business news in context, analysis with attitude

Published on: August 1, 2022

A thought this morning - a plea, actually - about something that men can do to make the planet a better place.  (And yes, this is a bit of an Andy Rooney moment for me.)

Published on: August 1, 2022

by Kevin Coupe

Marketing Dive reports on a unique ad campaign by LL Bean that is based on an actual letter written to the company in 2007 by an eight-year-old girl who was wondering how best to wear out her LL Bean backpack;  she desperately wanted a new one, but was told by her parents that she could only get one when the old one wore out.  Which it wouldn't.

Here's the ad:

According to the story, "L.L. Bean also located the writer, who is now 23 years old but was eight years old at the time of the letter, to recall the event, representing the evergreen trend of utilizing real people and stories in marketing materials to form the human connection consumers crave. The campaign will see a social media activation with the hashtag #dearllbean, encouraging others to share similar stories on social media, as well as a microsite full of similar stories about the Book Pack’s durability with a call-to-action to purchase the bag."

What impresses me about the ad is that it makes clear the importance of value, not just low price.  That's a key component of the LL Bean proposition - its prices may not be the lowest, but generally its products are going to stand up over time, making them more an investment than an expense.

I know this from personal experience - I have shirts and t-shirts from LL Bean that I've been wearing for decades - they last seemingly forever.  The only problem for LL Bean is that also means there is no reason to buy new ones, unless they come out with a new color or two.  (May I put in a request here for a black and navy blue Sunwashed Canvas Shirt, please?)

Retailers that can make clear to shoppers that there is a difference between "value" and "low price," and that sometimes the latter isn't the best or most frugal option, are the ones more likely to established sustained relationships with their shoppers.

This approach, I think, can be an Eye-Opener.

Published on: August 1, 2022

Three stories this morning about the impact of the inflationary economy on shoppers' purchase behavior…

•  The Wall Street Journal reports that as more and more Americans look to lower the costs of essentials, "one way they are doing so is by relying more on dollar and discount stores for groceries. Average spending on grocery products at discount chains increased 71% from October 2021 to June 2022, according to analytics firm InMarket. Over that time period, spending on the same items in grocery stores decreased by 5%."

The story notes that "roughly 2,300 Dollar Generals across the country currently stock fresh produce, out of more than 18,000 total locations, according to a Dollar General spokeswoman. 'While Dollar General isn’t a full-service grocer, we consider ourselves today’s general store by providing nearby and affordable access to daily household essentials, including the components of a nutritious meal,' she says. The company plans to expand fresh produce to a total of more than 10,000 stores in the next several years."

In addition, "A spokeswoman for Dollar Tree, which owns Family Dollar, says the chain aims to complement, not replace, grocery stores. She adds that most of the 16,162 stores offer frozen fruits and vegetables, along with sugar-free options, fruit juices, nuts, beans, whole wheat products, eggs and milk.

"Other households are buying in bulk or making do without items they never used to think twice about spending money on. Sam’s Club membership income was up 10.5% year-over-year, according to parent company Walmart’s May earnings call."

•  The Wall Street Journal also has a story about the mixed signals being sent by con sumner behavior, which create some of the confusion about the likelihood of a recession.

 An excerpt:

"The past week revealed new evidence from companies and the government that household spending is increasingly strained. Families are paring back purchases of items such as electronics and furniture as prices for essentials like food and gasoline have become more expensive. Inflation drove consumer spending in June to a new four-decade high while personal incomes fell when adjusting for inflation and taxes … Changes in spending habits, so far, have been uneven, companies and economists say. Many people are dining out and traveling more after missing chances to do it earlier in the pandemic. Pent-up demand is also fueling sales for automobiles. And some people- especially higher income households - are continuing to shell out for desired items regardless of elevated prices.

"Consumer confidence, however, has softened. After raising interest rates for the fourth time this year to battle inflation, Federal Reserve Chairman Jerome Powell said Wednesday that people are going to the grocery store and finding that their budget no longer covers their usual shopping list. On Thursday, the government said that the nation’s gross domestic product contracted for a second consecutive quarter, raising fears that inflation and a slowdown in inventory building and the housing market are dragging the economy into a recession."

•  The New York Times has a piece about how this is a terrific time to be a liquidation warehouse, which collect surplus and returned items from major retailers and then resell the products at steep discounts.

The volume that they are doing at this moment in time, the Times writes, opens "a window into a reckoning across the retail industry and the broader economy: After a two-year binge of consumer spending — fueled by government checks and the ease of e-commerce — a nasty hangover is taking hold.

"With consumers cutting down on discretionary purchases because of high inflation, retailers are now stuck with more inventory than they need. While overall spending rebounded last month, some major retailers say shoppers are buying less clothing, gardening equipment and electronics and focusing instead on basics like food and gas.

"Adding to that glut are all the things people bought during the pandemic — often online — and then returned. In 2021, shoppers returned an average of 16.6 percent of their purchases, up from 10.6 percent in 2020 and more than double the rate in 2019, according to an analysis by the National Retail Federation, a trade group, and Appriss Retail, a software and analytics firm … It’s becoming clear that retailers badly misjudged supply and demand. Part of their miscalculation was caused by supply chain delays, which prompted companies to secure products far in advance. Then, there is the natural cycle of booms — whether because of optimism or greed, companies rarely pull back before it’s too late."

Published on: August 1, 2022

The Wall Street Journal this morning reports that "Amazon. com Inc. is making room for big new warehouse projects even as the e-commerce giant reins in its aggressive logistics expansion.

"The e-commerce giant recently won local approval to build a five-story, 3.1 million-square-foot distribution center in western New York, and has even bigger sites in the works in Southern California and Colorado as it bolsters a network aimed at getting more goods faster to more Americans.

"The projects signal that the sprawling warehouses that anchor Amazon’s U.S. logistics network still have a place in the company’s strategy following its announcement in May that it was slowing the build-out of its logistics network and planned to sublease some existing space following its slowest quarterly revenue growth in about two decades."

The story ;points out that "Amazon has canceled some warehouse projects and delayed others, but experts say the big projects moving forward suggest the pause in logistics expansion is targeted at specific types of facilities and that the broader efforts to build up capabilities are still under way … Amazon so far this year has canceled, closed, listed for sublease or put on hold more than 25 delivery stations and fulfillment centers across the U.S. and has delayed opening 15 more, according to MWPVL data.

"At the same time, Amazon is expected to open some 250 more facilities in 2022."

Published on: August 1, 2022

This week, six Starbucks locations in Los Angeles will close because of concerns about security and employee safety.  The New Yorker has a piece about it, noting the incidents that presumably have prompted the company's decision, but also noting the hole it will leave in the lives of some of their customers.

Here's an excerpt, quoting Ray Indolos, who spends several days each week sitting and drawing in various Starbucks around Los Angeles.

"'I’m super bummed out. Some of my favorite Starbucks are the ones closing.' At the location in the Little Tokyo section of downtown, Indolos sat at a table with two fountain pens, ink brushes, and a sketch pad spread out in front of him. 'I do my art work. I thrive on the whole vibe here, the energy of people,' he said.

"He looked around the shop. 'My first assessment is: Is this guy gonna stab me? And, if not, more power to him. It only takes one glance.'  He gestured toward a man dancing alone. 'God bless him, whatever he’s going through,' he said. 'He doesn’t bother me.'

"Indolos started hanging out at Starbucks twenty-two years ago. 'I’m from Hollywood,' he said. 'I hitched my horse here.'  His regular order is an iced Americano with chocolate foam. He used to work in the animation industry, and now works in the office of a mental-health facility. He went on, 'I mean, it’s not like a hotbed for the Mafia or anything like that. It’s not so much crime as disturbance.'

"'Starbucks is a window into America,' Howard Schultz, the Starbucks C.E.O., said last month, in remarks to his staff. 'We are facing things which the stores were not built for.' At the branch on Hollywood and Western, two monitors showed customers live video of themselves: a woman in leopard-print leggings ordering at the register, another woman going through the garbage and fishing out a half-smoked cigarette. At a Little Tokyo location, an employee was jabbed by a used hypodermic needle while emptying the trash."

You can read the piece here.

Published on: August 1, 2022

McDonald's last week announced the end to its test of a McPlant burger in the US, which used Beyond meat patties.

CNBC writes that "McDonald’s first tested the meat-free burger in eight restaurants in the U.S. in November to understand how the menu item would impact its kitchens. In mid-February, it rolled the McPlant out to roughly 600 locations to learn more about consumer demand for the menu item."

The story notes that "Beyond’s stock has fallen 53% this year, dragging its market value down to $2.06 billion. Wall Street has become skeptical over the company’s long-term growth opportunities as grocery sales lag. Moreover, buzzy partnerships with restaurant giants like Pizza Hut owner Yum Brands and McDonald’s haven’t progressed to many permanent nationwide menu offerings yet."

Published on: August 1, 2022

•  Yahoo Finance has a story in which a Wall Street analyst suggests that Amazon's advertising business eventually could be bigger than its Amazon Web Services (AWS) business, which generated $19.7 billion in revenue during Q2, more than 16 percent of the company's overall revenue.

"'When you see some of the bids around, some of the NFL, some of the other ad-based connected TV content they’re going after, there’s a long runway to grow their advertising business,' Nick Jones, an equity research analyst at JMP Securities, told Yahoo Finance.  'That could be very, very profitable, potentially more than the AWS business longer term.'

"Amazon generated $8.76 billion in advertising revenue in its second quarter … Jones’ projection for future ad growth relies on Amazon Prime Video successfully segueing into live sports. Amazon is set to broadcast the NFL’s Thursday Night Football for the first time this season. The company’s $1 billion bet on professional football kicks off on Sep.15 and will feature 14 more regular season games."

Published on: August 1, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  The Washington Post reports that Hershey is saying that global supply chain issues may impact the availability of candy like Kit Kats, Twizzlers and Reese’s Peanut Butter Cups this Halloween season.

According to the Post, "Hershey said it began producing Halloween candy and chocolate in the spring. But because its everyday and seasonal products use the same production lines, the company was forced to recalibrate. When asked why the company had not shifted to an 'all-hands-on-deck' operation to produce as much seasonal candy as possible, chief executive Michele Buck said it opted to prioritize the more immediate need of replenishing store shelves now."

So this year we're in for more tricks than treats?  I guess we have to hope for another toilet paper shortage, so angry kids don't TP our houses…

Published on: August 1, 2022

•  The Western Association of Food Chains (WAFC) announced that longtime executive Carole Christianson, who has been COO of the association for 15 years, plans to retire later this year.

The announcement notes that "before joining WAFC, Christianson spent over 29 years in the Food & Beverage Industry culminating with her role at Coca Cola as Vice President of National Accounts.  In 2003, she established her own venture, 'Christianson West' leveraging her network with retailers in the Western United States with her first client being Kellogg’s. In 2005, she was retained by the WAFC to establish a formal business meeting process for the 2006 and 2007 annual WAFC conventions."

Christianson will remain as an advisor to WAFC "to insure a smooth and transparent transition" to a successor once one is announced.

Published on: August 1, 2022

•  Bill Russell, who with the Boston Celtics won 11 championships during his career and served as the first Black head coach of any U.S. professional sports team, died yesterday.  He was 88.

During his NBA career, Russell was a five-time MVP winner and a 12-time All-Star.   He also won two championships while at the University of San Francisco and captained the US team that won the Olympic gold medal at the 1956 Games.

The Boston Globe describes Russell as "the cornerstone of basketball’s greatest dynasty and an exemplar of racial harmony and progress," though it also reports that "his front-and-center prominence made him both an icon and an irritant in a city that was unaccustomed to a visible and vocal Black man and that was less than welcoming to the centerpiece of its most successful sports team. His home in suburban Reading was vandalized by intruders who destroyed his trophies, painted racial slurs on the walls, and defecated in the beds."

Russell, the Globe writes, "who was in the prime of his career during the civil rights movement of the ’60s, was a role model for African Americans who appreciated both his athletic prowess and his unabashed candor on social issues at a time when outspoken Black men often were considered 'uppity' or ungrateful."

In 2011, Russell was awarded the Presidential Medal of Freedom, the nation’s highest civilian honor … remarkable for someone who earlier in his life had an FBI file that referred to him as “an arrogant Negro."

•  Nichelle Nichols, who leapt to fame as chief communications officer Lt. Nyota Uhura on the original "Star Trek" Tv series and six subsequent feature films, has passed away.  She was 89.

Nichols reportedly helped to name her character - "Uhura" means "freedom" in Swahili, apparently - and also was known for participating (with William Shatner, who played Captain Kirk) in one of the first interracial kisses ever shown on television.  And, when she was considering leaving the series after the first season, she reportedly was talked out of it by Dr. Martin Luther King, Jr., who was a "Star Trek" fan who felt it was important for young Black children to see someone of their race in a non-menial role on a major TV series.

Published on: August 1, 2022

Responding to last week's story about changes being made at St. Joseph's University to the business program that will make it more customer-centric, one MNB reader wrote:

As a graduate of St. Joseph’s University’s Masters of Food Marketing program, I am pleased to know that Dr. Stanton and the Haub School of Business are breaking down barriers to a well-rounded education.   Everyone who works in food, pharma, and healthcare ultimately seeks to improve the well-being of people. Amazon just bought a health care provider.  The use of our products and services are now, more than ever, holistically intertwined.  These improvements will provide students with a cross-section of expertise that will make them the thought leaders in business organizations as they evolve to meet that need.

Agreed.

On another subject, from another reader:

We are in a recession. If renaming it to something else makes the DC folks happy, then so be it. Next issue will be excess inventories that retailers will have to unload. Promotions will help reduce with a positive inflation impact, however, will also reduce employment and hours worked as a result within the manufacturing sector.

Housing has already declined which will have a ripple effect downstream. The good news is that it might take less than six months to have furniture shipped once ordered. Most issues to be survivable and recoverable over time.

IMNSHO, we'll be fine.  There will be some pain, but we just came out of a pandemic, which stress tested to many of our institutions, people, and systems.  Some passed.  Some failed.  The people I admire are the ones who have learned from what we've gone through and who try to do better.

What amazes me is the number of weak people who claim victimhood at every turn, distressed by their lot in life.

Grow up, I say.  Behave responsibly toward your neighbor.  Take responsibility for your mistakes and missteps.  Try to act in a responsible manner going forward.  And stop whining.

(I may be in a mood this morning…)

On the subject of a Trader Joe's store being unionized, one MNB reader wrote:

I am shocked that the employees voted to unionize as Trader Joe’s has always appeared to be sort of a cult with extremely happy employees, I am even more shocked at the company’s response insinuating that they are welcoming to negotiate with the union. Might be a strategy the company is using. Unlike the Amazon situation where I doubt there will ever be a union, this one is going to be interesting.

What, Trader Joe's shouldn't negotiate?  This strikes me as a bad, knee-jerk reaction.

Seems to me that under the circumstances, Trader Joe's management should a) negotiate in good faith (because to do otherwise would send a terrible message to employees throughout the chain), and b) try to figure out why employees felt they needed the union.

Even the best companies can lose track of the core values that defined them.  That may have happened here, and Trader Joe's certainly has to ask the questions if it is going to find the answers.

Last week we took note of an Axios report that "Walmart is embarking on a 'mini-retail' journey with health and wellness hospitality company Getaway to add small general stores at select travel outposts across the country."  The stores, according to the retailer, will be just 75 square feet and are its "first micro-retail shopping experience."

Prompting one MNB reader to write:

Walmart seems to have lost total touch as to what got them where they are. In my opinion they put 100% emphasis on e-commerce and ignored their core customer and concept which is in my opinion the reason for the warning of lower profits for the year. A senior Vice President of a great company I worked for one said to me “you can’t be everything to everyone."

First, Walmart never put 100 percent of its emphasis on e-commerce,  Never.  But it would have been retail malpractice to ignore what was happening in the marketplace.

Two, to say that company's approach to e-commerce caused its current profit issues is silly.  Maybe you heard about the pandemic?  Inflation?  Fast-shifting consumer trends?  Even the best retailers have been trying to catch up.  As I said last week on MNB, Walmart actually may be better equipped than most to deal with the current scenario.

Third … give me a break.  Walmart hardly is trying to be all things to all people.  But it is trying to figure out a) what its core customers want, b) how its core customers are changing, and c) how it can expand its market share in a way that makes sense.  Walmart may make mistakes, but I actually think it shows remarkable fealty to its core mission.

Last week on MNB, we pointed out an Axios report that "in an innovative pushback against paper and plastic waste, eco-companies are starting to pump out cups, spoons and straws that you can eat after you use them — no need to recycle … New edible products, made from ingredients like rice and sugar, include strawberry-flavored drinking straws for your smoothie (or margarita), oat-and-grain coffee cups (in regular or chocolate), and black pepper-flavored spoons that pair well with soup or mac and cheese … Edible utensils and tableware are starting to crop up at major retail, dining and entertainment chains — which are using or selling them not only as a novelty, but to boost their green credibility."

From MNB reader Nathan Tully:

Love this push to eliminate single use plastics.  I say let’s see more of it! I know that there are efforts on-going in the CPG company I work for to replace packaging with those that are compostable. I believe all consumers will respond favorability to less trash and waste in this world.

This is a real environmental issue that everyone can participate in that is actionable and you feel good about even if you don’t worship at the altar of the green religion. Everyone can do their small part daily in their choices of containers, bags, wrappers, not littering, and recycling. What ever happened to the “don’t litter” campaign anyway?

I used straws made of pasta a couple of years ago on an island that has outlawed single use plastic. Needless to say it was not edible and did not hold up to the margarita it was used in but it was an early pioneer and I applauded their efforts.

Bring this one on!

Me, I would've been more concerned about the quality of the margarita than the quality of the straw.  But that's just me.

Another MNB reader wrote:

On edible coffee cups and “staying crunchy for up to 40 minutes.”  Wondering if the cup would start to ‘dissolve’ after 40 minutes.  If so, I would be in trouble.  My husband says I’m the slowest coffee drinker in the world.  I say I like to savor it slowly! 

Sounds to me like research is required.

And, from another MNB reader:

"Innovative" "Revolutionize."  We have had an edible plastic straw alternative for nearly 100 years. It's called the Twizzler.

I'm sorry.  That sounds like the waste of a perfectly good Twizzler to me.

In my house, we refer to Twizzlers as "heroin."  Because if I eat one, I'm likely to eat a two-pound bag.