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    Published on: April 6, 2017


    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 the Google campus in Mountain View, California.

    As I record this, we're in the final stretch of the GMDC "Retail Tomorrow" conference, which has consisted of what I think of as several days of "immersion therapy" in Silicon Valley - looking at innovative store formats and talking to tech entrepreneurs about the kinds of changes we may be seeing in the retail landscape in coming years.

    It has been fascinating stuff, one of the best such conferences I've ever been to.

    One of the things that has most struck me is the fact that while most of the attendees have been middle-aged white guys (a group in which I include myself, even though my kids always remind me that if I am middle-aged now, it means that I'm going to make it to 124 .... which I plan to), the vast majority of people we heard from were far younger, and many of them were either women and/or immigrants.

    They see the world differently, to say the least.

    I think that's enormously important. Sometimes the word "diversity" is tossed around as a box to be checked in modern corporate culture-speak, but it ought to be far more than that. It is important for all of us to understand there are inherent limitations to how we see the world, and that it is critical to the survival of our businesses that we embrace those people and their viewpoints.

    It has been a couple of years now since I did a piece about the New York Times columnist David Brooks and his contention that "epistemic closure" is a significant problem in the political classes, and I argued that this is a major challenge in business as well.

    Essentially, "epistemic closure" is another phrase for being closed-minded. It has at its root the word "epistemology," which is the study of the origin, nature, and limits of human knowledge.

    "Epistemic closure," Brooks said, is when you are so hemmed in by your own belief system that you are unable or unwilling to accept anything other than what you believe as being possible or factual ... it is the opposite of "empiricism," which is defined as the practice of relying on observation and experiment.

    What I've seen and heard at the GMDC "Retail Tomorrow" conference also is the opposite of epistemic closure. It has opened my mind to what may be down the road and, I think, the minds of my fellow attendees.

    Now that it's over, I'm already jonesing for another hit.

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

    KC's View:

    Published on: April 6, 2017


    by Kevin Coupe

    Wow. That didn't last long.

    It only was a day or two ago that Pepsi unveiled a new segment in its "Moments" advertising campaign, using model Kendall Jenner to create a commercial that, as CNBC reported, "aims at reflecting today's millennial generation and 'what living for now looks like'."

    Jenner is perceived as having generational credibility, described as a "21-year-old fashionista (who) is the daughter of Kris Jenner and the former Bruce Jenner — who is now known as Caitlyn after sex reassignment."

    In the Pepsi-produced film called "Jump In," CNBC wrote, "a diverse group of millennials is seen marching through the streets protesting for love while Jenner poses for a photo shoot. That is, until she decides to wipe off her makeup and walk through the streets herself, joining the peaceful protests with a Pepsi can in hand.

    "The ad ends by saying: 'Live bolder, live louder, live for now'."

    As it ends up, the only things that were loud were the howls of protest once the ad was posted online, the crashing sound made as all the publicity ran headlong into a social media and late-night-comedy tsunami, and the groveling sound made when Pepsi withdrew the ad and apologized.

    Here's how Advertising Age reported it:

    "Pepsi is pulling its Kendall Jenner ad after the spot drew a torrent of criticism, including complaints that the ad was not only clumsily executed but that it co-opted protest movements such as Black Lives Matter for commercial gain. The ad had been planned to run globally across TV and digital.

    "'Pepsi was trying to project a global message of unity, peace and understanding. Clearly we missed the mark, and we apologize,' the brand said in a statement. 'We did not intend to make light of any serious issue. We are removing the content and halting any further rollout. We also apologize for putting Kendall Jenner in this position'."

    Yikes.

    If this was how fast the Pepsi ad got pulled, can you imagine how fast New Coke would've been pulled from store shelves had it been introduced in a social media-driven era?

    I have a couple of thoughts about this.

    First of all, the decision by Pepsi to try and create connectivity to movements largely being driven by young people was absolutely deliberate. Pepsi has said that it wants to create "emotional connections" such as joy and passion "that can bring people together amid a time of divisiveness." That's why the new ad was populated by an incredibly diverse cast - men and women of a wide variety of ethnicities and ages, including a Muslim woman who has perhaps the second largest role compared to Jenner.

    I think that Pepsi's desire to link itself to the passions of a diverse and younger generation was completely sound. It was the implementation that was tone deaf.

    When the company created "Pepsi Generation" ads back in the sixties, it was to connect to young people. But those ads showed people largely engaged in fun and athletic pursuits, not social justice advocacy. Pepsi has said that we live in volatile times, but it miscalculated exactly how volatile.

    I know that some folks saw the ad as a crass cashing in on things like the Black Lives Matter movement, but I didn't see it that way; I just saw it as a labored attempt to sell a soft drink by trying to be relevant, an attempt that simply did not work. I've been to marches and protests, and they tend to have a lot more energy and passion than as portrayed in the Pepsi ad ... and they also are populated by serious-minded people who don't want to see their opinions reduced to an ad slogan.

    To refer back to this morning's FaceTime, the Pepsi ad struck me as a diversity ad thought up and produced by middle-aged white guys.

    The Pepsi ad didn't actually stand for anything except more sales. That may have been the worst sin it committed.

    Except, perhaps, for the use of Kendall Jenner.

    I must confess that if I'd never read any of the coverage, I would have had no idea who she was just by watching the commercial. I have no knowledge of or interest in the Jenner-Kardashaian universe ... except for having a sense that these people are popular for being notorious. Or maybe notorious for being popular. Beats the hell out of me, though the whole syndrome seems to be indicative of the decline of western culture and civilization.

    Somehow suggesting that a child of privilege, self-promotion, media overexposure and reality television has any freakin' ideas what the real world is like, much less any passion for social justice, ought to be a poster child for such things, strikes me as offensive in the extreme ... and it puts the lie to any suggestion that Pepsi is sincere in being serious, or serious about being sincere.

    In the end, the whole mishegoss is an Eye-Opener about a lot of things - not least the power of social media to unite people in a movement.

    KC's View:

    Published on: April 6, 2017

    The Washington Post has a story saying that "a fresh round of distress signals sounded in the retail industry this week, as another big-name chain announced hundreds of new store closings and still others moved aggressively to recalibrate their businesses for the online shopping stampede."

    The story notes that "Payless ShoeSource filed for Chapter 11 bankruptcy and outlined plans to immediately close nearly 400 of its 4,400 stores globally. Ralph Lauren is shuttering its flagship Polo store, a foot-traffic magnet located on tony 5th Avenue in Manhattan, the latest step in a massive cost-cutting effort. Big-box office supplies stalwart Staples is reportedly considering putting itself up for sale."

    This follows closures by major chains such as Macy's and Sears, as well as distress signals sent by companies as varied as The Limited ... Hudson’s Bay, the parent company of Saks Fifth Avenue and Lord & Taylor ... Banana Republic ... Abercrombie & Fitch ... Urban Outfitters ... Bebe ... and Lululemon, among others.

    This malaise, the Post writes, "has spread even as the economy overall grows stronger and the stock market marches higher." And, "It doesn’t help any of these legacy brick-and-mortar companies that customers are increasingly seeking out under-the-radar labels with a more specialized, boutique feel. The likes of Bonobos, Warby Parker, Shinola and Marine Layer are picking off shoppers that might once have filled their closets with goods from more ubiquitous chains."

    And, of course, there is Amazon, which "captured 38 percent of all dollars spent online during the holiday season. The next-closest retailer, Best Buy, had a mere 3.9 percent." And now Amazon is slowly testing bricks-and-mortar concepts that could further expand its ecosystem.

    "All of this change," the Post writes, "is not just pushing traditional retailers to reduce their overall numbers of stores — it is also forcing them to re-think what their stores should look like."
    KC's View:
    To quote Tom Furphy's line from yesterday's Innovation Conversation, this is a matter of "when," not "if." Retailers that do not question every aspect of their businesses, including formats that may have served them well in the past, are the ones that are most likely to find themselves on the road to irrelevance.

    Published on: April 6, 2017

    Eater reports that Voodoo Doughnuts has ended a challenge to customers that it has extended for years, but that last weekend resulted in the death of one of its customers.

    The story says that Portland, Oregon-based Voodoo has for years challenged its customers to eat a half-pound doughnut (the equivalent of a half-dozen normal-sized doughnuts) in 80 seconds, with winners getting "bragging rights, a free meal, and other swag."

    But last Sunday, at Voodoo's Denver store, "that challenge was taken on by 42 year old Travis Malouff who began choking on the doughnut and soon thereafter died of asphyxia, due to obstruction of the airway." As a result. the company announced that "it has suspended the challenge at all seven locations."
    KC's View:
    Voodoo, which is an enormous tourist attraction in Portland (there often are lines of dozens of people waiting to buy doughnuts, many of which have names unmentionable on this website), is well-served by ending this promotion for good. I don't mean to get curmudgeonly, but somehow I lately find these kinds of promotions, trading on gluttony and excess, to be sort of hard to watch.

    It ought not take someone's death to make people realize that we can do better than this.

    Published on: April 6, 2017

    Reuters reports that ABC News lost a final effort "to avoid a trial in a beef producer’s $5.7 billion defamation case over reports about a product that critics call 'pink slime,'" which is actually “lean finely textured beef” that is "made from beef chunks, including trimmings and exposed to tiny bursts of ammonium hydroxide to kill bacteria" and included in ground beef products.

    The story says that South Dakota Supreme Court Chief Justice David Gilbertson "denied ABC’s petition to appeal a recent ruling letting plaintiff Beef Products Inc (BPI) take its case to a jury ... The case is scheduled to go to trial on June 5 and could last eight weeks."

    BPI is arguing that ABC News and reporter Jim Avila defamed BPI with how it characterized "lean finely textured beef," while the network "has called BPI's lawsuit an attempt to chill media coverage of the industry and inhibit free speech."

    While the US Department of Agriculture (USDA) has approved the use of "lean finely textured beef," one of its staff microbiologists actually is the person who coined the allegedly negative term, "pink slime."
    KC's View:
    BPI better hope it wins. This case goes back to 2012 coverage by ABC, and if the jury decides in favor of ABC, all that will have happened is that the whole "pink slime" thing will have been reintroduced to consumers.

    Published on: April 6, 2017

    The Wall Street Journal this morning has a piece suggesting that with all the strategic and tactic issues challenging Target, its position on allowing customers and employees to use restrooms corresponding with their gender identities has proven to be nettlesome. "For Target," the story says, "the posting of what was its long-held practice quickly became an expensive and distracting lesson about the perils of combining the web’s megaphone with touchy social issues."

    While gay advocacy groups applauded the move, some conservative and religious groups objected loudly and called for a boycott.

    Ironically, the blog posting about restroom policies at Target was never approved by CEO Brian Cornell, who sees it as a self-inflicted and unnecessary wound that created more problems for stores that already were struggling.

    You can read the entire story here.
    KC's View:
    I have to be honest here. I have several readers who, every time we have a story about Target's issues, have come back to the bathroom issue and have suggested that I was blind to the impact that it had on the company's business.

    If the Journal story is to be believed, they are right and I've been wrong.

    I still think that this issue may be more divisive in some regions of the country than others, but maybe it has been a mistake to underestimate how it resonated with some folks. My miscalculation on this can be traced to a certain epistemic closure on my part - I'm a child of the northeast with urban predilections, and I'm happy to own that. But sometimes it means I miss things.

    Published on: April 6, 2017

    MarketWatch reports that discounters Aldi and Lidl "continue to take market share from the top four U.K. grocers," are have reached new highs in the UK market.

    New numbers from Kantar Worldpanel say that Aldi's market share rose to 6.8 percent in the last quarter, from 6.0 percent, while Lidl's rose to 4.9 percent from 4.4 percent.

    Of the top four UK grocers, Tesco's market share fell to 27.6 percent from 28.1 percent a year ago ... Sainsbury's share went to 16.1 percent from 16.4 percent ... Walmart-owned Asda's share went to 15.7 percent from 16.2 percent ... and William Morrison's market share fell to 10.4 percent from 10.5 percent.
    KC's View:
    When US retailers read stories like this, they should do so accompanied by the old Jimmy Van Heusen / Johnny Burke / Frank Sinatra song, 'It Could Happen To You."

    Published on: April 6, 2017

    Nielsen is out with new research pointing to the continued growth of e-grocery in the US.

    According to the report,"compared to the relatively flat growth in the traditional brick and mortar grocery category, in 2016, e-commerce actually drove 1% of topline growth for grocery.  Across developed categories such as beauty and personal care (where beauty saw only slight in-store growth of 0.6% and personal care saw 1.3% in-store growth from 2015-2016), online retail drove more than 10% of 2016 sales.

    "The rapid expansion of e-commerce in top FMCG categories also fostered significant growth in categories such as pet care. In fact, e-commerce drove 16% of pet care sales in 2016, attributing more than 80% of pet care category growth from online channels.  Grocery consumers are migrating online and according to the 2017 Nielsen FMI Digitally Engaged Food Shopper Report, by 2025, the share of online grocery spending could reach $100 billion in annual consumer sales."
    KC's View:
    Didn't I already refer you back to the Tom Furphy line from yesterday's Innovation Conversation, about how this is a matter of "when," not "if"?

    Published on: April 6, 2017

    • The Wall Street Journal reports that Amazon is saying that it "will create 30,000 part-time positions in the U.S. over the next year, nearly doubling the total as its customer base and sprawling warehouse network expand. Of the jobs, 25,000 will be warehouse positions and the remaining 5,000 home-based positions answering customer calls, emails and chats in what the online retail giant calls its virtual customer-service department."

    The story goes on: "Amazon’s workforce has been growing rapidly in recent years as it builds dozens of warehouses to be closer to customers, which reduces shipping costs and allows the company to deliver more of its own packages. Last year the world-wide workforce grew 48%, to 341,400. Tom Weiland, vice president for world-wide customer service, said a rapidly growing customer base is the reason for more than doubling the size of the U.S. virtual customer-service program."


    • The New York Times reports that Amazon founder/CEO Jeff Bezos said yesterday that his goal is to sell $1 billion worth of Amazon stock every year to finance his Blue Origin space exploration company.

    Bezos yesterday "showed off the reusable rocket booster and the mock-up of the capsule that will take people up for panoramic views back down at earth ... Mr. Bezos, who hopes to build Blue Origin into a commercial and tourist venture, also disclosed that it would cost about $2.5 billion to develop an even bigger rocket, New Glenn, capable of lifting satellites and, eventually, people into orbit."

    Saying that he believes that reusable rocket parts are key "to lowering the price of admission to the field," and leading to a “golden age of space exploration.” Bezos said, “If we can make access to space low-cost, then entrepreneurs will be unleashed. You will see creativity, you will see dynamism, you will see the same thing in space that I’ve witnessed on the internet in the last 20 years.”


    • The Wall Street Journal reports that Amazon has reached an agreement with the Federal Trade Commission (FTC) that will result in its "refunding as much as $70 million to consumers for in-app purchases made by children."

    The FTC said that Amazon "agreed to end appeals related to a federal-court decision last year that found Amazon was liable for in-app purchases children made over the course of about five years without their parents’ authorization due to the lack of sufficient safeguards. The court also ruled last year that Amazon had implemented sufficient safeguards since the case began, rejecting the FTC’s attempt to require more consent from Amazon customers."
    KC's View:

    Published on: April 6, 2017

    National Public Radio reports that Walmart, in the process of reorganizing its technology division, "is eliminating around 300 jobs in the Information Systems Division (ISD)," representing about 10 percent of the unit's workforce.

    The company said it was part of a streamlining effort, with some jobs being eliminated completely, some being outsourced, and others being reduced from full-time to part-time.
    KC's View:

    Published on: April 6, 2017

    Reuters reports that 7-Eleven owner Seven & i Holdings Co. plans to spend $3.3 billion to buy more than a thousand convenience stores owned and operated by Sunoco, a move that brings the company close to its goal of having 10,000 outlets in North America.

    According to the story, "The operator of the 7-Eleven chain of convenience stores has been aggressively opening stores in Japan as well as the United States, where it has been acquiring stores from local retailers. Its latest purchase comes as operators of traditional big-box retailers including Seven & i have been suffering weak sales as changing tastes and modest wage growth have prompted shoppers to defect to cheaper specialty chains and online outlets."


    • The New York Times reports that JAB Holding Company - owner of American brands such as Krispy Kreme, Peet’s Coffee, Caribou Coffee, Keurig Green Mountain and Stumptown Coffee, among others - plans to spend $7.5 billion to acquire fast-casual Panera to its $40 billion portfolio of retail brands.

    JAB is described by the Times as "the investment arm of the Reimann family of Germany, who are heirs to the consumer goods company Joh. A. Benckiser."


    USA Today has a story about the growth of "grocerants," defined as grocers who are "turning portions of their stores into a nosher's delight -- and creating tough new competition for fast-food chains and traditional restaurants ... Customers get the convenience of being able to order a meal, then fill their shopping carts with home essentials while they wait. Stores pick up extra sales ... For years, fast-casual restaurants snatched sales away from supermarkets by catering to busy workers looking for a quick hot meal after a day at the office or harried moms and dads who didn't have time to make a home-prepared dinner. Now the roles have reversed. "

    The story goes on to say that "while food safety creates a new challenge for stores opening grocerants, the prospect of higher sales is hard to resist. The Food Marketing Institute, a trade association, said 61.9% of its members say in-store dining gives them a competitive edge. It also can fatten profits compared to the razor-thin margins in much of a grocery story."


    • The Associated Press reports that "Unilever plans to sell its spreads division and combine its foods and refreshments units as part of a major review of operations prompted by a $143 billion takeover bid by rival Kraft Heinz that fell through in February."

    In a statement, CEO Paul Polman expressed his confidence that the changes "will accelerate the transformation of Unilever and the delivery of sustainable shareholder value over the long term."


    • The New York Times reports that China National Chemical Corporation has won approval from European Union regulators for the $43 billion takeover of Syngenta, the Swiss farm chemical and seed company.

    According to the story, "It would be the largest Chinese takeover of a foreign company and is one of three proposed mergers in a stop-and-go international race seeking greater influence over the world’s food supply." It also, the Times writes, part of a broader effort by the Chinese government "to make sure its food supply is reliable and safe as it works to feed a rapidly growing middle class."
    KC's View:

    Published on: April 6, 2017

    ...will return.
    KC's View: