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    Published on: July 27, 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, I'm Kevin Coupe and this is FaceTime with the Content Guy.

    This week's FaceTime was recorded during my vacation, when I attended - and moderated several panel discussions at - the second annual Organic Produce Summit (OPS).

    Just like last year, I found OPS to be among the most energetic conferences in the food industry. Lots of great presentations, lots of great exhibits.

    One of the most interesting talks was by keynoter David McInerney, a founder of FreshDirect who also serves as the company's "chief food adventurer." One of the core points he made was that he believes that it is critically important for people and companies in the organic space not to demonize fresh foods that are not organic, because the result might be people bypassing a fresh, non-organic pear in order to eat organic Twinkies, if such a thing existed. (His example, not mine.)

    in fact, McInerney argued against using the word "conventional" when it comes to non-organic produce - there is nothing "conventional" about it, he said, and the produce business needs to be more open-minded in how it thinks about such things. No produce, he said, should be marginalized ... rather, it should be celebrated in marketing, merchandising, and informational efforts.

    Which actually reflected a point made in both the sessions that I moderated - that even as people become more informed about and get greater access to an expanded selection of fresh produce, it remains critical that every part of the supply chain focus on education, in addition to doing lots of sampling and providing as much experiential marketing as possible.

    One final point. A nutritionist named Ashley Koff made the following point - that the vast majority of consumers are not looking for better nutrition. They are, she said, seeking better health - and that is not just a semantic difference. It is, in fact, a difference that should inform every marketing, merchandising and educational decision.

    That's what is on my mind this morning, and what was on my mind when I attended the Organic Produce Summit - a great event that I hope they'll invite me back to next year. As always ... I want to hear what is on your mind.

    KC's View:

    Published on: July 27, 2017

    In Rochester, the Democrat and Chronicle reports that working with delivery service Instacart, "Wegmans Food Markets will begin rolling out same-day grocery delivery next week across upstate New York — launching Tuesday in Buffalo, and beginning Aug. 8 in Rochester."

    The story notes that "Wegmans and Instacart began offering delivery in mid-June in northern Virginia and Maryland markets. The initial rollout schedule did not include upstate. And there still are limits. Stores in Canandaigua and Ithaca are not included, for example, and the delivery area is set between 20 and 30 minutes from select store locations, said Wegmans spokeswoman Tracy Van Auker."

    Delivery costs $5.99 per order of $35 or more, with unlimited one-hour deliveries for customers who pay an annual membership fee of between $99 and $149, depending on location.
    KC's View:
    It is a measure of the great respect that I have for Wegmans that I continue to believe that they will find the Instacart tie-up to be a mistake, largely because it cedes control of an important part of the customer experience to an outside company. The only way I think this makes sense is if Wegmans is using it to mark time while it develops its own delivery infrastructure.

    Which wouldn't surprise me.

    Published on: July 27, 2017

    Business Insider reports that a federal judge has ruled against Kroger's request that it stop Lidl from selling products under its "Preferred Selection" private label, which Kroger said mimicked its own Private Selection" brand.

    The judge said that while the labels were "somewhat alike," there is a difference between "preferred" and "private." The judge scheduled a bench trial to begin on January 11.

    The story says that Kroger "filed its lawsuit against Lidl a couple weeks after the German chain, which has 10,000 stores globally, opened its first US stores. Lidl is planning to open 100 stores along the East Coast by next summer. The two chains are expected to compete fiercely on prices, with Lidl promising to offer prices of up to 30% below its competitors."
    KC's View:
    In the end, Kroger will depend on its ability to compete in-store, not on what happens in the courtroom. The folks at Kroger know that ... and I suspect that the lawsuit is just to demonstrate that it is willing to play hardball and fight for every inch of competitive advantage.

    Published on: July 27, 2017

    Walmart this week made 10 recommendations for how the US manufacturing sector might revitalize itself and "help recapture $300 billion of the $650 billion worth of consumer goods that are currently imported."

    According to the Reuters story, "The company's policy proposals included building vocational training programs, reducing costs for private industry to train workers, rebranding U.S. manufacturing to attract workers and drive demand for domestic products, encouraging component production to close supply chain gaps and promoting manufacturing clusters through public-private cooperation.

    "Other proposals included eliminating federal overlap in manufacturing regulations, creating flexible compliance requirements for small businesses, creating a globally competitive tax environment, expanding tax deductions to foster manufacturing investments and overhauling trade agreements."

    The MarketWatch story points out that Walmart made the recommendations "without irony," even though the retailer "could arguably be said to be a contributor to the demise of U.S. manufacturing, with its rapacious sourcing of consumer goods from China as it became the nation’s dominant retailer ... A 2015 estimate from the Economic Policy Institute, a left-leaning think tank, said Wal-Mart’s trade deficit with China had displaced more than 400,000 U.S. jobs."

    MarketWatch also notes that "in 2013, the Arkansas-based retailer committed to sourcing an additional $250 billion of goods “that support American jobs” over a decade. Wal-Mart says two-thirds of products sold in its U.S. stores are made, assembled, sourced or grown domestically."
    KC's View:
    I do love irony, and, as the story points out, these prescriptions fairly drip with it. It seems to me that, regardless of whether these all make sense, achieving any of them to any degree, much less all of them, would require a level of public policy maturity and nuance of which the nation and its leaders in both parties are incapable.

    Published on: July 27, 2017

    MarketWatch reports that "Lidl and Aldi are Britain's fastest growing supermarkets as the discount retailers continue to increase sales and market share, a survey showed Tuesday." Kantar Worldpanel said that Lidl's UK market share went from 4.5 percent to 5.1 percent and Aldi's went from 6.2 percent to seven percent during the quarter ending July 16.

    Of the other major UK grocers, Tesco's market share dropped from 28.3 percent to 27.8 percent during the period, while Sainsbury's went from 16.3 percent to 16 percent, Walmart-owned Asda's went from 15.5 percent to 15.1 percent, Morrison's went from 10.7 percent to 10.5 percent, and Waitrose alone saw no decrease in market share 0- it stayed steady at 5.2 percent.
    KC's View:
    The US is not the UK. Comparing them, and suggesting that what Lidl and Aldi have done in the UK will be easy for them to do in the US, is a mistake. But that doesn't mean that US retailers should underestimate or be complacent about the disruption they can create.

    Published on: July 27, 2017

    The Seattle Times reports that Amazon is saying that its online store for office supplies - dubbed Amazon Business - has grown 150 percent in just the past year, and currently has more than one million business customers.

    These customers, the story, says, includes "large firms that U.S. antitrust regulators and a federal court thought it would have trouble luring away from competitors ... Large institutions are key to Amazon’s new venture because they are the turf of rivals Office Depot and Staples, huge suppliers with the expertise to navigate big corporations’ stodgy purchasing practices that hinge on requests for proposal and multiyear contracts guaranteeing discount pricing."
    KC's View:
    What this means - and it is no surprise here - is that the Federal Trade Commission (FTC) was myopic in its approach when it decided to prevent Staples from buying Office Depot for $6.3 billion. Staples and Office Depot argued that they need to merge in order to survive in the current competitive environment, but regulators essentially ignored the existence of Amazon when it ruled against them.

    Prentis Wilson, vice president of Amazon Business, released a statement saying, “We are grateful to our customers for helping us reach this significant milestone."

    Wilson should've thanked the FTC, which missed the point.

    Published on: July 27, 2017

    The Chicago Tribune reports that Supervalu "is making a power play in the Chicago area, stepping into the void being left by the bankrupt Central Grocers, a nearly century-old grocery cooperative that's closed up shop." Supervalu is said to be buying Central Grocers' "massive," one-million-square-foot Joliet, Illinois, warehouse for $61 million, a move that comes just a month after it closed on a $390 million acquisition of California-based Unified Grocers.

    The suggests that as a result of the new Illinois acquisition, local consumers "likely will notice a greater variety of store-branded items in grocery stores previously served by Central Grocers, which operated as a wholesaler for more than 400 independent stores in the Chicago area. Many of those retailers already have switched from Central Grocers to either Supervalu or Associated Wholesale Grocers, a Kansas-based cooperative with a warehouse in Kenosha, Wis."

    This move seems to be in line with Supervalu's new reality - while it still owns some retailers (Cub, Shop 'n Save), its wholesale business during the just-completed first quarter was up 12 percent over the same period a year ago, while same-store retail sales were down 4.9 percent during the same period.
    KC's View:

    Published on: July 27, 2017

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

    • Amazon announced that it "has more than 50,000 roles available to fill across its U.S. fulfillment network. For anyone who has ever been curious about what working at Amazon is like and how the retailer fulfills customer orders at superfast speed, the company is opening up 10 of its fulfillment centers on August 2 from 8 a.m. to noon local time for its first Jobs Day with tours and information sessions ... Candidates can come on-site to learn more about working at Amazon and the technology it utilizes in its operations. The company plans to make thousands of on-the-spot job offers to qualified candidates who apply on-site as part of Amazon Jobs Day."

    Tech Crunch reports that Amazon "is continuing its international expansion push with the launch of its services in Singapore," which is expected to happen "as soon as this week ... The launch will see Amazon Prime, Amazon Prime Now fast delivery and Amazon’s regular e-commerce services become available to Singapore’s population of over five million people."

    The story notes that in addition to attempting to acquire Whole Foods in the US, Amazon "has spent 2017 pushing into new geographies ... It expanded into the Middle East — via the acquisition of — (and) initiated a move into Australia ... Now it is jumping into Southeast Asia, a region of 600 million consumers where rival Alibaba and fellow Chinese firm Tencent are already actively investing.

    Let's face facts. You can't aim for world domination without actually trying to take over the world.

    • The Washington Post reports that David Kahan, CEO of Birkenstock USA, has sent a "blistering" five-page email to store owners selling his shoes and warning them to under no circumstances to sell them via Amazon.

    The reason? Counterfeits.

    The Post writes that "Birkenstock stopped selling its shoes on Amazon earlier this year, citing a rise in counterfeit products and unauthorized sellers." However, when Amazon reportedly contacted individual retailers offering to buy Birkenstocks at full price so it could offer them online, Jahan said that "he is considering legal action against for 'knowingly encouraging a breach of our policy'."

    Kahan also called Amazon's efforts a “desperate act” and a “PERSONAL AFFRONT."

    Not cool. Amazon doesn't even deny the charge. I'm not sure that Amazon is morally required to say no if a third party wants to sell Birkenstock on its site, but the effort to deliberately circumvent the show company's policy strikes me as a mistake. They seem petty when they don't have to.
    KC's View:

    Published on: July 27, 2017

    • The Wall Street Journal reports that "small investors are buying up stand-alone retail sites that house Wal-Mart Stores Inc.’s smaller grocery stores in the South, eyeing the stable revenues being generated by the largest U.S. grocer ... These buildings have so-called triple-net-lease structures, which are typically leased to single tenants such as McDonalds’s Corp. or CVS Corp. Landlords simply own the buildings, while tenants under long-term leases of about 10 to 20 years manage the properties and pay the operating expenses and taxes. These real-estate holdings are seen to generate low but stable yields."
    KC's View:

    Published on: July 27, 2017

    • In Florida, the Sun-Sentinel reports that Lucky's Market, the Colorado-based natural and organic grocery chain, plans to open its third South Florida location in Oakland Park late next month.

    The story notes that Lucky's operates more than 20 locations around the country; the Oakland Park opening is part of a broader Florida strategy, which has the company scheduled to also open stores in Sarasota, St. Petersburg and Orlando.

    "We believe everybody deserves access to good, healthful good," CEO Bo Sharon says in a prepared statement. "At Lucky's we lower the price point. We sell affordable, cheap, organic and natural foods every single day."

    • The Atlanta Journal Constitution reports that Coca-Cola "has announced that it plans to phase out no-calorie Coke Zero in the United States after it introduces Coca-Cola Zero Sugar in August.
    The new recipe is already being sold in 25 markets worldwide, including Mexico and the UK ... On its website, Coca-Cola said the ingredients of the new drink are the same as Coke Zero, but the taste is closer to Coca-Cola Classic — just with no sugar."
    KC's View:

    Published on: July 27, 2017

    The New York Times has a sad story about a single, family-owned store in San Luis, Colorado - R&R Market - that has been in the family since 1857. It is, in fact, "the oldest business in Colorado, built by descendants of Spanish conquistadors in the oldest town in the state." And now it "is in danger, at the edge of closing just as rural groceries from Maine to California face similar threats to their existence."

    Excerpts that take both the macro and micro view:

    "Across the country, mom-and-pop markets are among the most endangered of small-town businesses, with competition from corporations and the hurdles of timeworn infrastructure pricing owners out. In Minnesota, 14 percent of nonmetropolitan groceries have closed since 2000. In Kansas, more than 20 percent of rural markets have disappeared in the last decade. Iowa lost half of its groceries between 1995 and 2005."

    "In New York or Los Angeles, the loss of a favorite establishment is an event to be mourned. But in this ranch town, where the closest reliably stocked market is 40 miles away, the threat to R&R Market raises questions about the community’s very survival."

    The story notes that the owners, Felix and Claudia Romero, "have worked in this shop seven days a week for 48 years, doling out bread and tamal flour, diapers and fishing rods, medicines and ranch tools."

    Now, they have discovered that trying to find "a buyer at a time when owning the local grocery is a high-risk endeavor, and when President Trump’s budget proposal for 2018 calls for billions of dollars in cuts to aid for rural America, including programs like food stamps and business loans that help small groceries."

    Interesting story ... and a little depressing. You can read it here.
    KC's View:

    Published on: July 27, 2017

    I may have been on vacation the past few weeks, but I've also been getting emails from Portland, Oregon-area MNB readers wondering if I am going to have one of those casual get-togethers that we've done here the past few years. I'm game if you are...

    So, let's get together tonight, July 27, at 5 pm, at Nel Centro, located at 1408 SW 6th Ave, in Portland. I'll plan on being there for a couple of hours - if the weather continues to be as amazing asa it has been the past few weeks, on the outside patio - and I hope that any MNB readers who'd like to stop by will do so.
    KC's View:

    Published on: July 27, 2017

    Commenting on a story yesterday about Hy-Vee's plans to open a super-sized convenience store, I suggested that format definitions are probably a lot more important to retailers and the media than to consumers. This prompted MNB reader Joe Luehrmann to write:

    I will make one comment on convenience stores.

    Since I retired four years ago, I have kept careful track of my spending.  I have noted one thing.  When I need a quick meal, I will drive by all of the fast food places to stop at either QuikTrip (C-store) or the local Fry's store with a lunch counter.

    QuikTrip (like Wawa and Sheetz) offers a variety of food options, many healthy, as well as a made-to-order counter that is open from 6 am- 10 pm.  In addition to that, they offer plenty of free deals to those who use their apps.  And the value is excellent.  For example, you can get two 4 oz sausages on bun with every condiment imaginable for $2.59.  The service is out of this world.  Locally, the Circle K and 7-Eleven stores are struggling to remodel.

    Or I will head to Fry's for a chicken dinner - three pieces of fried or baked chicken and two sides for $4.95.  It is a better deal than any of the burger joints.

    I think that there are a lot of opportunities for smart operators to capture the  prepared food market.

    We had a story yesterday about how President Trump continues to attack Amazon, conflating it with the journalism of the Washington Post, and accusing it of not paying taxes. I pointed out that, in fact, Amazon collects sales taxes in every state that has them, but MNB reader Mark Littrell responded:

    Something to keep in mind, state sales tax collected by Amazon did not happen until last year in my state, as well as some others.  If Amazon didn’t have a physical presence in the state, sales tax was not collected.  When filing the state returns where I live, you had to note whether you purchased anything online and whether sales tax was paid.  If not, you were to include the amount you owed.  It was strictly on an honorary basis. 

    Two things remain true. Amazon complied with the law, and now collects taxes in every state.

    Got the following email about Walmart's new pickup towers:

    Yesterday when I read that Walmart was adding this new feature I thought of Service Merchandiser too. Today they add some technology and it is labeled as new. It all seems to come around just with a different slant, and the younger generation thinks it is grand. I worked for a local grocery chain that was at ahead of its time. In the mid 90’s we started grocery pick up and loyalty cards. There were no real tech programs or software to support these innovations yet we did it. It is just now that grocery pick up and delivery and loyalty cards are working. I look back now and smile at what we had accomplished. Is that an age thing????


    Not that there's anything wrong with that.

    We had a story the other day about changes that Albertsons is making in order to compete with Amazon on one end and Lidl/Aldi on the other. We had an email yesterday suggesting that what Albertsons really ought to do is scale back on its slotting allowance demands, which prompted another MNB reader to respond:

    Well said on the part of that reader.  Slotting is a major source of income.  Items are brought in for the slotting fees and all knowing that they will fail at the market due to poor strategy selection or exorbitant retail pricing.  In  regards to market strategy, I am still trying to figure that out!

    Got the following email from MNB reader Mike Nichols:

    In your reference to the Business Insider article that reported on how Walmart is using an “easy reorder” app, you commented that “asking me to reorder amounts to imposing a step that I’d rather avoid.” While this may be true, there should still be a large segment of the population – me included – that finds this arrangement appealing. I also think that your comparison is slightly off. Instead of competing with Amazon’s subscription service, this seems like it would more directly compete with Amazon’s Dash buttons.

    I say this as a devoted Amazon customer who makes heavy use of their virtual Dash buttons to reorder items. I have never gone to their subscription model because I like to stay in control of the timing of when orders are placed (I don’t necessarily run out of products at consistent intervals). And, the Dash buttons allow me to stay in control of the reorder process while still offering most, if not all, of the convenience of a subscription service. They also avoid the hassle of having to cancel/delay pre-scheduled orders, which would inevitably come up with a subscription service. Walmart’s “easy reorder” app sounds like it would be about as attractive and convenient as Amazon’s dash buttons.

    And, on another issues from another reader, about LL Bean's repositioning of its brand:

    LLBean’s brand is really strong, starting with their return policy.  While current management may wish to change it, the fact is that part of LLBean’s loyalty is their return policy.  For me, they get “first purchase consideration status”.  To me, this is worth $5-$10 more for their shirts (for example).  They change their return policy – they become a “price merchant” to me. 

    On another subject, one MNB reader wrote:

    The Taco Bell/Lyft hook up seems like a really good idea—especially if they can tie the apps together for mobile ordering to make the drive-thru trip more efficient (or at least to save some poor Lyft driver from having drunk frat boys scream chalupa orders at his or her head).

    We took note yesterday of a Boston Globe report that the Organic Consumers Association has announced that it "found traces of glyphosate in 10 of 11 samples of the company’s ice creams — although at levels far below the ceiling set by the Environmental Protection Agency." Glyphosate, the story notes, is "the herbicide that is the main ingredient in the popular consumer pesticide Roundup..."

    I commented:

    The interesting thing about this, at least to me, is that I completely accept the rationale offered by Ben & Jerry's that they're caught by surprise by this and are doing their level best to meet the standards they've set for themselves. They've earned that kind of credibility. Unlike, say, Chipotle, which has no credibility in my view.

    MNB reader Jessica Duffy wrote:

    What really bothered me about this report is that Ben and Jerry’s has never claimed to be organic, so if the cows producing the milk and cream for their products feed where glyphosate is used, then it could certainly show up in the product. The fact is that glyphosate is used so universally across the agricultural spectrum as a weed killer that it is probably in just about everything not certified as organic. This is a classic ploy by the Organic Consumers Association to put up some big name to get some gratuitous attention. They have done it for years to Whole Foods. They are shady and try to pump people up to grab themselves donations. They love to breed some bogus controversy to get peoples’ attentions. I don’t know if they actually do anything positive for the extension and support of organic growers or not.

    But another MNB reader had a different perspective:

    I remember when you s**t a brick when they found sawdust in Parmesan Cheese as their filler. Put a cancer causing agent in ice cream and that's fine.

    I don't think I said that this was "fine." I said that some companies, in my view, have earned an extra measure of trust, and my willingness to cut them a little slack. Others haven't.
    KC's View: