business news in context, analysis with attitude

Published on: May 23, 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.

During a recent trip to Toronto, I had the opportunity to spent sometime downtown at the Assembly Chef’s Hall, which is an 18,000 square foot space that feels like a food truck culture indoors - which is fine with me, since it was a lot colder in Toronto during the spring than I would’ve wanted.

The space is open for breakfast, lunch, and dinner - offering a wide variety of cuisines, from barbecue to Italian to Mexican to various forms of Asian foods - as well as for drinks, which makes sense since it features two different bars.

The thing that most impressed me about these food vendors is that they’re actual chefs who take an enormous amount of pride in the food they’re serving. I ordered some chilaquiles - which I love, but trust me, you can’t get good chilaquiles anywhere near my home in Connecticut - and watched as one of the workers carefully crafted an enormous plate of food. But right before she served it to me, the chef came over, and apparently wasn’t happy with the proportions, because she put my plate aside and remade it to her own satisfaction.

If a thing is worth doing, it is worth doing right.

Being at Assembly Chef’s Hall made me think about an idea that more food retailers should embrace. If you were trying to communicate a real commitment to food culture, you could install a small display kitchen in your store, and then contract with different chefs who specialize in different cuisines to come in and cook there for a period of time, rotating through two or three or four of them in any given year. It could get young chefs started, it would create a differentiated and innovative food-centric environment, and it would smell and taste and look good - everything a retailer needs to compete more effectively these days.

It would be cool. And it could make a store really hot in the eyes and ears and noses and mouths of its shoppers.

That, in my view, is how you compete.

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

Published on: May 23, 2019

by Kevin Coupe

The Hill reports that fast-casual salad chain Sweetgreen announced this week that it will offer all of its employees five months of paid parental leave.

The company posted online in social media: ““At sweetgreen, mothers, fathers, adoptive parents, foster parents, and others with new additions to their families will now receive 5 months of fully paid parental leave … We believe it’s our responsibility to lead the way given the U.S. is one of the few countries that does not mandate any paid leave for new parents.”

The post goes on:

“Nobody makes a bigger impact than our team members - it’s their dedication that allows us to live our mission every day: connecting people to real food. Someone once gave us a piece of advice we live by: people don't care how much you know, until they know how much you care. This is the essence of one of our most important core values - make an impact. This move is rare for our industry and we hope this creates a conversation for other companies to join.”

The story notes that the proposal has a political component. Sen. Kirsten Gillibrand (D-New York), who is running for the 2020 Democratic presidential nomination, “reintroduced a paid family leave bill last month that would allow people to take paid family and medical leave for up to 12 weeks and would be paid for through small increases in payroll taxes. GOP lawmakers, meanwhile, have offered a proposal that would allow people to pull forward some of their Social Security benefits to use for paid parental leave.”

At a time when at least some quarters of business are becoming more sensitive - appropriately so, in my view - to the personal needs of employees, understanding that their companies are only as effective as the people on the front lines, it is heartening that a company like Sweetgreen - 91 locations in eight states, close to 4,000 employees and a reported valuation in the neighborhood of $1 billion - decides to do something it didn’t have to do.

It is called leadership. And an Eye-Opener.

Published on: May 23, 2019

Bloomberg reports that Amazon is “developing a voice-activated wearable device that can recognize human emotions.”

The story says that “the wrist-worn gadget is described as a health and wellness product … Designed to work with a smartphone app, the device has microphones paired with software that can discern the wearer’s emotional state from the sound of his or her voice … Eventually the technology could be able to advise the wearer how to interact more effectively with others.”

The development group behind the program is the same one that worked on the Alexa-driven Echo smart speakers (which have been enormously successful), the story says, though that’s also the same group that developed the Amazon Fire smart phone (which was a huge flop).

And, some context from Bloomberg:

“The notion of building machines that can understand human emotions has long been a staple of science fiction, from stories by Isaac Asimov to Star Trek’s android Data. Amid advances in machine learning and voice and image recognition, the concept has recently marched toward reality. Companies including Microsoft Corp., Alphabet Inc.’s Google and IBM Corp., among a host of other firms, are developing technologies designed to derive emotional states from images, audio data and other inputs. Amazon has discussed publicly its desire to build a more lifelike voice assistant.”

Published on: May 23, 2019

The Wall Street Journal reports today that clothing retailer Urban Outfitters is developing a secondary business that would emulate Netflix, allowing subscribers to “pick six garments on its website, then deliver them with a reusable bag and a prepaid postage label. Customers return the clothes after a month to get six more.”

The story quotes Naomi Braithwaite, a lecturer at Nottingham Trent University who has been conducting research on the subject, as saying that “clothing rental is getting a lift from Instagram culture, where new outfits are valuable, and increasing awareness of sustainability problems in fashion.”

Eileen Fisher, CEO of the eponymous women’s clothing retailer, puts it another way: “People are really starting to understand that there are too many clothes in the world and too much consumption.”

Published on: May 23, 2019

USA Today reports that a federal lawsuit has been filed against importer Cento Fine Foods, charging the company with selling pomodoro tomatoes in cans that label - and price them - as more expensive San Marzano tomatoes.

According to the story, “The lawsuit, filed in San Francisco by three California consumers, contends ‘authentic’ San Marzano tomatoes can only come from an area in southern Italy, Agro Sarnese Nocerino, with ‘rich volcanic soil and (a) warm, sunny and coastal climate.’ It also asserts the premium tomatoes must be certified by a ‘consortium’ – the Cosorzio di Tutela del Pomodora San Marzano DOP.”

USA Today writes that the suit “alleges some of Cento's tomatoes come from the adjacent Campania region, and that the firm's San Marzano products are certified by a third-party organization other than the consortium. The class-action suit seeks damages on behalf of two proposed groups of Cento customers, in California and nationwide. It asserts the ‘matter in controversy’ has a value of more than $5 million.”

Cento says that the claims are "completely unfounded,” adding that “we take pride in the fact that our labels accurately describe the products inside.” Cento also says that it "exceeds industry standards in production and has always operated with the highest integrity.”

Published on: May 23, 2019

• The New York Times reports this morning that Amazon shareholders have voted down “proposals that would have pushed the company to reconsider its societal impact in two key areas: facial recognition and climate change.

“The proposals asked Amazon to develop a more comprehensive approach to reducing its carbon footprint and put the brakes on how the company sells surveillance technologies to governments.”

While there had been some support for the proposals from a pair of shareholder advisory firms, Amazon’s board opposed them, and the shareholders went along.

The vote totals have not yet been disclosed.


• TechCrunch reports that “discount chain operator Stein Mart announced it will install Amazon Hub lockers in nearly 200 stores as soon as next month. The lockers are self-serve kiosks that allow Amazon shoppers to take advantage of in-store pickup and returns.”

According to the story, SteinMart hopes that increased foot traffic will “help save its struggling business,” while Amazon “gains the advantage of a brick-and-mortar presence for delivery and returns without having to invest in more real estate or making an acquisition … The move also benefits Amazon’s battle with Walmart — the latter which has been quick to leverage its brick-and-mortar locations to aid its online shoppers.”


• The Washington Post reports that several Amazon warehouses are offering employees the ability to structure their work within video game formats that are “part of an experiment by the e-commerce giant to help reduce the tedium of its physically demanding jobs. And if it helps improve the efficiency of work like plucking items from or stowing products on shelves for 10 hours a day or more, all the better.”

According to the story, “the games are displayed on small screens at employees’ workstations. As robots wheel giant shelves up to each workstation, lights or screens indicate which item the worker needs to pluck to put into a bin. The games simultaneously register the completion of the task, which is tracked by scanning devices, and can pit individuals, teams or entire floors against one another to be fastest, simply by picking or stowing real Lego sets, cellphone cases or dish soap. Game-playing employees are rewarded with points, virtual badges and other goodies throughout a shift.”

The format is optional for the employees.

Published on: May 23, 2019

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

• Target said yesterday that its Q1 revenue was up five percent to $17.63 billion, and that its e-commerce sales were up a whopping 42 percent.

Same store sales were up 4.8 percent.

Net earnings rose 10.8% to $795 million.

CNBC analyst Jim Cramer called the results “nothing short of astounding,” CNBC’s Jim Cramer said, adding that Target has figured out to beat all their opponents, from Walmart to Amazon to everyone inside and outside the mall.”

While I think that Cramer ought to switch to decaf - his analysis strikes me as a little hyperbolic, in that this quarter’s competitive solutions aren’t always successful in the next quarter - I do think that Target is showing unexpected strength, and is clearly in a growth mode. The question for me is, what’s next? I’m guessing some sort of merger or acquisition, which will look like a strategic move rather than an act of desperation under the current circumstances.


• Albertsons has announced the “amping up” of the presence of its Signature Select private label brand “with the addition of more than 300 new products and updated branding in 2019.”

According to the company, “The redesigned products are long-time favorites from the Signature Kitchens, Signature Home, refreshe, and The Snack Artist brands … The new branding includes a refreshed rendition of Signature SELECT’s trademark tag. The overall design allows for flexibility in the packaging architecture in each category, so the products can stand out and compete effectively wherever they’re found throughout the store.”

“Our Signature family of brands aren’t like your parents’ store brands anymore,” says Geoff White, President of Albertsons Companies Own Brands. “We are laser focused on innovation and staying at the forefront of culinary trends. Customers should expect to see trends first at our stores. With the expansion of Signature SELECT, customers will find even more surprises, from seasonal and holiday items to ethnic and even plant-based offerings.”


• Mario Batali, the celebrity chef who has lost his restaurant and CPG licensing businesses because of multiple charges of sexual harassment, “is now facing criminal charges for allegedly kissing and groping a woman against her will in a Back Bay restaurant in 2017.”

The story says that Batali “is charged with indecent assault and battery in what appears to be the first criminal charge to arise from a series of sexual misconduct allegations against him. He is scheduled to be arraigned in Boston Municipal Court on Friday morning.”

The Globe goes on: “If convicted, Batali could face 2½ years in jail and would have to register as a sex offender.

“Like some of the other powerful men who have been accused of sexual misconduct during the #MeToo movement, Batali had faced civil litigation but until now had avoided criminal charges.”

Published on: May 23, 2019

• Walmart announced the hiring of a new vice president and International chief ethics and compliance officer - David Searle, a former assistant U.S. attorney in Houston who most recently has been chief compliance officer and associate general counsel for Bristow Group, a global industrial aviation services company.

Published on: May 23, 2019

Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire.

• Fox Business reports that US Treasury Secretary Steven Mnuchin has spoken with Walmart CFO Brett Biggs “regarding the next round of tariffs on Chinese goods,” and told the Walmart executive about the items that the retailer “can and cannot source.”

“We haven’t made any decision yet …” Mnuchin told the US House of Representatives Financial Services Committee. “We will be sensitive to consumer items that particularly affect people on fixed salaries.”

Fox writes that “Biggs told reporters they're ‘monitoring the tariff discussions and are hopeful that an agreement can be reached.’ The CFO warned that ‘increased tariffs will lead to increased prices for our customers’.”

The conversation took place in the wake of the decision by the Trump administration to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese goods after trade talks collapsed. The increased tariffs are expected to cause price increases on a wide range of items and categories.

Published on: May 23, 2019

Got the following email from MNB reader Steve Zimmerman:

I was hoping to give you some insight from an independent grocer. You talk a lot about finding ways to be "different", for which I agree, is a must in this heated grocery market. Everyone, for the most part, is grasping for anything that will give them an edge and increase sales.

I am Director of Natural and Organic Foods at our local IGA store, as well as heavily involved in our conventional grocery and frozen departments. As the data shows, growth in the conventional grocery market is very slow, virtually flat, whereas organic grocery sales have had healthy growth every year for the past 15 years. We are located in Northeast Ohio, and we see the same changes in our market as the bigger city markets. Our market sees the same trend. We work very hard to carry products that people need, want, and have never heard of. We encourage the customer to "discover" new things, which has paid off tremendously in sales of specialty and organics.

The main problem we run into is our wholesaler, who is so far behind the current trends. And it isn't just our wholesaler, its others as well. When I came on board with IGA, the goal was to get other vendors as a source of products that would help differentiate us. We began working with KeHE, UNFI, and some other local distributors to fill in the gaps. After a few years, KeHE has become a solid partner with us and made improvements in how quickly they adapt their product assortment to match consumer trends. Even with all the improvements made, they are still behind. And as for UNFI, they are far worse on all levels after they acquired Supervalu. Lots of out-of-stocks, mis-picks, and wholesale pricing that is too high.  The main value for us regarding UNFI is some exclusive product lines we can’t get anywhere else, that's it.

The way we do business has changed a lot this year, as a way to be more competitive and get ahead of the trends. When the Keto Diet trend took social media by storm late last year, not a single one of our suppliers was ready for it. It was extremely frustrating and challenging. I started researching new, emerging brands and contacted them directly. They all agreed to do business directly, therefor cutting out the wholesaler and specialty vendors. A perfect example of this is Rebel Creamery, a Keto-specific ice cream that was first-to-market. A couple of e-mail exchanges and we had a wholesale account set up and could order cases of ice cream for next-day delivery using dry ice. First order was received and stocked on the shelf on January 28th, 2019. To date, we have sold just over 900 pints and were, at one point, the only store listed on there product locator in the entire State of Ohio to have it (now there are two of us). We had calls from people who live in Cleveland and Columbus, interested in buying it and checking our inventory on it before making the long 60 mile-drive to the store. As of late April, KeHE starting carrying this line, but not UNFI. Since buying ice cream direct, we have done this with other low-carb, keto-friendly items that are doing very well, and are still not available to us via normal wholesale channels. All of this has given our frozen foods department a lift, and therefor the store.

If we wait around and assume our wholesaler is going to take care of us, we are sadly mistaken. It seems like they acknowledge the trends, but have a hard time separating themselves from the old-school ways of doing business. They still want us to promote the same items in our ad plans, even though movement of these items has slowed significantly (think Manwich, Folgers Coffee, Domino Sugar, canned veggies, and even pop). If you are an independent grocery operator, you must look outside the normal channels to keep pace, or no pace in the future will be enough to catch up. This goes for technology and product assortment. You will absolutely get left behind. Customers will notice your relevance to them has changed, and they will change their shopping habits. No question about it. 

I will be visiting Eataly, Amazon Go and Mariano’s in Chicago in June. All of your articles and writings about these companies has me excited to visit them!

Enjoy. I hope you’ll report back about what you learn.



On a different subject, from MNB reader Richard Lowe:

We have a brand new Lidl store here in Lilbur, GA about 1 mi away from home and the 2nd closest grocery store. They have struck out with us. Still prefer Aldi and Publix with Kroger 3rd.

The checkout operation is not as seamless as Aldi. They ram stuff through so the person behind you ends up on top of you.

The meat is tough and terrible

Ambience in Aldi’e feels better.

Went in one morning early to buy baked goods marked at .45 ea. and check said they were .99 ea. The employee made me walk over and show her. Made me wait while she removed the sign. Then still wanted to charge me .99. She had no authority to charge the lower price. I asked for a manager. Had to wait for him to come from the back and then he gave me the 3rd degree, before finally caving in. Wasted 15 minutes with all the shenanigans. Should have given me the product for free for calling out the pricing problem!

They also inundate us with ads and fliers.

Doesn’t sound optimal to me. Lidl has lots of money and patience … we’ll see if it has the capacity to learn and improve.



Regarding a new Kroger initiative, MNB reader Howard Harris wrote:

I love that Kroger is leading on Circular Packaging. I worked for Kroger (Nashville KMA) in high school in the 1970s and many of the things we drank were packed in glass or cans. I collected bottles for change many times. The Purity milk man came to our home twice a week and brought milk, butter, OJ and picked up the empties to reuse.

Ahh, the good ole days may just be coming back if only a small portion that makes complete sense.

From another reader:

Are we going back to the future?  This sounds just like the milkman!

And another:
 
What goes around….
 
We didn’t have fancified terms like “Circular Packaging” but we did deliver milk in glass bottles to customers, who, when empty, placed them back on the porch for us retrieve, return to the plant, wash, refill, and of course deliver again.



Responding to Kate McMahon’s piece about the suddenly controversial Aperol Spritz, MNB reader Phil Censky wrote:

I really enjoyed your piece about the Aperol Spritz debate.

Count me in the pro-spritz camp as well. I can’t imagine consuming anything else on a hot Roman summer afternoon (pick a piazza, any piazza).
 
One positive thing from the backlash on Twitter was it introduced me to a classic cocktail I’d never heard of, the Paper Plane. It’s fantastic.

1.    1½ ounces amaro (preferably Nonino)
2.    1½ ounces Aperol.
3.    1½ ounces bourbon.
4.    1½ ounces fresh lemon juice
 
Cheers!

And from another reader:

Eh... what we should REALLY be talking about is why this bottle (of Aperol) is $20 here and $3 in Italy! Who shells out this kind of cash for juice!?!!