business news in context, analysis with attitude

Published on: November 16, 2022

The continuing goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive who led the team that developed Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

Today, Tom and KC focus on the disarray that seems to be enveloping the technology sector, putting the mass layoffs at Amazon in context … analyze the three factors that might lead Amazon to sell Whole Foods …  look at the cyclical nature of the problems facing technology companies … chat about the issues facing Elon Musk at Twitter and the cryptocurrency industry … and consider the ripple effect that all these factors are having on even tech companies with solid businesses.

If you'd rather download and listen to The Innovation Conversation as an audio podcast, click below.

Published on: November 16, 2022

Kroger said yesterday that its Thanksgiving promotions will include "a zero-compromise shopping guide with meal options that can feed 10 people for as little as $5 per person." Kroger also said that while "the cost of turkey has risen 20 cents per pound this year," it "will not shift the rising cost to customers."

Kroger said that according to 84.51º, its retail and data science, insights and media arm, "48 percent of customers surveyed plan to cut back on at least some Thanksgiving staples due to inflationary pressures."  The shopping guide, it said, "teeming with the grocer's Our Brands products, covers all the staples families need to create memorable and delicious holiday meals at an incredible value. On top of everyday savings, Kroger has also increased total promotions, digital deals, personalized offers and expanded fuel points savings throughout the holidays to keep purchase prices low."

"At Kroger, we are committed to making the holiday season memorable and accessible for everyone," said Stuart Aitken, Kroger Senior Vice President and Chief Merchant & Marketing Officer, in a prepared statement.  "We strive to keep prices low every day, and this Thanksgiving, we are helping our customers keep turkey at the center of the plate by not passing on rising turkey costs."

Published on: November 16, 2022

CNN reports that while restaurants have been reporting growing sales, the evidence is that foot traffic is falling, and the increased volume can be attributed to inflation:  "Restaurants have been raising menu prices over the past few years, so they get a sales boost because each bill is higher, even if fewer customers are buying their food or people are coming in less often."

The story goes on:

"Some consumers may be trading down to more affordable restaurants. But many are finding that while grocery prices are also rising, eating in is still cheaper than dining out.

"Food is getting pricier across the board, and not just at restaurants. In fact, grocery prices are rising at a faster clip than menu prices. In the year through October, unadjusted for seasonal swings, grocery prices jumped 12.4%, according to data from the Bureau of Labor Statistics. Restaurant prices increased by 8.6%.  But groceries are generally cheaper than restaurant meals. And as consumers try to stretch their budgets, demand for groceries is staying high."

Published on: November 16, 2022

Ahold Delhaize announced yesterday that with the retirement of Kevin Holt, CEO of Ahold Delhaize USA, JJ Fleeman, who has served as President, Peapod Digital Labs and Chief Commercial and Digital Officer of Ahold Delhaize USA since May 2018, will be named as Holt's successor.

Holt is scheduled to step down in April 2023 and remain as an advisor until the end of next year.

The announcement noted that Fleeman "has spent the majority of his 30-year career in grocery retail in Ahold Delhaize companies, including Food Lion, the largest U.S. brand, serving a diverse array of executive leadership roles, covering strategy, commercial, digital, retail operations, marketing and merchandising. JJ will continue to be based in Salisbury, N.C., and spend time across other U.S. offices."

Published on: November 16, 2022

The US Food and Drug Administration (FDA) this week announced what it called "an unprecedented advancement in foodborne illness prevention through the finalization of a rule to more effectively trace contaminated food through the food supply, whether sourced in the U.S. or abroad.

"The final rule establishes additional traceability record-keeping requirements for those that manufacture, process, pack or hold certain foods, including fresh leafy greens, nut butters, fresh-cut fruits and vegetables and ready-to-eat deli salads. In collaboration with industry, the FDA will be able to more rapidly and effectively identify the origin and route of travel of certain contaminated foods to prevent or mitigate foodborne illness outbreaks, address credible threats of serious adverse health consequences or death, and minimize overly broad advisories or recalls that implicate unaffected food products."

“This rule lays the foundation for even greater end-to-end food traceability across the food system that we’re working on as part of the New Era of Smarter Food Safety initiative,” said Frank Yiannas, the FDA’s deputy commissioner for food policy and response, in a prepared statement. “This standardized, data-driven approach to traceability record-keeping helps create a harmonized, universal language of food traceability that will help pave the way for industry to adopt and leverage more digital, interoperable and tech-enabled traceability systems both in the near term and the future.”

FMI-The Food Industry Association released the following statement from its Chief Public Policy Officer, Jennifer Hatcher, responding to the FDA move:

“We will analyze the 597-page final rule on traceability released today to understand the range of its impact on our member companies. Since the proposed rule was released, we have continually urged FDA to release a Supplemental Rule rather than moving straight to a final rule given the volume and complexity of changes commenters urged FDA to make. We believed a Supplemental Rule was a critical step to ensure that a final regulation is consistent with the statutory mandate and realistic in terms of the ability of companies of all sizes to comply.  

“It is already clear that implementation of the requirements in the rule will demand tremendous investments of time and resources across the entire food industry, and it looks like this rule significantly exceeds the statutory authority, both written and intended, by Congress. FMI and our members work every day to further strengthen the safety of our food supply and the continued rapid removal of any impacted products. This work needs to be done in the most efficient, consistent manner across all elements of the food supply chain with the least possible impact on food prices, greatest impact on results, and consistency with the intent of the law passed in 2011. Based on our quick review of this incredibly complex rule, it does not accomplish this.

“FMI and our members remain committed to further strengthening the most robust food safety system in the world and will continue to work every day to improve and enhance our food safety efforts and culture.”

Published on: November 16, 2022

Catalina is out with data gleaned from its Shopper Intelligence Platform showing that . the number of self checkouts in the U.S. "has increased 10% in the last five years, driven by growth in grocery chains where they make up 38% of lanes … With retailers continuing to make sweeping shifts from manual to self-checkout (SCO) lanes in an effort to offset shrinking margins from inflationary labor costs, respond to social distancing protocols, and take advantage of automation technology, our data indicate that a hybrid model – of self-checkout and manned checkout – will improve customer experience enabling cost efficiency over the long-term."

Other conclusions:

•  "Catalina data shows that, although SCO lane penetration accounted for 38% of transactions, it produced only 24% of sales."

•  "SCO-only shoppers had smaller baskets and bought less than hybrid and MCO fans. One consideration is that SCO-only customers likely either do not pantry load – or they pantry load in other channels, such as mass retailers or online. Another is that some retailers limit the number of items a shopper can purchase in SCO lanes."

•  "Shoppers were more likely to use SCO lanes during off-peak hours, but that timeframe accounted for less than 5% of daily transactions and sales."

•  While "conventional wisdom in the industry says that shoppers won’t take the time to use coupons at SCO lanes," data shows that "SCO lane shoppers who received coupons drove 4X more sales growth than the SCO checkout lanes with suppressed incentives. When compared with the six-month pre-period, these coupons accounted for an 181% in sales growth versus the control group, which posted a 40% increase. Data analytics show that incentives attracted new shoppers, engaged lapsed buyers, and contributed to increased store visits."

•  "Hybrid shoppers produced the highest customer value ($1,720) and made 36 trips per year (2021)."

Published on: November 16, 2022

Yesterday, MNB took note of a Semafor story saying that "TikTok quietly entered the United States e-commerce market this week, where it will compete with Amazon and other retail giants during the coming holiday shopping season."

Later in the day, however, CNBC reported that "Federal Bureau of Investigation Director Christopher Wray told lawmakers … that he is 'extremely concerned' about TikTok’s operations in the U.S.

"'We do have national security concerns at least from the FBI’s end about TikTok,' Wray told members of the House Homeland Security Committee in a hearing about worldwide threats. 'They include the possibility that the Chinese government could use it to control data collection on millions of users. Or control the recommendation algorithm, which could be used for influence operations if they so chose. Or to control software on millions of devices, which gives it opportunity to potentially technically compromise personal devices'."

According to CNBC, "Reporting from Forbes has cast doubt on the security of U.S. user information at TikTok. The outlet reported, for example, that TikTok’s parent company ByteDance planned to use the app to monitor specific location details of certain American citizens, citing materials it reviewed. TikTok pushed back on the report, denying that it had ever tracked certain U.S. citizens with their specific locations and slamming Forbes for publishing the allegations.

"Wray said that any details about TikTok’s actions would have to be discussed in a classified briefing. But he assured lawmakers that 'it is certainly something that’s on our radar and we share your concerns'."

Published on: November 16, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  The BBC reports that "UK-based food delivery app Deliveroo says it is quitting Australia, citing tough economic conditions.

"The company's Australian operation, which launched in 2015, is being placed into voluntary administration.

"Deliveroo has come under increasing pressure to treat its 15,000 riders as employees, with the country's new government pledging to improve gig workers' conditions.  It has also faced competition from rivals such as Uber Eats and Menulog.

"Deliveroo said it had stopped accepting orders through its app, with customers receiving an error message if they tried to place an order."

"Voluntary administration," to be clear, is what happens when a company either is or is likely to become insolvent, and an outside, independent administrator is named to evaluate and implement options.

Published on: November 16, 2022

•  Walmart said yesterday that it has agreed "to pay $3.1 billion to settle opioid-crisis lawsuits brought by several U.S. states and municipalities, adding to a landmark settlement with rival pharmacy chains," the Wall Street Journal reports.  "The agreement resolves a collection of lawsuits brought by states, cities and Native American tribes."

The story notes that Walmart joins CVS and Walgreens in a group of settlements that total $12 billion.

Published on: November 16, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  Albertsons has introduced "its new, premium Vinaforé Collection, a private label wine selection that "features five distinctively crafted varietals originating from some of the best wine regions in the world and is now available at Albertsons Cos. banner stores including Albertsons, Safeway, Shaw’s, Vons, Jewel-Osco, Acme, Tom Thumb and United Supermarkets … The Vinaforé Collection was curated by Curtis Mann, Master of Wine at Albertsons Cos., in partnership with DC Flynt MW Selections and is already receiving acclaim. Wine Enthusiast recently announced that the 2021 Vinaforé Napa Valley Chardonnay received 90 points while the 2020 Côtes du Rhône Villages scored 90 points from James Suckling. Using a 100-point scale, a wine rated 90 points is deemed to be outstanding or excellent. The collection also includes the 2020 Alexander Valley Cabernet Sauvignon, 2021 Sonoma Coast Pinot Noir and 2021 Sonoma County Sauvignon Blanc. All five varietals retail between $14.99 and $21.99 each."

•  Subway said this week that after positive feedback from a test at the University of California San Diego, it will begin rolling out "Grab & Go" smart fridges - vending machines with premade Subway sandwiches.

The goal, the company says, is to position the fridges in airports, truck stops, convenience stores, gas stations, hospitals and other college campuses.  At present, some 400 locations have been identified for the machines.

"As more of our guests search for dining experiences to meet their 'in-the-moment' needs, the brand's non-traditional locations and platforms can serve them wherever and whenever they are craving Subway," said Taylor Bennett, vice president of non-traditional development at Subway, in a prepared statement. "As Subway focuses on strategic and profitable growth, there is a significant opportunity to expand our footprint in non-traditional locations and for franchisees to generate incremental revenue for their business."

Forgive me, but I cannot help but wonder about the quality of a premade Subway sandwich made with fake tuna fish.  The made-to-order versions aren't exactly paragons of excellence … premade versions are likely to challenge the palate, though not in good ways.

Published on: November 16, 2022

We had a story the other day about the mainstreaming of electric vehicles, which prompted the following email from MNB reader Jesse Sowell:

Last week I drove a Tesla from SoCal to Dallas, about 1400 miles. It's a car trip I've made probably 50 times (decades of living in SoCal, with family in Texas), but this was the first time in an EV. Observations:

Tesla's Supercharger network is ubiquitous on interstate highways. On this trip there was a station about every 100 miles, and always right where I needed one.

Most Superchargers were right off the highway along the frontage road, none more than one mile away from an exit ramp.

Many Superchargers were in the parking lots of truck stops or convenience stores. The big chain gas-sellers are already preparing for life with fewer customers at the pumps.

The trip took about three hours longer than if I'd been driving a gasoline powered car, for charging stops. But I was less tired at the end than on my previous trips, possibly due to having to stop for 20 minutes every 2-3 hours, and getting to walk around and decompress while doing so.

Most people just drive to commute, and can charge an EV overnight at home, less expensively and more conveniently than taking an ICE vehicle to a gas station. Range anxiety should only be an issue on long trips, and my experience is that the infrastructure is being put in place to remove that obstacle for most people, as well.

We took note of a New York Times report that "one of the largest food safety companies in the United States illegally employed more than two dozen children in at least three meatpacking plants, several of whom suffered chemical burns from the corrosive cleaners they were required to use on overnight shifts, the Labor Department found.

""The department filed for an injunction in U.S. District Court in Nebraska on Wednesday against Packers Sanitation Services, which Judge John. M. Gerrard swiftly ordered on Thursday. The injunction requires the company to stop 'employing oppressive child labor' and to comply with a Labor Department investigation into the practice … The Labor Department found that Packers employed at least 31 children, ranging in age from 13 to 17, who cleaned dangerous equipment with corrosive cleaners during overnight shifts at three slaughtering and meatpacking facilities: a Turkey Valley Farms plant in Marshall, Minn., and JBS USA plants in Grand Island, Neb., and Worthington, Minn. … According to court documents, the Labor Department believes Packers may employ minor children under similar conditions at other plants."

I commented, in part:

What kind of company does this?  What kind of people running a company do this …

I really hope the injunction is only the first step, assuming these charges can be proven.  Not sure if this is proportional or not, but when kids are exploited this way, companies ought to be put out of business and the so-called adults who run them ought to go to jail.  (I always wonder in these cases - do the company leaders at such places not have children?  Or do they just consider other people's children to have less value than their own?)

One MNB reader responded:

The more things change, the more they stay the same.

Upton Sinclair wrote "The Jungle" in 1906 to expose the appalling working conditions in the meat-packing industry.

His description of diseased, rotten, and contaminated meat shocked the public and led to new federal food safety laws.

To no one’s surprise, industry fought tooth and nail.

Public sentiment won out, and it’s my hope that your column is a first step in shining a light on this issue.

Responding to our piece about TikTok entering e-commerce, one MNB reader wrote:

While I have no doubt that this has great potential for success given how many people find "why has no one invented this before" type of products on TikTok, the elephant in the room is the regulatory environment for the app. With skepticism over TikToks use of user data for allegedly nefarious purposes, I can't help but wonder if handing over credit card data could be potentially problematic.

On another subject, from MNB reader Catherine Gipe-Stewart:

As e-commerce options widen and strengthen, I’m curious if consumers will opt for the easiest and/or cheapest option, and if this will dip the growth a bit before it grows again? For example, my house got tired of paying $10/mo+ for Instacart, and when Instacart charged us $50 in fees on our last Costco order (percentage-based, not flat fee), we cancelled membership. But, Walmart and Target we can both order from for free and now can do same day pick up. Since quarantines are more of a past phenomenon, pick-up works great for our house and I can put my order in on a work break and pick up on the way home.

A note from an MNB reader about our piece regarding the creation of Chief Purpose Officers at some companies:

Too many chiefs?

CEO

COO

CFO

CAO (Accounting)

CIO (Innovation)

CIO (Information)

CISO (Information Security

CHRO (Human Resources)

CRO (Risk)

CEO (Equity)

CMO (Marketing)

CPO (Product)

CDO (Data)

CEO (Experience)

CPO (Purpose)

You're right.  It's gonna get crowded in there.

I did a FaceTime the other day about the new production of "1776" on Broadway in which all of the roles - America's Founding Fathers - is played by a woman, many of them women of color.  This approach (probably done best in "Hamilton") takes a musical with some dust on it and gives it a fresh perspective.  And, of course, provides a business lesson.

One MNB reader wrote:

I’ve got mixed feelings about art recreating history.  I see the benefit of new interpretations, but sometimes it appears too heavy-handed to make a point.  I’m all for diversity in casting people—they’re actors after all.  Recently I saw the excellent London production on film of “Straight Line Crazy”, a play about Robert Moses starring Ralph Fiennes that is opening soon on Broadway.  I loved Robert Caro’s book about Moses, “The Power Broker.”  The production created a pivotal supporting role played by a black woman as an architect working for Moses later in his career (1950’s).  She was excellent but I couldn’t help feeling that inventing a character to play a moral compass that had no physical or actual relationship to the way Moses worked was a bit too much for me.  But then I heard two women behind me discussing the play saying they didn’t know much about Robert Moses, but they liked the play.  A lot of people don’t know much about our Founding Fathers today either.  And it’s art, not history.

MNB reader Dave Ahrens wrote:

My wife Maria and I did a short trip to NYC last weekend to visit our son that has lived there for around 15 years.

We had gorgeous weather and checked off a bunch of our lists – including some firsts.

LIST of To Dos:

•  bagel w/cream cheese lox and capers at a Manhattan deli.

•  a slice on the street

•  Junior’s plain cheese cake

•  lots of subway trains and walking

•  Central Park and Tavern on the Green

•  Times Square

•  Macy’s (always need to ride the wooden escalators)

FIRSTS:

•  Statue of Liberty-Ellis Island

•  The Edge

•  Broadway Show – to go with your FaceTime, we saw “Death of a Salesman” at the Hudson Theater.  I was intrigued to see this from the perspective of a black family in the late 40’s. Willy and Linda Loman were GREAT.

•  I enjoyed my first Broadway experience – including the slice of pizza and cheesecake we took back to our room.

I love visiting NYC.

You did a lot on a short trip … and I'm sure NYC loved having you.