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    Published on: October 17, 2016

    by Kevin Coupe

    The Associated Press has a story this morning about how the City of Seattle, concerned about traffic congestion created by a plethora of e-commerce companies making deliveries to residences and offices, has "pledged $285,000 over the next three years to the UW's new Urban Freight Lab, which will test more efficient methods to deliver goods that are ordered online and delivered to large residential or retail and commercial buildings."

    The fact is that just in the city of Seattle, some "170,000 truck trips are taken on the city's road network every day." It is going to get worse before it gets better, hence the decision to invest in research to help figure out how to alleviate some of the pressure.

    According to the piece, "Metropolitan areas across the globe have been testing other ideas, such as using three-wheeled cargo bicycles or electric vans or setting time restrictions for commercial deliveries. In New York, a pilot project studying off-hour freight deliveries paid dozens of grocery stores and retailers to take deliveries between 10 p.m. and 6 a.m. instead of normal business hours."

    And, "UPS Inc. been trying out alternative methods in Europe, including using bikes in Brussels or tricycles and electric vehicles that make deliveries from four containers parked in Hamburg's city center. In the U.S., UPS has been signing up thousands of neighborhood stores to serve as secure drop-off or pickup locations. The service is designed to cut down on delivery trips, as well as potential package thefts."

    While individual companies can adopt new processes to be more efficient and effective, the story says, the use of public streets and highways is something that only can be regulated via public policy. Which is why cities - and, I think, virtually every community - have to begin thinking about new challenges created by a new economy. Progressive companies will be part of the process.

    It'll be an Eye-Opener.
    KC's View:

    Published on: October 17, 2016

    The New York Times over the weekend had a story about Walmart, "a company famous for squeezing pennies so successfully that labor groups accuse it of depressing wages across the American economy," made the decision last year to increase employee pay across the board.

    "That set in motion," the Times writes, "the biggest test imaginable of a basic argument that has consumed ivory-tower economists, union-hall organizers and corporate executives for years on end: What if paying workers more, training them better and offering better opportunities for advancement can actually make a company more profitable, rather than less?

    "It is an idea that flies in the face of the prevailing ethos on Wall Street and in many executive suites the last few decades. But there is sound economic theory behind the idea. 'Efficiency wages' is the term that economists — who excel at giving complex names to obvious ideas — use for the notion that employers who pay workers more than the going rate will get more loyal, harder-working, more productive employees in return."

    The result of the decision have been promising, the Times writes. "By early 2016, the proportion of stores hitting their targeted customer-service ratings had rebounded to 75 percent. Sales are rising again." However, the impact on the company's stock price have not been so positive.

    "The question for Walmart is ultimately whether that short-run hit makes the company a stronger competitor in the long run," the Times writes. "Will the investments turn out to be the beginning of a change in how Walmart and other giant companies think about their workers, or just a one-off experiment to be reversed when the next recession rolls around?"

    You can read the entire, fascinating story here.
    KC's View:
    At the risk of seeming self-satisfied, I must admit that I was gratified when I saw this Times piece. I've been making this argument here for years - that when companies pay people better and empower them more, the result can be an operation in which engaged employees are more productive and effective. Efficiency is fine, but it can't be the only measure of excellence, and the problem with many companies is that executives often are evaluated based on how low they can drive their labor numbers.

    (I wish I'd come up with the notion of "efficiency wages.")

    People love to talk about how, in their companies, people are their most important asset. But not every company lives up to that premise. I'm not saying that Walmart is there yet, but the direction is the right one.

    As for the stock market price ... it is easy for me to say, but I think that Walmart has to work under the premise that if its stores are more effective and its people are more engaged, sales and profits will go up, and Wall Street will respond accordingly. It may take time, but I firmly believe that this is the best way for Walmart to proceed. Maybe the only way that is sustainable long-term.

    Published on: October 17, 2016

    MarketWatch this morning reports that Supervalu has pulled the trigger after almost a year of considering various options, and is selling its Save-A-Lot retail business to Canadian private equity group Onex Corp. for $1.365 billion.

    Supervalu will continue to supply Save-A-Lot with product as part of a five-year professional services agreement. There are more than 1,300 Save-A-Lot around the country, with most of them licensees.

    The Save-A-Lot story has been unfolding for more than a year, with Supervalu originally planning to spin the company off. However, late last year it began entertaining bids from private equity groups for the company, which this year got a new CEO, Eric Claus, and a new management team tasked with making the company more competitive.

    Some speculation suggested that Save-A-Lot might be worth as much as $1.8 billion.
    KC's View:
    Finally. Now Claus and his team can move forward, knowing what their ownership situation is and what they have to do to move Save-A-Lot into a more competitive position. There have been stories, noted here, saying that the company wants to have a better fresh foods presentation and more national brands ... and believes it could move forward on a growth track that will give it 75 new stores next year and eventually as many as 3,500 in the US.

    Time to get to work.

    Published on: October 17, 2016

    The Wall Street Journal reports that Aldi wants to go beyond its traditional appeal to "cash-strapped customers" and is "moving into wealthier areas as Americans of all stripes get more budget-conscious and their traditional low-to-middle-income niche gets crowded with competitors. Aldi is going even further in appealing to upscale tastes by stocking some fancier goods, such as organic foods."

    The same pivot, the story says, is being contemplated by Lidl, another German discounter that has had considerable European success and has plans to enter the US next year.

    Just this weekend, the Houston Business Journal reported that Lidl, which had been focusing on east coast sites for its initial US foray, now also is looking at Texas sites. Texas is a hotbed of competition, and so it seems logical for Lidl to look for ways to expand its appeal as a way of being more competitive.
    KC's View:
    The Journal story suggests that one of the reasons that both Aldi and Lidl are planning this positioning shift is that they have concerns that their traditional no frills appeal - limited assortment, private labels, minimal staff - may have a ceiling in the US that could limit their growth. And they seem to believe that an expanded offering will raise that ceiling, which would only be helpful in an increasingly competitive marketplace.

    Published on: October 17, 2016

    Interesting piece in the Washington Post suggesting that while there is an enormous amount of data out there available to retailers and suppliers, "it appears that the typical manager of a retail shop is pretty much guessing."

    According to the story, "Blue Yonder, a retail tech company, surveyed 750 grocery managers and directors in the U.S., U.K., Germany and France. Forty-six percent of those directors said replenishment of their inventories is a manual process and a further 46 percent say that even when the process is automated it can be overridden by managers, suggesting a reluctance to rely on automation. The most disturbing metric: 48 percent said they use a 'gut feeling' when making inventory decisions."

    The Post goes on to say that "the study also found a quarter of grocers feel they are not delivering at the speed that their customers require - not a great sign in an age where customers are becoming more and more demanding for speed and convenience and would have little patience for stores running out of stock."
    KC's View:
    It seems to me that there are a couple of things at work here, and that it might be a mistake to think that making instinctive decisions is the same thing as "guessing." It isn't a good thing if a store manager doesn't know what is in his or her store, but it can be as very good thing if a manager is able to look beyond product movement and see a larger picture. Sometimes a product may not move a lot of cases, but can be invaluable in terms of positioning and appeal to a store's core customer. That's something that a spread sheet cannot necessarily discern.

    That said, automated fulfillment as a powerful tool that can provide speed and accuracy is hard to argue with ... that goes for suppliers and retailers, and for consumers, a growing percentage of whom are going to find things like Amazon's Subscribe & Save as a valuable shopping tool.

    Published on: October 17, 2016

    The Wall Street Journal this morning has an interview with Randall K. Fields, CEO of ReposiTrak, in which he addresses the food safety challenges that face many retailers and focuses on the greater levels of transparency are needed.

    "We’ve been disappointed at the general level of compliance to basic standards across the industry," Fields says. "If you take a look at all the facilities that are actually food-safety audited, it’s 10% to 12% of all the facilities registered with the Food and Drug Administration. And there’s a lot of companies that do business that aren’t registered ... The consequence is an unsupervised supply chain. Not everywhere. Many companies do this just right. But in general, there’s not enough compliance."

    You can read the entire story here.

    Full disclosure: ReposiTrak is a longtime and valued MNB sponsor. When I was thinking about whether or not to run this piece in MNB, I applied a simple rule (which I use every time a story concerning a sponsor comes up): Would I run the story if the company were not a sponsor? When the answer is yes, I run the story ... and with it, run this advisory noting our business relationship.
    KC's View:

    Published on: October 17, 2016

    • The Orlando Sentinel reports that "Amazon is pushing further into Central Florida by launching a restaurant delivery program free to members of its Prime service ... Amazon Restaurants is starting delivery with 37 restaurants in the Orlando area, including Avenue Gastrobar, Hawker's Asian Street Fare, P.F. Chang's and Spoleto.

    "Amazon says it will deliver food from the restaurants in an hour or less. It also says the program doesn't include any markups or hidden fees."
    KC's View:

    Published on: October 17, 2016

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

    • The Wall Street Journal has a story this morning suggesting that one of the central ways that traditional bricks-and-mortar retailers are competing effectively with e-commerce companies is by stressing produce - it is about aesthetics, selection and a local orientation that differentiates companies' approach to fruits and vegetables.

    According to the story, "Many customers decide where to shop based on the quality of the produce, and - for now - most shoppers want to pick their own ripe tomatoes or perfectly green heads of lettuce, say grocers and industry researchers. Shoppers who don’t buy groceries online most often cite the desire to pick their own produce as the reason, according to an online survey from Morgan Stanley earlier this year."

    The story also notes that this is not an either/or proposition, pointing out that both Walmart and Ahold Delhaize, which have made considerable investments in e-commerce, also have made fruits and vegetables central to their bricks-and-mortar tactical decisions.

    • The Battle Creek Enquirer reports that Kellogg Co. will spend $429 million "to buy a controlling stake in Parati Group, a Brazilian food company ... marking the company's fourth major acquisition in emerging markets in the past two years ... Among the brands under Parati's umbrella are Pádua, Minueto, Zoo Cartoon, Hot Cracker biscuits, Trink powdered beverages, Parati Lamen instant noodles and Parati dried pasta."

    Kellogg chairman/CEO John Bryant said in a prepared statement that "with its outstanding portfolio of popular consumer brands, Parati Group is an excellent strategic fit for Kellogg and our business in Latin America. Brazil is the largest economy in Latin America and this acquisition will allow us to accelerate our growth and improve our margins in the region."

    Full disclosure: Kellogg Co. is a regular and valued MNB sponsor.
    KC's View:

    Published on: October 17, 2016

    • The Produce Marketing Association (PMA) has named Lauren M. Scott, a former marketing executive in beverage companies, including Diageo and PepsiCo, to be its new chief marketing officer, responsible for "global strategic leadership to increase consumer demand for fresh produce and floral products through association and industry marketing initiatives."
    KC's View:

    Published on: October 17, 2016

    I'm still sifting through all the email that came in about a wide variety of stories while I was doing business travel last week.

    Responding to the rumors about Kroger being interested in acquiring Whole Foods, MNB reader Brian Blank wrote:

    Sigh…if I had a dollar for every bogus Kroger acquisition rumor - especially the ones insisting they are intent on moving into the Northeast by purchasing Shaw’s, A&P, or whomever - I’d be able to buy the Whole Foods chain!

    We had a piece a couple of weeks ago about the last Howard Johnson's in America, prompting the following note from MNB reader Deb Faragher:

    I had to chuckle when I read this piece.  My husband and I were in Lake George last week for a wedding and saw this Howard Johnson's.  We had just seen that the next to last one in Bangor, Maine closed in September.  It evoked memories of fried clam strips and chocolate chip ice cream.  We were sorely tempted to take that same photo but it all looked so forlorn.  Based on your experience, I’m glad we didn’t waste the time.  Sad to see the decline of these icons and, as you point out, sadder still that they don’t seem to care.   A missed opportunity for sure.

    MNB recently took note of a Fortune report on a new study saying that "caffeine intake may be linked with a lower risk for dementia in older women ... Researchers found that participants who self-reported drinking more than 261 milligrams of caffeine cut their risk for dementia by 36%. That’s almost three 8-oz cups of coffee, with each cup containing 95 mg of caffeine."

    I commented:

    I hope this also works for middle-aged men. Because when it comes to caffeine consumption, I like to think I am doing my best to hold up my end.

    From an MNB reader:

    Agree with your hope on middle-aged men.  Add beer to this theory and I am covered!


    I also got a note from a friend of mine suggesting that I am way past the point when I need to be thinking about health advantages for middle-aged men.

    Which I thought was a little harsh.

    I recently endorsed the concept of retailers ticketing vehicles that inappropriately park in spaces reserved for pregnant customers, energy-efficient vehicles, and people with physical challenges, though I conceded that this could alienate customers. One MNB user wrote:

    In Ohio, to issue a valid ticket for illegal parking in a handicapped spot, certain specific language needs to be on the sign, including the amount of the fine.  My observation is that the handicapped spots at most retailers, as well as our nearby U.S. Post Office, do not include that language so the police cannot ticket the violators.  Maybe the refusal to post the legally required signs is for the purpose of insulating their customers from getting fined for their ill manners.

    On the subject of the e-grocery challenge, one MNB user wrote:

    Seen and overheard yesterday at Giant Eagle:  Retirement-age couple scouring the cleaning aisle shelves said, "Well, if they don't have it, we'll just have to order it from Amazon".

    Not just the millennials.

    Responding to Kate McMahon's column last week about how the makers of Skittles and Tic Tacs navigated unwanted publicity when their brands got dragged into the toxic political debate, one MNB user wrote:

    Totally a political hack Kate is. Making light of a candy comment but paying no attention to the deaths of 4 American Citizens at the hands of Clinton. Funny how a liberal can degrade a Presidential candidate but ignore the horrible and illegal actions of another.

    True color shine through yet again.

    Forgive me, but this is just so much crap.

    Kate's column was about how brands reacted to specific situations, not about the broader political situation. The column was prompted by the fact that these companies felt compelled to respond to how their brands were being characterized within circumstances that were at the very least controversial.

    Did these situations have to do with the Trump campaign? Yes. Would she have written the same column had the situations arisen within the Clinton campaign? Absolutely.

    Kate was being anything but a political hack.

    In fact, the hackery in this case is being practiced by a reader who tries to connect two things that have nothing to do with each other.

    Responding to our continuing baseball coverage, one MNB user wrote:

    The WNBA championship is going on too.

    So is college football, and I get emails every once in a while suggesting that I should do those scores, too.

    I can't do it all. MNB isn't a sports site. I'm not being anti-woman here, but just writing about the stuff that interests me.

    Sorry about that.

    One MNB user took issue with my commentary about the latest Blue Bell recall:

    The Blue Bell situation is one that I now feel I have to chime in.  Yes, I am a Texan. And yes, I do know a lot about this company as I have acquaintances connected with them.  Blue Bell did have a problem in their plants, and their employees paid the price.

    Your recent stories are again pointing the finger entirely at Blue Bell on the latest recall.  This cookie dough was sold to 27 food manufacturers. Why are you not reporting the entire story.  This is not a Blue Bell problem.  This cookie dough was recalled by Aspen Hills, the Iowa company that makes this cookie dough.

    Fair enough. You're right that there have been other companies that have had to recall product because of the tainted cookie dough.

    Let me recast my commentary this way - that many customers ultimately don't care where the problems begin. They simply know that trusted brands can't be trusted anymore ... and this is a problem with which brands have to contend.


    Finally, regarding one of last week's Eye-Openers, one MNB user wrote:

    I think that Bob Dylan winning the Nobel Prize for literature is a life lesson that can be applied to business…. a reminder to look at things differently and that what we do in grocery does not always have to be (nor should it be) status quo. A grocery store can be a quality restaurant, a great florist, a fun shopping experience…. Metropolitan Market, Wegmans, Publix, Market District, Eataly, etc.  A convenience store can offer a better food option…example: Wawa, Sheetz. 

    I also happen to think that Bob Dylan is quite the poet.

    And from another:

    Like you, I was absolutely thrilled to see Dylan receive the recognition he so richly deserves. There can be no over estimating the influence he had on my generation who were in college in the early 60s. His songs inspired us to stand up against the injustice we saw, and to convert those that were silently standing by, in many cases our parents.

    Someone once said that the world can be broken up into two groups - those who feel that the world ultimately was better off because of all the social tumult and political rebellion of the sixties, and those who think the world was worse off.

    Count me among the first group ... and the existence of Bob Dylan, and the way in which he spoke for all those people and emotions, can be seen as exhibit one.
    KC's View:

    Published on: October 17, 2016

    In the best-of-seven American League Championship Series, the Cleveland Indians hold a 2-0 series lead, having defeated the Toronto Blue Jays 2-0 and 2-1.

    And, in the National League Championship Series, the Chicago Cubs and Los Angeles Dodgers are tied at one game apiece, with the Cubs defeating the Dodgers 8-4 and the Dodgers beating the Cubs 1-0.

    In Week Six of National Football League action...

    Eagles 20
    Redskins 27

    Jaguars 17
    Bears 16

    Bengals 17
    Patriots 35

    Ravens 23
    Giants 27

    Panthers 38
    Saints 41

    Cowboys 30
    Packers 16

    Steelers 15
    Dolphins 30

    Browns 26
    Titans 28

    49ers 16
    Bills 45

    Rams 28
    Lions 31

    Chiefs 26
    Raiders 10

    Falcons 24
    Seahawks 26

    Colts 23
    Texans 26
    KC's View: