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    Published on: December 10, 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. I'm coming to you today from Westport, Connecticut ... and I was brought here today by two emails I received this week.

    The first one was from a reader who said that while she likes MNB, she feels that I spend too much time focusing on big companies and not enough on smaller companies. Now, I'm not sure that this is true ... I like to think that I really spend most of my time focusing on the big innovations that grab my attention, but I take seriously even the criticisms I disagree with.

    The second email was from a reader responding to a comment I made regarding the need for retailers to differentiate themselves .... and we both agreed that a really great cinnamon roll is one of the ways that food stores can do so.

    I think that one of the reasons I originally mentioned a cinnamon roll has to do with the place you see behind me - the Coffee an' Donuts shop. Not a sexy or modern sort of name ... but they make a cinnamon twist that is the size of a small tire, and utterly delicious. You can sit at the counter and have eggs or pancakes, and they're very good, as is the coffee. But it is the doughnuts that are magic - hot and dense and flavorful.

    On a Saturday or Sunday morning, you can wait a long time to get a table, and people will line up to get inside to order doughnuts. This is a one-store operation, owned by a Greek family, and doing business in this location - very successfully - for decades.

    I don't come here as much as I used to because I'm at the age where I have to be a little careful about doughnut consumption .... but when the kids were young, this to be a favorite place to come on weekends ... it is about eight miles and six exits on the interstate away, and we'd pass plenty of supermarkets and other coffee shops and bakeries to get here. But this was the place - it was special, and worth the effort.

    That's what retailers have to do. They have to find that thing that makes them different, makes them special, and then cultivate and nurture it in a way that comes to define the business ... and gives people a reason to pass other stores and not go online to do their shopping.

    In the food business, inevitably that means food that smells and tastes great ... and it can be as simple as a really great cinnamon bun.

    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 10, 2015

    Walmart has announced that it is launching its own mobile payments service, called Walmart Pay, that will directly compete with payment services that are being offered by Apple, Google and Samsung. Walmart Pay also is separate from the CurrentC service being tested by a consortium of retailers called Merchant Customer Exchange (MCX) in which Walmart is a member; MCX - which also includes Target, CVS and 7-Eleven - was launched in 2012, but CurrentC remains in a test phase with no announced plans for a rollout.

    According to the New York Times story, Walmart Pay is a QR code-based system that "is meant to allow for a smoother trek through checkout lines, and to bridge the retailer’s e-commerce and in-store shopping experience." And, "in a change of strategy for Walmart, its new payment app does not seek to bypass credit card companies. Walmart Pay instead acts more like a gateway to a variety of payment options, including credit cards and even other mobile payment systems. Analysts said that Walmart’s decision to start a service that allowed for credit card payments meant that it had probably negotiated better fees with the card companies. (Walmart declined to disclose the transaction fees it pays.)"

    Walmart Pay will be integrated into its existing mobile application, and will be accepted at stores in the Bentonville, Arkansas, market this month, with a rollout to stores nationwide in early 2016.

    In its analysis of the new product introduction, the Times writes that "Walmart Pay ... presents a fresh challenge to front-runners in mobile payments, none of which have gained overwhelming traction with users so far. One obstacle has been the slow growth in the number of merchants that support near-field communication technology, or N.F.C., on which systems like Apple Pay and Google’s Android Pay are based.

    "Both Apple and Google have found that persuading shoppers to switch from using physical credit cards or cash is tough. A survey released by the consumer data firm InfoScout found Apple Pay use to be at its lowest rate since the firm started tracking its usage. Shoppers used it this past Black Friday for only 2.7 percent of eligible transactions."

    But in its assessment, TechCrunch is less sanguine, saying that in its current iteration, "Walmart Pay sounds like a hassle. To use the service, which will be available in the first half of 2016, customers need to open the Walmart app and present a QR code to their cashier to check out with the payment information already entered in their account. Walmart claims that its mobile app currently has about 22 million users.

    "Using an in-app QR code is arguably so cumbersome that many shoppers will likely prefer to just take out their debit or credit cards and check out the old-fashioned way. Walmart has also never enabled the NFC readers needed for Apple Pay."
    KC's View:
    I have to wonder if Walmart will have any greater luck making its mobile payment app successful than Apple, Google and Samsung have ... especially because Walmart tends to do more cash business than a lot of other retailers.

    I have Apple Pay, but I have to admit that I don't often use it. It isn't a conscious decision ... I often have my debit card out before I even remember that I have Apple Pay, and at that point, it is just easier to do it the way I've always done it.

    However, I think that the companies getting involved in this business have to play a long game. Mobile payment systems will become mainstream, will be used by a lot of people, and there will be a time when people will wonder why there was any hesitancy. But in this case, it may take some time to get there ... though it could be argued that when Walmart makes a move like this, it has the potential to jump-start the process.

    Published on: December 10, 2015

    International Supermarket News reports that Kroger plans to expand its ClickList e-grocery service, currently available in Cincinnati, Indianapolis and Nashville, to the Atlanta market.

    The company has not laid out an extensive rollout schedule, but rather has been taking a measured approach to adding stores and markets, saying only that it expects the process to continue through 2016.
    KC's View:
    Slow and steady wins the race. I didn't always think this about Kroger's approach to e-commerce, but I'm pretty sure that this is exactly what they're thinking in Cincinnati.

    And everybody who competes with Kroger should be worried.

    Published on: December 10, 2015

    Amazon announced this morning that it has added 4,000 SKUs to the list of items available for one-hour delivery as part of its Prime Now service - including groceries, beer, wine and spirits from the Eataly gourmet food store that will be delivered in Manhattan.

    The company is describing the expansion of Prime Now options as a "procrastinator's dream," saying it is designed to be be able to deliver in just one hour gift products that include toys, wrapping paper, and flat screen televisions.

    Prime Now, the company says, "is offered exclusively to Amazon Prime members in Atlanta, Austin, Baltimore, Chicago, Dallas, Houston, Indianapolis, Las Vegas, Los Angeles, Manhattan, Miami, Minneapolis, Nashville, Orange County, Phoenix, Portland, Sacramento, San Antonio, San Francisco, San Jose, San Diego, Seattle and Richmond. In select cities, in addition to the products offered by Amazon, the service also includes deliveries from local restaurants and stores. Through Prime Now, one-hour delivery is $7.99 and two-hour delivery is free."
    KC's View:
    I haven't used Prime Now because I don't have access to it. But I absolutely believe that as Amazon expands the network of consumers and retailers that use it, it is going to become a major contributing factor to the company's success. I just think that it is one of those things that people didn't realize they wanted or needed until they had access to it ... and then, once they got it, they wonder how they lived without it.

    Published on: December 10, 2015

    The Orange County Register reports that the bankruptcy court overseeing Fresh & Easy's affairs has approved the sale of six of its now-closed California stores to the Grocery Outlet discount chain.

    The stores are in Orange, Rosemead, Long Beach, Downey, Whittier and Sunnyvale.

    The Register writes that "Grocery Outlet, which had previously operated stores in Buena Park and Fountain Valley, returned to Orange County last week with the opening of a new location in Costa Mesa. That store is a former Fresh & Easy. Chain officials say former Fresh & Easy spaces are the right fit for the brand. The growing chain will open another store in Westminster this week, and La Habra will be next. Those locations also are former Fresh & Easy markets.

    "The Emeryville-based discounter has 235 stores in six states and plans to add 30 stores in Orange and Los Angeles counties by the end of 2017."
    KC's View:
    First, for what I think is a strong analysis of the Grocery Outlet model, let me refer you to Michael Sansolo's column from earlier this week, which you can read here.

    This is just another development in the growing influence of the discount business ... as companies like Grocery Outlet, Aldi, Save-A-Lot, and, soon, Lidl, start to exert enormous influence on the US grocery marketplace.

    Published on: December 10, 2015

    The Washington Post this morning has a story about how Home Depot is having to adjust its approach to marketing and merchandising, compensating for the fact that aging baby boomers have tired of the do-it-yourself mindset and millennials are not quite at the point where they are embarking of remodeling projects.

    Home Depot executives say that because of these changes, "they will be ramping up their focus on catering to the professional contractor — whether they are an independent handyman or a small or midsize business — as older homeowners tire of taking on home-improvement projects themselves."

    The Post writes: "DIY-happy baby boomers have been a critically important demographic for Home Depot, the fourth-largest retailer in the United States and one of few major chains that have consistently delivered robust quarterly sales growth in the past two years. The company said Tuesday that a majority of its non-professional customers are baby boomers, even as millennials now outnumber that generation. (A majority of Home Depot’s shoppers are also homeowners, and about a quarter of them have incomes of more than $100,000 a year.)

    "With home prices climbing, and given that about 63 percent of the housing stock in the United States is more than 30 years old, Home Depot executives said they believe these boomers will still want to invest in improving their homes. But catering to them will increasingly be a different proposition.

    "It will mean being smarter about wooing the professionals who boomers might hire to do these jobs for them."

    As for millennials, who "are not yet embracing homeownership and are opting to live in multifamily housing ... Home Depot says it is confident that millennials will eventually take the plunge and buy a home, and that when they do, its research has found they will have the do-it-yourself ethos that their parents had in their younger years. For now, though, executives said they typically see millennial customers spring for items such as paint and window treatments — the kinds of things that can spruce up a home without violating a rental agreement."

    Home Depot also is investing in its e-commerce business, believing that this will be key to connecting with those millennial shoppers and maintaining a sustained relationship with them.
    KC's View:
    As a baby boomer with DIY expertise that begins and ends with being able to screw it a lightbulb, I don't really relate to this business model. But I do understand the notion of changing approaches when the customer base's interests change ... which is what Home Depot seems to be doing. The question is, are retailers in other venues and categories making the same sorts of determinations and reaching the same sorts of conclusions?

    Published on: December 10, 2015

    In an assessment this morning of the persistent food safety problems plaguing Chipotle - including an E. coli outbreak in eight states and a norovirus problem in Boston - the Washington Post writes that "after years of strong growth and accolades, Chipotle suddenly is facing the same critical challenge brand names such as Costco and Blue Bell ice cream confronted when serious questions were raised about the quality or safety of one of their products. About a decade ago, Taco Bell's business shrank for more than a year after an E. coli outbreak, even though it rapidly fixed the problem.

    "In each case, the company recovered, but customers have begun demanding better-quality food without being willing to pay much more for it. That mean the pressures on companies to achieve both affordability and quality are greater than ever."

    The problem for Chipotle is that its "reputation is perhaps more at risk than most in the fast-food industry because the chain has promised that it adheres to more-rigorous standards for procuring and serving its food." But, as Bill Marler, a lawyer specializing in food-borne illness lawsuits who has become an expert in the area, tells the Post, "people shouldn't assume that just because a company touts certain kinds of food that it has taken all steps to protect them from pathogens."

    This morning, on the "Today Show," Chipotle founder/CEO Steve Ells told Matt Lauer that the "procedures we're putting in place to eat are so above industry norms that we are going to be the safest place to eat," and he apologized for the food safety issues.

    "It's a really tough time,'' Ells said. "I have to say I'm sorry for the people that got sick. They're having a tough time. I feel terrible about that, and we're doing a lot to rectify this and make sure it doesn't happen again."

    And, regarding the company's dropping sales because of the food safety issues, Ells said, "That's not what we're thinking about now ... We're thinking about the safety and quality of our ingredients to put in place practices that will not enable this to happen again, practices that are so far above industry norms today that we will be the safest place to eat."
    KC's View:
    This is going to be a very long, steep hill for Chipotle to climb ... it won't be impossible, but nobody should expect any quick turnaround, especially because our expectations of Chipotle are higher than any many of its brethren.

    At the same time, everybody in the fast food business ought to be examining their processes, if only to get ahead of inevitable problems that they likely will face.

    Published on: December 10, 2015

    The Wall Street Journal reports that "Anheuser-Busch InBev NV’s new plan to reverse declining volumes in the U.S.—by rewarding distributors who focus on brands like Budweiser and Bud Light—is raising alarm among craft brewers who worry it will make it harder to get shelf space for their IPAs and porters."

    The world's largest brewer, the Journal reports, has "introduced a new incentive program that could offer some independent distributors in the U.S. annual reimbursements of as much as $1.5 million if 98% of the beers they sell are AB InBev brands ... Distributors whose sales volumes are 95% made up of AB InBev brands would be eligible to have the brewer cover as much as half of their contractual marketing support for those brands, which includes retail promotion and display costs."

    The program has been introduced just as Anheuser-Busch InBev is trying to convince federal regulators that a proposed $10-8 billion acquisition of the world's second largest brewer, SABMiller, would not reduce competition in the marketplace.

    "Craft brewers fear AB InBev’s new incentive program could do just that," the Journal writes. "They say the program encourages AB InBev distributors around the country to drop competing brewers and discourages them from stocking new brewers. They added it could make it impossible to get distribution from some of the nation’s strongest distributors."
    KC's View:
    I'm with the MNB reader who sent me a link to this story yesterday with the note, "They'll separate me from my craft beer when they pry it from my cold, dead fingers."

    I'm no lawyer, but as a consumer, just on the face of it, I think it would be an utter travesty if the acquisition of SABMiller by Anheuser Busch InBev is approved by regulators, especially in the face of these incentive programs, which seem totally focused on reducing craft brewers' access to the marketplace.

    The story makes clear that this would hurt the prospects of big craft brewers ... one can only imagine the damage it would do to the smaller companies, which is where a lot of innovation takes place.

    If the feds block Staples' purchase of Office Depot, but leave this alone, it will be some sort of governmental malpractice ... or to put it another way, a total crock.

    Published on: December 10, 2015

    The Wall Street Journal reports that "Great Atlantic & Pacific Tea Co. won bankruptcy-court approval to sell its Food Emporium brand and related intellectual property to Key Food Stores Co-Operative Inc.

    "Judge Robert D. Drain of the U.S. Bankruptcy Court in White Plains, N.Y., approved the $1.75 million sale to Key Food, the only bidder, according to court documents. The sale, which includes the assumption of certain liabilities, covered such assets as Food Emporium trademarks, domain names, e-commerce business and a mobile application.

    "Based in New York, Key Food is a cooperative of independently owned grocery stores in Connecticut, New Jersey, New York and Pennsylvania. In October, Key Food bought 23 stores from A&P at a bankruptcy auction."
    KC's View:

    Published on: December 10, 2015

    • In Houston, Channel 2 News reports that HEB is testing "a new curbside pickup program" at its Bunker Hill location "that will allow customers to go online, order groceries, pay a $4.95 fee and drive up to the store to pick their purchases up at the curb ... The $4.95 dollar fee is for orders large and small, and there is no order minimum.

    "HEB's curbside pickup is available at the Bunker Hill location from 7:30 a.m. to 9:30 pm. For now, curbside pickup is only available at the Bunker Hill HEB, but the company may explore adding it to other stores in the Houston area in the near future."
    KC's View:

    Published on: December 10, 2015

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

    • The Associated Press reports that "US food companies are mounting an aggressive year-end push to head off mandatory labeling of genetically modified foods.

    "The food industry wants the labeling to be voluntary, and it hopes to get a provision in a massive spending bill that Republicans and Democrats want to wrap up this week. If that becomes law, states could not require companies to disclose whether their products contain genetically modified organisms, or GMOs."

    I've reached the point where I think that the pro-labeling forces ought to just focus on comprehensive labeling of products that do not contain GMOs, and an educational marketing program that looks to educate consumers about their point of view. So much time and money is being spent on the labeling argument that I wonder if the USA consumer is actually being informed ... I'd try to win the argument in the court of public opinion, and put the pro-GMO/anti GMO labeling forces on the defensive there.

    • The Canadian Press reports that "Sobeys underestimated the difficulty in integrating Safeway stores in Western Canada into its retail grocery network, company executives said Wednesday in a conference call with financial analysts. Among the problems is a switch to the Sobeys private-label brand, Compliments, which the Nova Scotia-based company has introduced to replace Safeway-branded products."

    Marc Poulin, president/CEO of Empire Co., the parent of Sobeys, says that "the company needs to convince customers that the quality of the products is just as good, and in some case the products are exactly the same, as before the switch, even though the packaging is different."

    As a result, while overall sales are up, net income is down, but the company remains confident of its ability to realize savings from the acquisition that will get profit moving in the right direction.

    Reuters reports that "investors in Dole Food Co and the fruit importer's chief executive agreed to settle litigation over the company's 2013 buyout, clearing the way for shareholders to begin receiving more than $400 million in payments in the coming months. The litigation stems from allegations that shareholders were shortchanged when Dole Chief Executive Officer David Murdock bought the company for $13.50 per share, or about $1.2 billion." It has been established that former Murdock top lieutenant undervalued the company so that Murdock could buy it at a lower price.

    How do people not go to jail for pulling this crap?
    KC's View:

    Published on: December 10, 2015

    ...will return.
    KC's View: