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    Published on: October 1, 2018

    by Kevin Coupe

    Bloomberg reports that Amazon is getting into the mattress business, offering an Amazon Basics foam mattress starting at $130 … a move that ratchets up the competitive landscape in this suddenly restless category, and reflects what is happening in so many segments.

    Amazon, in fact, is just the latest to this party, following where a number of other disruptors already have gone. For years, you had your traditional mattress companies that sold their mattresses out of traditional stores. Then you had buy-by-phone and online shopping options for traditional mattresses. Then you had mattress-in-a-box companies like Casper and Tuft & Needle that offered a higher end, untraditional shopping and delivery experience with generous guarantees that took the sting out of not stretching out on the mattresses before buying them.

    And then … Target invested $75 million in Casper … Walmart launched its own mattress line, and Tuft & Needle was just absorbed by/merged with Serta Simmons Bedding.

    The Bloomberg story notes that Amazon’s private label entry was spotted “by TJI Research, which monitors the e-commerce giant’s growing list of more than 120 private label products, including kitchen goods, batteries, clothing and electronics accessories. Amazon’s furniture brands already included bed frames and bedding, but this is the first Amazon-branded mattress, according to TJI. It’s the latest example of the company selling a product that will compete with merchants and retail partners on the site.”

    The Eye-Opening reality is this. If your business has not been upended by competition, it will be. Soon.

    So don’t get caught napping.
    KC's View:

    Published on: October 1, 2018

    Bloomberg reports on a new Morgan Stanley study suggesting that German discount chain Aldi “was the choice of almost one in five shoppers who recently switched grocers … That’s more than Costco, Target, Kroger or Amazon-owned Whole Foods, highlighting Aldi’s growing appeal.”

    While “Walmart and Kroger still dominate the $840 billion U.S. food retail sector, accounting for a combined one-third of the market, far above Aldi’s 2 percent,” Bloomberg notes that Aldi’s aggressive expansion plans in the US have “forced them to slash prices, compressing their already-thin profit margins.”

    Aldi has said it plans to open 700 new US locations by 2022, which would bring its fleet total here to about 2,500. And, it is expanding its appeal by offering stronger selections in vegan and organic items, as well as by offering delivery in 35 states by this Thanksgiving.
    KC's View:
    I’ve been arguing here on MNB for some time that Aldi (and maybe even Lidl at some point) could represent the same kind of threat to US retailers that UK retailers have been facing for several years now.

    In the UK, discounters’ market share is up at 11 percent, and they’ve forced Tesco to come up with its own discount format, called Jack’s, to blunt the impact. But in this case, even if Jack’s is a viable format, it probably is fair that in this case at least, Jack has been neither nimble nor quick.

    Sure, the UK is different from the US … but that doesn’t mean that, over the long term, Aldi will be any less dangerous.

    Here’ a statistic from the Bloomberg story that I had not seen before: “There’s an Aldi located within five miles of about half of all Walmart and Kroger stores.” Yikes.

    Morgan Stanley analyst Simeon Gutman assesses the situation this way: “The war of attrition has begun.”

    I’m not sure I’d disagree.

    Published on: October 1, 2018

    Chicago’s Treasure Island Foods, in business there since 1963 and once described by Julia Child as “America’s most European supermarket,” has announced ton its employees that it is going out of business and shutting down its existing six stores.

    Company president/CEO Maria Kamberos, in a memo to employees that was posted on social media, said that management had “made the very difficult decision to wind down operations as a company … We are sorry it has had to come to this point and we know how detrimental this is to each and every one of you and your families. We have done everything we could to attempt to get the company on solid ground to try to operate for another 55 years … Unfortunately, given the current industry conditions, it has been impossible for us to continue to operate without losing money.”

    The story makes it sound as if this did come not come as a total surprise to local observers, since it closed down its Lincoln Park store last month and had “pulled out of a planned location at an Uptown development.”

    The Sun Times writes that founder Christ Kamberos, who died in 2009 at age 83, “opened the first Treasure Island Foods store on Broadway near Cornelia with his brothers in 1963, building up the chain’s reputation by traveling the world to bring unusual organic produce to Chicagoans.” And, the story says, the Chicago-born son of Greek immigrants “was remembered as a curious innovator always on the lookout for the next big thing in food.”
    KC's View:
    There was a time when Treasure Island was cutting edge, but based on my last visit or two to one of its stores, I have to say that it seemed as if time had passed it by. They had some decent real estate, but the format was tired and creaky, and certainly couldn't stand up against more modern, progressive and relevant competition.

    It always is sad when a retailer like this goes away. But if you want to delay the inevitable end to the circle of life, you actually have to move forward.

    Published on: October 1, 2018

    The Wall Street Journal reports that private equity groups Bain Capital and KKR & Co., which own defunct retailers Toys R Us, “are putting together a $20 million fund to make payments to thousands of former employees left jobless by the retailer’s liquidation,” and have “brought on a third party to help structure the fund and iron out the eligibility requirements … It is unknown what the median payout will be and the fund will be open to outside contributions,” though it will be funded at the start by the firms’ general partners.

    The story notes that this is seen as an “unusual move by private-equity owners of a bankrupt company. It isn’t required under bankruptcy law and has no ties to the bankruptcy process.”

    When Toys R Us shut down its more than 800 US stores earlier this year, it resulted in the elimination of in excess of 33,000 jobs. Soon after, the Journal writes, Toys R Us “workers, under the guidance of advocacy groups, banded together to fight for severance payments, taking aim at the retailer’s private-equity backers.” After a lobbying trip to Washington, DC, in which these former company employees protested the fact that the retailers’ management took better care of themselves during the company’s final days than they did their employees or even the retailer itself, “nineteen members of Congress sent a letter to the private-equity backers, questioning their role in the retailer’s demise.”
    KC's View:
    Be interesting to see how this plays out … because $20 million divided by 33,000 workers works out to about $600 bucks apiece.

    I’m a lot more interested in seeing the development of company cultures in which management focuses on stakeholders and not just themselves, and in which the first reaction to tough times isn’t to engineer retention bonuses for top executives.

    Published on: October 1, 2018

    The Washington Post has a piece by food columnist Dave McIntyre in which he reviews the “Walmart’s Winemakers Selection line of wines, which the chain introduced to 1,100 stores nationwide in June. These were 10 private label wines, exclusive to Walmart, from Italy, France and California, priced at either $11 to $16 per bottle.”

    Among them are La Moneda, described as “a delicious $7 malbec from Chile that was a Walmart exclusive,” and that says might be the world’s best-rated $7 wine, as well as an $11 cabernet franc and a $16 sparkling rosé, both from France: “I tried both and found the cab franc particularly impressive, especially for the price, and the rosé nice and fun,” he writes.

    “Such a line is possible because winemaking around the world has improved so much over the past two or three decades that good-quality wine can be found at good prices,” McIntyre writes. But he also gives Walmart high marks for how it has gone about sourcing and testing products submitted for the line, and then marketing it effectively.

    You can read the entire story here.
    KC's View:
    The Washington Post, I think, is often unfairly characterized as being staffed by editors and reporters out of touch with mainstream America, so it is worth noting that McIntyre’s column begins this way:

    Earlier this year, on a business trip out west, my colleagues and I checked into the motel that would be our home for four nights and then dashed to the local Walmart to stock up on provisions. We bought chips, dip, granola bars, bottled water (someone even bought salads to stick in the mini-fridge) and, of course, beer and wine.

    Doesn’t sound all that out of touch to me…

    Published on: October 1, 2018

    MarketWatch has a story about Bed Bath & Beyond’s continuing travails, writing that it continues to miss its financial targets, which then drives down its share price, which is tough at a time when it is in the middle of a “turnaround and modernization program that includes optimizing the supply chain and revamping stores.”

    The story points out that an analysts’ assessment of the company indicates that there is a “widening price gap” with Amazon that only lessens when one goes to Bed Bath & Beyond with one of its familiar blue and white 20 percent (or more) discount coupons, or belong to its frequent shopper club.

    But, the analyst consensus seems to be that there is very little light at the end of a very long tunnel.
    KC's View:
    We’ve discussed Bed Bath & Beyond here before, but it is worth pointing out again that this is what happens when a retailer devalues the brand to the point where the vast majority of customers won’t walk in the door without one of those coupons. There’s very little that one can get at a BBB that you can’t get online or at other retailers, and they did almost nothing - other than send out coupons - that was designed to get people in the front door.

    Maybe Toys R Us should be reserving space on the rowboat to Retail Oblivion for Bed Bath & Beyond? Maybe they could squeeze them in next to Sears and Kmart?

    Published on: October 1, 2018

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

    • The Syracuse Post Standard reports that Wegmans is adding curbside pickup to the services offered by two Syracuse-area stores, in DeWitt and Clay, New York; this increases the number of stores where Wegmans provides this option, as it previously made it available at its stores in “ in Buffalo, Rochester, Ithaca, Johnson City, southern New Jersey, Virginia and southeast Pennsylvania.”

    The story says that curbside pickup requires a $10 minimum order, and does not carry with it the fees charged for home delivery.

    The service is being offered in partnership with Instacart, with also handles Wegmans’ deliveries.

    I hope and pray that somewhere at Wegmans headquarters, the really smart folks who work there are developing a delivery option that the company will really own, and that will allow it to stop outsourcing this critical part of the customer service experience to someone else. It is hard for me to imagine that a company as committed to a superior and differentiated customer experience as Wegmans would see this approach as anything other than a stopgap measure.
    KC's View:

    Published on: October 1, 2018

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

    • The Wall Street Journal reports that “Walgreens Boots Alliance Inc. has agreed to pay $34.5 million as part of a settlement with the Securities and Exchange Commission (SEC) over allegations that the company and two former executives misled investors.

    “The SEC said it charged Gregory Wasson and Wade Miquelon, the company’s former chief executive and chief financial officer, with misleading investors regarding whether the company the giant drugstore chain would hit a financial target in 2016.” Neither the company nor the two former executives admitted any wrongdoing in agreeing to settle by paying the fines; the story says that Wasson and Miquelon “are both required to pay a $160,000 penalty as part of the SEC order.”

    I’m always skeptical about the “we’ll write a check but we really didn’t do anything wrong” defense.

    USA Today reports that Chipotle, still in the process of reversing the negative impact of a series of food safety issues over the past few years, is introducing a new frequent customer program: “Enrollees in the program who order online or via the app earn 15 points for every $1 they spend, while those who order in person receive 10 points, according to the company. A free entrée requires 1,250 points.”

    The program is being launched in three markets - Phoenix; Kansas City, Kansas; and Columbus. It will roll out nationally next year.

    The story notes that Chipotle tested a loyalty program in 2016 called “Chiptopia,” that didn’t end up going anywhere.
    KC's View:

    Published on: October 1, 2018

    • California-based Raley’s announced late last week that its president, Keith Knopf, is adding the title of CEO to his portfolio of responsibilities.

    Knopf joined Raley’s as COO in 2015, and became president two years later.

    Michael Teel, who has been chairman/CEO at Raley’s, will continue in the chairman’s role.
    KC's View:

    Published on: October 1, 2018

    On Friday, our Eye-Opener featured a music video called “She-I-O” that has been turned into a commercial for Land O’Lakes; it is an updated version of “Old MacDonald Had a Farm,” sung by country artist Maggie Rose and written by Liz Rose, and a celebratory anthem about how women are contributing to an age-old industry. In fact, one-third of all US farmers are women.

    Got the following email from MNB reader Sandra Cotter:

    Thanks for sharing that video.  My mom grew up on a dairy farm in Michigan.  Her parents (my grandparents) were migrant workers from Mexico who worked hard and saved enough money to buy and run a dairy farm in the heartland.  The farm was Paul Zamarron and Son – despite the fact that there was one son and eight daughters who worked the farm with Grandpa and Grandma.  I love seeing barns with “. . . and Girls” or “Family” painted above the door now.  I always felt my mom and her sisters didn’t get the recognition they deserved.  Farming is hard work that keeps us alive.  My daughter is now a food science Ph.D. student at OSU (got her BS at MSU).  One of her favorite T-shirts is “Farmers – who else is going to feed you people!?”  Anyway, that video made me smile and go back in time a bit.  (Plus, Land-O-Lakes is the only butter I’ll buy!)

    From another reader:

    To add a little additional color to your piece on Land O'Lakes and women farmers: One of the demographic pressures on American farms is the aging out of the farm-owner population. More and more women are inheriting farms from their husbands. In the past, the wife would either sell the farm if the children didn't want to run it, or lease to other operators. One of the encouraging trends we are seeing today is women deciding that they can run the farms themselves. After all, many of them have a lifetime of experience. There has been some social resistance, as women have found seed and equipment dealers not taking them seriously, and lenders raising the bar for access to credit, but more and more, women are making a go of running their own farms.

    What kind of neanderthal, in 2018, would make it harder for women farmers to get credit and equipment? After all, as Sandra Cotter says above, if they don’t run these farms, who the hell is going to feed us?

    MNB reader Jeff Gartner wrote:

    Thanks for sharing the Land O’Lakes She-I-O spot, it was really well done both conceptually and in execution. 

    I've conducted marketing research for a Land O’Lakes competitor, and it's just amazing how they have dominated the butter case for decades and decades. 

    BTW, is it just a coincidence you included this in your column today, the day after yesterday's Supreme Court hearing? And another BTW, I believe her and I don't believe him.

    I’ll quote the great Robert B. Parker: “Coincidence exists, but believing in it never did me any good.”

    Regarding the new Amazon 4 Star store in New York City, MNB reader Michael Sharpe wrote:

    I wonder how long it will be until we see the Amazon dollar store.

    Don’t bet the over.

    Last week, we took note of a BusinessInsider report that Walmart has filed for a patent application on a “shopping cart that would track things such as shoppers' heart rates and temperatures and how strongly they're gripping the handle … the cart would use this data to figure out whether shoppers are stressed and when they might need help.” The story says that “employees would be alerted to check on customers who seem to be internally freaking out, based on the shopping cart's analysis.”

    One MNB reader responded:

    Very funny and yes the bad scenario possibilities are endless.  However, I love this idea of increasing customer service in the aisles with data that could actually have employees approaching the right people who really want help.  Now they just have to back it up by having enough people to go around with the motivation to leave their other duties and help the customer.

    And from another:

    I hope they have a camera….this technology could really elevate the “Walmart Customer Pictures” one always sees on the interwebs.

    And MNB reader Tim Heyman wrote:

    It might throw me into a surprise heart attack to find a Walmart employee in an aisle to ask for help!

    No kidding.
    KC's View:

    Published on: October 1, 2018

    Even after a 162 game Major League Baseball season, the National League playoff picture still is in flux, with divisional tie-breaker games required today in both the Central Division, where the Milwaukee Brewers will play the Chicago Cubs in Chicago, and the West, where the Colorado Rockies will play the Los Angeles Dodgers in Los Angeles. The Atlanta Braves have nailed down the National League East, and Wednesday’s Wild Card Game will be played between whichever teams lose the tie-breaker games.

    It is a lot clearer in the American League:

    • American League East - Boston Red Sox
    • American League Central - Cleveland Indians
    • American League West - Houston Astros
    • Wild Card Game - Oakland A’s vs. New York Yankees in New York

    In Week Four of National Football League (NFL) action…

    Houston 37
    Indianapolis 34

    Buffalo 0
    Green Bay 22

    Tampa Bay 10
    Chicago 48

    Miami 7
    New England 38

    Detroit 24
    Dallas 26

    Cincinnati 37
    Atlanta 36

    NY Jets 12
    Jacksonville 31

    Philadelphia 23
    Tennessee 26

    Cleveland 42
    Oakland 45

    Seattle 20
    Arizona 17

    New Orleans 33
    NY Giants 18

    San Francisco 27
    San Diego 29

    Baltimore 26
    Pittsburgh 14
    KC's View: