Walmart & Zero-Based Shopping Bags

The Wall Street Journal: “Wal-Mart has started using zero-based budgeting in some corporate units and has made cost cuts as mundane as printing receipts on smaller strips of paper—a change that has saved $7 million so far this year … Wal-Mart expects to save $20 million this year by using slightly smaller plastic shopping bags.”

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Lidl Effect: So Far, Not Much

The Wall Street Journal: “Since opening its first U.S. store in June, Lidl, the German grocery giant, hasn’t exactly upset the American grocery cart … When Lidl’s first nine U.S. stores opened June 15 in Virginia and the Carolinas, they lured customers away from other grocers, according to an analysis by inMarket, a location-based data firm. But Lidl hasn’t been able to sustain that level of traffic, and grocers including Kroger Co. and Wal-Mart have recovered much of their lost market share, according to inMarket.”

“The timing of Lidl’s U.S. arrival wasn’t ideal. It opened its first stores the day before Amazon.com Inc. surprised the industry by announcing it would buy Whole Foods Market. Supermarkets responded, slashing prices to keep up with growing competition on many fronts while investing in online ordering and delivery. Lidl doesn’t currently have an online grocery-shopping operation in the U.S.”

“Missteps in store location and merchandise have hurt Lidl’s U.S. rollout, consumer analysts say … Other analysts said Lidl stores give prominent display to items that seem geared toward Europeans, whether it is $39.99 cycling shoes or $15.99 badminton sets. Some stores’ produce sections have run low on conventional items while stocking big organic offerings, and in some stores emphasis on wine hasn’t squared with local tastes focused on beer.”

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Walmart Shoppers & Drive-Thru Culture

The New York Times: “A personal shopper is something you might expect at Bergdorf Goodman or a boutique on Madison Avenue. Not at the Walmart on Route 42 in Turnersville, N.J. But that’s where you will find Joann Joseph and a team of Walmart workers each day, filling up shopping carts with boxes of Honeycomb cereal, Cheez-Its and salted peanuts. The customers select their groceries online, and then the shoppers pick the items off the store shelves and deliver them to people when they arrive in the parking lot. Customers never have to step inside the store.”

“Walmart, which is one of the largest food retailers in the United States, sees grocery pickup as a way to marry its e-commerce business with its gigantic network of stores — a goal that has eluded many other retailers. The company started ramping up the service two years ago, and it is now available in about 1,000 of Walmart’s 4,699 stores across the country … Walmart is betting big on the millions of Americans in suburban and rural areas who drive everywhere. The company is trying to make ordering groceries online and then picking them up in your car as seamless as a fast-food drive-through.”

“Walmart is also showering grocery pickup customers with perks — Easter eggs hidden in grocery bags, a “beauty box” for moms at Mother’s Day, dog biscuits and discounts for recruiting new customers. It’s unclear how the company will be able maintain this kind of dedicated service if a store is inundated with pickup orders, which in many stores are free of charge and require an order of $30 or more. Walmart said it had hired thousands of workers to staff the new service across its many stores.”

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How Whole Foods Steals Walmart Shoppers

Business Insider: “When Amazon’s acquisition of Whole Foods formally went through in August, the e-commerce giant immediately made some changes — most notably, significant price cuts … The biggest source of foot traffic for Whole Foods were regular Walmart shoppers. People who visited Walmart at least twice a month accounted for 24% of new Whole Foods customers the week of the price cuts.”

“Across the board, the customers who defected to Whole Foods from grocery rivals were wealthier than the retailers’ average shopper … Walmart’s regular customers’ average income is $59,264, according to Thasos data; the average income of a regular Walmart customer that is defecting to Whole Foods, however, is $71,697 … While Walmart has aimed for more aspirational customers as Whole Foods cuts prices, Thasos data proves that both retailers are competing for the same shopper: the upper-middle class customer who is increasingly important as wages stagnate for much of the US.”

“All of this means that wealthier shoppers are increasingly influential, forcing bargain-centric retailers like Walmart to expand into more aspirational brands … Walmart is gearing up to cash in on wealthier customers, especially as it expands its e-commerce lines. Whole Foods winning over high-income customers could force Walmart on the offensive in this battle — one that both retailers are determined to win.”

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The Future of Plant-Based Protein

“Look at the dairy category: 14 percent of it now is plant-based, like soy or almong or rice milk. I believe the same could be true for meat. If we get to that meat [department] I believe there’s potential for at least 14 percent of this category to become plant-based.” – Seth Goldman, executive chairman, Beyond Meat, in brandchannel.

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Starbucks Shutters Digital Store

The New York Times: “As customers increasingly shift their retail shopping toward e-commerce, Starbucks is bucking the trend: It shuttered its online store … Maggie Jantzen, a company spokeswoman, said that the decision to shut down the online store was part of a push to ‘simplify’ Starbucks’ sales channels … The company’s chief executive, Kevin Johnson, spoke on Starbucks’ most recent earnings call about a ‘seismic shift’ in retailing. To survive, he said, merchants need to create unique and immersive in-store experiences.”

Starbucks chairman Howard Schultz told investors last April: “Every retailer that is going to win in this new environment must become an experiential destination. Your product and services, for the most part, cannot be available online and cannot be available on Amazon.”

“Starbucks said it would continue to sell branded products like coffee through grocery stores and some online sites managed by its sales partners. But it broke the hearts of some fans by ending retail sales of a cult-favorite product line: flavored syrups. The mixes used to concoct drinks like the Pumpkin Spice Latte are generally not for sale in the company’s stores, but Starbucks stocked them on its website … On eBay, a jug of Starbucks pumpkin spice syrup could be had on Sunday for $100.”

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Cereal Killers: Food CEOs On The Firing Line

The Wall Street Journal: “A cereal killer is stalking the executive offices of packaged food companies, with Kellogg boss John Bryant being the latest victim. Other companies where chief executives have left since the spring of 2016 or are on their way out include General Mills, Mondelez, Hormel, Hershey, Nestlé and Coca-Cola.”

“Of the 10 largest U.S.-listed food companies by revenue, not a single one has outperformed the S&P 500 in the past 12 months … One reason is moribund food prices. Last month’s U.S. consumer-price index for food eaten at home was essentially unchanged from the spring of 2014.”

“Even as prices stagnate, consumer preferences have shifted toward fresher and healthier food. Meanwhile, supermarkets are suffering too and are responding by cutting the number of brands stocked or pushing store brands. Food companies have reshuffled or pruned brands to appeal more to consumers and done expensive acquisitions, such as General Mills’ 2014 purchase of organic food company Annie’s. To really move the needle, though, they will have to focus ruthlessly on costs.”

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Cake Ladies: Inside The Box Thinking

The New York Times: “Elsewhere, the American appetite for packaged baking mixes is waning, according to the market research firm Mintel, as consumers move away from packaged foods with artificial ingredients and buy more from in-store bakeries and specialty pastry shops. Yet in the small, mostly indigenous communities that dot rural Alaska, box cake is a stalwart staple, the star of every community dessert table and a potent fund-raising tool.”

“The offerings in village stores often resemble those in the mini-marts or bodegas of America’s urban food deserts, at two and three times the price. Food journeys in via jet, small plane and barge. Milk and eggs spoil fast. Produce gets roughed up. Among the Hostess doughnuts, Spam and soda, cake mix is one of the few items on shelves everywhere that require actual cooking. As a result, tricking out mixes has become a cottage industry, and many villages have a ‘cake lady’ with her signature twist. Some bake as a hobby, while others do a brisk business selling cakes in places where getting to a bakery requires a plane ticket.”

“In America’s northernmost town, Utqiagvik (formerly known as Barrow), the baker Mary Patkotak is an expert at gaming cake economics. She uses Betty Crocker triple chocolate fudge mix for her famous cherry-chocolate cake. In the village store, it costs $4.59 a box. On Amazon, where Ms. Patkotak orders it, it’s $1.29. Alaska’s many weather delays mean the mix never shows up on time, but she doesn’t care because it qualifies her for partial refunds on her annual Prime membership.
‘I can’t remember the last time I paid the Amazon Prime fee,’ she said.”

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Strategic Selection: Less is More for Aldi

The Wall Street Journal: “German discounter Aldi, is betting billions it can win over spoiled American shoppers. How? By offering them fewer choices—way fewer—than rival retailers. The unlikely proposition has worked nearly everywhere Aldi has set foot … It offers a deliberately pared-down selection, sometimes a tiny fraction of the number of items sold by rivals, which helps Aldi cut costs to levels U.S. grocers can only dream of. Among other benefits, fewer items means faster turnover, smaller stores, less rent, lower energy costs and fewer staff to stock the shelves.”

“About 70 years ago, brothers Karl and Theo Albrecht, fresh from military service in World War II, took over their family’s store in Schonnebeck, a mining neighborhood of the bombed-out industrial city of Essen. In the early 1950s, they began rolling out their ascetic concept to other branches throughout the region. Back then, their stores offered just 250 items, the essentials miners’ and steelworkers’ families needed to survive—flour, sugar, coffee, butter, bacon, peas and condensed milk. In the 1950s and ’60s, Germany’s economic miracle took off, and a wave of glitzy supermarkets selling thousands of items sprouted up to serve the newly affluent middle class. Aldi didn’t flinch.”

Today: “Aldi is gambling it is more in tune with the American tastes, rolling out small, nimble stores instead of sprawling warehouses and supermarkets that take longer to navigate … One of Aldi’s strengths that has eluded many discounters is its ability to draw middle-class shoppers—those with more money to spend—despite its limited array of goods. It did this by cultivating the image of a company focused on quality rather than pinching pennies … There too, executives say, the limited assortment played a central role. The small number of items ensured that staff could carefully choose, taste-test and quality-control each item.”

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Nestle’s Supermarket Barge

Business Insider: “Nestlé, the world’s largest packaged food conglomerate, came up with a way to spread its presence abroad: sponsor an Amazonian river barge to sell its products to the backwoods of Brazil … the boat was a way to expand in hard to reach parts of Brazil, reports the New York Times. Since 2010, the boat delivered tens of thousands of cartons of milk powder, yogurt, chocolate pudding, cookies, and candy to isolated communities in the Amazon basin.”

“According to The New York Times, the boat was taken out of service in July 2017, but private boat owners have taken over to fill the demand.”

“The program, called ‘Nestlé Takes You Onboard,’ was part of a larger effort of Nestlé’s door-to-door marketing campaign … Nestlé currently also employs thousands of local vendors, who sell its products to quarter-million households, many of which are in isolated, low-income areas of Brazil … The ‘supermarket’ boat, which measured 1,076 square feet, journeyed to 18 cities and up to 800,000 consumers on the Para and Xingu rivers in Brazil … It carried 300 different items, including chocolate, yogurt, ice cream, and juices.”

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