business news in context, analysis with attitude

Published on: February 2, 2023

Carmen Quiroga, who immigrated to the US from Mexico 17 years ago, was living the American dream, opening up a little breakfast spot in Coventry, Connecticut.  But it has turned into a bit of a nightmare, since she chose for her business a name that seemed in tune with its value proposition, but that, unbeknownst to her, held political connotations:  Woke.  I have some thoughts…

Published on: February 2, 2023

The hits - and not the good kind - keep coming for Amazon…

The Seattle Times reports that the Department of Labor’s Occupational Safety and Health Administration (OSHA) has issued a new round of citations, saying that its inspections revealed that at six of Amazon's warehouses, "workers … faced a high risk of lower back injuries and musculoskeletal disorders. That high risk is due to long hours, awkward and repetitive motions and the weight of items workers are lifting, picking and packing."

This is just the latest in a series of citations against Amazon issued by OSHA, as government regulators take aim at the company, maintaining that, as stated in one court filing, "many of Amazon’s policies and practices are determined at the corporate level."

“Amazon’s operating methods are creating hazardous work conditions and processes, leading to serious worker injuries,” Doug Parker, assistant secretary for occupational safety and health, said in a statement. “They need to take these injuries seriously and implement a companywide strategy to protect their employees from these well-known and preventable hazards.”

The Times writes that "Amazon has appealed the earlier citations and intends to appeal the most recent penalties."

However, the story also suggests that OSHA's bark may be worse than its bite:  "Amazon could face more than $136,000 in penalties: $29,008 from citations issued in December, $60,269 from citations issued in January and $46,875 from citations issued Wednesday.

"Amazon, comparatively, recorded net sales of $127 billion in the third quarter of 2022, the most recent financial data available. The company recorded net income of $2.9 billion that quarter."

Yesterday, MNB took note of another Seattle Times report that the US Department of Justice civil division is investigating "whether Amazon executives knew about safety hazards and misled others about the company’s safety record."  Specifically, the story says, the DOJ wants to know whether Amazon's management “engaged in a fraudulent scheme designed to hide the true number of injuries” to its workers, and made "'false representations' to lenders about its safety record to obtain credit."

Meanwhile, The Information reports that Amazon's drone delivery plans have not exactly taken off as planned:

Amazon in December announced with great fanfare that, after nearly a decade of work, it had finally launched drone delivery in the U.S., in two towns in California and Texas. But by mid-January, Amazon Prime Air had made deliveries to fewer than 10 houses, according to people who worked on the project.

"Despite what Amazon has said publicly about regulatory approvals for the drone effort, the Federal Aviation Administration is blocking Amazon’s drones from flying over roads or people without case-by-case permission, according to federal records. That has severely limited the number of homes they can reach in the two towns, Lockeford, Calif., and College Station, Texas. Amazon had asked the FAA to loosen those safety restrictions, but the agency issued a new set of rules late last year that rejected many of the company’s requests."

According to the story, "A person with direct knowledge of Amazon’s operations in Lockeford said they were only aware of two households having received a total of three deliveries between them as of mid-January. In College Station, delivery numbers were similarly limited by the FAA restrictions, with around five households having received deliveries by the middle of last month, one person who worked at the site estimated … Amazon’s drones have flown several hundred flights at the two locations since the fall, but nearly all of those have been maintenance flights in which its drones flew on its own property, where they completed tasks such as delivering dummy packages, two people who worked on the project said."

The Information writes that "while many of Prime Air’s missed milestones and safety incidents over the years have been well documented, the restrictions that continue to kneecap Prime Air’s expansion plans have not been previously reported."

The story notes that "Amazon has a spotty record with the FAA. The company’s drones have crashed at least eight times during drone tests, including one time in 2021 when the crash sparked a multiple-acre blaze in rural Oregon … In at least two of those crashes, the FAA said Amazon moved crash evidence before regulators could inspect it, according to Insider. Amazon has said no one has ever been injured as a result of its flight tests."

The Information also points out that "looser safety restrictions enjoyed by Amazon’s competitors have significantly increased the number of households they can reach. Alphabet’s Wing has made more than 300,000 deliveries for partners such as Walgreens and DoorDash in the U.S., Australia and Finland, according to the company. Walmart, which is working with multiple drone-delivery startups, made more than 6,000 deliveries of items like rotisserie chickens and paper towels from dozens of stores across the U.S. in 2022, the company said in January."

Published on: February 2, 2023

Axios reports that Robert Califf, commission of the US Food and Drug Administration (FDA), is calling for the food portion of the agency to be reorganized "under a new deputy commissioner for Human Foods."

Some key elements in the story:

•  "Under the proposed plan, the existing Center for Food Safety and Applied Nutrition, the Office of Food Policy and Response, and certain functions of the agency's Office of Regulatory Affairs 'will be unified into a newly envisioned organization called the Human Foods Program,' per the announcement."

•  "The new deputy commissioner 'will have decision-making authority over policy, strategy, and regulatory program activities' within the Human Foods Program, 'as well as resource allocation and risk-prioritization,' Califf said."

•  "As part of the plan, Califf suggested the creation of a Center for Excellence in Nutrition to prioritize efforts 'to help American consumers make more informed food choices,' and proposed an Office of Critical Foods within that center."

•  "He also proposed the creation of an Office of Integrated Food Safety System Partnerships to better integrate the FDA's food safety and response activities with state and local partners.  He proposed a Human Foods Advisory Committee be established as well, which 'will consist of external experts to advise on challenging and emerging issues in food safety, nutrition and innovative food technologies'."

The story notes that the Consumer Brands Association (CBA) argues that the proposal fails "to provide the deputy commissioner with direct line authority over all major food program components or fully integrate the agency's policymakers with its inspection force, the Consumer Brands Association said in a statement."

Published on: February 2, 2023

Bloomberg reports that as the Super Bowl approaches, certain popular foods may be more affordable this year than last year.

According to the story, "the price of chicken wings has plunged 22% from last January according to a report from Wells Fargo’s Agri-Food Institute. Then, whole chicken wings were priced at $3.38 per pound, according to a USDA weekly retail price report. Now, they sell for $2.65 per pound as poultry farmers pushed the supply of birds to the highest level since the beginning of 2019."

At the same time, "Avocados are another bright spot with prices down 20% versus a year ago due to increased plantings and strong crop yields, USDA data show. In Mexico, an important source of the fruit for the US, prices have dropped 40% from a year ago, according to a Bloomberg Index. And sirloin steak is down $1 per pound since last December, according to Federal Reserve Economic Data."

However, it's not all good news:  "Beer and wine prices are up 11% and 3%."

Published on: February 2, 2023

With brief, occasional, italicized and sometimes gratuitous commentary…

•  The Wall Street Journal reports that "a federal judge declined to halt Meta Platforms Inc.’s acquisition of the virtual-reality startup Within Unlimited, delivering a setback to antitrust enforcers at the Federal Trade Commission seeking to block the deal, a person familiar with the ruling said.

"In a sealed court decision issued overnight, U.S. District Judge Edward Davila in San Jose, Calif., denied the FTC’s request for an injunction blocking the proposed merger, the person said.  The judge’s opinion, which isn’t yet public, is a boost to Meta’s virtual-reality ambitions and appears to vindicate for now the Facebook parent’s claims that the FTC overreached by bringing a flawed antitrust case."

It remains possible that the FTC could employ other means to block the acquisition, but the Journal notes that traditionally it will not do so once a federal judge has weighed in.

The question is whether the judge's ruling will be seen as specific to this case, or whether it indicates that the FTC's more aggressive approach to antitrust issues - which could affect companies like Amazon - will find limited acceptance in the courts.

Published on: February 2, 2023

•  From the New York Times:

"The nation’s demand for labor only got stronger in December, the US Labor Department reported Wednesday, as job openings rose to 11 million.

"That brings the number of posted jobs per available unemployed worker, which had been easing in recent months, back up to 1.9 — not what the Federal Reserve has been hoping for as it seeks to quell inflation … The 5.5 percent increase in job openings was largely driven by hotels and restaurants, which have been steadily recovering from the pandemic, and jumped sharply to 1.74 million positions posted. Jerome Powell, the Fed chair, has been particularly focused on wage inflation in the services sector, but like wages more broadly, increases in hourly earnings in private services have been decelerating.

"In another sign of confidence among workers, people voluntarily left their jobs at about the same rate as they did in November. Quits as a share of the overall employment base have fallen slightly from 3 percent at the end of 2021 but plateaued over the past few months. Overall, in 2022, about 50 million Americans quit their jobs.

•  The Los Angeles Times reports that Costco is considering the building of a new store in the Baldwin Hills neighborhood of South Los Angeles that would be a little different - it would serve as the foundation for an 800-unit apartment house that would include 184 units for low-income tenants.

"There have been no applications filed with the city of Los Angeles for the project," the Times writes, "but it was officially announced earlier this year and renderings for the development were released Tuesday. A spokesperson for Costco could not be immediately reached for comment."

The Times also points out that the project would be "eligible for incentives through the city’s Transit Oriented Communities program, which allows greater density and floor area than is normally allowed under current zoning rules, according to the Los Angeles Planning Department’s guidelines.

"The project is meant to support families, seniors and other residents from the community, according to Thrive Living, a privately-owned national real estate firm. Apartments would be marketed for affordable housing for both seniors and low-income households, the developer said."

•  Yahoo Finance reports that "McDonald's plans to open 1,900 new locations in 2023. More than 400 of the new Golden Arches will be in the U.S. or in its internationally operated markets, including Germany, Canada, France, Australia, Canada, and the U.K. The remaining 1,500 will be in developmental licensee and affiliate markets, including 900 in China … The growth strategy marks the first time since 2014 that McDonald's has made a big push into growing its U.S. locations."

•  The Wall Street Journal reports that FedEx "is laying off more than 10% of its global management staffers as the delivery company faces a shipping slowdown.

"In an email to staff Wednesday, Chief Executive Raj Subramaniam said the company is reducing the size of its officer and director ranks and consolidating some teams and functions. The company declined to say how many jobs were being eliminated.

"The Memphis-based company has already trimmed its U.S. workforce by 12,000 since the start of the current fiscal year in June 2022, through regular attrition, a hiring freeze and other head-count initiatives. It had more than 550,000 employees globally, according to its most recent financial statement in December."

•  The Seattle Times reports that REI has laid off 167 people from its headquarters, citing 'increasing uncertainty' and a need to get back to profitability … REI is making 'organizational changes' at its headquarters, including reducing headcount and reorganizing and combining several divisions. In the year ahead, Artz said, REI will 'align' around a few strategic priorities to ensure the co-op is making the best use of its resources and centering its work around the customer and member experience."

According to the story, "The layoffs affected 8% of the co-op’s headquarters workforce and less than 1% of its total headcount, president and CEO Eric Artz said in a letter to employees on Tuesday. 

"REI shifted to remote work in 2020, meaning there is no single headquarters location. The co-op has offices in Issaquah, Seattle and Sumner."

•  The Wall Street Journal reports that "Bed Bath & Beyond Inc. missed interest payments on its bonds, a week after its bank lenders sent the company a default notice because it was overdrawn on its credit lines.

"The home-goods retailer failed to pay more than $28 million on three tranches of notes totaling roughly $1.2 billion due on Feb. 1, a spokeswoman for the company confirmed Wednesday … The coupon miss comes nearly a month after the company raised the possibility of filing for bankruptcy and said it was running low on funds."

Published on: February 2, 2023

Executive Suite is sponsored by Robin Russell Executive Search.

•  Dollar General has announced the retirement of its president-CFO, John Garratt, effective June 2023.  The company says that it has "robust succession plans," and at the moment is evaluating internal candidates.

Published on: February 2, 2023

Responding to our story about the shortage of adult-age employees facing US businesses, one MNB reader wrote:

I started my career in the grocery industry working as a “Box Boy” in 1963 working at a starting wage of$1.65 an hour at a chain store.  This job helped me learn about taking care of the customer, learning how to check, ordering for the  store from a paper order guide, building displays, being responsible for being there when the work schedule was posted, and again taking care of the customer. The ground work was laid for going to college at Portland State College for a whopping $305/term. Today, it costs about $5000/term. I ended up working for Campbell Soup for 2 years and then a 48 year career with a large paper company. What does the above missive have to do with a shortage of workers? In MHO, most young people are not encouraged by parents to go out and get a job. Second, young people are not motivated to make money to accommodate their wants, i.e. a car,  gas for their car, pay for their I-Phones, clothes, help pay for their college tuition, etc. 

Most of the major grocery chains here in Portland, OR are woefully understaffed. Help wanted signs are everywhere, with a starting wage of$15-$16/hour starting wage. 20 hours a week is $300+ per week.  Journeyman starting wages are $25-$26/hour. I am not categorizing young people and their work ethic but where are the parents encouraging their youngsters to go out and get a job and why that is important ? 

The food/grocery industry needs to have young people entering this wonderful industry. 

Reacting to our piece about Walmart investing in vertical farm company Plenty, MNB reader Bob Thomas wrote:

Here in Panama you can find vertical farming leafy greens in all of the super markets.  Panama wants to become the next Latin American food hub.  In 2021 Panama passed a law that aims to create about 50 thousand acres of special economic zones for farming.  In 2019 the International Congress on Controlled Environment Agriculture held its event in Panama City (Panama).  In 2016 The Research Center for Controlled Environment Agricultural Production (CIPAC) in Panama led Panama’s embrace of Controlled Environment Agriculture. Panama is the first Latin American country to understand that climate change is impacting traditional agriculture in Latin America and due to these permanent changes is preparing to completely embrace new technologies such as controlled environment agriculture (which includes vertical farming, greenhouse vegetable production and indoor agriculture.)

On another subject, MNB reader Brian Blank wrote:

Addressing the bandwidth and technology problems would seem to be of critical importance, and I don’t understand why grocers seem to be lagging so far behind.  Not even speaking to behind the scenes operational needs, stores keep pushing digital coupons, but are poorly prepared for customers to utilize them in real-world conditions.

I don’t personally know anyone who sits down with the weekly flyers from local grocery stores and goes through each and every page of each and every store, making sure to go onto each store’s website or app to load all potentially useful digital coupons before heading out for their weekly shop (ditto for sitting down with the web site or app version of the weekly flyer).  In my experience, it seems people mostly find out about the extra savings of digital coupons in store, where they have to stop in their tracks and try to navigate through the app—fingers crossed the store has halfway decent wifi, or at least a strong cell reception—and hope that all that results in the digital coupons actually loading to the “loyalty” card, which chances are maybe 50-50 that it will.

And finally, one MNB reader wrote in about my FaceTime lament about the significant number of people who would skip births, deaths and weddings to attend a Super Bowl game in which their favorite team was playing:

Your readers know that you are not an NFL fan. So what if it were the Mets were in a game 7 of the World Series?

Births and funerals I realize can sometimes be unexpected. But any of my friends or family would not plan a wedding close to the Super Bowl.

Here's the deal.  In the unlikely event that the New York Mets were in the World Series and one of their games conflicted with a birth, wedding or funeral of a family member or close friend, I would take my cue from Sandy Koufax, who in 1965 decided not to pitch the first game of the World Series against the Minnesota Twins because it fell on the Jewish holiday Yom Kippur.

It is all about priorities.  I might not be happy about missing the game, but I hope I'd do the right thing.