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    Published on: September 14, 2022

    It's just me who thinks that the Green Zebra store on the campus of Portland State University in Oregon ought to be rechristened "Green Phoenix" - it just strikes me as appropriate since the store had to be closed down during the pandemic but reopened about a year ago.  I've always liked the format - there are some pics below - but it hasn't been an easy nine years for founder/owner Lisa Sedlar.  But she's hanging in, is out there hustling up new financing, is making adjustments, with a stubborn belief that there is a future in a healthy convenience store.

    Published on: September 14, 2022

    The US Department of Labor yesterday said that overall consumer prices were up 0.1 percent last month, and are up 8.3 percent year-over-year - despite the fact that gas prices have dropped more than 25 percent over the past three months.

    The reason: food and shelter inflation is such that economists say is concerning to the Federal Reserve, which is likely to continue raising interest rates until inflation has been beaten back sufficiently.

    CNN reports that "food costs spiked 11.4% over the past year, the largest annual increase since May 1979 … Egg prices soared 39.8%, while flour got 23.3% more expensive. Milk rose 17% and the price of bread jumped 16.2%.

    "Meat and poultry also grew costlier. Chicken prices jumped 16.6%, while meats rose 6.7% and pork increased 6.8%. Fruits and vegetables together are up 9.4%."

    The reason:  "Food prices are affected by global events, such as the war in Ukraine, which affects the costs of wheat and other commodities. Prices also reflect the impact of natural disasters like crop-killing droughts and diseases such as avian flu, which has constrained the supply of eggs and turkeys."

    KC's View:

    The Wall Street Journal has a story about how food prices have become a matter of some contention among many couples, as they negotiate over which products are necessities, which ones are optional, and which ones can be stricken from shopping lists as families deal with inflation.

    Seems to me that retailers can play a role in these conversations - not as marriage counselors, but as resources that can help people make these decisions using information - financial and  nutritional - that is laid out in clear, user-friendly terms.  Retailers make a mistake, I think, if they just raise prices and don't deal with the elephant in the room.

    Published on: September 14, 2022

    Information Resources Inc. (IRI) and the New York University Stern Center for Sustainable Business are out with their fourth annual Sustainability and the Consumer report, concluding that "93% of consumers have maintained or increased their sustainable purchase habits in the past year."

    Other key findings:

    •  "76% of consumers believe sustainability is important when selecting products to buy, up 15% from 2021 findings."

    •  "While sustainable products represent just 17% of total CPG sales, they drove a third of all CPG growth in the past year."

    •  "Sustainability-marketed products grow 2.7x faster in their categories than conventionally-marketed products."

    KC's View:

    The events of the past few years - pandemic, climate change, inflation - have, I think, made some people (not all, but a growing percentage) a lot more aware of issues like sustainability that have an impact on their health and the future of humanity on the planet.  I believe the percentages only are going to grow, and that retailers paying attention and connecting to this community, in the long term, will be rewarded.

    Published on: September 14, 2022

    The August 2022 Brick Meets Click/Mercatus Grocery Shopping Survey says that "total U.S. online grocery sales slipped by less than 1% versus last year to $8.5 billion" during the month, with research showing that "eGrocery sales have remained at significantly elevated levels following the dramatic surge experienced at the onset of the pandemic."

    Other findings:

    "During August 2022, over 68 million households went online to buy at least one grocery order via Delivery, Pickup, or Ship-to-Home."

    "Although the total base of monthly active users (MAUs) for August 2022 is down by just over 1% versus 2021, it’s still up 23% from 2020 and 116% compared to 2019. 

    Demand for Pickup and Delivery."

    "As the base of MAUs has grown, the demand for specific receiving methods has continued to shift from pre-COVID behaviors."

    "The share of MAUs engaged with Ship-to-Home dropped from 58% in 2019 to 44% in 2022.  Over the same time period, Delivery’s share of MAUs climbed from 25% to 44%, and Pickup expanded from 32% to 54%."

    Published on: September 14, 2022

    The Wall Street Journal reports that Amazon plans "to raise pay and benefits for its delivery partners, as the e-commerce giant gears up for the peak holiday season amid a persistently tight labor market.

    "The company will invest $450 million to fund wage increases and other benefits for delivery drivers employed by members of its Delivery Service Partners network, it said in a release. The company started the program in 2018, encouraging entrepreneurs to start their own fleets of drivers with initial investments of as little as $10,000.  Other benefits as part of the new initiative include up to $5,250 a year for drivers to pay for educational programs, and financial support for a 401(k) investment plan for drivers."

    Amazon says that it "has invested more than $7 billion in its Delivery Service Partners network since 2018," similar to "similar benefits for its warehouse workers as it expanded the logistics network, which is the backbone of its vast e-commerce operation, while trying to fend off union organizers who have started to make inroads in its workforce."

    KC's View:

    Makes sense to me.  It may be seen by some as too little, too late … but Amazon has to make moves like these to live up to its value proposition and consumer promises.  To do otherwise is to put the whole enterprise at risk, I think.

    Published on: September 14, 2022

    The Wall Street Journal reports that at an investor meeting yesterday, Starbucks interim CEO Howard Schultz said that the company "over the coming year plans to spend hundreds of millions of dollars to update its stores, aimed at improving customer service and reducing employee turnover. It expects to spend between $2.5 to $3 billion annually through its 2025 fiscal year to build new types of stores and deploy updated equipment across locations."  He said that the company expects that the expenditures will result "in higher sales and profits" - between 10 and 12 percent per year from 2023 to 2025.

    More from the Journal story:

    "Schultz and other executives have been crafting what they call a reinvention plan for Starbucks, aimed at evolving the 35,000-location chain to better meet customers’ current tastes. Starbucks now sells the majority of its beverages with ice, versus hot cups of coffee. The chain’s baristas have said they struggle at times with increasingly complex drink orders and growing demand for food.

    "Starbucks executives on Tuesday said the company would invest $450 million in its existing North American stores over the next fiscal year, including adding faster coffee brewers and food ovens. A patented machine Starbucks will use to make batches of cold brew coffee, for example, is expected to cut the time to seconds from 20 hours currently, Chief Operating Officer John Culver said.

    "Starbucks said it would also add 2,000 stores in North America by 2025, including new locations designed to handle only pickup, delivery or drive-through orders. The new store designs and equipment aim to speed service and make work easier for baristas, the company said.

    "It said it expects to have nearly 45,000 stores globally by 2025, and is on track to reach a previously set goal of 55,000 locations by 2030."

    Schultz also used the moment to introduce Laxman Narasimhan, CEO of Lysol maker Reckitt Benckiser Group, who will succeed him as Starbucks’s next CEO "in April 2023, after a six-month period learning under the chain’s longtime leader."

    KC's View:

    I've been picking on Schultz and Narasimhan lately, so I'm going to give them a break for a moment.  (Though I'd refer you to a conversation about Starbucks in "Your Views," below.)

    For the moment, I am just trying to wrap my head around the idea that they plan to add thousands of stores in the next few years, in addition to remodeling the ones they have.

    I mean, it isn't like one wanders communities of any decent size and thinks, "What this place needs is another Starbucks."  I don't ever think that, and I like Starbucks.

    Published on: September 14, 2022

    The Arizona Republic has a story about Gastromé, described as "a highly anticipated new luxury grocery store in Scottsdale" that opened last weekend.

    Some context:

    "After moving to metro Phoenix from Boston in 2018, owners Jenny Le and Tiffany Chavez dreamt of opening a specialty store similar to Dean and Deluca or Eataly to offer cheese, wine and imported and hard-to-find luxury food items.

    "That dream has materialized with the opening of a 3,500-square-foot market (and soon to open 1,500 square foot restaurant) where they sell an impressive array of cheeses, wines, pantry items, bread and fresh cut flowers."

    Chavez has been quoted as saying, "“We want you to take your time when you come here – we’re not your traditional wine and cheese shop.  You can come in and grab a quick bottle on-the-go, or sit down, have a glass of wine or Champagne and chat with us about everything from food pairing suggestions to our favorite wine varieties."

    The Republic writes, "Education is a big part of the high-end service the pair hope to provide. 'We’ve worked hard to create an inclusive environment where you can feel free to ask whatever you want – you won’t find any stuffiness or intimidation here,' said Lee."

    KC's View:

    Well, good luck to them … even in Scottsdale, I would imagine that this is not the best economic climate in which to open a store like this.  For one thing, money is tighter than usual … and for another, labor is tight, and a format like this seems to be dependent on a lot of labor.  I hope it works.

    Published on: September 14, 2022

    •  Amazon announced the opening of its newest Amazon Go store yesterday - the first to be opened in the Los Angeles market, and the second (after one in Mill Creek, Washington) to feature a suburb-centric format.

    The suburban concept is larger than the urban Go stores - a total of 4,100 square feet, with 2,150 square feet in front of house.  The format also features a "Made-to-Order kitchen which offers nearly 30 freshly prepared breakfast and lunch items for customers to choose from or customize – available all day and at prices they can feel good about. The Made-to-Order kitchen offers breakfast bowls, sandwiches and burritos, hot and cold deli sandwiches, salads, and wraps."  However, the suburban concept also has the checkout-free, Just Walk Out technology pioneered in the original Amazon Go stores.

    A third suburban store is slated to be opened in Torrance, California, "soon," according to the company.

    •  The Wall Street Journal reports that "a union election at an Inc. facility in upstate New York has been scheduled for October, setting up another company showdown with activist workers trying to build on a watershed union victory earlier this year.

    "The vote at the facility near Albany is to be held in person between Oct. 12 and 17, according to the company. A group of workers affiliated with the Amazon Labor Union filed for the election in August, after what has been an up-and-down year for ALU organizers following a successful union bid in April at a company facility in Staten Island, a borough of New York City.

    "The National Labor Relations Board recently said organizers had proved they had enough support to request an election."

    •  The Harvard Crimson reports that Harvard University has launched a three-year research partnership with Amazon Web Services (AWS) that "aims to promote research into quantum networking — a method of sending and receiving digital information — at the Harvard Quantum Initiative … It will increase funding for faculty-led projects and allow more students to get involved in research efforts."

    “The collaborative initiative between AWS and Harvard will harness top research talent to explore quantum networking today and establish a framework to develop the quantum workforce of the future,” Antia Lamas-Linares, quantum networking lead at AWS, said in a prepared statement.

    Published on: September 14, 2022

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  Axios reports that "Retailers are preparing for the first holiday season in years where inflation collides with slowing consumer spending … 41% of Americans are planning to spend less this holiday season compared to 2021, according to a recent survey by Trustpilot, a consumer reviews platform."  And, "20% plan to reduce spending by more than 50%."

    The story notes that "Deloitte estimates that overall holiday sales will grow by 4%–6% — less than the current annual inflation rate of 8.5%."

    •  The BBC reports that "Aldi has overtaken Morrisons to become the fourth-largest UK supermarket for the first time, according to data from research firm Kantar."

    The story notes that "discounters are grabbing more market share as shoppers take steps to manage their budgets, Kantar said."

    •  Wine Spectator reports that "Ste. Michelle Wine Estates (SMWE) has acquired Oregon's fast-growing A to Z Wineworks brand, as well as its sister label, Rex Hill … Already the largest producer in Washington state, Ste. Michelle now has a dominant footprint in Oregon as well. The purchase, when combined with SMWE's existing Oregon winery, Erath, brings the company's total annual production in Oregon to approximately 700,000 cases."

    Terms of the deal were not disclosed.

    The story notes that "this is the first acquisition for SMWE under the new ownership of New York–based private equity firm Sycamore Partners, which purchased the company for $1.2 billion in late 2021."

    The betting here is that this is just one of a number of acquisitions planned by SMWE, which is likely to try to put together an even larger portfolio of brands before selling them off - at a profit, it hopes - to a major conglomerate in the space.  And, as this happens, I suspect there could be other players making similar moves, which could drive up prices considerably.

    Published on: September 14, 2022

    Got the following email from MNB reader Tim McGuire:

    I understand your skepticism about Howard Schultz’s record of repeat returns to the CEO role. But don’t fall into the trap of underestimating Laxman Narasimhan.

    I worked with Laxman at McKinsey for 20 years. You say he has no retail experience - the major retailers he consulted to during his McKinsey career would beg to differ. He helped 3 of the top 20 global food retailers turn around their businesses.  You could equally say he had little experience in consumer packaged goods, but he rapidly rose to #3 in PepsiCo worldwide, and a smart board would have chosen him as Indra Nooyi’s successor.

    He took the CEO role at Reckitt when the company was in turmoil and turned it around.

    You are skeptical.  I can tell you the day his appointment was announced I bought $500,000 of Starbucks stock.  People have underestimated Laxman since he showed up from India with $100 in his pocket and a dream. Every single time they’ve been wrong. He’ll fix it.

    Okay.  I could be wrong.  It happens several times a day.

    I would suggest, however, that consulting with major retailers may be different than running a major retailer.  Leading such a company, more than ever, requires EQ as well as IQ.  The question I am asking is not whether he is smart enough to lead Starbucks, but whether he will be able to forge the emotional connections to employees that are necessary to fix the company while remaining true to its unique value proposition.

    I think that's a question worth asking.

    And, by the way, good for you to be able to buy a half-million dollars in Starbucks stock.

    MNB reader Rickard Werner had a thought about an IRI report on inflation that at one point observed that "the most significant drop-offs in volume are in categories where prices have risen dramatically, including frozen dinners/entrées, cookies and coffee." 

    It occurs to me that it  could be driven by, or at least heavily influenced by a return to food-away-from-home.  Frozen dinners = fast casual meal solutions; and cookies and coffee = Starbucks and Dunkin Donuts.  A quick check of Starbucks' sales show record revenues and I keep hearing that restaurants can't find enough workers to keep up with returning customers.  My guess is that this is more influential in these categories than inflation, especially when you consider the cost of eating out!

    Yesterday, we took note of how Wegmans customers received an email from Colleen Wegman, the company's president/CEO, announcing the end of the company's SCAN app, which allowed customers to scan their groceries as they shopped the store.  The email blamed "losses" for the decision, and, she said, "We've learned a lot and we will continue to introduce new digital solutions to streamline your shopping experience for the future."

    I conceded that I've never used the Wegmans SCAN app, but my youngest sister, Clare, has, and I let her offer some commentary.  It included the following statements:

    WORST NEWS!!! Okay, there are worse things. But this is pretty bad. 

    For me this has been a game changer. I can scan as I shop, and bag my own groceries. (Wegmans cashiers are the WORST baggers I have ever experienced. I do believe they bag the way they are trained, but they are terrible.)

    It is rare that I wait in line. I usually scan at the checkout, pay and leave. Waiting in line will add time to my shopping trips.  Minimal human interaction.  In the wake of Covid, I value this.

    I will also tell you that I am doing more comparison shopping, with inflation. I have not done this in a while b/c I always felt the prices and quality at Wegmans beat everyone else. Not really feeling that way of late. I am surprising myself and shopping at Aldi's for produce, milk and some other items. 

    I also had some suggestions for Wegmans (a retailer that, to be clear, has done very well for itself without listening to my suggestions):

    First, you should've quantified and qualified the word "losses" to a greater degree.  It is a little vague.  If you had been more specific, customers using the SCAN app might have been more sympathetic.

    As for Clare's analysis … Wegmans has a choice,  They can act as if she is an outlier, just one dissatisfied customer.  (In a variety of areas, apparently.). Or, they can proceed as if she is representative of a much larger customer group, many or most of whom did not write emails.  Or hand an older brother who has a soapbox and is not afraid to use it.

    Wegmans usually is not tone-deaf.  But it is possible that in this case, it needs to listen a little harder.

    One MNB reader responded:

    Interesting comments by your sister. It’s a bit hard for me to reconcile her complaints given Wegmans overall customer satisfaction ratings.

    There is no doubt every retail establishment can improve… I’m an ardent fan of continuous improvement. Clearly, Aldi, Lidl and Costco (to name a few) can provide better retail pricing than a conventional supermarket, but I would ecstatic if I lived in an area with a Wegmans. Maybe your should ask your sister to compare the the positives of shopping at Wegmans vs. the negatives. If “minimal human interaction” is a major issue for her, explain the shopping experience at Amazon Fresh.

    You are perfectly entitled to your opinion, but I would argue that it is precisely the wrong way to respond to consumer comments.

    Sure, Wegmans gets great customer satisfaction ratings…but that doesn't mean a) that every customer is satisfied, or b) that as the company has gotten bigger and more spread out, there hasn't been slippage.  Companies that are not vigilant about such things - and I'm not referring specifically to Wegmans - run the risk of missing or ignoring problems until it is too late.

    Plus, you're ignoring the fact that Clare was a huge Wegmans fan and constant customer.  But something has changed … and to suggest that what really needs to happen is that someone should "explain" things to her is precisely the wrong approach.  (It is really the wrong approach with Clare, who takes after our late mom in being a force of nature not to be reckoned with.)

    Besides, she's apparently not alone.

    One MNB reader wrote:

    Yes!! 1000% yes to what your sister shared. I have recommended the SCAN app to so many friends and family because of how easy it is – and how seamless the transaction is. The inefficiency of unloading my groceries on to a belt and then bagging them myself (because, again, your sister is right, they are terrible at bagging) was frustrating; the speed and control I had to scan and bag my own groceries the way I wanted to, in the time I had, was a huge seller of the SCAN app. My weekend routine (it’s become a “date” for my husband and I), is to go to Sam’s Club – use their Scan & Go app, and then drive across the street to Wegmans and finish our trip using their SCAN app. I scan, he does the bagging. It’s fun! We look forward to it! It also required you bringing your own reusable shopping bags, which was a win-win.

    I am surprised at how Wegmans handled this; I have been a proponent of them and their customer service and shopping experience, but this really put a sour taste in my mouth. There was no indication that they were phasing it out; how do you offer this for years and then give less than a week’s notice, and your solution is only a coupon? They definitely pulled the rug out from under me. I am annoyed at how tone deaf their response is and their lack of solutions.

    They didn’t explain what they meant by “losses,” but wonder if they factored in customers like me as a weekly shopper!

    And, from another reader:

    What a great way to respond to this story. Your sister makes for compelling reading.

    I don’t know a lot of the details about how SCAN works, but I have operated these systems before and can say that the shrink issue can be overcome in several ways. It’s unfortunate that Wegmans did not better respond to their concerns by working smarter to fix the issue rather than eliminate the service. Shows the need for a stronger collaboration (and perhaps skill) between operations, digital product, IT, and the commercial teams. That being said, Wegmans should probably be even more concerned about your sister’s feedback about their price competitiveness and overall value proposition.


    Published on: September 14, 2022

    The Los Angeles Dodgers last night clinched the National League West division title with a 4-0 defeat of the Arizona Diamondbacks.

    The Los Angeles Times notes that it is "the 20th division title in Dodgers franchise history, and their ninth in the last 10 years."  They accomplished it in "their 141st game, the fastest a Dodgers team had ever done so in a full-length (162-game) season."