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    Published on: August 14, 2017

    by Kevin Coupe

    I feel negligent because I had to read in the Dayton Daily News over the weekend that the iconic, legendary Dorothy Lane Market has just begun its 70th year in business.

    As the story notes, “DLM began as a fruit stand on the corner of Dorothy Lane and Far Hills Avenue when Calvin D. Mayne and Frank Y. Sakada started the business on Aug. 12, 1948 … 1958, Sakada sold his share of the company to Mayne, who continued to operate the store until his death in 1972. Calvin’s wife, Vera, became president and retired at the age of 100 before passing at age 105. Their son, Norman Mayne, became CEO in 1967 and runs the business with his own son, Calvin, who is the president.”

    DLM now consists of three stores, but what it really represents is the best kind of hope when it comes to competing with big box stores and online retailers … because DLM has focused with laser-like precision and unerring good taste on great food. The food at DLM looks good, smells wonderful, and tastes great … and the Mayne family clearly believe in creating a unique experience for the shopper on every possible level.

    There are a lot of companies that talk about food and experiential marketing, but sometimes it seems as if their commitment only goes as far as the next article or blog that they happen to read.

    That’s not the case at DLM, where the commitment is as thick and rich as the Killer Brownies that the company has made a calling card all these years.

    I see headlines all the time about the death of bricks-and-mortar, and I always think to myself that the people who make such dire predictions have never been to Dorothy Lane Markets, a company that, while it long has been a player in e-commerce, always has kept its eye on the prize - feeding people well, and giving them the tools to feed themselves better than pretty much anyone else.

    Dorothy Lane Market. Always an Eye-Opener.
    KC's View:

    Published on: August 14, 2017

    Hard discounter Aldi has announced its intention to partner with Instacart to provide delivery services in Los Angeles, Dallas and Atlanta, beginning at the end of the month.

    Fortune writes while grocery delivery once was seen as a service “reserved primarily for high-end food retailers and high-income customers,” this move can be seen as “a sign of how competitive the supermarket landscape has become as food retailers look for every edge possible in a fast-changing marketplace.”

    Scott Patton, Aldi’s vice president of corporate buying, tells Fortune, “Aldi follows the digital world and e-commerce just like everyone else in the business. Online grocery retailing will be part of the future.”

    Aldi currently is in the process of investing $3.4 billion to increase its store count from 1600 currently to 2500 by 2022. While the company has been seen as primarily attractive to low-income shoppers, the general consensus is its strategy now is to appeal to upper-income shoppers as well with nicer stores and better in-store departments, at least in part to counter the entry of fellow discounter Lidl into the US.
    KC's View:
    I don’t think I’ve facilitated a panel discussion about e-commerce in the past six months in which the possibility of Aldi or Lidl getting into e-commerce and delivery hasn’t come up; I know we talked about it last week at the MyWebGrocer “Customer Days” event, where we did a session on Lidl and Aldi. Both companies have done limited e-commerce tests in various European markets, so this isn’t the first time to the rodeo.

    I have to wonder if this will be the first domino in a series that will fall as a result. Whole Foods has a relationship with Instacart, but it also is about to be acquired by Amazon; public statements to this point have suggested that the Whole Foods-Instacart relationship will remain intact, but I cannot imagine that being likely.

    For that matter, there are a bunch of other companies out there doing business with Instacart that should reconsider those relationships … I’ve always felt that it is problematic to outsource the delivery function - the time when customers come into contact with the representative of the store - to an outside entity, which at best has divided loyalties. If they want to do business with Instacart only as a way to give themselves time to develop in-house solutions, that’s fine … but it cannot see Instacart as a long-term answer to the challenges of e-commerce and delivery.

    The Instacart deal with Aldi only underlines my feelings about this.

    One other thing. I’ve wondered if the Amazon-Whole Foods deal might hasten the decision by some big company - Walmart, Google? - to acquire Instacart. I now am wondering if this deal might reduce the options for such a deal. Then again, the e-commerce business has the option of creating strange bedfellows.

    Published on: August 14, 2017

    Walmart said over the weekend that the gun display in one of its stores that labeled it as a back-to-school special - a picture of which posted on social media created an enormous outcry - was “a prank,” though the company offered no further details.

    According to a story in USA Today, a spokesman said that Walmart was “certain” the picture was a “ruse.” He added, “I really don't think any retailer is immune from things like this popping up through social media. When we're faced with it, we do take the claim seriously.”

    The story notes that “Walmart started its own investigation of the incident Wednesday, after a photo of the display spread across Twitter. The photo showed a glass gun case in a Walmart store with a sign on top reading, ‘Own the school year like a hero,’ the store's back-to-school slogan.”
    KC's View:
    Not funny. Not sure what kind of sick jerk would think that this would be an amusing prank in the context of some of the nonsense that takes place these days, but I think it is up to Walmart to identify exactly who the person was and under what circumstances the “prank” played out.

    Published on: August 14, 2017

    CNBC has an interesting story comparing two meal kits companies - Blue Apron and Chef’d - that have embarked on very different approaches to long-term viability.

    Blue Apron, as the story points out, “tested the public markets” with an IPO, but “the results haven't been pretty.” It “planned to sell shares at $15 to $17 a piece and ended up cutting that price to $10 in late June. The company, which is scheduled to report quarterly results on Thursday for the first time since its IPO, has since lost 38 percent of its value, closing on Wednesday at $6.24.”

    Rival Chef’d, on the other hand “is skirting the venture capital path and is instead reeling in cash from strategic investors who are seeking to adapt to digital trends in the food industry. Corporate capital gives the company a different approach to a market that features 10 or more players all vying for consumers who want meals delivered directly to their door.”

    Among the partners are Smithfield Foods (to the tune of $25 million), Campbell Soup ($10 million), and FreshDirect ($200,000). Plus, the story notes, Chef'd CEO Kyle Ransford points out that “Chef'd spends just 1 percent of its sales on promoting the product. Blue Apron, by contrast, spent about 25 percent of its $245 million in first-quarter revenue on marketing. Rather than offering free meals and deep discounts for newcomers and spending heavily on social media, Chef'd relies on partnerships with household brands that have big budgets.

    “Last year, the start-up teamed up with the New York Times to become the exclusive meal kit for the newspaper's online cooking section, and last month Chef'd partnered with Coca-Cola to offer combination food and beverage kits. It also gets a lot of business through Amazon, where a search for ‘meal kits" typically puts Chef'd results at the top, and has gotten some publicity for raising money on crowdfunding sites Indiegogo and CircleUp.”
    KC's View:
    This probably isn’t an apples-to-apples comparison, but while reading this story I found myself thinking back to the Webvan IPO, and how less than two years later that company found itself declaring bankruptcy. One of the problems that Webvan had was that its goals exceeded the ability of the foundation it built to support them.

    I have to say that I kind of like the Chef’d approach … find lots of strategic partners and build as strong a foundation as possible, and not let the goals get ahead of them. Managing growth in an effective way is incredibly important, because it allows companies to be both effective and efficient.

    Published on: August 14, 2017

    Reuters reports that Amazon is looking at “a technology first developed for the U.S. military to produce tasty prepared meals that do not need refrigeration, as it looks for new ways to muscle into the $700 billion U.S. grocery business.”

    This technology, known as microwave assisted thermal sterilization (MATS) “was developed by researchers at Washington State University, and is being brought to market by a venture-backed startup called 915 Labs, based in Denver. The method involves placing sealed packages of food in pressurized water and heating them with microwaves for several minutes, according to 915 Labs.

    “Unlike traditional processing methods, where packages are in pressure cookers for up to an hour until both bacteria and nutrients are largely gone, the dishes retain their natural flavor and texture, the company said. They also can sit on a shelf for a year, which would make them suitable for Amazon's storage and delivery business model … The dishes would be easy to stockpile and ship because they do not require refrigeration and could be offered quite cheaply compared with take-out from a restaurant.”

    Amazon has not commented on the report.
    KC's View:
    One doesn’t necessarily think of military rations, however high-tech they may be, as being exactly where a food oriented company would want to go.

    But … there are a couple of things to keep in mind. One is that Amazon invests in a lot of stuff that never find their way into consumers’ homes. Another is that the company’s Whole Foods division (assuming the deal goes through) might be able to bring the technology to a higher level.

    Lots of moving pieces, and it remains to be seen which innovations will pay off. But it is the constant innovation that really matters.

    Published on: August 14, 2017

    The Wall Street Journal reports “recent upheaval in the U.S. grocery business is proving to be especially painful for regional supermarkets and their suppliers, creating opportunities for big-food retailers to further consolidate their position in the market.

    “Increased consumer spending at discount grocers, club chains and e-commerce sites are forcing middle-market grocers and distributors to take stock of their finances, resulting in store closures or other steps to pare down debt. Traditional chains captured 44% of spending on food and beverages last year, down 6 percentage points from a decade ago, according to Inmar Willard Bishop Analytics, a market-research firm.

    “There were 25,380 stores offering a full-range of groceries with at least $2 million in annual sales last year, down 6% from 2015, Inmar Willard Bishop found. The number of stores is expected to drop to roughly 19,000 by 2021, the firm says.”
    KC's View:
    If it has become an article of faith that the nation is over-stored, then this decline in the number of stores is probably a good thing … unless, of course, you are living in a place where suddenly you are going to have fewer options, or none.

    One of the things that strikes me as likely is that it will be the mediocre, un-differentiated stores that will be in the most trouble. Which means that such stores and companies ought to be working overtime to address such conditions.

    Published on: August 14, 2017

    The New York Times has a very good story over the weekend that started like this:

    “Imagine a retailer that began by specializing in just one product, then grew into a mammoth that redefined the American shopping experience.

    “Among its innovations: No matter where you lived, it shipped your order directly to you, whether you were looking for cast-iron cookware, a mandolin, the newest technological marvel, or the latest in petticoats.

    “Amazon, right? Actually, it was Sears — a century ago.”

    The story details a company where pretty much nothing has worked as it has struggled to compete not just with its bricks-and-mortar brethren, but with Amazon … and where some combination of mismanagement and an inability to read and respond to the market correctly has led to a company where its market share has pretty much shriveled up even as its top exec makes noises about strategic transformations.

    Great, detailed piece … and an object lesson to anyone who thinks that it cannot happen to them. You can read it here.
    KC's View:

    Published on: August 14, 2017

    CNBC reports that “Wal-Mart has been quietly building up its online advertising business, opening up a new revenue channel for the retail giant,” showing banner ads more frequently for third-party sellers and not just its own products and promotions.

    In addition, the story says, “Wal-Mart has recently started linking its in-store and online shopping data, giving more in-depth data that advertisers could play with … Wal-Mart already offers plenty of online ad options, including display media, native ads and programmatic buying programs.”

    Third-part advertising has been a robust business for Amazon, and while Walmart’s online traffic is a lot smaller, a move in this direction could allow it over the long-term to generate additional revenue that could support its expansionist efforts in the digital realm.
    KC's View:

    Published on: August 14, 2017

    Quartz reports that Amazon is warning customers who bought from it protective glasses claiming to make it safe to view the coming total solar eclipse not to use them.

    According to the story, “Amazon’s email to customers explains that certain solar eclipse-watching glasses sold on its site have not been proven safe for their purpose, and promises to refund the purchase price. At time of writing, Amazon had not provided a full list of products being refunded, but one of the products being refunded is WEBSUN’s ‘Direct Sun Viewing Safety Eye Protection Glasses.’

    “Customers who bought the glasses were notified that they would find the cost refunded to their Amazon accounts. ‘We recommend that you DO NOT use this product to view the sun or the eclipse,’ the company’s email warns.”
    KC's View:

    Published on: August 14, 2017

    • Costco on Friday named a new board chairman to succeed co-founder Jeff Brotman, who passed away a couple of weeks ago. The new chairman is Hamilton "Tony" James, whose day job is as president/COO of investment firm Blackstone.

    James has been on Costco’s board since 1988.
    KC's View:

    Published on: August 14, 2017

    On Friday, we took note of an Advertising Age report that “Bud Light, which has struggled amid the craft beer revolution, has a new message for drinkers: Simple beer is good, too.” The ads not only make a virtue out of the beer’s "four essential ingredients -- water, rice, barley and hops,” but it also pokes fun “at more complex brews.”

    I commented:

    Now, I grant you that I have a bias here. I spend my summers in Oregon, which is sort of ground zero for great craft beer. And I almost always try to order local/craft beers wherever I happen to be.

    But I have to wonder if the Bud Light folks are misjudging the zeitgeist … that the American public maybe is less interested in “simple” than in the past, at least when it comes to food and drink. Folks - especially younger folks - are more sophisticated about such things, and complexity and nuance doesn’t necessarily frighten them, at least when it comes to food and drink.

    MNB reader Tom Redwine wrote:

    Ye gods, how about something simple like TASTE? Bud Light does not taste good. I also enjoy an abundance of local craft brews, but I stopped drinking crap like Bud Light pretty much after my first Bud Light.

    I prefer a glass from one of the eleven (at last count) breweries in the area, all making some crazy-good tasting brews. Even the convenience stores are selling local crafts along with the industrials because of customer demand. There will be some folks that will not try local craft, and that's a shame; they're missing out. Yet I believe, as more and more people try something a lil' different and find they like it, as you said, they may be "less interested in 'simple'" and more interested in flavor.

    MNB reader Jeff Davis wrote:

    The "big" vs. "craft" beer wars are a mirror of the political environment: Marketing Budweiser/InBev products as simple, good ol' American brews targets the red-state, middle-America, blue-collar demographic that is their bread and butter. It is in direct opposition to the craft revolution, which is grass-roots and locally focused, primarily serving a younger, more urban consumer. ABI is not looking to gain new market share – they are looking to regain what they've started to lose.

    From MNB reader Chris Weisert:

    The implication seems to be that us “older” (ex?) beer drinkers are “less sophisticated and afraid of complexity and nuance” when in fact it could be that we have migrated to a really good Bourbon.

    Maybe there is something to the complexity thing though since I prefer it all by itself over ice…

    And from another reader:

    I know you can't print this, but it's worth paraphrasing Monty Python's quote.

    How is Bud Light like making love in a canoe?

    It’s ******* close to water.

    Who says I can’t print it? I just had to clean it up a bit.

    We reported last week that DineEquity, patent company to Applebee’s and IHOP, plans to close as many as 160 restaurants, more than double the number of closings that it previously had announced, though the company also said that getting rid of sub-par units would actually help the brands.

    I commented:

    Call me a food snob, but you could shutter both chains completely and I’d never notice.

    And one other thing. I have real questions about any company that lets so many stores fall into the kind of condition that closing them helps the brand. Keeping the shine on the brand - the physical location, the people who work there, the product served, and the value/values proposition - is an everyday job.

    Sounds like it is a job that has been largely ignored in this case.

    MNB reader Frank Fay wrote:

    Easy Kevin on this one,  there are a lot of hard workers out there at these units. Comment on ‘they could close and I wouldn’t even notice’ sounds a bit elitist, and I don’t think you are that person.  Those 24 hour IHOP’s provide an income to many a working Mom’s out there, etc…just a reminder.  My nephew and his buddies frequent the ½ price apps at Applebee’s and it keeps them out of trouble as well.  Point well said on keeping the units in better shape, just keep in mind that there are people’s lives and incomes at stake.

    Point taken. I wasn’t commenting on their role as employers, just on their food. Sad to say, it may be fair to accuse me of being a bit elitist in such things.

    Regarding savings that Ahold-Delhaize said they realized pos-merger, one MNB reader wrote:

    Yes, so the merger has created $137M in savings.  How much of that will then be spent on the decentralization?

    I would venture to say that the short term savings is a smoke screen for a company that is has internal turmoil and is losing share due to lack of focus.

    Decentralization, generally is a good thing, but their issues are far deeper than that.

    Ahold Delhaize probably has figured out the efficiency part. Now, they have to work on being more effective.

    Got the following email from an MNB reader:

    In my opinion, to think that Amazon is going to be “hands off” after the Whole Foods acquisition is short sighted.

    Amazon did not purchase Whole Foods to take out a competitor.

    Amazon purchased Whole Foods for other reasons:

    To gain access to a greater variety of offerings for their customers … Grab a larger share of the e commerce business … And to provide a “touchy-feely” experience of an actual store.  Something they do not have now.

    Plus with all the hype of this acquisition, how can they not overhaul Whole Foods’ “Whole Paycheck” image under Amazon as a low cost provider of high quality products.  It would not be a good day for WF.

    Also got the following email from MNB reader Gregg Raffensperger:

    Kevin, I read your column every day.  You are a little more left than I, but I enjoy the point of view.

    One thing that stands out in the dialogs that come in on “your views”, it’s the use of White American and African American.

    If I am considered a “white American” then there are black Americans, brown Americans, yellow Americans, and red Americans.


    It is pretty safe to say that the majority (another dirty word) were born here and enjoy the freedoms this country has to offer.  So instead of perpetuating segregation from both sides of the line, let’s start taking a more nationalistic approach and put us into the category of American citizens.

    Signed, an English, Dutch, Native American.  i.e. American citizen

    I use “African-American” because it is my understanding that this is the preferred term among the African-American community. That’s good enough for me.
    KC's View: