business news in context, analysis with attitude

Published on: May 14, 2018

by Kevin Coupe

CBS News has a story about how two recent graduates of the Colorado School of Public Health decided how best to out their degrees to work - they retrofitted a bus and turned it into a mobile farmers market.

According to the story, Steve Lockhart and Ashleigh Ruehrdanz “identified several underserved neighborhoods,” and laid out an initial plan for serving them and getting out the word, looking to provide both access to food and some measure of education of residents of food deserts.

“The nonprofit has received funding through various city incubators but the funding isn’t permanent,” the story says. Ashleigh and Steve will have to find other avenues to get ahead of the growing problem.

Lockhart says, ““Our dream would be to have a bus like this in every neighborhood that has this need.”

Now, I know this is not an entirely unique proposition. There are a number of cities where such efforts have been tried, including Portland, Oregon.

I have to wonder, though, if this is the kind of thing that more traditional retailers ought to be embracing as a way of extending their footprints and brand messages. Sometimes they get criticized for not putting stores in food deserts - that’s how they became food deserts - but they could solve that problem to some degree by teaming up with these public health advocates and entrepreneurs.

There are a lot of supermarket chains in Denver … and I cannot imagine it would cost very much to invest in a food bus. And then, they could use the experience to figure out ways to move beyond farmers market-style products, and maybe provide a greater selection to folks in these neighborhoods.

It could be an Eye-Opener.

Published on: May 14, 2018

Late last week, Amazon sent the following email to US members of its Prime service:

Dear Prime member,

Thank you for being a valued member of Amazon Prime. We are writing to you about an upcoming change to your membership.

The price of the annual Prime membership increased from $99 to $119 on May 11, 2018. The new price will apply to your renewals starting December 11, 2018.

(Content Guy’s Note: December 11 is my Prime renewal date. The increase will be charged to Prime members whenever their renewals kick in.)

Prime provides an unparalleled combination of shopping and entertainment benefits, and we continue to invest in making Prime even more valuable for our members. We have expanded Prime Free Same-Day and Prime Free One-Day delivery to more than 8,000 cities and towns and we will keep expanding. The number of items eligible for free two-day shipping increased in recent years from 20 million to more than 100 million items. Members also enjoy unlimited streaming access to millions of songs and thousands of movies and TV shows, including popular and award-winning Prime Originals.

No further action is required. You may manage your Prime membership anytime by visiting Your Account.

Sincerely,

Your Amazon Prime Team

Published on: May 14, 2018

The New York Times has a story about the potential - and, to be fair, actual - vulnerability of various smart speaker systems.

An excerpt:

“In the past two years, researchers in China and the United States have begun demonstrating that they can send hidden commands that are undetectable to the human ear to Apple’s Siri, Amazon’s Alexa and Google’s Assistant. Inside university labs, researchers have been able to secretly activate the artificial intelligence (AI) systems on smartphones and smart speakers, making them dial phone numbers or open websites. In the wrong hands, the technology could be used to unlock doors, wire money or buy stuff online — simply with music playing over the radio.”

The story goes on:

“This month, some of those Berkeley researchers published a research paper that went further, saying they could embed commands directly into recordings of music or spoken text. So while a human listener hears someone talking or an orchestra playing, Amazon’s Echo speaker might hear an instruction to add something to your shopping list.”

The implications are enormous:

“Smartphones and smart speakers that use digital assistants such as Amazon’s Alexa or Apple’s Siri are set to outnumber people by 2021, according to the research firm Ovum. And more than half of all U.S. households will have at least one smart speaker by then, according to Juniper Research.”

Amazon, Google and Apple all say that security is a high and continuing priority.

You can read the entire story here.

Published on: May 14, 2018

The World Health Organization (WHO) is reported to be “launching an initiative to eliminate trans fats from diets globally, pressing makers of foods and oils, and governments, to accelerate work to prevent hundreds of thousands of deaths from heart disease each year,” according to the Wall Street Journal.

The story notes that trans fats, “often in the form of partially hydrogenated food oils,” became more prevalent as processed food became more popular after World War II. However, in countries with a progressive approach to regulation - such as the US, Canada and parts of Europe - they’ve been eliminated by manufacturers, often because of their use has been restricted through governmental intervention. But in places with a more lax approach to regulation, the story says, they are more widely used, often by local producers - and those nations tend to have populations with more health issues, such as diabetes and high cholesterol.

Published on: May 14, 2018

USAToday reports that “the national average price of regular unleaded gasoline touched $2.84 a gallon Thursday, up 18 cents the past month and 50 cents the past year. Gas has spiked in recent weeks due mainly to increasing oil prices as the Organization of the Petroleum Exporting Countries (OPEC) maintains strict production limits despite global economic growth.”

At the same time, the story says, “President Trump’s decision this week to withdraw from the Iran nuclear deal and reinstate sanctions against that oil-rich country could constrain global supplies, further pushing up crude and gasoline prices.”

Published on: May 14, 2018

The Street has a story about how a recent presentation that Sears chairman/CEO Eddie Lampert gave to analysts and investors failed to impress, with people saying that Lampert’s claim that he is "fighting like hell" to transform the company is “too little, too late.” One analyst tells The Street that Sear’s financials suggest that “this isn't really a business that is worth saving.”

At one point, the story says, Lampert said that Sears “outpaces” Walmart and Target because “it has used internal ‘incubation’ to drive growth, rather than making acquisitions.”

There are, The Street says, several problem with such a claim.

One is that there is virtually no growth at Sears not related to the recent business tax cut.

Another is that Sears has no money no acquire anything, so the statement is spurious.

“Lampert may want to find a different comparison for next year's annual meeting,” the story suggests, “if there is one.”

Published on: May 14, 2018

The Associated Press reports that “the US Postal Service reported another quarterly loss on Friday after an unrelenting drop in mail volume and costs of its health care and pension obligations outweighed strong gains in package deliveries … The Postal Service’s report shows a net loss of $1.3 billion between January and March, larger than a $562 million loss in the same period last year, due in part to rising fuel costs and added wage expenses as it grows its package business.”

However, the USPS said that it saw “a 10 percent increase in package delivery, boosted by its business with Amazon and other Internet retailers, but suffered a loss in first-class letters and marketing mail, which together make up more than two-thirds of postal revenue.”

The report contradicts claims made by the Trump administration, which has argued that Amazon actually is scamming the Post Office - and the public - by not paying enough for shipping of its packages.

The Post Office, according to the story, “called for greater freedom to raise stamp prices to help cover costs. It warned of a serious financial situation that prevented it from making much-needed investments in letter and package delivery, saying it could not wait for a task force created by Trump to study the reasons behind its losses at a time of increased competition in the e-commerce age.”

Published on: May 14, 2018

• CNBC reports that “Walmart said on Saturday in a filing with a U.S. regulator that it may take India's Flipkart public in as early as four years, detailing for the first time a potential listing timeline for Walmart's largest-ever acquisition.”

Just days earlier, Walmart announced that it is spending $16 billion to take a 77 percent stake in the e0-commerce company.

According to the piece, “Minority investors holding 60 percent of Flipkart's shares ‘acting together, may require Flipkart to effect an initial public offering’ (IPO) four years after the close of the Walmart-Flipkart transaction … The IPO should be done at no less a valuation than that at which Walmart invested in the Indian e-commerce firm, the filing said.

Published on: May 14, 2018

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

• The Wall Street Journal this morning reports that the University of Michigan May consumer sentiment index is 98.8, unchanged from the April number. “The sentiment measure had hit 101.4 in March, its highest level in 14 years before easing in April and stabilizing this month,” the story says.

According to the Journal, “A wide partisan split persists in the survey between downbeat Democrats and upbeat Republicans. The overall sentiment index for self-identified Democrats was 81.5 in May, versus 122.2 for self-identified Republicans. Independents were in the middle, clocking in at 97.1 for the month.”


• The New York Times has a story about the last gasps of Toys R Us, which is closing its doors and putting some 30,000 people out of work.

The story notes that a year ago, debt-laden Toys R Us “wanted to refinance about $200 million in debt.”

Now, the Times writes, “a year and a messy bankruptcy later, Toys R Us is expected to pay as much as $348 million for the dozens of bankers, lawyers and consultants that tried to fix its problems. The giant payout, detailed in company documents released on Friday, shows how lucrative corporate bankruptcies can be for professionals, while leaving many workers and creditors with scraps.”


Fox News has a story about how Lidl Germany got in trouble last week with ads promoting vacuum cleaners, a sewing machine, an iron, a cookbook and an espresso machine as perfect Mother’s Day gifts.

Critics labeled the ad “sexist.”

Y’think?

Published on: May 14, 2018

• Western New York-based Tops Friendly Markets announced that Matthew Hamed, the company’s western regional pharmacy manager, has been promoted to the role of director of pharmacy.

Published on: May 14, 2018

Got the following email from MNB reader Gail Nickel-Kailing:

I’m a regular reader of Morning News Beat and your piece today on New Seasons’ multiple constituencies sent me looking for something I first read about at least 20 years ago. It was a good test of my memory because I didn’t think I would be able to remember the name of the group that outlined these stakeholders (i.e., constituencies) to which every business is responsible. The Caux Round Table, originally founded at and still connected with the University of St. Thomas in St. Paul MN, is "an international network of principled business leaders working to promote a moral capitalism.”

In their business principles, they outline six stakeholder groups - in this order - that every business has and to which they are responsible: customers, employees, owners/investors, suppliers, competitors, and communities.

All companies have this same responsibility - too bad morality is out of favor in so many segments of our business and economic systems. (Not even going to start on our political system…)

Keep it up, Kevin; my mornings are just not the same when your newsletter doesn’t arrive in my inbox!




I mentioned last week that I haven’t been to a Chipotle since it started having food safety issues, leading one MNB reader to write:

I’m with you.  I haven’t been to Chipotle since the food safety/health issues.  However, after hearing James Marsden, Ph.D. and Executive Director of Food Safety for Chipotle speak at the Meat Summit in San Antonio last month, I have a renewed confidence.  I feel like the steps they have taken make them a leader in quick serve restaurant food safety/health assurance.  They, like all food processors, are walking the careful line between fresh and natural high quality less processed food and food safety.

The things that we as an industry have put into place to protect people are the things that most people are shunning, or more accurately revolting against.  This consumer shift has and will continue to spawn innovative approaches to meeting a new set of expectations.  The changes that Chipotle has implemented are innovative and world class in my opinion.  Food for thought on thoughtful food.




We had a piece last week reflecting on a Financial Times story connecting Jeff Bezos with Winston Churchill, essentially saying that they both subscribe to the notion that clear writing reflects clean thinking, and that clear thinking begets clear writing.

Prompting one MNB reader to write:

I couldn’t agree more that the art of telling a longer, functionally-connected story is missing in today’s CPG corporate environment.

But, in all fairness, clear thinking doesn't make everything a success at Amazon. Amazon Destinations, Amazon Local, Amazon Wallet and Amazon Local Register come to mind. The biggest failure might have been Amazon Fire Smartphone, which wouldn’t sell at under a dollar.
 
I feel the real success at Amazon is the willingness to try, regardless of failure.  The 6 page memo definitely gives confidence to the initiative and informs leadership when to walk away.  Many major CPG’s can’t stand any failure (e.g. any loss of capital).  Everything has to be "proven".   In this period of low growth, many CPG’s are more adventurous out of necessity, albeit through acquisition.

it is important to remember that while the Fire smartphone was a failure, much of what Amazon learned in that experience informed its Alexa initiative, which has been an enormous success.




On another subject, MNB reader Stacy McCoy wrote:

As I have been reading your articles on Best Buy, I wanted to share my recent experience with the company. I would encourage you to go into a store to check them out. I think they are putting up the good fight. In the past, whenever we “had” to go to Best Buy, it was for something that we had to have, that we weren’t able to find anywhere else. We braced ourselves for poor service, disorganized stores, non-existent sales floor staff, and long checkout lines (granted, we were shopping a lot at the holidays).

I recently became a bit overwhelmed with technology and had to call in reinforcements to assist with some WiFi network set ups for my home and home office. We called the Geek Squad. I was so impressed with the technician’s professionalism and patience with me… when he recommended another piece of equipment to purchase for my set up, I went first to his competitor (because I really didn’t want to go to Best Buy). However, they of course did not have the piece in stock, so I begrudgingly went to Best Buy. As soon as I walked in the door, I was amazed at the difference.

There were no cash registers at the front end of the store. I paused momentarily to wonder how I was going to pay for my item, but decided I would deal with that later… moving through the store, I saw a large in-store Geek Squad section with lots of customers getting in-store support (similar to an Apple store). There were tons of employees in the store – at least 1 per section, and they were actually knowledgeable and helpful. I was directed to the section I needed, and then approached by another employee who asked if I needed assistance, since she was in charge of the section I was in. I had a question about the piece that I needed, so she looked up the information on a computer kiosk in her section, just a few steps away from where I picked up the equipment. With my question answered I made a purchase decision and looked tentatively toward the front end, starting to wonder where I needed to take my purchase, when the employee said “May I check you out right here?”. Boom. Done.

I walked out of the store an amazed and happy customer, nothing like in the past where I was just grateful to be out of the store. I will be back. And my guess is that the many customers that were also in the store at the same time I was will be back too. Because that was the other thing that I noticed. Not only was the store staffed with a lot of employees in blue shirts ready to help you out… there were also a lot of customers in the store… looking for help.  Go check them out… I would be interested to read what you think.

I will.




Finally … we’ve had a number of stories lately about racial bias being demonstrated at retail, which has created problems for companies such as Starbucks and Nordstrom Rack. At one point, I commented:

I do think … that most retailers have to be aware that this could happen to them. They need to have plans in case it does, and they need to do what they can to create a company culture where it is less likely to happen.

One MNB reader responded:

It would be a lot less likely to happen if there weren’t so many Blacks who DO steal from stores.

I debated long and hard with myself about whether to post that comment, but decided in the end to do so because “with attitudes like these, it is no wonder that companies get into trouble. The problem is, no amount of sensitivity or diversity training may be able to correct Neanderthal thinking like this.”

Another MNB reader wrote:

Thank you for calling this out.  I am appalled this attitude still exists, but certainly not surprised. Personally, after reading the books:  Just Mercy and The New Jim Crow, I have a better idea of just how thinking like this is still prevalent in our country.  Thank you for reminding us.

Of course, the person who wrote the original, repellent comment also wrote to me again, to say that he’s just being realistic.

I, too, am appalled. But not surprised.