business news in context, analysis with attitude

Published on: July 26, 2022

The move by Amazon last week to acquire One Medical for $3.9 billion - which will be dissected by various analysts in a story below - strikes me as Amazon playing a kind of three-dimensional chess, not playing the game in a linear fashion but rather seeing strategic connections and possibilities that actually will change the game.  This creates challenges for every one of its competitors, no matter how big or how small, which is what I want to FaceTime about this morning.

Published on: July 26, 2022

by Michael Sansolo

Unless you’ve been under total media silence for the past few months you’ve noticed an on-going story perplexing consumers and one very large global industry: airlines. Hardly an hour passes without stories of major flight delays impacting travelers in various parts of the globe.

And even when flights are successful, they seem to leave behind a mountain of lost luggage either in their origination, destination or connection point. Rather than take any glee in this happening to another industry, retailers would be well advised to remember a line that dates back to the mid-16th century:  "There but for the grace of God go I."

(A historical note of irony:  That phrase is attributed to an English theologian and religious reformer named John Bradford, who said it about prisoners about to be executed.  However, Bradford himself was burned at the stake in 1555 … which says something about the transitory nature of avoiding the inevitable, and maybe something about the grace of God.  But I digress…)

The airline industry is a very, very different business model than running a retail store, but their problem is very, very similar: people. Right now, staffing shortages are hampering nearly every part of the flying experience turning what was once routine into a nightmare for consumers. Certainly that’s a situation retailers can understand.

But a second and looming problem for the airline business should also merit more than a moment’s consideration for any businessperson in any field: the increased pace of retirements draining the airlines system of its most critical pool of staffers - its pilots.

The situation is so bad that the industry is lobbying Congress to raise the mandatory retirement age for pilots to 67 from the current 65 and to lessen some requirements for new pilots.

And to show that there’s nothing new about this problem, it was only 15 years ago that the same retirement requirement was raised to 65 from age 60.

So, why should you care other than the fact that your next pilot might have gone to Woodstock? It’s simple, because this is your problem as well.

In a video last week, Kevin made an important suggestion that companies need to consider creating a “heat officer” position, or someone to help food companies (retailers and suppliers) prepare for increasing heat emergencies as we’ve all been experiencing.  It’s a notable idea just as it is worth having in-house plans for hurricanes, snowstorms, tornadoes or other natural disasters.

Likewise, you need a plan for staffing beyond the current labor shortage. Business leaders have known for more than a decade that the demographic reality of the large baby boom generation guarantees an enormous brain drain. (A situation only made worse by covid-induced retirements.) If you haven’t started already you need succession planning throughout your organization to deal with a tidal wave of coming retirements especially in upper level and middle management.

Demographics are always seen as destiny because population trends undeniably show us the future. The issue with airline pilots is your issue as well and unless you want to experience a massive loss of leadership, experience and institutional knowledge in the next few years you need to start planning immediately, if not sooner.

To paraphrase Bette Davis, from All About Eve, "Fasten your seat belts, it’s going to be a bumpy ride.”

There’s an increasing likelihood that your pilot will be familiar with that movie.

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: July 26, 2022

As reported last Thursday, Amazon will spend $3.9 billion to acquire 1Life Healthcare Inc., which under the name One Medical provides membership-based primary healthcare services to employees for more than 8,000 companies in a dozen major US markets.  This is Amazon's third largest acquisition, after Whole Foods ($13.7 billion in 2017) and MGM ($8.5 billion earlier this year).

Some analysis from various sources…

•  From CNBC:

"These deals underscore how Amazon and other Silicon Valley giants like Google, Facebook, and Apple have transformed into 'modern day conglomerates' in pursuit of continued growth from their already enormous bases, according to Emilie Feldman, a management professor at the University of Pennsylvania’s Wharton School.

"'What they’re doing is a strategy in search of growth in adjacencies to this core area that might be a bit constrained in and of itself,' said Feldman. 'So e-commerce is e-commerce, but can we kind of search for niches that might be faster growing like health care, or can we accelerate our ability to get before people’s eyeballs through ads or something like that through MGM.'

"'They need to get into new areas where they can find growth, and health care is ripe,' agreed Lisa Phillips, a principal digital health analyst at Insider Intelligence. 'With this acquisition here, they’re saying we’re in this to win it now.'

"Amazon also can’t make acquisitions in its core markets, lest it risk angering regulators who are already eager to scrutinize its market power. Instead, the company has to buy big in areas where it has less of a presence, like healthcare or autonomous driving."

•  From MarketWatch:

"The One Medical deal will place Amazon in the increasingly popular field of primary care. Long viewed as the center of American medicine, the place where patients can talk directly to their doctors about their health, it’s also become ripe for investment in recent years. CVS, UnitedHealthGroup, Walgreens Boots Alliance and Walmart all operate clinics that offer primary-care services. 

"That said, healthcare is a very small slice of Amazon’s revenue. A search of the company’s most recent 10K doesn’t yield a single mention of any of its healthcare or medical businesses, including Amazon Care and Amazon Pharmacy, the rebranded PillPack business.

"'While One Medical will not be a meaningful contributor to revenue near term, it provides AMZN more touch points with patients, particularly early on while medical decisions are being made, both preventative and reactionary,” JMP analysts told investors on Thursday.

"The deal will also give Amazon new options to bundle services. Wall Street analysts say they expect Amazon Care, if it includes One Medical services, to eventually be included in Amazon Prime memberships."

•  From the Washington Post:

"Krista Brown, a senior policy analyst at the American Economic Liberties Project, a nonprofit advocacy group that supports antitrust causes, called the acquisition 'terrifying' in a statement.

"'Acquiring One Medical will entrench Amazon’s growing presence in the health care industry, undermining competition.' Brown said. 'It will also pose serious risks to patients whose sensitive data will be captured by a firm whose own Chief Information Security Office once described access to customer data as ‘a free-for-all'."

•  From the New York Times:

"Health care has been tantalizing to Amazon executives who believe it is an immense market, rife with inefficiencies and generally lacking the kind of customer-focused approach that Amazon tries to take with its businesses. But none of the company’s forays into health care have had notable success nor have they been as big as the One Medical acquisition.

"'We think health care is high on the list of experiences that need reinvention,' Neil Lindsay, the senior vice president of Amazon Health Services, said in a statement announcing the deal.

"Mr. Lindsay ticked off some of the annoyances of modern health care: booking appointments, sitting in waiting rooms, traveling to a pharmacy, even finding a parking spot. Amazon’s notion of seeing a provider could include more virtual or online care, which health care companies like One Medical and Kaiser Permanente are already doing.

"Amazon wants to be the 'front door' through which customers access health care, said Christina Farr, an investor in health care with OMERS Ventures. 'They want to nail the consumer experience'."

Published on: July 26, 2022

Instacart founder and current executive chairman Apoorva Mehta announced yesterday that once the company goes through its initial public offering (IPO), he will step down from his role and leave the company's board of directors.

“Instacart has been my life’s work for more than a decade," he said in a statement.  "Since I transitioned from CEO to Executive Chairman a year ago, I realized that I want to pursue a new mission and I want to do it with the same singular focus that I had while building Instacart. Stepping off the board will allow me to do just that.  We have a high caliber leadership team with Fidji at the helm, and I’m excited about her vision for the company and the expanded role Instacart can play for retailers for years to come. I remain confident in the enormous opportunity ahead and will always be a supporter of the team and company.”

The company said that CEO Fidji Simo will become chair of the board when Mehta departs.

TechCrunch offers this analysis:

"Founders often transition to executive chairman roles as their companies grow, pivot or require new leadership as the business shifts from a private startup to a public company. Think of the transition as going from being involved with day-to-day decisions to overseeing broader strategy, from time to time. Mehta’s plan to leave an already distant role may mean competitive dynamics are afoot between Instacart and his 'new mission' that he alluded to. Instacart did not address questions related to competitive dynamic at play. Mehta’s departure could also just be a clean break after rising tensions between him and the board that he once appointed."

And, the Wall Street Journal writes:

"San Francisco-based Instacart hasn’t said when it plans to go public. In May, the company said it had confidentially filed for an IPO, less than two months after cutting its valuation by nearly 40%. The Wall Street Journal reported at the time that Instacart was positioning itself to go public as early as September, according to people familiar with the offering."

Published on: July 26, 2022

Kroger and Alimentation Couche-Tard/Circle K are among the newest investors in Kitchen United, the ghost kitchen and restaurant hub technology company that has just concluded a $100 million Series C fundraising round.

"This Series C financing further solidifies Kitchen United's leadership position in the industry," said Michael Montagano, Kitchen United's CEO.  "Kitchen United uniquely sits at the intersection of technology, food, and real estate. Our solution serves as the technological and physical infrastructure revolutionizing centrally located distribution hubs through streamlining off-premises ordering and consumption. To that end, we are thrilled to partner with leading investors across grocery, convenience, restaurants, malls, packaging, logistics, distribution, automation, and urban and suburban real estate development."

Kitchen United currently has approximately 200 operational kitchens across 20 regions, including several in Kroger stores.

Published on: July 26, 2022

Digital Commerce reports that Amazon has launched its fleet of Rivian all-electric delivery trucks "in Baltimore, Chicago, Dallas, Kansas City, Nashville, Phoenix, San Diego, Seattle, St. Louis and some other markets. It will expand into 100 cities by year-end and then continue growing as it expands its EV fleet. It also has lined up a smaller order with Ram, the truck division of Euro-American automaker Stellantis."

Amazon CEO Andy Jassy called the launch “a significant milestone,” adding, “Fighting the effects of climate change requires constant innovation and action, and Amazon is partnering with companies who share our passion for inventing new ways to minimize our impact on the environment.”

Axios writes that in the new vans, "onboard software links up with Amazon's logistics systems.

"Accelerometers throughout the vehicle monitor for bangs and bumps, signaling that it might be time for preventative maintenance before something important breaks.

Driver-assist features like collision warnings and automatic braking are meant to improve safety.

"The cabin is ergonomically designed, and a powered cargo area door can automatically open at delivery destinations - features that could help reduce driver fatigue and, by extension, turnover."

Digital Commerce goes on:

"Amazon is by no means the only company looking to migrate its delivery fleet away from internal combustion to electric drivetrain technology. A study released by market research firm BlueWeave Consulting last January forecast the global market for EV trucks had already reached $21.4 billion last year and would have a compound annual growth rate of 14.6% through the end of 2028, by then reaching $42.3 billion.

Meanwhile, a number of startups and legacy automakers are now battling for that business.

"UPS and FedEx are also going electric. In fact, FedEx has already taken delivery of several vans from GM subsidiary BrightDrop. And the U.S. Post Office this past week buckled to criticism of an earlier truck replacement program that stayed with IC-powered trucks. It now plans to have 40% of its massive fleet go electric.

"Both Ford and General Motors have launched new EV truck subsidiaries and claim to have booked substantial orders. Mercedes, meanwhile, has inked a deal to provide its own battery vans to Amazon in Europe."

Published on: July 26, 2022

From the Wall Street Journal:

"Walmart Inc. warned that higher prices for food and fuel are causing consumers to pull back, hurting the retail giant’s profits for the current quarter and fiscal year.

"The company, which warned in May that it was stuck with too much unsold goods, said it was having to cut prices to reduce merchandise levels at its flagship chain and Sam’s Club warehouse chain, which would crimp its profits … Walmart said higher prices for food and fuel have hurt sales of general merchandise, especially apparel, which generate higher profit margins for the company.

"Overall, the company expects comparable store sales, excluding fuel, for its Walmart U.S. division to rise 6% in the second quarter from a year ago, but the growth is coming from less profitable items. The company is slated to give its full second-quarter report Aug. 16."

Published on: July 26, 2022

The Wall Street Journal this morning writes that "for companies looking to ease supply-chain pressures, putting more women in charge of logistics planning should improve efficiency, a team of researchers says.

"In a study to evaluate collaboration between retailers and suppliers, researchers from the University of Arkansas and the University of Akron found that women performed more efficiently than men in an experiment conducted with 214 students.

"The findings strengthen the case for greater gender diversity in supply chains, says John Aloysius, a professor at the University of Arkansas and one of the study authors."

The story goes on:

"Researchers determined that subjects behaved differently depending on their own gender, and depending on whether they were paired with men or women. Female retailers were significantly less likely than male retailers to inflate product demand forecasts, regardless of the gender of the person with which they were paired. Male retailers, meanwhile, tended to inflate their forecasts more than women whether their partner was male or female.

"A similar dynamic was seen among suppliers. Male suppliers were more likely to underproduce than female suppliers, although male underproduction was less pronounced when the male worked with a female partner compared with when they worked with another male. Supply-chain pairs consisting only of women inflated and underproduced the least in comparison with other combinations.

"In another finding, male participants were found to be more cooperative when paired with women, in contrast with their behavior in pairs of men only."

You can read the entire story here.

Published on: July 26, 2022

•  H-E-B announced that it has has opened a new e-commerce fulfillment center in Leander, Texas, describing it as "a project that expands the retailer’s commitment to integrate innovative technologies that drive omnichannel growth and provide a more convenient and better shopping experience for Texans.

"The 50,000-square-foot facility, which is located at 651 North U.S. Highway 183 in Leander, will support H-E-B Curbside and Home Delivery orders throughout Leander and surrounding cities in Central Texas. Building on H-E-B’s longstanding presence in the area, the move reinforces the retailer’s commitment to serve more customers in this rapidly growing part of the state."

•  From The Information:

"The departure of Jay Carney, Amazon’s top public relations and public policy executive, has set off an executive reshuffling that could recalibrate Amazon’s policy priorities at a time when the company faces the most serious regulatory challenges in its 28-year history.

"CEO Andy Jassy is on the hunt for a new senior policy executive, he wrote to staff in an email reviewed by The Information. The search will focus on external candidates, according to two former employees in Amazon’s corporate affairs group familiar with the senior leadership team’s thinking. The new executive would set Amazon’s objectives on antitrust, labor and transportation issues following a string of high-profile public policy setbacks, such as the collapse of Amazon’s plans for a second headquarters in New York and a successful unionization drive at an Amazon warehouse in Staten Island. The new executive will not also oversee Amazon’s communications team, as Carney did, the people said."

Carney is going to Airbnb, after seven years at Amazon (following a stint as press secretary in the Obama White House), as its new global head of policy and communications.

•  FreightWaves reports that FedEx Ground said last week that "it would halt Sunday residential delivery services as of mid-August in what it described as 'lower-population' markets where shippers would not be greatly affected. The unit did not specify which markets it would target. However, it is apparent the move will focus on rural and less-populated suburban areas. About 80% of the U.S. market will retain access to Sunday deliveries after the downsizing, according to FedEx Ground."

Published on: July 26, 2022

•  From the Associated Press:

"The Justice Department filed a lawsuit Monday against some of the largest poultry producers in the US along with a proposed settlement seeking to end what it claims have been longstanding deceptive and abusive practices for workers.

The suit, filed in federal court in Maryland, names Cargill, Sanderson Farms, and Wayne Farms, along with a data consulting company known as Webber Meng Sahl and Co. and its president.

"In its lawsuit, the Justice Department alleges the companies have been engaged in a multiyear conspiracy to exchange information about the wages and benefits of workers at poultry processing plants to drive down employee competition in the marketplace. The companies did not immediately respond to messages seeking comment."

•  From City News Service:

"More than 600 pharmacists and pharmacy workers at Ralphs, Vons, Albertsons and Pavilions stores in Southern California could walk out following an 'overwhelming' membership vote to authorize union leadership to call for a strike

"No dates have been set for a strike and negotiations with the stores have continued.

"United Food and Commercial Workers (UFCW), which represents workers across seven locals, has filed Unfair Labor Practice charges against the stores with the National Labor Relations Board, claiming they have engaged in 'unlawful and unfair treatment.'  The accusations include retaliation against pharmacists who engage in union activity, attempting to bribe pharmacists with bonuses rather than negotiating wage increases and hiring temporary workers to undermine union activity."

•  From NBC News:

"Family Dollar has issued a nationwide recall of at least 400 personal care and drug products, including brand names like Tylenol, DayQuil, Crest toothpaste, and more.

The items were inadvertently shipped to certain stores on or around May 1 through June 10 due after being stored outside of labeled temperature requirements, according to the Food and Drug Administration.

"Other recalled products include varieties of Colgate toothpaste, Alka Seltzer, Motrin Ibuprofen, and hundreds of other items.

"To date, Family Dollar has not received any consumer complaints or reports of illness related to this recall, the FDA said. Customers who may have bought affected products may return them even without a receipt, the agency said."

Published on: July 26, 2022

Three deaths yesterday in the world of popular culture struck me as offering a business lesson to retailers…

Paul Sorvino, perhaps best known for playing gangster Paulie Cicero in Martin Scorsese's "Goodfellas," passed away at age 82.

David Warner, best known for roles in the original "The Omen," "Titanic," and multiple iterations of "Star Trek," passed away at age 80.

And Bob Rafelson, who in addition to co-creating "The Monkees" was the director of "Five Easy Pieces," passed away at age 89.

As I was scanning the various obits for these men, it occurred to me that they had something in common.

Sorvino and Warner were character actors with long careers and impressive résumés.  And they all had moments that defined some of the projects they were in…Sorvino slicing garlic while in prison in "Goodfellas," for example … or Warner terrorizing Patrick Stewart's Jean-Luc Picard in an episode of "Star Trek: The Next Generation" that explored the effects of physical and psychological torture.  And yet, while audiences knew their faces and voices, they may not have known their names or the range of their talents.  They just got the jobs done.  They delivered.

And Rafelson … well, he didn't have an impressive directing career over the long term, but "Five Easy Pieces" is one of the most influential movie of its time.  And a company he founded produced some impressive titles:  "Easy Rider," "Stay Hungry," and "The Last Picture Show" among them.

And it occurred to me that a lot of companies, especially retailers, have people like these in their ranks.  Even though they may not have a "C"in their titles, these people get the job done … they deliver … they are, indeed, influencers … they make a difference, often defining a store's value proposition.

Not everybody can be a star.  But often it is the people who form the background, who create context and color and texture … these are the people who make the difference, who define excellence.

And I think that's worth thinking about.

Published on: July 26, 2022

Last week we took note of a Washington Post report that Robert Califf, commissioner of the Food and Drug Administration (FDA), told a Senate Appropriations Committee hearing that he has initiated a review of the agency's food safety program designed "to recommend changes in light of the expanding number of industries producing food, as well as the role of climate change and the war in Ukraine. Califf … spoke of an increasingly complicated food system that requires a new approach."

MNB reader Tom Ewing wrote:

Why wait for the FDA to consolidate efforts food safety?  Food safety experts in companies across the country should work with their industry associations to create an industry task force on food safety to create best practices and expectations to operate food manufacturing plants of all types. The introduction of the Global Food Safety Initiative has been a tremendous boost for those manufacturers who use their programs, it is now time that they become table stakes for operations in this country.  I trust the combined industry experts combined with food safety and GFSI certified inspection services to come up with appropriate steps to build pathogen prevention into processes, formulations, processing equipment, raw materials, finished goods and logistics.  The overall food industry has the talent and knowhow and financial motivation to get food safety right and should endeavor to be leaders in the effort and not wait on federal and state regulators.

MNB reader Albert F. Chambers wrote:

With reference to the timeframe for calls to consolidate US agencies in the field of food safety, you could have stated that it was in the last millennium (not the last century).  It was in the last millennium that the Canadian federal government created the Canadian Food Inspection Agency out of parts from Agriculture & Agri- Food Canada, Fisheries & Oceans Canada, Health Canada and, if my memory serves me well, a few little bits out of Industry Canada and of Consumer Affairs Canada. 

We’ll se what happens this time inside the Beltway.

Responding to the story about Amazon acquiring One Medical, one MNB reader wrote:

This is pretty cool news, and I'm curious if it will speed up One Medical introductions in new cities. I went to One Medical when I was living in DC. Spending $200 annually was a bit off-putting at first, but ended up being extremely worth every penny. It felt like a boutique experience rather than the clinical cattle-call of a normal Dr's office.  I recently moved to Philadelphia and was hoping to find a One Medical, but was dismayed that they're not here yet.

MNB reader Ron melton wrote:

You being the lover of game changer and eye openers I’m surprised (to my knowledge) you haven’t mentioned CostPlus.

They don’t do insurance and only deal in generic drugs at this point. I saved $180.25 on my 90 day Cholesterol medicine. CVS was billing me $193.64 and CostPlus came in at,…. $13.40 for the same meds. If that isn’t a game changer what is?

Agreed.  I didn't mention it in the story and should have … though I have reported on it previously in MNB.

Wonder if Walmart, Kroger, Target, CVS, Walgreen or Apple might be interested in partnering with or even acquiring CostPlus?