Tuesday, June 20, 2017

Aspect dominance, competitive landscapes, and other reasons why the Amazon acquisition of whole foods may not be that big of a deal.

First off, let's look at some numbers.
[From Wikipedia]

National chains
    Albertsons LLC - 2,400 stores; besides the parent company, some stores are operated under the banners: Acme Markets, Carrs, Jewel-Osco, Lucky, Pavilions, Randalls and Tom Thumb, Safeway Inc., Shaw's and Star Market, United Supermarkets and Market Street, and Vons
    Aldi - 1,401 stores;
    Costco - approximately 500 warehouse stores in the USA, plus 200 elsewhere
    Ahold Delhaize - 2265 stores under the following brands.
        Food Lion (1098 stores in Delaware, Georgia, Maryland, Pennsylvania, Tennessee, West Virginia, Kentucky, North Carolina, South Carolina, Virginia)
        Hannaford (188 stores in Maine, Massachusetts, New Hampshire, New York and Vermont)
        Giant-Carlisle (197 stores in Pennsylvania, Maryland, Virginia and West Virginia)
        Giant-Landover (169 stores in Delaware, District of Columbia, Maryland and Virginia)
        Stop & Shop (416 stores in New York Metro: Connecticut, New Jersey, New York, New England: Connecticut, Massachusetts and Rhode Island)
        Martin's Food Markets (197 stores in Pennsylvania, Virginia, Maryland, and West Virginia)
    Kmart Super Center - 624 stores
    Kroger - 2,460 stores; besides the parent company, stores operate under Baker's Supermarkets, City Market, Dillons Supermarkets, Food 4 Less, Foods Co., Fred Meyer (technically a hypermarket), Fry's Food & Drug, Gerbes Super Markets, Harris Teeter, Jay C, King Soopers, Owen's, Pay Less Super Markets, QFC, Ralphs, Roundy's, Ruler Foods, Scott's, and Smith's
    Schnucks - 100+ Stores
    SpartanNash - operates 167 retail stores in 44 states, Europe, Latin America, and the Middle East
    SuperValu Inc. - 1,582 stores (691 corporate and 891 franchised stores); the Save-A-Lot name is its most common banner; others are Cub, Farm Fresh, Hornbacher's, Shop 'n Save and Shoppers
    SuperTarget - 251 stores
    Trader Joe's - 457 stores (as of April 22, 2015)
    Walmart - 3522 stores + 699 Neighborhood Markets + 660 Sam's Clubs (as of January 31, 2017)
    Whole Foods - 430 stores (as of June 14, 2016)

Add in a ton of local and regional players and it becomes evident that Whole Foods' is not that big of a block. 

The distorting effects of aspect dominance
Whole foods is not just small in absolute terms; it is almost exclusively focused on a very narrow target market. Upscale, price insensitive, urban foodies credulously immersed in the world of health and culinary trends. By coincidence, this profile matches almost perfectly with the journalists currently reporting the story.

Whole Foods looms large in the lives of the kind of people who write for New York magazine or produced segments for CNN. This inclines them to lend this story and air of importance it does not merit. For example check out Matt Yglesias.

The post-peak problem

Even with its targeted demographic, there is considerable evidence that Whole Foods was already in danger of losing its dominant position. A decade ago, the chain largely had a lock on the organic and exotic market. If you wanted heirloom tomatoes and cage free eggs and pink Himalayan salt and those big bottles of Dr. Bonner's soap that your stoner friends used to read in the bathtub in college, you could either drive around various health-food shops and co-ops or you could go to Whole Foods.

Recently, though, the company has found its one time monopoly under assault from all sides. Old-fashioned retailers like Kroger's and Walmart have greatly expanded their organic and exotic selections. On the opposite front, small, nimble players like Trader Joe's and Sprouts have gone directly after the target market and have done so with far better prices and superior branding. This latter threat has gotten so bad that Whole Foods was forced to launch the Trader Joe's clone 365.

Before Amazon swooped in, the company had been facing one of the ugliest competitive landscapes in the industry.

"But we'll make it up with volume"

I know it seems a mundane point in this age of disruptors and economages, but Wal-Mart (and Krogers and Costco and ...) have mastered the art of selling groceries at a profit. Amazon appears to have gone into the business largely as a kind of loss leader and it's not clear they have any real plans to move beyond that model.

Wal-Mart, on the other hand, just might

This is an interesting idea, with some potentially big implications.

And finally, Jim Cramer predicts the possibility of great things.

There are few things scarier in the world of finance.

Tuesday, February 16, 2016

Angry diners, happy beavers

From Bloomberg:

Acting on a tip, agents of the U.S. Food and Drug Administration paid a surprise visit to a cheese factory in rural Pennsylvania on a cold November day in 2012.

They found what they were looking for: evidence that Castle Cheese Inc. was doctoring its 100 percent real parmesan with cut-rate substitutes and such fillers as wood pulp and distributing it to some of the country’s biggest grocery chains.

One might be tempted to think of this as a ripped-from-the-headlines episode of “NYPD Bleu,” except that the FDA wasn’t playing. Some grated Parmesan suppliers have been mislabeling products by filling them with too much cellulose, a common anti-clumping agent made from wood pulp, or using cheaper cheddar, instead of real Romano. Someone had to pay. Castle President Michelle Myrter is scheduled to plead guilty this month to criminal charges. She faces up to a year in prison and a $100,000 fine.

Tuesday, November 10, 2015

Feeling better about (most) fast food

From the Washington Post
On Thursday, Panera became the latest fast-food chain to announce its plan to use only cage-free eggs. The commitment, which the company will carry out by 2020, is quickly becoming an industry-wide standard: McDonald's, Burger King, Dunkin' Donuts, Starbucks and many others have made similar announcements.

But cage-free eggs, which come from hens that are free to move and lay eggs in nests, are hardly the only promise fast food companies are making these days. Raising chickens without antibiotics, which Panera made a priority more than 10 years ago, is something many others are now offering or working toward achieving. Efforts to end the confinement of pigs and cattle are becoming more popular, too.

The reality is that animal welfare, broadly speaking, has become something that people care about, and companies have moved to honor. It's something you have to do, or at least have to seem to want to do, if you want to woo customers.

That is, unless you are Taco Bell, Pizza Hut, or KFC.

"When you look at the major fast food brands, Taco Bell really stands out," said Leah Garces, who is the U.S. director of Compassion in World Farming, an animal rights group. "They're the only big player in the United States that doesn't have plans to change how it sources its food."

All of the brands belonging to Yum! Brands, the parent company which owns Taco Bell, Pizza Hut, and Kentucky Fried Chicken, were given an F grade in a recent report by six organizations, including the Consumers Union and Center for Food Safety, on industry sourcing practices. What's more, it has made no clear promises to fix that.

The closest the company has come was last year, when Greg Creed, who used to served as Taco Bell's CEO but now is at the helm of Yum! Brands, told The Wall Street Journal that he would like for Taco Bell and its sister brands to switch to hormone- and antibiotic-free meat, but that it wasn't currently possible.

There hasn't been a peep about animal welfare since.

Thursday, August 20, 2015

Wednesday, August 19, 2015

Popsicle Pete and friends

Popsicle (now owned by Unilever of all people) was another staple of kids' advertising.
In April 1939, Popsicle Pete was introduced on the radio program Buck Rogers in the 25th Century as having won the "Typical American Boy Contest." The character told listeners that they could win presents by sending wrappers from Popsicle products to the manufacturer. During the 1940s, Popsicle Pete ads were created by Woody Gelman and his partner Ben Solomon. The ads appeared in print, television commercials, and activity books until 1995.
But the real fascination came with those red dots.

Pop culture historian has a more personal take.

That's right: It's the dictionary definition of empty calories — the orange popsicle. I liked the way they looked. I liked the way they tasted. I liked that nothing bad ever happened to you while eating an orange popsicle and I regretted that that time period lasted such a brief time. Sadly, you couldn't draw it out and make the "safe" feeling last because the popsicle would melt at a rapidly-accelerating pace and drip all over you and become more of a problem than a joy. Still, it was great while it lasted.

This feeling, by the way, only applied to orange popsicles. A grape popsicle or a red one was just a hunk of frozen flavored water. I was never sure what the red ones were. I think they were whatever you wanted them to be. If you asked for strawberry, they gave you a red one. If you asked for cherry, they gave you the same red one. Or raspberry. Or one time, even apple. I'm sure that if I'd asked for a tomato popsicle, they would have handed me one of those red ones. It tasted as much like tomato as it did any of those other flavors.

As wonderful as they were, there was another downside to orange popsicles: The two sticks. I could rarely get the one-stick variety in my area. which was silly. Think how many trees they could have saved by only inserting one…but they gave you two on the faulty premise that some folks might want to split the popsicle in half and share it with a friend.

First thing wrong with that concept: Share it with a friend? Never. Let my cheapo friend get his own orange popsicle. Even if you were eight, it wasn't a significant expenditure.

Second problem: Splitting one of those things in half was about as easy as splitting the atom and almost as dangerous. I certainly never successfully accomplished either.

Usually, attempting it would send one entire half of your beloved orange popsicle plunging to the pavement. Or one stick would come out, making the popsicle impossible to share and awkward to eat. In the TV commercials, some trained ninja popsicle-divider would grasp the two sticks, give an artful twist and bisect the popsicle perfectly. They should have put up a little disclaimer: DON'T TRY THIS AT HOME — because it never worked like that in reality.

So you'd just eat the popsicle with two sticks, which would put you perpetually off-balance. Whichever one you held was the wrong one. But I still loved them…up until about the age of twelve or thirteen.

When you're in that age range, much changes in your world. Certain toys you own seem childish and you toss them out as a rite of passage. You have to start seriously thinking about a career or at least a way of start making spending money. If you're a boy, girls suddenly seem a lot less yucchy. And orange popsicles lose a large chunk of their magic.