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    Published on: September 9, 2016

    by Kevin Coupe

    Starbucks is moving beyond the coffee-and-food business, and getting into the fresh content business.

    Which means, I think, that it continues to be in the brand-building business.

    The company has unveiled a new, free series called "Upstanders" - available as text, podcasts and video - that it says "is storytelling in the public interest, but brought to you by a Fortune 500 company."

    Advertising Age reports that the series - a multimillion dollar project - is the brainchild of Rajiv Chandrasekaran, Starbucks executive producer and a former editor at the Washington Post, and "is designed to highlight 10 positive and inspiring tales from across the country, including those of Baldwin, Mich., a town where residents have banded together to give every high school graduate a college scholarship, and John D'Eri, who employs autistic individuals to work at his car wash."

    And, the story goes on: "Starbucks plans to promote the effort through its own retail and digital channels, including its mobile app, which Mr. Chandrasekaran noted has had 20 million downloads to date, and print ads in the New York Times and the Wall Street Journal. The company partnered with Upworthy and as well to market the series to millennial audiences, and is working with Fotition, a new social change platform."

    It seems to me that this is entirely consistent with Starbucks' broader approach to business. Agree with it or not, the company always has had a social consciousness component as part of its business plan and marketing message, and focusing on outstanding individuals is a great way to create connectivity with positive social forces.

    BTW ... Ad Age notes that the title of the series "comes from an employee town hall meeting Starbucks Chief Executive Howard Schultz held last year in which a staffer mentioned the word as an alternative to being a bystander."

    It is an Eye-Opener.

    One other, unrelated note that I can't help but making. It wasn't surprising yesterday when Starbucks CEO Howard Schultz decided to publicly endorse Hillary Clinton in the current presidential race. It was a move that has the potential of sending 40 percent of the population running to Dunkin' Donuts or Peets or Caribou, I suppose ... but at the same time as the Schultz endorsement was being reported, it also was reported that the Walton family in Arkansas also is supporting Clinton. (When was the last time Schultz and the Walton families pulled the same lever in the voting booth?)

    The Washington Examiner writes: "The heirs of late Walmart founder Sam Walton are backing Hillary Clinton for president. Collectively, the leading members of Arkansas' Walton family have given about $714,000 to the candidate and the Democratic Party during the current election cycle, federal records show.

    "The donations are an example of the longstanding ties between the Walton and Clinton families. It is an awkward situation for the candidate, a former Walmart board member, since most of her allies in organized labor and the broader liberal movement detest the Waltons, mainly because of the company's anti-union stance. Clinton has sought to distance herself from the family in recent years and has returned donations from the company in the past after they became controversial."

    I have no idea what this all means ... but I do wonder how many people will stop shopping at Walmart because of these donations.

    Just curious.

    KC's View:

    Published on: September 9, 2016

    The Wall Street Journal this morning reports that while Technomic says that foodservice sales in supermarkets grew from$15 billion in 2005 to $28 billion in 2015, the more sophisticated foods they are offering require "more complex cooking and serving practices," which in turn create "food-safety issues that even leading chains are racing to manage."

    For example: "Whole Foods Market Inc., a trailblazer in the sale of fresh-cooked items, was recently forced to temporarily shutter one of its commercial kitchens producing fresh meals for stores. The move was a response to the U.S. Food and Drug Administration’s warning over safety gaps in the Boston-area plant. The grocer is now overhauling its approach, including discontinuing the processing of meat, poultry and raw seafood in that kitchen and two others, according to a letter obtained through a public document request and the company."

    And, "The FDA’s warning followed an E.coli outbreak last year that was linked to rotisserie chicken salad made at Costco Wholesale Corp. and sickened 19 people. Deli foods from the Boise Co-Op, a natural-foods grocer in Idaho, were also tied to a salmonella outbreak last year that sickened nearly 300 people."

    The Journal goes on to say that "the grocers’ woes highlight challenges facing supermarkets competing for consumers forgoing home-cooking and traditional restaurant meals in favor of fresh offerings from sushi counters or taco bars at neighborhood grocery stores. As prepared-food offerings increase in volume and complexity, the risk of food-safety issues also grows, with supermarkets now facing safety concerns that have beset the restaurant industry for years."
    KC's View:
    This just reinforces the point that has been made here on MNB for quite some time - that in order to compete, companies up and down the food chain have to be assiduous and transparent about how they treat the food they sell, and the records they keep about the foods they sell.

    There is no choice. None. It is their legal responsibility., as per the Food Safety Modernization Act. It is their ethical responsibility. It can be an opportunity, if embraced. It will be a nightmare, if ignored.

    One more time, a bit of full disclosure...

    I'm very careful about mixing church and state here on MNB ... which means talking about a sponsor within the context of editorial. But in this case, there is a direct connection, and I want to be both transparent and informative.

    ReposiTrak, which has created automated information management technology that allows companies to do the things necessary to comply with evolving FSMA regulations, is a longtime MNB sponsor ... and we've been running a series of videos from ReposiTrak here that have interviewed CEOs such as Kevin Davis of Bristol Farms and Karen Caplan of Frieda's who have been proactive ands progressive in their approach to this issue. I hope you'll check it out; it was my pleasure to produce these videos, a task I welcomed because this is a serious issue that requires an industry-wide focus.

    Published on: September 9, 2016

    The Wall Street Journal reports this morning that the Serious Fraud Office (SFO) of the UK has charged three former Tesco executives "with false accounting and abusing their positions, the first charges announced by the office since the investigation began." That probe has been looking into Tesco's systematic and systemic underestimation of costs and overstatement of revenues as a way of bolstering its stock price.

    The story says that "the SFO has charged former UK finance director Carl Rogberg, former UK managing director Chris Bush and former UK food commercial director John Scouler with one count of abuse of position and one count of false accounting. The three men must now appear in the Westminster Magistrates’ Court on 22 September."

    The Serious Fraud Office says that the investigation is continuing.

    The Tesco accounting scandal resulted in the resignation of then-CEO Philip Clarke, who reportedly also has been interviewed by the SFO.
    KC's View:
    Let's be clear about one thing.

    Regardless of who gets charged and how this thing finally ends up, it seems inarguable that executive leadership at Tesco created a culture in which it was acceptable to manipulate the books so that the company looked better and healthier than it was. In fact, it may have been necessary for employees to do that if they were able to survive.

    Tesco hardly is alone in such behavior. After all, it is big headlines today about how Wells Fargo has been fined $185 million because employees opened accounts for customers who did not want them or never asked for them. They did it to build up their own numbers and meet certain goals.

    Companies pull this crap all the time. Senior executives turn a blind eye to it, or implicitly approve of it, because it is all about performance, not what is right or wrong or ethical or unethical.

    Now, it isn't all companies. Not by a long shot.

    But when one reads about companies like Tesco or Wells Fargo and what they have done and why they have done it, can there be any wonder why so many people are losing faith in institutions that they thought they could trust?

    Published on: September 9, 2016

    Reuters reports that in the UK, Mastercard has been sued for the equivalent of $19 billion, charged with hitting consumers with excessive fees.

    According to the story, "The case brought by a former chief financial services ombudsman alleges the payments company charged unlawfully high fees to stores when shoppers swiped their debit or credit cards and these were passed on to consumers in higher prices.

    "Mastercard is alleged to have done this for 16 years between 1992 and 2008, in more than 600 pages of documents filed at the Competition Appeal Tribunal on Thursday ... The lawsuit comes after the European Union's antitrust regulator found in 2014 Mastercard's fees to store owners to process international payments within the EU were excessive."

    Mastercard has denied the allegations.

    If the suit is successful, money could end up being distributed to "any person living in Britain who used a credit card, cash or cheques and was over 16 years old in the period covered by the lawsuit."
    KC's View:
    I know that we're all supposed to view these cases with a presumption of innocence ... but I have to admit that I'm totally on the side of the prosecutors and regulators here. I just think that in general, financial services companies do the stuff they think they can get away with.

    Published on: September 9, 2016

    Bloomberg reports that "slumping sales at Wal-Mart Stores Inc.’s Asda supermarket chain have been accompanied by thousands of job cuts that analysts say may help explain the U.K. grocer’s declining fortunes."

    The story goes on to say that "the average number of workers in Asda’s retail and distribution facilities fell by 5 percent to 107,740 in 2015, according to company accounts filed this week. That’s even as the chain opened 37 new stores. Following the cuts, Asda’s sales have progressively worsened. Same-store revenue -- a key barometer of a retailer’s performance -- tumbled a record 7.5 percent in the second quarter of this year."

    Bloomberg writes that "last year’s headcount reduction was mainly due to the grocer not replacing some workers when they left, a spokeswoman said by e-mail. The contraction is in contrast to the company’s main rivals. Market leader Tesco Plc put more staff on shop floors, helping its sales to stabilize as Asda’s worsened."
    KC's View:
    At some level, this can be blamed on the damage that discounters Aldi and Lidl have done in the marketplace, which has forced a lot of retailers to engage in cost cutting as a way of dropping prices. The problem has been that it hasn't worked. Which is one of the reasons that Tesco - a company dealing with its own issues, trying to emerge from accounting scandals, lousy performance and now the charging of three former execs with accounting misdeeds - has decided that to compete, it has to invest ... in people, as well as real estate. They're trying to differentiate, not conform.

    US retailers should take note.

    Published on: September 9, 2016

    The Seattle Times reports that Project Wing, a unit owned by Google's parent company, will begin delivering Chipotle burritos via drone to students on the campus of Virginia Tech.

    The story says that "Project Wing will use self-guided hybrids that can fly like a plane or hover like a helicopter. They will make deliveries from a Chipotle food truck to assess the accuracy of navigation systems and how people respond. The devices will hover overhead and lower the Chipotle edibles with a winch. Part of the experiment will be to see how well the packaging protects the chow and keeps it warm."

    According to the Times, "The Federal Aviation Administration approved the venture, the most extensive test yet in the U.S. of what many companies — including Amazon and Wal-Mart Stores — hope will eventually become routine drone deliveries of products. Amazon has begun a round of trials at a site in the UK."
    KC's View:
    Am I wrong to be more concerned about the safety of the Chipotle burritos than about the drones that will be delivering them?

    By the way ... keep in mind that for many college students, this kind of innovation will seem entirely natural and normal. In fact, they'll probably wonder why it took so long. Which ought to be a message to marketers wondering if this technology is going to take off. (Pun intended.)

    Published on: September 9, 2016

    The Washington Post this morning reports that Priceline "has quietly axed its Name-Your-Own-Price tool for flights, saying it would instead focus on set-price airfares that are easier and faster to book." The story notes that "fewer people were using the bidding feature, opting instead for straight-forward airline and hotel bookings. In recent years, Priceline has tried to steer customers toward its Express Deals, which offer so-called blind bookings for a discounted rate."

    The Post writes that "Priceline, which was founded in 1997 during the heyday of the dot-com boom, was among the first online travel sites to offer discounted bookings with the click of a mouse. Two years later, the company went public, raising a record $12.9 billion in one day.

    "Today, is the world's largest travel reservation site. The Priceline Group has expanded rapidly in recent years with the acquisition of sites like Kayak and Last year, Priceline had $55.5 billion in gross bookings and $9.22 billion in revenue, more than double the $4.36 billion it posted in 2011."
    KC's View:
    It should be noted that Priceline continues to offer a name-your-own-price feature for hotel rooms and rental cars, though I have to say that my recent experience is that it is far less effective than it used to be. The discounts are far smaller, and in fact a lot of hotel companies have developed pricing mechanisms that make it easier and cheaper to just go to them directly, which also reinforces loyalty.

    Let's face it - Priceline always has encouraged the opposite of loyalty. Which is fine, though it often works against the interests of the companies that sell their wares on it. This is why, when Priceline got into the name-your-own-price business for groceries in the late nineties, it didn't work. (I've gone on record about this. It was one of the dumbest ideas that I'd ever heard of when it started, and I used to spend a lot of time criticizing the retailers that embraced it when I was writing for another website, pre-MNB. The owners of that website actually threatened to fire me when they got pressure from Priceline ... but fortunately for me, I had a contract that guaranteed me editorial freedom. But that's ancient history...)

    Published on: September 9, 2016

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

    • The Associated Press reports that "Walgreens believes that it will probably have to unload more stores than expected to ease antitrust concerns over its pending, $9.41 billion acquisition of Rite Aid, a deal that would make the nation's largest drugstore chain even larger."

    The retailer said it still hopes to complete the acquisition this year.

    That's a lot of retail real estate that will be available. Kroger already has been mentioned as possibly having an interest, and I'm sure that before it all is over, somebody will suggest that Amazon ought to buy them all and open physical stores in all those locations.

    • The Wall Street Journal reports that Target "is building dedicated teams to manage the grocery sections of its stores as part of an effort to turn around declining sales in its food business.

    "Grocery employees will no longer work in other parts of the store and they will receive specialized training, including handling backroom inventory and interacting with customers. Each grocery team will have 10 to 60 employees, depending on the store. The changes have already been rolled out to about 450 stores and are expected to appear in another 150 by next month."

    • The Denver Post reports that "all nine Albertsons stores in the Denver metro area will be re-branded under the Safeway banner, the grocers’ parent company announced this week. The transition will be completed by mid-October,  the latest in series of changes following the merger of the two chains last year."

    The feeling at Albertsons was that it made sense to consolidate around one brand in the market, and the Safeway banner was the better choice.

    • New York-based Tops Friendly Markets has "announced the launch of its revitalized Tops Brand line of products, featuring thousands of Tops brand items, many reformulated with cleaner, simpler ingredients, and in new, more attractive packaging ... Many of these Tops Brand products are developed in coordination with vendors from across Western New York, reaffirming Tops’ commitment to our region. The Tops Brand relaunch also includes hundreds of household items including paper products and cleaning supplies."

    “Customers will find them to be great a complement to the national, regional and local brands that Tops is well known to offer them,” says Frank Curci, chairman/CEO.
    KC's View:

    Published on: September 9, 2016

    Michael Sansolo had a column the other day about how open communication can be the best tool in customer service, which prompted MNB fave Jack Allen to write:

    Point well taken! Moreover, thoughtful gestures are possible. For instance, at least 20 years ago one winter night Linda and I dined at the Greek restaurant, the Parthenon on Halsted. We  joined a sizable line of folks waiting for a table, several of us standing on the sidewalk in the cold. Soon a waiter appeared with a tray of glasses offering shots of Ouzo  to counter the chill. I have related this incident to hundreds. I no longer recall what I ate nor what I paid, but I have never forgotten that gesture. And I have returned on many other occasions.

    On another subject, MNB reader Jessica Duffy wrote:

    I remember my history teacher telling us in the 80’s that we were going to become a cashless society and we all laughed at him….”Ha ha Mr. Gould!” I hope we don’t because the other problem with cards is staying within limits. It’s simply easier to strategize and keep track with the physical money in your hands. I know that I, personally, had trouble keeping track when I was using just my Debit card and credit card….It’s the little, random purchases you make throughout the day (coffee, lunch, a pack of gum) that add up so quickly and are so hard to keep track of. I called the bank once because I thought someone had gotten into my account, but it was all me…..LOL

    Regarding the 50th anniversary of the first episode of "Star Trek" airing on NBC, MNB reader Robert Hemphill wrote:

    Fifty years ago I was a UCLA freshman, living in a dorm when a bunch of us from the men’s floor went down to claim a seat in the TV room to watch the Star Trek debut.  We were there early, and set it to the right channel.  When it started, a student from the women’s floor changed the channel, but was roundly booed by the majority audience.  I’ve been hooked ever since!

    The next week, Rod Serling was our guest in an informal chat - what a presence he had in person, just as he was on Twilight Zone.  

    I guess you can sign me as a long standing Sci-Fi junkie.

    Just the idea of everybody going to a single location to watch TV together seems so antiquated...

    Finally, I mentioned yesterday that my last chemistry class was at Iona Prep in 1970-71, which led MNB reader Bill Welch to ask:

    Was Ritchie Petrie a class mate in high school?

    Ritchie and I are, in fact, about the same age; he is about a year younger. But I think he went to Salesian.

    (I recognize that the number of people who get these references is dwindling with every passing day. But I'm going to keep posting them until I'm the last man standing...)
    KC's View:

    Published on: September 9, 2016

    In last night's opening game of the National Football League season, a rematch of last season's Super Bowl combatants, the result was the same - the Denver Broncos defeated the Carolina Panthers 21-20.
    KC's View:

    Published on: September 9, 2016

    If you have not seen it, you should make a maximum effort to watch "The Night Of," an eight-part series on HBO that serves as a kind of fictional companion piece to the first season of the "Serial" podcast.

    "The Night Of" actually is an adaptation of an old British TV series that looks at the inside of the criminal justice system. It begins on a night when Nasir Khan, a Pakistani-American college student, makes a year's worth of bad decisions that result in him being accused of murder ... and for seven subsequent episodes, it takes us deep inside a system that, even if it is the best available, also is deeply flawed.

    John Turturro plays John Stone, an ambulance-chasing attorney who ends up representing Khan; the role originally was to be played by James Gandolfini, who died after the pilot was shot. Robert DeNiro was then supposed to play the role, but had to back out because of scheduling conflicts. But no matter. Turturro is amazing - a knight in battered, tarnished armor, who finds himself running on faith and moral outrage that surprises even him.

    Riz Ahmed also is extraordinary as Khan, who is not everything he says he is, and who evolves in unexpected ways as his case proceeds. In fact, the entire cast is wonderful ... it is like a "Law & order" on steroids, with deeper cynicism and a bigger budget. And the scripts, by Richard Price and Steve Zaillian, are a great example of economy and insight.

    Watch "The Night Of." It is one of the best things I've seen on TV in a long time.

    I have two wines to recommend to you this week ... both from the Bedell Winery on the North Fork of Long Island. The 2015 Taste Rose, and the 2014 Sauvignon Blanc, are both exceptional wines - full of flavor, refreshing, and perfect for these still-hot September days.

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

    KC's View: