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    Published on: August 19, 2015

    by Kate McMahon

    Talenti, the gelato and sorbet company, is asking fans to channel their inner gelato, which means that I currently find myself considering some unusual flavor combinations - Waffle Cone Mocha Pine Nut, Rolled Oat Mint Crumpet and Rice Krispie Treat Pinot Noir Nut.

    Not exactly flavors that roll off the tip of your tongue, or are likely to leap into your grocery cart, but one-of-a-kind personalized creations based on my family and friends’ individual social media persona.

    It’s all part of Talenti’s new Flavorize.me promotion, in which a specially developed algorithm will analyze the words a person uses the most on Facebook, Twitter and Instagram, and place them into a flavor index and a list of 350 ingredients. Within minutes your persona is assigned a custom flavor based on how proportionately sweet, salty, spicy, sour or bitter you are.

    So I’m admittedly a little concerned about my friends who were tagged as Praline Prune and Tangerine Crisped Rice.

    One Facebook user was flummoxed when her flavor was revealed to be “Framboise Horchata Pie Crust?? … I don't even know what that is!” Another quickly responded “Framboise is raspberry, horchata is a sweet rice drink. Sounds good actually!”

    The promotion runs through this Saturday, and Talenti promises that founder Josh Hochschuler will create a few of the selected flavors. Winners will be notified September 15. It’s a fascinating example of using social media to connect personally with consumers, and definitely more interactive than similar promotions, such as Lay’s current Do Us a Flavor contest, which last year generated 14 million entries for a new product idea. (The 2014 $1 million winner was Kettle Cooked Wasabi Ginger.)

    And also not surprising given the skyrocketing success of Talenti Gelato & Sorbetto. Talenti began as a storefront gelateria in Dallas in 2003 and is now the best-selling packaged gelato in the U.S., with sales expected to eclipse $120 million this year. It was purchased by Unilever for an undisclosed price last December.

    Hochschuler and partner Steve Gill see themselves as market disruptors, shaking up the frozen dessert business just as Chobani disrupted the traditional yogurt sector. Talenti has a fervent fan base, and is known for its sourced natural ingredients (such as Belgian Callebaut chocolate and Tahitian vanilla beans from Papua, New Guinea) and distinctive clear, recyclable, BPA-free containers. The favorite existing flavor in our house is Caramel Sea Salt.

    While it will be difficult to quantify whether this campaign will definitively drive sales, it has already achieved its goal of generating excitement about the brand and a lively, personal connection with its consumers. And the lesson for retailers is you don’t need an algorithm to do that, just a engaging approach to connecting with your customers on social media and in the store.

    That is certainly the case at stores such as Trader Joe’s and Costco, where shoppers crowd the free sample tables, and at Stew Leonard’s, the home of real and costumed cows on site and other family attractions alongside produce, dairy and private label specialties.

    And for Talenti, disrupt and engage are clearly two key ingredients for success.

    If you're interested in finding your inner gelato, and you are an active Facebook, Twitter or Instagram user, click here.

    Comments? As always, send them to me at kate@morningnewsbeat.com .
    KC's View:

    Published on: August 19, 2015

    by Kevin Coupe

    I read a lot of periodicals, but I have to admit that one I don't look at with any degree of frequency is Lebensmittel Zeitung, the German publication.

    But apparently I should. Because an MNB reader sent me a link to a recent Lebensmittel Zeitung interview with Christian W. E. Haub, currently the Co-Chief Executive Officer of Tengelmann and the former CEO and chairman of the Great Atlantic & Pacific Tea Co. (A&P).

    In that interview, he made the following observation:

    "The new insolvency at A&P comes as no surprise for those who know the US trade. The reorganisation of the company in 2012 was only done half-heartedly. The new investors held on to too many loss-making outlets and kept all of the head office open. They also neglected to reduce cost structures, such as logistics and wages.

    "Pay structures had been negotiated with the unions so that wages would have reached their original level again in three years. For all these reasons, and also because price levels were too high in the stores, A&P wasn't able to withstand the competition ... I expect the whole company to exit the market by the end of the year. The final demise of one of America's most traditional food retailers is very sad and particularly for those who work there."


    And then, he offered the following defense of his company's ownership and management of A&P:

    "The facts are that Tengelmann was able to achieve a positive return on invested capital for the whole 30 years it owned the company. During this time we also came to really understand the American consumer market, which is proving very advantageous today for our new investments in young consumer goods companies."

    Well, I'd just like to say that I'm really happy for those young consumer goods companies that are benefitting from all the education that Tengelmann got at A&P. But it also strikes me that the last statement is staggering in its lack of self-awareness ... because I don't think there many folks out there would argue with the observation that during Tengelmann's tenure, A&P suffered from a lack of strategic creativity, an inability to execute on any sort of vision, a deficit in competitive juice, and a dysfunctional culture in which top management isolated in a New Jersey headquarters that might as well have been isolated by a moat.

    The question I'd ask is how Tengelmann was able to achieve positive ROI ... because it certainly was not by creating a fleet of stores relevant to an evolving consumer class, a fleet designed to disrupt the marketplace and capture the imagination of shoppers.

    The folks at Tengelmann may want deniability when it comes to the company's stewardship of A&P ... but it strikes me as implausible deniability at best.
    KC's View:

    Published on: August 19, 2015

    Internet Retailer reports that according to new US Commerce Department figures, Americans spend $83.86 billion online in the second quarter quarter - representing 7.2 percent of all retail spending during the period.

    The total also was up 14.1 percent from the same period a year earlier, the story says, with the e-commerce increases accounting for "nearly all the gains in retail sales in the past year."
    KC's View:
    Which explains in part why Amazon, despite all the current criticisms of its workplace practices, will continue to grow and expand.

    Here's the thing. If you are in the bricks-and-mortar business, the continued growth of the e-commerce segment illustrates why you have to figure out how to be relevant to a consumer class that is changing and evolving and responding to different prompts than in the past. I'd argue that you almost have to have an oar in these waters ... but if you don't, you'd better figure out how to appeal to that shopper and get them into the store when they have so many other options.

    Published on: August 19, 2015

    The Indianapolis Star reports that Kroger said yesterday that it plans to offer "online ordering at seven additional Indianapolis-area locations by the end of September ... customers can order groceries at www.kroger.com/onlineshopping and select a pickup time in a one-hour window at a specific location."

    The story notes that Kroger began testing the service at one Indianapolis-area store in early August - following a successful test in Cincinnati - before deciding to expand it.
    KC's View:
    See my comments about the importance of e-commerce above.

    Published on: August 19, 2015

    Walmart yesterday said that it had second quarter revenue of $120.2 billion, a half-billion-dollars higher than forecast, on US same-store sales that were up 1.5 percent. Still, the Wall Street Journal writes, " the retail giant reported that second-quarter profits fell to $3.48 billion, down 15%, from a year earlier. The company cited higher costs from adding store hours and raising hourly worker pay, among other factors. Total e-commerce sales rose 16% in the quarter ending July 31, down from 17% in the first quarter and 22% a year ago, the company reported."

    In addition, MarketWatch writes, "Greg Foran, president and CEO for Wal-Mart U.S. said on the earnings call that 'accelerating pressures in shrink' were one of three major factors that contributed to the company’s underperformance. The others were an overall decline in gross margin, and in particular, lower than expected pharmacy reimbursements."

    The story goes on to say that "despite media reports beginning in 2013 of store 'out-of-stock' situations, the company’s stated goal has been to grow inventory less than sales. That goal has now been accomplished. Total inventory grew 2.2% in the second quarter, which is slower than the 4.8% sales growth that unit reported, and comparable-store inventories fell by 2.4% compared to the 1.5% sales growth."
    KC's View:
    The thing that Walmart seems to be pleading for the most in this case is patience ... because that's what its leadership seems to think it needs the most. It will take time for its investment in e-commerce to pay out, it will take time for its adjusted approach to employee pay to find the appropriate levels, and it will take time for the 21st century Walmart to take shape and find the right balance. Of course, in the modern business environment, time is not something that most companies have...

    I do think that Walmart's emphasis on inventory management could be problematic if it appears to shoppers that it is resulting in out of stocks and holes on the shelves. We'll have to see how it plays out.

    Published on: August 19, 2015

    Former US Secretary of Labor Robert Reich has a column on Salon.com reflecting on new family-friendly policies that are being adopted by some companies, even as Amazon deals with a highly critical New York Times article about an allegedly "punishing" workplace environment.

    "Millennials now constitute the largest segment of the American work force," Reich writes. "Many are just forming families, so the new family-friendly policies seem ideally timed. But before we celebrate the dawn of a new era, keep two basic truths in mind.

    "First, these new policies apply only to a tiny group considered 'talent' – highly educated and in high demand. They’re getting whatever perks firms can throw at them in order to recruit and keep them."

    The second thing to remember about these liberalized policies, Reich writes, "is that relatively few talented millennials are taking advantage of them. They can’t take the time." Because, he says, they are dealing with a basic fact - that "you’re either on the fast track or you’re on a dead-end road." And being on the fast track often means never getting off it.

    You can read the entire piece here.
    KC's View:
    I do think that these are not just business issues ... that there are some cultural issues here that need to be resolved. I think most people would agree that our society is better off when parents actually have the time to be parents (and do things like coach their kids' games, have dinner with them) ... but our society also encourages entrepreneurialism, a solid work ethic, dedication to duty, etc...

    It is hard to find a balance for all those. Most people I know spent much of their adult lives trying to figure it out and make it work, some more successfully than others. Some companies support that, some don't ... some always have, and some never did.

    But this is not just about the kinds of companies for which we work. It also is about the kinds of lives we wish to lead. And I think it is a positive thing that this week's Amazon workplace story has created so much awareness and conversation.

    Published on: August 19, 2015

    Variety reports that Jared Fogle, the longtime Subway spokesman who got the gig when he lost 200 pounds in part by eating the company's products, is expected to accept a plea deal on charges of being in possession of child pornography. The announcement of the deal is expected to come today.

    Subway suspended its relationship with Fogle when last month the FBI raided his home and seized several computers; that followed by two months the arrest of the director of Fogle's nonprofit organization of child porn charges. Now, Subway as officially terminated the relationship, saying in a Tweet that "we have already ended our relationship with Jared and have no further comment."
    KC's View:

    Published on: August 19, 2015

    The Associated Press reports that "Target has reached a deal to pay up to $67 million to settle Visa claims related to a massive 2013 data breach that resulted in the theft of millions of debit and credit card numbers." Neither Target nor Visa have commented on the reported agreement.

    The story goes on to say that "the breach of Target's computer systems compromised 40 million credit and debit card accounts. The hackers also stole the personal information, including names and addresses, of as many as 70 million people, putting them at risk of identity theft.

    "Unlike a $19 million agreement between Target and MasterCard Inc. that fell apart in May, this deal isn't in danger of failing due to a lack of support from affected banks and credit unions."
    KC's View:

    Published on: August 19, 2015

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

    • The Kroger Co. said yesterday that it is establishing "two new supermarket divisions, a Dallas division and a Houston division. Previously, both markets were served as part of Kroger's Southwest division." The Dallas division includes 105 stores in the Dallas/Fort Worth and in the Shreveport and Alexandria, Louisiana area. The new Houston division includes 109 stores in the greater Houston region, as well as stores in Lake Charles, Louisiana.

    "Kroger also announced that Dana Zurcher has been promoted to serve as president of the company's new Dallas division. Bill Breetz, who has been serving as president of the Southwest division since 2002, will continue to oversee operations in Texas and Louisiana for the remainder of the year, and serve as president of the new Houston division."


    • The Chicago Sun Times reports that as part of an ongoing restructuring and cost-reduction plan, Walgreen plans to eliminate about 370 corporate headquarters positions.

    According to the story, spokesman James Graham says that "employees who will be cut will be told throughout the month ... there are no plans for additional staff cuts in the near future."

    Betcha this is doing wonders for the morale at Walgreen HQ ... everybody is going to be watching the door, wondering if George Clooney or Anna Kendrick are going to walk in...


    CNN reports that the number of US Starbucks locations serving beer and wine during the evening hours has grown to 70, with the company "expanding the menu to include booze at coffee shops in New York City, Denver, Miami, the Orlando suburbs and northern California ... The drinks are served alongside dishes that are not the usual Starbucks fare. Small plates include truffle mac & cheese, chicken skewers, artichoke & goat cheese flatbread, meat balls with tomato basil sauce, bacon-wrapped dates, a cheese plate and truffle popcorn."
    KC's View:

    Published on: August 19, 2015

    Got the following email from MNB reader Chris Utz about the expansion of services by the US Postal Service (USPS):

    The Post Office will be delivering fish?  Not to my home.  The term Post Office conjures up an image of a tedious, slow, experience, complete with long lines, but never enough employees.  Standing in a line of 20-30 other people, who also want to get on with their lives, one would love to hear a cheerful: “No waiting at Window Two”  as you can experience this at most successful retail establishments…

    Instead, one trudges slowly forward, down a cold granite hall, hoping for the bored employee to utter a dismissive: “NEXT”.    This  Monolithic Government Service Experience is replicated when trying to get a Social Security Card, or perhaps license tabs at the DMV.

    I once asked a Post Officer if I could trade part of my 100 stamp roll of old Postage Stamps for properly valued stamps as the price had changed.  “We don’t take stamps back was the rejoinder.  He ended up selling me some 1, 2  and 4 cent stamps so I could add them to an envelope.  I still have most of them.

    Offering More? Better? Different?  I think not.  I know that there are many hard working friendly postal employees doing carrier delivery, but I would NEVER trust the US Post Office to deliver something as perishable as seafood.  I want my fish FRESH please.


    No question that the USPS has a long way to go, both in terms of culture and infrastructure, for it to achieve the service levels that its leaders are talking about. And fish wouldn't be the place where I'd start. But ... it seems to me that this is the direction it needs to take if it has any hope of relevance in the new world.




    Got an email from another reader about Blue Bell's return to ice cream coolers in select markets following the listeria outbreak that caused all of its products to be recalled:

    The issues at Blue Bell were on-going and ignored. Listeria, in the dairy world is a daily threat.



    On another subject, MNB reader Jim DeLuca wrote:

    My local business paper, Rochester Business Journal, ran a question about the new SEC rule about corporations being required to publish the pay ratio between the CEOs and the basic line worker.  A majority of voters thought transparency would be good.  However, most of the published comments were negative; that it was just another intrusion into private business.  Of course many people jumped in with why not do this for lots of different sectors.  One person included the military in his comment.  So I took about 2 minutes to look up that data and learned that a 4 star general makes 13+ times as much as a private.  Certainly the benefits for rank include better housing and maybe better military medical.  Plus extra pay is due for combat, paratroops etc which is also probably more for higher rank.

    But overall I was amazed to learn that the pay ratio leaders of the "employees" who keep our country safe, who are expected to risk their lives and the lives of their "employees" was so low; probably less than the CEO/employee ratio from back in the 1960's...


    Let's say that the lowest-level person in an organization made $50,000 a year. In that organization, by your reckoning, if it played according to the same rules as the military, the CEO would make $650,000.

    That sounds like a lot of money to me. Now, I have no problem if the CEO also had stock options that would reward him or her if the company does well.

    But how many CEOs make far more than that and don't get the job done, don't leave their companies better off than how they found them?

    Robert Reich, who is quoted in a story above, recently wrote another column in which he said, "Consider that in 1965, CEOs of America’s largest corporations were paid, on average, 20 times the pay of average workers. Now, the ratio is over 300 to 1."

    I was pointed in the direction of this quote by MNB reader Tom Kroupa, who also referenced in his note a previous email by an MNB user defending CEO pay:

    I cannot believe that MNB reader Cynthia Fisher can justify the pay for CEO's. Of course we agree it should be higher, but the ratio is much higher today than ever, and the employees in most companies have not been sharing in the profits. Dare I say that it is rigged for the top income earners, and the  Cynthia Fishers of the world make excuses to justify their high pay. The worst argument is that CEO's create jobs. Its the employees who create jobs via their own purchasing power. Even Henry Ford knew that when he increased his employee pay to $5/day over 100 years ago.

    Again, let me be clear about this. I have less of a problem with CEO pay than I do with highly paid CEOs who make it their mission to drive down employee pay. I think that creates a dangerous financial and cultural dynamic.
    KC's View: