business news in context, analysis with attitude

Published on: June 21, 2021

Drones have come a long way since Jeff Bezos speculated about their deployment on "60 Minutes" a number of years ago.  Just last week, Walmart announced that it has invested in a drone delivery company.  And Kroger has announced a pilot that is on the verge of going live.

Kroger is working with a company called Drone Express, a division of a defense contractor called Telegrid.  I wanted to know more about the test, the technology and the potential … and so I reached out to Beth Flippo, the company's Chief Technology Officer … and my big question was about the relevance to companies not named Amazon, Walmart and Kroger, and without the deep pockets those companies enjoy.

I hope you enjoy our conversation.

Published on: June 21, 2021

by Kevin Coupe

Yahoo Finance had an interview with Scott Moses, managing director at PJ Solomon, in which he discussed the acceleration of e-grocery during the pandemic (he judged it "sustainable," with plenty of room for growth) and the growing dominance of companies like Amazon and Walmart (he said both understand that "if you're going to be the leading retailer in the world, you've got to be the leading grocer in the world").

Moses, who is one of the leading M&A facilitators in the grocery segment, also suggested that this dominance meant that there also certainly will be more mergers and acquisitions going forward as smaller retailers look for ways to compete:

Amazon, he said, has a AA minus credit rating, "which means they borrow cheaper than most countries. Their market cap is more than literally every grocer combined by a wide margin, that's Walmart, Target, Costco, BJ's, Dollar General, Family Dollar, CVS, and Walgreens. All of them combined are worth well less than Amazon today.

"And as Amazon uses its low cost of capital to make investments to strengthen its Prime ecosystem … Most folks can't keep up with that. And as a consequence, it's going to require more transaction activities so that regional businesses can become part of larger ecosystems that will help them retain customers."

Moses added:

"Scale matters in grocery. Like I said, cost of capital is important to acquire and retain customers. And the bigger you are statistically, the better your credit rating, the better your cost of capital.

"So we happen to think that transactions are going to continue because the cost savings that these combinations can generate, from procurement to logistics to store management and corporate contracts, they are significant. And in many cases, they're actually bigger than the EBITDA of the companies involved.

"So I think it's really important that, when folks are evaluating these transactions, they remember just how important they are coming back to the beginning to protect the grocers that have been doing such a great job protecting us during this crisis and really serving heroically.

"We need our local grocers. We need to protect them with these kinds of transactions that help them compete with the biggest guys who continue to grow and gain scale."

As always, Scott Moses gets it right - and delivers an Eye-Opener that lays out the likely future of food retailing.

Published on: June 21, 2021

CNBC reports on a new prognostication by eMarketer suggesting that "e-commerce sales in the U.S. on Prime Day - including those made on Amazon and at competitors - will jump 17.3% year over year to $12.18 billion," and that Amazon alone will own more than 40 percent of the US e-commerce market by the end of 2021.

Walmart is expected to have about seven percent of the digital retail market by the end of the year, the projections say.

Some broader context:

"In 2008, e-commerce sales accounted for just 3.6% of total retail sales in the United States, according to data from eMarketer. Following gradual growth year after year, that figure skyrocketed to 14% in 2020, as the Covid pandemic fueled online spending on everything from groceries and toilet paper to spin bikes and workout clothes. E-commerce sales are predicted to account for 15.3% of total retail sales by the end of this year and jump to 23.5% by 2025, eMarketer said."

Published on: June 21, 2021

The New York Times weighs in on the great tuna mystery - which has been created by the filing of a lawsuit in California last year charging that the tuna fish sandwiches sold by Subway "are completely bereft of tuna as an ingredient."

Subway says that "there simply is no truth to the allegations in the complaint that was filed in California.  Subway delivers 100 percent cooked tuna to its restaurants, which is mixed with mayonnaise and used in freshly made sandwiches, wraps and salads that are served to and enjoyed by our guests.”

The Times piece is a long examination of tuna's role in the food chain, with tons of background about how it fished and processed.  But the bottom line is this:  When the Times sent tuna it bought from Subway to a testing lab, the result came back:  “No amplifiable tuna DNA was present in the sample and so we obtained no amplification products from the DNA … Therefore, we cannot identify the species.”

The Times writes that "the spokesman from the lab offered a bit of analysis. 'There’s two conclusions,' he said. 'One, it’s so heavily processed that whatever we could pull out, we couldn’t make an identification. Or we got some and there’s just nothing there that’s tuna.' (Subway declined to comment on the lab results.)"

Now, there are a couple of caveats here.  One is that other, similar tests commissioned by other media organizations have come up with different results - Subway is serving actual tuna, they've said.  The other is that a number of experts say that if there is a problem, it probably isn't Subway's fault - the fraud is being committed at the cannery, and Subway is more victim than perpetrator.

Published on: June 21, 2021

Wegmans has announced that it "recently became aware that, due to a previously undiscovered configuration issue, two of our cloud databases, which are used for business purposes and are meant to be kept internal to Wegmans, were inadvertently left open to potential outside access.

"Certain customer information … was contained in these databases. This issue was first brought to our attention by a third-party security researcher and we then confirmed the configuration problem, beginning on or about April 19, 2021. We then worked diligently with a leading forensics firm to investigate and determine the incident’s scope, identify the information in the two databases, ensure the integrity and security of our systems, and correct the issue."

According to the company, "The types of impacted customer information included: names, addresses, phone numbers, birth dates, Shoppers Club numbers, as well as e-mail addresses and passwords for access to Wegmans.com accounts. However, all impacted Wegmans.com account passwords were, in technical terms, 'hashed' and 'salted,' meaning that the actual password characters were not contained in the databases.  Social security numbers were not impacted (Wegmans does not collect this information from its customers) nor was any payment card or banking information involved."

Published on: June 21, 2021

Kantar’s BrandZ is out with its annual ranking of the world's most valuable brands, and Amazon sits atop the list with an estimated value of $684 billion, followed by Apple at $612 billion and Google at $458 billion.

Reuters announced that while US companies are seen as most valuable, "Chinese brands are rising up the leaders list and are more valuable than Europe’s top brands … Tencent, China's biggest social media and video games company, was the People's Republic's top brand, in fifth place, while Alibaba was in seventh place … Five brands more than doubled their value, led by Chinese e-commerce giants Pinduoduo and Meituan, China's top liquor maker Moutai, China's TikTok and America's Tesla."

The top 10, in order:  Amazon, Apple, Google, Microsoft, Tencent, Facebook, Alibaba, Visa, McDonald's, and MasterCard.

Published on: June 21, 2021

With brief, occasional, italicized and sometimes gratuitous commentary…

•  Tesco reportedly is on track to open its own version of the Amazon Go store - a checkout-free unit that will allow people to simply pick up products off the shelves and depart the store, with a receipt landing in their email boxes shortly thereafter.

However, while the retailer is saying it close to opening the store, it will not say where or when, various UK news reports say.

•  Business Insider reports that more than 41,000 people have signed a set of petitions arguing that when Jeff Bezos goes into space next month - he will be a passenger when his Blue Origin spaceship carries humans for the first time - he should not be allowed back on the planet.

The petitions say things like "billionaires should not exist...on earth, or in space, but should they decide the latter they should stay there," and that Bezos is "an evil overlord hellbent on global domination."

I know Amazon won't do this, but there's a part of me that thinks it ought to comb through the petitions, take note of all the names, and then cancel their Amazon prime memberships.   Or, on second thought, maybe it ought to embrace the you-can-catch-more-flies-with-honey approach, and give all 41,000+ people free Prime membership for an extended period.

Published on: June 21, 2021

•  In the UK, the William Morrison supermarket chain has rejected the equivalent of a $7.6 billion (US) takeover offer from US private equity firm Clayton, Dubilier & Rice - which happens to employ Sir Terry Leahy, the former CEO of rival Tesco, as an advisor.

Morrison's said that the offer "undervalues" its assets and prospects.

The Financial Times writes that "US private equity firm Clayton, Dubilier & Rice is set to push ahead with its pursuit" despite being rebuffed.

Published on: June 21, 2021

•  George Coleman, CVS's senior vice president of merchandising, has announced that he is leaving the company;  his wife is an Italian citizen who has been unable to move to the US permanently, and he said that "we’ve spent the last three years hopping back and forth across the Atlantic for extended stays and visits, but we’re married and want to be with each other every day. One of the silver linings of the pandemic was that I was able to work from Europe and shift my workday to accommodate an East Coast schedule, but that’s not a sustainable approach to balancing my personal and professional life."

Published on: June 21, 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…

•. Here are the up-to-date US numbers for the Covid-19 coronavirus:  34,406,001 total cases … 617,166 deaths … and 28,711,315 reported recoveries.

The global numbers:  179,287,781 total cases …   3,882,808 fatalities … 163,850,309 reported recoveries.  (Source.)

•  The Centers for Disease Control and Prevention (CDC) says that 65.4 percent of the US population age 18 and older has received at least one dose of vaccine, with 55.8 percent being fully vaccinated.   The CDC also reports that a total of 149.7 people in the US now are fully vaccinated.

•  The Washington Post quotes Scott Gottlieb, former chief of the Us Food and Drug Administration (FDA) as saying this weekend that "the transmission of the more contagious delta variant in the United States could spur a fall surge in coronavirus infections if only 75 percent of the country’s eligible population is vaccinated."  Gottlieb said that "states with low vaccination rates already are showing a concerning rise in cases with the spreading of delta, which is up to 60 percent more contagious than earlier variants."

"Mississippi, Alabama, Arkansas, Missouri show very substantial upsurges of infections. That’s based entirely on how much population-wide immunity you have based on vaccination,” Gottlieb said, urging "a renewed vaccination push closer to the fall, as people prepare to return to school and work, when he said they may be more open to the shots."

Published on: June 21, 2021

In a story about how companies were reacting to the making of Juneteenth into a national holiday, I commented, in part:

I have to say that this year has been a real education when it comes to things like Juneteenth and the 1921 Tulsa Race Massacre - things I was never taught in school, and knowledge of which gives me greater understanding of what some of this nation's citizens have endured.  Though, of course, I can never really understand it … which is part of the problem that endures.

One MNB reader wrote:

Thank you, Kevin for your comments about Juneteenth & educating yourself about the black American experience.  If you want to read more, I highly recommend reading "Uncomfortable  Conversations with a Black Man" by Emmanual Acho - best book I’ve read about black culture lately!!! Keep shining light on this issue - the holiday is great, but learning and understanding the true history of our black citizens is critical toward making racial equality in this country a reality! 

I will add it to the list.  Thanks.

I had a piece on Friday about why companies should have people designated to create climate-related strategies and tactics, and noted that it was just a couple of years ago that it was so hot in Phoenix that planes couldn't take off or land at SkyHarbor Airport.  I said that the runways were melting, but I got that wrong, as one MNB reader wrote:

That is not correct, the reason is hot weather causes thinner (less) air which impact the “lift” on the wings.

It is my understanding that once the temperature hits 117 degrees the airports stop take offs and landings.  

Thanks for correcting me.

By the way … I think it hit 115 degrees over the weekend in Phoenix.

On the subject of millennials hating the traditional car buying experience, MNB reader Monte Stowell wrote:

I had a company car for over 48 years. When I retired 3 years ago, I knew what kind of car I wanted by checking out the reviews on 3-4 brands and checked out availability of the model I wanted. I found the car at a semi-rural dealership in Sandy, OR. My wife and I drove to the Chevrolet dealership, met with a sales professional, took the car for a test drive, got the thumbs up from my bride, and told the salesman I will buy the car. After agreeing on the price, the whole transaction took about 30-35 minutes to complete. Some dealerships understand how to make buying a car a very pleasurable experience.  Kudos to Suburban Chevrolet and Jim, the salesman.

We're not saying the car buying experience has to be awful.  Just that it often is.

Last week we reported on how the about-to-be-spun-off Victoria's Secret will have a newly constituted board - seven women, one man - and I suggested that this may be an example of choosing leadership that reflects the consumer base as opposed to, at least in this case, is more interested in objectifying the people who purchase its products.

We also posted an email from a reader who said that the company had not traditionally objectified women, but rather allowed them to celebrate their sexiness, and called me "a liberal coastal boomer whining in his rosé."

I responded that I was pretty confident in my assessment, and that the evening I recorded the commentary, I'd had a Tito's and soda with lime.

One MNB reader responded:

As a conservative, midwestern boomer that whines in my beer, I completely agreed with your comments regarding the new board for the Victoria’s Secret spin-off. I’m pretty sure those that disagree with the comments gives credence to why the new board is a good thing.

Another MNB reader chimed in:

KC, had to comment on this after reading the response from the reader (loved how you handled it and your come back!)

Bottomline, time will tell.  If the business model is turns out to be “successful” (granted, more than one definition) from the changes then they did well.  If not, I think we’ll see more changes!  Corporate America will need some time to figure out what’s “woke” vs what consumers actually want to see.  Sales & profits will almost always be the deciding factors!

To be clear, it isn't like Victoria's Secret was a thriving retailer in recent times.  There'a s reason there is so much sturm und drang at the company - they're trying to map out a viable future.

If this works, the strategy will be proven to have worked.  If not … well, it may just be that the company has passed its expiration date.