business news in context, analysis with attitude

Published on: June 21, 2019

by Kevin Coupe

It is an article of faith that Amazon invests in so much original video content because it is seen as a way of building value for Prime membership. Jeff Bezos is fond of saying that he wants to make Prime so valuable that it is irresponsible not to be a member.

And so, Prime is not just about getting speedy deliveries. It is also about being able to see things like “The Marvelous Mrs. Maisel,” “Bosch,” and “Jack Ryan,” among other shows.

Sometimes, though, original content carries with it some risks.

Take, for example, Amazon’s current series, “Good Omens,” which is a tongue-in-cheek look at the apocalypse based on a novel by Neil Gaiman and the late Terry Pratchett. Too tongue-in-cheek for some apparently - CNet reports that more than 20,000 signatures have been affixed to a petition demanding it be taken down, calling the show “a mockery of religion for depicting ‘God as a tyrant and the Devil as being good.’ The Christian group behind the campaign found an issue with other aspects of the show -- God being voiced by a woman, the portrayal of the Antichrist as a normal kid, the four riders of the apocalypse as a biker gang and more.”

The petition was organized by the American Society for the Defense of Tradition, Family and Property.

But there’s just one problem. The petition calls for Netflix to take the series down … not Amazon, which is running it.

If I were Amazon, I think I’d be a little annoyed … not by the petition, but by the fact that some viewers can’t or don’t know the difference between the two streamers. This may prompt an addition to the to-do list: “Work on branding.”

Amazon has to be pleased by the broader public reaction to “Good Omens.” Rotten Tomatoes has given it an 83 rating on the critics meter, and a 90 audience score. Lots of heathens out there, apparently.

I have two questions.

First, I’d like to know how many people who signed the petition actually have seen the show.

Second, I’d like to know if the people who signed the petition understand they nobody has to watch the show … if you start it and you are offended, turn it off. If you don’t like what you read about it, don’t start watching it.

On the other hand, a little viewer outrage often is good for business. It makes people who haven’t watched a program wonder what is so offensive about it, and they add it to their queues.

Like I have. The previews didn’t do it for me, and so I had no plans to watch it. But now I’m intrigued.

Maybe it’ll be an Eye-Opener. I’ll find out on my own, and for that I’d like to thank the American Society for the Defense of Tradition, Family and Property.

Published on: June 21, 2019

Kroger yesterday released its Q1 results, reporting that same-store sales were up just 1.5 percent while digital sales were up 42 percent.

The company said that Q1 total company sales were down to $37.3 billion, from $37.7 billion during the same period a year ago, which Kroger said was due to the sale of its convenience unit. Total sales, when the sale of the c-store business and fuel sales are factored out, were up two percent.

Q1 profits were $772 million, compared with $2.03 billion a year ago, which included its c-store business.

The Cincinnati Business Courier quotes Kroger CEO Rodney McMullen as saying he knows the company’s financial results have to improve: “It really is time for us to step up our game … We know we can do better when it comes to our identical (store) sales results,” he said.

The story notes that McMullen told analysts that he’s optimistic Kroger’s results will improve “based on several indicators. The number of loyal households shopping at Kroger grew. Spending per item rose. And Kroger has improved its customer experience, he said, mentioning friendliness of employees and keeping items in stock.”

Published on: June 21, 2019

The Northwest Arkansas Democrat Gazette reports that Walmart has agreed to pay $282 million to settle civil and criminal allegations that it used bribes in foreign countries to grease the wheels of its own growth.

According to the story, “The settlements include civil charges filed by the Securities and Exchange Commission as well as a guilty plea by Walmart's Brazilian subsidiary to a criminal charge filed in federal court in Alexandria, Virginia.

“Criminal prosecutors went after Walmart under the Foreign Corrupt Practices Act, which prohibits American companies operating abroad from using bribery and other illegal methods.

“Walmart said the two settlements constitute a global resolution of federal investigations that stretch back to 2012 and have collectively cost the company more than $900 million.”

The Democrat Gazette reports that “the plea agreement filed in federal court in Alexandria shows Walmart has agreed to pay $138 million to avoid prosecution, while its Brazilian subsidiary, WMT Brasilia, pleads guilty to a single violation of the Foreign Corrupt Practices Act.

“Later Thursday, the SEC announced a $144 million settlement against Walmart for ‘failing to operate a sufficient anti-corruption compliance program’ in Brazil, China, India and Mexico.”

"We're pleased to resolve this matter," said Walmart President and CEO Doug McMillon in a statement.

Published on: June 21, 2019

The Wall Street Journal reports that Canada-based e-commerce technology company Shopify “is extending into physical distribution, offering customers access to a network of dedicated U.S. fulfillment centers to store and ship consumer goods for online orders.”

The goal, according to the story, “is to speed up delivery for retailers racing to keep up with Amazon.com Inc. while keeping a lid on transport costs by placing inventory across a distributed network within easy reach of major population centers.”

The Journal writes that Shopify says that “its new service uses machine learning to forecast demand, allocate inventory and route orders to the closest fulfillment centers. The company is working with logistics providers and software companies in Nevada, California, Texas, Georgia, New Jersey, Ohio and Pennsylvania.”

Published on: June 21, 2019

Walmart, Procter & Gamble, PepsiCo and Google reportedly have signed on to be launch sponsors for Quibi, a new streaming service headed up by Jeffrey Katzenberg, formerly of Paramount, Walt Disney and Dreamworks, and Meg Whitman, who has been CEO of both eBay and Hewlett Packard and also is a member of P&G’s board.

Quibi stands for “quick bite,” and when it launches next year it is expected to provide entertainment content in segments of 10 minutes or less that are designed to be seen on mobile screens. These segments often will be like chapters of a book, making up a larger whole - people can watch just one, or several in a row.

The streaming service will have an advertising driven option, which will have a lower subscription cost than a no-ad version. Which is where the sponsors come in.

Published on: June 21, 2019

CNN reports that a new report, the annual "The State of Legal Cannabis Markets,” is projecting that global, legal cannabis sales could hit $15 billion this year, up 36 percent from 2018.

According to the story, “The surge of CBD products coupled with Canada starting legal recreational cannabis sales in 2018 helped to buoy the industry's growth … This was the first full year to evaluate the effects of three significant developments in the cannabis industry: the FDA approval of CBD-based drug Epidiolex, legal adult use sales starting in Canada, and the 2018 Farm Bill giving hemp products more legal standing.”

Cannabis investment firm Arcview Group, which produced the report, “expects the bulk of sales to remain at dispensaries, followed by retail stores and then pharmacies. Sales of CBD products across those channels are poised to hit $20 billion in 2024, the researchers projected.”

Published on: June 21, 2019

Terrific piece from Bloomberg about the unique - and in some ways, unexpected - alliance between Walmart and comedian and talk show host Ellen DeGeneres.

DeGeneres, the story says, “produces movies, voices a popular Pixar character, has her own digital content network, and has earned at least $500 million on endorsement and TV deals, according to a Bloomberg Billionaires Index analysis. She has her own lifestyle brand and last year formed a partnership with Walmart Inc. to create a clothing and accessories line that’s awash in American flags and rainbows and is sold in 2,300 Walmart stores. ‘I’m still gay, by the way. It’s really working out for me now,’ DeGeneres said in her Netflix stand-up special last year.”

The relationship between Walmart and DeGeneres reflects a larger cultural reality, the story says. “That the largest U.S. retailer finds value in aligning itself with a 61-year-old lesbian … is, in many ways, a testament to how thoroughly Americans have accepted LGBTQ rights. It’s been 50 years since the Stonewall uprising in New York marked the start of the modern gay rights movement. Almost two-thirds of Americans support same-sex marriage, Gallup polls show, the opposite of what they reported when DeGeneres first came out two decades ago. The chief executive of America’s first trillion-dollar company, Apple Inc., is gay, and yet iPhones still fly off the shelves. Walt Disney Co. this year had its first gay characters on both its youth cable channel and in its latest Avengers film. According to GLAAD, 8.8% of prime-time TV characters are gay, bisexual, transgender, or queer. Walmart even has a Pride shop online.

“Such mainstreaming of LGBTQ products, characters, and culture would have been almost unthinkable 22 years ago, when DeGeneres publicly came out as a lesbian. Back then, being gay almost killed her career.”

A really strong piece … and a little ironic considering that there are still places in this country where discrimination against gay people still takes place. You can read it here.

Published on: June 21, 2019

• Smart & Final, the west coast-based, 257-store retailer, has completed the process of being acquired by an entity connected to private equity group Apollo Global Management for $1.12 billion.

This is the second time that Apollo has owned Smart & Final.

“As we turn the page to the next chapter in our almost 150-year history, we are excited to again work with Apollo to capitalize on our unique value proposition in this dynamic grocery marketplace,” said David Hirz, Smart & Final's president/CEO, in a prepared statement. “We look forward to continued evolution in the Smart & Final and Smart Foodservice store banners, as we endeavor to provide the best shopping experience for our household and business customers across both in-store and digital sales channels.”

Published on: June 21, 2019

• Sprouts Farmers Market announced the hiring of Jack L. Sinclair as its new CEO.

Sinclair’s resume includes a stint as CEO of 99 Cents Only Stores, Executive Vice President of the U.S. Grocery Division of Walmart, and several positions with Safeway PLC in London.

He succeeds Brad Lukow, interim co-chief executive officer and chief financial officer, who has resigned “to pursue other opportunities.”

Published on: June 21, 2019

We took note the other day of a Fortune story about a new trend in Seattle - restaurateurs opening small spaces close or adjacent to their more traditional locations, “super personal concepts” that thrive “on face-to-face interaction.” The idea is for these chefs and restaurant owners to “seize upon an intersection of their own creativity and turn the traditional limitations on opening restaurants into a format giving them, if anything, a bit more freedom, while offering diners an intimate and incredible experience to boot.”

I commented:

Love this … it is yet another example of what I think traditional retailers need to do. Find unorthodox locations. Come up with creative approaches. Change lanes. Push boundaries. Challenge yourself. Challenge your customers. Repeat.

MNB reader Frank J Eich responded:

Interesting approach for a restaurateur! Love the low cost tactic that get closer to customers and to test & learn.

No reason that traditional brick & mortar grocers shouldn’t do the same with a focus on highlighting their prepared foods. Imagine a Kroger stand-alone restaurant featuring foods available at some of their stores…..

Anyone in the grocery industry pursuing such a test & learn tactic with a focus on their culinary expertise?



The other day we reported that he US Supreme Court has decided not to take a case that pits discrimination laws against religious freedom, but rather has urged the Oregon Supreme Court to reconsider its ruling.

I commented:

Look, I’ve always been clear about my opinion in these sorts of cases. I think people’s religious beliefs should never be treated with hostility or disrespect, and that everybody at least has to acknowledge that when two core American values - religious freedom and freedom from discrimination - come into conflict, it is a hard decision to make.

I always wish in these cases that the gay couple in question could simply get a cake elsewhere, or that the bakers would think that baking a cake is not the same as being in a same-sex marriage. But life doesn’t always work that way, for lots of reasons, and I think in the end that I support the gay couple … though I do so with the utmost respect for the bakers’ religious beliefs.

First of all, MNB reader Monte Stowell corrected one part of the story:

The subject case is not being referred back to the Oregon Supreme Court. It is being referred back to the Oregon Court of Appeals, the court that made in the original ruling against the bakery that refused to bake a cake for the gay couple.

Thanks for the clarification.

One MNB reader wrote:

I agree with you that everyone should have the right to practice whatever religion they want as well as live the life they want, but in a case like this it’s not as easy as simply going to another bakery.

Being an out and confident gay man, its important to ensure cases like this are publicized. I’ve of course encountered discrimination but never have been refused service. It would be humiliating and demoralizing. What would happen if you walked into Shake Shack and they said no, we can’t serve you because you’re above the age of 30 or that you had white hair? You’d be infuriated and I’m sure write an article about it.

It’s discrimination, pure and simple and just because it’s “a religious” thing doesn’t excuse it. What about discrimination and segregation during the civil rights movement? Black people couldn’t even eat at a lunch counter with whites, driven by “faithful” people who didn’t like someone due to the color of their skin.

It’s not that we can’t get a cake somewhere else, it’s that these minority groups constantly go through life wondering if someone is or is going to discriminate against them and it’s just not fair in a society where the default seems to always be straight.

I think the while the fine seems extreme, they should have some repercussion for their hateful actions. If we don’t speak up for this who knows what else could happen.

I do appreciate your support and just wanted to share my opinion. I think your approach to politics is great and well spoken to.

MNB reader Skye Lininger wrote:

The Supreme Court punt on this issue is concerning-and I don't think it's a hard decision to make. If we substituted "gay couple" with "white man marrying a black woman" and the bakers said they had religious views against that, how would we feel?

This, to me, is clear cut. If you are in the service business, you must serve everyone. You can't refuse to serve lunch, provide a hotel room, let ride on a bus, or anything else so long as the person can pay for the service and meets certain standards for cleanliness and apparel (no shoes no service), possibly age. Otherwise, the person's personal life, so long as it is legal, is not my concern and I can't invoke my own opinions as to why I shouldn't serve them.

If this is allowed to stand, then almost any reason could be used to refuse service and a person could invoke religion as the basis for that discrimination. There is no way to determine if that basis is sincere or just flat out prejudice. Since that can't be done, the solution is simple. If you are in the service business, you must provide service to all comers. Otherwise, make a living doing something else.

From another reader:

Let’s try that phrase with some different terms:

“I always wish in these cases that the black couple in question could simply get a cake elsewhere.”

“I always wish in these cases that the Jewish couple in question could simply get a cake elsewhere.”

“I always wish in these cases that the female customer in question could simply get a cake elsewhere.”

Hmm… It sounds like discrimination no matter what adjective - black, Jewish, woman - is used.

Remember, bigots and anti-Semites have long used religion - in particular Christianity - to justify their actions.

And from MNB reader Brett Hassler:

Your response to this article couldn’t be any less “clear”. The bakery is free to refuse service even though that choice could have business repercussions they should be prepared for and expect. Pretty simple, IMO.

I only agree with one part of this past email - that I was not as clear as I should have been. I was trying to be sensitive in my comments about people’s religious beliefs even while trying to say that I disagree wholeheartedly with the idea that religion can be used as an excuse for discrimination. But I sort of backed into it, and should have been stronger in my comments.



Responding to Kate McMahon’s piece about ordering via voice-activated technology, one MNB reader wrote:

I think voice activated grocery commerce requires more than technology and trust. I think for it to break through being on the “cusp” of voice shopping, it needs to be easier. Right now, questions like “What’s the weather today?” or “Play music” are pretty straightforward. But ordering a whole shopping list?
 
While it might be easy to request 2 liters of Coca Cola, you couldn’t ask for “a dozen eggs” without clarifying that you mean the cage-free pasteurized ones, size AA large (unless the organic-fed cage free ones are on sale). And you might not know the brand. It would be easier to click through a list online rather than talking to a speaker about an entire cart.
 
There’s an opportunity here. Imagine a local retailer that lets you build and save lists (say of weekly staples or a holiday meal), down to specific items, and making it available through your smart speaker. Telling a voice assistant, “deliver my weekly grocery list” is as easy as asking the weather. And assuming it arrives, fresh and on time, would represent a powerful incentive to remain with that retailer. I wouldn’t be surprised if Amazon’s already working on that.



We had a story this week about how Dorothy Lane Market continues to illustrate how an independent retailer - in this case, a three-store supermarket company in Dayton, Ohio - can continue to be a vital and growing presence. In this case, the food-centric retailer is opening a new facility, in Miamisburg, Ohio, where it can make its famed Killer Brownies.

I commented, in part:

Pretty much daily, DLM Gets. It. Done.

As a three-store independent, it is a pretty fair bet that DLM has fewer resources than bigger entities. But the greatest resources an independent retailer can have are imagination, ambition, and an unwillingness to be hemmed in by tradition and expectations. A core value at DLM - one of the most accomplished retailers in the country - has been never to be complacent about its achievements. Reputation is something you had yesterday … today you have to earn it all over again.

MNB reader Beatrice Orlandini wrote:

Norman Mayne, Calvin Mayne and their team are the best!

I know.

Every group I ever brought to visit their three stores got the most outstanding and memorable welcome they could even dream of.

They deserve every single ounce of success that they have, and even more.

Agreed.



We noted a Cincinnati Business Courier report this week that Kroger is testing a 30-minute delivery service called Kroger Rush that is available to online customers at two stores - one in Ohio, one in Kentucky - near its Cincinnati headquarters.

I commented:

They don’t talk about it, but I suspect that the real race - Amazon, Walmart and Kroger are in it, along with a bunch of other folks like Google, Apple and Microsoft - is to develop a Star Trek-style food replicator that will make a 30-minute delivery wait seem like an eternity.

MNB reader Theresa Zaske responded:

Before I die I’m bound and determined to ask Alexa for “tea, Earl-Gray, hot” and have her deliver rather than explain that replicators are not operational.

Me, too.



Yesterday’s FaceTime video told the story of a Whole Foods customer who long ordered via Instacart, until Whole Foods started using Amazon for its deliveries, which only made sense since Amazon had acquired Whole Foods.

But this customer then got an email from Instacart explaining that while it no longer had a relationship with Whole Foods, here is a list of all the purchases that he had made at Whole Foods via Instacart, and identified current Instacart partner retailers where those same products could be bought.

Here’s what I said, in part:

That’s right. Instacart basically weaponized Whole Foods’ shopper and transaction data to use against - wait for it - Whole Foods.

Now, I have no idea who or why a contract was signed by Whole Foods that gave Instacart ownership and use of its data. I have no idea how many other retailer contracts give Instacart those same rights … though I’d be willing to bet that more of them do than don’t.

But this is nuts.

It gets even more nuts. I totally believe the rumors that Instacart plans to open dark stores in certain markets, which will give it the ability to serve shoppers who see themselves as Instacart customers without the participation of any local retailer.

Instacart, in other words, isn’t a service provider. It is a competitor … Why would any retailer essentially sign away its customers?

A couple of different reactions.

One, fromMNB reader Joe Axford:

You're preaching to the choir, KC - you've been saying this for years and I thought you were right on the money since day one!

But, from another reader:

How could Instacart not have rights to the data they collect on their platform? They’ve become part of the transaction chain. It seems like a bit of a reach to expect them to just ignore or delete their data. Retailers don't do that. Distributors don't do that.

I guess it comes down to if Instacart is a retail service or a retailer. I'd argue the latter. Their prices don't match in-store pricing. Usually, they have a ~20% markup, but sometimes their prices are lower than shelf. That makes me wonder if some items are bought direct or through distributors and warehoused.

I cannot imagine that Instacart ever has presented itself to retailers with which it wants to do business as anything other than a service provider … and as such, I do not believe that it should be able to use the data for its own ends.

The problem is that Instacart wants it both ways - it wants to provide the service as a way of funding and growing its eventual business as a retailer.

I don’t blame Instacart for its ambitions. I blame retailers who make decisions that undermine their brand equity and value propositions and put their businesses at risk.



And finally from another MNB reader:

I love that you post general sports stuff at the bottom of MNB whenever relevant, but I’ve been scratching my head the last two weeks wondering when you’re going to start sharing the scores of the National Women’s Soccer team. We’re favored to win another world cup! Where’s the love for our strongest national team?

Mea culpa, mea culpa, mea maxima culpa.

The painful reality is that I know nothing about soccer, and rarely mention it here. To be fair, I hardly mentioned the NBA finals either, and only mentioned the NHL when shamed into it by an MNB reader.

I guess I’ve been blinded by the pain associated with watching my Mets …

Published on: June 21, 2019

Netflix has a remarkable four-part TV series that is wrenching, deeply affecting, incredibly difficult at times to watch and yet absolutely must-see television - “When They See Us,” a searing portrayal of the miscarriage of justice that became known in shorthand as the Central Park Five.

The series is based on true events that took place in 1989. A woman jogger was raped and beaten while running one evening through Central Park. Five boys - four African American and one Hispanic, ranging in age from 14 to 16 - were arrested; they were believed by law enforcement officials as being part of a “wilding” group that went through Central Park committing random acts of violence.

As portrayed by writer/director Ava DuVernay, these boys were coerced into confessing to the crimes, deprived of appropriate legal and parental counsel, and deceived by police and especially by assistant district attorney Linda Fairstein, head of the city's sex crimes unit. At its most basic, this is where the title comes from - when officials saw these young boys, they saw something very specific and very guilty. It was irresistible tabloid fodder for the Daily News and the , and a certain New York real estate developer bought full page ads within weeks of the arrests and called for a reinstatement of the state’s death penalty so these boys could be executed.

Let’s be clear. While there are those who continue to maintain that justice was done - Fairstein chief among them - it is not spoiling anything to say that after serving sentences of various lengths and severity, the boys - then adults - were exonerated when someone else confessed to the crime, and the confession was backed up by DNA evidence. Some say that it doesn’t matter, because they must’ve been guilty of something, but that, to my knowledge, is not how the justice system works.

“When They See Us” is an extraordinary piece of art. There were times that I needed to pause it and walk around for a bit, just to catch my breath. The acting is deeply felt, especially by the actors who play the so-called Central Park Five as kids and adults, and also by the actors who play their parents and lawyers and other people who became collateral damage of a system that was deeply flawed. (It is a little jarring to see Felicity Huffman as Fairstein - she is very good, but it is hard to forget that since the series was filled, Huffman has pleaded guilty of bribing her kid’s way into college.)

The four parts of “When They See Us” each work as a piece, slightly different in tone and flow, building on what we’ve seen before and yet adding layers and deepening our appreciation of the situation. I will say this - this is not meant for bingeing … it is too hard to take, too hard to endure, over an extended period of time.

Watch “When They See Us.” It is about a thought-provoking piece of work as I have seen in recent years. And it even offers a business lesson - that you cannot make smart and informed decisions if you refuse to be informed, and choose the first and easiest options. The law enforcement officials portrayed in “When They See Us,” as the series makes clear, could have avoided the miscarriage of justice in which they participated simply by looking deeper - there were opportunities for them to find the truth early on, or at least understand that their early assumptions might be flawed.

They didn’t. In the case of these five young people, the results were devastating.



I have yet another rosé to recommend to you this week … my daughter Allison discovered the 2018 Berne Inspiration from France’s Côtes de Provence. It is utterly delightful - made from Grenache (50%) Cinsault (30%) Syrah (20%) - with a great texture and mouth-feel, perfect for a summer evening and a plate of seafood. I like it really cold.



Back Monday. Have a great weekend.

Slàinte!