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    Published on: May 28, 2020

    KC offers a perspective from yesterday's "Re-Invest to Re-Invest Leadership Summit," in which he finds a common theme in suggestions made by Albertsons co-chairman Jim Donald.

    Published on: May 28, 2020

    by Kevin Coupe

    The New York Times this morning reports that more than 140 years after Thomas Edison invented the light bulb and founded a company called General Electric, that company - now referred to as G.E. - has sold its lighting business.

    According to the story, "G.E. sold its lighting business to Savant Systems Inc., a home automation company based in Massachusetts. G.E. did not disclose the terms, but said the lighting division’s headquarters would remain in Cleveland and its more than 700 employees would transfer to Savant upon completion of the sale. The deal also included a licensing agreement to allow Savant to use the G.E. brand."

    The Times writes that "analysts said the sale, announced Wednesday, was not a surprise. G.E. had sought to offload its lighting division for several years, as it focused on more profitable areas such as renewable energy and health care technology.

    "But in the annals of American corporate culture, where G.E. and the light bulb have long been synonymous, the uncoupling struck some as a pivotal moment, as if Kellogg had jettisoned its cornflakes business or Ford had stopped making cars."

    In other words, an Eye-Opener.

    Published on: May 28, 2020

    Breaking news from Politico this morning:

    "Workers filed 2.1 million new unemployment claims last week, the Department of Labor reported, suggesting about a quarter of the workforce is seeking jobless aid to weather the economic crisis caused by the coronavirus.

    "The latest figure indicates that the pandemic has pushed 40.8 million Americans out of work in just 10 weeks.

    "DOL also reported that another 1.2 million people applied for benefits under the new temporary Pandemic Unemployment Assistance program created for individuals who are typically ineligible for unemployment insurance, such as self-employed workers. With those people added, the raw unadjusted number of claims filed last week could be as high as 3.1 million, though there could be some overlap between the new program and traditional unemployment benefits."

    The New York Times also provides some context:

    "The report marks the eighth week in a row that new jobless filings dipped from their peak of almost 6.9 million, but the level is still far above historic highs.

    "The latest claims may not only be a result of fresh layoffs, but also evidence that states are working their way through a backlog. State unemployment offices that manage and distribute benefits have been stretched by the scale of the layoffs. And overcounting in some places and undercounting in others has made it difficult to precisely measure the number of layoffs caused by the pandemic — and devise policy responses — as shutdowns lift and state and local economies start to reopen.

    "Shelter-in-place orders and business restrictions have been lifting across the country, and some workers have been called back to work. But the reopenings remain bumpy and incomplete, and flare-ups of the coronavirus continue to disrupt business."

    Published on: May 28, 2020

    Bloomberg reports on new McKinsey & Co. surveys saying that "even in cities hardest hit by the pandemic, more than 7 in 10 people have continued to visit stores for groceries and other essentials."

    Some context from Bloomberg:

    "Online grocery sales have surged as much as 200% this year, according to Earnest Research, part of a broader boom in home cooking now that thousands of restaurants are closed. The $840 billion grocery industry has been one of the few bright spots amid a pandemic that has infected about 1.7 million Americans, killed almost 100,000 and crushed the economy. Walmart Inc., Inc. and startup Instacart Inc. are all reaping the rewards, and some e-commerce prognosticators say the online grocery industry has finally hit an inflection point promised for decades.

    "But how much of that spending shift will stick is guesswork. It’s difficult to predict lasting behavior changes from a fear-fueled surge - growth peaked more than a month ago. Problems with online food shopping also persist. The operations are expensive to run, and limits on capacity and inventory abound right now with supply chains upended. The shopping experience can be clunky and confusing, especially for older consumers. And one thing the pandemic hasn’t changed is that Americans still like to squeeze their cantaloupes and eyeball their rib-eyes."

    The story goes on:

    "Among those who use online grocery pickup services, only half include produce in their orders primarily due to concerns over quality, according to Field Agent, an industry researcher. Fresh food is the thing that consumers are most likely to buy in physical stores exclusively once the pandemic subsides, according to research from Evercore ISI. Items like bottled water, pet food and other bulky, non-perishable household staples have better prospects online, due to the hassle of lugging them out of stores."

    KC's View:

    The most important thing to remember about online grocery shopping vs. bricks-and-mortar stores is that it really isn't an either-or proposition.  It is all about the "and."

    Of course shoppers are more confident in the ability of retailers to deliver on an e-grocery promise that focuses on packaged products as opposed to fresh foods.   That simply makes sense, and that's one of the things that the pandemic has made clear - when it comes to products such as toilet paper and paper towels and laundry detergent and cookies and cereal and soft drinks and all those sorts of things, there is absolutely no advantage to going into the store.  In fact, there is an enormous advantage of having such things delivered, or even having regular purchases locked into an auto-replenishment program.

    Not necessarily so when it comes to fresh foods … though as retailers become more accomplished at e-grocery, and earn consumers' trust over time, that also may change.

    One of the things that this all does is point us toward one future of the supermarket business - in which the stores are smaller and more focused on fresh food and service, in which there is a limited selection of grocery on shelves, with a broader selection available online, in which customers can access delivery and pickup services, in which stores and customers are serviced  by micro-fulfillment centers and dark stores that reduce costs and increase responsiveness, in which shoppers don't have to think about certain categories because they are part of an auto-replenishment eco-system that keeps them satisfied and in-stock with regularly purchased items.

    That's just the beginning of one future.  (Not every future, to be sure.)  But it is a future that, at its core, is relentlessly customer-centric.

    But one note … this is a future that companies like Amazon already have envisioned.  So it isn't like this is some wild, futuristic speculation.

    Not everyone agrees with me on this, to be clear.

    The New York Times "On Tech" newsletter has a piece the other day by Shira Ovide in which she argued that "the most helpful shopping ideas right now are coming from blah big box stores like Walmart and Lowe’s. It’s surprising, yeah. And Amazon, the company that’s determined to reinvent everything, is kinda boring."

    She wrote that sure, "Whole Foods stores are offering home deliveries now. But it’s other retailers that are rethinking how their physical stores can work hand-in-hand with online shopping … Amazon’s digital experiments for grocery shopping outside Whole Foods are interesting, but they lack oomph. Three years after Amazon opened two drive-in grocery pickup outposts in the Seattle area, there are still only two. Amazon doesn’t do small things. If these pickup spots are still experiments, it’s a good bet Amazon doesn’t think they’re working."

    But I would argue that there is "working,:" and there is working.

    Sometimes even ideas that don't work out, or are not worthy of rollout, provide all sorts of learnings about what is possible.

    You want oomph?  I think we may see a lot of it in the supermarket industry, from a number of players.  But I wouldn't count out Amazon just yet.

    Published on: May 28, 2020

    Reuters reports that Amazon "plans to offer permanent jobs to about 70% of the U.S. workforce it has hired temporarily to meet consumer demand during the coronavirus pandemic … The decision is a sign that Amazon's sales have increased sufficiently to justify an expanded workforce for order fulfillment, even as government lockdowns ease and rivals open their retail stores for pickup."

    According to the story, Amazon "will begin telling 125,000 warehouse employees in June that they can keep their roles longer-term. The remaining 50,000 workers it has brought on will stay on seasonal contracts that last up to 11 months, a company spokeswoman said."

    Reuters notes that Amazon "will begin telling 125,000 warehouse employees in June that they can keep their roles longer-term. The remaining 50,000 workers it has brought on will stay on seasonal contracts that last up to 11 months, a company spokeswoman said."

    KC's View:

    Glad to hear it.  I was wondering what the layoffs of all those people at some point would do to an already fast-rising unemployment rate.

    Published on: May 28, 2020

    From the Washington Post this morning:

    "The Food and Drug Administration has temporarily loosened labeling and information rules for food manufacturers for the fifth time during the novel coronavirus pandemic.

    "The changes are intended to ease manufacturers’ supply-chain snags, but advocacy groups say they are concerned that the changes will become permanent and that they will present problems for consumers concerned about tracking the provenance of their food.

    "The new guidance allows manufacturers to substitute hard-to-source ingredients in their products without changing the label. And it allows vending machine operators latitude to omit calorie information for foods sold."

    The Post notes that "other temporary changes that the FDA has issued since the start of the pandemic address nutrition labeling on food packages, menu labeling at fast-food chains, and two involving the packaging and labeling of eggs."

    "The food industry has informed us that there are supply disruptions or shortages for some ingredients. As a result, manufacturers may need to make formulation changes, such as omissions or substitutions of minor ingredients," FDA spokesman Peter Cassell tells the Post.  "To address this situation, and to continue to support the food supply chain during this emergency, the FDA is issuing guidance to industry to provide temporary flexibility for manufacturers to make minor formulation changes in certain circumstances without making conforming label changes."

    KC's View:

    The devil is in the details, and you can count me among the people who would be concerned if these changes are anything but a temporary fix to pandemic-related supply chain issues.

    Longtime MNB readers know that I firmly believe in exacting, precise and detailed food labeling - including, wherever possible, country of origin labeling (COOL) that provides consumers with as much information and transparency as can be legitimately offered.

    I get a little nuts about this - I can do a five-minute rant about so-called frozen blueberry waffles that don't have any actual blueberries in them.

    If this is a quick fix to address crisis conditions, fine.  But if the food industry things is a way to get a foot in the door to create a longer term relaxation of labeling rules, then I think it is not doing its shoppers any favors, and in the end, not doing itself any favors.

    Published on: May 28, 2020

    USA Today reports that Netflix "recently forecast it will have over 190 million subscribers worldwide at the end of the quarter. Its normal growth rate, plus a surge due to the pandemic, could push that number above 200 million by midyear. In a market in which most people pay for only two or three streaming services, Netflix's size and rapid rise mean trouble."

    Trouble, that is, for all the new streaming services that have come online in recent months, including HBO Max, Disney+, Apple TV+, CBS All Access, Peacock, and Quibi.

    The story goes on:  "Among Netflix's advantages are that it has turned its subscriber base into a revenue-creating machine. It should bring in $25 billion this year. Net income should top $300 million.

    "Its one major weakness is that it has made and must continue to make a huge investment in original programming to keep current subscribers and add new ones. It carries $14 billion on its balance sheet, against cash of $5 billion. Investors have largely ignored that challenge. Netflix has a market value of $188 billion."

    KC's View:

    I have no idea how the economics of this will play out over a long period of time;  it is hard to imagine all of these services, plus Amazon Prime Video, plus a bunch of new ones that are likely to emerge, continuing to be grow at this rate.  At some point, there may have to be some mergers, or some reduction in the fees charged to viewers - it is hard to know what the traffic will bear.

    But I do think there is a valuable lesson in how they are coming to market and differentiating themselves - it is all about creating proprietary content that cannot be found elsewhere.  

    CBS All Access makes itself essential with its Star Trek offerings, including the new "Star Trek: Picard" and "Star Trek: Discovery" and the planned "Star Trek: Strange New Worlds."

    Amazon Prime Video has tons of stuff I love, including "Bosch" and "Jack Ryan."

    I was a little skeptical about Disney+, but ended up getting hooked on "The Mandalorian" and am over the moon about "Hamilton," which will debut on July 3.

    Haven't really made up my mind yet about Apple TV+ or HBO Max.  There are, after all, only so many hours in the day.

    But this is what retailers have to do.  Offer products and services (and even attitude and vibe) that nobody else has.  Otherwise, you become me-too, which is a dangerous place to be these days.

    Published on: May 28, 2020

    Random and illustrative stories about the global pandemic and recovery efforts, with brief, occasional, italicized and sometimes gratuitous commentary…

    •  In the United States, there have been 1,745,911 confirmed cases of the Covid-19 coronavirus, with 102,114 deaths and 490,151 reported recoveries.

    Globally, there have been 5,807,702 confirmed cases of the coronavirus, 357,807 deaths, and 2,511,143 reported recoveries.

    •  The store closure news only gets worse.

    USA Today reports this morning that "Coresight Research, which tracks retail openings and closings, has upped its projected store closures for 2020 from 8,000 at the beginning of the year to 15,000 at the beginning of March to about 25,000 now."

    Coresight CEO-founder Deborah Weinswig describes this as "unlike anything the industry has ever seen,” and predicts that retail bankruptcies in June will be double the number that take place in May.

    •  From USA Today:

    "Restaurant chain Le Pain Quotidien filed for Chapter 11 bankruptcy protection Wednesday and revealed plans to sell itself to another restaurant company in a bid to avoid liquidation.

    "The company is proposing a sale to New York-based Aurify Brands in a deal that would allow at least 35 of its 98 U.S. restaurants to reopen, according to a court filing. The rest appear to be at risk of permanent closure."

    •  USA Today reports that "Advantage Rent A Car filed for court protection from its creditors late Tuesday, following larger rival Hertz into Chapter 11.  The move comes amid a massive slowdown in leisure and business travel" in the wake of the coronavirus pandemic.

    The story notes that Advantage "is owned by Toronto-based Catalyst Capital Group," and that this is not a new situation for the company - it is Advantage's third bankruptcy filing.  It also filed in 2008 and 2013, and the "most recent bankruptcy ended with its sale to Catalyst. Advantage went on to acquire E-Z Rent-A-Car under Catalyst's ownership."

    Sounds like it could be yet another situation in which a company that might've been in trouble anyway can use the pandemic as an excuse for bankruptcy.

    •  USA Today reports today that Tuesday Morning, described as an off-price retailer that "sells a wide variety of merchandise including home decor, bath and body goods, crafts, food, and toys," has declared bankruptcy, hoping "to stay in business while using the bankruptcy process to close about 230 of its 687 stores this summer."

    •  Axios reports that "Disney on Wednesday submitted a proposal for a phased reopening of its iconic Walt Disney World theme park in Florida beginning on July 11 … Disney's plan is to open its Magic Kingdom and Animal Kingdom parks on July 11 and to open EPCOT and Hollywood Studios on July 15.

    "The parks will take a number of safety precautions, including temperature checks of employees and customers. Disney plans to add hand sanitizing stations and will limit the parks' capacity."

    The plan requires approval from local and state officials.

    The story notes that this matters because "as a global leader in entertainment and tourism, Disney's reopening is being watched closely by companies and consumers around the world to see whether a safe reopening of a major venue is possible."

    Disney's Florida parks were closed in mid-March. 

    No plans for opening Disneyland in California have yet been announced.

    Published on: May 28, 2020

    •  The New York Times this morning reports that "a new court filing Wednesday morning asserts that pharmacies including CVS, Rite Aid, Walgreens and Giant Eagle as well as those operated by Walmart were as complicit in perpetuating the crisis as the manufacturers and distributors of the addictive drugs.

    "The retailers sold millions of pills in tiny communities, offered bonuses for high-volume pharmacists and even worked directly with drug manufacturers to promote opioids as safe and effective, according to the complaint filed in federal court in Cleveland by two Ohio counties."

    The Times goes on:  

    "Most of the companies did not respond to a request for comment. CVS emailed a statement that said, 'Opioids are made and marketed by drug manufacturers, not pharmacists. Pharmacists dispense opioid prescriptions written by a licensed physician for a legitimate medical need.'

    "The other companies have made similar arguments in the past."

    Published on: May 28, 2020

    •  Nancy Winé, for nine years an executive at Amazon, most recently as "Head of CPG Scale," has been hired by Kroger to be VP-Advertising at its 84.51° business.

    Published on: May 28, 2020

    •  Larry Kramer, an author and playwright who used his work and high profile to fight for an aggressive national response to the AIDS epidemic, has passed away of pneumonia.  He was 84, and was best known for his play "The Normal Heart."

    The Wall Street Journal this morning writes that "early in his activist years, Mr. Kramer often criticized Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and now a leader in trying to combat the Covid-19 pandemic. During the AIDS crisis, activists often saw the agency as too slow to pursue research on treatments. In time, Dr. Fauci gave Mr. Kramer credit for his impact.  'There is no question in my mind that Larry helped change medicine in this country,' Dr. Fauci told The New Yorker in 2002. 'In American medicine there are two eras, Before Larry and After Larry'."

    Published on: May 28, 2020

    Got a number of reactions to yesterday's story about the growth of private label sales during the pandemic.

    One MNB reader wrote:

    The WSJ article reflects the "traditional/old viewpoint" of private brands with their comments that all the retailer needs to do is simply place their brand on the shelf........that is not what I'm seeing in the market.

    Retailers who have actively marketed their private brands to their shoppers have become industry leaders: Costco/Kirkland, Whole Foods/365, Trader Joe, Kroger/Simple Truth, Albertsons/O Organic, Target/relaunch of their portfolio of brands and more examples out there from regional retailers.

    Shoppers are looking for products/brands that meet their needs and Retailers have stepped up in the last 10 years to develop a portfolio of brands across the store that do this, equally and in many instances better than the mid tier manufacturer brands.

    That is why Private Brands should increase its share of the market.  Simply placing their brand on the shelf next to a manufacturer  brand and hoping shoppers will discover it, does not work.  Passive or No Marketing is not an effective strategy for national. brands nor for private brands.

    MNB reader Pat Smith wrote:

    Fred Meyer, a Kroger retailer here in the Pacific Northwest, has done an outstanding job with their private label Simple Truth organic and natural products. They dominate most categories where they participate. In some other segments, paper products particularly come to mind, are totally dominated by Kroger labels. Branded shelf space has shrunk dramatically in bath tissue, towels, plates and napkins taken over by Kroger Labels. No longer in the business, but I believe either Nielsen or IRI would confirm private label share growth.

    From another reader:

    It is a unique economic time in America.  Never before have so many consumers tried private brands (Ref. Consumption in March COVID panic buy), and never before have so many consumers needed the value and quality they provide (Ref. 20% reported unemployment figures).  As a longstanding CPG journeyman (General Mills, Nabisco, Kraft, Kraft Heinz, Newell), we should all remember that the “first moment of truth” is the retailer all of our consumers choose to shop at, and as such that BRAND- their name, has significant and unparalleled value.  May consumers be well served by the value, quality, and service that retail brands are providing today.  More of us are smiling with Brian Sharoff …. Saluti!

    Finally, this note from MNB reader Rich Heiland, responding to my piece about the demise of Nel Centro, a favorite Portland, Oregon, restaurant:

    I used to do a lot of work in Portland and usually based at the Hotel Modera. The first time I stayed there I had my wife with me. We noticed the crowd gathering at the Nel Centro fire pits so went out.

    Alas, it looked like all the pits had been claimed. We were standing next to a group and I said to Connie we might as well go in the bar when someone said “Oh, please join us.” So, we did and in an instant were in a community.

    It was that way every time I stayed there. Late afternoon communities formed - regulars, drop-ins, strangers. I swapped emails, still in touch with some folks I met.

    I have to think and hope, this is temporary....

    That's what great retailers and restaurants do.  They create community … you know, a place where everybody knows your name.

    Published on: May 28, 2020

    I'm happy to announce that tomorrow, at 5:30 pm EDT / 2:30 pm PDT, we're going to do it again … our fourth MNB Virtual Happy Hour.

    The folks at GMDC have once again agreed to sponsor and host it, and I'll have a link and instructions for you later this week.

    Hopefully, you can put it on your calendar … choose a libation for Happy Hour … and then prop up your laptop or warm up your computer on Friday, May 29, for a conversation and a drink.  (You don't have to let me know you're coming, but it would be nice to know.)

    To join us, click here.