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    Published on: March 21, 2016

    by Kevin Coupe

    Staples seems to want to transition from "that was easy" to "that was easier."

    The retailer - which is battling federal regulators for the right to acquire Office Depot, which it hopes will make it more competitive with online office supply stores - has rolled out a new system "that taps natural language processing and machine learning."

    According to the Wall Street Journal, "The Staples Easy System lets business customers reorder products through a mobile app or its familiar red 'easy' button outfitted with sensors, wireless networking and voice-response technology. The Wi-Fi-enabled red button communicates with an ordering system integrated with the customer’s account information and purchasing history to process the request. Using natural language processing software, the system behind the button translates spoken words and makes order confirmations via voice. Custom-built analytics comb a customer’s purchasing history to suggest brands and amounts, based on past orders. The new Easy System mobile app can also make orders by voice or by tapping and typing ... The intent is to fit purchasing into the typical way a company works, rather than require that customers return to their desks to access a special application for ordering."

    This sounds a little like Amazon's Echo, which clearly is creating reverberations that are being felt throughout retailing. The broader lesson, I think, is that we're likely to see a lot of these kinds of technological innovations as companies look to make it easier for consumers to interact with them and create the kinds of ecosystems that Amazon has been so successful and forging.

    Next thing you know, I'll be able to say, 'Earl Grey. Hot" ... and it'll just appear on my desk.

    It'll be an Eye-Opener. In fact. it already is.
    KC's View:

    Published on: March 21, 2016

    General Mills announced on Friday that months ahead of the implementation of a Vermont GMO labeling mandate, it will begin labeling all of its products with GMOs on a nationwide basis. The Wall Street Journal writes that the company decided "it would be too complex and expensive to create a separate distribution network for the 626,000-person state of Vermont."

    According to the story, "The maker of Cheerios and Lucky Charms remains firm in its stance against mandatory labeling, but 'having one system for Vermont and one for everywhere else is untenable,' said Jeff Harmening, General Mills’ chief operating officer of U.S. retail."

    Last last week, the US Senate 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 Journal story goes on to note that General Mills is not alone in responding to the Vermont requirements, which go into effect on July 1.

    "Some companies, fearing such labels will be a sort of scarlet letter and scare off consumers, are replacing ingredients altogether," the Journal writes. "Vermont Fresh Pasta, which touts its fresh, local fare, said it has swapped out canola oil, which typically contains GMOs, for olive oil, which has no genetically modified version ... Freedom Foods LLC, a maker of organic and gluten-free products based in Randolph, Vt., has stripped GMOs from the granolas and cookies it makes for Vermont grocery stores, said owner Cathy Bacon ... Vermont institution Ben & Jerry’s Homemade Inc., which is part of Unilever PLC, decided to remove GMOs from its ice cream in response to consumer pressure before the state law passed. It took about three years just to remove GMOs from ingredients like cookie dough and caramel, and the new products averaged 11% higher in price."

    And "Grocery chain Price Chopper, owned by Golub Corp., has decided to keep the GMO ingredients in its store-brand products and said it would use special labels for foods like cornflakes and ice cream. But it is also busy making sure its suppliers are compliant and calculating how much product it will have to restock come July in its 15 Vermont stores, compared with its 120 other locations."

    The story makes clear that not only can labeling products with GMOs be time-intensive and costly, but it isn't even a cut-and-dried law ... state officials have conceded that they don't have the answers to every question, and essentially have asked companies to stop calling. (You can see some of the details here.)

    It should be noted that more than two months ago, Campbell Soup announced that it would begin labeling GMO ingredients in its products. CEO Denise Morrison said that the company was breaking from its peers "by calling for federal action to make mandatory a uniform labeling system of foods that contain such ingredients."

    The Grocery Manufacturers Association (GMA), which has been a vocal proponent of a national voluntary GMO labeling standard that would also ban states from enacting their own laws, responded to the General Mills announcement by essentially calling on the US Senate to get back to work passing legislation that would render the Vermont law moot.
    KC's View:
    Of course, the US Senate is on vacation until April 4, so GMA will have to wait a bit ... and there is still no guarantee that 60 votes can be generated for anything. (The Senate takes a lot of vacation ... just check out its 2016 schedule here.)

    I recognize that there are a lot of holes in the system as it exists, and even in how pro-GMO labeling forces would like it to exist. (I'd be really annoyed if I called Vermont officials looking for guidance on how to follow their laws, and was told that I'm on my own.)

    To me, despite the problems, the guiding principle is transparency. Getting there may be messy, but I think it'll be worth the effort. Kudos to General Mills for making this decision, even if it did so grudgingly.

    Published on: March 21, 2016

    Bloomberg reports that as investigators approach the finish line of a global probe into allegations that Walmart has used bribery of government officials as a way to grease the wheels of growth around the world, the consensus seems to be that there has been no widespread corruption - not in China, nor in Brazil, India, or Mexico, where charges of millions of dollars in illegal payments first came to light through a major story in the New York Times.

    The Bloomberg piece notes that "Wal-Mart, which has said it’s cooperating with U.S. authorities, has spent almost three-quarters of a billion dollars on its own global investigation and to overhaul its compliance operations." The story suggests that if there are penalties in the cases, they are likely to be civil and imposed by the US Securities and Exchange Commission (SEC) rather than criminal and brought by the US Department of Justice.

    Bloomberg writes that "the Wal-Mart case has posed challenges for investigators. Much of the conduct uncovered in Mexico was too old to be used as evidence, according to the people. The government may be able to build stronger cases in Brazil and India, according to two of the people, who added that it’s unclear whether any individuals will be charged.

    "At the least, prosecutors are likely to bring a case against the company for not having sufficient controls to detect and prevent violations of the Foreign Corrupt Practices Act, two of the people said. The law bars payment to foreign officials to obtain or retain business and requires companies to maintain internal controls to prevent corruption."
    KC's View:
    I've said all along that I thought this was going to turn into a major problem for Walmart management, and it looks like I'm going to be wrong. I think that it certainly is a good thing that Walmart has had to tighten up its governance issues, and it sounds like the company will get out from under the cloud of suspicion fairly soon.

    Published on: March 21, 2016

    The Wall Street Journal has a story this morning about how increases in minimum wages around the country could hit the cost of e-commerce.

    According to the story, "Analysts with real-estate brokerage firm CBRE Inc. estimated a $1 increase iA average hourly wages could add more than $1 million in annual costs to a warehouse operation employing 500 people. For e-commerce facilities, which can be two-to-four times more labor-intensive than a typical warehouse - especially during the busy holiday shipping season - the impact could be even greater, the report said."

    However, the story suggests that rather than relocated warehouse operations to areas where the minimum wage is lower, companies are more likely to seek automated solutions that will allow them to cut the number of people who actually work for them.
    KC's View:
    I can hear the gnashing of teeth already, as people talk about how higher wages are going to cost jobs and hurt the economy. Which isn't an illegitimate concern, except that an economy in which employees who don't make enough money to make ends meet isn't any great shakes either.

    Published on: March 21, 2016

    The Philadelphia Inquirer reports that Ahold-owned bfresh, an autonomously run small format/fresh food-driven division of the company that also owns Stop & Shop and Giant, has leased space in the City of Brotherly Love where it can expand the concept.

    According to the story, "Fresh Formats LLC spokeswoman Suzi Robinson said Thursday the company has entered into a lease agreement at the property and is working on its plans for the site. There is no timetable for the opening."

    There currently are two bfresh stores - in urban Allston, Massachusetts, and suburban Fairfield, Connecticut.
    KC's View:
    I really like the bfresh stores, and the degree to which Ahold seems to have been hands-off in allowing this format to find its own way. They seem to be taking their time to get it right, which probably is a good thing.

    To read my review of the original store, click here.

    Published on: March 21, 2016

    The New York Times has a story about how Kraft Heinz decided to reformulate its iconic macaroni and cheese, removing artificial preservatives and replacing artificial dyes with a combination of paprika, annatto and turmeric, and then executed the change without really telling anybody about it.

    The change "had been under development for three years," the Times writes, "and last April Kraft announced that it planned to make the switch. But when the reformulated version hit shelves in December, only customers paying careful attention to the ingredients listed on the side of the box would have known. Even the orangeish color of the mac and cheese remained the same."

    The company knew that the change would raise concerns among dedicated users, and so it concluded that the best thing would be to get as many of them to try the new formula without knowing it. Which is what happened; the company estimates that some 50 million boxes of its macaroni and cheese were consumed without any significant reaction ... and now it is marketing the change by using the lack of response as a selling point.
    KC's View:
    Sort of unique, to make these kinds of changes and not really talk about it. But clearly it worked.

    Makes me wonder what would happen if companies start labeling products with GMOs but not making a big deal about it. Might be a good way to defuse some of the controversies...

    Published on: March 21, 2016

    The New York Times this morning reports about how Amazon remains obsessed with the delivery side of the business, constantly trying to figure out how to get products to shoppers faster and cheaper, even in investing in trucking fleets, planes and ships, and even drone technology as it looks for the secret sauce that will give it a differential advantage.

    "Nowhere is the company’s push to become a logistics and delivery powerhouse more evident than here in the nation’s capital," the Times writes. "Amazon has emerged as one of the tech industry’s most outspoken players in Washington, spending millions on this effort and meeting regularly with lawmakers and regulators. Amazon has pushed officials to allow new uses for commercial drones, to extend the maximum length of trucks, to improve roads and bridges and to prop up a delivery partner, the United States Postal Service ... The money Amazon spent on lobbying in 2015 nearly doubled, to $9.4 million, compared with the year before, which helped to pay a bigger lobbying staff and pay for a new office to house them. The tally, compiled from public records by the Center for Responsive Politics, includes only the spending that Amazon must legally disclose."

    There's a lot of money at stake here: Amazon's shipping costs rose 19 percent, to $5 billion, in 2015.

    But the company's efforts has more than a few detractors, ranging from those who think Amazon is moving too fast with its drone technology development plans to those (like Ralph Nader) who believe that pushing for longer tractor trailers makes the nation's highways less safe.

    In related news, the Seattle Times reports that Amazon "is rapidly exercising the right to buy 9.99 percent of Air Transport Services Group (ATSG), a sign that the Seattle tech giant plans to look over the shoulder of its air-cargo partner from the get-go as they jointly work out new ways of hauling Amazon merchandise across the U.S."

    The story notes that "two weeks ago, ATSG agreed to run an ambitious air-freight service operation for Amazon out of ATSG’s Wilmington, Ohio, hub. The agreement, which followed months of secret testing with a few planes, includes the leasing of 20 Boeing 767 freighter jets by ATSG to Amazon. The big fleet will connect Amazon’s far-flung fulfillment centers at a time the company seeks to speed up delivery of items while keeping its transportation costs under control. As part of the deal, ATSG gave Amazon the right to acquire up to 19.99 percent of its outstanding common shares over the next five years."
    KC's View:

    Published on: March 21, 2016

    Starbucks has been hit with a class-action suit contending that the latte drinks it serves are 25 percent underfilled, and that baristas are instructed not to fill 12, 16 and 20 ounce cups to the brim - thus not giving customers what they are paying for while saving the company millions of dollars.

    Here's how Oregon Live described the suit, filed by two California customers on behalf of all latte drinkers everywhere:

    "Starbucks Lattes are made from a standardized recipe, which Starbucks instituted in 2009 to save on the cost of milk – one of its most expensive ingredients. To create a Latte, the standardized recipe requires Starbucks baristas to fill a pitcher with steamed milk up to an etched 'fill to' line that corresponds to the size of the customer's order, pour shots of espresso into a separate serving cup, pour the steamed milk from the pitcher into the serving cup, and top with ¼" of milk foam, leaving ¼" of free space in the cup. However, Starbucks' standardized recipes for Lattes result in beverages that are plainly underfilled. Stated otherwise, the etched 'fill to' lines in the pitchers are too low, by several ounces.

    "Moreover, the serving cups used by Starbucks for its Lattes are simply too small to accommodate the fluid ounces listed on Starbucks' menu. For example, the serving cup used for Grande beverages holds exactly 16 fluid ounces, when completely full. However, Starbucks' standardized recipe for its Grande Latte calls to fill the serving cup up to '1/4 inch below cup rim.'

    "Thus, when used in conjunction with its standardized recipes, Starbucks' serving cups do not permit 12 ounce, 16 ounce, and 20 ounce Lattes."

    MarketWatch reports that Starbucks has said the suit is "without merit:"

    "Hand-prepared beverages increase the likelihood of variations, as disclosed in the nutritional section of our website ... Customers often tell us how they want their beverage prepared (e.g. with room, extra foam), therefore beverage volumes are largely collaborative. If a customer is unhappy with their beverage preparation then we are happy to remake it to their satisfaction.”
    KC's View:
    As a regular Starbucks consumer, I can't say that I have any complaints ... but I am sort of intrigued to see where this goes. If it ends up being a Subway foot-long situation (the foot-long sandwiches weren't that long), it'll end up being a black eye for Starbucks. I suspect that won't be the case, but I am curious...

    Published on: March 21, 2016

    • In Minnesota, the Star Tribune reports that "two big-box retailers are expanding in the Twin Cities, one just arriving in the market and the other opening a new kind of outlet. Meijer Inc. bought land in Brooklyn Park in the first of what local real estate brokers think will be at least four purchases to bring its superstore chain to the metro area. Meanwhile, Costco Wholesale Corp. bought a building in northeast Minneapolis that it will use for a store focused on small businesses rather than consumers." (Costco already has six locations in the Twin Cities area.)

    KNBC-TV News reports that Grocery Outlet has opened its first store in Compton, California, bringing a discount format to an area that formally was labeled a "food desert" after Fresh & Easy closed its doors, forcing local residents to go to nearby communities to do their food shopping.
    KC's View:

    Published on: March 21, 2016

    • Target last week announced that Tom Kadlec, a former retail and finance executive with Tesco, is joining the company as senior vice president of infrastructure and operations. At the same time, Joel Crabb, chief architect and head of digital engineering at best Buy, is joining Target as vice president of architecture, with responsibility for enterprise architecture, agile practices and Application Program Interfaces (APIs).

    • The California Grocers Association (CGA) Educational Foundation announced that Brad Askeland, a vice president of Holiday Markets, has been elected Chairman of the foundation's Board of Trustees. Mark Johnson of Unified Grocers was elected to replace Askeland as vice chair, while Jacquie Slobom of Gelson’s Markets and Jerry Landers of Raley’s will continue as secretary and treasurer, respectively.
    KC's View:

    Published on: March 21, 2016

    Got the following email from MNB reader Karen Snyder about Whole Foods' decision to start selling slower-growing chickens:

    I did find this move interesting although not surprising coming from Whole Foods. I don’t know a ton about the wholesale chicken industry but I raise chicken for my own consumption using the fast growing chickens they are referring to.

    Although I’m not super familiar with the breeds they are switching to, I have raised more traditional breeds in the past and they are extremely less efficient to raise, taking 12-16 weeks to slaughter vs. 6-8 for the Cornish X-Rocks. Traditional breeds also can be tougher with less meat than the faster growing varieties. I think the breed of chicken has less to do with animal welfare than how they are actually raised. The faster growing breeds do have issues but you need to raise them with a bit more care than the traditional ones so that they don’t grow too fast and have adverse effects. One thing can be certain – expect chicken costs to skyrocket at Whole Foods come 2024!
    Bet that was more than you ever needed or wanted to know about chickens!

    I'm still marveling that you raise chickens for your own consumption.

    As for knowing about chickens ... I guess I should know more, considering my last name.

    We wrote here last week about how changing consumer consumption behavior is affecting the cable business, which led MNB user Daniel Hogan to write: 

    I cut the cord about 6 months ago &  bought an antenna from Amazon for I believe $17 to get local channels (PBS, ABC, NBC, FOX, CBS, & other random channels), & have MLB.TV for games, & everything is fantastic thus far. However, you living in CT might put you in a blackout area for Mets games, so MLB.TV might not be worth the investment.
    MNB user Mark Littrell wrote:

    With ROKU box, I can access Sling TV for $25 month.  Sling has several channels from premium – ESPN, ESPN2, AMC, Food Network, A&E, History, TNT, TRU, HGTV, CNN, HLN, etc…  All of the NCAA tournaments are accessible. 
    I cut the cord (so to speak) several years ago.  You had published how I did it on MNB.  With the price of cable/satellite, and the number of channels that I really don’t watch, this give me those that I am only interested in.

    And from another reader:

    My family replaced our cable with an antenna a couple years ago and we have never looked back.  We now watch TV on our terms with an acceptable amount of content over the air which we supplement with Hulu and Netflix.  When those services fall short, we supplement with rentals from Amazon.  This does leave some gaps with sports but has also given us a much needed (separation) ... BTW if you ever wonder how much of a screw job you are getting from the cable companies just cut the cord and watch how hard they will work to try to lure you back in.  Have never questioned this decision!

    On the subject of Macy's continuing issues, one MNB user wrote:

    Many years ago, I only shopped at Macy’s. Shoes, clothes, purses and all accessories. Why? Because Macy’s had a personal shopper program. Twice a year, I’d make an appointment with “my” personal shopper. She had virtually everything I owned on a list. We’d shop every department together and she’d arrange for everything to be in one place for me to pay and, if needed, help me out to my car. She’d also call me to let me know if there was something I might be interested in. “Hi. We have a beautiful red dress that would look great on you and I think you need a splash of color in your wardrobe for special occasions.” She would also caution me, “I know you love coats, but you have three lightweight coats. Are you sure you want another one?” I spent a lot of money with Macy’s and I had a blast.

    They cancelled the program and now I shop everywhere.

    KC's View: