business news in context, analysis with attitude

Published on: April 8, 2022

Today's FallBack Friday Video dates back to December 2006, when I was in Japan doing a video piece about Aeon and one of its superstores, Jusco.  In rewatching the piece and remembering the circumstances - it was part of a series of trips that I described here - I am struck by the degree of transparency and level of information that Aeon achieved in a pre-smartphone world, and the unique customer perceptions behind that strategic approach.  And, I remember something else - it was on this trip that I first became aware of the power of Amazon, for reasons that I explain in the postscript.

Enjoy!

Published on: April 8, 2022

Perhaps the most predictable story of the week are that both Amazon and organized labor are both objecting to the ways in which unionization votes that they lost were conducted.

Here's how Reuters reports it:

"Amazon.com accused the new union at a New York City warehouse of threatening workers unless they voted to organize, an assertion an attorney for the labor group called 'really absurd.'

"A second labor group, the Retail, Wholesale and Department Store Union (RWDSU), which was losing a bid to organize an Amazon warehouse in Alabama, also filed objections on Thursday to that union election.

"The U.S. National Labor Relations Board (NLRB) is giving Amazon until April 22 to back up its objections to last week's election in New York, in which Staten Island workers voted to form the company's first U.S. union. Amazon had requested extra time to provide evidence because its objections are 'substantial,' it said in a filing Wednesday … Among Amazon's planned objections to the outcome are that the ALU interfered with employees in line to vote and that long waits depressed turnout, Amazon's filing said. Some 58% of eligible voters cast ballots in person over several days."

In Alabama, the story says, "the RWDSU objected to the election … in which Amazon workers voted against unionizing. It was the second election in Bessemer, after the NLRB determined that Amazon had improperly interfered in the first contest there last year. The most recent outcome is pending in light of hundreds of challenged ballots and now the RWDSU's objections, which could delay a result for months … In a filing, the RWDSU said Amazon unlawfully removed pro-union literature from non-work areas and terminated an employee who spoke in favor of the union during mandatory work meetings, among other objections. The RWDSU said these were grounds for the NLRB to set aside the result."

Published on: April 8, 2022

From CNBC:

"Walmart said Thursday it is raising pay for long-haul truck drivers and launching a new program to train the next generation, as it seeks the staffing it relies on to replenish store shelves and warehouses across the country.

"The retailer said truck drivers will now make between $95,000 and $110,000 in their first year with Walmart. The company did not provide the current salary range for a new truck driver at Walmart, but said they have made an average of $87,500 in their first year.

"Walmart has also started a 12-week program in Sanger, Texas, and in Dover, Delaware, where people can earn a commercial driver’s license and join Walmart’s fleet. It will cover the cost of earning a license, which can run between $4,000 and $5,000."

According to the story, "Walmart posted about the pay bump and training program Thursday morning on its corporate website. It has about 12,000 truck drivers in its workforce. The company hired 4,500 truck drivers in 2021, a larger number than any time in its history, a spokeswoman said."

Published on: April 8, 2022

The Washington Post this morning reports that "a new study in Science magazine identified antibiotics in some of the beef cattle in a USDA-approved no-antibiotics labeling program recognized as a gold standard for restaurants and grocery stores around the country.

"The study tested some 699 cows at one slaughterhouse that processes 'raised without antibiotics' cattle. Most cattle in the study tested negative for antibiotics. However, 10 percent of cattle came from lots where one of the cows sampled tested positive for antibiotics, the researchers found. Additionally, the study found an additional 5 percent of cattle came from lots with multiple positive antibiotic tests.

"The study also found that 26 percent of cattle to be labeled in the 'Global Animal Partnership' program came from a lot with at least one positive test for antibiotics … The Science article said the findings call into question the trustworthiness of USDA-approved labeling programs that promise meat is raised without antibiotics (RWA)."

The Post notes that "Americans are increasingly willing to pay more to know the foods they eat contain certain beneficial nutrients and ingredients. But in many cases, they will pay an even greater premium to ensure the foods they buy are free of things they don’t want. Restaurants, supermarkets and food companies are paying attention, offering bold and specific commitments about their meat and poultry."

Published on: April 8, 2022

The March 2022 Brick Meets Click/Mercatus Grocery Shopping Survey is out, saying that "total U.S. online grocery sales pulled back 6% to $8.7 billion versus March 2021’s record high of $9.3 billion?  Q1 2022 e-grocery sales "finished just 2.5% lower compared to a year ago."  ($8.5B in January and $8.7B for both February and March.)

The report goes on:

"The Ship-to-Home segment experienced the largest sales contraction, plummeting over 30% in March compared to a year ago, from $2.1 billion to $1.4 billion. The decline was driven by a 13% reduction in the number of orders placed by Monthly Active Users (MAUs) combined with a 23% drop in the average order value (AOV).

"Pickup sales declined almost 11% in March from $4.3 billion in 2021 to $3.8 billion in 2022, affected by similar factors but to different degrees. Order frequency for Pickup declined 8% while AOV dipped less than 4% versus the prior year.

"In contrast, Delivery reported strong sales growth for March, surging over 20% on a year-over-year basis from $2.9 billion to $3.5 billion. The number of orders placed by MAUs climbed by 13% and AOV rose 7% versus 2021."

Published on: April 8, 2022

Business Insider reports that Amazon has done internal projections that suggest it will cost $65 to make individual drone deliveries via its Prime Air service, which it plans to roll out later this year.  

That's $65 for each of the one million packages that Amazon believes it will be delivering via drone in 2025.

That's $65, As opposed to less than $5.50 that it currently costs to make deliveries on the ground.

According to the Business Insider story, "The drone deliveries, which Amazon expects to be available free of charge to Prime customers, will be offered in 32 different locations by 2025 … Amazon has been quietly testing Prime Air deliveries in a handful of rural areas in Oregon and California for at least the past 18 months, and is looking to expand the trial test to 1,300 shoppers later this year."

The good news, Insider writes, is that the $65-per-delivery is seen by Amazon as "a significant reduction compared to current drone delivery costs."

Published on: April 8, 2022

FMI—The Food Industry Association yesterday released the first in a six-part 2022 U.S. Grocery Shopper Trends series conducted in partnership with The Hartman Group Inc.," which was "designed to explore food shoppers’ journeys and behaviors … the first analysis focuses on the shopper landscape and finds Americans are balancing a mix of concerns, including their health and safety as it relates to COVID-19, higher food prices and out-of-stocks."

The report elaborates:

"As of mid-February, 48% of shoppers report being extremely or very concerned with COVID-19, which is the lowest level of concern measured since the pandemic began but down only slightly from October 2021. At the same time, more than half of Americans cite their worries about rising food prices, and 45% are concerned about out-of-stocks. Consumers report their weekly grocery spending has gone up by 4% compared to early last year and the majority (72%) of those who have noted increased spending point to rising prices on specific items or brands as the cause of the increase."

"The majority (86%) of shoppers who are worried about rising food prices are making behavior changes, including looking for deals (59%), making substitutions or product changes (58%), changing where or how they buy groceries (48%) or buying more store brands (35%). Notably, shoppers continue to use and rely on many of the go-to grocery stores and grocery shopping methods they adopted during the pandemic."

Published on: April 8, 2022

The New Yorker this week explores the "remarkable" unionization vote at an Amazon distribution facility on Staten Island in New York that created "the first Amazon union outside of Europe. More remarkable still, the Amazon Labor Union was new and completely independent. It had none of the money or political connections of traditional organized labor."

An excerpt:

"It made all the difference at JFK8 that the union was independent and led by workers from the warehouse, not managed by a large, outside union … The risk of a D.I.Y. strategy, though, is burnout. It isn’t easy to wage permanent revolution while packing boxes ten-plus hours a day.

"Yet the Amazon Labor Union showed that being an independent union doesn’t necessarily mean working in isolation. It borrowed office space, supplies, and strategy from traditional unions, and welcomed 'salts' - people who got jobs in the warehouses for the express purpose of organizing. Community supporters donated thousands of dollars to the A.L.U. and to individual worker-leaders who were fired by Amazon. And a pro-bono labor lawyer and a staff attorney from Make the Road New York, a local social-justice group, have represented fired workers."

Still, the odds were daunting:  "At a recent administrative hearing, one lawyer appeared on behalf of a member of the A.L.U.; some fifteen lawyers, including from the firms Gibson, Dunn & Crutcher and Morgan, Lewis & Bockius, appeared for Amazon."

You can read the entire piece here.

Published on: April 8, 2022

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 81,988,278 total cases of the Covid-19 coronavirus, resulting in 1,011,096 deaths and 66,219,496 reported recoveries.

Globally, there have been 496,738,773 total cases, with 6,196,337 resultant fatalities and 432,452,035 reported recoveries.  (Source.)

•  The Centers for Disease Control and Prevention (CDC) says that 77.1 percent of the total US population has received at least one dose of vaccine … 65.7 percent are fully vaccinated … and 45.1 percent of fully vaccinated people have received a vaccine booster dose.

Published on: April 8, 2022

•  Reuters reports that Amazon "will face a shareholder vote calling for an independent audit of its treatment of warehouse workers after the top U.S. securities regulator turned down the company's request to skip the resolution.

"The decision means Amazon investors will get to vote on the issue for the first time, proponents said, taking advantage of guidance from the U.S. Securities and Exchange Commission in November that made it more supportive of votes on significant social issues … Amazon has drawn increasing criticism in recent years for its treatment of workers, including claims of poor working conditions at its warehouses and its attempts to block workers unionizing.

"With investors globally pushing companies to look after their workforce as part of an increased focus on social issues, London-based retail investor activist platform Tulipshare helped file a resolution seeking to shine a light on Amazon's practices."

Published on: April 8, 2022

•  Costco has posted Q1 net sales of $130.00 billion, an increase of 16.7 percent from $111.37 billion during the similar period last year.  US same-store sales were up 16.1 percent, while company-wide same store sales were up 12 percent.

•  From CNBC:

"Walgreens Boots Alliance said Wednesday that it will expand the number of stores in the San Francisco and Los Angeles areas with so-called Health Corners, which offers medical care in association with health insurer Blue Shield of California. It has opened 12 Health Corner locations in California and plans to open eight more by mid-year.

"Health Corners are discrete spaces in stores where a registered nurse or pharmacist can schedule a mammogram, screen a patient for high blood pressure or diabetes or help set up a high-tech medical device.

"Dr. Sashi Moodley, chief clinical officer of Walgreens Health, said Health Corners act as 'connective tissue that are keeping these patients on track, especially when they’re between doctor’s visits.'

"These new services are being offered in 'health-care deserts' that have few doctor’s offices and a predominant number of patients with chronic conditions like diabetes."

Published on: April 8, 2022

Got this note from MNB reader Tom Murphy:

I have been on both sides of the union discussion.  As a programmer at a utility, I was forced to join the IBEW (International Brotherhood of Electrical Workers).  This group had everything from janitors, secretaries, operations staff to electrical and software engineers.  None of these groups had the same problems or demands…so this was a useless mess.  I also was on executive teams dealing with everything from the Longshoremen to the various unions under the AFL-CIO.

I have several perspectives:

First and foremost, I truly believe that if your company is unionized, you deserved it…at least at some point but maybe not now.

Second, both sides, management and union leadership, are generally driven by greed…for money and power.  So, the relationship likely has no long-term benefit.  In fact, there are numerous instances where the battles for money/power led to the destruction of entire industries (think US automotive industry) and thus Detroit.

Finally, to your point…smaller may be better and more flexible.  Large unions tend to have a history of corruption and graft and leadership’s objectives are often driven by differing needs than the union membership.  After all, union leaders are the executives of their “corporations”.  Maybe the smaller approach can result in better working relationships.

I am not a fan of unions, but realize that the real world will govern this…frequently on a cyclical basis.  In any case, the next decade will be interesting!

Reacting to yesterday's piece about the amenities being created for employees at Walmart's new Arkansas headquarters, one MNB reader wrote:

This further amplifies the divide between home office and the stores.  If Walmart cut jobs a the office, how many of those folks would take a job at a store??  We know that answer. 

We had a piece yesterday about community college culinary programs are ramping up their cooking schools, creating a pipeline of trained cooks and chefs available to be hired by restaurants and supermarkets.

One MNB reader wrote:

This probably the single greatest example of what a community college can do. I learned about it and stayed there during my foodservice days.  In the middle of a cornfield is this beautiful hotel and restaurant that is entirely staffed by students from the local community college. Not exactly on point for the topic about hiring chefs, but it is certainly the kind of thing that retailers could sponsor and use to develop talent.

MNB yesterday took note of a Wall Street Journal report that the US Securities and Exchange Commission (SEC) is investigating how Amazon "has disclosed certain details of its business practices, including how it uses third-party-seller data for its private-label business."  The question, the Journal writes, is how Amazon "handled disclosures of its employees’ use of data from sellers on its e-commerce platform … The SEC’s enforcement division has asked for emails and communications from several senior Amazon executives, according to one of the people."

I commented:

The argument here consistently has been that there is nothing inherently wrong with a retailer looking at sales numbers and determining, based on volume and potential profitability, what branded products ought to be knocked off as a private label offering.  It is, in fact, what virtually every retailer does … if Amazon is prevented from doing so (and, admittedly, it almost certainly is faster, better and more precise in its analysis and implementation), then those same regulations need to be extended to Walmart, Kroger, Albertsons, CVS, Walgreens, etc…

That said, if Amazon is obfuscating the facts of the case and systemically being less than transparent with lawmakers and regulators, then it will end up paying the price.  The case can be made for a certain kind of behavior up to a certain point, and Amazon needs to tell its story.  But it cannot hide the chapters it finds to be inconvenient.

MNB reader Phil Herr responded:

Kevin, while I mostly agree with your positions, I have been stewing over the issue of private label products. You point out that the practice is widespread and consequently Amazon should not be castigated for their practice of using sales data from national brands to determine which to “knock off”. Sorry, I just don’t agree with the practice. 

Corporations such as P&G, Kelloggs, Coca-Cola and others spend enormous resources on R&D and establishing brands, only to find retailers ripping them off. 

You have been quick to point out how Instacart and other third party agents are effectively parasitic. So my question is, how is the practice of “ripping off” national brands any different?

Interesting point.  You're right - the "we've always done business this way" argument really shouldn't be employed here.

I do think it is important to keep in mind that both suppliers and retailers have long agreed that private label items allow retailers to offer lower prices to bargain-hunting shoppers … and that in many cases, the CPG brands actually are making the private label products being sold next to their own SKUs.

When I object to Instacart's "parasitic" behavior, it has more to do with retailers giving up their customer data, which is one of their most important assets.  It's not really the same thing.

Finally, MNB fave Glen Terbeek had a two word response to my mentioning that the Major Leaguer Baseball season started yesterday:

Go Cubs!!

Agreed.  Unless they're playing the Mets … who, by the way, beat the Washington Nationals 5-1 yesterday, and currently (and trust me, temporarily) stand alone atop the National League East standings.

Published on: April 8, 2022

It has been a chilly and wet week here inNew England, and so it seemed like to good time to open a bottle of the 2018 Bodegas Breca Calatayud Garnacha Old Vines, which is made, as I understand it, from vines that had their origins in seventh century Spain.  It has a deep red color and a ripe mouth-feel that made it absolutely delicious.

I have to be honest, though .. I'm looking forward to the weather warming up to the point where whites and rosés seem more appropriate.

That's it for this week.  Have a great weekend, and I'll see you Monday.

Sláinte!!