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    Published on: November 30, 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.

    Tom and KC today consider the tumult affecting the devices business, most dramatically at Amazon, which is cutting back on the division that has developed the Alexa-based system, a division that some reports say could lose as much as $10 billion this year.   But the conversation goes farther than that, looking at innovations in the sector … changes affecting the Internet of Things (IoT) … the difference between the "leading edge" and the "bleeding edge" in a challenging economic climate … and the degree to which devices can play an expanding role in users' lives.

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

    Published on: November 30, 2022

    Kroger CEO Rodney McMullen and Albertsons CEO Vivek Sankaran went before the US Senate's Subcommittee on Competition Policy, Antitrust and Consumer Rights yesterday, arguing that the merger of their two companies - a deal valued at more than $24.6 billion -  will be good for consumers and employees, and will not be anti-competitive.

    “I just don’t see less competition going forward,” McMullen said.  “It’s easy for customers to make a right turn or a left turn.”

    The argument is that a merger of the nation's second and fourth ranked supermarket chains will allow them to be more competitive with number one Walmart, and with Amazon, which has an outsized influence on the marketplace;  even combined, the new combined company will still be smaller than Walmart.

    “The marketplace for groceries over the past decade has completely transformed making the competition for consumers fierce,” said Sankaran. “The best way to compete with mega stores like Walmart and highly capitalized online companies like Amazon will be through a merger with Kroger."

    CNBC writes that "Sen. Amy Klobuchar, a Democrat from Minnesota, led the hearing Tuesday along with Sen. Mike Lee, a Republican from Utah. Both challenged the companies on their actions, including Kroger’s $1 billion in share buybacks announced last year and plans to pay dividends to shareholders as well as previous deals, such as Albertsons’ acquisition of Safeway.

    "They emphasized that the proposed deal comes at a time when groceries are taking up more of American families’ budgets. Food prices have surged as inflation hovers near four-decade highs. Prices of everyday items, including butter, eggs, poultry and milk have jumped by double-digits from the year-ago period as of October, according to the most recent federal data available."

    From the Wall Street Journal coverage:

    "The proposed merger has drawn opposition from elected officials, independent retailers and some union groups over its potential impact on workers’ jobs, as well as on industry competition and food prices for consumers … Kroger and Albertsons have said their combination would give them a more national reach with a bigger network of stores, distributors and suppliers. The companies have said they expect to invest $500 million in keeping prices low, along with spending $1 billion on wages and benefits and $1.3 billion on improving Albertsons stores."

    The Associated Press noted that Lee conceded that "the subcommittee would have little say in whether the merger will go through. That will be a decision for the Federal Trade Commission and the Justice Department. But he said the hearing was an important opportunity for the public to understand a merger that could impact their lives."

    Also testifying were  Sumit Sharma, senior researcher at Consumer Reports, and Andrew Sweeting, professor of economics at the University of Maryland.

    Sharma argued against the merger:  "We are skeptical that the benefits of the deal as claimed by the parties will be realized.  The most likely outcome of this merger would be to significantly lessen competition and lead to higher prices, fewer choices and worse supermarket access in some neighborhoods … Even if there are some efficiencies, these cost savings are not likely to be passed on to consumers. Why would these be passed on to consumers unless competition required it?”

    And Sweeting argued that competitive issues need to be evaluated local market by local market, not seen in a national context.

    KC's View:

    I watched the entire hearing yesterday, and it was a kind of mini-education in how government works.  It was kind of nice to seem since more often we all seem get exposed to examples of ays in which government doesn't work.

    I'm not sure that anybody was persuaded to change their minds, one way or the other, or was presented with a telling argument that made them rethink a stated or entrenched opinion.

    One person I was really impressed with was Michael Needler, Jr., CEO of Fresh Encounter, a 100-store company who was representing the interests of both his brethren and the National Grocers Association (NGA).  He made the point that, as a retailer who has grown his company considerably through the purchase of distressed retail assets, he is "not opposed to growth," and actually is "agnostic" about the Kroger-Albertsons acquisition.  However, he emphasized a familiar - and to my mind, legitimate - NGA refrain, that guardrails that should be in place through enforcement of the Robinson-Patman Act are virtually non-existent, and that predatory pricing by power buyers like Walmart, Kroger and Albertsons is a far greater threat to viable competition.

    I continue to believe that with some divestment of stores, this deal eventually will go through.  But I also think that this is a perfect time to have a conversation at the legislative and regulatory levels about the impact of such deals on shareholders vs. stakeholders.  McMullen and Sankaran argue that this merger will do much to protect local markets and union employees, but they may have a way to go to persuade folks that in the end, this is really going to be best for shareholders.

    I did find it interesting when Sen. Josh Hawley (R-Missouri) decided to use his time to critique both companies' embrace of ESG (environmental, social and governance) issues, and saying that their complimentary approach was reason enough to approve the merger.  “Why would having complementary ESG strategies be justification for a merger?” Hawley said. “Why would that be relevant at all?”

    In some ways, he has a point - the fact that both companies embrace ESG isn't enough to justify a merger.  Though, I suspect that what the companies really are arguing is that their cultures will be a nice fit in these areas, without the kind of dissonance that might disrupt the merger of two giant businesses.

    That said, I've never understood the hostility that some folks have for ESG.  Seems to me that if companies or investment funds prioritize ESG because they think it is good for business, that's, well, their business.  As long as they're transparent about it, investors can decide whether they want to put their money into those companies or not. 

    The same goes for companies that reject ESG - people can make their investment decisions based on that information as well.

    At another point in the hearing, Hawley questioned McMullen about layoffs that might occur as a result of the merger, and the Kroger CEO said that no front line workers would be laid off.  That didn't seem to satisfy Hawley, who pushed McMullen to say that nobody would be laid off … which strikes me as a specious position, since there almost certainly will be front office duplication that will result in layoffs.  To think otherwise is silly.  (I thought that was the moment for Vivek Sankaran to raise his hand and point out that once the merger is completed, he, in fact, will be laid off.)

    Published on: November 30, 2022

    An employee at the Chesapeake, Virginia, Walmart unit where six workers were killed in a mass shooting by a store supervisor has filed a lawsuit in which she claims that she complained to management months earlier about the shooter's "bizarre" behavior.

    The suit is seeking $50 million in compensatory damages.

    From the New York Times:

    "Donya Prioleau, an employee in the Chesapeake Walmart, said in her lawsuit filed on Tuesday that she had lodged a formal complaint against the man, who was a supervisor in the store, after he repeatedly made bizarre and inappropriate comments to her.

    "Ms. Prioleau’s mother even visited the store in September to warn managers about the employee’s behavior because she was 'very concerned for her daughter’s safety,' according to the lawsuit. But she was told that nothing could be done because he was 'liked by management,' the lawsuit said.

    "'We are reviewing the complaint and will be responding as appropriate with the court,' a Walmart spokesman, Randy Hargrove, said in a statement."

    The Times goes on to point out that "the lawsuit accuses Walmart of negligent 'hiring and retention' practices because of its employee’s 'known propensities for violence' and 'strange behavior' before the shooting. Ms. Prioleau is seeking $50 million in compensatory damages.

    "The police said the person they identified as the gunman, Andre Bing, 31, had left a 'death note' on his phone in which he said employees at the store had mocked him and compared him to a serial killer. They said he had also noted co-workers he planned to target and others he planned to spare."

    Bing reportedly committed suicide before he could be captured by authorities.

    The plaintiff's attorneys said that "our client alleges Walmart acknowledged her written complaint alleging harassment, but continued to employ the perpetrator … As workplace shootings and violence become horrifyingly common, employers have a responsibility to understand the warning signs and take threats seriously in order to protect their employees and customers."

    KC's View:

    While the charges against Walmart may be legitimate, this does seem a little soon to be filing $50 million lawsuits.  But, who am I to question the extend of the ordeal that these folks have gone through, and what it may take to assuage their trauma?

    This does serve, I think, as a warning to every employer.  Since we live in a world country where mass shootings have become so commonplace and so little is being done to address the issue, employers need to be more vigilant than ever about these kinds of complaints, and more aggressive in dealing with potential problems.  

    Published on: November 30, 2022

    IRI is out with a new report, “Private Brands: Look Who’s Buying Now,” which looks at the own-label business trends and opportunities.

    Key findings:

    •  "Across the total store, 99.7% of U.S. households purchase store brand products, whether intentionally or not."

    •  "Store Brand Loyalists tend to be older, have larger households, are less urban and are homeowners."

    •  "54% of Store Brand Loyalists have a median household income of less than $70,000. "

    •  "SNAP recipients are an important segment of private label shoppers, as 36% of SNAP shoppers will switch to store brands more often."

    •  "During the recent inflationary time, store brands increased their share of all-outlet dollar sales to 17.5%."

    •  "Consumers increasingly say that store brands influence where they choose to shop; 35% of consumers frequently or always choose a retailer based on the selection of store brand products, up 2% from 2021."

    •  "Both club and mass channels are gaining more than their fair share of consumer spending on non-edible store brand products."

    The report also recommends that "retailers can appeal to and capture younger shoppers by offering more options for convenience, healthy attributes and flavor adventure in private brand products," and that "retailers should support store brands in a similar fashion to name brands with a commitment to brand development, production, packaging, promotions, placement and pricing."

    Published on: November 30, 2022

    •  From the Wall Street Journal:

    "Amazon. com Inc. is adding a supply-chain management service to its web services business, jumping into an increasingly competitive technology field as companies try to get tighter control of the flow of goods from factories to consumers … Amazon has a ready audience for its software with a phalanx of small- and medium-size businesses in its third-party marketplace. It says its application gives companies better visibility into their supply chains and that it uses machine learning to help manage inventory levels and better forecast demand."

    The Journal writes that "Amazon’s launch of its cloud application, AWS Supply Chain, adds Amazon to a growing list of software suppliers, such as Manhattan Associates and Blue Yonder, that help merchants juggle increasingly complex cargo flows and inventory demands. Microsoft Corp. launched its own supply-chain management software platform earlier this month."

    According to the story, "Many companies are pressing for greater efficiency and visibility of their goods flows after being caught flat-footed during the pandemic by disruptions such as factory shutdowns in Asia and U.S. port congestion that added months to import delivery times and led to empty shelves and lost sales heading into the 2021 holiday season.

    "Companies are relying more on sophisticated supply-chain software as a growing share of sales shifts away from sending goods in bulk to retailers and moves more toward direct-to-consumer online sales that require better balancing and positioning of stock."


    •  From GeekWire:

    "'Small Business Saturday' turned out to be a good day to spot a growing effort by one very big business to shrink its carbon footprint.

    "Across Seattle, GeekWire spotted Amazon’s distinct electric delivery vans made by Rivian. The tech giant began rolling out the vans in Seattle and select U.S. cities this summer, but spotting them in the wild has still been a bit of a rare occurrence.

    "Amazon said in a blog post earlier this month that its fleet now has more than 1,000 electric vans making deliveries in more than 100 cities across the U.S."

    The story notes that "Amazon previously said that it planned to have 100,000 of the vans on the road by 2030.

    "In 2019, the tech giant pledged to become carbon neutral by 2040 and encouraged others to do the same as it co-founded and became the first signatory of The Climate Pledge. Its emissions, however, have continued to rise over that time, including pollution associated with transportation."

    Published on: November 30, 2022

    •  "A record 196.7 million Americans shopped in stores and online during the five-day holiday shopping period from Thanksgiving Day through Cyber Monday," according to the annual survey released yesterday by the National Retail Federation (NRF) and Prosper Insights & Analytics. "The total number of shoppers grew by nearly 17 million from 2021 and is the highest figure since NRF first started tracking this data in 2017 … According to the survey, more than three-quarters (76%) of consumers say they shopped over the Thanksgiving holiday weekend, up from 70% in 2021. The numbers shattered NRF’s initial expectations by more than 30 million.

    "Retailers saw a sizable uptick of in-store shoppers. More than 122.7 million people visited bricks-and-mortar stores over the weekend, up 17% from 2021. The number of online shoppers also grew, albeit at a slower pace. This year saw 130.2 million online shoppers, a 2% increase over 2021."


    •  FMI - The Food Industry Association yesterday said that it "welcomed the commitment from Congressional leaders to pass legislation that would prevent a rail strike from occurring on December 9 after rail stakeholders failed to reach consensus in recent weeks."

    FMI Chief Public Policy Officer Jennifer Hatcher said in a prepared statement:  “Freight rail networks play a critical role in our nation’s food and consumer goods supply chain, transporting raw materials to manufacturing and processing plants that ultimately produce many of the goods sold on grocery store shelves. As we head into the busiest shopping season of the year, Congress must act now to keep our railroads operational. We are encouraged that leaders in the House and Senate have signaled their commitment to passing legislation to avert a rail strike, and we strongly urge lawmakers in both chambers to swiftly approve the bill in bipartisan fashion … A potential rail strike would have significant ramifications for our economy as well as the food industry’s ability to operate as efficiently as possible to meet consumer demand. As we are in the midst of the busy holiday season, American consumers and businesses cannot afford to have our economy shut down."


    •  Ahold Delhaize yesterday announced "the update of its interim CO2 emissions reduction target for its entire value chain … to at least 37% by 2030, and to become net-zero by 2050. For its own operations, the company remains committed to become net-zero by 2040 with an interim target of a 50% reduction by 2030. With this updated … interim target, Ahold Delhaize aims to achieve the decarbonization of its entire value chain and ensures that all of its climate targets are in line with the UN's goal of keeping global warming below 1.5°C."

    Published on: November 30, 2022

    …will return.

    Published on: November 30, 2022

    The US men's soccer team advanced to the knockout round of the World Cup in Qatar yesterday with a 1-0 defeat of Iran.

    From the New York Times story:

    "Though the American star Christian Pulisic was forced from the game at halftime with an injury sustained as he scored the game’s only goal, the 1-0 victory was a moment of redemption for a U.S. team that has been rebuilt since a stunning failure to qualify for the last World Cup in 2018. Though a new generation of talents has been unearthed and developed, many thought the Americans’ moment was still four years away, when they would be just a little older, a little more experienced, and playing on home soil in North America.

    "The players showed otherwise, fending off the attacking Iranian team and advancing to the round of 16. While the U.S. has won the last two Women’s World Cups, the men have not made it past the round of 16 since 2002."

    KC's View:

    Alas, I haven't been paying much attention to the World Cup … I'm just not much of a soccer/football fan.  But I am really impressed with Tyler Adams, the captain of the US men's team, who showed grace and patience yesterday when he was lectured by an Iranian journalist about discrimination against Black people in the US.  When Adams' athletic career is over, he needs to run for office …