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    Published on: March 6, 2023

    I've discovered jazz rather late in life, but it has become a constant and lovely presence that adds texture and depth to everyday existence.  Not surprisingly, I've found a business lesson not just in the sound, but in the act of education and discovery.

    Published on: March 6, 2023

    Amazon said on Friday that it is pausing construction of its vaunted HQ2 corporate offices in Arlington, Virginia, as well as permanently closing eight of its pioneering checkout-free Amazon Go stores.

    Bloomberg broke the story on Friday about Amazon's HQ2 decision :  "John Schoettler, Amazon’s real estate chief, confirmed the pause … Schoettler said the company remains committed to Arlington, Virginia, where by 2030 Amazon has committed to spend $2.5 billion and hire some 25,000 workers. But the construction moratorium will delay the online retailer’s full arrival at its biggest real estate project, and could create headaches for local developers, as well as construction and service workers banking on Amazon’s rapid expansion."

    Bloomberg goes on:  "The first phase of the campus that the company calls HQ2 is nearing completion and will be finished and occupied as planned. Amazon, which says it now has more than 8,000 workers in the area, expects to start moving those employees to two newly completed office towers in a 2.1-million-square-foot development called Metropolitan Park, near the Pentagon and Ronald Reagan Washington National Airport, in June.

    "The delay affects a larger phase across the street. It calls for three, 22-story office towers and the 350-foot-tall (107-meter) Helix, a corporate conference center and indoor garden designed to echo the Spheres, plant-filled orbs at the heart of the company’s Seattle headquarters. Arlington officials granted the 2.8-million-square-foot project, called PenPlace, its most important approval in April."

    The Wall Street Journal quotes Christian Dorsey, chair of the Arlington County Board, as saying, "It really doesn’t concern me. In fact, I’m quite understanding.  I think that we are still going to see all of the benefits that we envisioned…It’s just going to take a little longer to realize.”

    The Journal also offers some context for the area's development:

    "Under an incentive package used to attract Amazon to the region, the company over time could receive up to $750 million from Virginia if it creates enough high-paying jobs and up to $23 million from Arlington County. A new $1 billion Virginia Tech graduate campus for computer science and computer engineering, being built in nearby Alexandria, was part of the region’s winning bid for Amazon’s HQ2."

    There also is a new Metro station being built at the location.

    "Terry Clower, director of George Mason University’s Center for Regional Analysis, which wasn’t involved in the bid to bring Amazon to Northern Virginia, said one particular strength of Virginia’s HQ2 agreement with Amazon is that it didn’t require the state or localities to provide upfront cash to Amazon," the Journal writes.  "Instead the company must hit certain targets.

    "Specifically, Arlington County’s incentives to Amazon are tied to the company’s occupying a certain amount of office square footage and to local hotel tax revenue hitting specific levels, Mr. Dorsey said. He said Arlington County has yet to pay the company any incentives.

    "Nor has Virginia paid Amazon any money for job-linked incentives, though the company’s hiring is running well ahead of expected targets, said Suzanne Clark, a spokeswoman for the Virginia Economic Development Partnership, the state economic-development authority. Amazon has until April 1 to request its first payment for jobs created through 2022, putting the company on track to get its first state payment in mid-2026, she said."

    In Friday's other big Amazon news, GeekWire reports that two of the affected Go stores are in Seattle, two are in New York City and four are in San Francisco.  (The San Francisco closures will leave that city without a Go store.)

    However, Amazon says that it will continue to open new Go stores.

    “Like any physical retailer, we periodically assess our portfolio of stores and make optimization decisions along the way,” an Amazon spokesperson tells GeekWire.  “We remain committed to the Amazon Go format, operate more than 20 Amazon Go stores across the U.S., and will continue to learn which locations and features resonate most with customers as we keep evolving our Amazon Go stores."

    GeekWire writes that "the move to tighten its physical retail belt comes exactly a year after Amazon announced it was closing 68 brick-and-mortar stores, including all of its Amazon 4-star, Books, and Pop Up stores. The company said at the time that it planned to focus more on its Amazon Fresh, Whole Foods Market and Amazon Go grocery and convenience stores.  In the time since, Amazon has been hit by the same economic uncertainty as a number of large tech companies."

    The Puget Sound Business Journal writes that "the Go stores shakeup comes as Stephenie Landry, the former vice president of grocery and a 20-year Amazon vet, announced she will be moving to the worldwide sustainability team. Landry said Friday on Twitter that she will take over as vice president of net zero operations. Amazon hasn't shared information on plans for her replacement."

    KC's View:

    Humility, Ernest Hemingway once wrote, "was not disgraceful, and carried no loss of true pride."

    That sentiment is being tested a bit at Amazon's corporate offices, I suspect.  

    I'm not sure this has all quite reached the level of Icarus flying too close to the sun, but with every passing day it seems clear that if CEO Andy Jassy is not dismantling Jeff Bezos' vision, he's certainly changed the company's priorities.

    Witness, for example, a story that was posted this morning by the Financial Times:

    "It has been more than a decade since Jeff Bezos excitedly sketched out his vision for Alexa on a whiteboard at Amazon’s headquarters. His voice assistant would help do all manner of tasks, such as shop online, control gadgets, or even read kids a bedtime story.

    "But the Amazon founder’s grand vision of a new computing platform controlled by voice has fallen short. As hype in the tech world turns feverishly to generative AI as the 'next big thing', the moment has caused many to ask hard questions of the previous “next big thing” — the much-lauded voice assistants from Amazon, Google, Apple, Microsoft and others.

    "A 'grow grow grow' culture described by one former Amazon Alexa marketing executive has now shifted to a more intense focus on how the device can help the ecommerce giant make money. 'If you have anything you can do that you might be able to directly monetise, you should do it,' was the recent diktat from Amazon leaders, according to one current employee on the Alexa team. Under new chief executive Andy Jassy’s tenure this change of focus has resulted in significant lay-offs in Amazon’s Alexa team late last year as executives scrutinise the product’s direct contribution to the company’s bottom line."

    I have no doubt that there is plenty of innovation investment taking place at Amazon, but it has to be pointed out that the company either has lost control of the narrative, or has decided that an alternative narrative that emphasizes prudence is acceptable.

    I've written for years that the best way to compete with Amazon is to do things it either cannot do or will not do.  At the moment, the list of areas it can't or won't do appears to be somewhat longer than in the past.

    Jeff Bezos once said that "if you’re long-term oriented, customer interests and shareholder interests are aligned.”  At the moment, that alignment seems off, with Jassy more focused on the latter.  

    Published on: March 6, 2023

    The Washington Post reports that the US Food and Drug Administration (FDA) efforts "to update the current definition of 'healthy' - manufacturers would only be able to use the term "if they contain a meaningful amount of food from at least one of the main food groups such as fruit, vegetable or dairy, as recommended by federal dietary guidelines," and would be required to "adhere to specific limits for certain nutrients, such as saturated fat, sodium and added sugars" - are facing strong resistance from a number of manufacturers.

    The opposing argument, the Post writes, is that under the proposed new rules, almost no products currently labeled as "healthy" would be allowed to do so.

    One example - Conagra's Healthy Choice frozen meals and entrees, which "have been a go-to for people in a rush who want to eat something convenient but seemingly good for them. Chicken parm, sweet and sour chicken — microwaves around the country are humming with them right now. The brand represents 60 percent of sales of all products labeled as 'healthy' in the market today, with more than 200 million meals sold last year."

    In comments submitted to the FDA last month, the Post writes, Conagra said that "it is our strong conviction that if FDA’s proposal is adopted in its current form, companies like Conagra will have every incentive to shift their innovation efforts away from products labeled as ‘healthy’ and towards less healthy options."

    According to the story, "Dozens of other food manufacturers and industry organizations have joined Conagra in claiming the new standards are draconian and will result in most current food products not making the cut, or in unappealing product reformulations."

    The Post writes that "the Consumer Brands Association, which represents 1,700 major food companies from General Mills to Pepsi, wrote a 54-page comment to the FDA in which it stated the proposed rule was overly restrictive and would result in a framework that would automatically disqualify a vast majority of packaged foods.

    "'We are particularly concerned by the overly stringent proposed added sugars thresholds. We appreciate FDA’s interest in assessing added sugars intake. We believe, however, that FDA’s restrictive approach to added sugars content in foods described as healthy is unwarranted and outside FDA’s authority given the lack of scientific consensus on the relationship between sugar intake and diet-related disease,' the association stated.

    "The proposed rule, if finalized, they said, would violate the First Amendment rights of food companies and could harm both consumers and manufacturers."

    KC's View:

    I struggle with this.  "Healthy" isn't exactly an absolute term.  Some products, even if not perfect, certainly are healthier than others.

    And I can understand why Conagra is more than a little concerned, since "Healthy" is the name of the brand.

    But the FDA's job isn't to protect brands.  It is to protect consumers/citizens, and that's a good thing.  A tension between business and government, in this case, is a good thing.  "Overly stringent" may be how the CBA and its members would characterize the FDA's approach to added sugars, but if it is a threshold supported by medical science, then that ought to be the bottom line.

    I am chagrined that Conagra's reaction to the debate is that if it doesn't get its own way it simply will focus on making less healthy foods, rather than work on figuring out how to make its "healthy" foods healthier.

    Published on: March 6, 2023

    MediaPost has a story about how PepsiCo "is developing a series of audio logos that the company believes represents its brands. The goal is to improve ad recall -- when consumers hear the sounds they can recognize and identify with the brand without seeing a visual or hearing the name of the product."

    The idea us to create "sonic logos" for products like Doritos, Tostitos, Fritos and Ruffles that, over time, consumers would connect to the brand, "a distinctive and ownable audio logo" that research has found "to generate 23% higher recall of the brand, 70% of 18- to-24-year-olds found it disruptive in a positive way, and 12% gave higher appeal on the overall brand score."

    “We had a good idea of how we wanted to present Doritos visually, for example, but what does Doritos sound like?” James Clarke, PepsiCo senior director of digital and social," tells MediaPost.  "We developed a crunch sonic logo.”

    KC's View:

    I don't mind companies adding sound effects to their commercials as a way of linking them to specific brands.  It is just engaging the consumer's senses.

    But if bags start talking to me as I walk down the grocery aisle, I'm going to get annoyed.

    Published on: March 6, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  The Hartford Courant reports that "Connecticut legislation aimed at regulating Amazon’s use of quotas and biometric surveillance to keep warehouse workers 'on task' drew dramatic testimony this week from labor and silence from Amazon.

    "Testifying anonymously by video, one worker described working for 'the app,' an Amazon program that clocks them into highly automated warehouses, monitors the speed of their work, clocks them out and, on occasion, fires them.

    "Using the bathroom in Amazon’s massive fulfillment center requires a 10-minute round trip, a period marked as 'time off task' by his electronic minder, said John Doe. His quota remains the same: packing 160 boxes an hour."

    The story says that the proposed legislation "would make Connecticut at least the third state after California and New York to require transparency and set limits on quotas in warehouses.  It would require employers to provide 'a written description of each quota the employee is subject to, including any potential adverse employment action that may result from a failure to meet such quota.'

    "Under the bill, no employee could be required to meet any quota that interferes with meal periods or bathroom breaks, including a 'reasonable time' to reach bathroom facilities."

    Yet another example of how Amazon has lost control of the narrative.

    Published on: March 6, 2023

    •  Walmart announced that it plans to close its two Portland, Oregon, stores, saying that "unfortunately some do not meet our financial expectations … While our underlying business is strong, these specific stores haven’t performed as well as we hoped.”

    While Walmart didn't specifically blame retail theft for the closures, local press coverage suggests that the crime problem in the Portland area likely is responsible for the decision.  CEO Doug McMillion has made the point that retail theft was having a negative impact on the company's performance, and that stores might have to be closed in certain cases.

    Published on: March 6, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    • CNBC reports that "in 2022, U.S. consumers spent nearly $1 billion buying air fryers, up 51% from 2019, according to market research firm The NPD Group. Sales of the cooking appliance have been soaring since 2017, and they received an extra boost during the early days of the pandemic as people cooked more at home.

    "And now with more workers returning to the office and spending less time in the kitchen, consumers are increasingly turning to the portable convection ovens. Joe Derochowski, home industry advisor at the NPD Group, said the main draw is the ease and speed of using the appliance, plus achieving a crispy texture without deep-frying. And food manufacturers want to capitalize on the trend."

    CNBC writes that a wide range of manufacturers - Campbell Soup,  Gorton’s Seafood, Nestle and Tyson among them - are bringing out items that cater to a compelling statistic - "60% of U.S. households have an air fryer at this point."  Not exactly ubiquitous, but getting closer.

    Are there any retailers out there consolidating all these products in "air fryer sections" that also will appeal to these consumers?  I haven't seen any, but wonder if it might be a good idea.

    • In California, The Sun reports that "the winter storms that have battered the San Bernardino Mountains have done serious damage" to Goodwin and Sons Market, described as Crestline, California's only supermarket.

    Crestline is about 80 miles east of downtown Los Angeles.

    The heavy snows caused the roof of the 43,000 square foot store to cave in, just a day after the retailer "braved the storm and pulled a semi-truck up Highway 138 using a work truck and tractor to restock the grocery store."

    The cave-in took place while the store was closed.  No injuries were reported.  It could take as long as a year to rebuild the store.

    Goodwin and Sons opened in 1946 and is still owned and run by the founding family.  

    •  From Bloomberg:

    "One of the biggest questions for investors over the past year has been when Americans will pull back on spending and trigger a recession. In the fourth quarter, that didn’t happen as retailers and brands exceeded expectations.

    "But their results and forecasts raised a bunch of red flags for the year ahead.

    "After the highest inflation in a generation, an increasing group of shoppers — including wealthy ones — are bargain hunting. Savings are dwindling. Consumer debt is piling up. The spending splurge after the height of Covid-19 is over.

    "As a result, several big retailers tried to pump the brakes during earnings season by issuing sales guidance for this year that disappointed Wall Street. Lowe’s Cos., Best Buy Co. and Target Corp. all see the potential for revenue to decline this year.

    "'There is a sense among retailers that the consumer has been defying gravity for quite some time, and they are expecting the music to stop,' Neil Saunders, managing director at GlobalData Plc, said in an email. But 'no one really knows when this will happen or the extent to which it will occur'."

    •  First there was avian flu.  Then super pigs.  And now, there's African swine fever (ASF).

    Reuters reports that "Another case of African swine fever (ASF) has been confirmed in farm pigs in east Germany … It was reported on a small farm with 11 animals in the eastern state of Brandenburg, the state's health ministry said. All 11 animals were slaughtered as a precaution, it said.

    "China and a series of other pork buyers banned imports of German pigmeat in September 2020 after the first case was confirmed in wild animals.

    "Discoveries on farms will make it harder for Germany to get the export bans lifted, analysts say.

    "The disease is not dangerous to humans but is fatal for pigs. Many countries impose bans on pork from regions suffering from the disease, distorting world food trade.  Wild boar coming into Germany from Poland were believed to have spread the disease to Germany, especially in the eastern states of Brandenburg and Saxony."

    Published on: March 6, 2023

    Executive Suite is sponsored by Robin Russell Executive Search.

    •  Stew Leonard's announced that Jake Tavello, the company's Vice President of Stores, has been named COO.

    The announcement notes that Tavello is a third generation leader in the company - his grandfather is the original Stew Leonard, and his uncle is company CEO Stew Leonard Jr.

    The announcement also points out that "Tavello has worked in every department across all Stew Leonard’s food stores, learning everything from how to toss pizza dough and roast coffee to how to cut a 200-pound swordfish.  He also worked for three years at Wegmans Food Markets in their Management Training program, both in Rochester, NY and outside of Boston."

    KC's View:

    This last paragraph need to be pointed out - the rule at Stew Leonard's always has been that members of the next generation that want to work for the company have to spend a certain number of years working elsewhere.  I'm not sure how many family companies have that rule, but I think it is a good one.

    I give Stew Leonard's a lot of credit.  With the third generation positioned to begin moving into top leadership (Stew Jr. and I are the same age), I think they've done a remarkable job of assuring continuity and cultural consistency.