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    Published on: September 13, 2018


    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here, and this is FaceTime with the Content Guy.

    I’m fascinated by companies that are working to develop innovative solutions to consumer problems … and I’m not talking just big companies, but also the startups that come up with key insights that can be translated into compelling business models.

    Sometimes we consumers don’t even know the problem, or don’t have a sense of how it can be addressed.

    A company with which I recently came in contact reminded me of this.

    The problem is well-known. The vast majority of people have no idea what they are going to have for dinner late in the afternoon. It is a problem that led to the badly named mini-industry called meal solutions, with lots of companies coming up with a variety of approaches, from store pickup to delivery to meal kits, to help shoppers cope.

    These approaches sort of depend on customers knowing what they want. I buy a chicken parmesan meal kit because I feel like chicken parmesan. I order products for pickup or delivery because I know what I want. It requires a kind of consumer proactivity that is nice when it happens, but puts the ball firmly in the shopper’s court.

    That’s where this company called Fleat comes in. They’ve come up with a fascinating construct that, I think, could be adopted by supermarkets, convenience stores and restaurants - anybody who is looking for share of stomach.

    The idea, as I understand it, is that they have an algorithm that analyzes customer purchase behavior and matches it up with location information (they call it “patented StreetLogic technology”) and so when they send a delivery truck to a neighborhood, it can be stocked with foods and meals that either have been ordered by people from that area in the past, or is the kind of food they they are likely to order. And then, the Fleat app … which is customized for whatever business is using it … informs people in the neighborhood that a) they are coming to the area, and b) what foods they have on the truck.

    Sort of like the old ice cream trucks, except that rather than a bell they have an app, and rather than chocolate eclair or creamsicle ice cream bars, they have chicken parmesan or seafood risotto or whatever happens to be appropriate, whether it is a meal, meal kit, or ingredients.

    I’m intrigued by this. They’ve been testing it out with an Orlando restaurant called Farm & Haus, and, as I understand it, are working on a couple of other tests that are designed to be proof of concept.

    Here’s what I know. There’s no question in my mind that retailers of various kinds are looking for ways to compete that will differentiate them from everybody else. That means your bricks-and-mortar store has to be differentiated, relevant and resonant … and your digital strategy needs to be an extension of that.

    What I kind of like about Fleat is that, if it works, it has the potential to move the needle on all of this … it takes the most targeted and appropriate parts of a food business and then parks it in the shopper’s driveway.

    We’re going to be seeing a lot of these kinds of innovations, I think, and it is incumbent on retailers to be aware of them, to have conversations with them, and figure out a way to use them to take their businesses to the next level.

    That’s what is on my mind this morning. As always, I want to hear what is on your mind.


    KC's View:

    Published on: September 13, 2018

    Jim Donald, one of food retailing’s most respected leaders, has been named president/CEO of Albertsons Companies, effective immediately. He moves into the job from his role there as president/COO; Robert Miller, who has been serving as chairman/CEO, now becomes chairman of the board.

    Donald is the former CEO of Extended Stay Hotels … Haggen … Starbucks … and Pathmark, and has been named one of the “Top 25 CEOs in the World” by The Best Practice Institute. He also has held executive roles at Safeway, Walmart and - yes - Albertsons, where he worked in various roles between 1976 and 1991. He began his supermarket career as a trainee at Publix.

    Donald joined Albertsons as president/COO earlier this year, and was charged with the integration of Albertsons’ operations with Rite Aid’s, in anticipation of a successful merger, which had been announced before Donald re-enlisted. Those plans were scuttled 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.

    In a prepared statement released yesterday, Donald said, “Albertsons Companies is uniquely positioned to operate in both a ‘four walls’ traditional environment and the ‘no walls’ world of technology. We serve 34 million customers each week across our 2,300-plus stores and serve 5.5 million patients in our 1,700-plus pharmacies. That’s a significant food, health, and wellness footprint. We’re well positioned to serve the evolving needs of today’s customer, wherever and whenever they choose to shop with us. I am looking forward to leading this dynamic company as we focus on innovation and customer-centric retailing in all its forms.”
    KC's View:
    The bottom line on Jim Donald is that wherever he has worked, the people who worked for him continue to feel that he’s the best person they’ve ever worked for - indefatigable, exacting, supportive, nurturing, decisive, and incredibly smart. (Did I mention indefatigable?)

    Sounds to me like this move was inevitable once the Rite Aid deal fell apart, and while he doesn’t have to worry now about integrating the drug store chain, Donald still has an enormous enterprise to lead into a new world of retailing. Albertsons has made some moves, but I do think that the company has a way to go in terms of innovation and disruption, not to mention coping with the threats from Amazon and Walmart/Jet.

    Jim Donald has vision, but just as important, he has the ability to communicate it internally and marshal his forces. That’s a huge advantage.

    Published on: September 13, 2018

    The Wall Street Journal this morning has a story about how some progressive bricks-and-mortar stores “are crafting high-tech retail experiences that give internet marketplaces a run for their money.”

    An example cited in the story:

    “In Los Angeles, the new Nike by Melrose store has outsize vending machines, dubbed ‘digital lockers,’ which customers can access by scanning QR codes sent to their smartphones when they buy items through the app. Flash yours and a shoebox pops out—no pesky humans required. Elsewhere in the store, codes on every product let customers scan and search for variations in styles and colors; you can also use the app to set up a one-on-one with a Nike Expert.”

    And another one:

    Nordstrom’s new Manhattan Men’s Store, the story says, is “integrating in-store tech to bolster a full-service operation, which can include a shave, shoe polish or custom fitting. Even before you arrive, you can use the Nordstrom app to select what you’d like to try on, so a dressing room can be made up in advance. The app can even track your location so chosen merchandise is hung and waiting as you step out of an Uber. For those loath to leave the car, curbside service can be arranged via the app and online orders can be picked up in store 24 hours a day.”
    KC's View:
    I read about these stores, and it makes me want to visit them. That alone is a big deal.

    Integrated digital experiences will be different, depending on the store and target customer. But using digital components to create differentiated store environments strikes me as critical to sustained bricks-and-mortar success.

    Published on: September 13, 2018

    Forbes reports that one year after the completion of Amazon’s purchase of Whole Foods, a new study concludes that the impact on Whole Foods’ prices has been negligible, with a lot more noise than actual cuts.

    Here’s how the story frames the findings:

    “In seven pricing studies of a basket of 108 items over the past year, from the week before the acquisition was completed through Aug. 27, 2018, Gordon Haskett analyst Chuck Grom found that the basket’s aggregate price was just 0.8% below the price before the acquisition was completed. In fact, compared with Whole Foods' first round of price cuts under Amazon a year ago, the basket price has actually inched up 1.3%, the study found.

    “Including such perks as the 10% off sale items Amazon offers to Prime members and other member deals, the study found that on Aug. 27, Prime members got savings of about $1.50 on the $400-plus total basket compared with non-Prime members.”

    The study concedes that food price inflation needs to be factored into the numbers, since it actually could be argued that Whole Foods is keeping prices down more than they otherwise would have. In addition, the study points out that there have been more cuts in private label than in national brands, as Amazon-owned Whole Foods puts greater emphasis on that side of the business.

    Regardless of the numbers, Forbes writes, a different survey concluded that 49 percent of Whole Foods shoppers said that Amazon’s ownership had resulted in lower prices, while 46 percent there was no difference, and five percent said they had gotten higher.
    KC's View:
    In other words, noise matters.

    Let’s remember, Amazon never has been a price leader. It always has been a price follower … albeit one that has been really fast and really nimble in a way that is relevant to people, knowing when and where to lower prices in an effective way.

    The other thing is, it hasn’t been that long. We aren’t even close to seeing where Whole Foods fits into the Amazon ecosystem over the long term.

    It would be a mistake to underestimate the power of this partnership, and malpractice to feel any sort of complacency.

    Published on: September 13, 2018

    CNBC reports that White Castle, which began testing the sale of meat-free Impossible Burgers in 140 locations last April, now will make the offering available at its more than 400 stores nationwide. The story describes White Castle's Impossible Sliders as “topped with smoked cheddar cheese, pickles and onions and cost $1.99 each.”

    The expansion comes as a result of strong performance by the burger-like item; it has, the company says, become a cult favorite.

    The story notes that “the product is made with an ingredient called soy leghemoglobin that releases a protein called heme that gives the meat substitute its distinctive blood-like color and taste. This ingredient was approved by the Food and Drug Administration in July, a big win for Impossible Foods, which has been rapidly expanding in the U.S. and abroad.
    KC's View:
    Last time I went to a White Castle - with Michael Sansolo, as it happens - we both agreed that it would be the last time. But I’ve tried and liked an Impossible Burger (at the very nice Irving Street Kitchen in Portland), and so I’d be willing to see how the White Castle version compares.

    Published on: September 13, 2018

    VentureBeat reports that Walmart has made a deal with a Washington State-based company called Ossia, which has developed “a wire-free, over-the-air transceiver that could beam electricity to devices anywhere within range.” The story says that Walmart, as Ossia’s first retail customer, will work with the company “to explore ways in which Ossia “might help Walmart cut power costs in its thousands of stores, clubs, and facilities.”

    Here’s how VentureBeat describes the technology:

    “Unlike most ‘wireless’ charging tech on the market, Cota doesn’t require line-of-sight access, plugs, or charging pads. Instead, it taps thousands of antennas embedded in transmitters that communicate with compatible transceivers. When a device starts running low on power, those antennas emit microseconds-long beacon signals that reflect off of walls and other obstacles until they reach a transmitter, which triangulates the beams to pinpoint the transceiver’s location and sends power along those paths.

    “A single transmitter can send about 1 watt to a smartphone sitting 3-6 feet away, Ossia claims, while its prototype Cota Tile can charge devices up to 30 feet away (or 50 feet with two transmitters working in tandem). Future designs will take advantage of more powerful 2.4GHz and 5.8GHz hardware, the latter of which will enable Ossia to squeeze more antennas onto a same-sized transmitter.”
    KC's View:
    I’m intrigued by the idea that one service that Walmart may be able to offer is wireless charging of shoppers’ mobile devices using the Ossia technology. That would be a pretty cool thing.

    Published on: September 13, 2018

    The New York Times this morning reports that the US Food and Drug Administration (FDA) yesterday said that “teenage use of electronic cigarettes has reached ‘an epidemic proportion,’ and it put makers of the most popular devices on notice that they have just 60 days to prove they can keep their devices away from minors.”

    If they don’t comply, the FDA said, these products could be pulled from the marketplace.

    The Times writes that “the agency said it was sending warning letters to 1,100 retailers — including 7-Eleven stores, Walgreens, Circle K convenience shops and Shell gas stations — and issued another 131 fines, ranging from $279 to $11,182, for selling e-cigarettes to minors.

    “Federal law prohibits selling e-cigarettes to anyone under 18. In a briefing with reporters, the F.D.A. commissioner, Dr. Scott Gottlieb, said that more than two million middle and high school students were regular users of e-cigarettes last year.”

    Among manufacturers, the story says, the FDA is especially targeting Juul, which “offers especially potent nicotine hits. Juul Labs launched the sleek device, which looks like a flash drive, in 2015. It comes with ‘pods’ in eight flavors, among them mango, menthol and creme. In a short time, Juul has become the dominant seller of e-cigarettes and a fad among students. According to Nielsen data, Juul controls 72 percent of the market, and is valued by investors at $16 billion.”

    The story goes on: “The other four products facing the 60-day deadline are RJR Vapor Co.’s Vuse, Imperial Brands’ blu and devices made by Logic. They said they were working with the F.D.A. as well. RJR, Imperial and Altria are all major tobacco companies. As smoking rates have declined, the industry sees e-cigarettes as an important piece of its survival, a fact that makes some in public health mistrustful.”

    Juul responded to the FDA statement this way: “Juul Labs will work proactively with F.D.A. in response to its request. We are committed to preventing underage use of our product, and we want to be part of the solution in keeping e-cigarettes out of the hands of young people.”
    KC's View:
    Yeah, right.

    These manufacturers, as far as I am concerned, have no credibility, and believing that they will give this subject anything more than lip service - and maybe, if they have to, some token move to demonstrate minimal cooperation with regulators - is foolish.

    We’re going to trust tobacco companies - which historically have proven that they only thing they do better than manufacture poisonous, addictive products is lie to legislators, regulators and customers - to cut off young customers who they hope will buy their products for the rest of their lives? I don’t think so. We’re going to trust the manufacturer of mango e-tobacco products when they say they are committed to keeping their products out of the hands and lungs of young people? Nope.

    This is all a crock. And retailers should be careful about doing business in this segment, which is populated by the craven and the mercenary.

    I’ve always been upfront about my opinion of these people. I hate them. I cannot imagine that there are adults working at these companies who would want their children using their products. And I believe that a special circle of hell is reserved for them.

    Published on: September 13, 2018

    Barron’s reports that UBS analysts are predicting that if Kroger were to stop charging for its grocery delivery service, it would take a significant hit to its earnings.

    “While we don’t expect Kroger to change its fee structure in the near term, we believe there’s a chance it may revisit it in the next few years,” UBS analysts wrote, “citing free pickup offers from Walmart and Amazon.com’s Whole Foods.”

    However, the analysts also argue that if Kroger were to move to free delivery, it could “offset some of this (economic) pressure through greater automation and best practices learned from Ocado,” with which it recently struck a deal to adopt its robotic warehouse technology.
    KC's View:

    Published on: September 13, 2018

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

    • Kroger this morning said that its Q2 total sales rose 1 percent to $27.87 billion, on same-store sales that - excluding fuel - were up 1.6 percent. Q2 net income was up 44 percent to $508 million.


    • The Cincinnati Business Courier reports that Kroger “is among the biggest employers of workers on food stamps in Ohio and at least three other states. That’s one of the findings of a study by industry trade publication the New Food Economy on employers of people whose wages are low enough that they participate in the Supplemental Nutrition Assistance Program (SNAP), which is commonly referred to as food stamps.”

    Kroger, the story says, “ranked third in Ohio, behind only Walmart and McDonald’s, according to the study. Those two behemoths ranked 1-2 in four of the other five states New Food Economy studied: Arizona, Kansas, New Hampshire, Pennsylvania and Washington. Kroger affiliates ranked third in Arizona, where its Fry’s stores have a large presence, and Kansas, where its Dillons stores have a sizable market share. Kroger’s Fred Meyer stores ranked fourth in Washington state behind the top two and Safeway, another large grocery store operator.”


    Bloomberg reports that Starbucks is throwing in with UberEats “to test delivery in more than 100 locations in the Miami area.”

    Starbucks tested delivery with Postmates as its delivery arm several years ago, and has “dabbled” with various approaches over the years, but nothing has gained enough traction to get any sort of rollout.


    • Kroger’s Mid-Atlantic division announced that more than 3,200 associates working at 22 Kroger stores in its Richmond and Hampton Roads market have ratified a new labor agreement with The United Food and Commercial Workers Union (UFCW) Local 400.

    The agreement “raises starting wages to $9.50 an hour for part-time associates and $10 an hour for full-time associates. After one-year of service, wages move to $10 an hour for part-time and $11 an hour for full-time. This is in addition to overall wage rate increases, high-quality, affordable health care benefits and contributions to a pension fund to support associates in retirement.”


    • Add another big name to the list of people and companies investing in the cannabis business: Adolphus A. Busch V, great-great-grandson of the late founder of Anheuser Busch, announced the launch of an eponymous cannabis brand, ABV Cannabis Company.

    According to the announcement, “Busch has created a brand that provides clean, consistent, quality and affordable cannabis products that appeal to consumers from every walk of life. The company launches with a line of disposable vaporizer pens, crafted with the highest quality components available and filled with CO2 extracted cannabis oil derived from environment-friendly, greenhouse grown cannabis. Each is complete with natural, strain-specific terpenes added to the oil at specific ratios for stronger flavor and effects. These products will be followed shortly with ABV cannabis flower products, as well as other form factors, all created with sustainable practices in a fully compliant facility in the heart of the Colorado Rockies.”

    I remain ambivalent about this segment, to be honest … and very concerned about the vaping side of the business, which strikes me as being as potentially problematic as the tobacco and e-cigarette business. One advantage of a change in federal laws about marijuana would be the FDA’s ability to regulate it more stringently.
    KC's View:

    Published on: September 13, 2018

    …will return.
    KC's View: