business news in context, analysis with attitude

Published on: February 21, 2019

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’d like to suggest that there is a lesson to be learned from the Amazon-abandons-New York City story that broke a week ago, and continues to get attention in the media, including here on MNB. I’m sure there are are bunch of members of the MNB community who are sick of this story, in fact are sick of every story about Amazon.

But as I say, there are lessons to be learned.

As I read all the postmortems about the situation, I kept thinking of the great writer and journalist, Pete Hamill, who once wrote that “ideology is a lousy substitute for thought.” I think that the reactions to the Amazon story - both before and after the company decided not to build part of its HQ2 project in New York City because of hostility to its plans from some political circles - have generally fit within ideological boundaries.

For example, NYC Mayor Bill de Blasio called Amazon’s decision “an abuse of corporate power,” saying that the company “just took their ball and went home and confirm people's worst fears about corporate America.”

Which strikes me as a load of crap.

First of all, it isn’t an abuse of corporate power for a company to say that it would rather go where it is wanted … in fact, it would be imprudent for a company to spend a lot of time and money trying to go somewhere it isn’t wanted.

My problem with all this has more to do with the fact that I don’t think anyone - not Amazon, and not the politicians who were in favor of the project - did a very good job of telling the story about why this was important.

Which makes no sense to me … since New York City is, after all, the place that is so resistant to the charms of certain kinds of companies that it has fought Walmart’s desire to open stores there. How could Amazon and local government officials NOT realize that they had to tell their story in a way that was specific, relevant, and completely transparent?

To me, a perfect example of this is in the references by HQ2 opponents in New York to “corporate welfare,” to the point that there have been a number of stories about the episode is likely to change the way many municipalities think about tax incentives because they are, after all, a kind of corporate welfare.

I don’t think of it this way. To me, an intelligent and nuanced way to think about these kinds of opportunities is to think of them as a time when it makes sense to make a public investment in growth-oriented private businesses. Sure, to some degree this means that governments end up choosing winners and losers, but it would be on the basis of which investments are going to pay off best for the future of the community.

I think people have a right to ask why billions of dollars of incentives are being made available to corporations - especially fabulously wealthy corporations - at a time when the subways, roads, bridges and schools all are falling apart, and when the infrastructure of the city is reaching the point of being dangerously obsolete at a time when affordable housing is less and less available. That’s a good question. It deserves a response. But it could’ve been answered, both by Amazon and the city, in a way that explained how the public investment would bear fruit and lead to a better city, one with greater resources for more people, not just a windfall for a few.

That case never was made. That story was never told. Both Amazon and the city lost control of the narrative. I don’t blame one side or the other … and I blame everybody for not understanding the importance of telling the story in an honest and compelling way.

Amazon and New York City both will, I expect, survive. But I hope there is a greater lesson here about how to create public-private partnerships in which one plus one can equal three or four or five or one hundred or one thousand.

That’s a story that, if properly told, will make sense to a lot of people. Frankly, I think it is a story that people are dying to hear … because it would reflect leadership and compassion, and might actually engender trust in our institutions.

But it requires nuance. It requires thinking. And not just falling back on ideological tropes.

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

Published on: February 21, 2019

by Kevin Coupe

The Wall Street Journal reports that not only isn’t baseball dying, but it actually is experiencing a kind of resurgence.

Go figure.

“The number of people who played baseball in the U.S. surged 21% last year from 2014, to nearly 15.9 million, according to the Sports & Fitness Industry Association,” the Journal writes. “That includes everyone from a 6-year-old swinging a bat in the backyard to a starter in the College World Series.

“Most of the gain has been in casual players, those who play the game between 1 and 12 times in a year. The ranks of those dabblers grew 53%, or by nearly 2.3 million people, from 2014 to 2018 … The growth of more frequent baseball players was a modest 5% over four years. But in an era of esports and no sports … any growth is a win. Tackle football participation dropped 3.4% in the past five years. Hockey and soccer saw one-year drops of 3.8% and 4.3%, respectively, in 2018.”

Baseball’s improving fortunes isn’t just because it is the best game ever invented, the Journal suggests.

Major League Baseball believes that the increase can at least in part be attributed to “a program it launched in 2015 called Play Ball, which holds programs across the nation. The approach is very basic - getting kids swinging a bat or throwing and catching, even if they don’t have enough people to play an actual game. Every kid who shows up gets a plastic bat and plastic or foam ball.”

That’s an important lesson. You create allegiance by putting tools in people’s hands, not just by telling them what to do and how to do it. You open their eyes by giving them the tools and then you create a kind of muscle memory by providing the opportunity to use them.

In the case of baseball - which, if I haven’t mentioned it, happens to be the greatest game ever invented, and, as the great Robert B. Parker once wrote, “the most important thing that doesn’t matter” - it helps put people in touch not just with a sport, but with a game that is replete with metaphor and history and deeper meanings, all tied up in history and myth.

Or, as the writer W.P. Kinsella (“Shoeless Joe”) once wrote, baseball consists of “mathematics, geometry, art, philosophy, ballet, and carnival, all intertwined like the mystical ribbons of color in a rainbow.”

Published on: February 21, 2019

Restaurant Dive has a story about how “a new report from Allied Market Research shows that the global food delivery mobile app market is expected to grow at a compound annual growth rate of 27.9% — to $16.6 billion — by 2023, according to a news release. The market was valued at about $3.79 billion in 2017.”

The story says that “the main drivers of this growth include high internet penetration, higher standard of living in developing countries and an increase in mobile usage. Further, increased investments in digital marketing strategies are expected to provide more opportunities for delivery players … Off-premise channels currently account for just 3% of all restaurant orders at this time. As digital ordering grows and companies scale through third-party aggregates, that number should ramp up pretty quickly.”

Published on: February 21, 2019

The Washington Post this mornin g reports that “this year, the money spent on digital advertising in the United States will surpass that spent on traditional ads for the first time … representing a landmark inversion of how advertisers budget their resources and highlighting the rise of digital media as platforms seek consumers’ attention.”

The numbers come from eMarketer which “expects companies to spend nearly $130 billion on digital ads, compared with about $110 billion on traditional advertisements, or about 54.2 percent of the ad market vs. 46.8 percent, respectively … By 2023, digital ads will capture more than two-thirds of all ad spending, according to the estimates.”

The story goes on: “The increase in digital ad dollars will come, in part, from sharp declines in key print ad formats including directories such as the Yellow Pages, whose ad spending will fall by 19 percent, and the print versions of newspapers and magazines where ad spending is expected to decrease by about 18 percent, eMarketer said. Ad spending on TV will decline 2.2 percent this year, to about $71 billion, eMarketer said, owing largely to the absence of elections and big sports events, such as the Olympics.”

Published on: February 21, 2019

The Wall Street Journal reports this morning that just-unsealed court testimony in a lawsuit aimed at preventing a former insurance company executive from going to work for a new venture launched by Amazon, Berkshire Hathaway and JPMorgan Chase has shed some light on the three companies’ goals.

The story says that the unnamed startup’s COO, Jack Stoddard, testified that “the venture is focusing on the complexity of health insurance and asking if it can ‘reinvent what insurance looks like in terms of benefit design?’ He said workers are often confused about what their plans cover. Employers could try different approaches and see what works, he suggested.”

Stoddard testified that “the venture will be deploying smaller-scale tests of ideas like making primary-care access easier, or maintenance drugs cheaper. If these ideas work, they could be scaled up among the venture’s owners.

“One goal is to bolster the importance of primary care, he said in the newly public testimony.”

Stoddard also said that “the startup is initially focused on analyzing data to ‘understand where there’s variation in care, quality, where prices don’t match value, where doctors are performing’.”

The lawsuit was filed by UnitedHealth Group. The new venture, according to the Journal, had sought to keep Stoddard’s testimony from being unsealed.

Published on: February 21, 2019

MediaPost reports that “Millennials, Gen Z and Gen X are more likely than boomers to choose organic,” and that “upwards of 50% for the younger generations and only 30% of boomers choose organic.”

Those are among the conclusions of a recent survey from organic produce company Earthbound Farm, entitled “Annual Organic & Other Lifestyle Choices.”

The survey goes on to say that “Millennials/Gen Z are the most likely to say they purchase organic food "all the time" (20% for Millennials/Gen Z vs. 8% for Gen X and 7% for boomers) … Of the 500+ consumers surveyed, 40% say they plan to increase their household's organic consumption in 2019.”

Other conclusions:

“Health is still the number-one reason to purchase organic, with 75% saying that's their main reason for choosing the category. The next closest reason (at a big distance) was because "it's higher quality" at 45%, with 44% saying they choose organic because it's better for the environment … People with kids at home are more likely than those without kids to buy organic (52% vs 41%).”

As for other lifestyle choices that correspond with a preference for organics, “organic shoppers are most likely to say they'll listen to any kind of music, followed by rap or hip-hop. Pet owners are more likely than non-pet owners to choose organic. Forty-nine percent of organic consumers consider themselves sports fans.”

Published on: February 21, 2019

The Financial Times has an excellent story about the made-in-America trend, which involves not just supply chain realities, but the stakeholder-vs.-shareholder debate, conscious capitalism, some politics, and the automation movement. Using one company - American Giant - as an example, FT takes a trip deep into its supply chain to examine the economic, technological and demographic factors that affect its business decisions.

An excerpt:

“Bringing manufacturing back to the US will require some things that private business can’t do on its own — educational reform, tax reform, smart industrial policy (not picking winners, but building infrastructure, sharing best practice across industries and creating a supportive environment for investment with more than just tax cuts) … The public sector has to play a role. Yet, for the past 40 years, we’ve lived in a world in which business has become global, while politics has remained local.

“Business complains that government fails to train a 21st-century workforce or support industries of the future, even as it lobbies for tax cuts that make it harder to do those things. Multinationals can fly 35,000 feet above local concerns, putting capital and jobs where it is cheapest to do so. But eventually that becomes a zero-sum game, as the political climate not only in the US, but in much of the world, makes quite clear.”

You can read the entire, fascinating story here. (Subscription required.)

Published on: February 21, 2019

• CNN reports on how Procter & Gamble is expanding its dry cleaning business, which has grown since 2010 to now include some 125 franchises, plus “wash-and-fold services on 20 college campuses and more than 700 drop-off lockers at stores like Hy-Vee around the country.”

The company announced this week that it “would pull together these services together under a new name, Tide Cleaners. The brand plans to double the number of places around the country where customers can drop-off and pick-up their laundry to 2,000 by the end of next year. Tide will grow by opening up more laundry and dry cleaning stores, adding drop-off lockers to new apartment complexes and supermarkets, and expanding at schools.”

The story says that P&G “hopes its latest strategy will help it reach new customers and grow its business with customers who already use Tide. It plans to solicit building managers, franchisees, and retailers to open up a store or add a drop-off locker in their neighborhood.”


• The New York Times reports on how both the US Department of Justice and the US Securities and Exchange Commission (SEC) “are investigating Johnson & Johnson over concerns about possible asbestos contamination of its popular baby powder and other talc-based products.

There have in the past been press reports about “internal documents that showed decades of communications within the company about the risk of asbestos in its talc products even as Johnson & Johnson fought to keep negative information out of the public eye … Johnson & Johnson, which faces around 13,000 lawsuits in which its body powders are blamed for causing ovarian cancer or mesothelioma, has stood by the safety of its products.”

The information about the federal probes was included in a securities filing in which J&J said it was “cooperating with these government inquiries and will be producing documents in response” to subpoenas it had received.


• Hormel Foods announced that it is selling its CytoSport business, including Muscle Milk products, to PepsiCo. Terms of the deal were not disclosed.

The Star Tribune notes that “Hormel bought CytoSport in 2014 for $450 million as another entry point into non-meat protein sources, a growing consumer market.”

Published on: February 21, 2019

• Cornell University has announced the retirement of Ed McLaughlin, the Robert G. Tobin Professor of Marketing at the Dyson School of Applied Economics and Management in the Cornell SC Johnson College of Business at Cornell University where he also serves as Director of the Food Industry Management Program.

McLaughlin is the former Dean of the Dyson School and has spent 21 years as the Director of Dyson’s undergraduate business program, the largest major at Cornell. He received his PhD at Michigan State University and joined the Cornell faculty in 1983.

Published on: February 21, 2019

Got the following email following up on our story about how some critics say that dollar stores in poor areas may actually help sustain poverty, not alleviate it:

I am the store manager of a high volume grocery store, we operate in a more rural area. Dollar stores have popped up like mushrooms after a rain. In the small towns that surround the community we operate I have seen many small family owned stores fold up and leave. Simply because dollar stores sell the dry goods so cheap they can't compete. I do believe if some of them would have competed in fresh food better they may have survived.

Dollar stores are also Amazon proof. Need Ibuprofen, 2.00 for a bottle, need cereal small box 2.00, cheap paper products they have it. People who shop them get a little everyday. They operate in more fringe areas, no city limits as a rule, so they can ignore pesky building codes that add cost. They throw up a metal sided building, stand alone coolers, little to no staffing great buying habits. They know their rules and they stay in between the lines. They are becoming giants, while selling a little bit everyday. Add up 15,000 stores just for Dollar General (not counting the other companies) adds up quickly to tremendous buying power. Just because they aren't pretty, don't have much foo foo, and aren't always the cleanest or most organized, (after all that takes money) they shouldn't be over looked. They are pretty damn tough operators.



Responding to our story about how how some cities may ban stores that refuse to take cash, MNB reader John Rand wrote:

Speaking entirely as a consumer, I like cash. Cash doesn’t expose me to security risks. Cash lets me see and interact with a person, not a machine. Cash doesn’t make me wait for approval. Cash lets me tip easily and sometimes leave a small act of kindness behind (“keep the change!”).
 
For a big purchase, sure, I use plastic or some secondary version of it, like everyone else. For small stuff? I like cash. Am I weird for insisting that physical money is still a valuable alternative?
 
It is also still at least officially, legal and required to be accepted “for all debts, public and private”. 
 
And yet I don’t see the point of legislating a requirement for it – like so many things these days, there is no reason to insist on an “either/or” mandate. I would prefer “and”.  Some stores may not accept cash. Some consumers may avoid them. Some will – consumers who wish to use cash may seek them out.
 
I would think Amazon Go stores would have a difficult time with cash. I also think the 7-11 down the street might want to put up a sign “we also take cash” in response.
 


And, regarding our obituary for the great Brooklyn Dodger pitcher Don Newcombe - he was the first truly outstanding black pitcher in Major League Baseball, the National league Rookie of the Year in 1949, and subsequently was a four-time All-Star, a Cy Young winner, and the league’s MVP in 1956 - MNB reader Chris Breen wrote:

I’m 49. Living in Maine. I have never heard of him. I used to collect baseball cards as a kid.

Maybe it is just that you’re too young. I’m older than you are by 15 years, and I have no memory of having seen him play, even though I was six years old when his career ended.

I’m glad I was able to bring Newcombe to your attention. I’ve read enough books about the Dodgers - and especially about players like Newcombe and Roy Campanella and especially Jackie Robinson, not to mention Branch Rickey, who made it all possible - to have some sense of Newcombe’s importance, not just to the game, but to our history as as culture.

As James Earl Jones, as writer Terence Mann, says in Field of Dreams, “The one constant through all the years … has been baseball. America has rolled by like an army of steamrollers. It has been erased like a blackboard, rebuilt and erased again. But baseball has marked the time. This field, this game: it’s a part of our past … It reminds us of all that once was good and that could be again.”  

Published on: February 21, 2019

Karl Meinhardt, Alberstons’ Vice President Social/Digital Marketing, has announced his departure from the company on LinkedIn.

“After seven digitally transformative years I am saying good bye to Albertsons,” he wrote. “I started at Albertsons LLC when there were 192 stores. After two major acquisitions and transitions there are 2300+ stores today. It’s been a fast and furious ride! I appreciate the opportunity I was afforded by LLC leadership to build one of the most amazing teams of my career, to break new digital frontiers, and to achieve awesome results in the world of digital marketing and retail.

“But when is all said and done…the real success for me as a leader is being a participant in helping employees take on new responsibilities and grow professionally, aiding them through career challenges, enabling them to afford major life purchases, and most of all, creating an environment where learning, challenge, respect, and achievement were able to flourish while having fun

“Because after all, if you’re not having fun, you are not engaging the hearts and minds of those you lead to their fullest potential.”

No word yet on what is next for Meinhardt.