Published on: July 18, 2022
Some final thoughts from the Organic Produce Summit (OPS), where I thought Raley's Michael Schutt offered a terrific example of how retailers can communicate the value of fresh organic produce - or, when you think about it, any better-for-you food - in one of the keynote presentations.
Published on: July 18, 2022
CNet reports that Amazon said over the weekend that it has no plans to shutter its private label operations, and plans to "continue to invest in this area … just as our many retail competitors have done for decades and continue to do today."
The comments are a response to a Wall Street Journal report last Friday that Amazon "has started drastically reducing the number of items it sells under its own brands, and the company has discussed the possibility of exiting the private-label business entirely to alleviate regulatory pressure, according to people familiar with the matter."
"Over the past six months," the Journal wrote, "Amazon leadership instructed its private-label team to slash the list of items and not to reorder many of them, the people said. Executives discussed reducing its private-label assortment in the U.S. by well over half, one of them said."
The Journal reported that Amazon's private label business accounts for about one percent of its sales, though a few years ago, then-CEO Jeff Bezos challenged employees to drive private label sales to 10 percent by 2022. It didn't work.
Amazon is said to have some 243,000 SKUs in its private label portfolio, using 45 different house brand names. I commented on Friday that I've long believed that Amazon's portfolio of private label brands is way too extensive and unfocused. I think it would make a lot of sense not just to cut back on the SKUs, but on the brand names that don't really add up to much other than confusion.
I got different reactions to what I said.
One MNB reader commented:
Kevin, your suggestion sounds like the Costco approach where Kirkland is now recognized as a brand that represents quality and value. Am I correct?
I would have expected Amazon to understand the Costco strategy and mimic it.
And another reader wrote:
Amazon should not only retain its private brands, but they should both expand item selection and offer higher quality products that deliver even more value. Inflation has increased from about 2% to 8+% in the last 3 years. Private brand products that offer a lower price/acceptable quality choice help the consumer at a time they need it more than ever in the last 40 years.
Every retailer in American uses internal data as part of the process in evaluating private label offerings… don’t penalize Amazon with an unfair standard.
I agree with the observation about data usage … but not with the idea that Amazon should expand its private label presence. At least, not the way Amazon has been doing it.
If Amazon really is only doing one percent of its total retail sales in private label, that indicates to me that it has not been very effective in communicating value and quality.
If Amazon is going to continue investing in private label, then it also ought to invest in a broad overhaul of all of its own-label offerings. It should see what's worked (like Amazon Basics batteries) and what hasn't, and work to figure out how to establish and effectively communicate differential value.
Published on: July 18, 2022
The Washington Post reports that while "a tight labor market has pushed wages up across the board," it has not been enough "to keep pace with inflation, which hit a 40-year high in June."
This means that many employees are seeking second jobs in order to cover their normal expenses.
According to the Post, "The percentage of employed people working multiple jobs in the United States has steadily increased since March 2020 from 4 percent in April 2020 to 4.8 percent in June 2022, according to data from the St. Louis Federal Reserve, although it has not returned to its pre-pandemic levels. In February 2020, 5.1 percent of workers in the United States held two or more jobs. While people taking on multiple jobs is typically a sign of a healthy job market where workers have more job opportunities available, it is also a sign of increasing financial strain on Americans’ pocketbooks."
Some more context from the Post:
"Wages grew faster last year than they had in decades with the biggest gains for low-wage workers in leisure and hospitality who had newfound leverage to negotiate higher pay, quit their jobs and unionize. Hourly average earnings were up 5.1 percent over the past year, according to government data from June. But for most workers, even in the lowest paid sectors where wages are rising fastest, inflation is now wiping out pay increases. Soaring prices meant overall wages fell by 3.6 percent when adjusted for inflation over the past year, the BLS data showed. The June jobs report showed cooling wage growth after months of strong gains, which is sometimes an indicator of an economy headed toward recession."
There's nothing inherently wrong with working two jobs. I've done it. My dad did it. (When he was just starting out as an elementary school teacher, he would park cars at night at Yonkers Raceway for extra money. And he would teach ice skating to kids during the winter, plus ran his own summer camp for a lot of years. It was tough raising seven kids on a teacher's salary … I'm getting sentimental, perhaps because tomorrow would've been his 96th birthday…)
In some ways, the fact that in the neighborhood of five percent of the workers in the US hold two jobs is surprisingly low. I would've guessed 10-15 percent in normal times, and maybe 20 percent in tougher times.
The larger issue for businesses, I think, is the emotional toll that the tough times of the moment may be taking on employees. This has been a tough few years - there's the pandemic, inflation, the cultural and political tumult. Everybody is feeling stressed. (If you're not, then you must not be paying attention.)
This is a moment when business leaders can reach out to those employees and show real compassion - some of it monetary, and some of it demonstrating some level of emotional intelligence. Retailers need to remember that these employees were being described/defined as "essential" not that long ago. If you meant those words, then it is time to live up the meaning of that word, and actually lead.
Published on: July 18, 2022
The Wall Street Journal reports that "restaurants and grocery stores said they are revamping operations in response to crime, with some operators limiting hours, spending more on security and closing stores entirely."
Some examples cited in the story:
"Starbucks Corp. last week said that it was permanently closing 16 U.S. stores after workers reported incidents related to drug use and other disruptions, and would likely close more. Casual dining chain Noodles & Co. has encountered drug use in bathrooms in certain markets, and is training workers on how to respond, Chief Executive Dave Boennighausen said. Supermarket giant Kroger Co. last year listed organized theft among the factors pressuring its profit margins for the first time."
And, some context:
"Food-oriented establishments and consumers are airing increased concerns over crime as U.S. consumers have resumed shopping in stores and dining out, after governments and businesses lifted Covid-19 restrictions. Forty-four percent of 1,005 adults surveyed earlier this month said they were more fearful to be in public because of bad behavior and rising violence, up from 39% in March, according to a national online survey by food-service research firm Lisa W. Miller & Associates LLC.
"Violent crime has been on the rise in the U.S. since the onset of the pandemic, with cities including Seattle, Los Angeles, Chicago and New York reporting a surge in shootings and killings. Murder rates have also soared in rural areas. Local officials and law enforcement point to pandemic-related stress, a proliferation of guns and increased alcohol sales, among other factors.
"While violent crimes in restaurants and grocery stores remain a small part of the overall U.S. total, incidents have increased in recent years, according to Federal Bureau of Investigation statistics. The number of aggravated assaults that took place in restaurants increased by 60% from 2018 to 2020, the FBI data showed, and the number in grocery stores increased by 73% during the period."
Add this to the stresses being felt by many retail employees - there is a sense that when they go to work, they may not be safe. It is the same feeling that many teachers have, and it is an overwhelming sense that employers have to factor into the ways in which they lead.
Published on: July 18, 2022
Axios reports that "younger employees, customers and potential hires are much more concerned than previous generations about what a company stands for — its mission, values and higher purpose … 77% of people surveyed globally by the Edelman Trust Barometer last year said their employer is the institution they trust most — a huge opportunity for CEOs."
Interestingly, the trend seems to favor consumers supporting brands with which they agree, as opposed to boycotting brands with which they disagree: "Only 1 in 5 people will boycott a brand due to its stance on societal issues," while "1 in 4 Baby Boomers said they would actively boycott a brand they disagree with."
Gen X, Millennials and Gen Z, the survey concludes, "are less likely to boycott — and more likely to intentionally support like-minded brands."
This puts many business leaders in a tough position, especially if the priorities and values of their employees are different from those of their customers. It is a tough road to navigate, but increasingly, they may have no choice. I don't envy them, but that's why so many retail businesses are actually re-evaluating the qualities that they looking for in their C-suite occupants.
Published on: July 18, 2022
The New York Times has a piece this morning that contrasts Amazon CEO Andy Jassy's leadership approach to that of his predecessor, company founder Jeff Bezos. An excerpt:
"When Jeff Bezos was chief executive of Amazon, he took an arms-length stance toward the company’s affairs in Washington. He rarely lobbied lawmakers. He testified only once before Congress, under the threat of subpoena.
"Andy Jassy, Mr. Bezos’ successor, is trying a different approach.
"Since becoming Amazon’s chief executive last July, Mr. Jassy, 54, has visited Washington at least three times to traverse Capitol Hill and visit the White House. In September, he met with Ron Klain, President Biden’s chief of staff. He has called Senator Chuck Schumer, the Democratic majority leader, to lobby against antitrust legislation and talked with Senator Tim Kaine, a Democrat from Virginia, about Amazon’s new corporate campus in the state … Mr. Jassy’s actions in Washington are a sign of a new era taking shape at Amazon. The executive, who joined the company in 1997 and built its Amazon Web Services cloud computing business, followed Mr. Bezos’ footsteps for years and was viewed as one of his closest lieutenants. The succession last year was largely seen as a continuation of Mr. Bezos’ culture and methods.
"But Mr. Jassy has quietly put his own imprint on Amazon, making more changes than many insiders and company watchers expected."
You can read the entire story here.
Published on: July 18, 2022
USA Today reports that candy manufacturer Mars is being sued by a consumer who maintains that Skittles contain a "known toxin" called titanium dioxide - a compound that the company said it would remove from the candy in 2016, but that remains in it today.
The story says that "Mars Inc. uses titanium dioxide to produce Skittles' well-known array of artificial colors … The Thursday complaint also pointed to several Mars competitors who, according to the suit, do not use titanium dioxide to color their products - such as Sour Patch Kids and Nerds. In addition, Thames' attorneys noted that Mars has other confectionary products, such as M&Ms, "that do not rely" on titanium dioxide."
According to USA Today, the FDA's Code of Federal Regulations says that "'the color additive titanium dioxide may be safely used for coloring foods generally,' but there are several restrictions – such as the quantity of titanium dioxide not exceeding 1% of the food's weight.
"While the regulated use of titanium dioxide in food products is still legal in the U.S., it has been banned in some other countries, including throughout Europe. In May 2021, the European Food Safety Authority announced that titanium dioxide 'can no longer be considered safe as a food additive' – noting the importance of genotoxicity concerns, for example."
Mars has not commented on the litigation.
Published on: July 18, 2022
The Financial Times reports that "Starbucks is examining a possible sale of its UK business," and has hired financial advisers to look at potential strategic options, though it has not formally launched a sale process.
FT writes that Starbucks "oversees about 1,000 stores in the UK of which about 70 per cent are franchises and the rest company owned."
It wouldn't be the first time Starbucks make such a move; last year, Starbucks sold its South Korean operations "to its local partner and the Singaporean sovereign wealth group GIC, though it continues to receive royalties from the operation."
Published on: July 18, 2022
• CNet reports that "Amazon said Friday it'll begin delivering packages to residents of College Station, Texas, later this year, the second location in the United States for its Prime Air delivery service and the latest in an expansion of the technology that emerged this week.
"College Station, about 80 miles northwest of Houston, is home to Texas A&M University, which has a drone research program that's already several years old. The e-commerce giant in June also announced plans to begin drone deliveries in Lockeford, California, near Sacramento."
The story notes that "Amazon helped kick off the drone delivery idea with the 2013 announcement of Prime Air. But abundant challenges slowed the technology's arrival: safety, regulatory approval, autonomous navigation, bad weather, cost, and finding a good way to hand off packages."
Plus, there's tons of competition: "This week, Zipline announced medical package delivery plans near Tacoma, Washington, and Alphabet's Wing debuted new drone designs for larger and smaller packages. With partner DroneUp, Walmart expects to deliver packages via drone in Arizona, Arkansas, Florida, Texas, Utah and Virginia for a $4 delivery fee. UPS, Flytrex, Manna and others also are delivering packages around the world."
Published on: July 18, 2022
• Bloomberg reports that US retail sales in June increased one percent, reversing the upwardly revised 0.1 percent decline in May, which the story suggests indicates "resilient consumer spending despite decades-high inflation and raising the prospects of an even larger Federal Reserve interest-rate hike this month." Compared to June 2021, retail sales were up 7.7 percent.
The numbers, from the US Census Bureau, indicate a 49.1 percent increase in spending at gas stations compared to a year ago, and a 13.4 percent increase at restaurants and bars. Grocery store sales were up 0.6 percent from May 2022 and 8.3 percent from June 2021.
• From the New York Times this morning:
"Three people were killed at a mall in Greenwood, Ind., in a shooting that ended when an armed man fatally shot the gunman, city authorities said.
"Two additional people were hospitalized in the shooting, which began when a man with a rifle and several magazines of ammunition entered the mall’s food court and started firing, Chief Jim Ison of the Greenwood Police Department said. The authorities did not indicate a motive for the shooting and did not identify the gunman.
"The injured were a 12-year-old girl who suffered a very minor wound on her back and another person who was in stable condition, Chief Ison said."
• Reuters reports that Amazon announced that it matching prices against Tesco's Clubcard program in the UK as it seeks "an edge amid a deteriorating cost of living crisis."
According to the story, "Facing the toughest economic conditions in decades, Britain's food retailers are monitoring each others' prices more than ever.
"Tesco's Clubcard Prices scheme has been popular with consumers. Holders of the group's loyalty Clubcard pay up to a half less than non-holders across some 3,000 products both in-store and online. When Clubcard Prices are taken into account, Tesco increasingly features as the cheapest of Britain's big four supermarkets in The Grocer's widely-followed weekly pricing survey."
Published on: July 18, 2022
…will return.
Published on: July 18, 2022
• Australian Cameron Smith staged a Sunday comeback at the British Open, moving from four strokes off the lead to a 20-under par victory.
