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    Published on: April 21, 2017

    by Kevin Coupe

    There is a lovely column by David Leonhardt in the New York Times suggesting that business leaders ought to take a page from one of the nation's most accomplished statesmen.

    "When George Shultz was secretary of state in the 1980s, he liked to carve out one hour each week for quiet reflection. He sat down in his office with a pad of paper and pen, closed the door and told his secretary to interrupt him only if one of two people called:

    “'My wife or the president,' Shultz recalled.

    "Shultz, who’s now 96, told me that his hour of solitude was the only way he could find time to think about the strategic aspects of his job. Otherwise, he would be constantly pulled into moment-to-moment tactical issues, never able to focus on larger questions of the national interest. And the only way to do great work, in any field, is to find time to consider the larger questions."

    Certainly, the emergence of technology has made finding such time more difficult. But, Leonhardt argues, "Our society, or at least the white-collar portions of it, needs some more of ... Shultz’s reflection time. (It is ) the route to meaningful ideas in any almost any realm: personal relationships, academic papers, policy solutions, diplomatic strategies, new businesses. I find it striking that new-business formation has declined over the last 15 years, despite (or perhaps partly because of) the digital revolution."

    This is such a good column, making such a critical point - that most people have "confused the availability of new information with the importance of it. If you spend all your time collecting new information, you won’t leave enough time to make sense of it."

    You can read it here.

    It is the very definition of an Eye-Opener.
    KC's View:

    Published on: April 21, 2017

    The Wall Street Journal reports on the impact that Walmart's decision to invest "heavily in lower prices" - primarily crafted to help it compete both with Amazon and discounters Aldi and, soon, Lidl - is likely to hurt many of the nation's grocers.

    "Operating profits for U.S. supermarkets declined about 5% last year," the story notes, adding that shopping basket comparisons around the country are showing the extent to which Walmart is dropping prices.

    "Wal-Mart’s price cuts are eating into its own profit, forcing it to cut costs and putting pressure on its vendors," the story says. "But the company is stealing market share. While profit fell 18% in the most recent quarter, Wal-Mart’s sales in existing stores, a key metric of retailer health, have risen for 10 consecutive quarters.

    "The fight between big food retailers is good for consumers. Last year, shoppers paid 1.3% less than a year earlier for eggs, meat and other staples, federal data shows, the steepest drop since 1959. Two thirds of consumers surveyed recently by the Food Marketing Association said they chose where to buy groceries based on price."
    KC's View:
    It has been the argument here for a long time that we're about to go into a period of intense competition in which there is going to be a lot of collateral damage. And while the majority of people may choose stores based on price, for the majority of stores it can't just be price - there has to be that something else that they're good at, that makes the store a compelling shopping experience worth bypassing other stores for, or not making the purchase online.

    It is like Bette Davis says in All About Eve: "Fasten your seat belts. It's going to be a bumpy ride."

    Published on: April 21, 2017

    The Baltimore Business Journal reports that Ahold Delhaize-owned Peapod is partnering with Health IT startup DinnerTime is an "attempt to simplify the meal planning and shopping process."

    According to the story, "DinnerTime's subscription-based technology generates meal recommendations based on a person’s, or family’s, tastes, budget and time constraints, as well as any health concerns like food allergies or dietary restrictions. It then uses that generated meal plan to provide shopping lists for the week. Now that list can automatically be turned into a Peapod delivery order through DinnerTime, which charges subscribers $10 per month."
    KC's View:
    I love moves like this ... it goes back to something that Tom Furphy and I wrote about a few weeks back. Companies can do all these things on their own, so it is important to create networks ... which is precisely what both these companies are doing.

    Published on: April 21, 2017

    • MNB does not usually report much about executive salaries - feeling, in general, that people ought to be able to make as much as they can as long as a) they deliver value for their wages, b) they are being evaluated on the right things, and c) women in the company are being made as much as men for the same jobs. MNB also has a bias in favor of companies where senior executives understand that good salaries and benefits ought to be extended as much to people on the front lines as those in the executive suite.

    That said...salaries at Walmart are much in the news today, and worthy of a mention here.

    Reuters reports that Walmart CEO Doug McMillon "received a 13 percent increase in total compensation to $22.4 million in the fiscal year ended Jan. 31, according to a regulatory filing on Thursday, as sales growth at the world's largest retailer remained robust." The compensation is in the form of cash and stock.

    Meanwhile, Bloomberg reports that US e-commerce chief Marc Lore got a total payout of $243.9 million, which "included restricted stock worth $236.3 million, which came as part of the buyout of his company, Jet.com, according to a regulatory filing Thursday. Most of those shares will vest monthly through September 2021 starting later this year. He also received about $7.55 million in salary, stock awards and perks."

    Greg Foran, president and CEO of Walmart US, got a slight raise, to $11.55 million from $11.54 million a year ago.
    KC's View:

    Published on: April 21, 2017

    Business Insider reports that while Sears Holdings announced that it would shut down a total of 150 Sears and Kmart stores this year, most of them during April, the company has been notifying another dozen or so stores that they will be closing in July.

    The stores are said to be in Florida, Hawaii, Michigan, New Mexico, Ohio, Pennsylvania, South Carolina, and Washington.

    The story says that Sears Holdings CFO Jason Hollar has said that the company would have to close more stores as a way of seeking "liquidity."

    In other words, cash.

    Business Insider notes that Sears now has fewer than 1,500 stores, down from 2,073 five years ago.
    KC's View:
    I have no idea if these guys are clueless about Sears' future (they've certainly been clueless about virtually every retailing mood they've made in the past), or if they have some sort of strategy for how they're going to land this turkey.

    For some reason, I find myself thinking of the scene from Airplane!, when flight attendant Elaine Dickinson gets on the P.A, and says, "We regret any inconvenience the sudden cabin movement might have caused, this is due to periodic air pockets we encountered, there's no reason to become alarmed, and we hope you enjoy the rest of your flight... By the way, is there anyone on board who knows how to fly a plane?"

    Published on: April 21, 2017

    The Chicago Tribune reports that Subway "closed hundreds of domestic locations last year, marking the biggest retrenchment in the history of a chain that spent decades saturating America with restaurants."

    In fact, Subway close 359 stores last year, a 1.3 percent drop in the fleet that brought the total store count down to 26,744 from 27,103.

    While Subway is the fast food chain with the most units, it "is coping with a sales slowdown in the U.S., made worse by the emergence of newer fast-casual rivals and the industry's heavy reliance on discounts and promotions. Subway also has lost some of its luster as a healthier-food option. It's been working to restore its status by eliminating antibiotics from its chicken and switching to cage-free eggs.

    "In another bid to revive growth, Subway is adding delivery services -- a strategy that's also been embraced by McDonald's. And it even unveiled a new, more contemporary logo. But so far, the changes haven't helped much: Sales fell 1.7 percent last year to about $11.3 billion."
    KC's View:
    It must be hard for Subway's management, since it can't blame Jeff Bezos or Edward Lampert for its problems.

    Which actually illustrates something important. There are some folks who love to write to me suggesting that the ills affecting US retail are the result of Amazon being an "evil" company trying to destroy companies and livelihoods. But the fact is that, as The Byrds sang, to everything there is a season ... a time to be born and a time to die.

    (And yes, I know that The Byrds didn't say it first. I've just always liked that song.)

    Published on: April 21, 2017

    Fascinating story from Bloomberg about the $400 Juicero machine, which was developed by a startup company that attracted some $120 million in Silicon Valley investment capital and was described as a "Keurig for juice" - offering "an internet-connected device that transforms single-serving packets of chopped fruits and vegetables into a refreshing and healthy beverage."

    Key to the business model was the fact that not only did one have to buy the $400 juicing machine, but once that commitment was made, it was necessary to buy the ingredient packets - for $5 to $8 apiece - that would be turned into juice. For Juicero and its investors, it was seen as the gift that would keep on giving.

    Except...

    While Juicero founder Doug Evans would claim that his juice press exerted four tons of force during the juicing process, or "enough to lift two Teslas," it ends up that his claims may have been a bit of hyperbole.

    Bloomberg writes that "after the product hit the market, some investors were surprised to discover a much cheaper alternative: You can squeeze the Juicero bags with your bare hands. Two backers said the final device was bulkier than what was originally pitched and that they were puzzled to find that customers could achieve similar results without it. Bloomberg performed its own press test, pitting a Juicero machine against a reporter’s grip. The experiment found that squeezing the bag yields nearly the same amount of juice just as quickly - and in some cases, faster - than using the device."
    KC's View:
    Gee, that must be kind of embarrassing.

    Now, a couple of things here. I had a chance to see the machine last summer at the Organic Produce Summit (and see Evans speak). I thought the machine was interesting and the juice tasty, but way overpriced for all but a few folks. I always thought that the machines might be better suited to a commercial environment, where gourmet juice could be sold to consumers. And, I thought that Evans had an interesting story, if a somewhat enlarged ego. (He likes to compare himself to Steve Jobs. Give me a break.)

    Juicero has responded to the negative publicity - and the pasting it has been taking on social media - by offering consumers the ability to return the machines for a full refund. This isn't the first time that Juicero has had to do a little back-pedaling ... the machine used to cost $700 and they reduced the price to $400 to make it more accessible.

    For the most part, though, the company has defended itself, saying the machine is a unique experience, and that the packets have greater quality control than fresh fruits and veggies.

    I'm not sure that Juicero's hyperbole is the worst thing in the world. They could be selling worse products, and their target customer would seem to be one that is willing to use ample disposable income for toys like these.

    But I do think that one piece of the company's current strategy - limiting sales of the packets to people who actually own the machine - speaks volumes about what may be a core insecurity about the hardware it has been selling. The sum of the parts, high tech though they may be, may in fact be less than the whole.

    Published on: April 21, 2017

    Good piece in the Wall Street Journal about how the United States largely has been replaced as the bread basket of the world:

    "Brazil overtook the U.S. as the world’s biggest soybean exporter in 2012-13, according to the U.S. Department of Agriculture. It’s projected to be the second-largest corn exporter, on the heels of the U.S., this season. As of the last crop year, Russia now beats America in shipments of wheat.
    "It’s a reversal for a country that has long identified as the world’s bread basket. America’s share of global corn, soybean and wheat exports has shrunk by more than half since the mid-1970s, the USDA says. In soybeans, the most exported U.S. crop, U.S. supplies make up about 40% of world exports, down from more than 70% three decades ago."

    This shift has larger implications, the Journal writes:

    "American farmers’ fates are inextricably tied to the broader economy. Farmers produce three-quarters of the nation’s food. U.S. agricultural exports in 2015, the latest year for which data is available, generated more than $300 billion in economic output and directly supported more than one million jobs, according to the USDA."

    It is a complex issue and a fascinating story, and you can read it here.
    KC's View:

    Published on: April 21, 2017

    • The New York Times this morning reports that Unilever " is buying Sir Kensington’s, a small condiment maker that has muscled its way on to grocery store shelves long thought impervious to disruption ... It is the first acquisition Unilever has made since it fended off a $143 billion takeover offer from the Kraft Heinz Company in February. In the intervening months, Unilever has announced that it is selling its spread business, which includes brands like Country Crock and I Can’t Believe It’s Not Butter, as well as some baking lines, leading some to speculate that it might get out of food sales altogether.

    "But instead, it seems to be refocusing its food portfolio on ice cream and condiments, as well as tea. Unilever also makes Hellmann’s mayonnaise and Marmite, a yeast extract spread, and is not selling either."
    KC's View:

    Published on: April 21, 2017

    • The Wall Street Journal reports that "Javier Polit, a long-time IT executive at Coca-Cola Co., joined Procter & Gamble Co. Monday as chief information officer. Mr. Polit replaces Linda Clement-Holmes, who is retiring after 35 years at the consumer packaged goods company."
    KC's View:

    Published on: April 21, 2017

    ...will return.
    KC's View:

    Published on: April 21, 2017

    It has been pretty busy, so let me just offer a few short takes...

    • I finally saw Miss Sloane, a political drama/thriller that focuses on a rebel lobbyist (played by Jessica Chastain) trying to buck the Washington, DC, establishment. I'm not sure it entirely works, but it does offer some food for thought about the degree to which lobbying affects public policy. Good performances, though, especially by Chastain and the always reliable Mark Strong. John Lithgow and Sam Waterston chew the scenery a bit as the bad guys, but they're entertaining while doing it.

    • I've been resisting Sing for a while, but my daughter finally persuaded me to watch it ... and I found that it was pretty entertaining, especially for kids. It isn't one of those animated movies that works well on different levels - for kids and adults - but the music is toe-tapping and Matthew McConaughey and Seth McFarlane do especially nice voice work.

    Homeland ended with a bang a couple of weekends ago, ending with a provocative ending to a season that I thought was as timely as anything they've produced. I recommend going back and watching it if you haven't seen it. The new season of "24," on the other hand, left me conflicted - I've enjoyed the reboot, but it didn't strike me as compelling as the early Jack Bauer-centric seasons. That said, if they renew it I'd be willing to give "24" another shot.

    • Best news of all - the third season of "Bosch" - based on the Michael Connelly novels and featuring the great Titus Welliver in the title role - now is streaming on Amazon. Yippee.




    That's it for this week.

    Have a great weekend, and I'll see you Monday.

    Sláinte!!
    KC's View: