business news in context, analysis with attitude

Published on: July 11, 2022

A recent visit to Citi Field, where a statue of New York Mets legend Tom Seaver now stands at one main entrance, got me thinking about a business lesson that could be useful to many companies.  It has to do with history…

Published on: July 11, 2022

Walmart is saying, in essence, that it doesn't need to respond specifically to Amazon's Prime Day promotion this week because it is already primed to offer superior deals to consumers.

According to CNBC,  "The big-box giant, like other retailers, has typically thrown its own overlapping sales event. Yet this year, much of its merchandise is already on sale.

"Bright yellow 'Clearance' signs have become a fixture in many stores in recent weeks, and its website is touting thousands of Rollbacks, a signature term for the discounter’s 90-day price cuts, on bicycles, air fryers and more.

However, "While Walmart is skipping the flashy marketing and short-term sales event, discounts will be plentiful for shoppers who hit its stores."

CNBC points out that "some retailers are still pressing ahead with sales events that coincide with Prime Day. Target is hosting Deals Days, a three-day event from Monday to Wednesday with discounts on thousands of items across every category from electronics to beauty. Best Buy is having a Black Friday in July Sale with deals on laptops, TVs, smartphones and more from Monday to Wednesday. And Macy’s kicked off its Black Friday in July event on Thursday and it will run through Wednesday, with specials in store and online on apparel, accessories, beauty and home."

Published on: July 11, 2022

Business Insider has a long profile of Doug Herrington, Amazon's new retail CEO, which seems to conclude that while he is a smart, out-of-the-box, entrepreneurial thinker, he is someone without "a giant success story on his résumé. While he's responsible for helping grow Amazon's retail business, which sold an estimated $600 billion worth of products last year, his big ideas for the grocery and private labels have not found any smash-hit success so far."

The profile - which seems to have been done without Herrington's or Amazon's cooperation - suggests that Herrington has succeeded at Amazon because of his ability "to pursue ambitious ideas," something that was valued by company founder, former CEO and current chairman Jeff Bezos.  "But many of Herrington's initiatives still remain works in progress," Business Insider writes.

Here are some excerpts from the piece.

•  "From at least 2015, Doug Herrington, who became Amazon's new retail CEO last month, pushed the idea of launching an online-pharmacy business to the company's senior leadership team, including founder Jeff Bezos.

"He would argue pharmacy was another large market bogged down by inefficiencies and pitched an online service that could quickly deliver prescription medications, according to people familiar with the matter. At one point, his team even drew up potential partnerships with Pfizer and Johnson & Johnson to help screen for counterfeit products, as Insider previously reported.

"In those meetings, other participants would often lean in to hear Herrington talk because he spoke in such a low voice, one of the people said. Bezos, who was a fan of Herrington's entrepreneurial streak, one former direct report said, bought into the idea, approving the $750 million Pillpack acquisition in 2018.

"But four years after buying Pillpack, which was later rebranded as Amazon Pharmacy, Amazon is struggling to add new customers to its prescription business, according to people familiar with the team. Some say it's emblematic of Herrington's work at Amazon: big, bold ideas with mixed results."

•  "Part of Herrington's success at Amazon has to do with his ability to pursue ambitious ideas. He's considered the de facto founder of Amazon's Fresh grocery segment, and ran other major projects, like its private-label business and a task force to catch counterfeit sellers. More recently, he oversaw the launch of Buy with Prime, a new service that is going after Shopify's turf … But many of Herrington's initiatives still remain works in progress, and some he's championed, like the questionable Dash button, are already dead."

•  "Though Herrington hasn't directly managed it in recent years, Amazon's Fresh grocery business accounts for a tiny sliver of the market, even after spending over 15 years in the space and billions of dollars in investments, including $13 billion to buy Whole Foods. As of March, Amazon and Whole Foods accounted for just 1.6% and 1.3% of the US grocery market, respectively, falling way behind Walmart's 21.3% share and Kroger's 10.2%, according to the research firm Numerator. 

"And it still hasn't figured out a way to sell groceries profitably. An internal financial report, reviewed by Insider, shows Amazon's physical stores and grocery business recorded an operating loss of $1.1 billion in the first quarter. The grocery business itself, excluding ad-related revenues, generated about $900 million in first-quarter sales, one person said.

"With Herrington's promotion, Amazon will likely double down on growing its grocery business going forward, people who worked close to Herrington said."

•  "Herrington is also known for his out-of-the-box thinking. He was a strong advocate for the Treasure Truck, a bizarre blue truck that drives around cities to sell limited-quantity products, such as inflatable paddleboards and 24-ounce porterhouse steaks. While the truck added some fun and engagement with customers, it has yet to drive huge revenue to Amazon, a person familiar with the business said.

"Internally, Herrington is famous for a 2012 presentation he gave to the leadership team titled 'Amazon's future is CRaP.'  In his memo, Herrington argued that Amazon had to sell CRaP products — CRaP stands for 'can't realize a profit' and includes low-margin items like grocery items — more profitably if it wanted to compete with the world's largest brick-and-mortar retailers, which rely on the sales of frequently shopped, low-priced products to gain market share."

The Business Insider story notes that "some executives defend Herrington's track record. His teams have always had to compete in established categories, like groceries, apparel, and pharmaceuticals, making it hard to scale against large incumbents in a short period of time. He has also been a key member of Amazon's market-leading e-commerce business since 2005, which now accounts for almost 40% of the US market.

"Some of his other bets, like Amazon's business marketplace, reached $25 billion in annualized sales last year. It's why Amazon continues to pour money into his teams and give long runways to prove themselves."

Published on: July 11, 2022

Good piece in the New York Times this weekend about how "more than 300 new independent bookstores … have sprouted across the United States in the past couple of years, in a surprising and welcome revival after an early pandemic slump. And as the number of stores has grown, the book selling business — traditionally overwhelmingly white — has also become more much more diverse."

The Times writes:  "Two years ago, the future of independent book selling looked bleak. As the coronavirus forced retailers to shut down, hundreds of small booksellers around the United States seemed doomed. Bookstore sales fell nearly 30 percent in 2020, U.S. Census Bureau data showed. The publishing industry was braced for a blow to its retail ecosystem, one that could permanently reshape the way readers discover and buy books.

"Instead, something unexpected happened: Small booksellers not only survived the pandemic, but many are thriving … The association now has 2,023 member stores in 2,561 locations, up from 1,689 in early July of 2020. Some of the growth reflects the renewal of memberships by existing stores that put off doing it last year amid the uncertainly caused by the pandemic. But there has also been a sharp and sustained rise in new bookshops, and more than 200 additional stores are preparing to open in the next year or two."

Many of the new stores that opened, the Times writes, "during the pandemic are run by nonwhite booksellers, among them The Salt Eaters Bookshop in Inglewood, Calif., which specializes in books by and about Black women, girls and nonbinary people; the Libros Bookmobile, a Latina-owned mobile bookstore in a converted school bus in Taylor, Texas, which stocks fiction in Spanish and English, and Reader’s Block, a Black-owned bookshop in Stratford, Connecticut … The new crop of bookstores may also be a byproduct of broader pandemic-driven shifts in the economy as people re-evaluated their lives and changed professions, and retail spaces became more affordable. Government assistance to small businesses helped many bookstores weather the shutdown, while stimulus checks enabled some people to leave their jobs and start new businesses."

And, some broader context:

"The rapid growth of physical bookshops is especially surprising at a time when brick and mortar stores face crushing competition from Amazon and other online retailers. Many bookstore owners are also confronting new uncertainty from a grim outlook for the overall economy — labor shortages, supply chain snafus, rising rents and interest rates, higher costs of goods, and a looming recession that could drive down consumer spending.

"But one unexpected outcome of the pandemic was the way many communities rallied around their local bookstores in a time of crisis. When in-person shopping plummeted during the shutdown, bookstores rapidly scaled up their online sales operations, and found other ways to keep their customers, including curbside pickup, home delivery, outdoor pop-up stores and bookmobiles. Readers, it turned out, were eager for print books during the pandemic, and the spike in sales continued into 2021, when publishers sold nearly 827 million print books, an increase of roughly 10 percent over 2020, according to NPD BookScan."

Published on: July 11, 2022

•  Kroger this morning announced that will use the Pacvue software suite to allow advertisers "to programmatically manage advertising campaigns on Kroger to create cost efficiencies, grow share of voice, and increase sales. Kroger Product Listing Ads are a pay per click solution where brands can set the bid price for individual products within the campaign. The selected products will be eligible to boost within the search results they organically show up in already."

Published on: July 11, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  NBC News reports that "Starbucks has withdrawn a recently introduced breakfast chicken sandwich from its locations, saying Friday the seasonal item failed to meet its standards for quality.

"The Seattle-based company said it issued a voluntary 'stop sell' for its chicken, maple butter and egg sandwich on June 26. Any claims the item caused specific illness are simply false, Starbucks said … 'The quality issue that was identified by Starbucks would not lead to food borne illness and any reports linking the stop sale to illness are inaccurate,; Starbucks said in a statement."

Two questions.  One, since this was part of Starbucks' efforts to revitalize its food business, especially at lunch, how did it get into the stores if there was a question of quality?  And second … does "chicken, maple butter and egg" really sound like a good combination to anybody?

•  The BBC reports that "Heinz has reached an agreement with Tesco which will see some of the UK's best known products back on the supermarket chain's shelves in the next few days.

"Last week, the food company had stopped supplying Tesco with products like baked beans, ketchup and tomato soup after a disagreement over pricing.

"The row had led to shortages of some popular items.

"However the supermarket have now said that 'the full range of Heinz products' will return to Tesco shelves and online … both companies have now sorted out their differences, although no details on the deal have been revealed."

Without knowing the specifics of the agreement, I remain convinced that at least from a public relations point of view, this will be seen as a win for Tesco - anytime a retailer seems to be acting as an agent for the consumer as opposed to a tool for the manufacturer, that's a good thing for the business's image.

•  From the Wall Street Journal this morning:

"Tyson Chief Executive Donnie King said he is committed to fixing the nation’s largest chicken operation, which produces roughly one-fifth of the U.S. supply. The effort now faces a test, as profits from Tyson’s beef business are projected to decline this year from record levels, while the company has committed millions of dollars to expand its chicken production … The Arkansas-based company has struggled for years to meet demand and turn a consistent profit in its poultry business. The problems have persisted through a succession of chief executives, with five different CEOs leading the company in as many years.

"Tyson’s challenges have played out across its sprawling operations, from problems hatching enough of the tens of thousands of chicks scampering inside cavernous barns that dot the Arkansas countryside near Tyson’s headquarters, to short-handed processing lines in the plants that slaughter and process the birds into chicken breasts or wings.

"Demand for chicken is hot, from supermarkets to fast-food chains battling over crispy chicken sandwiches. Tyson’s problems have meant that the biggest U.S. chicken processor hasn’t been able to consistently fulfill growing customer orders, while its profitability has suffered. The company has had to pay more for grain to feed its chickens and wages to keep plants staffed. To meet orders, Tyson has sometimes bought chicken from rival processors, Mr. King said, at a time when boneless skinless breast prices have tripled since the start of 2021."

•  From the Wall Street Journal:

"Abbott Laboratories has reopened its biggest factory after a shutdown last month that dealt another blow to efforts to replenish the country’s short supply of baby formula.

"Abbott on July 1 reopened its plant in Sturgis, Mich., following a nearly three-week closure that stemmed from severe thunderstorms that blew through southwest Michigan, a spokesman confirmed on Sunday. The company has restarted production of its EleCare formula, a formula for babies with digestive issues, and will begin shipping in the next few weeks, said spokesman John Koval.  Mr. Koval said Abbott is working to restart production of its formula Similac as soon as possible.

"The company said on June 15 that it stopped production at the plant to assess damage caused by the storm and to clean and sanitize the facility. The company said areas of the plant had been flooded, but didn’t elaborate on what damage may have resulted.

"When the storm hit, the Sturgis plant had been open for just over a week following a multi-month closure that began in February, when the Food and Drug Administration found traces of a potentially deadly bacteria, raising the possibility that contaminated products from the plant had caused the illness of several infants. The second closure elevated concerns about shortages that continue in many states despite efforts by the Biden administration to ease the crisis with formula supply from Europe, Mexico, Australia and elsewhere.

"The Sturgis factory had produced roughly one-fifth of the infant formula in the U.S. In early June, before Abbott’s most recent plant closure, industry executives said the shortage would persist for several more weeks."

Published on: July 11, 2022

•  From the Wall Street Journal this morning:

•  "CVS Health Corp. is creating a new senior technology role that will oversee its chief information officer and other tech leaders while focusing on tech strategy and business growth.

"Tilak Mandadi, formerly chief strategy, innovation and technology officer at MGM Resorts International, will step into the newly created role of chief data, digital and technology officer on July 25. He will be an executive vice president and report directly to CVS President and Chief Executive Officer Karen Lynch.

"Before Mr. Mandadi’s appointment, technology leadership at CVS was divided among the president of data and analytics, the chief information security officer, the CIO, the senior vice president of digital engineering and architecture and the SVP of digital products, user experience and operations, each of them reporting to different business leaders.

"The creation of the new role is meant to bring those spheres together, eliminate silos and take a more integrated company approach to technology according to Ms. Lynch."

Published on: July 11, 2022

Got the following note responding to last week's reference to a piece about Erewhon:

Erewhon Market was started by some hippies who came up with the name “nowhere” spelled backwards.   They had a good location and  developed a cult like following.   The first store in LA was on Beverly Blvd.  Tony Antoci bought the company and greatly improved the store then expanded it to where it is now.

When we worked on remodeling his first store I asked Toni how he came to buy Erewhon.  He told me he built and sold a successful food distribution company and was not working at the time.  He told me that one morning his young son came to him and asked him what he does and Tony said what do you mean?   His son told him that his friend’s dad goes to work (I cannot remember what work he said the son’s friend dad did for work).  Tony said he realized then that he had to do something different for his son’s sake.  To be a good example of what hard work is.  I was impressed at the time and I still am.

Years ago, my kids told me that when they were young, they were convinced that I was, in fact, an assassin.  I would leave for days, sometimes weeks at a time.  There was little concrete evidence that I was actually in many of the places that I said I was visiting, and they figured that my line of work had to be a cover story, since nobody could actually make a living doing what I do.

Just on principle, I've never denied the story.

We took note last week of a Business Insider report that "Costco has raised prices on two items in its beloved food court: the chicken bake and the 20-ounce soda … The chicken bake, a breaded dish filled with chicken, cheese, bacon, and a Caesar dressing, now sells for $3.99 — $1 more than in June. The soda price increased from $0.59 to $0.69, an increase of 10 cents or about 17%."

The story said that CEO Craig Jelinek has consistently said that the hot dog's $1.50 price tag will not change, and that he was once told by Costco founder Jim Sinegal, If you raise the [price of the] effing hot dog, I will kill you. Figure it out."

MNB reader Monte Stowell responded:

When I was still working for a large CPG company, I knew several fellow employees who were on the Costco team, and I remember them telling me about Jim Senegal’s reply to the big money guys in NYC about raising the price of a Costco Dog and a soft drink. They kept challenging Jim to raise the price of a Costco Dog and a soda above the $1.50. Jim’s reply was simple, “ if a customer spends several hundred dollars a year, I can certainly afford to sell them a hot dog and a soda for $1.50.” This is a great business lesson, keep the customer coming to spend their dollars in Costco. 

Another MNB reader responded by referencing another MNB story, about the importance of emotional intelligence when leading companies:

Interesting reading the Jim Sinegal quote, “If you raise the price of the effing hot dog, I will kill you.” after the Inc. recap on empathy and emotional intelligence.  Did he not care how his employees would feel?

I think Craig Jelinek could handle it.

Last week we reported on a Women's Wear Daily piece about how "CVS Pharmacy is getting into the prestige beauty game … launching a new format for merchandising skin care, dubbed the Skin Care Center. The space will feature an array of brands, from mass market giants CeraVe and La Roche-Posay to the channel’s newcomers, like Blume and Volition Beauty, both of which are entering mass for the first time. Wander Beauty, the prestige skin care and makeup brand, will also be participating."

One MNB reader responded:

This is interesting.  As a customer, how will I feel about a skin care consultant on staff/in-store when I can't find anyone at the front end, pharmacy hours are reduced due to staffing, and shelves are in horrific conditions?  Also, many of the CVS stores I see are not in "beauty-care" demographics.  I wish them luck, but suspect they have better places to focus dollars, time and energy.

Subway last week introduced a revamped menu, with 12 new sandwiches, promoting me to write:

Being a cynic, I have to wonder if Subway is actually using real meats in these sandwiches, as opposed to the fake tuna that some have accused it of using in the past.

Actually, it is interesting - best I can tell, tuna is not one of the ingredients in any of the new sandwiches.  Coincidence?  I think not.

One MNB reader responded:

I'd be a bit skeptical also due to the "fake tuna" debacle, but your skepticism I think is also due to you being a bit of a food snob.  Come on, admit it, you know it's true.  I love you anyway.

Published on: July 11, 2022

In the Wimbledon men's singles championship, Novak Djokovic beat Nick Kyrgios in four sets -  4-6, 6-3, 6-4, 7-6 (3) -  for his fourth consecutive Wimbledon championship and seventh overall.

In the women's singles finals, Elena Rybakina defeated Ons Jabeur in three sets, 3-6, 6-2, 6-2.