business news in context, analysis with attitude

Published on: May 24, 2017

by Kate McMahon

When we first embarked on the 10-hour drive to my daughter’s college four years ago, it never occurred to me to seek out a convenience store in Pennsylvania for a healthy snack or a freshly brewed cappuccino. Then I discovered Sheetz and Wawa.

On our final drive back home last week, after her graduation magna cum laude (permit me a mother's pride), I knew I had to choose one over the other.

For residents of Pennsylvania, the Sheetz vs. Wawa rivalry is said to inspire “tribal loyalties” and heated debate. The two regional chains are also prime examples of convenience stores that defy the old “Cokes and smokes” image and an ongoing shift in consumer behavior.

I first stopped at a Wawa to refill the gas tank and did a double take when I entered the well-lit, welcoming store. This was not the tired, crowded convenience mart I expected. Instead of facing a rack of beef jerky and pastries in plastic, there was a cold storage case with cut-up fresh vegetables and dip and sliced fruit. I had one of those “Why don’t we have a Wegmans at home?” moments, except that in this case it was Wawa envy.

I had a similar reaction entering the bold, bright and big Sheetz, where many specialty items end in the letter Z. Customers were at a touch-screen custom ordering sandwiches with a choice of sauces and “fryz” on top, and the offerings in "Schweetz" section were beyond tempting.

In both, the coffee options matched Starbucks and other premium coffee emporiums in taste, at a lower cost point.

For the first time, I thought of a convenience store as a destination, rather than a midway point. And therein lies the defining difference for convenience stores faced with both gas and tobacco sales on the decline.

It’s all about the product inside, and convenience. A recent survey by Videomining found that more fuel buyers are making in-store, higher-margin purchases after filling up, with pump-to-store conversion up 2% nationwide since 2015. The research said an increasing number of women and Millennials are now shopping at convenience stores.

As the Wall Street Journal noted yesterday, the world’s big oil companies are looking to retool the gas station with new fuel options, restaurants, shops and even package delivery services to make up for revenue lost to electric cars and increased fuel efficiencies. These retooled stores also will present far more compelling competition to traditional grocery stores.

Freshly prepared food is clearly a key factor, whether a convenience store is a stand-alone on an urban corner, or part of a gas station on a rural route or an interstate highway.

In fact, the National Association of Convenience Stores reported that about 34% of in-store profits at convenience markets came from food and beverage service in 2015, up from 22% in 2010. While most menus include the basics - pizza, burgers and hot sandwiches - the NACS estimates that 10% of the 154,000 convenience stores across the country could be described as “food-forward” with ethnic offerings and make-your-own milkshake machines.

The trend also is adding to the pressure on fast-food chains such as McDonald’s, Burger King and Wendy’s, particularly since consumers can swing by a local Sheetz, for example, and pick up an affordable made-to-order burger and a gallon of milk from the drive-thru window.

Now back to Sheetz vs. Wawa. Family-run Sheetz, founded in 1952, has more than 650 locations across six states and some 1.3 million Facebook followers. Privately-held Wawa, founded in 1964, has close to 750 outlets in six states and is followed by 1.28 million on Facebook. In a national poll, Wawa nabbed the nation’s best convenience store rating, followed by QuikTrip at No. 2 and Sheetz in third place.

More importantly, both chains have a distinct personality and signature offerings (hence the rivalry), as well as mobile ordering apps that only add to the convenience of shopping there.

Pressed to choose on my final college road trip, I went to Wawa. That said, I am indeed jealous that it in the last week it was announced that Washington, D.C. is getting both a Wawa and a Wegmans.

That's what I call a Trump bump.

Comments? As always, send them to me at kate@mnb.grocerywebsite.com .

Published on: May 24, 2017

by Kevin Coupe

The Associated Press points out that when airline passengers take videos of unpleasant occurrences on airplanes - like passengers being dragged off so that flight crews can take their seats - they in fact are violating terms of service established by the major airlines.

In fact, the people who shot the video of the passenger being dragged off the plane also could have been removed, since they "violated United's policy on photography ... Under United's policy, customers can take pictures or videos with small cameras or cellphones 'provided that the purpose is capturing personal events.' Filming or photographing other customers or airline employees without their consent is prohibited. American, Delta and Southwest have similar policies ... Airline rules on photography are sporadically enforced, but passengers should read them in the in-flight magazines because there can be consequences."

This sort of reminds me of the time a few years ago when the Domino's Pizza employee took a video of himself picking his nose and putting it on a pizza ... and the company responded in part by outlawing the use of video cameras in its kitchens.

That was, I said, exactly the wrong thing to do. In fact, they should've made a point of saying that they were going to spend so much time and money on employee education, better hiring and stronger food safety initiatives that cameras would be absolutely welcome there.

The same goes for the airlines.

While I realize that these regulations are only occasionally enforced, I would argue that they need to change them. Now. They should say that they want their service to be so good that any videos taken will be the most boring imaginable. And that if they make a mistake, they want the cameras there, because they want to be held accountable.

They might as well. Because people are going to use their cameras, they're going to upload the videos to social media, and if the airlines every try to enforce their rules, it is only going to make things worse.

It used to be that most supermarkets would have a sign at the front door: "No still or video photography." I almost never see that sign anymore, because stores realize that every person walking into the store comes equipped with a video camera. They can't do anything about it.

It almost doesn't matter if a company doesn't want to be transparent. Customers want them to, and will find a way to make them so. Corporate practices, good and bad, are on full view for the world to see ... and if they aren't today, they will be.

Personally, I think this is a good thing.

Deal with it.

It is an Eye-Opener.

Published on: May 24, 2017

The Seattle Times reports on Amazon's annual meeting yesterday, pointing out that founder/CEO Jeff Bezos remains resolute in his "today is day one" approach to business.

"It never looks like smooth seas to us," he said. "There’s no rest. We can’t rest on our laurels."

The Times writes that "at the gathering, Bezos spelled out how Amazon expands its territory. For a business to spark Amazon’s interest and commitment, 'it has to be difficult, distinctive, innovative in some way,' Bezos said.

"The business doesn’t need to be a guaranteed success, but it has to be big — and to provide a significant return on capital. The enormous size of Amazon’s 'pillars' — multibillion-dollar businesses such as the Prime membership program, cloud-computing unit Amazon Web Services, and its selling platform for third-party merchants — has set a 'high bar' for new ventures, Bezos said."

A couple of other major points from the Times story:

• "Protesters for various causes — from pilots working for the airfreight companies that fly Amazon’s planes to animal-rights advocates — swarmed outside the meeting venue, showing how the world’s largest online retailer has become a lightning rod for a wide array of economic and societal issues.

"Inside the room, the Rev. Jesse Jackson asked Bezos to make decisive efforts to increase diversity at the company ... Bezos replied that diversity is 'very important' to Amazon, and that the company is working on 'quite a few initiatives in this area.' Amazon executives described investments in science and technology education as well as the existence of internal 'affinity groups' as progress in that direction."

• "A shareholder said that he was concerned that Amazon’s stiff opposition to Trump’s proposed travel ban for nationals of certain Muslim countries, as well as Bezos’ ownership of the Post — a newspaper that has aggressively covered the Trump administration — risked 'reputational harm' to Amazon and could turn off a large chunk of current and potential customers.

"Bezos responded that Amazon, as a company, does not oppose the president nor other elected officials. Rather, it takes an 'issue-by-issue approach.' Amazon stood up against the travel ban because the immigration issue is one that directly affects its employees, Bezos said.

"Moreover, Amazon has seen four presidents in its life span as a company. 'Under all of them, customers have liked low prices, fast delivery, vast selection,' Bezos said."

Published on: May 24, 2017

In Colorado, the Daily Camera reports that Walmart has announced that it will close its Neighborhood Market store in Boulder less than four years after it opened.

The story notes that Walmart says that "the decision was motivated by the changing nature of retail, including the shift to online shopping." But, the story also points out that Boulder could be referred to as a chain store-resistant "liberal enclave," and that "the 53,500-square-foot Neighborhood Market opened in October 2013 to protests from Boulder residents."

At the same time, the Daily Camera writes, "this is the second national grocery store to close a Boulder location this year. Austin, Texas-based Whole Foods shuttered its Baseline operation in February, part of an effort to shed smaller, older stores. Local grocer Alfalfa's saw a boost in sales from the Whole Foods closure, said company spokesperson Sonja Tuitele. The two stores, a mere two miles apart, catered to the same group of nearby organic shoppers."

Tuitele says that she "is confident that Alfalfa's will continue to thrive in Boulder and wasn't surprised that Walmart hadn't in the hyper-competitive market that includes two Lucky's Markets, two Whole Foods, two Sprouts, three Safeways, two King Soopers, and a Natural Grocers and Trader Joe's."

Published on: May 24, 2017

Business Insider reports on what appears to be a culture clash at Starbucks, as store managers throughout the company have been holding mandated meetings designed to reinforce the necessity for baristas to connect with customers. It is, the company says, part of a broader "fight for the heart and soul" of Starbucks.

But at least some employees don't see it that way, instead interpreting the meetings as a way to force "baristas to take responsibility for customer-service problems caused by other issues like understaffed stores, an increasing demand from mobile and drive-thru orders, and time-intensive drinks." One barista says that "Starbucks essentially ordered employees to find a way to improve the customer experience — or quit the company."

According to the story, "Starbucks baristas told Business Insider they felt Starbucks was right about one thing: that the coffee chain needed to make some changes. However, instead of corporate pep talks, the employees we spoke to said they wanted better support in the form of higher wages and better staffing at stores."

The story also provides some context, saying that the meetings are "part of a two-year agenda called North Star that aims to refocus the company's approach to customer service ... North Star is one of the company's first major initiatives under the leadership of Starbucks' new CEO, Kevin Johnson, who replaced longtime chief executive Howard Schultz in April."

"I think a key differentiator for Starbucks is that emotional connection our partners have to what we stand for, and the fact that we are in the business of human connection," Johnson says. "At the end of the day, there is one thing that every person on this planet has in common, and that is the human experience. ... It's a beautiful thing."

Published on: May 24, 2017

• The Ann Arbor News reports that Walmart plans to spend millions of dollars on 12 Michigan stores, part of a "plan to update the chain's U.S. store portfolio" in a way that will help "consumers integrate online options into their shopping patterns."

Among the changes being made are "moving in-store pickup areas to the front of the store" ... "testing online grocery ordering with in-store pickup in 3 southeast Michigan markets" ... "creating a relaxing lounge-like area for shoppers picking up online orders" ... and "increasing the number of fresh and organic items" as well as expanding the produce, deli, bakery and baby departments.


• The Associated Press reports that Walmart is "expanding its military leave-of-absence policy by offering differential pay to all eligible employees who are on military assignments lasting more than three days ... the differential pay will cover the duration of military leave, including basic training, for employees whose military salary is less than what they earn working for Wal-Mart."

Walmart says that its employees "took more than 4,400 military leave of absences last year," according to the story.

Published on: May 24, 2017

The Washington Post reports that "Google has begun using billions of credit-card transaction records to prove that its online ads are prompting people to make purchases – even when they happen offline in brick-and-mortar stores, the company said Tuesday.

"The advance allows Google to determine how many sales have been generated by digital ad campaigns, a goal that industry insiders have long described as 'the holy grail' of online advertising ... The new credit-card data enables the tech giant to connect these digital trails to real-world purchase records in a far more extensive way than was possible before. But in doing so, Google is yet again treading in territory that consumers may consider too intimate and potentially sensitive. Privacy advocates said few people understand that their purchases are being analyzed in this way and could feel uneasy, despite assurances from Google that it has taken steps to protect the personal information of its users."

You can read the story here/.

Published on: May 24, 2017

• The New York Times reports that Amazon is opening one of its bricks-and-mortar Amazon Books stores in the Big Apple this week, inside the upscale Time Warner Center at Columbus Circle. It is the company's seventh.

" The 4,000 square-foot space, near the site of a now-shuttered Borders store, is just a few blocks from Penguin Random House, and walking distance from Simon & Schuster and Hachette’s Midtown headquarters," the Times writes, placing Amazon right in the middle of an industry that it has done its level best to disrupt. "This summer, the company plans to open another store on 34th Street."

Published on: May 24, 2017

• The New York Times reports that "Target will pay $18.5 million to 47 states and the District of Columbia as part of a settlement with state attorneys general over a huge security breach that compromised the data of millions of customers. The settlement ends a years-long investigation into how hackers obtained names, credit card numbers and other information about tens of millions of people in 2013 ... Target said that it was 'pleased' to have resolved the issue. Target has spent $202 million on legal fees and other costs since the breach, according to the company’s most recent annual statement."

Published on: May 24, 2017

• Albertsons yesterday announced hires that it said would "collectively add 30 years of digital leadership experience in product and digital technology" - Karl Varsanyi, "who helped develop macys.com into one of the largest eCommerce sites in the United States," and Ramiya Iyer, "who was instrumental in building and scaling Levi Strauss & Co.'s platforms and analytic capabilities worldwide," as well as holding IT executive positions at Walmart and Sam's Club.

Varsanyi joined Albertsons as GVP of Digital Product Management with responsibility for the digital experience (web, app, and in-store) for all brands and locations.

And Iyer joined Albertsons as the GVP of IT Digital and Marketing/Merchandising.

Published on: May 24, 2017

• The Food Marketing Institute (FMI) yesterday "submitted a statement for the record to the U.S. House of Representatives Committee on Ways and Means hearing on Increasing U.S. Competitiveness and Preventing American Jobs from Moving Overseas: How Border Adjustment and Other Policies Will Boost Jobs, Investment, and Growth in the U.S."

This is the same hearing where, as MNB noted yesterday, Target CEO Brian Cornell testified, arguing against a Republican-backed proposal that would create a border adjustment tax on imported products (and also offering tax credit on exports). The Cornell position is that such a tax would result in increased prices and thus hurt consumers.

We also reported yesterday that other executives scheduled to testify in favor of a border adjustment tax included Juan Luciana, president and CEO of agribusiness Archer Daniels Midland, and former Walmart CEO William Simon.

The FMI statement read, in part:

"Although the industry is generally supportive of efforts to move to a territorial system, there is no room for border adjustments in tax reform and the approach should not be considered. The type of border adjustment being discussed would inevitably lead to higher consumer prices. In an industry that operates on such a narrow profit margin anyway, grocers do not have the ability to absorb cost increases. "Border adjustment is, even under a best case scenario, a gamble. The wager, unfortunately, is a bigger tax bill for many food retailers and/or higher prices for consumers. There is no reason to make this bet; tax reform can and should proceed without a border adjustment."

Published on: May 24, 2017

...will return.