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    Published on: August 17, 2022

    Good to be back after a few days off … and what's on my mind this morning is an email from an MNB reader who responded to our stories about all the things put at risk by climate change - including parmesan cheese and arborio rice production, as well as the glass used in wine bottles - by asking if I'd be willing to solve climate change issues by consuming Rice-A-Roni, processed and inferior parmesan cheese, and boxed wine.  I have a response to that … and some thoughts about how circumstances are depriving us of some of the most pleasurable things in life.

    Published on: August 17, 2022

    Walmart, just weeks after advising that it expected sales and profits to take a hit because of inflationary pressures and an inventory glut, said that its total second quarter same-store sales were up by 6.5 percent, on revenue that was up 8.4% to $152.86 billion.

    Q2 net income was $5.15 billion, up from $4.28 billion a year earlier.

    The company said that its "unit sales of food were slightly negative for the quarter."

    Some context from the Wall Street Journal:

    "Walmart, in its earnings report Tuesday, said it is gaining market share in some categories such as grocery as shoppers grapple with inflation, and that some Covid-19-related costs have shrunk. But higher prices have led shoppers to hold back on some purchases. Walmart is also selling through a glut of inventory leading to higher discounts … Walmart has been working to get its financial house in order. It has been trimming costs, including culling its corporate ranks in recent weeks.

    "The company’s stores are packed with discounted goods, with rows of toys, clothes and summer items under yellow clearance signs. The value of inventory was up 25% from a year earlier, but that is lower than the previous quarter, and executives said they believe inventory has peaked."

    CEO Doug McMillon also said yesterday that "we have seen mid- to higher-income customers come to Walmart, as you’d expect” in an inflationary environment.

    KC's View:

    When Walmart started cautioning investors about its numbers, my reaction was that, from a competitive point of view, this is when Walmart can get really dangerous.  It has the resources to sell through a ton of merchandise at vastly reduced prices, can absorb a temporary loss of margin, and the foresight to realize that this is a time for it to earn market share.

    Expect this pattern to continue for the foreseeable future - times like these are tailor-made for Walmart.

    Published on: August 17, 2022

    BoiseDev reports on how Albertsons is testing "a store without traditional checkout lanes.  The conveyor belts are gone at the store at Five Mile Rd. and Ustick Rd. in Boise. But so are the checkers punching buttons and scanning items behind a piece of plexiglass.

    "Instead, customers can choose from a beefed-up array of self-checkouts, with staff nearby to help."

    The story says that the program - being tested in two Albertsons stores around the country - "guides customers to self-checkouts by their basket size: 10 items or less, about 15 items, and 20 items or more. Albertsons replaced the previous small number of self-checkouts with more than two dozen. In the pods marked 20 items or more, there’s a much larger area to bag groceries than the traditional self-checkouts."

    KC's View:

    I love this, but have a question - why isn't Albertsons also testing checkout-free stores?

    To me, self-checkout systems haven't changed all that much in decades … I think it is time for Albertsons, if it is committed to this path, to take the next big step.

    Published on: August 17, 2022

    Business Insider reports that "a leaked email reveals a big reorganization of Amazon's physical stores and Whole Foods business. Announced internally by Tony Hoggett, Amazon's new SVP of physical stores and specialty fulfillment, the plan includes several high-profile departures and a call for better collaboration between teams. 

    "VP Dilip Kumar, who oversaw the Just Walk Out cashierless tech, is moving to Amazon Web Services … Kumar's move to AWS signals a greater focus on selling Amazon's in-store technologies to corporate customers."

    According to the story, "Other changes appear to be aimed at building a closer alliance between Amazon and Whole Foods, whose relationship hasn't always been great since the 2017 acquisition … Whole Foods executives, such as CMO Sonya Gafsi Oblisk and EVP of growth and development Christina Minardi, are getting expanded roles that cover parts of Amazon as well. Whole Foods's incoming CEO Jason Buechel will report to Hoggett, too."

    KC's View:

    The question that needs to be answered here is whether Amazon, in making these shifts, indeed is adhering to its traditional "it all starts with the customer" approach … or are these changes instead geared to operational mandates.

    I'm just not sure.  But I do think we're going to find out.

    Published on: August 17, 2022

    The Wall Street Journal reports that "restaurants are taking on grocery stores over value, contending that eating out can be a better deal than cooking at home.

    "They have some recent data on their side. Consumer prices at grocery stores and restaurants increased 13.1% and 7.6%, respectively, year-over-year in July, according to the Labor Department - the biggest inflationary gap between grocery stores and restaurants since the 1970s.  The unusual pricing dynamic has given ammunition to fast-food chains and sit-down restaurants, which are increasingly touting their prices and overall value in advertisements."

    One example cited in the piece:  "Brooke Tucker, a 25-year-old barista from Durham, N.C., turning to fast food over groceries nearly daily. A full meal from KFC costs $7, she said, while a recent grocery run for chips, dip and sushi set her back $19."

    KC's View:

    The problem here is that "value" is being equated with "price," which just isn't accurate.

    Sure, it may cost more to buy the ingredients for a salad than it does to buy a burger and fries at a fast feeder, but it isn't a remotely fair comparison.  That said, just saying it isn't fair isn't enough.  Not by a long shot.

    Supermarkets ought to engage with this debate.  Now.  Forcefully.  Relentlessly.

    Published on: August 17, 2022

    Bloomberg reports that before Amazon made the deal to acquire primary healthcare company One Medical for $3.5 billion, CVS Health was trying to make a deal to buy the company.

    CVS, the story says, "negotiated with the company for months, and even offered the same amount that Amazon ultimately agreed to pay. 

    "CVS first approached One Medical parent 1Life Healthcare Inc. about a deal in October 2021 and was in the mix to buy the company until weeks before it agreed to sell to Amazon … CVS had offered to pay $18 a share in cash for One Medical in June but later had concerns about moving at an 'expedited pace'."

    The difference maker was, in fact, speed:  "Amazon entered the fray in February but paused M&A discussions in April. It restarted M&A conversations after it learned that 1Life had gotten an offer from someone else. On July 2, Amazon offered to pay $18 per share in cash, subject to due diligence. Amazon said it would stop engaging if its interest leaked.

    "Amazon ultimately reached an agreement to buy One Medical on July 20. The deal was announced the next day."

    KC's View:

    Go figure.  Amazon moved faster than CVS.  I'm shocked.

    Published on: August 17, 2022

    The Washington Post has a story about Knead Hospitality and Design, a restaurant group that runs more than a dozen locations in Washington, DC, which "has rolled out a pioneering perks package among its restaurants’ salaried workers."

    One employee, for example, "saved a total, Knead confirmed, of $1,651 on dinners, dry cleaning, facials, a gym membership, manicures, massages, parking, pedicures, a Nationals game and a Chris Rock show with his father, and a 'Wheel of Fortune' taping with his mother — all reimbursed to varying degrees by Knead."

    The Post story notes that " Knead is part of a radical, once-in-a-lifetime shift in the restaurant industry’s business model as it struggles with nothing short of an existential reckoning … The nation’s 11.6 million food service workers, including managers, earn an average of $18.48 an hour and work an average of 25.7 hours a week, according to May 2022 data from the U.S. Bureau of Labor Statistics. A January BLS report flagged that the restaurant industry’s year-over-year quit rate jumped from 4.8 percent to 6.9 percent — a larger increase than in any other job sector — yet the hiring rate remained steady at 8.1 percent. As a result, restaurant job openings increased from 5.8 to 8.4 percent."

    Knead's co-founder, Jason Berry, frames the company's approach to perks through the "lens of retention and cost-cutting, flagging that the hiring of an assistant general manager in 2019 cost Knead $15,000 in recruiting fees and $10,000 in training even before the employee had really started working. Even a server, he said, costs $1,000 to hire and train. 'You can spend this money proactively or reactively,' he explained. 'So why not do it proactively with intention the way you want to do it, instead of spending $100,000 a year advertising on Indeed and $200,000 in recruiting fees? I’d much rather give that money to our teammates'."

    A reality check from the Post:  "The package may yet be a game changer. Or not. Despite its legendary perks program, Starbucks is wrestling with widespread unionization efforts (union restaurant jobs make roughly $100 more per week than nonunion positions, according to federal labor data)."

    KC's View:

    The challenge, even to progressive employers, is that no matter what they do, it may not be enough to meet the moment.

    But I have this sense that when the pendulum swings back toward employers - and it will - there may be some blood-letting in the labor markets, and employees (and some labor organizers) may not know what hit them.

    Published on: August 17, 2022

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  Walmart announced that it has "reached a deal with Paramount Global to include the Paramount+ streaming service as part of the retailing giant’s Walmart+ membership program starting in September," Variety reports.  "The Paramount+ Essential plan, which includes ads, will be available for no extra cost to Walmart+ members. In the U.S., Paramount+ Essential is regularly $4.99/month … The move by Walmart is intended to make Walmart+, which launched in September 2020, more competitive with Amazon’s Prime by adding a streaming-entertainment component. Walmart+ costs $12.95 per month (or $98 per year), providing subscribers with same-day delivery on more than 160,000 products. Program members also can save up to 10 cents per gallon on gas at more than 14,000 participating stations nationwide and get up to six months of Spotify Premium for free."

    When this possibility got floated, I said I thought it was a good idea for all parties - the biggest challenge for Walmart is that sometimes the streaming content at any of these services veers away from the family-friendly approach that Walmart generally prefers. Walmart won't have control over content, which might create some conflicts.

    Published on: August 17, 2022

    •  The New York Times reports that workers at a Minneapolis Trader Joe's have voted to unionize, "adding a second unionized store to the more than 500 locations of the supermarket chain.

    "Employees at a Trader Joe’s in Massachusetts voted to unionize last month, part of a trend of recent union victories involving service workers at companies like Starbucks, Apple and Amazon.  The Minneapolis vote was 55 to 5, according to the National Labor Relations Board, which held the election."

    A Trader Joe’s spokeswoman, Nakia Rohde, tells the Times, “While we are concerned about how this new rigid legal relationship will impact Trader Joe’s culture, we are prepared to immediately begin discussions with their collective bargaining representative to negotiate a contract.”

    •  From the Financial Times:

    "Starbucks has accused federal labour officials of working with union leaders to sway election results and demanded the government halt all further ballots pending an investigation … Starbucks said a current employee of the NLRB — the federal agency that oversees collective bargaining in the US — had approached the company with evidence that labour officials in Kansas City shared information about mail-in ballots with the union.

    "Starbucks detailed the allegations in a 14-page letter sent to the NLRB chair and general counsel on Monday, in which it also demanded that all upcoming union elections be halted pending an investigation. Some 34 stores have elections scheduled or in process, labour officials reported in a data release on Friday. Another seven stores have pending election requests."

    The FT story notes that Starbucks "has been the target of one of the most concerted labour-organising campaigns in the fast-food industry since the 1980s, with more than 220 Starbucks stores across the country voting to unionise since December. Workers say the chain’s stores are understaffed and Starbucks is taking advantage of them for profit."

    The NLRB said it will consider the Starbucks challenge.

    •  From Reuters:

    "Workers at an Inc. warehouse near Albany, New York, are seeking to unionize, the National Labor Relations Board said in a statement on Tuesday.

    "The Amazon Labor Union - the same independent group that organized a historic union win at another warehouse on New York's Staten Island in April - petitioned the federal labor board to hold an election at the warehouse near Albany and represent about 400 workers."

    The story notes that "employees at dozens of Amazon warehouses across the United States are considering joining unions as the online retailer faces claims that it prioritizes profit over worker safety and has unlawfully discouraged union organizing."

    •  From the Los Angeles Times:

    "Warehouse workers at Amazon’s largest air freight facility on the West Coast walked off the job Monday, demanding higher pay and relief from hot conditions they say are unsafe.

    "Organizers with a group called Inland Empire Amazon Workers United said in a Facebook post that 160 employees walked out at the San Bernardino International Airport facility, which is a critical part of Amazon’s logistics network and one of the company’s three U.S. 'air hubs.'

    "In a statement, Amazon officials disputed the number, saying that 74 out of roughly 1,500 employees at the facility walked out.

    "About 900 employees at the San Bernardino airport have signed a petition calling for base pay to be increased from $17 per hour to $22 per hour, Inland Empire Amazon Workers United said in a statement."

    •  From The Information:

    "At a moment when Amazon’s overall workforce is shrinking, the company is awarding stock to employees at a record-breaking clip to keep top talent from heading for the exits.

    "Amazon granted 138 million restricted stock units to employees in the second quarter … an 82% increase from the number of restricted shares for employees it issued during the same period last year, according to corporate filings.

    "That’s more shares than Amazon has ever awarded to employees in a single quarter, and more even than the number it issued to workers in all of 2021 … One big reason for the hefty stock awards: Amazon is doing everything it can to keep people, especially workers with much sought-after technical skills, as its stock tumbles and hiring competition intensifies. But it’s also happening at the same time that the company is deliberately reducing its total head count, mainly workers in its warehouses, who account for the vast majority of its 1.5 million employees, as of June 30. The company went on a hiring binge to handle a pandemic surge in online shopping, but once that surge abated Amazon found itself with too many staffers, a situation it has sought to remedy through attrition and by slowing hiring."

    Published on: August 17, 2022

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  The Financial Times reports that "Amazon has accused the US Federal Trade Commission of harassing its top executives, including founder Jeff Bezos and chief executive Andy Jassy, as part of a probe into the ecommerce group’s Prime membership scheme.

    "Since March 2021, the regulator has been investigating whether Amazon uses deceptive techniques to lure customers into signing up for Prime, the subscription service that offers free delivery and other benefits at a cost of $139 a year. The FTC is also examining whether Amazon unfairly complicates the process for customers who want to cancel their membership.

    "In a filing from August 5 that was made public by the regulator on Monday, Amazon said the investigation had become 'unduly burdensome' on employees and executives after at least 19 were served individual subpoenas — or Civil Investigative Demands — to give evidence. The company called for the FTC to 'quash or limit' the demands, which it alleged served no other purpose other than to 'harass Amazon’s highest-ranking executives and disrupt its business operations'. Amazon said briefing Bezos and Jassy to testify on 'granular' details would be a 'tremendous burden on them'."

    Oh, stop.  This is silly.  The FTC has legitimate questions about Amazon's business practices - even if you don't agree with some of its early conclusions - and is doing the people's business when it wants answers from the people who are paid the big bucks to answer them.  Stop whining, and book a flight to DC.

    •  CNBC reports that "in its latest effort to contend with soaring inflation, Amazon is planning to raise fulfillment fees during the holiday season, passing off some of its increased costs to the millions of merchants who rely on the site to sell their products.

    "Starting Oct. 15, and running through Jan. 14, third-party sellers who use Fulfillment by Amazon, or FBA, will have to pay 35 cents per item sold in the U.S. or Canada, the company said Tuesday in an email to sellers. For merchants using FBA, Amazon handles the process of picking, packing and shipping items.

    "The holiday fee comes on top of existing charges that sellers pay for using FBA services. Those costs vary depending on an item’s size, category and weight.

    Amazon said it’s implementing an added holiday surcharge for the first time as 'expenses are reaching new heights,' making it harder for the company to absorb costs tied to the peak shopping season."

    •  From the Wall Street Journal this morning:

    " has struck a deal with Nielsen Holdings PLC to have the ratings firm measure its coverage of 'Thursday Night Football' games on its Prime Video streaming platform, the two companies said.

    "The deal marks the first time Nielsen will include ratings from a streaming service in its closely watched weekly television-viewing report, whose data is crucial for determining the value of commercial time. Amazon’s Prime Video streaming service has exclusive rights to the National Football League’s Thursday matchups starting this coming season, and the company has told advertisers its coverage would get a big audience."

    Published on: August 17, 2022

    •  Target Corp. this morning said that its Q2 comparable sales were up 2.6 percent, "reflecting comparable store sales growth of 1.3 percent and comparable digital sales growth of 9.0 percent. Total revenue of $26.0 billion grew 3.5 percent compared with last year, reflecting total sales growth of 3.3 percent and a 14.8 percent increase in other revenue. Operating income was $321 million in second quarter 2022, down 87.0 percent from $2.5 billion in 2021, reflecting a decline in the Company's gross margin rate.'

    •  C-store retailer QuikTrip has opened a store in Tulsa powered by Amazon’s Just Walk Out technology, the first time QuikTrip is using checkout-free technology.

    According to the announcement, "Guests visiting the new store will be able to insert their credit card at the entry gate to enter, shop like normal, and then leave the store. Just Walk Out technology determines what items shoppers take from or return to the shelves, and when they leave, the credit card they inserted will be charged for the items they took."

    •  Associated Wholesale Grocers, Inc. (AWG) yesterday announced "a temporary reduction to fuel surcharges for their member-retailers through year-end and a one-time rebate for year-to-date activity. The company estimates the sum of the rebate and temporary reduction to exceed $9,000,000 for 2022."

    The company said, “AWG is proud to be positioned to make this very significant investment to help our member-retailers maintain competitiveness and profitability, despite the ongoing fuel cost and inflationary headwinds and margin pressures; being driven by an increasingly price competitive retail climate.” 

    Full disclosure:  AWG is a longtime and valued MNB sponsor.

    •  The Cincinnati Enquirer reports that 13 Kroger stores in Ohio will offer sports betting next year, as it becomes legal in the state, effective January 1, 2023.

    According to the story, "The law will allow both online and brick and mortar sports betting to take place, with betting available at a number of locations once it goes into effect. Locations like grocery stores fall under Ohio's 'Type C' category …  To be considered a Type C applicant, a location must hold both a valid liquor permit and lottery sales agent license. It must also have a current recommendation for licensure from the lottery and needs to be a for-profit corporation or association."

    The story says there are "13 Kroger locations around Greater Cincinnati on the pre-approved Type C sports gaming list."

    •  The New York Times reports that Trader Joe's has closed a popular wine store that it has operated in Manhattan's Union Square for more than 15 years, developing a "cult following for its bargains."

    The closure reportedly came without warning or explanation, the Times writes, with Trader Joe's only saying that it plans to offer “an even better wine shop experience” at some point in the future.

    Unconfirmed "theories about the reason for the closing abounded," the Times writes, and include "the impacts of the pandemic, the end of a lease, a new location."

    Published on: August 17, 2022

    •  Hy-Vee said yesterday that Jeremy Gosch has been named CEO and president of Hy-Vee’s retail operations as well as vice chairman of Hy-Vee’s Board of Directors. Gosch will lead alongside Aaron Wiese, who will serve as CEO and president of Hy-Vee’s subsidiaries and supply chain as well as vice chairman of Hy-Vee’s Board of Directors. 

    Current CEO Randy Edeker, who will serve as chairman of the company when the new leadership structure kicks in on October 1, said that the company has "reached a point where one person can no longer hold the title of chairman, CEO and president for the entire company.  We have become more than just a grocer. With our focus on health and wellness, pharmacy, restaurants, grocery, distribution and digital assets, it’s time we evolved our leadership structure to best position the business for the future, which is why Jeremy will also serve as a CEO for the company.”  

    Published on: August 17, 2022

    Responding to our piece las week about how wine bottles may be contributing to climate change, MNB reader Stacy McCoy wrote:

    Sounds like it’s time to buy my wine by the barrel and just have it on tap at my house!

    We had a story last week about how Domino's Pizza is pulling out of Italy.  I commented:

    I deeply, deeply hope that blaming the pandemic for Domino's abject failure to get any traction in Italy is just a rationalization, and that the real reason for the failure is the fact that Domino's doesn't really serve pizza.  Sure, it sort of looks like pizza and has some of the same ingredients as pizza … but it isn't pizza in all its spirt-lifting, stomach-filling, mouth-watering possibilities.

    To me, pizza falls into what I would call the "life is too short…" category.  Life is too short to drink cheap wine … crappy beer … and eat inferior pizza.  We all have our own "life is too short" lists, and pizza is certainly on mine.

    One MNB reader reacted:

    My wife and I took our kids for the first vacation in 7yrs that was just us and our two boys this summer.  We flew into Vegas since it’s a cheaper airport to fly into in order to begin a tour of the canyons – Zion, Bryce, Antelope and Grand.  My family’s fancier dinners are fewer and further between but it had been so long since our last time alone together that we decided to splurge for a nice meal.

    The only thing “kid friendly” at the nice restaurant was wood fired pizza.  It was much more expensive than I recall pizza being but the boys would split one so it worked out ok.

    After we were done, I asked them how they liked it and the response was “It was good, but definitely not as good as Dominos. That’s the best!”

    Isn’t the expression, “there’s no accounting for taste?”  Anyway, my wife and I still chuckle about this and figured you might, too.

    Kids grow up, and their tastes mature.

    Thank goodness.