business news in context, analysis with attitude

Published on: July 23, 2018

by Kevin Coupe

There was a wonderful story in the Seattle Times over the weekend about how John Yokoyama, the longtime owner of the Pike Place Fish Market - the shop that “is famous for its team of mongers tossing customers’ selections from the ice-packed displays at the front to the scales in the back” - has sold the business to four of his employees.

That business, the Times writes, “has become one of Seattle’s most well-known landmarks, drawing thousands of visitors a day during peak summer months and serving as the backdrop to countless selfies.”

According to the story, “the foursome did not disclose what they paid for the shop, but Yokoyama, who bought the business from its founder for $3,500 in 1965, said he worked with ‘the kids’ to make the purchase possible.” (The “kids” are in their forties and fifties. Age is relative.)

The fish tossing, the Times writes, was not always part of the business plan. In fact, it only came about when the business was close to bankruptcy, and Yokoyama and his employees - helped along by a consultant - determined that they had to come up with something that would make the act of selling fish more memorable.

At the same time, the story says, Yokoyama had to change the way he led and managed his people. “I was a grumpy, stupid young buck,” he says. “I had to transition myself from a yelling, screaming dictator tyrant who my employees didn’t like very much into someone who cares about people and is committed to being in a loving partnership with my employees, our customers and the world.”

“He could have sold it to just about anyone, but he went out of his way to sell it to us,” says Ryan Reese, one of the new owners. “The city is changing so fast, it’s an honor to be part of a small, 1,000-square-foot legacy that makes this city special.”

To me, this alone is an Eye-Opener … it heartwarming to know that Yokoyama, who probably could’ve gotten a higher price and better terms elsewhere, decided that the city, the business and its customers would be better served by having longtime employees owning the place and having skin in the game.

This is one step beyond what was described in a Wall Street Journal story over the weekend, about how a number of companies, facing a tightening labor market and a limited number of ways to attract employees, have decided that handing out stock to rank-and-file employees is one way to differentiate themselves.

There is, the story says, “evidence that offering lower-level workers a modest amount of restricted stock is good for the bottom line because it generates loyalty … A recent study by the National Center for Employee Ownership that an index of 28 companies offering “broad-based” equity options—including stock for retirement plans and grants—outperformed the S&P 500 by nearly a two-to-one margin over the past year. The NCEO, a non-profit based in Oakland, Calif., estimates workers who make less than $30,000 and get equity in their company have 11% longer median job tenures than those without.”

Employees with skin in the game being better, more loyal employees?

Now that’s what I call an Eye-Opener.

Published on: July 23, 2018

There’s a piece in Tech Crunch suggesting that Amazon’s ecosystem may be showing some cracks, and that Walmart has a unique opportunity at the moment to mount a competitive response that would take advantage of it.

The story argues that while Amazon has created and ecosystem of considerable breadth, it may actually not be so deeply rooted in the lives of its shoppers. “Amazon has invested in its Prime program continuously, adding feature after feature in an obvious bid to make the service appear as valuable as possible,” TechCrunch writes, but while everybody pays for them, many services actually are superfluous to people’s lives. It doesn’t matter, though, because people are hooked into Prime and can’t let go … even as the price of Prime rises and competing services may be as good or better.

“Streaming services and exclusive content have multiplied, and Prime users are frequently left out in the cold,” the story says. “Photo storage? Isn’t that free everywhere? Twitch Prime? Is that really useful for millions of working families? Prime Originals? Not exactly raking in the Emmys. But still… it’s Prime. It’s necessary.

“The only one who can realistically break this deadlock is Walmart. Not by providing the same thing as Amazon, but by providing something simpler and more focused, taking over the workhorse duties of Prime (shipping, sales, some basic media of opportunity) at a much lower price, granting the customer freedom to pursue their own choice in subscriptions while not meaningfully affecting their online retail experience.

“What would this Walmart offering consist of? They already offer free shipping on a lot of items, free store pickup, and so on. You don’t need to use your imagination here. What would make this better? Free 2-day shipping on all items with no minimum amount; grocery and secure package delivery; a set of basic TV and music streams or even just a partnership with a couple existing products; and lastly some in-store benefits like members-only promotions and perhaps even early access on Black Friday. (Plus extra perks at sub-chains like Sam’s Club.)”

TechCrunch argues that Walmart should price this at $50 a year - well below Amazon prime’s $129. “Timing-wise they’d want to announce this well ahead of the holidays — at least three months. First three months free if you sign up now and all that. It’ll be a big cash outlay but you don’t unseat a titan like Amazon on a shoestring budget. You do what it takes to put items in carts and go from there.

“Walmart won’t risk its business on this, but it makes sense to do it now and do it with vigor.”

You can read the entire argument here.

Published on: July 23, 2018

While as pushback comes from some Rite Aid investors who object to the company being acquired by Albertsons in a $24 billion deal because of the latter company’s “burdensome debt load and recent performance struggles,” CNBC writes that “to sway investors, the two retailers have embarked on a public relations campaign. Those efforts have centered, in part, on the benefits that scale gives them … Increased size gives increased ability to bargain with food and consumer companies as retailers focus on competing on price. It could also give Albertsons and Rite Aid a greater ability to find $375 million in cost savings that would help the two invest in necessary technology for the future, the companies argue.”

However, the story also notes that this argument is being made “even as shopping in the U.S. shifts online and away from stores. The nation's largest retailer, Walmart, has been doubling down on its grocery and e-commerce investments. Competitor CVS Health has announced a $69 billion deal to merge with insurer Aetna.”

And, at the same time, “Amazon’s purchase of Whole Foods and planned acquisition of Pill Pack bring the Seattle giant's might to both the grocery and pharmacy business. Kroger has struck numerous deals and partnerships to augment its e-commerce business and has its own pharmacy business.”

"Scale is big here," says Albertsons COO Jim Donald. ”Scale is what we can use as we continue to [serve] customers online and [in] brick and mortar.”

Published on: July 23, 2018

In the UK, This Is Money reports that Unilever, impressed to the degree that its Dollar Shave Club has capitalized on a direct-to-consumer model that essentially disintermediates traditional retailers, plans to apply the same model to other products and categories.

The story says that Unilever plans to test a subscription model with its “gourmet tea company T2 and a growing stable of so-called prestige beauty brands.”

CEO Paul Polman says, “We’ve learnt a lot from Dollar Shave Club … We are now also seeing our online business taking off… and with our prestige businesses we see more opportunities to go direct to consumers.”

This Is Money notes that Polman’s comments “come as supermarkets such as Tesco and Sainsbury’s are turning the screws on Unilever, striking mega-deals to merge or forge partnerships that massively increase their buying power with the consumer goods giant.”

Published on: July 23, 2018

CNBC reports that Krispy Kreme, which is owned by JAB (which also owns Keurig Dr Pepper, Peet's Coffee & Tea and Panera Bread), plans to become a majority shareholder in Insomnia Cookies. Terms of the deal have not yet been disclosed.

Insomnia Cookies, which has 135 locations and is valued at less than $500 million, has become a cult favorite by locating may of its stores near college campuses and being willing to deliver to students until 3 am. It also sells brownies and, of course, cold milk.

The CNBC story suggests that “buying Insomnia Cookies would help Krispy Kreme reach more diners than its doughnut loyalists, as well as provide new delivery infrastructure. There also could be opportunities to bundle the two products together, for example selling a day-old doughnut at a discount alongside an Insomnia Cookie.”

Published on: July 23, 2018

• Walmart announced that Walmart de México y Centroamérica has struck a deal to acquire supermarkets from Gessa Corportate Group in Costa Rica, which owns Perimercardos, Super Compro, and Saretto. The deal will add to the 247 storesWalmart currently operates in in Costa Rica.

Terms of the deal have not been disclosed.

Published on: July 23, 2018

• The Wall Street Journal reports that “meat is piling up in U.S. cold-storage warehouses, fueled by a surge in supplies and trade disputes that are eroding demand.

“Federal data, coming as early as Monday, are expected to show a record level of beef, pork, poultry and turkey being stockpiled in U.S. facilities, rising above 2.5 billion pounds, according to agricultural analysts.”

While US consumer demand for meat is growing, it isn’t enough to keep up with supply. In the past, the meat would’ve been exported to places like Mexico and China … but Mexico and China “have both set tariffs on U.S. pork products in response to U.S. tariffs on steel, aluminum and other goods.”


• Colorado-based Lucky’s Market, in part enabled by an investment from Kroger, announced that it has signed leases for four new stores that it plans to open within two years in various Florida cities - Venice, West Boca, Pensacola and Ormond Beach.

The move is part of a broad expansion in Florida; it currently operates 30 stores, with 13 of them in Florida, with expectations to grow its total store count to 35 by the end of the year.


• The Orlando Sentinel has a story about a refresh given to one of Winn-Dixie’s stores there, “with bright red paint splashed across the walls, a revamped deli area, expanded products and new features” that include more produce and organics, cut fruit, and “more cuts of fish and pre-made steaming bags with fish like salmon that can be thrown in an oven or steamer. The store will even steam the $6 bags for customers on site.”

The refresh comes just months after the company’s emergence from bankruptcy, and after similar remodels took place elsewhere in the chain.


• The Wall Street Journal has a story about “the Food Business Pathways program, a 10-week-plus program that is open to the 400,000 residents of New York City Housing Authority’s 325 developments, along with 200,000 New Yorkers living in Section 8 housing administered by the agency.” The goal is to help potential entrepreneurs learn about the food business, and “the program provides courses covering everything from government regulations to budget management, and it also helps attendees incorporate their business and pays the necessary fees involved. And while it doesn’t actually fund their businesses, it connects them with many lenders, particularly those who support small businesses.”

Published on: July 23, 2018

Jonathan Gold, the Pulitzer Prize winning restaurant critic for the Los Angeles Times, died on Saturday. He was 57, and had been diagnosed with pancreatic cancer less than a month ago.

Published on: July 23, 2018

Got the following email from MNB reader Brian Blank, regarding the former Toys R Us employees who lost their jobs when the retailer went belly up and now have reached out to the three private equity groups that owned it, hoping for some sort of hardship fund that could help them out financially:

Let me preface this by saying that I share your contempt of the Wall Street types who acquire businesses such as Toys R Us only to plunder them and screw over the employees AND customers.

But…I do have to ask:  Why didn’t these hard-hit employees do something to help themselves?  If you know you’re about to lose your job—go look for a new job!  Supposedly - and maybe this is “fake news” - the economy is in such a good place that employers are reported to be begging for workers.  TRU has been in trouble for a long time, and the plan to shut down the company was well-publicized and a long process - not one of these situations where people showed up to work one day and found the doors locked.

I agree with you to a point. I’m not sure we know that the employees haven’t looked for new jobs. And ultimately I’m okay with employees getting just a little bit of the consideration that the people who wrecked the company got.



We had a story the other day a new Food Marketing Institute (FMI) study, conducted by Precima, concluding that “the best way for food retailers to gain an advantage over digital retailers and other competitors is to have a large, loyal customer base,” and that “to achieve this, it is critical for retailers to take a next generation approach to customer loyalty.”

I commented:

The problem with this is that second-generation loyalty marketing may not be much good to stores that never got the first generation right. They called them loyalty programs, but they really were just juiced up coupon programs … about bribing customers into staying rather than demonstrating their loyalty to the shopper.

The stated purpose of these programs seems obvious. They won’t mean much to retailers that are oblivious.

MNB reader Glenn Cantor responded:

Store Managers should know their best shoppers and they should know when they are in their store.  ( Amazon does!) They can make this familiarity comfortable for these shoppers by then providing customized services- dedicated deli service, meal suggestions, special offers, etc.  Retailers kind of do this now, through their loyalty marketing programs.  They need to bring loyalty marketing into the store.

Another reader objected to the phrase, “"they really were just juiced up coupon programs … about bribing customers into staying rather than demonstrating their loyalty to the shopper.”

Perhaps they're demonstrating their loyalty to the shopper by providing them with coupons on the products they buy.  Can you really think of a better way to meet that objective?

I think that when loyalty becomes all about price, the vast majority of retailers are going to end up losing. Very few retailers can win that battle … most can be undercut by somebody else.

Back in the day when people had loyalty card fobs on their keychains, they often had dozens … because they weren’t really loyal at all. Just opportunistic. And retailers weren’t doing anything differentiated to prove their loyalty to their shoppers.

So I disagree with your argument.



On another subject, from another reader:

Costco’s continued adjustments to its’ food menu started with their decision to eliminate the "real thing", Coca Cola, and bring in Pepsi (yuk!) products. Then the snack items began to be altered, e.g., the berry freeze was replaced by a supposedly better for you mixture albeit at almost twice the price. Their legendary hot dog is no longer kosher, sorry Sol Price, but in place they have substituted a lesser concoction of fats and boned meat. Life is short . . . let the people have what they crave . . . tasty food with lots of carbohydrates. Can you imagine if John Blutarsky (Bluto) in Animal House had organic food only from which to choose at the college cafeteria!

Wait. The green jello wasn’t organic?

Imagine how disappointed I am.



Finally…on Friday we took note of a CNet report that a new vodka is about to hit the market - Ten Forward Vodka, named after the USS Enterprise bar tended by Whoopi Goldberg’s Guinan in “Star Trek: The Next Generation.”

It is part of a line of “Star Trek”-themed alcoholic beverages. The Silver Screen Bottling Company, which makes it, recently announced the James T. Kirk Straight Bourbon Whiskey, and already makes Klingon Bloodwine.

The vodka’s label is designed to look like the Enterprise D’s computer screens. It will retail for about $30 per bottle. The launch was announced at Comic Con 2018 in San Diego.

As I said Friday, this was a story that was made for MNB … and its readers, one of whom, Dennis Barthuly, wrote:

I assume they will have to have a "Tribble" Fuzzy Navel.

And then there was Leo Martineau, who wrote:

But can they produce a Tzartak Aperitif properly aligned to the consumer’s body temperature? Just asking.

All compliments to Leo, who came up with a reference that I actually had to research. According to one Star Trek fan site, the Tzartak aperitif “was an extremely delicate and difficult-to-make beverage with many different ingredients. When made properly, the evaporation point of the drink's main ingredient was one-half degree lower than the body temperature of the consumer. Thus, the liquid evaporated immediately after it touched the tongue, and the flavor was carried entirely by the vapors. However, the slightest miscalculation in the mixing process would crash the vapor point, and the entire drink would evaporate away.”

The Tzartak Aperitif was first mentioned on a “Star Trek: The Next Generation” episode called “Time’s Arrow,” in which Guinan is explaining to Capt. Picard the delicacy of the timeline, and how easy it is to disrupt it.

I remember the episode (Samuel Clemens actually makes an appearance!) and the metaphor, but I didn’t remember the actual drink. So thanks to Leo for reminding me yet again why I love MNB and its readership so much.

Published on: July 23, 2018

As often happens at this time of year, I’ve 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.

The answer is yes … and this year, I’m thrilled that it will be sponsored by Portland State University’s Center for Retail Leadership.

So, let's get together Thursday night, August 2, 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, hopefully on the outside patio - and I hope that any MNB readers who'd like to stop by will do so. Put it on your calendar.

Published on: July 23, 2018

Francesco Molinari became the first Italian ever to win the British Open on Sunday, besting Tiger Woods, Jordan Spieth, Justin Rose and Rory McIlroy.