‘Round The Trade
Whole Foods will be meeting with some of its major suppliers on March 19 to discuss recent changing initiatives at the organics/natural foods retailer which was acquired by Amazon last June. We’ve spoken to about half a dozen key vendors who have complained about the Austin, TX retailer’s lack of transparency and detail especially when trying to better understand WFM’s shift to a centralized merchandising model. Part of their criticism centers on the retailer’s new in-store execution (ISE) service charge (ranging from 3 to 5 percent) that major suppliers will be charged to have their products directly managed at store level by Whole Foods or a designated vendor partner (Daymon) that the retailer selected. Such a move virtually eliminates independent food brokers from WFM’s sales pipeline. We’ll have a report for you next month with highlights of the upcoming summit. Centralizing merchandising isn’t the only change that’s occurring at Whole Foods. While lowering prices thus far has proven to be more hype than substance (when viewing retails on a total store basis), we’ve seen the addition of Amazon products (Echo, Fire, Kindle) being sold in some Whole Foods stores, free grocery delivery offered to Prime members, and one other speculated product addition that would clearly bear Amazon’s imprint: the possibility of including Coca-Cola products at its more than 450 units. If Coke did gain entry into Whole Foods, it would mark a major policy change for the retailer which has always sold foods that were “free of artificial preservatives, colors, flavors, sweeteners and hydrogenated fats,” according to its website. And in its latest move to expand its Prime membership, Amazon is now offering discounts (including free shopping and video) to millions of Medicaid recipients who would now pay $5.99 per month, which is more than 50 percent lower than the normal $12.99 monthly Prime fee. Clearly, this is an arrow aimed directly at Walmart. And according to Bloomberg, amazon.com is on a growth pace that could see its market capitalization $1 trillion (that’s with a “t”) by 2022. The Seattle-based juggernaut’s market cap currently is valued at about $775 million, more than combined value of two next largest retailers – Alibaba and Walmart…Instacart, which has been rockin’ for the past six months (despite the fact that it is now competing on a head-to-head basis in some markets with one of its early partners – Whole Foods), will now service all Aldi units in the Chicago market after a three-store test with the grocery delivery service proved successful last year. Kroger, too, will add 500 stores to its Instacart list. Moreover, the San Francisco-based startup that was founded less than six years ago, now has all three club store operators in the fold with Sam’s utilizing same-day service in several Texas markets and BJ’s expanding its program by making the service available to its customers at all 215 stores by the end of April. Costco began partnering with Instacart last October at all 441 continental U.S. stores and recently has broadened the service to include more grocery items…Sprouts had a huge opening at its first Mid-Atlantic unit, a 30,000 square foot unit in a former Mars Super Market in Ellicott City, MD earlier this month. Having visited many Sprouts stores out West in recent years, I’ve been long impressed by the company’s business model and even more impressed by its ability to execute its perishables-driven merchandising plan at store level. The company plans to open two stores in the Delaware Valley later this year – in the new Lincoln Square development of Broad Street and Washington Avenue in Philadelphia and in part of the old Macy’s location in the Moorestown (NJ) mall. It was also great to see Dan Sanders, former Acme president (2010-2012), at the new Sprouts unit, where he serves as chief operations officer for the Phoenix-based merchant. I’ve always admired Sanders’ integrity, humility and access even when Acme (under the misguided leadership of Supervalu) was enduring the worst period in its history. He’s in a much better place now and is a key component in the recent success of Sprouts…according to the Belgian newspaper De Standaard, current Ahold Delhaize CEO Dick Boer could retire as soon as later this month. The story noted that current deputy CEO Frans Muller will be elevated to the top job at the Dutch retailer. Boer would then become chairman of AD’s Supervisory Board replacing Mats Janssen, former Delhaize chairman. Ahold would not comment on the possible changing of the guard, but it makes sense given Dick Boer’s age (he’ll be 61 in August) and the fact that the integration of Ahold and Delhaize is now complete. It’s likely that a detailed succession plan was negotiated as part of the merger of the two large European-based chains whose primary holdings are in the U.S….earlier this month, the Salvation Army opened is first non-profit grocery store in its history. The new store is called DMG Foods (Doing the Most Good) and is operating in a 7,000 square foot warehouse on East 29th Street in Baltimore. DMG Foods will provide fresh and affordable “healthy” food to about 1,200 families who live in that food desert area of northeast Baltimore. It will be working with the Maryland Food Bank in offering daily meal solutions and cooking demos…Kohl’s will soon begin a 10-unit test in which it will house Aldi stores within its four walls as part of continuing effort by the apparel merchant to build traffic and drive overall sales. Aldi will essentially rent space from the Menomonee Falls, WI retailer and independently operate its “store within a store.” If the beta test is successful, the concept could be expanded to an additional 200 stores later this year. Kohl’s proved it is willing to experiment with other retailers’ products when it began selling Amazon products at about a dozen of its 1,150 department stores last fall…Walmart is clearly trending in the right direction and is investing heavily in its IT and digital infrastructure which will allow it to remain a powerful organization for many years. Walmart is also developing a technology called “Eden” which inspects produce for defects and can accurately predict the exact date when that item will spoil. Walmart believes it can save as much as $2 billion over the next five years. “Eden” is currently being used in 43 Walmart DCs and will shortly be brought to the retailer’s supplier farmers. Walmart has also entered the meal kit business with 10 different meal varieties available in about 250 stores. By the end of 2018, the meal kit offerings will be expanded to about 2,000 units. Prices of the prepared meals will be in the $8 to $10 range…boxed.com, the “membership warehouse” e-commerce firm, officially spurned Kroger’s $400 million acquisition offer and apparently plans to remain independent as it continues to build its business which it hopes to take public in the near future. Of course, that is until somebody else waves more dollars at them…Target said it would raise its minimal hourly wage to $12 by this spring, the first step of a broader, more long-term initiative that would ultimately boost the mass merchant’s minimum wage to $15 per hour by 2020…some very notable obits to report this month. For you old folks out there (including me), Roger Bannister has passed away at age 88. That would be Dr. Roger Bannister, who had a long and distinguished career in medicine. But, he was far better known for an achievement that many athletic observers thought to be impossible at the time. On a cool, wet and blustery English day in May 1954, Bannister ran four laps around a cindered track in his hometown of Oxford in 3:59.4, making him the first person to run a mile in under four minutes. Bannister’s record stood just 46 days and he retired from competitive running less than a year later to pursue his medical career. “I wouldn’t claim to have made any great discoveries, but at any rate, I satisfactorily inched forward in our knowledge of a particular aspect of medicine,” he said about his post-athletic career. “I am far more content with that than I am about any of the running I did earlier.” By the way, the current world record for the mile is now 3:43.13….finally, one of the most amazing people of the past 50 years – Stephen Hawking – has passed away at 76. Diagnosed with ALS at the age of 21, Hawking did not let his severe disability impede his desire and ability to become one of the greatest theoretical physicists in history. Although the disease ravaged his body, his incredible brain remained fully functional. When he lost the ability to speak, computer scientist Walter Woltosz created a program that allowed him to use his still-functional fingers to create sentences that would be sent to a speech synthesizer allowing him to vocalize his thoughts. “My goal is simple,” he once stated. “It is a complete understanding of the universe, why it is as it is, and why it exists in all.” His 1988 book “A Brief History of Time: From the Big Bang to Black Holes” is arguably the greatest scientific tome of all time. From that book came an excellent film of the same name directed by iconic documentarian Errol Morris in 1991. In 2014, “The Theory of Everything,” a more romanticized and highly acclaimed film about Hawking from his first wife’s perspective was released. Stephen Hawking’s life should be an inspiration to us all.