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    Published on: June 3, 2016

    by Kevin Coupe

    I don't know about you, but there are certain songs that, whenever I hear them, I get happy feet. I can't help myself. It isn't pretty, I must concede, but there it is.

    Just such a song is "Rhythm Is Gonna Get You," by Gloria Estefan and Miami Sound Machine. And for reasons I can't completely explain, I've been thinking about that song this morning ... and it has to do with the major stories on MNB this morning, which combine to make a kind of Eye-Opener.

    Just look at the headlines. Walmart To Test Grocery Delivery. Kroger Launches ClickList Pickup Service In Houston. Amazon Moves To Improve, Expand Grocery Footprint. And then, because it can't all be about e-commerce, there's Besieged By Competition, Walmart Looks To Reinvent Food Approach. Except that, of course, even when companies work to reinvent themselves at the bricks-and-mortar level, it in part is because the competitive skyline is evolving,, and e-grocery is changing at least some of the rules and expectations.

    To me, in reading and reporting on these stories this morning, it just felt reflective of a kind of Eye-Opening tipping point ... not a sudden revolution, to be sure, but indicative of a slow but sure tectonic shift that reshapes the landscape.

    And as I read and wrote, "Rhythm Is Gonna Get You" suddenly was playing in the back of my mind. Because the music is playing, and for executives and companies that want to remain relevant, it may be hard to resist.

    Can you hear the music? Can you feel the beat?

    The rhythm is gonna get you tonight.
    No way, you can fight it every day.
    But no matter what you say
    You know it the rhythm is gonna get'cha...

    KC's View:

    Published on: June 3, 2016

    Tech Crunch this morning reports that Walmart plans to test grocery delivery, utilizing services such as Uber, Lyft and Deliv to bring products from its eponymous and Sam's Club stores to consumers' homes.

    According to the story, the announcement follows "the launch of a similar pilot program in Miami in March. There, Walmart-owned Sam’s Club is using the parcel delivery service Deliv to test delivery of general merchandise and groceries for its business members in the area."

    The test will allow customers to order from Walmart's websites and get products delivered "for a small fee." The orders will be filled by "specially trained Walmart Personal Shoppers" who "are trained to understand how to select the best meat and produce, and they quickly place frozen and fresh items in a designated, temperature-controlled holding area in the back of the store." Drivers will be summoned via text message and informed that it is a grocery delivery, not a passenger pickup; customers will then be alerted that the delivery is on its way.

    Walmart says it is "starting small" with tests in Denver and Phoenix and "will let customers guide the process going forward."

    Tech Crunch notes that "this is not Walmart’s first experiment with grocery delivery. The retailer also has long run grocery delivery pilots of its own in both Denver and San Jose, California. However, it has not yet moved to expand upon that program. That hints that the company hasn’t figured out how to make the economics of home grocery delivery successful as an in-house program, or that customer demand hasn’t been as strong."

    Walmart has been more focused recently on offering pickup services, saying that "pickup makes more sense for its customer base, who are more concerned with the cost of groceries rather than the convenience of doorside delivery, which tends to be pricey. Walmart doesn’t markup the cost of groceries, nor does it charge a pickup fee."

    That focus will continue, Tech Crunch writes. Grocery pickup "was expanded in April to a number of new markets across the U.S., while also doubling its presence in some of its larger, established markets. This allowed Walmart to widen its footprint to 30 U.S. cities, it said at the time. It’s now live in 40 markets, and is now announcing expansions into 14 more in June. By the end of July, Walmart will nearly triple the number of stores and markets that offer the service, compared to when it began expanding at the beginning of April 2016."
    KC's View:
    It seems to me that Walmart is trying to do is create a real e-commerce-oriented momentum, as it expands grocery pickup and tests different methods of grocery delivery. My sense is that this is designed as much to compete with Kroger's expansion in this segment as well as all the stuff that Amazon is doing ... Walmart understands that it isn't hard to be left behind, and that innovations have to be constantly developed and tested and implemented and even occasionally discarded in favor of something else. It is a constant, energizing, sometimes perilous churn of ideas ... and Walmart either has to be part of it or not.

    This doesn't mean that Amazon and Kroger and everybody else in the e-grocery arena will stop innovating or even slow down. Far from it, and almost certainly to the contrary. But Walmart's moves in this area should make the case to everyone that they need to be in the game ... and if they're not, they'd damned well better have a compelling competitive offering that compensates for not being in the e-commerce business.

    Published on: June 3, 2016

    The Houston Business Journal reports that "Kroger launched a new curbside pickup service at several Houston-area stores, joining a bevy of other retailers that have jumped into the convenience game ... Kroger plans to roll out the service to 22 stores by fall 2016."

    The Journal goes on: "Kroger joins other area stores that launched their own curbside service. San Antonio-based H-E-B launched its curbside pickup service in Houston in December, and Wal-Mart Stores Inc. (NYSE: WMT) launched its service in October.

    "Aside from pickup service, other on-demand services have launched to satiate Houstonians' thirst for convenience. Google (Nasdaq: GOOG) recently launched a delivery service, called Google Express, in Houston that will deliver items from a number of retailers, including Barnes & Noble, Costco, PetSmart. Amazon Prime launched its one-hour delivery service in Houston in October."
    KC's View:
    Every time I read a story about Kroger's burgeoning e-commerce business, I feel like such a fool for having carped for so long about how slow the company was being on this front. Clearly, it was more a matter of not wanting to shoot from the hip ... but rather come into battle well-armed and fortified, with a coherent and executable strategy that would differentiate the company against the likes of Walmart and Amazon.

    Published on: June 3, 2016

    There are a bunch of stories this morning about various components of the Amazon story, as it continues to develop its grocery strategies:

    • The Dallas Morning News reports that Amazon has announced a deal with a Sprouts Farmers Market store there that will allow Amazon Prime members to "order grocery items, including fresh produce and seafood, through the Prime Now one-hour delivery service ... Sprouts-Prime Now orders will be fulfilled from the Sprouts store on Henderson Avenue. The company expects to add more fulfillment stores in the future to expand the reach in this area."

    According to the story, "Amazon did not list the turf covered locally by the program, but a spot check of several zip codes shows that it includes some areas south of downtown Dallas previously described as a food desert. The program could help fill the gap while the city tries to lure a grocer into the area."

    The Morning News goes on: "The announcement comes a day after Google expanded its Google Express delivery service to include a large part of Texas and parts of Oklahoma, Arkansas and Louisiana. (Membership in Google Express costs $95 a year and includes free delivery for orders of at least $15 from companies that include Costco, Whole Foods, Barnes & Noble, PetSmart and Walgreens..)

    "Once seen as bitter rivals, brick and mortar retailers are pairing up with tech giants to provide nearly instant gratification to the time-starved and the sedentary," the Morning News writes. "The partnerships expand the reach of the retailers, while potentially boosting participation in profitable membership programs."


    CNBC reports that a deep-dive analysis of the success of Amazon Prime - which offers two-day delivery on all the products fulfilled by Amazon for a $99 annual fee, as well as offering a variety of other advantages, including access to exclusive movies and television programming - suggests that there are "58 to 69 million global Amazon Prime subscribers at the end of 2015."

    At the same time, Motley Fool quotes a Consumer Intelligence Research Partners study saying that after taking advantage of a free trial period, 73 percent of people who try Amazon Prime become paid members. After a year, "91% of Prime members renew for a second year while 96% of those subscribers pay for a third year."


    • The Wall Street Journal writes this morning that Jeff Bezos told a technology conference this week that despite his company's investments in a variety of shipping technologies and infrastructure - ranging from drones to planes to cargo ships - Amazon has no intention of competing with FedEx, UPS or the US Postal Service (USPS) for the last-mile delivery business.

    Rather, he said, the goal is to "supplement it heavily," which is "necessary for peak selling seasons ahead of the major gift-giving holiday in the countries in which Amazon operates."


    Barron's reports that "Amazon passed Facebook this week to become the sixth-largest U.S. company by stock market value," and that its current trajectory suggests that it could be the largest by 2020.

    Just "consider Amazon’s potential in retailing," Barron's writes. "It holds a 35% to 40% share of U.S. e-commerce, on its way to 50% by 2018, according to estimates from Doug Anmuth at JPMorgan published last month. And e-commerce is just 11% to 12% of U.S. retail, not counting gas, food and cars, on its way to more than 30% eventually, and 14% by 2018, according to Anmuth. In other words, Amazon is securing a quickly growing slice of a quickly growing pie."
    KC's View:
    Yikes.

    Let me repeat. If you're not playing in this space, you'd better have a strong competitive offering that compels people to come into your store.

    Just being a hometown store with history isn't enough. Not nearly enough.

    These companies are eating legacies for breakfast.

    Published on: June 3, 2016

    Fortune reports this morning that Walmart "is in the process of overhauling the layout of the food section at 3,000 stores, including super­centers and the smaller Neighborhood Market stores, by year-end." The goal is clear - to more specifically delineate and differentiate Walmart's approach to food in a way that will allow it to compete more effectively with the likes of Kroger, which continues to grow, evolve and excel; with Target, which has pledged a reinvention of its approach to food; and with lower-cost retailers such as Aldi and, eventually, Lidl.

    "Some of these steps," Fortune writes, "are deceptively simple: Put leafy greens closer to the front of the store, replace black plastic crates with ones that look like wood for a farmers’ market feel, and group like-colored produce together to create a visual pop.

    "Another key part of the transformation involves lowering display cases and opening up floor space so that shoppers can see clear across the food area, lending it a higher-end feel. Walmart is even adding faux chalkboards, evoking a Whole Foods.

    "As for other foods, Walmart is emphasizing things like 100% grass-fed beef and antibiotic-free meat, and it now prepares 60% of bakery items on site. It’s also putting more refrigeration on the floor so that less food lingers in back rooms—which increases freshness and means less running back and forth by workers."

    Walmart also is releasing a new line of meal kits - using the brand name "Street Kitchen" - that offer easy to make Chinese and Mexican dishes for less than three bucks apiece ... its bid to get a piece of the burgeoning meal kit business, albeit at a much lower price point than is being charged by some other companies in the segment.
    KC's View:
    This is the other part of Walmart's planned resurgence ... because the competition is coming at them from all directions. 'Duck and cover" is not an option.

    Published on: June 3, 2016

    • The New York Times reports that Walmart "is testing the use of flying drones to handle inventory at its large warehouses, which supply the thousands of Walmart stores throughout the nation. In six to nine months, the company said, the machines may be used in one or more of its distribution centers ... Walmart is testing its new technology for the next six to nine months as part of its Emerging Sciences and Technology group, which focuses on drones, virtual reality and other technologies to see how they might help improve its supply chain. The company said drones may have other applications, perhaps even in its stores, but did not give details."
    KC's View:
    The key words here are "other applications." Stay tuned.

    Published on: June 3, 2016

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

    • The Bellingham Herald reports that "Northwest grocer Haggen began its first official day under Albertsons’ ownership on Thursday, June 2, with very few changes at the local stores.

    "The sale of Haggen’s 29 core stores to Albertsons for around $106.2 million was finalized Wednesday, June 1, in U.S. Bankruptcy Court in Delaware. Judge Kevin Gross signed an order approving the purchase agreement on Tuesday, March 29. Albertsons will keep the Haggen store name on 15 of the core stores, including five in Whatcom County. Those 15 stores will be a standalone business unit in the Albertsons company, much like Safeway, Vons and Randalls. The 14 other stores are transitioning to the Albertsons brand."

    Thus concludes the seemingly endless and sad story of Haggen, a once independent and progressive chain of food stores brought down by greed, ego, and ambition.


    MarketWatch reports that Starbucks and Anheuser-Busch InBev have announced a new partnership that will "produce, bottle and distribute the first ready-to-drink tea beverages from Starbucks' Teavana brand. The product is expected to launch during the first half of 2017. Anheuser-Busch will lead the production, bottling and distribution side of the effort, while Starbucks will focus on the beverage and retail elements.
    KC's View:

    Published on: June 3, 2016

    • Weis Markets announced the promotion of Wayne Bailey, Vice President of Supply Chain and Logistics, to the role of Senior Vice President of Supply Chain and Logistics.

    At the same time, Bob Cline, Weis's Director of Training and Organization Development, has been promoted to Vice President of Talent Development and Associate Relations.
    KC's View:

    Published on: June 3, 2016

    Roger Enrico, the Pepsi CEO who through ambitious and aggressive marketing brought the cola wars to new heights, passed away on Wednesday while on vacation in the Cayman Islands. He was 71, and no cause of death has yet been given.

    The New York Times writes that Enrico signed celebrity endorsers such as Michael Jackson, Madonna, Lionel Richie and Michael J. Fox, and used them to promote his brand as both differentiated and with tangible appeal to the so-called Pepsi Generation. Indeed, it can be argued that Pepsi's aggression under Enrico's stewardship forced Coca-Cola to temporarily retire its classic, namesake brand and launch New Coke ... which is generally considered to be one of the biggest marketing missteps of all time.

    Enrico retired from PepsiCo in 2001 and was later named chairman of DreamWorks Animation, where he served from 2004 to 2012.
    KC's View:

    Published on: June 3, 2016

    Not a lot of time for email this morning, but I did want to answer this one, from an MNB reader, following up on our discussion of iconic Irish retailer Feargal Quinn.

    (The discussion has been prompted by Feargal's new memoir, "Quinntessential Feargal," which I reviewed on Monday and is now available on Amazon.com.)

    Over the years you have met many people in the food industry here in the USA. Who might you consider to be an American equal to Mr. Quinn? I know as a young man, Mr. Quinn’s name was used prominently by our senior executives as one of the finest men they had ever met.

    I hesitate a bit on this, simply because if I name one person I leave a lot of other people out. But .. there's one name that immediately comes to mind as being equal to Feargal Quinn. He runs a smaller company, with a somewhat more upscale approach to fresh foods. But in terms of marketing savvy (especially an early and sophisticated understanding of loyalty marketing), good taste in food and drink, an appreciation of the importance of great people in his stores, and a basic and essential human decency, this person stands out and above pretty much everybody in the industry.

    Norman Mayne, of Dorothy Lane Markets in Dayton, Ohio.

    And here's the deal. I've just ignored a lot of great people ... and pretty much all of them would agree with me about Norman Mayne. That says a lot.

    (I hope Norman writes his memoir someday. Can't wait to read it. And if he's hesitating, I'd also be willing to ghostwrite it.)
    KC's View:

    Published on: June 3, 2016

    Earlier this week, I was watching "Morning Joe" on MSNBC, and the show had a round-table discussion that featured legal scholar and Harvard Law School professor Cass Sunstein ... and he was talking about Star Wars.

    More precisely, Sunstein was on the show promoting a new book he has written, "The World According to Star Wars." I paid attention, in part because I am a 'Star Wars" fan, but also because I have some interest in the idea that movies can provide lessons and metaphors that we can use in our work and everyday lives.

    (You may not know this, but I co-wrote a book on the subject with Michael Sansolo: "The Big Picture: Essential Business Lessons from the Movies," which continues to be available on Amazon.com.)

    The on-camera discussion lasted just a few minutes, and so I decided to download the book to the Kindle app on my iPad and read it.

    At the risk of seeming uncharitable, I'd recommend you not follow my lead.

    In "The World According to Star Wars," it seems to me, Sunstein - an avowed Star Wars fan - does his best to drain all the blood from the films, approaching the subject as a legal scholar and over-analyzing the series to the point where I thought my head was going to explode. Sure, Star Wars has roots in classic myths, which is one of the things that makes the movies resonate to varying degrees.

    But it examining every pause, every shot, and even the scenes and characters that were in early drafts but did not make it to the screen, Sunstein underestimates what used to be called "movie magic," and gives way too much credence to what seems to me to often be revisionist history about the series' evolution.

    Also, while I like Star Wars as much as the next guy, I'm not sure I'm ready to get on board with the idea that Star Wars is "the defining work of our time." I also think he's way too definitive in certain opinions, like saying that Star Wars is certifiably better than Star Trek. I've always felt that they are entirely different enterprises (pun intended) and almost shouldn't be compared ... they resonate with different people for different reasons. As do, by the way, many movies.

    In short, Sunstein writes about Star Wars like a lawyer, not a film enthusiast. That may be what some folks are looking for, but not me.

    There is one thing that Sunstein managed to persuade me about - that in many ways, the work of Lawrence Kasdan - who co-wrote The Empire Strikes Back, Return of the Jedi and The Force Awakens, as well as co-writing Raiders of the Lost Ark and writing/directing The Big Chill - may actually be more important to and more intelligent about the Star Wars franchise than that of creator George Lucas. This may be heresy to some, but that's what I'm thinking.



    Sometimes it is fun to venture down to the wine cellar (okay, it isn't a wine cellar ... it is just a messy basement with a few wine racks) and find something forgotten yet appealing. Such was the case last weekend, when we cracked open a bottle of 2011 Roads End Pinot Noir from Oregon's Carlton Cellars.

    As expected, it was delicious. To be fair, it is hard to get Carlton Cellars wine in much of the country; it is a small operation, with limited distribution. But I've become friends with owners Dave Grooters and Robin Russell, I visit them every summer, and I belong to their wine club ... so I make sure I always have some of their wines on hand. I've mentioned their wines before on MNB, and will again ... they make a wonderful product, and you should try it, even if it means ordering online.




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

    Slàinte!
    KC's View: