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    Published on: February 20, 2020

    This commentary is available as a video, above, or as text, below.  They are similar, though not identical;  enjoy both, or either.

    Hi, Kevin Coupe here and this is FaceTime with the Content Guy.

    The other day I found myself in Florida with Mrs. Content Guy, and since a rainy afternoon sort of precluded any outdoor activities, we decided with friends to do a brewpub tour.  A good time was had by all, but one of the visits actually surprised me - after 40 years together, I learned something I didn't know about my wife.

    We were at a brewpub called the Odd Breed, in Pompano Beach, which we discovered specializes in sour beers and ales.  Now, I'm not the biggest fan of these kinds of beers, so I went with the least sour beer on the menu.  But Mrs. Content Guy had something called Diner Food, which was a farmhouse ale with strawberries.  It was incredibly sour - and she loved it.  She said it was like drinking candy.

    I din't know she liked sour ales.  She didn't know she liked sour ales.  But the experience of trying something new and different had the effect of expanding her palate … and potentially creating new and incremental sales.

    That's a great business lesson, I think, about the power of sampling and exposing people to foods that can challenge their taste buds, enlarge their universes, and build fresh sales opportunities.  It is the kind of thing for which bricks-and-mortar food retailing is uniquely positioned, and that retailers should do constantly and aggressively, not just waiting for a promotional fee that will pay for it.

    After all, it is just the kind of thing that can create a differential advantage, and maybe even keep you in business.

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

    Published on: February 20, 2020

    by Kevin Coupe

    There must be something in the air.  And it smells like bread baking … still one of the best smells anywhere, capable of making even the most hardened soul hungry.

    Just the other day we referenced a piece in the Financial Times about how bread is back: "Real bread. Crusty, leavened rye, sourdough, wheat and country white have left the domain of hipsterdom and re-entered the mainstream … If the world is warming, continents are ablaze with unstoppable wildfires and liberal democracy is going up in smoke, who has the energy to care about carbs? You might as well have a cookie. Probably two."

    Now, the New York Times has a story about "a collective of about 40 bakers, millers, teachers and wheat-breeders who work with the Bread Lab, a famed research center affiliated with Washington State University that has long focused on developing wheat varieties specific to regions of the country. Since last April, using guidelines established by the lab, the collective has pursued a common goal: making a whole-grain loaf that’s familiar-looking and affordable enough to appeal to a mass audience."

    What they've come up with is something called the "approachable loaf," made in 20 states, as well as in England, Canada and Australia, each version slightly different to account for local tastes, but with 10 cents of each sale going back to the Bread Lab to fund more research and development … The Bread Lab has set three strict parameters for the approachable loaf: More than 60 percent of the flour must be whole wheat; it can’t have more than seven ingredients, all of which have to be real food, not chemical additives; and it can’t cost more than $6."

    "The loaf is something of a Trojan horse," the Times writes, "a way to sneak healthy ingredients onto the taste buds of a younger generation. Its disguise as a standard-issue sandwich bread might be just the guerrilla tactic needed to get regional whole grains integrated into the developed world’s diet."  

    Put simply, it is a way to get younger people to move away from squishy, white, less-than-optimally nutritious breads with which they've been brought up.

    Count me as being on board for this.  And retailers ought to be, too - anything they can do to improve the eating habits of their customers, and at the same time do something for sales and profits, should be on their list of strategic and tactical priorities.

    Plus … think of how great it would be if you could have that wonderful smell of fresh baked bread greeting people when they walk through the front door.

    Not just an Eye-Opener, but a chance to get people's stomachs growling.  Which to a food retailer ought to be one of the best sounds on the planet.

    Published on: February 20, 2020

    The Seattle Times reports that "Amazon has launched a pilot program to directly administer health-care services to many of its nearly 54,000 Seattle-area employees and their families."

    The story suggests that this represents Amazon's most ambitious health care-related effort, providing "on-demand chat and video consultations with medical professionals," and enabling "users to schedule in-person visits with clinicians at patients’ homes or offices."

    When people pay for those services, they do so through - natch -

    Some context from the Times story:

    "Amazon Care clinicians are employed by Oasis Medical Group, which Amazon describes as 'a medical practice licensed in Washington State.'

    "Oasis, which does not have a website and appears to be in Amazon’s Prime building on Mercer Street, according to business filings, was founded in April 2018 by Dr. Martin Levine. Amazon hired Levine, a Seattle geriatrician, in January 2018 from health-care startup Iora, a leader in patient-centered care."

    Amazon already has made a move into the prescription business with its acquisition of Pillpack, an online pharmacy that provides per-sorted prescriptions to customers.  And, it is working with Berkshire Hathaway and JPMorgan Chase on health care initiative the details of which have not been disclosed.

    While Amazon Care  is limited to the company's Seattle-area employees for the moment, the Times  suggests that, if successful, it could be made available to Amazon's more than a half-million employees around the country.

    KC's View:

    I think most people would agree that the nation's health care business is a) ripe for disruption, and b) more likely to be revolutionized by private companies looking for innovative solutions as opposed to elected officials looking for politically palatable formulas that adhere to their ideologies.

    While Amazon's continued investment in yet another segment of our lives certainly could be a matter of some concern, it seems to me that there are few companies as likely to rock the boat in a way that gets us to the dock as effectively and efficiently.  And a half million employees would be a pretty good start.

    Published on: February 20, 2020

    The Wall Street Journal reports that Blue Apron Holdings, having just had another bad quarter - it lost $21.9 million in the fourth quarter, and its customer count was down to 351,000 from 557,000 during the same period ago - "is exploring strategic options," including as sale or merger of the company.

    The story notes that while Blue Apron was an early and notable player in the meal kit space, "newer players offering cheaper or more niche meals have siphoned off customers. Rival HelloFresh SE surpassed Blue Apron as the biggest U.S. provider of meal kits in 2018. Grocers Kroger Co. and Albertsons Cos. expanded their own offerings of prepared foods by acquiring meal-kit companies."

    While it has forged partnerships with the likes of Weight Watchers and Beyond Meat, it also has "trimmed marketing in recent quarters as it attempted to curtail losses stemming in part from operational problems at a warehouse in New Jersey built to prepare and package its kits."

    KC's View:

    This writing has been on the wall for a long time.  The font is just getting bigger, and the colors more vivid.

    Published on: February 20, 2020

    Excellent piece from Bloomberg about how unimpressive sales and profit numbers from the likes of Walmart and Target are leading to some fears that consumer spending - the "lone consistent driver" of American economic growth - could be softening, which could spell trouble for an expansion that now has lasted more than a decade.

    "There have as yet been no real signs in the broad data of that changing, with unemployment, housing and gas prices remaining supportive."  But, at least some economic advisors are starting to ask questions.

    "Consumer spending is helping prop up the economy at the moment while other areas, like manufacturing, have softened," Bloomberg writes.  "So any weakening there is another sign that first-quarter U.S. economic growth could cool from the previous period’s 2.1% pace, a rate that’s below the Trump administration’s 3% goal for full-year growth. The end of interest-rate cuts, the looming U.S. presidential election and fallout from China’s coronavirus outbreak could also weigh on consumer confidence, analysts have said, jeopardizing a record-long economic expansion."

    You can read the entire story here.

    Published on: February 20, 2020

    The Wall Street Journal has an interview with Bed Bath & Beyond's new CEO, Mark Tritton, in which he lays out his plans for "remaking the troubled retailer."

    A big emphasis, he says, will be on editing the selection - there was simply too much of everything, which led to "purchase paralysis."  As a test, the company trimmed the number of can openers it stocked from more than a dozen to three. Sales went up.

    According to the story, "Tritton plans to trim inventory by more than 10% this year, part of a broader plan that also calls for spending as much as $400 million on store remodels, technology upgrades and supply-chain improvements …Other changes include wider aisles and no more piles of merchandise up to the ceiling. Checkout lines flow through more of an organized queue, making them move faster. And while he has no plans to eliminate the coupons the retailer is known for, he does want to simplify pricing by doing away with overlapping promotions and use more signs to better explain deals."

    The Journal writes that Tritton hopes to have 25 out of 1,000 stores converted to the new format by the end of the year.

    But there are some changes that can be made faster:  "The company is so behind on some basic functions that its stores don’t have Wi-Fi, meaning that shoppers can’t easily check prices online while they shop. They also don’t offer the option of buying online and picking items up in store, a service provided by most large chains.

    "Mr. Tritton said he plans to have both Wi-Fi and the buy online pickup service available in all stores by year-end. Along the way, he wants to add more private brands, which have bigger margins and can help the chain differentiate itself from rivals. Mr. Tritton said he developed over 35 private brands for Target, while serving as that chain’s chief merchandising officer."

    Tritton also plans to sell non-core business so he can add top the $300 million in cash that bed Bath & Beyond already has on hand.  For example:  Bloomberg notes that Bed Bath & Beyond "is selling its business amid efforts to slim down, renew focus on its core home-furnishings business and reverse years of stagnant sales."

    KC's View:

    One of the hardest things that Bed Bath & Beyond will have to do is retrain an entire customer base not to wait for those damned blue-and-white coupons to come in the mail before shopping there.  That's got to be a killer, and undermines its ability to communicate value beyond discounts.

    Published on: February 20, 2020

    •  CNBC reports that Walmart executives are saying that its online grocery business is having the effect of "reeling in higher-income customers … As its online grocery business grows, the company is seeing pricier items like choice cuts of meat and organic fruits and vegetables in customers’ virtual baskets, said John Furner, president and chief executive officer of Walmart U.S."

    According to the story, "Furner said Walmart’s range of groceries, including prime beef and organics, has helped draw in different kinds of customers. Once they buy groceries, he said those new or more affluent customers may purchase an item in another department of the store or part of Walmart’s website."

    Published on: February 20, 2020

    •  Engadget reports that Groupon is getting out of the business of selling products.

    According to the story, Groupon "announced its fourth-quarter results, with gross profit falling thanks to the killer mix of fewer customers, lower traffic, and tougher competition.

    "In a letter to shareholders, CEO Rich Williams said that engagement with Goods, historically a big earner for the company, was cratering. Citing an 'economically irrational retail landscape,' he said that Groupon can no longer compete in the market.  Consequently the site's going to stop trying to beat other what-the-hell-is-this-I'll-buy-it-it's-only-eleven-bucks companies, like Wish. Instead, it'll focus on becoming the place to go for experiences."

    Published on: February 20, 2020

    •  From the Houston Chronicle:

    "The next time the wind blows and the lights go out along the Texas coast, odds are your local H-E-B will be open for business, providing food, ice and a place to cool down, thanks to a new power player in Houston.

    "After years of struggling with finicky diesel generators, the grocer has contracted with Enchanted Rock Energy to provide backup power from on-site natural gas generators at 50 locations in Houston and will eventually in introduce them at stores across the state. Using an innovative business model, Enchanted Rock will operate the generators from a control room in downtown Houston and will make money using them to back up the state's electric grid almost every day."

    The story goes on:  "The idea of using small, distributed generators in many places is not new, but making it financially feasible is. And it sets the stage for renewable sources to become the primary source of electricity and backup generators like Enchanted Rock's to become the stopgap. It also reduces the need for expensive transmission lines and large-scale power plants.

    "Enchanted Rock has accomplished this without subsidies or government-funded research."

    •  From the Baltimore Sun:

    "A labor union that represents workers at Giant and Safeway said Wednesday that it has reached a tentative contract with Giant but is recommending Safeway workers reject that company’s offer and possibly go on strike.

    "The United Food and Commercial Workers Local 400 said earlier Wednesday that more than 25,000 Giant and Safeway workers in Maryland and the region could go on strike over wages, health care and retirement benefits.

    "The local has been negotiating new contracts that would cover employees at hundreds of stores in Maryland, Virginia and Washington, and some breakthrough occurred with Giant … Union officials said Safeway’s proposal would freeze new hires in Maryland and Washington at minimum wage for the next three years, maintain a 24-hour cap on weekly hours for part-timers hired after Oct. 30, 2013, making them ineligible for benefits, offer top-of-scale increases far below those in other parts of the country, cut health care funding and cut future pension benefits."

    The Des Moines Register reports that Hy-Vee has purchased four former QuikTrip locations in metro Des Moines and will reopen them as convenience stores" under its Fast & Fresh Express banner.

    The story describes Fast & Fresh Express as "a smaller version of the West Des Moines-based grocery chain's Fast & Fresh concept. Occupying a niche between convenience stores and supermarkets, Fast & Fresh stores currently operating in Iowa offer groceries, pre-made dishes and a growler craft beer station alongside traditional convenience store items and gas pumps."

    •  MyRecipes has a story about how Burger King is testing a new menu item in New Zealand - the “Chip Butty,” or Fry Burger, which basically is a french fry sandwich.

    According to the story, "Essentially, Burger King decided to put a bunch of fries - or 'chips' to subjects of the British commonwealth - between two buns, slathered them in ketchup and mayo, and called it a day. If you loved all the carbs of a fast food combo meal but hated the main course’s protein, today is the greatest day of your life."

    Not everyone is impressed:  "Leave it to a country not exactly known for its cuisine to think that jamming french fried potatoes between bread counts as a meal."  The reviews are mixed, and My Recipes suggests that for the moment at least, it seems unlikely that it will be exported to America.

    Published on: February 20, 2020

    Responding to yesterday's reference to an article about how private equity contributed to the decline of Fairway, one MNB reader wrote:

    Kevin, glad you published this information and article. Do people forget that greed drives both the Private Equity firms as well as the seller (like Fairway)?  How ignorant can you be to think these situations are a win-win. Private Equity is going to be the downfall of retail! The facts are self-evident. It’s all about $$$$$$ and that’s the state of the union these days. Frustrating and sad.

    MNB reader Gregory Gheen chimed in:

    The same thing happened to Heinz, then Kraft/Heinz. It can happen with large Private Equity firms such as 3G and Warren Buffett as well as smaller firms.

    Regarding WeWorks' decision to get into the food industry with R&D development spaces, one MNB reader wrote that this is not an entirely new trend:

    For nonprofit examples, see ACE Networks in Athens Ohio, which started one in the late 1990s I think (I saw a presentation about it in 2005), La Cocina in San Francisco, etc.  (They have a cookbook out, featuring stories of their various participants, along with a couple recipes from each.)

    DC has a bunch of very for profit examples, a couple are under the Union Kitchen moniker.

    Maybe WeWork can differentiate with a cross market brand.  But probably not, because success isn't based on awareness of the incubator but the quality of the technical assistance.

    Published on: February 20, 2020

    Digital strategies aren't just about creating alternatives to the bricks-and-mortar shopping experience.  Done effectively, they can actually bring people back to the store, while also eliminating customer anonymity, creating rich and actionable data, and deepen relationships between the store and consumer in a way that transcends the simple transaction.

    Our newest Retail Tomorrow podcast, which brings together a terrific panel of experts from a wide range of disciplines, was recorded at Google’s New York City offices during the recent National Retail Federation (NRF) Show.  Our guests:

    •  Matt Alexander, co-founder of Neighborhood Goods, an unusual and fascinating take on physical retailing with stores in Dallas and New York.

    •  Patrick Flanagan, senior vice president of digital marketing and strategy for Simon,  which has more than 200 properties in 37 states and Puerto Rico.

    •  Tom Furphy, CEO and Managing Director of Consumer Equity Partners, a member of the Retail Tomorrow podcast family and a regular contributor to "The Innovation Conversation" on MNB.

    •  And Jalna Silverstein, a leader in Ernst & Young’s Transaction Advisory Practice and its Real Estate, Consumer Experience and Retail Strategy.

    You can listen to the podcast here.

    This Retail Tomorrow podcast is sponsored by the Global Market Development Center (GMDC).

    Pictured below are our panel members, from left:  The Content Guy, Matt Alexander, Tom Furphy, Patrick Flanagan, Jalna Silverstein.