business news in context, analysis with attitude

Published on: August 7, 2019

Content Guy’s Note: It has been my pleasure in recent years to have the opportunity to guest-teach (i’d never call it a “lecture”) at Siena College, in classes taught by my old friend Dr. Russell J. Zwanka, who I think is doing tremendous work bringing his experience as a retailer and marketer into the classroom. He’s also a serial author, having written a number of books about retailing and, most recently, CBD marketing.

Russell’s newest book is entitled “CBD Reality: A Consumer's Guide to Cannabidiol,” which is a broad look at this rapidly changing market segment. And so I am happy to offer the following guest column, adapted by Russell from his book, which I think is chock-full of good and useful information.

Enjoy.

The majority of the CBD being sold today is either through natural and organic food stores, vape shops, or Amazon. The larger consumer packaged goods (CPG) companies have been averse to the potential negative stigma of CBD, so have been only hinting they want to enter the market.

The fact is, though, if the larger CPG companies would enter the marketplace, we would have better oversight and clearer regulation. Yes, in this case, we want regulation. The number of products being found as labeled CBD, but containing no CBD, means we need the government to take control of the regulation of the contents- clearly defining sourcing and packaging regulations.

Stop debating legality, and start regulating the contents to keep the public safe!

CVS and Walgreens have announced their intent to sell creams, sprays, roll-ons, lotions, and salves in 2,300 stores, over the counter - CVS in 800 of their stores (in California, Colorado, Illinois, Indiana, Kentucky, Maryland, and Tennessee), and Walgreens in 1,500 of their stores (in Oregon, California, New Mexico, Kentucky, Tennessee, Vermont, South Carolina, Illinois, and Indiana). Two of the largest drug stores in the country, and they chose only four of the same states! Yes, there is significant confusion. Sheetz is also going to be carrying similar products in 140 of their stores.

Notice, the larger companies are still shying away from any CBD products you ingest. Externally applied CBD seems to be legally interpreted as okay, at least in the states chosen by CVS and Walgreens. Other retailers will not be far behind, as we have expected all along. The nature of competition means others are not going to let the store across the street carry something they don’t.

Of the five main ways CBD is being used (lotions and salves, tinctures, infused food and beverage, vape, and pets), the link between CBD and vaping is the most stigmatized - as one would expect, since smoking has such stigma to it. Moving CBD products into the mainstream resellers can only help in awareness as well as regulation.

In other developments, and highly encouraging, reviews of how CBD is sourced, processed, and the integrity in the process, has come to the forefront of customers’ minds. In our work with resellers, we have found certain best practices being used in choosing the CBD suppliers.

As a consumer, it is suggested you follow the same methods of choosing your products as the stores do - at least until mainstream retailers like Target and Walmart carry all CBD options.

Here are the questions that everyone has to ask:

• Review the third-party lab testing. Is the certifying party accredited, is the product free of contaminants, is the cannabinoid content listed, etc.? Are all ingredients listed? Yes, make sure it’s third party, and not supported by the company that could benefit.

(As an aside, did you know all the health benefits claimed by Subway are based upon reviews by “Doctor’s Associates”, a group of doctors formed by Subway?....always read the fine print).

• Does the product contain less than .3% THC? Yes, you need to check, especially if your employer randomly drug tests. You’re usually safe if the hemp source is from one of the industrial hemp farms in the United States (see below).

• What is the hemp source and cultivation method? United States hemp is best, and there are some specific hemp farms in Colorado, North Carolina, and Kentucky. Make sure it is U.S. hemp!

• What is the type of CBD used? Is it labeled Isolate, Full Spectrum, or Broad Spectrum? Full Spectrum is your best bet, based upon the entourage effect of the other cannabinoids. Isolate, though, may be used if you experience stomach issues from CBD, etc.

• How is it extracted? CO2 extraction is standard, where pressurized carbon dioxide preserves the terpenes.

• How much CBD is in each dose? This is surprisingly quite confusing for CBD products. Issues range from needing 25 CBD gummy bears for any impact to not really understanding what a label might mean when it states “10 mg CBD per serving, 600 mg total CBD, serving size 1 ml” when you are taking it in a dropper (tincture).

• Is it a fair price, for the dosage? Once again, the amount of CBD in each product will reflect the potency. When you vary by potency, but the product looks the same, it can be confusing. If the same bottle of CBD has either 600 mg total or 1,200 mg total, and the bottle looks the same- the consumer is confused when the 1,200 mg is twice the price. As with most products, value is in the eye of the consumer, as long as they can trust you are labeling properly.

• What is the reputation of the producer? Yes, websites are the first place to look, although a company’s own website is probably not going to point you to any issues about their own company. Why would they? Find third party sites like CBD Origin.

• Is this product legal in your state? Simple, right? Legality has been so clearly interpreted by each state. What’s so hard about this step?

You can reach Dr. Zwanka at rzwanka@siena.edu .

Published on: August 7, 2019

Walmart CEO Doug McMillon, faced with calls from anti-gun activist groups asking for the retailer to stop selling guns, said on social media yesterday that the company will be “thoughtful and deliberate” in its decision-making process.

The demands from activists in the wake of the killing of 22 people in one of Walmart’s stores in El Paso, Texas, carried out by what is being described as a white nationalist domestic terrorist. The El Paso shootings actually were the third gun-related incident at a Walmart in recent weeks, with other shootings taking place in Auburn, Maine, and Southaven, Mississippi.

As McMillon posted his comments, word came about another gun-related incident at a Walmart. The New York Post reported that “an innocent bystander was wounded during a shootout at a Walmart store in Baton Rouge, Louisiana … East Baton Rouge Sheriff Sid Gautreaux told reporters at the scene Tuesday that one of the shooters was in custody and the other at large.”

In his social media posting, McMillon wrote, in part:

“As it becomes clear that the shooting in El Paso was motivated by hate, we’re more resolved than ever to foster an inclusive environment where all people are valued and welcomed. Our store in El Paso is well known as a tight-knit community hub, where we serve customers from both sides of the border. I continue to be amazed at the strength and resilience we find in the diversity of communities where we live and work.

“We’re a learning organization, and we’ll work to understand the many important issues arising from El Paso and Southaven as well as those raised in the broader national discussion around gun violence. We’ll be thoughtful and deliberate in our responses, and will act in a way that reflects our best values and ideals, focused on the needs of our customers, associates and communities.”

And, McMillon wrote, “When the worst happens, we counter with our best selves. We support each other, pray, stand firm and heal together. We’re proud to be woven into the American fabric as a place for all people, a community gathering place.”

In the immediate aftermath of the shootings, a Walmart spokesperson said that there were no plans to change the retailer’s policies on gun and ammunition sales.

Yahoo Finance writes that Walmart “has made changes in recent years, including ending the sale of modern-sporting rifles, like the AR-15, in 2015. Last year, Walmart also raised the minimum age for purchase to 21. The company also removed nonlethal airsoft guns and toys that resembled assault-style firearms from its website. The retailer stopped selling handguns in 1993, except for in Alaska. In 2006, Walmart began phasing out firearms sales across 1,000 locations, nearly one-third of its stores at the time.”

Yahoo Finance also has a story about another side of Walmart’s connection to the gun issue -“the millions in campaign contributions that Walmart’s political action committee (PAC) has given in recent years to Republican candidates for Congress, many of whom have voted against gun reform measures and received funding from the National Rifle Association … In the most recent election cycle, spanning 2017 and 2018, a Walmart-affiliated political fundraising group gave about $655,000 to Republican candidates for the U.S. House and Senate, according to the Center for Responsive Politics. Those contributions nearly match the some $690,000 given by the NRA to Republican candidates over the same period.”

The story goes on: “Among 2018 candidates for the U.S. House, four of the top eight recipients of Walmart contributions were Republicans who have received an A or A+ rating from the NRA: Rep. Steve Scalise (R-LA), Rep. Steve Womack (R-AR), Rep. Steve Stivers (R-OH), and Rep. Bruce Westerman (R-AR). In the 2018 election cycle, each candidate received $10,000 from the Walmart’s political fundraising group, in addition to thousands in funds they received from the NRA.

“In February, the four House representatives joined hundreds of their colleagues in voting against the most recent gun control legislation taken up by Congress: two bills that would expand mandatory background checks and close a loophole that allows for the sale of a gun if a background check isn’t finished within three days.”

It isn’t just Walmart facing gun-related issues.

The Washington Post reports that “Google and Amazon, two of the biggest platforms for online shopping, have been offering for sale and profiting from listings of firearm and gun accessories, an apparent violation of their own stated policies that shows the pitfalls of software-driven retail.

“The companies as recently as Monday, within days of three mass shootings that have shaken the nation, were offering rifle magazines for sale on their sites, including models with a capacity to hold 25 or more bullets … The availability of the goods speaks to the limitations of the company’s algorithms to keep even prohibited items from making their way to the websites. Algorithms play a huge role in policing the Internet, by automatically weeding out prohibited language, images and other disallowed things. Technology companies constantly update the software, often in response to new internal policies or societal change.”

Published on: August 7, 2019

In Canada, the Financial Post writes that American restaurateur/chef David Chang “wants the ethnic food aisle to die.”

Chang argues that the notion of an ethnic food aisle is ”out of date and doomed … because it puts ‘all the places in the world that are not White America’ in one aisle.”

The Post writes that Chang “urged supermarkets to mix it all up instead, putting sauces with sauces and spices with spices, regardless of where they came from. That format would fit better in the ‘hodgepodge’ of modern cuisine, he said, where diners and home cooks know enough about food not to think of it in terms of ethnic or mainstream.”

“I have nothing but anger” about the notion of an ethnic food aisle, Chang says, adding, “I’m not saying it’s straight racist, that’s not what I’m trying to say. But it is pretty close to it — because it’s values of how we ate years ago.”

The Post writes that “Canada’s largest supermarket chain, Loblaw Companies Ltd., appears ready to side with Chang, and will phase out the ethnic aisle as it renovates its stores, mixing international products into other sections.”

But, the story says, “other major chains are significantly expanding their global aisles, in some cases creating a standalone store in neighbourhoods with diverse populations.”

Published on: August 7, 2019

Fast Company reports that Amazon-owned Whole Foods is teaming up with a six-year-old startup called Packed Party to develop a new in-store section devoted to party products.

“Until now,” the story says, “the party department at Amazon-owned Whole Foods was fairly rudimentary, with paper plates and plastic forks. But now, the grocer is competing with the bigger party supply retailers and making it easier to be a one stop shop for customers about to throw an event.”

The new Packed Party sections are designed to have a lot of millennial appeal - with sustainable products that include “colorful disposable dining sets, as well as tons more party supplies, including decorative banners, celebratory cupcake kits, and drinkware.”

It is all going to be in place, the story says, “just in time for your Labor Day party.”

Published on: August 7, 2019

The Wall Street Journal reports that as Amazon looks to make a push into the pharmacy and prescription drug business, it is being accused os accessing and then misusing patient data.

Here’s how the Journal frames the story:

“Surescripts LLC, a provider of the technology widely used to route electronic prescriptions, accused Amazon’s mail-order pharmacy subsidiary PillPack of receiving patient data that it had fraudulently obtained through a third party. Surescripts went public with the allegations in a news release.

“PillPack, which caters to patients taking multiple medications, denies any wrongdoing. PillPack accessed Surescripts’ database via a third-party software vendor, ReMy Health Inc., to retrieve the medication histories of its customers who had explicitly authorized PillPack to obtain the information, said PillPack spokeswoman Jacquelyn Miller.”

The story points out that “the dispute with Surescripts is an example of the challenges that PillPack faces in disrupting the $424 billion U.S. prescription drug market: In many cases, PillPack’s competitors are also gatekeepers that control access to patient data and payment rates from insurers … PillPack’s dispute with Surescripts indicates the challenges facing Amazon as it tries to rattle the consolidated and highly regulated world of prescription drugs, industry analysts said.”

Surescripts reportedly has referred the complaint to the Federal Bureau of Investigation (FBI).

It is a complicated story, and you can read it here.

Published on: August 7, 2019

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

• The Motley Fool reports that FedEx “has finally admitted what everyone could see was obvious: Amazon.com is a logistics industry competitor. The global freight carrier's annual 10-K report for the first time said that the capabilities that Amazon has developed over the years - including delivery vehicles, aircraft, and airport hubs for which it is ‘investing significant capital’ - now allows it to be considered a competitor.”

As recently as four months ago, FedEx COO Rajesh Subramaniam said that Amazon "is not a threat to our business ... nor is Amazon a threat to our future growth.”

Elephants in the room can be difficult to ignore. It is about time FedEx admit it publicly.


• The Associated Press reports that Amazon’s six-wheeled, self-driving robots - which are “the size of a smaller cooler” - will start serving customers in Irvine, California, expanding the test from Seattle, where a test of the technology started earlier this year.

Amazon says that “the robots, which are light blue and have the Amazon smile logo stamped on its sides, are able to avoid crashing into trash cans or pedestrians. Still, a worker will accompany the robots at first.”


• Shake Shack announced yesterday that after several years of testing out various delivery schemes - working with Grubhub, Doordash, Caviar and Postmates - it has settled on a nationwide relationship with Grubhub as it looks to provide on-demand delivery services.

According to a CNBC story, the “announcement comes as major restaurant players are seeing key growth from delivery. McDonald’s recently added DoorDash as a partner, ending its exclusivity with UberEats. The burger chain has said delivery will be a $4 billion business globally this year.”

Shake Shack CEO Randy Garutti tells CNBC that “the partnership will give Shake Shack access to tools to analyze performance or ordering trends,” and he says that Grubhub “really does a dynamic job on the tech side of measuring time, giving guests and carriers a good marriage of time goals so we have the best shot at lessening the time.”

Published on: August 7, 2019

• As Walmart is reported to be considering the sale of one or more of the non-core retailing businesses that it acquired a couple of years ago as a way of expanding its footprint and appeal, the Los Angeles Times reports that women’s apparel site ModCloth is the one that may go on the sales block.

The story says that Walmart “acquired ModCloth in March 2017,” and now has received “outside interest from buyers” … ModCloth was always an odd fit inside Walmart’s buttoned-down culture, and the business has seen a revolving door of senior managers.”

Published on: August 7, 2019

• CNBC reports that Walgreens plans to close 200 of its US stores, which it says represents about three percent of its US fleet; the move comes as the company also plans to close stores in the UK. All of the closures are aimed at saving “$1.5 billion in annual expenses by fiscal 2022,” the story says.

“As previously announced, we are undertaking a transformational cost management program to accelerate the ongoing transformation of our business, enable investments in key areas and to become a more efficient enterprise,” the company said in a statement.


• USA Today reports that Sears plans to close 21 of its eponymous stores and five Kmart units, all by late October. Liquidation sales are expected to begin this month.

The story notes that “in February, former Sears CEO Eddie Lampert struck a last-minute deal to buy Sears assets out of bankruptcy and keep about 400 stores open under a new entity, Transform Holdco. In Tuesday's statement, the company calls itself TransformCo.”


• Food Lion announced yesterday that it is rolling out a new program chain-wide, giving customers with a Healthy Savings card discounts on fresh produce, whole grains, lean meats, yogurts and other items.

The announcement says that “Healthy Savings is a high-engagement, national health & wellness program helping health insurers, employers, government entities and nonprofits make healthier foods more affordable … Partnering with over 14,000 brands and stores, Healthy Savings allows members to save over $50 weekly on healthier foods without having to clip, print or download coupons.”


• Published reports say that UK retailer Tesco plans to open its 10th Jack’s store tomorrow, expanding the presence of a discount format that it hoped would compete effectively against German discounters Aldi and Lidl, which have been eating away at traditional retailers’ market shares.

The effectiveness of the Jack’s format has not been universally celebrated, however, and Tesco has not detailed its long-term plans for the format.


• The Tampa Bay Business Journal reports that Publix Super Markets reported Q2 sales of $9.3 billion “up nearly 7 percent over the same three-month period in 2018 … Net earnings in the second quarter were up more than 7 percent year-over-year — $661.1 million versus $616.2 million in 2018.”

Same-store sales were up almost 5 percent.

Published on: August 7, 2019

• Marketing Daily reports that “online natural and organic grocer Thrive Market is returning hemp- and cannabidiol (CBD)-based products to its virtual shelves.

“The retailer was forced to stop selling such items in June in response to a request by its merchant processor.” The company was able to bring the products back by changing its payment processor.

In an email to customers, CEO and co-founder Nick Green wrote, “Hearing your stories of how CBD has positively impacted your lives, and enhanced your (and your loved ones') general wellbeing reinforced why we started carrying hemp products in the first place -- and why it was so important to take a stand against a policy based more in fear and ignorance than sound legal reasoning or science.”

Published on: August 7, 2019

Toni Morrison, the first African American woman to win the Nobel Prize in literature, has passed away at age 88, from complications related to pneumonia.

In its obituary, the New York Times wrote that her “best-selling work explored black identity in America and in particular the often crushing experience of black women through luminous, incantatory prose resembling that of no other writer in English … Ms. Morrison was the author of 11 novels as well as children’s books and essay collections. Among them were celebrated works like “Song of Solomon,” which received the National Book Critics Circle Award in 1977, and “Beloved.”

In an appreciation, New Yorker writer Vinson Cunningham wrote, “I can think of no other writer whose work, and the cult of its consumption - still, surely, in its very first stages - embodies the ideal of writing and reading as a community practice, meant more for the enrichment of a people than for any individual’s private therapy or entertainment. ‘We don’t need any more writers as solitary heroes,’ she once said. ‘We need a heroic writer’s movement: assertive, militant, pugnacious.’ Her writing opens up into other writing, richness into richness, in a way that will help such solidarity come to pass.”

Published on: August 7, 2019

In this new Retail Tomorrow podcast, recorded at GMDC’s annual GM conference in Denver, we focus on the ways in which startups are working to disintermediate traditional retailers … how retailers can turn these innovations to their own advantage … why cultural resistance within companies can be the ultimate enemy of progress … and even brainstorm about a business model that could’ve made Toys R Us relevant again.

You can listen to the Retail Tomorrow podcast here, or on iTunes or GooglePlay.

The Retail Tomorrow podcast series is a production of GMDC, the Global Market Development Center.

Our guests:

• Patrick Fore, CEO and co-founder of Fleat.

• Sterling Hawkins, co-founder of the Center for Advancing Retail & Technology (CART).

The host: Kevin Coupe, MorningNewsBeat’s “ContentGuy.”

Pictured, left to right: Patrick Fore, Kevin Coupe, Sterling Hawkins

Published on: August 7, 2019

I’ve gotten some emails from Portland, Oregon-area MNB readers wondering if I am going to have one of those casual get-togethers that we've done here the past few years.

The answer is yes … we are getting together tomorrow night, August 8, at 5 pm, at Nel Centro, located at 1408 SW 6th Ave, in Portland. I'll plan on being there for a couple of hours, hopefully on the outside patio - and I hope that any MNB readers who'd like to stop by will do so.

Once again, I’m thrilled that our get-together will be sponsored by Portland State University’s Center for Retail Leadership.

See you tomorrow night!

Published on: August 7, 2019

Got the following email from MNB reader John Rand:

No offense that you missed the parking lot shooting at a Walmart in Maine. But probably it isn’t Walmart’s fault, or yours.

There have been over 240 mass shootings in the U.S. since the beginning of this year, which is nearly one per day. The pace is far above any previous year of which I am aware.

There are more mass shootings than days on the baseball schedule.  There are more gun deaths than traffic deaths per year. I noticed that last year more children under 19 died from gun deaths than from cancers; only  auto accidents caused more child deaths. According to the CDC gun deaths now outpace automobile accidents and only trail drug overdoses as a cause of early mortality for everyone.
 
It seems, to put it mildly, a problem for us all. You are certainly forgiven for not being able to keep track of them all.

MNB reader Scott S. Dissinger wrote:

I am not sure banning them is the issue. Although I do support bans on the military grade stuff.

Some interesting annual statistics…

14,000 die at the hands of others from guns (another 23,000 take their own lives with guns)

11,000 die at the hands of drunk drivers

37,000 from traffic accidents

88,000 from alcohol related issues

Do we ban guns, cars and alcohol?  To what degree do we allow the glorification/advertising of each?  Do we treat them like sugary cereals for kids?

I guess your answer depends on your relationship with the subject matter.  I think I remember that the alcohol ban was tried once before.

MNB reader Chris Weisert wrote:

Has anyone thought to look at the purchase of body amour? Seems like its use is pretty specific and a lot of these crazies are wearing it. I doubt those that truly need it on the good side of the law would not mind a vetting process (they most probably get this equipment through their employer anyway).
 
I know there are some that would argue the same for some of the guns and accessories for those guns, I just wanted to open up another conversation that maybe has not been explored.

And MNB reader Gloria Olson wrote:

I’m not surprised Walmart will continue to sell guns. This is typical Corporate America thinking: bottom line sales are more important than the lives of customers and employees.

MNB reader Kelly Dean Wiseman wrote:

Amen and bravo to not waiting for Washington anymore!



Yesterday we took note of a Bloomberg story detailing ways in which Amazon manipulates its site and pressures its vendors - all with the goal of assuring that it has the lowest prices on items for which it deems it important. It is, the story says, yet another example of behavior that could prove problematic when examined by antitrust regulators.

One MNB reader responded:

Personally I believe the only difference here is increased transparency that the practice is being done.  Large retail competitors have been monitoring prices and promotions for years.  Anyone who has been a CPG AE across the table from a buyer knows the heated conversation and ramifications of distribution and pricing that take place when they see the pricing or promotional price one of your colleagues has sold into the competitor.  This happened quite a bit at Walmart when when they caught a promotional price at a Hi-Low retailer.



We had a story yesterday about a new book written by a woman who worked for two weeks as an Amazon fulfillment center employee; while the work is tough, workers also say that “it’s one of the best jobs a person without a college degree or specialized skills could land.”

One MNB reader responded:

Yes it's very hard work, as is retail.  Understaffed stores, and we have to present a happy face to the customer, answering questions, etc while trying to stock our departments. Maybe it's just where I work, but it's not fun anymore…

MNB reader Andy Casey wrote:

Maybe it is just me, but I find it a little disturbing that our definition of a good job has become primarily that it pays well over federal minimum wage. The Union movements of past days were fueled as much by working conditions as wages.
 
People do what they have to do to support their families and survive but at some point it almost always begins to be too much and they push back.  I’m thinking jobs with ambulances waiting outside because they know people are going to pass out from the heat, with managers isolating employees from each other to enhance productivity and treating them as if they aren’t smart enough to think might just qualify as a ticking bomb.




We also had a story the other day about how United Parcel Service (UPS) and FedEx are introducing Sunday deliveries as a way of keeping up with an e-commerce economy in which customers want everything tomorrow and retailers want to keep them happy, but that they’ll be paying the Sunday delivery folks lower wages than paid to weekday drivers.

Prompting one MNB reader to respond:

In today's MNB the last comment is from a reader stating traditional market economics points about paying people less to deliver on Sunday.  That could work because people will do it as a second job maybe, and are desperate.  In the old days, when you worked on weekends, at least with a union job, you'd get a premium.

But I think the point you were making, and the point the guy completely missed, is about optics.  The optics of this will be really bad.  Union organizers will make a point of it.  Etc.  Like your example of InstaCart but even better, about Uber or Door Dash, etc.