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    Published on: November 11, 2015

    Kroger this morning announced that it plans to buy Roundy's, including its Mariano's chain of 34 upscale supermarkets, for $800 million.

    Bob Mariano, Roundy's chairman/president/CEO, said in a prepared statement, "We are excited about becoming part of The Kroger Co. Kroger's scale, knowledge and experience allows us to accelerate the strategic initiatives we have invested in and makes us a more formidable competitor in the marketplace. This is a great win for our customers, communities, employees and our shareholders, and I personally look forward to continue to exceed customer and employee expectations."

    Rodney McMullen, Kroger chairman/CEO, said, ""Mergers for Kroger always involve both parties bringing something to the table. We admire what Bob Mariano has done with the Mariano's banner in Chicago, where he has created an urban format that is resonating with customers and we expect to apply Roundy's experience to our stores in urban areas around the country. Kroger's scale and strong financial position will enable Roundy's to reinvest in its home state of Wisconsin while continuing to grow in Chicago. Together, we are committed to investing in Roundy's people, communities, stores and merchandising to deliver a fantastic customer experience that will create opportunities for associates, grow customer loyalty and revenue, and create value for shareholders."

    MarketWatch writes that "the new entity will operate 2,774 supermarkets and employ more than 422,000 people across 35 states and the District of Columbia." The companies aid that "following closing, Roundy's will continue to operate its stores as a subsidiary of The Kroger Co. and will continue to be led by key members of Roundy's senior management team. There are no plans to close stores."

    The deal is subject to regulatory approvals, but no problems are expected in that area.
    KC's View:
    The folks I talk to tell me that they believe that the Kroger influence will be a positive on on Roundy's and help make its stores more competitive ... kroger is very good at acquisitions and turning the whole into something greater than the sum of its parts.

    It'll be very interesting to see how this impacts the Mariano's format and long-term growth ... I have to believe that local competition in Chicago has to be worried about the extent to which Kroger plans to expand and strengthen the concept.

    Published on: November 11, 2015

    by Kate McMahon

    All eyes are on Chipotle Mexican Grill in the Pacific Northwest this week, as the fast casual chain is set to re-open 43 restaurants shut down after an E. coli outbreak.

    Although investigators have not yet been able to pinpoint the source of the outbreak that sickened 42 patrons at 10 sites in Washington and Oregon, Chipotle and health officials said yesterday the risk was over.

    The next pressing question is whether consumer confidence will be rattled by this, coming on the heels of a Salmonella outbreak traced to tomatoes that affected 60 Chipotle customers in Minnesota in September. Though not food-borne, a norovirus hit 100 employees and diners at a California Chipotle in August. There have been hospitalizations – and lawsuits - but no deaths in the three outbreaks.

    The irony is Chipotle’s “Food with Integrity” mission to provide fresh, locally sourced ingredients makes it all the more susceptible to such outbreaks. Food safety experts note that fresh produce and meats from small farmers can be more vulnerable to food-borne illness, compared to products from large suppliers which have the resources to test for dangerous pathogens. The positive news is the outbreaks can be relatively contained, since the produce is indeed local.

    For Chipotle, the timing of the late October outbreak could not have been worse.

    Facing slowed sales growth and increased competition, Chipotle altered its annual Halloween “boorito” promotion on social media. Instead of offering free (initially) or cheap ($3) burritos to customers who showed up in costume on Halloween, Chipotle upped the politically correct ante. To draw attention to “creepy” and “scary” additives in other fast food offerings, your costume had to have an "unnece-scary” addition.

    And then Pacific Northwest E. Coli Shutdown occurred on Halloween. The reaction on Facebook and Twitter? “Talk about scary. I’d rather have the additives!” and “Don’t forget--E. coli is 100% natural! Yay Chipotle!” were typical posts.

    Chipotle’s most vocal critic was also quick to capitalize on the news. “You can’t spell Chipotle without E. coli” blared the ad in the New York Post last week from the Washington, D.C.-based lobbyist Center for Consumer Freedom, which has called the chain “Chubby Chipotle” for its high-calorie offerings.

    Chipotle said yesterday it had cleaned and sanitized the 43 restaurants after tossing all food, tested employees for E. coli and the sites would reopen “in the coming days with a fresh supply of new ingredients.”

    The chain also said it was working with health officials to improve food handling processes and adding audits and inspections in all of its 2,000 restaurants.

    Given Chipotle’s “holier than thou” reputation, I’m sure competitors were watching this unfold with glee.

    But I think this is a lesson for restaurateurs and retailers seeking to meet America’s demand for more locally sourced, natural or additive free products. The experts say the tradeoff is simple: Fewer preservatives, the greater the potential risk of harmful microbes being present. In order to minimize that risk, attention must be paid to food sources before they are served or sold to the public, and immediate action taken if there is any cause for concern.

    I give Chipotle credit for shutting down 43 outlets when only 10 were implicated, and being transparent throughout the process. In the end, that may be the biggest lesson of Chipotle's food safety problems - that transparency and clarity will be absolutely critical in achieving, maintaining and, sometimes, restoring consumer trust.


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

    Published on: November 11, 2015

    by Kevin Coupe
    In the UK, the Telegraph reports that a drone may have been responsible for the death of a police horse.

    According to the story, "Fimber, a 14-year-old horse who joined West Yorkshire Police in 2004, died after he vaulted the fence of his paddock and collided with a wooden post after appearing to be spooked. Officers later discovered a radio-controlled drone at the site near Wakefield, West Yorkshire, after it was spotted by a police helicopter crew."

    Police have not said definitively that the drone was responsible, but have said that video footage shows the horse being spooked, apparently after hearing something. The horse was used to hearing helicopter takeoffs and landings, the story says, so it must have been something unusual to cause this reaction.

    It is a pretty good bet that this won't be the last such story we hear about drones causing havoc of one form or another. But it also is worth pointing out that this wasn't a commercial drone, but rather one being flown by a private citizen ... and I think that if commercial drone usage becomes commonplace, there will be rules and regulations and lanes to which companies will have to adhere.

    It is up to a sophisticated culture to provide the framework for new technologies to work ... and not to take the knee-jerk reaction, which is that such technologies are inherently bad. Still, the story is an Eye-Opener.
    KC's View:

    Published on: November 11, 2015

    Amazon announced yesterday that its Amazon Echo voice recognition device "will be available in more than 3,000 stores around the country in time for the holiday shopping season. Customers will be able to visit select locations of The Home Depot, Staples, Sears, Brookstone, RadioShack, Fred Meyer, P.C. Richard & Son, as well as several other retailers to experience and purchase Echo."

    The Echo is described as "a black cylinder studded with microphones that connects to the cloud, is built around its voice-recognition software (responding to the name Alexa), which works even when music is playing ... The device can access music and radio services, do searches on Wikipedia and Yelp, set up shopping and to-do lists, connect to other devices on the Internet -- basically everything a normal computer does, only without the screen."

    "Amazon Echo is a must-have gift this holiday season, and we're excited to work with retailers across the country to make Echo available to their customers," Greg Hart, Vice President, Amazon Echo and Alexa Voice Services, said in a prepared statement. "Using only your voice to play music, control your lights, and ask questions is magical, so it's great that people will be able to visit local stores and try it for themselves."
    KC's View:
    Let's be clear. I love the Echo. My daughter has one, and uses it constantly. And I've often described the Echo as a "Siri that works."

    Let's be even clearer about something else: The retailers agreeing to sell it are ultimately committing a kind of commercial suicide, shooting themselves in the foot, pursuing short-term sales at the risk of their long-term futures.

    Because the one thing that Amazon does not emphasize in its press release about the new Echo sales points is that it also allows people to build shopping lists and place orders instantly and seamlessly on Amazon.

    All these folks are allowing Amazon to use their sales floors to peddle a tool that easily, in the future, take customers and sales away from them.

    This is brilliant on Amazon's part, which essentially is sending a Trojan Horse behind the walls of its bricks-and-mortar competitors, filled with offensive weapons that could put them out of business.

    But those competitors? They're freakin' nuts, in my estimation.

    Published on: November 11, 2015

    Time reports that Alibaba Group, the Chinese e-tailing portal, did more than $1 billion in sales in just the first eight minutes of its "Singles Day" promotion yesterday, with the company saying that the day's total take "exceeded last year’s total $9.3 billion in just half the time."

    The story notes that "what began in the early 1990s as an annual celebration of China’s bachelors is now synonymous with retail therapy in the world’s most populous country. In 2009, Alibaba used its online store TMall to reinvent the day as China’s answer to Black Friday or Cyber Monday — the days flanking the weekend after Thanksgiving, when stores across the U.S. and other Western countries use hefty discounts to lure massive waves of shoppers."

    By comparison, last year's Cyber Monday sales in the US were $1.35 billion.
    KC's View:
    I was intrigued in reading the Singles Day stories the degree to which the company tapped into western cultural icons to promote the sale - both Kevin Spacey, in his Frank Underwood/"House of Cards" persona, and James Bond star Daniel Craig were used to give the promotion a push. (Numerous stories about the new Bond movie, Spectre have pointed out that the movie, which cost $250 million to make and will require $650 million in ticket sales to turn a profit, will almost certainly be propelled over the finish line by the Chinese box office.)

    I'm not sure that Singles Day will ever become a major shopping event in the west ... but I wouldn't bet against it. Just because it hasn't been one to this point doesn't mean that a major online presence like Alibaba couldn't turn it into one.

    Published on: November 11, 2015

    There is a great interview in Fast Company with Angela Ahrendts, Apple's senior vice president for retail and online stores, in which she talks about the future of the Apple retail experience.

    Speaking at the Fast Company Innovation Festival, "Ahrendts spent much time talking about how to refocus the stores around Apple’s new services, some of which were not products. While the company has become masterful in selling iPhones and iMacs, Ahrendts says, 'How should we handle Apple Pay? How should we help customers download Apple Music? They're not products we’re selling—we get no credit for doing that at all. Yet that’s good for Apple and the customer'."

    The story goes on: "Ahrendts bemoaned how fragmented the Apple retail experience has been in the past, with Apple.com separate from the Apple Store’s website, and both those separate from the in-store experience. 'I asked Tim (Cook) a very simple question: Why do we do it this way?' she recalled. "He said, ‘I don’t know—we’ve always done it this way.’ The company is now working to better unite its online and offline experience."

    And: "One of the first things she decided to do was create a better way to communicate with her 60,000 Apple retail employees. 'My kids were visiting from London and all they were doing in the car was WhatsApp and Snapchat,' she says. 'It hit me: That’s the way we should communicate.' She now shares a video with her employees every week—three thoughts in under three minutes, she says—so her employees can feel more involved with Apple’s decision-making."
    KC's View:
    It is fascinating to me that in some ways, Apple is dealing with the same issues at a retail level that many retailers are dealing with, albeit at a different level. They're trying to figure out how to move beyond being a source of product to being a resource for service and information ... they're trying to eliminate silos ... and they're trying to empower and engage employees to a greater degree.

    Here's the thing. Apple is the most successful and, arguably, the most innovative retailer in the country, if not the world ... and they're still working on this stuff.

    Every retailer has to do the same. Actively. Persistently. Consistently. Because to do otherwise is to open a door that the competition may go through.

    Published on: November 11, 2015

    • The Los Angeles Business Journal reports that Amazon launched its Prime Now one-hour delivery service in LA yesterday, with Prime members able to get one-hour delivery - including from some local restaurants - for $7.99.

    The story says that "the local restaurants included are: John O’Groats Restaurant in West Los Angeles, West Hollywood’s Baby Blues BBQ, Sprinkles Cupcakes and Umami Burger."
    KC's View:

    Published on: November 11, 2015

    Fortune reports that the focus on a better store environment and higher wages being paid by Walmart may be paying off, as a new study by Wall Street firm Cowen & Co. points to higher shopper ratings.

    According to the story, "Some 75% of customers in Cowen’s rolling survey of 2,506 shoppers in September said they were satisfied with the overall shopping experience, Walmart’s highest score since June 2013 on that front. On customer service, 60% of shoppers were satisfied, the best the retailer has fared in two years."

    The story notes that Walmart still has a long way to go: "Walmart U.S. CEO Greg Foran said recently that one-third of stores still get a failing grade."


    Business Insider has a story noting that while the investor class seems to be worried about Walmart's long-term prospects and far more optimistic about Amazon's, "Walmart's critics are ignoring a key advantage it has over Amazon: an extensive network of stores and distribution centers, according to analysts for Moody's Investors Service.

    "That network puts Walmart in a better position than Amazon to win the long-term battle for shoppers, Moody's analysts write in a new research note. 'Walmart is much better placed to catch up to Amazon online than Amazon is to catch up to Walmart in brick-and-mortar, and as a result, Walmart will remain the most powerful retailer in the world,' the analysts write."
    KC's View:
    I have one big problem with the Moody's analysis - the line that "Walmart is much better placed to catch up to Amazon online than Amazon is to catch up to Walmart in brick-and-mortar, and as a result, Walmart will remain the most powerful retailer in the world."

    I'm not sure that Amazon needs to catch up with Walmart in terms of bricks-and-mortar to be the most powerful retailer in the world. I think it is entirely possible for Amazon to catch up with Walmart in terms of total sales and claim that crown ... and I also think that one could argue right now that Amazon has changed the retail world to a greater degree than Walmart has. At the very least, the Moody's comment is a non-sequitur and betrays a bias that in the long run may prove unsupportable.

    Published on: November 11, 2015

    Multichannel Merchant has story suggesting that "traditional holiday shopping as we know it no longer exists, not even in comparison to last year. A customer who shopped one way in the past may well stir the pot by hopping from one unexpected channel to another, only to return to the original option for the next transaction.

    "Despite the proliferation of shopping channels, a recent study published by Oracle and Edison Research indicates that last year Christmas sales via smartphones and tablets were up 55%, and 37% of all online sales (or 8.9% of all total retail sales) were made directly via a mobile device."

    The story also notes that "a recent Apptentive survey reveals that 'app-rooming' is becoming increasingly popular. This term refers to the act of using a mobile app to browse items, followed by a physical visit to the store to purchase them. Out of the survey respondents who said they use retail mobile apps, 71% stated that they had 'app-roomed' at least once in the previous month."

    Meanwhile, the Wall Street Journal reports that "forty percent of Americans plan to spend more on holiday shopping this year thanks to increased optimism around personal financial situations, compared with only 25% who said the same in 2014." Those numbers come from an Accenture report, which also says that "online is the preferred shopping option as compared to in-store though one in 10 think they will use a particular channel depending on what they are purchasing ... Sixty-five percent prefer to purchase products from the website of a brick-and-mortar retailer (versus other online stores), due to convenience, trust and security."
    KC's View:

    Published on: November 11, 2015

    • Safeway announced that it is in the process of dissolving its relationship with Theranos, a startup company that it contracted with for $350 million, with the goal of building medical clinics in 800 of its stores.

    The Wall Street Journal writes that "the tests never began, the clinics are now used largely for flu shots and travel-related vaccines ... Current and former Safeway executives said Theranos missed deadlines for the blood-testing rollout. They also said several Safeway executives questioned the accuracy of results Theranos gave to Safeway employees tested at a clinic in the supermarket chain’s headquarters in Pleasanton, Calif."

    Safeway was the exclusive supermarket company with which Theranos was doing business, but the startup also had a deal with Walgreens - which also has stopped building new Theranos-run clinics until questions about its technology have been resolved.


    • The New York Times this morning reports that Anheuser-Busch InBev has completed its deal to acquire SABMiller for about $105 billion. The deal, the story notes, "would create a behemoth in the beer industry with annual revenue of about $64 billion and would give Anheuser-Busch InBev more exposure in faster-growing emerging markets, particularly in Africa and Latin America.

    "Hoping to gain regulatory approval for the merger, SABMiller said on Wednesday that it would sell its 58 percent stake in MillerCoors in the United States to its joint venture partner Molson Coors Brewing Company for about $12 billion. That deal is conditioned on the Anheuser-Busch InBev transaction closing and includes the rights to the Miller brand globally."
    KC's View:

    Published on: November 11, 2015

    • Making Change, the non-profit organization that used to be known as Food For All, has announced that it has named David McConnell, the recently retired president/CEO of GMDC, to be its new president/CEO.

    Making Change describes itself as promoting "human dignity, wellness and self-sufficient communities" by "operating point-of-purchase fundraising programs in over 1,250 food retail stores nationwide in addition to partnering with national manufacturers to support charitable causes concerned with health, education and community spirit.  Since 1985, over $96 million has been raised for worthy causes in the U.S. and around the world."
    KC's View:
    I've known Dave McConnell for years, and he's one of the nicest people I've ever met in the business ... he also strikes me as the kind of guy who can give Making Change a new kind of energy and drive it to new accomplishments. I'm happy for him ... I always kidded with Dave that he is way too young to retire.

    Published on: November 11, 2015

    ...will return.
    KC's View: