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    Published on: December 3, 2015

    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here, and this is FaceTime with the Content Guy.

    There was a piece in the New York Times the other day that grabbed my attention. It was about George Zimmer - you remember him, right? He is the founder of Men's Wearhouse who was unceremoniously dumped from the company after a boardroom fight that he lost.

    Now, I'm not naive about these kinds of fights. There usually is plenty of blame to go around, and lots of ego driving the conflicts. In the Men's Wearhouse case, there also was something else at play - the company's acquisition of Jos A. Bank for $1.8 billion, which came after Jos A. Bank tried to acquire it but failed.

    What interested me in the story was that Zimmer, who was a retail guy, told the Times that he's happy in the two internet-based businesses he's created since leaving Men's Wearhouse, and is "so happy not to be working in the retail store business.”

    Now, one might expect him to say that. After all, he's not in the retail store business anymore, and probably is enjoying to some degree the fact that both Men's Wearhouse and Jos. A Bank have been suffering.

    But here's the line that grabbed my attention. Talking about the merger, Zimmer said, “A deal never made sense. Why do you want to add hundreds of retail stores when there’s more competition than ever from the Internet?"

    It seems to me that this is a canny observation that more retailers ought to be making, especially these days, when we seem to be enduring a flurry of mergers and acquisitions. The legitimate question that needs to be asked is whether the companies that are trying to get bigger by adding chains and stores are in fact investing in a business model that is on its way to being increasingly irrelevant.

    I'm not saying bricks-and-mortar stores are going away. But I am suggesting that maybe business leaders need to think twice before investing in deals that not so long ago might have made sense, but today, not so much.

    Put too much money in bricks-and-mortar, as opposed to investing in the future, and it is at least possible that you're not going to like the way you look.

    I can almost guarantee it.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: December 3, 2015

    by Kevin Coupe

    The Associated Press reports on new government numbers showing that only eight percent of the nation's households have only landlines, and that "more than 47 percent of American homes use only cellphones."

    About 42 percent of the nation's household have both, the story says ... though the implication is that the tipping point is on the horizon.

    After all, "a dozen years ago, a mere 3 percent of U.S. households used only cellphones."

    While the shift is technological, it is driven by demographics: "About 71 percent of people in their late 20s live in households with only cellphones," the story says. "Only 19 percent of people 65 and older use only cellphones."

    Those older people will die. And with them, the traditional landline business.

    It is an Eye-Opener.

    A postscript...I'm sure there will be people who will bemoan this trend, arguing that the move away from landlines will mean that people working for traditional phone companies will be out of work. I have a brief and respectful suggestion for these folks...

    Get over it.

    KC's View:

    Published on: December 3, 2015

    The Grocery Manufacturers Association (GMA) announced yesterday the introduction of new SmartLabel technology, already adopted by more than 30 major CPG companies, that "will enable consumers to have easy and instantaneous access to detailed information about thousands of products."

    The program, GMA says, "enables consumers to get additional details about products by scanning a bar code or doing an online search to reach a landing page with information on ingredients and other attributes of a wide range of food, beverage, pet care, household and personal care products.  SmartLabel will provide consumers at the touch of finger all the information they want to know about what they are purchasing."

    That information will include nutritional data as well as "ingredients, allergens, third-party certifications, social compliance programs, usage instructions, advisories and safe handling instructions and company/brand information, along with other pertinent information about the product." It also, GMA said, will eventually include information about whether products contain genetically modified organisms (GMOs).

    GMA said that by the end of 2017, the majority of manufacturers say they "will disclose via SmartLabel whether 20,000 food products do, may or do not contain ingredients sourced from genetically engineered (GE) crops, commonly known as GMOs. Current estimates indicate that number could triple once a uniform national standard is set for GMOs." The implication is that the existence of SmartLabel technology will make it even more important to eliminate the "patchwork" of state GMO regulations and move to a national standard.

    Consumers will be able to access the comprehensive information via smartphone when scanning a QR code; they also will be able to access a SmartLabel website, and GMA said that eventually there will be a mobile application serving as an interface.

    Among the companies committed to the SmartLabel technology, GMA said, are ConAgra Foods, Hormel Foods, Campbell Soup Company, Knouse Foods, Land O’Lakes, PepsiCo, Coca-Cola, Nestle, Hershey, J.M. Smucker Company, Kellogg Company, General Mills, McCormick & Company, Bimbo Bakeries USA, Wakefern Food Corp, Bruce Foods Corporation, Bumble Bee Seafoods, Ferraro USA, Flowers Foods, Reily Foods Company, Rich Products Corporation, Sunny Delight Beverages Co., Tyson Foods, Inc., Ahold USA, Topco LLC, The WhiteWave Foods Company, Pharmavite LLC, Clorox, Colgate-Palmolive, Procter & Gamble and Unilever.
    KC's View:
    Finally. It's about time.

    I say that with tongue in cheek, since I understand that such initiatives do not come together overnight, and that it makes sense to take the time to both get it right and get enough companies on board so that a certain kind of momentum takes place.

    It has seemed obvious for a long time that despite the fact that a lot of companies and trade associations/lobbying entities have resisted calls for ever more comprehensive information about the products they sell, there are two realities that have made this inevitable.

    One is that new technologies make it possible to provide an enormous amount of information. (A growing number of people who walks into a store these days have an extraordinarily powerful computer in their pockets. That's a force with which to be reckoned. As they say, you have to use the force...) The second is that consumer demands for transparency make it a cost of doing business. Resistance, as we also so often say around here, is futile.

    (Yikes. I got both Star Wars and Star Trek into a single commentary. Boom!)

    There will be some who will argue that not everyone has a smartphone and not everyone has a computer. But it seems to me that if you are going to create informational technologies, you do it for the future, not the past. (Though retailers could get into the act by putting SmartLabel readers in their stores. This might be a good way to publicize the program.)

    And, if they can get the GMO thing right, it becomes the solution - or at least a resolution - to that entire debate.

    Now, a lot of things have to fall into place for this all to work, but my position on this always has been that manufacturers can turn this kind of technology and transparency into a highly successful marketing tool. It's like that old marketing slogan for the clothing store that said, "an educated customer is our best customer." They have to get the information right, combining accuracy with accessibility and user-friendliness, but this conceivably could be an enormous step forward for the CPG business, for the food industry, and for consumers in general.

    Published on: December 3, 2015

    Supervalu announced yesterday that it has hired Eric Claus, who served as CEO of A&P between 2005 and 2009, to be the new CEO of its Save-A-Lot chain. notes that Claus is charged with "shepherding Save-A-Lot’s potential spin-off or sale, which is valued to be more than $1.7 billion."

    Claus succeeds Ritchie Casteel, who is stepping down as CEO, will remain as president.

    The story notes that Claus "spent the last two years as chairman and CEO of Ontario-based Red Apple Stores, a value-based retail chain with 155 locations across Canada. He will assume the leadership role at Save-A-Lot on January 4, 2016."
    KC's View:
    I got to know Eric Claus a little bit back when he was at A&P. I'd spent a fair amount of time eviscerating the company's top management, and we spent a day together driving to stores and talking to front line employees ... and I have to admit that I walked away from the experience thinking that Claus might actually give the company a chance to succeed. Or at least survive. He seemed to have a plan, he was thinking both strategically and tactically, and I thought made a lot of sense.

    But he didn't last there long enough to turn the company around, for reasons I've never really understood. (No surprise there. A&P's board made a lot of decisions I couldn't figure out.) Then, returning to Canada, Claus took over Red Apple and turned that company around in ways that obviously impressed the folks at Supervalu.

    Save-A-Lot has challenges, not least the expansion of Aldi and the planned entry of Lidl in the US. But I think Eric Claus is a pretty good bet for "shepherding" Save-A-Lot, though I think the metaphor may be inaccurate. Claus doesn't strike me as a shepherd ... he's more of an extreme athlete type.

    Published on: December 3, 2015

    MarketWatch reports that Starbucks has launched a coffee delivery pilot program in Seattle, using delivery service Postmates to offer the service "to a handful of Seattle neighborhoods." When people place orders there using the Starbucks app, they can choose a new delivery option and have the coffee arrive within an hour.

    The story notes that "Starbucks introduced the Green Apron Delivery service in the Empire State Building in October, serving 12,000 people who work in the Manhattan landmark. The latest program in Seattle is part of a plan to expand delivery service that was announced earlier this year."

    And GeekWire notes that "with a delivery fee of $5.99, this will not be an economical way of getting a single cup of coffee every morning. The new delivery service is targeted more to larger orders, allowing for delivery of up to 8 food and drink items at a time."
    KC's View:
    Not economical, to be sure ... but also not very timely. I don't know about you, but when I need a cup of coffee, I usually need a cup of coffee. A one-hour wait just isn;t going to do it for me.

    But this isn't really designed for people like me who need a cup of coffee. I can see that this will have some strong implications for big orders, and Starbucks is smart to be testing it.

    Published on: December 3, 2015

    Amazon announced this morning that it is expanding its Prime Now restaurant delivery service to Baltimore, offering one-hour delivery from more than four dozen local restaurants.

    The retailer said that Prime Now customers there "can view participating restaurants, browse menus, place orders, track the status of their delivery, and watch as the driver travels from the restaurant to the delivery address in real time. Once an order is placed, Amazon drivers deliver the food in an hour or less ... Restaurant delivery on Prime Now offers customers transparent pricing—there are no menu markups or hidden service fees and delivery on all orders is free for a limited time. Customers pay using the information already stored in their Amazon account."

    Prime Now restaurant delivery also is available in markets that include Seattle, Portland (Oregon), and Los Angeles.
    KC's View:
    Amazon's ecosystem expands. It is that simple.

    Published on: December 3, 2015

    As we noted a couple of weeks ago, Mark Bittman, the influential bestselling cookbook author and food columnist for the New York Times who resigned to become chief innovation officer for startup Purple Carrot, described as "a meal kit delivery service for vegans," is back with a twice-monthly column for Fast Company. The subject will be the process "of going through the startup process, an as-it-happens story."

    Bittman now has posted his second column in the series, entitled, "Sourcing Food Ethically Is A Huge Challenge For My Startup."

    An excerpt:

    "One big puzzle right now, mission-wise, is deciding what we consider 'good' food—and figuring out how to find it and get it to our customers. Generally, our meals have been well-assembled, well-handled, and well-received—but they aren’t yet close to what I want them to be. Our company’s simplest promise is to deliver vegan meals, and we’re doing that. But there are bigger promises we’re making; ultimately, we want to challenge the distribution networks that dominate how plant-based ingredients are sourced ... Inside the company, I have struggled to determine how hard I should push on these kinds of choices. On the one hand, I don’t yet have enough data and feedback from our customers to make the business case for some of these decisions—but I also believe that if we prioritize our mission from the beginning, our customers will respond positively."

    You can read this installment here.
    KC's View:
    As I said a few weeks ago, I'm particularly interested to read this because Bittman admits to finding himself a little out of his depth ... the skills he's developed as a writer and analyst don't necessarily translate to actually doing the stuff he writes about. I'm nowhere near being in Bittman's league, but I often wonder if I could actually do the things I write about and recommend.

    Though, to be honest, seeing GMA adopting a technology-based labeling program that I've been suggesting for years gives me a little bit more confidence.

    Published on: December 3, 2015

    Fortune reports that McDonald's is testing table service in a number of its Los Angeles locations, bringing food to customers at the table after they've ordered at the counter. According to the story, "The tweaked service approach is just one of the many experiments the fast food chain has undertaken in recent months to revamp sales and to compete with higher-end burger upstarts like Five Guys and Shake Shack."

    Also being tested in these locations, the story says, are new menu items that include "beef patties and grilled or buttermilk chicken cutlets with a variety of bun options, including artisan, potato, or sesame seed."
    KC's View:
    If the food tastes better, maybe table service will make a difference. Otherwise, it is just lipstick on a pig.

    Published on: December 3, 2015

    The Wall Street Journal this morning reports that YouTube, owned by the same company that owns Google, is "seeking streaming rights to TV series and movies to bolster its new subscription service, intensifying its rivalry with Netflix Inc., Inc. and Hulu in the competitive market for online video." According to the story, "YouTube is eager to secure premium videos because it recently launched a $9.99-a-month subscription service called Red, which offers ad-free videos and streaming music, the people familiar with the situation said."

    YouTube already has decided to get into the original content business, the story notes, and "plans to release at least 10 of its own movies and series" that will only be available to paid Red subscribers.
    KC's View:
    To me, this is interesting because it highlights the degree to which Amazon and Google are competing. We've seen the stories about how Amazon is used by many people as a de facto search engine, even though it isn't, and how Google is expanding its e-commerce capabilities, which allow retailers to compete better with Amazon ... and so the competition between the two morphs and expands and creates the potential for greater dominance by the two and resulting collateral damage.

    Published on: December 3, 2015

    TechCrunch reports that a data analysis firm called Slice Intelligence is saying that "Amazon dominated online Black Friday sales, accounting for 35.7 percent in e-commerce spending on November 27. A distant second, Best Buy brought in 8.23 percent of total online revenue, followed by Macy’s at 3.38 percent, Walmart at 3.35 percent and Nordstrom at 3.11 percent."

    The data is based on "e-commerce data from receipts linked to its Slice package tracking app," the story says.
    KC's View:

    Published on: December 3, 2015

    • The Wall Street Journal this morning reports that the US Food and Drug Administration (FDA) "has sent warning letters to five nutritional supplement manufacturers concerning the use of picamilon, increasing scrutiny over the substance it says isn’t approved as a dietary supplement or a drug ... The companies have 15 business days to respond to requests to remove products labeled with picamilon as an ingredient, or they could be subject to further enforcement by the FDA."

    Picamilon is described in the story as a "synthetic chemical developed in the former Soviet Union and is still used in Russia as a drug to treat neurological conditions."

    USA Today this morning reports that European Union regulators are looking into whether Luxembourg gave McDonald's there an unfair tax advantage that allowed it to avoid EU and US taxes. Such a deal would violate EU rules; similar investigations have been conducted into tax deals allegedly given to companies like Apple, Amazon and Starbucks.
    KC's View:

    Published on: December 3, 2015

    Yesterday's Eye-Opener concerned a possible regulatory challenge to Shinola's "Built in Detroit" credibility, since the Federal Trade Commission (FTC) looks askance at companies that say they are made in America if they don;t meet the standard for that claim ... and a previous case suggests that "Built in Detroit" could be seen by the feds as tantamount to saying "made in America."

    While Shinola watches are, actually, built in Detroit, some of its timepiece movements are made in Switzerland ... which, in the FTC's view, could make its claims inaccurate.

    I commented, in part:

    I don't think this is just about semantics, and whether "built" is the same as "made." I think it really is all about credibility and authenticity ... As I've said here many times, I do think that the "made in the USA" claim needs to be reserved for companies that are actually living up to the claim, and can prove it. By this standard, I think that Shinola may fall a little short ... it doesn't matter in terms of my appreciation of the brand, but it may matter in terms of being able to make certain claims. Shinola, by the way, is transparent about sourcing on its website ... but that probably isn't enough ...

    There are different ways to slice this loaf, by the way. New Balance is a great example of a company that has maintained its "made in the USA" credibility while being totally upfront about the fact that it does as much as it can in the US while making some products and getting some materials in other countries. That might be a good model for Shinola.

    In the end, this is an Eye-Opening argument about authenticity and credibility ... and I hope that Shinola doesn't get into a fight it cannot and should not win, because that might distract from the good work it is doing in Detroit.

    MNB reader Craig Espelien took issue with my observations:

    I am a bit disappointed in your approach to the Shinola “issue” (in quotes because Built in Detroit is not saying Made in the USA – remember Chrysler’s Imported from Detroit commercials?).  Instead of focusing on what is wrong perhaps focusing on all of the things they have done right would be better (but probably does not make good press).  Some examples:

    • One of their supervisors was a security guard in the building they ultimately decided to lease.  He was trained on how to build watches and how to lead others – most likely building a better life for him and his family.

    • One of their watch builders was a cleaning woman in the building they lease – again, trained on how to assemble high quality watches in a town struggling to recover from other manufacturing job losses (interesting – we call it car manufacturing but these are technically not Made in the USA so perhaps we should change how we speak – some college kid might get offended).

    • Bicycles – their frames come from one of the last (or perhaps actually the last) frame manufacturer in the US – located in Wisconsin (from the family that created Schwin) and are made in Wisconsin.

    They are using local wherever they can and decided to build their watches in a town in the US in need of good news – rather than outsourcing all manufacturing overseas.  They are now attempting to find like-minded companies in the US to work together to learn how to bring better jobs (higher paying) back to the US.

    I have no stake in Shinola – just had a chance to hear more of their story and was very impressed by what they are trying to do – in both Detroit and in the US.  As stated earlier, I am disappointed you did not do more to share all of the good – but decided to jump on the “bad company” band wagon.

    Is Built in Detroit too close to Made in the USA?  Not sure – I certainly do not see it that way (granted, others might) but be careful of continuing worthless debate that may ultimately push these types of companies completely overseas.

    As an FYI, you also may want to see if any watch parts are still manufactured in the US – not sure they are and certainly not to the precision of Swiss components. So I guess Shinola could have just said “Oh well, no US manufacturers of our needed raw materials so why even try”.  I for one am glad they did not.

    I have to admit being a little surprised by this criticism ... in no way do I think that anything I said or implied would suggest that I was jumping on the "bad company" bandwagon.

    To be clear ... just in case I was not yesterday ... I admire what Shinola is doing enormously. The point of my piece was to look at the way in which its marketing claim may be viewed by regulators, and to suggest that it should not allow its good work to be diluted by a discussion of this issue. (You're right. A federal probe would get headlines. That was sort of my point.)

    Quite honestly, I don't share your opinion that "built in Detroit" implies something very different from "made in America." ("Imported from Detroit," on the other hand, does suggest something different, I think.) And I do think that "made in the USA" ought to mean something very specific, and ought not be watered down even a little. There are plenty of companies investing a lot of money and time living up to what this statement is supposed to mean ... and I think if we start accepting 90% or 85% as the standard for made in America, it becomes a slippery slope and ends up not meaning anything.

    And I certainly don't think this is a worthless debate.

    One can say all these things and still think that Shinola seems to be a terrific company with admirable goals. I've been online and seen how and where they source certain parts - as I said yesterday, they are completely transparent about this - and I think that they may have to adjust their language a bit.

    I was relieved that not everybody disagreed with me. MNB reader Gary Butler wrote:

    You make a great point.  I also own a Shinola watch and love it.  I love the fact that it is built in Detroit.  By the way, the quality and workmanship is awesome as well.


    MNB reader Doug Madenberg wrote:

    Hard to believe the marketing folks at these companies can’t be a bit creative with alternatives to make their point.  “A Proud American Company” or in the case of Shinola, “It’s Detroit Time” or whatever.  Have a customer contest.  But I agree with your inclination that the Made in America claim should mean exactly that.

    A customer contest is a great idea. I love it.
    KC's View: