business news in context, analysis with attitude

Published on: June 21, 2016

by Michael Sansolo

Some stories are so good that even when retold they never lose their power. And that’s why when it comes to competitive challenges I always think of a wonderful scene in the movie Young Frankenstein.

In the scene, Dr. Frankenstein and his assistant, Igor, are digging up a dead body for the experiment in re-animation. It’s a cold, dirty and disgusting job. But, as Igor (that’s eye-gore, not e-gore by the way) points out, it could be worse. It could be raining.

And with that, it starts to rain.

So it is with competition. No matter how hard you think it is, there’s always a way it can get tougher…and then it happens.

Or to put it another way, there's always another hump to get over.

A number of readers have commented recently about the attention MNB gives to the looming threat of Amazon.com, as if not mentioning the e-commerce giant would somehow make things better. It won’t. The challenge that Amazon presents to virtually every retailer is going to be enormous ... and not just from Amazon, but from all the companies that themselves are innovating to do battle with it.

It's not just Amazon that should give you nightmares. It’s also Aldi and Lidl, the array of dollar stores, c-stores and drug stores. It’s Martha Stewart following the path of Blue Apron for meal services and all those celebrity chefs who will follow.

Still raining.

I received an e-mail this weekend from my gym - Lifetime Fitness - reminding me that they too are a culinary option. The little café located inside my gym is now being hawked as an excellent option for mealtime dilemmas because, as they say:

“LifeCafe Meals to Go entrees and snacks are conveniently packaged for you to bring home, to work or wherever your day takes you. Just look for the specially marked Meals to Go cooler in LifeCafe and discover wholesome food for your busy life.”

Still raining.

Let’s be clear, I go to the gym for many reasons and meal solutions are never on that list. But I can understand why others in my gym might feel differently. There are gym members who use the facility for personal training, day care and the salon. They regularly get meals and beverages from the café.

For them the gym is more than a gym; it’s an integral part of life including their desire to live healthier. That goes beyond personal training and into nutrition. They get advice on vitamins and supplements at the gym, and increasingly, the gym tries to sell them meals.

The fact that our gym has both a relatively new Harris Teeter and a Walgreens across the street is unimportant. Somehow the gym has invaded the health and wellness space both of those retailers can easily fill.

And that’s why the Young Frankenstein story matters because the job in front of us always gets harder. Increasingly every business sector sees a widening field of competitors and challenges for its core market. Increasingly we all become aware that no matter how good we are, we need to find a way to constantly get better or risk falling behind.

Still raining. From where I sit, there is a far greater chance of a hurricane than of sunshine anytime soon.

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Published on: June 21, 2016

by Kevin Coupe

As the nation still wrestles with the cultural and political implications and repercussions of the Orlando mass shooting, there was a Reuters story the other day that pointed to another potential result - the need for consumer-facing businesses, especially retailers, to invest in greater security measures, "such as metal detectors or extra guards."

Indeed, the story says, "This week, a large U.S. retailer contacted First Texas Products to launch a test of its hand-held security wands, which start at around $100 each, in 50 stores."

But that may be an outlier, because the story also notes that especially "smaller U.S. businesses remain reluctant to invest in more physical security measures." Attacks like the one in Orlando, Reuters writes, "often prompt a flurry of inquiries from potential customers to security companies. But the calls fail to translate into meaningful sales as owners tally the cost of the equipment and the extra personnel needed ... The trend stands in contrast to Europe, where companies say sales can spike after a major incident, such as the coordinated attacks on restaurants, a concert hall and soccer stadium in Paris in November that killed 130 people."

For example, "U.S. movie theaters have generally not installed metal detectors following the 2012 slaying of 12 people at a theater in Aurora, Colorado." But more incidents - and growing consumer concerns - could "change that calculus."

While heightened security precautions at retail venues around the country would not say something positive about the direction the world is taking, it would, I think, say something important about the premium companies place on their customers' and employees' safety and well-being. While such efforts might raise a few eyebrows at first, the fact is that we're all used to higher levels of security in most public places. And in the end, the cost of such efforts and whatever perception issues they might create will pale when compared to the impact of an actual attack.

And there will be another actual attack. And another. And another.

Retailers have to face these new realities with their eyes open.

Published on: June 21, 2016

Walmart announced yesterday that it is selling its Chinese online business, Yihaodian, to China's number two e-commerce business, JD.com, while simultaneously buying a five percent stake in that company and opening an online store on its site.

According to the Associated Press, Walmart "stands to gain a tremendous amount of traffic from JD.com’s huge customer base and its same-day delivery network. JD.com has nearly 6,000 delivery and pickup stations in about 2,500 counties and districts across China. Yihaodian owns and operates only about 250 hubs."

The AP notes that "sales growth has been slow over all for Walmart’s global online business. The retailer said recently that global e-commerce sales rose 7 percent in the first quarter, weaker than the 8 percent in the previous quarter and far below the 20 percent increases seen under two years ago." The deal with JD.com is seen as creating an entity that will be more competitive with Alibaba, china's largest online business.

Specific terms of the deal were not disclosed, but Reuters writes that the five percent stake in JD.com is "worth about $1.5 billion by the firm's latest market value."

Published on: June 21, 2016

Daymon Worldwide is out with a new study, "The Next World: How Millennials Will Shape Retail," that describes itself as exploring "the nuances and values of this generation to gain a better understanding of how they will shape the future of retail."

Among the conclusions:

• "Millennials are found to be unstructured shoppers that shop frequently and for a long period of time. When shopping for groceries, Millennials shopping missions are for immediate needs compared to Gen X who shops in order to stock up for a few days."

• "Millennials are less loyal to and are disaffected by brands compared to Gen X. Twenty-nine percent of Millennials and 35 percent of Gen X say they 'usually buy the same brand, but will try others on occasion' and 26 percent of Millennials say they are likely to 'buy whatever brand they feel like at the time'."

• "Millennials seek transparency, connectivity, authenticity and social responsibility. And they chase these persistently. They are not willing to give up these values which are embedded in their consumption habits, and will become increasingly significant as their purchasing power increases."

The research project surveyed more than 7,000 Millennials and Generation Xers in five continents and 14 countries across the globe.

Published on: June 21, 2016

The Los Angeles Times reports that unionized employees at Southern California's largest supermarket chains "turned out in large numbers" yesterday to vote on whether or not to give the United Food and Commercial Workers (UFCW) a strike authorization that would add additional tension to current contract negotiations.

According to the Times, "The results of the vote won’t be available until Tuesday night. But grocery workers historically have followed the union’s suggestion on whether to vote no or yes on a strike, said officials from the United Food and Commercial Workers union, which represents about 47,000 clerks, meat cutters and merchandise stockers across Southern California. The union advised members vote to authorize a strike."

The chains affected include Kroger-owned Ralphs and Albertsons-owned Vons, Pavilions and Safeway.

The Times writes that "according to union officials, the grocery companies want to give workers a 10-cent-per-hour raise over the next three years, reduce the companies’ additional contributions to pensions, and ask workers to put in several more months of work before they can reach the highest pay level of $20.10 for a clerk."

Published on: June 21, 2016

The Detroit Free Press reports that Kellogg Co. "has launched 1894 Capital, a venture capital fund that plans to invest $100 million in start-up businesses pioneering new ingredients, foods, packaging and technology." The company said that it will pursue minority investments that will target companies focused on "next-generation innovation, bolstering access to cutting-edge ideas and trends."

"As consumer preferences move toward more diverse tastes and trends, the pace of innovation in the packaged food industry continues to intensify,” said Gary Pilnick, the company’s vice chairman, in a prepared statement. “By investing directly in the most promising entrepreneurs and ventures, we can increase greatly our access to game-changing ideas and trends that could become significant sources of growth for us."

Published on: June 21, 2016

Tesco said yesterday that it is selling its Dobbies Garden Centres division in the UK for the equivalent of $319 million, as it continues its ongoing effort to get rid of businesses that it sees as non-core. Tesco bought Dobbies in 2007, a time of rapid expansion for the company from which it now is trying to recover.

The buyer is an investors group led by Midlothian Capital Partners and Hattington Capital.

In a prepared statement, Tesco CEO Dave Lewis said that "it was a difficult decision to sell the business, but we believe this agreement will give Dobbies a bright future, while allowing our UK retail business to focus on its core strengths.”

Published on: June 21, 2016

Variety has a story about a new Nomura Securities report suggesting that "hundreds of thousands of Netflix subscribers may bail on the streaming service after the No. 1 subscription video service raises prices for long-term customers over the course this year."

The story goes on: "About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD plan, or will see it later this year, according to Nomura Securities analyst Anthony DiClemente. The price hikes could result in 480,000 customers cancelling their service, he estimated — while at the same time leading to about $520 million in additional annual revenue for Netflix."

Variety notes that "in the U.S., Netflix in May began raising the price of the standard HD service for those previously paying $7.99 monthly by $2, to $9.99 per month. Customers who signed up for the HD plan at $8.99 following the May 2014 price increase will be rolled over to $9.99 in October. Alternatively, the affected customers will have the option of continuing at $7.99 for a single-stream, standard-definition plan."

Netflix has conceded that the price increases are likely to create a higher churn rate than it is used to, but that it will be able to better monetize the subscribers who remain with the service.

Published on: June 21, 2016

• Save Mart Supermarkets announced that it is changing its corporate name to The Save Mart Companies, which it says better reflects the "collective strength" of a company that runs stores under the ave Mart, Lucky, Lucky California, FoodMaxx, S-Mart and MaxxValue banners.

Published on: June 21, 2016

...will return.

Published on: June 21, 2016

The annual Food Market Institute (FMI) Connect show is this week, at Chicago's McCormick Place ... and I'm looking forward to having the opportunity to catch up with MNB readers who may be attending.

I'll be camping out at the MyWebGrocer booth, #1020 today from 1:30-2:30 pm ... I'll have some copies of my books to give away, and I hope you can stop by ...

Also ... if you want to come grab a beer or some other adult beverage tonight, I'll be at The Boss Bar, located at the corner of Clark and Hubbard in Chicago’s River North neighborhood, from 5-7 pm. Nothing formal, nothing stuffy ... just an opportunity to hang out together and decompress from FMI.

Hope to see you in Chicago.

Published on: June 21, 2016

The annual Food Market Institute (FMI) Connect show is this week, at Chicago's McCormick Place ... and I'm looking forward to having the opportunity to catch up with MNB readers who may be attending.

I'll be camping out at the MyWebGrocer booth, #1020 today from 1:30-2:30 pm ... I'll have some copies of my books to give away, and I hope you can stop by ...

Also ... if you want to come grab a beer or some other adult beverage tonight, I'll be at The Boss Bar, located at the corner of Clark and Hubbard in Chicago’s River North neighborhood, from 5-7 pm. Nothing formal, nothing stuffy ... just an opportunity to hang out together and decompress from FMI.

Hope to see you in Chicago.