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    Published on: October 13, 2016


    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here and this is FaceTime with the Content Guy, coming to you this week from Eataly in Chicago.

    I'm a big fan of Eataly, though I'd concede that this is a very specific format that wouldn't work everywhere. But in the right place - it is gangbusters, a celebration of Italian food and culture that skillfully mixes grocery and restaurants; it is the kind of place where it seems perfectly normal to see someone perusing the mammoth pasta section while sipping on a glass of red wine. In other words, my kind of place.

    I've always liked the Chicago version of Eataly more than the New York edition, probably because in New York, it always feels like there is 10 pounds of pasta jammed into a five pound bag, and it seems like more of a tourist attraction than an actual market. Here in Chicago. there is more room to breathe, and people do seem to be doing some actual shopping and the variety of sections that feature fresh produce, meat and seafood, baked goods and almost too many other specialty items to name.

    A little while ago, I met up with my son David - the actor/writer who lives here - and we enjoyed some arancini, while essentially is risotto balls. One variety was made with squid ink risotto and poached seafood, and the other of tomato risotto, crispy salumi, caramelized onion and cacio de roma. Fantastic! And we washed it down not with wine, but with beer - beer they actually make here on the premises. In this case, a dark lager called Duncan's Dunkel by Birreria. Fantastic!

    My point is this. Thew Chicago Eataly is dedicated to writer Ernest Hemingway, and there are numerous signs posted about that offer lines he used in various books about food and wine. There are many. But the Hemingway quote I love best is not so much about food, but about writing - that ""Good writing is good conversation, only more so."

    And while that may not refer to food, it does refer to Eataly. Because I think the true magic of this place is not the arancini (though it was amazing), but the fact that it actually is a living, breathing conversation about food, and it serves to stimulate such conversations among its customers.

    Not every retailer can do that to the extent Eataly does, but I do think it can be a noble goal. Through products that nobody else has, through sights and smells and tastes, food stores can engage customers in this kind of conversation in a way that can create loyalty and profits and people who eat better and drink better and live better.

    That's what Eataly does. Only more so.

    That's what is on my mind this Thursday morning. As always, I want t0 hear what is on your mind.

    KC's View:

    Published on: October 13, 2016

    by Kevin Coupe

    This morning's Eye-Opener has nothing to do with business. It is just a piece of happy, unexpected news ... that Bob Dylan has been named the winner of the 2016 Nobel Prize for Literature, for what the Swedish Academy said was “having created new poetic expressions within the great American song tradition."

    The New York Times writes this morning that Dylan is "the first American to win since the novelist Toni Morrison, in 1993," and that he was considered a long shot for the prize since his work "does not fit into the traditional literary canons of novels, poetry and short stories that the prize has traditionally recognized."

    I just think this is the coolest thing, since it honors a quintessentially American artist of enduring influence. It made my morning, and like so many of his songs and lyrics, it is an Eye-Opener.

    How many roads must a man walk down
    Before you call him a man?
    How many seas must a white dove sail
    Before she sleeps in the sand?
    Yes, and how many times must the cannon balls fly
    Before they're forever banned?
    The answer, my friend, is blowin' in the wind
    The answer is blowin' in the wind...

    KC's View:

    Published on: October 13, 2016

    The Wall Street Journal this morning uses yesterday's news about Amazon planning to open convenience stores and grocery pickup depots around the country to speculate about how it could impact the traditional supermarket business.

    "The new Amazon stores will compete with grocery stores on their own turf, and come as traditional retailers, including Wal-Mart, are rapidly expanding their online grocery services, particularly curbside delivery services known as 'click and collect,' aimed at attracting busy grocery shoppers in the Midwest," the Journal writes.

    "Supermarkets battered by a rough patch in food retail are hoping curbside delivery will help them not only keep market share as more shoppers turn to e-commerce, but also coax shoppers into their stores to buy additional items when they collect orders. Other retailers are offering one-hour delivery and eye-catching apps to attract millennials and shoppers looking for convenience."

    While "part of Amazon’s move and its subsequent expansion into the field was made possible by the reluctance of some big companies to invest heavily in notoriously profit-starved grocery-delivery services ... brick-and-mortar grocers are now having some success by offering a wider array of shopping formats for different customers. Technological improvements and warehouse investments, meanwhile, are making deliveries of produce fresher and more tailored, such as the ability to select bananas according to their degree of ripeness."

    CBS News reports, incidentally, that Walmart said this week that it plans to offer curbside grocery pickup in 600 US locations by the end of October.

    There remains some debate about the impact of online grocery. "Online sales remain a fraction of total supermarket sales," the Journal writes. "Among traditional food and beverage stores, e-commerce accounted for $1 billion in sales in 2014, or 0.16% of the $670 billion market, according to U.S. Commerce Department figures. But big e-commerce vendors, such as Amazon Fresh and other online mass merchants, racked up more than $6.3 billion in food and beverage sales in 2014, up 20% from 2013, the federal figures show."
    KC's View:
    I don't think there is any question that most retailers are going to have to find some sort of on-ramp to the e-commerce business. Some will do delivery, others click-and-collect, and these things will represent various percentages of their businesses. It won't be the same thing for all companies, just as e-commerce will have varying degrees of appeal to different customers.

    But all of the moves being made by companies like Walmart, Kroger and Amazon are going to have an impact on the decisions being made by other companies. They're going to raise the bar on consumer expectations, and that'll affect the nature of competition ... and while I have no idea how big e-grocery will get, it seems inevitable that it is going to get a lot bigger and more pervasive.

    Published on: October 13, 2016

    The Financial Times reports that Tesco has responded to price increases by Unilever in the UK by "removing Unilever products from its website and warning that some of the items could disappear from shelves if the dispute dragged on."

    The price increases have been taken by Unilever because of weakening currency in the UK as a result of the Brexit vote, with the story noting that "Unilever has demanded steep price increases to offset the higher cost of imported commodities, which are priced in euros and dollars, according to executives at multiple supermarket groups."

    The irony, FT writes, is that Tesco CEO Dave Lewis is "a former Unilever 'lifer' who ran the Anglo-Dutch company’s personal care business, overseeing brands that include Dove soap, Signal toothpaste and Tresemmé shampoo. He had been seen as a potential successor to Paul Polman, chief executive of Unilever, before he jumped ship to Tesco two years ago."

    The paper writes that "Lewis signalled last week that he was limbering up for a fight with suppliers that tried to use the fall in sterling to push through price increases. He said many of them had failed to pass on currency benefits to consumers when sterling was on the way up, and that he was 'uncomfortable' with efforts to raise prices on the way down ... An executive at another British supermarket group said Unilever had threatened to cut off its entire supply unless it agreed to an across-the-board price increase of 10 per cent. He said the retailer would consider banishing Unilever products from its stores rather than comply with the ultimatum."
    KC's View:
    I have two reactions to this story.

    One is that I always sort of admire it when retailers position themselves as being agents for the consumer rather than sales agents for the manufacturer. I just think it is a better place to be ... and if that means occasionally delisting products to make a point to both constituencies, I'm okay with that.

    Second, I have to wonder if Tesco passed on currency benefits to consumers when the sterling was on the way up. Just curious.

    Published on: October 13, 2016

    The Chicago Tribune this morning reports that the National Labor Relations Board (NLRB) has filed a complaint against delivery service Postmates, accusing the company of "labor violations against its drivers" by "requiring that workers enter arbitration agreements as a term of employment, thus waiving their right to pursue class or collective actions ... The complaint also alleges workers were warned not talk to other employees about work terms and conditions, including safety issues, which the NLRB says violates federal law protecting concerted activity."

    What makes this complaint interesting - with potentially extended implications for a number of gig economy companies - is that it assumes "the drivers are employees, a classification many gig economy employers have rejected because it would require them to pay for overtime, workers' compensation and other benefits tied to employee status." It makes the assumption without explicitly addressing "whether Postmates drivers are independent contractors versus employees entitled to protections under the National Labor Relations Act, such as the right to unionize and engage in concerted activity."
    KC's View:
    As someone who more than 20 years ago embraced the idea of becoming an independent contractor, I cannot help but feel that sometimes people who take on such roles and then argue for the protections of more traditional employment are trying to have it both ways. Which isn't entirely fair to the employer.

    On the other hand, there are employers that do try to take advantage, looking to treat people as actual employees without the responsibilities that this entails. That's not fair, either.

    I just hope that when the courts finally decide these issues, they do so with an accurate perception of what is fair and not fair, and apply some understanding of the real world and the gig economy to their conclusions.

    Published on: October 13, 2016

    The Cincinnati Business Courier reports that Kroger has been "caught in a firestorm after customers at stores in Texas and Louisiana complained that cashiers wouldn’t serve them because they wore pro-police T-shirts."

    In short, it appears that the cashiers had experienced problems with the police and were offended by t-shirts that said "Police Lives Matter/All Lives Matter” and the like. The incidents not nationwide coverage, and the Blue Bow Foundation described as "a Houston-area nonprofit aimed at supporting law enforcement officers," said it would pull "its link to Kroger’s rewards program after the incident. Blue Bow, like many nonprofits, had an arrangement that gives the foundation a donation when supporters use the Kroger rewards card."

    And, Blue Bow released a statement saying that "we do not condone and cannot support an organization that refuses to immediately and unequivocally stand up for officers, their families or anyone who supports them.”

    Kroger released a statement: “We were disappointed and sorry to hear about the incidents in Alexandria, Louisiana, and Spring, Texas. We’re especially saddened by how this incident reflects on the 431,000 Kroger associates who work hard to serve every customer in communities all across America.

    "We’ve taken steps to ensure this doesn’t happen again - and we are reminding associates that is our responsibility to honor our company values of Diversity and Inclusion and treating our customers with Integrity and Respect in every interaction, every day. Our goal is always to create a welcoming, hospitable environment for all customers."
    KC's View:
    This is what happens when employees start thinking they can act in a prejudiced way against customers for their own personal reasons. A checkout person should no more be able to not deal with a customer wearing a "Blue Lives Matter" t-shirt than they should be able to reject taking care of a customer wearing a "Black Lives Matter" t-shirt, or a "Vote Trump" t-shirt, or a same-sex couple that wants to buy a wedding cake.

    The willingness to be intolerant of other people's opinions is just spinning out of control, and I'm not sure how we as a culture move back to a more accepting time with more civil discourse.


    There are those who think that the checkout folks should have been summarily fired. I get that, though I do think that the better way to go is to educate them about the value of diversity and inclusiveness. In the end, though, employees have to know that they are representing something bigger than just their own feelings and opinions ...

    Published on: October 13, 2016

    Nice column in the Washington Post about Maryland-based MOM's Organic Market, which has grown in the last six years - after some rough years - to be a business with 16 stores, 1,000 employees and around $200 million in sales. Owner Scott Nash grew the business out of a "tiny home delivery company that sold fruit and vegetables out of his mother’s garage."

    The story quotes Nash as saying that he sees MOM’s as a cross between Whole Foods and Trader Joe’s: “We carry much more than Trader Joe’s and less than Whole Foods. But we have strategy with our business that we believe is the reason people come and shop with us. And we make money by not wasting money. We pay very well here. We have a $12 minimum wage and lots of benefits. So we invest in people. And we realize that they are the most valuable asset to us.”

    Interesting piece, and you can read it here.
    KC's View:

    Published on: October 13, 2016

    MarketWatch reports that Walmart has raised salaries for entry-level managers as a way of avoiding the impact of new overtime rules imposed by federal regulators.

    According to the story, "Effective Sept. 1, pay for new and current entry-level salaried managers increased 7.8% to $48,500 from $45,000. That came three months before the Department of Labor’s new rule goes into effect. It doubles the minimum annual pay - from $23,660 to $47,476 - in which full-time salaried workers remain eligible for overtime pay."
    KC's View:

    Published on: October 13, 2016

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

    • The Wall Street Journal this morning reports on how there is such a milk glut in the US that more than 43 million gallons of it has been "dumped in fields, manure lagoons or animal feed, or have been lost on truck routes or discarded at plants in the first eight months of 2016." Two other results - there is tons of cheese being stored in warehouses, and milk prices are being slashed virtually everywhere in the country.

    According to the story, "Desperate producers are working to find new uses for the excess, like getting more milk into school lunches, and in revamped tacos and Egg McMuffins. But many can’t even afford to transport raw milk to market at current prices, which have plunged 36% on average since prices hit records in 2014."


    • The US Postal Service (USPS) said yesterday that it wants to increase the price of a first class stamp to 49 cents. The increase needs to be approved by the Postal Regulatory Commission. The Wall Street Journal notes that the cost of a stamp was rolled back from 49 cents to 47 cents last April when the term of a temporary surcharge - imposed to help the USPS make up a financial shortfall - ended.

    The Journal writes that "the USPS delivered 154 billion pieces of mail last year, a 27% decline since 2007 as deliveries fell each year. First Class Mail, the USPS’s most profitable product, declined by 35% over the same period, to 62 billion pieces."


    • Soylent, a startup company that makes meal replacement products, said yesterday that it would stop selling a new line of nutrition snack bars and asked consumers to throw out any that they have bought, citing reports of stomach pain, diarrhea and vomiting.

    The announcement came after the company had tested the bars and found no reason to be concerned about food safety. Soylent says that "the bars are manufactured at an FDA-inspected facility and go through microbiological testing before shipping."

    Anyone who has seen the movie "Soylent Green" won;t be surprised by this in the least. I've always felt that this was an unfortunate name for a company, and this would appear to be, at some level, karma.
    KC's View:

    Published on: October 13, 2016

    I'm back from the road, with more time to go through the emails. So let's catch up...



    Responding to our various stories about the troubles at Kmart and the seeming inability of Eddie Lampert to deal with them (or even admit them), one MNB user wrote:

    It appears that Fast Eddie has reduced the inventory in the stores to have the look of a fire sale.  He needs to stock the stores and improve on the appearance.  Their retail sales floor has the look of the 1960's and doesn’t fit into the 2010's.  Sure wish they would quit reinventing the banner and actually concentrate on sales.  He can generate sales by changing the atmosphere within the 4 walls by quit looking like a glorified Dollar General. (the dirty store).




    We've had a bunch of stories recently about Target's strategic moves, prompting one MNB user to write:

    Maybe it is time for Target to get back to what it does well - everything but food.  It's core business seems to be doing  just fine, I just think we are overstored, everyone is selling food.

    Just a thought -  maybe Target's plan is to buy up all the Walgreens/Rite Aid stores they will have to divest in their merger, possibly as many as 1,000!




    We had a piece about single-source beef the other day. I admitted I'd never had it, and one MNB reader responded:

    Since you’re such a “foodie,” I was surprised you haven’t had a single-source burger.  I HIGHLY recommend it.  I live in Idaho which gives me more access to rural connections.  I’ve had a couple of opportunities to buy a half a beef for the freezer.  Being grass fed, the meat can be a little tougher than commercial beef.  But the flavor is divine – it’s like the burger my dad use to make way back when. 

    As for the toughness, the secret is to grind your own meat.  Thinly slice the meat, put it in the freezer just long enough for the meat to stiffen just a bit, but not freeze.  Then throw it in the food processor and pulse just enough to create the perfect grind (don’t over do it, it will make the meat rubbery).   I’m allergic to milk, so I can’t do this – but, especially with a lean cut of meat, throw in a bit of butter when you grind it.  Enjoy!


    Wow. Sounds amazing. But I'd never call myself a foodie. I'm just a guy who likes to eat, drink and cook.

    MNB user John Baragar wrote:

    I live in Phoenix and we get our meat, chicken, and eggs from a local farm.  It’s Organic, the beef is Grass Fed and the chickens are Pasture Raised.  You put in your order and every two weeks the same two guys (farm owner’s sons) go to 8 different delivery spots around the city – and you pick your order up.  It’s not really convenient and you have to drive to them, but we think it’s worth it.

    At first we were only one of a few people at our stop, but over the past year the lines have grown longer and longer.  I can’t say that it tastes any better than store bought meat or eggs but you know where it comes from, you know at least two of the guys who work on the farm and that gives you a certain level of comfort that it has not gone through a mass producer’s supply chain or even a grocery store’s supply chain. I also trust them.  You read a lot of stories about how organic isn’t really organic but still meets the FDA Definition  and Grass Fed Meat can still be fed corn and grains the last month to fatten them up and still qualify as Grass Fed. For these guys, it goes from their farm to you the same day and the people who work on the farm are the ones who sell it to you.

    I noticed the eggs were noticeably smaller this summer and he said “Chickens don’t like the heat so they lay smaller eggs when it’s really hot out.”  They don’t do anything to make their chickens lay “normal” eggs – the eggs are just smaller in the Summer because that’s the way chickens are.   You do get a bit of sticker shock when you compare it to what you get from a Mainstream grocery store but it is not really that much more than Grass Fed Beef or Pasture Raised Chicken or Eggs at Whole Foods.

    As these items gain popularity, mainstream stores will start to carry more of it and the price will go down as producers find ways to cut costs and still be able to call them Single Source, Grass Fed or Pasture Raised within the legal FDA definition, but I will still pay more to these local guys because I trust them, know where it comes from, and Grass Fed means Grass Fed.


    Another reader wrote:

    I wonder if I'm the only one with a twisted sense of humor that wants to see a QR code on each burger that takes me to a pic of the cow with a name and story to go with it?

    Don't know. I do know that you are the only person with a twisted sense of humor to write in and suggest it.

    I am impressed.




    On the subject of how competitive Aldi is and Lidl may be, one MNB user seems less than overwhelmed:

    Aldi has been in USA since 1976 and now has almost 1,500 USA stores, gaining a sliver of market.

    Aldi’s worldwide average sales per store is $6 million, probably similar in the USA.
    Lidl’s average worldwide sales per store is slightly higher at $7 million.

    Think of Lidl’s planned USA format as a Food Lion, with a lot more private label.

    By the way, the average Food Lion store records around $15 million in sales
    and the average Kroger $35 million. If Lidl opens 500 stores and achieves their system wide average volume…they will total 3.5 billion in sales, about the size of Price Chopper.





    We had a piece about Safeway installing Amazon lockers in some of its stores, which I wondered about; it seemed akin to letting the fox into the henhouse.

    One MNB user wrote:

    Upside here could be a relationship between Safeway and Amazon.  Safeway could be a future partner for Amazon in their fresh grocery program, or even a future acquisition?  It could happen...

    Not so sure.




    Regarding our story about how Kroger is dealing with deflation by playing a market share game until things go back to normal, one MNB user wrote:

    The only thing wrong with this conversation is Kroger's belief that "things will change".   With Amazon now playing aggressively in the food arena, and Lidl bearing down on the US, I don't foresee a time when margin pressure will ever decrease.  This current reality is the only reality, which Kroger so far has played really well.




    MNB reader Monte Stowell wanted to take issue with my Shake Shack enthusiasm:

    I was in Arlington, TX. last week for a WinCo grand opening. I had never been in a Shake Shack, so I thought I would give it a try. The milkshake was one of the best ever, but the Shake Shack double classic cheeseburger was not all that great. I will take Burgerville USA here in the NW or an In and Out anytime over Shake Shack.

    Fair enough. Any of the three is terrific ... I just think you may have hit them on a bad day.




    Responding to my enthusiastic review of the new Dave Barry book, MNB reader John Rand wrote:

    I sincerely hope you have also read and appreciate Carl Hiaasen. A delightful madman, especially his earlier books.
     
    If not, go read a couple. I suspect you  would like them.
     
    They are fiction., At least I sincerely hope so. But like all the best fiction, they are more true than truth itself.


    Big Carl Hiaasen fan here. We're in total agreement.




    And, of course, we have more baseball-related email, this one from Craig Jones:

    Couldn’t hold back on sharing this story from the Field of Dreams ballpark. I visited the ballpark on vacation with my family about 20 years ago. I can’t give you too many details on the ball park itself since I was about 5, I just remember it being surrounded by corn like everything in Iowa. Here the cool part, we watched a baseball game there and afterwards they invited the kids to try and come hit and run the bases. They must have assisted me hitting in some way because I can’t imagine I was coordinated enough to make any contact but after hitting I started running the bases backwards (no idea why but hey, I was 5). I distinctively remember all the players cheering me on regardless and giving me high fives as I went from 3rd to 2nd to 1st to home. I’m sure this must have been entertaining for all the other spectators as well. To this day that is one of my dad’s favorite stories to tell. I think it’s a great example of how to leave a positive impression on your customers, get your customers involved in a fun and entertaining way.

    And, from another reader, Troy Patterson:

    We just visited this location in Dyersville Iowa this past summer with our three children, ages 11, 9 and 7.  All three play baseball/softball, but it was more of a “dad’s” stop on the way home from vacation from southern Missouri.   I thought it was amazing,  to be on the same iconic field as this great movie was shot was pretty special for me.

    Having the kids walk out of the cornfield into the outfield and videotaping them what pretty neat.  We all brought our baseball gloves and played a “pick up” game with other visitors for nearly an hour.  The neat thing is they don’t allow organized baseball to be played on the field so everyone who visits has an opportunity to crack a pitch into the corn, run the bases or field a ball in the infield or outfield.  To have the opportunity to play on this field with my kids was simply overwhelming, in a few years when the kids are a bit older and better follow the movie they hopefully will better understand.

    The location is totally free to visit, but they do have a small donation box to drop a few dollars in to help with upkeep of the field.  They do offer a tour that runs a few times a day that has an older gentleman in an Old Style White Sox uniform that explains quite a bit of the making of the movie, why they picked this location and the future of the location.   They also offer a small gift shop. I recommend this afternoon visit to anyone that enjoys the movie Field of Dreams.


    I am so doing this next summer when I drive west.
     
    KC's View: