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    Published on: January 5, 2016

    by Michael Sansolo

    Changing the pages on a calendar - if anyone uses a calendar with pages anymore - means it’s a New Year. But beyond that it’s the same old, same old—even when it comes to change.

    Over the New Year’s holiday the Minneapolis Star Tribune ran an interview with General Mills CEO Ken Powell, who in one quote nailed what the industry has been, is and will be facing a while to come.

    Referring to the pace of change in the industry, Powell, a 36-year industry veteran said, “I’ve been doing this a long time and I’ve never seen it this fast.”

    Amen to that.

    There probably was a time when a year-beginning column like this might indulge in some predictions with the potential for some accuracy 12 months later. This isn’t one of those times.

    2015 demonstrated the unpredictability of the times in so many ways, from the falling price of gasoline to the longevity of Donald Trump’s campaign, from the New York Mets' appearance in the World Series to any one of a thousand business events that caught us by surprise.

    Yet, Powell’s words do provide some sense of both guidance and challenge to the industry as 2016 begins.

    For example, asked about the incredible shift in consumer habits away from products that have made companies like General Mills so successful, Powell identified a couple of key sources of change.

    There’s the demographic shift, especially the growing power of Millennials. As Powell said, “They have different food values. They are looking for real food, authentic food, simple food, and it shows up in a lot of ways. There are lots of things they are avoiding — artificial sweeteners, preservatives, flavors.”

    There’s the technological too. “The consumer has much more control,” Powell said. “They can get information the way they want, when they want.” The key is to listen to, understand and respond to changing consumer values. As Powell said, “If we don’t…they won’t trust us and they won’t support us.”

    And, of course, there’s the competition. As the article highlights, companies like General Mills are under pressure to both satisfy all these new needs and manage to contain costs at the same time, catering to both Main Street and Wall Street and trying to get that balance right.

    Although the pressures on a company like General Mills and other traditional center store powers may be unique, they bring lots of insights for businesses far from the cereal aisle or other categories in which General Mills does business.

    As we’ve said many times here at MNB, change is inevitable but your success is not. The challenge for 2016 is very similar to what you’ve always faced: finding a way to be relevant and important to your customers, whoever they are. (Though, if you are referring to your customers as "whoever they are," that may be your first problem. It is critical these days to have a much more granular understanding of who your shopper is.)

    Interestingly, the same Star Tribune article talked about how a small company like Chobani went from “pipsqueak to major yogurt producer” in about five years thanks to modern communication spreading the word about Greek yogurt. At the same time there are many industry experts casting shade on Greek yogurt overall, saying sales may well have peaked and consumers are looking for something new.

    Things are moving fast out there. So Happy New Year; now get running!

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
    KC's View:

    Published on: January 5, 2016

    by Kevin Coupe

    Interesting story in the New York Times about how reporters and other employees at the Boston Globe (which used to be owned by the Times) responded to "widespread delivery problems" after the paper's management switched to a new delivery service.

    They went out and delivered last Sunday's papers themselves, just to make sure that readers got them.

    The story notes that after a raft of subscriber complaints about deliveries, management asked for volunteers ... and was flooded with responses. Those "editors, reporters, web producers and employees in marketing and advertising were directed to arrive at the newspaper’s three distribution centers at midnight," with the suggestion that they should bring a GPS and a flashlight. They then stacked the papers in their own cars and delivered them.

    “It was definitely a bonding experience for the newsroom,” Nicole Dungca, a transportation reporter, tells the Times. “It was pretty incredible that so many people were willing to give up their sleep because we care so much about our readers.”

    I love this story ... and not just because I'm engaged in an ongoing fight with the New York Times over the clown who, when he delivers our Times each morning, leaves in 6-8 feet out in the street, where it gets run over at least several times before we ever get to it. (If I had my way, I'd switch to digital-only ... but Mrs. Content Guy is old fashioned and likes a paper copy.)

    Here's the thing. Every company - and every employee, no matter how high or low they are on the food chain - has to understand that they are vulnerable to disruption, and the possibility that some new business or technology could render them to be irrelevant. One has to do whatever one can to be relevant to the customer ... and that, at its core, is the realization that drove those Globe employees to do what they did.

    "Because we care so much about our readers." That's a strong statement, and it seems to me that every organization ought to be asking whether it has created a strong enough culture that employees would extend themselves to this degree for their customers.

    The answer to that question would be an Eye-Opener.
    KC's View:

    Published on: January 5, 2016

    Tech Crunch has a good piece about how "last year was a bellwether year for food systems, specifically food distribution systems. In 2016, the traditional method of delivering food from farms to tables is going to shift to include new players, more technology and shocking transparency." And it concludes that "all that happened in 2015 suggests that 2016 will begin to show us how our food distribution and delivery systems may look by 2020 and beyond. The ground has been primed for new players, new technology and a new landscape for how food moves from farm to plate. Old-school food logistics are ripe for transformation."

    You can read the piece by clicking here.
    KC's View:
    Transformation won't be easy, of course ... the same consumer demands for fresh, local product may also be creating an environment in which there will be more, and more serious, food safety issues. (Chipotle is exhibit one in this debate.) But that doesn't mean the pressures will change, as consumers are likely to demand more of the food companies with which they do business, and those companies struggle to satisfy those desires while also meeting business model demands that can put stresses on their infrastructures, profitability, and expertise.

    Tech Crunch doesn't suggest that this all will be easy ... though, as Michael's column today suggests, it all is likely to happen faster than anyone expects. But I think the story does a good job of framing some of the important issues. People and companies that don't pay attention will, in all likelihood, be lost.

    Published on: January 5, 2016

    Global Cosmetics News has a story about how Wegmans has announced that it is removing all cosmetics and HBC products from its stores - including Johnson & Johnson’s RoC, Aveeno and Clean & Clear brands, P&G’s Olay and Crest toothpaste, and L’Oréal’s Garnier - that contain polyethylene microbead plastics.

    According to the story, the ban goes into effect in February and puts the company in compliance with Erie County, New York, legislation banning their sale. However, the ban will be in effect in all of Wegmans' stores, not just its Erie County locations.

    “We feel it is the right thing to do for the communities we serve, and it falls under our sustainability initiative to make responsible decisions for people, business and environment,” Mary Ellen Burris, senior vice president of Consumer Affairs at Wegmans, says on the company's website.
    KC's View:
    I've always felt that one way to measure whether or not it has been a good day is to figure out if I've learned something. This qualifies ... because until now, I'd never heard of polyethylene microbead plastics and therefore did not know that they were an issue. (Perhaps I wasn't paying attention, and perhaps everybody else knew. But I missed it.)

    When I saw this story, I went to the font of all knowledge - Wikipedia - to find out what polyethylene microbead plastics are ... and it explained that "microbeads from exfoliating personal care products and toothpastes are washed down the drain, pass unfiltered through the sewage treatment plants and make their way into rivers and canals, resulting in plastic particle water pollution. Plastic microbeads have been found to pollute the Great Lakes in high concentrations, particularly Lake Erie."

    It also explained that "as momentum against microbeads in cosmetics has grown worldwide, companies such as Adidas, The Body Shop, Johnson & Johnson, L’Oréal, Procter & Gamble, and Unilever have pledged to phase out plastic microbeads from their products."

    So that's what I learned today.

    Published on: January 5, 2016

    Fortune has a story about how Thrive Market - described as the "online natural and organic retailer" - is beginning the six-month-long rollout of approximately 100 private label items that represents "the latest step for Thrive as it attempts to offer natural and organic goods at the price of the conventional non-organic equivalent."

    The story notes that "Thrive, with about 150,000 members and about 20,000 new paying members a month, is approaching a $100 million run rate after launching the site at the end of 2014. Every order over $50 receives free shipping, with 90% of the company’s orders hitting that threshold."

    The company offers a “hyper-curated catalogue" of SKUs, with about 4,000 items ... compared to the ten-times as many that its traditional bricks-and-mortar competition might carry. But that doesn't seem to matter; Thrive says it "is now one of the top-five sales channels for most the brands it carries."

    “We can’t scale the infrastructure fast enough to service the demand,” says co-founder and co-CEO Nick Green.
    KC's View:
    I wonder if the folks at Whole Foods, as they develop their "365" concept that is supposed to be smaller and less expensive than their traditional stores, are looking at Thrive as any sort of object lesson. There's a part of me that thinks that this is where the market is going, and that this is where Whole Foods ought to be placing more of its investment energy.

    Published on: January 5, 2016

    The Daily Meal reports that "the product experts at Whole Foods think they know what consumers (i.e. Whole Foods customers) will go wild for in 2016."

    Canned wine.

    “Options that provide accessibility and convenience without trading quality will continue to gain traction,” Whole Foods says. “Cue the aluminum can — a portable, easy-to-chill option that’s well suited for single servings and active, outdoor lifestyles. And with choices like Infinite Monkey Theorem and Presto Sparkling wine, today’s pop-tops are the new popped-cork.”
    KC's View:

    I am, to be fair, a little conflicted about this. I guess that anything that contributes to a greater appreciation of wine in the US is a good thing.

    But one of the things that I love about wine is that it is a little magical. It makes an average weekday meal a little better. And somehow, I worry that this will be lost if suddenly it is in the same kind of packaging a a soft drink or beer.

    Published on: January 5, 2016

    • Walmart yesterday announced that it will accept MasterPass - described as "a digital payments platform that enhances the online and mobile checkout process" - in all its US properties this year. The platform "securely stores payment and shipping information" and enables one-click online and mobile purchasing without customers having to enter their delivery and billing information.
    KC's View:
    It is all about mobile.

    Published on: January 5, 2016

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

    • In Maine, the Portland Press-Herald reports on how Hannaford is testing an expanded foodservice operation in several locations, offering items such as stir fry, chicken wings, fresh sandwiches, quesadillas, hamburgers, pizza, burritos, sushi and salads.

    Eric Blom, a Hannaford spokesman, tells the paper that "it's something we’re exploring to bring our food expertise to customers in another way." He says that while early results have been positive, it is too soon to know whether it the program will be rolled out chain-wide, especially because it tends to be space-intensive.

    The story notes that "Hannaford is one of the larger chains to offer takeout food or a place for customers to eat in-store, but it isn’t the first. Whole Foods has an extensive prepared-food section and its Portland store has a small restaurant space, and the larger Market Basket stores – including its Biddeford location – have cafes where shoppers can sit, eat and ponder their shopping lists."

    For me ... and I know not everybody feels this way ... a key part of being a competitive food store is focusing on share of stomach. Which means that you are competing against anyone who sells food, because people only have so much money and so much room in their stomachs. The more food stores can focus on the food ... which is not as obvious, nor as easy as it sounds ... the better. But - and this is really, really important - it has to taste good, and cannot be, at least IMNOHO - lowest common denominator food. Because that just sabotages the whole thing.

    • The Associated Press this morning reports that the US Department of Justice is suing Volkswagen "over emissions-cheating software found in nearly 600,000 vehicles sold in the United States ... The civil complaint against the German automaker, filed on behalf of the Environmental Protection Agency in U.S. District Court in Detroit, alleges the company illegally installed software designed to make its 'clean diesel' engines pass federal emissions standards while undergoing laboratory testing. The vehicles then switched off those measures in real-world driving conditions, spewing harmful gases at up to 40 times what is allowed under federal environmental standards."

    The suit is not a criminal complaints, but rather is focused on alleged violations of the federal Clean Air Act. If Volkswagen is found to be liable, it could be facing more than $18 billion in fines.

    And, the story says, there could be additional criminal charges brought against the company, as well as civil suits from car owners.

    The car manufacturer responded to the suit with a statement saying that it "will continue to cooperate with all government agencies investigating these matters."

    There probably wasn't much else it could say ... after all, Volkswagen has zero credibility now, and putting up any sort of defense only would have exacerbated its problems. I don't know about you, but every time I see a Volkswagen or one of its commercials, all I can think about is how it systematically and systemically tried to cheat the system and lie about its own attributes. Which speaks, I think, to what already can be described as a classic case of brand mismanagement and lack of anything resembling corporate ethics.

    • The New York Times this morning reports that "Chick-fil-A’s Midtown Manhattan restaurant remained closed on Monday for a fifth business day after an inspection by city health officials found several violations, including the presence of fruit flies and food stored at the wrong temperature."

    The closing was said to be voluntary, and the company has said that it is "making upgrades to the facilities and equipment and that it had hired an independent consultant to evaluate the changes."

    The Manhattan Chick-fil-A "opened in October with great fanfare," the Times writes, "and consumers continued to wait in a line that stretched along 37th Street right up until the company closed it on Dec. 30."

    • Ahold-owned Giant Food Stores yesterday announced it has entered into an agreement with C&S Wholesale Grocers, Inc. to acquire the Nell’s Shurfine Market in Carlisle, Pennsylvania. Terms of the deal were not disclosed.
    KC's View:

    Published on: January 5, 2016

    • Target Corp. said yesterday that Janna Potts, the company's senior vice president of human resources focused on stores and distribution, has been promoted to the role of executive vice president, chief stores officer.
    KC's View:

    Published on: January 5, 2016

    Got a couple of interesting emails yesterday about the report that Whole Foods will pay a $500,000 fine to settle accusations that it mislabeled and overcharged for products in New York City, though the company continues to be defiant both about the original charges and the settlement.

    I commented:

    I guess that Whole Foods has to stay on its high horse about this, but somehow it leaves a bad taste in my mouth. They're bigger problem is that a lot of people equate mis-pricing with extravagant over-pricing ... and I'm not sure that whining about how the New York City Consumer Affairs Department interprets a legal agreement.

    MNB reader Tom Kroupa wrote:

    I agree with your comments about Whole Foods response to the weights and measures fine they paid in New York City.

    Because their CEO John Mackey is a libertarian, his default line is always anti-government. You may recall that he called President Obama a nazi because of his distaste for Obamacare. This may be the reason for his begrudgingly paying the fine for overcharging customers. 

    If he would have admitted their mistake openly, rather than try to give the perception that the government somehow was targeting Whole Foods, it would have been a better approach for customer relations. An honest "mea culpa" is the fastest way to regain customer loyalty.

    I'm not even sure it has to be an honest mea culpa. It just has to appear sincere.

    (I think it was George Burns who once said, "Sincerity - if you can fake that, you've got it made.”)

    But MNB reader Bruce Wesbury disagreed:

    I’m growing extremely tired of all this Government intervention. Whole Foods is and always will be the most overpriced grocery store on the planet. If you are a shopper there and don’t know this you are more than likely a member of the 1% club. The ill-informed will now cheer that the big corporation had to pay 500 million to the State of New York. All this so Cuomo and his team can continue to find stores that charge more than they think is fair for a Twinkie. The circle will continue as all Whole Foods will do is raise prices to everyone else to cover the fine. In the end, only the consumer suffers.

    Just a couple of things here.

    First, Whole Foods has to pay a half-million dollars ... not a half-billion dollars. (If the fine had been for $500 million, I'd be up in arms about government intervention, too. And I suspect John Mackey would be preparing for a re-enactment of the siege at the Alamo.)

    Second, I'm pretty sure Whole Foods doesn't sell Twinkies.

    But let's put these aside. And let's mostly talk about the broader issue, not Whole Foods.

    While I understand and appreciate concerns about government overreach, I do think that when a company mislabels products and appears to be deceiving the consumer, it is perfectly appropriate for the government to step in and make sure it doesn't happen.

    You seem to suggest that it doesn't really matter, because Whole Foods' customers and rich and can afford the higher prices anyway. But that's not the point. Companies have to be honest and above-board about how they treat their customers, and there needs to be some sort of governmental mechanism for assuring that this is the way business is done.

    There is a difference between charging high prices and over-charging through mislabeling. In the first case, consumers make their own choices. But if the second case occurs, consumers aren't making their own choices because they're being deceived ... and so somebody has to step in.

    If you are reflexively anti-government, you don't think it should be the government that does so. (Or maybe you just are reflexively anti-Cuomo. hard to tell.) Either way, that's a perfectly legitimate position to argue. But then you have to tell me how such situations get rectified. (The "free market" argument doesn't work for me, because "free market" and "theft" are not, in my mind, synonymous.)

    The thing is, I think even most people with legitimate concerns about the size of government are okay when some agency steps in and prevents them from being ripped off. it is when government appears to be doing the ripping off that they get irritated. Sometimes justifiably so.
    KC's View: