business news in context, analysis with attitude

Published on: September 15, 2015

by Michael Sansolo

You’ll come to see that a man learns nothing from winning. The act of losing, however, can elicit great wisdom. Not least of which is… how much more enjoyable it is to win. It’s inevitable to lose now and again. The trick is not to make a habit of it.
- A Good Year

We’re constantly told silly things about the importance of winning when the truth is that losing matters much more. It’s how we learn from losing, how we recover and how we improve for the next time that really matters so much.

There have been two industry stories of late - the long slow death of A&P and the fairly sudden demise of Haggen - that must focus us all on losing and hopefully are causing all of us to think about what could and should have been done differently.

The A&P saga defies easy summation. This was a company that once commanded the landscape from the Atlantic to the Pacific with a store design that was a recognizable part of the American landscape. Its demise reminds us that even giants don’t live forever if they don’t constantly change and align with shifting values.

That’s a lesson to all of us struggling to understand the world of changes in our new electronic age. Sitting on the sidelines or hoping the change goes away is never an option for success. Times change and we have to change with them.

But for sheer spectacle it’s hard to top what’s happening out west with Haggen though it’s also hard to imagine that anyone is really surprised. We’re all told to pursue audacious goals, but we also need remember the sage advice from the movie Jurassic Park - that just because we can do something does not mean we should do something.

It was a staggering goal for a company to grow so much - from 18 to 164 stores, by acquiring an enormous number of units made available when Albertsons bought Safeway - virtually overnight. No doubt careful thought was given to the economies of scale the new company would enjoy without similar questions being asked about the challenge of running a multi-regional company. The company had no history of doing anything close to what it was undertaking, had no disciplines in place to master the intricacies of the endeavor.

As one savvy retail executive told me about the situation, “They behaved as if this would be easy, but there is no easy button and never is.”

That, too, is a powerful lesson. We have to dream big and have those huge goals. We need, as A&P shows us, to take chances to remain relevant. At the same time, we need to have a sense of what we can and cannot do.

A while back a successful family retailer told me the hardest growth for any business is simply adding a second store. With one store the owner-operator can watch everything personally, but with a second he or she suddenly needs a system. The owner needs a trusted team who can run everything at peak level even when the boss isn’t around.

In other words, the company needs a culture that can manage the growth. Jumping to 164 stores from 18, as Haggen did, just puts the entire equation on steroids.

A&P and Haggen are two sad stories, yet it would be even sadder if others didn’t harvest the lessons from them. After all, losing isn’t a sin. The sin comes from making a habit of losing or wasting its lessons.


Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . 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.

Published on: September 15, 2015

by Kevin Coupe

There is a fascinating and Eye-Opening piece in the Houston Chronicle that casts a critical eye on Blue Bell, the iconic Texas ice cream brand that was forced to conduct a national recall of all its products when some were found to be tainted with listeria that originated in its plants.

The company has finally got its ice cream back in coolers, and to this point the consuming public seems to be receptive ... but the Chronicle writes that the company's food safety issues may have been more systemic than accidental.

According to the story, "In interviews with the Houston Chronicle, more than a dozen former employees of Blue Bell's flagship Brenham plant described a company fighting to keep up with its growing customer base while sanitation and safety slipped. Cleanup workers regularly ran out of hot water, making machinery susceptible to pathogens and allergens. Reused packaging brought grime into the factory. Equipment went without safeguards for years, and several workers lost parts of one or more fingers.

"The 14 employees have a combined 213 years of experience on the production lines. Their accounts are bolstered by the limited information reported by the Food and Drug Administration, including details about a contaminated machine that kept cranking out products even as a listeria crisis deepened. They're also backed by an Occupational Safety and Health Administration investigation that blasted the company for failing to protect workers."

Blue Bell responded to questions about the accusations with the following statement:

"We are a family at Blue Bell and we have always valued all of our employees and want them to feel safe and enjoy working here. Our employees are our company's greatest asset and many have spent their entire careers with us. Workplace safety, sanitation, and employee training remain our highest priorities as we continuously work to improve."

Which sounds like the company really didn't want to address the accusations.

The MNB reader who sent me the article noted that "what was going on inside Blue Bell was much further from the 'little creamery in Brenham' image of the company. I would imagine even some of the most die-hard Blue Bell fans might be cringing a bit."

And, he added, "Lesson? The push for bottom line and increased production, when it disconnects from common cores values around the welfare of those inside and outside the company, rarely creates a long-term benefit."

In other words, real values have to match so-called brand values.

Which certainly is an Eye-Opening lesson for any retailer or manufacturer.

You can read the entire Houston Chronicle piece here.

Published on: September 15, 2015

Target announced this morning that as part of Instacart's new expansion into Minneapolis, it will team up with the grocery delivery service, giving consumers there the ability to "order food, household, health and beauty, pet and baby products from Target and have them delivered straight to their doorstep in as little as one hour."

"Target wants to serve guests on their terms, however they want to shop with us,” says Jason Goldberger, president of Target.com and Mobile.

Target also said that the deal with Instacart will roll out to additional markets; Instacart has pledged that the online prices it charges will match the retailer's in-store prices.

In addition to teaming with Target in Minneapolis - its 18th market - Instacart said it will provide delivery services there to customers who want to shop at Whole Foods Market, Costco, Petco stores, Cub Foods, Wedge Community Co-op, Lakewinds Food Co-op and United Noodles.

According to the announcement, "No Costco membership is required" for Instacart shoppers. "Customers who are already members of The Wedge and Lakewinds Co-ops can enter their member numbers when they order via Instacart to ensure that purchases are applied toward their patronage refund. Instacart has hired around 150 shoppers - about 100 of those part-time employees - to kick off its Minneapolis operations with more to come as the service grows in the area."

Published on: September 15, 2015

A company called Lifecycle Marketing is out with a study suggesting that "retailers are not tapping into the full potential of their available customer data in order to identify and engage their most valuable customers," despite the fact that they "have more online and offline data about their customers at their disposal."

The study also found that "42 percent of retail store associates know very little -- if anything -- about their most profitable customers in order to engage with them effectively. Another quarter of respondents admit that employees only have high-level information on customers such as name, address and past purchases."

In addition, the study says, only "13 percent of store associates currently have access to customer data to ensure a successful in-store customer experience," only 43 percent of retailers leverage social media for customer service," and just "36 percent of employees use past purchase history to personalize their interactions with customers."

The study was conducted by Retail TouchPoints, which surveyed nearly 200 retailers "to find out more about their clienteling strategies and how they utilize data and technology to engage customers at the store level."

Published on: September 15, 2015

Crain's New York Business reports that John Catsimatidis, the billionaire owner of the New York City-located Gristedes supermarket chain, plans to spend $10 million to renovate the chain's 30 stores, with the goal being "to lure back New Yorkers who swore off the stores years ago for the more appealing confines of Fairway or Whole Foods."

According to the story, "Gristedes’ turnaround effort comes at a time when the city’s supermarket scene is changing fast. Longtime rival A&P filed for bankruptcy in July, and on Sept. 24 its last 26 stores in New York City will be auctioned off to the highest bidder. Several area A&P-owned supermarkets, such as Food Emporium, Pathmark and Waldbaum’s, have already been acquired in recent weeks by Key Food or Stop & Shop - and the ones that haven’t been sold are expected to disappear ... Growth is strongest at newcomers Whole Foods and BJ’s Wholesale Club, which have seen 30% jumps in New York sales during the past two years, while Fresh Direct reportedly generates $500 million in revenue. Business has also been strong at standbys Key Food and Associated Supermarkets, which are networks of independently owned grocers that focus outside Manhattan."

But, the story says, "the chains that have served Manhattan for decades are fighting for their lives, squeezed by rising rents and falling sales as shoppers flock to newer stores nearby. D’Agostino’s sales have barely budged during the past two years. Sales at Gristedes’ 29 Manhattan stores dropped 7%, to $191 million," which Crain's says is a worse decline than at A&P.

Published on: September 15, 2015

• CNBC reports that RBC Capital Markets analyst Mark Mahaney is saying that Amazon "can grow revenue more than the market expects thanks to its ballooning Prime membership ... The firm now believes Amazon has 50 million U.S. Prime subscribers and 60 million to 80 million global subscribers ... That's important because the longer customers stick with Amazon Prime, the more they spend, Mahaney said. RBC's survey indicates that 49 percent of first-year Prime members and 68 percent of year-four subscribers spend at least $800 on Amazon each year."

Amazon does not make these figures public.

Published on: September 15, 2015

The New York Times reports that George Zimmer, the founder and recently ousted CEO of Men's Wearhouse, has launched a second men's clothing business to compete with his old company.

The new venture is called Generation Tux, described as "a website for tuxedo rentals ... Using mostly his own money, with small investments from friends and other investors, he has already spent more than $6 million to have 30,000 tuxedos made, construct an elaborate website and prepare a big distribution warehouse.

"Those 30,000 tuxes - along with accompanying shirts, cummerbunds, shoes and cuff links - are sitting in a 200,000-square-foot warehouse in Louisville, Ky., waiting for the online orders to start rolling in. Also in the warehouse: an army of tailors ready to make adjustments, and a dry cleaning business that Mr. Zimmer had constructed to service the inventory."

This is Zimmer's second post-Men's Wearhouse entrepreneurial effort. The first, called zTailors, is designed to connect tailors who are willing to make house calls with consumers who need their wardrobes refitted ... and is described by Zimmer as like "Uber for tailors." So far, though, zTailors has not caught on; it has sales of about $200,000 a month, but is losing millions of dollars a year.

He has higher hopes for Generation Tux. The Times writes that "Men’s Wearhouse rents more tuxedos than any other company, and has found it to be a surprisingly lucrative business" - it has annual revenue of more than $400 million a year just from tux rentals, but has not yet offered the service online.

Zimmer, who was well known to consumers from his appearances on Men's Wearhouse commercials, tends to minimize the competition with his old company. “We’re not trying to go after them,” he says. “They happen to be in the way.”

Published on: September 15, 2015

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

• The Indianapolis Star reports that "Marsh Supermarkets will open kiosks stocked with Indiana-grown food in 50 of its groceries across the state.

"The kiosks will sell as many as 100 Indiana products, from raw vegetables to processed foods. Marsh will sponsor the kiosks with the Indiana Grown Initiative, a new state program that promotes Indiana foods. The kiosks should make it easier for shoppers to buy locally sourced ag products," according to the initiative.

I hope they do better than Tesco has done in the UK, where the British retailer has come under fire for creating a section called "the best Scottish lamb in season," but which includes lamb from New Zealand. Critics call it deceptive, but Tesco says that the signage makes no claim that all the lamb is Scottish, and that all lamb products are "clearly labeled" with their country of origin. It strikes me that once a company is on the defensive on an issue like this, it is really difficult to change the narrative ... retailers need to be consistent, transparent and accurate ... and two out of three, IMHO, ain't good enough.


• Fortune reports that "subscribers to popular streaming services, including XBox Live and Spotify, have filed a lawsuit that claims the city of Chicago’s controversial tax policy on digital entertainment is illegal ... The controversy turns on Chicago’s recent decision to extend its existing 9% 'Amusement' levy, which applies to events like shows and baseball games, to a wide range of online services."

The story goes on: "In a claim that may have national significance, the lawsuit also says the Chicago streaming tax violates the federal Internet Tax Freedom Act, which forbids states and cities from imposing discriminatory internet-only taxes. Specifically, the Chicago subscribers claim the tax is illegal because it treats streaming differently from DVD-by-mail services and also imposes a higher rate than various live forms of entertainment."

Published on: September 15, 2015

• The Wall Street Journal reports that Kroger has promoted CIO Chris Hjelm to executive vice president, charged with overseeing its 84.51 Degrees subsidiary, which is the renamed Dunnhumby analytics business.

Published on: September 15, 2015

In a piece yesterday about online retailer Jet, I wrote:

Some of the early metrics for Jet may be positive, but it has a long way to go to prove it can go head-to-head with both Amazon and Walmart, each of which is willing and able to go to the mattresses against this interloper.

Which prompted MNB reader Lou Scudere to write:

I have to tease for a moment ... unless one has read "The Godfather," or seen the movie, (though I don’t recall if the term was actually used in the movie) I wonder, other than contextually, how many younger readers actually know what “go to the mattresses” really means. It struck me because the other day I made a comment to someone about “doing an OJ through the airport” and was met with a blank stare. At which point I realized the person I was speaking to probably was not yet even a gleam in his father’s eye when OJ did his Hertz commercial. LOL.

Hell ... the OJ Simpson murder trial was 20 years ago ... there are a lot of young people who don;t even remember that, much less the Hertz commercial.

My feeling about these things is that I need to be aware of when I'm making cultural references that young people don't get. (This happens in my PSU classes all the time. I make the reference, they look at me like I'm old, I explain the reference and we keep moving...) But it doesn't mean I'm going to stop making the references.

In part, it's because these are the allusions with which I am most comfortable. And in part, it's because if people don't know The Godfather, they should. (I've been known to send relevant DVDs to people who have significant holes in their cultural education.)

It isn't just movies, by the way. I quoted Raymond Chandler yesterday, fully aware that the guy who, to me, is one of the great American novelists, may not be on top of many current reading lists.

I don't care. He should be. And I don't mind doing a little evangelizing.




Responding to yesterday's piece about the competitive and often unforgiving Southern California market, MNB reader Larry Ishii wrote:

I have grown up here and spent 48 years in the grocery industry in the Los Angeles market, starting as a “box boy” and eventually having my own consulting firm and I have seen plenty of proverbial “water” go under the bridge.

I can remember when Albertsons bought the independent All American Markets to enter the marketplace. I have seen the many independent and major market banners disappear: Cole’s, Hiram’s, E.F. McDonald, Smith’s, Alpha Beta, Lucky, etc.

When I became a buyer and worked for four of the major chains here, it seemed that the L.A. market was the center of the grocery marketing “universe”. Every retailer wanted to have stores here and every vendor wanted to sell something here.

But everything changes and L.A. is no longer that center of buying activity but what has not changed is the allure L.A. has to retailers outside the marketplace. Throughout history, whether you were an explorer, a fur trader, or merchant, Los Angeles has been a place to be and probably always will.

In so many ways, despite its challenges, Southern California remains the promised land for many. I spent three years in college there, and continue to love it ... though I also bear in mind the words of novelist Ross Macdonald, who know the place better than almost anyone, and who once wrote, "There was nothing wrong with Southern California that a rise in the ocean level wouldn't cure."




I want to follow up on an exchange from yesterday's MNB...

I noted that when commenting last week about a McDonald's story, I cracked wise on one particular subject:

"The company said in its statement that animal welfare is a top priority for the company. I'd prefer that McDonald's think more about human welfare and make a better hamburger..."

Which led one MNB user to write:

Seriously? I can't believe you just wrote that. Humans have a choice in whether to consume McDonald's products. Animals don't have any choice regarding their living conditions. If we're going to eat them the least we could do is treat them humanely while they are alive and sacrifice them as humanely as possible when their time comes. Do you have pets? Probably not. That would explain this careless comment. $10 says you get a lot of heat on this one.

I pointed out that this actually was the only comment I got ... maybe because most folks realized that I was kidding, that it was part of my ongoing and probably wearying anti-McDonald's schtick.

Two things.

We have two dogs. Love them both. The oldest, a yellow lab called Buffett, has her large and aging body wrapped around my feet even as I write this, just as she does pretty much every morning. (The other lab, Parker, probably is in the other room scavenging for a cookie.)

Second ... regarding McDonald's. yesterday, our car broke down on the Bruckner Expressway while we were driving home from New York City. Pulled into a parking lot and called for assistance. There happened to be a McDonald's there ... and so, while we waited, we indulged.

I have to tell you, the new Buttermilk Chicken sandwich doesn't suck. It probably is awful from a nutrition perspective, but I ate it, along with some fries, and I liked it. (And I don't even hate myself for it.)

One MNB user responded yesterday:

Okay, maybe that was a bit harsh.   You weren’t exactly joking about the poor animals’ suffering… more like being unnecessarily dismissive of it in favor of your schtick.

Sad, but true.

And another MNB user wasn't amused:

I didn’t write in immediately (wish I had), but I certainly disliked your comment immediately.    Comparing the suffering of a human being made to endure the horror of eating a substandard burger to the horror that animals go through is not cool.   Okay, it was a joke, but it was a tasteless, unfunny and offensive joke.

And “I was kidding” is never a defense!  If it were, then every racist, sexist, etc. would be granted an automatic pass because,“Hey, it was a joke!”

In your response you didn’t address the reader’s point that animals deserve better from us.   You talked about how much you love your pets, and how tasty the chicken sandwich was… with no apparently realization that loving one and giving them cookies but eating the other and joking about their suffering is a pretty arbitrary way to regard helpless animals.

To be clear, I wasn't coming out in favor of animal cruelty. I wasn't even joking about animal cruelty. I was joking about McDonald's priorities ... and how decent food isn't as high on the list as it should be.

I only mentioned my dogs because the original accusation was that I probably didn't have pets.




Finally, this comment about Walmart's new willingness to mimic other retailers and take promotional fees and slotting allowances, from MNB reader Herb Sorensen:

On of the more rapacious grabs for promotional fees was the old Walmart TV.  That program was utterly worthless to the suppliers, but brought a lot of cash to Walmart and their company that managed the program in the stores.  And yet, industry meeting after industry meeting heard glowing reports from paid endorsers.  Walmart, like A&P before them (1st billion $$$ business) is now generating close to 1/2 trillion $$$ of business - with MASSIVE "parked capital."  Meanwhile, Amazon, super efficient with their own capital, has passed them in market capitalization.

It will be a lot easier for the super efficient Amazon to build needed small, efficient neighborhood stores, than for Walmart to learn and meld super efficient online with small efficient neighborhood stores. Walmart is toast, and it is just a matter of time.  Fundamentals always win, in time.

Published on: September 15, 2015

In a Monday Night Football doubleheader, the Atlanta Falcons defeated the Philadelphia Eagles 26-24, and then the San Francisco 49ers beat up on the Minnesota Vikings 20-3.