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    Published on: July 27, 2016

    by Kevin Coupe

    The Wall Street Journal reports this morning that Whole Foods is testing a new program at a just-opened store in Brooklyn that "allows customers to scroll through a list of exotic, seasonal produce not sold in the store and order customized amounts for pickup."

    A computer kiosk created by Baldor, a local produce distributor, allows customers to choose such items as "pineberries (white strawberries at $7.99 a pound), fresh huckleberries (like dark, thick-skinned blueberries with seeds at $19.99 a pound), apple blossoms ($15.99 apiece) and baby South African pineapples ($5.99 apiece). There is also a kale-Brussels sprout hybrid called lollipop kale sprouts."

    The goal of the program is to make available via Whole Foods - which may carry only 400 SKUs of produce - many more of the 5,000 items that Baldor offers, and to do it in a sophisticated market where there will be acceptance not just of unusual products, but also the accompanying high prices.

    It is interesting to see Whole Foods piloting a high-cost program like this at the same time that it is trying to play the lower cost game with its "365" stores. That's not to say that it can't successfully play both ends of the field ... just that it takes a different sort of organizational discipline and culture to do so. When I read about this program, I must admit, it seems to me that this is Whole Foods' sweet spot, not a price-driven store ... but maybe that's just because I was underwhelmed by the "365" store I saw last week in Lake Oswego, Oregon. (See that critique here.)

    This is what's called "the long tail," and bricks-and-mortar stores are to be encouraged to use technology to make low-demand products available to customers in a way that creates relationships, loyalty, and profits.

    It can be an Eye-Opener.
    KC's View:

    Published on: July 27, 2016

    The Washington Post reports that while the institution of an all-day breakfast menu may have given McDonald's a "badly needed sales jolt," it has not proven to be "a panacea for what ails McDonald’s."

    The fast feeder said yesterday that its most recent quarterly US same store sales were up just 1.8 percent, described as "tepid growth, especially considering it’s a year-over-year comparison to a quarter in which sales sank 2 percent."

    To be sure, the Post writes, "adding the anytime breakfast accomplished important things for McDonald’s: It showed customers that the company was listening to them. And it demonstrated to investors that new chief executive Steve Easterbrook is willing to take bold steps — not just make incremental tweaks — to try to pull the burger chain out of its rut. But, even though McDonald’s plans to make more items available on its all-day breakfast menu later this year, the offering appears to be bumping up against its limits in terms of its ability to drive long-term sales growth."

    The Post goes on: "As the company tries to solve the problems that are particular to its brand, it will have to do so against what appears to be a backdrop of gathering storm clouds for the industry overall. Fast-food behemoths including Dunkin’ Donuts and Yum Brands, the parent of KFC, Pizza Hut and Taco Bell, have said a softness in the U.S. restaurant marketplace overall weighed on their businesses in recent months. According to market research firm NPD Group, traffic was flat at quick-service restaurants in the latest quarter and was down 2 percent at fast-casual spots" - the first time the fast casual numbers have been down since NPD started tracking the segment.
    KC's View:
    It would appear that supermarkets may in fact be looking very good to consumers when compared to fast food and fast casual restaurants. has a similar story to the one in the Post, noting that "restaurant food inflation is outpacing the increases at supermarkets and the gap is widening, McDonald's Chief Financial Officer Kevin Ozan said on a conference call with analysts."

    At the same time, Reuters points out, there is growing consumer interest in where their food is from, which tends to work in favor of grocers.

    All of this may in fact be true, but supermarkets shouldn't start celebrating yet. These things tend to be cyclical, and so it is up to these retailers to use these trends as building blocks that allow them to construct stronger relationships with consumers that are woven together by concepts like better food, better nutrition, healthier meals, and lower costs ... not to mention the cultural benefits that can be realized when people cook and eat at home with their families and friends.

    Published on: July 27, 2016

    The Wall Street Journal reports this morning that a new paper published in Nature Biotechnology says that "scientists have successfully tweaked a gene that slows how quickly (tomatoes) soften without affecting their size or color.

    The story notes that in the past, efforts to slow down the softening process have resulted in tomatoes that do not taste as good, and in this case, the impact on taste is unknown "because consuming genetically modified foods isn’t allowed in the U.K., where the research was conducted."

    The Journal also reports that no matter what the taste results are, it is unlikely that this gene technology would be applied to tomatoes on a broad scale because the tomato market simply isn't big enough to justify the expense. (Unlike soy and corn, for example.) However, the research is seen as potentially providing a kind of "road map" that will allow scientists to make other kinds of GMO-related choices.
    KC's View:
    They say the tomato market isn't big enough to justify the expense, and that's all right with me. The tomato happens to be one of my favorite foods, and I'm a lot less concerned with shelf life than I am with taste.

    The thing is, I would hope that genetic modification would allow fresh products to last longer. Otherwise, what's the point? People who object to GMOs aren't arguing this, but rather suggesting that the people who think shelf life is the be all and end all are themselves missing the point.

    A tomato that last forever but doesn't taste great isn't real food as far as I'm concerned.

    Published on: July 27, 2016

    Reuters reports the Conference Board says that US consumer confidence "held steady in July" and that "its consumer index was 97.3 this month after a reading of 97.4 in June. Economists had expected the index to drop to 95.9 in July."

    In addition to other factors, such as new single-family home sales, these numbers suggest that there is "sustained momentum in the economy that could allow the Federal Reserve to raise interest rates this year.

    "The reports joined a slew of data, ranging from retail sales to manufacturing and services sector surveys, in painting a bright picture of the economy, and came as the Fed started a two-day policy meeting," the story says, adding that "according to a Reuters survey of economists, the government is expected to report on Friday that the economy grew at a 2.6 percent annual rate in the second quarter, accelerating from the 1.1 percent pace logged in the January-March period."
    KC's View:
    Regardless of what the numbers say, I'm amazed that consumer confidence is anywhere near these levels. After all, right now it is in the best interests of one side of the political equation to try to convince the electorate that we're going to hell in a hand basket.

    This is not political commentary, by the way. The Democrats hold the White House, so the GOP has to say that they've driven the economic bus into a ditch. If Republicans held the White House, it'd be the other way around.

    Here's what I'm fairly sure of. Forty-five percent of the electorate that votes will vote one way, and 45 percent will vote the other way. What will matter is how the other 10 percent votes.

    I did enjoy it recently when a retailer I know said to me on the phone, “Three hundred and fifty million people in this country, and this is the best we can do?”

    Apparently so.

    Published on: July 27, 2016

    Cal State San Bernardino has a announced that its Board of Trustees has voted to rename its College of Business and Public Administration for Jack H. Brown, executive chairman of Stater Bros. Markets, who the school says "last month generously pledged the largest single cash gift in university history to the college."

    The school will henceforth be known as the Jack H. Brown College of Business and Public Administration.

    According to the university, Brown's endowment will go to support academic enrichment and student scholarships, help attract and retain faculty, facilitate student enrichment, provide for new programs, and supplement research in perpetuity.
    KC's View:

    Published on: July 27, 2016

    The International Business Times reports that in the UK, Tesco "has formed a partnership with Holland & Barrett that will see the health food retailer launch outlets in the grocer's supermarkets," selling "best-selling items as Bootea health drinks and snail gel beauty products."

    While the pilot is limited to a single store at the moment, more are planned, Tesco says.

    According to the story, "The move comes as supermarkets carry fewer product ranges in order to save on costs, as part of the fierce ongoing price war with leaner discounters such as Aldi and Lidl. This creates underused space, which grocers look to fill with complementary retailers.

    "The partnership also aims to take advantage of UK consumers' clamour for healthier food, beauty and similar products."

    Holland & Barrett operates more than 1,000 health food stores in countries that include the UK, UAE, Spain, China and Singapore.
    KC's View:

    Published on: July 27, 2016

    • The San Diego Union-Tribune reports that delivery business Instacart this week has begun serving the city's downtown and surrounding neighborhoods and communities.

    Local retailers currently partnering with Instacart include Jimbo’s Naturally, Whole Foods, Smart & Final, Costco (with no membership required), Ralph’s and Petco.

    Instacart now operates in 24 US cities, with users able to choose between "an annual convenience fee of $150, or a per-delivery rate of $6 for orders over $35 and $8 for purchases less than $35."
    KC's View:

    Published on: July 27, 2016

    • The New York Times reports that Anheuser-Busch InBev "raised the price it has offered to pay for its rival SABMiller on Tuesday, making it the latest in a series of deals that have been affected — or in some cases driven — by the declining value of the pound after Britain’s vote to leave the European Union." While the two companies agreed to the deal late last year, the Brexit vote meant that "uncertainty ... has weighed on the value of the pound against the dollar and the euro."

    A-B now says it is willing to pay the equivalent of $59 (US) a share for SABMiller, up $1.31 (US) per share from its original offer. The new deal values SABMiller at the equivalent of $103 billion (US).
    KC's View:

    Published on: July 27, 2016

    Got the following email from MNB reader Rebecka Rivers:

    As always, enjoy your callouts and challenges that you present daily in MNB.

    Regarding your snippet on change today, I tend to enjoy the challenges that come from change. Despite my love for challenges I have to confess that I have not yet jumped on the Amazon bandwagon. Don’t get me wrong, I think they have made some important advancements to retail that will stand long after they do. I think my apathy is more due to always having a well-stocked pantry, so I never “need” something so badly that it can’t wait for the next shopping trip. Those days passed when we accomplished potty training! LOL. I also tend to like getting out of the house to shop, getting that time to pamper myself at a favorite shop is important to my overall mental health-!

    I did want to challenge you to think about (and hopefully, discuss) the one thing that could cause significant change at Amazon: a ruling that they are a monopoly.
    I think as they gather more and more retail under their umbrella, it seems that this sort of challenge is just a matter of time. What would that look like, what would the consequences be to the industry? I would welcome your views on this…maybe even further: what constitutes a monopoly online? Does anyone even know?
    Hope you can find time to bring this up, or find someone to talk to it—no one thought AT&T would ever be broken up, either. On the other hand, the courts seem to have a huge blind spot to considering online business “competition” in the marketplace. Something to consider.

    I'm happy to throw it out there, but I cannot even imagine circumstances under which Amazon could be declared a monopoly. A monopoly on what, exactly? It isn't like they're lacking for competition...

    Plus, my argument all along is that competition can't be thought of vertically. It isn't like Amazon can only be thought of within the e-commerce silo ... competition is so much broader these days, and the regulators ought to see it that way.

    By the way, I like to get out of the house, too. It is good for my mental health. But if I can find the time to go for a run or a bike ride, or go to a movie or museum, or just go for a walk with Mrs. Content Guy, because I did some of my shopping online rather than go to the store ... well, I think that's a pretty good trade off.

    Regarding Starbucks' decision to relax its barista dress code, one MNB user wrote:

    So now customers can be “informed” about important issues by a barista with green hair, bull nose ring, plug lobes in their ears, plaid shirt and a green apron. Yeah, that sounds about right.

    Wow. Did it take you long to achieve that level of tolerance? Or does it just come naturally?

    Responding to Michael Sansolo's column yesterday about opera companies struggling to be relevant in the modern world, MNB reader Peter Talbott wrote:

    This reminds me of the baseball teams (including the Yankees) that instituted a 5 year ban on radio broadcasts in the 1930s because they believed it reduced game attendance.  That theory was disproven.  Maybe the issue isn’t the channel but that the product hasn’t evolved.  All it takes is one “Hamilton” to breathe new life into an existing business.

    And, about the passing of actress/singer Marni Nixon, noted here yesterday, MNB reader Mary Schroeder wrote:

    I know every song from Mary Poppins as a result of the Marni Nixon-Disney album and a case of some childhood disease.  A little piece of my childhood disappeared today.
    I think I’ll go feed the birds…

    KC's View: