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    Published on: September 19, 2016

    by Kevin Coupe

    The Seattle Times reports that last Friday, a tap was turned on in the city of Bruges, Belgium - a tap that connects to a two-mile pipeline capable of carrying 1,000 gallons of beer per hour "from one of the country’s oldest still-operating breweries in the center of Bruges to a bottling plant on its outskirts."

    The creating of the pipeline by De Halve Maan (The Half Moon) brewery got a lot of attention when it was first announced almost two years ago. The goal was to avoid using tanker trucks to run the beer back and forth, since that traffic could have a deleterious impact on the city's aging infrastructure, not to mention being expensive; the theory was that if so many other of life's necessities - water, electricity, cable television - could be carried via pipes, why not beer?

    But what I found intriguing about the project - beyond the obvious - is the fact that much of the $4.5 million needed to build the pipeline was raised from people who were promised that in exchange for their largesse, they'd get free beer.

    According to the story, "Backers are to be rewarded 'with free beer for life in proportion to their contribution ... For example, someone that only made a small investment will get maybe a pack of beer every year on his birthday. But someone who paid the maximum amount may receive up to one bottle of beer a day for the rest of his or her life.”

    Again, beyond the obvious appeal of this program, it seems to me that there is something important to learned here. De Halve Maan got not just customer loyalty, but investment ... and it likely will reap the benefits of those investments for years in terms of repeat business.

    It can't and won't always be with beer pipelines or even crowdsourcing. But brands of all sorts have to find ways to make consumers feel invested in their products and services ... to feel that they are part of the business in a way that transcends simple transactions.

    One way - and Eye-Opening way - is to build a beer pipeline and get customers to pay for it.
    KC's View:

    Published on: September 19, 2016

    The Sydney Morning Herald reports that the man who helped Aldi establish itself in Australia says that market leaders Woolworths and Coles "need to spruik their huge product range and services such as delicatessens to battle Aldi's cheaper but utilitarian offer."

    (Quick linguistic note. "Spruik" is defined as Australian slang that means "to speak in public," especially in the case of a salesman or showman. I mention this because it was a word I'd never heard before. Clearly I need to spend more time in Australia.)

    According to the story, "Woolworths, Coles and wholesaler Metcash are cutting product prices and product range to fight Aldi, which has an estimated 10 per cent of Australia's $90 billion-odd grocery market and is expanding into South Australia and Western Australia."

    The former 23-year Aldi executive, Paul Foley (who now operates a retail consultancy), says, "What I think the incumbents have to do is market the choice that they're offering, and they have to be first to market with new concepts." And, "Foley estimated Aldi would have between 700 and 800 stores over the next seven to eight years, and would nab 15 per cent market share."

    Noting that Aldi has a limited selection, a higher percentage of private label products and prices that tend to run about 20 percent cheaper than Woolworths and Coles, Foley says that the only way that the more traditional retailers can compete is to emphasize their differences - but to understand that they also have to lower prices, and do business in a climate that is going to have lower margins that they've been used to.
    KC's View:
    This is what's called an object lesson for US retailers that may be laboring under the delusion that as Aldi expands and Lidl comes to the US, it won't really affect them because they've been serving certain communities for a long time and they have a lot of name recognition and loyalty, and they offer services that Aldi and Lidl do not.

    There are a lot of companies like this. (You know who you are. Even if you prefer to deny it.) And the thing that such companies have to realize is that when companies like Aldi and Lidl invade a market, they can change a lot of longtime shopping habits. Good enough no longer is good enough. Perceived customer loyalty suddenly seems to be more illusory than believed. And services end up not being the differential advantage that people thought they were.

    And just as important, because prices get driven down by the discounters, margins go down as well ... which affects so-called "traditional" companies' ability to invest and compete.

    This is what has happened in the UK. It seems like what is happening in Australia. And there's no reason to think that this cannot happen in numerous US markets.

    Published on: September 19, 2016

    Business Insider has a piece about what might be called the creeping robotization of the fast food business, and the likelihood that this will extend to supermarkets and other retail segments. The trend seemed to take form recently when it was revealed that Walmart has patented a self-driving shopping cart, and while this "may sound like science fiction ... the automation of retail jobs isn't so far off. 

    "In late August, Lowe's announced that, starting this fall, 11 locations in the San Francisco Bay Area will feature LoweBots, which are multi-lingual, autonomous customer assistance robots.
    In the grocery industry, self-checkout stands have become standard. And the industry is now looking for more ways to use tech to streamline shopping and minimize the need for human employees."

    In many ways, the story suggests, much of this is being driven by Amazon, where founder/CEO Jeff Bezos has a famous antipathy toward people in business, often saying that his goal is to automate everything possible and depend on algorithms to drive marketing and merchandising decisions. This can drive cost out of the business, which puts the pressure on other retailers to do the same.

    As other companies invest in robotic technology and other forms of automation, "it is inevitable that shopping will involve more and more robots," Business Insider writes. "And, as times goes on, that's likely to mean fewer and fewer human employees."

    You can read the entire story here.
    KC's View:
    Inevitably, this story will generate emails from people who will suggest that it proves, once and for all, that Amazon is evil, and that its growth is promoting trends that will bring about the downfall of America.

    To which I can only suggest, somebody has to build and program the robots.

    And while I certainly don't think that it is a good thing that people may be losing their jobs to robots, I think it is important to not just embrace progress, but to think about one has to adjust in order to be relevant within a changed society.

    Published on: September 19, 2016

    The Independent reports that the French government "has passed a new law to ensure all plastic cups, cutlery and plates can be composted and are made of biologically-sourced materials," essentially banning all plastic glasses, knives, forks and food boxes."

    The law goes into effect in 2020, and the story says that it is part of "an ambitious plan that aims to allow France to make a more effective contribution to tackling climate change."

    There are, of course, naysayers.

    According to the story, "Pack2Go Europe, a Brussels-based organization representing European packaging manufacturers, says it will keep fighting the new law and hopes it doesn't spread to the rest of the continent." And it hopes to persuade the European Union that France has violated EU law by taking such a unilateral action.
    KC's View:
    I can't help but chuckle at all this. The Brits are unhappy with European Union rules, they pull out of the EU. The French are unhappy, they ban plastic forks.

    Vive le France!

    I love France, I love Paris, and I firmly believe in the philosophical notion of "Liberté, Égalité, Fraternité."

    But that said, I can't help but think of the great Gene Hackman line in French Connection II: "I'd rather be a lamppost in New York than the president of France."

    Published on: September 19, 2016

    The New York Times had a story the other day about how Amazon is partnering with a number of universities, taking over their campus bookstores and turning them into something ... different.

    An excerpt: "This summer, Stony Brook, part of the State University of New York, announced a partnership with the online retailer Amazon, now the university’s official book retailer. Students can purchase texts through a Stony Brook-specific Amazon page and have them delivered to campus. Eventually, the story says, there will be an Amazon pickup location on campus as well.

    "In the campus store where the textbooks used to be, there are now adult coloring books, racks of university-branded polos and windbreakers and three narrow bookshelves displaying assorted novels. The rest of the store is a vibrant collage of spirit wear and school supplies: backpacks and baseball caps; pompom hats and striped scarves; notebooks and correction fluid. There will soon be a Starbucks ... Stony Brook, like other universities working in partnership with Amazon, receives a percentage of the sales taking place on the Amazon site, said Mark Pace, the chief contracts administrator for the university’s Faculty Student Association."

    The story notes that "partnerships with online vendors have potential downsides, Bob Walton, chief executive of the National Association of College Stores, said. Using any remote supplier means students may acquire the wrong books; students on financial aid must figure out how to order books and get reimbursement passes. The buyback system is thrown off. 'If they save five bucks and have a miserable week because they can’t even get the damn thing, what good is that?' he said. 'It’s not that people can’t figure these things out, it’s just a hassle'."
    KC's View:
    Several things about this story...

    First, it is yet another indication of Amazon's ecosystem approach to business. It wants to be everywhere and available to everyone. At some level, universities are seeing the Amazon approach as being more appealing and relevant to students and, probably more importantly, more profitable to the academic institution. (This is important, I think, because it is hard to get by when students are only paying a quarter-million dollars for a four-year college education.)

    Second, I have to point out that my daughter, who just graduated as an honors student with a BA in Criminal Justice (and is still looking for a job, in case anyone out there is hiring whip-smart young women in this area), used to order all her books from Amazon anyway. It didn't actually matter what was being sold in the campus bookstore, which ended up being abetter source of sweatshirts than textbooks.

    But ... this all said, I have to say that I worry a little bit about campus bookstores that think it is more important to stock adult coloring books rather than the textbooks that actually get used in classrooms. I don't want to be that grumpy old guy, but somehow this feels like maybe the emphasis is being put on the wrong stuff.

    Published on: September 19, 2016

    MarketWatch reports that Walmart has launched its 2016 holiday season layaway program, once again setting the minimum down payment on any item as $10, or 10 percent of the product's price, whichever is greater. There is a $50 minimum basket, and customers have until mid-December to pay off their accounts and claim the purchased items.

    According to the story, "While some people wait for Black Friday deals to start their holiday shopping, many customers started using layaway programs weeks ago. Those shoppers, experts say, have likely been to the store more than once to make payments since, creating a valuable form of customer loyalty. Seventeen percent of shoppers will take advantage of a layaway program this holiday season, according to Deloitte. ... And creating a customer that has to keep coming back throughout the holiday season is a benefit of these programs."
    KC's View:

    Published on: September 19, 2016

    • The Seattle Times reports that Amazon "plans to build a mammoth wind farm in West Texas — the company’s biggest to date — as it endeavors to clean up its energy diet. The farm, in the heart of Texas’ wind country, will yield a million megawatt hours of electricity a year, enough to power 90,000 households.

    "With more than 100 turbines, it represents a more than 60 percent jump in the generation capacity of the renewable-energy projects announced by Amazon so far."

    The story notes that "Amazon has been building solar and wind farms, mainly in the Midwest and the Eastern seaboard, in large part to offset with renewable power generation the consumption of its energy-hungry data centers, home to the biggest cloud-computing operation in the world."
    KC's View:

    Published on: September 19, 2016


    • Albertsons said last week that it has purchased three Fresh Market stores in Texas - two in Dallas and one in Fort Worth. The company's plan is to convert the stores to its Tom Thumb banner; they will be closed for renovations, but will reopen before the end of the year.


    • In Canada, the Financial Post reports that Sobeys is looking "to cut costs and drive up flagging sales in the wake of its botched integration of the Western Canadian Safeway chain," though the company is not yet saying specifically where the cuts will come.

    According to the story, François Vimard, CEO of Empire, which owns Sobeys, says that the company's "cost base is too high given our sales challenges across the country, and therefore it is critical that we optimize our cost structure so we can reinvest cost savings to drive the top line ... We will need to work over the next few months to identify additional cost reductions aimed at improving our efficiency.”
    KC's View:

    Published on: September 19, 2016

    • Edward Albee, one of the greatest playwrights of the 20th century with plays such as "Who's Afraid of Virginia Woolf" and "A Delicate Balance" to his name, not to mention three Pulitzer Prizes, passed away last Friday after a short illness. He was 88.

    The New York Times noted in its obituary that in his work, Albee "has unsparingly considered subjects outside the average theatergoer’s comfort zone: the capacity for sadism and violence within American society; the fluidness of human identity; the dangerous irrationality of sexual attraction and, always, the irrefutable presence of death.” And, it said, Albee focused not on reassuring audiences but challenging them, forcing them to consider emotions they would prefer to ignore.


    • W.P. Kinsella, who waxed poetic about baseball in novels such as "Shoeless Joe" - which was turned into one of the best sports movies ever made, Field of Dreams - died last Friday at age 81. He reportedly had what was called a "doctor-assisted death" in Hope, British Columbia; no details were provided about his illness.
    KC's View:
    Two brief notes about these gentlemen.

    Regarding Kinsella's passing, I can only say that if there is a heaven (other than Iowa), its doors ought to be thrown open for the guy who made Field of Dreams possible - a magical film that never fails to bring me to tears in its final minutes. (The book is pretty good, too ... though I must confess that this is one of those cases where I think the movie actually is better than the book.)

    As for Albee ... I once played the lead in "A Delicate Balance." I was in college, probably about 21, and was in no way equipped to act in a play so deeply cynical and so focused on middle-aged angst and disillusionment.. I was awful, the production was awful, and for those of us who were in the play, it was a shared nightmare. But I was never under the impression that the shortcomings were in the play ... they were only mine. (Which I realized some years later when I saw his "Seascape" on Broadway, and realized what real actors could do with an Albee play.)

    Published on: September 19, 2016

    On the subject of a possible $1 billion acquisition of Jessica Alba's Honest Co. by Unilever, MNB user John Phillips wrote:

    The potential acquisition of Honest, by Unilever, might possibly be focused not on a direct to consumer strategy (as you stated) but could be aimed at the wealth of consumer intelligence that Honest possesses. As was done in the acquisition of Dollar Shave Club , learning more about these types of consumers, their purchase habits and their need states might potentially help Unilever with their partnerships with retailers-which continues to be (by far) the biggest piece of their consumer business. Clearly consumer intelligence is a differentiator for any CPG company and Unilever could be at the forefront of this trend with this acquisition and what they discern from Dollar Shave Club. I personally think this makes Unilever a better trading partner to help retailers in the future and not a potential competitor.

    I think in many ways they are the same thing. A direct-to-consumer strategy results in greater consumer intelligence ... and you're right that this makes Unilever potentially a better partner. Though it also could make it a stronger competitor.




    On the subject of Walmart's patent on self-driving shopping carts, one MNB user wrote:

    Is Walmart concerned about shoppers or labor?  Why not adopt the cart system already successfully in Europe where shoppers pay to use carts and are refunded when they return the carts?  They could also adopt the use of motorized people movers that take the shopper and cart into the store.

    MNB fave Glen Terbeek wrote:

    Isn’t the "self-driving shopping cart” just another example of trying to incrementally improve the large, “logistics” based real store shopping experience?  But what would you expect based on Walmart’s history and their investment in large, category based stores.

    The future will be winning the “logical” shopping experience through small, locally focused value added real stores (ideas, information, solutions, social, convenience, etc) supported by a “logical”, personal virtual shopping experience for staples and other needs.





    Regarding the employee badges that track movement and behavior with the idea of creating greater efficiency and productivity, sort of like "a Fitbit for work," one MNB user wrote:

    As a fan of technology and the beneficial new tools it provides for many aspects of life, this is simply crossing a line.  Tech gone too far!




    Responding to our pieces about Target's grocery strategy, which suggested that the company will focus on CPG products rather than fresh/servicer departments - wanting to be known for convenience rather than offering a full shopping experience - MNB reader Tom Murphy wrote:

    I like the fact that Target is trying to figure out where to BEST invest their energies and capital to be a differentiator with their chosen customer segment(s).  I don’t think any amount of investment is going to make Target a grocer of choice for fresh, organics, prepared foods, etc.  I think they recognize that at best, this is a convenience/center store play.  If I am in a Target for their private label clothing, and remember I need milk & eggs…bingo.  Conversely, if Target is more convenient to home or office than a grocer, I can make a stop and get most of what I want.  Too many retailers think anyone with a dime in their pocket should be a customer…which leads to bad business decisions in trying to be all things to all people…and their related bad investments.

    I questioned whether Target can differentiate itself only by carrying products that everybody else carries, and MNB user Andy Huth responded:

    I agree Kevin.  It seems that Target is going in exactly the opposite direction from every other retailer.  In my humble opinion the last thing customers want is more dry goods, however they are displayed.  If you are not in the fresh game then you are not in the game, period.  Target would be far better served to get out of grocery entirely.




    I did a FaceTime last week about the mismatch between the millions of jobs available in the US and the skill levels of people who are looking for work.

    Which led one MNB user to write:

    I think the mismatch of 5.2 million jobs is indicative of a cultural issue I’ve seen in many organizations.  We have a disposable culture when it comes to consumer goods, and it often bleeds over into our work cultures.  Leaders see people as equipment and statistics rather than assets.  Rather than looking for development opportunities to alleviate mismatches within an organization, managers look to replace the employees.  I’ve heard many managers say, “Well, we’ll just fire him and get someone else.”  I’ve been in training and development for a couple of decades, and I know that training is the first “expense” to be cut when the belt gets tightened.
     
    I’m told I’m a good worker, intelligent, skilled, and hard to replace. Even so,  I’ve been in the workforce for over 40 years, and I’ve only had one manager ever ask me where I wanted my career to go and discuss my development.  Unfortunately, she was promoted two months after she hired me, and I’ve since moved to another company.   As a society, until we see employee development as an investment, the mismatches are just numbers.


    Agreed.

    I wrote, in part:

    Wouldn't it make sense to open a bunch of computer programming schools in coal mining communities and say to the people there who are out of work, "Hey, we're going to make it possible for you to go to school for almost no money, and we're going to do our best to help you position yourselves for the economy we're going to have, not the economy in which you grew up?"

    One MNB user responded:

    That would be great. It’s your approach I take issue with. The solution, in my opinion, ought to be market driven. Companies in need of computer programmers should partner with tech. schools to make classes available in target areas and then help cover the costs. I wouldn’t be opposed to offer tax incentives for this, but that’s as far as I’d be willing to go.

    But MNB user Gary Loehr wrote:

    Dead on,  as usual, in your observation.  It would seem like community colleges could be the ideal conduit for filling this gap.  Inexpensive and community based. Forget teaching the core class requirements, just hit the classes needed for the job requirements.  Local employers could work with the schools to define the requirements.

    While this may provide a quick fix to help bridge the gap, there is another fundamental cause of job gap.  We need to find a way to make kids believe that they can and should be a part of the American dream.  How do we get kids to take advantage of the opportunities they have to get an education and marketable skills.  There is definitely a cultural problem in some communities that makes it “uncool” to stay in school and learn.  Kids who don’t want to be in school disrupt classes so that no one can learn and they make it impossible for teachers to do their job. Everyone gives up and everyone loses.  It has to start in the homes, expand to neighborhoods and communities.  It starts with respect…for yourself, your parents and your community.  We have a long way to go, let’s hope we can get there.





    We wrote last week about a study suggesting that e-grocery is a failure because it only does about four percent of industry sales, and that retailers ought to focus more on marketing to people with kids than on marketing to millennials. (I disagreed with both conclusions, as you can see here.

    One MNB user responded:

    Agree with your view and while I have not read the full study it also seems like it was poorly conducted.

    Of course Amazon has grown as they are one of the only pure play, full e-commerce grocery options that has expanded rapidly into new cities (it does not sound like the study is looking at comp. sales). I mention pure play, full e-commerce grocery options because I think it's important to examine companies that offer a full shopping experience (fresh, center store, well developed site, etc) before making such bold claims.

    What % of customers actually have regular access to full e-commerce grocery (seems like a reasonable benchmark for a study making such bold claims)?

    Even if the study accounts for Instacart, click and collect, etc. it makes sense that these efforts would not lead to widespread adoption since by definition these efforts are mostly conducted by companies that are dipping their toes into e-commerce grocery vs. making a full commitment (some do it better than others and they often have other competing priorities so the slower growth makes sense).

    There are successful grocery e-commerce players that exist - why can't they/won't they be replicated???

    I could go on but will leave it at that. There are few things that bother me more than cherry picked statistics being passed off as reliable information.


    From another reader:

    Millennials are also harder to target with deals than other demographic groups since their participation in deals is well below the national average, particularly circulars and free standing inserts. Despite an uptick in participation in 2016, millennials use of circulars remains a full 12 percentage points below the study average of 42 percent. The gap for free standing inserts is even larger at 14 percentage points below the study average of 34 percent."
     
    I get a kick out of this statement when we are using the traditional communication vehicles of Boomers to measure Millennials.  Maybe the problem is that they don’t know how to speak to them in a manner that suits them.  Most of them don’t even take a newspaper so no wonder they don’t respond to circulars and FSIs.


    From your lips...

    MNB reader Philip Calderone wrote:

    I’ve never written in before, but felt compelled to based on this recently released study.  I must say…my wife and I are in our early 30’s and have an 18 month old boy.  My wife LOVES to shop at the brick and mortar grocery stores, including Target and Costco.  Why?...one of the reasons is it gets her out of the house and she gets a break from our son while I babysit (she is a stay at home mother).  I think we are overlooking that sometimes parents just want to get out of the house and have a small break away from the kids…this is something e-commerce cannot replicate.  Obviously these thoughts are based on a two parent household, I would think if mom (or dad) was single with kids, that the e-commerce solution would be more advantageous.

    I wouldn't argue with any of your statements. I've never argued that e-commerce will totally take over the food shopping experience ... just that it has a role, it is going to grow, and will someday will be seen as a feature that most relevant grocers will have to offer, in the same way as they offer scanning.




    One MNB reader last week took issue with Kate McMahon's column criticizing the manufacturer of the EpiPen for gauging consumers with high prices that seem largely designed to pay senior execs enormous salaries.

    In part, that reader wrote:

    Why would you even care about the cost of EpiPen? You have no right to complain about what profit or salary someone is paid. Let's try this, an iPhone cost $15 to make but sells for $600, what is the difference? Hillary Clinton charges $250,000 to speak, I have not heard you complain about that fee. Same profit but no one complains ... By the way, I use and carry the EpiPen as well, I have no problem paying $600.00 because I'm grateful something is around that can save my life in an emergency. There is no need for me to look the gift horse in the mouth.


    Another MNB reader responded:

    This response might be the most ignorant comment in the history of Morning News Beat. No one is against capitalism and companies/working individuals making money. You are worth what someone is willing to pay you. However, when it comes to life and death medicine, maximizing profit margin cannot be the ultimate business model. I’m glad this person can afford an EpiPen at all costs. Have some empathy for those who cannot.

    And, from another reader:

    To the person who wondered why you would care about the cost of an EpiPen- whether I need one or not I do care that there are children who need access to the Epipen and their parents have to choose whether to purchase a pen or have dinner. There is a huge difference between needing a potential lifesaving drug and the latest iPhone.

    Agreed.




    Finally, responding to my enthusiastic review of "Debt To Pay," the new Jesse Stone novel by Reed Farrel Coleman (following in the footsteps of the late Robert B. Parker), one MNB user wrote:

    I agree with you on Reed.  I picked his name up from you a couple of years ago…am current on everything he has written.
     
    If you like the Jesse Stone novels, you should also like Craig Johnson’s Longmire series…a Wyoming sheriff (current day setting).  You can also catch the series on Netflix if you want to start there…although the novels and series diverge from each other slightly, but no in the core storyline.


    I've not read the Longmire books, but I love the series ... and it is worth noting for other fans that the fifth season begins streaming on Netflix this Friday. If you haven't seen it, it is worth catching up ... and I heartily recommend starting with the first season and engaging in a little binge watching...
    KC's View:

    Published on: September 19, 2016

    In Week Two of National Football League action...

    Saints 13
    Giants 16

    Titans 16
    Lions 15

    Cowboys 27
    Redskins 23

    Chiefs 12
    Texans 19

    Dolphins 24
    Patriots 31

    Ravens 25
    Browns 20

    49ers 27
    Panthers 46

    Bengals 16
    Steelers 24

    Buccaneers 7
    Cardinals 40

    Seahawks 3
    Rams 9

    Falcons 36
    Raiders 28

    Jaguars 14
    Chargers 38

    Colts 20
    Broncos 34

    Packers 14
    Vikings 17
    KC's View: