business news in context, analysis with attitude

Published on: February 4, 2019

by Kevin Coupe

The New York Times had a story over the weekend about how hotels, “challenged by the home-sharing economy” that has created companies such as Airbnb, which recently reported Q3 revenue of more than $1 billion, are working hard to create for themselves differential advantages.

The scenario is a familiar one to many companies in many industries - disruptive companies “, “shook legacy brands out of their slumber and forced them to consider innovating their value propositions, and it encouraged entrants to experiment with novel and bold innovations.”

Chekitan S. Dev, a professor in the School of Hotel Administration at Cornell University, tells the Times, that “new hotel brands are routinely asking a series of ‘what if’ questions:
‘What if customers could check in anytime they like? What if the room was customized to the needs of the guest? What if the room could be rented in parts or in combination with others? What if the guest determined the value of the room? What if there was a seamless experience between the hotel and the local community?’”

One example: the Angad Arts Hotel in St. Louis, a 146-room property that “offers four color schemes designed to support emotions. Rooms come in yellow, said to be associated with happiness, green for rejuvenation, blue for tranquillity and red for passion (doubles from $185) … Rooms come with corresponding accessories, including a tabletop Zen garden with a mini rake in the blue rooms, a lamp set with Himalayan salt crystals in the green rooms, a smiley whoopee cushion in the yellow rooms and a scented candle in the red rooms.”

And then, there is the SCP Hotel chain, which goes so far as to allow “guests to name their rate when checking out, meaning they can lower the suggested price if they feel the value doesn’t align.”

The point is that these new brands are starting with the customer and working from there, and in doing so, challenge existing businesses to do the same thing … which isn’t always easy, because it challenges established business practices and legacy systems.

But they don’t have any choice. And that’s the Eye-Opener.

Published on: February 4, 2019

Walmart announced on Friday that it is making significant changes to its US employment policies, making it possible for store and distribution center workers “to earn as many as 48 hours of what it calls ‘Protected Paid Time Off,’ which is classified separately from their regular vacation time and can be used for any reason.”

The story says that the move is designed to standardize a patchwork of local policies as well as to improve Walmart’s image as an employer in a competitive labor market.

However, Walmart’s new rules also include a stick as well as a carrot:

“The retailer has also cut by nearly half the number of attendance infractions allowed over a six-month period before a worker is fired,” Bloomberg writes. “ In addition, quarterly bonus payments, which were previously based only on a store’s performance, are now partially tied to attendance. A worker who bails on a couple of shifts, for example, could see his or her bonus cut by as much as half. Those with no violations, meanwhile, can receive 25 percent more. (Workers who use their protected leave won’t get penalized for absences, no matter the reason.)”

The story notes that “About 300,000 U.S. hourly workers have perfect attendance, Walmart said. That’s less than a third of its 1.1 million-strong hourly workforce … From Walmart’s perspective, the new policies are designed to combat absenteeism both by making it easier for workers to take the time they need and discouraging no-shows.”

Published on: February 4, 2019

The New York Post reports that “a small army” of Instacart employees has taken to social media “demanding better pay and treatment by the $7.6 billion unicorn, which has raised nearly $2 billion over the past seven years largely on the promise that it gives grocers a fighting chance to compete with Amazon.”

According to the story, “The complaints are mounting as Instacart faces the loss of its prize Whole Foods contract in December — as Amazon takes control of Whole Foods’ delivery services — just as Instacart faces an onslaught of competition from such startups like Mercato, Jyve, which just raised $35 million, and Roadie, which inked a deal this month with Walmart.”

The Post notes that on Friday, Instacart “introduced a $3 minimum for each job, “ and says that “its shoppers earn more than $15 an hour and defended its new payment system as being ‘consistent with the practices of other on-demand delivery companies’.”

Published on: February 4, 2019

Considering how much we talk here about technology and innovation, I found a piece in Axios that struck me as provocative, about how “the U.S. is now in a winner-take-all race with China for dominance in 5G, artificial intelligence and quantum computing.”

And, the race “is even broader than that … U.S tech dominance was much broader than just information technology. But the U.S. has lost dominance of manufacturing technology, and did so decades ago, ceding it first to Germany, then to Japan, then to China.

“In other areas like agriculture and weaponry, the U.S. is still strong. But a large part of ‘One Belt, One Road’ is a Chinese attempt to corner mega-scale infrastructure technology, where the U.S. is pretty far behind these days.”

You can read the piece here.

Published on: February 4, 2019

Good piece from CNBC about how Amazon went from being a company that disdained conventional advertising to one that last year bought $1.8 billion worth of ads, up more than 70 percent from the year before, making it the fifth largest advertiser in the US.

Amazon founder/CEO Jeff Bezos once was quoted as saying that ads are “the price you pay when your product is unremarkable." But how he seems to have recognized that as his company’s business has matured and can benefit from mainstream appeal that can be generated through mass media, advertising can play a role.

CNBC writes: “Bezos’ about-face on advertising reflects the dramatic change in Amazon's business, which is no longer predominantly an e-commerce marketplace. While most of its revenue still comes from online sales, Amazon now has a whole portfolio of branded products and services that consumers and businesses need to see on TV ads and elsewhere. The four companies ahead of Amazon are Procter & Gamble, AT&T, Berkshire Hathaway (owner of brands including Geico, Kraft Heinz and Fruit of the Loom) and Comcast.”

There’s also a defensive play for Amazon: Joe Swallen, chief research officer at Kantar, tells CNBC that as “Amazon is becoming more of a product company, it also has to invest more in defending its own turf because Walmart, Target and Best Buy are stepping up promotion of their online commerce businesses.”

Published on: February 4, 2019

The Wall Street Journal has a story about how frozen food, which many still think of “over-processed and overpriced, a wasteland of pizza rolls and tater tots,” is giving way to a new wave of products and innovation. And people are responding.

“According to recent figures released by Nielsen and Acosta, a Florida-based sales and marketing research group, respectively, year-to-year sales of frozen vegetables jumped 4.5% in 2017, and 32% of shoppers polled planned to buy more frozen food in the coming year,” The Journal writes. “Among their motivations: making meals more healthful, convenient and less wasteful.

“A recent study conducted by scientists at the University of California, Davis suggests that most fresh produce is no more nutrient-rich than frozen. What’s more, especially outside prime harvest season, frozen vegetables, fruit and fish are often the more economical and sustainable choice. You know the pit you get in your stomach when you open the fridge and realize you have to toss a $5 bunch of Swiss chard you let wither to mush? That doesn’t happen with the frozen stuff.

Paul Greenberg, a seafood industry expert, tells the Journal that this also applies to seafood. In fact, especially seafood. He says that “blast freezing technology has improved so much the seafood you buy frozen is often more pristine than anything at the fish counter. ‘The truth is that a lot of consumers wind up eating frozen fish without realizing,’ he added. ‘If you’re buying Alaskan salmon in the dead of winter, there’s no way it’s fresh—it has just been defrosted to go into the fish case.’ So why not buy fish frozen and stash it away, preserved at peak quality, until you’re ready to cook it?”

Published on: February 4, 2019

CNBC reports on what some shopping malls are doing with themselves after realizing that their future may not be in retail.

Here how the story is framed:

“An old Toys R Us store in Milwaukee is now home to Engine & Transmission Exchange, a re-manufacturer for car parts. Meanwhile, six dead malls across the U.S. are either in the process of being turned into or have been revamped as massive manufacturing plants and logistics hubs. The empty Euclid Square Mall in Euclid, Ohio, for example, is under construction to become home to a new Amazon e-commerce fulfillment center. And that’s after Amazon already moved into a new facility where Randall Park Mall used to sit in North Randall, Ohio.”

While “these types of projects — converting a shuttered retail space into industrial complexes — have historically been hard to do,” the story says, real estate services company CBRE “found 24 such examples of properties across the country that were once home to retailers but now have turned — or are in the process of being turned — into a warehouse or some sort of supply chain center. Since 2016, at these 24 locations, 7.9 million square feet of retail space has been converted into 10.9 million square feet of industrial space. The second figure is larger because, in many instances, a developer will tear down the existing structure and build a bigger building on that dirt…”

Published on: February 4, 2019

Bloomberg reports that Bud Light has gotten itself into trouble with the nation’s corn lobby.

At issue is a commercial run during the Super Bowl last night, in which Bud Light did something unusual - it called out competitors Coors Light and Mille Lite for using corn syrup in its beer, and made the point that it does not.

The story notes that “American consumption of high fructose corn syrup started to fall at the beginning of the millennium when it was linked to the country’s high rate of obesity. This was due in part to decreasing consumption of soda; soft drink makers have also moved away from corn syrup, replacing it with sugar.

“Much of the reaction on social media to the Bud Light ads suggests most people didn’t know beer contained corn syrup at all. Perhaps the corn lobby wanted to keep it that way.”

In a Twitter response to the commercial, the National Corn Growers Association tweeted at Bud Light that “America’s corn farmers are disappointed in you. Our office is right down the road! We would love to discuss with you the many benefits of corn! Thanks @MillerLight and @CoorsLite for supporting our industry.”

Published on: February 4, 2019

• The Washington Post had a story the other day about supermarkets in Washington, DC, where “sit-down restaurants and bars are as essential as cage-free eggs or gluten-free and dairy-free aisles. Long the preserve of suburban chains, sipping from a glass of wine or beer while browsing the produce section or relaxing with a hard-earned glass of Riesling or stout after picking up ingredients for dinner is becoming more common in an urban setting.”

Indeed, the Post offers its appraisal of the five best supermarket bars: the Streets Market and Cafe located in the NoMa (north of Massachusetts Avenue) neighborhood … the Whole Foods on H Street … Glen’s Garden Market, located on 2001 S St. NW … the Whole Foods on South Capitol Hill … and the Ahold Delhaize-owned Giant at Cathedral Commons.

Published on: February 4, 2019

Richard L. Knowlton, the former president. CDEO and chairman of Hormel Foods, has passed away at age 86, from complications of Alzheimer’s disease.

Published on: February 4, 2019

We had a story last week about how PCC Community Markets in Seattle is getting rid of all its self-checkout, preferring to depend on old-fashioned human interaction as a differentiator. It prompted MNB reader Bob Vereen to write:

As a consumer, I think self checkouts in big-box stores like Walmart and Meijer need to be maintained.

They are a great convenience for shoppers, especially if a customer has purchased just a few items and those items did not need any help from an employee.



Last week we reported on how Ahold Delhaize-owned Peapod Digital Labs said 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 … The Deliv option is in addition to delivery services already being offered by the retailers through Peapod’s own fleet of vehicles.

I commented, in part:

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.

MNB reader Jim Huey replied:

I couldn’t agree with you more about outsourcing delivery. I find it comparable, however, to snack and soda vendors. I work for a small independent in the Midwest where we take out of stocks and display conditions very seriously. With few exceptions our snack and soda vendors do not have the same standards (even in a busy store like ours they are here twice a day only). In a world where even the major players (Kroger, Walmart, etc.) seem unable, or unwilling, to implement change, we should hardly be surprised that so many supermarkets are willing to farm delivery out.
 


We had a piece last week about how the Kraft Devour frozen food brand, which has been describing itself as “food porn,” decided to actually advertise on a real porn site … which I suggested was “a bridge too far.”

Illustrating why I love the MNB community, Stephen Avola wrote:

Being a student of history, specifically WW2 in Europe, I had to write when I saw the title of your Friday Eye-opener: "A Bridge To Far."  I thought this would be a good opportunity for a quick history lesson for your readers on were the phrase, "A Bridge Too Far" comes from.

Yes, it is the title of the 1977 film based on the book of the same name with a cast that included: James Cann, Michael Caine, Sean Connery, Elliott Gould, Gene Hackman, Anthony Hopkins, Laurence Olivier, Ryan O'Neal, Robert, Redford, and others, but it refers to the failure of Operation Market Garden during WW2.  Operation Marketing Garden took place in Sept 1944 (3 mos. after D-Day) and was intended to end the war in Europe before Christmas.

Its objective was to capture a series of nine bridges in the Netherlands that would give the Allies a quick invasion route into Germany.  The Allies captured all but the last bridge in Arnhem and the battle at Arnhem was lost by the Allies and Operation Market Garden was a disaster and the war in Europe raged on until May 1945. It's been said that a British officer told British Field Marshal Bernard Montgomery (the architect of the operation) that it appears they went "A Bridge Too Far," referring to their defeat in trying to capture the last bridge in Arnhem. 

It's never a bad time for a quick history lesson and now all of your readers will know the story behind the phrase, "A Bridge Too Far.”

Thanks. I’m a sucker for an educational moment.

Published on: February 4, 2019

In Super Bowl LIII last night, the New England Patriots defeated the Los Angeles Rams 13-3. It was the lowest scoring game in Super Bowl history, and the Pats’ sixth championship victory since 2002.