business news in context, analysis with attitude

Published on: August 8, 2022

Well, we have another scandal in Florida.  Not hanging chads, or alleged voting booth irregularities.  No, this is something really serious.

And it has to do with pie … which as far as I am concerned, is a pretty serious subject.

(I've gone on the record here about how much I love key lime pie - one of my favorite pics from my recent trip to the Bahamas is below, featuring key lime pie that I had for breakfast, plus a cup of coffee.)

Attention must be paid.  Because, as the folks at Blue Raeven Pies in McMinnville, Oregon, would say, "Pie fixes everything."

Published on: August 8, 2022

The Information reports that Amazon on Friday announced that it is acquiring iTobit, the manufacturer of the Roomba automated vacuum cleaner, for $1.7 billion.

CNBC writes that "the acquisition marks Amazon’s fourth-largest deal, behind its $13.7 billion purchase of grocery chain Whole Foods in 2017, its $8.45 billion purchase of film studio MGM last year, and its $3.9 billion acquisition of boutique primary-care provider One Medical, announced last month."

The Information story points out that "the robot maker’s automated cleaning products have been a mainstay on Amazon’s online marketplace, and are typically featured prominently during sales periods like Prime Day alongside Amazon’s own smart-home devices. If approved by regulators, the acquisition will further Amazon’s dominance in the connected electronics space … nearly one-in-three U.S. households with internet access had either an Amazon Fire TV device, an Echo smart speaker, or both, according to research published by eMarketer. And Ring, which was acquired by Amazon in 2018, commands the largest slice of the growing video doorbell market."

CNBC notes that in addition to the Roomba, iRobot "has also introduced robotic mops and pool cleaners. iRobot also has a subscription program that offers automatic equipment replenishment, among other services."

From the Washington Post, an assessment of how iRobot's products may fit into Amazon's vision of the world:

"What began as a microphone in a speaker has evolved into a growing genre of devices meant to make domestic life more enjoyable. Last September, at the company’s annual fall press event, Amazon unveiled a 15-inch wall-mounted version of its Echo Show screen that watches and listens to your home, and a number of other products and services that all monitor consumers in some way to anticipate their needs.

"The growth of such technology highlights consumers’ increasing tolerance for sensors and cameras trained on their daily routines. That evolution has drawn criticism from privacy advocates and concerned consumers. It also underscores how tech giants view the home as yet another platform for an array of services and a goldmine of personal data."

Wired casts a skeptical eye on the proposed acquisition:

"Combined with other recent acquisition targets, Amazon could wind up with a comprehensive look at what’s happening inside people’s homes. The ecommerce giant acquired video doorbell company Ring in 2018 and Wi-Fi router-maker Eero a year later. Speakers and other devices with AI assistant Alexa can now control thousands of smart home devices, including Roomba vacuums."

“People tend to think of Amazon as an online seller company, but really Amazon is a surveillance company. That is the core of its business model, and that’s what drives its monopoly power and profit,” Evan Greer, director of the nonprofit digital rights organization Fight for the Future, tells Wired.  “Amazon wants to have its hands everywhere, and acquiring a company that’s essentially built on mapping the inside of people’s homes seems like a natural extension of the surveillance reach that Amazon already has.”

Federal regulators and iRobot's shareholders have to approve the deal for it to be completed;  the latter is likely, since Amazon's offer is more than 20 percent over iRobot's stock price, and this is the first positive economic news the company has gotten in more than a year.

Published on: August 8, 2022

•  CNBC has a story suggesting that "in the current confusing economic environment — marked by inflation, supply chain bottlenecks and a volatile consumer changing spending patterns due to the high prices which followed Covid — small business experts say that Main Street should be more optimistic about the advantages of being small.

"The inventory builds and subsequent markdowns from the biggest retailers, including Walmart and Target, show that even the best can get this consumer economy wrong. In fact, small business owners, being closer to relationships on both the supply and customer ends, may be able to more nimbly manage a fast-changing environment."

According to the story, Nada Sanders, Northeastern University distinguished professor of supply chain management, argues that the moment presents "a tremendous opportunity" for small retailers:

"Her opinion is that the biggest companies have become too reliant on inventory algorithms to forecast data, but in the current economy, which has defied many historical patterns, 'historical data in this space right now isn’t really good data. It’s not clean data, it doesn’t indicate the future that is very volatile,' she said.

"This gives small business owners who can connect directly with customers, to understand what their needs are, a potential advantage that can’t be calculated by an algorithm.

"Whether a small business is B2B or B2C, Sanders said direct communication is a 'real answer' for them right now in dealing with changing consumer behavior.

"'What I’m seeing with the big companies, they’re trying to hire futurists and trying to figure out ways to actually predict demand. But every time we look at the numbers, the Consumer Price Index, all of it, we’re looking backwards,' Sanders said. 'The fact of the matter is, we’re in a very quickly changing landscape and I think we have to look forward. Small business owners really need to connect and use judgment to forecast and to understand what their customers need'."

•  The Wall Street Journal has a piece about 10-store Karns Foods of Mechanicsburg, Pennsylvania, where management is making adjustments in anticipation of a recession … and trying to do exactly what the Northwestern professor is suggesting.

According to the story, the company "is carrying more low-cost food brands and dropping some expensive products altogether. The grocer removed quart-size heavy cream products from some stores as they became more expensive and put less expensive store brands and smaller packages on shelves instead … Karns stores got rid of 200-count bottles of pain-relief medicine because executives believed that the item was too expensive and wouldn’t sell. The grocer is considering eliminating one or two of the least popular salad dressing items that executives said are unlikely to sell if they get more pricey.

"As people increasingly seek lower-cost products, Karns is adding more of them. The company is focusing on store brands while expanding its so-called $10 Max Packs in the frozen meat department where it sells three- to five-pound bundles of protein. Karns, which said it highlights Pennsylvania suppliers to draw customers, buys meat made for restaurants and repackages them for the value section."

The story notes that "amid an economic slowdown and high inflation, companies are trying to forecast shifts in consumer demand and recalibrate their business. A number of retail giants and consumer companies have issued profit warnings and projected falling sales in recent weeks as consumers start to pull back on spending. Small operators like Karns face particular challenges of managing growing costs and juggling competition from bigger peers."

•  And, the Wall Street Journal also has a story in which "some big U.S. companies say hiring is getting easier, at least by a little.

"Employers in hospitality, retail, healthcare and other industries hardest hit by worker shortages over the past two years say they are seeing emerging signs that recruiting workers - and getting them to accept jobs when offered - is becoming less of a challenge, even as the overall job market remains tight … Corporate leaders say the job market still favors workers over employers and that challenges remain in drawing enough staff. Still, many say the worst of the hurdles appear to be over."

One reason for the shift may be the tenuousness of the economy:  "Fears of a recession or inflation … appear to be keeping some workers in their existing jobs, economists and executives say, leading to a drop in turnover in some industries - another boost for companies."

Published on: August 8, 2022

AdWeek reports that "online grocery shopping company FreshDirect has appointed BAM Strategy, a Montreal-based digital agency, as a strategic partner to build the company’s first-ever loyalty program. The goal of the project is to attract new customers and provide more value to existing ones, while also driving sales and retention."

According to the story, "BAM Strategy will be responsible for successfully creating and launching a redesigned loyalty program for FreshDirect customers, which will include conducting customer research that will help with content and analytics strategy, as well as branding for the program. BAM Strategy will also audit FreshDirect’s current programs to better understand where there may be opportunities to expand into loyalty for consumers.

Published on: August 8, 2022

The Wall Street Journal reports that CVS health is looking to acquire Signify Health, which describes itself as "a leading healthcare platform that leverages advanced analytics, technology, and nationwide healthcare provider networks to create and power value-based payment programs. Our mission is to transform how care is paid for and delivered so that people can enjoy more healthy, happy days at home."

The Journal notes that Signify Health is in the process of evaluating various strategic options, including a possible sale.

For CVS, the story says, "a deal would help fulfill its stated ambition to become an even bigger provider of medical services. The company has indicated it hopes to have a deal in place to help it do so by year-end."

Signify also may be something of a consolation prize for CVS, which "had eyed a deal for the parent of One Medical, people familiar with the matter said, before Amazon.com Inc. agreed to buy the primary-care clinic operator for about $3.9 billion last month."

Published on: August 8, 2022

Interesting piece from The Street about Costco, which "has famously been a good place to work. It even paid its employees $15 an hour way before most places."   And while Costco gets good reviews on Glassdoor, the website where employees can rate their employers, a small percentage of them - 792 out of more than 13,000 - "mentioned issues with management: 'Poor management by not listening and hearing employees' issues and situations'."

"In 451 reviews," the story says, "employees noted that Costco was 'very effective at keeping selective employees in check if the managers don't like that specific person'."

Reports point out that roughy 20 percent of Costco's national workforce is unionized, and that "as of August 4, 2022, employees continue to bargain with Costco over a desire for a new national contract.

"This fight has been continuous. Workers were offered a contract in June, which was referred to as 'last, best and final' by the big corporation. But the offer was quickly rejected by over 93% of the employees. This week, negotiations continue, but so far are looking stark."

Published on: August 8, 2022

Axios reports that while inflation continues to be a major problem for Americans, and worries about a recession persist, that doesn't mean people aren't spending money.

According to the story, "Credit-card balances are defying the gravitational pull of stubborn inflation and slower growth … Credit cards account for $890 billion of Americans' staggering $16 trillion in household debt."

Axios notes that "credit-card issuers are leaning into Americans’ hunger for debt, primarily by offering travel-related bonuses and cash back on purchases."  A survey from Wells Fargo "found that 45% of Americans with rewards credit cards 'rely on their credit card rewards to help offset some of the cost of everyday purchases'."  And, "Consumers are compensating for soaring prices by discount shopping — and using copious amounts of plastic to offset surging costs for food and gas."

Published on: August 8, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  From the Associated Press:

"Demand for grocery delivery is cooling as prices for food and other necessities rise. Some are shifting to pickup — a less expensive alternative where shoppers pull up curbside or go into the store to collect their already-bagged groceries — while others say they’re comfortable doing the shopping themselves … Some think delivery demand could drop further. Chase Design, a consulting firm, says its surveys show the number of U.S. shoppers who plan to use grocery delivery 'all the time' has fallen by half since 2021."

As the pandemic, which fueled growth in the sector, began to recede, "demand softened. In June, Americans spent $2.5 billion on grocery delivery — down 26% from 2020. For comparison, they spent $3.4 billion on grocery pickup, which saw demand drop 10.5% from its pandemic highs.

"That’s causing some turmoil in the industry. Buyk filed for bankruptcy in March; Jokr pulled out of the U.S. in June. Instacart — the U.S. market leader in grocery delivery — slashed its own valuation by 40% to $24 billion in March ahead of a potential IPO."

•  Politico reports that Amazon lobbied the White House and the US Food and Drug Administration (FDA) this spring, urging them "to tap Amazon’s massive distribution networks to speed the delivery of formula to desperate consumers" at a time when formula was difficult to come by.

Ultimately, the decision was made to prioritize bricks-and-mortar stores in finding ways to get baby formula to consumers, and "Amazon officials were left with the impression the White House didn’t want to appear as if it was prioritizing the online retail giant, according to a person familiar with the conversations.

"The company has had at times contentious relations with the Biden administration and progressive Democrats in Congress. One White House official, who was not authorized to speak publicly, said the reason was more simple. 'They can’t take WIC,' the official said, referencing the federal nutrition program for low-income moms and babies, which is used to purchase roughly half of all infant formula consumed in the country.

"That’s because as of now, WIC benefits cannot be used to purchase food online — restrictions that have proved to be a major headache for the administration as it tries to address the formula crisis. The federal government has been working to change that in recent years, including efforts to modernize the 1980’s-era payment system for WIC as well as the Supplemental Nutrition Assistance Program, known as SNAP, which provides federal food assistance to more than 40 million Americans."

•  Technical.ly reports that fast delivery company Gopuff is rolling out an immediate payment option called Instant Cash Out that will be a way "for drivers to immediately transfer their earnings to a bank account … The change comes to US delivery partners, aka drivers, through a partnership with fintech platform Stripe, to offer drivers 'with an eligible debit card' the option to cash out their earnings and tips quicker. Previously, the company paid drivers their earnings and tips on a weekly basis, a spokesperson said."

The new option, the story notes, was one "heavily requested by drivers."

These drivers must be thrilled to be listened to … at least, the ones that are left.  The story also points out that it was just weeks ago that it laid off 10 percent of its US workforce.  

•  TrendHunter reports that "Instacart is enabling grocers to make use of the FoodStorm order management system (OMS) in a bid to make it easier for them to offer catering items online and for delivery. The first retailer to use the service is Uncle Giuseppe's Marketplace, which will allow customers in the New York and New Jersey area to place catering orders online."

Jeanette Barlow, Instacart's VP - Product, Retailer Solutions, says that ""Catering represents one of the highest-margin categories for grocers, driving meaningful incremental growth for their business as consumer demand increases. In the first half of 2022, we’ve seen nearly a 20% increase in customers searching for ‘catering’ on Instacart, compared to the same period last year."

Published on: August 8, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  From the Boston Globe:

"The US economy created 528,000 jobs in July, the Labor Department said on Friday, a confoundingly robust gain that pushed total employment back to its pre-COVID level.

"The unemployment rate dipped to 3.5 percent, matching a five-decade low last seen just before pandemic lockdowns began in March 2020.

"Last month’s hiring binge - the increase was double most forecasts - came as soaring prices for products and services have rattled consumers and businesses, and other indicators point to a possible recession. It was especially remarkable given that the labor force, or pool of available workers, shrank in July, extending a worrying post-pandemic trend."

•  From CNBC:

"Some restaurants are reporting weaker sales or declining traffic in the second quarter, signaling that diners are cutting back on eating out to save money.

"But CEOs are split on how consumer behavior is changing and whether it’s impacting their companies.

"McDonald’s Chris Kempczinski and Chipotle Mexican Grill’s Brian Niccol are among those who told investors that low-income consumers are spending less money at their locations, while higher-income customers are visiting more frequently. Other chief executives, like Starbucks’ Howard Schultz and Bloomin’ Brands’ David Deno, said they haven’t seen their customers pull back.

"The mixed observations come as restaurant companies hike menu prices to pass along higher costs for ingredients and labor. Prices for food eaten away from home have risen 7.7% in the 12 months ended in June, according to the Bureau of Labor Statistics. People are also paying much more for necessities like gas, toilet paper and groceries, stoking worries about the possibility of a recession."

Historically, the story says, "pricier fast-casual and sit-own restaurant chains typically see sales deteriorate during slowdowns as people opt to stay home or pack their own lunches. Fast food tends to be the top-performing restaurant sector as people trade down to cheaper meals when looking to treat themselves."

•  Fast Company reports that a New York City woman has filed a lawsuit charging that "Starbucks' summery fruit drinks are not as fruity as their names suggest … She claims the refresher drinks are all predominantly made with water, grape juice concentrate and sugar."

The litigant is seeking class action status for her suit.  Fast Company notes that she "doesn’t say in her suit how she determined the ingredients were missing."

Starbucks has not yet commented on the accusations.

•  NJ.com reports on a trend in New Jersey that has emerged since the state enacted a strict plastic bag ban - people are stealing stores' handheld plastic shopping baskets and not returning them.

The problem is forcing retailers to not allow the baskets to leave their stores.

The story actually gets it right - that "customers are flouting basic shopping rules and common decency by stealing handheld baskets."  Eliminating single use plastic bags is an intelligent move in terms of the environment, and it is a mark of people's selfishness and perceived victimhood that they would not practice common decency.  I've said it before and I'll say it again - the fabric of our society is unraveling.  I am less sure with every passing day that the it can be rewoven.

Published on: August 8, 2022

Walmart announced last week a new program - "Walmart Restored … created to help customers discover refurbished products at everyday low prices. In a year when customers are looking for ways to save money, like-new refurbished products have become an increasingly popular way to cut down on costs without sacrificing quality."

One MNB reader responded:

Not sure if you saw this...Not only is Walmart diving into the "like new" sandbox... here are some other premium brands … Lululemon (love the mission on this one!) …. and Allbirds.

Now, I haven't ordered any, but considering these brands are in their own "direct" omnichannel only (no indirect, no Amazon, no third-party discounters for Overstock), this must also make sense for how to handle the return issue of not being able to restock as new. 2 birds, one stone? Solve a problem in a creative way...that's innovation in my book!

Last week we took note of a Business Insider report that "the Federal Trade Commission has deepened an investigation into Amazon's Prime subscription service and whether the e-commerce giant intentionally dupes consumers into signing up for the membership program."

I commented, in part:

I'm neither a lawyer nor an FTC investigator, but I must admit I am having trouble with the idea of people being "duped" into signing up for Prime.  Best I can tell, it all seems pretty transparent to me - this is what you pay, and this is what you get.  For the most part, I've been pretty happy with the exchange of dollars for services … but maybe there is a cadre of people out there being tricked into signing up for something they don't want or need.

But one MNB reader wrote:

You are a long time Prime Member and wouldn’t get the landing page pasted below.  I am a regular user of Amazon, but NOT a Prime Member.  Thought I’d share the graphic below that shows why some people could get “duped” into signing up for Prime.  It shows up EVERY SINGLE TIME I ORDER…What stands out?  “…FREE trial of Prime” in the header and the BIG yellow button (highlighting “FREE” again) showing where to start the process.  You have to look much harder to find where it says “No Thanks” or to see the cost of $14.99/month after your FREE trial. 

I am used to it, and it annoys the hell out of me that I have to navigate thru each time.  If you were new to the site you may get roped into the free offer and then not remember to follow up to cancel if needed.  I almost always choose the free shipping option for my orders and they almost always show up two or three days before the promised delivery date. 

I take your point.  "Duped" still seems strong to me.

Last week we also pointed out an Axios Chicago piece about how "every quarter, Mariano's top bosses travel downtown from their suburban headquarters to listen to pitches from local businesses trying to get on their shelves … Called 'What's Next at Mariano's,' the reality-TV-like event gives about 20 locals roughly 15 minutes each to pitch their product and field questions from a panel of executives."

The goal, the story said, is to identify local businesses that can help the Kroger-owned retailer maintain local street cred, ax well as giving appropriate local vendors the opportunity to take the next step.

One MNB reader responded:

Mariano’s may have gotten the idea from HEB who has been holding a similar competition for quite a few years where they identify local companies to carry products in the stores.  A number of these small companies are now stretching out across the country. Customers love the local products and the companies get the benefit of have HEB market them to customers all over the state.  In fact this year the competition will be in the Dallas area where HEB is just starting to gain traction. 

As in almost all things having to do with food retailing, H-E-B often is first and best.

And finally, another email about the passing of Vin Scully, from MNB reader Howard Schneider:

You and others have noted Vin’s incredible store of literature and his ability to effortlessly weave it into the game, never condescending, in such a way that even if you didn’t get the allusion, you knew what he meant. Once when he was calling a game on radio, three straight grounders were hit to shortstop (I don’t remember the team or the player). He failed to field the first two, then cleanly picked the third and threw to first for the out. Vinnie said, “And like the Ancient Mariner, he stoppeth one in three.” I’m sure I wasn’t the only English major who got a chuckle out of that.