest and more predictable collapses.