business news in context, analysis with attitude

Published on: August 29, 2022

I'm almost embarrassed to admit that, after more than three decades of covering the food retail business, I don't think I've ever been in a Nugget Market.  The Northern California chain, which is closing in on its 100-year birthday, is in the fifth generation of family ownership, has some 16 locations and for more than decade has been celebrated  in the pages of Fortune as one of the best places to work in the US.  I recently rectified the situation with a visit to one of its newest stores, where I found its approach - a unique combination of artisan and affordable - to be utterly compelling.  

Here's some video and pictures of what I found…

Published on: August 29, 2022

CNBC has a piece about what has changed at Whole Foods in the five years after Amazon acquired the company for $13.7 billion…

•  "Amazon has opened 60 new locations, including one “dark store” entirely devoted to filling online orders. Yet Whole Foods still controls just over 1% of the grocery market, according to research firm Numerator, compared with Walmart’s 19% and Kroger’s 9%."

"On the corporate side, Amazon centralized some operations, moving them from individual stores to Whole Foods’ Austin, Texas, headquarters. But it hasn’t become a conventional supermarket like some predicted. Whole Foods says rather than swapping out regional suppliers for bigger names, the company has added 3,000 local brands in the past five years, a 30% increase since before the Amazon deal."

•  "Whole Foods insists it’s committed to keeping products local and clean. Since the Amazon deal, Whole Foods told CNBC it’s more than doubled its list of banned food ingredients, bringing the total to more than 250. It prohibits things like hydrogenated fats, high fructose corn syrup and artificial sweeteners, and meat must be free of antibiotics and added hormones."

•  "For shoppers, the most visible change to stores is the technology inside the doors.

Customers can now enroll their palm print with Amazon One to pay without a card or phone. A device scans your palm, triggering a charge to your Amazon account. It’s available at more than 20 Whole Foods locations, with 65 more stores in California coming onboard soon."

•  "Amazon’s commitment to low prices didn’t align with Whole Foods’ image at the time of the acquisition, when the grocer was often called 'whole paycheck' and mocked for selling $6 asparagus-infused water.  An Amazon spokesperson told CNBC in a statement that its goal was to 'make high quality, organic foods more affordable and accessible for everyone,' and that it’s since 'lowered prices across aisles at Whole Foods Market, offered Prime Membership Discounts and Prime Member Deals in-stores'."

CNBC also points out that this is a significant week for Whole Foods - on Thursday, COO Jason Buechel succeeds co-founder John Mackey as CEO, the first time that the company has had someone other than Mackey at the helm.

Published on: August 29, 2022

From The Verge:

"Walmart is expanding its Walmart Plus InHome program, adding Chamberlain’s myQ smart garage door controller technology to its list of in-home / in-garage delivery partners. Starting in September, Walmart Plus InHome delivery customers can have their groceries securely delivered into their garage if they have a myQ smart garage door controller. And if they don’t have one, the company will install one for free.

"Walmart’s in-home delivery service currently works with the Level Lock smart lock and the Aladdin Connect Genie smart garage door opener, as well as any keypad-controlled lock or garage door. Even without the free offer, partnering with Chamberlain will greatly expand the number of customers who are equipped to use the service; The Chamberlain Group claims its myQ technology is installed in one in five households in America … With the myQ integration, the Walmart delivery person gets one-time access to the garage via a myQ-connected device, such as a myQ smart garage control hub or a myQ smart garage door opener. You don’t share any codes or apps, and the delivery person will close the door when they leave."

The Verge notes that "Chamberlain myQ was a launch partner for Amazon’s in-garage delivery service, Amazon Key, and still works with that program."

The story says that "Walmart’s InHome Delivery service is currently available in Dallas, Los Angeles, San Jose, San Francisco, and Chicago, among other cities … Earlier this year, Walmart said it planned to expand InHome Delivery to reach 30 million US homes by the end of 2022."

Published on: August 29, 2022

Ahold Delhaize-owned Fresh Direct, acquired by the company in 2020, has decided to pull out of the Philadelphia and Washington, DC, markets, effective at the end of this week.

The move leaves FreshDirect serving only its core - and original - New York City market, plus parts of Long Island and the Jersey shore.

FreshDirect started doing business in 2002, and expanded to Philadelphia in 2012 and Washington in 2017.

Published on: August 29, 2022

From the Washington Post:

"Curbside pickup, BOPIS (buy online, pick up in-store) and other 'omnichannel' approaches meant to make shopping seamless no matter the point of purchase — in-store, by phone, app or desktop — were already gaining traction before the coronavirus crisis took hold in early 2020. But the pandemic forced retailers to adapt quickly to new safety concerns and social distancing norms, and now there’s no going back for many consumers: 33 percent of adults younger than 50 who started using curbside pickup during the pandemic say it’s a habit they expect to continue, according to a study from the Associated Press-NORC Center for Public Affairs Research and the SCAN Foundation."

“Retailers have started to see it as a competitive advantage,” said Katherine Cullen, the senior director of industry and consumer insights at the National Retail Federation. “They know it’s something shoppers like … and it addresses the reality that there’s not really a distinction in consumers’ minds anymore between online or in-store.”

Published on: August 29, 2022

Fast Company has a story about how Instacart is introducing what it is calling "shoppable carts … essentially bundles of products recommended by retailers, celebrities, and creators."

CEO Fidji Simo describes the carts as "like mini stories that tell a universe of possibilities, and I think that’s at the root of a lot of the behaviors we see on the platform … To me, it was obvious that our experience needed to evolve from transactional and utilitarian to inspirational,” she says.

Fast Company goes on:

"The carts come alongside a broader sweep of investments in the platform. The company is also building on its shoppable recipe integrations to help recipe creators and food-focused developers make their websites commerce-enabled. That means bloggers and publishers can share recipes and, instead of having the reader write down every item and run to the store, the items needed can be instantly purchased on Instacart.

"Instacart is also launching an affiliate network for creators, publishers, and developers, enabling them to monetize purchases that their audiences make on the platform. The feature, called Instacart Tastemakers, offers creators in the program 3% commission on qualifying purchases made via their shoppable links, a spokesperson tells Fast Company.

"All the updates come as Instacart readies for its public debut. The company confidentially filed for an initial public offering in May, and is expected to hit the markets before 2023."

Published on: August 29, 2022

Business Insider has a piece noting that "since starting Amazon in 1994, Jeff Bezos preached the importance of a 'Day 1' mindset: No matter how old a company, it should always preserve the speedy, risk-taking entrepreneurial zeal of that founding moment. 

But 28 years on, Day 2 has finally arrived, according to more than a dozen current and former Amazon employees who cited problems including a stodgy engineering culture, extra management layers, and rising red tape."

It is, the story suggests, "a perilous moment for Andy Jassy, who took over as CEO last July. Bezos once described Day 2 culture as 'stasis, followed by irrelevance, followed by excruciating, painful decline, followed by death.'

"Amazon isn't dying of course. But inflation and a looming recession, combined with a post-pandemic return to in-store shopping, have hammered growth. Revenue rose 7% in the latest quarter from a year earlier, the slowest in nearly two decades. Amazon's stock is down 20% this year, almost double the decline of the S&P 500 index."

Business Insider writes that at least part of the problem seems to be a lack of the tools necessary to keep the company both speedy and effective:  "Like any technology company, Amazon relies heavily on an army of talented engineers to churn out inventive new software to keep its businesses growing. And within these ranks, some say the company's building culture has significantly weakened in recent years. 

"During an internal all-hands meeting in November, an Amazon software developer told Jassy that the engineering tools needed to do their jobs were inadequate, making their work more challenging … Jassy acknowledged this as a problem and said it was part of a question on 'how do we remain speedy and fast.' The CEO noted that he had already told two of the company's most senior technical executives, Dave Treadwell and Peter DeSantis, to lead an effort to 'make things even faster for our developers'."

Business Insider also writes that "it's not just engineers or the founder who have felt Day 2 nearing. Those on the business side told Insider there are more processes, paperwork, and decision-makers involved in every step. 

"A salesperson on the advertising side, for example, said Amazon can take 6 to 7 days to close large customer deals compared to other companies that typically wrap them up in 48 hours. This person said the turnaround time is 'arduous' because Amazon requires approvals from multiple teams across legal, ad policy, finance, and pricing, among others. The slow process upset some larger advertising customers, this person added.

"Another salesperson at AWS said the rigid frameworks Amazon created in the sales process forces them to waste time navigating internal tools. Even a small contract amendment could take weeks, if not months, to complete due to the multiple approvals required, and AWS salespeople have to manually fill out forms across different portals, which means more time spent on non-customer facing work."

And this doesn't even include all the problems that Amazon has had in the physical stores arena, where the company has not been able to translate a significant financial investment into proportionate market share.

You can read the entire story here.

KC's View

Gee, it certainly seems like Bezos got out at a good time.   The question is, at what point do the problems start sticking to Jassy, making his situation less tenable?  I think it won't happen anytime soon, but the possibility is there.

One of the points that Business Insider makes is that  executives there are more and more thinking with their feet, leaving to go places where they can build more and more easily, and thrive in more nimble environments.  This won't kill Amazon … but it will make Amazon more like other companies, which dilutes its advantages.  

Published on: August 29, 2022

The Wall Street Journal reports that "from Walmart Inc. to Nordstrom Inc., retailers have a glut of inventory and are discounting items to clear out space for holiday goods. Many have already lowered profit expectations for the year and are working to cut costs as consumers are pulling back spending in categories such as apparel and home goods ahead of the key year-end shopping season."

However … the picture is not black-and-white.

"Consumer spending in July increased at a slower pace than in the previous month, due in part to falling gas prices, according to government data," the Journal writes.  "Yet signs are emerging that people are feeling better about the economy overall, as the University of Michigan’s survey of consumer sentiment showed improvement for the second month in a row.

"The tumultuous environment is unlike what retailers have encountered in previous economic slumps and inflationary periods, said David Bassuk, a co-leader of the retail practice at the consulting firm AlixPartners. While the 2008 financial crisis was a clear downturn, he said, 'this one has pockets of real strength' … Rising prices for food, fuel and a host of other goods and services have damped consumer moods. Shoppers are buying, but paying more for fewer goods. They are also giving priority to food and other need-based purchases over patio furniture and gadgets."

Published on: August 29, 2022

The Washington Post reports that "meat prices have continued to rise even as other costs have come down. Overall meat and poultry prices have risen 11 percent from a year ago, while the cost of chicken has gone up nearly 18 percent, according to the latest data from the U.S. Bureau of Labor Statistics. Bacon costs 12 percent more than it did last summer."

The response by a growing number of Americans?  Buy meat in bulk, directly from farms - half cows, entire pigs and chickens, in a way that saves them money.

According to the story, "The number of Americans buying meat directly from farms in bulk, though still low, is higher than it was before the pandemic … Early covid-related shutdowns and shortages prompted many Americans to look for more direct, local sources of meat. But more recently, sticker shock at the supermarket is prompting a specific type of family — with the money and space needed — to buy and store hundreds of pounds of beef, pork or chicken at once.

"In interviews, cattle farmers across the country said they were fielding more requests for direct orders. Some were reconfiguring their businesses altogether to accommodate half- and quarter-cow purchases."

Published on: August 29, 2022

•  Walmart said this morning that it has reached an agreement to buy the 47 percent of South African retailer Massmart that it does not own for about $377.6 million, a number that is a 53 percent premium over the stock's closing price on Friday.

Bloomberg writes that "Walmart is preparing for increased competition amid press reports that Amazon.com Inc. is planning to expand into Africa’s most-industrialized nation. Taking Massmart private may help Walmart cut costs and invest in the company," which has been a losing proposition for the company.  Walmart acquired majority control over Massmart a dozen years ago.

Bloomberg also reports that "Jonathan Molapo, who joined Massmart in January as COO will take over as chief executive officer a year after he joined the company. He replaces Walmart veteran Mitchell Slape."

Published on: August 29, 2022

•  Amazon said last week that "the Seattle Seahawks and Lumen Field announced today plans to modernize the stadium’s concessions experience with a new store powered by Amazon’s Just Walk Out technology for checkout-free shopping and Amazon One for entry and payment with palm recognition.

:"Lumen Field will become the first NFL stadium to implement both technologies in a single store, District Market. Amazon’s technologies are designed to offer fans a frictionless shopping experience as they grab food and drinks to get them back to the game faster by eliminating checkout lines … The stadium’s Just Walk Out technology and Amazon One-enabled store will be located on the upper concourse in an upgraded area of section 323. District Market will offer a selection of assorted beer, wine, seltzers, and non-alcoholic beverages, along with gameday snacks and cuisine from the stadium’s community neighbors in Seattle’s International District."

Customers will have the option of using a credit card to enter the store, or "hover their palm over an Amazon One device to enter."  The store is scheduled to open when the Seahawks open their regular season at home on Monday, September 12.

•  Amazon announced that it "has signed an agreement with Plug Power to supply 10,950 tons per year of green hydrogen for its transportation and building operations starting in 2025. The company will start to use green hydrogen to replace grey hydrogen, diesel, and other fossil fuels as it works to decarbonize its operations, and this green hydrogen supply contract will provide enough annual power for 30,000 forklifts or 800 heavy-duty trucks used in long-haul transportation."

Published on: August 29, 2022

•  The US Department of Agriculture (USDA) said at the end of last week that "in 2022, food-at-home prices are predicted to increase between 10.0 and 11.0 percent, and food-away-from-home prices are predicted to increase between 6.5 and 7.5 percent. Food prices are expected to grow more slowly in 2023 than 2022, but still above historical average rates. In 2023, food-at-home prices are predicted to increase between 2.0 and 3.0 percent, and food-away-from-home prices are predicted to increase between 3.0 and 4.0 percent."

•  The Wall Street Journal reports that both Dollar General and Dollar Tree reported higher quarterly sales last week as consumers turned to the format as a way of dealing with inflation.  "Dollar General said comparable sales, those from stores and digital channels operating at least 12 months, rose 4.6% in the quarter ended July 29," the story says, while "at Dollar Tree, which owns the Dollar Tree and Family Dollar chains, comparable sales rose 4.9% in the quarter ended July 30."

According to the Journal, "Shoppers are more often using credit cards, not cash, said Dollar Tree Chief Executive Mike Witynski on a call with analysts. They are buying more powdered detergent, which is cheaper than liquid detergent, and skipping fabric softener or detergent entirely."

“I’ve never felt better about our positioning,” said Dollar General CEO Todd Vasos, the Journal writes. “We are here to help that customer through probably the toughest time she’s seen in quite a while.”

•  The St. Louis Business Journal reports that "Schnuck Markets on Wednesday opened Schnucks Express, a convenience-focused concept offering traditional grocery items, connected to its EatWell natural food store in Columbia, Missouri.

"The St. Louis-based grocery chain said Schnucks Express is stocked with grocery staples to give customers 'a complete grocery experience,' focusing on 'customer favorites' available at traditional Schnucks stores in the Midwest."

The story elaborates:  "Schnuck Markets opened EatWell, A Natural Food Store by Schnucks, in Columbia in June 2020. EatWell focuses on natural food items, including organic produce, and local and specialty products, and includes a ramen and sushi bar, dairy, meat and deli, among other items.

"Schnucks Express has its own entrance but is also connected to EatWell. They share the space at 111 S. Providence Road in Columbia, a former Lucky's Market that Schnucks acquired for EatWell, with Schnucks Express filling 11,000 square feet of the 42,000-square-foot building."

•  Ahold Delhaize-owned Stop & Shop announced "the launch of its Deal Lock program. This new cost-saving initiative will allow customers to take advantage of sale prices longer by providing extended savings on select items for a couple of weeks at a time …  

Both national and private label brands are included in the Deal Lock program which spans all store departments and categories.  Deal Lock items will be highlighted in the circular, as well as in store with dedicated endcaps, aisle displays, shelf tags, in-store radio announcements and additional store signage - all designed to help customers spend less for longer. Customers can visit stopandshop.com/pages/deal-lock to see all the products currently part of the savings program and how long those prices will stay locked-in."

•  The New York Times reports that "Abbott Nutrition, which shut down a plant in Michigan in February amid contamination concerns, triggering a national shortage of baby formula, said on Friday that it was set to resume making its leading formula, Similac.

"With production of the formula set to ramp up at the plant in Sturgis, Mich., the company hopes to ease the shortage that left parents across the country scrambling to feed their infants.

"The shortage started earlier this year after pandemic-related supply chain issues created a scarcity of ingredients for formula, and it was further exacerbated by the trouble at the Michigan plant."

•  Bloomberg writes that "Nestle, the Swiss food giant, is launching KitKat V, a plant-based version of one of the world’s most popular chocolate bars, which began Friday with a rollout planned across 15 European countries including the United Kingdom.

"Unlike the classic KitKat, the vegan version uses a rice-based formula as a milk substitute, as first revealed by Bloomberg News. It’s one of the biggest launches of a vegan alternative of a major confectionery brand and took two years to develop … KitKat V is likely to cost more than the regular version. This is because it’s more expensive to produce, because of pricier ingredients and the need for stringent cleaning measures on production lines, Nestle said."

Published on: August 29, 2022

Erby L. Foster, Jr., who served as Clorox's first-ever Chief Diversity Officer and was deeply respected within both the retail and supplier communities - he was an enormous supporter of what used to be called the Network of Executive Woman (now NextUp) - has passed away.  He was 68.

Published on: August 29, 2022

We had a story last week about how California has banned the sale of new gas-powered automobiles as of 2035 … The rule also sets interim targets, requiring that 35 percent of new passenger vehicles sold by 2026 produce zero emissions. That requirement climbs to 68 percent by 2030.

This prompted one MNB reader to write:

And how are they going to dictate that 35% of car-buyers will want to purchase a zero-emission version.  This is so reminiscent of the Soviet Union’s obsession with manufacturing what the government wanted to make . . . with zero regard for what their citizens wanted to buy.  Didn’t work out too well for them.

I think that's an absurd comparison.

California is recognizing and dealing with an issue that presents an existential threat to humanity.   It actually is showing leadership.  Sure, it may be ahead of where consumers/citizens are, but that's the definition of leadership.

The Soviet Union had different priorities in mind, I think.

Last week we reported that Nicholas Bertram, president of The Giant Company, is leaving the organization on August 31 "to pursue other opportunities."  John Ruane, the company's Senior Vice President and Chief Commercial Officer, will serve as interim president until a successor is named.

One MNB reader wrote:

John Ruane was born and trained at Pathmark   He is a terrific Executive and they would be wise to make him the President.

Agreed.

I've been fairly critical of Amazon Fresh stores that I've seen, saying that they seem haphazardly merchandised, more like dark stores that just happen to allow shoppers in.  MNB reader Andy Casey replied:

Your comments about Amazon Fresh store shortcomings remind me of comments heard (and said) in the early days of Walmart entering grocery in a big way – unexciting stores, lousy fresh departments and so forth. I would never call a WM exciting but they do seem to have found a profitable niche.

Fair point.  That could be the case.  But it feels different to me … perhaps because I don't think that Amazon has the kind of long runway that Walmart had to get good at grocery stores.