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    Published on: September 8, 2015

    by Kevin Coupe

    When I go to stores, there are certain things I look for.

    One, differentiation - an effort to create a format with a differentiated advantage.

    Two, relevance - a realization that a store has to cast a very specific net, targeting customers specifically and effectively. No lowest common denominator thinking here.

    And finally, I love stores that know how to tell a story. They are not just a collection of departments and products, but you get a sense of the guiding intelligence behind them ... one that lays out a narrative for customers, employees, even business partners.

    This isn't to say that all stores need to have these elements, or that stores cannot be productive without them. But I think that stores are better with them than without them.

    And, I found all three elements last Friday when I ventured up to the Allston neighborhood just west of downtown Boston to see the new "bfresh" concept created by the new Fresh Formats division of Ahold.

    bfresh is the second small-store iteration created by Fresh Formats, the first being a 3,000 square foot unit in Philadelphia; this new one is 10,000 square feet, and is located in a densely populated, competitive marketplace - there are several stores (including Trader Joe's and Whole Foods) within a mile of bfresh, and 150 restaurants within a half mile.

    The great thing about bfresh, I think, is the fact that it seems so specific to the place in which it finds itself - a neighborhood that is occupied by millennials in their first post-college apartments, as well as aging baby boomers moving back to the city after raising their kids in the suburbs. From the first moment one walks into bfresh, the overwhelming sense is of a food-centric store that is going for something different - something with style, some imagination, and a sense that something "epic" can be achieved even within as relatively small footprint.

    You see - and smell - a largely scratch bakery that makes you hungry. There is a bank of foodservice stations - offering breakfast, salads, pizzas, soups, sandwiches - that has been inspired by La Place, a Netherlands-based company that handles catering duties at Google's New York offices. (La Place is partnering with bfresh, though it is not running the foodservice side of the business.) It has a terrific produce department, full grocery selection (tons of brands though not in every size), and a strong service meat and seafood counter. (You can see pictures of the store at left ... the company had a soft opening on Friday, with a grand opening planned for September 18.)

    It is all part of an avowed effort to create what the company calls an "epic" approach to produce, foodservice and staffing ... and in this last case, bfresh is hiring for personality as much as retail experience. In fact, employees are auditioned as much as interviewed - the company wants to create a highly engaging and engaged sales floor.

    The bfresh store even has a "culture ninja," who is charged with making sure at every level - employees, community affairs, even the music played in the store - the company is creating a fresh and consistent culture and retailing DNA that distinguish it from other retailers (including those in the Ahold family).

    There's even irreverence - the best sale prices are marked as being "Kickass Prices." No stodginess here.

    The concept will continue to evolve. Scott Miller, the company's "operations oracle" (I love that the company is eschewing traditional titles for job descriptions that are more playful and evocative), tells me that there are plans for introducing e-commerce, giving customers the ability to order and pay via their smartphones so they can simply pick up their orders when they arrive at the store. And while this bfresh is in an urban neighborhood, the next iteration will be in Fairfield, Connecticut - an assiduously suburban location that is a bedroom community for New York City.

    No plans have been set beyond that, though I imagine that the Fresh Formats folks must have their eye on other locations that could suit them in terms of both geography and demography.

    It will be interesting to see how Fresh Formats develops. I have to believe that if it continues to tell a specific, relevant and differentiated story ... finding new ways to evolve a culture and engage with shoppers ... this is likely to be a winning story.

    bfresh isn't the first small-format urban store to be created by a major retailer to take advantage of current shopper trends. But it is a strong entry, and I have a lot of confidence in its ability to deliver value as long as it remains consistent with its stated values.

    KC's View:

    Published on: September 8, 2015

    by Michael Sansolo

    Longevity is rarely celebrated in these days of people switching jobs with increasing regularity. But given that we are about to witness some historical longevity - on Wednesday Queen Elizabeth II will become the UK’s longest serving monarch ever - it seems an appropriate time to remember and celebrate a very different monarch.

    Twenty years ago (this past Sunday, that is) baseball player Cal Ripken Jr. competed in his 2,131st consecutive game. In the process he provided us with ample lessons to ponder, celebrate and possibly imitate.

    First: never say never again! In setting his record, Ripken bettered the legendary Lou Gehrig whose own record for consecutive games was widely considered an unbreakable record. Only Ripken broke it and then played in another 500 straight games.

    The unthinkable always happens, whether it concerns a sports record or anything else in life. Remember when Apple was thought to be a dead company walking, and when A&P and Sears were believed to be unbeatable retail giants. The examples could go on beyond the length of this column. Unthinkable things are constantly happening.

    Second: Never underestimate the importance of showing up. As one article on Ripken’s record stated, the streak was considered a pedestrian record in that it only involved the baseball equivalent of good attendance. Except it didn’t.

    Let’s remember that Ripken wasn’t playing in the Little League, where showing up means you play and get a snack and a trophy. He was in the Major Leagues - a place precious few athletes ever reach. And he needed to perform at a high level throughout that entire streak to ensure his presence in the line-up every day.

    Even if you aren’t a baseball fan, you can get a sense of the enormity of Ripken’s achievement through two numbers. In all of baseball history only one player has played in more than half the number of games Ripken played consecutively and that was Gehrig. And the current consecutive game leader in baseball is below 200 games, less than 10 percent of what Ripken did.

    But this goes way beyond baseball. Woody Allen used to joke that 80 percent of life is just showing up, yet far too many never even achieve that. Showing up in whatever you do means coming prepared to do your best (a la Ripken), dealing with hardship or whatever other challenges come your way.

    This isn’t to say we should encourage people to come to work ill or suggest that mothers return from maternity leave immediately after leaving the hospital. We need understand that there are times people should be absent and that’s not a bad thing.

    Rather, I’d suggest we salute the attitude of coming ready to perform each day. We need to attend meetings with an attitude of being present and participating. And we need to understand the importance of being there or just showing up, knowing that our presence is the first step toward excellence, improvement or whatever you need.

    After all, the odds are you won’t be born into royalty and get to celebrate longevity that way.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
    KC's View:

    Published on: September 8, 2015

    Bloomberg reports this morning that Google plans to begin testing a fresh food and grocery delivery service in San Francisco and one other US city before the end of the year.

    The service will be run through the company's Google Express business, the story says, and will partner with, among others, Whole Foods and Costco. It will put Google into even more direct competition with Amazon, as well as with services such as Instacart and retailers that operate their own e-grocery businesses. Not to mention Jet, which is trying to establish itself quickly as a major e-commerce player.

    According to the story, "Google is investing in delivery services for homes and businesses as it seeks to lure more traffic to its websites. The move puts the company in more direct competition with Amazon, which has rolled out its Fresh Direct service in several U.S. cities. In April, a report showed the e-commerce giant was the lowest-cost among rivals in New York. Online groceries are a $10.9 billion industry in the U.S., and the market is expected to grow 9.6 percent annually through 2019, according to a December report by IbisWorld."
    KC's View:
    This should not be a surprise to anyone paying attention to the emerging and evolving competition between Amazon and Google, which almost have to fight with each other for users' eyeballs, attention and time. People's focus in a lot of ways is the most perishable and precious of commodities, and when companies like Google and Amazon battle for it, they are trying to create the ecosystem that will envelop their users, giving them little reason to go elsewhere for what they need.

    This is a throw-down to the likes of Instacart - which also does business with the likes of Whole Foods and Costco, by the way; it'll be interesting to see if retailers decide to make choices down the road. If so, those decisions should be keyed to which service provider is more representative of the retailer's brand equity and which one has the greatest economic advantages. (I find myself wondering if this is the moment that Instacart has been waiting for, when Google might decide to acquire it. I have no idea of it is a good fit, but it seems at least a possibility...)

    This also is a throw-down to every retailer that is in the e-grocery business, as well as to those that are not. Google has enormous penetration, and if it can make this work and scale it up, then it could be a potent competitor in the supermarket space. If I were a retailer, I would be thinking about the words of Samuel Johnson...

    "When a man knows he is to be concentrates his mind wonderfully."

    Published on: September 8, 2015

    The Hill reports that the US Food and Drug Administration (FDA) has submitted final food safety rules required by the bipartisan Food Safety and Modernization Act (FSMA) to the Federal Register, which will publish the rules for public review any day now.

    The story notes that the final rules "will require food manufactures to implement preventative controls to minimize the risk of contaminating food when it’s manufactured, processed, packed or held by a facility ... The agency has until Oct. 31 to issue its final standards for produce safety and a final rule to create a foreign supplier verification program, which are both regulations required by FSMA."
    KC's View:
    This is very serious stuff, and precisely what experts in this area have been waiting for - the final rules with which people and companies up and down the food chain will have to comply, or face significant sanctions, fines and possible even jail time for senior executives who are found to be culpable for not following the rules. So attention must be paid...

    For a moment, let me do something that I'm very careful about doing here on MNB ... which is to talk about a sponsor within the context of editorial. But in this case, there is a direct connection, and I want to be both transparent and informative.

    ReposiTrak, which has created automated information management technology that allows companies to do the things necessary to comply with evolving FSMA regulations, is a longtime MNB sponsor ... and it so happens that this morning, ReposiTrak is launching a new, five-part series of videos designed to help you begin the process of figuring out if you are prepared for FSMA. You'll see the first of those videos elsewhere on MNB this morning, and I hope you'll check it out; it was my pleasure to produce and host these videos, a task I warmed to because I think this is a serious issue that requires an industry-wide focus.

    Published on: September 8, 2015

    The Orlando Business Journal reports on a recent conference of the International Council of Shopping Centers (ICSC) at which Jim Sud, executive vice president of growth and business development at Whole Foods, offered a preview of what the company's new "365" stores will be like.

    The story says that "the format will be geared more toward millennials, heavy in technology and social media tools, things the company believes will appeal to that generation. In fact, Whole Foods as a company overall is investing more into technology, with a focus on offering more of an interactive in-store experience, Sud said.

    "Some of the new stores will be ideal for underserved grocery markets, where lower-income residents don’t have a lot of options when it comes to fresh food. 'There’s a perception that Whole Foods only caters to wealthy clientele, but we see customers who are very high end to those who come in and spend what looks to be their last dime,' Sud said. 'Food deserts — where there’s not a supermarket within two miles — obesity rates [are higher]. We want to be able to provide those residents access to fresh, healthy foods.'

    "The store sizes will range 25,000-35,000 square feet, which is well below Whole Foods Market’s sweet spot of about 45,000-50,000 square feet. Though the smaller stores won’t have enough space to offer the 'full Whole Foods offering,' 365 will be more focused on value, Sud said."

    The story reiterates that Whole Foods "plans to open its first five in 2016 and double that number in 2017."
    KC's View:
    I think most of us are curious to see what the new 365 stores look like ... mostly because in some ways, the description of the format almost sounds like the company has developed a checklist of the things it thinks will attract young people, and is developing the format to satisfy that checklist rather than developing the format in a more organic - pun intended - way. (It sometimes seems as if Whole Foods invented 365 in part to change the conversation away from some of the more negative stories that have plagued it.)

    But I don't want to prejudge ... the folks at Whole Foods are very smart, and I try not to underestimate them.

    Published on: September 8, 2015

    Fresh Market announced last week that it has hired Richard Anicetti, the former CEO of Food Lion, to be its new chief executive officer.

    The Wall Street Journal reports that he succeeds interim CEO Sean Crane, who stepped up from the COO job when president/CEO Craig Carlock left the company last January.

    "Mr. Anicetti was an executive at Hannaford before joining Food Lion in 2000 as chief operating officer," the Journal writes. "He was Food Lion’s CEO from 2002 to 2010 and served as interim CEO of 99 Cents Only Stores during 2013."
    KC's View:
    I've always liked Anicetti a lot, and have found him to be a smart, tough, focused executive - Fresh Market has some significant challenges, but it is hard to imagine anyone better for figuring out how to tell the company's story in a way that is both effective and efficient. I look forward to seeing what he does with the company.

    Published on: September 8, 2015

    The Bergen Record last week reported that lawyers for the Great Atlantic & Pacific Tea Co. (A&P) are "asking the Bankruptcy Court to approve some $5 million in retention payments to 495 executive and management employees to prevent them from leaving their jobs while the supermarket company is being sold and dissolved ... A&P plans to give executives and managers payments ranging from $125,000 to a few thousand dollars, with the average payment being $10,000. A&P did not identify which employees would receive payments in court papers filed with the U.S. Bankruptcy Court in White Plains, N.Y., late Tuesday night."

    A&P, the Record writes, says that the payments are necessary because executives are "'resigning at an escalating rate,' and that it has lost 54 top-level employees since its July 19 bankruptcy filing, including its chief operating officer and the director of deli and bakery."
    KC's View:
    Hell, why not? It seems entirely appropriate that executives who have been steering the ship get retention bonuses after they've hit an iceberg ... these are the same folks who probably would make sure that it would be women and children into the lifeboats last.

    Published on: September 8, 2015

    UK-based Tesco announced that it is selling its South Korean Homeplus Group business to a consortium led by the Asian private equity group MBK Partners for the equivalent of more than $6 billion (US).

    "This sale realizes material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet," Tesco CEO Dave Lewis said in a prepared statement.

    In other words, experts say, if the sale is approved by regulators it will help Tesco retire debt and put its remaining businesses on a more secure footing.

    Of course, the list of remaining businesses may get a lot shorter. Bloomberg reports that Tesco "is also considering divesting its central and eastern European operations to further reduce debt, according to three people familiar with the matter.
    While the company is discussing options with advisers, no final decision has been made..." Selling off these operations, the story says, could generate close to $3 billion for Tesco.

    Bloomberg notes that "Tesco’s presence in central Europe dates back 20 years. The company entered Hungary in 1995 and has grown to become the country’s third-largest employer. In 1996, the company opened stores in Poland, now its largest market in the region, as well as in the Czech Republic and Slovakia. Turkish operations began in 2003."

    In addition to selling off retail operations, Tesco already has sold off its share in Dunnhumby's US and is said to be peddling what remains of its data analysis business.
    KC's View:
    Call Tesco the amazing shrinking retail chain.

    The Wall Street Journal writes this morning that these moves represent a significant "about-face for the battered supermarket chain, which under former Chief Executive Terry Leahy embarked on an aggressive expansion plan, pushing from five countries into 13."

    There certainly is enough blame to go around, but I tend to think that when the case studies about Tesco are written, Leahy will be the one who shoulders most of the blame.

    Published on: September 8, 2015

    Tech Crunch reports that DoorDash "is partnering with 7-Eleven to deliver products to DoorDash users beyond its typical restaurant deliveries ... DoorDash is first enabling those deliveries in Chicago, Los Angeles and New York. Washington D.C. and Boston are the next cities in line for the launch, DoorDash CEO Tony Xu said."

    According to the story, "DoorDash is not the only company to work with 7-Eleven. Postmates had actually worked with the company prior to DoorDash beginning deliveries from 7-Eleven, but the two companies serve different cities — with Postmates in San Francisco and Austin ... DoorDash has experimented with other types of stores — like delivering groceries — in a few markets, but they were all very brief tests, according to the company."
    KC's View:
    See my commentary about Google's new grocery delivery service above ... this isn't quite as consequential, but it is indicative of a trend that is being driven by changing shopper needs and priorities, and that competitors need to take seriously.

    Published on: September 8, 2015

    CNet reports that Amazon is "doubling down on its Dash buttons - a set of small Internet-connected buttons emblazoned with brand logos that consumers can click to order new products shipped from the company ... Amazon will now sell a Dash device for $4.99 a pop, but then reimburse customers that money back after their first purchase with the button."

    The story says that Amazon "first started offering its Dash button in late March, but only on a limited basis and at times by invite only. Amazon on Wednesday said it's making the tiny device a more permanent feature, now allowing all its US Prime members to purchase the buttons. The retailer also added 11 more Dash buttons to the mix ... That grows the total lineup to 29 brands, so customers can now set their buttons to order from more than 500 products."

    In other Amazon news...

    The Los Angeles Times reports that Amazon is testing a new Farmers Market Direct program in Southern California, described as a service that "will deliver herbs from Maggie's Farm, Mangalitsa pork from Peads & Barnetts and black cod from Wild Local Seafood — direct to your doorstep with just a mouse click."

    The service is being run in conjunction with a Connecticut-based startup called Fresh Nation, which "has begun delivering farmers market products through Amazon in Los Angeles, Orange and San Diego counties. Amazon is trying the service first in the Southland and will expand to New York City in a few weeks before deciding whether to roll it out elsewhere."

    Farmers Market Direct currently is available only to Amazon Prime Fresh members.
    KC's View:
    It is all about ecosystems ... and Amazon's ongoing efforts to dominate wherever and whenever it can.

    Published on: September 8, 2015

    CNBC reports that while Walmart may be raising employee wages, it also "has been cutting workers' hours to trim labor costs." The story says that "Wal-Mart has asked workers to leave shifts early or take two-hour lunches. The cuts only affect stores that are exceeding their budget for staff and would not affect expanded service quality against the backdrop of the back-to-school season."

    The Christian Science Monitor reports that while labor groups accuse Walmart of being disingenuous in making a big public relations show of raising wages while simultaneously cutting hours, the retailer "has defended the decision, saying that the reduction in hours is happening only in places where managers have overstaffed stores ... The cuts won’t affect efforts to increase staffing, cleanliness, and stocking, and shorten checkout lines, the company said."
    KC's View:
    At some level, I don't find any of this surprising ... Walmart never was going to dramatically increase its labor factor, even with the pay increases, which meant that it was going to look for ways to be more efficient in its staffing levels. (Whether it should have increased its labor expenses and suffered with slightly lower profits is a separate debate.)

    However, if Walmart is just giving lip service to the notion of being more effective, and ends of sacrificing effectiveness at the altar of efficiency, then these decisions will come back and bite it on the rear end.

    Published on: September 8, 2015

    The Salt on National Public Radio (NPR) reports that Chipotle is the subject of a class action suit charging that its claims to not sell any foods containing genetically modified organisms (GMOs) are inaccurate.

    The story says that "'Chipotle serves meat products that come from animals which feed on GMOs, including corn and soy,' the suit says. In addition, the complaint laments the fast-casual chain's sour cream and cheese — from dairy farms that feed animals GMO feed — and its soft drinks, made with GMO sweetener."

    The Salt notes that Chipotle has consistently "disclosed at the bottom of this page on its website that 'many of the beverages sold in our restaurants contain genetically modified ingredients, including those containing corn syrup, which is almost always made from GMO corn.' The chain also acknowledged the 'challenge' of the GMO feed used by its meat suppliers." But, the lawsuit maintains that Chipotle hasn't made any "meaningful steps to clarify consumer misconceptions."
    KC's View:
    I'm a consumer. I understood where Chipotle stood, and what the limitations were. Hard to imagine that Chipotle suffers as a result of this suit (other than the expense of legal fees).

    Published on: September 8, 2015

    • Instacart announced that it is partnering with H-E-B so that "customers in the Austin and Houston areas will now have access to a broader assortment of H-E-B items, all delivered in as soon as one hour ... Instacart also announced ... that it has expanded its Houston delivery area into the Katy and Woodlands areas. Houston area customers will have access to Whole Foods Market, Costco (no membership required), Petco, and H-E-B."
    KC's View:
    I continue to believe that a lot of retailers are partnering with Instacart because they don't have a lot of choice - Instacart shops their stores anyway, damages their brand equity in certain cases, and so companies decide to do business with it so they can exercise at least some control. But I also believe that when these companies develop viable alternatives to Instacart, they'll drop the service like a hot potato.

    Published on: September 8, 2015

    Bloomberg Businessweek reports that Hampton Creek - the company that ran afoul of the US Food and Drug Administration (FDA) for making a product that it called Just Mayo even though it did not include eggs, which regulators say mayonnaise must have - has decided to fight back against what it sees as "stupid" government interference.

    “I think it is stupid we can’t call our product mayonnaise,” Tetrick says. “I think it’s ridiculous. We’re definitely not changing the name.”

    According to the piece, "One reason Tetrick is loath to back down: This is unlikely to be the last time a Hampton Creek product flaunts conventional notions of exactly what’s supposed to be inside a well-known food item. His company makes plant-based egg substitutes, and he wants to upend the global food system by replacing animal proteins with sustainable, cheaper, and healthier vegetable ones. In the next five months, Hampton Creek plans to roll out scrambled eggs, pancakes, waffles, muffins, and other breakfast foods, as well as salad dressings like Caesar and blue cheese. None will contain eggs."

    • The Austin Business Journal reports that "Blue Bell Creameries' frozen desserts got an enthusiastic reception on Monday in Central Texas when the products went on sale for the first time since a listeria outbreak occurred in April." The story says that "lines had formed at some stores early Monday morning as shoppers waited to grab the familiar-looking tubs of ice cream. H-E-B Grocery Co. was limiting shoppers to a maximum of four containers but several stores sold out quickly."

    • The New York Times reports that "as meat companies scramble to eliminate antibiotics from their products to address consumer and regulatory concerns, the federal Agriculture Department has quietly opened a new front in the debate over the use of drugs in the livestock and poultry industries.

    "In the next few months, consumers will start seeing the phrase 'produced without ractopamine' on packages of Organic Buttercroft Bacon from Tendergrass Farms, a company that markets 'natural' and organic meats ... Ractopamine hydrochloride is among a class of drugs called beta-agonists, which are used to add muscle weight to animals in the weeks before slaughter. Animals gain weight while eating less, making them cheaper to raise. By some estimates, 60 to 80 percent of pigs raised in the United States are given the drug."

    The story notes that "the European Union, China, Russia and many other countries prohibit imports of one or more of beef, pork and turkey raised with ractopamine out of concern that its effect on human health is unknown." Now, the US Department of Agriculture (USDA) is making it possible for companies that have sold ractopamine-free products to global markets to now market it as such to domestic customers.
    KC's View:

    Published on: September 8, 2015

    Leon A. Gorman, the grandson of LL Bean who led the transformation of a small store and catalog business into a billion dollar retail entity that has become a major omnichannel presence, passed way last week at age 80.

    Gorman served as president of the company for 34 years, and as chairman for another 12.

    The New York Times obituary noted that Gorman, described as "an accomplished fly fisherman and ardent conservationist (who) donated more than $6 million to the National Park Foundation, the Appalachian Trail Conservancy and other environmental groups and thousands of acres to state parks," lived in the same house in Yarmouth, Maine, where he was raised, despite the fact that he was one of the richest people in the state.
    KC's View:

    Published on: September 8, 2015

    Last week, while on vacation, I wrote a couple of MNB stories about developments at Haggen ... one about the company filing a billion dollar lawsuit against Albertsons for allegedly trying to subvert its ability to compete in the 140+ store sit acquired after the Albertsons-Safeway merger.

    Which prompted one MNB user to write:

    Who would have guessed, you would have paused your vacation to take additional shots at Haggen under the thinly veiled “I have nothing against them” mantra. I also find it humorous you too position your comments so as “not be accused of lying”, but your anti-Haggen bias shows itself in every other sentence….Read your first sentence in KC’s View if you somehow convinced yourself your comments are unbiased.

    I think you would be better served to stop pilling on with the negative, report on facts and share your valued option in an unbiased way….Also curious to see if when Haggen emerges for this, albeit as a smaller leaner company with many hard lessons learned, if you will give them credit for identifying and changing course, or if you will again choose to focus on the negative.

    For the record ... though you may not believe it, I have absolutely nothing against Haggen.  I have no dog in this hunt.  None at all.  I think that from the very beginning I've raised legitimate questions about whether this acquisition made any sense, and whether the Haggen management would be able to make it work.  Based on the numbers that I've seen, I think I was right to ask those questions.  I've seen the internal memos about cash flow and out of stocks, I've had the conversations with staffers and PR people in which words clearly were very carefully parsed so as not to be inaccurate while not being entirely truthful about the reality of the situation.  

    You're right that my commentary has been negative about Haggen's situation and the collective judgement of the people who got the company to this point.  (I don't think I'm alone in that, but on MNB at least, I'm making the comments and I'm signing my name to them.)  The whole nature of commentary is that it requires me to make judgements about situations and be honest about what I see.  Sure, I have a bias .... though you misinterpret it as a bias against Haggen.  In fact, it is just a bias against what I think was bad decision making.

    Also, I think that anyone who has been reading MNB for any length of time knows that if I'm proven wrong on this and Haggen survives as a leaner, more competitive company, I'll go out of my way to give them credit for it ... to be honest, I hope that this happens.  When I've been wrong, I've been happy to admit it.  And I'll do it again.

    I'll even come back from vacation to do so.
    KC's View: