business news in context, analysis with attitude

Published on: April 19, 2022

by Michael Sansolo

Building any kind of business success is incredibly hard, so I cannot imagine the challenge of doing it twice.  That's especially true when, the second time around, it is critical for leadership to abandon, or at minimum, greatly change, the things that made their original business successful.

The hardest thing is knowing when it’s time to move on and evolve.

A great example of this was presented this past Sunday on 60 Minutes via an interview with Herbert Diess, the CEO of Volkswagen.  It might be worth assigning an online viewing of the segment to people in your organization as homework, asking them to think about what your company can and should learn from the Volkswagen experience.

Volkswagen, the world’s second largest car company (VW owns Audi, Bentley, Porsche, Lamborghini and Ducati) after Toyota, is in the throes of major change with a clearly stated goal to electrify its fleet and leave behind gas powered internal combustion engines.  It’s a change borne out of business realities and climate concerns, but unsurprisingly, as Diess says, it’s anything but easy.

“Historically, there aren’t many cases where successful companies in the old world can demonstrate they are successful in the new world,” he says in the interview. For Volkswagen that means also accepting the changed reality of competition.

As Diess explains, his competitors are no longer just car companies, but now also software companies. And in order to succeed in this new world, Volkswagen needs both new goals and new staffers with the skills to help the company meet those goals.

It is the same in retail.

Retailers have long been accustomed to competitors with fairly similar operations. Sure, Walmart, Costco or Dollar General may look significantly different than the basic supermarket, but all run stores, distribution centers and supply chains that are basically the same as any supermarket company.

The same cannot be said for Amazon, Instacart or even Ocado and some future competitor that at the moment we cannot even envision.  It’s not just that rules of the game are changing; it’s the game itself that is becoming completely transformed.

There is no simple way of knowing whether this new direction at Volkswagen is folly or fortune, but it’s hard to argue with the challenge CEO Diess poses. We’ve all seen incredibly powerful companies fall in recent years due to an inability to evolve quickly enough with the changing times, technologies and customer desires.  

It’s a simple truth that the status quo is comfortable and frankly a place we like to stay, especially for those who are incredibly successful in the present. Change, as we all know, is hard in countless ways.

But change is also the only constant and the ability to anticipate and embrace change before others is the path to sustained success. There’s no telling if Volkswagen’s vision is correct or out of focus and certainly the company doesn’t have a perfect track record in the past. But if Diess is right about anything it is that the world is changing and business leaders need get out in front to win.

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com.

His book, “THE BIG PICTURE:  Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available here.

And, his book "Business Rules!" is available from Amazon here.

Published on: April 19, 2022

I think there is a persistent virus affecting American retail - the degree to which a growing number of front line employees feel disconnected from headquarters and the c-suite … feel like they are costs, not assets … and feel like their complaints are seen as an annoyance without real validity.  But there are too many evident symptoms to ignore the virus, and so leaders are faced with a choice.  Treat the virus.  Or risk a different kind of pandemic.

Published on: April 19, 2022

The Cincinnati Business Courier reports that Kroger's "recently launched Boost loyalty program that provides delivery discounts has already taken flight, thanks largely to Greater Cincinnati customers."

According to the story, Kroger chief merchant and marketing officer Stuart Aitken, calling Boost "the next generation of loyalty program," says that "in just a few short months, Boost membership is growing rapidly."

The Courier writes that Kroger "rolled out Boost in November in four markets: Cincinnati, Atlanta, Columbus and Indianapolis … Aitken said Kroger’s Ocado automated warehouse and distribution facility that opened a year ago in Monroe, just northwest of Cincinnati, provides the best example of Boost’s growth. Of the Kroger customers who use that Monroe facility, 30% have signed up for Boost, he said."

The piece explains that "customers pay either $59 or $99 a year to join membership program Boost by Kroger Plus. For $59, customers get free next-day delivery on their orders. At $99, Kroger provides free delivery in as little as two hours. And all Boost members get double their usual fuel points earned on orders of $35 or more as well as discounts on Kroger specialty brands.

"Kroger figures an average customer can save $1,057 a year. That assumes two deliveries a week and spending $91 per week on groceries."

Published on: April 19, 2022

The Wall Street Journal reports that "even as pandemic restrictions end, and many people continue working and watching movies at home, stores are mounting a comeback. E-commerce companies that were counting on a broad secular shift are now facing slowdowns, and the prospect of expensive investments in bricks-and-mortar retailing while speeding up delivery times.

"It turns out there are limits to buying stuff on screens. Foot traffic to malls and bricks-and-mortar stores has rebounded since vaccines and booster shots became widely available and the worst waves of the virus receded. Sales slowed at many digital storefronts specializing in apparel, home furnishings and other categories where many consumers prefer to see in-person and touch what they are buying."

According to story, "Data suggests consumers are finding a new balance between online and in-person shopping. In the second quarter of 2020, as stay-at-home measures were in place, the share of U.S. retail sales that happened online surged more than four percentage points to 15.7%, according to Census Bureau data adjusted for seasonal factors. By the fourth quarter of 2021, that share had dropped to 12.9%, putting consumer buying habits roughly back to their prepandemic trend.

"This March was the first month since the pandemic hit during which e-commerce sales declined from the same period a year earlier while in-store sales rose, according to Mastercard SpendingPulse, which tracks transactions made over the Mastercard payments network as well as survey-based estimates for spending with cash and checks. The drop in online spending was 3.3%, the first year-over-year decline since November 2013. The rise for bricks-and-mortar stores was 11.2%."

Published on: April 19, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  From the Washington Post:

"Another Amazon warehouse, this time in New Jersey, has qualified to hold a vote on whether to unionize — just weeks after the first Amazon facility in the United States successfully voted to organize.

"The National Labor Relations Board confirmed Monday that a union organizing workers at the DNK5 facility in Bayonne, N.J., has submitted enough signatures to hold an election. The date for the vote has not yet been set.

"A filing shows that 200 employees are expected to be eligible to vote at the small delivery facility. Workers are being organized by the Local 713 International Brotherhood of Trade Unions, the first successful push by that union for a vote at an Amazon warehouse."

Some context from the story:  "Labor experts had predicted that a successful vote to unionize could start cascading efforts at the United States’ second-largest private employer, and union organizers say they are seeing increased interest and outreach from workers. An upstart, independent labor union called the Amazon Labor Union (ALU) made history this month when thousands of workers at the JFK8 warehouse on Staten Island voted to join its union."

New Jersey is a state where labor has enough juice to make it one of just two states - Oregon is the other - where people are not allowed to pump their own gas.  Be interesting to see if New Jersey is the next domino to fall.

•  From the New York Times this morning:

"A judge ruled on Monday that Amazon must reinstate and pay lost wages to a worker the company 'unlawfully' fired two years ago after a protest at its fulfillment center on Staten Island, the same warehouse that recently voted in a landmark election to unionize.

"A National Labor Relations Board regional director argued that the firing was retaliation for protesting safety conditions, which is protected by federal labor law. Benjamin W. Green, an administrative law judge, agreed."

According to the story, "The case centers on a verbal altercation during the early days of the pandemic in New York. On April 6, 2020, Gerald Bryson was protesting outside the warehouse, known as JFK8, and said it should be shut down for safety. Another employee said she wanted the facility to remain open because she was grateful for the extra pay she was receiving for working during the pandemic. The two exchanged insults, but only Mr. Bryson was fired. The woman received a written warning."

“For me to win and walk back through those doors changes everything,” Bryson tells the Times.  "It will show that Amazon can be beat. It will show you have to fight for what you believe in.”

Amazon says it plans to appeal.

•  From CNBC:

"The CEO-to-worker pay gap is widening yet again, as top executives who took pandemic pay cuts more than recovered lost earnings in the last year.

"CEOs made 254 times more than the average worker in 2021, up 7% from the year prior, according to the Equilar 100, which offers an early look at CEO compensation among the largest companies by revenue that filed 2021 proxy statements by March 31.

"In 2021, median CEO compensation reached $20 million, a 31% increase from the year prior, due to big jumps in stock awards and cash bonuses based on market performance and company productivity. CEO pay consists of wages, as well as extremely lucrative bonuses, long-term incentives and, most importantly, stock options, which comprise around 85% of CEO compensation, according to Lawrence Mishel, a distinguished fellow at the Economic Policy Institute.

"For comparison, CEO pay decreased by just 1.6% between 2019 and 2020 due to pandemic cuts, from $15.7 million to $15.5 million.

"Median worker compensation at Equilar 100 companies rose from $68,935 in 2020 to $71,869 in 2021, a roughly 4% increase. Equilar says this bump is due in part to companies that offered bonuses and other cash payouts in the recovering pandemic economy that saw increased consumer demand and a tightened supply of workers."

Published on: April 19, 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…

•  The United States now has had a total of 82,377,156 total cases of the Covid-19 coronavirus, resulting in 1,015,790 deaths and 80,244,093 reported recoveries.

Globally, there have been 505,291,086 total cases, with 6,225,311 resultant fatalities and 457,116,084 reported recoveries.   (Source.)

•  The Centers for Disease Control and Prevention (CDC) says that 77.4 percent of the total US population has received at least one dose of vaccine … 65.9 percent are fully vaccinated … and 45.4 percent of fully vaccinated people have received a vaccine booster dose.

•  Axios reports that a Florida federal judge, U.S. District Judge Kathryn Kimball Mizelle, yesterday ruled that "the Biden administration's rule mandating masks on planes, trains and other forms of public transportation," saying that "the Centers for Disease Control and Prevention exceeded its statutory authority and failed to properly justify its decision."

After the ruling was handed down, CNN reports, the Transportation Security Administration (TSA) said that it "will not enforce the mask mandate on public transportation … The CDC continues to recommend that people wear masks on public transit, a Biden administration official said."

Almost immediately a number of airlines - including Alaska, America, Delta, Southwest and United - said they would no longer mandate masks on their domestic flights.

However, in New York the Metropolitan Transportation Authority (MTA) said that it would continue to mandate masks for its trains, buses and subways.  And the city of Philadelphia has not backed off its new indoor mask mandate, imposed just days ago because of increased Covid-19 case rates.

The timing on this is interesting.  The CDC just last week extended its mask mandate, but only for two weeks.  While case rates are going up, it seemed to want to get the country past the aftermath of spring break;  it seemed inevitable, except if circumstances changed, that the mandate would've been dropped on or about May 3.

I hope that this ruling - issued by a judge who the American Bar Association rated as "not qualified" when she was nominated - doesn't result in an even higher rate of transmission and new life for the pandemic.  I'll be traveling a lot over the next two weeks, and my plan is to wear a mask when I'm in airports and on planes;  I'll be curious to see what flight attendants and other passengers do.  (I'm double vaxxed and double boosted, but I still worry about the person next to me.  I can only imagine the discomfort when people find themselves sitting next to someone who is coughing and sneezing - unpleasant in the best of times, but now carrying a higher level of concern.)  One thing does seem clear - we'll know pretty quickly what this elimination of the mandate means in terms of the public health.

I'm not a lawyer nor a legislator, so I'll also be interested to see how this plays out in regulatory terms.  Because to my mind, one of the reasons that an agency like the CDC exists is to be able to mandate certain behavior in times of national emergency.  Which, make no mistake, this has been - more than a million people in the US have died from Covid-19.  If a new - and more dangerous - variant emerges, I worry that the CDC may be handicapped in its efforts to do its job.  That would be a tragedy of potentially epic proportions.

Published on: April 19, 2022

•  CNBC reports that "Amazon will conduct a racial equity audit of its hourly workforce after shareholders urged the company to provide more transparency into how its policies impact diversity, equity and inclusion.

"The company said in a recent securities filing that the audit will evaluate 'any disparate racial impacts on our nearly one million U.S. hourly employees resulting from our policies, programs and practices.'  The audit will be led by former Attorney General Loretta Lynch, now a partner at Paul, Weiss, Rifkind, Wharton & Garrison, as well as other attorneys from the law firm.

"Amazon said it will make the results of the audit public. The company declined to say when it expects the audit to be finished."

Published on: April 19, 2022

•  Lund Food Holdings announced that it is employing a new "automated retail shelf intelligence solution in every Lunds & Byerlys grocery store."

The company says that "using patented computer vision and artificial intelligence to scan all products and categories across all stores," the company now will have "almost instantaneous access to actual shelf inventory conditions, enabling the company to improve sales, optimize labor and deliver against its commitment to give customers the best shopping experience possible."

According to the announcement, the system will offer "an improved omnichannel experience that reduces product substitutions based on a more accurate e-commerce catalog … worker efficiencies through more effective omnichannel product picking and faster, more accurate inventory gap scanning … (and) improved in-stock levels to increase sales and customer satisfaction."

The program is being powered by Pensa Systems.

•  From the New York Times:

"The Food and Drug Administration said on Monday that it was looking into reports that thousands of people had become ill after eating Lucky Charms, the frosted toasted oat cereal with marshmallows marketed as 'magically delicious.'

"The investigation comes after more than 3,000 people who said they had been sickened after eating Lucky Charms submitted reports to iwaspoisoned.com, a site where consumers can share reports of illnesses that they suspect are related to food products. Several reports on the site detailed bouts of diarrhea, nausea, stomach pain and vomiting after consumption.

"The F.D.A. said in a statement on Monday that it had received more than 100 submissions related to Lucky Charms this year through its own reporting system for adverse events and product complaints."   General Mills has said than an internal investigation did not find "any evidence of consumer illness linked to the consumption of Lucky Charms.”

•  From the Bangor Daily News:

"Hannaford Supermarkets … announced it will fully transition to renewable energy by 2024.

"That comes as Maine moves to drastically cut carbon emissions in line with Gov. Janet Mills’ pledge to make the state carbon neutral by 2045 and as other Maine businesses, including New Balance, move to reduce their impact on the climate.

"Over the past decade, the regional supermarket chain has sourced about 30 percent of its electricity from renewables through partnerships with 30 community solar projects across Maine, Massachusetts and New York. That amounts to about 86.4 million watts."

•  From AL.com:

"The popular convenience store chain Wawa could soon be coming to Alabama.

"In a release, the Pennsylvania-based chain said it was planning to expand its footprint into the 'Florida panhandle region, along with adjacent markets of Pensacola, Panama City and Tallahassee, along with Mobile, Alabama.'

Current plans are for Wawa to open 40 stores in these markets with the first locations expected to open in 2024."

•  From Axios:

The National Audubon Society is introducing a new certification program: Cattle ranchers who can show that their ecological practices will restore bird populations will earn the designation "bird-friendly beef" for their products."

According to the story, "Three billion North American birds have perished since the 1970s, and global warming may push many more to the brink of extinction, per Audubon," which created a "bird-friendliness index" designed to "evaluate conservation success in grasslands, where bird populations are particularly hard hit."

"For the first time, Audubon says, consumers 'can contribute to grassland conservation efforts by selectively purchasing beef from Audubon-certified farms and ranches'."

Published on: April 19, 2022

Lots of emails today…

Yesterday we took note of what I thought was a terrific story in the New York Times about how a Dollar General store manager went from being one of its top employees to a fired dissident who now is "trying to build what she calls a 'movement' of workers who feel overworked and disrespected and is encouraging Dollar General employees to form a union."

The manager, Mary Gundel, loved her job, but was frustrated by the working conditions and the sense that she was unheard by unheard by corporate.  So, she decided to post a six-part video on TikTok, in which she "laid bare the working conditions inside the fast-growing retail chain, with stores that are a common sight in rural areas," conceding as she did so that she could get in trouble for her videos.   But, she said, "Whatever happens, happens. Something needs to be said, and there needs to be some changes, or they are probably going to end up losing a lot of people."

She got fired.

Dollar General released a statement saying, “We provide many avenues for our teams to make their voices heard, including our open-door policy and routine engagement surveys. We use this feedback to help us identify and address concerns, improve our workplace and better serve our employees, customers and communities. We are disappointed any time an employee feels that we have not lived up to these goals and we use those situations as additional opportunities to listen and learn … Although we do not agree with all the statements currently being made by Ms. Gundel, we are doing that here."

I commented:

First of all, Dollar General is full of it.  If management really cared and wanted to learn, it would've kept Mary Gundel inside the tent, empowering her to help identify and solve the problems.  That might've given her a better understanding of the broader problems, and given them a different, front lines-centric appreciation for the issues.

Gundel went public not because she didn't care, or hated the company, but because she loved her job and the company - enough to risk her career.

C-level execs who do not get that ought to lose their jobs.  It is that simple.

Go into a competitive battle with an army of people like Mary Gundel, and you can conquer the world.  If I were another Tampa-area retailer, I'd reach out to her immediately … tap into that passion, and use it to create a business model more in synch with front line realities.

One MNB reader responded:

I disagree with the approach as personal accountability would dictate otherwise.  She is free to resign if she doesn't like her working conditions.  While it's an option to look poorly upon the company.  Let's look honestly at the employee.  Accept the things one cannot change and change the things one can.  (Resign.)  What does it have to do with anything or anyone else?  Another person might have been practicing acceptance each and every day in the face of such challenges and worked towards ideals, never wavering in the face of such insurmountable odds.  Just because this person didn't like the working conditions doesn't mean the company is wrong or bad.  To publicly put the company on notice?  It was a call for action from her, by the company, to do exactly what they did.  Terminate.  She didn't have the courage to change the things she could.  Maybe this will help her learn a great lesson.  

I disagree.  For one thing, there seems to be some evidence that her situation is anything but isolated.

MNB reader Roy Dacke wrote:

After a recent move landed me within walking distance of a Dollar General in St Petersburg, FL I’ve had several opportunities to witness these overworked employees. There are frequently only two visibly tired and loudly complaining employees holding down the entire store. Dollar General is trying to saving a buck off the sweat of their worker’s brows. Meanwhile the products on the shelves are what I call “fake cheap” predatory products whose low sticker prices are only owed to small package sizes with a high unit price.  DG gives a bad shake to both customers and employees.

From another MNB reader:

I sent in an email 4/5 years ago about having to stop at a DG store for Tylenol for my dad on Thanksgiving. (Only store open, that says a lot). Employee working had been by herself from 8-3. No bathroom break or anything. Bet the c-suite team enjoyed their holiday. 

I worked retail all my life, have hired ex DG people every chance. They enjoyed working in our environment much more.

Their store conditions as a whole are horrible, not because of worker apathy but because of lack of workers. Low prices come with a downside, lower wages and less labor. 

And from another:

Being a store manager anywhere is tough, but Dollar General store managers are known to work long hours, since a DG store doesn’t have that many employees to start with.  If Mary was making $51,000 a year, my guess is that she probably worked in excess of 60 hours a week.  That would mean that her pay equates to roughly $16.34/hour.  She was dedicated, loved her job, wanted to make the company better, and they fired her because she spoke up.

Of the people I know who have worked at DG in store operations, all are ex-employees. Knowing that they have high turnover, they fire a store manager in their “top 5%”, because she had an opinion on how to make the company better.  Dedication and hard work are assets that any company will value.  My hope is that Mary never looks back and instead runs towards the future. 

From still another:

In my 40+ years in retail and wholesale leadership, the 18 months I spent with Dollar General was the worst 18 months of my life!

Weighing in on the broader subject of labor issues and unionization, one MNB reader wrote:

A year ago January I retired after 45 years in the CPG world. Wonderful memories. After starting as a retail sales rep. I got an MBA and enjoyed exciting roles in sales and marketing management.  But to this day I have my United Steelworkers Union card in my wallet.  I worked in a PA. steel foundry in the early 70’s to pay for college.  Yes, unions over the years have worked to the detriment of industries and even their own members.  However, I have been on the other side and agree that “management” to often is unsympathetic and greedy in their treatment of workers.  The best way to “fight” a union is to honor your workers, verbally and materially.

From another reader:

I am currently semi-retired as the VP/GM of a regional C-store chain … We have struggled immensely with staffing and worked extremely hard to keep our stores open, compensate people fairly, and serve our mostly rural communities.

I agree that you have to be careful to not be too far removed from the front lines. During the height of the hiring crunch we went out to stores to help, myself included. We cleaned bathrooms, swept parking lots, stocked coolers, etc. This did not relieve the hiring crunch and only slightly helped at store level, but we sent a message that we were in the battle with them. It helped.

Maybe that is what Starbucks and Dollar General need to do. Go out and work in stores. When there is a shortage of workers it is tough or nearly impossible to solve, regardless of pay, but what you can do is work shoulder to shoulder, even if it is only 1-2 days a week.

Sounds like your company doesn't have the problem I am describing.

Yesterday MNB pointed out an Axios report that the California legislature is considering a bill "that would cut the workweek to four days for companies with more than 500 employees … California's AB2932 would change the definition of a workweek from 40 hours to 32 hours for employers with more than 500 employees, and require overtime pay for eligible employees after that."

I commented:

Count me among the opponents.

This is the kind of stuff that gives liberals a bad name.

I cannot imagine what the rationale is for California making this kind of legal change, which not only would cost companies a lot of money, but would also create upheaval for a lot of companies' operations and cultures.

MNB readers know that I am all in favor of companies being more compassionate toward their employees … that they need to treat workers like assets and not costs … and that for too long executive compensation packages have been way too generous when compared to the frugality mindset often employed on the front lines.

But unilaterally saying that anyone who works at a company with more than 500 employees needs to be paid overtime once they go beyond 32 hours?  This just strikes me as unreasonable and badly timed especially in view of broad staffing shortages.

I believe in creating as pro-worker environment, but the worst thing a government can do for workers is create an anti-business environment, which this does.  A little balance would be nice.  I also believe that judicious government regulation is not necessarily a bad thing … but this is way over the line.

One MNB reader wrote:

As a Californian, I TOTALLY agree with you.

And from another MNB reader:

I'm a liberal who loves living in California, and I agree with you that this is a terrible idea. I also think the actual bill has no chance of passing, and if we scrutinized the docket in all 50 states we'd find all sorts of wacky legislation that reinforces whatever stereotypes we have for each state but won't get passed and therefore isn't really relevant. What's frustrating for me is how easy some of our CA politicians make it to reinforce stereotypes like this about CA. We're our own worst enemy at times.

Just to be clear about this, I don't want to be lumped in with the California bashers.  It is one of my favorite places in the country, I loved going to school there, and California is one of the places to which I would move tomorrow if it were entirely up to me.

Another MNB reader chimed in:

As the saying goes “there must be something in the water in California “.  Every time you think they have reached the peak of insanity, they fine something new.  Talk about chasing businesses out of the state.  This is what happens when lifelong politicians without business experience, propose laws.  There is so much wrong with this proposal, that you could fill a book.   One ironic thing is the companies with under 500 employees would have much harder times recruiting.  If you are an hourly associate and have a choice of making $600 for 32 hours or 40 hours , where would you work.  

The concept of working flexible schedules make sense and is a recruiting advantage, such as 4 ten hour days which gives employees the 3 days off and reduces commuting by one day.  This is the type of flexibility the politicians should be encouraging. 

But another MNB reader, Mike Sommers, disagreed:

Surprised by the hard stance you took on this one.  The Axios article answers your question about what rationale California used to make this change, but since you missed it, “Proponents say a four-day workweek, which has been tried in Europe and is popular with many workers, would boost productivity, work/life balance, and mental and physical health”.  If not for the labor movement, there wouldn’t be a 2 day weekend, or the federal holiday, Labor Day.  How is your marketing plan for the horse buggies coming along?  Maybe you could consider switching professions, I hear cutting ice out of lakes and delivering to homes is the new up and coming trend.  Or maybe you could manufacture and sell rotary phones.  I kid, sort of...

But another MNB reader wrote:

Congratulations Kevin, you are starting to sound like a true conservative. Welcome to the land of logical and level headed thinking.

I am conservative about some things, liberal about others, and like to think that I actually relatively centrist and open-minded about most issues … But the only "true" thing I am is skeptical about anybody who thinks their way is the only logical and level-headed approach to anything.

Published on: April 19, 2022

Evans Chebet of Kenya won the men's race in the 126th Boston Marathon yesterday, with a time of 2:06:51 seconds.

Peres Jepchirchir, also of of Kenya, won the women's race with a time of 2:21:01.