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    Published on: August 9, 2018


    Another on-location FaceTime video, this one from the Oregon Brewers Festival, an annual event each summer in Portland … and where the Content Guy goes every year for beer, and this year found both beer and a business lesson.

    There's no text version of FaceTime this week, because this is one of those times when the video is more effective than words at communicating the message.

    As always, you can access this and every MNB video by going to our MNB Channel on YouTube.

    Enjoy.


    KC's View:

    Published on: August 9, 2018

    Albertsons and Rite Aid announced late yesterday that they have called off their $24 billion merger, largely because a number of Rite Aid shareholders, including a couple of influential advisory firms, felt that the drug store chain was being undervalued in the proposed deal.

    Albertsons released a statement that said, in part:

    “Albertsons Companies believes that the strategic rationale of the Rite Aid combination was compelling, including the $375 million of cost synergies and $3.6 billion of identified revenue opportunities. We disagree with the conclusion of certain Rite Aid stockholders and third-party advisory firms that although they acknowledged the strategic logic of the combination, did not believe that Albertsons Companies was offering sufficient merger consideration to Rite Aid stockholders. Consistent with Albertsons Companies’ disciplined approach to mergers and acquisitions, and after careful consideration of all information available to our Board of Directors through today, we were unwilling to change the terms of the merger.We remain excited about the improving momentum, financial strength, and industry leadership of Albertsons Companies. Our team has remained laser focused on execution to drive our financial and operating performance, while ensuring we continue to meet and exceed the needs of our customers.”

    In its report, the Wall Street Journal writes that “some of Rite Aid’s biggest shareholders had planned to vote against the pharmacy’s planned merger with privately held grocer Albertsons, unconvinced by the companies’ argument that a deal was necessary to fend off competition from Amazon.com Inc. and others … The retailers each said their mutual decision to call it quits was made despite their belief in the deal’s rationale. Albertsons said it disagreed with investors and proxy-advisory firms that felt it had undervalued its offer for Rite Aid, which has a market-capitalization of under $2 billion. Albertsons board declined to change the terms of the merger, the retailer said.”

    Neither company will owe the other any money under the terms of the cancelled deal.

    The Journal notes that “private-equity firm Cerberus Capital Management LP had been the main owner of Albertsons for over a decade and had tried to take Albertsons public in 2015. Combining with Rite Aid would have allowed Albertsons to go public and given Rite Aid shareholders about 30% of the company.”

    And, the New York Times notes that “it was hardly the transformative deal that rivals have pursued — such as CVS’s proposed merger with Aetna, the health insurer, or Walmart’s efforts to deepen its ties with Humana.”
    KC's View:
    I know there were a lot of investor questions having to do with whether Albertsons was paying enough, and whether the deal creates enough value in the end. I have tons of respect for Jim Donald, Albertsons’ COO … if anyone could’ve made this work, it is him. But it always struck me as a deal about a) size, and b) giving Cerberus a way to cash out.

    For me, the more important question wasn’t about investor value, but whether physical size, as defined in the traditional sense, remains a critical differentiator. Not to make everything about Amazon, but it seems to me that its expansion of an ecosystem is less about size and more about relevance and resonance. That’s what its acquisition of PillPack is all about - identifying a pain point and figuring out a solution, or, in this case, acquiring one that, when grafted onto its existing business model, has the potential of representing a significant leap forward.

    I’m not sure that acquiring a whole bunch of drug stores represents the same sort of leap.

    That said, Albertsons is making new and significant investments in technology and looking for innovation-minded partners, so I’m hopeful, for Albertsons’ sake, that it has some new tricks up its sleeve. Old tricks probably won't be enough.

    Published on: August 9, 2018

    by Kevin Coupe

    Nielsen is out with new research about how - and how much - American adults interact with media … and the numbers are a little Eye-Opening.

    For example:

    • “Nearly half an adults’ day is dedicated to consuming this content. In fact, American adults spend over 11 hours per day listening to, watching, reading or generally interacting with media. Behind this surge are the growing use of new platforms, as well as the younger, multicultural generations who leverage them.”

    • “Live + time-shifted TV viewing and radio have remained consistent over the measured quarters—a testament to the relative stability to these cornerstone media platforms. Radio alone reaches 92% of adults on a weekly basis; live and time-shifted TV has a weekly reach of 88%.”

    • From fourth-quarter 2017 to first-quarter 2018, daily time spent on devices such as game consoles and internet-connected devices (such as Apple TV and Amazon Fire TV) by adults “increased by five minutes to about 40 minutes. Specifically, 14 of those minutes are dedicated to game consoles, while 26 belong to internet-connected devices.”

    • “Though older generations generally spend the most time with media (adults 35-49 spend over 11 hours a day on it, while adults 50-64 do so at a nearly 13-hour clip), younger generations are at the forefront of TV-connected device and digital usage. Radio is uniquely  immune to having age as a factor. It consistently accounts for between 14%-17% of daily media use.”

    • “Overall video use—time spent with a TV set, computer video and using video focused app/web on smartphones and tablets—netted out to nearly six hours per day for U.S. adults during first-quarter 2018. Compared with the previous quarter, this viewing time increased by 11 minutes, with six of those minutes stemming from TV-connected devices.”

    Fascinating stuff.

    I have a few thoughts.

    First of all, these are adults. Maybe we have to finally dispense with the notion that adults always have to tell kids to get off their devices. (Of course, we don’t know how much more time kids are spending on their devices…)

    There’s a reason that that companies like Amazon and now, apparently, Walmart, are investing money in media businesses. They know that these are both ways to strengthen and lengthen their interactions with customers, and how much competition there is and will be for eyeballs. In the future, this may end up being a significant competitive advantage.

    Finally, I could not help thinking, as I read the research from Nielsen, about the every existence of this data. Sure, Nielsen has been accumulating this kind of stuff for years, but in this context, I think it serves as a reminder of how important accurate, actionable data is for retailers, if they;’re willing to actually act on it.

    It’s all an Eye-Opener.
    KC's View:

    Published on: August 9, 2018

    The Food Marketing Institute (FMI) has gone to the US Supreme Court, requesting that Associate Justice Neil Gorsuch reverse a ruling by the 8th Circuit Court of Appeals that would have resulted in the release of government data showing how much taxpayer money is paid to supermarkets participating in the the Supplemental Nutrition Assistance Program (SNAP).

    The Sioux Falls Argus Leader reports that the Appeals Court had ruled in favor of a release of the data after a lawsuit by the Argus Leader under the Freedom of Information Act. The court said that the sales figures were public information, but FMI argued that the release would make public proprietary competitive in formation that could hurt its members.

    The Argus Leader writes that it “sued the United States Department of Agriculture, which administers SNAP, in 2011 after the government refused to turn over the sales figures under a Freedom of Information Act request.

    “In January 2017, USDA abandoned the case after losing a bench trial in U.S. Federal District Court in South Dakota. FMI intervened in the case, and appealed to the 8th Circuit. In May, the 8th Circuit ruled that release of the annual sales figures would not cause competitive harm to the retailers who voluntarily participate in a program financed by taxpayers.

    “Last year, taxpayers paid $68 billion to finance SNAP, formerly known as food stamps. The program is the primary food safety net for the nation’s poor, including children and the elderly.”
    KC's View:
    To be honest, I just didn’t understand the ferocity of the FMI position, and why this was worth going all the way to the Supreme Court. It seemed to me that the numbers ought to be made public in the interest of transparency. I didn’t get it.

    So, I reached out to Jennifer Hatcher, FMI’s chief public policy officer, to try to get some perspective on the case … and I offer to you our email exchange in the hope that it offers some clarification.

    MNB: How does knowing how much business a store or chain does in food stamp business reveal how much total business a store or chain does? (We’re not talking percentages, right? Or departmental breakdowns? Isn’t it just a dollar figure?)

    FMI: Our members are very protective of their store level data, particularly for those companies not publicly traded. Aggregated data is already available and public. Companies are very concerned that if specific store level information for that particular store was released, it could be targeted by a competitor – particularly one not in the market now and all of their years of market analysis work would be negated overnight.

    MNB: It always has been my experience that most retailers know pretty accurately what competitive stores are doing in terms of business - they get the info from wholesalers, brokers, suppliers, etc… Is this really telling them something they don’t already know?

    FMI: As you know, our members who are privately held hold their market analysis information very closely and believe there is a difference between knowing general trends and knowing the exact sales and demographics of a single store location.

    MNB: Doesn’t the FMI argument depend on a belief that it is more important to protect businesses than it is for taxpayers to know how their money is being spent?

    FMI: There is a host of SNAP information already currently publicly available to taxpayers on the website.

    First, the amount of SNAP dollars redeemed is public, by month and by state and county and you can compare one year to the next or one year to 5 years. We follow all of that for business and customer trends. And it is very helpful.

    Also the types of stores with licenses and redemptions by category is also available and where SNAP authorized stores are located is also available on the web site. When we started engaging on this issue 10 years ago, we suggested that we would be much more comfortable disclosing aggregated store sales data. Therefore, rather than disclosing specific store-level data to tell competitors exactly how many SNAP dollars were spent in your store last month, the public would be able to know how much is redeemed by month, which stores are authorized, how much is redeemed by category of store. USDA publishes the category expenditures now and they also publish a list of the bad actors who have committed violations or fraud.

    Fair competition is good and comes in all sizes, types, formats, (brick and mortar, online, down the street and international), but unfair competition that discloses information on only one side can drive local players out of the market and do real damage.

    Published on: August 9, 2018

    Reuters has a story about how Kroger “is experimenting with a variety of technologies as it battles Amazon.com and Walmart Inc to find a profitable formula to serve customers who want milk and eggs whisked to their doorsteps. These shoppers are a tiny but fast-growing segment of the $800-billion U.S. grocery market. Kroger must win them over to survive.”

    While Kroger believes that its most valuable assets are “brick-and-mortar stores located within a mile or two of most of its current customers,” it also knows that the competitive ground is shifting.

    “In May,” Reuters writes, “Kroger paid roughly $248 million for a minority stake in Ocado, a British company whose newest machines can pull together a 50-item grocery order in as little as five minutes. That technology leapfrogs what is currently in use by any retailer in the United States. It has turned Ocado into the world’s No. 1 online grocer, serving 679,000 active customers in the United Kingdom without operating a single supermarket.”

    Kroger also “has teamed up with Silicon Valley self-driving startup Nuro to test a driverless delivery van in Phoenix. And Kroger continues to invest in curbside pickup.” And, “earlier this month it launched a beefed-up online shopping service called Kroger Ship that sends packages directly from its distribution centers via United Parcel Service Inc and FedEx Corp.”

    The argument is that “Kroger’s new delivery push is a recognition of the value of online shoppers. These customers crave convenience and tend to spend more per order than those who just drop by the supermarket for a few items. The ‘first-mover’ advantage is key to locking them in.” While “analysts say online grocery purchases currently account for just 1 percent to 4 percent of U.S. industry sales,” there is a growing conviction that this number only will grow.

    One interesting tidbit from the Reuters story:

    “Chief Financial Officer Mike Schlotman revealed for the first time that the company never made money on Home Shop, a roughly 30-year-old delivery service it shuttered in April. Kroger offered it in just 20 stores in the company’s King Soopers division in the Rocky Mountain area, for prices ranging from $10.95 for an internet order to $20.90 for telephone orders. That was not enough to cover the cost of labor and the expense of operating a fleet of refrigerated trucks … Kroger replaced Home Shop with Instacart, one of a handful of third-party delivery firms that now serve more than 1,200 Kroger stores.”

    “It’s highly inefficient to do that out of a store. You can’t get the critical mass you need,” Schlotman tells Reuters.
    KC's View:
    It would be my sense that Kroger certainly is throwing its efforts in this area into a higher gear, and only can pick up speed now that the clock is ticking on its Ocado arrangement if it wants to maintain exclusivity in the US.

    The level and speed of competition is picking up to the degree that Kroger has to take big swings.

    Published on: August 9, 2018

    CNN has a story reflecting the reality that while “meal prep kits were supposed to make the supermarket obsolete,” the exact opposite has proven to be true.

    It ends up that the “meal kit brands that are primed to survive are the ones that married off, such as Home Chef, which recently sold to Kroger, Plated, which was purchased by Albertson's, and Gobble, which reportedly is partnering with America's No. 1 grocery chain Walmart.”

    Both Chef’d and Blue Apron both are looking to sell their meal kits in stores. And Amazon is selling meal kits both online and in its Amazon Go store.

    Darren Seifer, a food consumption analyst from research firm The NDP Group, says that “there's lots of companies jockeying for marketshare but they aren't focusing on the bottom line. The segment is still in the mode of expanding user base and are figuring out how profits come later.”
    KC's View:
    It seems like there are lots of stories in the medias lately that are simultaneously writing the obituary for the meal kit business and offering some level of hope for how it can be resurrected. The fact is that the folks who invented this business managed to serve the traditional supermarket business a large portion of shame, since traditional food stores always had the tools to create this segment, but never saw the opportunity.

    How many other opportunities are there in traditional stores that are going undetected by people who cannot or will not see them?

    Published on: August 9, 2018

    Wine Spectator reports on a new study suggesting that moderate drinking can stave off dementia. (Can’t imagine why Wine Spectator would be interested in such a study…)

    Essentially, the British researchers found that people who were moderate alcohol drinkers - between one and two drinks a day - seemed to have less of an occurrence of dementia than people who were either teetotalers or who drank more than that. Among people who drank more than two drinks a day, “every seven additional drinks per week increased dementia risk by 17 percent.”

    The story notes that the group started being studied in 1985, when they were in middle age, and so there is no conclusive data about how much they drank when young.
    KC's View:
    Let’s be clear … I’m not taking this story entirely seriously. The group studied is too small to be conclusive. But, on the other hand, I’m perfectly happy to abide by the conclusions on the off chance that they’re right.

    Published on: August 9, 2018

    CNBC reports that “Chinese online grocery delivery company Dada-JD Daojia said on Thursday it has raised $500 million from U.S. retailer Walmart and JD.com in its latest round of financing … JD Daojia delivers goods from local supermarkets and other partners via a location-based smartphone app and has about 20 million monthly active users.”

    The story notes that earlier this year Walmart “opened its first small high-tech supermarket in China where customers use smartphones to pay for items that are available on Walmart's virtual store on JD Daojia's platform.”


    • The Seattle Times reports on this week’ “graduation ceremonies” at Amazon for five former members of the US Armed Forces, the first graduates “of a program designed to shepherd veterans into careers in in-demand technology jobs.”

    While the five people “won’t make a dent in the company’s roughly 17,000 job openings,” the story suggests that the graduation represents “the lengths the Seattle giant will go to satisfy its insatiable appetite for workers … Amazon says about 175 veterans are currently pursuing apprenticeships at Amazon offices around the country.”
    KC's View:

    Published on: August 9, 2018

    • The Chicago Sun Times reports that “a Chicago Walmart store was temporarily closed Wednesday after a health inspector found over 400 rodent droppings throughout the store … According to the health inspection report, there were 405 mouse droppings throughout the store, including 35 droppings under the cereal and snack shelves, 100 droppings along the wall of the dog food and toilet paper shelves and 25 droppings in the bakery section. The droppings were initially noticed during a previous inspection on July 31, but were not cleaned up, the report said.”
    KC's View:
    Yuck.

    Published on: August 9, 2018

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

    USA Todayreports that CVS “plans to offer a nationwide service to treat easy-to-diagnose maladies and other medical issues via its smartphone app … The telemedicine service will be offered for diagnosis of conditions like colds and flu, skin issues and general wellness matters.”

    According to the story, “The video visit service, which will be provided on smartphones, will cost $59 and can be paid by credit card or debit card … The move reflects an expansion of the CVS MinuteClinic brand. It comes as the drugstore chain is seeking approval of its deal to acquire Aetna in a sweeping plan to diversify its business.”


    Bon Appétit has a story concluding that Portland is the 2018 Restaurant City of The Year.

    Portland, Maine.

    Why? “For starters, it’s the sheer number of outstanding openings—from a tiny pastry shop that serves knockout Roman pizza to a Jewish-style deli that ranks up there with New York and L.A.’s best. And while you can still get an Instagram-worthy lobster roll and a dozen local oysters, you’re missing out if you skip the killer pho spot or the guy selling hand rolls out of a Yeti cooler.”

    You can read the entire assessment here.

    It was somewhat disconcerting to read this story while sitting in Portland, Oregon. But I have to admit that this story made my mouth water. When I get back east, it may be time for a road trip…


    • The Food Marketing Institute (FMI) has named this year’s recipient of the Esther Peterson Award for Consumer service to Andrea Gold, director of the retailer policy and management division, Supplemental Nutrition Assistance Program (SNAP), at United States Department of Agriculture (USDA), Food and Nutrition Service (FNS).

    Seems sort of ironic that as FMI goes to the Supreme Court to prevent the release of SNAP data, it is simultaneously celebrating the work of someone who works on the program.
    KC's View:

    Published on: August 9, 2018

    • H-E-B announced that it has named Mike Georgoff as Chief Product Officer, H-E-B Digital, responsible for helping to grow the company’s omnichannel business.

    Georgoff’s most recently was Chief Product Officer at Main Street Hub, a digital marketing firm acquired by GoDaddy earlier this year.
    KC's View:

    Published on: August 9, 2018

    …will return.
    KC's View: