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    Published on: August 1, 2016

    by Kevin Coupe

    Two interesting stories about companies changing the way they do business have caught my eye ...

    The Los Angeles Times reports that Standard International, a boutique hotel chain, "is letting guests schedule when they want to initially arrive and depart." While this does create some issues in terms of housekeeping and room availability, the story says that computerized scheduling software largely can compensate for any inconvenience.

    Think of it. Instead of checking in after 3 pm and checking out by noon because that's what the hotel demands, guests can no pretty much pick their own 24-hour window during which they can stay at the hotel ... which makes a lot more sense from the consumer perspective.

    The new approach speaks volumes about the hotel chain's guest-driven orientation. “Instead of having guests work around the hotel’s schedule we want the hotel to work around the guest’s schedule,” Amar Lalvani, managing partner of Standard International, tells the Times.

    The other story is in the New York Times, and focuses on restaurants that have decided to stop taking cash.

    "Although America is far from becoming a cashless society, cash transactions are less frequent than even a few years ago and some restaurant owners are betting that customers will be comfortable doing away with cash for convenience," the Times writes. These establishments "are pushing credit and debit cards and mobile apps for payments. Apps enable restaurants to gather data and feedback, and allow consumers to order ahead and skip long lines."

    The restaurants that have made this shift largely say that they've gotten very little pushback from patrons, that the shift has actually sped up the checkout process and even saved money - while they have to pay transaction fees, there is no theft and faster table turnover seems to more than compensate.

    Now, that's not to say that this shortly will become a universally accepted phenomenon. Some people can't or won't use credit cards, and the Times notes that a " 2015 study on consumer payment choice from the Federal Reserve found that although credit card use was steadily rising, slightly over 26 percent of purchases were still made in cash." But, at the other end of the ledger, there is a growing percentage of people growing comfortable with using mobile payment apps; the Times writes that "Forrester Research forecasts in-store mobile payments will grow to nearly $34 billion in 2019 from about $4 billion in 2014."

    The Eye-Opening part of this, I think, is simply how companies within established industries are choosing to challenge entrenched ways of doing business. That's not to say there won't be bumps in the road or consumer pushback over time, and businesses certainly have to be wary about getting too far ahead of consumers.

    But, as I sometimes say, the future is here. The only questions are, now what? And, what's next?
    KC's View:

    Published on: August 1, 2016

    The Tampa Bay Business Journal has a story suggesting that Publix Super Markets probably is not "immune from the problems that have tripped up Whole Foods," which just last week announced its fourth straight quarter of same-store sales declines as it wrestles with tougher competition on the organic side and a "Whole Paycheck" image.

    In some ways, the story suggests, Publix faces some of the same headwinds as Whole Foods. The competition only is going to get tougher as it expands into new markets like Virginia, where it is going to go head-to-head with formidable retailers such as Wegmans. At the same time, the story says, Publix - a company not known for low prices - is going to faced with value-driven retailers such as Sprouts and Aldi that could erode its market share or at least impact its expansion efforts.

    And, the story quotes Jim Hertel, senior vice president at Willard Bishop and Inmar Analytics Co., as suggesting that maybe Publix is not as far along on the innovation curve as some retailers , and that it needs to do more in order to remain relevant.

    ""People are going to have to go smarter and harder just to keep pace," Hertel tells the Business Journal. "I guarantee you Wegmans is wondering what’s next, too. So there’s always somebody who’s going to go maybe a step ahead and figure out."
    KC's View:
    I do think that this article makes a good point, though it is hard to argue that Publix is looking at what the great Bob Murphy used to call "nine miles of bad road." Publix, after all, has been a dominant force in the markets it has served for a long time. But, it has never faced off against Wegmans before. And I have to believe that Harris Teeter, an innovative retailer that now has the resources of Kroger behind it, is only going to get tougher.

    The article doesn't get into it, but to me, Publix's ongoing flirtation with - but unwillingness or inability to commit to - e-commerce could be a reflection of where it sits on the innovation curve. Because the thing is, you can't sit on the innovation curve at all ... you have to be constantly moving, constantly testing new ideas, constantly looking for ways to disrupt your business from the inside.

    To be clear, I don't think Publix is incapable of this. I think it is even possible that they've got dozens of innovations at various stages of development, and they're just not quite ready yet. But if they're not ... well, that could be a problem.

    Published on: August 1, 2016

    Reuters reports that "some of the world's largest buyout firms are preparing offers for Supervalu Inc's Save-A-Lot business, making an outright sale of the U.S. discount grocery chain more likely than a spin-off, according to people familiar with the matter.

    Among the private equity groups said to be interested in making a play for Save-A-Lot are Advent International, KKR, Clayton, Dubilier & Rice, TPG Capital, Onex Corp and Thomas H. Lee Partners.

    An auction is expected to take place in coming weeks, with Save-A-Lot valued at as much as $1.8 billion. The results of the auction will determine whether Supervalu sells the division outright, or spins it off to shareholders.

    The story notes that Save-A-Lot operates about 463 stores, with almost 900 additional stores operated by licensees.
    KC's View:
    I just hope that whatever path Supervalu takes, the result gives new CEO Eric Claus and his team a little bit of breathing room so they can re-energize what became a moribund and largely uncompetitive chain. Just because I like healthy competition, I want to see Save-A-Lot get better and more competitive with the likes of Aldi, and be better positioned to compete with Lidl when it comes to US shores.

    Published on: August 1, 2016

    President Obama has signed into law federal legislation mandating the labeling of food containing genetically modified material, supplanting any existing state laws, like in Vermont.

    The Associated Press writes that "the legislation passed by Congress two weeks ago will require most food packages to carry a text label, a symbol or an electronic code readable by smartphone that indicates whether the food contains genetically modified organisms, or GMOs."

    The US Department of Agriculture (USDA) has two years to write the rules.

    The AP story notes that "congressional passage came over the strong objections of Vermont’s congressional delegation. Sens. Bernie Sanders and Patrick Leahy and Rep. Peter Welch argued that the measure falls short, especially compared with the tougher labeling requirements in their state. While the bill gives companies the three options for labeling, the Vermont law would require items be labeled 'produced with genetic engineering'."

    There was considerable positive reaction from the food industry.

    Leslie Sarasin, president/CEO of the Food Marketing Institute (FMI), said that she was "convinced it will help circumvent further consumer confusion on the already misunderstood and complex topic of GMOs.

    “I am grateful that this law will help avoid further disruption in the interstate commerce of food products.  And I am encouraged that this law allows our industry to move beyond the traditional label and toward exploration of new and unprecedented ways of providing our customers with the information they need in making the wisest food choices for themselves and their families."

    Peter J. Larkin, president and CEO of the National Grocers Association (NGA), said: “We appreciate President Obama taking action and signing into law this important bill that creates a national standard for the labeling of foods containing genetically engineered ingredients. With this new law, consumers will have access to more information and the confidence that the label they are reading contains the same information from coast to coast.

    “NGA is proud to have been a part of the Coalition for Safe and Affordable Food, a coalition that brought together over 1,100 entities that represent our nation’s food supply system, to advocate for a commonsense solution for the confusing and harmful patchwork of state national labeling disclosure laws."

    Alison Bodor, resident/CEO of the American Frozen Food Institute, said:  “This bipartisan solution bolsters consumer confidence while giving frozen food and beverage makers the certainty they require to meet the needs of America’s consumers without a patchwork of different state labeling mandates. We look forward to continuing our work as the law enters the rule making process at USDA to ensure implementation remains in line with Congressional intent."
    KC's View:
    I'm sure this law isn't perfect, and that to get it passed numerous accommodations and compromises had to be made. But that's the art of governing - getting the best you can and then moving on. I just hope that some food companies don't spend the next two years looking for loopholes that will allow them to circumvent or ignore the law. I'm hopeful, but not confident.

    Published on: August 1, 2016

    Business Insider reports that McDonald's plans to roll out a so-called "next generation" store concept that it already has been testing in Europe, Canada and Australia, to the United States over the next couple of years.

    The story says that these "Experience of the Future" stores feature Samsung Galaxy tablet computers that are mounted on tables, allowing customers to place more customized orders and pay for them without standing on line at the counter; they also can provide various kinds of entertainment while people are waiting for their food.

    According to Business Insider, McDonald's "hopes that adding technology to its eateries can improve the customer experience and drive sales." However, since it remains a pilot project, "exactly how it will work remains a bit of a moving target."
    KC's View:
    I have two things to say about this, and I'm going to try to do it without engaging in the sort of easy target practice that I sometimes utilize when commenting on McDonald's.

    First, I think this is fundamentally a good idea. The story points out, quite rightly, that in many ways the traditional McDonald's store seems to operate pretty much the same way it did 50 years ago. Adding these kinds of technological flourishes - and making them relevant to the customer and the brand - is a good idea.

    That said, I think that McDonald's has to be careful about defining the "future" too specifically. I think savvy companies actually play around with lots of different technologies, to see what connects and what doesn't. Maybe instead of tablets, there could be a role for Amazon Echo-type voice recognition computers to take orders. Or maybe there will be something else that comes on the scene tomorrow, that makes tablets and the Echo yesterday's news. Being relevant in the future means doing everything you can not to cast strategies and tactics in stone.

    The second thing is that I continue to believe that the best thing McDonald's can do for its business is improve the food. I try to avoid fast food, but over the past few weeks, for various reasons, I've eaten in both an In-N-Out and a Burgerville ... and the hamburgers they make are far superior to pretty much anything on McDonald's menu. (And I actually stopped at a McDonald's when driving out to Oregon in mid-June, so I have some recent experience with this.) Just make the food better ... and let technological change support that effort.

    Published on: August 1, 2016

    The Seattle Times reports that Walgreens plans to shut down by early autumn Drugstore.com and Beauty.com, five years after it acquired the sites.

    The company says that it wants to focus on its core site and develop the core brand's omnichannel potential.

    The story notes that the closure is part of a broader effort by Walgreens to save $1.5 billion in annual expenses. And it points out that despite the buzz that surrounded it at one point, Drugstore.com never actually turned a profit.
    KC's View:

    Published on: August 1, 2016

    There is a long and interesting story in the New York Times about a brewing scandal at the Milton Hershey School, described as "a boarding school for at-risk children and one of many gifts bequeathed by the chocolate magnate to the community that bears his name."

    Here's how the Times frames the story:

    "Thanks to a historic gift by M.H.S.’s founder, the Hershey Trust Company has an endowment of $12.3 billion and an ownership stake in Hershey Company, giving it control of the candy dynasty behind Kit Kat, Reese’s and Hershey’s Kisses, to name a few.

    "With Hershey now the subject of a $23 billion takeover bid, the trust is enduring one of its periodic turns in the klieg lights, and the timing is hardly ideal. A leaked internal memo has revealed back-stabbing, allegations of insider trading and the threat of something called a 'suicide parachute.'

    "All of this is happening as a dubious deal to buy a golf course continues to reverberate and as critics charge that members of the trust’s board are more interested in earning hundreds of thousands of dollars on Hershey-related boards than in helping needy children ... Perhaps it is naïve to expect that a treasure as immense as $12.3 billion could sit anywhere without producing at least some acrimony and intrigue. In a way, this is a tale about human nature, and how great gobs of cash evince both the best and worst of it. While the money is earmarked explicitly for disadvantaged children, its fate is decided by grown-ups. And while they may care deeply about the school, at the same time some are being enriched financially, and others — mostly elected officials — have shown motivations more political and economic than scholastic."

    You can read the entire story here.
    KC's View:

    Published on: August 1, 2016

    • MillerCoors announced that it has acquired the Hop Valley Brewing Co., a craft beer manufacturer located in Eugene, Oregon.

    According to the New York Times, "This comes just about a week after Chicago-based MillerCoors said it was taking a majority interest in Athens, Ga.-based Terrapin Beer Co. — another craft brewery with a reputation for India pale ales, or IPAs. Hop Valley is known for beers such as Alphadelic, Citrus Mistress and Alpha Centauri, according to the MillerCoors news release Friday. Terms of the deal were not disclosed.

    "Hop Valley will join Tenth and Blake Beer Co., MillerCoors' craft and imports division, and will continue to operate independently under the same management team, the release said."


    • The Grocery Manufacturers Association (GMA) announced over the weekend that McCormick & Co. and Pinnacle Foods have been recognized with GMA's 2016 CPG Awards for Innovation and Creativity. At the same time, Ed Crenshaw, former CEO of Publix, was inducted into GMA's Hall of Achievement.

    The awards were made at GMA's annual Leadership Forum.
    KC's View:

    Published on: August 1, 2016

    Thanks to the couple of dozen MNB readers who stopped by Nel Centro in Portland, Oregon, last Thursday to hang out, enjoy some beer and wine, soak up a little sunshine, and engage in fun conversation. (That's a few of them at left.)

    These sorts of events are among the most fun things I do during the year, because they allow me to put faces with names that I see all the time; many of the folks who show up are people who write to me, often passionately, about their beliefs and feelings about a wide variety of subjects. And I am grateful that they take time out of their day not just to read MNB, but to come by and visit when we have the opportunity.

    It is yet another reason why my job - if indeed you can call this a "job" - and my life in general are totally cool.

    KC's View:

    Published on: August 1, 2016

    Got the following email from MNB reader Claire Tenscher:

    I’d like to offer a slightly different viewpoint than the reader whose email you shared on Friday regarding the cost of food. While I agree that good food doesn’t have to be considerably more expensive, I think the issue is much more nuanced. According to a Harvard School of Public Health study ... a diet rich in fruits, vegetables, fish, and nuts will cost a $1.50 more per day per person than a diet that consists of processed foods.

    Then, the real reason I’m writing: there are costs beyond the dollar value of the ingredients. For many low income Americans, having time to cook and shop can be more ‘expensive’ than actually buying the raw ingredients. Imagine working two jobs and having to take public transit, it isn’t easy to also pick up your kid, spend time at the store, plan your meals and cook. Proximity to full service grocery stores affects the time it talks to do this shopping. Living in a food desert is the unfortunate reality of many poor families.  For other parents living paycheck to paycheck there may not be enough money at one time to cover the cost of buying the ingredients up front. Then food waste is also a deterrent. If you’re asking your kids to try vegetables that they reject (it can take a child 8-15 attempts to accept something novel) you feel as though  just thrown away your paycheck and your kids are still hungry.

    A Opinion piece ... really opened my eyes. Here’s an excerpt:

    “One mother strove to provide healthy food on a budget. She cooked rice and beans or pasta with bruised vegetables bought at a discount. These meals cost relatively little — if they’re eaten. But when her children rejected them, an affordable dish became a financial burden. Grudgingly, this mother resorted to the frozen burritos and chicken nuggets that her family preferred.”
     
    It isn’t that families don’t want to feed their families right or are lazy. Rather than putting the onus on the shopper ‘making the right choices’ we should shift the conversation to how we as society can help.


    I agree with you. However, I'm not sure at the moment that the cultural and political climates are conducive to such a conversation taking place in the public discourse.




    Weighing in on the modern shopping experience, MNB reader Jerome Schindler wrote:

    Needed some Eureka N vacuum cleaner bags.  These are hard to find now as most newer vacuums are bag free.  Lowes didn't have them, Target didn't have them.  Available at Walmart.com but Walmart has no ship to store option for this item - buying this and paying shipping is not something I care to do.

    Had the same issue last December with a Sam's Club order of an item that was out of stock in their stores. When I complained they promised to refund my shipping fee but that never happened.  Less than $10 so not worth my time to followup.

    I no longer subscribe to Amazon Prime - a lot of items there are not covered by their PRIME membership free shipping anyway. As for the Amazon automatic replenishment for many items we use every day, I can do much better with local brick and motor retail deals and coupons.
    Of course I am semi-retired and have time to do that.  Your mileage may differ.

    At this point in my life, at age 73, a few bucks doesn't make much difference, but I have a life long habit of being frugal and use that, and remaining just semi-retired, as an excuse for dining at better restaurants and buying better beer.


    Can't argue with the better beer part.




    Regarding Chipotle's decision to test out a new burger restaurant concept, one MNB user wrote:

    This doesn't make any sense.  After reeling from several food poisoning incidents, Chipotle is going into the ground beef business?  What's next sushi?

    And, from another reader:

    Good luck bringing this model to the northeast where we are already overrun with the entire spectrum of burger joints - Five Guys, Wayback, Zinburger, Bobby's Burgers, all of the fast food options, Fudruckers, the plentiful amount of local places that have jumped on the trend, I could go on and on and on...when is the burger bubble gonna bust?

    Eventually, I suppose ... but hopefully it'll just be the pretenders who get hurt, and the real innovators that make good food will survive. They'll just have to keep innovating ... like a race car that has to speed into the curve, not slow down.
    KC's View: