business news in context, analysis with attitude

Published on: September 5, 2017

by Kevin Coupe

It is impossible to overstate the degree to which Houston-area supermarket chains reacted swiftly, efficiently and effectively to the dire human needs and logistical nightmares created by Hurricane Harvey last week, with companies such as Kroger, Walmart and Albertsons doing their best to bring food to devastated local residents, while also contributing funds to rescue efforts.

But perhaps no chain was as front-and-center as HEB, which has been highlighted both in traditional and social media for its response.

Longtime MNB reader Rich Heiland - who knows something about storms, since he was part of the Xenia Daily Gazette reporting team that won a Pulitzer Prize in 1975 for the coverage of the 1974 Xenia, Ohio tornado, and who now lives in Texas - send me this piece from LinkedIn that described HEB’s storm-related activities.

Here’s a passage that grabbed my attention, and that suggests something that transcends Harvey:

“At a time when retail watchers question the future of brick-and-mortar stores due to Amazon's continued ascendance, the 112-year-old retailer is drawing widespread praise after managing to open 60 of its 83 stores in Houston last Sunday, hours after Hurricane Harvey slammed into Texas as a Category 4 storm. (Now, 79 of the 83 stores are open.)

“When employees couldn't get to work, some stores still operated with as few as five people: one stationed at the door as crowd control and four working the registers, trying to get people out as quickly as possible.”

You can read the LinkedIn piece here.

Meanwhile, there also was a video put together for Facebook in which HEB president/COO Craig Boyan gave a tour of the company’s operations center, giving a sense of how the company was responding to the effort.

You can see it by clicking here, or by clicking on the picture below.

This is the Eye-Opening definition of what great retailers do. In fact, it is the definition of what great retailers are.

Published on: September 5, 2017

The Associated Press reports that Best Buy, “trying to make itself indispensable to shoppers as people shop more online,” is rolling out a new service that has salespeople making house calls on customers “to help make recommendations on TVs, streaming services and more.”

The move comes after a successful five-market test of the service. Best Buy CEO Hubert July says that it has been found that “shoppers spend more at the home than they do at the stores,” and that it works in both the company’s and shoppers’ best interests when Best Buy can make itself part of the conversation.

The AP writes, “Skeptics had been prepared to write Best Buy’s obituary just a few years ago, predicting it would follow its now-defunct rival Circuit City as shoppers used stores as a browsing showroom and then bought online. But the company has cut costs and improved stores and training. Best Buy is also working to forge deeper partnerships with its suppliers, and offering more online services.

“Joly said Best Buy would do more marketing of the in-home service. Right now, sales associates are promoting it in stores — when they talk to shoppers about products, they often will recommend setting up a home visit. Consultation topic range from getting recommendations for TVs to streaming or smart home services. That complements the Geek Squad service, which offers tech repairs and at home installations for a fee.”

The story notes that there may be some competition in this segment: Amazon “has reportedly also been trying out a program that sends its employees to shoppers’ houses for free ‘smart home’ recommendations.”

In other Best Buy-related news, the Star Tribune reports that the retailers is expanding the availability same-day delivery services - rolling it out from the 13 markets where it is now available to 14 more next week, and to a total of at least 40 by the end-of-year holiday shopping season.

According to the story, “Best Buy also is drastically cutting its fee for the service from $14.99 to $5.99. And Best Buy has added more products to the list of thousands of eligible items, from phone chargers to tablets and headphones.”

Published on: September 5, 2017

MarketWatch reports that an 11th straight quarter of revenue decline and earnings that did not measure up to estimates caused Campbell Soup Co.’s stock price to decline more than six percent last week, but actually reflects a great set of challenges and trends that are affecting many retailers and suppliers.

““The operating environment for the packaged foods industry remains challenging due to shifting demographics, changing consumer preferences for food, the adoption of new shopping behaviors and the dynamic retailer landscape,” CEO Denise Morrison said. “In these times, sales growth remains a challenge.”

That “dynamic retailer landscape,” MarketWatch writes, includes the acquisition of Whole Foods by Amazon, and the entry of discounter Lidl into the US.

Morrison said in her statement that the company will continue to position itself “for long-term growth by managing costs aggressively and re-investing a portion of those savings back in the business with a focus on our strategic imperatives of real food, digital and e-commerce, health and well-being, and snacking.”

The story goes on: “Campbell Fresh, which includes Bolthouse Farms beverages, salad dressings and carrots, Garden Fresh Gourmet salsa, hummus and dips and fresh soup, had a disappointing quarter, said Morrison, but she is encouraged by progress made in addressing execution issues. The division has been hurt in recent quarters by weak carrot growing seasons, a recall of protein drinks and capacity constraints … The company is working to collaborate with key customers on merchandising and improving data-driven shopper insights. It has also set up a distinct digital e-commerce business to address pure play and omni-channel opportunities.”

Published on: September 5, 2017

There is a fascinating piece in Bloomberg Businessweek looking at Unilever’s unique approach to a kind of virtuous capitalism, which would seem to position the $170 billion conglomerate as an outlier, more concerned about customers than shareholders, crafting what the story calls “a sincere rebuttal to the bottom-line-above-all demands of shareholder capitalism” that also is good for the bottom line.

An excerpt:

“Under Chief Executive Officer Paul Polman, Unilever is seeking to espouse a trendy sentiment—that it’s possible to make more money by acting virtuously—on a global stage. That means selling environmentally friendly detergent, installing thousands of water pumps in African villages, even removing gender stereotypes from advertising. The initiatives are tied together by two arguments.

First, that ethically discerning shoppers in the developed world—or, less charitably, Gwyneth Paltrow among the urban bourgeoisie—are willing to pay a premium for products that do less harm to the planet. And second, that encouraging health and happiness in emerging markets will turn millions of the global poor into consumers for the first time. In theory, they’ll be loyal to the brands that sought them out.”

It is a really good, really provocative piece, and you can read it here.

At the same time, the New York Times had an interview with Apple CEO Tim Cook, in which the story describes him as “one of the many business leaders in the country who appear to be filling the void, using his platform at Apple to wade into larger social issues that typically fell beyond the mandate of executives in past generations. He said he had never set out to do so, but he feels he has been thrust into the role as virtually every large American company has had to stake out a domestic policy.”

In arguing that business has a moral component as well as a fiscal responsibility, Cook says, “The reality is that government, for a long period of time, has for whatever set of reasons become less functional and isn’t working at the speed that it once was. And so it does fall, I think, not just on business but on all other areas of society to step up.”

Interesting piece - with some nuance and even some contradictions - that you can read here.

Published on: September 5, 2017

Juicero, a Silicon Valley startup that raised $120 million in capital so it could make a $700 Wi-Fi-enabled juicing machines - or, as the New York Times described it, “trying to solve a problem that did not exist” - has shut down its operations.

Launched by a “health fanatic” named Doug Evans “with a checkered history as an entrepreneur,” the Times writes about Juicero’s plan “to deliver small glasses of expensive cold pressed juice to kitchens around the country. The machine scanned codes printed on pouches of chopped produce to help assess the freshness of the contents inside … The company was a particularly bold bid to capitalize on the hype around the so-called internet of things and interest in the juice business. Mr. Evans believed there was a legion of customers who, once they tasted his juice, would find it superior to the many varieties that can be bought at convenience stores, juice bars or even Walmart.”

But there were problems. Like the price, which the company eventually had to slash in order to sell the machines. And, there was the small fact that enterprising journalists figured out that if you simply held the pouches in your hands and squeezed them, you could get essentially the same juice without the expensive juicing machine.

Published on: September 5, 2017

The Cincinnati Business Courier reports that Kroger’s new meal meal kit offerings “are working so well that it’s adding local stores that carry the popular products and expanding recipe offerings.” Kroger is said to be “adding five stores to the five where it already sells its own brand of meal kits … The latest round of stores is just the beginning. Kroger will add its meal kits at its Mason-Montgomery and Dent stores Sept. 9. And it will sell Prep + Pared kits in 37 local stores by the end of September.”

Published on: September 5, 2017

The Star Tribune reports that Hy-Vee plans to build and operate 26 Wahlburgers restaurants, which have gained some notoriety because of their ownership by chef Paul Wahlberg and his actor brothers Mark Wahlberg and Donnie Wahlberg.

According to the story, “Hy-Vee will add select Wahlburgers menu items in its 84 Market Grille restaurants in stores and build new restaurants. Several locations are planned for the Twin Cities, but the first Hy-Vee-owned location will open in West Des Moines next year.”

At the same time, Hy-Vee announced a partnership with Orangetheory Fitness “to add workout centers in or near its stores.”

Published on: September 5, 2017

The Cleveland Plain Dealer reports that German discounter Lidl, which opened its first US stores this summer, now plans to open stores in Ohio. The first is slated to be opened in Broadview Heights, a suburb of Cleveland, in 2020, and the story says that Lidl “has also submitted applications in Howland, a township near Warren, and Austintown, south of Columbus. More applications in Ohio are planned.”

Published on: September 5, 2017

Tech Crunch reports that even as Amazon expands its US food business presence with the acquisition of Whole Foods, “other supermarket players are figuring out their own strategic responses to Jeff Bezos’ big food fight. UK online supermarket brand Ocado has today outed an app for Amazon’s Alexa voice assistant, enabling users to add groceries to their shopping list by voice — at least if they also own one of Amazon’s AI-powered Echo smart speakers.”

According to the story, “The app lets users add a product to an existing Ocado order or basket via voice command — though the phrasing for this is pretty clunky, with users needing to speak two brand names (Alexa and Ocado) to amend their orders by voice. (It gives the following sample command: ‘Alexa, ask Ocado to add carrots to my order’ — which is a bit of a mouthful for something that’s billed as increasing convenience for shoppers.)

“New orders also cannot currently be created via the Alexa app — Ocado says it’s intended for updating existing orders only. Its envisaged use-case is someone realizing they’ve run out of a certain product when they’re in the middle of cooking, and being able to add it to their list without having to break off from whatever they’re chopping.”

Meanwhile, the New York Times reports that Amazon and Microsoft - each of which has its own digital assistant product, the Alexa and the Cortana - have now completed a partnership agreement that allows the two systems to interface with each other.

“It is unusual for big tech companies to cooperate on important new technologies that they want to stand out from the competition,” the Times writes. “Amazon, Apple, Microsoft, Google and nearly every other big tech company is pouring huge amounts of money into making digital assistants that are smarter and can do more, seeing them as a new way for people to interact naturally with devices and online services.” But Amazon CEO Jeff Bezos and Microsoft CEO Satya Nadella apparently have been persuaded - or persuaded each other - that “each assistant has unique strengths that could benefit the other assistants.”

Bezos, for example, cites “Cortana's superior integration with Outlook, the popular calendar and email application that is part of the Microsoft Office suite of software. Because Microsoft controls both products, Outlook is integrated more deeply with Cortana than with other voice assistants. Through its collaboration with Microsoft, Amazon said, Alexa users will get answers to some of the same questions that Cortana can now answer — for instance, when is the next budget review with the boss?”

At the same time, Cortana users may find that having access to the Amazon ecosystem will help them shop online more efficiently.

Published on: September 5, 2017

• On National Public Radio (NPR), The Salt reports that Coca-Cola has decided to crowdsource the search for a sugar replacement, with the offer of a $1 million prize.

According to the story, Coke “has launched a competition on the crowd-sourcing platform HeroX … seeking ‘a naturally sourced, safe, low- or no-calorie compound that creates the taste sensation of sugar when used in beverages.”

The goal is to be able to find something to replace sugar, but with lower calories, top satisfy people looking for a diet drink without artificial sweeteners.


• The Indianapolis Star reports that Simon Property Group, which operates shopping malls nationwide, is suing Starbucks “over its plans to shutter all of the Teavana stores” operating in its locations.

According to the story, the mall owners maintain “that their shopping centers rely on each of their tenants fulfilling their lease obligations, including  continuously operating in the space for the entire lease term.

“But when Starbucks announced July 27 that it would be closing all 379 of its Teavana stores, including the 78 stores in Simon shopping centers, the company ‘put its stock price above its contractual obligations, the viability of Simon and its Shopping Centers, other retailers and consumers who count on the Teavana stores’.”


• Reuters reports that the trial of three former Tesco executives accused of fraud and falsified accounting has been adjourned until September 25; the trial was scheduled to begin yesterday, and is expected to last as long as 12 weeks, providing a window into how Tesco systematically and systemically overstated revenue and understated costs.

The story notes that “Christopher Bush, who was managing director of Tesco UK, Carl Rogberg, who was UK finance director, and John Scouler, who was UK food commercial director, are all charged with one count of fraud by abuse of position and one count of false accounting at Britain’s biggest retailer.”


• The Food Marketing Institute (FMI) announced that a coalition of industry groups in which it is a member reached a settlement in the U.S. District Court for the Southern District of New York in which New York City agrees not to fine or sanction FMI members for alleged non-compliance with calorie and nutrient information menu labeling requirements prior to a May 2018 compliance date established by the U.S. Food and Drug Administration (FDA).

FMI, along with the National Restaurant Association’s (NRA), Restaurant Law Center (RLC), the National Association of Convenience Stores (NACS), and the New York Association of Convenience Stores (NYACS) had challenged the city’s decision to require chain stores with 15 or more locations nationwide to disclose calorie counts and full nutritional information in advance of federal regulations scheduled to come out next year.

Published on: September 5, 2017

• Ahold Delhaize-owned Peapod, the e-grocery company, announced that its president, Jennifer Carr-Smith, has resigned, effective September 15, to take what it calls “another opportunity.”

Walt Lentz, Chief Supply Chain Officer at Peapod, will take over Carr-Smith’s role on an interim basis while an executive search is conducted.

Published on: September 5, 2017

Content Guy’s Note: I took some time last week to offer a brief report and commentary on the goings on at Whole Foods now that its $13.7 billion acquisition by Amazon has been completed; if interested, you can check out the story and pictures here. The process has just begun, but the coverage is in full swing, and here are some of the stories that I’ve found interesting…

• CNBC has a story suggesting that while Amazon’s “acquisition of Whole Foods Market may finally be complete,” the company still “has work to do.” To really have an impact, the story suggests, Amazon “may need to add more brick-and-mortar locations.”

The rationale is that relatively few US shoppers buy any groceries online, and for Amazon to compete with Walmart, Kroger and the rest - especially if it wants to appeal to a broader demographic - it will need to “augment” its e-commerce business with a significant bricks-and-mortar portfolio.


• Business Insider writes about Amazon’s questionable corporate reputation, and how its image as a new kind of Walmart that is positioned to destroy America’s Main Streets could bleed over to Whole Foods, which has enjoyed a progressive reputation tied to its hippie roots.

One of the challenges for Amazon is that it is taking it “from all sides,” as it faces criticisms from the left for being too corporate and profit-driven and the right for being too anti-Trump (which is more tied to CEO Jeff Bezos’ private ownership of the Washington Post than anything that Amazon has done). And because Amazon is being scrutinized, that now means that “Whole Foods' reputation is also under the microscope.”


• Bloomberg has a story about how PepsiCo-owned Frito-Lay “now has versions of 11 core chip brands without artificial ingredients,” including Lay’s, Tostitos and Cheetos, that it believes qualify to get into Whole Foods, and that it hopes can “build a more healthful reputation” for its brand.

At the same time, Frito-Lay feels “pressure to get a foothold at Whole Foods during a time when Amazon is threatening to upend the supermarket industry. The e-commerce site is using the grocery chain to support its food-delivery business and looks to take market share by cutting prices and integrating online and offline operations. But the big enticement at Whole Foods remains the promise of healthful and wholesome products.”


• MarketWatch writes that Amazon, “far from dominating the retail sector, is actually the weakest of the big U.S. players based on operating results, Moody’s Investors Service said Wednesday.

“The e-commerce giant is the subject of a number of myths regarding its size and clout that mask the reality of its position compared with rivals like Wal-Mart Stores Inc. and Costco Wholesale Corp., according to Charlie O’Shea, Moody’s vice president and lead retail analyst.

“Amazon’s stock has outperformed rivals, but it’s mostly based on the company’s growth story, and particularly the success of its cloud business, Amazon Web Services, O’Shea wrote in a new report.”

The Moody’s report challenges estimates that Amazon Prime has 85 million members, suggests that the number could be as low as 50 million, and points out that this would be lower than the 86.7 million people who are Costco members.

Published on: September 5, 2017

Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire. I'm flexible.

• The Seattle Times reports that “the leaders of Amazon, Microsoft and Starbucks joined other corporate executives in asking President Donald Trump to keep in place a program that shields from deportation young people who came to the U.S. illegally as children.

“The Deferred Action for Childhood Arrivals (DACA) program, which protects about 800,000 ‘Dreamers,’ is said to be a target for repeal as Republican attorneys general threaten to sue to push the Trump administration to carry out the president’s hard-line pledges on immigration.

Supporters of DACA include, the story says, “hundreds of corporate executives, lawyers and other organizations” who make largely economic arguments, suggesting that “dreamers are vital to the future of our companies and our economy.”

Published on: September 5, 2017

Michael Sansolo is on assignment this week. His regular weekly column will return next Tuesday.

Published on: September 5, 2017

Got the following email from an MNB reader:

I do find it amazing that the discussions that talk about shopping moving online have largely focused on shifting purchase patterns and attributed them to Millennials. To me, this really misses large portions of the picture.
 
Let’s take malls as an example. At the same time that malls are declining we have seen strip malls expand rapidly with stores selling similar products to those that you find at the shops at the mall. The strip mall is easier to navigate, more conveniently located and anchored by stores that range from Grocery stores, supercenters, drug stores and clothing outlets.
 
When I do venture to a mall, I am often going to a movie or other experience that I enjoy. When I am out for those reasons, I do not want to buy anything that I will have to carry around until I return to my car. If I could simply experience the item and purchase it from the retailer then have it shipped, that would be a game changer. That has not been my experience.
 
The anchors of many malls include stores like Sears or JC Pennies. Those particular retailers are not the types of stores that are relevant to current shopping trends and consumers. How could you expect them to fulfill the role of anchor store when they cannot remain relevant to their own shoppers? Sears never did react to Home Depot or Lowes growing in the same categories that I used to frequent Sears to shop decades ago. (Yes, I have to go back decades to recall the last time I bought anything at Sears and last time I was there, they really hadn’t changed a bit!)
 
When I look at other high end anchors, they feel out of place in many malls and do not carry items at prices that consumers struggling to start their lives as they pay off immense student debts and try to figure out how to afford a place to live would be interested in. It’s not that they don’t want these things, they just cannot see a time when they will be able to afford them. At least that is what my daughter and her friends tell me.
 
When I look at all of the factors, it seems to me that the story is less about Millennials or e-com than it is about technology that has brought to life the very things that large portions of society in every generation desire.