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    Published on: February 1, 2019

    by Kevin Coupe

    On Monday in this space, we featured a brief look at a commercial for Kraft’s Devour brand of frozen foods, which the company has been positioning as “food porn” - the commercial suggests, complete with racy double entendres, that Devour is totally addictive.

    The commercial was deemed too edgy to be run CBS during Sunday’s Super Bowl, however, so the company had to pull together a somewhat sanitized version for the broadcast. Not surprisingly, the fact that there were two versions gave Kraft and Devour double the bang for its buck, which probably was the point to begin with.

    This morning, however, comes more news about the brand … that for one day, it paid for ads on the pornography site Pornhub. The Wall Street Journal notes that “advertising on Pornhub takes the stunt to another level. It stands out particularly as brands take pains to avoid any chance that their ads could appear next to potentially inappropriate content.”

    I must admit that for me, this is a bridge too far.

    As I said on Monday, I wasn’t offended by the “racy” version of the ad. I thought it was reasonably clever in approach and execution. But I also took seriously email I got from MNB readers suggesting that at this point in history, where the exploitation and abuse of women is a front-and-center cultural issue, an ad making fun of pornography could be considered a little tone-deaf.

    Paying to advertise on a real porn site, to my mind, is putting the company out on a limb that it may not want to be on, associating it with content that it needs not be. I cannot imagine that the one day of advertising generated a ton of sales, but it puts the brand at risk.

    It is too clever by half, and an Eye-Opener in all the wrong ways.
    KC's View:

    Published on: February 1, 2019

    Amazon said yesterday that its Q4 net sales increased 20% to $72.4 billion, compared with $60.5 billion in the fourth quarter of 2017. Operating income increased to $3.8 billion in the fourth quarter, compared with operating income of $2.1 billion in fourth quarter 2017.

    Net income increased to $3.0 billion in the fourth quarter, compared with net income of $1.9 billion, in the fourth quarter of 2017.

    For the full 2018 fiscal year, Amazon said that “net sales increased 31% to $232.9 billion, compared with $177.9 billion in 2017. Operating income increased to $12.4 billion, compared with operating income of $4.1 billion in 2017. Annual net income increased to $10.1 billion, compared with net income of $3.0 billion in 2017.

    The Los Angeles Times notes that “the fourth quarter offered investors the first glimpse of year-over-year results since Amazon’s $13.7-billion acquisition of Whole Foods Market in 2017. Sales in physical stores, which are predominantly Whole Foods locations, decreased 2.7% to $4.4 billion. In-store pickups of online grocery orders don’t count as physical store sales, further clouding the ability to track the performance of Amazon’s grocery push. The online retailer’s bricks-and-mortar strategy also includes bookstores and a cashierless convenience store called AmazonGo, which lets customers check in with a smartphone app and be charged automatically based on what they remove from the store.”

    Other analysis:

    The New York Times: Amazon held off stiffer competition for online shoppers during the holiday season, once again increasing its sales. But the company said on Thursday that growth slowed from its usual breakneck pace — and it came at a cost, with the company spending far more on shipping to win customers. While strong, the latest quarterly results suggested that Amazon’s retail business not only faces more competition, it is also maturing … The company is compensating for slowing growth in e-commerce by expanding its fast-moving, highly profitable cloud and advertising businesses.”

    The Financial Times: “Amazon signalled that it would be ramping investment back up in 2019, even as its stellar revenue growth slows, sending its shares lower … Investors have long accepted scant profits from Amazon as its sales soared and it funnelled money into everything from warehouses and data centres to drones, freight planes, and international expansion. More recently, the company has shown strengthening profitability, however, boosted by its push into high-margin cloud computing and advertising.”
    KC's View:
    No question that Amazon’s business is maturing and evolving.

    Digiday has a story today about how Amazon, having figured out that it “makes more money letting other people sell to customers on its marketplace than it does selling to customers itself,” has shifted its strategy and “has been opening up more e-commerce features and capabilities to third-party sellers that were once reserved for wholesale vendors, and shifting resources to be more hands-on with third-party sellers.”

    The story goes on: “According to eMarketer data, Amazon’s marketplace accounts for more overall sales than direct, and the gap is widening. In 2017, direct sales grew 21 percent to $70.4 billion, while marketplace sales grew 41 percent to $129.5 billion. This year, eMarketer forecasts that marketplace sales will increase to $230 billion. And, due to higher margins, Amazon makes more revenue from the marketplace although inventory sold there isn’t the majority: The company reports that the marketplace accounts for more than 40 percent of all units sold.”

    My point is this. Among the things that Amazon is best at - maybe better than any other company - is reinvention and disruption from within. It isn’t like you can look at any of this stuff and say, “Well, they’re screwed now. The Amazon era is coming to an end.”

    In fact, just the opposite. Amazon always has known that as it business grew, competition would become more intense, not less so. It is built for that. Sure, there will be valleys and bumps, but there also will be progress and momentum.

    Published on: February 1, 2019

    In Seattle, KIRO-TV News reports that cooperative PCC Community Markets is removing all self-checkout lanes from its stores.

    The company says that it stopped putting self-checkout in new stores three years ago.

    Heather Snavely, VP of marketing at PCC, says that the company looked “at the relationship our shoppers have with our cashiers and our staff. And what we realized was a kiosk doesn’t create community or connections. So we wanted to take those out so that when someone comes into our stores, they have a human connection with someone and an interaction that will make the experience more special.”

    Snavely also says that “removing the self-checkout machines won’t create any new jobs, they’ll just shuffle existing employees around. They’ll also build new express checkout lanes to replace the kiosks and keep the lines moving.”

    The story notes that at this point in time, PCC’s move could be seen as counter-intuitive, since Amazon has been making news with its checkout-free Amazon Go stores, with other chains also seeking ways to streamline and/or eliminate the checkout process.
    KC's View:
    Good timing, considering that The Retail Feedback Group (RFG) annual Supermarket Experience Study, which we talked about here yesterday, specifically focusing on what retailers need to do in order to create a compelling in-store experience, mentioned that “too many shoppers are leaving the store without pleasant human contact.”

    Of course, it isn’t as simple as just getting rid of self-checkouts. You have to have great people working for you who will serve as your ambassadors … and that isn’t common, or easy. But if companies like PCC are going to compete, they have to build on their strengths … and this should be one of them.

    Published on: February 1, 2019

    Ahold Delhaize-owned Peapod Digital Labs said yesterday that it has made a deal with logistics company Deliv to provide same-day delivery services to customers of its Giant and Martin’s chains in select zip codes in the Willow Grove, Penn. area. The company says that the “pilot is expected to be scaled in the coming months to additional Giant/Martin’s markets and to other brand’s markets where delivery is powered by Peapod.”

    The Deliv option is in addition to delivery services already being offered by the retailers through Peapod’s own fleet of vehicles.

    In a prepared statement, JJ Fleeman, President of Peapod Digital Labs and Chief eCommerce Officer of Ahold Delhaize USA, said, “At Peapod Digital Labs, it is our mission to support each of Ahold Delhaize USA’s local brands in providing an industry leading omnichannel experience for their customers. This means being there for customers, anytime, anywhere – within hours. Through Peapod Digital Labs’ relationship with Deliv, we will assist the brands as they continue to conquer the last mile, and rapidly scale same day delivery to the benefit of millions of local brand shoppers by 2020. Deliv is an example of many partners we will work with to deliver this benefit to customers.”
    KC's View:
    Another example of how Ahold Delhaize seems to be playing on a different level these days.

    I must admit that I hope this is a short-term solution, that outsourcing to Deliv is a way of meeting a specific need while the company figures out a way to do it long-term on its own. That would, I think, be the smartest way to go.

    Published on: February 1, 2019

    The Wall Street Journal reports that the Ninth U.S. Circuit Court of Appeals has unanimously ruled that a San Francisco law “requiring health warnings on advertising for sugary drinks violates the First Amendment, in a victory for national beverage makers whose products have come under increasing government scrutiny.”

    The ruling affirmed one by a lower court that had been appealed by the city.

    The Journal writes that “the court also determined the city’s warning that consumption of sugary drinks can lead to obesity and other diseases wasn’t based on established fact - citing statements by the Food and Drug Administration that sugars are ‘generally recognized as safe’ when not consumed to excess.”

    City officials said that they will consider a different approach to the labeling mandate that would survive a court challenge.

    The story notes that “makers of sugary drinks are facing increased regulation by local governments across the country amid concerns about obesity and diabetes rates. San Francisco, Philadelphia and Albany, N.Y. have passed soda taxes, while states including California and New York have considered ordering warning labels on cans and bottles.”
    KC's View:

    Published on: February 1, 2019

    USA Today has a story about how Monday will be the day that the federal government, mall owners and creditors will line up against Sears and its chairman, Eddie Lampert, arguing that Lampert essentially has orchestrated a "scheme" to "steal" the company and capitalize on its “long, slow decline” under his ownership.

    It is, the company says, “fittingly dramatic for a company whose slow-motion collapse has been mourned, mocked and foretold by many observers for the past several years.”

    Lampert has offered to spend $5.2 billion to acquire the company out of bankruptcy, keep about 400 stores open and retain the services of some 45,000 employees. The argument against the offer is that the rights of pensioners and creditors alike will not be protected, and that creditors have a better chance if the company is liquidated.

    According to USA Today, “Both sides will get their chance to persuade Judge Robert Drain during a hearing Monday in New York regarding the acceptability of Lampert's offer through his hedge fund ESL Investments.

    “After the hearing, which may extend to Wednesday, Drain is expected to rule on whether Sears can sell itself or not. Absent a deal, liquidation is almost inevitable.”
    KC's View:
    The chain’s death is inevitable. The only question is how Sears gets there, and whether Lampert gets one more bite at the carcass.

    Published on: February 1, 2019

    Reuters reports that “Walmart Inc-owned Flipkart and Inc’s Indian unit are rushing to rejig ownership structures and rework some key vendor relationships, as they seek to comply with new Indian e-commerce curbs without disrupting their businesses.”

    The story notes that India’s government has “modified rules around foreign direct investment (FDI) in e-commerce, creating additional hurdles for the retail giants. The rules, which kick in on Friday, do not allow e-commerce sites to ‘exercise ownership or control over the inventory’ of sellers.”

    The new rules “state that if any seller purchases more than 25 percent of its inventory from the wholesale units or other group companies of an e-commerce firm that runs an online marketplace, then that vendor’s inventory will be deemed to be controlled by the e-commerce company … That could disrupt the models of Amazon and Flipkart, whose wholesale units buy products in bulk and sell to thousands of vendors on their platform, who in turn sell to consumers.”
    KC's View:

    Published on: February 1, 2019

    • California-based Raley’s said yesterday that it is relaunching its entire private label program, including what it calls “ a major expansion of the Purely Made brand, featuring additional standards and products for clean, affordable eating … Raley’s Purely Made products are free from 101+ artificial preservatives and ingredients.  Raley’s utilized the most up-to-date research and industry standards to update their banned ingredient list.”

    The company says that “according to Nielsen data, 59% of grocery shoppers experience difficulty in understanding nutrition facts. To combat this, the nutrition label on all relaunched products include the updated FDA nutrition facts panel, which standardizes serving size and is more transparent on added-sugar. In addition, Raley’s Purely Made calls out key attributes on the packaging, including Non-GMO, No-artificial ingredients and gluten free.”

    • The Wall Street Journal reports that Mondelez International said that it will be charging more for its snacks in the US as a way of covering rising costs.

    “Pricing in 2019 will be slightly higher than 2018,” Chief Executive Dirk Van de Put said in an interview. “Overall, snacking is doing pretty well, so that helps in pricing decisions.”

    The story says that “the maker of Oreo cookies, Wheat Thins and other snacks began raising prices last year along with other food and consumer-products companies, despite opposition from grocery stores worried about losing customers.”
    KC's View:

    Published on: February 1, 2019

    Yesterday’s FaceTime focused on the Retail Feedback Group’s annual Supermarket Experience Study, specifically focusing on what retailers need to do in order to create a compelling in-store experience. They had four recommendations and MNB reader Paul Schlossberg wrote:

    Excellent write-up on a very important subject. 

    Those "tools" will work in almost any business. Just have to be shrewd enough to understand how to adapt it and apply it. Loved the "time of day" point.

    MNB reader Norm Myhr responded:

    I’d add one more…

    Food stores have no idea how important the food they sell, the meaning it has, or the place it holds in the Customer’s life. That cake could be baby’s first birthday, grandpa’s last birthday, a meaningful celebration like graduation or citizenship. Food is central to a family’s celebrations.

    Yes, lots of customers buy on price, and for most food stores that’s the easiest way to sell, so food stores sell that way.

    Believe me it’s not that hard to dignify your customer’s life, by understanding what it means to them.

    I’m with you. In fact, let me repeat a story I’ve told often over the years, but that may be fresh to new MNB readers.

    Every summer for the past seven years I’ve taught marketing at Portland State University in Oregon, where they’ve been kind enough to make me a member of the adjunct faculty. It is one of the great experiences of my life, for which I thank the kind and generous Prof. Tom Gillpatrick, who team-teaches the class with me.

    The first thing I ask each of the students to do each summer is to write a short essay on the subject of their most memorable meal. I have a bias, long on display here on MNB, that too many people in the food business think only in terms of category management, sales lift and profit margins, and don't think enough about food. So I want the students, to use a familiar phrase, to think different.

    The essays are almost always good, and sometimes brilliant. They have ranged from meals eaten in a four-star restaurant in Beirut to quieter, more intimate dinners shared at home with family and friends.

    One of my favorites was written by a man who said that his most memorable meal consisted of Minute Rice and A-1 steak sauce consumed on Christmas Day; he was serving in Afghanistan, had just returned from patrol, and, he said, it was memorable because he was with his brothers, all of whom he would have died for, and each of whom would have died for him. (Puts things in perspective, doesn't it?)

    The lesson from this essay is exactly what Norm Myhr is making - that every product in the supermarket may be special to some shopper, and that retailers should not minimize this importance. In fact, they should celebrate it.

    (Full disclosure: I stole the idea for this essay from the novelist and journalist Bob Morris, who uses the same idea with his creative writing classes at Rollins College in Florida. My class was full of business majors, but it had the same impact - it got people to write with passion about a subject easy to feel strongly about. So thanks to Bob for that.)

    On another subject, from MNB reader Renée A. Vassilos:

    Kevin, thank you for your awesome newsletter … without fail, you make my head churn a little each morning on something new.

    This morning it was on UnitedHealth Care's reasons behind trying to stop a former exec joining the new health care venture being started up by Amazon, Berkshire Hathaway and JPMorgan Chase.

    It made me churn on how non-competes are outdated and, I believe, no longer recognized in California. Also, it helped me recognize how vulnerable the incumbents must feel with someone else coming into their lucrative industry! I see the same happening in the food & ag space!


    Got the following email from MNB reader Greg Kerr, commenting on something I said in an MNB Politics Desk entry:

    Agree with your position on all aisles coming to the table with how they'll lead and stances on policy, domestic and foreign.  The fact that the Democrats are talking about Schultz' siphoning off support, just tells me they do not have a strong enough candidate that can codify the votes necessary.  It also should be telling of the two parties that many Americans are fed up with the political wrangling of both the Democrats and Republicans.  I changed my affiliation nearly 20 years ago to Independent because of the seeming idiocracy of both parties. 

    Democrats should focus their attention on getting the strongest candidate that will can defeat Trump and Schultz (if he runs).  Democrats are creating their own distractions versus focusing on the potentials within their own party.

    I offered some question yesterday that I would pose to candidates for the presidency, prompting MNB reader Tim Phillips to add another one:

    Have you paid your fair share in taxes the last decade - at your income level that should be something around 40% - is that the case?”

    As a person who is nowhere near a Billionaire and pays close to 40% every year I would find it difficult to vote for anyone who makes that kind of money and doesn’t pay taxes.

    In all fairness, you never used to have to ask that question when candidates released their income taxes.

    An interesting note along these lines, by the way … Seattle Times columnist Danny Westneat has written a piece noting that as former Starbucks CEO Howard Schultz positions himself as an un-politician, he also at times has been an un-voter:

    “State and county election records show that going back to 2005, Schultz has cast a ballot in just 11 of 38 elections. This isn’t the worst voting record I’ve seen in a political candidate. But neither does it suggest someone actively involved in ballot-box democracy over the years.

    “Schultz has at least voted in every election for the office he’s now seeking, the presidency. He also voted in the most recent midterms, in 2018. But he has skipped most of the state and local elections over the years, as well as some of the big midterms (like in 2014, when Republicans retook the U.S. Senate, and 2006, when Democrats “blue-waved” the Bush administration).
    He also passed up voting in Seattle municipal elections for mayor and city council most years, including in 2005 — right when he was petitioning City Hall for money to rebuild a basketball arena for the Sonics, which he co-owned. In fact, he sat out all the municipal elections in the period he owned the Sonics — 2001, 2003 and 2005.

    “He also didn’t vote during an election that featured a measure targeting him. Initiative 91, which passed in Seattle in 2006, sought to bar public subsidies for sports arenas. Schultz had sold the Sonics a few months before the vote, so maybe he didn’t care anymore at that point.

    “This is all a little awkward, because a couple years ago, when Starbucks rolled out a voter participation drive, Schultz said this: ’It’s not just about who will be the next occupant of the White House. More Americans should participate in all elections, even those for city councils and school boards’.”

    Schultz’s voting history, Westneat writes, suggests “a certain trope - the business executive who’s above the messy political fray, but also somehow most qualified to swoop in and fix it.”

    So maybe that’s something else we should require of our elected officials - that they’ve actually voted in every election in which they’ve been qualified to do so.

    Just a thought.
    KC's View:

    Published on: February 1, 2019

    I found BlacKkKlansman, nominated for a Best Picture Oscar, to be a problematic but entertaining piece of work … but not because it diverges too much from the true story the first African-American cop in the Colorado Springs, Colorado, police department, who infiltrates the local chapter of the Ku Klux Klan; he does so with the help of a white, Jewish detective who interacts with the KKK on a live basis, while the black detective handles the phone conversations and mail interactions.

    The film, in fact, is based on the true story of Ron Stallworth, and a memoir he wrote a couple of years ago, though it detours from the true story in order to make dramatic and narrative points along the way. Directed by Spike Lee, BlacKkKlansman is as stylized as you would expect, and does an excellent job of portraying the cultural realities of the early seventies. Stallworth, played by John David Washington, finds himself betwixt and between - while he sympathizes with black protesters, he is unwilling to subscribe to their facile characterization of the police as “pigs.” And Adam Driver, playing the physical embodiment of “Ron Stallworth,” is equally good - he is a cultural Jew who never thought about his heritage until running headlong into the corrosive attitudes of the KKK.

    I have no particular problem with stylized filmmaking, but what bothered me about BlacKkKlansman is that it served to underline the polemical aspects of the narrative, when the last thing it needed to be was underlined. And then, at the end, the stylized approach gives way to a more documentarian approach, which further underlines the firm’s political points in ways that I found unnecessary. I got the point the first few times, I agreed with it every time Lee made it, and then he hit me over the head with it again.

    That said … I recognize that maybe I’m the wrong guy to suggest that underlining salient points about race and bias isn’t necessary. Maybe Spike Lee feels he can’t make the point too often, because too many idiots (as the film’s coda shows us) simply don’t get it.

    I’m okay with that. I liked BlacKkKlansman. Didn’t love it, but liked it, and thought it was an interesting story worth telling. In the end, passion wins out.

    HBO this week has been featuring a fascinating documentary, “Breslin and Hamill: Deadline Artists,” that looks at the lives and careers of New York journalists and columnists Jimmy Breslin and Pete Hamill, each of whom at pretty much defined different and wonderful aspects of the New York tabloid business.

    While both were children of the New York area who grew up in poverty, Breslin and Hamill were very different writers. Breslin was a machine gun of a writer, with little about his life and work that was subtle; he was all seething resentment and moral outrage, but he channeled those emotions into often unforgettable columns that trained a spotlight on people he thought were ignored or disenfranchised. And he had an indisputable gift for the dramatic - his column about the black man digging John F. Kennedy’s grave at Arlington National Cemetery is just one of his many classics.

    Hamill, on the other hand, was a kind of urban poet - deeply in love with the city of his birth, with its people and buildings and streets and attitudes, and able to write spellbinding columns about all of them and more; his pieces about Vietnam and Robert Kennedy were remarkable. (Both Hamill and Breslin were with RFK on the night of his assassination.) Hamill was an elegant and probably the more versatile writer, capable of columns, book-length nonfiction, and some pretty great novels. (For my money, Hamill’s memoir, “A Drinking Life” and collection of journalism, “Piecework,” are two of my favorite books. Ever.) Hamill also, at various points in his life, dated Shirley MacLaine and Jacqueline Kennedy Onassis … so it has to be said that he had game.

    If I have a problem with the documentary, it is that too much attention is paid to the romance of the fifties and sixties and seventies, and not enough to the actual writing; this may be because writing is harder to illustrate in the video medium. But maybe this isn’t so bad, since the film also illustrates the degree to which Hamill and Breslin understood that they had brands that needed to be nurtured and even exploited as they plied their craft - their images as passionate, hard-working, hard-drinking, and even hard-living New York City columnists served their ability to do their jobs. It fit their images - and their professional goals - when they said that “the most interesting story always is in the loser’s locker room.”

    I’m old enough to remember when New York had more than a half-dozen newspapers; we read three of them at home, and I can remember being sent down to the local newsstand to pick up the New York Times, the Daily News and, I think, the . And I can remember immersing myself in their pages, mostly the sports and comics sections, and somehow sensing that this was more than just paper and ink … it was the lifeblood of a specific place and time. (I even remember a kind of withdrawal during the 1962-63 newspaper strike.) From the opening moments of the documentary to the wistful closing scenes, Breslin and Hamill: Deadline Artists” shows us two people of extraordinary talent, who helped to define the art of the newspaper column and the possibilities and heartbreaks of the greatest city on the planet.

    That’s it for this week. Have a great weekend, and I’ll see you Monday.

    KC's View: