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    Published on: February 2, 2016

    by Michael Sansolo

    Asked how he lost all his money in "The Sun Also Rises," one of Ernest Hemingway’s characters responds, “Two ways: Gradually and then suddenly.”

    Likewise, many businesses, when asked what kinds of problems hurt them most, should respond: Two kinds - big and small.

    Allow me a relevant metaphor. Recently, a massive snowstorm buried the area where I live, near Washington, DC. It closed schools, the federal government and streets like mine for days on end.

    Less publicized was the half-inch of snow that fell right at the evening rush hour two days before the monster storm. Thanks to the unique properties of this area that dusting resulted in traffic problems that caused commutes to take four to six hours longer than usual.

    Here’s the thing: the area actually did everything possible to ready for the monster storm. Weather forecasters issued warnings, municipalities readied whatever equipment they had, and shoppers appropriately panicked - and hoarded - until the roads became useless.

    The smaller storm went largely unnoticed until it wreaked havoc.

    Now think about challenges business face and ask whether they all get the attention they deserve. The truthful answer is probably not. Big challenges get big response, yet we struggle to muster sufficient attention to smaller issues that can prove highly troublesome.

    Consider all the discussion here at MNB in the past week about Walmart closing hundreds of stores. It reminds us how incredibly focused the industry remains on the giant retailer even decades after it substantially altered the retail landscape.

    But we rarely hear such impassioned discussion of the impact of category killers - for example, pet superstores - that essentially removed once profitable categories from traditional operators. (Let’s remember that competition is only one problem to consider that happens piece by piece. Think employee retention or trading partner relations as examples where problems can start small and mushroom quickly.)

    As many retailers have learned, the death by 1,000 cuts can be just as fatal as a single large wound.

    So the question is, have we learned?

    We at MNB aren’t the only people watching Amazon intently and constantly questioning what impact electronic commerce as a whole might have on retail. It’s impossible to contemplate a future in which electronic commerce doesn’t significantly change the way people shop.

    Yet that’s hardly the only challenge out there. Inside companies we have to hope there’s time being spent on less publicized challenges from other channels or less glamorous operators from Aldi and Lidl, dollar stores, convenience stores, drug stores and more. None of us should ignore the reality that all those channels are finding new ways to serve consumer needs to ensure survival and build sales and profits.

    Sadly we never have the luxury to deal with challenges on our own schedule. Just like those inconvenient winter storms, challenges can come one on top of another and all require a response.

    Advance planning, concerted responses and aggressive training don’t guarantee anything. Yet that’s still the right path for problems large and small.

    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: February 2, 2016

    by Kevin Coupe

    There has been a lot of attention paid in recent days to the Zika virus, with the World Health Organization (WHO) this week saying that its spread constitutes a global public health emergency.

    The Zika virus, which apparently is spread by a specific species of mosquito, is believed to be linked to a birth defect that causes babies to be born with undersized heads and brains. The Wall Street Journal this morning reports that the WHO has "called for more surveillance, research, and efforts to control the virus’s spread. It also pushed for the development of more readily available tests to diagnose the virus - none are commercially available now - as well as drugs and vaccines."

    This virus may be making headlines now, but until just a few days ago, it was virtually unknown in the US.

    Last night on "The Daily Show," Trevor Noah joked that it is a lot like soccer ... "there's a mild curiosity about it in the US, but it is huge in Brazil." This is a joke rooted in truth; there may be as many as 1.5 million Brazilians infected with the Zika virus.

    It is within the context of all the publicity for this sudden global public health emergency that I was fascinated yesterday to read a Bloomberg piece about antibiotic-resistant bacteria. Fascinated ... and more than a little concerned.

    Now, let me be clear here as I try to explain this in the simplest possible terms: I am the farthest thing from a scientist, my last biology class was in 1971 and my last chemistry class was in 1972.

    But as I understand the story, there are certain superbugs that are resistant to antibiotics, which can be scary. But now, researchers have identified "a gene that can make bacteria resistant to a last-resort antibiotic called colistin," and that gene "has been detected in 19 countries in bacteria from farm animals, retail meat, or humans."

    This is not a good thing. If you're sick, when no other antibiotics work, they give you colistin. If colistin doesn't work ... well, the odds at that point are that you are screwed.

