Yesterday we referenced a piece in The Street analyzing the proposed Kroger acquisition of Albertsons. Essentially, it argued that even combined, the Kroger-Albertsons market cap is still far less than that of Amazon, Walmart and Costco. The Street argues that "inherently, Kroger and Albertsons are small, local players in relation to Walmart, Amazon, and Costco. Merging -- as the two grocery chains are trying to do -- would give them more scale, more buying power, and a bigger network of stores to leverage delivery and loyalty programs against." However, even merged, The Street suggests a combined Kroger-Albertsons entity "would still be at a major disadvantage to Amazon, Walmart, and Costco."
I think this is precisely the argument that Kroger and Albertsons will make to the Federal Trade Commission (FTC), but it is not an argument that sat well with a number of MNB readers.
The Street's conclusion that a combined Albertsons-Kroger would still be a "small, local player" based on market cap vs Walmart, Amazon, and Costco is just silly.
Kroger and Albertsons sell groceries in the United States, while the other three companies are multinational retailers of categories well beyond food. The US government will consider grocery market shares of the companies, finding, for instance that a combined Albertsons-Kroger is about 50% of Walmart's size in many food categories, which the government may not find to be too large, but certainly won't find to fit the definition of "small, local player."
MNB face Glen Terbeek wrote:
When I read the headline (Still a Small, Local Player) I hopefully thought they meant “focus on the local store and it’s shoppers”. What a disappointment, the article was all about the old measures of financial size and buying power.
Remember, shoppers only care about “their” store, not the size of the chain. I know several "small, local player" independents that have wonderful shopper loyalty. Larger size could enable a retailer to better focus on each store defined by its shoppers, if organized and measured accordingly. In flat population growth, store saturated markets, winning the loyalty of each shopper is critically Important through locally focused stores.
Another MNB reader wrote:
The justification for the Kroger-Albertsons merger always mentions increased "buying power."
Isn't that a tacit admission that they would be violating the Robinson-Patman Act - even to a greater extent than they likely now are?
And would that not make their competitors less able to compete, potentially causing some of those to go out of business?
The result is a lessening of competition. Everyone in the industry knows that buying power is more than the price you see on the invoices.
And from another MNB reader:
After years of competing with Kroger with a retailer with around 100 stores and nearly a billion in annual sales, I never, ever, considered Kroger a small, local player. Albertsons, albeit a third the size of Kroger is still large enough to command leverage with their brands and suppliers vis-a-vis true small local players, with 100 stores or less. Kroger was always able to buy better and defray fixed costs over more stores, very much like the bigger players mentioned in the article. Consequently, I think this merger is much more about expense reduction than price reduction, with the exception of Kroger being much better at price optimization than Albertsons. After the smoke clears and the deal is done, don’t be shocked if not much changes from a shopper’s perspective.
And, one more:
Market capitalization is not an appropriate arbiter of market dominance - Walmart, Costco, and Amazon are not necessarily food-centric, which is how I’d characterize Kroger/Albertsons.
I certainly would agree … the problem is that Kroger/Albertsons continue to justify the merger by comparing themselves to Walmart, Costco and Amazon…
We also had a story yesterday about Albertsons announcing a new initiative, dubbed Sincerely Health, that it describes as a "digital health and wellness platform … designed to help improve lives by connecting, educating, encouraging and rewarding customers on their health and wellness journey so they can make informed choices regarding food, physical activity, sleep and mindfulness."
In general, I applaud any initiative that tries to connect the dots between food and all the ways in which we're able to track our fitness and wellness. Part of the problem that I think a lot of consumers have is that there is a ton of data, myriad ways to compile it, and yet some level of confusion exists about how to turn data into something actionable.
If that's part of the goal here, that's a good thing. The fact is that it also will give Albertsons a lot of data to use in figuring out to be both relevant and resonant to its shoppers, but as long as it isn't
creepy intrusive, that's also a good thing.
MNB reader Dian Emerson wrote:
Call me skeptical here….some reactions to offer. I am a former Safeway employee of 20+ years and was in the audience for one of Steve Burd’s pronouncements (during the Theranos era) that Safeway was going to become “a healthcare company that sells groceries” to stunned silence. We all know how that turned out.
That was then and this is now, and as you famously point out on almost a daily basis- the core business remains the stores and their customers. Digital is here to stay, but I can’t help thinking that it is all around the edges here. Fundamentally, my local Safeway (other than self-checkout) is really no different in its approach, merchandising or product selection than it was decades ago. The health app changes nothing about my shopping experience, nor would it keep me from shopping elsewhere-whether that be Trader Joe’s, Costco, or local independents.
So, I am going to pass on this one.
From another MNB reader:
I have to confess as a “Senior Citizen” age 65 who takes medical care seriously I am so frustrated with the current verifications and paperwork. It seems that every time I walk into a medical, dental, or vision office They want me to fill out new or updated paperwork even if I have been a patient for years. I thought technology was going to make things easier? Now that buildings full of lawyers are involved in CYA (and you know what that means) every LLC wants you to let them off the hook for liability, but wants you to confirm you will pay them everything they feel they are owed if your insurance doesn’t cover it. Why can’t there be a basic form that is accepted by every health care provider? Whomever figures this out will be the next Jeff Bezos, but I doubt it will ever happen since there is no money in it. Bottom line for me: make it easy to do business with you and I will be your customer for years to come. Unfortunately in health care we are a captive audience.
The other day we pointed to how Stew Leonard's leveled with its customers via email about why some prices are up, some are down, and where some of the real bargains are, and suggested that this approach - being an advocate for the shopper, not a sales agent for the supplier - is the exactly right strategy. One MNB reader responded:
Stew nailed it as usual, I would love to see the CEO's of Shaw's, Hannaford or Stop and Shop do something like this, if they truly want to resonate with the customer.
One MNB reader had an observation about the story comparing the hot dog-and-soda combos at Costco and Sam's Club:
In Cancun at CostCo you get pickled jalapeños as an additional topping - which are delicious!
Yesterday, we pointed to a report from The Street about how, as Starbucks CEO Howard Schultz prepares to step down from the role for a third time, he is promising " one last major surprise to fans of the brand."
Let's be clear - Howard Schultz deserves enormous credit for making Starbucks one of retail's great stories, and essentially inventing a category.
But … since he was named incoming CEO last October, Laxman Narasimhan has been virtually invisible to the outside world. I wonder how many CEOs would take a top job in which they'd have to hang around six months before actually being allowed to do the job.
And now, with this "game changer," Schultz - in my mind, at least - confirms that whatever he says about his dedication to the company, it is really all about him. This is his surprise, his transformative platform, his alchemy. This is all about ego … and if Schultz had any class at all, he would want Narasimhan to be in a position to take the credit and to start his tenure with a transformative move.
This is venti narcissism, with three shots of hubris.
MNB reader Mark Johnson wrote:
Wow........this might be your best one-liner yet:
"This is venti narcissism, with three shots of hubris."
Still laughing MAO!
There was a story yesterday about how c-store chain Sheetz has ended a policy that employees felt was discriminatory against people with dental issues.
NorthcentralPA.com reported that the policy stated that "applicants with missing, broken, or discolored teeth were not eligible for employment" because those hires would not be able to comply with the company's "smile policy," which requires that frontline workers greet customers with a "warm and welcoming smile."
The policy got a lot of attention in the media when one woman said she lost her job after her abusive husband knocked out her teeth.
The story says that "Sheetz officials issued a statement saying that the company's culture is centered on respect and inclusivity, and the smile policy was found to be inconsistent with these values. The company states it is now committed to ensuring all policies are equitable and celebrate the diversity of its employees."
I'm sure the policy wasn't meant to be discriminatory, and sometimes certain results can't be foreseen.
I just hope that abusive husband's ass is in jail, and that it stays there for a long, long time.
One MNB reader responded:
Living in north central PA, I understand why Sheetz had this policy. Dental health here for some, is not a priority, layer on those who abuse drugs which rot one’s teeth and selective hiring would be a priority. There are always one-offs such as the abuse issues or accidents which cause teeth to be knocked out. These are explainable and I would think must people would fix but those people who choose to ignore dental health or abuse drugs, well, not the best presentation for a company’s brand, especially food service. Btw, I am not an elitist, many programs in PA to help the less fortunate including colleges offering dental care so their students get real life practice in the dental hygienist program.
More comments about Sandy Koufax's decision to not pitch game one of the 1965 World Series because it fell on Yom Kippur. One MNB reader said it was "perhaps the most heinous display of narcissism in the annals of professional sports." I was chagrined by this, and noted that after Game One, Koufax had an amazing Series, pitched three games and was the MVP.
I also noted that some thing are unimportant, some things are important, and some things are very important, and quoted the great Robert B. Parker, who once said that "baseball is the most important thing that doesn't matter."
One MNB reader wrote:
Parker got it right. Koufax got it right. And YOU got it right !!
Another MNB reader wrote:
BRAVO on your FaceTime comments this morning regarding Sandy Koufax and his decision not to play and also highlighting his performance in the World Series.
And, from another reader:
Bottom line is that it was Sandy's decision for his beliefs...thus it was the right decision. What anybody else thinks is irrelevant.
There was a player 10ish years ago who skipped the World Series for the birth of his son. Also the right decision.
Simone Biles skipped the Olympics for her mental and physical wellbeing. Still the right decision.
Making space for ourselves, our beliefs, and our families is always the right choice and no one else is qualified to judge that.
I totally agree. But not everyone does. One MNB reader wrote:
What Koufax did after he made his self-centered decision has absolutely nothing to do with his thinking when he made his self-centered decision. Or perhaps the Jewish gods had assured him that he’d be rewarded for determining his religious-beliefs were more important than his teammates, fans, and employer.
First of all, yes … his religious beliefs should be more important.
(I debated long and hard with myself whether to post this email. In so many ways it is distasteful in its language and sentiments, having nothing to do with Sandy Koufax. But I decided to use it precisely because of what it says and how he says it. Jewish Gods? Last time I checked, Jews had a single Deity, the same one as Christians. We should never forget that people like this think the way they do and say the things they say.)