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    Published on: December 1, 2022

    USA Today reminded me the other day that Netflix still is in the DVD rental-by-mail business, though it is a segment that is a shadow of its former self.  Still, the memory of how Netflix changed the nature of content consumption and challenged the business status quo, remains a good lesson to all retailers, everywhere.

    Published on: December 1, 2022

    Amazon CEO Andy Jassy appeared yesterday at the New York Times DealBook Summit in New York City, addressing a number of front burner issues with which the company is dealing.  Among the things he said:

    •  Jassy said that he has no regrets about all the hiring that the company did during the pandemic, even though Amazon now has to lay some of those people off as business slows in the post-pandemic, high-inflation climate.  He said that the company is making the cuts "thoughtfully but thoroughly” and won't compromise on "key long term bets."

    •  He said that Amazon will go to court to challenge the vote by employees at one of its Staten Island, New York, warehouses that resulted in unionization.

    •  Jassy also said that Amazon has no plans to remove from its store an antisemitic film, “Hebrews to Negroes: Wake Up Black America," which got a lot of attention when Brooklyn Nets guard Kyrie Irving tweeted about it.  "As a retailer of content to hundreds of millions of customers with a lot of different viewpoints, we have to allow access to those viewpoints, even if they are objectionable — objectionable and they differ from our particular viewpoints,” he said, adding that it is easier to make decisions about products that advocate for things like violence or pedophilia.

    In other Amazon news…

    •  Bloomberg reports that "Amazon’s cloud unit plans to add employees next year and keep building new data centers, a sign that a hiring freeze elsewhere in the company hasn’t derailed investment plans for its most profitable business … Matt Garman, a senior vice president who oversees Amazon Web Services’ sales and marketing teams, said he expected both his organization and the wider AWS business to add staff in 2023."

    •  Amazon said that "this Thanksgiving holiday shopping weekend was its biggest ever, with customers around the world purchasing hundreds of millions of products between Thanksgiving and Cyber Monday."

    "This was a record-breaking holiday shopping weekend for Amazon. Customers shopped millions of deals this weekend and we have many more amazing deals to come,” said Doug Herrington, CEO, WW Amazon Stores, in a prepared statement.  “Thank you to our customers for choosing to shop on Amazon, and to our employees and selling partners around the world who are delivering for customers every day.”

    KC's View:

    In order…

    •  Right-sizing makes sense, and should be a constant endeavor.  As for "key long-term bets," it'll be interesting to see if the definition of those bets has changed now that Jeff Bezos is no longer engaged operationally.

    •  I detect very little introspection at Amazon as to whether the union vote reflects real and legitimate concerns about working conditions.  We can debate whether a union is necessary in representing employee concerns, but there does seem to be a disconnect between management and labor.  (Then again, maybe there is a ton of introspection, but we just aren't seeing it.)

    •  I think that there is plenty of evidence that antisemitism can, in fact, lead to violence.  Some viewpoints do not deserve oxygen … and it is hard for me to imagine that this is a hill that Amazon wants or needs to defend.

    •  AWS can be classified as a "key long-term bet."  No surprise there.

    •  The bet here is that Amazon is going to have a surprisingly good Christmas.

    Published on: December 1, 2022

    The Information reports that "Wonder, a mobile kitchen and food-delivery startup led by Jet.com founder Marc Lore, has laid off 7% of its workforce, a company spokesperson said, as it attempts to overhaul its business … It’s a dramatic stumble for Wonder, which had been riding high on Lore’s previous e-commerce successes and the tail end of the pandemic-era surge in investor interest in food delivery."

    Lore built his reputation on starting Quidsi.com (parent company to Diapers.com), which he sold to Amazon in 2011 for $545 million, and Jet.com, which he sold to Walmart in 2016 for $3.3 billion.

    The Information puts the situation in context:

    "Wonder, which has pitched its meals as a fresher, upmarket alternative to what’s available on delivery apps like DoorDash, has built its business around vans staffed with employees who drive to customers’ homes and prepare meals in their driveways, based on recipes from celebrity chefs like Bobby Flay and Nancy Silverton … Wonder exited stealth mode in 2021 and swelled to more than 2,000 employees by this summer, according to the company. Wonder’s expansion included opening a 47,000-square-foot facility in Lawton, Mich., devoted to retrofitting vans by installing ovens and industrial kitchen gear, according to public records and job listings."

    The story notes that Wonder "landed a $3.5 billion valuation when it raised $350 million this summer and planned to add more than a thousand kitchens around the tri-state area this year. But now it’s changing up how it’s selling food and trying to find other companies to buy the custom vans it’s been building. The company currently has a headcount of 1,900, a Wonder spokesperson told The Information, meaning the layoffs affected about 130 employees."

    And, the story says:

    •  "Wonder has been slow to execute on Lore’s vision. It currently has less than 500 mobile kitchens on the road, according to the company. Wonder started operating in New Jersey’s Bergen County in September and New York’s Westchester County in October, but it is still not available in Connecticut, New York City or most of New Jersey. Wonder is currently available to 450,000 households in about 75 towns in the tri-state area, the Wonder spokesperson said. The company expects to start operating in New York City in late January or early February of 2023, the spokesperson added."

    •  "A Wonder spokesperson said the company now expects revenue to increase 20 times between 2021 and 2023, which would come out to $100 million in revenue in 2023. That would be a decline of more than a third from the 2023 projections Wonder shared with potential investors in June."

    •  "Wonder has been pitching other companies on buying its mobile kitchens as well as equipment like ovens. The startup has also been trying to branch out by selling meal kits to establishments like bars and sports arenas, according to a former employee. The buyers would then do the final preparation of the meals, as opposed to Wonder fully preparing them itself."

    KC's View:

    Just like everyone else in the technology, e-commerce and e-grocery spaces, Lore's startup accelerated during the pandemic and then slammed into inflation and a recessionary mindset.  I'm not sure that expanding into the meal kit business is the option with the greatest potential, but it may be that the options are, in fact, limited at the moment.  (Also not good that they're trying to offload some trucks…)

    Maybe instead of thinking so grandly, Lore should've screened Chef before launching his business - it is all about bringing a chef's mentality to the food truck business.

    Published on: December 1, 2022

    DoorDash announced that it is eliminating some 1,250 corporate jobs, or about six percent of its workforce, as it acknowledged that its expenses continue to outgrow its revenue, especially in a post-pandemic e-commerce climate.

    The Associated Press notes that "DoorDash said early this month that revenue rose 33% to $1.7 billion in the third quarter, but costs also ballooned and it almost tripled its losses from $101 million during the same period last year, to $296 million in 2022."

    Here are some excerpts from an internal email to employees from CEO Tony Xu:

    "This is the most difficult change to DoorDash that I’ve had to announce in our almost 10-year history. Today, we are reducing our corporate headcount by approximately 1250 people and saying goodbye to many talented teammates. If you are among those impacted, I am truly sorry and I apologize to have some of you wake up to this news as opposed to reading it during more normal hours.

    "I know that for many of you, today’s news will come as a shock, especially because our business remains strong and continues to grow. That is why I think it is important that I explain how I arrived at this decision, what we are doing for those departing DoorDash, and why I’m optimistic about our future.

    "As with all things, I want to start and discuss the factors in our control that led to today’s announcement and take accountability for this decision. Prior to COVID-19, DoorDash was actually undersized as a company. The pandemic presented sudden and unprecedented opportunities to serve the evolving needs of merchants, consumers and Dashers. We sped up our hiring to catch up with our growth and started many new businesses in response to feedback from our audiences.

    "Most of our investments are paying off, and while we’ve always been disciplined in how we have managed our business and operational metrics, we were not as rigorous as we should have been in managing our team growth. That’s on me. As a result, operating expenses grew quickly.

    "Now, let’s acknowledge the macro situation. Our business has been more resilient than other ecommerce companies, but we too are not immune to the external challenges and growth has tapered vs our pandemic growth rates. While our business continues to grow fast, given how quickly we hired, our operating expenses – if left unabated – would continue to outgrow our revenue.

    "I did not take this decision lightly. We have and will continue to reduce our non-headcount operating expenses, but that alone wouldn’t close the gap. This hard reality ultimately led me to make this painful decision to reduce our team size."

    Xu goes on:

    "DoorDash has always been a resilient company. For the first half of our history, we were constantly cash-starved and under-resourced compared to our peers. Today, we are a market leader that is still in its early innings of becoming the defining local commerce company globally. We’ve grown from one business (our US Restaurants Marketplace) in one country, into five businesses serving 27 countries, across merchants in every category of local retail on both our Marketplace and Platform. Our business – just like the local economies we serve – has been resilient and our execution has been dynamic in the face of a global pandemic, persisting inflation, an energy crisis, recessionary demand, and a war. The runway ahead is massive and we’ve built tremendous momentum. If we can achieve our mission to grow and empower local economies around the world, not only will we prosper as a business but I also believe much good will be achieved as we create a world where millions of merchants can thrive, bringing out the best of our neighborhoods’ ethos and personalities. 

    "Just as our mission hasn’t changed, neither has our strategy. Our business fundamentals remain strong. But as I’ve said before, what got us here won’t necessarily bring us to the next stage and we have to tailor some of our tactics. Looking ahead, we’re confident that we have reset the size and shape of our organization to match our strategic priorities. We must keep this level of discipline moving forward and act with the hunger, efficiency and creativity of the younger startup we once were while leading with the responsibility of the market leader we’ve become. One outcome from this approach is that we’ll continue to hire and add back recruiting capacity in a more targeted and rigorous way … We must remember that it’s always the people who build the business; everything is derived from them and how we treat one another. Your talents, energy, and relentless pursuit of excellence are what keep me going."

    KC's View:

    Same deal as with everyone else in this space.  Irresistible force meets an immovable object. 

    Published on: December 1, 2022

    Axios reports that a new Morning Consult/Axios poll says that "despite all the headlines … chronicling the wave of layoffs hitting the tech industry, most Americans work in other sectors and still feel pretty good."

    According to the story, "Across all income groups, the share of U.S. adults who fear they could lose their job in the next month ticked down during November — and is sitting near series low points."  (The poll has been conducted since May 2020.)

     "Despite consumers being pessimistic, economists being pessimistic and the Federal Reserve intentionally reducing demand — workers remain very optimistic," says Jesse Wheeler, economic analyst at Morning Consult.

    KC's View:

    Ironic, huh?  So many layoffs in tech, and yet most employees are feeling pretty secure … which is a good reminder that the majority of people in this country don't work in tech or related businesses.  

    They should feel secure, by the way.  Most stores I see still have "help wanted" signs.

    Published on: December 1, 2022

    •  Alimentation Couche-Tard said this week that two of its Circle K stores in Charlotte, North Carolina, will begin offering last mile delivery via Food Rocket, a California startup that has emphasized fresh food, which comprises 60 percent of its orders.  The delivery window is said to usually be 15 minutes.

    Food Rocket will be delivering from a 7,000 SKU set, with a focus on breakfast sandwiches, tacos, burgers, pizza, coffee, snacks and bakery products, as well as traditional c-store convenience items.

    Food Rocket has been one of the beneficiaries of a $100 million Circle K Venture Fund, which has been partially devoted to funding startups dedicated to exploring the "future of experience."

    Published on: December 1, 2022

    •  From CNN:

    "The US economy grew much faster than expected in the third quarter, according to the latest gross domestic product report, which showed GDP rose by an annualized rate of 2.9%.

    "That’s an improvement from the initial government reading in October that showed 2.6% growth in economic activity, and better than the Refinitiv forecast of 2.7%. And it’s a marked turnaround from economic contractions of 1.6% in the first quarter of the year and 0.6% in the second.

    "The better-than-expected growth came as consumer spending increased more than in the government’s previous reading, while the value of imports was revised down. Imports are subtracted from GDP, which is the broad measure of economic activity within the country.

    "The strong reading does not necessarily remove the risk forecast by many economists of the US economy falling into recession at some point in the next year.

    "But the stronger-than-expected growth shows the resilience of the economy as it deals with the headwinds caused by the Federal Reserve’s aggressive course of large interest rate hikes in an attempt to slow the economy in order to tame decades-high inflation."


    •  The Wall Street Journal reports that Macy's, having already committed to rolling out Toys R Us-branded departments in some 400 locations as a way of drawing in shoppers, now will test the opening of Claire’s, a fashion-and-accessories store, inside 21 locations.

    The company believes that Claire's boutiques will help attract younger, more diverse customers.

    This is becoming common for department stores - Kohl's now has Sephora-branded departments inside more than 600 of its stores and says hat those units are outperforming those stores without Sephora departments.

    Published on: December 1, 2022

    •  From Bloomberg:

    "Starbucks Corp. violated labor law by refusing to bargain with unionized workers at its Seattle mega-cafe, the US National Labor Relations Board ruled Wednesday.

    "The decision, issued unanimously by the one Republican and two Democratic members of the labor board, orders Starbucks’ subsidiary Siren Retail Corp. to negotiate with the new union at its hometown Seattle Roastery restaurant. Employees there voted in April to join Starbucks Workers United, the labor group which has prevailed in elections at around 250 of the coffee chain’s US sites over the past year.

    "The board members wrote that Starbucks 'admits its refusal to bargain' with the union, adding that the company contested the legitimacy of the union’s victory because of the government’s choice to hold a mail-ballot rather than in-person election. 

    "Starbucks plans to appeal the ruling, teeing up the latest in a series of federal court showdowns between the coffee chain and the government agency. The labor board has filed five lawsuits asking judges to issue injunctions against Starbucks, including a new suit Wednesday in New York State, and one that led to reinstatement of seven terminated activists in Memphis."

    Published on: December 1, 2022

    •  Publix Super Markets announced that Marsha Singh, regional director in the company's Lakeland Division, has been promoted to Lakeland Division vice president.  She succeeds Sam Pero, a 45-year company employee who is retiring at the end of the year.

    Published on: December 1, 2022

    •  Christine McVie, the Fleetwood Mac singer-songwriter who composed some of the band's greatest hits - including “Don’t Stop,” “Everywhere,” “Say You Love Me” and “You Make Loving Fun" - has passed away.  She was 79.

    Billboard says that McVie composed some 25 songs that earned their way onto its U.S. Hot 100 singles charts.

    Published on: December 1, 2022

    Got the following email from an MNB reader:

    I loved your conversation about corporate succession plans and the need for accountability on the part of the CEO and the Board in their respective roles.  In my work, it’s crucial to be confident in understanding a firm’s succession plan.    I can’t count the number of times that in doing due diligence work on a company, or a mutual fund, or the active management of any type of investment vehicle how often we have rejected investing with a firm who can’t clearly define their succession plan.  


    Responding to our coverage of the proposed Kroger-Albertsons merger, MNB reader Patrick Smith wrote:

    I would be surprised if there is not some consternation in management circles of major suppliers. This merger, if it happens, will really tip the balance of power to Kroger and will give manufacturers far less options … Consumer and labor groups may have a silent ally with the largest of food manufactures and processors.

    Another MNB reader had a comment about this week's Senate subcommittee hearing:

    I'm sure Vivek Sankaran will fight for this with all his heart and soul.  He stands to make $50 million from the Albertsons dividend payout according to Forbes (article from October 14, 2022).

    In my coverage of the hearing, I wrote:

    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.

    Prompting this email from an MNB reader:

    For 25 years I was an attorney at a major consumer products manufacturing company.  (Before becoming a lawyer I had some experience at the retail level - independent as well as chain.)  While as an attorney in those 25 years, compliance with R-P was not among my responsibilities, I was familiar with the statute and what was happening at ground zero level.   To begin with, the statute is subject to some interpretation.  The sales people in large measure were reacting to what competitors were offering.  The major chains etc. stretch the limits of the statute in their demands.  They had to do it because their competitors did. It became a sort of race to the bottom in complying on both sides and the lack of federal enforcement is certainly a factor.  Add to that I strongly suspect that more often than not the sales people were making concessions that they never had reviewed.  Brokers get involved.  The higher ups didn't often get into the details - they just told the sales people to make the numbers or else.  R-P covers a lot more than just "pricing".  There are many other "incentives and services" that major accounts get that are not offered to independents.  R-P covers a lot more than just pricing discrimination.  It is not a level playing field out there.  Independents survive largely because they have lower overhead.