business news in context, analysis with attitude

Published on: May 25, 2018

by Kevin Coupe

Yesterday’s Eye Opener started this way:

It is just one measurement of value, and not necessarily the most important one.

But here’s a story that grabbed my attention yesterday.

According to Variety, “Netflix surpassed Comcast in market value Wednesday, thanks to a new record high for the video streaming company’s stock price. Netflix’s market cap also came within arm’s-length of Disney, with both companies separated by just a few hundred million dollars.”

Netflix ended yesterday with a market cap of $152.8 billion, compared to Comcast’s $147.15 billion.

Now, this could change, based on the vagaries of the stock market. But it is notable, especially one considers that Netflix is a business that has been built on both a disruptive attitude and disruptive technologies, while Comcast has its roots in a more traditional media construct.

That was yesterday morning. By the end of the day yesterday, Variety was reporting the following:

“For now, Netflix is the world’s most valuable media company, after its stock rallied again Thursday to record highs — pushing the video-streaming leader’s market capitalization past media giant Disney for the first time.

“Shares of Netflix closed up 1.3% for the day, to $349.29 per share. That gives the company a market cap of about $161 billion. Year to date, Netflix shares now have increased 82% in value as of May 24.”

It is reassuring, I think, that Netflix CEO Reed Hastings has a history of being unimpressed by such numbers. The Variety piece says that “the seemingly insatiable investor enthusiasm for Netflix calls to mind CEO Reed Hastings warning five years ago about irrational exuberance amid volatile swings in the company’s stock price.”

But the numbers are worth noting, as I said yesterday, because Netflix is a business that has been built on both a disruptive attitude and disruptive technologies, while Comcast and Disney both have their roots in a more traditional media construct.

Equally important, I think, is the fact that Netflix continues to invest in proprietary content - its version of private label - that differentiates it from competitors ranging from Amazon to HBO to the traditional broadcast networks.

“Netflix is burning through tons of cash as it spends an ever-increasing amount on original content for its global audience — and it expects the business to be free-cash-flow negative for the next few years,” Variety reports. “The company will spend upwards of $8 billion on content in 2018, with 85% of new spending being poured into original programming, according to chief content officer Ted Sarandos. Netflix expects to have around 1,000 original TV shows, movies, specials and other programming on its service by year-end.”

There is no such thing as the unassailable business model.

That’s the Eye-Opener.

Published on: May 25, 2018

In Minnesota, the Star Tribune quotes Target CEO Brian Cornell as saying that “every element of our strategy is working and working together” - a comment that seems justified since the retailer just reported Q1 results that include same-store sales that were up three percent.

In fact, the story says, “A strong economy, remodeled stores, new clothing and furnishing brands — plus the launch of free two-day shipping — helped drive more shoppers to Target this spring.” In fact, Target said that things would’ve been even better except for “the cold and wet weather in April, which delayed the sales of higher-margin warm-weather items such as outdoor furniture and apparel and contributed to depressed margins.”

The story notes that “growth came at a cost as the investments needed to improve sales weighed down profits … Target has spent on everything from costly remodels to higher employee wages. Even a 28 percent growth in online sales pinched the bottom line because of the higher costs to fulfilling digital orders.”

(Target’s Q1 revenue was up 3.4 percent to $16.8 billion, while net profit was up 5.9 percent to $718 million.)

The story also notes that “Target’s same-day delivery service through subsidiary Shipt has rolled out to more than 75 more markets and Target looks to have it up and running from most stores by the end of the year … In total, more than two-thirds of Target’s digital orders in the first quarter were fulfilled from stores, compared with half in the same period a year ago, he said. That helps keep Target’s fulfillment costs down since the stores are closer to customers.”

Published on: May 25, 2018

The Los Angeles Times has a story about how a Portland, Oregon, couple had to unplug all their Amazon-branded, Alexa-powered devices after they learned that not only where their private conversations being recorded, but were then being emailed as audio files to someone on their contact list.

The couple says that all their Alexa-powered devices now have been unplugged. The story notes that they “used Amazon's voice-activated devices throughout their home to control heat, lights and the security system.”

While Amazon has not commented on this specific incident, the company did release a statement, saying, “Amazon takes privacy very seriously. We investigated what happened and determined this was an extremely rare occurrence. We are taking steps to avoid this from happening in the future.”

Published on: May 25, 2018

The Portland Tribune reports that petitioners have submitted close to 180,000 signatures to the Oregon Secretary of State’s office, calling for a referendum on a constitutional amendment that would ban any taxation on groceries in the state.

Once verified - the number is far more than the 117,578 needed - the referendum would be placed on the ballot on November 6.

According to the story, “Initiative Petition 37 would prohibit local or state taxes on all food for consumption, except for alcohol, tobacco and marijuana. Personal hygiene products were excluded from the measure, based on the results of the campaign's internal polling.”

The Tribune quotes Joe Gilliam, president of the Northwest Grocery Association, as saying: ”Since statehood, Oregon has never taxed groceries, yet politicians in Oregon continue to push for a tax on grocery sales. This initiative will end these efforts and other future efforts by proactively prohibiting the taxing of groceries from farm-to-fork.”

But, the story says, “Katherine Dreissen, spokeswoman for Our Oregon, a labor-backed social justice political group, said the measure is an attempt by major retailers to prevent lawmakers from passing a gross receipts tax. Our Oregon campaigned for a gross receipts tax in 2016, which voters rejected, but lawmakers have since discussed passing a more moderate tax to help raise revenue for schools and social services … Driessen said the initiative isn't aimed at protecting consumers. ‘It's about padding the pockets of Walmart, Safeway and other big retailers that have already spent more than $2 million to qualify this measure’.”

Published on: May 25, 2018

• CNet reports that Amazon has rolled out a new feature, Map Tracking, that allows shoppers to track packages with more specificity than in the past, providing “an estimate on when the package will arrive, how many stops away the driver is and a map showing the delivery truck's proximity to your home. “

The feature has been in test, and now is “available for all packages delivered by Amazon in the US.”


• Recode reports that “this year, 19 percent of Amazon merchants brought in more than $1 million in sales, according to a new survey by Feedvisor, an e-commerce company that helps merchants price goods on Amazon and other online marketplaces. That’s up from 10 percent in 2017.

“Three percent made more than $10 million, up from 1 percent last year. That means more merchants are becoming high-volume sellers on Amazon.”

The Recode story notes that these third party merchants “supply Amazon with an almost limitless assortment of goods that make it the everything store — more than 100 million items in the U.S. are now eligible for two-day shipping under Amazon Prime. And more than half of all items sold on Amazon last quarter came from third-party businesses.”


• Albertsons-owned United, which operates stores in Texas and New Mexico, said yesterday that it is upgrading its e-commerce platform with “two new digital advertising solutions support enhanced merchandising and collaboration with CPG brands for United.”

The upgrades are power by MyWebGrocer.

Full disclosure: MyWebGrocer is a longtime and valued MNB sponsor.

According to the United announcement, “ The first is MWG’s new Sponsored Listings solution that enables CPGs to invest with grocers to increase native product placement and sales. In addition, new Category Header ads have been introduced to the shopping experience to better enable CPG brands to reach and influence United Supermarkets shoppers on their path-to-purchase.

“The platform upgrade also includes enhancements to the Mobile Personal Shopper (MPS) application, part of MWG’s solution for pick and packing of eCommerce orders. MPS is a proprietary mobile application that guides grocers’ personal shoppers through the store aisles for easy and accurate fulfillment of customer orders. New MPS features include enhanced personal shopper metric reporting to drive greater picking quality, efficiency and overall eCommerce profitability.”

Published on: May 25, 2018

My friend Karen Caplan, CEO of Frieda’s, the specialty produce company, has a weekly blog in which she writes about a wide variety of issues, from the importance of giving blood to her recent trip to South Africa. It’s a fun read.

This week’s is something special, and you can read it here.

In it, Karen writes about her recent attendance at the annual Women Against Gun Violence (WAGV) luncheon in Los Angeles, which has been held for two decades. She writes specifically about 9-year-old Madison Rude, who spoke at the luncheon.

An excerpt:

“Madison told the story of when she and her dad, Steven, were at Barnes & Noble bookstore a few months ago. Passing by the magazine rack, she noticed more than 20 magazines promoting guns, photos of guns, guns sales, etc. She asked her dad why Barnes & Noble was selling gun-oriented magazines and displaying them at eye level where young children could see and pick them up. He didn’t have an answer.

“So they discussed it, and when they got home, Madison wrote a letter to the CEO of Barnes & Noble asking him to move the magazines. And then she waited. She never got a response. She actually called and emailed his office multiple times over the next few weeks, but never heard anything back.

“But when they went back to that very same Barnes & Noble several weeks later, Madison noticed that almost all of the gun-oriented magazines had been moved to another display area out of the sight of young children.”

There is lots more to the blog posting, but (spoiler alert!) here’s what she concludes:

“These young people will speak up and fearlessly confront the most difficult issue with courage and conviction.

“Watch out world. They’re coming to change everything.”

Published on: May 25, 2018

• The Washington Post reports that “Human-caused greenhouse gas emissions threaten to make rice less nutritious … raising a worrying possibility about the staple food item for billions of humans.”

Scientists have found, the story says, that rice “contains lower levels of key vitamins when grown amid high concentrations of carbon dioxide, the most common of the greenhouse gases driving climate change … The research, conducted in Japan and China, examined 18 rice varieties in outdoor experiments in which the plants were subjected to atmospheric carbon dioxide concentrations of 568 to 590 parts per million.

“Current concentrations are about 410 parts per million, but they’re growing at about 2 parts per million every year — and could reach the study’s levels in the latter part of this century.”

“If we do nothing, then yes, there is this potential for profound negative impacts on human health,” said Kristie Ebi, a public health researcher at the University of Washington in Seattle and one of the authors of the study.


• 24/7 Wall Street is out with a list of the nation’s most popular retail businesses, based on foot traffic, sales and store count data.

They are, in order: McDonald’s, Walmart, Subway, Walgreens, Starbucks, CVS, Target, Taco Bell, Dollar Tree, Burger King, Wendy’s, Shell, Home Depot, Dunkin’ Donuts, 7-Eleven, the US Postal Service, Dollar General, Lowe’s, Rite Aid, Best Buy, Family Dollar, Applebee’s, Chase, Wells Fargo.

Published on: May 25, 2018

• The Wall Street Journal reports that Paula Price, the former CFO of Ahold USA, has been named CFO of Macy’s. She replaces longtime CFO Karen Hoguet, who is retiring next February.

Published on: May 25, 2018

We had a story the other day about how Amazon tries to ban some online shoppers that its algorithms have determined are abusing the returns process. Prompting one MNB reader to write:

I’m not sure its as easy as imagined to stop a shopper from buying online.  Families are already starting to share Prime memberships (to save annual fee costs) which leads me to think that shoppers will still be able to access digital market.

In my mind, the bigger issue in the Amazon return story is the inability to easily access a customer service representative.  It seems the norm today for companies to outsource this to India companies or to simply ask consumers to complain online.  Every major airline is now pushing their fliers to complain (or compliment) online. Compliments are always followed up by the airline.  At Uber, despite the CEO change, you can’t talk to anyone.  This impacted me when they started offering the $15 monthly credit if you use your AMEX Plat Credit card.  In my case, I would book and travel UBER and not get the credit.  I could find no one to talk with, being forced to APP then email to complain. They “reloaded” my account no less than 10 times, continuing to insert an out of date corp AMEX card into the payment field, which would negate the benefit because there were “multiple forms of payment in my profile” (quote from Uber). They couldn’t explain how a long-deleted, out of date card kept getting loaded.   After a month-long, back and forth, they finally acknowledged a programming error but wouldn’t credit me for the rides taken.  I asked for but was not given a phone number of anyone to talk to live. I asked AMEX to intervene and even they couldn’t get someone “live” (so they said). So, I voted with my feet; Lyft is a terrific alternative.  My time is worth more than the $15.
 
Even the CPG companies which put an “800-WE-CARE” phone number of their package are cutting the hours when these lines are open to let consumers know when they purchase a defective product.  I’m not sure what the answer is;  24/7 company representative availability doesn’t make sense, outsourcing to India is at best a frustrating call and going all the way to online seems to forgive companies of their responsibility to listen to their customers.  There must be a better way….

From another reader:

My spouse works for a Cruise Line and from time to time they ban certain individuals from signing up for future cruises – amazingly few but there are some.  Usually it’s because of incredibly tawdry or unsafe behavior all caught on CCTV.  Not only does the Cruise Line want to protect other passengers who have expectations of a safe vacation but employees who deserve non-nutty customers (and I mean nutty, think Cuckoo’s Nest).  I’m with Amazon on this one.




Yesterday we reported on an IRI study suggesting that “stable inflation, low unemployment, and recent tax cuts,” rather than creating an expanding shopping environment, instead have resulted in a more uncertain spending climate, related to “irregular weather, household finances, and an evolving marketplace.” However, IRI also projects that things will get better as the year progresses … though I was skeptical.

So was this MNB reader:

IRI might want to check the price at the gas pump before they publish their next update…. Also, with freight prices going up, there’s few CPG categories (and retailers) not experiencing some cost pressure. 
 
Makes me wonder what IRI had to gain in releasing their insights….




On another subject, from another reader:

I think some of those people with issues about facial recognition technology either haven’t been out of the US or been to Casinos in Vegas, where these technologies have been in place for many, many years.
 
One country I travel to often for business (which would be considered a 3rd world country for most MNB readers) has used facial technology, both for identification and to check for flu, at Immigrations.  Last time I went, they immediately knew I had changed Passports (as my 10 year duration on my former PP was completed) without showing actual “before / after” photo.  When I made a comment about how much they know – the Agent “winked with a smile”.
 
The Casino industry has used facial technology to catalogue record, catalogue then monitor “guests” who have done something (example: steal a purse, or pick pocket) so that when that “guest” re-enters that Casino or any other, they are immediately flagged, watched and apprehended.   (No, I don’t have any first hand experience… but I’ve talked to those that sell the technology to them.)
 
For most of us that lead a dull, boring, out of the limelight lifestyle, this technology is non-factor.  We have to hope this data is secure – or go live on a farm in Kansas for the rest of our lives.  (And, having grown up on one for the first 18 years of my life… its not a bad option!)




Finally, regarding Starbucks’ efforts to address racial bias, MNB reader Robert S. Burch, Jr. wrote:

Starbucks is getting it right. Sometimes it takes ‘the show’ to have that ‘teaching moment’ as my wife likes to put it. In this context Starbucks has it right that ‘the show’, hopefully, is the start of the conversation for them and everyone else.
 
I certainly will continue to post stories on social media about Starbucks efforts.

Published on: May 25, 2018

Deadpool 2, like its predecessor, is going to make a ton of money. (Let’s see if it retains the number one slot this week, going against Solo, the new Star Wars movie.) Unlike the original, Deadpool 2 was released with a lot of expectations - it had a higher production budget, owing to the fact that Deadpool was a surprise success - a hard-R-rated superhero movie that was as much a vulgar comedy as it was an action flick.

I can tell you that Deadpool 2 pretty much met all my expectations, mostly because it retains star/writer Ryan Reynolds’ profane and irreverent take on both the character and the entire genre. As the title character, he manages to both propel the movie forward and comment on its absurdities without losing any credibility or empathy; in fact, it may be that he takes almost nothing seriously that gives Deadpool 2 its charm. (The word “almost” is important here - there are things he does take seriously, and they actually give the film some emotional heft.) The supporting cast is terrific - especially Morena Baccarin, Josh Brolin, newcomer Zazie Beetz (who steals every scene she’s in), and some surprises that you have to watch for.

If you like this kind of stuff, I recommend Deadpool 2. If you don’t, I have no idea what you’d make of it.



Netflix is featuring a four-part documentary, Bobby Kennedy for President that retraces the short but impactful presidential campaign run by Robert F. Kennedy in 1968, as well as providing some background context and a coda that looks at its aftermath. While it acknowledges Kennedy’s character flaws, the documentary largely is a positive look at Bobby Kennedy through the eyes of people who worked with him and for him, as well as covered him.

What comes through in the piece is that Kennedy, for all his faults, was a man capable of personal growth, better in the end at listening than talking; he was someone for whom the presidential campaign was an educational experience, as he absorbed the realities of a fractured and fractious America and worked out, on the run, how he would be able to address the compelling issues of the time.

I’m old enough to remember not just the day of JFK’s assassination, but the aftermath of the murders of both RFK and Martin Luther King Jr.; I even remember exactly where I was, watching television when LBJ said he wouldn’t run in 1968, and when Nixon executed the Saturday Night Massacre. And still, I found the events of June 5-6, 1968, in Los Angeles’ Ambassador Hotel, to be utterly heartbreaking all over again.

Bobby Kennedy for President isn’t a perfect documentary, but I found it captivating. And sad. And a reminder of when I was young.



If you haven’t watched “Barry,” on HBO, yet, I cannot urge you strongly enough to get to it.

It isn’t a major commitment. Eight episodes, each one about 30 minutes long.

But these eight episodes are about as close to perfect as I can imagine. Created by and starring Bill Hader, “Barry” is the story of a hitman who unexpectedly find himself yearning for an acting career and some normalcy in his life. (Except, of course, there is nothing normal about being an actor, which is part of the joke.) Hader is joined by Henry Winkler, who is amazing as his acting teacher, and a supporting cast that is a revelation.

Watch “Barry.” Please. You can thank me later.



I have another wine to recommend that was poured for me by Morgan of Etta’s fame - the 2016 Cedergreen Cellars Chenin Blanc, which was delicious and refreshing when served with Etta’s pacific scallops, accompanied by black fideo, salsa roja, chorizo, and spring onion. Yum.

Doesn’t get any better than that.

Published on: May 25, 2018

Monday is celebrated as Memorial Day here in the US, and is a national holiday ... which means that MNB will not be posted.

But, we’ll be back Tuesday, May 29, with all-new, hand-crafted news and commentary.

Have a great weekend.

Sláinte!!