Published on: May 22, 2023
It was a chilly and rainy Saturday in the New York metropolitan area, and I found myself having to detour through New York City on the way to the New Jersey Shore. But on that detour, I found a business lesson and an unexpected metaphor.
Published on: May 22, 2023
A new study from customer data science firm dunnhumby is out this morning, identifying "Save-A-Lot, Food 4 Less, and Dollar General as the top three grocery retailers for SNAP customers with Winco and Grocery Outlet rounding out the top five. The next five retailers in the top ten are Price Rite (6), Walmart (7), Aldi (8), Marcs (9) and H-E-B (10)."
The study also notes that there is about to be considerable upheaval in the SNAP world: "In March 2023, pandemic era emergency allotments ceased resulting in an average 22% reduction of SNAP benefits per household, according to Center on Budget and Policy Priorities (CBPP). With the average SNAP household spending 30% of their disposable income on food, a 22% reduction ($97 dollar on average monthly), means more missed meals, smaller meals, cheaper and less healthy food, skipped medication, delaying or foregoing medical care according to the CBPP. And according to dunnhumby's analysis of data made available by Edge Ascential and the CBPP, U.S. Grocery revenues will fall by $20 billion from their 2022 levels."
“SNAP recipients began a roller coaster ride in April 2020 with the arrival of higher SNAP benefits due to the pandemic that initially left them with larger food budgets to feed their households. For many, this meant they could purchase healthier foods. But although benefits were increased again in 2021 under the Covid Relief bill, consumers were also hit with record inflation eating into in all areas of their household budgets,” said Matt O’Grady, President of the Americas for dunnhumby, in a prepared statement.
“This year, they are again left in a precarious position with a deep reduction in their SNAP benefits resulting in much less disposable income available to take care of their household food needs," O'Grady said. "Retailers need to understand that one out of every eight grocery shoppers in 2023 are walking into their stores stressed, emotionally drained, and looking for retailers to be part of the solution. At one point or another 20% of Americans have been on food stamps. Retailers that can be part of the solution by providing customers with strategies and tactics that meet their needs better than the competition will be building loyalty with a group of customers that over time will represent a sizable portion of the grocery market.”
Other key finds from the study:
• "Ninety-two percent of SNAP customers are at or below the poverty line and are likely to be caregivers, working or both: 65% have families with children, 36% are in families with older adults who are disabled, and 41% are working. Cashiers and food service workers are twice as likely as the general population to be on SNAP."
• "Lower income consumers are just as reliant on the grocery store for satisfying their hunger as shoppers from higher income groups. They shop some of the most common categories - meat, packaged food, dairy - at similar rates to higher income groups. They are less likely to buy fresh produce but more likely to buy frozen produce compared to higher income groups. Lower income consumers rank saving money (63%) as their most important need. In baby care, ready-to-eat, deli, fresh produce and meat, lower income consumers prioritize savings over quality."
It also seems at least possible that SNAP benefits could be affected by the current negotiations being conducted by the Biden White House and Speaker of the House Kevin McCarthy - so grocers could be looking at even more reductions in volume because of smaller food stamp benefits. And if those negotiations are not successful and we do go off the economic cliff, heaven knows what will happen. All bets will be off as we enter uncharted territory.
(My theory about this is that the negotiations only will be successful if both Biden and McCarthy are willing to piss off a percentage of their bases - it goes without saying that everyone won't be thrilled with a deal, so they'll have to settle for everyone being a little bit unhappy with whatever settlement they reach.)
There are two other conclusions from the study to which retailers should pay attention, I think.
First, "Cashiers and food service workers are twice as likely as the general population to be on SNAP." That'll be a talking point in any future union negotiation, I would expect.
And second, "SNAP and lower income shoppers visit fewer grocery banners on average than higher income shoppers (3.6 stores versus 4.5 in an average month), and they give a greater share of their grocery budget to any one retailer. They are therefore more likely to give a retailer their loyalty than higher income shoppers who have bigger grocery budgets. Retailers should look at SNAP and food insecure customers as a segment to target with actions that appeal to them. Once their loyalty is earned, retailers will be more likely to keep them."
Published on: May 22, 2023
Axios reports that "premium brands — including Lunchables and Dunkin' — are spinning up variations for discount shelves, as dollar stores saturate the nation."
Here's how Axios frames the story:
"Inflation has pushed many consumers to discount and dollar stores for groceries and essentials, fueling a stunning surge in new dollar-store locations … America's dollar-store chain storefronts steadily increased between 2019-2023, with more than 34,000 in the U.S. last year — exceeding the total of all McDonald's, Starbucks, Target and Walmart locations in the country combined, per a recent study. In 2021, nearly half of the new stores that opened in the U.S. were chain dollar stores."
And so, major CPG companies - including Kraft Heinz and J.M. Smucker - are developing discounted versions of traditional items that will fit into a dollar store environment.
So it now is a dollar store world and we're just living in it?
Depending on how things develop over the next few months, it may be even more so. This is the reality with which we are coping at the moment.
One question I would have is whether these discount versions will cause erosion of brand equity for the more traditional/expensive versions. I suppose it could be argued that they exist in different universes, with very little customer overlap, but I'm not sure.
Published on: May 22, 2023
The Seattle Times reports that while there was some resistance to Amazon's decision to require its employees to return to the office at least three days a week, at the very least the decision has had a positive impact on downtown Seattle.
Columnist Jon Talton writes:
"Deciding to examine Amazon’s return to its South Lake Union and Denny Triangle offices myself, I found a scene outside reminiscent of Seattle around 2016.
"Employees were catching up with people they hadn’t seen since the pandemic emptied offices. Plenty were wearing jackets and jeans and carrying backpacks, but suits and dresses were also there. Long lines of cars went into all the parking garages, and shuttle buses came, too.
"At least 300 people were having lunch from the restaurants there Tuesday. It was pleasant outside, the perfect environment for 'creative friction,' a term that describes the sharing of ideas and spontaneous innovation that can’t be found with remote work. Employees and dogs enjoyed the festive parks. A nearby nail salon was booked solid. Outdoor areas offered comfortable and colorful furniture and a playground/art installation Los Trompos (merry go rounds)."
Talton goes on:
"The first week of the Amazon return, downtown hit a daily average of 77,000 worker visits — the highest daily average seen since the start of the pandemic … The largest employer bringing workers back to the heart of the city should send a clear message to other employers (private and public) that it’s time to return. After all, Amazon is a company constantly analyzing data for every move it makes, and it has determined that being in-person for at least three days per week is a sound strategy.
"This can and should build momentum — and that momentum will help small businesses, restaurants, arts and culture. It’s about getting people back downtown and doing what we can to ensure a clean, safe, interesting and welcoming environment once they’re here. Mayor Bruce Harrell clearly gets this, as does City Attorney Ann Davison."
The future of office work - at least in major cities - probably has changed forever, with some level of remote work becoming acceptable. Enlightened employers will, I think, understand that effectiveness and productivity may be heightened by a more flexible culture.
But that said, there's no question in my mind that these cities' long-term health depends on workers returning to some degree. Cities are the lifeblood of innovation in this country, and the nation is better when its cities thrive.
A side note - CNBC reports that Amazon employees are beginning the process of moving into the first phase of the company's HQ2 campus in Arlington, Virginia, described as a uniquely sustainable environment:
"Amazon’s HQ2, formally called Metropolitan Park, has many features that contribute toward the company’s goal of reaching net zero carbon emissions across all operations by 2040.
"The buildings will run with no operational carbon emissions and will be powered by 100% renewable energy from a nearby solar farm … The 2.1 million square feet of space includes some of the newest clean energy technology and sustainability features. An enormous meeting room has a mass timber ceiling made from 70-foot laminated planks of sustainable material. The floor is made of concrete from Carbon Cure, a clean cement company funded by Amazon’s Climate Pledge Fund.
"There are 3,000 tinted glass windows for cooling, and red/green lights by the side of the windows that tell workers when is a good time to open those windows. The building is also using special cooling technology that helps save about 7 and a half million gallons of water per year. That’s more water than is needed to fill the Lincoln Memorial reflecting pool.
"The heating and cooling systems operate based on need, meaning the ventilation and temperatures will change depending on occupancy. There are also advanced energy metering systems in the building to help evaluate future improvements as the building is occupied and teams use the space."
CNBC writes that "as for the second phase of HQ2 offices that was recently delayed, Hurst wouldn’t give a time frame but said Amazon is in the pre-construction phase and still committed to it."
Published on: May 22, 2023
Tesco announced on Friday that its chairman of the board John Allan, is stepping down from the board of directors earlier than anticipated because of sexual harassment allegations.
In the announcement, Tesco said:
"In recent weeks, four allegations have been made in the media in relation to John's personal conduct. Three of these allegations are vigorously denied by John, for the other John unreservedly apologised for the comment he made.
"One of the allegations related to the Tesco AGM in 2022. In response, Tesco immediately instigated an extensive review of the allegation. This has involved an internal communication to colleagues inviting them to come forward if they had concerns regarding any conduct issues and specifically at the Tesco 2022 AGM. Tesco attendees at the meeting have been further contacted, including colleagues who have since left the Company. Available video footage of the meeting has been reviewed, as have internal complaints records, including from the Company's confidential whistleblowing service.
"The scope of the review has been considered by external legal counsel, who advised that the steps were reasonable and appropriate in the circumstances.
"This review has not identified any evidence or complaints in relation to John at the Tesco 2022 AGM or at all in his tenure as Tesco Chair."
The BBC notes that the instances for which there reportedly is no proof all had to do with alleged inappropriate touching. Allan has "admitted to making a comment to a female … worker in late 2019 about a dress suiting her figure.
Mr Allan said he was 'mortified after making the comment' and immediately apologised."
Pending the appointment of a new permanent Chair, Tesco's Board has confirmed the appointment of Byron Grote, the company's Senior Independent Director, as Interim Chair.
Published on: May 22, 2023
The New York Times has a story headlined, "Amazon Is Everywhere. That’s What Makes It So Vulnerable."
Here's the thesis:
"Amazon’s recent growth helped create the choke points that workers have sought to exploit. During its first two decades, the company stayed out of the delivery business and simply handed off your cat toys and razor blades to the likes of UPS, FedEx and the Postal Service.
"Amazon began transporting many of its own packages after the 2013 holiday season, when a surge of orders backed up UPS and other carriers. Later, during the pandemic, Amazon significantly increased its transportation footprint to handle a boom in orders while seeking to drive down delivery times. Hence all those new vans.
"The problem is that shipping networks are fragile.
"If workers walk off the job at one of Amazon’s traditional warehouses, the fulfillment center, the business impact is likely to be minimal because the sheer number of warehouses means orders can be easily redirected to another one.
"But a shipping network has far less redundancy. If one site goes down, typically either the packages don’t arrive on time or the site must be bypassed, often at considerable expense. All the more so if the site handles a huge volume of packages."
You can read the entire story here.
Published on: May 22, 2023
• In the UK, The Sun reports that "Amazon Prime customers will soon need to spend more in order to get free Morrisons delivery within two hours … Prime members can currently spend a minimum of £40 and qualify to get their supermarket shopping within two hours for free.
"But from June 19, Morrisons customers will have to spend at least £60 to be eligible - that's an extra £20."
The story notes that "Morrisons is the only major supermarket to offer deliveries through Amazon Prime."
However, The Sun points out that Tesco also "upped the minimum basket values for home delivery earlier this month. The minimum basket value for home delivery increased to £50 on Tuesday, May 2 - up from its previous level of £40. It also increased the basket charge for those who don't meet the minimum spend from £4 to £5."
• From The Information:
"YouTube and Netflix are the most-watched streaming services in America. But it is Amazon that has come closest to building a streaming version of cable TV with its Prime Video Channels service, which lets Prime subscribers easily sign up for a wide range of streaming services run by other companies. It’s an enormously profitable business, more so than almost any individual streaming service. Now YouTube, too, is gunning for a piece of the market.
"The Google-owned company, which last year launched its own version of Prime Video Channels, is undercutting Amazon by as much as 10 percentage points on what it will charge to carry streaming services, say people familiar with the matter. YouTube’s effort, which follows similar but less successful moves by both Apple and Roku to compete with Amazon, demonstrates how big tech companies are jockeying to provide the most complete streaming alternative to cable TV … Amazon typically takes a 50% cut of the subscription fee. YouTube, in contrast, is offering to take just 40% or less, depending on the partner."
Published on: May 22, 2023
• Axios reports that Sweetgreen has opened "its first automated salad bar in Naperville, Illinois — 30 miles outside of Chicago … It's faster, more accurate and more precise, Sweetgreen notes."
The company says that "guests can watch the technology at work, from dispensing greens and dressing bowls and plates, to evenly dispersing ingredients and mixing salads … Team members add the final touches at the finishing station, with a sprinkle of herbs or a scoop of avocado."
• From the Financial Times:
"Ireland is introducing the world’s first requirement for alcoholic drinks to provide health labelling, including calorie content, grammes of alcohol and warnings about cancer, liver disease and drinking while pregnant."
The requirement takes effect on May 22, 2026, so companies have three years to prepare.
FT notes that the move has "drawn flak in Italy, which has called the move an 'attack on the Mediterranean diet'."
Published on: May 22, 2023
Executive Suite is sponsored by Robin Russell Executive Search.
• The Philadelphia Business Journal reports that Jim Perkins, president of Albertsons' Mid-Atlantic division and the former president of Acme Markets, "has been tapped by parent company Albertsons to play a key role in the grocery giant's proposed $24.6 billion merger."
Perkins, the story says, "will lead the planning efforts for SpinCo, a standalone public company consisting of approximately 100 to 375 divested stores that may need to be established to obtain regulatory approval for Albertsons' planned merger with Cincinnati-based supermarket chain Kroger." Perkins will continue "to serve as Executive Vice President of Retail Operations and Special Projects for Albertsons," the story says.
• Albertsons announced that it has hired Tom Moriarty, most recently the Executive Vice President, Chief Policy and External Affairs Officer, and General Counsel at CVS health, to be its new Executive Vice President and General Counsel.
Published on: May 22, 2023
…will return.
Published on: May 22, 2023
• Brooks Koepka won the the PGA Championship at Oak Hill Country Club in Rochester, N.Y., with a 9–under par performance that made him the first player to win a major tournament after leaving the PGA Tour for the Saudi-backed LIV Golf league.
