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    Published on: February 25, 2019

    by Kevin Coupe

    Couple of interesting animals-as-food related stories grabbed my attention because they also have a technology-and-innovation angle.

    First, there was the story on National Public Radioabout how researchers seem to have come up with a way to put devices on animals so that their movements and provenance can be tracked, so that you can be assured that you are getting what you pay for.

    Robyn Metcalfe, a food historian who teaches at the University of Texas at Austin, says that “a GPS tracker strapped to the leg of a chicken means ‘that people who potentially will buy that chicken will know every step that that chicken has taken’.”

    It isn’t just animals. The story notes that “tracking technology is already being used by California-based Driscoll's, the largest berry distributor to monitor shipments in real time” so that “consumers can hold their phones up to a QR code on the packaging of their berries to see the smiling faces of the family that grew them.”

    Meanwhile, the New York Times has a story about how “Chinese companies are pushing facial and voice recognition and other advanced technologies as ways to protect the country’s pigs. In this Year of the Pig, many Chinese hogs are dying from a deadly swine disease, threatening the country’s supply of pork, a staple of Chinese dinner tables … So China’s ebullient technology sector is applying the same techniques it has used to transform Chinese life — and, more darkly, that the Chinese government increasingly uses to spy on its own people — to make sure its pigs are in the pink of health.”

    The argument around here always has been that transparency is always the best policy, and that companies get in the most trouble when they start making arbitrary decisions about what customers don’t need to know. And so, I suppose, if that means tracking devices on chicken legs and using facial recognition technology to tells pigs apart … well, I’m all for these sorts of Eye-Openers.
    KC's View:

    Published on: February 25, 2019

    Albertsons last week went into some detail about what it expects to come out of its new partnership with Microsoft, which it said it expects “to provide new and transformative experiences to customers and employees” and “reduce friction in the shopping experience.”

    Anuj Dhanda, Albertsons’ executive vice president/CIO, says that the goal is “to serve customers in a way they want to interact with us across all channels … Our partnership has already produced an innovative way to save time at the gas pump. Microsofts strengths in cognitive technologies, artificial intelligence and data science applied at scale at Albertsons Companies will transform the customer experience in our stores and digitally.”

    According to Albertsons, “Moving forward, the two companies plan to work together to leverage Azure and Azure AI and other Microsoft Cognitive Services to transform the shopping experience by eliminating the friction customers experience at the grocery store, such as not finding the products they want, longer-than-usual waits at the deli or meat counters and, of course, checkout lines. For store managers and associates, these intelligent solutions can also help anticipate out-of-stocks and misplaced products.”
    KC's View:
    Since Jim Donald became CEO at Albertsons, it seems to me that the company has taken very seriously his mandate that it had to go from being a four-walls company to being a “no walls company.”

    It is going to be interesting to watch all this play out, and how quickly. Because time is a’wasting, and it is going to take speed, dexterity and a ton of discipline to get Albertsons’ varied banners to where they need to be.

    Published on: February 25, 2019

    Fortune has an interesting follow-up on last week’s story about how Kraft Heinz announced a multibillion dollar write-down, saying that a shift in consumer tastes - a preference for fresh over processed food - has had a negative impact on its sales and profits.

    The story suggests that this announcement exposed as a disaster “a new, highly-praised strategy for reviving slogging, slow-growing brands.”

    Here’s how Fortune frames its analysis:

    “Over the past several years, Brazilian investment firm 3G has deployed brutal cost-cutting to raise profits at Anheuser-Busch InBev, Burger King, and Kraft Heinz, using an approach called zero-based budgeting requiring that each expense be justified from scratch each year, as opposed to the traditional approach of adding a couple of percentage points to last year’s line items. The strong implication is that managers should strive to lower all costs from one period to the next, at all costs.”

    Kraft Heinz’s numbers, the story says, “since the completion of the food giants’ merger in 2015 demonstrate that it’s achieved all gains in profits exclusively from chopping costs, that starving the brands resulted in flat sales and rising debt, and that falling margins and zero growth forced the company to suddenly reverse course by swelling marketing costs. That move, in turn, hammered profits, and came too late. The damage to the brands, the announcement acknowledges, are permanent.”

    Whether or not the company’s traditional brands can be revived remains an open question, Fortune writes, because “the 3G folks were too tough on costs, when Kraft Heinz desperately needed trendy new products and offshoots that only targeted spending on R&D and marketing - and creative thinking - could bring.”

    The New York Times makes much the same point: “Kraft’s problems suggest that unremittingly squeezing expenses can make it harder to stay competitive. Kraft Heinz may soon need to spend more. Consumers are increasingly drawn to products they perceive to be healthier and fresher over processed products. Kraft Heinz will have to show that it can win them back with innovative new products and engaging marketing. And that could weigh on future profits.”

    By the way … Reuters reports this morning that “Kraft Heinz Co has hired investment bank Credit Suisse to review options for its Maxwell House coffee business, including a potential sale,” which could be for as much as $3 billion. It would be just “one in a string of divestitures for Kraft Heinz.”
    KC's View:
    You wouldn’t think it would come as such a surprise that a company cannot cut its way to prosperity … it almost doesn’t matter what the company is, nor which segment it occupies.

    It is extraordinary how little real innovation seems to take place at major CPG companies … maybe a new flavor or size here or there, but so much of the real innovation seems to come from smaller companies.

    I do think there is an object lesson here for retailers as well. If all they do is cut, and don’t invest in the kind of real innovations that can disrupt their own businesses as well as the competition’s, then they’re not going top succeed long-term.

    Published on: February 25, 2019

    Canadian convenience store company Alimentation Couche-Tard announced last week that it is plans to get into the retail marijuana business.

    According to the Financial Post, it is teaming up with Cannabis company Canopy Growth Corp. “to support a privately run pot shop in London, Ontario … Canopy says the two companies plan to form a multi-year strategic partnership involving a new cannabis outlet set to open in the city in April … Currently, the only place to buy legal recreational weed in Ontario is through a government-run online outlet, the Ontario Cannabis Store, but private brick-and-mortar shops are set to open April 1.”
    KC's View:
    Just the beginning of what I expect to be a long and profitable road that will have a lot of companies on it.

    Published on: February 25, 2019

    Motley Fool writes about how, China's largest direct retailer, recently partnered with Japanese e-commerce giant Rakuten to use both unmanned delivery ground vehicles and drones in Japan, building on a service already available in China.

    According to the story, “JD's unmanned ground vehicle, which has a top speed of 9 miles per hour, is only about 5 feet tall and less than 6 feet long. Its drone, which can travel up to 10 miles, is less than 2 feet high and weighs about 11 pounds.” (The Japanese government recently relaxed rules covering drone flights, which opened the door to the new service.)

    Motley Fool goes on to point out that “The team-up could be a win-win deal for JD and Rakuten. It could also give the latter an edge against, which holds a slim lead over Rakuten in Japan's e-commerce market. Amazon has been testing out its Prime Air drone deliveries since 2016, but it hasn't disclosed any detailed plans for the Japanese market yet.

    “JD faced three major headwinds over the past year: decelerating sales growth, which was caused by softer demand for big-ticket electronics and appliances; slower growth in active customers; and contracting operating margins, caused by the expansion of its e-commerce ecosystem and first-party logistics network.

    “The bears think that JD's capital-intensive business model is unsustainable. But the bulls believe that those investments -- particularly in autonomous warehouse robots, delivery vehicles, and drones -- will pay off and boost its operating margins over the long term.”
    KC's View:
    This may not be the trick to competing successfully against Amazon, but it certainly demonstrates the kind of mindset that these companies have to embrace going forward. Take to the ground, take to the skies, and find ways to engage with and serve the customer. No limits.

    Published on: February 25, 2019

    The PSFK website has an interview with Brandon Avery, creative managing director for FRCH Design Worldwide, about his work developing a new physical retail concept for The Container Store.

    It is instructive, and here are some excerpts:

    “The Container Store wanted to reinvent itself, but wasn’t quite sure what that meant or how to do it. It had a long legacy of being known for great customer service and having a high-quality product, yet it was stagnating.”

    “We uncovered a handful of opportunities. One was to drive shopper frequency by bringing some of the great products the brand has out of the shadows. All of its stores with the exception of one were presented in a big-box format, which didn’t align with the brand’s image of being an expert in a more niche market … We wanted to redesign the store so that all those great products including the more unique ones have a place to shine within the store.”

    “There were also key categories that were ripe for reinvention, specifically kitchen, office and closets. We tried to make the rest of the store efficient, so that somebody could get in and get out easily, but also recreate the experiences of those categories to be much more inviting and engaging.”

    “(Technology) needs to be helpful. It needs to go beyond entertainment. It should actually be a tool, not just a big flashy screen in the space. We focused on a few different elements for improvement: Integrating screens into key categories like kitchen, office and closets, to enable inspiration.”

    You can read the entire interview here.
    KC's View:
    A really interesting story, especially since The Container Store seems like such a well-run and consistently winning player. That’s especially the time when companies have to be willing to make changes, to try different things. To wait is to risk obsolescence, because someone else is able to step in and cut your legs out from under you.

    Published on: February 25, 2019

    UnitedHealth has lost its legal effort to stop one of its former executives from going to work for the new health care venture that has been launched by Amazon, Berkshire Hathaway and JPMorgan Chase.

    The New York Times writes that “a federal judge in Boston denied UnitedHealth’s request to have the executive, David William Smith, immediately stop working. Mr. Smith was an executive at Optum, a unit of UnitedHealth, and it accused him of taking corporate secrets to what it claimed was a competitor. Mr. Smith has denied any wrongdoing. In its court filings, UnitedHealth argued that Mr. Smith’s role at Optum made him privy to sensitive information about its plans.”

    The story notes that “the case against the nascent venture has highlighted the anxiety of established insurance companies and pharmacy benefit managers over newcomers to their territory. From start-ups to giant technology firms, the new rivals threaten to unseat companies, like UnitedHealth, that have traditionally dominated these markets. Amazon, which has made tentative forays into the pharmacy business, has emerged as a particularly worrisome competitor.”

    However, to this point the new venture doesn’t even have a name or a clear mandate, though it appears that it “plans to tackle several areas, including how benefits are provided through traditional health insurance plans.”
    KC's View:
    At least, through discovery, UnitedHealth has a little bit more information about what Amazon, Berkshire Hathaway and JPMorgan Chase have in mind. Not that it’ll matter, if all it wants to do is play defense.

    Published on: February 25, 2019

    The New York Times Magazine had a story over the weekend that presented a series of arguments for a higher minimum wage.

    An excerpt:

    “For years, when American policymakers have debated the minimum wage, they have debated its effect on the labor market. Economists have gone around and around, rehashing the same questions about how wage bumps for the poorest workers could reduce employment, raise prices or curtail hours. What most didn’t ask was: When low-wage workers receive a pay increase, how does that affect their lives

    “But recently, a small group of researchers scattered around the country have begun to pursue this long-neglected question, specifically looking into the public-health effects of a higher minimum wage. A 2011 national study showed that low-skilled workers reported fewer unmet medical needs in states with higher minimum-wage rates. In high-wage states, workers were better able to pay for the care they needed. In low-wage states, workers skipped medical appointments. Or consider the research on smoking. Big Tobacco has long targeted low-income communities, where three in four smokers in America now live, but studies have found strong evidence that increases to the minimum wage are associated with decreased rates of smoking among low-income workers. Higher wages ease the grind of poverty, freeing up people’s capacities to quit.”

    The argument is that “a $15 minimum wage is an antidepressant. It is a sleep aid. A diet. A stress reliever. It is a contraceptive, preventing teenage pregnancy. It prevents premature death. It shields children from neglect.”

    And that doesn’t even count the fact that people who make more money have more money to spend. Which continues to drive the economy.

    You can read the entire story '; -->
    KC's View:

    Published on: February 25, 2019

    • The National Grocers Association (NGA) yesterday presented the Thomas K. Zaucha Entrepreneurial Excellence Award to Trygve (Trig) Solberg of T.A. Solberg Company, Inc.

    Since 2009, the Thomas K. Zaucha Award, sponsored by Mondelz International and named after NGA’s first President and CEO, has been presented annually to recognize an independent grocer that “demonstrates persistence, vision, and creative entrepreneurship.”

    • The Wall Street Journal reports that “the University of Michigan said Friday its consumer-sentiment index was 95.5 this month, up from 91.2 in January. January’s reading had been the weakest since October 2016 … Although consumers were more optimistic now that the longest shutdown on record is over, they continued to feel its lingering effects and worried about the possibility of another shutdown.”

    • The Associated Press reports that the “ugly produce” trend may have hit its expiration date.

    According to the story, “Walmart and Whole Foods in recent years tried selling some blemished fruits and vegetables at a discount, produce they said might otherwise be trashed because it’s not quite the right size, shape or color. But the two chains and others quietly ended their tests, suggesting dented apples and undersized potatoes may not be all that appealing in stores where better looking fruits and vegetables are on display.”

    Not everyone has bailed out on ugly produce, though; Kroger and Hy-Vee are still working the category.

    • The Associated Press reports that the United Food and Commercial Workers (UFCW) has been authorized by members who work for Ahold Delhaize-owned Stop & Shop to call a strike “if the contract dispute with the supermarket chain continues. The union is asking members to keep working while negotiations continue … The fight centers on health insurance, pensions and vacation time.”

    Fortune reports that Anheuser-Busch InBev is getting into the spirits business, acquiring San Diego-based Cutwater Spirits, which the story says “offers 16 types of spirits, including rum, vodka, whiskey, and gin. It also makes 14 canned cocktails, which are currently distributed to 34 different states. Cutwater will join Anheuser-Busch’s ‘Beyond Beer’ portfolio, which also includes Spiked Seltzer, the non-beer brand Ritas, HiBall, and Babe Rose.”

    • The Wall Street Journal reports that Target “is launching new lines of lingerie and sleepwear, becoming the latest retail behemoth to challenge market leader Victoria’s Secret … Target next month will launch three brands to sell women’s bras, underwear and pajamas that it expects will hit more than $1 billion in sales in a year. Some of the sales will come from eliminating Gilligan & O’Malley, its existing brand for undergarments and sleepwear. Target said all the new bras will cost less than $22 and include plus sizes. Inc., which in 2017 launched its own line of lingerie called Mae, sells private-label bras at prices mostly between $10 and $22.”

    • The Wall Street Journal reports that the Bud Light advertising campaign differentiating the Anheuser-Busch-made product from its competitors because it doesn’t use corn syrup has thrown into jeopardy a proposed campaign designed to pump up the entire industry.

    “High-fructose corn syrup, used as a sweetener, has attracted negative attention for its role in the national obesity epidemic. MillerCoors notes that it uses corn syrup, not high-fructose corn syrup, only in the fermentation process for beer making, as does AB InBev for some other brands. MillerCoors says the corn syrup doesn’t actually make its way into the beer.”

    Pete Marino, MillerCoors’s communications chief, tells the Journal that it is a “waste of time and money” to work on a common industry campaign “while the dominant industry leader is spending millions of dollars demonizing beer ingredients.”

    MarketWatch reports on a new survey by Nielsen saying that the margarita is far and away the favorite drink throughout the United States … except in Chicago, where they prefer the old-fashioned.

    In fact, in Chicago the margarita didn’t even make the top five.

    “Just chalk it up to a regional quirk, Nielsen says. And it’s not as if the predilection for the whiskey-based old-fashioned is so out of fashion. It ranked third nationally behind the margarita and martini in Nielsen’s national numbers. Mimosas and Moscow mules rounded out the top 5. And, speaking of regional quirks, the Manhattan is not the most popular cocktail in Manhattan, just No. 3.”
    KC's View:

    Published on: February 25, 2019

    Stanley Donen, who shared responsibility for perhaps the four most joyful minutes in the history in cinema - the singing-in-the-rain sequence in Singin’ In The Rain, performed and co-directed by Gene Kelly - has passed away at age 94.

    If that wasn’t enough, Donen also directed Royal Wedding, in which Fred Astaire seems to be dancing on a ceiling. And if that’s not enough, he also directed On The Town, Funny Face, Indiscreet, Charade, Two For The Road, and Bedazzled, among others.
    KC's View:

    Published on: February 25, 2019

    MNB reader Glenn Cantor wrote in about the Kraft Heinz story:

    The recently announced decline in value of Kraft Heinz stock may be the proverbial “shot across the bow” for branded consumer packaged goods manufacturers, as well as their retailer and wholesaler customers.  It was reported that sales revenue actually increased by 1%, while increasing costs and an SEC investigation into vendor agreements caused the write-down.

    The increasing transportation and raw material costs that affected Kraft Heinz are affecting every business in an industry that needs to keep consumer prices down.  The process that is used to maintain low consumer pricing is not sustainable in this business environment.  This will force changes in the way all of the companies in our business make money.  The Kraft Heinz news means that this change will start from the top.

    On Friday we took note of a Bloomberg story about how, “while the rest of the world has been doing this for centuries, Americans are just starting to catch up when it comes to nose-to-tail eating,” enjoying things like calf brains, pig snouts and beef cheeks.

    One MNB reader wrote:

    I can hear my parents laughing. Growing up in the South, my Mom spoke occasionally of her younger days on their farm, butchering hogs and using every part of the animal “except the squeal”. Saturday breakfast with my Dad frequently included one of his favorites, pig brains and eggs.

    And MNB reader Bob Vereen wrote:

    Your Eye-Opener this morning brought back memories. My grandmother, with whom I lived as a youngster, always served pickled Pig’s Feet. I hadn’t thought of them since I was in the army in WWII.
    KC's View:

    Published on: February 25, 2019

    The Oscars … or, as Tina Fey started the evening, “the one millionth Academy Awards” … were last night. Here were the major category winners:

    Best Picture: GreenBook
    Best Actress: Olivia Colman, The Favourite
    Best Actor: Rami Malek, Bohemian Rhapsody
    Best Supporting Actress: Regina King, If Beale Street Could Talk
    Best Supporting Actor: Mahershala Ali, Green Book
    Best Director: Alfonso Cuarón, Roma
    Best Adapted Screenplay: BlacKkKlansman
    Best Original Screenplay: Green Book
    Best Documentary Feature: Free Solo
    Best Animated Feature: Spider-Man: Into The Spider-Verse
    KC's View: