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    Published on: April 25, 2017

    by Michael Sansolo

    Facing today’s problems is hard enough, so it takes a special kind of leadership to start planning for the issues of the future well before they arrive. But that’s exactly what creative leaders need do and there are two recent - and staggeringly different cases - that demonstrate this thinking.

    Let’s start with an unexpected source, the American Automobile Association (AAA). To be honest, I always think of AAA when we get stranded with a dead battery or unfixable flat tire. I never think of AAA for innovation, but once again, I was wrong.

    AAA actually has a pretty strong innovate streak built into its DNA. The organization is 115-years-old, which means it began at a time when cars were still pretty new to the road. AAA has been evolving ever since. As Fast Company reported recently, that evolution is far from done.

    AAA recognizes a major trouble spot on the horizon: a time when many Americans may no longer own cars. Already, car sharing services like Zip Cars and Car2Go are popping up in major cities and both business models make AAA useless.

    My daughter is one of those car sharers and her experiences are fascinating. When she needs a car she checks an app to find the closest Smart Car offered by Car2Go. Then by using her phone and PIN she gets access to the car, drives it for however long or short she needs it, and is done.

    If there’s a problem with the car she won’t call AAA, even though we have a family membership. She just leaves the car, alerts Car2Go and finds a new vehicle.

    Apparently the folks at AAA recognize the long-term erosion this type of behavior could create for its business. Now the association is rolling out GIG, its own car-sharing service. There’s no telling whether it will succeed or if it can break into an already established market.

    But this much is for sure: at least AAA is trying. That seems a much better plan that simply staying on its current path and ignoring the changing trend in car ownership, especially about younger people in urban areas. For all we know in another 115 years people will marvel that AAA got the jump on this trend much as it jumped on driving overall in 1902.

    More expectedly, the same spirit of innovative problem solving is true at Facebook. Business Insider reported this week that the social media giant is working hard on what they see as the next big change in their market: the world after the smart phone.

    Given how quickly the smart phone has risen to prominence, it seems both inconceivable and inevitable that its days are numbered. And Facebook is smart to anticipate that, especially since the site is overwhelmingly reliant on that technology today.

    Facebook’s 10-year growth plan examines all the future ways we might interact with technology in the days after the smart phone. Like AAA, Facebook is planning for a very different future to keep the company vital and growing.

    To paraphrase the line from Ferris Bueller’s Day Off, “The future moves pretty quickly. If you don’t stop and look around once in a while, you could miss it.”

    Sounds like we all need to be looking around.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
    KC's View:

    Published on: April 25, 2017

    by Kevin Coupe

    The Wall Street Journal has a story this morning suggesting that "after years of fretting that people had stopped eating breakfast, or simply nibbled on the go, food makers and restaurants are discovering that more of us actually want to eat more than once in the morning."

    The two breakfasts may be smaller than the traditional morning meal - often people grabbing a quick yogurt before working out or going to work, and then something else when they get to their desks.

    According to the story, "The fast-growing habit seems to have caught the giant food industry by surprise. Food makers have focused on persuading us to eat breakfast food all day, such as cereal for dinner and oatmeal for an afternoon snack. Meanwhile, consumers have expanded their appetite for what passes as breakfast food as restaurants serve up grain bowls and even salmon and chicken slices during morning hours. Multiple breakfasts are often celebrated in social-media posts, with more than 87,000 posts on Instagram using #secondbreakfast" ... The increasing popularity of multiple breakfasts is boosting sales of convenient breakfast foods. Sales of frozen breakfast entrees rose 24% over the past five years, according to Nielsen. Meantime frozen breakfast sandwiches have risen 30%."

    I can certainly relate to this. I usually have a first breakfast when I get up at 5:30 am, and then nibble on something else mid-morning ... after I've posted MNB and gone for a run. (The one staple is a 6-8 cups of coffee I consume each morning.)

    This certainly seems like a prime marketing opportunity for both retailers and suppliers ... especially because all those social media posts are creating their own marketing groundswell.

    It all is an Eye-Opener.
    KC's View:

    Published on: April 25, 2017

    The Financial Times is reporting that Cerberus Capital Management-controlled Albertsons "is exploring a takeover of high-end grocer Whole Foods Market," a process that comes at the same time as there has been speculation that Kroger might be interested in acquiring Whole Foods.

    Whole Foods appears to be very much in play at the moment, following the revelation that activist investor group Jana Partners had acquired a nine percent stake in the retailer and was looking for operational and perhaps organizational changes. FT writes that Whole Foods has a market value of $11.4 billion, and that the retailer "has hired Evercore to advise it on a strategic review of its business operations, which could include exploring a sale."

    According to the story, "Cerberus has been looking for deals to expand its supermarket business. Bloomberg reported in March that Albertsons had held preliminary talks to merge with Sprouts Farmers Market, an organic food retailer. However, talks between Albertsons and Sprouts have not proceeded, according to two people briefed about the matter, prompting Cerberus to take a serious look at Whole Foods, which is significantly larger."
    KC's View:
    I'm not sure this deal makes much more sense than the rumored Kroger deal, but the involvement of Cerberus does change the calculation a bit;; it seems to me that a private equity group will look at a deal through a different prism, and so this is more likely to happen.

    I would've thought a Sprouts deal more attractive to both sides. And I never would've thought of Whole Foods as a consolation prize.

    Published on: April 25, 2017

    CNBC reports that Walmart's new investment boutique, Store No 8, has hired Jenny Fleiss - founder of Rent The Runway, a designer fashion rental business - to be CEO of the first business that it will incubate.

    The business is called Code Eight, and is described as "a startup that will develop personalized, one-to-one shopping experiences."

    The Store No 8 investment business is based in Silicon Valley and, the story says, "plans to work with startups that specialize in areas such as robotics, virtual and augmented reality, machine learning and artificial intelligence."
    KC's View:
    Just another indication that Walmart is very serious about recasting its e-commerce side as both innovative and aggressive, and willing to put its money where its mouth is. For now it appears that Walmart is going to continue with its recent trend toward acquisition and the hiring of experienced people to drive digital innovation, since it doesn't have a tone of bench strength. But ... it is building a bench and a farm system. Attention must be paid.

    Published on: April 25, 2017

    The Indianapolis Star has a story about how Marsh Supermarkets plans to close 10 stores next month, including four in Indianapolis, which will leave the troubled regional chain with 53 stores.

    According to the story, "The latest round of closing come a little more than two years after Marsh CEO Tom O'Boyle told IndyStar he wanted to open as many as 13 new stores by the end of 2018 while updating 52 of the chain's then-73 existing stores. In addition, Marsh — long thought to be up for sale — was looking to acquire other grocery stores, O'Boyle said ... Even at that time, O'Boyle's plan represented an abrupt pivot for a company that had been closing far more stores than it has opened in recent years. Marsh opened one store in 2014, but it also closed eight. It closed four more in 2015, and O'Boyle acknowledged at the time that additional stores could be shuttered."

    Multiple stories about the Marsh situation point to reports that Marsh has found itself not paying rent on some properties, even as it was wrestling with new and aggressive competition.

    The Indianapolis Business Journal notes that "Sun Capital bought Marsh for $88 million in cash and the assumption of $237 million in debt. Sun, with more than $9 billion in capital under management, has the financial firepower to rescue Marsh if it chooses. But private equity firms, like any investor, aren’t prone to put in additional cash unless they’re confident they’ll earn a return on it."

    The stories suggest that industry observers are pessimistic about Marsh's ability to come back, and that it likely it looking at some combination of additional closures and a sale of some units in the not too distant future.
    KC's View:
    The general consensus seems to be that Marsh isn't long for this world. I see no reason in this case to disagree with the general consensus.

    Published on: April 25, 2017

    The Wall Street Journal reports that Amazon has established an internal team that is designed "to help navigate the retail giant’s role in the shake-up of transportation ... the team serves as an in-house think tank to figure out how to leverage autonomous vehicles."

    While Amazon has been up front about its desire to get more involved in supply chain and transportation logistics, leasing trucks, airplanes and even ships, the Journal says that this team is not currently focused on Amazon building its own fleet of driverless vehicles.

    The Journal writes, "Amazon could see potential in linking self-driving technology with its payments and services as cars become a way to place and receive deliveries. Its voice-command software, Alexa, which has been successful in its Echo speakers, is being used in cars. Ford Motor Co. , Daimler AG’s Mercedes-Benz and others have announced ways to integrate Alexa into their vehicles, enabling drivers to tap into some functions from home, such as starting the engine and unlocking doors."
    KC's View:
    This is what Amazon does - spread its bets around on lots of different technology plays, looking for every possible advantage and possibility. Not every retailer can replicate the breadth of its approach, but every retailer needs to be looking outside the four walls of the store, testing different possibilities to see where there is a glimmer of potential.

    Published on: April 25, 2017

    The Wall Street Journal reports that as bricks-and-mortar stores closes their doors, malls are having to find new uses for real estate - and one of them is the housing of call centers, back offices and even warehouse space designed to serve customers of online retailers.

    According to the story, "The moves also show how internet retailing and changing shopping preferences are beginning to reshape real estate and local labor markets. By walling off sections of previously vacant retail space, landlords are making more efficient use of their properties even as they create new employment centers and alter the look and feel of venues that have been centerpieces of communities."

    Not everybody thinks this is an idea with long-term potential: "Some real estate consultants say putting a call center in a mall to fill up space is generally seen as a short-term fix that hurts the long-term viability of the building as a retail center, since stores live off each other."

    One real estate puts it this way: "It’s like pulling roof shingles off your house to put in a fireplace."
    KC's View:
    While I can understand the short-term appeal of renting backroom space to online retailers, it does sort of seem like the real estate version of a dog falling on its back and throwing up its legs in surrender.

    I wonder if this might be what Sears is thinking, though. Maybe they're thinking about turning stores into warehouse/backroom/call center space, leasing the buildings in areas that are close to where shoppers live.

    Published on: April 25, 2017

    • The National Retail Federation (NRF) says that "consumers say they will spend more than ever on Mother’s Day this year ... Mother’s Day shoppers are expected to spend an average of $186.39 for the holiday, up from last year’s $172.22. With 85 percent of consumers surveyed celebrating the holiday, total spending is expected to reach $23.6 billion. That’s the highest number in the survey’s 14-year history, topping last year’s previous record of $21.4 billion."

    MarketWatch reports this morning that Tyson Foods has agreed to spend $4.2 billion to acquire AdvancePierre Foods Holdings, a Cincinnati-based company that "will add a line of ready-to-eat lunch and dinner sandwiches and snacks to Tyson's range of retail offerings."
    KC's View:

    Published on: April 25, 2017

    • Kroger announced that Kristal Howard has been named the company’s new Head of Corporate Communications and Media Relations. Since 2010, Howard has been Public Relations Manager for Kroger’s Dallas and Houston divisions.

    Kroger also said yesterday that Colleen Lindholz, currently president of The Little Clinic, is expanding her role to also lead Kroger Pharmacy as Kroger's President of Pharmacy and The Little Clinic.
    KC's View:

    Published on: April 25, 2017

    • The Associated Press reports that Greek yogurt company Chobani has filed a lawsuit against Alex Jones, the right-wing radio host, and his InfoWars website, charging that Jones posted fabricated stories "that linked Chobani owner Hamdi Ulukaya and the company to a sexual assault case involving refugee children."

    According to the story, "The complaint says InfoWars released a video on April 11 describing Chobani’s practice of hiring refugees and a sexual assault case that did not involve the yogurt company. During the video, an Info Wars reporter republished statements that claimed the Chobani plant brought crime and tuberculosis since it opened the plant five years ago while also pointing out previous reports of its willingness to hire refugees in Twin Falls.

    "Twin Falls is one of the two cities in Idaho with a refugee resettlement center."

    The AP story goes on: "The report was critical of Ulukaya’s support of hiring refugees while reporters then reacted to a separate issue involving three Twin Falls refugee boys who admitted to charges involved in the assault of a 5-year-old girl at an apartment complex. The 2016 assault sparked months of turmoil in Twin Falls after the story about the incident was spun by far-right blogs and anti-immigration groups into accounts that exaggerated and falsified many of the details."

    In the complaint, Chobani's lawyers wrote, "(Jones) is no stranger to spurious statements. He has claimed that the U.S. government orchestrated the 9/11 attacks and the mass shooting at Sandy Hook Elementary School in Connecticut. Mr. Jones has now taken aim at Chobani and the Twin Falls community ... The defendants' defamatory statements were designed to cause — and did in fact cause — customers to call for a boycott of Chobani’s products."

    Jones and InfoWars did not respond to AP requests for comment.
    KC's View:
    I'd guess that the folks at Chobani would've preferred to ignore Jones, who strikes me as someone who manages to consistently combine ignorance with inflammatory rhetoric, resulting in nothing more than verbal flatulence. (His claims about 9/11 and Sandy Hook are particularly reprehensible.)

    But sometimes the bully has to be smacked down. I wish Chobani luck.

    Published on: April 25, 2017

    Responding to the stories about Kroger considering an acquisition of Whole Foods, something about which I am skeptical, MNB reader Tom Murphy wrote:

    As an-ex Krogerite…quite some time ago, let me just say this, “Kroger didn’t get where they are by listening to financial analysts, or consultants, or too many outsiders”.  They listen to the hearts and minds of their carefully crafted internal talent…who knows what is not only possible, but likely to succeed.  Lots of stuff looks good in print and sounds good over lunch…where there is only opinions and little accountability for results…which is why nearly 80% of mergers fail to produce the intended benefits.  I am with you…I am not there yet.

    On the subject of hiring middle aged people instead of millennials, even for start-up jobs, MNB reader Jim Mahern wrote:

    In 2008, at the age of 58, my sister in law lost her job in the hospitality industry due to "cutbacks". She tried for months to get a similar job elsewhere in the hotel industry. She ended up with a series of part time jobs and spent four years as the nanny for my daughter's two sons. She never gave up, and in 2013, she was hired by the Delaware North Co. to be the Food and Beverage manager at the Ahwahnee Hotel in Yosemite National Park, kind of a "dream job". When Delaware North lost the contract at Yosemite in 2016, they offered her a similar job at Shenandoah National Park in Virginia. So at age 65, they moved her across the country, at their expense and at her current pay, because they realized the value that comes with experience. Age can also be an asset. She is there now and works as hard as she ever did and with a special commitment to Delaware North.
    KC's View: