business news in context, analysis with attitude

Published on: May 5, 2023

A last note from my New England travels - a reminder of what great omnichannel retailing looks like.  (It kind of looks like an iconic waterproof boot.)

Published on: May 5, 2023

The Wall Street Journal reports that the United Food and Commercial Workers (UFCW) has come out against the proposed $24.6 billion acquisition of Albertsons by Kroger.

According to the story, the union's president, Marc Perrone, said he was concerned about "a lack of information provided by the companies about the merger, including on potential store divestitures. The labor group is also worried about the viability of stores that could be sold and whether buyers might be saddled with heavy debt loads, he said … UFCW International plans to discuss its concerns with legislators and the Federal Trade Commission, which is reviewing the deal, Mr. Perrone said, and lobby the companies for more information. The union, which represents about 350,000 Kroger and Albertsons workers, expects to discuss with state-level officials how the merger could affect state operations."

The Journal writes that "Kroger said the company is working with regulators to develop a plan for store divestitures to ensure that any divested locations are sold to qualified operators with appropriate management experience and financial stability. The company said it wouldn’t close any stores, distribution centers or manufacturing facilities as part of the deal, or lay off front-line workers from stores that might need to be divested for regulatory approval."

And, the story says, "Kroger and Albertsons have agreed to sell up to 650 stores to secure regulatory approval, according to securities filings. Kroger has said the companies are receiving good interest from prospective buyers on stores they expect to divest."

The UFCW announcement comes as the Economic Policy Institute (EPI) came out with a study saying that if the Federal Trade Commission (FTC) allows the deal to go forward, it will "reduce the number of outside employment options available to workers, lowering grocery store workers’ annual wages by a total of $334 million—about a $450 loss in annual wages per worker."

MNB ran that story yesterday, and it elicited a response from a Kroger spokesperson:

"The report also egregiously ignores Kroger’s public commitment to invest an additional $1 billion to increase wages and expand industry-leading benefits starting on day one following close. This commitment builds on the incremental $1.9 billion Kroger has invested in wages and comprehensive benefits since 2018. Higher wages and more opportunities for our associates would help all grocery workers by raising the bar for compensation in areas in which we operate.”

Published on: May 5, 2023

Former First Lady Michelle Obama this week announced the creation of a new company, PLEZi Nutrition, with a stated goal "to create higher standards for how the U.S. makes and markets food and beverages for kids, leading with nutrition, taste, and truth."

The announcement came at the Wall Street Journal Future of Everything Festival.

PLEZi Nutrition is being described as a "public benefit company, which means, according to the Cornell Law School website, that it is "a corporation created to generate social and public good, and to operate in a responsible and sustainable manner."

Here's the rationale for PLEZi, as delineated in the announcement:

"The U.S. is in a nutrition-related health crisis. Kids are not getting the recommended levels of nutrients they need, and they are consuming far too much added sugar—on average, 53 pounds of added sugar per year. Sugar-sweetened beverages, also referred to as sugary drinks, are the leading source of added sugar, and nearly two-thirds of youth consume sugary drinks on a given day. 

"Building on her efforts in the White House with her Let's Move! initiative, Mrs. Obama is a Co-Founder and Strategic Partner with PLEZi Nutrition, working behind-the-scenes to guide the company's mission to be a driver of change and a model for how food and beverage brands can support the health of our next generation … PLEZi Nutrition was created to give parents a helping hand by offering healthier, great-tasting products that parents can feel good about giving their kids and that kids actually want. The company is focused on lowering sugar content and lowering sweetness to help adjust kids' palates to crave less sweetness overall. In addition to reducing the sugar and sweetness, they are adding in nutrients kids need, all with the aim to replace sugary drinks and snacks.

"PLEZi Nutrition's first product - a kids' drink called PLEZi—has 75% less sugar than average leading 100% fruit juices, no added sugar, plus fiber and nutrients, like potassium, magnesium, and zinc. Currently available in four flavors nationwide at Target and Sprouts and online at Walmart, PLEZi's goal is to ultimately be available anywhere you can buy a soda or sports drink. The company plans to expand into additional beverages and snacks in the years ahead.

"More than an effort to create better products, PLEZi Nutrition will also provide an educational platform for parents and kids. A sizable portion of the marketing budget will be dedicated to promotional content around what's best for kids' health. PLEZi Nutrition believes kids should be drinking water as their primary beverage. The company will actively promote drinking water and eating whole fruits and vegetables. PLEZi is intended to replace sugary drinks and snacks that do not support kids' health and to help promote healthier habits."

