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    Published on: November 10, 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.

    I have a few things on my mind this morning...

    First of all, there was a Washington Post story the other day about how Samsung, fresh off the recall of its Galaxy Note 7, which was experiencing battery fires and explosions, now is recalling 2.8 million top load washing machines, which the company said "can become dangerous when washing bulky items ... which can cause the machines to vibrate violently or even burst apart." These explosions have resulted in a number of injuries, including one broken jaw and one injured shoulder.

    Yikes. This, of course, is the same Samsung that is developing washing machines that can reorder detergent on their own when they begin to run low. I don't want to sound any alarms, but is anyone else concerned that these machines apparently not only will be able to place e-commerce orders on their own, but also able to inflict physical damage on their human masters?

    I'm telling you. Judgement Day is coming. Samsung may just be a cover name for Skynet. Or maybe Delos Corp.

    I'm just saying...I'm just not sure we can trust any of this stuff anymore.

    Then, there was a story in the Los Angeles Times about a new survey from a hotel trade association saying that while more hotels than ever are "plying guests with freebies, including wireless Internet, parking and a hot breakfast," a number also are getting rid of things like swimming pools, minibars and room service.

    The lesson here seems to be that the hotel industry, faced with greater competition than ever before - including from such services as Airbnb, a company that has as many rooms for rent as any hotel chain in the world, and yet does not actually own a single room - is making choices about what will resonate with customers ... even if that means getting rid of some stuff that used to be standard operating procedure.

    These days, there's no such thing as standard operating procedure. Or shouldn't be. Companies thinking that way almost inevitably will find themselves made irrelevant, or disrupted out of business.

    Speaking of disruption ... I want to circle back on my FaceTime piece from last week, which was about Talkspace, and it is way for people to get online and phone therapy 24/7. My point was that every industry is vulnerable to disruption, even the therapy business.

    However, I gather from some email that a couple of my comments - like suggesting that "unlike psychologists and psychiatrists, Talkspace doesn't go off to the Hamptons for a month during the summer," may have been taken as minimizing the importance of therapy and how critical it is to people who need and want it.

    Nothing could be farther from the truth. in fact, I think that anything that makes legitimate therapy available and accessible to more people is a good thing. Sometimes I say things in a way that may make it seems that I don't take anything seriously, which simply isn't true.

    I just don't take many things seriously.

    That's what's on my mind this morning, and as always, I want to hear what is on your mind.

    KC's View:

    Published on: November 10, 2016

    by Kevin Coupe

    We had a story the other day about how Toys R Us - a company that I've lambasted frequently as running stores that are slightly less appealing than a colonoscopy - is testing an interactive prototype concept aimed at enhancing the consumer experience in a smaller footprint.

    MNB reader Cassie Howard then pointed me to a story in the Independent that pointed to something else that Toys R Us is doing in the UK to make the shopping experience more appealing.

    On Sunday, the chain opened early, dimmed the lights, turned off the music and PA system, and offered "autism friendly signage" and "quiet zones" that it said it hoped would "make Christmas shopping easier for children with autism and their parents."

    The initiative followed a one-store UK test in 2014. And the Independent writes that "most parents and campaigners said the initiative was an excellent idea for autistic people, who can struggle with loud noises and bright lights, making shopping in crowded stores with fluorescent lighting and loud music a nightmare."

    And now, the story says, Toys R Us plans to test the concept in the US at a single store in Louisiana.

    I think this is really smart, and I hope Toys R Us finds ways to institutionalize it across the chain, and maybe even do it in every store on a regular basis. My sense is that the autism community will embrace it, and communicate among themselves about a retailer that is doing something special and something different ...

    And I'll bet that over the long run, it'll be good for sales.

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

    Published on: November 10, 2016

    An MNB reader wrote in yesterday that ground has been broken for a new Lidl store in Indian Land, South Carolina, just a half-mile south of the North Carolina border.

    This store, the reader noted, "will be  about 500 yards from a Walmart Super Center, 1 mile from an Aldi, 1 mile from a Harris Teeter and about 1.5 miles from a Publix.

    "They will all get firsthand knowledge how to compete with the newcomer."

    A quick Google check reveals that Food Lion also has a store in the market.
    KC's View:
    In fact, my argument would be that all these retailers ought to have been competing with Lidl before the first shovel tip got plunged into the ground. Because if they wait until Lidl opens and has an opportunity to tell its story and establish its narrative, it'll be too late.

    By the way ... the Cincinnati Business Courier reports this week that Kroger's McMullen told analysts that his company has been watching Lidl for a long time. "We started studying Lidl eight to 10 years ago,” McMullen said. “Our assumption was that they would come to the U.S. at some point. We know them and respect them ... For us, it’s really making sure we understand who our customers are and how do we deliver against that."

    You have to dictate your own narrative - and control the story to the best of your ability - before new competition tries to change the game.

    Published on: November 10, 2016

    USA Today reports that residents of three California cities -  San Francisco, Oakland and Albany - and Boulder, Colorado, all voted this week to tax sugary soft drinks, arguing that the imposition of such taxes could serve, by making such products more expensive, to help reduce consumption and address the health issues often related to them.

    The story says that "Boulder added a 2-cent per ounce excise tax on distributors of sugary drinks such as soda, sports drinks and sweetened iced tea," while the three Northern California communities "each added a 1-cent per ounce excise tax."

    The paper reports that "the taxes are projected to generate $15 million in San Francisco, $3.8 million in Boulder and $223,000 in Albany, according to estimates by each city. In Oakland, the tax was projected to generate $6 million to $10 million per year, according to the Oakland Chamber of Commerce, which took a neutral stance on the proposal." And, "the campaigns were big-dollar affairs rivaling U.S. Senate races," with tens of millions of dollars spent by the beverage industry to fight the bills, albeit unsuccessfully.
    KC's View:
    These votes provide yet another window to how divided the country is in terms of attitudes and priorities. You have Donald Trump being elected to the presidency and the GOP retaining control of both houses of Congress (though it remains to bee seen whether Trump, for most of his life a Democrat, will have precisely the same to-do list as the House and Senate). And then you have four communities passing legislation that probably would be anathema to the party now fully in charge of the federal government.

    But, of course, we also have a country in which Hillary Clinton (narrowly) won the popular vote, and the communities that passed these taxes are located in areas that voted for her. (Let's face it. Clinton was a candidate who really only did well in the northeast and west coast, with just a few exceptions.)

    I'm sure there are places where the soft drink industry wouldn't have to spend a buck-and-a-half to defeat such a tax proposal. That's probably okay. The debate will continue.

    Published on: November 10, 2016

    MarketWatch has a story about ways in which governments and retailers are "searching for ways to address food deserts ... some big supermarket players are opening test stores that use charitable contributions and tax incentives for funding - an attempt to sidestep the problem of turning a profit. Other companies are experimenting with online food-delivery services that bring groceries to households that aren’t served by supermarkets."

    The story notes that it is a difficult process, and that even the biggest players have run into mixed results.

    While Walmart and Supervalu, along with other companies, worked with the Obama administration to develop a system in which hundreds of millions of dollars in public/private funds and tax credits could be used to open stores "in areas that lacked access to a grocery store," the government contribution has ended up being less than robust than expected. This has meant that "many of the brick-and-mortar stores haven’t generated enough sales to stay afloat. Earlier this year, Wal-Mart said it was closing 154 stores, many of them smaller stores designed to serve neighborhoods with low volume, like food deserts.

    "Kroger, the nation’s largest food retailer after Wal-Mart, has been experimenting with a chain of several dozen no-frills stores called Ruler Foods, which serve rural areas in the Midwest. Company executives have said that its pilot has proved difficult to make profitable, although it intends to open a total of eight more stores this year."

    “We think it’s important, so we’re not going to give up, but we still have a lot of work to do,” says Kroger CEO Rodney McMullen.

    The story goes on: "Other retailers hope to be included in a federal pilot program next year that will allow food-stamp recipients to use their benefits with online grocery sellers. Providing access to fresh foods in food deserts, along with cost savings, motivated the Agriculture Department to conduct the test, an agency spokeswoman says. Unlike with FreshDirect, recipients would pay for their groceries directly online with their SNAP benefits, not through hand-held devices at delivery.

    "Some observers warn, though, that providing access to healthier foods is only part of the problem. For instance, education on nutrition is crucial, says Roger Thurow, senior fellow at the Chicago Council on Global Affairs, who writes about nutrition."
    KC's View:
    One question, it seems to me, that remains to be answered is whether these issues will have the same currency and priority after January 20. I don't think anything can be taken for granted, and it seems entirely likely that some of these issues will be moved off the front burner in the new year.

    Published on: November 10, 2016

    The Puget Sound Business Journal reports that two years after Starbucks opened its Reserve Roastery and Tasting Room in Seattle, sales are up 24 percent in 2016 over the previous year, and "the average Roastery customer spends four times more than at a typical Starbucks store."

    CEO Howard Schultz says that "the Seattle Roastery's success is proof that the new concept can grow the company ... He sees an opportunity to eventually have as many as 30 locations in influential cities around the world.

    "Starbucks has already announced plans to expand its premium Roastery brand in Shanghai, New York City and Tokyo in 2018 as well as a Roastery scheduled to open in an unidentified European city in 2019. Starbucks also plans to open 1,000 or more Starbucks Reserve stores and have Reserve espresso bars – an espresso bar that makes coffee in a variety of different brewing methods – in 20 percent or more of existing and new Starbucks stores, Schultz said."

    (Content Guy's Note: You can check out MNB's coverage of the Seattle Roastery here.)

    In other Starbucks news from yesterday, Forbes reports that Schultz sent an email to the company's 170,000 "managers, employees and other partners" to say that while he was "stunned" by this week's election results, he urged everyone to give President-elect Donald Trump “the opportunity to govern well and bring our country together.”

    He wrote: “We cannot know what the precise impact will be on our country and the rest of the world. I am hopeful that we will overcome the vitriol and division of this unprecedented election season. As Americans, we must honor the democratic process ... Whether you are pleased or disappointed by the outcome, we each still have a choice … in how we treat one another in our homes, in our neighborhoods, and of course in our stores."

    And, Business Insider reports that a week after Starbucks released a green holiday cup that features a design that is a mosaic of more than a hundred people "drawn in one continuous stroke" but does not have Christmas-themed wording, the chain debuted not one but 13 new red holiday cup designs on Wednesday, each of which is "inspired by customers' photos of their decorated red cups, posted on Instagram last year."

    The Christmas cup decision by Starbucks is making news because last year, when it had a cup design that some believed was insufficiently Christmas-oriented, it causes a social media and eventually mass media backlash.
    KC's View:
    I'll take these in order...

    First, I'm not surprised the Roastery is doing big business. It ain't cheap, and it also has become a major tourist stop in the city. I do think it remains whether this can be replicated precisely in other markets, but it is worth a shot.

    As for Schultz's political message, this certainly is in keeping with the CEO's high-profile approach to public policy issues. He may be personally liberal, but he sells a lot of coffee in red states ... and he has to be careful about this kind of stuff.

    Finally, regarding the coffee cups ... I just hope this can be the last story we write about the subject this year. Because to me, it is much ado about nothing, and the backlash had more to do with people who are just spoiling for a fight.

    Rudyard Kipling once wrote that "a good cigar is a smoke." In this case, a coffee cup is just a way to drink coffee. And as Robert B. Parker wrote, "A thing is what it is, and not something else."

    Published on: November 10, 2016

    The New York Times reports on what could be the eventual demise of the Town News kiosk in Harvard Square, in Cambridge, Massachusetts, which for decades "has catered to the eclectic, ink-stained needs of the famous, the soon-to-be famous and 10 million others who pass through Harvard Square each year," selling newspapers and magazines from all over the world.

    "Fewer people are buying newspapers and magazines these days, and the kiosk’s life as a purveyor of print publications is almost certainly coming to an end," the Times writes. "The powerful Harvard Square Business Association wants the newsstand out so it can clean up the square — or, in its phrase, 'polish the trophy' ... Starting in August, the lease for Out of Town News will be renewed by the city on a month-to-month basis, meaning it could close the kiosk at any month after that. The lease expires in January 2019.

    "By then, if not sooner, Out of Town News is likely to become the latest of the nation’s premier newsstands to close — after other casualties of the internet like News Haven in New Haven, Barnett’s in Athens, Ga., and the 101-year-old De Lauer’s in Oakland, Calif."
    KC's View:
    The fact is that the kiosk no longer is what it used to be. While the Times writes that it still is "stuffed with magazines from around the world, obscure journals and scores of hobby publications," it no longer carries the Washington Post or Los Angeles Times or smaller papers in between. (I guess because we can all read those on the internet, no matter where we live.) "The owners have made up for lost revenue by selling Harvard trinkets and, to the consternation of the business association, lottery tickets, cigarettes and pornography," the Times writes.

    I also thought it was interesting - and totally unexpected, at least for me - that the newsstand is only 32 years old. The Times writes that "it became a newsstand in 1984, when Sheldon Cohen, who founded Out of Town News in 1955 in a wooden shed next door, moved inside." That said, there are limits on what the city can do. "The Cambridge Historical Commission has vetoed any thoughts of major alterations to the original structure," the Times reports, and "the kiosk was put on the National Register of Historic Places in 1978."

    I think it is a shame when such institutions falter. But I also think that life moves on, and sometimes progress, however difficult it may be to accept, is inevitable.

    Published on: November 10, 2016

    Barron's has a story about the fact that Amazon stock went down 2.5 percent yesterday, for no apparent reason.

    Well, maybe one reason.

    "Perhaps it’s because President-Elect Donald Trump and Amazon CEO Jeff Bezos haven’t exactly gotten along in the past," Barron's writes. "Back in May, the two business executives exchanged some harsh words, with Trump suggesting that Amazon was an illegal monopoly."

    The story notes that Trump has accused Bezos of using his ownership of the Washington Post “as a tool for political power against me and against other people, and I’ll tell you what, we can’t let him get away with it.” And Trump "raised the idea that Bezos had an antitrust issue on his hands because of Amazon’s e-commerce dominance."

    Bezos responded that Trump’s comments are “not an appropriate way for a presidential candidate to behave.”

    Barron's writes that "Some might try to argue that Amazon has achieved monopoly status in online retail, amounting to a violation of antitrust laws. Could Trump make that case when he takes office in January? No one else has managed to challenge Amazon’s dominance, but maybe Trump can. Investors have a least some reason to be nervous."
    KC's View:
    Bezos always said that he bought the Post because he believed in a free and independent press and wanted to see if he could disrupt the competitive dynamics of an industry that clearly had business issues. If the Trump administration decides to go after Amazon because it does not like Post coverage, we'll see exactly how strong Bezos' commitment is.

    That said ... I suspect that the Trump administration has bigger fish to fry. Besides, Amazon has more than 200 million active users ... and I wouldn't go out of my way to tick them off.

    Published on: November 10, 2016

    • The Austin Business Journal reports that Walter Robb's separation agreement from Whole Foods, where he is leaving his role as co-CEO, will include a $10 million lump sum severance payment, the payment of health insurance premiums for three years, paying the costs of his relocation from Texas to California, and a discount card that will give him a 30 percent discount at Whole Foods stores for life.

    It is a little ironic that Robb not only gets $10 million, but a card that allows him to pay lower prices ... which is part of Whole Foods' broader problem, which is the reason he lost his job in the first place. Robb's non-compete clause certainly limits his options, but he'll have the time and money to make a deliberate decision, and I'll be fascinated to see what he does next.
    KC's View:

    Published on: November 10, 2016

    We had a story the other day about how Walmart CEO Doug McMillon laid out aggressive environmental and sustainability goals, saying that it wants to Walmart is double the sales of locally grown produce in the U.S.; expand and enhance sustainable sourcing to cover 20 key commodities, including bananas, coffee and tea; and implement a new plan designed to achieve science-based targets for reducing greenhouse gas emissions.

    Part of my commentary read as follows:

    I give the company a lot of credit for trying to do the right thing. McMillon seems to accept the notion that Walmart's size and ubiquity gives it extra responsibilities, and he appears focused on living up to them while understanding that he also has to keep the company productive and profitable. That's not an easy balancing act, but I think he's decided to take the long view - his approach may create some short term rough spots, but the decisions will bear fruit (some of it, apparently, fair trade and/or local) in the long run.

    It gave MNB reader Richard Layman pause:

    Walmart doesn't have "responsibilities."  They make business decisions.  It's to their advantage to make commitments concerning the environment and sustainability so they do.  It was to their advantage to underpay women and cut people's hours, so they did that too.

    How people mess up their thinking about WM is believing that they make decisions based on norms or values.

    Sure, making smart business decisions that result in increased profitability is a top priority, but I also think that aligning one's brand with relevant and appropriate social responsibilities and public policy priorities is critical to being successful in the modern market.

    I think it is fair that McMillon is trying to move Walmart in specific directions when it comes to seeming - and actually being - more responsible. And I think that's a good thing.

    I've raised the possibility several times, based on conversations I've had with people a lot smarter about this stuff than I am, that maybe Whole Foods is getting rid of the wrong co-CEO.

    MNB reader Rich Richardson disagrees:

    I’m not sure I’m aligned with your opinion on John Mackey and his ability to steer the Whole Foods ship, based primarily on not knowing where some of the ideas you mentioned like the loyalty program, fresh food delivery, and lower prices and accessibility for younger shoppers came from.

    If those are Mackey’s ideas, you may be selling him short, as “a purist”, since I think we would both agree that Bezos also fits that mold, with his laser focused obsession on the consumer, complimented by the best loyalty program on the planet!

    In fact, some of the very things that you agreed with Tom Furphy on in "The innovation Conversation," are the same things you challenge Whole Foods on...

    For example, Tom said specifically that “it absolutely behooves retailers to develop their own “lock in” strategy, and “They should ask themselves what it is that they can offer their shoppers to make them the go-to destination for the products that they carry.”

    If Mackey is the source for the previously mentioned ideas, it seems at least to me, that he is doing exactly what Tom said he (and all other retailers) should be doing.

    From another reader:

    I completely disagree.

    Yes, WFM is in a highly competitive space of natural organic grocery that it established.

    Yes. Their competition is relentless and with deep pockets.

    Yes.  Mr. Mackey is not Howard Shultz and neither are Jeff Bezos (although Mackey and Schultz both sell their books on Jeff’s platform.

    Mackey is a purist. I had a chance to ask him a question about his mantra Conscious Capitalism, the relationship to WFM and his controversial article about health coverage in the US.   He walked to the podium, stood tall and said in the most commanding voice, “Listen to me.” At that moment, you could hear a pin drop of the 500 people in the room and he proceeded to lay out the convergence of health, food and the role each of us in resolving more access to quality health care and food, while improving the environment. Nobody moved.

    He had a plan.  He had a vision.  He had the data.  He has the conviction.

    Yes, every business needs someone to plan, control, staff, organize and execute responsibly.  That is an absolute.  However, today - more than ever, we need leadership disrupting the status quo.  (Don’t look up at political landscape.)

    I have fullest confidence in Mr. Mackey.

    Another MNB reader chimed in:

    Having worked with Whole Foods for 20 years while I was working with the magazine company that serves them-meaning before and after going public – several things came to mind.

    Mission: What does Whole Foods stand for these days?  While Mr. Mackey says they won’t compete on price….they have been with those lower priced and staffed stores in Detroit, Chicago and New Orleans and the 365 brand which borrows concepts from the former roll outs. The recent Hepatitis outbreak in the Detroit store, the infused water flap, and weight discrepancy problem they’ve had over the last year or so are symptomatic to me of something else: Whole Foods has lost some of the qualities that made them who they are.  Whole Foods is the last place I would have expected a problem with food safety. And yet….

    Public Company: Very few of the grocers I’ve seen go public over the years have prospered as a result. The scrutiny in being public, activist investors, all the red tape that comes with being pubic has hurt Whole Foods in the long run. Sure they’ve expanded and for a while rode this great wave….but they can’t operate the way they did when they built the brands reputation for quality when they were the retailer other grocers looked towards. They’ve been saddled with the whole paycheck meme that lazy journalists keep repeating. They were never about saving money but getting your money’s worth of quality. But with Wall Street weighing in each quarter it’s impossible to Whole Foods to keep on track with its own internal organic track.

    Private Equity: I don’t believe Whole Foods should stay public.  The Private Equity industry is performing much better than Wall Street because the companies involved have a focus and- they’re aren’t the same kinds of challenges around activist investors, quarterly profits etc. I was skeptical about the Kroger rumor of a few weeks ago-about buying Whole Foods. Kroger has its hands full with the Roundy’s acquisition-they’ve already slowed capital investment down for that chain and have put some Mariano’s projects hold.   At this point the right private equity company-say one like Endeavour which seems to be doing well with their portfolio which includes New Seasons, Metropolitan Market and Bristol Farms-might be the only answer for Whole Foods.   (Did you know the Carlyle private equity company is now the second largest employer in the country after Walmart-with 725,000 employees  among all the companies it owns?)

    Move the Baby Boomers aside. Mr. Mackey is an icon but maybe it’s time for him to let go and let some new people guide things. I would suggest giving Jeff Turnas more influence.  It may be time to reduce the cult of personality aspects that hover around the brand and get some proven younger leaders into higher positions so the brand stays relevant while staying true to its core mission.

    KC's View: