business news in context, analysis with attitude

Published on: October 5, 2015

by Kevin Coupe

The Financial Times reports that more than a dozen appliance manufacturers, including such major names as General Electric, Samsung and Whirlpool, have said they plan to integrate Amazon's Dash Replenishment Service into their products, placing Dash buttons onto products such as washing machines and dryers that will allow consumers to reorder needed and relevant products.

For example, the story says, "next month GE will launch a smart washer and dryer that can automatically reorder detergent and softener from Amazon through its laundry app when it is running low." Liz VerSchure, product general manager at GE appliances, tells FT that the company is "pretty excited about this. As we look to the connected space and the connected home, we are trying to make our appliances help their owners, and make time spent with our appliances more enjoyable.”

The project, FT writes, "underscores Amazon’s focus on the 'smart home' at a time when a range of companies are trying to integrate new connected technologies into consumer devices.

While Amazon, as the story notes, "has a history of investing in new hardware projects and experimental devices that may never see the light of day or, like the Fire phone, be shelved after a brief period," this development suggests that Amazon has made a real commitment to the replenishment business - something that it has long thought could be a key to the creation of an Amazon "ecosystem" that makes it the first, best and even most inevitable option for shoppers. It started with Subscribe and Save, and then, more recently, the company introduced the Dash wand, which allowed people to scan bar codes or use voice recognition to reorder.

Now, with the Dash buttons - which, while Amazon does not release specific figures, must have been generating enough interest and sales to warrant this sort of next step - the company seems to believe that it has cracked the replenishment code.

It'll be interesting to see what develops. It almost certainly will be an Eye-Opener.

Published on: October 5, 2015

Haggen announced this morning that it has filed motions with the bankruptcy court overseeing its affairs, asking it "to approve two separate asset purchase agreements for stalking horse bidder packages," that would sell eight of its stores to Gelson's Markets and 28 stores to Smart & Final.

All of the stores in which Gelson's is interested are in California, in markets that include Carlsbad, Laguna Beach, La Jolla, San Diego, Santa Monica and Thousand Oaks. Two of the stores that Smart & Final is bidding on are in Las Vegas, Nevada, with the other 26 in California.

According to the announcement, "Haggen is seeking a court hearing on October 19, 2015 to hear the Company’s proposed global bid procedures. Parties interested in participating in the sale of stores need to submit an indication of interest by no later than October 26.  The procedures provide for a deadline for submission of bids to purchase some or all of the assets on 5:00 p.m. ET on November 2, with an auction scheduled on November 9.  The hearing to consider the results of the auction will be held on November 24. In the event no auction is conducted for a stalking horse package or if one of the stalking horse bidders is the successful bidder for its package after the auction and the contracts identified in the original bid have not changed, a sale hearing for those stores will be held on November 13 instead.  All dates are tentative and subject to bankruptcy court approval.

"Haggen previously requested approval to begin going out of business sales in the identified non-core locations and will exit operations during the last weeks of November."

For those who may not have been paying attention ... Haggen is trying to recover from its ill-considered decision to grow from an 18-store, Pacific Northwest chain to a 164-store regional chain with stores in Washington, Oregon, California, Nevada and Arizona, by acquiring stores made available when Albertsons bought Safeway and regulators required a divestment of stores for competitive reasons. The vast majority of the stores were unsuccessful when reopened under the Haggen name, with consumers complaining about high prices, out-of-stocks, and a general lack of competitive offerings.

Published on: October 5, 2015

The Portland Business Journal reports that WinCo is converting a former Food 4 Less location into a new, smaller format WinCo store that will serve the Southeast Portland area.

"We've begun doing a few more of these smaller models, as infill projects, and they're performing well," says Michael Read, a company spokesman. "We're looking for infill opportunities that operate successfully without cannibalizing our other stores."

The 55,000 square foot store is said to be one of several smaller formats operated by the company; others are in Washington and Idaho. Most WinCo stores are closer to 100,000 square feet in size.

The story notes that "The store's set to open in the first half of 2016 and will provide a far-closer traditional grocery option for residents in several growing Southeast Portland neighborhoods."

The Oregonian writes that "WinCo currently operates 16 Oregon stores and 102 chain-wide. The grocer opened five stores in its last fiscal year ending last spring, and hopes to open nine this year. WinCo is considering Grants Pass as another possible Oregon location, Read said."

Published on: October 5, 2015

The Wall Street Journal reports that as expected, Walmart announced the laying off of 450 people at its Arkansas headquarters.

“After months of evaluation, we’ve concluded there is an opportunity to better position our Home Office teams to move with speed and purpose,” CEO Doug McMillon wrote in an internal memo.

According to the story, "The reductions include some managers and vice presidents. A Wal-Mart spokesman declined to detail what departments or types of employees are being eliminated."

Published on: October 5, 2015

Aldi announced last week that it "has removed certified synthetic colors, removed partially hydrogenated oils (PHOs) and removed added MSG from all of its exclusive brand food products. "

This announcement, the company said is part of its efforts "to expand store offerings and address customers’ preferences and needs about particular ingredients in their food. With 90 percent of ALDI products being sold under private labels, ALDI is able to ensure that customers have a wide selection of options free of these ingredients and available at the low prices they are known for."

Published on: October 5, 2015

In Toronto, the Globe and Mail reports that McDonald's there "is going upscale, one customized burger at a time. The fast food giant is introducing digital kiosks at its restaurants to allow customers to order premium hamburgers from almost 30 options, including five types of cheese, while adding greeters and servers to bring the food to the table ... It’s part of an array of initiatives this country’s second-largest restaurant company is investing in to sway people to come more often to their outlets – especially at lunch and dinner, when fewer consumers head out to eat than in the past."

The story goes on to say that "the efforts are bound to stir a buzz but the added touches also come with a price. Mr. Betts digitally ordered a $9.26 Angus True Blue & Guac (blue cheese and guacamole) burger with fries and iced coffee (with an extra espresso shot) for a total of $12.46. The custom burger prices at the kiosks are more than 15 per cent higher than those of a regular Big Mac. A burger conceivably can cost as much as $50, depending on the extras."

And, the paper writes, "McDonald’s Canada is spending more than $200-million over the next two years to add the kiosks and extra staff to about 1,000 of its 1,400-plus restaurants. It entails adding 15,000 new jobs to its current 85,000, he said, insisting the plan is not to eventually replace staff with the kiosks."

John Betts, CEO of McDonald’s Canada, puts it this way: "We’re going to turn things upside down."

Published on: October 5, 2015

Fascinating piece in the New York Times over the weekend saying that while "the soda industry is winning the policy battles over the future of its product," the bigger picture indicates that "soda companies are losing the war."

What has happened is that while there has been a lot of noise about fees and taxes that some have felt would help discourage soft drink consumption - which in turn would have a positive impact on the fight against obesity - those efforts largely have been unsuccessful. But, "they have accomplished something larger. In the course of the fight, they have reminded people that soda is not a very healthy product. They have echoed similar messages coming from public health researchers and others — and fundamentally changed the way Americans think about soda."

And sales have gone down.

It is really worth reading, and you can do so here> (It is worth doing so if only to see the picture atop the story ... which looks like a soda executive's dystopian nightmare.)

Published on: October 5, 2015

• The New York Times reports that on Friday, Albertsons "set the price range for its initial public offering on Friday, saying it plans to raise as much as $1.9 billion.

"The supermarket chain expects to sell 65.3 million shares in the offering, pricing its stock at $23 to $26 a share, the company said in a filing with the Securities and Exchange Commission on Friday ... The offering, first announced in July, paves the way for Albertsons to exit years of ownership by a consortium led by the investment firm Cerberus Capital Management and came just months after its owners completed a deal to acquire rival Safeway."


• Crain's New York Business reports that Brooklyn startup Farmigo, which "delivers fresh harvests from local farms to households," has raised $16 million to fund its growth from a new round of funding. The story says that the money will allow it to "expand its footprint beyond the New York-New Jersey region and Northern California by launching service in the Seattle area Oct. 14."


• Time reports that "Starbucks has announced that all of its eggs will be cage-free by the year 2020 ... McDonald’s recently made similar pledges, saying it is going to be making the switch to cage-free eggs over the next decade. Burger King has also made a cage-free commitment, set to be met by 2017."

Published on: October 5, 2015

Last week, Michael Sansolo had a piece about the New York Mets in which he cited some of the dysfunction taking place in the Washington Nationals dugout ... which prompted an email from MNB reader Mark Heckman:

Michael, I always enjoy your observations, but equating a dugout scuffle between two frustrated, testosterone laden, MLB players with workplace violence is at best a stretch and at worst another example of our culture’s race to elevate political correctness to an unwarranted and even dangerous level of priority.   The Nationals may fire Matt Williams because of their September fade, but it won’t be due to his lack of reaction (or overreaction) to two teammates trading some air punches.  As a Yankee fan, I can only tell you that when Reggie Jackson and Billy Martin were at each other’s throats figuratively and physically and they did so all the way to a World Championship in 1977.  I don’t remember either of them filing charges or being offended by the other.   Emotion in competitive sports manifests sometimes in brawls, pushing matches, a brush back pitch,  or even two hockey players pummeling each other while the crowd cheers and the refs watch.  Certainly there is line in sports that should not be crossed, but a dugout scuffle is not even in the same zip code with those that actually have been victimized, injured, or even killed by violent acts in the workplace.

To which Michael responds:

Great comments. I'd never, ever want to diminish how awful workplace violence is compared to a baseball scuffle, but I still think there is a lesson in what happened in Washington.

Somehow no one in a crowded dugout saw what was developing and found a way to short circuit this situation. This situation was brewing for days thanks to an incident earlier in the week and the team knew the two players were having issues with each other. And sure these are testosterone laden guys, but even they need to understand the need for control. The picture of Harper being held by the throat is powerful.

Plus I believe any time we can open up a tough topic, we need do it. I'd love to hear that companies are using that photo to discuss how quickly things can spin out of control and how violent responses never, ever solve anything.

And if I may chime in here ... I get really tired of the argument that somehow all the competitive juices that get going in any kind of sporting match somehow justifies outbreaks of violence, like one player attempting to throttle another. It may be that one sometimes does lead to another, but that makes it neither inevitable nor justified. It is not political correctness raised to an unwarranted priority, in my view ... it is more often coddled and spoiled athletes who have been raised (by parents and coaches) to believe that somehow their athletic talents mean that they don't have to pay attention to the same rules as everyone else, that they are so special that whatever they do, it doesn't matter because they can hit a ball 400 feet, throw a sinking curve, or hit a three point shot consistently, or tackle a quarterback. This can lead to choking a teammate, or abusing a spouse, or all sorts of other transgressions that we've all read and heard about.

Is it exactly the same as workplace violence? No. But I believe that as a society, we excuse way too much for all the wrong reasons.




Last week, we had an email from a reader expressing concerns about some of the motivations behind layoffs at Whole Foods, writing, in part:

One of the larger stockholders in WFM is a company called Vanguard, who are known for these type of corporate raider politics/practices. They did it to their own company, then Toys'R'Us, then Home Depot, and now are doing it to Whole Foods. Their goal in every holding has been to restructure the employment percentages to a 90/10 split of part-time to full-time. If you think about a typical experience in Home Depot (can never find anyone to help, when you do they know NOTHING about hardware or home improvement), it's scary to see where Whole Foods may be headed.

Which led another reader to write:

Vanguard is a MUTUAL fund conglomerate and not a corporate raider. I highly doubt they tell management what to do seeing they are busy managing 2 TRILLION dollars of the public’s money. So, the writer of the Whole Foods article might want to check their facts before they start talking about Jack Bogle’s firm….




On another subject, MNB reader Kevin Hollenbeck wrote:

Kevin, I enjoyed reading about the demise of Hydrox being driven by mismanagement, formula changes, executives making bad decisions trying to make a name for themselves etc…..I think everyone might be overlooking a little ole brand called “Oreo” as the real reason for the demise of Hydrox.

The question, it seems to me, is not whether Hydrox was as big as Oreo. It is whether there was mismanagement of a brand that has a lot of consumer equity.




Regarding the possibility that antitrust regulators could scuttle the Staples-Office Depot merger, MNB reader Woody Weddington wrote:

If the regulators are willing to stop the proposed merger of Staples and Office Depot due to setting up a monopoly then they should in turn look at the monopoly created by Wal-Mart, Amazon,  Kroger, and major players in the marketplace.  These have followed the big bank and auto industry in becoming businesses too big to fail.  FTC should be looking at the market place with wide open eyes if they are concerned with such mergers and really level the playing field.

Just because a company is big does not mean that it has a monopoly ... it just means that it has been really successful and has gotten really big. The Staples-Office Depot merger needs to be examined because it creates a new big entity ... but as I wrote the other day, I think that the plethora of companies selling office suppliers, including Walmart and Amazon, may mean that a merger is the only way for these two companies to survive.

If the merger is rejected, and one or both of these companies goes out of business, it would be bad for competition in the long run ... and that's why I think regulators have to start using a new mindset when making these deliberations.




Last week, MNB took note of a Seattle Times report= that "Amazon plans to stop selling two of the most popular electronics products on Amazon.com at the end of the month" - Google's Chromecast, which is its 4th best selling electronic device, and Apple TV, which is its 14th best selling device. The reason? They compete with Amazon's own Prime Video services.

While Amazon says that this is to eliminate consumer confusion, I commented:

This strikes me as yet another example of saying one thing and meaning another. This isn't about lessening my confusion. It is about not giving up any potential sales, and not giving the competition a platform.

The funny thing is that this is out of character for Amazon, a company that generally is pretty transparent about the competition, trusting in its own ability to provide better value.

Perhaps this shows the degree of importance that Prime has for Amazon ... and maybe some degree of competitive insecurity.

One MNB user responded:

Here's a direct quote from Amazons career page on leadership principles they seek: "Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers."

Which customer do you suppose they started backwards with on this decision?

MNB user Tom Redwine wrote:

As a cord-cutter, I'm concerned about Amazon no longer selling the Chromecast or the Apple TV. The next step might be pulling their Amazon Video app from those platforms as well, forcing Prime Video fans to their Fire TV platforms. I like the new Microsoft way of being available no matter the platform, and I hope Amazon gets that message; if not, I (and likely lots of other cord-cutters) will be running out of HDMI inputs quick.

If there's a box that comes out supporting all three (along with HBO, Hulu & Netflix), then I may only need one HDMI input to rule, (er, play) them all. Now that's what I'd call "precious."

Redwine then followed up with another email:

One correction, one update: 

Amazon Video does NOT support Chromecast (as a result of an ongoing 'urination contest' between Amazon & Google).

In a rumour heard on the Daily Tech News Show podcast this past week (ep.2594, "Rock Me, AmaZeus"), Amazon IS working on an app for the Apple TV.




Last Friday, MNB detailed the millions of dollars in payments made to senior executives before A&P declared bankruptcy, and I commented this way:

Let's be clear about something. I think people deserve to be rewarded for performance, and ought to be able to make as much money as the market will bear ... though I also believe that in retail companies, CEO value often is seen in different and more outsized terms than the value contributed on the front lines, in the stores.

That said ... these A&P people are disgusting. I don't mind them making money, but they keep making more and more money even as they seem to do nothing to reverse the company's decline. Even as they were being rewarded with bonuses, at no point was there ever a glimmer of hope that they might be able to save the company.

They are disgusting. Their actions are obscene.

In my opinion, their actions and the results of their actions reflect a high level of incompetence ... or, at the very least, a far higher priority on feathering their own opulent nests than on innovative retailing, competitive excellence, and marshaling the troops in a way that would give A&P a chance.

I would't follow these guys across the street, much less into battle.

I'd like to know exactly what value Mays brought to the failing A&P that justified an average $100,000 a month, plus bonuses, plus car allowances and expense payments. (He must've had a helluva early 2015 to justify $500,000 in February. Probably hosted an executive conclave in Hawaii.)

What a crock.

One MNB user responded:

Agreed...I could hardly read your comments it made me so mad.  So much money for so little value, it should be criminal.

And from another:

Instead of using the phrase, “what a crock” to conclude your statement about A&P’s executive payouts, you should have said, “what a crook.”
 
How can the A&P executives look at themselves in the mirror knowing that they are robbing the store-level workers out of this money?  It is criminal to drive a business into the ground merely to suck out all of the value for owners and shareholders.  A business entity has an ethical responsibility to the community in which it operates, which includes their employees.  While the A&P situation may have been easy fodder for commentators, it was the livelihood of many good people.  These people deserve to see the so-called executives who benefited from this closing be held responsible for causing this demise.

From another:

I would say with some certainty that not one of these executives will enter an A&P store and face the employees for their actions before they are closed/sold, they are cowards.

Then again, based on the results over the past several years I doubt if they had ever entered a store in the first place.

And another:

What if A&P leadership had been captains of the Titanic:

Helicopters would have arrived on scene that cold stormy night and rescued them from the bridge.  On their flight to safety, they would have been offered champagne and caviar, while the pilot flew them to their individual multi-million dollar residences in the Hamptons where they’ll have paid time off to recuperate and reinvest the bonus checks they received for hitting the iceberg….I mean their heroic performance while on the ship.

And still another:

As a former long term employee of the once Great Atlantic & Pacific Tea Company, this new information makes me sick to my stomach.

For years loyal associates worked hard in the trenches because they believed in what the company was doing and we were proud to say we were part of it. The leaders we followed were all 'let go' because they were thought to be 'old school' and were not moving the company in the right way. The new leaders they brought in had ZERO grocery store knowledge and even less common sense yet they are able to walk away with hefty bonuses and leave the workers with absolutely nothing.

For years the A&P workers, both store and field, have been mistreated and abused by these pathetic executives. There are many awesome people who still work for the company and my hope is that they all find a new home with a retailer who knows how to treat people and customers the right way. They have certainly done their time in purgatory and now deserve some respect and stability.

Purgatory? Methinks you understate this...

Published on: October 5, 2015

In Week Four of National Football League action...

Jets 27
Dolphins 14

Panthers 37
Buccaneers 23

Chiefs 21
Bengals 36

Jaguars 13
Colts 16

Browns 27
Chargers 30

Packers 17
49ers 3

Giants 24
Bills 10

Raiders 20
Bears 22

Texans 21
Falcons 48

Eagles 20
Redskins 23

Vikings 20
Broncos 23

Rams 24
Cardinals 22

Cowboys 20
Saints 26



And, in Major League Baseball, the Houston Astros will play the New York Yankees in a one-game wild card playoff game, with the winner to play the Kansas City Royals in the five-game AL Division Series, while in the other ALDS, the Texas Rangers will play the Toronto Blue Jays.

In the National League, as previously noted here, the Pittsburgh Pirates and the Chicago Cubs will play the one-game wild card playoff, with the winner to play the St. Louis Cardinals in the five-game NLDS, while in the other NLDS, the Los Angeles Dodgers will face off against the New York Mets.