business news in context, analysis with attitude

Published on: May 13, 2016

by Kevin Coupe

Thanks to Phil Lempert over at Supermarket Guru, who has brought our attention to Farmhouse Market in New Prague, Minnesota, a 24-hour supermarket that is manned with a cashier only nine hours a week. It is an almost entirely self-service store, allowing customers to shop anytime and then check themselves out using an iPad. There is a $99 fee to become a "member" of Farmhouse Market, and there are only video cameras to make sure customers are being honest.

The concept is similar to one being tested in Sweden, where a self-service convenience store has been opened - customers actually use a mobile app to unlock the front door, and to pay for their purchases.

The Good website suggests that the notion of a self-service supermarket is a "funny hybrid of small-town homeyness and modern tech disruption," using modern technology to create the kind of trust that used to exist - or we thought existed - in a kind of Norman Rockwell-style America. And it offers the potential of the kind of disruption that could be a game changer in select markets, especially so-called "food deserts" where it is hard to make a supermarket profitable.

It is an interesting idea probably is ripe for a variety of iterations ... and certainly an Eye-Opener.

Published on: May 13, 2016

Business Insider reports that Target CEO Brian Cornell is resolute in his support of the company's position on transgender bathrooms, despite the fact that more than a million people have signed a boycott pledge as a result.

The company announced its policy - saying that its shoppers and employees were free to use the bathroom facilities matching their gender identities rather than the gender of their birth - in response to a North Carolina law prohibiting such accommodations in public places and banning any local communities from offering them on their own.

While critics of Target's policy have said that it puts women at risk of being victimized by sexual predators, Cornell promised that the company will "continue to embrace our belief of diversity and inclusion" while making sure our commitment to safety is unwavering." He said that most Target stores have family restrooms and that the company is working to make sure they all do, in order to reassure customers.

According to the story, "Cornell likened the public backlash against Target to when the retailer started used African American models in advertising in the mid 1960s. 'Back then it wasn’t well received, but sitting here today we know we made the right decision,' Cornell said."

Published on: May 13, 2016

A couple of stores this morning focus on the competitive conundrum in which Staples and Office Depot find themselves now that a federal judge has blocked efforts to merge their operations in order to be more competitive with online retailers. The judge supported the Federal Trade Commission (FTC) contention that the move would hurt large businesses and institutions that have large contracts with the two companies.

The Wall Street Journal writes that "the companies now must fend for themselves in a market that has become even less forgiving than it was 15 months ago, when the chains originally proposed joining forces, analysts say. Both companies had counted on the deal to help them slash as much as $1 billion in costs to combat shrinking demand for office supplies and fresh competition from online players like Amazon."

According to the story, "Staples now will face pressure to close hundreds of more stores and to consider a sale to a private-equity firm, one institutional investor with a stake in the company said following the ruling ... After the verdict, Staples Chief Executive Ron Sargent outlined a plan to eliminate another $300 million in annual expenses by leaning on suppliers for lower prices and tweaking promotions. The company also said it plans to reduce operating costs. Staples spokesman Mark Cautela declined to say how the company will meet those goals."

As for Office Depot, it "is slated next week to collect a $250 million breakup fee from its would-be suitor, which should give the smaller of the two chains some breathing room. The company’s long-term debt is also minimal, though its sales have dropped faster than Staples’ of late."

Meanwhile, the New York Times offers some analysis, writing that "the trade commission’s argument underscores just how complicated it has become to judge Amazon’s place in the retail industry. To put it simply: The agency does not think that the company benefits all customers equally. The decision also shows how difficult it is for regulators to keep up with industries being reshaped almost daily by technology ... the agency was not convinced that Amazon was about to offer services that would suit large office supply buyers. Staples and Office Depot are the country’s two largest office supply companies, with fleets of trucks, thousands of stores and large geographic footprints. Cutting the two down to one, the agency decided, would hurt those large buyers."

Published on: May 13, 2016

The International Food Information Council (IFIC) Foundation is out with its
“Food Decision 2016: The Impact of a Growing National Food Dialogue" survey, concluding that "significant numbers of Americans have changed their minds or behaviors around food and nutrition issues," with many of those changes driven by media coverage of the issues.

Some excerpts:

• "This year, 47 percent of Americans said they look at the ingredients list on foods or beverage packages when deciding what to purchase, up from 40 percent in 2015."

• "When Americans define what makes a food healthy, it’s becoming more about what isn’t in a food rather than what is in it. Thirty-five percent of Americans define a “healthy” food as one that does not contain (or has low levels) of certain components such as fat and sugar, the top response when asked in an open-ended question."

• "The survey asked whether Americans’ opinions had changed about a number of dietary components. An average of 31 percent changed their minds about at least one of them, for better or worse. In most cases, media headlines and articles were at or near the top of the sources that altered consumers’ opinions."

• "The media were a top source that caused a less healthful view of enriched refined grains, saturated fat, added sugars, and low-calorie sweeteners. Whole grains, protein from plant sources, and natural sugars were among the dietary components that gained a more healthful opinion from consumers based on media headlines."

• "Americans also want to know more about their food and are changing their behaviors based on what they learn. According to the survey, 44 percent read a book or article, or watched a movie or documentary, examining the food system and/or commonly held beliefs about diet. About one-quarter of Americans either changed their food purchasing decisions (26 percent) or engaged with friends, family, or coworkers (23 percent) based on what they read or viewed."

• "Similar to previous years, 57 percent describe themselves as being in very good or excellent health. However, those views are often at odds with health status as judged by Body Mass Index (BMI). Out of those describing themselves as being in very good health, 51 percent are actually overweight and 33 percent are obese. Of those describing themselves in excellent health, 11 percent are overweight and 6 percent are obese."

Published on: May 13, 2016

Fox News reports that Donald J. Trump, the presumptive Republican presidential candidate, has gone on the offensive against Amazon founder/CEO Jeff Bezos, saying that he bought the Washington Post in order to use it to influence corporate tax policy.

"Amazon is getting away with murder, tax-wise," Trump told Fox host Sean Hannity on his program yesterday. "He's using The Washington Post for power so that the politicians in Washington don't tax Amazon like they should be taxed."

Trump apparently was reacting to comments made by Washington Post associate editor Bob Woodward, who revealed in a speech this week that the Post has assigned 20 investigative journalists to look into the candidate's life. Woodward also said that the Bezos had urged Post editors "to run as many stories as possible about all the presidential candidates so that voters can't say they were uninformed when they select the next president."

Bezos, Trump told Hannity, "thinks I'll go after him for antitrust. Because he's got a huge antitrust problem because he's controlling so much, Amazon is controlling so much of what they are doing."

Published on: May 13, 2016

The Omaha World Herald has an interview with Hy-Vee CEO Randy Edeker in which he says that "Hy-Vee expects to open two more full-service stores in the Omaha metro area in three to four years as the city’s population grows and expands westward," and "also has explored building a smaller-format store in downtown Omaha."

That downtown Omaha store, the story says, "could be similar to what Hy-Vee has under construction in downtown Des Moines: a four-story structure housing a 35,000-square-foot supermarket, 81 apartments and a two-level parking garage. That store is expected to open this winter." He says that "Hy-Vee, which is based in West Des Moines, toured stores in New York City to get a feel for what an upscale urban grocery could offer."

Edeker also tells the World Herald that the company will open a central fulfillment facility later this year for its Aisles Online e-commerce program; to date, Hy-Vee has been fulfilling orders out of individual stores. The central location is expected to make the program more efficient and hence, more profitable.

Edeker says that Aisles Online isn't profitable yet, and to reach that point, "It has to reach a critical mass."

Edeker also says that he would be "disappointed" if Hy-Vee's annual sales did not exceed $10 billion in 2016; it hit $9.3 billion in 2015.

Published on: May 13, 2016

Nielsen is out with a new global study saying that "many local companies are thriving, despite being suddenly faced with daunting foreign rivals that have an array of advantages, including vast financial resources, diverse talent pools and sophisticated technology infrastructures, supply chains and operating practices. By leaning on their flexibility and agility, as well as their often superior grasp of the domestic operating environment, local companies are leveraging their unique advantages to resonate with consumers."

The study goes on to say that "many consumers appear to have strong preferences about the origin of the products they buy, but how important is this attribute really when they consider a purchase? How does it stack up against other selection factors?

"The short answer: It matters—a lot.

"More than four in 10 global respondents (46% on average) say brand origin is as important as nine other purchasing drivers, including selection/choice, price, function and quality. And more than one-quarter (28% on average) say brand origin is more important than other selection factors."

Published on: May 13, 2016

• Reuters reports that the Joe's Crab Shack restaurant chain is beginning a roll-back of the no-tipping test that it instituted last year, with 14 of the 18 restaurants that took part in the program dropping out. According to the story, "Bob Merritt, CEO of Houston-based parent company Ignite Restaurant Group, told investors this month that research indicated 60 percent of customers disliked the no-tipping policy."

The story goes on to say that "At the test locations, Joe's paid some workers a minimum of $12 an hour. The Houston-based company raised menu prices less than 20 percent to compensate for the higher labor costs. The test, launched under a different CEO, came as a nascent movement has been launched to remove a more then century-old tradition of tipping in U.S. restaurants."


• USA Today reports that McDonald's is conducting a test in the Dallas market of fresh rather than frozen burger patties, cooked to order for customers, looking to see if such a shift can move the needle in terms of the company's taste perception and overall sales.

"If rolled out nationwide," the story says, "the move could help McDonald's repel competition from rival chains like Shake Shack and In-N-Out, both of which tout using fresh, never frozen, beef in their burgers."

Published on: May 13, 2016

...will return next week.

Published on: May 13, 2016

Last week, looking for something other than a superhero movie to see, we ventured out to see A Hologram For The King, the new Tom Hanks movie that has been released to relatively little fanfare, which is something of a surprise considering Hanks is arguably the pre-eminent movie star of our generation, but less so since it is an adult-oriented character-driven drama in which very little happens.

Hanks plays a salesman who has fallen on professional and personal hard times, who is dispatched by his company to Saudi Arabia to sell a holographic teleconferencing technology to the government. Once there, he essentially waits for an audience with the king, lost in a maze of government bureaucracy, isolated and disconnected in a culture he does not understand. In addition, he is dealing with an unexplained growth on his back - which shouts "metaphor!" - and the guilt he feels from having been a Schwinn executive who, by outsourcing all production to China, was responsible for that company losing its competitive and differential advantages. (In some ways, that was the story I really wanted to see.)

A Hologram For The King is written and directed by Tom Tykwer, based on a novel by Dave Eggers with which I am unfamiliar. The movie, I must concede, is flawed - the narrative line is entirely too dotted for my taste, and the movie ambles off in different directions at various points as Hanks' character waits and waits and waits. But I was never bored ... I found the movie's flaws to be kind of interesting, since it was clear that Hologram had not been made by committee and edited by focus group.

The good news about the movie is that Hanks brings enormous good will and enthusiasm to his role, holding the whole thing together in a way that a lesser star never could have. Or would have. He's at the point in his career right now where he's almost an elder statesman in the film business; if he's in a movie, it is a pretty good bet that it'll have some level of taste and intelligence behind it. (We'll forget about Larry Crowne.) He can make big movies, like last year's Bridge of Spies and the coming Inferno, and small movies like this one, and even do the occasional Broadway show ("Lucky Guy"), and challenge himself and keep his audience coming back for more.



I have two red wines to suggest to you this weekend ... the Chateau Haut Selve 2012 Grand Vin de Bordeaux, which is a deep and smooth wine that is absolutely perfect with a steak ... and the Carlton Cellars 2012 Estate Pinot Noir, a wonderful pinot from one of my favorite Oregon vineyards. Enjoy. Thank me later.



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

Slàinte!