business news in context, analysis with attitude

Published on: June 4, 2019

by Michael Sansolo

As longtime readers know, I believe there are all types of lessons we can glean from countless sources to help us focus on the challenges of today and tomorrow. While I’m usually reluctant to take many lessons from the world of politics - and certainly from German politics, a subject with which I have limited familiarity - that’s where we are going today.

Because believe it or not, many of the headaches you have today are similar to those faced by German Chancellor Angela Merkel.

Merkel, Germany’s chancellor for the past 14 years, is globally regarded for countless leadership issues, yet the past month has brought some surprising news. In the recent European parliamentary elections Merkel’s party, the center-right Christian Democratic Union, lost about a quarter of its support. Incredibly, Merkel’s coalition partner and chief opponent, the center-left Social Democrats, managed to do even worse.

The bigger lesson, as reported by the New York Times, was the sharp rise in votes flowing to the Green Party thanks to younger voters.

As the Times reported in its story,
“The country and the world have changed and both (leading) parties have failed to keep with the times. They have missed out on engaging the next generation. They have failed to adapt to a changing communications environment. And both parties have contented themselves to ‘managing’ politics, instead of shaping politics. Unable to change, they are frozen in place.”

In that one paragraph I hope you can see both the challenges and lessons for business leaders everywhere. We need to be asking ourselves whether we are making bold changes with the times to engage the emerging needs of younger and future shoppers. The points being made by the Times can easily be translated into key business questions:

• Are your business and your leadership changing with the shifting realities of the times?

• Are you stepping up to master the new world of communication?

• And, hardest of all, are you just managing change with small incremental adjustments or are shaping the future? Are you frozen in place or are you moving ahead?

None of those are simple or easy questions, but all are powerfully important and frankly for many businesses they are probably fraught with greater peril than for Angela Merkel. After all, when politicians lose they simply move into the opposition for a few years. They don’t go out of business.

It strikes me that Germany’s political leadership likely has many of the same limitations as businesses anywhere. The Times story makes clear that the young vote seemed especially angered at Merkel’s tepid support for environmental issues, which fueled the shift to the Green Party. One has to wonder if Merkel has many key advisers from the younger demographic that just sent her a powerful message.

I’d bet not.

To reference and paraphrase from a movie musical that took place in Germany decades ago, ignoring shifting realities is like sitting all alone in your room. It is far better, if you want to survive, to come hear the music play.

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Published on: June 4, 2019

by Kevin Coupe

The International House of Pancakes (IHOP) is going back to the advertising well.

It was just about a year ago that IHOP announced that it was temporarily changing its name to “IHOB,” stringing out the mystery about what the “B” stood for as long as it could before unveiling a new selection of hamburgers.

It was, according to Fast Company, a successful effort: “The IHOB campaign got the brand more than 42 billion media impressions worldwide, and immediately quadrupled the company’s burger sales.” And it was sustained - burger sales are “still humming along at double their pre-IHOB numbers.”

I remember the campaign well. When it was first announced, I was dubious about how effective it would be. (I guess I got that wrong.) My previous experiences with IHOP left me with indigestion, and I didn’t see the point of putting myself through that again. But when I said that here, MNB readers challenged me on it, suggesting that I had no business criticizing the burgers if I had not tried one. I saw their point, I tried one, was unimpressed, and two hours later experienced, shall we say, intestinal distress that seemed vaguely familiar from my last IHOP visit. (Colonoscopy prep would’ve been preferable…)

Now, IHOP is using a variation on that year-old campaign to talk about its burgers yet again … this time, calling them pancakes because that’s the business it supposedly is in. You cans see the new commercial above … which I think is Eye-Opening in all the wrong ways.

First, I’m not going back to IHOP to try any more of its food. Sorry, but I don’t need to put myself through that again. I’ve got a lot of intestinal fortitude, but there are limits.

Second, I’m skeptical about any claims that IHOP is in the food business. I’m not sure what they’re serving, but it ain’t food. (I’ve eaten pancakes at places like Dupar’s in Los Angeles, Sears Fine Food in San Francisco, Cafe Luna in Cambridge, Massachusetts, and Coffee An’ in Westport, Connecticut. I can’t be fooled by IHOP’s lame efforts. And, by the way, I’ll bet pancake lovers everywhere have favorite spots … and most of them aren’t called IHOP.)

Third, I may be proved wrong yet again, but I’m going out on a limb and say that this one of the dumbest commercials I’ve seen in recent days.

Published on: June 4, 2019

CNBC reports this morning that Walmart, the largest private sector employer in the US, “plans to expand a previously announced college-education perk to high schoolers, hoping to get them off to universities to continue their education, and relieve them of staggering loan debt.”

Walmart says that its program “provides students an end-to-end workforce solution, from access to jobs, to building foundational soft skills and more advanced skills through work-based training, and an opportunity to earn a debt-free college degree.

“Along with other eligible Walmart associates, high school students will now have access to: jobs with scheduling options for flexibility or core hours (work the same days and shifts for up to 13 weeks), free ACT and SAT prep, up to seven hours of free college credit through Live Better U’s College Start program, and a debt-free college degree through Live Better U (upon high school completion) in the in-demand fields of technology, business or supply chain management at six nonprofit universities.”

Walmart says that roughly 25,000 of its US employees are high school students - a small portion of its 1.5 million person workforce.

CNBC writes that “the announcement comes roughly one year after Walmart started subsidizing the cost of higher education for its employees who’ve yet to earn college degrees, creating ‘Live Better U.’ It’s been doing this through a partnership with Guild Education — a tuition reimbursement and education platform that helps large employers extend education benefits, including tuition reimbursement, to workers. Walmart workers accepted into this program only have to contribute $1 per day, for 365 days each year, toward their education, so long as they’re enrolled. Walmart covers the rest of the tab.”

Walmart also announced that it “is expanding its offering of debt-free degrees that associates can earn through Live Better U. The additional 14 technology degrees and certificates — like cyber security, computer science, computer and network security and computing technology — are in addition to the business and supply chain degrees currently offered for $1 a day.”

Published on: June 4, 2019

The Washington Business Journal reports that Amazon “will offer free one-day shipping to Prime members for roughly 10 million products,” expediting the pace at which it is converting a Prime benefit from two-day shipping to one-day.

The story says that Amazon, in promising the improvement in Prime benefits, said that it would take a "significant amount of time to achieve.” But then, last month Walmart “announced it would offer free next-day delivery for about 200,000 products. The Bentonville, Arkansas-based retailer, Amazon's chief competitor, also took a swipe at Amazon on Twitter for requiring $119 annual Prime membership to get free one-day shipping.”

In a statement, Amazon said that “Prime Free One Day is possible because we’ve been building our network for over 20 years, enabling us to create a world-class customer experience powered by incredible employees and great technology. We’ve strategically grown our network in the U.S. to include 110 fulfillment centers, 40 package sortation centers, 100 delivery stations, and 20 air gateways all to be closer to our customers.”

The Wall Street Journal writes that “the two rivals have been one-upping each other with announcements of faster shipping options as they seek to cater to ever-demanding online shoppers.”

Published on: June 4, 2019

There was a really good column the other day in the New York Times by David Tamarkin about why home cooking makes sense.

Seriously.

Tamarkin writes about what he calls the Prepared Food Industrial Complex (PFIC), which “pushes the idea that any time and any effort put into cooking is a waste … All these companies want to do is give me my life back by keeping me out of the kitchen — more time for YouTube, more time for CrossFit — and they’ve created myriad ways to do so.”

Except, he says, it is a canard: “The not-very-secret truth about the P.F.I.C. is that some of these services don’t save any time at all, and all of them exaggerate the time and effort cooking involves.”

Tamarkin writes that “people who cook at home are conclusively healthier, consuming less sodium and fewer overall calories than people who mostly eat out. Cooking at home is better for the planet: it avoids the single-use plastics and paper goods that delivered food usually comes with, and with just a bit of creativity with leftovers, home cooking can be entirely free of food waste. Cooking is being studied as a promising tool for improving mental health, and even as a method for eliminating unhealthy behaviors such as smoking. And no matter what restaurant you order in from, there’s always a home-cooked meal that can be made for less money.”

Great piece … and you can read it here.

Published on: June 4, 2019

Good story in the Boston Globe about Flexetail, am area company that has created three retail-friendly trailers that the company rents out to local companies, allowing them to bring their businesses to where customers are without having to invest in their own vehicles.

Recently, the story says, the trailers have been “selling Bruins gear outside TD Garden, canned iced coffee outside Copley Place Mall, and Gillette’s new heated razor on the Greenway.”

The Globe writes that “Boston has seen mobile retail trucks before, but often they’ve been built by individual businesses selling products like sneakers or vintage clothing. The idea behind Flexetail is that its 142-square-foot mobile store can be rented by the day, week, or month by a company that wants to try selling or demonstrating a product in a specific location.”

The story says that “Bill Aulet of MIT’s entrepreneurship center was one of the first to see the prototype Flexetail trailer last year … Aulet considers it part of the trend of ‘moving away from more rigid long-term commitments and to a more agile business structure. Remember the old days, when you had to sign up for a five-year lease for a fixed amount of real estate?’ In that sense, Flexetail is similar to the kind of office space offered by WeWork, CIC, and other operators of co-working spaces, Aulet says.”

Published on: June 4, 2019

Fox News reports that when McDonald’s begins introducing some of its “international favorites” to its domestic US menu - selling items such as the Tomato Mozzarella Chicken Sandwich and the Stroopwafel McFlurry that previously only were available abroad - it also will begin accepting foreign currency in its US locations.

At least for a few hours on June 6.

“To welcome these new flavors, we created the McDonald’s International Currency Exchange event,” Molly McKenna, McDonald’s director of communications, tells Fox News. “This unique event provides our customers with an international experience that only a brand with our global scale could create, all without having to hop on a plane.”

According to the story, “To participate in the McDonald’s “Currency Exchange” event, customers merely need to bring any one denomination of foreign currency to a participating restaurant on Thursday, June 6, between 2 and 5 p.m. local time. Patrons will then be allowed to choose one item from the Worldwide Favorites menu.”

Published on: June 4, 2019

Gray News reports that Procter & Gamble-owned Charmin toilet paper has come out with a new product idea - giant toilet paper rolls that are 12 inches in diameter for multi-user households and 8.7 inches for the single-user size.

Called “Forever rolls,” the product has been developed because “more Americans, particularly millennials, are living alone,” and they may have limited storage space for traditional small rolls of toilet paper. The story says that “one Forever roll can last up to three months in a single-person household and requires half as much storage space as a conventional roll.”

Gray News reports that “if you’d like to give this type of toilet paper innovation a ‘swirl,’ Charmin has a $30 Forever Roll ‘starter kit’ on its website. It comes with a brushed-stainless-steel roll holder, either free-standing or wall-mounted and three mega rolls of TP.”

Published on: June 4, 2019

• Delivery service Deliv, which offers outsourced services to retailers in some three dozen markets in the US, announced that James McCann - formerly the CEO of Carrefour’s French business, CEO of Ahold USA, and chief commercial officer for Ahold in the Netherlands - has joined its board of directors. McCann currently is an investor in early stage grocery and food tech companies.

The move is seen as a possible - or likely precursor - to Deliv taking a more aggressive approach to the supermarket business, where companies like Instacart have been more dominant to this point.

Published on: June 4, 2019

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

• The Wall Street Journal reports that a ruling by the California Office of Environmental Health Hazard Assessment has gotten a final sign-off, making it once again possible to sell coffee in California without a cancer warning.

According to the story, “The safety of coffee has been in dispute in California since a state court judge ruled last spring that coffee must carry a cancer warning because of the presence of acrylamide, a potentially carcinogenic chemical created during the roasting process.

“A branch of the World Health Organization came out with a conflicting decision in June 2018, finding inadequate evidence that drinking coffee causes cancer, based on a review of more than 1,000 studies. Soon afterward, the California Office of Environmental Health Hazard Assessment released its own finding that coffee doesn’t pose a significant cancer risk, proposing an exemption from a warning under a state law known as Proposition 65.”

The new rule goes into effect on October 1.


• The Wall Street Journal reports this morning that there is a problem as a number of fast food chains rush to add meatless burgers to their menus - there may not be enough of them to go around.

The growth of the category is undeniable: The Journal writes that “imitation meats made by Beyond Meat Inc. and Impossible Foods Inc. are on sale at nearly 20,000 restaurants across the U.S., according to those companies. Fifteen percent of U.S. restaurants offered meatless burgers in March, according to a Technomic Inc. study of menus from 6,000 operators, with the number serving them up 3% from a year earlier.” And fast food chains hope that “these higher-priced alternatives will help them capture additional traffic and dollars.”

But, this “rapid growth in demand is straining the ability of Beyond Meat and Impossible Foods to meet it,” in part because “the production process remains relatively expensive despite requiring a fraction of the crops, water and energy needed to raise livestock.”


• CNBC reports this morning that women’s clothing retailer Forever 21 “is exploring restructuring options to shore up its liquidity as the fast-fashion giant struggles with its business … The company is in talks with private equity firm Apollo Global Management about raising debtor-in-possession funds to provide financing should it file for bankruptcy.”

The CNBC report makes clear that this is a familiar story: “The talks come as the apparel industry continues to struggle amid sweeping changes, including the shift of more purchases online. Many of the most troubled retailers, like Forever 21, are located in malls, where fewer shoppers are spending their money. As sales decline, the companies are still weighed down by large, expensive store bases even as the retailers need to invest in technology to fend off competition from new brands born online, like Lulus.”


• The Wall Street Journal reports that “hedge fund owner Edward Lampert has reached a roughly $21 million deal that would bring Sears Hometown stores under the same corporate umbrella as Sears and Kmart.

“Transform Holdco LLC, which owns Sears and Kmart … is buying the 42% of Sears Hometown & Outlet Stores Inc. that Mr. Lampert’s hedge fund and affiliates don’t currently own for $2.25 a share in cash, the companies said Monday.

“Sears Hometown stores were spun off from Sears Holdings about seven years ago.
Transform’s majority owners are ESL Investments Inc.—Mr. Lampert’s hedge fund—and its affiliates. A judge earlier this year approved a plan for Sears Holdings, the former owner of Sears and Kmart stores that applied for bankruptcy last year, to sell assets to Mr. Lampert’s new company.”

The deal is expected to close in the third quarter.

Lampert’s company, which is spending this money, is the same one trying to weasel out of severance pay commitments that it had made to former Sears employees. Maybe it is just me, but I think the money would be better spent on people who earned it than on more stores that Lampert inevitably will screw up.

Published on: June 4, 2019

Regarding a change at the top of Massmart in South Africa, one MNB reader wrote:

Kevin, while it gets so little press today, Massmart in South Africa seems to be at cross-roads. Their shopper proposition and brand differentiation lacks relevance. Part of the challenge is definitely economic, but some of the issues lie squarely on WalMart.  We don't see the same issues with Shoprite or Woolworth's.

Unless Walmart invests in SA (perhaps even launching the Walmart brand) they will continue to lose money as some of MM existing brands (like GAME) have lost their reason for being

Massmart likely needs more help than one ex-Pat can bring to the table.  Bringing in Mitchell Slape is the right first step.



Responding to an MNB piece about Costco’s e-commerce strategy, which seems less aggressive than Walmart’s, MNB reader Phil Censky wrote:

I think Costco’s cautious approach to online growth is on-brand and wise. Other retailers are trying so hard to catch up to Amazon, they aren’t thinking seriously about differentiation, implementation, or loyalty. Retailers are making a mistake by abrogating their role as assortment curators by opening up their platforms to third party sellers. It creates information overload and choice paradox (read Barry Schwartz) that is ultimately anti-consumer.

Costco has a unique opportunity to compete with Amazon because of its membership model. I won’t venture a guess as to how they add value to the bundle, but I guarantee they’re working on it. And that will drive far more loyalty than a half-hearted BOPIS.

MNB reader Monte Stowell wrote:

I do not worry about the future of Costco’s future. They hold a unique position in retailing. They have the very best value proposition on all hard goods and an outstanding pricing and quality PL pricing advantage over any other major retailer day in and day out. Their gross margins are second to none. Having been a Costco member since 1984, and all I see year in and year out are clean stores that are well stocked with well paid employees, and a store full of happy shoppers. I think Costco will be just fine despite the changing demographics. Oh yeah, where else can you get a hot dog, er, Costco Dog and a soft drink for $1.50? Beats the hell out of the same at a MLB BB park hot dog and a soft drink for $9-10 bucks. Just bought hearing aids at Costco, saved over $2000+ vs buying them from a major retailer.

And MNB reader David Warrick wrote:

It is Costco rebate time when find out that you really spent that much at Costco

Their Connections magazine reports that the Citi Card issued over $2 Billion in rebates last year!

That $2 Billion has to be cashed at Costco!



MNB the other day took note of a Business Insider report about how analysts are suggesting that Amazon’s decision to improve its Prime membership offering from two-day shipping to one-day shipping could be a precursor to an increase in its Prime membership fees … if Amazon is going to invest $800 million in this effort, does it need to raise prices someplace else to compensate? … Amazon raised Prime membership from $79 to $99 in 2014, and from $99 to $119 in 2018. Studies have suggested that “the rate of signups seems to be staying steady even after the 2018 price increase.”

I commented, in part:

The reports say that Amazon Prime has 100 million members. If it could get people to pay just $10 more - $129 a year, which I think wouldn’t be all that bad - it’d bring in an extra $1 billion a year (if my math is correct). That more than pays for one-day delivery … and all it really needs is for 80 percent of members to accept the increase. I’ll bet it could do better than that.

One MNB reader responded:

I think your math may be a little off. If 80% of members accept a $10 increase and the other 20% drop their membership, then Amazon nets $600 million. It would take a 90/10 ratio to net the $800 million needed to cover the investment. Still doable, I believe, but a little higher hurdle.

And MNB reader Steve Baus wrote:

Not sure I am following the math on how a $10 increase in Amazon Prime would cover the 800 million cost of next day shipping if only 80% of members stay.  If 20% of members cancel as a result of the increase, the net effect is about a 1.5 billion decrease in revenue.  All that being said, I am not sure how the Prime pricing works, if there is optional multi-tier pricing that would include the next day shipping for the higher annual cost.   I am told my household is a prime member but I myself have never used it although the Blink camera by Amazon I have at my front door assures me we get our moneys worth from being members.

My dad, before he moved in elementary school administration, was a passionate elementary school math teacher … he loved numbers, and he loved communicating that passion to students.

I was a terrible math student. One summer, my dad decided that he was going to teach me math, that he was going to find a way to get through to me so that I would appreciate the subject and be better at it.

In his later years, my dad would bemoan the fact that there was only one person that, in his long career, he was unable to teach math to. He would not be surprised by the fact that MNB readers are challenging my math.

One last MNB reader comment on Amazon’s one-day promise:

Honestly, as a customer: I’d appreciate it if they’d get the two-day delivery right before they start promising one day delivery.

Published on: June 4, 2019

In game four of the NHL Stanley Cup finals last night, the St. Louis Blues defeated the Boston Bruins 4-2, evening the best-of-seven series at two games apiece.