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    Published on: March 1, 2016

    by Michael Sansolo

    As hard as it is to believe, there are lessons to be learned from Al Qaeda. And yes, it pained me to write that sentence.

    But the lessons are real and were outlined definitively by retired General Stanley McChrystal during the opening session of this year’s National Grocers Association (NGA) show in Las Vegas.

    McChrystal explained his role overseeing the joint strike force of America’s elite forces during part of the war in Iraq. As he explained, the US forces held every advantage - in manpower, technology, intelligence and, of course weaponry.

    Despite all that, winning the battle against Al Qaeda in Iraq went poorly for a long time. For example, information and decisions on the US side followed a traditional organizational structure, with power consolidated at the top. Al Qaeda had no such structure. Rather, the terrorist group was simply a loose group of people, all interconnected by consumer technology and unburden by an org chart or bureaucracy.

    When the US side responded in kind by turning the organizational chart into a matrix of action, the battle changed. Suddenly decisions were made quicker and people with knowledge from the front lines were more able to influence actions and results.

    So how does that connect to your business? You could argue: in every way possible. Challenges today come in countless directions - whether from emerging competition, changing consumer demands, new technologies or more. As Dan O’Connor of Retailnet Group explained in his general session Monday, the challenges are more varied than ever. That in turn requires retailers to think differently, flexibly and nimbly.

    Likewise, Laurie Rains of Nielsen in Monday’s breakfast session detailed findings on consumer behavior that speak to the need for an ever more varied approach. She outlined the many ways shoppers can behave in diametrically opposite ways. For example, while newspaper ads are decreasing in use in many markets, they continue to hold tremendous importance in rural areas.

    Or consider that while an increasing percentage of shoppers are moving toward on-line alternatives, a large group - nearly 75%- - remain committed to traditional stores, largely because they want to see and select their own food products.

    Cutting through all these contradictions requires that organizations change in the ways McChrystal said the military shifted, by empowering decisions makers at all levels and encouraging insights from all points of the organization.

    One more lesson from McChrystal: a serious concern the military had when making its shift was the potential for increased mistakes. After all, giving more people the authority to approve bombing operations could have produced disastrous results.

    Instead, the opposite happened.

    With more authority came additional accountability and as a result, the military’s precision improved because everyone became that much more careful with their own decisions. One has to wonder if the same could be achieved with far less impactful decisions such as where to build a display.

    The challenges of the current world leave all parts of the industry facing a chaotic field of battle, but finding a way to adapt to new challenges is what winners always do.

    You can’t control chaos, but you can learn to cope.

    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:
    McChrystal made a similar point in March 2015 when he guested on "The Daily Show with Jon Stewart," an appearance that we took note of here on MNB. He said that "no plan survives contact with the enemy," and suggested that in both military efforts in the Middle East and in modern business, there is an enormous gap between what we were designed to fight and the enemy we actually face. You can see the MNB piece and the "Daily Show" appearance here.

    Published on: March 1, 2016

    by Kevin Coupe

    It was just another email. Until I thought about it for a minute, and considered the implications.

    The email was from Amazon (as so many are in any given day), and it was promoting a new item available on the site - a Brita water pitcher that comes with a filter than enables the consumer to have cleaner, better-tasting water.

    Except that this was a pitcher with a curveball - because this Brita pitcher comes complete "equipped with a built-in counter that tracks the amount of water that passes through the pitcher's filter. The pitcher itself will automatically order a new filter through Amazon Dash Replenishment when the old filter nears its capacity. This new connected pitcher with Amazon Dash Replenishment gives Brita owners exactly what they want - a new Brita filter on their doorstep at the time they need it."

    Wow. That's pretty cool.

    The Brita Infinity Pitcher will cost about 45 bucks, which seems to be about a third more expensive than most of the Brita pitchers that I found on Amazon ... but the argument is that the tech-driven convenience will make the price difference palatable. And I have to say that I think the argument is pretty compelling. Or, to coin a phrase, it is an argument that holds water.

    At another time, I might've thought that this was an unnecessary innovation. But just a few minutes before, I was looking for a replacement water filter for my Cuisinart coffeemaker, and didn't have one, and realized that I had a choice between ordering replacements from Amazon and finding a local store that carries them. I decided to go the Amazon route, but when I got the email, I thought about how great it would be if my coffeemaker knew that it was time for a new water filter, and ordered one automatically.

    That'd be pretty cool.

    One of the things that traditional retailers have to realize is that the advent of smart appliances and the expanding Amazon ecosystem are combining to create an environment in which it is less and less necessary for people to actually go to the store. Not everybody, and not all the time. But enough to have an impact on a lot of bottom lines.

    One of the things that one finds a lot at industry conferences is people who like to cast doubt on the e-revolution. They like to talk about the people who still want to go to the store, about the hiccups that can affect click-and-collect or delivery services, about how rural customers have different needs than urban customers, and about how selling points like "your neighborhood grocer" or "hometown proud" or "old-fashioned service" or similar tropes are enough for retailers to hang their hats on when competing in this new environment.

    All of this may, in fact, be true. And still not enough to stave off the impact of technologies like the Brita pitcher, or other, similar smart appliances that can fundamentally change the way people shop.

    Not all people, and not all the time. But enough to create leaks in the traditional market shares of a lot of retailers and manufacturers. Leaks that are likely to grow bigger with time.

    It was just another email. Until I thought about it for a minute, and considered the implications.

    It was an Eye-Opener.
    KC's View:

    Published on: March 1, 2016

    The Chicago Tribune reports that Kraft Heinz is being sued in federal courts in Illinois, New York, Missouri, and California "for using cellulose, a filler made from wood chips, in its '100% Grated Parmesan Cheese' product."

    According to the story, "Kraft Heinz spokesman Michael Mullen couldn't be reached immediately Monday for comment on the lawsuits. In a previous comment to the Tribune, Mullen said cellulose was FDA-approved and that the Kraft Heinz cheese was still within the levels of cellulose considered acceptable."

    Walmart also has been sued over its sale of adulterated parmesan cheese.
    KC's View:
    Memo to anyone in the industry who wants to say out loud that there are "acceptable levels" of wood pulp in parmesan cheese.

    Shut the hell up.

    You're not doing anything to reinforce the industry's commitment to safety and transparency with shoppers. All you are doing is suggesting - intentionally or not - that if there is a loophole that will allow you to cut costs, you're going to exploit it as much as possible.

    If I buy cheese, I want cheese. Not as much wood pulp as the manufacturer can cram into the container to save some money.

    I have no idea how these lawsuits will play out. But I do think that manufacturers and retailers have to rethink some of the ways in which they do business in the modern and transparent economy.

    Published on: March 1, 2016

    The Boston Globe has a piece about the decision by General Electric to move its headquarters from Fairfield, Connecticut, to Boston, and how CEO CEO Jeffrey Immelt explains it in the company's annual report to shareholders.

    Among the goals that Immelt points to in his shareholder letter is the desire to embark on a "simplification journey" that reflects a reduced importance of headquarters, with reduced corporate costs and heightened focus on the company's various (and increasingly integrated) businesses. And Immelt tells the Globe that in moving to Boston, the company plans to take advantage of the area's vibrant tech scene and robust educational environment.

    But the line that stands out is when Immelt says that "we must be in the world of ideas, so that we remain contemporary and paranoid."
    KC's View:
    Contemporary and paranoid. Sounds like pretty good marching orders for any 21st century organization.

    Published on: March 1, 2016

    The New York Times has a story about concerns among Italian olive oil producers about legislation that is being considered there that "would tinker with the penalties for passing off counterfeit olive oil and its origin. If the decree passes, critics say, commercial fraud and counterfeiting would no longer be considered a criminal offense. Instead, it would be punished by a relatively light fine, effectively incentivizing the wrongdoing, the producers say."

    But ... the Times also says that "like so many things in Italy, the truth of the matter is as murky as just-pressed olive oil itself, while the controversy is sizzling."

    It is an intriguing story, and you can read it in its entirety here.
    KC's View:
    There have been so many questions raised in recent years about the quality of olive oil, and whether people are actually getting what they are paying for, that I think this story raises a lot of relevant issues. My general feeling is that laws that create loopholes for industry are not, in the long run, doing industry any favors. All they do is allow companies to cut corners in ways that are not fair to shoppers ... and that eventually comes back to bite those companies in critical anatomical places.

    Published on: March 1, 2016

    LAS VEGAS - Some stories that emerged from the National Grocers Association (NGA) and IGA meetings here...

    • IGA Inc. announced at its annual conference in las Vegas that its longtime chairman, Dr. Thomas S. Haggai, will become chairman emeritus, effective April 1. Mark Batenic, IGA’s president and CEO, will succeed Haggai and take on the additional title of chairman.

    • IGA announced that Tyler Myers, president/CEO of The Myers Group, which operates six stores in the Pacific Northwest, has been named the organization's USA retailer of the year in recognition of "excellence in retailing and advancement of the IGA brand."

    • Candice Lastimado of Seattle-based Metropolitan Markets, defeated 24 other Best Bagger competitors from across the nation to claim a grand prize of $10,000 and the title of the National Grocers Association (NGA) Best Bagger Champion.

    Bethany Berger of Shaw's Supermarket in Vermont was awarded the second place prize of $5,000, and the third place prize of $1,000 went to Lauren Gillson of Lunds & Byerlys of Minnesota. Fourth and fifth place winners, winning $1,000 each, were Janessa Plummer of Plummer's Shop 'n Save in Maine and Nathan Toth of Martin's Super Markets in Indiana, respectively.

    • IGA announced three recipients of the J. Frank Grimes Award, given in recognition for outstanding service to IGA. The recipients are John Mayer, corporate vice president of The J.M. Smucker Company; Larry Higdon, president of Ira Higdon Grocery; and Mary Helen Potts, long-time executive assistant to IGA Chairman Dr. Tom Haggai.
    KC's View:

    Published on: March 1, 2016

    Reuters reports that the US Supreme Court has "rejected Wal-Mart's bid to overturn a federal appeals court decision allowing female workers to sue the retail giant for paying women less and giving them fewer promotions than men. The court's decision not to take the case leaves intact a 6th U.S. Circuit Court of Appeals ruling that found former members of the landmark Dukes v. Wal-Mart class action did not miss the deadline to bring their gender discrimination claims on a regional basis after the Supreme Court rejected the nationwide class in 2011."
    KC's View:

    Published on: March 1, 2016

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

    • The Associated Press reports that a judge has "granted final approval to a settlement of a class-action suit filed against Subway after an Australian teenager in 2013 posted an image of his sandwich on Facebook that was only 11 inches. The image garnered international media attention, with The New York Post writing that it found four out of seven Footlongs it purchased in New York ‘'measured only 11 or 11.5 inches' ... As part of the settlement, Subway agreed to institute practices for at least four years to ensure its bread is at least 12 inches long. The judge approved $520,000 in attorney fees and $500 for each of the 10 individuals who were representatives of the class, but no monetary claims were awarded to potential members of the class."

    Whether it is parmesan cheese or olive oil or bread, companies actually have to give shoppers what they say they are giving them. It is easy to go over to the dark side, but also not hard to do the right thing. Better to do it before the lawsuits, not after...

    • The Charlotte Observer reports that Snyder’s-Lance has completed its $1.9 billion acquisition of Diamond Foods. The story notes that "Snyder’s, known for Hanover’s pretzels and Lance peanut butter sandwich crackers, has been expanding its portfolio of 'better-for-you' offerings as consumers preferences evolve, and the addition of Diamond is intended to support that goal. Diamond’s brands include Kettle Brand chips, Pop Secret popcorn and Emerald nuts."

    • United Natural Foods said yesterday that it plans to acquire Haddon House Food Products for $217.5 million, allowing it to expand its portfolio of gourmet and ethnic products.
    KC's View:

    Published on: March 1, 2016

    Dow Jones reports that Target has hired Arthur Valdez as its new chief supply chain and logistics officer. Valdez previously was vice president of operations at Amazon.

    • The St. Louis Business Journal reports that Save-A-Lot president Ritchie Casteel is leaving the company, where he was hired as president/CEO in February 2013.

    Supervalu, which currently owns Save-a-Lot but has been exploring a possible spinoff or sale of the division, said that Casteel will not be replaced. Eric Claus was hired as Save-a-Lot's new CEO earlier this year, but Casteel had stayed on as president.
    KC's View:

    Published on: March 1, 2016

    • George Kennedy, one of the film industry's most enduring and versatile character actors, passed away on Sunday. He was 91.

    Kennedy won the Oscar for Best Supporting Actor in 1967 for his role in Cool Hand Luke, where he played a chain gang prisoner alongside Paul Newman in the title role. (Younger MNB readers who never have heard of or seen Cool Hand Luke should rectify that. Immediately.) Kennedy then went on to play a gruff mechanic in the popular Airport series of films, and got some late career fame when he made fun of his popular persona in The Naked Gun films. He also was well known for roles in such films as The Dirty Dozen, Earthquake, and In Harm's Way.
    KC's View:

    Published on: March 1, 2016

    I commented yesterday about the degree to which discounters Aldi and Lidl have disrupted the UK supermarket business and tried to draw a lesson for US retailers:

    I saw a comment the other day from a regional supermarket CEO in which he said that he thought that Aldi would have only a "minimal impact" on his company. Forgive me, but I think this is incredibly shortsighted ... I think that pretty much every food retailer has to work on the assumption that competitors from every angle - Aldi, Lidl, Amazon, etc... - are positioned to have maximum impact on their companies, and then to arm themselves for the battles that will ensue.

    MNB user Craig Ryder responded:

    With reference to your regional supermarket CEO comment: I was with one of the UK Big Four when Aldi, Lidl and Netto first threatened UK retail in the mid 90s. We experimented with formats to combat them….and then concluded that they would barely threaten the market, perhaps commanding a combined 5% in the long term. In fact, we sold excess car park space to Aldi in a couple of instances – so sure were we that they appealed to a small and discrete audience. For ten years this all played out as expected …. then you know the rest!

    As an aside, it’s not often reported this way, but the catalyst to their impressive growth was a rapid and unpublicised improvement in private label quality – the imminent economic downturn then created the perfect storm.

    And MNB user Paul Gillis chimed in:

    Death by a thousand paper cuts is still death.  Just a little slower.

    But no less painful, methinks.
    KC's View: