business news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: April 22, 2016

    by Kevin Coupe

    LL Bean has a lovely new commercial on the air in which it decries the disposability of so many of the products that Americans buy, playing up what Advertising Age calls "its high-quality, durable goods as an improved alternative to disposable fashion."

    "When did we stop valuing things to get better over time? When did disposable become our default?" the voice-over says. "At LL Bean, we didn't stop and we never will."

    The story notes that this is the first marketing effort under new CEO Stephen Smith, the first outsider ever to lead the company. Smith is a Walmart veteran who spent the beginning of his career working for Bean's Maine neighbor, Hannaford Supermarkets.

    (I have a certain bias here. As I write this, I am wearing a Bean shirt and jeans. Based on experience, I know they're likely to last almost forever.)

    You can watch the commercial here. For companies looking to differentiate themselves, it is a commercial worth watching and sentiments worth emulating.

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

    Published on: April 22, 2016

    The Associated Press reports that Starbucks yesterday say that it is confident that changes in its rewards program will generate more sales in the long run, though it "warned that the transition could be bumpy ... While it's still early, Starbucks said spending is up across loyalty members, including those who stood to lose out from the change."

    Earlier this month, Starbucks changed its loyalty program to reward dollars spent rather than the number of transactions. Rather than customers earning one star per purchase and getting a free coffee every 12 stars, now they earn two stars for every dollar spent, with 125 stars needed for a free coffee. The optics were poor, and there was much outcry on social media about Starbucks making it harder for customers to be rewarded as a way of saving money.

    Starbucks made the comments yesterday as it revealed during its first three months of the year, it same-store global sales were up six percent, with US same store sales up seven percent in the US. This was below expectations of Wall Street analysts, and the company did warn that despite its own expectations that the change in the long run would drive sales, there could be a short term impact on sales. (Indeed, analysts expectations may have been a little unreasonable, since total revenue for the quarter was up nine percent to $4.99 billion, and quarterly profit was up 16 percent to $575.1 million.)

    CEO Howard Schultz told analysts, ""We're building something so enduring and so unique I think it's going to be one of the most significant changes to the equity of the brand."

    In other Starbucks-related news, the company has opened its first stores in South Africa.

    According to Reuters, "Starbucks, brought in under license by South Africa's Taste Holdings, is the latest U.S. chain to court brand-conscious consumers in South Africa, which has Africa's most advanced economy. The same queues snaked out from Krispy Kreme when the doughnutmaker opened its first store 50 meters up the road last year."
    KC's View:
    As a loyal and regular Starbucks customer, I've found the new program a little disconcerting. Best I can tell, I think we're actually generating rewards at a faster rate under the new system, which is a good thing. Though I've discovered that if you know that you are getting two stars for every dollar you spend, you suddenly become aware of exactly how much you're spending. That's not an awareness that Starbucks may want people to have.

    I used to think that the change in the star system is just optics. But it could end up being a matter of dollars and sense.

    Published on: April 22, 2016

    Sears Holdings announced yesterday that it will shutter 68 Kmart locations and 10 Sears stores this summer, yet another round of store closings "as it continues to shrink its fleet of stores amid chronic sales declines."

    According to the story, "The closings will leave Sears with fewer than 700 department stores, compared to 860 in 2008, while Kmart’s store count will below 900, compared to almost 1,400 that same year ... Comparable sales have declined every year since 2005, and the retailer has logged a total of $8 billion in net losses since 2010. Sears and Kmart have struggled to keep pace with their respective competitors - in Sears’ case, the brand has been faulted for not upgrading its stores or improving its merchandise to keep pace with everyone from J.C. Penney to Home Depot."

    The AP goes on to say that CEO Eddie Lampert "claims that he is transforming the company into a membership-based retailer that will be less reliant on its physical stores. The company, which in recent years has sold off many top assets, such as the Lands’ End clothing brand, and hundreds of its best store locations to raise billions of dollars and stay solvent amid the sales bleed, said the closings would raise a lot of cash thanks to selling store inventory or selling or subleasing those locations."
    KC's View:
    Ironically, there was a story on the Twice site about how Sears has just introduced "the first wave of what will be a wider assortment of connected-home products marketed under its private-label Kenmore, Craftsman and DieHard brands ... Each of the items is Wi-Fi-enabled, allowing owners to change temperature settings, monitor product status and receive alerts via their mobile devices ... The latest initiative is part of an overarching smart-solutions strategy linking Sears' CE, appliance, automotive, lawn and garden, and home services businesses."

    Which sort of surprised me, since I would've figured that Sears' idea of connected home products would be things that plug into wall sockets, like toasters and blenders and stuff.

    Published on: April 22, 2016

    Fortune reports that Costco is making plans to create its own chicken farm so it can produce one-third of all the chickens that it sells - including the 80 million rotisserie chickens that it sells annually.

    According to the story, "Costco will slaughter about 1.7 million chickens a week, or 85 million a year ... The move is part of Costco’s plan to have more control over its own supply chain. The wholesaler would be able to determine the size and cut of the meat. At the same time, Costco has sought to move toward antibiotic-free and cage-free chickens." While Costco would own the facility in Dodge County, Nebraska, it would use a third party to actually operate it.

    The story notes that Costco "has already made investments in the organic food space in the hopes of ensuring greater organic food supply in the future."
    KC's View:
    I generally think that the more one can control one's own circumstances, the better. Control means being able to better differentiate, and differentiating is always the best way to succeed.

    Published on: April 22, 2016

    Golub Corp. said yesterday that it has doubled the number of stores that it has converted to the Market 32 concept, "with the revelation of four newly converted Price Chopper Supermarkets in the Capital Region of New York – one, at Hamilton Square in Guilderland, NY; another at Hudson Valley Plaza in Troy, NY, and two in the heart of the City of Albany, on Madison and Delaware Avenues."

    The Market 32 concept is seen by the company as an evolution from its Price Chopper banner in that it "emphasizes convenient, ready-to-eat foods, fresh, handcrafted, and locally grown, produced and manufactured products, and intuitive product/department adjacencies (e.g. greeting cards next to the floral department). An elevated level of customer and signature items throughout the store further differentiate the brand experience."

    The company says that as it rolls out new Market 32 stores, "the Price Chopper in Torrington, CT will be the next to convert to Market 32 by mid-May, and the one in Glenville, NY is readying for conversion. Stores in East Greenbush and Brunswick, NY are currently in the design phase, while a brand new Market 32, being built from the ground up in Oxford, CT, is slated to open this summer. A groundbreaking for the new Market 32 in Ft. Edward, NY will be held in the coming weeks."
    KC's View:

    Published on: April 22, 2016

    • The Wall Street Journal reports that Walmart once again "tops the list of the biggest technology spenders worldwide, shelling out more than $10.5 billion in 2015, according to market researcher International Data Corp ... Wal-Mart is navigating shifts in shopper behavior by building e-commerce capabilities, which includes plans to spend $2 billion on e-commerce by the end of 2017. The retailer also intends to expand its online grocery business, in part by targeting new customers with analytics features in its mobile shopping app."
    KC's View:

    Published on: April 22, 2016

    ...with brief, occasional, italicized and sometimes gratuitous commentary…
    • The Associated Press reports that Walgreens has agreed to pay a half-million dollars "to settle the latest case of a company accused of duping New York consumers over prices." The drugstore chain was accused of using misleading advertising and overcharging customers, hitting them with higher prices in-store than had been listed in ads. The company said it is working with the NY State Attorney General's office to "make improvements in how it communicates in its stores and with advertising."

    Bloomberg reports that "the US lawsuit to block Staples Inc. from buying Office Depot Inc. now rests with a judge who has undercut the government’s case throughout the trial," challenging "how the agency prepared a witness statement, whether it shared certain information with the companies, and why it didn’t allege harm to consumers who buy pens and Post-its. In fact, the FTC said the merger would harm competition in sales to corporate customers — not retail consumers — in its suit to block the $6.3 billion proposed merger."

    • Add Alex Lee to the name of retailers that have announced "their goal to transition its grocery stores to a 100 percent cage-free egg supply chain by 2025, subject to regulatory changes. This step is an outcome of the company’s independent review of industry capability and readiness, and represents a commitment to continuously improving the food supply chain while maintaining the affordable prices that customers expect."

    Y'think chickens everywhere read this torrent of stories and breathe a sigh of relief?

    • Weis Markets said yesterday that the company "plans $140 million in cap ex investments in 2016 for new stores, remodels, supply chain improvements and continued information technology upgrades.

    Chairman/CEO Jonathan Weis said that "over the next year, we plan to build three new stores and complete 20 remodels. We will also build three Gas N’ Go locations. Our budget also includes record technology investments."
    KC's View:

    Published on: April 22, 2016

    • Prince, described in the New York Times as "the songwriter, singer, producer, one-man studio band and consummate showman," died yesterday at age 57. No cause of death has yet been released by authorities.

    The Times writes that "Prince was a man bursting with music — a wildly prolific songwriter, a virtuoso on guitars, keyboards and drums and a master architect of funk, rock, R&B and pop, even as his music defied genres. In a career that lasted from the late 1970s until his solo 'Piano & a Microphone' tour this year, he was acclaimed as a sex symbol, a musical prodigy and an artist who shaped his career his way, often battling with accepted music-business practices."

    And in a brief remembrance on The New Yorker website, editor David Remnick writes:

    "It’s hard to imagine Prince not in this life; he was the epitome of live. I loved his records, his sweetness and strangeness, his genius as a seer of sexuality and performance. The greatest gift was to see him onstage. Live, emerging from the dry-ice clouds, he was unforgettable, unstoppable, a weather system all his own. If there’s any way to alleviate the awfulness of the news—Prince’s life cut short at fifty-seven—it’s to recall some of his greatest moments onstage."

    • Guy Hamilton, who directed four James Bond movies - Sean Connery in Goldfinger and Diamonds Are Forever, and then Roger Moore in Live and Let Die and The Man With The Golden Gun - as well as films such as Funeral in Berlin and Battle of Britain. His career dated back to 1951, when he was an assistant director on John Huston’s The African Queen.
    KC's View:
    I'm not proud of this, but I have to admit that I've spent a lot more of my life in the company of Hamilton's work than Prince's. It is probably a character flaw, but there it is.

    Published on: April 22, 2016

    ...will return.
    KC's View:

    Published on: April 22, 2016

    It has been a busy week, without much time to indulge in cultural pleasures, but I did have a chance to watch the first episode of the highly touted British series, "The Night Manager," which now is running on AMC. Based on a 1993 novel by John le Carré, the series stars Tom Hiddleston as Jonathan Pine, a former solider and hotel night manager who finds himself in the unique position of being able to help MI6 take down an arms dealer, played by Hugh Laurie.

    Based on the initial viewing, I can vouch for "The Night Manager" as being a worthy addition to all the great television series that recently have graced US audiences. The acting is first rate, the show has movie-like production values (moving from Egypt to London to the Alps), and the direction, by Susanne Bier, keeps the cat-and-mouse game driving forward with methodical, deliberate suspense. The hardest thing to know at this point, as in all great spy stories, is who is the cat and who is the mouse.

    There are five more episodes to come, and I'm looking forward to them. And yes, for those who keep track of such things, it is fair to suggest that "The Night Manager" serves as a long and effective audition for Hiddleston to replace Daniel Craig as James Bond.

    That's it for this week. Have a great weekend, and I'll see you Monday.

    KC's View: