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    Published on: March 3, 2017

    by Kevin Coupe

    Score one for the National Retail Federation (NRF) for taking a well-aimed shot at Washington politicians believing that a border adjustment tax is a good idea that will be beneficial to the American economy by putting America first.

    Opponents argue that not only is it likely to raise prices on the enormous number of imported products sold in the US, but it also is likely to start a trade war. The NRF seems to be firmly in this camp, and so it decided to take to the US airwaves with a commercial designed to make its point.

    However, the ad hardly is a boring recitation of public policy arguments. Rather, it is framed as an infomercial in the style one might see on the air for steak knives, the Bass-O-Matic, or nonstick cooking pans - complete with an Art Fern-style slick-talking pitchman making the facetious case for the border tax.

    It's a really good, really Eye-Opening commercial ... and appropriately enough, one of the places it'll be seen this weekend is on "Saturday Night Live."


    KC's View:

    Published on: March 3, 2017

    The Associated Press has a story about how supermarket chains making a foray into e-commerce are dealing with an abiding fear that online shopping trips will eliminate some impulse purchases.

    "Part of the worry for companies is that shoppers won't get to see their products as they would at a store, where people often decide they want an item only after walking past it on shelves or in displays," the AP writes. "When shoppers order from a website, the thinking is that they aren't as susceptible to tossing extra goodies into their carts.

    "'They don't buy so many Snickers and Skittles online as they would in the store,' said David Ciancio, senior customer strategist at dunnhumby, a shopping analytics company."

    And so, the story says, "companies are using targeted ads, like to frequent cookie buyers, or suggesting add-ons like gum if someone is just short of getting free shipping. It's still a relatively new arena for packaged food makers, with less than 2 percent of groceries being purchased online, but that figure is expected to keep growing."

    In addition, sites are offering features like cooking videos in the hope that they will inspire additional purchases.
    KC's View:
    Most of the retailers that I've talked to that are doing e-commerce find that their online basket sizes tend to be much larger on average than in-store basket sizes ... and so I find it amazing that anybody is worrying about impulse purchases of a stick of gum or candy bar.

    Sure, some of those checkout impulse purchases are going to go away. But worrying about this reflects a kind of limited thinking that is going to kill some retailers.

    I know that I make a ton of impulse purchases online, largely because smart e-commerce companies use data to push buttons that they know actually will work on me.

    Published on: March 3, 2017

    Mashable reports that Subway - outraged over a Canadian Broadcasting Company (CBC) study saying that the chicken in its sandwiches and wraps was less than 50 percent actual chicken - has come out with its own study.

    That study "evaluated the soy protein in the chicken samples," and, not surprisingly, "found the plant protein to be less than 1 percent of the sample." In other words, it was almost all fowl.

    “The stunningly flawed test by Marketplace is a tremendous disservice to our customers,” said Suzanne Greco, Subway president and chief executive, said in a prepared statement. “The allegation that our chicken is only 50 percent chicken is 100 percent wrong.”

    The CBC has not retracted or apologized for its conclusions, and in fact has stood by it, posting the full study on its site, and saying, essentially, that DNA does not lie.
    KC's View:
    Ah. Subway is going with the "fake news" defense.

    Which is sort of funny, because I've always thought of what they sell as being fake sandwiches.

    If I have to choose, I'm going with the CBC study. It just seems more credible to me.

    Published on: March 3, 2017

    The Associated Press reports that Dunkin’ Brands Group has announced that it plans to remove all artificial colors from the products sold at its Dunkin' Donuts and Baskin-Robbins stores by the end of next year.

    The exception, the story says, "will be on brand-name ingredients it sources to use as toppings, ice cream mixes and decorations for its sweets. It also noted that Baskin-Robbins will take longer to find replacements for ice cream cake decorations."

    The move follows similar announcements made by chains such as Subway, Panera and Taco Bell.
    KC's View:
    It is a reflection of where the market is moving that even companies like Dunkin' Donuts are making moves to appear more natural and even a tiny bit healthier. Probably makes sense, even if it won't affect my consumption habits much.

    I don't eat a lot of doughnuts anymore, but I'm more impressed by places like Kane's Donuts in Boston, where they make the doughnuts primarily with local, and sometimes organic ingredients. And if I'm going to eat ice cream, I'm going with Graeter's Black Raspberry Chocolate Chip.

    Published on: March 3, 2017

    The Wall Street Journal reports this morning that, as expected, Costco will increase the cost of its US and Canada memberships by $5, to $60. Executive memberships will go from $110 to $120.

    At the same time, Costco said that "the reward cap will increase from $750 to $1,000" on purchases made by people with executive memberships.

    Costco made the announcement as it said that its most recent quarterly same-store sales were up three percent, while Q2 profit fell 5.7 percent to $515 million and revenue rose to $29.77 billion, up 5.7 percent.
    KC's View:

    Published on: March 3, 2017

    The Wall Street Journal has a story this morning about a debate taking place in the food industry over one simple question that apparently does not have a simple answer:

    What, exactly, is milk?

    Here's how the Journal frames the story:

    "Dairymen are lobbying Congress to restrict use of the word 'milk' to products derived from lactating animals like cows. Makers of increasingly popular soy, almond and coconut-based milk substitutes pushed back on Thursday, asking the U.S. Food and Drug Administration to back a broader use of the term.

    "At stake is a $16 billion milk market where cows no longer stand alone. Sales of plant-based milk substitutes have soared 76% over the past five years while conventional milk sales dropped 18%, according to market research firm IRI."

    You can read the entire story here.
    KC's View:
    One thing seems certain. The lobbyists will get rich.

    Published on: March 3, 2017

    The Washington Post reports that Jeff Bezos, founder/CEO of Amazon as well as the owner of the Post and a commercial space exploration company called Blue Origin, has been "circulating a seven-page white paper to NASA leadership and President Trump's transition team about the company's interest in developing a lunar spacecraft with a lander that would touch down near a crater at the south pole where there is water and nearly continuous sunlight for solar energy. The memo urges the space agency to back an Amazon-like shipment service for the moon that would deliver gear for experiments, cargo and habitats by mid-2020, helping to enable 'future human settlement' of the moon."

    According to the story, "Blue Origin’s proposal, dated Jan. 4, doesn’t involve flying humans, but rather is focused on a series of cargo missions. Those could deliver the equipment necessary to help establish a human colony on the moon — unlike the Apollo missions, in which the astronauts left 'flags and footprints' and then came home."

    There is competition in this new space race, as "SpaceX founder Elon Musk made a stunning announcement this week that his company planned to fly two unnamed, private citizens on a tourist trip around the moon by next year — an ambitious timeline that, if met, could beat a similar mission by NASA."
    KC's View:
    This is a fascinating story, and you can read it here.

    What it illustrates to me is the degree to which Jeff Bezos is willing to consider possibilities and opportunities that other folks never would. Think about it: while other companies try to figure out how to do same-day delivery and make it profitable, and others are thinking about whether they should do click-and-collect, and still others are worrying about gum and candy bar impulse sales, Bezos is thinking about delivering stuff to people who live on the moon.

    Published on: March 3, 2017

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

    MarketWatch reports that Kroger's Q4 same-store sales fell 0.7 percent, compared to a 3.7 percent increase during the same period a year ago.

    Kroger also reported Q4 profit of $506 million, down from $559 million, while revenue climbed 5.5 percent to $27.61 billion.

    A rare a minor stumble for Kroger, which is dealing with the impact of deflation. This won't last long.

    • The Daily Meal reports that actress/lifestyle entrepreneur Gwyneth Paltrow plans to open an organic café in New York City mid-March. According to the story, "The café will have a menu offering of coffee, smoothies, and prepared meals, along with branded merchandise by Tracy Anderson, whose fitness studio will be located next to the café."

    Am I wrong to think that this may be the last place in New York City where I'd want to eat? It just sounds like the most prominent thing on the menu will be poached pretension...
    KC's View:

    Published on: March 3, 2017

    • CVS Health yesterday announced the promotion of Jonathan C. Roberts, a quarter-century veteran of the company and the current president of CVS Caremark, as EVP and COO of the company, a new position.
    KC's View:

    Published on: March 3, 2017

    The other day I wondered if Target has "foundational problem." One MNB reader responded:

    You wonder?

    Sales comps have been down, following an "up year" in 2015.  Few remember that their comps were horrible in 2014.  There is only so long that Target can blame what ails them on the credit card debacle and their complete mis-management of Canada. 

    Outside of doing store audits on their companies products, I wonder how many in MNB can honestly say they make Target their destination shop?  Wall Street Analysts gave Target a pass because everyone believed that they had a strong connection with next generation shoppers (guests).  But, Target forgot this is a fickle shopper, one who will shop online pretty quickly.

    Target continues to push Private Label development. And, they continue to push (and play favorites with) their largest suppliers.  The Target brand is losing whatever relevance it has/d; why does anyone at Target feel another P/L is going to bring us back in their doors?  Maybe their loyal shoppers can be convinced but Target needs shoppers more than basket size.  National Brands, both from the suppliers that Target gives preferential treatment too, and the small, growing supplier base - should be their focus.

    Operationally, out of stocks are an issue. What few guests that come in their stores are not interested in empty shelves, Cartwheel, FSI or not.

    At the last major retrenchment of staff, Target focused on taking out their longest tenure (and highest) salary roles. Today, vendors deal with Target team members that are not trained nor retail savvy.  As one example, Cornell gutted the Vendor Negotiations team, the one place where there was a team who trained buyers, helped them collect vendor funding and built processes that gave the buying staff "thinking time" in how they approach their business. I can't prove this statement - but I feel pretty certain that Target is leaving a lot of money on the table because this team is no longer present to give training, guidance and confidence to the buyers who simply await upward direction on what to do.  Many decisions come "top down", many reactive based on the Tuesday leadership meeting, where Cornell and direct reports decide the "flavor of the week" (sales, margin, income focused task list) for the buyers to execute against.

    I've dealt with Target for a few decades now.  They have never been fast (save for the preference they give to large suppliers' initiatives).  They, like Costco, are humility challenged, both putting their heads in the sand and not prioritize online, where their best shoppers are moving towards today.  More private label inside even cleaner stores doesn't do it for me and Target's next generation guest.  Target should use its existing vendors (of all sizes) to "sell more".  Reduce / eliminate ad fees (and rules) to let shoppers know they carry new-to-market and niche brands.

    I think most in MNB community want Target to win; most of us identify closely and sometimes personally with Target. We don't want to see Wal-Mart get any larger.  Target seem to get in their own way by not thinking like merchants.

    But tell us how you really feel.

    This may be unfair of me, but when I read this email, all I could think of is a scene from a movie. You can see it here.

    From MNB reader Rita Held, a different view:

    Personally, I think Target is just fine as is. No remodeling needed – at all.

    Also, have you ever noticed Target has no music playing in the stores? I LOVE that. Keeps me relaxed and I spend more time shopping.

    Not to mention the fact that the aisles are nice and spacious and there are no lines at checkout. It is almost like shopping by yourself.

    I got a bunch of emails yesterday about my FaceTime video promoting blood donation, and I'm glad you all liked it. Perhaps my favorite was from MNB reader Stacy McCoy:

    I haven’t donated blood since college (we don’t need to know how long ago that was, except to say that there were no apps back then).

    I have the app installed on my phone and am setting up an appointment!

    Great PSA today – thank you for sharing!

    It was my pleasure ... but not as much of a pleasure knowing that I got some folks to donate blood.
    KC's View:

    Published on: March 3, 2017

    I'm an enormous Jimmy Buffett fan. Have been forever. One of the enduring pleasures of owning a convertible is the ability to put down the top, crank up some Buffett, and take a drive to the beach.

    Now, I acknowledge that Buffett's fan base skews old. One can see that when attending a Buffett concert - there are a lot of middle-aged people there (and people like me who like to consider themselves middle-aged but who are often reminded by their children that this would mean that I'm going to live to 124). But I've always been impressed by the number of younger people who show up at concerts; I suspect that these are kids who, like mine, have been raised on Buffett music and have enormous affinity for the mythical charms of Margaritaville.

    The presence of these younger folks, I've long believed, is a positive thing for the Buffett/Margaritaville empire. Buffett is 70, after all, and this is a time when his business, in league with numerous other companies, has been opening new restaurants, hotels and casinos in various locations. I'm sure that the music business is a smaller and smaller part of his revenue stream, though it remains a critical component, since it creates the environment that feeds the other businesses.

    That said ... I saw a story this week that makes me wonder if Buffett and his business folks may be making a strategic mistake.

    A site called Mental Floss reports that "construction on a Margaritaville-themed senior housing development in Daytona Beach, Florida is currently underway," designed to provide a community for "seniors who dream of spending retirement like they’re living in a Jimmy Buffett song."

    According to the story, "Latitude Margaritaville will offer many of the same amenities as a typical Florida retirement complex. Residents of the community’s 6900 homes will have access to a gym, a pool, arts and education programs, a beach shuttle, and a 200,000-square-foot shopping center.

    "According to the Margaritaville blog, the facility will also channel the brand’s 'authentic, ‘no worries,’ tropical vibe.' Indoor and outdoor dining spaces will serve food and drinks from the Margaritaville restaurant chain and a bandshell in the village’s center will host live entertainment."

    I'm just not sure this is a good idea, if only because it seems to firmly establish Buffett and Margaritaville as an old-person's brand ... and at a certain point, that is likely to make it less attractive to younger consumers.

    One of the goals of the leader of any brand - and that's what Jimmy Buffett essentially is - has to be to make sure that the brand outlives them. Hopefully, Buffett will be performing for years to come, keeping the brand alive. While this move into the retirement community business may seem like a smart short-term play, I'm not sure it is the best way to make the brand relevant to the next generation on which it will depend for future growth.

    As for me, if I'm going to waste away in Margaritaville (and I'm probably constitutionally incapable of doing this for more than a couple of days), I'm going to find a real island and a real beach and order myself an authentic local beer and maybe some conch.

    I just re-read that last paragraph, and it reminded me of something that I often think about ... usually when I'm in Las Vegas or Orlando.

    I'm not a big fan of either place, largely because they are built around artifice and illusion. But whenever I'm driving through Orlando or jogging along the Las Vegas strip, I always remind myself that part of the reason I don'd find them enthralling is that I've been to most of the places that they try to recreate. I was born in New York City, so who cares about New York New York. I've been to Paris, and Venice, and in fact to six of the seven continents (Antarctica remains on my bucket list) and 49 of the 50 states (I still have to get to Alaska). Fake versions cannot help but disappoint me.

    I've been really lucky. And I guess I just mention this because sometimes when I write about stuff, it may appear that I've lived a privileged life, which informs my attitudes. Which I have, and it does. But I never forget it ... and am thankful for the opportunities I've had, and the ones I will have tomorrow and the next day.

    That's it for this week. Have a great weekend, and I'll see you Monday.

    KC's View: