business news in context, analysis with attitude

Published on: November 7, 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 … coming to you this week from Sisters, Oregon … which is about 22 miles northwest of Bend and about 150 miles southeast of Portland.

This week's lesson comes courtesy of the Eurosports shop, which rents and sells bicycles, skis and other outdoor equipment. This is a good place for such a store, because this is about an outdoorsy a place as I can imagine.

One of the things that I found impressive about Eurosports is that they actually have a small bar inside the store - after your ride, you can have a beer or a glass of wine, cider or even a cup of coffee.

Now, this may not strike you as all that extraordinary. This is, after all, Oregon. There are brewpubs and coffee shops everywhere. (One of my favorite hiking trails in Oregon is the Trail of Ten Falls, where one of the trailheads has a lodge where they serve cold local craft beers. Doesn't get any better than that.)

But what I like about Eurosports is that they also have a bunch of picnic tables … and in the back, they have a couple of food trucks, serving tacos and pizza. There's a fire pit, hanging lights for after the sun goes down … and the whole thing seems designed to create a sense of community.

That's what is extraordinary, I think … and an example of what retailers need to do if they are going to stand out in a crowded marketplace. Eurosports could've just rented and sold bikes and skis, but instead they decided to go a little bit farther and create something welcoming and comfortable.

What are you doing to go the extra mile?

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

Published on: November 7, 2019

by Kevin Coupe

Barron's has a story suggesting that Berkshire Hathaway ought to buy Walgreens Boots Alliance, which, it was reported yesterday, is considering going private in what would be the largest leveraged buyout ever.

Here's the logic: "Berkshire Hathaway CEO Warren Buffett has been searching in vain for a large acquisition—what he has called an elephant—that could absorb a chunk of Berkshire’s (BRKA) growing cash balance, which hit a record $128 billion at the end of the third quarter.

"Walgreens is Buffett’s kind of company. It’s an easy-to-understand business that has an inexpensive valuation, trading at just 10 times projected earnings of $5.94 a share in the fiscal year ending in August 2020, a discount to the overall market’s price/earnings multiple of around 18. Berkshire could offer to pay $75 to $80 a share for Walgreens, or about $70 billion, in an all cash-deal or some mix of cash and Berkshire stock."

But moving beyond the economics of the deal's potential … one MNB reader suggested to me yesterday that Berkshire Hathaway already is in the healthcare business through its alliance with Amazon and JP Morgan. And it has a number of investments in the insurance business.

This all might make a lot of sense … and would have the potential, if all the pieces came together and Berkshire Hathaway actually invested in the future, of helping to remake this side of the business.

Could be an Eye-Opener.

Published on: November 7, 2019

In an op-ed piece published in the New York Times, Walmart criticizes the Trump administration's decision to pull out of the Paris Climate Accord as "deeply unfortunate," and says that it will not affect its commitment to the goals of the climate change agreement.

"Walmart is one of over 3,800 American businesses, states, cities and other entities that have joined together in the coalition We Are Still In to continue our efforts to reduce greenhouse gas emissions to meet the goals of the Paris Agreement," the piece says. "Together, these entities represent nearly 70 percent of the country’s gross domestic product and two-thirds of its population. If this group were a country, it would be the world’s second-largest economy — behind the United States but ahead of China."

The op-ed piece is co-written by Kathleen McLaughlin, executive vice president and chief sustainability officer of Walmart and president of the Walmart Foundation, and Andrew Steer, president/CEO of the World Resources Institute.

Some excerpts from the piece, which makes the business case for sticking with the accord:

• "The Trump administration’s announcement this week that it would follow through with its plan to officially withdraw the United States from the Paris Agreement is deeply unfortunate. Leaving the accord will hamper America’s economic competitiveness and put Americans and people around the world at greater risk for climate-related disasters."

• "Why is the Paris Agreement so important? Climate change is a global challenge that requires a global response. Although the commitments are voluntary, the agreement sets a clear course toward a low-carbon future, with nearly 200 countries working together and playing by the same rules. The Paris Agreement provides the context for national and global policies in areas like agriculture and energy, which have direct implications for businesses with customers and suppliers around the world."

• "According to the recent National Climate Assessment, by the end of the century, warming at the current trajectory would cost the American economy hundreds of billions of dollars from crop damage, lost labor and the consequences of extreme weather. Similarly, the National Bureau of Economic Research found that climate change could cost the United States 10.5 percent in real income by 2100.

"In addition, by backing away from the international climate pact, the United States will fail to fully seize the economic opportunities in the growing clean energy sector. At the same time, other countries — including the nation’s biggest economic competitors — are seizing the opportunities in wind, solar and low-carbon innovation and technology."

You can read the entire op-ed piece, which details some of Walmart's efforts in this area, here.

Published on: November 7, 2019

CNN reports that the California Attorney General's office is "investigating Facebook over the technology giant's privacy practices," which, the story says, "adds to the list of legal and regulatory headaches staring down Facebook, which has come under fire for its policies on political speech and its handling of user data."

The year-long California probe had not been disclosed to this point, but Attorney General Xavier Becerra, in a court filing, made it public because, he said, the company was not being cooperative and was not complying with requests for information.

"If Facebook had complied with our legitimate investigative requests, we would not be making this announcement today," Becerra said. "But our work must move forward."

Will Castleberry, Facebook's VP of state and local policy, disagreed with that assessment: "We have cooperated extensively with the State of California's investigation. To date we have provided thousands of pages of written responses and hundreds of thousands of documents."

From the CNN story: "Since last June, California's investigation into Facebook has involved two subpoenas containing more than a dozen questions and several requests for documents. The demands called for Facebook to produce information about its privacy settings, developer policies and even communications involving top executives such as CEO Mark Zuckerberg and COO Sheryl Sandberg.

"'What initially began as an inquiry into the Cambridge Analytica scandal expanded over time to become an investigation into whether Facebook has violated California law,' the filing reads, 'by, among other things, deceiving users and ignoring its own policies in allowing third parties broad access to user data'."

Facebook also is being investigated by the New York State Attorney General, as well as by the Federal Trade Commission (FTC), over a range of company policies.

Published on: November 7, 2019

The Financial Times writes about how most of Unilever's some 158,000 employees "are remunerated in the same way that people in big companies have been paid for decades. They get a fixed salary; a pension and other benefits and a bonus that depends on how well they perform each year. Its 14,000 senior managers and executives can also take part in a scheme that can more than double their bonus if they invest it in Unilever shares."

But go figure. That's changing, all because Unilever was willing to pose - and then answer - a question:

"What would happen if people lower down the pay ladder had a chance to take part in the executive share scheme? And what would those people do if they were also allowed to convert more of their fixed pay and benefits into a bonus or, conversely, turn more of their bonus into fixed pay?

"Peter Newhouse, Unilever’s global head of reward, was keen to find out, which is where the experiment came in. Mr Newhouse has long thought the traditional package of a fixed salary and one-size-fits-all benefits is 'archaic.' He thinks it would be better for both workers and businesses to tailor pay according to people’s needs."

And so, some 200 employees at a variety of levels were "told they could join the executive share scheme and then, if they chose, shift the balance of their pay to take more or less of it as a bonus. Here’s what happened: 20 per cent decided to put their entire bonus into the executive scheme and 20 per cent chose to shift the balance of their fixed and variable pay. But there were some revealing differences."

Higher salaried people shifted more of their annual pay into bonuses; 90 percent of lower paid staff chose higher fixed pay.

Published on: November 7, 2019

Nielsen has a piece that starts this way:

"If you’re a woman in North America, the OECD estimates that you make $10,000 less than your male counterparts each year, and you’re charged between $1,300 and $2,135 more for products and services. It’s a gender fine that adds up to about half a million dollars over your lifetime - and that’s if you’re lucky. If you’re college-educated, a professional school graduate, a minority, or a Millennial, experts estimate that your gender fine ranges between $1 and $2 million.

"So it’s no wonder that in our recent Wise Up to Women study, we found that 32% of women in North America say they only have enough money for the basics. In fact, the World Economic Forum’s 2018 Global Gender Gap report estimates that equality won’t be a reality in North America for another 165 years. That’s 57 more years than the global average."

The story goes on: "The fact that women are under-paid, overcharged and overworked is an old story. But with the #TimesUp and #MeTOO movements, we’ve entered a new era … It’s time for businesses to be an ally for women," Nielsen argues, because "they’re increasingly showing signs of fatigue, disloyalty and higher levels of discretionary spending."

In other words, wise up … or suffer the consequences of actively discriminating against more than half the population.

You can read the piece here.

Published on: November 7, 2019

• AdWeek reports that "Amazon will deliver orders directly to Prime members’ cars this holiday season. In-car delivery is now available in 50 U.S. cities through its Key by Amazon service, which also facilitates deliveries within customers’ homes and garages."

The story notes that "Amazon first launched in-car delivery about a year and a half ago for Prime members with compatible vehicles from Chevrolet, Buick, GMC, Cadillac and Volvo. It has since added Ford to the list.

"While in-car delivery was available for the holidays last year, this is the first year Amazon is really touting it as a fulfillment option … To receive in-car deliveries, U.S. Prime members must download the Amazon Key app and link it with their connected car service accounts. On delivery day, the app allows customers to check if they’ve parked within range of the delivery location and provides notifications like when the package is en route and when it has been delivered."


• The Boston Globe reports that Amazon announced "a big expansion of its robotics operation, leasing 350,000 square feet at a shuttered drug manufacturing plant" in Westborough, Massachusetts.

According to the story, " The company plans to spend $40 million upgrading a former AstraZeneca facility, where it expects to add about 200 workers over the next few years, designing, building, and testing robotics equipment.

"The move will further cement Boston’s status as a robotics hub for the e-commerce giant, which bought North Reading’s Kiva Systems in 2012. That firm’s technology, which picks and sorts packages for faster delivery, has proved to be a key ingredient in the explosion of Amazon’s ever-more-automated logistics and distribution centers around the country, and the presence of what’s now called Amazon Robotics in Greater Boston has grown to several hundred employees."

Published on: November 7, 2019

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

• QSR reports that fast-growing Shake Shack is "redefining how restaurants look and operate. And that includes future builds as well as legacy units."

The company is installing ordering kiosks and upgrading kitchen equipment, all in the service of trying to achieve "ops simplification and frictionless guest experience." And in some cases, the chain will close locations during remodels, conceding that it will have to endure some pain in order to get to where it needs to be.

CEO Randy Garutti says that "moving forward, Shake Shack will look to urban, freestanding pads, and shopping lifestyle centers. To start. And notably, the brand plans to pilot additional formats, Garutti said, including 'a few' urban units with smaller footprints that integrate digital ordering and an improved pickup experience." Some of those could be as small as 2,000 square feet, built for "the digital and delivery experience."

This seems to be a common strategy lately … opening stores that are as reductionist as possible - without diluting the essential value proposition - in urban markets and suburban markets looking to mimic some elements of the urban experience. Works for me.


• From CNN: "More than 2 million pounds of poultry products have been recalled in eight states over fears of contamination with foreign matter such as metal, federal health officials said.

"Arkansas-based Simmons Prepared Foods, Inc. recalled the items produced from October 21 through November 4 this year. They are 2,071,397 pounds of poultry products, including ready to cook chicken whole legs, boneless skinless chicken, halal chicken leg quarters and chicken tenderloins, the US Department of Agriculture's Food Safety and Inspection Service said Wednesday."


• From USA Today: CVS plans to close 22 stores next year, after having closed 46 stores this year.

The cuts are said to "represent fewer than 1% of about 9,900 CVS Pharmacy stores nationwide."

“We believe these decisions will generate enhanced longer-term performance,” CVS Chief Financial Officer Eva Boratto said during Wednesday’s quarterly earnings call with analysts. “Our real estate footprint remained very productive, and we will look for opportunities to further improve the performance in our portfolio.”

Published on: November 7, 2019

Responding to Kate McMahon's column yesterday about our experiences at Popeyes and Chick-fil-A, one MNB reader wrote:

We had the exact same experience on Sunday at 11:30 in suburban Denver, CO. It was so awful that even if the sandwich was the most amazing thing ever, and it was not, we will not be back. I felt sorry for the employees who were clearly set up for failure, and were not handling it well. Popeyes had all the time in the world to get the relaunch perfect. Instead, it was a disaster that caused more ill-will and bad press.  As we waited for over an hour, I kept asking myself how they could have screwed this up so badly. It is simply mind-boggling. I am sorry to hear it had not improved by Monday.



Regarding the possibility that Walgreens Boots Alliance might go private, one MNB reader wrote:

Most of these private equity deals result in fewer outlets, less service, more cash for the investors and a major release of employees. It is step 1 to emulating Sears!



On another subject, from MNB reader Brian Blank:

I noted your mention of the CVS/UPS drone using a cable and winch to deliver packages to customers’ doorsteps, and how you prefer Amazon’s little parachutes.  Yes, I think the idea of tiny parachutes captures the imagination, I can think of a number of practical reasons against it.

Number one:  wind.  Lightweight little packages with sails attached…heaven knows where your pills will end up!  Second, all those parachutes would just end up in the landfill and/or killing turtles in the oceans.  Also, 3…that’s a lot of added expense as compared to the cable/winch setup.  But yeah, the idea of little parachutes does take some of us back to the little cartoon of Major Nelson’s space capsule in the opening credits of ‘I Dream of Jeannie’.

Another MNB reader wrote:

I was thinking about drone deliveries and how it may change the design of houses.  It would be much easier and secure for a drone to land on top of a house.  It makes me wonder if housing designs in the future will incorporate a rooftop landing pad, which in turn would require stairway access through the attic to retrieve the packages.



Regarding my Eye-Opener about American cheese, MNB reader Lisa Malmarowski wrote:

American cheese may be about to have its moment?

Really?

As someone from Wisconsin, I can tell you that American cheese and local foods have been “having a moment” for years.

Of course, we’re a flyover region, so we’ll just keep quiet and keep producing some of the best cheese in the world. More for us!

No passport required.



On another subject, from MNB reader Pamela Nyberg:

I am glad that McDonalds (and I guess, Walmart) held to their own rules of conduct for Easterbrook.  Throughout my career in retail, I’ve been surprised when I see one set of rules applied to senior executives and another set to everyone else.  While I can’t say it is going to make me patronize either business more, it does raise my opinion.



And finally, from MNB reader Pat Patterson, regarding the Kroger rebranding:

I speak as a former Kroger store manager comparing today’s Kroger and the several light years ago when I worked “in the stores.”  I live in a strong Kroger market and see many failings on at least one front in a company that started my retail career.  This short fall is employee training.

In 1971 as a management trainee I was sent to Cincinnati to keep the stores open during a strike.  I was impressed by the training facilities that division had for stockers, checkers and baggers.  Store level employees would spend several days doing dry runs at this facility before going on the floor.  A common practice at that time across many if not all Krogerland was for checkers to do at least a day processing test orders before being allowed to go live with real customers.  Baggers received training in such basics as cans go on bottom, not on top of the eggs or bread.  Just a few of the practices in place for employees who would have customer contact.  Quite possibly the only contact customers had with our multi-billion dollar company.

What my wife and I have experienced today in our local Kroger are employees who don’t seem to be aware of Kroger policy, cannot perform what were basic job functions, etc.  As an example, my wife spent twenty minutes to get a refund when overcharged for a gasoline purchase.  It took three separate customer service employees to come up with a number, and they still didn’t have it right.  Another incident, when an item scanned at a higher price than posted the checker and a customer service employee were unaware of the policies relating to this situation.  On another occasion I asked a grocery clerk about the location of an item and got an “I don’t know” with no effort to offer any further assistance.

I do come from a generation that expects customer service, rather than being surprised when it happens.  Given the service levels at Walmart, Aldi and other low price low service operations training and service I see as an area where Kroger can explore this void.  Yes, competing with the convenience of online and telephone ordering is a problem, but there are still a large number of customers who see brick and mortar as their desired experience.

Published on: November 7, 2019

Emerging technologies in the health and wellness segment are empowering consumers who more and more are invested in self-care … which can best be defined as a cultural trend keyed to people who want to feel good, look good, live longer and live better. In this new Retail Tomorrow podcast, recorded in front of a live audience at the recent GMDC Selfcare Summit, we talk about the technologies and trends that we heard about there, provide insights into how consumers will interact with them, and offer guidance to companies looking to invest in this burgeoning segment.

Our guests for this podcast are members of the regular Retail Tomorrow podcast family:

• Tom Furphy, CEO and Managing Director of Consumer Equity Partners.

• Nancy Giordano, a strategic futurist who specializes in the post-digital world.

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

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

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

This edition of the Retail Tomorrow podcast is brought to you by GMDC, the Global Market Development Center.

Pictured, below, from left: Kevin Coupe, Nancy Giordano, Tom Furphy, Sterling Hawkins