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    Published on: November 6, 2015

    by Michael Sansolo

    Food co-ops have an unusual and usually successful model. Born of the community they operate with unconventional rules such as having customers fill the roles of shoppers, board members and, oft-times, employees.

    In many cases customers win special discounts by donating time working in the store. Some co-ops even require the activity.

    The model works wonderfully except when it doesn’t. Then chaos and anger can follow.

    The Albany (NY) Times Union reported recently on a major kerfuffle at the local Honest Weight Co-op, resulting in the president of the organization stepping down and a major part of the shopper-employee link disappearing.

    As the now-deposed president said, the member workers weren’t nearly as effective as the co-ops employees. "Sometimes it doesn't pay to tell the truth because the truth hurts and they don't want to hear it," he said.

    The members see it very differently. One told the newspaper, “We are a huge part of what makes the co-op different from any other grocery store.” Yet another said, "It all has felt so calculated. They have systematically tried to corporatize the store."

    It’s hard to know what the co-op board meant to achieve, but in the end they lost a president because of a policy he advocated, yet implemented the policy anyway and stirred up anger among supporters. Rather than pleasing some of the people, the board seemed to upset them all.

    A win-win situation can be an Eye Opener as can be a lose-lose.
    KC's View:

    Published on: November 6, 2015

    The Wall Street Journal reports that there may be some glitches in the click-and-collect model in terms of customer satisfaction.

    "A survey of over 1,000 online U.S.-based shoppers by and JDA Software Group Inc. shows that, of 35% who opted to buy online and pick up goods in a store in the past year, 50% encountered problems getting their purchases. This is a surprisingly high failure rate of a strategy meant to offset the high costs of conducting e-commerce, said Wayne Usie, senior vice president of retail at JDA."

    The Journal writes that these numbers suggest "that retailers will face a tough time expanding their e-commerce sales while preserving their profit margins. Offering products online may be easy, but getting the goods to consumers can be a burden on the bottom line. Some believe that having customers pick up purchases at the stores can cost less than packing and delivering goods to homes."

    Part of the problem, the survey suggests, is that store pick simply is more complicated than warehouse picking, and retailers are not as facile about it as they might have expected or hoped.
    KC's View:
    Common sense, often in short supply, tells us that click-and-collect is a cheaper business model than delivery, but it also tells us that it may take some time for retailers to get this right. I have been mildly critical of Kroger for what I saw as a bit of lallygagging in its approach to e-commerce, but when I read this study, I reconsidered that opinion ... it seems more likely that Kroger took its time because it wanted to get things right.

    There is no question in my mind that retailers have to invest time, energy and money in getting this part of the business model right. They can't expect to get it right overnight, and they can't expect it to change their worlds overnight. But if they don't do these things, they're going to find themselves with limited futures and diminished expectations as they plod toward irrelevance.

    Published on: November 6, 2015

    Fortune has a story about an analysis done by real estate services company Cushman & Wakefield concluding that Walgreens' estimates about how many stores may need to be closed when it acquires Rite Aid could be very much on the low side.

    "Earlier this week," the story says, "Walgreens revealed in regulatory filings that its contract with Rite Aid allowed for the divestiture or closing of up to 1,000 stores, though the company said it expected the total to be less than half that amount. Walgreens runs about 8,200 stores, with locations in each state, while Rite Aid has about 4,600 stores in 31 states.

    "In his analysis, Garrick Brown, vice president of research at Cushman for the West Region, notes that Walgreens could close or sell 1,000 before the deal closes, and then shutter up to another 2,000 after ... Brown found there are 400 U.S. zip codes with four or more of either a Walgreens or a Rite Aid. So beyond what regulators end up requiring to give the deal their blessing, Walgreens may find all that overlap a problem."

    In other words, regulatory concerns may require a certain number of stores to be closed ...but competitive realities may force far moire drastic actions. “The post-merger Walgreens real estate imperative will be to minimize cannibalization,” Brown writes.
    KC's View:
    One gets a sense that there's a real sea change taking place, with an awful lot of retail real estate suddenly in flux because of mergers, acquisitions and business failures. The question is whether we're at the beginning of the process, or well along in it.

    I'm guessing that we've only just begun ...

    Published on: November 6, 2015

    The Great Atlantic & Pacific Tea Co. (A&P) said this week that it has accepted a stalking horse offer of $1.75 million from Key Food Stores to acquire The Food Emporium banner and related brands.

    Competitive bidders have until November 30 to come in with a higher offer.

    At the same time, the New York Post reports that A&P has "failed to get a buyer for 100 of its 296 stores ... That’s 50 percent higher than previous estimates."

    The Post writes that "rivals passed on the stores because they were either in unfavorable locations or had bad leases, sources said. Thousands of employees will be laid off as the bankrupt company closes the last of its stores on Thanksgiving."
    KC's View:
    Those stores, and the people left without jobs, will stand as a monument to the mismanagement, poor judgement and general lack of vision shown by so many people at the top at A&P, who often seemed more interested in their own perks and privileges than operating modern and competitive retail stores.

    Published on: November 6, 2015

    Reuters reports that "US regulators want food companies to be more proactive in preventing food-borne diseases, citing new data showing that multistate outbreaks - which involve widely distributed products - cause more than half of all food poisoning deaths, even though they account for just 3 percent of all outbreaks ... Just three germs - Salmonella, E. coli, and Listeria - cause 91 percent of outbreaks, contaminate widely distributed foods such as vegetables, beef, chicken and fresh fruits, and end up sickening people in many states, according to a new report by the U.S. Centers for Disease Control and Prevention."

    "Reacting to problems isn't sufficient in today's food system, nor is it the best way to practice public health," says Dr. Kathleen Gensheimer, director of FDA's Coordinated Outbreak Response & Evaluation Network. The story says that Gensheimer stresses that "in the past, food safety has been focused on reacting to outbreaks, but new regulations set to take effect in 2016 will require companies to take a science-based approach to building safety controls into food production ... The report stressed the need for food industries to play a bigger role in improving food safety by keeping detailed records to allow for faster tracing of foods, using store loyalty cards to identify which foods made people sick, and notifying customers of recalls."
    KC's View:
    We have spoken of this often here on MNB, both in editorials and in our sponsor messages and videos ... food industry companies have to real choice other than to embrace this challenge and be aggressive and ambitious in their approach to food safety.

    Published on: November 6, 2015

    • The Cincinnati Business Courier reports that Kroger "has added a few Cincinnati-area stores to its online ordering and pickup service known as ClickList and plans to take the service to at least four more local stores in the coming months.

    Kroger spokesperson Patty Leesemann tells the Courier that the chain will continue expanding the service, but has specific timeline for saturation.

    “We’ll continue to add stores throughout next year,” Leesemann says.
    KC's View:

    Published on: November 6, 2015

    • Kroger announced that its "climate disclosure score, as measured by the Carbon Disclosure Project (CDP), has improved 48% over the previous year, increasing 29 points for a total score of 89/100." Kroger also was named to the Dow Jones Sustainability Index-North America for the third consecutive year.

    "Kroger's sustainability efforts begin with a commitment to transparency and performance," says Suzanne Lindsay-Walker, Kroger's director of sustainability. "Our improving Carbon Disclosure Project score and inclusion in the Dow Jones Sustainability Index for the third consecutive year are important mile markers, but our work is only just beginning. We will continue to set and meet sustainability commitments for our customers, associates, communities and our planet." 

    Reuters reports that JM Smucker has entered into a deal to sell its U.S. canned milk business to private equity firm Kelso & Co for an undisclosed sum, noting that Smucker "acquired the business, Eagle Family Foods Co, in 2007 for $248 million, including debt."
    KC's View:

    Published on: November 6, 2015

    The New York Times reports that Guinness has decided to reformulate its Irish stout.

    According to the story, "The company announced on Monday that starting at the end of 2016, its beer will no longer contain trace amounts of fish bladder, an integral part of its filtration process." The change will allow Guinness stout - which has been made for more than 250 years - to be identified as vegan.

    "Few customers — except perhaps vegans and vegetarians who enjoy a pint — were probably even aware that the famous inky-black drink contained any fish parts at all," the Times writes. "But it is actually quite common for cask beers to be filtered using isinglass, a gelatinlike substance derived from the dried swim bladders of fish that is used to separate out unwanted solids like yeast particles from a brew, the company said ... The substance is removed from the beer after it has fulfilled its filtration role."

    Now, using a state-of-the-art filtration system, Guinness will be able to go vegan without changing the taste.
    KC's View:
    Who knew that Guinness was going through a bladder before it went through mine?

    Published on: November 6, 2015

    Yesterday, in commenting about the fact that Volkswagen seems likely, as best as possible, "to continue peddling the fiction that this was a few errant employees on the assembly line" who created the brand equity problems related to software designed to deceive both emissions regulators and consumers.

    I commented:

    To me, this is sort of the same thing as Claude Rains saying that he was surprised by the gambling at Rick's Cafe Americain in "Casablanca" even as he was pocketing his winnings, or Tom Brady saying he was shocked that a couple of locker room attendants, in an effort to get him a competitive advantage, deflate some of the footballs he used during the Super Bowl.

    Nobody at Volkswagen objected to this comment, nor anyone from Warner Bros. or the Claude Rains estate. But, not surprisingly, I did hear from fans of both the New England Patriots and Tom Brady.

    I knew I would. Frankly, I was just having a little fun at the expense of the team that keeps beating my Jets.

    However, I did get one fact wrong. The "deflategate" accusations did not occur after the Super Bowl, but rather after the 2014 AFC Championship game against the Indianapolis Colts.

    Apologies for this mistake. It's been a long week...
    KC's View:

    Published on: November 6, 2015

    ...will return.
    KC's View:

    Published on: November 6, 2015

    In Thursday Night Football, the Cincinnati Bengals defeated the Cleveland Browns 31-10.
    KC's View:

    Published on: November 6, 2015

    The new James Bond movie, Spectre is out today, and I'm happy to say that it is an entertaining throwback to Bond movies of old, while still featuring the steely and modern visage of Daniel Craig, who continues to give the British spy unsuspected depths only hinted at in the portrayals of Sean Connery, George Lazenby, Roger Moore, Timothy Dalton and Pierce Brosnan.

    This isn't to criticize any of those actors or their portrayals. I've always felt that each generation gets the Bond it deserves - or needs - and I can find pleasures in each of their Bonds. In many ways, my least favorite Bond is Roger Moore ... but that's largely because his movies emphasized the comedy aspects of the character, and that just wasn't to my taste.

    This is Craig's fourth Bond outing, and it has been interesting to see how each one has varied in tone. His debut film, Casino Royale, rebooted the series with him as a Bond beginning his career, and it was terrific as he gave the film an athleticism and grit it never before had featured. Quantum of Solace was a direct sequel, and while it has been the least regarded of the Craig Bonds, I actually think it is underrated - better than almost every Moore movie, and even better than some of those done by Connery and Brosnan. Then came Skyfall - a terrific film that had Craig portraying Bond as an aging, burned out Bond coming face to face with new enemies, a sense of loss, and his own past. And now, there's Spectre.

    Spectre doesn't have the emotional resonance of Skyfall, but I think much of it is terrific - the opening sequence, at Mexico City's Day of the Dead celebration, is a killer. There are sequences that remind one of scenes from Dr. No, From Russian With Love (there's a fight scene on a train that is fabulous), Goldfinger and On Her Majesty's Secret Service, but without seeming to rehash old material. The scenery is wonderful, the Bond women (Lea Seydoux, Monica Bellucci) gorgeous, wise and (eventually) willing, the bad guys evilly charming (or charmingly evil...Christoph Waltz and Dave Bautista do the honors), and the home team (Ralph Fiennes as M, Ben Whishaw as Q, Naomie Harris as Moneypenny) has lots to do and they do it well. (Whishaw is particularly delightful in his scenes with Craig.)

    If there is an undercurrent in Spectre, it is about relevance and making choices - these are considered at the macro/governmental level, and at the personal level. Some of the answers to these questions may surprise you, and they certainly serve to set up the next Bond film.

    There have been rumors that this will be Craig's last outing as Bond, but I hope not. Spectre brings back a criminal organization for him to face off against that has not been heard from in the Bond movies since Diamonds Are Forever, and I'm anxious to see what Craig and Bond do for an encore. They haven't disappointed me yet.

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

    KC's View: