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    Published on: October 17, 2022

    As would be expected, there were lots of stories over the weekend offering a wide variety of perspectives about the proposed  $24.6 billion acquisition of Albertsons by Kroger, which was announced on Friday.

    First, let's recap: 

    The deal requires the approval of the Federal Trade Commission (FTC), which has taken a hawkish stance on antitrust issues.

    It would combine the assets of Kroger, the nation's second-ranked grocery retailer, with a 9.9 percent market share, and Albertsons, the nation's number four grocery seller with a 5.7 percent market share.  Combined, the new company would have a 15.5 percent market share, second to Walmart's 20.9 percent of national grocery market share.  (Costco would remain in third place.)

    These market share numbers, however, are before any FTC-mandated divestments.

    The merger agreement says that Albertsons Cos. is prepared to establish a subsidiary dubbed SpinCo, which would be "spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. Kroger and Albertsons Cos. have agreed to work together to determine which stores would comprise SpinCo, as well as the pro forma capitalization of SpinCo. The establishment of SpinCo, which is estimated to comprise between 100 and 375 stores, would create a new, agile competitor with quality stores, experienced management, operational flexibility, a strong balance sheet, and focused allocation of capital and resources to provide customers with continued value and quality service and associates with ongoing compelling career opportunities."

    The merger is expected to be completed by early 2024.

    Got it?

    Here is a synopsis of some of the weekend coverage:

    •  From Bloomberg:

    "Kroger had eyed Albertsons for a while. So it quickly assembled a team of lawyers and analysts to answer a basic question: Would it even be able to buy the parent of Safeway, Vons and Albertsons supermarkets, given antitrust concerns around the two largest US grocery chains pairing up?

    "The group spent months evaluating where it might have to unload stores, according to people familiar with the plans, who asked to not be identified because the details aren’t public. It drew up maps to understand shopping behavior like who shops where and how far they drive for groceries.

    "Satisfied it could pull off a deal that would give it the heft to take on Walmart Inc., Kroger started working with Citigroup Inc. and Wells Fargo & Co. to figure out other details of the $24.6 billion deal announced Friday. 

    "Albertsons had already been working with Goldman Sachs Group Inc. and Credit Suisse Group AG on its review. Major shareholder Cerberus Capital Management had been looking to cash out, following the grocer’s initial public offering in 2020.

    "Cerberus was heavily involved in the talks, the people said, which started over Zoom and involved late-nighters in recent weeks. They used code-names to keep the project quiet: Acorn for Albertsons and Kettle for Kroger."

    •  From the New York Times:

    "A 2008 study conducted by Orley C. Ashenfelter, an economist at Princeton, and Daniel S. Hosken of the Federal Trade Commission, found that in four of the five mergers they evaluated, prices appeared to have increased between 3 and 7 percent. The authors cautioned that the study was not necessarily a reflection of the impact of all deals. It is unclear whether the dynamics have changed in the years since.

    "But any increase in prices now could have a painful impact, as food prices in general continue to shoot up. The cost of food across the United States last month rose 11 percent from the year before, according to the Bureau of Labor Statistics.

    "The companies for their part suggested on Friday that cost savings might not be the same everywhere.

    "'It is market-by-market in terms of what we feel like we need to invest to be able to get pricing where we feel comfortable,' Rodney McMullen, Kroger’s chief executive, said in an analyst call."

    •  CNBC reports that in anticipation of pushback from regulators, Kroger already has started making its case, saying that "the combination would lower food prices in a time of high inflation, boost profitability and speed up innovation in an otherwise fragmented industry."  However, "some investors question whether the merged companies can increase profits since the grocery business, already known for thin margins, is facing higher costs and cost-conscious shoppers."

    CNBC writes that "Kroger has done its homework and feels confident that the deal can go through, CEO Rodney McMullen said. 'We’ll sit down with the FTC as soon as we can.'

    "Some investors are already skeptical, if the stocks’ performance Friday is any indication. (Both Kroger and Albertsons were down midday.)

    "That’s because Wall Street has already seen a spree of grocer acquisitions — including some by Kroger and Albertsons — but no meaningful changes in profit margins. Costs have grown for everything from transportation to packaging, too.

    "Kroger said this acquisition is different. In the first four years of combined operations, Kroger said the companies expect to save about $1 billion in annual recurring savings."

    CNBC goes on:

    "McMullen pointed to a few examples of where it can drive higher profits and better margins. One of the biggest opportunities is capturing more shopper data across a wider number of banners, which can be turned into lucrative online ads. The combined company would have reach to about 85 million households across the country.

    "Many retailers, including Walmart, Target and Kroger, have turned to advertising as an alternative stream of revenue after seeing the success of established online players like Amazon. The business has much higher margins than selling cans of soup or gallons of milk.

    "A bigger Kroger would also have cheaper manufacturing costs and better bargaining power, too, McMullen said. Together, the companies would become one of the largest consumer packaged goods companies in the country with a combined portfolio of about 34,000 total private label products across price points. Those include organic items and premium products that often retail for less than namebrand national competitors."

    •  From the Wall Street Journal, more about the advertising implications:

    "The proposed merger of Kroger Co. and Albertsons Cos. would reshape the U.S. supermarket industry by combining its two largest operators. It also would create a big player in so-called retail media, one of advertising’s fastest-growing sectors.

    "Retail businesses from Walmart Inc. to Uber Technologies Inc.-owned alcohol delivery service Drizly have been developing advertising networks that use their websites, apps and even outside properties to show brands’ messages, often targeted by the data that retailers collect directly from their own customers. Kroger and Albertsons entered the retail advertising market in 2015 and 2021, respectively.

    "Total revenue from retail ad sales in the U.S. will increase 31% this year to $40.81 billion, which is more than three times its 2019 total, according to market-research firm Insider Intelligence Inc."

    “The strongest rationale is that it’s about building a retail media juggernaut,” said Andrew Lipsman, principal analyst for retail and e-commerce at Insider Intelligence, regarding the Kroger-Albertsons merger. “These digital ad businesses are completely transforming economics, and you get disproportionate gains from scale. It’s a case where 1+1 is going to equal 3, or maybe 4.”

    •  The Cincinnati Enquirer reports that there already are lawmakers expressing dismay about the merger.

    U.S. Sen. Bernie Sanders called Kroger's latest move an "absolute disaster," the story says.  "At a time when food prices are soaring as a result of corporate greed, it would be an absolute disaster to allow Kroger, the 2nd largest grocery store in America, to merge with Albertsons, the 4th largest grocery store in America," Sanders wrote.  "The Biden Administration must reject this deal."

    And "Sen. Elizabeth Warren reacted to the then-rumored merger in an interview with MSNBC on Thursday. The Massachusetts Democrat said the U.S. has failed to utilize antitrust laws for decades.

    "'For example, with grocery stores, remember how many grocery stores there used to be? And now what you have is a handful of giant chains,' Warren said.

    "The senator said Kroger earned almost $900 million in the third quarter of 2021, more than three times the amount it made in the same time period in 2019.  'That's because they have a lot of market dominance,' she said. 'If we move in on antitrust law, break up these giant corporations, then we get real competition and then we get markets that are truly competitive'."

    Bloomberg adds that "Mike Lee, a Republican on the US Senate Judiciary Committee, said in a statement Friday that he would do everything in his power to ensure 'antitrust laws are robustly enforced to protect consumers from anticompetitive mergers that could further exacerbate the financial strain we already feel in the grocery store checkout aisle'."

    The story notes that "FTC Chair Lina Khan hasn’t commented yet on the combination,:" but that "her earlier criticism of Albertsons’ acquisition of Safeway could be salient. In a 2017 Harvard law review article, Khan concluded that FTC remedies, including selling stores in shared markets, failed to protect consumers."

    •  Greg Ferrara, president-CEO of the National Grocers Association (NGA), released the following statement:

    "A merger of the nation’s top two grocery chains should raise serious questions about a single supermarket giant gaining unprecedented dominance over the nation’s food supply chain.  A merger would not only put smaller competitors at an unfair disadvantage, but also increase anticompetitive buyer power over grocery suppliers, which ultimately would harm consumers. It is our expectation that this deal will receive rigorous scrutiny from federal antitrust enforcers." 

    •  From Axios:

    "Consumer watchdogs are questioning Kroger's sincerity, expressing concern about the impact on customers already grappling with surging food inflation.

    "'With food prices rising, the last thing Americans need is a supermarket merger that will spike food prices even further,' Robert Weissman, president of Public Citizen, said in a statement.  'Rejecting this merger proposal should be a no-brainer for federal antitrust officials,' he added."

    •  “There is no reason to allow two of the biggest supermarket chains in the country to merge — especially with food prices already soaring,” said Sarah Miller, Executive Director of the American Economic Liberties Project. “With 60% of grocery sales concentrated among just 5 national chains, a Kroger-Albertsons deal would squeeze consumers already struggling to afford food, crush workers fighting for fair wages, and destroy independent, community stores. This merger is a cut and dry case of monopoly power, and enforcers should block it.”

    •  From the Seattle Times:

    "Unlike on the East Coast and in the Midwest, where Kroger and Albertsons are in largely separate markets, the two retailers overlap in several Western states, especially California and Washington, said Arun Sundaram, a market analyst at CFRA Research who follows the grocery business. In the Seattle area, the two grocery retailers appear to be each other’s biggest competitor.

    "'The area is kind of messy for them … so I think we’ll probably see more of these divestitures' in those states, Sundaram said.

    "Some analysts think a merger could improve operations at both chains. But at least some Seattle-area shoppers fear a tie-up could mean more expensive groceries or changes at neighborhood grocery stores."

    •  If the deal goes through, the West Seattle Blog writes, "an immediate result would be the same ownership for five of West Seattle’s 11 supermarkets, and in the longer run, the question would be whether any local closures might result. Kroger is proposing buying Albertsons. Kroger is parent company of QFC (among many other brands, including regionally prominent Fred Meyer), and Albertsons owns brands including Safeway (which it bought in the mid-2010s). West Seattle has two QFC stores and three Safeway stores, and among those, two – Junction QFC and Jefferson Square – are barely a block apart. To the south, Westwood Village QFC and Roxbury Safeway (a former Fred Meyer) are just a few blocks apart."

    There is, the blog writes, early opposition to the merger, including from "UFCW locals who represent many local stores’ workers. They allege the merger would create a 'monopoly … for many communities'."

    However, the blog also points out that this represents a narrow view of the market:  "West Seattle has a relatively diversified supermarket scene, including independent West Seattle Thriftway, mini-chain stores PCC, and Metropolitan Market, and three stores that are part of national chains, Whole Foods, Trader Joe’s, and Target."

    KC's View:

    Talk about strange bedfellows - at the moment, it would appear that Greg Ferrara, Bernie Sanders, Elizabeth Warren, Mike Lee, Lina Khan and organized labor all seem to have a common rooting interest.

    One argument is that a Kroger-Albertsons mashup will have greater buying power and cheaper manufacturing costs, which would give it the ability to provide shoppers with more options and cheaper prices.

    But the opposite argument is that the mashup is anticompetitive - it positions the new entity to better compete with Walmart and Amazon, but it also manufactures a business that will further put independents and regional chains at a disadvantage.  It also gives workers one fewer major retailer to work at, which could depress wages.

    I have no sense at the moment of how this will play out, except that it seems certain that it will take every bit of the next 15+ months to get this approved, and it seems equally likely that they'll have to divest a lot more stores than they are talking about at the moment.  The FTC seems unlikely to be compliant on this one.

    I am not yet persuaded - just speaking for myself - that this will be as good for shoppers as the announcement suggests.  There will be so many banners, so many different stores and operations, that it strikes me as unwieldy.  And I think one of the battles they'll have to fight is the perception that this will end up being better for shareholders in the long run than it will be for anyone else.

    Published on: October 17, 2022

    The monthly Brick Meets Click/Mercatus Grocery Shopping Survey is out, saying that "total U.S. online grocery sales in September declined 3% year over year to $7.8 billion … However, the ongoing research initiative reported that third quarter online grocery sales for 2022 gained nearly 4% to $24.1 billion compared to 2021."

    Q3 gains, the survey suggests, were "driven by significant gains in Delivery and to a lesser degree Pickup."

    Findings include:

    •  "Pickup, the largest segment of eGrocery sales, had a mixed third quarter with total sales up 1% despite a 6% drop in September sales versus the prior year. The growth in quarterly sales was the result of shifts in its user base and order frequency being offset by ongoing growth in spending each month."

    •  "Delivery had a strong third quarter and continued to benefit from a range of new service options from national players and new third-party providers that helped fuel a 20% lift in sales for the quarter versus the prior year. Each month’s total sales growth, however, slowed sequentially through the quarter with September finishing 12% up from a year ago."

    And, there is this nugget:

    "The rate of cross-shopping between Grocery and Mass increased during both the most recent month and quarter by more than 2 and 3 percentage points respectively versus prior periods in 2021. For September, the share of households that used both a Grocery and Mass service during the month was 28% while for the quarter the share finished at 29%.

    "The degree of cross-shopping is a key metric for grocers to monitor because while the overall repeat intent rate has climbed, so has the performance gap between Mass and Grocery. The likelihood that an online grocery customer will use the same service again within the next 30 days gained 3 percentage points to 63% for the quarter. More importantly, the specific repeat intent rate among Mass customers for September 2022 was 10 percentage points higher compared to Grocery customers, and this gap has grown by nearly 7 points since a year ago."

    KC's View:

    I think the combination of a post-Covid rebound for in-person shopping, driven by a desire to get out of the house, with economic pressures created by inflation and a possible.likely recession, will mean that e-grocery will evolve in fits and starts.  No such thing as a straight line.

    For more on this, see our next story, positing that "The Great Post-Covid Online Shopping Bet Was a Costly Delusion"…

    Published on: October 17, 2022

    Provocative piece from Bloomberg that starts out this way:

    "Did the pandemic forever change how we shop?

    "The answer seemed obvious in the first half of 2020, when retailers closed their doors to slow the spread of Covid-19, pushing millions to the internet. It looked like a fundamental shift in e-commerce’s trajectory. The thinking was simple: After experiencing the ease of online shopping, why would consumers return to stores?

    "Turns out they have. In the US, the e-commerce wave has receded. In some categories, such as clothing, the percentage of sales made online is back to where it was before the pandemic, according to an analysis by UBS. For the past five quarters, online growth has trailed the sales gains of the overall retail industry, according to US Census Bureau data."

    “Everyone’s thesis was that we moved five years in the future,” Ed Yruma, a retail analyst for Piper Sandler, tells Bloomberg.  “What’s been really interesting is, that’s been wrong.”

    You can read the entire story here.

    KC's View:

    Again, I think it is important to evaluate the state of e-commerce within the context of cultural and economic pressures.

    But I also think it is a mistake to underestimate the generational influences that will impact e-commerce over the long run, meaning the number of people who will become the center of the shopping target who do not remember a pre-Amazon world.  They have different expectations and priorities, and will simply desire a different shopping experience that focuses on their needs, not the store's operational imperatives.

    Published on: October 17, 2022

    The Information reports that "Instacart, the instant delivery company gearing up to go public, has slashed its internal valuation to about $13 billion, according to two people familiar with the matter. It’s the third time the San Francisco startup has reduced its internal valuation this year, in a period when public delivery stocks have continued to shed value.

    "The new price represents a two-thirds drop from the $39 billion valuation Instacart was given by Andreessen Horowitz, Sequoia Capital and other private market investors in 2021. The lower internal price cuts the price of new stock-based compensation issued to employees and could also help Instacart reset investor expectations ahead of its public listing, in which it plans to sell mostly employee shares."

    The story notes that "lowering a company’s 409a valuation can give the company an edge in recruiting and retaining employees. When the 409a valuation drops, new employees given restricted stock grants—the form of stock-based compensation Instacart has been offering—are awarded more shares for every dollar issued of a stock grant. For existing employees, the value of the stock grants declines. But sometimes the company will offer more stock units, or 'refresher grants,' in order to make up for the drop in value."

    KC's View:

    This is just makes the point that Instacart is going to do its IPO sooner rather than later - it is getting its ducks in a row and making sure that its valuations cannot be challenged in a way that would be deadly to its future.

    Published on: October 17, 2022

    For Amazon, here was the good news:  The company said that "its Prime members ordered more than 100 million items during a sales event this week that analysts are expecting to be a bellwether for a ho-hum holiday shopping season," the Associated Press reports.

    The not-so-good news, from the same story:  "According to the data group Numerator, which tracked roughly 44,670 orders during the sale, the average order clocked in at $46.68, $13 less than during Amazon’s Prime Day sales event in July. Inflation also had an effect — 26% of shoppers passed on a deal because it wasn’t a necessity, Numerator said."

    As usual, Amazon "did not share sales figures for its Prime Early Access Sale or compare it with July Prime Day sales, which Amazon said was its biggest ever with more than 300 million items sold."

    CNBC adds this analysis:

    "For Amazon, the event tested how members of its Prime subscription program would respond to two major discount events in the same year, after the company’s main Prime Day sale in July … data collected by third-party analysts gives a deeper look into how the Prime Day sequel went over with shoppers compared to Amazon’s sales event in July.

    "Sales during this week’s event seemed 'lighter' compared to Prime Day in July, Bank of America analysts said. They estimate Amazon brought in $5.7 billion in revenue from the Prime Early Access Sale vs. $7.5 billion in July.

    "Commerce data company Klover said it observed slower spending and volume, noting transaction frequency was down 30% between the July event and October event."

    KC's View:

    I didn't spend a lot of time online last week, but in the run-up to the second Prime Day event, I was singularly unimpressed with the degree of promotion and outreach that Amazon did.  I find myself wondering if, inexplicably, Amazon is falling into "we've always done it that way" patterns, and really needs to change things up going forward.

    Are the Amazon experience and brand becoming commoditized?  Have we reached the point where it is seen as dependable and kind of boring>?  Is this good for the brand?

    All questions that need to be pondered, I think.

    Published on: October 17, 2022

    From Fast Company:

    "Like any of the other 800 Costco big-box stores around the world, the new Costco in the Santa Fe district of Mexico City is gigantic. Its warehouse-like shopping area and three-story parking structure add up to more than 524,000 square feet of real estate. But looking at it from the outside, it’s almost hard to see that a megastore behemoth is even there at all. Unlike most of those other Costcos in the world, this one has been designed to conceal itself underneath a massive public park … Though some other locations in the retailer’s portfolio have taken interesting design approaches, from adaptive reuse of older buildings to the preservation of nearby natural features, the Santa Fe store may have Costco’s most adventurous design."

    The story goes on:

    "Over the store itself is a green roof, the largest element of the design, which is off limits to human use. Barba says the space has 10 species of native plants that creates a large sanctuary for birds, bees, and insects. The parking garage is topped with a large soccer field, two basketball courts, and a beach volleyball court. On the edge of the store that connects to the broader park, walking paths and the children’s skating area create a transitional space between the store roof and the park, while covering up the utilitarian loading area below. Designed specifically to blend into the groundscape, the store hides beneath walkways in the skatepark that seamlessly blend the rooftop and the greater park."

    KC's View:

    I love the notion of retail that is integrated into the environment, as opposed to dominating it.  It just feels like an enlightened, 21st century approach.

    Published on: October 17, 2022

    In Connecticut, the News-Times reports that Ahold Delhaize-owned Stop & Shop continuers to deal with "the closure of 21 People's United Bank branches" in its Nutmeg State stores that have "the Massachusetts-based grocery chain with a decision to make regarding what is the best use for the now-empty space."

    The story goes on:  "If Stop & Shop is willing to bring in another financial institution to fill the former People's United locations, it could be an attractive move for the right bank, said John Carusone, president of the Bank Analysis Center, a Hartford-based industry consultant.

    "'Even with the high cost of that leased space, any bank that opened a supermarket branch is going to make money,' Carusone said, adding that a typical supermarket bank branch takes up between 200 and 300 square feet. 'Providing customers with that level of convenience is a good strategy' … If Stop & Shop elects not to fill the former bank branch locations with another financial institution, Flickinger said the spaces could be used for a vision center retailer."

    KC's View:

    Seems to me that this only make sense if these bank branches rethink their in-store offerings in the same way that Capital One has been reconfiguring some of its branches, turning them into coffee shops that offer financial services.  Just to have the same old teller-centric offering doesn't strike mas the most progressive way to go.

    Published on: October 17, 2022

    •  The Wall Street Journal reports that "Apple Inc. retail workers in Oklahoma City voted to unionize, becoming the second group of employees at one of the iPhone maker’s U.S. stores to organize officially.

    "The group, which calls itself the Penn Square Labor Alliance, plans to join the Communications Workers of America. The Apple store located at Oklahoma City’s Penn Square Mall has a total of about 100 employees eligible for union membership … Employees voted 56 to 32 in favor of joining a union, according to a ballot count Friday evening released by the National Labor Relations Board."

    The story says that "the vote follows a successful unionization push in June at an Apple Store in Towson, Md., a suburb of Baltimore. Those employees joined the International Association of Machinists and Aerospace Workers. At an Atlanta retail location, organizers withdrew a petition to vote on unionization in May."

    An Apple spokesman said in a statement: “We believe the open, direct and collaborative relationship we have with our valued team members is the best way to provide an excellent experience for our customers, and for our teams. We’re proud to provide our team members with strong compensation and exceptional benefits.”

    Published on: October 17, 2022

    •  Bloomberg reports that "dozens of Inc. workers at a Southern California air hub walked off the job Friday demanding raises of $5 per hour and better working conditions, the latest sign of employee unrest for the online retailer.

    "The workers, carrying red signs that said 'Beware Amazon Air' and chanting 'living wages now,' marched in front of the facility in San Bernardino, California, about 60 miles (96 km) east of Lost Angeles. The one-day strike at the facility, which employs more than 1,500 people, followed summer protests that also raised the issues of pay and working conditions.

    "Workers said they gave Amazon an Oct. 10 deadline to meet their demand for raises that would increase the starting wage at the facility to about $22 per hour. Daniel Rivera, 28, who participated in the strike, said he received a $1 per hour raise in September that pushed his hourly earnings to $18.50."

    •  Axios reports that "Uber Eats customers in Toronto will be able to order cannabis starting today, thanks to a new partnership with Leafly …  It's the first time that marijuana delivery will be available through a major third-party delivery platform, Leafly says."

    According to the story, " Those in Toronto aged 19 years old and over will be able to order in the app as they would from a restaurant. When ordering, they'll be warned they must be of legal age.

    "Deliveries will be made by the cannabis retailer's staff rather than an independent driver.

    "The deliverer will verify a customer's age and sobriety, in order to conform to Canadian law."

    •  From Variety:

    "After years of Netflix execs spurning the idea of serving up commercials to viewers, the streaming giant is flipping the switch on its first cheaper, ad-supported plan next month.

    Netflix Basic With Ads will launch in the U.S. on Nov. 3 at 9 a.m. PT, priced at $6.99 per month, the company announced. The cheaper plan will be available in 12 countries: Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, South Korea, Spain, the U.K. and the U.S. It will first roll out in Canada and Mexico on Nov. 1.

    "Basic With Ads will be $3 cheaper than Netflix’s Basic plan ($9.99/month in the U.S. currently), which provides the ability to stream on one device at a time. Previously, the Basic plan has not supported HD, but with the launch of the ad tier, Netflix will provide video quality of up to 720p HD for both Basic With Ads and the plan with no ads.

    "The ad-supported plan will not include Netflix’s full content catalog, which the company previously had disclosed. A 'limited number of movies and TV shows won’t be available due to licensing restrictions, and we’re going to be working on reducing that over time,' Netflix chief operating officer Greg Peters told reporters."

    Published on: October 17, 2022

    •  Walmart last week announced "the launch of the Walmart Healthcare Research Institute SM (WHRI) to increase community access to healthcare research that may help lead to safer, higher quality and more equitable healthcare.

    "WHRI will be focused on innovative interventions and medications that can make a difference in underrepresented communities including older adults, rural residents, women and minority populations. WHRI initially is focused on inclusion in studies on treatments for chronic conditions and innovative treatments that should include members from these communities."

    "At Walmart, we want to help ensure all our customers have access to high quality, affordable and convenient healthcare resources, including innovative research,” said Dr. John Wigneswaran, Walmart’s Chief Medical Officer. “We know our customers are interested in participating in healthcare research, but many have not had access until now. We are already making an impact for our customers and for medical research, by raising patient trust and engagement in their care.”

    Published on: October 17, 2022

    •  Fox News reports that in the UK, "teenagers concerned about the environment are doing "milk pours." The new trend involves going into grocery stores, picking up cartons of cow-produced milk, and pouring out their contents, according to the animal rights group Animal Rebellion."

    "'The dairy industry is incredibly environmentally destructive. The world’s top 5 meat and dairy corporations are now responsible for more GHG emissions than Exxon, Shell or BP,' the organization said in a tweet Saturday."

    "'Animal farming is THE leading cause of the loss of our wildlife and natural ecosystems,' the group said in another tweet, which also called for the government to 'support farmers in an urgent transition to a plant based food system and allow the freed up land to be rewilded in order to restore wildlife populations'."

    •  The Los Angeles Times reports that "plant-based burger maker Beyond Meat is conducting further layoffs after a round of cuts made in August, according to people familiar with the matter.

    "It wasn’t immediately clear how many workers were terminated. Beyond Meat asked employees to work from home Thursday and restricted access to documents, according to some of the people, who asked not to be named because they weren’t authorized to speak for the company. Management then set up individual calls to inform some workers that they were losing their jobs. Some cuts came in the research and development department."

    The story notes that "the plant-based meat category as a whole has "cooled off. Retail sales of refrigerated meat alternatives fell almost 11% in the 12 months that ended Oct. 2 from the previous period, IRI data show. Beyond Meat-branded sausage substitutes fell 19% in the period, while the company’s plant-based patties dropped 27%. Its faux meatballs experienced growth, however, with sales rising 19%."

    •  Fox Business reports that Macy's has "started opening new Toys R Us locations in 451 stores ahead of the holiday season to capitalize on the most lucrative time of the year for retail, with a wide reopening on Oct. 15 … Each Toys R Us store will feature playful colored fixtures, hands-on demonstration tables for customers to interact with various toy assortments and a life-size "Geoffrey on a Bench" photo opportunity for families."

    The move is seen as giving Toys R Us - a retail brand that "filed for bankruptcy in 2017 and closed all locations in 2018 as the brick-and-mortar locations suffered declining sales" - a new lease on life.

    Macy's says it plans to have toy departments in all of its stores.

    Published on: October 17, 2022

    •  From CNBC:

    "Amazon has lost two high-profile executives who helped oversee the company’s hardware efforts.

    "Gregg Zehr, president of Amazon’s hardware research and development group, known as Lab126, has retired, the company confirmed to CNBC. Zehr is credited with inventing the hugely successful Kindle e-reader.

    "Tom Taylor, senior vice president of Amazon Alexa and a member of CEO Andy Jassy’s elite S-Team, is also retiring, Amazon said. Both Taylor and Zehr spent well over a decade at the company."

    CNBC notes that "for Jassy, it marks the latest high-profile exits at a time when Amazon is staring down a multitude of challenges, from soaring inflation to slowing sales. Heather MacDougall, Amazon’s workplace health and safety chief, departed the company in September. In July, public policy chief Jay Carney left to join Airbnb, and 23-year Amazon veteran Dave Clark resigned as retail chief a month later."

    “We have strong succession plans for all businesses, and both these positions were backfilled with strong internal leaders some time ago,” an Amazon spokesperson.

    Published on: October 17, 2022

    Not surprisingly, lots of email about the proposed Kroger-Albertsons merger…

    An MNB reader weighed in:

    The pending merger of Kroger and Albertsons has a defined strategy for a spinoff of 100 - 375 stores into what is known as a SpinCo.  SpinCo’s exist for at least two major reasons:

    1) To appease the regulatory authorities regarding unfair density and dominance in overlapping markets.  This is how the disastrous Albertsons-Haggen deal came about in 2014 when Albertsons was acquiring Safeway.  These SpinCo’s are generally starved for resources (capital, headcount and skills) and only exist to gain regulatory approval and generate whatever financial return possible by an eventual firesafe of the outlets.  Haggen and its PE investors regrettably took on an overwhelming acquisition that quickly collapsed affecting markets, service providers and consumers.

    2) As a financial tool to divest of distressed assets.  Selection of the outlets to be divested to the SpinCo will weigh heavily toward the worst properties (both physically and financially).  Unfortunately, this tends to be in areas of lower income demographics and sometimes can create a food-desert should the result eventually be bankruptcy or outlet closures.  A few of these stores may eventually make their way into the mix of regional grocers…but, largely, the majority will just whither.

    While I am not a fan of large, complex mergers (they seem to hurt everyone except the executives and seldom produce the promised results for shareholders), the West Coast, particularly sections of California and Washington, are over-stored and ripe for a clean-up.  This is an economic reality and of course is one of the reasons Albertsons was seeking “strategic alternatives” in the first place.  Lots of stores in these markets have excess capacity to service more customers (inefficiency), which in a low-margin business like grocery, is a business loser.

    It will be interesting to see how this plays out, but I expect plenty of disruption and pain well beyond a potential 2024 deal close.

    From another MNB reader:

    Your email box must be exploding with the blockbuster news of Albertsons and Kroger. Nothing surprises me these days of goings on in the food industry. I find Rodney McMullen's comments about being able to lower prices to compete with Walmart quite amusing. Who is he kidding? Walmart’s retails are so much lower across the board today than Fred Meyer, Safeway, Ralph’s, Fry’s, Albertsons, etc. and other Kroger banners. The investment Kroger would have to make to reduce their retail pricing to match Walmart pricing is not going to happen. They can probably compete on private label pricing, but I do not see how they would be able to do so on many of the branded skus, unless Kroger management will radically change their promotional strategy on branded categories. In many instances Walmart everyday retails on branded items are cheaper than advertised prices at Kroger banner stores. Really good EDLP operators like Winco will continue to do well regardless.

    MNB reader Rudy Dory wrote:

    It’s the private equity company finally getting to cash in. In our town we have 5 Safeway Albertsons and a Fred Meyer.  I have always admired how Kroger can buy a company and not screw up the operation unlike some former Safeway or Albertsons mergers. I’ll bet Joe Albertsons is spinning like a propeller in his grave seeing the demise of his once great company.

    I agree that Kroger has a better reputation for what happens when it buys companies than Safeway did … but I also know people in the Chicago market who have not been impressed by how it has handled the Mariano's acquisition.

    One MNB reader wrote:

    This is indeed shocking. But you neglected to comment on what the ripple effect this would have on the vendor and food broker community. Kroger has consolidated their KMA’s (divisions) into Cincinnati. New item introductions, promotions, marketing programs, etc. are all done in Cincinnati Very little people presence is found at the KMA level. The result is the loss of thousands of jobs if they follow this strategy of consolidation. Star Trek fans will understand – We are the Borg. Resistance is futile. You will be assimilated.

    MNB reader Andy Casey wrote:

    My guess is FTC will certainly oppose this vigorously. If it does go through, Amazon might be a big winner if they can pick up some stores being shed as duplicates. From the FTC’s perspective that could protect consumers by keeping another large competitor in major markets rather than closing stores or letting stores go to much smaller competitors who would struggle to absorb them. 

    Still another MNB reader wrote:

    Big overlap here in Colorado. Could be a opportunity for WinCoo expand their footprint.

    Y'know, "SpinCo" rhymes with "WinCo."  Just sayin'.

    And from yet another:

    The FTC would not allow Walgreens and Rite Aid to merge, no way they will allow this without thousands of stores divested. In SoCal alone Albertsons/Vons/Ralphs would be a dominant presence, DFW would be Kroger/Tom Thumb/Randall/Albertsons.. Not sure the numbers but crazy market share. Plus neither is a “great” operator.  

    From MNB reader Bob D’Amato:

    Long term Star Market/Shaws employee here (over 48 years, now retired). Managed to survive acquisitions from Jewel, American Stores, Investcorp, Sainsbury/Shaw’s, Albertsons, Supervalu, Cerberus/Albertsons. I’m very interested to see how this will affect Shaw’s and Star Market retail, support, distribution and transportation now that they have become even smaller pieces of a very large company.

    Another MNB reader wrote:

    Any word yet on the line for SpinCo lasting longer than Haggen did?  Standing at the helm with arms firmly crossed to watch that thing hit an iceberg will be a nice, easy last stop for any executive approaching retirement.  Not so much for the front-line, suppliers, and landlords unfortunately.  And kudos to whomever came up with the name!

    And from yet another:

    Well, this is horrible. 

    Thankfully, I’m just about done working in this industry. The consolidations make it almost impossible to be an independent retailer anymore. 

    I hope America likes their food supply controlled by a few players who are lining their pockets. You know, like our healthcare system.

    Published on: October 17, 2022

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  In the Major League Baseball playoffs this weekend, a trend continued - some of the teams with the best regular season records ended up washing out of the post-season, defeated by teams that got hot at the right time.

    The 101-win Atlanta Braves, for example, were defeated three-games-to-one by the wild card Philadelphia Phillies in one of the best-of-five National League Divisional series, as the Los Angeles Dodgers (who won 111 games in the regular season) were beaten three-games-to-one by the wild card San Diego Padres in their National League Divisional series.

    The Phillies now will play the Padres in the National League Championship series, starting tomorrow night.

    Over in the American League, the 106-win Houston Astros held their own, beating the wild card Seattle Mariners three-games-to-none in their AL Divisional Series.  The Astros will play the winner of the ongoing New York Yankees-Cleveland Guardians series, which is tied 2-2 and goes to the rubber game tonight.

    Wow.  What a fabulous baseball weekend.

    On Saturday, still confined to Covid isolation, I watched a lot of baseball.  I didn't watch the Braves-Phillies game, because those are two teams I pretty much can't stand.  But I watched almost every moment of game three of the Mariners-Astros game, which went a monumental 18 innings and ended with the Astros winning 1-0.  It was a classic duel of pitchers (starters and bullpen), and was absolutely riveting - one of the best baseball games I've ever seen.  (I was disappointed with the result, but you can't have everything.)

    Then, I watched the end of the Yankees-Guardian game, which ended with an exciting ninth inning comeback by the Guardians, defeating the Yankees 6-5.  And then, there was the Dodgers-Padres game, which featured an exciting five-run, seventh inning rally by the Padres, sending the Dodgers home and the Padres to the NL Championship series.  (I was rooting for the Dodgers, but am very impressed by the Padres.)

    It was all just fantastic - games to remember, even when the results disappointed.

    I'm now officially rooting for a Padres-Guardians World Series.

    •  In Week Six of National Football League Action…

    Washington Commanders 12, Chicago Bears 7

    Baltimore Ravens 20, New York Giants 24

    Jacksonville Jaguars 27, Indianapolis Colts 34

    New England Patriots 38, Cleveland Browns 15

    Cincinnati Bengals 30, New Orleans Saints 26

    Tampa Bay Buccaneers 18, Pittsburgh Steelers 20

    San Francisco 49ers 14, Atlanta Falcons 28

    New York Jets 27, Green Bay Packers 10 (not a typo)

    Minnesota Vikings 24, Miami Dolphins 16

    Carolina Panthers 10, Los Angeles Rams 24

    Arizona Cardinals 9, Seattle Seahawks 19

    Buffalo Bills 24, Kansas City Chiefs 20

    Dallas Cowboys 17, Philadelphia Eagles 26

    I found myself flipping back and forth between the Jets and Giants games yesterday … what a great day for New York-area football fans.  I'm not confident it will last, but for the moment, satisfying.