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    Published on: April 15, 2021

    Kroger yesterday announced that the first of its new Customer Fulfillment Centers (CFC), powered by robotics and machine learning technology developed by Ocado, is now online in Monroe, Ohio, about 30 miles north of the retailer's Cincinnati headquarters.

    At the same time, Kroger said that it has begun a "soft" launch of a CFC in Groveland, Florida, about 30 miles west of Orlando, serving friends and family.  It is notable that Kroger has no stores in Florida, though it does say the CFC there will be able to serve stores in southern Georgia and southern Alabama.

    Yael Cosset, Kroger's CIO and Chief Digital Officer, said yesterday that the Florida CFC will offer digital customers "an amazing experience," would be able leverage a high recognition level of Kroger's name in the state, though he also said the company would not yet "share too many details about our marketing approach" there.

    At least another nine CFCs of varying sizes are expected to be embedded in the Kroger ecosystem by the end of next year, with each one able to serve customers within a 90-mile radius, part of an evolving hub-and-spoke scenario that Kroger believes can be most responsive to shoppers.

    Rodney McMullen, Kroger’s chairman and CEO, emphasized in a virtual press conference yesterday that the CFCs need to be seen as a part of a broader ecosystem - in which stores remain the lynchpin - that "will be able to serve customers however they want to be served."  

    The CFC network being built by the Kroger-Ocado partnership, however, is predicated on the bet that Kroger's digital business, which more than doubled during the pandemic year of 2020, will continue to accelerate and double yet again by 2023.

    Here is Kroger's description of how the CFC works:

    "Kroger Delivery is a vertically integrated network, enabling coverage of up to 90 miles from the hub location and significantly more territory when spoke locations are integrated. In these highly automated Customer Fulfillment Centers, over 1,000 bots whizz around giant 3D grids, orchestrated by proprietary air-traffic control systems in the unlicensed spectrum. The grid, known as The Hive, contains totes with products and ready customer orders.

    "As customers’ orders near their delivery times, the bots retrieve products from The Hive and are presented at pick stations for items to be sorted for delivery, a process governed by algorithms that ensures items are intelligently packed. For example, fragile items are placed on top, bags are evenly weighted, and each order is optimized to fit into the lowest number of bags, reducing plastic use. 

    "After being packed, orders are loaded into a temperature-controlled Kroger Delivery van, which can store up to 20 orders. Powerful machine learning algorithms dynamically optimize delivery routes, considering factors like road conditions and optimal fuel efficiency.

    "The Monroe CFC measures 375,000 square feet, currently carries thousands of popular grocery products, and represents one of the models engineered for the flexible Kroger Delivery network, which will also include smaller facilities as well as spoke locations. The CFC can fulfill thousands of orders per day and has the capability to support fulfillment of pickup orders."

    Here is a video provided by Kroger:

    Bloomberg points out that Kroger's approach is different from that taken by others in the game:

    "Competitors including Walmart, Albertsons and Ahold Delhaize are taking a simpler approach, testing so-called 'micro-fulfillment' centers that can fit snugly in the back of a store or nearby. They’re cheaper and faster to build, are located closer to customers’ homes and could eventually replace many of the human order pickers that now clog the aisles at supermarkets across the nation. Walmart, which currently employs 170,000 people just to pick and pack online orders, now plans to build 100 micro-fulfillment centers, with more likely to come."

    USA Today provides its perspective:

    "Kroger shoppers can already get groceries delivered to their homes across the country. Currently, most of that service is provided through Instacart and other third-party partners.

    "What's changing is Kroger taking over a huge chunk of its own deliveries. With the switch, the company says, it will improve the consistency and quality of service … Customers could also save money as Kroger takes a hard look at its $9.95 delivery fee. The company is mulling lowering that for deliveries a few days in advance."

    Kroger's own drivers will be able "to make on-the-spot adjustments to your order. They broke an egg? They'll give you a discount. Don't want the Diet Coke they swapped out for your Coke Zero Sugar? They'll leave that off and adjust your order.

    "McMullen doesn't see home delivery replacing brick-and-mortar stores. Instead, he envisions many customers' shopping habits evolving to where they buy staples like cereal or toilet paper for home delivery while continuing to shop for items like produce in person."

    Bloomberg also suggests that McMullen seems to be hedging his bets a bit, saying in an interview that the Ocado-powered CFCs are just "'one piece of the total puzzle' in digital, and that the sheds will be supplemented by an aggressive expansion of curbside pickup, which car-crazed Americans prefer. Ocado will also provide software to Kroger stores to help process those curbside orders. McMullen won’t say when the fancy Ocado sheds might actually be more profitable than the old-fashioned method of customers with shopping carts walking aisles. The process, he says, will be 'a journey'."

    KC's View:

    McMullen said yesterday that the launch of the CFC was a "momentous" day, and that would seem to be the appropriate word.

    I have to be honest here.  I watch all those bots whizzing around, and it just seems so far away from what has always appealed to me about food retailing - the smell of a fresh bakery, the conversation with a fish monger who chooses a great piece of salmon for me, or the choosing of a great tomato that I can use when crafting a sandwich.

    But that's where we are today.  Kroger is playing a different game, and has to - the pitched competition with the likes of Amazon, Walmart, Target and Albertsons is taking place at a different level, and so must the innovation that drives it.

    I do think it is fair to say that if today was a momentous day, it also represents a momentous bet … I think about these ginormous CFCs, which take around three years of operation to break even, and that should be able to do everything from providing one or two hour delivery (though not just yet) to serving stores that are providing click-and-collect service (though not at the moment), and I do have to wonder if the MFC (micro-fulfillment center) approach is better, if only because these are closer to the action.

    That said, part of the Kroger's bet is that the CFC technology actually will be able to drill down on what consumers want and need so effectively that the considerable investment will pay off not just in terms of sales and profits, but in terms of shopper satisfaction.

    Big ask.  Big bet.  But it's a big game

    Published on: April 15, 2021

    Walmart said yesterday that by the end of the current fiscal year, it expects that two-thirds of its hourly store positions will be working full-time, with consistent schedules.

     Drew Holler, Senior Vice President, Walmart U.S. People Operations, laid out the reasons for the shift:

    "We’re uniquely positioned to offer a combination of stability and room for growth that few others can match. We are prioritizing consistent schedules, skills training and new pathways for growth, so all jobs at Walmart can lead to careers. We know offering more full-time opportunities along with skills, training and equipping associates with tools to make work easier will help us continue to attract and retain top talent.

    "Having a stable, reliable job is important. At Walmart, that starts with having a consistent, predictable schedule that makes it easy for associates to plan for all of the important things going on outside of work. That’s why we’re offering full-time associates set, consistent schedules, with the same hours on the same days each week. For example, an associate who works in the deli could go into work each day knowing they’ll be off in time to pick up their kids from school.

    "This approach has other benefits, too. Associates will be scheduled to work alongside their teammates and their leader on every shift. This is one way we’re building on the team-based structure we introduced in stores last year. Having these small teams of eight to 12 associates work together will lead to a more connected, productive and enjoyable work environment. Associates are cross-trained within their team’s area of the store, and they get real-time, one-on-one feedback and mentorship from their leader. All of this helps them build careers with Walmart if they choose. And all of this ultimately results in even better customer service."

    KC's View:

    "Even better customer service." 

    That's the key … and it is why, I suspect, Walmart believes that this investment in a higher-percentage full-time workforce will pay off in the future.

    Walmart is doing this even as it is raising the floor on wages - while there will be plenty of arguments that not enough, the fact remains that Walmart is investing in employees to a greater degree than ever, which should have the effect of helping those employees feel invested in the company.

    I find myself wondering if we're going to see companies like Walmart and Amazon engaging in their battle for supremacy on a new front - labor.  Amazon certainly gets its share of criticisms of how it treats its workers, and it seems to be in the crosshairs of political and regulatory attention to a greater degree than Walmart at the moment.  (Though this could change with one bad piece of publicity.)

    Walmart may see this as an opportunity to change perceptions, which could have the effect of changing shopper behavior and preferences.

    Published on: April 15, 2021

    The Seattle Times reports that Amazon has posted what is called the "most detailed look yet at its workforce demographic data, showing what many critics of the company have long suspected: Black, Latino and female employees are underrepresented in the best-paid jobs at Amazon.

    "The only segment where the number of women reflects countrywide demographics is among the company’s nearly 850,000 U.S. employees working lower-paid jobs, including in warehouses. Black and Latino workers are overrepresented in that slice of Amazon employees."

    “This is some of the most important work we have ever done, and we are committed to building a more inclusive and diverse Amazon for the long term,” Amazon’s head of human resources, Beth Galetti, said in a blog post. “I am grateful to the many employees who continue to share their experiences with me and other senior leaders. Tough feedback is always uncomfortable to hear, but their stories remind us that we have more work to do to achieve our goals.”

    Some excerpts from the story:

    •  "Diversity figures are most skewed among Amazon executives. Just 22% of Amazon executives globally are women. Seventy-one percent of Amazon executives in the U.S. are white, 20% are Asian, and a combined 8% identify as Black or Latino."

    •  "The recent union campaign at Amazon’s Bessemer, Alabama, fulfillment center, where nearly 80% of workers are Black, also highlighted issues of racial equity in Amazon’s workforce. Though the union drive was unsuccessful, its call for higher pay and less repetitive work for Amazon’s warehouse employees struck a chord with politicians and seems likely to continue at Amazon facilities beyond Bessemer."

    •  Last year, Black workers made up 31% of Amazon’s lowest-paid U.S. employees, which include warehouse and call-center workers, while Latino workers comprised 26.4%, the data shows. About half of Amazon’s lowest-paid workers are women — a higher percentage than in any other segment of the company.

    •  "Black employees in Amazon’s corporate offices have said they’re paid less and promoted less rapidly than their white peers, a recent Vox investigation found. Charlotte Newman, a Black Amazon Web Services (AWS) employee, last month sued Amazon over alleged racial and gender discrimination, saying the tech giant gave her a job title and a salary out of step with the higher-level work she actually performed."

    •  "The pay gap between Amazon warehouse workers and employees in its corporate offices can be stark. Warehouse wages start at $15 an hour, and in 2019, the typical worker earned $36,640 a year, the company said. Corporate employees’ average base pay is $150,000."

    KC's View:

    It's probably not fair to say that Amazon has a blind spot about this stuff, since it does seem to be acknowledging the issues (albeit under pressure from activists and investors).  But the company clearly has a lot of work to do.

    I've said it before and I'll say it again - if you want to be perceived as being the very paradigm of a 21st century company, then you have to behave like a 21st century company.

    Published on: April 15, 2021

    The Wall Street Journal this morning has an excellent piece about how Amazon uses its presence in numerous business and channels to exert pressure over vendors - in essence, saying that if you do not acquiesce to our terms here, we're not going to do business with you over there.

    "Amazon’s tactic of leveraging dominance in one business to compel partners to accept terms from another is a familiar one, said former Amazon executives and officials at companies on the receiving end. Amazon’s tactics, they said, go beyond typical product bundling and tough negotiating in part because the company threatens punitive action on vital services it offers, such as its retail platform," the Journal writes.

    "Partners often acquiesce to Amazon’s demands, the executives and officials said, because of its power in a range of market sectors."

    The problem is, "When a company uses its dominance in a market to impose terms on customers, it can raise antitrust concerns," the Journal writes.  "Regulators have long examined whether a dominant company is limiting customer choice by forcing buyers that want one product or service to buy another as well, a tactic sometimes called 'tying.'  Federal authorities have pursued tying allegations as part of antitrust lawsuits against companies ranging from John D. Rockefeller’s Standard Oil Co., broken up in 1911, to Microsoft Corp. , which in 2001 reached a settlement with the Justice Department over several allegations, without admitting wrongdoing, including that it unfairly tied its internet browser to its operating system.":

    You can read the piece here.

    KC's View:

    I know it seems like a lot of Amazon news this morning, but that's just the way the headlines landed.

    The thing is, none of these stories is particularly positive … they all reflect the fact that Amazon is an ever-growing target for lawmakers, regulators and journalists … and expose the company's apparent vulnerabilities.  Amazon tends to couch all its responses in an "it-is-all-good-for-the-customer" patina, but there may be a point at which that will no longer be good enough.

    Published on: April 15, 2021

    The New Yorker has, as usual, a contextual look at the unsuccessful effort to unionize the Amazon warehouse in Bessemer, Alabama, and suggests that this is just part of a continuum that will closely examine how it does business and treats employees, and lead to change.

    An excerpt:

    "Amazon is increasingly defining what entry-level labor now looks like in America, not least because the company’s dominance across so many sectors of the economy is leading rivals to adopt its ways. This new form of work has replaced countless brick-and-mortar retail jobs, but it is more physically taxing than those jobs; it is also less remunerative and purposeful than much of the assembly-line work it more closely resembles.

    "The jobs are highly repetitive and relentless, and have become only more so as the warehouses have become further automated, with more robots for workers to keep pace with and more surveillance tools to track their performance. The jobs are also highly isolating, a situation made worse by the pandemic, when people who had once worked together were spaced out to deter contagion. In addition to raising pay, which now starts at slightly above fifteen dollars an hour, one of the chief goals of union activism at the company has been to ratchet back the relentlessness and make the jobs more sustainable; as it now stands, many warehouses experience a-hundred-per-cent turnover per year."

    You can read the piece here.

    Published on: April 15, 2021

    Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

    •  In the United States, there now have been a total of 32,149,223 confirmed Covid19 coronavirus cases, resulting in 578,092 deaths and 24,696,161 reported recoveries.

    Globally, there have been 138,931,822 confirmed coronavirus cases, with 2,987,958 resultant fatalities and 112,582,533 reported recoveries.  (Source.)

    •  The Washington Post reports that "at least 123.9 million people have received one or both doses of the vaccine in the U.S.  This includes more than 76.7 million people who have been fully vaccinated … 251 million doses have been distributed."

    •  From the Wall Street Journal:

    "Newly reported coronavirus cases in the U.S. edged down, as a pause on Johnson & Johnson’s Covid-19 vaccine was kept in place.

    "The U.S. reported more than 75,000 new cases for Wednesday, according to data compiled by Johns Hopkins University that was published early Thursday … Wednesday’s tally was down slightly from the 77,878 new cases reported for Tuesday, but remained elevated compared with levels seen in early- to mid-March, according to Johns Hopkins data."

    •  Unlike a year ago, when relatively little was known about the Covid-19 coronavirus and how it was spread, many scientists and public health experts now are saying that " the outdoor spaces now warming under spring sun should be viewed as havens in the battle against a stubborn virus and restriction-induced fatigue," the Washington Post reports.  "For more than a year, the vast majority of documented coronavirus clusters have been linked to indoor or indoor-outdoor settings - households, meatpacking plants, nursing homes and restaurants. Near-absent are examples of transmission at beaches and other open spaces where breezes disperse airborne particles, distancing is easier, and humidity and sunlight render the coronavirus less viable."

    Now, "as the nation settles into its second year with the virus, that understanding is increasingly recognized in public policies. Ballparks are welcoming fans. Open-air graduations and county fairs are being planned. Outdoor gathering limits are rising or being dropped altogether. The playgrounds and public lands that were off-limits last spring are mostly open.

    "Even so, public health guidance about the outdoors remains cautious: Stay distanced, avoid crowds and wear a mask — even, in many jurisdictions, on beaches and trails."

    •  On the vaccination front, the Wall Street Journal writes that "the federal government’s recommendation to pause using Johnson & Johnson’s Covid-19 vaccine will remain in place after an advisory panel put off a vote on how to move forward following reports of a few cases of life-threatening blood clots. The Advisory Committee on Immunization Practices, or ACIP, said Wednesday it doesn’t have enough information yet about the risk of these unusual side effects to determine whether the vaccine should be continued, discontinued or recommended only for certain groups of the population. The ACIP expects to meet again in another week or two to revisit the issue."

    At the same time, the Journal reports, "an updated analysis of a large clinical trial showed that Moderna Inc.'s Covid-19 vaccine was more than 90% effective at preventing Covid-19 disease in people six months after vaccination. The updated efficacy figure, based on more than 900 cases of Covid-19 among study subjects, was largely in line with the 94.1% efficacy that Moderna had reported late last year based on 196 Covid-19 cases in the same 30,000-person study.

    •  The Associated Press reports that "a new study says leaving middle seats open could give airline passengers more protection from the virus that causes COVID-19.

    "Researchers said the risk of passengers being exposed to the virus from an infected person on the plane could be reduced by 23% to 57% if middle seats are empty, compared with a full flight.

    "The study released Wednesday supports the response of airlines that limited seating early in the pandemic. However, all U.S. airlines except Delta now sell every seat they can, and Delta will stop blocking middle seats on May 1.

    "The airlines argue that filters and air-flow systems on most planes make them safe when passengers wear face masks, as they are now required to do by federal regulation."

    Published on: April 15, 2021

    •  Reuters reports that Amazon's "bid to upend a $5 million verdict from a jury that found its Alexa smart-speaker technology infringed a Vocalife LLC patent was rejected by an East Texas federal judge on Wednesday."

    The judge ruled that "at a high level, Amazon’s motion essentially asks the Court to reweigh the evidence and elevate their evidence over that presented by Vocalife … The Court declines to do so.”

    Published on: April 15, 2021

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  The National Association of Convenience Stores (NACS) is out with its annual State of the Industry report, saying that "total industry inside sales increased 1.5% to a record $255.6 billion in 2020 as customers frequented their local convenience stores to fulfill daily shopping needs … While total transactions declined 13.9% for the year, basket sizes increased 18.4% compared with 2019. The average basket size was $7.34 in 2020 vs. $6.20 in 2019.

    "The in-store increase also came despite a 1.6% decline in the number of convenience stores, which totaled 150,274 stores at the start of 2021. Deep declines in transactions counts, particularly in April 2020, were mitigated with an upswing throughout the remainder of the year, particularly the fourth quarter when transaction counts approached those of previous years."

    •  CNN reports that McDonald's will begin requiring "anti-harassment training across all 39,000 of its restaurants, the company said Wednesday.

    "The trainings, among other measures, are designed to hold up a new set of brand standards, which focus on preventing harassment, discrimination and retaliation, preventing violence in the workplace, collecting feedback from employees and health and safety more broadly … McDonald's said it is working with independent experts to develop tools that will help franchise operators, who run the vast majority of McDonald's locations, meet the standards. It will start evaluating stores in January 2022."

    The move comes after media reports of systemic sexual harassment taking place at McDonald's restaurants around the country, as well as by its former CEO, Steve Easterbrook

    Not to paint with a broad brush here, but since a percentage of men, no matter how educated or how accomplished, seem incapable of treating people with respect and acting in a way that reinforces their sense of personal dignity, it makes sense for every business and institution to mandate this kind of training.  The other thing that ought to be mandated - a zero tolerance policy.  There is no excuse in 2021 for people not to know where the guardrails are;  there never were, but the lines need to drawn right now, because that's where we are.

    •  AgriPulse reports that "the Agriculture Department is ending the Farmers to Families Food Box program and shifting to more effective ways of delivering fresh produce and dairy products, says Agriculture Secretary Tom Vilsack.

    "May will be the last month of the program."

    FMI-The Food Industry Association released a supportive statement from FMI Vice President of Political Affairs Hannah Walker:

    “The Farmers to Families Food Box program was originally created to identify excess commodities and deliver them to those in need. While the Farmers to Families Food Box Program may be ending, there is still work to be done. In my comments during a March 22 virtual, public meeting hosted by USDA, I proposed pilots as alternative solutions to the USDA food box program that would instead foster partnerships and innovation via different models.

    "The food industry has worked throughout this national emergency to redistribute products that were originally intended for restaurants and other food service outlets and redirect them to the grocery aisles – all while maintaining necessary food safety and labeling requirements. These experiences offered some valuable insights and lessons learned that could be used in future pilots.

    "We commend Secretary Tom Vilsack and the agency’s commitment to addressing hunger in America. As with other successful public-private programs, it will require all parties working together toward the common goal to solve hunger challenges and mitigate food waste."

    Published on: April 15, 2021

    •  The USC Marshall Food Industry Management certificate program announced that it will honor Carole Christianson, Chief Operating Officer of the Western Association of Food Chains (WAFC) as its 2021 Executive of the Year.  Christianson will be the keynote speaker at the April graduation banquet and help celebrate the 100th Anniversary Celebration of the WAFC. 

    Published on: April 15, 2021

    •  W. Galen Weston, the former chairman and CEO of Loblaw parent company George Weston Ltd. (GWL), has died at age 80 after a long illness.

    Weston was the third generation of family leadership, succeeding his father as head of the company in 1974, and retiring just five years ago, passing the top job on to his son, Galen G. Weston.

    The Westons are one of Canada's wealthiest families, with holdings that include Loblaw and Shoppers Drug Mart in Canada, department store chains Selfridges in the UK, and numerous other retail entities around the world.

    •  Bernie Madoff, who perpetrated the largest Ponzi scheme in US history, bilking billions of dollars out of thousands of investors - including notably, the Wilpon family, owners of the New York Mets, dramatically impacting their ability to spend money on baseball players - has died in prison.  He was 82.

    Published on: April 15, 2021

    Today, April 15, is celebrated in Major League Baseball as Jackie Robinson Day, commemorating the first day of the 1947 season, when Robinson became the first player to break baseball's color line when he took the field for the Brooklyn Dodgers.

    Instituted as a baseball tradition in 2004, the day is one on which every baseball plater, coach and umpire takes the field wearing Robinson's number, 42 - a number that has been retired throughout the sport.

    KC's View:

    I've always believed that Robinson was not just one of the greatest men ever to play baseball, but actually was one of the most important people of the 20th century.  He accomplished something that had extraordinary importance beyond the lines of the baseball diamond, and did so under almost unimaginable pressure.