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    Published on: March 17, 2016

    This week's FaceTime is a little different...

    Recently, I was asked by the Private Label Manufactures Association (PLMA) to sit down with Tim Simmons, the organization's vice president of communications, for a video interview that it was going to make available to its membership as part of a regular series with industry leaders. The subject was e-commerce in general, and Amazon in particular ... and I was happy to chat about one of my favorite subjects. I'd never refer to myself an expert on anything, but that never stops me from expressing my opinion.

    PLMA has been kind enough to allow me to make the entire interview available to the MNB community ... and I hope you enjoy it. (No text version this week ... it would be way too long.)

    To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    KC's View:

    Published on: March 17, 2016

    by Kevin Coupe

    This is what happens when you lose control of your narrative. (And, perhaps, when your narrative wasn't authentic to begin with.)

    USA Today reports that SeaWorld Entertainment has announced that it will stop breeding killer whales in its facilities, and that the whales it currently has will be the last as it eliminates theatrical orca shows.

    And, it said, it will shift to what it is calling "new, inspiring, natural orca encounters" for the immediate future, moving away from the killer whale shows that brought it enormous scrutiny from animal rights activists, which had its apogee with the release of the documentary Blackfish, which effectively portrayed an organization far more interested in profit than the well-being of the whales.

    According to the story, "SeaWorld also announced a new partnership with the Humane Society of the United States to create educational programs and advocate for the health and welfare of marine life. The company said it would spend $50 million over five years to rescue animals and fight commercial fishing of whales and seals and fight the shark-finning."

    SeaWorld CEO Joel Manby released a prepared statement: ""SeaWorld has introduced more than 400 million guests to orcas, and we are proud of our part in contributing to the human understanding of these animals. As society's understanding of orcas continues to change, SeaWorld is changing with it. By making this the last generation of orcas in our care and reimagining how guests will encounter these beautiful animals, we are fulfilling our mission of providing visitors to our parks with experiences that matter."

    You can actually reduce Manby's statements down to the same two words uttered by a famous fighter when he realized he was being out-punched: "No más"

    It is very simple. SeaWorld realized that no matter what it did, the narrative surrounding its whales - which essentially have been the centerpiece of its marketing efforts for decades - now focused on how they were being abused in the pursuit of the almighty dollar. Even when they produced TV commercials featuring employees talking about how much they love the whales, those employees looked utterly unpersuasive, like they were making a hostage tape rather than a commercial.

    The argument here has less to do with animal rights and more to do with simple marketing intelligence. SeaWorld had a story that ceased to resonate with the public, and it had to make a change. The question is whether it waited too long to do so.

    Whatever happens, this situation has been an Eye-Opener.
    KC's View:

    Published on: March 17, 2016

    The US Senate yesterday failed to pass a bill that would have prevented individual states from mandating the inclusion of information about the presence of genetically modified organisms (GMOs) on the labels of food products. The bill also would have allowed for the establishment of voluntary labeling standards at the federal level that would have superseded state laws.

    The bill, introduced by Sen. Pat Roberts (R-Kansas), only garnered 48 votes; Senate rules require that 60 votes are needed for passage.

    The bill had been fast-tracked in order to head off a Vermont labeling law that goes into effect on July 1.

    The New York Times writes that "many food companies have already gotten approval for the language they will use on packaging there, but they worry that other states will pass similar laws, creating a patchwork of requirements that will add to the cost of compliance. Connecticut and Maine have passed laws requiring labeling, but the measures are contingent on bordering states’ adopting similar requirements ... Many companies have already begun labeling their products, even those that contributed money to the campaign to fight labeling. And the Non-GMO Project, the oldest of the groups that certify products to be free of genetically altered ingredients, has its seal on 34,774 products."

    The House of Representatives has passed a similar bill, but the lack of a Senate bill means there is no chance for federal legislation unless the Senate can find a compromise position that generates enough support.

    The Times writes that "the failure was a defeat for the Grocery Manufacturers Association and the major food and biotech companies that are its members, which have spent hundreds of millions of dollars fighting labeling requirements."

    GMA CEO Pamela Bailey said in a prepared statement that, "despite today’s vote, there continues to be a strong bipartisan consensus to protect American consumers from the increased food costs and confusion of a 50-state patchwork of labeling laws."

    Leslie Sarasin, president/CEO of the Food Marketing Institute (FMI), released a prepared statement that said, in part: "“Today, in spite of weeks and weeks of talks among leaders on both the majority and minority sides of the Senate, as well as thousands and thousands of letters, emails, calls and personal visits from leaders in the grocery industry urging that a solution be found, 60 Senators were not willing to coalesce around a single approach that could achieve 60 votes.

    “The real loss is for our grocery customers who are accustomed to enjoying low prices and an abundant availability of products due to tremendous advances of U.S. agriculture and the historical standard in the U.S. that requirements for food labeling be consistent and limited to issues related to health and safety. We know a patchwork system will drive up costs; we will monitor closely to determine the impact."

    Peter Larkin, president/CEO of the National Grocers Association (NGA), said, “NGA appreciates Chairman Pat Roberts’ efforts to implement a federal legislative solution to address the patchwork of state labeling laws for foods made with genetically engineered ingredients. We believe that a uniform standard that preempts state labeling laws strikes the right legislative balance to provide consumers with access to information that is consistent and transparent.  While we are disappointed that the Senate was unable to invoke cloture on this important bill, we will continue to look to a path forward for a solution.”
    KC's View:
    I continue to believe that, while I am personally agnostic on the subject of GMOs, consumers ought to be able to know what is in the foods they eat ... and that transparency trumps every other consideration. (I think "trumps" may be a verb I'll have to start avoiding...) Information is not condemnation, and the food industry could actually turn this into a learning opportunity, helping people understand why GMOs have value.

    But ... it may be that the food industry is making the SeaWorld mistake. They're losing control of the narrative. They're making the mistake of believing that it is all about the science, when this debate really is all about the information. As persuasive as some of the opposing arguments are, it almost doesn't matter anymore.

    Let's be clear. It isn't so much that these food industry interests don't want state-by-state labels as much as they don't want mandated labeling at all. And they can talk about the high costs of labeling, but that strikes me as a non-starter - if manufacturers discovered that sodium would help people be taller, thinner and more attractive, you can be damned sure that they'd figure out a way to say so on their labels virtually overnight, and products wouldn't cost a penny more because of it.

    Again, they've lost control of the story. I'm sure the fight isn't over, and that the food industry will continue making the argument and spending money in the fight against transparency. But I'm not sure it is going to work.

    Published on: March 17, 2016

    The Los Angeles Times has an interview with Trevor Suslow, extension research specialist in the plant sciences division at the University of California, Davis, about "the next steps for Chipotle and the state of food safety in fast-food restaurants."

    Among the things that Suslow argues is that Chipotle's response has been "disappointing," and that Chipotle may not be any safer now than it used to be.

    You can read the entire story here

    One other note. Reflecting the fact that Chipotle has not regained its competitive mojo in the days since it announced new food safety initiatives, the company plans to extend a free burrito promotion, and will give away "more than 20 million burritos via coupons or mobile offers," the Associated Press reports.
    KC's View:

    Published on: March 17, 2016

    AdWeek has a story about how Quaker "is harnessing the power of artificial intelligence to help consumers make an oatmeal method as old as Quaker itself: overnight oats. Working with agency partner Organic, Quaker has built its first ever app for Amazon's virtual assistant, which is available through products like the Echo speaker."

    The story says that the app "helps users find and make recipes for overnight oats, a trend that came as a bit of a surprise to the household brand that arguably knows oatmeal better than anyone.

    "The idea for the app began a few months ago, after Quaker's social media team noticed there was a resurgence of an age-old tradition of cooking oats the night before and then letting them cool in the refrigerator overnight to be eaten cold the next morning."

    The story notes that the Amazon Echo - essentially a screen-less, voice-controlled computer that goes by the name "Alexa" - "has gained traction and popularity over the past few months. Alexa now has more than 100 'skills' - or apps - and brands have begun working on integrations."
    KC's View:
    I just find this stuff fascinating ... and am completely on board with the idea that Alexa is Amazon's iPhone.

    Published on: March 17, 2016

    It was just a few months ago that Recreational Equipment Inc. (REI) threw consumers a curve by saying that its stores would not be open on the day after Thanksgiving, the traditional beginning of the Christmas holiday shopping season, but rather was urging its associates - and customers - to go outside and take a hike. In fact, the associates were paid for the day, even though they weren't working.

    Bloomberg reports that the contrarian position - which actually was totally in synch with its image and ethos - had an impact ... a positive one.

    "The outdoor gear retailer on Tuesday reported $2.4 billion in sales last year, a 9.3 percent increase over 2014. Revenue at established stores ticked up 7 percent and digital sales surged 23 percent. In terms of volume of commerce, REI is fast closing in on Urban Outfitters Inc. and Tiffany & Co.

    "REI also added almost 406,000 members to its co-op ranks, a 7.3 percent increase that brings its total just north of 6 million."

    The story also notes that "REI probably never got much out of Black Friday anyway. Those in the market for ice axes or grizzly bear mace probably aren’t the same kind of retail animals who would maul one another for a $99 television. Thus REI’s marketing team not only tapped into its customers’ interests but also what a lot of them are decidedly not into."
    KC's View:
    I would expect that the Black Friday holiday will become an annual event at REI, as will the annual sales and profit increases.

    Published on: March 17, 2016

    The San Diego Union-Tribune has a story about how, despite the two high-profile crashes of both Fresh & Easy and Haggen in Southern California, "new grocers are popping up all over San Diego to take their places — and more are on the way. Ten grocery stores have opened since the start of the year, filing in the former locations of Fresh & Easy and Haggen. Up to 20 stores are scheduled to open by the winter."

    Among them are value-driven retailers such as Smart & Final, Food 4 Less, Grocery Outlet, Aldi and WinCo - all of which, the story suggests, are primed to put pressure on mainstream, middle-of-the-road retailers that may find themselves undercut on price.
    KC's View:
    It isn't just value retailers that are expanding in Southern California, but it probably is fair to say that there will be some fallout down the road. I do think this - that retailers in the middle-of-the-road will end up being roadkill.

    Published on: March 17, 2016

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

    • The Wall Street Journal reports that bankrupt Sports Authority, which filed for bankruptcy just weeks ago and announced plans to close about 140 stores, has filed lawsuits against more than 160 vendors. At issue, the story says, is $85 million worth of shoes and gear that Sports Authority has on consignment from vendors, and that they want back. Complying, the company says, “would be devastating to the business,” and it has sued the vendors ... even though a bankruptcy court judge told "Sports Authority it will have to comply with consignment vendor demands to return their goods, reinstate arrangements that existed before bankruptcy which means continued payments to suppliers, or settle with the suppliers."

    According to the story, "The suits are designed to determine who gets the money when consigned goods are sold, vendors or the banks. Consignment arrangements are supposed to give makers of goods a direct claim on the money that comes in when the goods are sold. Sports Authority and its top banks signaled they are testing for defects in the consignment deals to upset those claims. If the lawsuits succeed, vendors that thought they had secured claims will wind up as unsecured creditors."

    This has the potential to turn into a real hairball. If Sports Authority alienates a large swath of the vendor community, it will make it even harder for the chain to thrive once it emerges from bankruptcy.

    • The Sacramento Bee reports that California Assemblywoman Cristina Garcia is introducing legislation that would allow the state to apply sales taxes to candy, arguing that candy does not meet the "essential" argument that should exempt certain products from being taxed. Interestingly, Garcia also has introduced a bill that would "lift taxes on feminine hygiene products like tampons and pads, arguing the fees burden women who have little choice in making those purchases."

    • The National Retail Federation (NRF) is predicting that US spending for the Easter holiday "is expected to reach $17.3 billion. Those celebrating plan to spend an average of $146 per person, according to the survey. That’s the highest level in the 13 years the survey has been conducted and up significantly over last year’s $140.62 per person and $16.4 billion total."
    KC's View:

    Published on: March 17, 2016

    • Kroger yesterday announced that Mary Ellen Adcock, the company's vice president of operations in its Columbus division, has been promoted to the position of group vice president of retail operations. She succeeds Marnette Perry, who is retiring.
    KC's View:

    Published on: March 17, 2016

    Yesterday, MNB took note of a Fortune report that a Washington State Superior Court judge has ruled that the Grocery Manufacturers Association (GMA) "broke the spirit and the letter of the law" when it "concealed the backers of a multimillion dollar campaign" designed to defeat a ballot initiative that would have mandated the labeling of products that include genetically modified organisms (GMOs). The ruling specifically found that GMA violated state campaign finance disclosure laws when it did not report that it funded the anti-labeling campaign with $11 million in funding from PepsiCo, Nestle and Coca-Cola.

    GMA, which eventually did reveal the donors' names, has said that the ruling “will hurt the constitutionally protected right of trade associations to engage in political debate in the state.”

    I commented, in part:

    I'm not a lawyer, so I am singularly unqualified to make any legal pronouncements in this case. But it certainly sounds to me like GMA almost certainly held off as long as it could before listing its donors, hoping that its millions of dollars would have undue influence over the voting. I don't know if that falls to the level of intentional illegality, but I certainly think it stinks ... though a lack of transparency that seems right in character for those who so assiduously oppose GMO labeling.

    On the broadest scale, I am totally sick and tired of a political system in which people and institutions can spend millions of dollars on one cause or another, and then hide in the shadows. As far as I'm concerned, the rule ought to be that if one donates or spends or loans more than $100 that is used to try to influence public opinion - or legislative votes - on behalf of any political issue or candidate, it ought to be made public within 30 days. We have the technology to make it so ... and just ought to do it.

    This isn't about limiting free speech ... it is just requiring that people who finance campaigns - all campaigns - ought to be bathed in the disinfectant qualities of bright sunlight.

    One MNB user disagreed:

    That would provide an open-door for opponents to focus their attention on demonizing the supporters rather than challenging their ideas.  You might draw a lesson from what happened when New Coke was taste-tested without a name attached.  The results were rather fatally distorted.

    I completely disagree. This isn't about demonizing supporters, just knowing who they are ... and understanding the context within which organizations and so-called public servants decide who and what to support.

    MNB user Monte Stowell wrote:

    Your review of the people and organizations who finance campaigns without divulging their identity was spot on ... Two words for you, Bravo and Amen!

    MNB user Ron Rash wrote:

    Could not agree more with your assessment of what is going on with the GMA and the GMO labeling laws.

    I also agree it is not about free speech.  Spending money on political causes and opinions is free speech… one man might afford a megaphone while the other only a soap box, but both are exercising free speech.

    This is about knowing who’s opinion it really is, and who will own it, and who is paying for it.  These companies prefer the shadows, but the judge at least brought partial sunlight to the whole affair.

    From another reader:

    Agree, interesting but not surprising. What I find most interesting is Nestle's involvement, given the EU requirements on GMO disclosures. Granted, Nestle markets many U.S. only products here, however it seems a bit disingenuous to attempt to block measures here that are standards in their home country. This may have been discussed in your previous GMO reporting, however I cannot give them a pass by not expressing disappointment. And we could also reflect on foreign companies influencing our political process, another "foul" act.

    MNB user Bruce Wesbury wrote:

    I’m glad to see that you are pissed Hillary Clinton does not disclose her contributions, Goldman Sachs speeches or her foundation donors.

    I totally think she should.  They all should … as should every PAC and SuperPac on both sides of the aisle.  No argument here.

    On the labeling issue, MNB user Paul Schlossberg wrote:

    What happens when the laws and regulations in one state conflict with another state? What if a state enacts rules conflicting with federal standards?

    How will companies decide which law takes precedence? 

    What if the added information required (from a few different states) takes up more space than the physical dimensions of the label? 

    There are existing specific minimum standards for font sizing (related to package size/shape) for mandatory text on a label: net weight or net volume; nutritional panel; allergens; ingredient list; and manufacturer information. 

    Don't forget that there are other labeling elements: UPC bar code; expiration or use-by date; preparation instructions; storage suggestions (e.g., "keep refrigerated").

    All reasonable points. I've actually argued that companies that achieve maximum transparency by simply putting a QR code on labels that allow consumers to access all relevant information; the actual label wording wouldn't have to be that extensive. And retailers could actually be seen as consumer-friendly if they had code readers for the shrinking group of people without smartphones.

    I have no argument with a federal mandate. I have an argument with federal standards that can be seen as anti-transparency.

    The Wall Street Journal reported that "Chipotle on Tuesday tapped meat industry expert James Marsden to be its new executive director of food safety. Mr. Marsden, a former Kansas State University meat-science professor, will oversee food safety across the 2,000-unit chain."

    MNB user Chuck Jolley wrote:

    They are fighting for corporate survival on two fronts: Science and public opinion.  I know Dr. Marsden well and am confident that he will give Chipotle the best advice possible but the public doesn’t often give a damn about the science involved.  The chain’s top execs need to work hard to demonstrate they’re willing to go the extra mile for food safety. They’ve already stubbed their toe several times on food safety issues, they don’t need to indicate to the public that they are willing to do it again.
    KC's View: