In what remains the best top-to-top forum for retailers and suppliers to exchange ideas, this year’s FMI Midwinter conference held late last month in Orlando, FL proved that some of the real worries from last year’s meetings hadn’t been as awful as some feared. However, food price inflation – which remains above the 10 percent level – and labor challenges – both in hiring and retention – are durable problems that continue to spark concerns.
During my three days in Central Florida, I asked more than 40 retailers and vendors if they felt more optimistic than they had 10 months earlier, and while most said yes, almost every executive I informally polled still felt a high level of uncertainty about stabilizing food prices as well as finding available and motivated associates to work in stores and distribution centers. On a more positive note, merchants and suppliers almost universally agreed that supply chain functionality had improved, which in the past six weeks has provided consumers with a better shopping experience and merchandisers with a better planning road map for the near future.
Retailers, however, continue to be frustrated by what they believe is an ongoing unwillingness by many of their suppliers to significantly increase their promotional spending for the rest of 2023.
“I really don’t get it,” said one SVP-merchandising for a large Mid-Atlantic-based retail chain who claimed to have had about 30 meetings with senior level manufacturing executives during the Midwinter conference. “We know and they know that unit sales are significantly down. We have urged them to open up their promotional pocketbook and rebuild their sales especially now that supply chains have improved. Most that we talked to were non-committal and a few said that the instructions that they were given by their bosses is to remain cautious. If suppliers believe they can continue to ride the inflationary tailwinds forever, that’s a bad outlook. Listen, we as retailers have also benefited from inflation over the past 18 months. That gravy train will likely end by the end of this year when customers move from trading down to not even buying certain items. National manufacturers, which can clearly see those signs already, will pay a big price if that occurs, but retailers and consumers will also lose.”
Beyond being an excellent forum for buyers and sellers to constructively engage in business issues, Midwinter’s positive vibes makes it an excellent networking forum, too, something that’s been generally missing since COVID, but which had been in decline for a decade before the pandemic arose.
The conference is an excellent blend of business and social affairs where longtime industry cohorts can actually meet one-on-one, play a round of golf together or do some elbow tipping in the lounge.
While I attended many (but not all) of the seminars, I found the dialogue between Scott Moses (PJ Solomon) and Karen Short (Credit Suisse), who discussed the “Tempest” affecting the grocery industry during these inflationary times, to be useful and thought the panel discussion focusing on how to navigate the realities of imperative business issues featuring Craig Boylan (CEO of H-E-B), Sandy Douglas (CEO of UNFI), Terry Thomas (EVP and CCO of Unilever) and Hunter Williams (who works for consulting firm Oliver Wyman) also provided excellent insight into such important topics as supply chain disruption, labor shortages and workforce challenges, accelerating technology transformation, changing marketplace and societal dynamics, evolving consumer behaviors and rising ESG expectations.
However, the highlight of the weekend was listening to Peter Hinssen, author and mind provocateur, who guided the audience through a journey on how companies can reinvent themselves during major periods of disruption and evolution. The Belgian-born speaker, whose speech focused on the concept of “never normal,” noted that technology is not the only consideration businesses face while evolving, proclaiming that the ecological, biological, societal and geo-political factors also need to be considered when dealing with change. Simply stated, Hinssen’s was one of the best speeches I’ve heard in the past 10 years.
I’ve also got to give a tip of the hat to former Giant Food president Anthony Hucker who now is CEO of Jacksonville, FL-based Southeastern Grocers. As chairman of this year’s event, the 56-year old Brit delivered a heartfelt and introspective keynote address praising the resilience of the people who work in the grocery industry. “…I’d like to focus on one word in particular: resilience,” Hucker exclaimed. “I think it’s fair to say we are a resilient industry. Frankly, we have to be. Our associates count on us. Our customers count on us, our communities count on us, too.
“The definition of resilience is the ability to recover from or adjust easily to misfortune or change. As an industry, as a nation, globally the past few years have represented great misfortune and change. And if we didn’t already know, we certainly know now that adversity does not discriminate.”
He said that developing a “people first” culture is paramount to any company’s success, while also noting that “many claim to put their people first, but let’s face it, do not.” At SEG, he claimed that listening to and addressing the concerns of its associates has elevated their trust in leadership by 30 percent.
The highly charismatic chief executive delivered an emotional and meaningful message. And after all, who can cite examples from Winston Churchill and his own mother (contrary to popular belief, the two were not related) when talking about resiliency? Only Hucker.
Amazon To Suspend ‘Fresh’ Stores Expansion, Also Close Some Stores;
‘Godzilla’ Completes Slowest Growth Year Since It Went Public In 1997
“Godzilla” has finally admitted that its Amazon Fresh (AF) concept (pick one): a) is disappointing, b) needs to be retooled, or c) sucks. While falling short of pulling the plug on its small store brick and mortar entity, the company said during its Q4 analysts call that it has paused building more AF stores while acknowledging some existing stores (no locations yet disclosed) would close.
Amazon CFO Brian Olsavsky said the decision came as part of a periodic assessment of its grocery portfolio, adding that the company “decided to exit certain stores with low-growth potential.” Olsavsky also noted that, as a result, the company took a $720 million impairment charge in the fourth quarter. Additionally, some of Amazon’s current 28 Amazon Go c-stores will close. The company said it remains focused on finding a format that differentiates itself from its competitors and resonates with shoppers. Olsavsky made those comments after Amazon posted its Q4 and year-end financials
One of the best self-analysts in corporate America, it only took Amazon about two years to figure out that its AF stores offered confusing merchandising, undertrained associates as well as poor store operations and pricing. And if anybody in the entire grocery industry believed that a more advanced level of technology would be an essential difference maker, they’d be considered nuts. For AF, “Just Walk Out” was overridden by “Don’t Come In.”
I’m sure I’m not alone in believing that a “pause” in new store growth is just a temporary pit stop towards a final exit. In the meantime, according to our data, more than 25 Amazon stores remain under lease in the Mid-Atlantic area, with about half a dozen fully built. It looks like somebody is going to be able to buy equipment on the cheap.
As for those Q4 results, it was kind of a mixed bag for the world’s largest digital merchant. For the period ended December 31, Amazon’s net sales increased 8.6 percent to $149.2 billion. However, the company’s online revenue (which comprises nearly 50 percent of company sales) dipped 2.3 percent to $64.5 billion. There was marginal improvement in the juggernaut’s physical stores sales, which are primarily comprised of 553 Whole Food Markets, 44 Amazon Fresh stores and 28 Amazon Go convenience units. Sales increased 5.7 percent during the 13-week period. On the earnings front, Amazon took a big hit; profit for the quarter was only $278 million compared to $14.3 billion in the corresponding period in 2021. For the year, “Godzilla” posted a $2.7 billion loss, much of that coming from its investment in troubled Rivian Automotive. All told, Amazon posted its slowest year of growth in its history as a publicly-traded company (which goes back to 1997) and during 2022 saw its market value reduced by nearly 50 percent. But, alas, there’s more. The Seattle-based merchant announced it will charge a fee for all Amazon Fresh (AF) online grocery orders of less than $150. Beginning on February 28, delivery fees will be increased to $9.95 for orders under $50; $6.95 for orders between $50; and $100, and $3.95 if orders total $100 to $150. Mother Amazon.com certainly can sustain those fee hikes (although it may slow Prime Membership growth), but any negative consumer change involving AF will be felt, especially when analyzing the current state of mediocrity of its smaller brick and mortar discount stores. Along with grocery, Amazon’s other big focus in recent years has been healthcare. Late last month, the company unveiled RXPass, a bolt-on for its Prime members where, for $5 a month, those subscribers can get delivery on approximately 60 generic prescription drugs including those meds that are targeted to treat high blood pressure, allergies, inflammation and other common maladies. In recent years, Amazon has expanded its healthcare offerings by acquiring PillPack in 2018, creating its own Amazon Pharmacy in 2020 and launching a virtual health care clinic last year. “Godzilla’s” biggest healthcare venture to date is its deal to purchase One Medical, a primary care provider, for $3.9 billion. That deal is currently under Federal Trade Commission (FTC) review.
And speaking of the FTC, according to the Wall Street Journal, the federal agency is preparing a potential antitrust suit against “Godzilla.” The reason: the agency, under the leadership of Lina Khan (yes, the same person with oversight of the Kroger-Albertsons proposed merger) has questioned Amazon’s third-party practices and is reportedly focusing on the bundling practices related to its highly profitable Amazon Prime subscription service.
It’s been a pretty horrific 12 months for Amazon and for its relative new CEO Andy Jassy, who took the reins from founder Jeff Bezos in July 2021. Over the next year, I don’t think you’ll be hearing “Happy Days Are Here Again,” either.
‘Round The Trade
The Wall Street Journal had an interesting story about a recent summit meeting held between Whole Foods and its suppliers in December in which the retailer is seeking help in reducing prices. According to the story, Alyssa Vescio, SVP-center store merchandising, told vendors that “…we know our customers are weighing the impacts of inflationary pressure on their buying choices.” Whole Foods said that its rate of price hikes have been lower than the industry average, but that’s somewhat relative to the already higher retails (and margins) that the Amazon unit goes to market with. It’s somewhat ironic that a few weeks later, Kroger CEO Rodney McMullen addressed a similar topic when he spoke at last month’s National Retail Foundation’s “Big Show” in Manhattan. “About half of our customers are under a lot of strain from a financial perspective, and their wages haven’t kept up with inflation, because a much higher percentage of their spend would be things that are in higher inflation categories,” he stated in his keynote address. McMullen said he expects inflation to abate later this year, although after hearing the thoughts of manufacturers at FMI Midwinter, I’m not sure they are ready to agree with that sentiment… Walmart’s Sam’s Club unit said that it will add 30 more units to its portfolio over the next few years, the first major expansion effort by the retailer in nearly six years. While specific locations were not announced, the second largest club operator in the country said the new stores will be about 160,000 square feet in size, a larger footprint than most of its current 600 clubs. All three club players – Sam’s, Costco and BJ’s – have enjoyed stellar performances over the past three years with Sam’s Club’s comp store revenue increasing 10 percent in its most recent quarter…smartest move of the month: the naming of Bob Miller to the board of directors of Save Mart Cos., the Modesto, CA chain now owned by PE firm Kingswood Capital Management. At Save Mart, Miller will be reunited with Shane Sampson, executive chairman of the board, who came aboard early last year shortly after Kingswood acquired the former family-owned chain which operates about 200 stores in California and Nevada. I’m very happy for Bob, one of the greatest leaders in the retail biz over the past 50 years who has mentored and trained so many current food industry executives (including Shane).
Local Notes
Kudos to Gordon Reid and Liz Chace-Marino on receiving the prestigious Esther Peterson Award for Consumer Service and also to Joe Sheridan, president of Wakefern Food Corp. for being named as this year’s recipient of the Sidney R. Rabb Award for Statesmanship at this year’s FMI Midwinter Conference last month. The “Peterson” award was named for the former director of consumer affairs in The Carter administration who then joined Giant Food in a similar role. She is considered the supermarket industry’s first consumer affairs executive and helped shape many of the Landover, MD-based chain’s policies as a consumer advocate. Reid, currently president of Stop & Shop, began his U.S. food industry career at Giant in 2013 when he was named president. Chace-Marino, who has been involved with consumer and legislative affairs for more than 30 years, currently serves as manager of government affairs at Ahold Delhaize USA. Both received the award for their work in community affairs, particularly in the area of hunger and nutrition. Joe Sheridan, who began his career at the Keasbey, NJ-based wholesale co-op 47-years ago, has been an innovator and trailblazer both at Wakefern and in the industry. He has literally worked in every area of his company and has helped his retail member-owners strengthen their dominant positions in the New York Metro and Delaware Valley markets. Sheridan has also been a key cog in expanding Waekfern’s culture of giving. Industry-wise, the New Jersey native is currently an FMI board member and is a former chairman of the trade group. And a nod to the other Executive Leadership Award winners: Rick Brindle, VP-industry development for Mondelez International (William H. Albers Award for Industry Relations); Bob Obray (posthumously), former CEO of Associated Food Stores (Herbert Hoover Award for Humanitarian Service); Art Potash, CEO of Potash Markets (Robert B. Wegman Award for Entrepreneurial Excellence); and Ron Edenfield, chairman of Wayfield Foods (Glen P. Woodard Award for Public Affairs)…a few new store openings (and future ribbon cuttings) of note: Giant Food enjoyed a very strong debut at its new Crofton, MD unit, which like several other Giant openings in the last two years, was once a Shopper Food unit. Likewise, Aldi’s newest store in Denton, MD opened to big crowds and marked the expansion of the extreme value merchant’s Eastern Shore growth plan. Aldi currently operates stores in Easton, MD; Salisbury, MD; Cambridge, MD; and Berlin, MD…C-store merchant Wawa will continue its Baltimore area growth effort with two stores slated for Overlea, MD and Rosedale, MD (both in Baltimore County). And another convenience store operator (a hybrid of sorts) Foxtrot cut the ribbon on its newest unit on 17th Street NW (Farragut Square) in Washington, DC. The new store is the Chicago-based startup’s seventh c-store in the Washington region…sadly, we begin the new year with several deaths to report. Bob Born is dead. The 98-year old former president of Just Born Candy Company was known as the “Father of Peeps” for mechanizing the process to produce the mysterious marshmallow candy. Today, the Bethlehem, PA confectionery firm produces nearly 2 billion Peeps annually, most of which are sold at Easter. Born also created the recipe for another Just Born Candy brand – Hot Tamales…also passing on were three actresses whose halcyon days occurred decades ago. Gina Lollobrigida, the Italian sex symbol from the 1950s, passed away last month at the age of 95 in Rome. Lollobrigida actually began her career in the late 1940s but rose to fame after billionaire industrialist and film producer Howard Hughes found a photo of her and flew her to Hollywood in 1950. Her first few movies were mostly shot in Europe – “Beat The Devil” (1953) and “Trapeze” (1956) – but by the late 50s her profile was elevated with performances in “Solomon and Sheba” (1959) with Yul Brynner, and as Frank Sinatra’s love interest in the World War II movie “Never So Few” (1959). By the early 1970s, when her film career was virtually over, she turned her interests to photography and working for the United Nations on humanitarian missions. In commenting about her sex appeal, Humphrey Bogart, who starred with Lollobrigida in “Beat The Devil” (1953), said her allure made “Marilyn Monroe look like Shirley Temple.” Cindy Williams has also died. The Los Angeles-born actress, who appeared in 84 film and TV roles beginning in 1970, was 75 when she passed. A terrific comedic actress, Williams’ first found fame for her portrayal of Laurie in George Lucas’ award winning 1950s high school homage, “American Graffiti” (1973). The next year, she appeared in another great and very underrated film, “The Conversation” which was Francis Ford Coppola’s follow-up project after “The Godfather II.” Of course, Williams will always be best known as Shirley Feeney, the soft-spoken foil to rowdy Penny Marshall in the iconic sitcom “Laverne & Shirley” (1976-1983). As you may recall, “Laverne & Shirley” was a spin-off of the classic sitcom “Happy Days” (1975-1979) in which she appeared in five episodes. From the world of TV sitcoms, Wednesday is dead. Actually, Wednesday died on Tuesday. We are referring to actress Lisa Loring, 64, who portrayed the oldest and slightly less weird child of Gomez (John Astin) and Morticia (Carolyn Jones) Addams in the dark comedy series “The Addams Family” (1964-1966). After Gomez, Morticia, Wednesday, Pugsley, Uncle Fester, Cousin Itt and Lurch left the world of black and white television, Loring’s career was essentially over, and she appeared in only 15 additional roles….one of the greatest hockey players of all time, Bobby Hull, has also passed away. The long-time Chicago Blackhawks left winger, who was nicknamed the Golden Jet, died late last month at the age of 84. While he may not have invented the slapshot, the Hall of Famer certainly perfected it, scoring 50 or more goals a season five times in his career. He helped his team win the Stanley Cup in 1961, breaking the record five-year run of consecutive Stanley Cup championships by the Montreal Canadiens. During a career that spanned 24 years, including seven in the upstart World Hockey Association (WHA), Hull scored 610 goals and was a 10-time first team All-Star. He was also a three-time winner of the Art Ross Trophy (point scoring leader), a two-timer of the Hart Trophy NHL MVP) and also won the Lady Byng award for sportsmanship. Here’s my Bobby Hull memory: in 1961, my dad took me to the old Madison Square Garden (49th Street & 8th Avenue) to see a Rangers vs. Blackhawks game. We sat about 20 rows behind the goal. During one rush up the ice, Hull unleashed a slapshot that went over the protective netting and hit the facade of the second level at the speed of more than 100 miles per hour. As a 10 year old, I had to check my diaper! As great a player as Hull was, his career stats were later surpassed by his son, Brett, another Hall of Famer, who scored 841 goals in his career…and finally, we mourn the passing of David Crosby, whose smooth voice and crazy lifestyle made him an admired but also infamous performer for more than 60 years. Beginning his career as a folk singer in the early 60s, Crosby joined a new rock band – The Byrds – when it was formed in 1964. The band’s unique sound, highlighted by the singing of both Crosby and Roger McGuinn (and his 12-string Rickenbacker guitar), helped propel the band to superstar status within two years. By 1968, Crosby’s drug use, drinking and overall bad behavior led him to being fired from the band. The following year, Crosby, along with Stephen Stills (who left the unsung Buffalo Springfield, also in 1969), and Graham Nash, from the Hollies (who had moved from England to perform in the U.S.), formed Crosby, Stills & Nash, a short-lived but immensely popular trio that combined creative songwriting with beautiful harmonies. In 1971, Neil Young joined his cohort from Buffalo Springfield to form CSN&Y. For the past 50 years, Crosby has mainly performed with Graham Nash and as a solo artist. During that time, Crosby has been to jail twice for drug and firearm violations, received a liver transplant and had several major surgical procedures to address cardiac issues, while also alienating many of his former friends and fans. Nearing the end, Crosby addressed many of his problems and relationships in the biographical movie “David Crosby: Remember My Name” (2019). Despite his flaws, Crosby was an incredible talent; the fact that he made it to 81 was a remarkable achievement in and of itself.