business news in context, analysis with attitude

Published on: March 29, 2023

by Michael Sansolo

 There’s an argument we make here about the realities of retail and technology (and we certainly made it at the recent Technology Summit Kevin and I led at the National Grocers Association Convention.) 

It’s simply this: technology for its own sake is a path to nowhere. In contrast, technology that cuts costs, reduces friction and improves the customer experience should always be the goal. And with that in mind we need to consider one of the hottest current issues: artificial intelligence.

AI is more than a fad, as it seems to hold the promise of unlocking an incredible range of activities that on the good side could lead to countless improvement in our lives and to the negative, well, we’ve all seen the movies about the rise of sentient machines. 

But putting aside fears of a cyborg Arnold Schwarzenegger traveling from the future to do some grocery shopping, AI might well offer some interesting solutions to countless current business problems.

Let’s start with labor, possibly the single most talked about issue in retail these days. Armed with artificial intelligence it’s possible to imagine a near term future where smart machines take over repetitive tasks in stores and warehouses, allowing staffers to focus on customers in ways that no machine could ever replicate.  As the Washington Post reported this past weekend, AI offers the promise of impacting countless industries, including retail, in different ways.

Given the competitive nature of the industry it would behoove everyone to carefully consider one quote in that article: “We’re moving to where AI is going to be embedded in a lot of things so we can increase associate productivity and reduce friction for members,” Pete Rowe, Sam’s vice president of tech at Walmart, said.

At Walmart, AI is already being used for cleaning floors, checking for out-of-stocks and now with a virtual assistant called Ask Sam, which workers can use to get information on products and prices to quickly respond to customers. 

It’s unlikely to stop there. The New York Times recently reported on the improvements and challenges evidenced by newer versions of AI. The story includes interesting AI demands such as asking the computer for a joke about Madonna, or more specifically showing the inside of someone’s refrigerator and asking simply, what can I make for dinner with those items? 

It’s a small leap from that to having AI kiosks in stores and on store apps that help shoppers come up with recipes and a list of the needed products specific to their needs, such as family members with food allergies or nuanced preferences. And just like that, AI finds another way to improve the customer experience.

The simplest truth about technology is that something new is always coming. Keep in mind two stories Kevin reported on Monday of this week. One was about the increasing likelihood of 3D created food, something that once seemed only possible in science fiction. And the other was on the recent passing of Gordon Moore, the co-founder of Intel who once opined that every two years processing speed would double while prices would come down.

Like it or not, we’re all in the technology business now and there’s no chance the pace is going to slow down to let anyone catch up.

Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com.

His book, “THE BIG PICTURE:  Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available here.

And, his book "Business Rules!" is available from Amazon here.

For information about hiring Michael to speak at your next meeting or conference, click here.

Published on: March 29, 2023

The news ain't great.  US life expectancy, maternal mortality, and youth mortality are all moving in the wrong direction.  In addition, Americans seem to be more unmoored from "traditional values" than ever.  Coincidence?  I think not.  But I also think (go figure!) it creates a small opening for retailers.

Published on: March 29, 2023

by Kevin Coupe

Fast Company has a story about an online venue called The Drop Store, where "pizza comes in pill form for $163. A bag of rice contains just 5 grains but costs $89. And a 15-milliliter bottle of “pure” water (about 1 tablespoon) will run you $198. If that’s not enough to quench your thirst, there’s also a 20-ounce bottle of “regular” water—but it’s still $199. And it’s brown."

The story emphasizes that "these products aren’t real. And yet they portray a future in which our water crisis worsens and water is a rare commodity. They also serve as a reminder that for billions of people around the world, water scarcity or access to clean water is already a pressing issue."

The launching of the site - by the Ministry of Foreign Affairs of the Kingdom of the Netherlands - was prompted by the fact that the water crisis "manifests in a few ways: too much water, too little water, or water that’s too dirty. Both floods and droughts are worsening due to climate change. Flood-related disasters have skyrocketed 134% since 2000. As of 2022, more than 2.3 billion people are dealing with water stress; 2 billion people also don’t have access to safe drinking water, and 3.6 billion people - nearly half of the world’s population - lack safe sanitation.

"The global demand for water is expected to increase 55% by 2050, threatening not only drinking water access but also crops and livestock."

That's certainly relevant to the world's food stores and the people they serve - if crops and livestock availability is affected by the global water crisis, it will give them less to sell.  And the things they do sell could cost a lot more - hence the consciousness-raising campaign.

For example, pizza isn't available in traditional forms at reasonable prices because the water crisis affected the grain and tomato harvest.  "Instead of a nutritional label, the page includes scientifically accurate information about how much water it takes to make a traditional margarita pizza (1,259 liters for 725 grams)."  And I certainly didn't know that "it takes 382 gallons of water to make a pound of cheese," and that a "pound of beef requires nearly 2,000 gallons of water to produce."

All Eye-Openers.

Published on: March 29, 2023

The National Grocers Association (NGA) has released a new commercial - debuting today on "Morning Joe" on MSNBC and "Fox & Friends" on Fox News - that it says is designed to shine "a spotlight on the unfair and discriminatory tactics of dominant food retailers that harm the ability of Main Street businesses to compete and serve communities throughout the U.S."

The argument is that "in today’s marketplace, just four big chains control 69 percent of the market share, and they systematically use their power to push smaller competitors out of business. Independent grocers have been competing on an uneven playing field over the years as dominant chains ignore antitrust law and abuse their buyer power to coerce suppliers provide discriminatory prices and more favorable supply terms, special package offerings and product availability, leaving independent grocers to pay the price. They not only set favorable terms for themselves, but they also effectively ensure that smaller grocers pay more and get less."

NGA also posits that "independent grocers and grocery wholesalers aren’t the only ones feeling the negative impact of economic discrimination; it’s bad for their customers, who are often people living in urban and rural areas who are forced to pay higher prices or travel farther distances to get the staples they need."

“For decades, dominant firms in the grocery marketplace have leveraged their buying power to demand special treatment through access to products, promotions and better prices from suppliers that are not offered to independent community grocers,” said NGA CEO and President, Greg Ferrara. “This unchecked anticompetitive behavior leaves independent store owners and their customers with less choice, fewer options and paying more for goods and products. Independents aren’t looking for a free handout. They’re just looking for a level playing field to compete.”

Published on: March 29, 2023

Former three-time Starbucks CEO Howard Schultz is scheduled this morning to appear in front of the US Senate Health, Education, Labor and Pensions Committee, chaired by Sen. Bernie Sanders (I-Vermont), to defend the company's anti-union activities.

The Washington Post writes that "Sanders and Democratic committee members are expected to grill Schultz about his role in designing Starbucks’s anti-union campaign and the company’s tactics in labor talks at stores that have unionized. More than a year into negotiations at some locations, not a single store has come close to reaching a contract agreement, with both parties accusing each other of not bargaining in good faith."

The Post points out that "the committee’s Republicans could take a softer approach to Schultz. Sen. Bill Cassidy (R-La.) accused the National Labor Relations Board earlier this month of coordinating with Starbucks Workers United and 'weaponizing its enforcement power to target high-profile employers'."

“The main topic is that even if you are a multibillion dollar corporation run by a multibillionaire, you have to obey the law,” Sanders tells the Post in advance of the hearing.  "The major request for Mr. Schultz tomorrow is obey the law. Sit down and negotiate a first contract with your employees.”

And Schultz tells the Post, "I’m going remind members of Congress and Bernie Sanders’ committee, respectfully, who we are, what we stand for, and what we believe in.  And what I have always believed is in building a different kind of company: a company that balances profit with a conscience, benevolence, and most importantly, putting our people first.”

The hearing is scheduled for 10 am today, and will air on CSPAN-3.

Published on: March 29, 2023

PepsiCo yesterday said that it is "unveiling a new logo and visual identity system, the first update of the iconic Pepsi globe logo in 14 years. Pepsi will roll out the new look in North America this fall in time for the brand's 125th anniversary."

The announcement described the change this way:  "An updated color palette introduces electric blue and black to bring contrast, vibrancy, and a contemporary edge to the classic Pepsi color scheme. Given the brand's continued focus on Pepsi Zero Sugar, the design brings in the color black, further showing the brand's commitment to Pepsi Zero Sugar in the future."

The company says that "in an increasingly digital world, the revitalized and distinct design introduces movement and animation into the visual system, unlocking more flexibility for Pepsi to move between physical and digital spaces, from retail shelves to the metaverse. It also allows for more seamless and creative collaboration with partners and retailers and more versatility to engage fans in the places they shop, dine, work and play."

Todd Kaplan, the company's Chief Marketing Officer, says in a prepared statement, "We couldn't be more excited to begin a new era for Pepsi, as this exciting new and modern look will drive brand distinction to show up bigger and bolder and help people find new ways to unapologetically enjoy the things they love."

Here's the video highlighting the new design:

Published on: March 29, 2023

With brief, occasional, italicized and sometimes gratuitous commentary…

•  Reuters reports that Amazon founder Jeff Bezos is exploring the possibility of acquiring the AMC movie theater chain.

Neither AMC nor Amazon have commented on the report.

The Reuters story notes that "Amazon last year closed its $8.5 billion deal for MGM, adding the company behind 'Rocky' and James Bond in a bid to beef up its Prime Video streaming service amid intensifying competition."  Meanwhile, "Movie theaters are struggling to draw in crowds since the lifting of pandemic restrictions, as rising costs force people to cut spending on out-of-home entertainment and more on groceries and rent."

Just the other day, we reported that both Amazon and Apple have decided to pivot away from their previous policies and spend significant dollars on movies that will see theatrical releases before going to their streaming platforms.  The goal seems to be to build greater awareness - and revenue - for their Amazon Prime Video and Apple TV+ services.  For Amazon to own a movie theater chain would give it even greater control of the distribution process.

Which suggests to me that there is no way the Federal Trade Commission (FTC) would approve such an acquisition - it would just be too much power resting in one place.  At least when Amazon bought Whole Foods there were a lot of other supermarket chains, and when it bought MGM, there were a lot of other movie studios and production companies.  That said, I'm not entirely convinced this is a real thing;  rumors about what Amazon might buy always are flying around, and a relatively small percentage of them actually play out.

•  From CNBC:

"An influential consultant for Amazon sellers admitted Monday to bribing employees of the e-commerce giant for information to help his clients boost sales and to get their suspended accounts reinstated.

"Ephraim 'Ed' Rosenberg wrote in a LinkedIn post that he will plead guilty in federal court to a criminal charge, stemming from a 2020 indictment that charged six people with conspiring to give sellers an unfair competitive advantage on Amazon’s third-party marketplace. Four of the defendants have already pleaded guilty, including one former Amazon employee who was sentenced last year to 10 months in prison."

In the post, Rosenberg wrote, “For a time, some years ago, I began to obtain and use Amazon’s internal annotations — Amazon’s private property — to learn the reasons for sellers’ suspensions, in order to assist them in getting reinstated, if possible … On some occasions, I paid bribes, directly and indirectly, to Amazon employees to obtain annotations and reinstate suspended accounts. These actions were against the law.”

CNBC writes that "Rosenberg, who’s based in Brooklyn, is a well-known figure in the world of Amazon third-party sellers. He runs a consultancy business that advises entrepreneurs on how to sell products on the online marketplace, and navigate unforeseen issues with their Amazon account. Rosenberg’s Facebook group for sellers, ASGTG, has over 68,000 members, and he hosts a popular conference for sellers each year."

But probably not this year.

Published on: March 29, 2023

•  In Canada, Global News reports that Gonzalo Gebara, president-CEO of Walmart Canada, says that "the company is willing to participate with other major grocers in the creation of a grocery code of conduct that would level the playing field between suppliers and retailers, reversing an earlier position against the measure."

“I acknowledge that in the past we didn’t participate, but we are willing to participate now,” he said.  “We will support any initiative that would bring better conditions and the ability to have more transparency in the whole (supply) chain.”

According to the story, "Work on a grocery code of conduct began in earnest in 2020 during the COVID-19 pandemic, after Walmart Canada imposed new fees on suppliers to help offset a $3.5-billion investment in its stores and e-commerce business through 2025. Loblaw Companies, Canada’s largest grocery corporation, also imposed new supplier fees that year. … The code of conduct would impose fair practice standards on retailers and suppliers and make those rules transparent, while potentially imposing financial penalties on companies that don’t comply."

Published on: March 29, 2023

•  The Associated Press reports that "Apple is getting into the buy now, pay later space with a few tweaks to the existing model — including no option to pay with a credit card. The company will roll out the product to some consumers this spring, and will begin reporting the loans to credit bureaus in the fall."

The move puts Apple into direct competition with the likes of Afterpay, Affirm, Klarna and Paypal.

According to the story, "Apple’s version, which is integrated with Apple Pay and facilitated by MasterCard, will require the consumer use a debit card and a bank account to make payments, the company said. It will not charge flat or percentage late fees. However, missed payments will eventually result in the consumer losing access to these kinds of loans.  Apple also says the loan and payment history can impact your credit score. Failure to repay on time may be reported to credit bureaus."

Published on: March 29, 2023

Executive Suite is sponsored by Robin Russell Executive Search.

•  US Foods Holding Corp. announced yesterday that Andrew Iacobucci has been promoted to the role of iSenior Executive Vice President, Field Operations and Chief Commercial Officer.  Iacobucci joined US Foods in 2017 and most recently served as Chief Transition Officer.

•  The Consumer Brands Association (CBA) announced that Stacy Papadopoulos, the organization's general counsel and senior VP of operations and initiatives., has been promoted to the role of Chief Operating Officer.

Published on: March 29, 2023

Yesterday we had a piece about how the Occupational Safety and Health Administration (OSHA) unit of the US Department of Labor "has inspected more than 270 Dollar General stores and found 111 instances of workplace safety violations. The agency has also imposed more than $15.5 million in penalties during that period, according to data provided by a White House official."

The Times story makes the point that Dollar General's entire business model seems to depend on being a fast-growing, lightly staffed entity where it costs less to pay the fines than to actually address the issues being raised by OSHA.  Now, OSHA has expanded its Severe Violator Enforcement Program "to include any type of company that willfully or repeatedly violated safety standards.  The first to be added under the program’s expanded scope: Dollar General."

I commented, in part:

Assuming that the charges are both legitimate and provable, it'd be nice of regulations actually had some teeth.  Like fines that are so onerous that they are not so easy to simply pay and move on.  Like the ability to post obvious signage attesting to individual stores' safety violations.  And maybe even force the closure of stores that are severe and repeat violators.

Are we going to wait for a store to have a fire, and for people to die because they can't access a fire exit?  And if that happens, will we allow high priced lawyers and lobbyists to help this company - or any company - avoid legal consequences?  Because that's the road we're headed down.

If stores are not willing to address safety issues because it is the right and responsible thing to do, then regulators ought to be able to force them to deal with these issues because it is too expensive, too inconvenient, and too negative for their brand image not to.

One MNB reader responded:

Honestly, after visiting numerous Dollar Generals over my years in retail, I would have to say that I’ve never seen such consistent problems as they have in their stores. I’m sure the company prides itself on its revenue per labor hour, but how many sales are they missing due to poor stocking conditions and out of stocks?  The store near my house has had its front door window broken for at least many months. The turnover has to be atrocious. I would challenge investors to visit the stores and see for themselves how much revenue is being left on the table in existing stores. Growth, like DG experiences, covers a lot of sins, but eventually those sins come to light. 

MNB user Karl Graff wrote:

It is good that OSHA finally steps in but the reality is that nothing of substance will change until the financial penalties force this retailer to actually care about safety- and even then it won’t be caring about safety but caring about the dollars lost.

Managers will be blamed for this. They are given about 90-150 payroll hours- not counting their own hours- to run a business that is open about 90 hours per week. There is no double coverage unless the business need literally demands it. Corporate will talk about how managers need to implement all of the processes already in place and that it is their fault that this is a problem instead.

Corporate will send safety tape, some calls to action and probably mandatory safety talks to show that they are doing something about this  while not actually making the changes that would get to the root- which is the low amount of payroll managers are given to run their complete operation.

Dollar General was the worst employer I ever worked for and I am so glad that I had other options!

I lived 3 blocks from the Dollar General store I ran in my home town- and I spent more time away from home working 3 blocks from my house than I did working 45 minutes away.

I remember one day my son was coming home from school, fell and broke his wrist. I was not allowed to close the store, (I was the only person scheduled), to take him to the hospital. I had to wait almost an hour before I was allowed to do so… after I found coverage. That was the day I decided to quit.

They severely underpay and overwork their staff- especially the “managers” – and the managers are told that the reason they have to work so many hours beyond what they are scheduled is because they are poor managers. The low payroll has been an issue for years but it cannot be brought up as a reason for any problems- it is always viewed by DM’s and above as an excuse.

Sadly, DG is not the only retailer where this is true. We as consumers have to take responsibility for these working conditions as well. We want the absolute lowest price and do not see / care how we get it. 

It’s a race to the bottom in many ways - and companies like DG are leading the way.

And, from another reader:

Dollar General stores in Central Texas have recently been forced to close by local police and fire departments due to unsafe conditions.  The Dollar General stores were not allowed to reopen until they could clean up the unsafe conditions.   Appears local authorities have more muscle and influence than simple fines.

Yesterday we noted that  in western New York, Hegedorn's Market, a single-store independent grocer, will close after seven decades in business.

"It's a tough gig to be an independent grocer now," says  Jonathan Gonzalez, grandson of the store's founder. "It's sad but its been a great run. This business has come to an end of its life cycle."

I commented:

The story also features comments from a number of customers bemoaning the closing of the store, but clearly there were not enough of them doing their shopping at the store to keep it open.  Gonzalez is right about it being a tough market - Hegedorn's is about a dozen miles northeast of Rochester, as well as being one mile from the closest Wegmans, three miles from the nearest Walmart, and eight miles from a Tops store.

An MNB reader - one more familiar than I with the geography - commented:

Hegedorn’s is also less than 1 mile from a Target, less than a half mile from an Aldi’s, and virtually shares a parking lot with a BJ’s.

About 5 miles from where we live, and our Wegmans is right across the street from the WalMart.

In other words, Hegedorn's was kind of screwed.

We had an Eye-Opener yesterday about my experience at a local Starbucks where I found service to be slow and the floor to be dirty - both attributable to what seemed to be a staffing problem.  But there also was this sign:

It seemed to me that there are two things wrong with this sign.

If these Reserve Coffees have "just arrived," why are they sold out?

Why the hell is there a sign for "just arrived" Christmas blend posted on March 27?

I told Mrs. Content Guy about my experience.  We agreed that the delay and the dirt could be attributed to staffing issues, but then she said:

Those two are people problems.  But the sign is a stupid problem.

And then I made the argument that this actually reflects what I would call the nobody-gives-a-damn syndrome, which may be the biggest problem that new CEO Laxman Narasimhan has to deal with.

And my rant went on:

The retailers reading this story and seeing that sign ought to take it to heart, and immediately go out and walk their stores.  Don't take it for granted that your stores don't suffer from nobody-gives-a-damn syndrome.  Go find out.  Check out every sign, every wall, every aisle and every department.

Take pictures.  Make sure the problem gets fixed.  And see the problems not as a product of lackadaisical employees, but as a result of your own leadership.  It is easy to blame others, and much harder to take the responsibility.  But if you do the latter, and double-down on creating a culture that actually gives a damn, then that will be some level of leadership.

MNB reader Lynn Olsen responded:

I couldn’t agree more with your FaceTime comments about “nobody-gives-a-damn” syndrome. It seems to be everywhere at retail. 

I’m mindful of two truisms: 

Retail is Detail

Jan Carlzon’s (former CEO of SAS) famous admonition that every point of contact with a customer is a “moment of truth”.  

I would argue that includes all types of contact: visual, audio, environmental, or with an associate. 

Marketing and Advertising make brand promises - which are not really truthful without consistent execution. 

From another reader:

Great insight…. Mrs. Content Guy! 🙂

And then finally, this email from MNB reader Steve Anvik:

Nobody gives a damn” is not a SBUX, or even retail at large(s) problem imho.  I realize you’ll argue, probably castigate me per usual - but it seems a fairly clear reflection of societal norms.  By that I mean the permissiveness of progressivism, has led to a breakdown of the golden rule. There are so many “me first” people generally, that workers who actually work (at any level) are giving up caring. Why fight (it), switch! Progressives: your chickens are coming home to roost. Who will make my latte!!

First of all, I'm sorry that you feel like when I disagree with you I'm "castigating" you.  At least I post your emails.

That said, I'm sure that when I feel strongly about something, and that something said by one of my readers is inaccurate, unpleasant, or just plain absurd, my comments are such that they could be interpreted as being castigating.

Which is what is going to happen here.

Ready?  Here it comes.

It amazes me that you would turn this into something political and so incredibly polarizing.  It just isn't helpful, and I don't think it is true.

The "permissiveness of progressivism?"  Are you suggesting that people with progressive political views don't have a work ethic, don't value a strong work ethic in themselves and others?  I would argue that there are as many me-first people on the non-progressive side of the ledger as the progressive side.  Also as many hard-working, dedicated, innovative people.

Your apparent belief that only those who agree with your view of the world are hard-working, selfless, do-unto-others-as-you-would-have-others-do-unto-you people strikes me as absurd.

If I were feeling less castigating, I'd say you were guilty of epistemic closure.

But because you got my Irish up, I'll just go with saying that I think it is B.S.