Published on: May 5, 2023

Marketing Daily reports on new research from analytics company GWI suggesting that "while corporate America may be lost in the weeds about the best ways to further diversity, equity and inclusion goals, consumers think they are headed in the right direction."

According to the story, the research shows that "70% of Americans say DEI is important. Of those, 81% say such efforts matter, helping to provide fair and equal opportunities.

"Racism, however, is relatively low on the list of concerns, ranking 10th, following issues like domestic violence, poverty, healthcare reform, and access to mental health help. Only 42% named anti-racism efforts.

"Predictably, the study finds considerable shifts by generation. Gen Z, the youngest cohort, is most concerned about DEI and is twice as likely as other groups to cite anti-racism and trans rights as important social issues. They are also the most activist, with 60% saying protesting injustice is essential.

"For millennials, reproductive rights, including access to abortion, is the top issue. Gen X consumers say they are more concerned with LGBTQIA+ Pride. And baby boomers are worried most about ageism."

The story also says that "while people want companies and brands to do more, there are still massive gaps in understanding, with 37% of the sample saying they themselves aren’t taking any practical steps to address social issues. When they have, those actions include educating themselves (40%), supporting diverse businesses (27%), educating others, including family and friends (25%), or engaging with brands and organizations on social media (13%)."

Published on: May 5, 2023

The Information reports that Shopify plans to "lay off 20% of employees and would sell its logistics business to Flexport, as the e-commerce company pushes to cut costs further and refocus on its core business."

The moves come as the company said that its Q1 revenue increased 25% to $1.5 billion, compared to the same period a year ago.  

However, The Information writes, the decision to sell the logistics business to Flexport is "a major blow to the Canadian e-commerce company’s ambitions to compete more closely with Amazon."

Some context:

"The sale comes less than a year after Shopify paid $2.1 billion to acquire logistics startup Deliverr, mostly in cash. Shopify entered the logistics business in 2019 with the purchase of warehouse automation and robotics startup 6 River Systems, which it will sell to Ocado, an automated grocery fulfillment company in the U.K.

"As part of the deal, Shopify will take an approximately 13% stake in Flexport and take a seat on the company’s board. The acquisition places Flexport, which is headed by former Amazon executive Dave Clark, in more direct competition with Amazon to deliver packages to shoppers’ doors. Prior to the acquisition, Flexport had mainly focused on other parts of the supply chain like cargo and ocean shipping."  The deal means that Flexport will take over some 50 warehouses and package sortation centers nationwide. 

The Wall Street Journal writes that Clark "came to Flexport last year after a long tenure building Amazon’s massive logistics network."

“It’s like going back in time to the early days of Amazon,” Clark tells the Journal. “When I started at Amazon in 1999, we had just opened our fourth or fifth warehouse. So Flexport is going to start with its 50 really small ones and three big ones here in another month or two, and it sort of feels like we’re starting the journey again, just in a different way.”

Published on: May 5, 2023

•  From the Associated Press:

"DoorDash posted stronger-than-expected results in the first quarter as it expanded into new markets overseas and new delivery categories at home.

"The San Francisco company said Thursday that its total orders rose 27% to 512 million in the January-March period. That was well above the 493 million orders Wall Street forecast, according to analysts polled by FactSet."

The story notes that "DoorDash acquired the Finnish delivery service Wolt Enterprises last summer, allowing it to expand in 22 countries where it previously had no presence, including Germany, Sweden, Hungary and Israel … In the U.S., the company said orders from convenience stores, groceries and other newer categories are growing faster than its traditional restaurant deliveries. DoorDash, which began delivering groceries in 2020, most recently announced a partnership with Aldi in February. DoorDash also launched nationwide delivery from Starbucks in January."

Published on: May 5, 2023

With brief, occasional, italicized and sometimes gratuitous commentary…

•  From the Associated Press:

"The number of Americans applying for unemployment benefits jumped last week but remain low overall, even as the Federal Reserve has furiously raised interest rates to beat down inflation and cool the labor market.

"The Labor Department reported Thursday that applications for jobless claims for the week ending April 29 rose by 13,000 to 242,000 from 229,000 the previous week. The weekly claims numbers are considered a proxy for layoffs.

"The four-week moving average of claims, which flattens some of the week-to-week volatility, rose by 3,500 to 239,250.

"Overall, 1.81 million people were collecting unemployment benefits the week that ended April 22, about 38,0000 fewer that the previous week."

• From the Wall Street Journal:

"Employers added 253,000 jobs while the jobless rate fell to 3.4% in April, showing the job market is resilient amid banking turmoil, rising interest rates and high inflation.

"Last month’s strong job growth suggests the labor market remains a pillar of strength in a cooling economy. The economy grew more slowly to start the year versus the end of 2022 as businesses cut back on investments, while the housing market remained weak. Many economists forecast the U.S. to slip into recession in the next 12 months.

"April’s monthly payrolls increase was slightly below the average monthly gain of 290,000 over the prior six months, but is consistent with a healthy labor market. Wage growth remained strong last month."

•  From Bloomberg:

"Kroger Co. has agreed to pay $68 million to resolve claims by West Virginia that supermarket chain failed to properly monitor opioid prescriptions filled by the company’s in-store pharmacies.

"The company was the last defendant to settle as part of a suit brought by the West Virginia attorney general’s office against providers of pharmacy services for mishandling opioid prescriptions. Other defendants included Walmart Inc., Rite Aid Corp. and CVS Health Corp. 

"Kroger agreed to pay $34 million immediately and $24 million over the next two years, state officials said in a release. Another $10 million will be paid by 2032.

“'While we continue to believe that the allegations made against Kroger in this and other opioid lawsuits are without merit, we have decided that a settlement is the best path forward to resolve this litigation,' the company said Thursday in an emailed statement."

•  From CNBC, a story about how Macy's "is thinking smaller and outside of the mall with its latest stores as it shutters more of its giant mall anchors. Macy’s has opened 10 locations in strip centers — mini-versions of its namesake stores and Bloomingdale’s — and plans to add five more this fiscal year. The shops, called Market by Macy’s and Bloomie’s, are about one-fifth of the size of the retailer’s typical Macy’s and Bloomingdale’s stores."

According to the story, "Macy’s off-mall expansion is part of its answer to investors who think of department stores as dusty and dull. The company is chasing customers in bustling shopping centers and fast-growing suburbs as it exits dying malls. Inside these new and smaller stores, it’s offering a slimmed-down assortment of popular brands with displays that rotate frequently to stay fresh and on-trend.

"Bloomie’s, the smaller version of Bloomingdale’s, features contemporary apparel brands. It has a slimmed down assortment and displays that are switched out frequently."

The degree to which shoppers have access to a long tail of selection online means that bricks-and-mortar stores can be more selective about what they offer in physical units - if they don't have everything on the rack, they can get almost everything pretty quickly.  It is a really smart approach to physical retail, I think.

•  From the New York Times:

"The beer giant Anheuser-Busch InBev on Thursday said that it would focus its marketing campaigns around sports and music and assign senior executives to oversee them, in the wake of controversy over a Bud Light promotion featuring a transgender influencer … The company said that senior executives would oversee all marketing campaigns before they are rolled out, and that it would largely focus its advertising and marketing around sports and music. The company noted it was a sponsor of the recent NFL draft and the Stagecoach music festival in California last week.

“'Everything we do should be about beer and promoting beer,' Michel Doukeris, Anheuser-Busch’s chief executive, told analysts.

"'Beer will always be at the table when a debate is happening, but the beer itself should not be the focus of the debate,' he added."

Weak sauce, IMHO.  But appropriate, since Bud Light is weak beer.

Published on: May 5, 2023

Got a number of emails responding to this story from yesterday's MNB:

The Economic Policy Institute (EPI) - which describes itself as "an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States" - is out with a study saying that if the Federal Trade Commission (FTC) allows the $24.6 billion acquisition of Albertsons by Kroger, it will "reduce the number of outside employment options available to workers, lowering grocery store workers’ annual wages by a total of $334 million—about a $450 loss in annual wages per worker."

One MNB reader responded:

EPI may be non-partisan as self-described but if you look at the members of the board, most are union executives and presumably they receive funding from various unions as well.  This is not to say the presentation is faulty; but you have to consider the source.  The same as you would from the Business Roundtable.

It is assumed that the Merger will eventually go through and some reports of 300+ stores being spun off is not likely to result of all the employees losing their job as many are likely to be picked up by some regional operators wishing to expand their footprints. Many of those operators hinted at picking up these “orphan” stores are already unionized so no loss of employment generally and the wages are likely the same as well in various markets.  And, Walmart is not going anyplace, so the competition will still be there, and Walmart is going to have to pay the going labor rate.

It is not clear how the study was organized and the assumptions but the conclusions seem less likely to occur.

So the FTC may try the old scheme of competition and consumer peril but they have been nearly winless in court with the antiquated thinking.

And from another reader:

According to your story, the firm only examined grocery retailers and not the entire retail market which sells food/ beverages etc. So their assumption is that grocery employees only alternative employment choice is another grocery store. We should ask why the firm chose to not include Walmart, Target, convenience chains that have advanced food capabilities (i.e., Kwik trip, Sheetz), and I expect they did not include specialty retail. 

To make this an insightful analysis, they should have started with the consumer, where does the consumer buy/consume their food/beverage and that becomes the market for retailers and their employees. 

I’m also aware that more retailers are adding foodservice to their definition of potential market size and retailers share of market. 

I have to ask why the firm narrowly defined a market that does not reflect how/where consumers shop? 

And, on another subject, one MNB reader wrote:

As a native Portland Mainer, I was so excited to tune in this morning and see a hometown favorite highlighted. I now living in San Antonio, but when I go home each year, Micucci’s is a must visit!

In January 1986, as this Northern European descendant married into an Italian family, it was to Micucci’s we went to get platters of Italian cookies for the wedding reception to impress the new ‘famiglia”. They ordered from a bakery in the North End of Boston and brought the cookies up the day of the wedding. This was the value of ”connections” that made them unique decades ago. Today, the assortment in the Portland store of cheese, wines, oil, desserts… all very, very good and specialty things that are hard to find elsewhere.

Congrats on your excellent find! Thanks for making my day and getting me excited for planning my summer trip home!

My pleasure.  And more below.

Published on: May 5, 2023

It was in 2018 that Portland, Maine - which I've often referred to as "the other Portland," owing to my deep affection for the Oregon version - was named "Restaurant City of the Year" by Bon Appétit.  I always was intrigued by that, but for various reasons I never managed to make it there, though the designation remained in the back of my mind.

When we took a few days off a week ago to celebrate our 40th wedding anniversary, though, and ventured up into New England just to wander around, I knew that this was a foodie moment to savor.  We planned two really nice dinners - one in Portland, and one in Portsmouth, New Hampshire - and were looking for experiences that would distinguish the celebration.  (Lucky us.  Our daughter and her boyfriend were up there just a few weeks before, and they have great taste in food and restaurants.)

In Portland, we went to a tiny little place called Central Provisions, which has a tapas-like menu of small plates that were extraordinarily good.   (Pic below.)

Among the dishes we enjoyed were Peekytoe Crab served on a miso pancake, with apple and lemon kosho;  Spring Lamb served as the filling of whole wheat agnolotti, with goat yogurt and sheep's head ricotta (pic below);  Suckling Pig, with apple brown butter;  and the best corn bread (made with brown butter and molasses) that I've ever eaten.

The wild card was something that I've never had before - Barnacles.  Yup, the stuff they scrape off the bottom of boats.  Essentially, barnacles are an edible crustacean, kind of like snails - you pull the meat out of the shell, like you would with lobster, and dip it in the butter and garlic sauce in which the whole thing has been prepared.  They were delicious - apparently they are a delicacy in Spain and Portugal, and ours had been imported from Spain and because of that were an unusual menu item.  I thought they were wonderful.  (Pic below.)

In keeping with the geographic theme set by the barnacles, the wine was a 2020 Luberri Tempranillo from Rioja, Spain.  Just lovely.

The other big dinner, in Portsmouth, was in a more traditional place, Ristorante Massimo - but the dinner was no less impressive.  We sat in the wine bar, which had a seriously romantic vibe, and I had the most extraordinary carbonara of my life.  It was made with house-made tagliatelle pasta, English peas, shaved black truffle, egg yolk, and Parmigiano Reggiano - and instead of the more traditional pancetta or guanciale, this was made with a crispy prosciutto.  It managed to be rich and delicate - a fabulous combination.  And it ended up working perfectly with the 2019 Alexana Pinot Noir from the Willamette Valley.

I love the idea of trying new things, as well as eating old favorites prepared in new and different ways.  For me, that's the whole point of food, and the weekend reminded me of why I'm constantly writing about why stores should raise the bar on the food they sell and serve.  The lowest common denominator may be safe, but it also is lazy.  By reaching for the new and innovative, stores have the opportunity to inspire customers, and to get them to think aspirationally about the foods they eat and the stores they patronize.

One other fun note - as I've gotten older, I've begun to enjoy things like martinis that I never used to drink.  My tastes have evolved - and, if I'm honest, my adult children have educated me in such things.  Something I've never ordered is a Vesper - the drink made famous when James Bond invents it in "Casino Royale," made with gin, vodka and Lillet blanc aperitif, shaken with ice until very cold and served with a lemon peel - largely because it just seemed obnoxious.  But when I looked on the menu at Massimo, there it was, at the top of the list, and so I ordered one.

All I will tell you is this - I have a new favorite cocktail.  In the words of 007, "Once you've tasted it, that's all you want to drink."

That's it for this week.   Have a great weekend, and I'll see you Monday.

Sláinte!