    Most of the countries where the colistin-resistant gene has been found are in Europe and Asia; it has not been detected yet in Latin or South America. But it also apparently has been found in retail meat sold in ... Canada.

    Now, I don't want to sound alarmist here. And I'd urge you to read the Bloomberg story here.

    But here are the things that concern me...

    • The story seems to suggest that one response to these concerns has been to reduce antibiotic use in livestock ... but I'm not exactly how that's going to be effective. Wouldn't that just make us more vulnerable, not less?

    • On the other hand, the story also says that we need to develop better antibiotics ... but my impression is that this is not a fast and easy thing to do. So exactly how vulnerable are we to these bacteria in the near-term?

    • When I look at the map showing where the colistin-resistant bacteria has been found, Canada's proximity to the US is striking ... and makes me wonder whether new calls for country-of-origin labeling are going to be heard. (Maybe we could build a wall...?)

    • Finally, as I read this story I thought about Chipotle's recent food safety issues ... and it makes me wonder what might've happened if the strain of E. coli that was sickening its customers had been a more virulent form of colistin-resistant E. coli. It seems at least possible that rather than getting sick, people could've died.

    That's just part of what concerns me. (If I knew and understood more, I have a feeling that I'd have trouble sleeping at night. Or would be investing in a bacteria-resistant bomb shelter.)

    One thing that I think all this adds up to is the absolute requirement that food retailers and suppliers have a granular understanding of the supply chain. With every passing day, it seems more likely that there will come a moment when they will have to know where specific products have come from, and the ability to quickly respond with confidence, credibility, and accuracy will be a determining factor in whether their businesses will survive.

    If companies are not doing what needs to be done in this area, they are playing with fire. If c-level executives are not demanding this of the people who work for them, then they are guilty of leadership malpractice.

    These kind of scenarios should scare the crap out of people in the food business. It seems that the more we know, the more vulnerable we seem to be.

    Read the Bloomberg piece. It is - or at least should be - an Eye-Opener.
    KC's View:

    Published on: February 2, 2016

    Consumer Reports is out with a new study saying that "while 62% of shoppers seek out foods labeled ‘natural,’ the truth is that these foods often contain the artificial ingredients and chemicals consumers are trying to avoid." The magazine is advocating for, if not an outright ban of the term "natural," a system that defines it in a way "that is meaningful and meets consumer expectations - for processed foods that would mean organic with no artificial ingredients."

    The study goes on to say that "nearly two-thirds of consumers are currently misled to believe the label means more than it does, including that these products are free of GMOs, hormones, pesticides, or artificial ingredients. And nearly half of consumers incorrectly believe that natural claims on labels have been independently verified."

    The word "natural" means very specific things to consumers, Consumer Reports says. Eight-five percent of those polled said that it means "no chemicals were used during processing," while 84 percent said it means "no artificial ingredients or colors," an equal number said it means "no toxic pesticides," and 82 percent said it means "no GMOs."

    Interestingly, 87% of shoppers who buy foods labeled ‘natural’ tell Consumer Reports that "they would pay more if the term met all of their expectations."
    KC's View:
    I've always thought that the way the word "natural" is used in the food industry often borders on the fraudulent. There are people and companies who are almost gleeful about the misconceptions and how they can help sales, but I think this is a serous miscalculation. If you deceive customers, in the long run it'll bit you in the rear end.

    Published on: February 2, 2016

    The Washington Post reports that Ahold-owned Peapod by Giant "has set up distribution areas at the Fort Totten, Glenmont and Vienna Metro stations" in the Washington, DC, metropolitan area, noting that "while the amenity is only being offered at three stations, Metro says that if the six-month try-out is successful it could expand to other locations in the 91-station system."

    To use the service, the Post writes, "Metro riders will place and pay for their order through Peapod’s online service with pickup options of 4 to 7 p.m. Mondays, Wednesdays and Fridays. Peapod will deliver the orders to pods at each station. An on-site attendant will distribute the groceries to customers. No money will change hands and no food will be stored overnight."

    The move by Peapod is consistent with broader growth in the grocery delivery-and-pickup business in DC: "Peapod has 53 pickup locations in the region, including one at a Chevy Chase gas station. Other services also have popped up, including Instacart, which delivers from Whole Foods, Harris Teeter, Safeway, Costco and other grocers, and Google Express, which provides same-day delivery from various stores, including Giant."
    KC's View:
    Smart move, and potentially differentiating. I guess my only problem with the concept is that the DC metro system is one of the more problematic in the country ... so I'd hate to be too dependent on it.

    Published on: February 2, 2016

    In Minnesota, the Star Tribune reports that even as Hy-Vee embarks on an eight-store invasion of the Minneapolis/St. Paul market, it appears that Meijer, Lucky's Market and Whole Foods' new 365 concept are all about to make the area more competitive.

    The story says that Meijer is considering four suburban sites, though no locations or dates have been put forward; Lucky's, which resembles a Fresh Thyme, is said to be hoping that its format will appeal to local shoppers who like the Twin Cities' thriving co-op scene; and Whole Foods reportedly is scouting for locations for its smaller-and-a-little cheaper 365 format.

    The Star Tribune writes that there is more: "Discount grocer Aldi will open 5 new stores in 2016, Fresh Thyme will open stores in Apple Valley and St. Louis Park this year. Trader Joe's opens a new downtown Minneapolis location in 2017."
    KC's View:
    Not Lidl? (At least not yet...)

    Published on: February 2, 2016

    Vox has an interesting piece about the negative reactions last week to Amazon's announcement that its record sales were short of expectations, which caused its share price to drop.

    The fact is that a look at Amazon's sales numbers shows a line moving steadily upward, while its profit numbers remain flat. It "does not look like a company that is trying and failing to increase its profits. Nor does it look like a brand new startup that is eschewing short-term profits in order to establish its business.

    "Amazon is a pretty old company, and its profits have never meaningfully differed from zero even as it gets bigger and bigger. That's because — drumroll please — Amazon's leadership, from CEO Jeff Bezos on down, are deliberately redeploying every dollar of revenue they earn into making the company bigger and bigger.
    One can debate the wisdom or sustainability of this strategy ... but it's clearly the strategy."

    But the big mistake, the author argues, "is in understating Amazon's ambitions."

    Worth reading ... here.
    KC's View:

    Published on: February 2, 2016

    Internet Retailer reports on a new Hitwise study saying that "visits to the leading 500 retail websites grew 25% in November and December, and accounted for 34.5% of them."

    Perhaps more significantly, the study says that Amazon's rate of growth was almost double that of Walmart's website ... and Walmart ranked as the second retail website in the study.
    KC's View:

    Published on: February 2, 2016

    The Associated Press reports that PepsiCo is trying to get edgy and hip by opening a restaurant this spring in New York City's trendy Meat Packing district that it says is "inspired by the exploration of the kola nut" and will feature a "full artisanal menu from a rising resident executive chef."

    The restaurant will sell Pepsi soft drinks as well as specialty drinks created by a "cocktail curator."

    The move comes, AP notes, "at a time when Americans are cutting back on soda consumption."
    KC's View:
    Maybe I'm wrong about this, since I haven't actually seen the restaurant, but ... just from the description, this sounds like it would be a lot more suitable for a shopping center in Orlando, situated between a Red Lobster and a Rainforest Cafe. But in NYC's Meat Packing District? I am dubious.

    Published on: February 2, 2016

    Reuters reports that "a Chinese court has sentenced 10 employees of the American food supplier OSI Group to prison and fined the company up to 2.4 million renminbi, or $364,875, over claims that it reused returned food products to avoid losses. The verdict is the end of a long-running investigation into OSI after a safety scandal in 2014 involving the fast-food giants it supplied - McDonald’s and Yum Brands, owner of KFC, Pizza Hut and Taco Bell in China."

    • As expected, the US Centers for Disease Control and Prevention (CDC) said yesterday that its investigation into E. coli outbreaks at Chipotle has ended, though it said that it has not been able to specifically identify the source of the outbreaks that sickened dozens of people.

    According to a New York Times piece, the CDC said that "a common meal or ingredient served at the restaurants was a likely source of the outbreaks, but investigators were unable to specify the food or ingredient responsible for the contamination."

    • TreeHouse Foods yesterday completed its $2.7 billion acquisition of ConAgra's private label food business, which it had struggled to integrate since it bought what used to be called Ralcorp in 2013.
    KC's View:

    Published on: February 2, 2016

    ...will return.
    KC's View: