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    Published on: May 4, 2022

    The continuing goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

    The subject today is Amazon, as Tom and KC put into context the company's decision to close six Whole Foods stores … the quarterly numbers that suggested that Amazon is subject to the same ebbs and flows as many other companies … and the admission that Amazon has overbuilt its logistics network.  And KC poses a provocative question to Tom:  Could founder Jeff Bezos make a Howard Schultz-like return to the CEO job?

    If you'd rather download and listen to The Innovation Conversation as an audio podcast, click below.

    Published on: May 4, 2022

    Fascinating piece in the Financial Times about a practice called "dogfooding," in which high level executives spend time on the front lines.

    Examples cited in the story:

    "The act of testing your own product or service has been dubbed 'dogfooding' in the technology world. It traditionally took place in software development but the use of the term has since expanded to refer to other employee initiatives such as spending time in frontline roles.

    "When DoorDash was created in 2013 the founders carried out deliveries themselves out of necessity. Its WeDash initiative, which began in earnest in 2015 before being paused during the pandemic, has turned a necessity into company policy."  The company's co-founder and head of consumer engineering, Andy Fang, says, “One thing that makes this programme so effective here is the fact that the founders and the company leadership team engage in it very passionately.”

    Fang "recently used it to test the feasibility of using e-bikes for deliveries, partly as a response to rising petrol prices and concerns over environmental sustainability. He describes WeDash as a way for staff to understand the company culture, stay in touch with frequent changes to the product, and to provide feedback on how to improve the service."

    FT writes, "Such practices are not confined to the technology sector. Ahead of becoming Burger King chief executive in 2013, Daniel Schwartz worked in its restaurants, flipping burgers and learning how other roles in the business worked."

    KC's View:

    I love it.

    Perhaps more c-level executives would have a better sense of exactly how essential those front line employees are, and how deserving of investment, if they actually had to do their jobs for an extended period of time.

    Published on: May 4, 2022

    Food & Wine has a story about how delivery service DoorDash, which is operating a ghost kitchen facility in Brooklyn, New York, has expanded the concept to include seating for people who want to eat on the premises.

    According to the story, "The company stresses that this new food hall is still very much delivery-centric — so don't expect Michelin-starred service — but 20 people can eat in at a time."

    Ruth Isenstadt, senior director of DoorDash Kitchens, says that "the dine-in option was intended to further help the brands working out of the ghost kitchen."

    KC's View:

    There are few better ways to gauge how people feel about the food you're selling than to  see the looks on their faces and the alacrity with which they attack their meals.  This is a very smart move … along the lines of operating a dark store that actually allows customers to do their shopping there.  It keeps things real and connected, not remote, and creates valuable insights.

    Published on: May 4, 2022

    The Associated Press reports that as Starbucks announced record sales, CEO Howard Schultz announced $200 million in additional investments in worker pay and training - on top of $1 billion announced last fall - that will only apply to non-union employees.

    Unionized workers will have to negotiate for pay and benefits, the company said.

    Schultz made the announcement as Starbucks posted Q2 sales that rose 15 percent  to $7.6 billion, though net earnings rose just two percent to $674 million, in part because of higher employee costs.

    According to the AP story, "On Tuesday, after a series of meetings with workers around the country, Schultz unveiled $200 million in additional investments in worker pay and training. That includes raises for employees who have been at the company for at least two years as well as a near doubling in training time - from 23 hours to 40 hours - for new baristas and shift supervisors. Starbucks is also reintroducing a coffee mastery program for employees and considering other benefits like increased sick time … Schultz said the new investments will improve employee recruiting and retention. Starbucks also plans additional changes it will outline at an investor meeting in September, including adding credit and debit card tipping in its stores and accelerating the rollout of new ovens and espresso machines."

    The story goes on:  "Workers who have voted to unionize or stores that have petitioned to hold a union election won’t be eligible for the enhanced benefits announced Tuesday. Instead, Schultz said U.S. labor law requires stores to negotiate their own contracts with Starbucks … Starbucks Workers United, the group behind the unionization effort, disagrees, and said it filed charges with the National Labor Relations Board against Starbucks on Tuesday. The group said the company is violating labor law for threatening to exclude unionized stores from receiving the new benefits."

    There's another interesting passage from the AP story:

    "Schultz opposes unionization. But he noted that employees are under 'tremendous strain' due to strong customer demand and pandemic-related changes in the business, including a surge in mobile and drive-thru orders. Stores are built to serve hot drinks, for example, but 80% of U.S. orders are now cold drinks.

    "'These young people have completely valid concerns given today’s uncertainty and economic instability. They look around and they see the burgeoning labor movement as a possible remedy to what they are feeling,' Schultz said.  'But compare any union contract in our sector to the constantly expanding list of wages and benefits we have provided our people for decades, and the union contract will not even come close to what Starbucks offer'."

    KC's View:

    I'm not a lawyer, nor a labor law expert.  But it seems entirely reasonable to me that once employees have decided to form a union, it is up to that union to negotiate for wages and benefits;  management has a lot more leeway when it comes to determining these things unilaterally for non-unionized workers.

    I'm not sure how successful Schultz and Starbucks will be in stemming the unionization tide.  It remains fairly small when considering in context - just 250 stores out of some 9,000 have filed petitions to hold union elections, and only 50 and actually voted to unionize.  While I've taken some shots at Schultz for having a messiah complex, and for shooting off his mouth in ways that not helpful upon returning to the CEO job, the moves that the company seems to be making could be effective.

    The lesson ought to be evident to other retail businesses - don't wait for unionization movements before addressing the issues that your front line workers may be facing.  Retailers ought to think about just one of the issues raised by Schultz - "stores are built to serve hot drinks, for example, but 80% of U.S. orders are now cold drinks" - and ask if there is any sort of corollary in their businesses.

    The betting here is that there is at least one.  Deal with it now.  Time alone won't solve anything.

    Published on: May 4, 2022

    The New York Post has a story about how "the makers of brand-name products such as Tide detergent and Kraft Macaroni & Cheese are bolstering their defenses against store-brand rivals like Walmart’s Great Value products as shoppers’ budgets start to show signs of strain due to persistent inflation … The roughly $361 billion US packaged-food and household-products sector is on alert as shoppers start to buckle under multiple rounds of price hikes, with more in the pipeline. Retailers including Walmart are partners with brand-name product makers like Clorox and Kraft-Heinz as much as they are rivals selling less costly store-brand goods. A bottle of 64-load Tide 'Free & Gentle' laundry detergent cost $12.97 on on April 25, while Walmart’s Great Value 'Free & Clear' brand costs $8.67 for the same number of washes, for instance.

    "A survey from financial services firm Jefferies found that roughly 72% of 3,500 consumers are buying cheaper grocery and household items. Inflation 'will ratchet private label growth,' said Jim Wisner, founder of marketing and research firm Wisner Marketing in Gurnee, Illinois. 'It most definitely is a moment'."

    The story notes that "executives at Clorox said they have seen private-label rivals make 'marginal improvement' in market share, in a Monday evening earnings call. The bleach maker’s CEO, Linda Rendle, said Clorox would increase promotions - now already higher than last year - if shoppers’ wallets show more signs of stress, a tactic for competing with cheaper store-brand products."

    KC's View:

    Interesting, since most of what we've heard from CPG companies in recent months is how they're going to have to raise prices to account for inflation.  Apparently there must be some room in there to make cuts if it is going to protect market share.

    Published on: May 4, 2022

    •  The Washington Post reports that "US employers posted a record 11.5 million job openings in March, and some 4.5 million Americans quit or changed positions, matching previous highs, reflecting continued strength in the rapidly growing labor market, where workers continue to have the upper hand.

    "Meanwhile, the number of new hires - 6.7 million - remained steady, according to a report released Tuesday by the Bureau of Labor Statistics."

    The Post writes that the "insatiable need for new workers has forced employers across the economy to offer higher pay and better benefits. Wages have risen 4.7 percent in the past year, although they have not kept up with inflation, which has grown 8.5 percent in the same period. Economists say they expect workers’ pay to continue ticking up in coming months as companies compete for a limited pool of workers."

    •  The Washington Post also has a story about how Amazon is likely to draw out any unionization efforts by going to the courts.

    Here's how the Post frames the story:

    "Last month, an Amazon warehouse in Staten Island became the e-commerce giant’s first U.S. workplace to unionize. But experts say it could take years for the union to formally secure a contract if Amazon chooses to dig in its heels and fight the effort in court.

    "Amazon has already sent objections over the union vote to the National Labor Relations Board, the federal agency which enforces America’s labor laws. If it loses the objection, it will have several more chances to appeal. But even if the NLRB orders it to sit down with workers and bargain, the company could simply refuse, forcing a court battle that could play out for years.

    "'If Amazon follows this playbook, they can string the process out for a few years to break down workers’ newfound enthusiasm for organizing, and maybe try to get the union decertified,' said Lance Compa, a labor consultant and former professor at Cornell University.

    "Even if Amazon doesn’t drag its feet, it could take months for regulators to consider Amazon’s objections, and then months more to negotiate a contract if needed."

    •  From The Verge:

    "Apple Store employees in Atlanta have reached an agreement with the company to hold a union election on June 2nd, according to a copy of the stipulated election agreement obtained by The Verge. The news is an important step forward in the worker-led effort to organize with the Communications Workers of America.

    "If the drive is successful, the Cumberland Mall location will be the first unionized Apple retail location in the US. In April, it became the first Apple retail location to file for a union election in the US. Workers at the Grand Central Terminal store in New York have also launched a union drive, as have workers at the Towson Town Center store in Maryland.

    "Apple pushed to hold the vote in July, according to a source familiar with the situation. The CWA opposed the later election date, as the move could have given Apple more time to dissuade workers from unionizing. While Apple hasn’t officially said it is against workers organizing, the company is working with anti-union lawyers from Littler Mendelson, the same firm used by companies like Starbucks and McDonald’s."

    Published on: May 4, 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 83,240,101 total cases of the Covid-19 coronavirus, resulting in 1,021,581 deaths and 80,795,416 reported recoveries.

    Globally, there have been 514,758,822 total cases, with 6,266,157 resultant fatalities and 469,487,946 reported recoveries.   (Source.)

    •  The Centers for Disease Control and Prevention (CDC) says that 77.7 percent of the total US population has received at least one dose of vaccine … 66.2 percent are fully vaccinated … and 45.9 percent of fully vaccinated people have received a vaccine booster dose.

    Published on: May 4, 2022

    •  The Boston Globe reports that Travis Kalanick, the former Uber CEO, is planning to bring his CloudKitchens "ghost kitchen" startup to the Boston area, having bought a warehouse in Roxbury from which he plans to make food deliveries from restaurant-operated commercial kitchen space.

    The story notes, however, that the project has hit a number of potholes - Kalanick has trimmed by half the number of restaurants he wants to host in the facility (the original number was 53), and he's now in negotiations to sell 65 percent of his warehouse space to City Fresh Foods, which "delivers food to homebound seniors, schools, and care centers."

    The Globe writes:

    "CloudKitchens is trying to reimagine how restaurants sell food in a world where more people order delivery online. It’s no easy task, but there’s reason to believe Kalanick, Uber’s ex-CEO, would be up for the challenge. Though he was eventually pushed out after several scandals and complaints of gender discrimination and sexual harassment at the ride app company, he played a critical role in jolting the long stagnant taxi industry.

    "His new company says it offers a way for restaurants to capitalize on the food delivery boom. A restaurant might lease kitchen space to grow their delivery business, without the cost of opening another brick-and-mortar location. Or it could be a way for companies with no physical presence in an area to expand though delivery-only. CloudKitchens already has dozens of food delivery hubs across the country, including in California, Arizona, and Rhode Island."

    •  Bloomberg reports that "Uber Technologies Inc. is partnering with Tesco Plc to advance high-speed delivery at the U.K.’s largest grocer. 

    "As part of the deal, the network of Uber Eats couriers will also fulfill orders from and the retailer’s app, Uber said Tuesday. The partnership will start in 20 stores across the U.K. from Edinburgh to Portsmouth and will guarantee delivery within one hour."

    Published on: May 4, 2022

    •  National Retail Federation (NRF) Chief Economist Jack Kleinhenz said yesterday that "the economy’s fast-paced growth could slow somewhat as the Federal Reserve tries to bring inflation under control in the next few months, but consumers are likely to keep on shopping as lower inflation eases uncertainty."

    Kleinhenz said that "the Fed’s tightening has kicked off a new cycle of adjustment and the outlook for interest rates has consequences for consumers and businesses alike.  There is a growing list of uncertainties, and the risks are mounting. But underlying strength and momentum from both the consumer and business sectors are likely to offset a modest slowdown and should leave the economy bustling forward this year.”

    Kleinhenz argued that "household finances have remained strong despite consumers’ worries over inflation and the war in Ukraine. The 4 percent year-over-year increase in retail sales in March showed consumers have the willingness and ability to spend as a result of job growth, wage gains and wealth accumulated during the pandemic as well as low financial obligations relative to income."

    •  Jonathan H. Weis, chairman-president-CEO of Weis Markets, has announced that "in 2022, we plan to invest more than $150 million in our capital expenditure program.  This budget includes four new stores, some of which will be completed in the coming years, one expansion, five major remodels and eight fuel centers.”

    •  From Axios:

    "Now that front-of-the-house automation has grown ubiquitous — we almost expect to order food through a kiosk — some of the biggest innovations in quick-serve restaurants are in meal preparation.

    "Robots with artificial intelligence don't just blindly plop mounds of hash browns into a deep fryer: They can tell if a basket handle is askew or the oil is too hot and correct the problem.

    "Machines are taking over a lot of mundane tasks that are prone to human error, like monitoring refrigerator conditions, cleaning exhaust hoods and disposing of fry oil.

    Big chains like Burger King and McDonald's have 'innovation teams' looking at how robotics can improve all aspects of the operation."

    Perhaps the most prominent example, Axios writes, is "Flippy, a burger-flipping droid made by a company called Miso Robotics, (which) has been making a splash at CaliBurger, which is showcasing Flippy's talents at its store in Pasadena.

    "Chains like White Castle and Jack-in-the-Box are using a next-generation machine called Flippy 2.  It's a ceiling-mounted automated fry station with a robotic arm that can turn out food round-the-clock and distinguish between a chicken wing and a nugget.

    "Miso Robotics also makes machines like Chippy, which turns out tortilla chips for Chipotle, and CookRight Coffee, which monitors the temperature and quantity of coffee in urns for Panera Bread."