business news in context, analysis with attitude

Published on: November 1, 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 … recorded this week at the two-story Wegmans recently opened in the Natick Mall in Massachusetts.

When I first visited this store, right after it opened, I did a piece in which I apologized to Wegmans for being skeptical about this location; my attitude was colored by a belief that supermarkets ought not be counting on malls - many of which are distressed real estate, falling out of favor with shoppers - as drivers of future growth. On my first visit - on a Tuesday - it just seemed way too big and cavernous, and I said so … but I also knew that in the middle of the weekend, it probably would seem a lot more size-appropriate and crowded. I also knew that it is a Wegmans … and who am I to question Wegmans?

Well, I visited the store last Sunday, and found that the upstairs was full of life and animation - it is where the foodservice stations are, as well as the fresh food departments, and the section had lots of energy and activity. No surprise there … that’s exactly what I expected.

But when you take the escalator downstairs, to the grocery departments (and alcohol), you find that it is much quieter. You can look down aisles and see nobody. They’re trying to do a lot of sampling, but there’s simply not much going on. Even on a Sunday, which the store’s staff says is their busiest day.

The same folks who told me that Sunday is the busiest day also conceded that the store is having trouble getting people to go downstairs, which obviously hurts the store’s overall sales and profitability; I’m told that while sales are good, they’re not enough, and Wegmans is engaging in a lot of advertising - especially of grocery, with a big emphasis on private label - to try and .lure more customers into the store.

I continue to believe that there may be another problem that will play out for Wegmans and other stores over time. The fact is, there is virtually nothing being sold downstairs at Wegmans that can’t be bought online. There is no differential advantage that I can find - except maybe the wine tasting room - that make the grocery section someplace that shouts out for an in-person experience, as opposed to ordering online and either picking up or having the items delivered.

I suppose one could make the argument that if Wegmans is successful at driving more customers into its grocery departments, this store will be right-sized. But I’d make the opposite argument - that for the future that inevitably will come, that space is way too big. In fact, you think it is big now, just imagine how cavernous it will seem when five, 10 or 20 percent of CPG sales move online, which I think they inevitably will.

And listen, this isn’t just Wegmans. I think that a lot of retailers, as they build new stores, may not be thinking specifically about how the supermarket experience, and what will be demanded of them by shoppers, will change over the next decade. And I think it is critical to start thinking that way, so they can be in a position to affect change, as opposed to being affected by it.

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

Published on: November 1, 2018

by Kevin Coupe

To build on some of the points made in this morning’s FaceTime piece, above…

Bloomberg has a story about how the restaurant business is undergoing some pretty dramatic changes, which are in turn having an impact on their physical locations.

Here’s how the story frames the issue:

“People are still eating restaurant food-- they're just not doing it at restaurants as much. Delivery apps from DoorDash Inc., Postmates Inc., GrubHub Inc. and UberEats have made ordering in easier, and have changed the way food chains think about their business. The number of food delivery app downloads is up 380 percent compared with three years ago, according to market-data firm App Annie, and research firm Cowen and Co. predicts that U.S. restaurant delivery sales will rise an average of 12 percent a year to $76 billion in the next four years.”

And furthermore:

“Some new restaurant owners are skipping tables and chairs altogether and just leasing kitchen space to prepare food for couriers. Those are called cloud kitchens or virtual restaurants because they have no dining rooms or wait staff and sell their meals through the internet and mobile apps like DoorDash or UberEats.”

Don Fox, CEO of the Firehouse Subs chain, tells Bloomberg that “revenue has increased 7 percent this year, mainly from orders placed online and through delivery apps.” In fact, “more than half of his sales are for food eaten elsewhere.” Which means that the chain has been eliminating some of its tables and chairs, and replacing them with shelves where delivery orders can be stacked.

This seems entirely logical to me. And the question I’d ask is whether food retailers in other channels - like, say, supermarkets - are prepared for similar shifts taking place in their businesses, building in infrastructure that can be adapted to new realities at a moment’s notice?

To repeat the phrase I used in today’s FaceTime, are they prepared to affect change as opposed to being affected by change?

The answers to these questions by many, I suspect, would be an Eye-Opener.

Published on: November 1, 2018

CNBC reports on how CVS is testing a new service, CarePass, in Boston, that sounds an awful lot like Amazon Prime - it includes “free delivery on most prescriptions and online purchases, access to a pharmacist helpline, a 20 percent discount on all CVS-branded products and a monthly $10 coupon … membership costs $48 annually or $5 monthly, less than half the price of a Prime membership.”

CarePass, the story says, “is a bold attempt to fight Amazon — and may even put the retailer ahead. CarePass bundles prescription drug delivery with everyday items — something Amazon doesn't yet do.” It is available in 350 Boston-area stores.

The CNBC story notes that “online shopping has already hurt drugstores' revenue as fewer consumers come in to buy everyday items. Amazon acquired online pharmacy start-up PillPack this year, a move seen as a major threat to pharmacies because it immediately gives the e-commerce giant a way into the prescription drug business.”

CVS Pharmacy President Kevin Hourican tells CNBC that the company wants the program to roll out nationally, but “we also want to make sure we are ready and prepared and that when we do roll it out nationwide, the program is one that customers can have a great experience with.”

One possibility: linking Minute Clinic services to a CarePass subscription.

Published on: November 1, 2018

Bloomberg has a story about how Dollar General has a new format store - dubbed DGX, it “is about half the size of Dollar General’s regular 9,000-square-foot stores. Carrying everything from bug spray to beer, it's a tidy mashup of a drugstore, convenience store and corner grocer, but with lower prices and free Wi-Fi.”

The story notes that this is part of CEO Todd Vasos’ plan to target urban, millennial shoppers who “are starting to settle down and look for reliable, affordable places to shop.”

The DGX stores are being tested in Philadelphia’s Northern Liberties neighborhood (variously described as “hipsterville” and “millennial nirvana”), Raleigh, NC, and Nashville, TN. Bloomberg says that Vasos has said he plans to almost double the number of stores he has in the US - from 15,000 to 28,000 - and finding a workable format for the nation’s cities is a key part of his strategy.

There are likely to be bumps in the road, Bloomberg reports: “Dollar General faces entrenched competition in urban markets, from convenience and drug chains to rival discounters like Family Dollar, which already has many stores in cities. In Northern Liberties, there’s a Family Dollar just up the street from the DGX, although the aisles are cluttered with unpacked boxes, and certain items were out of stock during a recent visit … Competition aside, Dollar General will find it tougher to turn a profit in cities thanks to higher real estate, labor and logistics costs. The company’s operating margins are already under pressure, having narrowed by a full percentage point over the past two years as sales of less profitable perishable food has increased.”

Published on: November 1, 2018

CNBC reports that Albertsons has announced “a trial partnership with Takeoff Technologies” that will look “to automate one of the biggest headaches when it comes to delivery: putting together the basket of items.”

According to the story, “Albertsons will portion off selected locations, where it will store a number of items popular with online orders. Artificial intelligence-enabled technology and conveyors will then bring the goods to an Albertsons employee, who will manually compile the order.”

CNBC notes that “Takeoff is just one of many technologies that have emerged to automate the picking process for online delivery. Kroger inked a partnership with British online supermarket Ocado in May, through which the company automates the process of online delivery prep in warehouses, rather than in the store. Walmart in August launched Alphabot in partnership with Alert Innovation.

“In the meantime, newer brands like Israel-based CommonSense Robotics have emerged to offer technology to regional grocers.”

Published on: November 1, 2018

MedCityNews reports that Amazon is teaming up with brand consultancy business Arcadia Group “to launch a brand of consumer-use medical devices for diabetes and hypertension management … Called Choice, the new brand will initially include blood glucose monitors and blood pressure monitors accompanied by supporting mobile apps that offer measurement tracking, data mobility and reminders.”

The story notes that Amazon “has busy in healthcare as of late.” Not only has it acquired PillPack, which offers per-sorted medications, but “there’s also the Amazon-J.P. Morgan-Berkshire Hathaway collaboration. First announced in January, the Boston-based venture will initially focus on tech solutions that will help the three companies’ U.S. employees and their families with healthcare.”

Published on: November 1, 2018

Vox reports that Unilever-owned Ben & Jerry’s - which describes itself as an “aspiring social justice company” - has “launched a new ice cream flavor to support progressive politics.”

Called “Pecan Resist,” the flavor, according to the company, is designed to support “a movement to lick injustice and champion those fighting to create a more just and equitable nation for us all.” The ice cream itself is “chocolate ice cream with white & dark fudge chunks, pecans, walnuts & fudge-covered almonds,” and here’s how Ben & Jerry’s is positioning it: “Alongside all those nutty chunks, this pint packs a powerful message under its lid: together, we can build a more just and equitable tomorrow. We can peacefully resist the Trump administration’s regressive and discriminatory policies and build a future that values inclusivity, equality, and justice for people of color, women, the LGBTQ community, refugees, and immigrants.”

The story notes that the company is “supporting four different organizations that Ben & Jerry’s identifies as ‘working on the front lines of the peaceful resistance.’ Color of Change focuses on racial justice; Honor the Earth works to raise ‘awareness and support for Native environmental issues’; Women’s March aims to ‘harness the power of diverse women’ to affect social change; and Neta is a media platform amplifying the voices of people of color living along Texas-Mexico border. Ben & Jerry’s will be donating $25,000 to each organization. The company is also urging fans to ‘speak out’ against the Trump administration’s socially regressive policies, and presents the option to ‘take action now’ by signing up for emails from the partner organizations.”

Published on: November 1, 2018

• Leafly reports that Walmart has started selling cannabis vaporizers in Canada, where the product has just become legal for recreational use.

The story says that Walmart is selling the $699 vaporizer item as “a rapid and safe delivery system of cannabinoids.”

The vaporizer apparently is just a start, as Walmart also reportedly is considering selling actual cannabis in its Canada stores.

Published on: November 1, 2018

• The Wall Street Journal reports that US companies - ranging from Coca-Cola to Clorox to Mondelez to Kellogg - “are raising prices on everything from plane tickets to paint, passing on to customers higher costs for fuel, metal and food after years of low inflation … The higher prices have effectively ended a long period of low inflation that led the Federal Reserve to keep short-term interest rates near zero for years.”


• The Associated Press reports that LL Bean, looking for “a return to sales growth,” is targeting Canada as part of its strategy.

According to the story, LL Bean’s “iconic boot and other products will be sold in 30 stores in Canada this holiday season, and in L.L. Bean-branded stores opening over the next decade. The company also has launched a dedicated website for Canadian customers that incorporates duties and smooths out currency fluctuations … the deal, inked last week, makes sense because L.L. Bean has a strong customer base in Canada and its cold-weather gear and outdoor focus are a good fit, CEO Steve Smith said.”

This will mark the first time that LL Bean will allow its products to be sold in another retailer’s stores, but the deal is seen as making sense before it has its own stores there.

Published on: November 1, 2018

Responding to this week’s story about the new Sam’s Club Now store, where the company is testing some new technologies, one MNB reader wrote:

The idea of Sam's Club Now is interesting to me, not in the concept, but that they are bothering with it.  I have already been using their Scan & Go app for months - sign into the app on your phone with your membership info, scan items as you put them in your cart, checkout using your saved payment info, go to the door where you present a barcode on your phone which the person at the door scans on their device (which I assume brings up a copy of your receipt), then they counts your items just as they would with a paper receipt.  It is great.

MNB reader Andy Casey wrote:

Not sure if they are testing something different in Texas but I have been using the mobile scanning app at Sam’s for a while now. It keeps a running total, very easy to use and lets you avoid unloading the cart at checkout. When you are done shopping, it simply pings your attached credit card, displays a bar code to show the greeter and you are out the door.

In other words, I guess, it is time to roll it out. Seems to me that it would be one way to raise the bar in the competitive battle with Costco.



We also noted that Walmart is planning to convert some parking lot space to virtual town centers, complete with small retailers and green space.

One MNB reader wrote:

Walmart is no stranger to charging fees for shops who’ve elected to be inside their stores.  Outside the US (Brazil comes to mind) Walmart collected 13% sales commission from non-Walmart branded retailers located inside their stores, for example, because of the foot traffic Walmart created.
 
What is interesting about this story is how the real estate developers are going to respond.  Typically, landing a Walmart lease required a subsidized rate that developers would be made up by charging other retailers more, reasoning that these other retailers rarely leased the same size footprint.
 
Many times, Walmart parking lots are used by truck drivers for overnight parking. I can see this decision impacting truckers.  The biggest question is how Walmart will maintain locally-required parking ratios?

And, from another reader:

Not sure why you don’t see the value in Walmart is doing to stay relevant in these communities. It is all about providing what the consumer wants, to bring on-stop shopping to their marketplace. Note the businesses are not necessarily price driven but brands appealing to those that know the difference.

I see the value … I just think the irony is rich, since many of the communities in which Walmart operates had actual town centers, replete with small retailers and green space, that Walmart wrecked with its approach to retailing.

What goes around comes around, I guess.



On the subject of what makes grocery shopping appealing to millennials, one MNB reader wrote:

I had the opportunity to be in a Mariano's store near O'Hare airport earlier this week...the parking lot was full, which considering the fact that it was Monday at noon, was a bit of a surprise. Once inside it was evident that the vast majority of shoppers (hundreds) were gathered in the "food court" area on the right hand side of the store, buying lunch, sitting at tables eating with friends, (both on the main floor and up on the balcony area overlooking the many food stations below), checking out at the multiple "quick checkout" area set up explicitly for this occasion......it was an eye opening experience, made me think of the line, "if you build it, they will come".....if I were to hazard a guess, I'd say 90% of the shoppers in the store fit neatly into the millennial category. It's all about the experience.

MNB reader Glenn Cantor wrote:

There is an interesting conundrum in the “Innovation Conversation” discussion about changing grocery store formats to attract younger shoppers.  Many shoppers are loyal to their familiar store because they are comfortable with the existing aisles and formats.  Even the smallest resets and moves will cause these shoppers to vocally complain.  However, younger shoppers who might prefer updated and exciting formats will not offer criticism to retailers who don’t update their formats.  Indeed, there is no way for these consumers to make their attitudes known.  Instead, they will silently seek out newer and innovative formats.  Their business is lost to traditional chains, but the decision makers in these companies won’t be able to identify from where the slippage comes.   Grocery store managers feel as though they have to respond to those who vocalize their complaints without trying to understand the unknown.

And, from another reader:

One last thought on the millennials.  If they irk the boomers so much (and I am in between the two as a gen X’er), it might be because they are so similar.  What “the kids” are doing on subjects such as gun control are exactly what the hippies did, no?  Fear them?  Look at how smart, articulate, dedicated and united this generation is in pursuing change on issues which they are passionate about because they impact them directly.  The world is shrinking faster than our tolerance is growing, and I for one am heartened this is the generation that will be in charge of the world when I’m old because they seem to be the only generation doing something about it.  Caught in between the “me generation” and the millennials, I see so much more in common than different.  The only difference between the author of that article and Timothy Leary or Jack Kerouac is she’s writing about the annoyances of everyday life, not about escaping the drudgery of everyday life.

I suspect this won’t be the “last thought”…



We had a story the other day about how home appliance manufacturer Whirlpool wants its inventory back from bankrupt Sears. Fox Businessreported that Whirlpool “sent a letter to Sears last week asking that the retailer return items it had received from Whirlpool in the 45 days leading up to its Oct. 15 bankruptcy filing … Whirlpool said that Sears has no right to the products since the company was insolvent when it ordered them, requesting the retailer refrain from selling or disposing of them.”

One MNB reader reacted:

That’s a really interesting request from Whirlpool. Having had the unpleasant experience of working for a company that went through bankruptcy, there is no doubt that part of the strategy of any company looking to emerge from bankruptcy is the revenue and profits generated from the new found “free inventory” on hand at the time of filing. I believe Whirlpool is right on in their request to have inventory returned, especially goods that have not been paid for. Why should Whirlpool, or any other vendor be on the hook to have to pay for any portion of Sears bankruptcy emergence plan?



Got the following email from MNB reader Jason Truss:

I grew up in Milwaukee WI, home of Kohl's. For many years they had Kohl's department stores located right next to a Kohl's food store - usually with an enclosed atrium in-between the entrances. The one my family shopped had a Hallmark store in-between the two, and I would park myself in the atrium next to the shopping carts to sell Cub Scout candy bars for $1. 

According to Wikipedia, the Kohl's food stores were closed in 2003. 

Anyways, point being if the Kohl's of today is bringing on Aldi grocery stores right next door to their Kohl's department stores, there is historical precedent. Maybe some old-timers remembered the old set-up (and the traffic it generated for the department store)!

The more things change…



Finally, on another subject, from an MNB reader:

When I was in the Air Force and later on a Federal Employee we always had to be concerned about the image we presented to the general public.  We could get into trouble for getting into the news and identified as an Airman or Federal Employee and the higher up you went in the ranks the more you have to be careful about it.

I use to think that it was a kind of double standard and that Companies like Ford, 3M and Campbells wouldn’t care about that. Well I guess I was wrong at that point at lease if you are a Vice President of the company.

On another point, since about a third of the country is blue, a third purple and a third red it seems to me companies should stay under the radar when it come to politics.  Why would you want the possibility of ticking off 2/3 of the country?

I agree that businesses - and business people - have to be careful, but I do think that there are times when staking out a position can be on-brand.

One example is Ben & Jerry’s. (See our story above.) In fact, if the company didn’t take certain positions, its brand equity would be eroded. (I think Unilever has been brilliant in taking a c’est la vie approach with Ben & Jerry’s.)

In the case of Land O’Lakes pulling its support from Rep. Steve King (R-Iowa), it definitely was on-brand in the sense that the company is marketing itself using a celebratory anthem about how women are contributing to an age-old industry like farming. (One-third of American farmers are women.) Its CEO is the first openly gay woman to run a Fortune 500 company. And so when King’s linkage to the white nationalist movement became front and center of his re-election campaign, they probably felt that they needed to plant a flag.

You have to choose your moments. You have to be connected to the authenticity of your brand. You have to really, really know who your customer is. And you have to be willing to take the risk.

Published on: November 1, 2018

The San Francisco Chronicle writes this morning that Willie McCovey, “the Hall of Fame first baseman who spent 19 of his 22 major-league seasons with the Giants and became one of the most beloved players in franchise history, has died at the age of 80.” He had been suffering from a series of health issues.

The Chronicle notes that “McCovey teamed with Willie Mays to give the Giants one of the most feared duos in baseball history, but he played in only one World Series … McCovey was a fearsome hitter during his heyday in the 1960s and ’70s, not merely because of his prowess — he hit 521 home runs (still tied for 20th on the all-time list, 38 years after he played his last game) — but because of how hard he hit the ball.

Among his accomplishments: 1959 National League Rookie of Year; 1969 National League Most Valuable Player; 1977 National League Comeback Player of the Year; 18 grand slams, most in National League history; and a six-time All-Star.