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    Published on: May 16, 2019

    This week’s FaceTime commentary is not available in a text version, because it consists of a conversation between Michael Sansolo and me. Readers of MNB are familiar with Michael’s weekly column, and while we talk almost daily, we rarely are in the same place at the same time. So when we were off giving a speech together last week - something we do occasionally and would like to do frequently - we decided to take advantage of the moment.

    As always, past FaceTime commentaries can be found on the MNB Channel on YouTube.


    KC's View:

    Published on: May 16, 2019

    by Kevin Coupe

    The Unknown Brewing Co. in North Carolina recently came up with an ingenious and Eye-Opening solution when somebody stole the company’s van.

    The brewery went on Facebook and posted the following message:

    “(Three) fine individuals stole one of our vans early this AM … Please help us find it. Share with all of your friends. Whoever finds it, (the owner) Brad will buy you a keg party. If you stole it and bring it back: you will also get a keg party.”

    Forty-two minutes after the posting, the van was found. The company got tips from some 15 sources. One woman, who saw the van on a Charlotte side street, took a picture of it and then posted it to Instagram, got the keg party.

    The Charlotte Observer writes that “social media responses to the theft and the quick discovery were largely humorous, with some accusing a competing brewery and others noting the futility of stealing a van with a company logo on it.”

    The paper takes note of one particular social media response - from a man who pointed out that “it sounds like all we need to do to have a keg party is hide your van from you for 45 minutes.”

    Good point. Though not, strictly speaking, legal.
    KC's View:

    Published on: May 16, 2019

    The Dayton Daily News reports that Kroger is teaming with investment firm Lindsay Goldberg to create an incubator “for next-generation products.”

    According to the story, the partnership, called PearlRock Partners, will combine “Kroger’s expertise in grocery and Goldberg’s data-driven focus on family- and founder-run businesses and management team.”

    Stuart Aitken, Kroger’s senior vice president of alternative business and CEO of 84.51°, said that Kroger is “transforming from grocer to growth company by deploying our assets to serve even more customers and create margin-rich alternative profit streams.” And the company said that “PearlRock Partners adds to Restock Kroger, Kroger’s plan to redefine the food and grocery customer experience through its stores, logistics and data assets. Kroger’s new growth model will be a ‘virtuous cycle,’ according to the statement.”
    KC's View:
    A very good idea, I think … the really smart retailers understand that if you want stuff to grow, you have to fertilize and water the land. Companies like Walmart and Amazon have internal incubators and there are a lot of companies out there that are using external incubators as a way to generate new ideas for products and services that can help them differentiate themselves.

    Whether formal or informal, whether requiring a big investment or a small one … enabling these sorts of constructs makes a statement about priorities and intent.

    Published on: May 16, 2019

    There is an excellent piece in Longreads that describes how Rich Niemann, president/CEO of the Midwestern grocery company Niemann Foods, worked with Kevin Kelley of architectural design firm Shook Kelley to figure out how to survive in an industry that he feared was dying, with stores that he feared might soon become obsolete.

    “Niemann hired Kelley in the context of this imminent doom,” the story says. “The assignment: to conceive, design, and build the grocery store of the future. Niemann was ready to entertain any idea and invest heavily. And for Kelley, a man who’s worked for decades honing his vision for what the grocery store should do and be, it was the opportunity of a lifetime — carte blanche to build the working model he’s long envisioned, one he believes can save the neighborhood supermarket from obscurity.”

    The result was a store called Harvest Market, which is designed to be “the anti-Amazon. It’s designed to excel at what e-commerce can’t do: convene people over the mouth-watering appeal of prize ingredients and freshly prepared food. The proportion of groceries sold online is expected to swell over the next five or six years, but Harvest is a bet that behavioral psychology, spatial design, and narrative panache can get people excited about supermarkets again. Kelley isn’t asking grocers to be more like Jeff Bezos or Sam Walton. He’s not asking them to be ruthless, race-to-the-bottom merchants. In fact, he thinks that grocery stores can be something far greater than we ever imagined — a place where farmers and their urban customers can meet, a crucial link between the city and the country.”

    You can read the whole, fascinating story here.
    KC's View:
    This story speaks so clearly about the necessary connection between technological connections and emotional connections. We talk a lot here on MNB - and in our Retail Tomorrow podcasts and conferences - about how technology is a transformative element … but it is just as important, maybe more so, to tell a story in stores, through services and products and people and format, that create and sustain emotional connections.

    Published on: May 16, 2019

    Marketing Daily reports that “a new report from Coresight Research finds that 36.8% of U.S. shoppers bought groceries online at least occasionally in 2018, up from 23.1% in the prior year” - which means that 35 million more people bought groceries online in 2018 than in 2017.

    The story says that “Amazon is still the one to beat, chosen by 62.5% of shoppers. But Walmart and Target are coming on strong. More than 37% of those who’ve purchased food online have made a purchase on last year, up from 25.5% in the 2017 survey, with Walmart doubling its number of online shoppers. And 15.7% purchased from, up from 6.9%, translating into more than triple the number of absolutely new shoppers.”

    What’s interesting about the research is that people shopping for groceries on Amazon seem to be buying less there than those who shop online at Walmart and Target:

    “Just 26% of Amazon shoppers buy ‘some,’ ‘most’ or ‘all or almost all’ of groceries online … But that percentage jumps to 35% for Walmart, Target and Kroger’s online shoppers.”

    The biggest increases in online penetration, the study says, came in two demographic groups - older millennials (age 30-44) and people 60+.
    KC's View:
    I suppose the reason that Walmart, Target and Kroger online customers do more of their shopping there than those using Amazon may speak to those retailers’ superior omnichannel presences.

    I think the smart money still is on Amazon … but I also think that anybody who underestimates any of these companies, or the potential impact of e-grocery, is making a serious miscalculation.

    Published on: May 16, 2019

    CNBC reports that Amazon-owned Whole Foods’ deal with delivery service Instacart has officially come to an end.

    Whole Foods was one of Instacart’s earliest and biggest partners; it could be argued that the contract between the two companies provided Instacart with a kind of imprimatur that allowed it to attract other retailers. When Amazon bought Whole Foods in 2017, a divorce was certain … though it also could be argued that this development provided the impetus for competitive retailers to get serious about delivery and sign deals with Instacart.

    The CNBC story says that Whole Foods now accounts for less than five percent of Instacart’s revenue.

    Instacart co-founder and CEO Apoorva Mehta tells CNBC that the company is ready for its new reality. ““Whole Foods was one of our first partners,” he says. “But over the last few years, pretty much every major grocer in North America has chosen Instacart as their partner.”

    CNBC reports that “Instacart says it now delivers groceries from more than 20,000 stores across the US and Canada and expanded its offerings to include alcohol delivery and advertising,” and claims that every one of its deliveries is profitable. “That doesn’t mean that Instacart as a company is profitable because it does not reveal administrative costs, sales and marketing and other expenses,” the story says. “Mehta would not say whether the entire company is profitable, but said it is actively focused on growth and continuing to scale. Profitability may become an important metric for Instacart as it prepares for an eventual IPO, which Mehta says he expects eventually.”
    KC's View:
    If he’s not saying that the company is profitable, then it isn’t. And it remains my guess that Instacart is in a race to achieve the kind of profitability that will allow it to make a killing through an IPO before the house of cards falls apart. Instacart is a good short-term solution, but it is a lousy long-term approach, for all the reasons that I’ve stated here in the past.

    One interesting note … when I was shopping at my local Whole Foods a couple of days ago, the checkout person made a point of telling me - unprompted - that Instacart was about to be out and Prime Now about to be in. That kind of employee buy-in sort of surprised me, but it suggests that we could see a full court marketing press from Amazon-Whole Foods in coming weeks.

    Published on: May 16, 2019

    Forbes writes: “It was bound to happen sooner than later: Amazon has surpassed Walmart as the biggest retailer on the planet. The e-commerce juggernaut jumped 25 spots to #28 on Forbes' Global 2000 list of the world’s biggest public companies, as measured by a composite score of revenues, profits, assets and market value. That was sufficient enough for it to steal the title of the world's largest retailer away from Walmart, which slipped five spots to #29 on this year's overall list.”

    Some other rankings from the Forbes study:

    “Walmart remains larger on some counts: It still pulls in more than double the revenue and has more assets on its balance sheet due to the significant real estate that it owns. It also has 2.2 million workers, which is nearly four times the number of employees that Amazon has on payroll.

    “Behind Amazon and Walmart, the third-largest retailer on the planet is Chinese e-commerce giant Alibaba. Its core business is selling goods via the internet, but it has also invested heavily in areas like entertainment, logistics and payments. Sales grew 51% to $56 billion in fiscal 2019, driven by the spending of its 654 million active retail customers. While Alibaba is still seeing immense growth, its growth rate has ticked down amid an economic slowdown in China and an escalating trade war with the United States.

    “Home improvement stores like Home Depot (#126) and Lowe's (#234) continue to do well, as do discount stores like TJ Maxx (#394) and Ross (#671).

    “Meanwhile, CVS fell out of the top three largest retailers. The drugstore chain lost $600 million in 2018, as its $69 billion takeover of Aetna and goodwill impairment charges in its long-term care business, Omnicare, ate into its bottom line. The company is now ranked #410 on the overall list, down sharply from #69 in 2017.”
    KC's View:

    Published on: May 16, 2019

    Forbes reports that digital retailer Boxed “will now license pieces of its end-to-end technology to discounter Lidl, offering delivery “to Lidl customers in parts of both New York and Georgia, as it tests out a partnership with the fast-growing chain.”

    The story says that Boxed is betting on Lidl’s global potential. Lidl’s “68 stores, mostly in the Southeast, are mainly stocked with the chain's own private label products. The real potential for Boxed comes with Lidl's global footprint, which tops over 10,500 stores in 29 countries.”

    Some context from the Forbes story: “Boxed is one of the leading startups in the food logistics business. In September 2018, it raised $111 million in Series D funding which valued the firm at $600 million. In all, it has raised $250 million from investors like Greycroft and Founders Fund. The company declined to provide sales, and last released the figure three years ago, when it surpassed $100 million. A representative for Boxed only said ‘it has increased significantly since then’.”

    Chieh Huang, the CEO and cofounder of Boxed, says that the company isn’t yet profitable but “is on track to be soon, and the Lidl partnership will surely help.”

    Boxed rejected a deal with Kroger several years ago.
    KC's View:
    Tom Furphy was calling this years ago, saying here that he believed that Boxed was going to have to find a partner that would allow it to further differentiate itself while getting needed funding and an expanded footprint.

    Published on: May 16, 2019

    Fox Business has an interview with John Layfield - a former professional wrestler and current business analyst who is CEO of the Layfield Report - in which he addresses the heightened online competition between Amazon and Walmart.

    Layfield says that Walmart is the original “mom and pop killer,” Amazon is the new “mom and pop killer” and that while competition between them might be bad for every other retailer, it is likely to be good for Walmart and Amazon.
    KC's View:
    Sort of sounds like Layfield sees this thing as a wrestling match. Wonder why.

    Business Insider had a story saying that “after Walmart announced Tuesday that it was launching free, next-day shipping on orders over $35, Amazon fired back in a tweet suggesting that its own customers have access to even faster delivery speeds. ‘Others are trying to up their fast shipping game,’ Amazon tweeted. ‘Fact is, Amazon customers in thousands of cities across 44 major metropolitan areas already have access to millions of items with free SAME DAY delivery. Customers are smart — they know the difference’.”

    I just wish these folks wouldn’t turn to Twitter to taunt the opposition. It strikes me as bad form and sort of juvenile … but maybe I’m just not the target for this sort of communication.

    Published on: May 16, 2019

    …with brief, occasional, italicized and sometimes gratuitous commentary…

    CNN reports that 300-store Grocery Outlet is planning an initial public offering (IPO) that it hopes will raise $100 million that can be used to fuel further growth.

    The story says that “Grocery Outlet is profitable. It has posted 15 straight years of sales growth at stores open at least a year and reached $2.3 billion in revenue a year ago. And it doesn't even sell online … The company plans to open more than 30 stores in 2019. In the long run, it says it can open 400 more stores in its existing states — California, Idaho, Nevada, Oregon, Washington and Pennsylvania — and another 1,600 stores in neighboring states.”

    • Seattle-based PCC Community Markets announced yesterday that “it will be the first grocery store in the world to pursue Living Building Challenge (LBC) Petal Certification. The Living Building Challenge, run by the International Living Future Institute (ILFI), is the world’s most rigorous green building standard. To date, no other grocer has successfully pursued LBC certification.”

    Brenna Davis, the cooperative’s VP of Social and Environmental Responsibility, said in a prepared statement, “We set high standards for the food we allow on our shelves and we believe that our stores should be held to equally high standards. In partnership with the International Living Future Institute, we are reimagining how grocery stores are built — using less water and energy, designing refrigeration systems that have a reduced climate impact, utilizing building materials that protect human health, and creating spaces that nurture a deeper sense of connection to the environment and our community.”

    The company says that the “Living Building Challenge is organized into seven performance areas: Place, Water, Energy, Health & Happiness, Materials, Equity and Beauty. PCC will pursue three of the seven Petals — as required for Petal Certification — across its five new stores: Ballard and West Seattle, opening later this year, and Bellevue, Downtown Seattle and Madison Valley, opening in 2020.”

    Reuters reports that a proposed class action suit has been filed against Bumble Bee, Chicken of the Sea and StarKist, “accusing the country's three major packaged-tuna brands of deceiving them into thinking their tuna is caught only through ‘dolphin-safe’ fishing practices.”

    The plaintiffs say that “the defendants employ fishing techniques that kill or harm dolphins, and do not always use safer, costlier pole-and-line and other methods used by such rivals as Whole Foods and Trader Joe’s. The consumers said this makes the defendants' dolphin-safe labels false and misleading, violating the laws of several U.S. states including California, Florida, New Jersey and New York. They also said StarKist violated federal racketeering law through its alleged dealings with foreign fishing companies.”

    The story says neither Bumble Bee nor Chicken of the Sea commented on the suit. “StarKist said it does not discuss pending litigation, but would not buy tuna ‘caught in association with dolphins’.”

    CNBC reports that “a federal judge is siding with public health groups suing the Food and Drug Administration to begin reviewing thousands of e-cigarettes on the U.S. market. The ruling handed down Wednesday in district court states that the agency shirked its legal duty when it postponed reviewing all U.S. vaping products by several years.

    “The American Academy of Pediatrics, Campaign for Tobacco-Free Kids and other groups filed the federal lawsuit in Maryland last year. The groups say the lack of FDA oversight has led to an explosion in underage vaping by teenagers, threatening to hook a generation of Americans on nicotine.”

    At the same time, the Wall Street Journal reports that “North Carolina officials are suing Juul Labs Inc., accusing the e-cigarette startup of targeting teenagers and misrepresenting the strength and health risks from the addictive nicotine in its products.” The suit accuses “Juul of fueling vaping activity among minors by deliberately designing the device and its flavors in a way to make them more appealing to that age group.”

    According to the story, the complaint “is the first state action against the San Francisco company, whose sleek, nicotine-packed vaporizers with fruit and dessert flavors such as mango and creme have fueled a surge in the e-cigarette market.”
    KC's View:

    Published on: May 16, 2019

    • The New York Post reports that “big-box retailers aren’t selling CBD yet, but they’re busy getting ready for the day when they can … top executives at major chains such as Walmart and Target have been quietly meeting with makers of drinks, gummy bears, topical creams and oils that are infused with cannabidiol, or CBD … The chains, which also include big supermarkets such as Kroger and Safeway, are requesting samples of CBD products, along with lab results and pricing information, manufacturers said.”

    CBD is the non-psychoactive compound in cannabis.

    This interest, the Post notes, is “despite the fact that the Food and Drug Administration said in December that it’s illegal to spike food and beverages with CBD or THC … or to transport them over state lines.”

    • Nielsen is out with new cannabis-centric research, finding that “34% of U.S. adults (age 21+) are interested in consuming legalized cannabis … Among U.S. adults (age 21+) who report they would likely consume cannabis if it were legally available, the top reasons are all tied to ailment treatment, prevention and general wellness.”

    The study goes on: “For some needs and ailments, consumers may actually prefer products derived from marijuana, which can only be sold in licensed recreational or medicinal dispensaries. In other instances, consumers might prefer CBD products derived from hemp, which have been federally de-scheduled and are gradually making their way into major retail chains.”

    Some other data from the study: “A significant percentage of certain ailment sufferers are interested in consuming cannabis: 40% of all headache / migraine pain sufferers, 40% of all arthritic pain sufferers and 41% of all back / neck pain sufferers. And, with a few exceptions, the majority of these cannabis-interested adults currently treat their ailments with OTC/Rx medications.”

    And: “Seventy percent of adults who are interested in cannabis and who today treat their ailment with OTC/Rx medications say they would consider treating with cannabis because of the perception that it’s more effective than OTC/Rx alternatives. Sixty-seven percent perceive cannabis to be healthier than OTC/Rx medications, and 69% are influenced by the perception that cannabis is more natural than OTC and Rx alternatives. Just under 50% of adults currently treating an ailment with OTC/Rx medications would consider cannabis as a treatment because they perceive it to be cheaper/more cost effective.”
    KC's View:

    Published on: May 16, 2019

    The other day, we took note of a Fast Company story about designer Susie Lu, a senior data visualization engineer at Netflix, who has been rethinking the notion of what a paper receipt should be.

    “What she created - using a grocery receipt of her own as reference - was a better receipt, with three distinct elements,” Fast Company writes. “On top, it features a bubble chart where spending is itemized by category. In her case, ‘meat & seafood’ is a big bubble, representing about a third of her spending, and ‘snacks’ is a tiny bubble, representing only 10%.”

    The story goes on: “Today, a receipt is nothing but a piece of paper most of us throw away. But if it could actually be designed to explain our purchases, it could teach us to shop more mindfully over time.”

    And I commented:

    I’d never really thought of the receipt as something that needed reinventing. But this story makes the case for how it can be … though I’d be even more impressed if this were all digital, accessible via my smart phone.

    If I could go on an app linked to my loyalty account, for example, and analyze my purchases, see where I could do better both nutritionally and financially, and maybe even segue from that information to getting advice from a nutritionist or a chef, let’s say … well, that’d be a game changer. But I’m not really aware of anybody doing that.

    Well, I got a bunch of emails informing me that someone is doing it. One of them was from MNB reader Alex Henry:

    I work with Kroger Health, the healthcare arm of The Kroger Co, which includes nearly 3,000 grocery stores and pharmacies, and over 22,000 healthcare practitioners in 37 states nationwide. Kroger Health serves 14 million people each year. One of the company’s most exciting new developments is the OptUP app, which personalizes and simplifies healthier grocery shopping.  OptUP offers a simple way to understand the nutritional quality of your food by scoring your grocery purchases on a scale from 1-1,000 and recommending better-for-you alternatives.  You can even contact dietitians or nutrition technicians at Kroger Health for a nutrition consult.  In short, OptUP does exactly what you claimed would constitute a “game changer” for you! The app is available for free download on the App Store or Google Play. And the rating system will begin making its way into stores, product packaging, and restaurant menus soon.

    When the emails started to come in, I began to remember about the OptUP app … in fact, I wrote about it here last year.

    So apologies for not remembering. I guess it slipped through the widening cracks of my memory, and since I live in one of the few places in the country where Kroger doesn’t operate, it wasn’t top of mind.

    On another subject, from MNB reader Jim Huey:

    We all should be doing everything we can to harm the environment as little as possible. I think though, that these discussions often ignore that our very presence, even in small numbers, adversely affects the environment. Once upon a time even a small village had an adverse effect on its environment because of human fecal waste. Eventually it was realized that this lead to the spread of disease. The solution was not to have less kids or start more small communities, but to develop sanitation systems that could effectively handle the waste. Necessity is the mother of invention. If we haven’t reached the moment of necessity as it pertains to the environment I think we must be close. I am confident that we will discover solutions to these problems, as we always have. In the meantime though I continue to use cleaning products that do not harm the environment. I wear my clothes forever and try to buy my food with as little packaging as possible, and I rarely get a straw when I get a soda at a restaurant.

    The belief that our resources are finite is not entirely accurate. We have always found another to replace what we couldn’t get anymore. I suspect that our great great grandparents would be shocked at our level of consumption. I also suspect that our great great grandchildren will suggest that they need to return their level of consumption  to the more reasonable levels of our time. The earth is more capable of withstanding our presence than we give it credit for.

    I share neither your optimism nor your confidence. Sorry.

    And, from MNB reader Karen Shunk:

    I have been thinking about your commentary on the topic of whether individuals receiving food assistance should be allowed to purchase sugary drinks and candy. Although there is evidence that SNAP recipients may not be any fatter than the rest of us, I have also read about studies that claim to show that obesity is a disease of poverty in part because nutritious food is more expensive than less-healthful processed foods. I don't agree, however, that the way to get people receiving food aid to make better food choices is to micromanage their use of the benefits.

    I follow the writing of behavioral economists Sendhil Mullainathan and Eldar Shafir who identify three types of poverty: money poverty, time poverty and bandwidth poverty. Money poverty and time poverty create bandwidth poverty, which robs people of the cognitive resources people need to spend on daily tasks or to plan for future deadlines. Forcing individuals in a fragmented landscape of federal, state and local government agencies to prove their worthiness and need over and over again and then dictating their use of the benefits every step of the way only undermines the very thing we as a society say we want poor people to do: make better decisions so they aren't poor.
    If we really want to help the poor, why not devote our energy to making sure that people can access the support they need in a way that is more streamlined and efficient and humane? And why not spend some public money to encourage the US agriculture sector to stop favoring crops "that yield unhealthful processed foods" and make nutritious food more affordable?

    MNB reader Dean Balsamo weighed in about Pete’s Fresh Market inn Chicago, which continues to grow despite tough competition:

    Saw your mention of Pete’s in Chicago. I met with them maybe four years ago about working with the magazine company I represented at the time.

    Even though we didn’t get the business I came way impressed with her and the company’s sense of identity. I’d toured a number of their stores including the fine Oak Park store ( reminded me of Heinen’s a bit).. Each reflected the focus of the particular demographics in the area the store served. I thought it was quite a balancing act - not one you usually see - where typically every store in a chain is pretty much the same. But they’re tuned into their communities and it shows in their success.

    Kudos to Pete’s.

    On another subject, from MNB reader Tom Carroll:

    Your article on feeding the hungry was very powerful. Regardless of the country there is a significant percentage of kids who go hungry.

    I work with a company-Erin Bakers who donates 3% of every sale to feed hungry kids breakfast. Erin Bakers makes a breakfast cookie and we donate them to the Boys and Girls clubs of America. To date Erin Bakers has donated over 720,000 cookies to hungry boys and girls.

    Responding to Michael Sansolo’s column about a travel debacle he experienced, MNB reader Chuck Jolley wrote:

    I read it all, nodding in complete sympathy, but. . .it was American Airlines. After some thought and remembering my past battles with them on late and missing flights, I need to tell him that his experience was the norm for that terrible excuse for an airline. (Ask me sometime about teaching one of their gate employees how to read a clock.)

    MNB reader Scott S. Dissinger added:

    Been in the business over 40 years and travel about 40 weeks each year.  I totally empathize with Michael on the American experience and have had many similar experiences – without all the details had a similar flat tire story where United loaded us then noticed the flat – after a few hours we boarded with supposedly a new tire only to be told it was the wrong tire and we went back on the hamster wheel.  That was a few years ago.  Just two weeks ago had a juggling of planes and gates with United that I thought was handled well.  They kept us apprised on a timely basis, apologized frequently enough, and kept us plied with snacks and beverages.  All things considered the gate personnel really did a great job.  Unfortunately I was suggesting these types of actions 30 years ago to the airlines, I guess someone is starting to catch on.
    KC's View: