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    Published on: October 13, 2021

    If the best way to deal with business challenges is to engage in fresh, even unconventional thinking, then an option for the future being considered by the Tampa Bay Rays is a potential home run.  KC explains the metaphor.

    Published on: October 13, 2021

    by Kevin Coupe

    There was a confluence of stories yesterday that revolved around the same issue…

    The Washington Post had another story about how "warehouse jobs were supposed to be the future of the retail industry, offering opportunities for displaced employees and reshaping the American workforce. Amazon, Target, Walmart and other companies pledged to create hundreds of thousands of these positions at competitive wages — and increasingly with perks like free college thrown in — so they could fill the deluge of online orders that began with the coronavirus pandemic and continues unabated.

    "But the industry is facing an unexpected problem: Far too few people are willing to take on the often-grueling work, according to industry officials and economic data. It is the latest sign that the job market is being buffeted by unexpected trends that are leading workers to reconsider the types of positions they want — and upending industries across the economy."

    Here may be one of the reasons why:

    The Los Angeles Times has a story about the decision by drugstore chain Rite Aid some two decades ago to  build a giant warehouse, almost one million square feet in size, to serve its Southern California stores, and how it chose to do so in "an isolated stretch of the Mojave Desert where the air vibrates with heat in the summer.

    "The land was cheap. The freeway was nearby. But during summers, the workers are boiling inside the mostly non-air-conditioned warehouse.

    "They say their leg muscles cramp and their hearts race. They sweat through their clothes. Made sluggish by the heat, they struggle to pull products at the pace the company sets, incurring demerits that threaten their jobs."  According to the story, "Workers say supervisors responded to their complaints with promises to install more fans in the warehouse … But even when they’ve followed through, it’s had little effect as Southland temperatures rise."

    Fans.  Wow.

    According to the story, "Rite Aid spokesman Bradley Ducey said the company has been working with its employees and their union to address increased temperatures. He said the company has installed more fans, opened doors in the evening to let in cooler air and allowed workers to take rest breaks and access 'cooling spots.' He said Rite Aid shifts its employees’ work hours during the hot summer months to cooler parts of the day — though employees said this effort has been impeded by demands for mandatory overtime."

    There is, the Times writes, only one part of the warehouse that is air conditioned - the room where they keep and sort the chocolate before distributing it to Rite Aid's stores.

    No surprise, then, that on the same day the Washington Post has a story about how the Bureau of Labor Statistics reported that roughly 4.3 million people - or close to three percent of the workforce - quit their jobs during August, a phenomenon that the story says "is being driven in part by workers who are less willing to endure inconvenient hours, compensation, or conditions because they know there are ample opportunities elsewhere."

    Now, these are not all the same people.  Not everybody is able to walk away from their jobs - they have families to house and feed and clothe and educate.

    But when I read these Eye-Opening stories, I cannot help but think that there seems to be a certain lack of respect for people who are performing necessary work.  We read a lot about supply chain issues these days, but perhaps forget that the people who are performing sometime grueling work in tough conditions are significant links in the supply chain.

    What it really reflects, I think, is something we talk about a lot here on MNB - a singular unwillingness on the part of some companies to invest in their people, to respect their dignity, and value their contributions.

    For the moment, the balance of power has shifted to labor … but we all know that this won't be permanent.  The pendulum swings.  I'm sure there are a lot of folks out there counting the days until it once again becomes a buyer's market for employers.

    But that won't solve the problem.  It may even exacerbate it.

    Published on: October 13, 2021

    In new testimony yesterday at the criminal fraud trial of Theranos founder Elizabeth Holmes, former Safeway CEO Steven Burd said that the company did at least 100 hours of due diligence before signing a deal worth close to $400 million that would've put Theranos blood testing machines in almost a thousand Safeway stores.

    CNBC reports that "Holmes rocketed to fame in Silicon Valley by developing technology that promised to run hundreds of diagnostic tests with just a finger prick of blood. But Theranos never realized those aspirations, and Holmes is now charged with 12 counts of wire fraud and conspiracy in connection with misleading investors and patients. She has pleaded not guilty.

    "During opening statements, defense attorney Lance Wade told jurors that despite making some mistakes, leading a failed start-up doesn’t make her a criminal. Holmes faces up to 20 years in prison if convicted.  With Burd on the stand, the defense tried to show that Safeway, a huge national chain, wasn’t duped in its negotiations."

    However, Burd has said that he was increasingly concerned and frustrated by Theranos' inability to deliver on promises.  He also has conceded that he was hoping that the opening of Theranos clinics in Safeway stores would help boost the company's stock price.

    The Wall Street Journal writes that "as the two companies hammered out a deal in 2010 that would have put blood-testing devices in hundreds of grocery stores, Theranos guaranteed Safeway a $10-per-test profit, Mr. Burd testified in October. A profit seemed plausible at the time, Mr. Burd recalled, because Elizabeth Holmes told Safeway that Theranos projected $223 million in revenue in 2011 and $167 million in operating expenses, with an adjusted profit of $56 million. In reality, the company had far less revenue and substantial losses until it shut down, court testimony has shown … Mr. Burd testified that Theranos told Safeway its devices could perform 95% of all blood tests and results would be available to customers in 20 to 30 minutes, which he said was crucial so shoppers could get their results back in the time it took them to buy groceries. Theranos pitched Ms. Holmes as a Stanford University Ph.D. student in chemical and electrical engineering, according to a 2010 presentation shown in court; it didn’t mention that Ms. Holmes dropped out of Stanford after one year of undergraduate study."

    KC's View:

    Burd was well known for an almost rabid focus on health care issues, but the more one reads the trial coverage the more it sounds like he may have fallen victim to the "if-all-you-have-is-a-hammer-everything-looks-like-a-nail" syndrome.

    I have to be honest here.  I've paid only cursory attention to the Theranos story, but all the recent. coverage makes me want to watch the 2019 documentary about it, The Inventor: Out For Blood In Silicon Valley.

    Health care ambitions haven't gone away.  Just yesterday, best Buy announced that it is acquiring Current Health, described as "a UK tech company that helps with remote patient monitoring and telehealth."  CNBC writes that "with the move, Best Buy is pushing further into health care — a sector that CEO Corie Barry frequently describes as a growth opportunity. She has pointed to several trends that work in the retailer’s favor, such as the desire of many baby boomers to age at home, the health-care industry’s need to manage costs and the popularity of watches and other tech that tracks people’s health."

    We know that companies like Amazon,Walmart and CVS all are making different bets on how they can become more immersed in the health care business.  It just looks like Burd bet on the wrong horse at the wrong time.

    Published on: October 13, 2021

    The Associated Press has an interview with Fidji Simo, the former Facebook executive who now is the CEO of Instacart, in which she talks about the company's plans.  Some excerpts:

    •  "Grocery is one of the largest segments of commerce but it’s only 10 percent penetrated online. And we think over the next five years, it’s going to get to 20 percent, 30 percent, like most other commerce segments. I would say that, before the pandemic, many people weren’t even aware that a service like ours existed. And that has been changed forever. We are seeing that many people are now making it part of the way they run their household."

    •  "I’ve always been fascinated by complex marketplaces. Facebook was one and certainly Instacart is one as well, a four-sided marketplace between consumers, shoppers, retailers and food brands. And I think this ability to think in terms of ecosystems and how to balance all the sides of the marketplace that I learned at Facebook is serving me well at this job."

    Simo says that the solicitation of ad dollars directly from manufacturers is "an important part of the consumer experience. We think that, through advertising, they’re going to be able to discover brands they wouldn’t have discovered otherwise. But it’s also an important part of our business model because it allows us to make the service cheaper for consumers and charge grocers less. And I fundamentally believe that if we  want 30 percent of people to shop online, we are going to have to make online grocery delivery cheaper overall."

    And, she says, "when you talk to customers about what they care about when it comes to buying online, they care enormously about selection and they care enormously about their loyalty to particular retailers."

    KC's View:

    She's right that loyalty is important, which explains why Instacart is doing everything it can to earn loyalty from consumers to its brand.

    Published on: October 13, 2021

    Washington Post opinion columnist Jennifer Rubin has a piece about David Card of the University of California, Berkeley, who was one of three winners this week of the Nobel prize in Economics.  Card, Rubin writes, earned recognition for challenging three popular articles of faith - that immigrants drive wages down and are not good for local workers, that an increased minimum wage causes businesses to lay off employees, and that government subsidies lead to people not going back to work.

    Some excerpts from her piece:

    •  "Card’s work suggests that immigration may not be bad for workers already here. One of his studies on the 1980 Mariel boatlift "showed that a sudden influx of 125,000 Cubans had no negative effects on wages or employment for low-skilled Miami residents, even as it increased the city’s labor force by 7 percent … While immigration restrictionists still cling to the idea it is a zero-sum labor market in which every job 'taken' is 'lost' by someone else, it’s clear the research is mixed at best."

    •  "On the minimum wage, Card looked at the difference between New Jersey workers, whose state’s minimum wage increased, and Pennsylvania workers just across the border, where the minimum wage was not raised. It turned out that 'raising the minimum wage didn’t necessarily cause businesses to lay off workers and hurt employment. Before [Card’s] famous study, economists almost universally believed increasing the minimum wage cost jobs.

    "Card told an interviewer that 'if you raise the minimum wage a little — not a huge amount, but a little — you won’t necessarily cause a big employment reduction. In some cases you could get an employment increase.' Since then, reputable economists have reached different conclusions on the impact of minimum wage hikes. It is now a legitimate subject of debate rather than an ironclad rule that any increase in minimum wages winds up hurting the people it is intended to help."

    •  "States that ended higher unemployment benefits showed little discernible bump in employment as compared with states that maintained the benefit. In early September, about 7.5 million Americans lost the entire federal subsidy, while 3 million had their unemployment checks cut $300 each week. Nevertheless, fewer than 200,000 jobs were added in September — less than what was projected for the month. Maybe generous safety net spending does not undermine work, but ending such benefits prematurely does inflict needless suffering on the most vulnerable."

    KC's View:

    Here's the thing.  Rubin suggests that while there is economic theory, it also is true that "real life is more complicated."  Those five words are very important, especially as they are taken in the context of other phrases that appear in her column, like "the research is mixed at best," and "a legitimate subject of debate rather than an ironclad rule."

    The important thing, is seems to me, is how businesses approach these issues.  Mindset can be important, and it seems like a pretty good guess that some businesses worked on the premise that, say, raised wages won't lead to higher unemployment but rather will reflect an investment in workers that could pay off in higher productivity and maybe even more sales.  Those businesses may have done better than those that thought the sky was falling.

    Published on: October 13, 2021

    From the Financial Times:

    "The UK’s leading food industry organisations have called for greater oversight of private equity-owned supermarket chains following recent acquisitions of two of the UK’s leading grocers.

    "The Covid-19 pandemic has allowed the big chains to increase their dominance over the groceries market, while suppliers face mounting pressures from labour shortages and rising input costs.

    "Ian Wright, the chief executive of the Food and Drink Federation, which represents food manufacturers, said that suppliers needed additional protection from PE owners that were not subjected to the same level of scrutiny as listed companies.

    "Speaking after US private equity group Clayton, Dubilier and Rice won a £10bn takeover battle for Wm Morrison, the UK’s fourth-largest supermarket, earlier this month, Wright said there was a strong case for expanding the remit of the supermarkets watchdog, the Groceries Code Adjudicator … Wright said action was needed to protect consumers and the supply chain given that private equity owners look to extract value by selling assets, loading acquisitions with debt and driving down costs."

    Published on: October 13, 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 US, there now have been total of 45,431,167 cases of Covid-19 coronavirus, resulting in 737,589 deaths and 34,997,968 reported recoveries.

    Globally, there have been 239,596,468 cases, with 4,884,243 resultant fatalities and 216,943,969 reported recoveries.  (Source.)

    •  The Centers for Disease Control and Prevention (CDC) says that 76.6 percent of the US population age 12 and older has received at least one dose of vaccine, with 66.2 percent being fully vaccinated.

    The CDC also says that 11.9 percent of the population age 65 and older has received a vaccine booster shot.

    •  The Wall Street Journal reports that Food and Drug Administration (FDA) staff has not taken a position on whether or not a Moderna booster is needed to prevent serious disease and death due to Covid-19 … The staffers’ review now goes to a committee of outside experts, who are scheduled to meet on Thursday and discuss whether the agency should authorize a Moderna booster shot.

    "Despite the lack of a staff endorsement of a Pfizer booster, the agency later authorized an extra dose for seniors and some high-risk adults."

    The Journal writes that "the staff said the third dose increased the antibody response sufficiently, one endpoint of the study. The extra dose, however, narrowly missed meeting the other study endpoint, of increasing antibody levels by a large magnitude and in a high enough percentage of study subjects."

    •  From the New York Times, a story about how the US "will lift travel restrictions at the borders with Canada and Mexico starting in November for fully vaccinated travelers, reopening the doors of the United States to tourists and separated family members who have been sealed out of the country during the pandemic.

    "Foreign travelers who provide proof of vaccination and are looking to visit families or friends or shop in the United States will be allowed to enter, senior administration officials said on Tuesday, weeks after the administration said it would soon lift a similar sweeping restriction on foreigners traveling to the country from overseas.

    "The lifting of the bans will effectively mark the reopening of the United States to travelers and tourism, signaling a new phase in the recovery from the pandemic after the country closed its borders for nearly 19 months.  But the new requirements also indicate that the United States will welcome only visitors who are vaccinated."

    Published on: October 13, 2021

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  The Wall Street Journal reports that the US Preventive Services Task Force, which is described as a body that "reviews evidence and offers guidance for preventative healthcare services," has drafted a recommendation that "people in their 60s or older shouldn’t take aspirin to prevent a first heart attack or stroke because risks likely cancel out the potential benefits … The draft recommendation will be open to comment for the next month or so before the task force releases a final recommendation."

    The recommendation runs counter to advice that has been given by doctors for decades, that a low-dose aspirin taken once a day can lower health risks.

    According to the story, "Heart disease and stroke are leading causes of death in the US. An estimated 605,000 people in the US have a first heart attack each year and 610,000 experience a first stroke, according to the American Heart Association. A daily dose of aspirin, a blood-thinner, has been demonstrated to lower the risk of a first heart attack or stroke, but it also can cause harms including bleeding in the stomach, intestines and brain. The risk for bleeding increases with age."

    Uh-oh.  I did the math, and since I started taking a baby aspirin once a day starting at age 40, it looks like I have taken close to 10,000 of the damned things.

    Now they tell me.

    Published on: October 13, 2021

    Got a number of emails responding to yesterday's breaking new story about how Kroger plans to go into both the northeastern US and south Florida with pure-play e-commerce operations that will build on its CFC warehouse development strategy with Ocado.

    I commented, in part:

    For a long time, I've heard people speculate about when Kroger might decide to enter the northeast (which happens to be where I live), and what company it would have to acquire to achieve such an end.

    The reality is that the old way of doing business now is just that.  The old way.  Kroger can move into markets with an e-commerce model that doesn't depend on the limitations of the past, but rather than use its online capability - powered by robotic warehouses and fueled by a strong belief in compiling and using actionable data - to build a business.

    A lot of things have to work, of course.  These Ocado warehouses are major investments, and I have to imagine that there will be some pressure to achieve ROI.  But these are strategic investments, not tactical moves, and so Kroger has to be play the long game.  There is every indication that this is exactly what it plans to do.

    This doesn't mean that Kroger won't have physical stores here, of course, though I have to wonder if there is a paucity of commercial real estate, which would prevent it from quickly achieving any sort of critical mass.  This could change, depending on how successful Kroger is in siphoning off business from other retailers … Kroger has some work to do in order to get up and running, which means that all these existing competitors have a little bit of time to start working on their weaknesses, building on their strengths, and making investments in operations, infrastructure and (most of all) people.

    I'm not saying that Kroger is going to be able to just come in and dominate the market.  Far from it.  But I am saying that it has the potential to be a disruptive influence, and existing food retailers do not have the option of being complacent.

    MNB reader Tom Ewing wrote:

    Kroger is better positioned to enter markets outside their physical footprint via eCommerce than ever before due to the success of the Simple Truth brand which is wildly successful in gaining consumer loyalty and unique to Kroger.  The Simple Truth brand is now rivaling President's Choice as the best ever retailer private brand ever developed.  This brand is strong enough to attract consumers to the Kroger online platform where more Kroger and National Brand products can be added to the order.

    MNB reader James Tenser wrote:

    This will be the first of several announcements by Kroger, I’m certain, based on Rodney McMullen’s statements on stage at GroceryShop last month. He made clear that the company’s ambition is to “feed the entire nation” and that new “sheds” would be erected in geographies not yet covered by Kroger banners.

    Seems like pure e-commerce is now Kroger’s “tip of the spear.” A shrewd strategy, as it enables the retailer to skim some of the largest baskets from entrenched omnichannel competition. My crystal ball says it could drive down the acquisition price of regional players by the time Kroger is ready to absorb them.

    From another reader:

    Northern California may be next for Kroger E-commerce?  Brick & Mortar being the “old way” and has not presented the right opportunity in the past.  My eyes are officially peeled.

    And another:

    Positives: Some retailers already have the ability to hold off Kroger.  Market Basket being the leader, with other wins coming from independents like Big Y and the specialty neighborhood stores Roche, Daves, Trucchi’s . Hannaford still has a pretty loyal following, even with some of the AHOLD influences.  They should be ok.  I see the big losers as SNS and Shaws.  They can’t compete in the traditional marketplace, let alone in an innovative environment.   Maybe Kroger will pair down Shaws enough to purchase them, and that could provide real estate in NE. 

    On another subject, from MNB reader Mike Springer:

    In reference to your article this morning about customer tensions rising and your comment “Some argue that people got used to an increasingly frictionless economy, and so now, when there is friction, people don't know to react.”

    I couldn’t agree more!  My wife who is a teacher at a local High School here in the DFW area tells me that a main concern for the faculty and administration is that many of the students (now back in classrooms) seemed to have regressed socially… by quite a bit.  She said cheating is up (which means they’re getting caught more!), ownership/responsibility is lacking and so on.  They are having to retrain due to the lost year+ 

    Maybe the lesson here is we cannot afford as a society to shut down like we just did.  The mental, spiritual and physical impacts are just too great.  And no, I’m not suggesting we ignore common sense directives (i.e. follow your Dr’s advice on vaccines, wear masks when appropriate, wash your hands etc…)  In hindsight, spending time with family & friends, getting outside, fellowshipping, interacting with real people face to face (or mask to mask) are all part of a healthy regimen.  Seems to far outweigh the negative fallout we’re dealing with now!

    And from another reader:

    Well said! There is a lot of angst and divisiveness in America currently. This, coupled with childish behavior only exacerbates the problem. Those who keep fueling these foolish "fires" need to be held accountable!

    Not sure I agree that the shutdown is what caused this.  Sure, it created some issues in terms of kids's socialization … but certainly at the high school level, it seems to me that kids ought to know by that point the difference between right and wrong, between responsibility and irresponsibility, and between civil and uncivil behavior.

    Seems to me that the kids acting out in school may be doing so because they've seen and heard parents acting out at home, and/or adults exhibiting that kind of behavior in the public square.  Part of parents' job during the pandemic was to reinforce the difference between proper and improper behavior.  (When you think about it, the pandemic shutdown was not as bad as other things that kids have had to deal with.  Like, say, the kids living in London during the Blitz.  Or the kids dealing with their lives being destroyed by natural disasters.  Or kids who've lost their parents for any of a dozen reasons.)

    Published on: October 13, 2021

    In the Major League Baseball Divisional Series…

    In the National League, the Atlanta Braves defeated the Milwaukee Brewers 5-4, taking the best-of-five series 3-1.  The Braves will now go on to the NL Championship Series to play the winner of the Los Angeles Dodgers-San Francisco Giants series - the Dodgers last night forced a fifth and deciding game in their NLDS with a 7-2 defeat of the Giants.

    In the American League, the Houston Astros beat the Chicago White Sox 10-1, taking their best-of-five series 3-1 and moving on to play the Boston Red Sox in the AL Championship Series.