business news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: September 13, 2016

    by Michael Sansolo

    When Kevin wrote about the rise of superbugs last week it should have caught your attention on two levels.

    First, it really should concern all of us that so many nasty organisms are evolving immunities to every existing solution because bacteria are always a major concern in an industry selling food.

    But second we need to reflect on how those bugs are changing as we think about the world of competition. Seriously, the parallel is huge.

    Years back, when I worked at the Food Marketing Institute, I would regularly have that very conversation with our food safety specialist, Dr. Jill Hollingsworth. Because Jill always knew more about food safety than anyone else out there, I always sought her insights when the industry faced serious outbreaks of food borne illness.

    Jill taught me the basic lesson of biology, also wonderfully articulated by Jeff Goldblum in Jurassic Park: Life will find a way.

    In other words, no matter how much science advances to fight the bad bugs, those bugs will continually find a way to evolve in order to survive. It’s simply their nature.

    The parallel Jill and I always discussed was how that compared to competition because the same truths hold. Competition will always find a way.

    That’s why no company should ever delude itself into thinking it has created the perfect product, store or service. Perfection is impossible because consumer habits are constantly shifting and competition constantly evolving to serve those emerging new needs. At best you have a temporary answer.

    What more, keep in mind this other rule of biological evolution: it’s not the biggest and strongest that survives. It’s the fittest or the ones most capable of adapting to the changed environment. That’s why the gigantic dinosaurs are gone and cockroaches live on.

    Again, the lesson should not be lost on business. We all need to continue to change with our environment recognizing that tomorrow will always bring new challenges. The more nimble, flexible, creative and, yes, fit we are, the better our opportunity to survive and thrive.

    In truth, we have no idea what the future holds. We can speculate, but never know for certain if e-commerce is actually going to work or whether Amazon and others will actually reshape the industry.

    Nor can we know for sure if value-based European retailers Aldi and Lidl will succeed as they have throughout their home continent. They might succeed or like other European retail invaders they may find the American market different and inhospitable.

    Change, as we like to say, is inevitable - whether it concerns competition or bacteria.

    Sounds like pretty powerful motivation to stay really, really fit.

    Michael Sansolo can be reached via email at . 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.
    KC's View:

    Published on: September 13, 2016

    by Kevin Coupe

    Dos Equis is about to find out if lightning can strike a second time.

    For almost a decade, the Mexican beer brand differentiated itself in the marketplace with an advertising campaign focusing on "the most interesting man in the world," who was described as having "charm ... so contagious, vaccines have been created for it," among other things. This man, portrayed by middle-aged actor Jonathan Goldsmith, would look at the camera and say, in lightly accented tones, "I don't always drink beer. But when I do, I drink Dos Equis. Be thirsty, my friends."

    Earlier this year, it was announced by Dos Equis that Goldsmith's character was being retired, and he was shown in one final ad as taking a rocket ship to Mars. There were various reasons cited, from a desire to appeal to younger consumers to some contractual issues with Goldsmith.

    But now, the brand has introduced a new, younger "most interesting man in the world" - 41-year-old French actor Augustin Legrand, who is seen in the tease commercial at left; it appears that they'll be showing him as being more active than the older version, and they are acknowledging that he will be the second man to hold the title.

    The gamble is that consumers who enjoyed the original campaign will accept someone else in the role, and that the new version of the campaign will resonate to the same degree, even though they'll almost certainly have to reinvent it to some degree just to keep it relevant.

    Andrew Katz, VP-marketing for Dos Equis, puts it this way to the New York Times: “The actor is obviously important, but at the end of the day we think the campaign itself is the thing that people love. It’s the framework that’s just so strong.”

    Which may be true. after all, Sean Connery was successfully replaced as James Bond by several actors. But on the other hand, there also was a sequel to The Sting in which Jackie Gleason and Mac Davis replaced Paul Newman and Robert Redford, and a prequel to Butch Cassidy in which Newman and Redford were replaced by Tom Berenger and William Katt.

    So, we'll see.

    Either way, I suspect, it'll be an Eye-Opener.

    KC's View:

    Published on: September 13, 2016

    Business Insider reports that "Amazon is aggressively expanding its presence in the real-world retail market, with a plan to open dozens of new pop-up stores in US shopping malls over the next year ... The pop-up stores, which are spearheaded by Amazon's head of devices and services, reflect the company's growing drive to reach consumers directly through a variety of access points including retail storefronts, home delivery, and innovative devices."

    The story notes that "the miniature retail storefronts are a separate effort from the physical bookstore that Amazon opened in Seattle last year and are primarily designed to showcase and sell the company's hardware devices, particularly its Echo home speakers."

    According to Business Insider, "As of August, Amazon had 16 pop-up stores in the US — nearly three times as many as the six it had at the end of last year, according to the source. That number is expected to exceed 30 this year and could go up to as many as 100 by next year, as new stores are popping up almost every week in shopping malls across the country ... Pop-up stores, typically 300- to 500-square-foot locations in the middle of shopping malls, carry an assortment of Amazon hardware — including the Kindle e-readers, Fire TV, and the Echo speakers — as well as accessories. But the broader goal is to drive more traffic to Amazon's online store, as these devices make it easier to purchase items there."
    KC's View:

    I had a chance to see one of these pop-up stores (pic at left) in San Francisco a few months ago, and it seems to me that they have a lot of advantages for Amazon. Not only do they give the company the chance to show off its technology products, such as the Kindle, Fire TV and Echo - which has the same impact as when Apple started opening stores - but they also don't create legacy problems for Amazon. They can be opened or closed pretty easily, compared to traditional bricks-and-mortar units, and can be far more situational and opportunistic in terms of timing and location.

    Published on: September 13, 2016

    The Cincinnati Business Courier reports that while food price deflation is hurting sales and earnings at Kroger, it also will "cut into the company’s spending on capital investments."

    CEO Rodney McMullen said in an investors conference call that the company won't spend as much on building and renovating stores - allocating $500 million less than planned, though it will still spend "$3.6 billion this year and $3.9 billion next year on capital projects."

    “There are certain projects that will slide into the next fiscal year and then projects from 2017 that will slide into 2018,” McMullen said. “We just think it’s prudent in this environment to maintain and increase our financial flexibility to respond to the environment that’s out there and to have that incremental cash to be able to spend. Our view is there will always be a significant number of projects in the pipeline and we’re comfortable we’re going to be able to do the projects we have the highest level of confidence in and get those built while maintaining as much financial flexibility as we can.”
    KC's View:
    Orson Welles often is quoted as saying that "the enemy of art is the absence of limitations.” In other words, limitations often force artists to find new and better ways to innovate. (One example is the movie Jaws, where the fact that the mechanical shark did not work forced director Steven Spielberg to shoot the movie by suggesting the threat rather than showing it ... which made it a much better movie.)

    I think the same can be said for retail development. Innovation comes as much from the hart and mind and soul as from the size of one's bank account ... and I'd be willing to bet that Kroger will continue to innovate and test new ideas despite the impact of food deflation.

    Published on: September 13, 2016

    The Wall Street Journal reports that "e-commerce hasn’t just reached rural America, it is transforming it by giving small-town residents an opportunity to buy staples online at a cheaper price than the local supermarket. It also provides remote areas with big-city conveniences and the latest products. Contemporary fashion, such as Victoria Secret bathing suits or Tory Burch ballet flats - items that can’t be found at Dollar General - are easily shipped."

    The story goes on: "Online shopping also brings with it deals and new entrepreneurial opportunities. These consumers, however, are the most expensive to serve for both retailers and delivery companies. According to Kantar Retail, about 73% of rural consumers - defined as those who drive at least 10 miles for everyday shopping - are now buying online versus 68% two years ago. Last year, 30% were members of Amazon Prime, up from 22% in 2014."
    KC's View:
    What's interesting about this phenomenon is that it pretty much costs everybody more money. The story notes that to offset the high costs of making deliveries to remote locations, "UPS and FedEx charge an extra $4 per package." And the story says that the evidence suggests customers are willing to spend more money to order some products online even when these items are available at the closest grocery store (which may not be all that close) for less money.

    I think this is a fascinating example of how e-commerce is changing not just the way people act, but also the way they think and feel. They're unwilling to accept the same old stuff when suddenly pretty much everything is available to them ... and this creates real challenges for traditional retailers.

    And just imagine how the economics might change once delivery drones become a factor.

    Published on: September 13, 2016

    The New York Times this morning reports that "five decades of research into the role of nutrition and heart disease, including many of today’s dietary recommendations, may have been largely shaped by the sugar industry," which did its level best to make sure that fat was identified as the major culprit, not sugar.

    The approach to lobbying hardly is an isolated case: "Even though the influence-peddling revealed in the documents dates back nearly 50 years, more recent reports show that the food industry has continued to influence nutrition science," the Times writes. "Last year, an article in The New York Times revealed that Coca-Cola, the world’s largest producer of sugary beverages, had provided millions of dollars in funding to researchers who sought to play down the link between sugary drinks and obesity. In June, The Associated Press reported that candy makers were funding studies that claimed that children who eat candy tend to weigh less than those who do not."

    The piece is worth reading here.
    KC's View:
    People and companies with deep pockets using it to influence the national debate hardly is a new phenomenon. The good news is that new levels of transparency make it easier to know when we're being played.

    This is, by the way, why I continue to believe that every dollar of political contributions - whether to candidates, political parties, political action committees, or any organization that makes political donations - ought to be reported and made public. Whether that money is trying to influence a lawmaker or a law, it ought to be public. No exemptions. No excuses.

    Published on: September 13, 2016

    The Associated Press has a story about how a variety of food companies - ranging from McDonald's and Chipotle to Panera and Sweetgreen - are "crusading against Big Food," hoping that this marketing approach will differentiate them from the competition.

    These companies "are positioning themselves as advocates for change before accomplishing some health goals, and skeptics say even well-intentioned marketing can be a disingenuous way to help people rationalize overeating."

    Some examples: "McDonald's unveiled a food 'philosophy' this summer and announced it was eliminating some unpalatable-sounding ingredients. Wendy's casts itself as part of the 'farm-to-fork, fast-food trend,' and Taco Bell, which has been testing a taco shell made out of fried chicken, refers to 'the farms that make our food' ... Chipotle remains an adept practitioner of the strategy, even as it employs some loopholes. It announced last year that it rid its menu of genetically modified ingredients, but serves Coca-Cola sodas made with high-fructose corn syrup."
    KC's View:
    Someone says in the article that even good marketing is still marketing, and that in the end, informed customers will be able to separate the wheat from the chaff. (In this case, almost literally.) Personally, I think that companies like McDonald's, Wendy's and Taco Bell are full of it when they try to position themselves this way; I simply don't believe what they say.

    I also think that companies have to navigate this approach very carefully. First of all, if you are found to be deceiving customers, you lose credibility. And if you say you have higher standards, inevitably you will be held to those high standards ... which will make it easier to fail.

    Published on: September 13, 2016

    Advertising Age reports that Campbell Soup is "introducing a new soup line called Well Yes that will earn a 100% score on the company's recently introduced real food index. On the index, products without things such as artificial colors, flavors and preservatives, high fructose corn syrup and MSG score higher." The line will include SKUs that include ingredients such as kale, quinoa, farro and lean proteins.

    The goal is to maintain momentum in Campbell's broader fresh strategy, and Ad Age writes that "Campbell has such confidence in the idea that it sped up plans to introduce the product six months early, giving it a January launch rather than holding off until the next fiscal year."
    KC's View:

    Published on: September 13, 2016

    Howard E. Butt Jr. the son of H-E-B founder Howard E. Butt Sr. and brother of chairman/CEO Charles Butt, has passed away from complications related to Parkinson's disease. He was 89.

    The San Antonio Express-News reports that "Howard Butt Jr. is best known to the public as the evangelistic member of Butt family and as the folksy, comforting voice of one-minute radio spots titled, 'The High Calling of Our Daily Work.' He operated the H.E. Butt Foundation, established in 1933 as one of the state’s earliest and largest philanthropic foundations. He also ran Laity Lodge, a Christian camp for kids in the Hill Country."

    The Express-News quotes Charles Butt as saying yesterday, “We are deeply saddened by the loss of my brother, Howard. His decades of inspired leadership, philanthropy and humanitarian efforts will forever be missed by our family and those he impacted across the U.S.”
    KC's View:

    Published on: September 13, 2016

    Responding to yesterday's story about the probability that Kmart could go into bankruptcy sometime soon, despite its claims to have ample assets, one MNB user wrote:

    I would include Sears in that as well but give it a few years.  This is Montgomery Wards all over again with some difference of course.  I see the present owners of Kmart and Sears milking all they can from the businesses then closing the stores.  They are taking the path of lease work to get a profit instead of trying to build or rebuild the business.

    And MNB user Gary Loehr wrote:

    They have the same valuable assets that A&P always talked about.

    On the subject of Chipotle, one MNB user wrote:

    I thought that I would give them another try after the food scare and I bit into a sheet metal screw. Quality control. Not exactly. They mail me gift cards for two free burritos. Any takers?


    We ran an email yesterday responding to a study suggesting that Walmart offers less customer service to poor and minority communities than it does to higher income neighborhoods. It said:

    Is it that Walmart is offering less service, or the community shopping the store is contributing to the environment? Several years ago I did a multiple years assignment in a town in Louisiana that was populated primarily by lower income African Americans. It was typical that the Walmart parking lot was littered with trash, including diapers, fast food sacks, beer bottles and soda cans. You had to pick your way through the lot to get to the store. Many of the retail stores in the town had the same issues, but it seemed worse at Walmart   And in the store there was plenty of evidence of shopper negligence; open packages of food, candy wrappers, clothing strewn on the floor and racks, partially eaten fruit, abandoned shopping carts, etc.   I’m not sure research can lay all of this on Walmart.

    I suggested that this seemed like painting with too broad a brush. One MNB user responded:

    Perhaps it is not a too broad brush, but rather the wrong brush.

    I live in an upper middle class neighborhood that borders on a much less affluent minority neighborhood east of me and observe the same things that this MNB user reported.
    People get robbed, murdered etc. frequently just a half mile away, as recently as last weekend in fact.  The Walmart in that area east of me is much like the one the MNB user described.  I won't even go there at night.

    There is even a huge difference in the quality of people they can find to hire in these areas.  I will drive a few miles further to a Bob Evans outside this area to eat breakfast because the staff is so bad at the one in my area.

    I believe the problem is basically socio-economic, but the fact is that this lower socio-economic population is highly skewed to the minority population so the racial distinction is often involved. One experience that for some reason will always stick in my mind is years ago walking behind a black woman downtown who was drinking a can of pop.  When finished she just tossed the empty can over her shoulder and it almost hit me. My upbringing would never have allowed me to do that.  I am amazed at people, many of whom I am sure are white, that think nothing of throwing trash out on the streets, highways, parking lots etc. Cigarette smokers of any race seem to be among the worst as I have many times seen them dump out their car ashtrays onto parking lots.  Even if I smoked I would never do that.  My parents taught me better.

    Even poor people can be good caring people. The proof of this is the many reported instances of black grandparents who have stepped up to raise their grandchildren because their own children have gone so far astray.  Lack of a "normal" family structure, drug use, low income, kids looking to gang leaders for recognition and leadership are all issues. As they say, there but for the grace of God go I, if I had been faced with all of those issues I might not have turned out any better.

    But the bottom line is, for whatever reason, the truth, politically incorrect as it is, as a group "lower income African Americans" exhibit these particular undesirable behaviors to a greater extent than the norm ... Maybe if we spent as much money on lifting these people out of their dire straights as we do jailing them things would gradually improve.  It's complicated.

    And, from MNB reader Jeff Gartner:

    I was offended by the commenter on the litter and mess at the Louisiana Walmart populated by "lower income African Americans." Really, did the commenter have to include their race? Lower income would have been sufficient. 

    Since almost all African Americans are Christians, that just could be easily rewritten as "lower income Christians." But that would be as inappropriate as it is to stereotype African Americans as did your commenter.

    Full disclosure -- our middle daughter is married to a black guy, and neither him nor anyone in his large extended family would ever fit that commenter's prejudiced stereotype.

    One might almost be tempted to say that the stereotyping was deplorable. But that'd be a mistake.
    KC's View:

    Published on: September 13, 2016

    In Monday Night Football, the Pittsburgh Steelers defeated the Washington Redskins 38-16, and the San Francisco 49ers beat up on the Los Angeles Rams 28-0.
    KC's View: