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    Published on: January 3, 2023

    Today we begin the New Year with an extended conversation with Rodney McMullen, the chairman and CEO of The Kroger Company.  Naturally, much of our conversation focuses on the proposed $24.6 billion acquisition by Kroger of Albertsons … but beyond the nuts and bolts of the deal and its implications, I wanted to get a sense of how the merger will impact the pace of innovation at both companies now, and at the combined company - which will be a behemoth by almost any measure - once the deal is approved.  Plus, I wanted to know how he thinks the supermarket industry will be transformed or will evolve over the next five years, and why a Kroger-Albertsons combination will be better positioned to serve a transformed consumer.

    Published on: January 3, 2023

    by Kevin Coupe

    An MNB reader made an observation a few months ago that I keep coming back to - that it seems like while Amazon for much of its existence prioritized customer satisfaction at any cost, these days it appears that the company has reframed that as customer satisfaction at an appropriate cost.

    Which I thought about again when I read a piece in The Information about how "Amazon has discussed doing a stand-alone app for watching sports content … the move comes as CEO Andy Jassy doubles down on the company’s streaming ambitions."

    The story pointed out that while Amazon "hasn’t made a decision about whether to proceed on the effort, the discussions suggest Amazon could be thinking about new ways to squeeze revenue out of the billions of dollars in deals it has inked to stream live sports events, which so far it has mostly included in the standard Prime membership.

    "Jassy recently highlighted streaming rights for live sports in particular as a place he’ll likely keep spending even as Amazon steps up its efforts to cut costs in other areas of its business."

    The story goes on:

    "A self-contained sports app would declutter Amazon’s main Prime Video app and better highlight the company’s sports offerings, which include exclusive rights to the NFL’s Thursday Night Football franchise, as well as some Premier League soccer matches in the U.K. and Yankees baseball games in the New York region. Amazon also recently made a big push into sports talk shows, launching a lineup in November that churns out 60 hours of content per week.

    "The discussion comes as Amazon has been spending heavily on sports streaming rights, including a reported $1 billion annually over 10 years for Thursday Night Football. Streaming executives say this could all point toward Amazon launching a separate streaming tier."

    (It is worth pointing out that Amazon is playing a competitive game here - it apparently lost the negotiations to land the NFL's Sunday Ticket, with Google's YouTube TV signing a reported $2 billion-a-year contract for the package.)

    I find this all interesting since it always seemed to be a strategic priority for Amazon to add value to Prime subscriptions whenever and wherever possible.  The calculus was simple - Prime members spent significantly more on Amazon than non-Prime members, and so the more people that were brought into the system, the better it was for Amazon.  (Jeff Bezos used to say that his goal was to make it "irresponsible" for people not to be members of Prime.)

    The Information notes that "a new tier would be a significant break from Prime Video’s role as a driver of Prime subscriptions and e-commerce sales, unless Amazon were to offer the sports package exclusively as an add-on to the standard version of Prime."

    This is where the notion of at any cost vs. at an appropriate cost begins to matter - since it seems like a decent bet that an Amazon prioritizing profitability and new revenue streams would be more likely to create a new tier separate from Prime.  There's nothing necessarily wrong with any of these strategic decisions, but if Amazon were to choose to establish a new tier, it would be an Eye-Opening pivot that would illustrate much about the company going forward.

    Published on: January 3, 2023

    The New York Times yesterday posted a fascinating piece about the disconnect that exists in specific markets between retailers' desire to keep their customers safe - and feeling safe - and the realities of permissive gun laws that sometimes threaten shoppers' security.

    The Times uses several incidents to illustrate "a uniquely American quandary: In states with permissive gun laws, the police and prosecutors have limited tools at their disposal when a heavily armed individual’s mere presence in a public space sows fear or even panic."

    For example, there was a case where "Rico Marley was arrested as he emerged from the bathroom at a Publix supermarket in Atlanta. He was wearing body armor and carrying six loaded weapons — four handguns in his jacket pockets, and in a guitar bag, a semiautomatic rifle and a 12-gauge shotgun.  Moments earlier, an Instacart delivery driver had alerted a store employee after seeing Mr. Marley in the bathroom, along with the AR-15-style rifle, which was propped against a wall."

    According to the Times, "Prosecutors initially went all in on Mr. Marley’s case, charging him with 11 felonies: five counts of criminal attempt to commit a felony and six counts of possession of a weapon 'during commission of or attempt to commit certain felonies.'  An arresting officer said in an affidavit that when Mr. Marley had put on his antiballistic armor in the Publix bathroom and placed the handguns, with rounds in the chambers, into his pockets, he had taken a 'substantial step of the crime of aggravated assault,' a felony."  However, "court records show that the charges were dismissed in February. Mr. Marley was released from jail after 10 months, only to be rebooked in May, this time after being indicted by a grand jury on 10 lesser counts of reckless conduct, a misdemeanor. The indictment says that Mr. Marley was 'loading and displaying' his AR-15 in the restroom and that he left it unattended.

    Or, there was the case in which "a man named Guido Herrera was discovered at the Galleria mall in Houston, a few yards from a youth dance competition, wearing a spiked leather mask and carrying a Bible and an AR-15-style rifle. An off-duty police officer working as a security guard was alerted to his presence and tackled him. Mr. Herrera was found to have more than 120 rounds of ammunition with him, as well as a semiautomatic handgun holstered in his waistband.

    "He was charged with disorderly conduct, a misdemeanor that under Texas law includes knowingly displaying a firearm in public 'in a manner calculated to alarm.' A jury found him guilty, and he was given a six-month jail sentence."

    The Times writes that "the question of how to handle such situations has been raised most often in recent years in the context of political protests, where the open display of weapons has led to concerns about intimidation, the squelching of free speech or worse. But it may become a more frequent subject of debate in the wake of a landmark Supreme Court decision in June, which expanded Americans’ right to arm themselves in public while limiting states’ ability to set their own regulations … Events like the one involving Mr. Marley, while difficult to quantify, are extreme examples of a problem already bedeviling the police and prosecutors, sometimes from the moment an armed person is spotted in public. All but three states allow for the open carry of handguns, long guns or both, and in many there is little the police can do.

    "Chuck Wexler, the executive director of the Police Executive Research Forum, a bipartisan law enforcement policy group, said police officers sometimes had mere seconds to determine whether a person with a gun 'either legally has the right or he’s a madman' — or both."

    KC's View:

    If retailers are not thinking about how they will and should deal with issues like these, they should be - it seems to me that while these may be seen at the moment as "extreme examples," our recent history is that extreme events appear to be occurring with greater frequency.  Retailers simply have to be thinking about not just how to create safe environments, but the perception of safe environments.  And when their desire to achieve these goals run headlong into the misguided actions of some people, and a legal system that is ill-equipped to cope with such people, it creates - at least to my mind - a fragile ecosystem.

    Retailers need to prioritize their customers' safety, but I also recognize that taking a position - any position - has the potential of creating ill will in some segments of their communities.

    I cannot even imagine how I would feel as a customer if I walked into a store's rest room and found an individual armed to the teeth.  Quite frankly, I wouldn't give a damn about open carry laws - I'd call the cops as fast as possible, and I would be wholly dissatisfied with a system that could not lock these people up.  There have been too many shootings, too many deaths, too many people who thought they were in safe places only to discover that fewer and fewer places actually are safe.

    Published on: January 3, 2023

    Albertsons said yesterday that "the State of Washington Supreme Court has granted the Company’s motion to hold an expedited review of the temporary restraining order" preventing it from paying out a $4 billion special dividend ahead of its acquisition by Kroger Co.

    The dividend was announced at the same time as Kroger, the country's second largest food retailer, said that it wanted to acquire fourth-ranked Albertsons for $24.6 billion, a move that would leave the newly combined company still at number two behind Walmart, but with some 5,000 stores around the US."

    The expedited review means that Albertsons will not have to wait until a scheduled February 9 hearing of the  state attorney general's appeal to permanently block the dividend, which is premised on the idea that it would hurt Albertsons’ ability to compete with Kroger and other retailers if the merger doesn't go through.

    Albertsons continues to maintain that "that the claim brought by the Attorney General of the State of Washington, and the similar lawsuit brought by the Attorneys General of California, Illinois, and the District of Columbia, are meritless and provide no legal basis for preventing the payment of the Special Dividend. Albertsons’ position has been supported by favorable rulings in both Circuit and District courts in the District of Columbia and a Washington State court."

    The deal is subject to regulatory approval by the Federal Trade Commission (FTC), with the divestiture of a number of stores in select markets expected.  However, the proposed deal has been roundly criticized by some lawmakers, labor groups and consumer advocates as being bad for competition and likely to result in higher prices for shoppers.

    KC's View:

    "Expedited," I suppose, is relative - Albertsons originally wanted to pay out this dividend two months ago.

    I suspect that the dividend will end up being paid out, even if it can legitimately be described as lining the pockets of private equity firm Cerberus Capital Management, which owns nearly 30% of the company's shares and holds two seats on Albertsons' board.  And we'll never know what the impact would be if the merger doesn't happen, since it eventually will be approved … though the conditions of the approval at this point are anybody's guess.

    Published on: January 3, 2023

    Ahold Delhaize-owned e-grocery company FreshDirect has come up with a new slogan - “Food That Delivers You” - that looks to get away from what Advertising Age says was the more "functional" approach of the past that focused on the "logistics and convenience of food delivery."

    The goal is to focus on “how food connects people and the quality of (that) food,” according to John MacDonald, FreshDirect’s chief marketing officer.

    Ad Age writes that "the spots will air from January to March, which MacDonald said is FreshDirect’s busiest season partly due to the cold weather and also because consumers develop goals and 'take a look at what and how they’re eating,' he said … The campaign comes as food brands deal with inflation. Polling firm Morning Consult found that 17% of U.S. respondents bought groceries via delivery in November, down from 19% a year earlier, after reaching a 12-month low of 15% in March.

    "FreshDirect will attempt to ease consumer concerns over prices by offering its 'DeliveryPass' for free for a year to new customers. The pass normally costs $129 per year and allows customers to get unlimited free deliveries and other benefits including reserving specific times for delivery."

    The story also points out that "later this year, FreshDirect will launch its first loyalty program with the aim of retaining long-time users. The program will include perks relevant to New York City consumers, such as tasting experiences for new products or information about artisan yogurt makers in Brooklyn, said MacDonald."

    KC's View:

    I appreciate the move to aspiration, but I still do not understand why the FreshDirect brand does not have a stronger representation in Ahold Delhaize-owned stores.  To be fair, I haven't recently been into that many of the company's banners, but in my local Stop & Shop stores, there is very little evidence of the brand that I've been able to discern.

    From the moment that they bought FreshDirect, I thought that every one of the company's bricks-and-mortar stores ought to have FreshDirect sections, which would highlight some of the SKUs available via e-commerce, and spotlight the ways in which Ahold Delhaize-owned stores offer a complete suite of services.  To me, this is something that needs to be marketed a lot more aggressively … unless, of course, they're worried about over-promising and under-delivering, in which case they have a different, more serious problem.

    Published on: January 3, 2023

    There is an old joke about how economics is the only field in which two people can share a Nobel Prize for saying opposing things.

    Which came to mind as two stories in the Wall Street Journal seemed to reach differing conclusions.  Or, at least, illustrate differing perspectives on the same story.

    First, there was a piece in the Journal about how "workers who stay put in their jobs are getting their heftiest pay raises in decades, a factor putting pressure on inflation.

    "Wages for workers who stayed at their jobs were up 5.5% in November from a year earlier, averaged over 12 months, according to the Federal Reserve Bank of Atlanta. That was up from 3.7% annual growth in January 2022 and the highest increase in 25 years of record-keeping."  In addition, the Journal writes, "Employees who changed companies, job duties or occupations saw even greater wage gains of 7.7% in November from a year earlier. The prospect that employees might leave for bigger paychecks is a main reason companies are raising wages for existing employees."

    The problem is that "faster wage growth is contributing to historically high inflation, as some companies pass along price increases to compensate for their increased labor costs. Prices rose at their fastest pace in 40 years earlier in 2022. Inflation has cooled in recent months but remains high. Federal Reserve officials are closely monitoring wage gains as they consider future interest-rate increases to slow the economy and bring down inflation."

    These officials may have been relieved to read another Journal story about how "the labor market proved to be a resilient stabilizer in 2022 for a U.S. economy facing the highest inflation in four decades.

    "With the Federal Reserve having raised interest rates at the fastest pace since the early 1980s to fight inflation, however, the economy has slowed, and effects of that are filtering into hiring and wages."

    The Journal writes that "many workers aren’t feeling the pay gains … Wages for all private-sector workers declined by 1.9% over the 12 months that ended in November, after accounting for annual inflation of 7.1%, according to the Labor Department."  Indeed, the Journal writes, "There are signs wage gains are beginning to ease as the tight labor market loosens a bit. Average hourly earnings were up 5.1% in November from a year earlier, slowing from a recent peak of 5.6% in March. Many analysts expect wage growth could cool further in coming months."

    KC's View:

    Which reminds me of yet another joke about economists…

    The First Law of Economics is that for every economist, there exists an equal and opposite economist.

    The Second Law of Economics?  They're both wrong.

    Let's be clear.  I'm no economist.  Never even taken an economics class.  So I make jokes with the understanding that if economists want to make pundit jokes, people of my ilk are fair game.

    While these two stories reflect, I think, the vagaries of economics, I also think they illustrate the unique historical moment in which we find ourselves.  In some ways, even as we deal with inflation and growing fears about recession, there are elements of the economy that still are cooking, which doesn't make it any easier on regulators.   

    Just easier on joke writers.

    Published on: January 3, 2023

    The Information reports that Instacart "has cut its internal valuation to around $10 billion, according to two people familiar with the situation. The new valuation is 20% lower than the one it had in October and nearly 75% lower than the price investors paid for shares early last year, when its paper valuation was $39 billion."

    Instacart is expected to have an Initial Public Offering (IPO) later this year after having delayed its plans to go public in 2022.  The company hardly is alone - "investor perceptions of app-driven delivery startups - a sector that raised billions of dollars during the recent funding boom " - have "soured" as the entire tech economy has been hit hard by inflation and a post-pandemic economy.

    However, the story notes that Instacart's "revenue has continued to rise," according to CEO Fidji Simo. "She told employees in mid-October that third quarter earnings had more than doubled since the second quarter, and that revenue and gross profit in the third quarter of the year had increased more than 40% from the same period the previous year."

    KC's View:

    This gets a lot of attention, but I have to admit that I am a lot less interested in an Instacart IPO than I am in how the service provider will help retailers - especially independent retailers - not just compete with the likes of Amazon and Walmart, but cope with a fractious economic environment that is creating a lot of change in the e-grocery sector.

    Published on: January 3, 2023

    Yahoo Finance reports that "Starbucks is updating its reward program, making it tougher for customers to score freebies with 'stars,' or points, in 2023 … Effective February 13, reward members will need 100 stars, up from 50, to get a free hot or iced coffee, tea, bakery item, packaged snack or a plastic to-go cup. Previously, iced coffee or tea was not included in this level.

    "The next tier is 200 stars, formerly 150, to score a handcrafted beverage like a latte, Frappuccino, or any hot breakfast item. To round out the updates, 300-star customers can get a packaged salad, lunch sandwich, or protein box. The 300-star tier will also include packaged coffee (a bag of whole beans to make at home), which was previously 400 stars."

    It is, the story says, "the first structural change for members since 2019."  The company said in a statement that "we occasionally need to make changes to ensure the long-term sustainability of the Starbucks Rewards program and to meet the changing needs of our members."

    KC's View:

    It usually isn't a good look when retailers change the terms of frequent shopper programs so that it is harder for best customers to earn rewards.  "Ensure sustainability of the program" is code for improving the bottom line … the question is, at what cost?

    Published on: January 3, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  Benzinga reports that Amazon has "tried to dispose of excess space on its cargo planes to adjust from a rapid pandemic-era expansion to a slowdown in online growth.

    Lately, Amazon, which has a fleet of about 100 planes in the U.S. and Europe, has hired executives with experience in marketing cargo space for airlines … Amazon launched the air cargo service in 2016, prompting speculation that it would ultimately create an overnight delivery network to rival United Parcel Service, Inc UPS and FedEx Corp FDX.

    Demand for air cargo has cooled this year and will likely tail off again in 2023."

    According to the story, "Amazon's possibilities include filling empty jets returning from Hawaii and Alaska with pineapples and salmon.

    "The long-term plan for Amazon Air remained intact despite the current turmoil.

    "The pressure to make money from unused space aboard its jets mounted as it looked to boost profits in a period of slower revenue growth."

    CNet had a great headline that pretty much described the environment that led to decisions like these:

    "Amazon's Big Year of Thinking Small"

    The story made the point that CEO Andy Jassy has made it clear that "Amazon wasn't done making bets on businesses that could have long-term payoffs," but is trying to streamline "our costs in a bunch of different areas, while at the same time making sure that we keep betting on the things that we believe long-term could change."

    •  The Financial Times has a story about how "Shopify is seeking to fill a lucrative gap in marketing data left by Apple’s privacy crackdown by offering retailers a new way to target potential customers through the world’s largest ad platforms … The new tool allows retailers to pool their customer data and upload it to Meta and Google’s advertising platforms. Marketers are then able to target ads at 'lookalike' customers who might be more likely to buy their products because they bought similar items from another retailer.

    "The system is designed to skirt Apple’s rules against tracking iPhone users, which have put a multibillion-dollar dent in the online advertising industry this year, and compete with Amazon’s fast-growing ads business. Though Shopify Audiences is not yet a significant money-spinner for the ecommerce company, it could offer a much-needed growth opportunity at a time when looming recession and cash-strapped consumers are squeezing retailers."

    Published on: January 3, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  From the BBC:

    "A third of the global economy will be in recession this year, the head of the International Monetary Fund (IMF) has warned.

    "Kristalina Georgieva said 2023 will be 'tougher' than last year as the US, EU and China see their economies slow.

    "It comes as the war in Ukraine, rising prices, higher interest rates and the spread of Covid in China weigh on the global economy."

    Betcha the New Year's Eve party at her house was a real bummer.

    •  From the Los Angeles Times:

    "A Sacramento County Superior Court judge has put a temporary hold on a new California law boosting protections for fast-food workers that was set to go into effect Jan. 1.

    "The order comes in response to a lawsuit filed Thursday by a coalition of major restaurant and business trade groups that is backing an effort to overturn the law, called Assembly Bill 257, through a referendum on the California ballot in November 2024. If the referendum qualifies for the ballot, it would block AB 257 until voters have a say … The coalition, called Save Local Restaurants, took issue with the state Department of Industrial Relations’ effort to implement AB 257 on Jan. 1, arguing that because the referendum effort is well underway, it renders the law unenforceable. Implementing the law could set a harmful precedent that threatens voters’ right of referendum, the coalition said."

    The Times writes that "the landmark law creates a mandate for a first-of-its-kind council to set standards for franchise restaurant workers’ hours and other workplace conditions. It also could raise the workers’ minimum wage as high as $22 an hour.

    The law requires the signatures of 10,000 fast-food restaurant employees to move forward with creation of the council once the law goes into effect.

    "Service Employees International Union California, which sponsored AB 257 and opposes the effort to overturn it, said it has submitted nearly double the number of signatures required by the statute to establish the Fast Food Council."

    •  From the Wall Street Journal:

    "The Covid-19 pandemic might not be gone, but the global supply-chain crisis it spawned has abated.

    "Goods are moving around the world again and reaching companies and consumers, despite some production snarls and Covid outbreaks inside China. Gone are the weeks-long backlogs of cargo ships at large ports. Ocean shipping rates have plunged below prepandemic levels … In the U.S., retailers have ample inventory. Railroads averted a labor strike and package delivery trucks have plenty of spare capacity. That bodes well for U.S. consumers heading into 2023, executives and analysts say, although profits for transport companies will be pinched now that demand and supply are back in balance."

    Published on: January 3, 2023

    •  Weis Markets announced that Amanda Bauman, the company's manager of digital marketing, has been promoted to the role of Director of Marketing.

    •  United Natural Foods Inc. (UNFI) announced that Ron Selders, the company's senior vice president of bakery and deli, has been promoted to the role of president of fresh, responsible for the deli, bakery, produce and meat departments.

    •  Walmart announced that Gonzalo Gebara, the CEO for Walmart Chile, has been promoted to the role of president-CEO of Walmart Canada.

    Published on: January 3, 2023

    Last night, about 10 minutes into a highly anticipated Monday Night Football game between the Buffalo Bills and Cincinnati Bengals, Bills safety Damar Hamlin collapsed on the field after what appeared to be a routine tackle of Bengals wide receiver Tee Higgins.  Hamlin, 24, was given CPR on the field before being taken away in an ambulance;  the Bills later said that Hamlin had suffered cardiac arrest and that his heartbeat was restored on the field.  He is "currently sedated and listed in critical condition," the team said.

    The game was temporarily suspended about 20 minutes after the tackle, as players for both teams, many of them in tears, returned to their locker rooms.  The game was officially postponed at about 10 pm EST.

    Published on: January 3, 2023

    Today, MNB initiates a new sponsorship tier that reflects what I think is a new approach to the topic.

    I've been doing this a long time, and at this point I've decided that I really want to forge sustained relationships with companies that have value propositions and missions in which I believe .. and that, in turn, believe in MNB's value proposition and mission.  My goal is to not just provide a forum for these "charter sponsors," but also commit to helping them grow their businesses in a variety of ways.  In other words, it ain't just about banner and tile ads.  It is about moving the needle forward in terms of innovation and, ultimately, service to the shopper.

    With that in mind, I am happy to welcome Sifter to the MNB family of Charter Sponsors.  I've written here often in the past, with great enthusiasm, about Sifter's technology, which retailers can use to make it easier for customers to find the right and relevant foods for their complex diet needs - I think this is a game changing business model, and I was urging retailers to check it out long before we ever talked about sponsorship.

    In addition, I am thrilled that Replenium, a longtime MNB sponsor, also is joining the Charter Sponsor cohort.  Again, I've always been a big proponent of Replenium's value proposition - automatic replenishment at the consumer level - and believe that it has the potential to drive many retailers forward into the future.

    So that's the beginning of the MNB Charter Sponsor era.  If you'd like to talk about joining the ranks of Sifter and Replenium, and want to support MNB's unique approach to news in context, analysis with attitude, I hope you'll reach out to us at