business news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: July 20, 2022

    I was listening to the 7-19-22  "Pivot" podcast, with Kara Swisher and Scott Galloway, and they unexpectedly started talking about the importance of soul in the food retailing experience.   The point is important, worth listening to, and it involves both Wegmans and Amazon.

    You can check out this podcast - one of my favorites, and a must-listen - here.

    Published on: July 20, 2022

    Variety reports that Netflix yesterday said that it suffered a lost of 970,000 subscribers during the just-completed Q2 … which wasn't nearly as bad as the two million customers that it predicted it would lose.

    During Q1, Netflix lost 200,000 customers, which factored in a loss of 700,000 customers when it pulled out of Russia in the aftermath of that country's invasion of Ukraine.

    According to Variety, "Netflix revealed in its Q2 letter to shareholders it currently has 220.67 million subscribers globally and is expecting to return to gains in Q3, projecting an addition of 1 million subs from July 1-Sept. 30. In a nutshell, Netflix lost 1.3 million subscribers in the U.S. and Canada, stayed flat in Latin America, lost about 770,000 in Europe and West Asia and grew by about 1 million subscribers in the Asia Pacific region."  For Q2, "Revenue was up 8.6% year over year, or '13% excluding a $339 million foreign currency impact,' per Netflix. Operating income for the quarter was $1.6 billion, with net income at $1.4 billion.

    "The company also stated it took a $70 million hit for severance costs in the second quarter following several rounds of layoffs, and is adjusting its operating model for slower top-line growth."

    In its analysis, the Wall Street Journal writes:

    "The company is contending with growing competition from rival streaming services, a saturated U.S. market and rising inflation that observers say could crimp spending on entertainment. To boost subscriptions and revenue growth, Netflix is working on launching a lower-price, ad-supported option for consumers, and it plans to crack down on password-sharing by charging households to share accounts.

    "In a letter to investors Tuesday, the company said those moves are scheduled to go into effect next year. Netflix executives said efforts to limit password sharing would have a more immediate impact on revenue than the ad-supported tier of service, which would take longer to materially help the company.

    "Meanwhile, executives stressed the importance of generating hit shows and movies and aggressively marketing content likely to build buzz and draw in new customers."

    KC's View:

    In a lot of ways, I think there are some lessons in here for retailers.

    Let's start with something that Netflix co-CEO Reed Hastings said yesterday - that "it’s definitely the end of linear TV over the next five to 10 years."  In other words, the traditional broadcast television model what we're all used to will go away, replaced by the streaming model that Netflix in many ways has pioneered.

    To which I would respond … maybe.

    And I say that as someone who doesn't watch a lot of broadcast television, who has largely adapted to the streaming world and the advantages/accessibility/higher quality that it tends to offer.

    It has been interesting to watch Netflix adapting its behavior in recent months.  For example, the just-released fourth season of its hit show, "Stranger Things," wasn't dropped all at once for viewers' bingeing pleasure;  Netflix decided to draw it out a bit, to keep viewers coming back.

    The move away from binge-centric releases actually is happening with a lot of other streaming services, as well - Disney+, Paramount+, Hulu and other streamers have taken to dropping an episode or two a week of series, believing that this is one way to create loyalty.  One way in which they differentiate themselves from broadcast network series is by having fewer episodes (10 or fewer as opposed to 22+) and higher budgets.

    And Netflix also plans to launch a less-expensive, advertising-supported service in the near future … which certainly sounds a lot more like linear, broadcast television to me.

    In the case of its new $200 million-budget movie, "The Gray Man," Netflix put the film into traditional movie theaters for a week before its streaming debut this weekend, and there is a lot of speculation that in select cases, it may put movies into theaters for longer periods before offering them online.  In other words, it may opt for more traditional distribution behavior.

    What matters, in the end, is content - the offering of proprietary and quality intellectual property (IP) that will bring customers to Netflix as opposed to elsewhere.  Just as in retailing, it is the the offering of proprietary and quality products and services that will bring customers into the store and onto websites as opposed to going elsewhere.

    I've believed for awhile that one of Netflix's weaknesses is that while it spends a ton of money on product, the quality is hit and miss and not nearly differentiating enough.  (Haven't seen "The Gray Man" yet.  I've loved the Mark Greaney books, and am hopeful without being overly confident, having been dismayed by movies such as "Spenser: Confidential" and "Red Notice," which I would describe as expensive crap.)

    Let me say it again:  Retailers have to offer proprietary and quality products and services that will bring customers into the store and onto websites as opposed to going elsewhere.

    Even now, as we deal with inflation and a potential recession.  Especially now, because this is a time to steal market share by aggressive and strategic marketing, not a misguided "time to get back to basics" strategy.

    The Journal makes this observation:  "Netflix executives have said they need to release a hit nearly every month to keep subscribers engaged."

    If you are a retailer, so do you.

    Published on: July 20, 2022

    Barry Clogan, Chief Product Officer at Wynshop and an old friend from his time at MyWebGrocer, has a LinkedIn article - which has been reprinted on the Forbes website - with the provocative title, "From Boom To Bust In Rapid Time: What’s Next For Quick Commerce?"

    Here's an excerpt:

    "Over the past two years, billions of dollars have been invested worldwide in rapid delivery or quick commerce startups like Gopuff, Gorillas and Zapp. With robust global economic performance and an explosion in online grocery sales, the quick commerce segment seemed like a great place to double down.

    "However, it isn’t just food deliveries that are moving in rapid time. Just as quickly as the quick commerce area boomed, we are now seeing signs of a bust. Gopuff, Gorillas, Jiffy, Getir, Zapp and Buyk have all announced closures, shifts in strategy or significant layoffs. Meanwhile, online grocery leader Instacart took a 40% haircut this year on its previous valuation of $39 billion and is slowing down hiring ahead of its anticipated IPO. Likewise, shares of DoorDash barely stand at a third of their 2021 high at the time of this writing, foreboding a potentially chilly reception to Instacart’s IPO.

    "As the era of easy money and hyper-growth draws abruptly to a close, many are beginning to ask, 'Was the rush into quick commerce merely the latest instance of irrational exuberance?'"

    Spoiler alert:  The answer is yes, but with a caveat … which is that "market expectations have been set, and there’s no going back. Failing the quick commerce startups’ ability to pull some major rabbits out of their collective hat, I expect grocers themselves to claw back direct sales and start filling the gaps between venture-fueled pipe-dreams and economic reality."

    You can read the entire piece here.

    Published on: July 20, 2022

    From CNet:

    "Whole Foods has long been thought of as a prohibitively expensive supermarket for many. But times -- and the national grocer's business model -- have changed. There's even an argument to be made that you could save money by shopping at Whole Foods … after doing a price comparison between Whole Foods and other organic and conventional grocers for certain items, I'm not so sure that Whole Paycheck nickname is appropriate anymore. There are certainly items that can be overpriced due to the overhead of maintaining a store like Whole Foods, as you'll find with any retailer, but there are also values to be found. Crunching the numbers, I came up with several strategies that illustrate how shopping at Whole Foods can actually save you money."

    While Whole Foods is criticized in some quarters for having lost some of its magic since being acquired by Amazon in 2017, CNet suggests that there have been some advantages created, specifically through the use of Prime membership deals that can reduce the cost of shopping at Whole Foods.

    And, the story suggests, Whole Foods' private label items in some cases "over deliver" in terms of the price-quality ratio.

    You can read the analysis here.

    KC's View:

    I have a Whole Foods about a quarter-mile from my house, and I use it as a kind of convenience/convenient store - there are things that I get there when I need them quick, and there things that I get there that I know are priced competitively. I find my Prime membership does save me money, and the ability to return items bought on Amazon there is a terrific benefit.

    One note: A couple of months ago, our Whole Foods did something that the brand never used to do - it put in six self-checkout units. In the old days, that was antithetical to its high-service image. But they've been enormously successful, I think - there often are longer lines for self-checkout than for manned checkout lanes.

    Published on: July 20, 2022

    FMI–The Food Industry Association announced this morning "the recipients of the 2022 Community Uplift Awards … eight were selected as winners for their standout efforts in addressing food insecurity, neighborhood health needs and youth development. The companies behind these laudable programs are Giant Food, Stop & Shop, Hy-Vee, Inc., The GIANT Company, Schnuck Markets, Inc. and Northgate Gonzalez Market."

    The winning programs include:

    Giant Food's effort to address food insecurity in Washington D.C.’s Ward 8 and Maryland’s Prince George’s County 'by providing easier access to purchasing fresh produce options for community members and their families' … Stop & Shop's 'Strike Out School Hunger Program,” which "provides gift cards and product donations to 130 school food pantries across the Northeast" … Hy-Vee's “Food Bank Fridays” program "to support and fully replenish food banks in its communities" … 

    The GIANT Company's conversion of "an abandoned high school’s bleachers into a productive, sustainable and high-yield garden to feed underserved families in Harrisburg, Pennsylvania … Schnucks' recognition of "the disparity in breast cancer survival rates between white and Black women," which led it to create the “'Treasure Your Chest' program to incentivize residents of 21 underserved zip codes of North St. Louis County to get mammograms" … and Northgate Gonzalez Market's Día de los Muertos Art Contest, educational scholarships and workshops, which "equips the youth in its communities with new skills and knowledge, while actively celebrating their Latin-American culture and traditions."

    “Beyond their day-to-day operations, grocers actively support, elevate and inspire their local communities,” FMI President and CEO Leslie Sarasin said in a prepared statement. “The altruistic and innovative contributions of this year’s winners provide clear examples of our members’ unwavering commitment to nourish those in need, empower the next generation and maximize the wellness of their people.”

    Published on: July 20, 2022

    •  DoorDash has announced "its third annual and largest ever Summer of DashPass – five jam-packed weeks with more than 25,000 incredible member-only offers, worth over $40M in savings, from nationwide favorites and local businesses … During Summer of DashPass, DashPass members will be able to access nationwide offers from beloved favorites like Coke and Walgreens as well as offers from local favorites, with more than 90% of deals from local businesses like Magnolia Bakery and Cardenas Market."

    •  From the Wall Street Journal:

    " said it filed a lawsuit against the administrators of what it says are more than 10,000 Facebook groups used to coordinate fake reviews of Amazon products.

    "Those in charge of the Facebook groups solicit the reviews for items ranging from camera tripods to car stereos in exchange for free products or money, Amazon said in a statement.

    "The activity, which is against Amazon’s rules, occurs across Amazon’s stores in the U.S., U.K., Germany, France, Italy, Spain and Japan, the company said. Such bogus reviews are typically used to boost products’ ratings and increase the likelihood customers buy them.

    "The lawsuit represents 'proactive legal action targeting bad actors,' Amazon Vice President Dharmesh Mehta said in the statement."

    The story notes that "One of the Facebook groups, called 'Amazon Product Review,' had more than 43,000 members. Facebook removed the group this year, Amazon said, adding that it evaded Facebook’s detection by changing letters in phrases that might set off Facebook’s alarms."

    • From Bloomberg:

    "Instacart Inc. investor Capital Group Cos. cut its valuation to $14.7 billion, far below the online grocery-delivery firm’s own calculation of $24 billion.

    "Capital Group marked Instacart shares at $45.84 apiece at the end of June, the asset manager said in a report on the website of its New Economy Fund. That makes it the second major investor in recent weeks to say that Instacart’s own estimate is now obsolete.

    "In late June, Fidelity Investments lowered its estimate for the closely held firm, which filed confidentially in May for an initial public offering. Representatives for Instacart, Fidelity and Capital Group declined to comment. 

    "The market for pandemic darlings like Instacart has soured amid slowing growth, surging inflation and higher interest rates. The firm, which was valued at $39 billion through a March 2021 funding round, slashed its internal calculation by about 40% a year later."

    Published on: July 20, 2022

    Responding to my FaceTime video yesterday about the impact of climate change on the making of parmesan cheese, MNB fave Beatrice Orlandini wrote to me from Italy:

    Sorry, me again; you know I always have to punctuate when you refer to anything Italian.

    Talking about the drought (horrible) affecting northern Italy "one of the places where Parmesan comes from"…

    You make me cringe.

    Parmigiano Reggiano (THE one and only so-called Parmesan) can come from only 3 provinces of the region of Emilia-Romagna: Parma (Parmigiano = Parmesan), Reggio Emilia (Reggiano) and Modena.

    So it's not "one of the places", it's THE place.

    We also have Grana Padano, similar, milder, ages less, also regulated by a Consortium, like Parmigiano Reggiano, but is produced in a much wider area, spanning from Piedmont, Lombardy, Veneto and a part of Emilia-Romagna.

    All the territory of the Val Padana (Po Valley).

    I suggest you come over and I'll be more than happy to give you a grand tour of our cheeses and our great unrivaled products.

    We may have lousy governments, but we still have the best food!

    I'm sorry I made you cringe with my imprecision … but I thank you for correcting me.

    Mi dispiace molto.  Really.

    MNB reader Bob Wheatley also responded to the story:

    The elephant in the room: our food system in a major contributor to emissions and climate impact. Agriculture contributes nearly 30% of greenhouse gases to the environment. If we don’t de-carbonize how we create food, it will be impossible to reach the Paris Accords 1.5 degree Celsius benchmark to prevent irreversible climate change.

    Here's the kicker – the top three contributors of emissions from the food system are 1) beef, 2) lamb and wait for it – 3) cheese.

    Cheese for all its wonderful goodness isn’t sustainable. How? Cows. The billions of cows on earth are four-legged Methane makers, a gas 82 times more toxic to the environment than carbon dioxide.

    What’s coming: cheese made using precision fermentation technology that precisely replicates dairy casein, the primary protein in cheese making, only without the cow.

    You can have your authentic parmesan but without the carbon impacts and supply chain vulnerabilities from overly hot Italian summers. Stay tuned.

    People have yet to fully understand the connection between food and climate impact. Big story that needs telling.

    This email from MNB reader Sarah Davis on a different subject:

    Regarding your FaceTime about San Francisco, this all could be said about Portland, too. People see the headlines about protests and homelessness and assume that’s the whole picture. Thanks for bringing a reality check.

    Yesterday we took note of an Axios report on how "the number of gas stations has been in steady decline for decades," and the likelihood that a combination of factors - volatile prices, the growing popularity of electric vehicles -  "will squeeze them even further."

    I commented:

    This trend is occurring at the same time a a half-dozen smaller California cities have decided to ban the building of new gas stations, with the premise being that such building represents an investment in technology facing obsolescence.  (Such a ban also is being suggested in Los Angeles, but isn't likely to be approved anytime soon.)

    Internal combustion engines aren't going away anytime soon, but we're certainly pointed in that direction.  Smart public policy looks to the future, and I would think that it will make sense for many of these independent gas stations to start thinking about what their futures are going to look like too.  The one thing they do not want to do is stay in the buggy whip business for too long.

    One MNB reader responded:

    A decision that should be made solely by the people making the investment.

    And from another reader:

    Seems like this should be market based as opposed to towns regulating.  Otherwise ban printing presses as hard copy newspapers and magazines decline, ban brick and mortar stores as on line shopping increases,  ban new housing as mortgage rates increase, ban swimming pools as water becomes more scarce, etc.   Where does the politics stop and free enterprise begin?

    I think it is entirely legitimate for communities to make public policy decisions consistent with the kind of infrastructure leaders believe we are going to need for the future.  Communities buy properties and turn them into public parks and recreation areas because they deem them important to residents' future.  Planning and zoning boards are there to make sure that developers' plans are consistent with communities' strategic visions and to limit growth that could hurt a town or city.   Some communities mandate that a certain percentage of new housing units have to be put aside for people who might not be able to afford to live there otherwise - like local teachers and other public employees.

    Some of the examples you cite are extreme and not really germane to the conversation, I think.  Though I can see a town saying that a new shopping center cannot be built if there is another one in town with lots of vacancies because of the impact of e-commerce.