Whole Foods’ John Mackey Is Struggling With Whole Foods’ Amazon Culture

John Mackey, the CEO of Whole Foods, says he learned valuable life lessons from his accountant father and paints himself as living a modest life, flying coach and staying only in the cheapest hotels. Although he is worth $75 million, according to Forbes, he reduced his salary to $1 a year back in 2007.

Jeff Bezos is also a no-frills guy, filling his offices with cheap particle-board desks and having all of his employees, even executives at Amazon Studios, fly coach. Bezos, worth $85.8 billion, according to Forbes, caps his and other senior executives’ salaries far below industry norms, saying they should make their money from Amazon stock ? the better the company does, the better they do.

So on the surface, these two executives, espousing similar values, should have a marriage made in heaven. But according to Mackey, the marriage is anything but perfect: In a speech Sunday at the American Production and Inventory Control Society’s annual conference, he described the culture clash as “challenging” and announced a retreat to help him and other top Whole Foods executives align with Amazon’s “higher purpose.”

Perhaps Whole Foods would be better served if Bezos ran the retreat and Mackey stayed home.

Days before the Amazon-Whole Foods deal was announced in June, Texas Monthly’sTom Foster wrote a terrific profile of Mackey, “The Shelf Life of John Mackey,” in which he predicted the Whole Foods co-founder’s leadership and usefulness to the chain had passed their expiration date.

Morgan Stanley’s Brian Nowak wrote in a note to clients in August, as the acquisition was finalized, that Whole Foods’ average food-item price was approximately 14% higher than the average grocery store’s. He cited a recent survey in which 70% of consumers who said they didn’t shop at Whole Foods blamed pricing as the primary reason. ChargeItSpot, a cellphone-charging-station company, conducted a nationwide poll of 900 consumers and found that 62% of shoppers were more likely to shop at Whole Foods after the Amazon acquisition, and 84% had positive feelings about the merger. The survey also found that shoppers were looking for Amazon to “upgrade the grocery store experience with additions of useful technology.”

Which is why it should come as no surprise that the Whole Foods 365 concept seems to have stalled, with one of its five stores already shutting its doors after being open just over a year. (Coincidentally it’s the store based in Seattle, Amazon’s home turf.)

Mackey unveiled the 365 concept as the way to attract shoppers and dispel the “Whole Paycheck” image. The store did neither: It was a mishmash of Whole Foods private label products at the same price as in regular Whole Foods stores and “innovations” that were more gimmicky than useful like the Juicero machine. The check stands were designed for small orders, and the queue line made the checkout experience seem more crowded and laborious.

Bezos and team are big thinkers, and rather than have a sub-chain that is supposed to stand for value, they have focused on the mother ship, as they should; their plan is to get rid of the overpriced reality throughout the entire chain, not just in four stores.

Amazon stands for value and putting the customer first, something Mackey admits he was never able to accomplish. The “marriage,” as Mackey puts it, is challenging for him and some of his team; what Amazon-Whole Foods does not need is a figurehead bringing dysfunction to the table. A single voice and focus have made Amazon a great retailer, and Mackey might soon be asking for a divorce.

Source: Supermarket Guru

It’s Only Going to Get Worse for America’s Grocers

Just over a month after Amazon.com Inc. ate Whole Foods, the shakeout in the American grocery aisle keeps getting uglier.

The latest sign of trouble: Private-equity giant Apollo Global Management recently tossed a $50 million lifeline to Fresh Market, the struggling high-end chain it took private only 17 months ago.

It will only get worse from here, analysts say. Under Amazon, Whole Foods has been cutting prices of marquee products including organic kale and avocados — a harbinger of the price wars to come. Among the most vulnerable are small regional chains that were facing fierce competition even before Amazon showed up.

“The amount of pressure the Amazon and Whole Foods deal puts on the grocery sector is going to be very significant, and the full ramifications will only be seen over time,” said Antony Karabus, chief executive officer at HRC Retail Advisory, a retail turnaround and performance-improvement consulting firm.

That’s because Amazon founder Jeff Bezos has never really cared much about profit margins, while old-school grocery stores live or die by them. Expect Amazon to keep squeezing and squeezing.

Fresh Market looks like a case study in the troubled economics of the grocery business. When Apollo bought the chain, for about $1.4 billion, the private-equity firm was coming off successes in the industry. Apollo made about $2 billion turning around Sprouts Farmers Market, and before that, made a profit on its stake in Smart & Final Stores Inc., a warehouse grocery chain.

That was then. Nowadays the business confronts the deepest round of food-price deflation in 60 years. Low prices are great for consumers — but bad for grocers. Nationwide, food prices rose in July for the first time in 19 months, according to the U.S. Department of Agriculture, but the increase, of just 0.3 percent, is hardly enough to make up lost ground.

Adding to the pressure, Kroger Co. and Wal-Mart Stores Inc., two of the largest sellers of groceries in the U.S., are trying to keep prices low to fend off German discounters Aldi and Lidl. Kroger said today it’s considering the sale of its convenience-store business to capitalize on a merger wave in that field.

Identity Crisis

Fresh Market is particularly exposed to the increased competition because it shares Whole Foods’ sweet spot: organic produce and gourmet products.

“They’ve had an identity crisis, and I think they were hoping Apollo could fix that,” Jennifer Bartashus, an analyst at Bloomberg Intelligence, said of Fresh Market.

Apollo declined to comment.

The industry’s stress is apparent in the credit markets, where Fresh Market’s bonds have been hammered. Apollo sunk roughly $525 million into the company at the time of the buyout. Since then, the chain’s $800 million 9.75 percent first-lien bonds have fallen almost 36 cents, to trade at 63.25 cents at 11:03 a.m. on Wednesday. Current prices suggest the company has little equity value.

Meantime, rivals including Tops Friendly Markets and Bi-Lo Holdings, a chain owned by private equity firm Lone Star Global Acquisitions, have fallen hard, too. Tops’ 8 percent senior secured notes due 2022 are trading at about 67 cents, while Bi-Lo’s 8.625 percent pay-in-kind toggle bonds due 2018 have fallen into deep distressed territory, at about 32 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. A group of Bi-Lo’s creditors recently hired legal advisers to gear up for a possible restructuring of the company’s almost $1 billion in debt.

Hurricane Damage

If all this weren’t enough, Hurricane Irma clobbered Bi-Lo and Fresh Market. More than half of Fresh Market’s roughly 180 stores, including 42 in Florida, are in states hit by the storm. A recent research note from Goldman Sachs suggested the damage forced the company to cut back on renovations and may have prompted the Apollo loan.

Apollo is known for trying to safeguard its investments, sometimes at the expense of other debt holders. But its recent loan to Fresh Market is unusual: The $50 million loan, without collateral, is junior to all other Fresh Market debt and pays an effective 6 percent. Retailer Restoration Hardware paid a 9.5 percent coupon in July on a secured loan also provided by Apollo.

That, analysts say, underscores the trouble at Fresh Market.

“The company needs working capital, and Apollo needs to keep it alive to preserve its equity,” said Mark Kaufman, a senior analyst in distressed debt at brokerage firm Ramirez & Co.

Source: Bloomberg

Why Amazon Buying Whole Foods Might Not Shake Up the Grocery Industry Like You Might Expect

Most U.S. shoppers are fiercely loyal to local food stores, calling them better than online options, according to a new Reuters/Ipsos poll that raises questions about how much Amazon.com‘s $13.7 billion purchase of Whole Foods will shake up the supermarket business.

Shares in Kroger, the largest U.S. supermarket operator, have tumbled 40% from this year’s highs on worries that the newly merged company will be quick to siphon business from traditional food sellers.

Seventy-five percent of online shoppers said they rarely or never buy groceries online, according to the survey of nearly 8,600 adults from Aug. 12 to Sept. 1. Even among frequent online shoppers who make internet purchases at least weekly, almost 60% said they never buy groceries online or do so just a few times a year, according to the poll.

The poll also found that around 60% of all adults said their local food markets win on price, selection, quality and convenience. Online sellers led in those categories with only around 3% of respondents.

“I like to touch everything,” said Beth Hatter, 31, who spends roughly $750 a month on groceries to feed an extended family in Newark, Delaware, and buys a lot of produce.

She shops at BJ’s Wholesale Club, ShopRite, and Food Lion, even though online shopping is an option.

Kristian Guy, 25, passes a Met Food market and an organic grocer that stays open until midnight on the walk to his subway stop in Brooklyn.

“I don’t really need to think about buying food online,” said Guy, who does not want food deliveries spoiling on his doorstep.

Amazon has tried for years to grow its online grocery business, without making much of a dent. Its purchase of Whole Foods took its U.S. grocery marketshare from 0.19% to 1.4%, versus 14.46% for Walmart and 7.17% for Kroger, according to GlobalData Retail.

The poll shows “brick and mortar is not dead yet,” said Roger Davidson, a grocery consultant, who predicts that the future of food buying will be mix of online and offline shopping.

The Food Marketing Institute and Nielsen expect U.S. online grocery sales to grow from $20.5 billion, or 4% overall, in 2016 to $100 billion, or 20% overall, by 2025.

Still, some respondents are changing or are open to changing the way they use technology to shop.

Fort Lauderdale resident Ashley Vettese, 24, who said she was wary of online retailers’ food quality, uses grocery store apps for coupons. Kirsten Fox, 28, of Albany, Oregon, likes to pick out her own food. But she said she would consider new online ordering/curbside pickup services being rolled out by Kroger and Wal-Mart Stores Inc to avoid taking her young son into crowded stores during flu season.

Loop Capital analyst Andrew Wolf said attitudes toward online grocery shopping could change.

“The fact that few people want online grocery shopping now doesn’t mean they won’t want it tomorrow,” Wolf said.

Source: Fortune

A new grocery startup is taking on Amazon and pursuing a $100 billion opportunity

From Instacart to FreshDirect to AmazonFresh, on-demand grocery delivery has taken off.

A new farm-to-fridge player called Farmstead is doing things a little differently. Food costs the same as in the supermarket; delivery takes under an hour and is less than $5 (or free in some cases); and the company uses artificial intelligence to figure out what and how much to stock, based on what customers buy most.

Farmstead has been piloting the service for the past year and formally launched in San Francisco on Thursday after raising $2.8 million in seed funding from Resolute Ventures, Social Capital, Y Combinator, and Joe Montana’s Liquid 2 Ventures.

Farmstead’s CEO, Pradeep Elankumaran, told Business Insider that the company’s goal is to reinvent the supermarket model. He believes the future of grocery is on-demand delivery. The online grocery industry is expected to reach $100 billion in US sales and share approximately 20% of the market by 2025.

The startup is entering a crowded space — one that has only become more crowded since Amazon began offering Whole Foods items for delivery this summer. The e-commerce giant is expected to gain a big share of the grocery market, boosting competition for online grocery delivery startups and traditional retailers alike.

But Elankumaran believes Farmstead offers lower costs, better customer experience, and increased efficiency compared to competitors.

“If you shop at Instacart, for example, there are a lot of nitty-gritty things you have to do between you placing the order and you getting the order,” he told BI. “These are things that do not happen at Farmstead. We want you to treat us as a utility. It should be as simple as opening a tap and getting water.”

Here’s how Farmstead works:

Farmstead is a new startup that can deliver groceries to Bay Area homes in under an hour. The other day, a customer received $150 worth of groceries in 35 minutes, Elankumaran said.

Farmstead is a new startup that can deliver groceries to Bay Area homes in under an hour. The other day, a customer received $150 worth of groceries in 35 minutes, Elankumaran said.

Farmstead

Customers can also schedule the specific day they want their food to arrive (as with many other on-demand grocery services).

That’s about the same time it takes to go to a supermarket, and quicker than AmazonFresh and FreshDirect.

That's about the same time it takes to go to a supermarket, and quicker than AmazonFresh and FreshDirect.

Farmstead

The company wants to make grocery shopping easier than going to a supermarket, but still super-quick.

“When we tell [customers] we have Asian pears in-stock, they click a link, and they buy the Asian pears,” Elankumaran said. “They don’t have to go to the store, park the car, make sure the kids are situated, wheel a cart in, go to the produce aisle to get the Asian pears, stand in the checkout line … It’s 2017. Why are we doing that?”

Farmstead is able to deliver quickly because it operates out of two small spaces near where customers live — one in the Mission neighborhood of San Francisco and the other in San Mateo, California.

Farmstead is able to deliver quickly because it operates out of two small spaces near where customers live — one in the Mission neighborhood of San Francisco and the other in San Mateo, California.

Farmstead

The service matches local supermarket prices. There is no order minimum, and deliveries are free if customers sign up to get groceries weekly.

Farmstead

Otherwise, delivery costs $3.99 for same-day or $4.99 for one-hour — cheaper than most other services.

Founded in October 2016, the company has completed more than 15,000 deliveries to Bay Area customers. Farmstead prioritizes sourcing from local purveyors and brands, but also sources produce and meat from farms around the US.

Since Farmstead’s AI system tells the company exactly what and how much to buy, the company doesn’t overstock. The minimal overhead, combined with the fact that the company sells from farmers and individual brands (instead of stocking up at grocery stores), saves money.

Since Farmstead's AI system tells the company exactly what and how much to buy, the company doesn't overstock. The minimal overhead, combined with the fact that the company sells from farmers and individual brands (instead of stocking up at grocery stores), saves money.

Farmstead

The company tests different brands and flavors to see which ones move quickly. Recently, Farmstead looked at potato chips: sour cream and onion, regular crinkle-cut, sea salt and pepper, and Sriracha-flavored. “Nobody wanted Sriracha,” Elankumaran said, so the site eliminated it.

The company tests different brands and flavors to see which ones move quickly. Recently, Farmstead looked at potato chips: sour cream and onion, regular crinkle-cut, sea salt and pepper, and Sriracha-flavored. "Nobody wanted Sriracha," Elankumaran said, so the site eliminated it.

Farmstead

Another long-term goal of Farmstead is to reduce food waste. Grocers throw out more than 38 million tons of food is every year, largely from overstocked product displays, customer expectations that produce must look “perfect,” damaged goods, and confusion about “sell-by” dates.

“A lot of the supermarkets’ pricing is because of wastage. If you’re wasting 30% to 40% of your produce, you’re going to pass that cost onto your customers,” he said.

Food stocked by Farmstead that isn’t purchased will go to the food bank network Feeding America, which sends the items to a shelter for women in the Bay Area. Farmstead also sells “ugly” produce, which is fine to eat but might have blemishes or weird shapes.

Elankumaran stresses that Farmstead is a tech company first and foremost. This means there is an emphasis on perfecting its algorithms, and communicating with customers via email and app notifications to learn more about preferences.

Elankumaran stresses that Farmstead is a tech company first and foremost. This means there is an emphasis on perfecting its algorithms, and communicating with customers via email and app notifications to learn more about preferences.

Farmstead

As the app learns more about the buying habits of each customers and asks them what perishables they throw out, it will tell them if they are over-buying food. It also alerts customers when certain foods are going out of season, urging them to buy.

The growth of delivery giants like Amazon and Instacart as well as smaller upstarts has made the on-demand grocery space crowded. But Elankumaran believes Farmstead works more efficiently, because it offers just 1,000 products between two 2,000-square-foot industrial spaces.

The growth of delivery giants like Amazon and Instacart as well as smaller upstarts has made the on-demand grocery space crowded. But Elankumaran believes Farmstead works more efficiently, because it offers just 1,000 products between two 2,000-square-foot industrial spaces.

AP

When Amazon bought Whole Foods, the e-commerce giant lowered prices of many items both in-store and online. That, combined with the fact that the company plans to expand Whole Foods offerings, could make Amazon an even tougher competitor for Farmstead.

Since Farmstead only sells brands that customers commonly buy (big, well-known brands, essentially), it could be difficult for  more niche brands to gain traction on the site. Elankumaran said that the company buys small cases of food from several Bay Area brands to trial them. If customers buy the products, Farmstead will continue to work with them.

“We carefully curate. We don’t carry 30,000 items like a traditional supermarket. If you go to a Safeway or Whole Foods, you’re just wandering the aisles and there are so many items. More often than not, these things don’t sell,” he said. “We only carry things that people like and buy.”

"We carefully curate. We don't carry 30,000 items like a traditional supermarket. If you go to a Safeway or Whole Foods, you're just wandering the aisles and there are so many items. More often than not, these things don't sell," he said. "We only carry things that people like and buy."

In 2017, Farmstead is working towards expanding to more parts of California, and eventually hopes to bring its small warehouses to cities across the United States.

Source: Business Insider

Costco shares down on fears of grocery delivery eating into margins

Costco shares down on fears of grocery delivery eating into margins

Shares in Costco fell 6 percent on Friday after the retailer reported a decline in quarterly gross margins and underlined the growing competition in the industry by launching new grocery delivery services.

The membership-based chain on Thursday reported a quarterly profit which scraped past estimates and said it had rolled out two grocery delivery services this week, a new step in its efforts to fight growing competition from Amazon.com and Wal-Mart Stores Inc.

Chief Financial Officer Richard Galanti said in the company’s post-results call that the retailer had started offering two-day delivery of dry groceries as well as a same-day delivery service for groceries including fresh foods.

The two-day delivery would be free for online orders over $75 across the United States, while the same-day service – offered through its partner Instacart – is available at 376 U.S. stores.

BMO Capital Markets analyst Kelly Bania said the new offerings were a huge positive for Costco given the perception that it has been slow with its pace of digital transformation.

“(But) we also see risk these initiatives will weigh on margins over time and may be viewed as defensive,” she said.

Groceries, while a low-margin business, bring more customers into stores, and major players including Wal-Mart and Target Corp. have poured millions into the area as they look to boost store traffic as well as online sales.

Competition has further tightened since Amazon bought Whole Foods and reduced prices at the upmarket grocer in August, a move which has hit Wal-Mart and Kroger hardest in terms of lost customers.

Galanti said Whole Foods’ price cuts had not impacted Costco and that it had not reduced its in-store prices in response to the deal.

“(Costco‘s) new online delivery initiatives improve its competitive offering and could drive increased engagement with millennials,” Jefferies analyst Daniel Binder wrote in a note.

The retailer said it was lowering online prices and adding more high-end and well-known brands such as GE appliances and Spyder skiing apparel to its ecommerce site.

“Costco made e-commerce a core part of its earnings call for the first time in memory,” Susquehanna analyst Bill Dreher said. “We believe this shows a new focus on a key engine of growth.”

Source: Reuters

Super cheap German grocery chain Aldi is taking America by storm — here’s why people are obsessed

Aldi started off as a small food store in Germany in the early 1900s.By the 1960s, the founder’s sons had taken over the business, and there were over 200 locations in Germany. The chain’s name was shortened from Albrecht Discount — the founder’s name was Anna Albrecht — to Aldi.The store’s first US location opened in 1976 in southeastern Iowa, but the chain is currently enjoying an upswing in popularity stateside.

Today, Aldi has about 1,700 stores in the US, and plans to open 800 more by 2022.

Since we know the chain has plenty of great buys, we took a trip to one of New York City’s two Aldi locations to see what it’s like to shop there. Keep scrolling to see our experience.

View Slides

Source: Insider

Signs Of Trouble For Lidl In U.S. As It Reshuffles Management

Lidl has appointed a new executive in Germany to oversee its operations in the United States. Though local U.S. management disputes aspects of the initial reporting of the reshuffle by a German newspaper, which pointed to “frighteningly weak” performance at some of the current 37 stores, it does seem to be a signal that conquering the U.S. may be a bit more difficult than Lidl had foreseen. From Tesco’s ill-fated Fresh & Easy effort to a long litany of other foreign chains that have failed here, breaking into the U.S. market can be more difficult than it would appear.

I had a chance to visit one of the North Carolina units a few weeks back. After the much publicized initial burst of stores and very high consumer demand, I would characterize the store I visited as one of the under-performers. Traffic was light, in-store programs like sampling were being poorly executed and there was a general low energy level that signifies poor results.

More critically, there are some potential systemic problems that Lidl must address in order to succeed in the U.S. market:

  • The stores, in my opinion, are way overbuilt. The stores are too large, too overly-engineered and too costly to operate. Eleven full-sized checkout lanes, as one example, adds costs to the box and seems overkill for demand.
  • The stores are too big. At 25,000 square feet, stores are overly spacious and feel sterile, particularly with the dearth of customers during the visit. While Aldi and Trader Joe boxes feel tight (and perhaps a bit cramped at times), it lends to efficiency and a feeling of excitement.
  • There is too much reliance on non-foods. While this is a critical part of the European experience, U.S. consumers have far more choice in these categories, and at the Lidl stores they were also merchandised with little flair. Perhaps when the Heidi Klum line launches, this will add some momentum, but the U.S. consumer may not appreciate this mix in the stores.

There are some excellent moments as well. Leading with an in-store bakery gives a great emphasis on fresh, as does the expanded produce area. The wine section is well done, and prices on private label are very sharp.

However, when competing head to head against Aldi, I would give their more established German competitor the edge. The Aldi stores, particularly the newer and remodeled units, are better merchandised and better designed to sustain lower costs and prices.

Lidl is an enormously tough competitor. Well capitalized and easily capable of making course corrections, it is not to be taken lightly, despite some early miscues. The road to 500 or 1000 or 1500 stores, however, must begin with a store model that works. I don’t see that yet. It will be interesting to see if new corporate management makes any significant course corrections.

Source: Forbes

Walmart puts its eggs in a time-saving basket: Grocery pickup

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.

“It’s about saving people time,” Ms. Joseph said as she helped load groceries into the back of a minivan one morning.

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.

The initiative is the latest salvo in Walmart’s retail battle with Amazon, and the centerpiece of its strategy to gain the upper hand in the pursuit of consumers looking to streamline their food shopping.

Many retailers are focused on new ways to deliver groceries to people’s homes — particularly in big cities. 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.

Groceries have become one of the most fiercely contested areas of retail. Amazon upped the ante in June with its $13.4 billion purchase of Whole Foods, giving it a major foothold in the industry. Lidl, the German supermarket chain, is also making a big push to open stores in the United States.

Grocery delivery companies like Fresh Direct have spawned a contest among traditional grocers and start-ups to offer faster home delivery.

Amid this heated competition, Walmart has been experimenting with different ways to get an edge. In a few cities, it works with Uber to deliver groceries to homes.

And last month, Walmart said it would begin testing a home-delivery service in which a worker loads the food into the refrigerator, even when no one is home. The customer can watch the process remotely from a home security camera and track when the delivery worker enters and leaves the house.

While these initiatives are limited to only a few states, the company’s grocery pickup is widespread. Walmart is betting that a big part of the country (“from Scranton to Sacramento,” one Walmart executive said) is more of a drive-through than delivery culture.

There is a risk that Walmart’s new grocery strategy could undercut its sales of other products. Selling groceries has lower profits, but it brings customers into the store regularly, allowing Walmart to push bigger-ticket items.

“That is the philosophy of the Supercenter: You put all these other categories under one roof,” said Gene German, a professor emeritus of food marketing at Cornell University. “So if the customers don’t go into the stores, that could be a negative.”

But Walmart believes that the “high touch” approach of online grocery ordering is improving people’s opinion of the shopping experience at its stores, making them more likely to purchase general merchandise in addition to food.

“We get feedback and how much they appreciate the time that we take” in fulfilling a grocery order, said Mike Turner, a vice president of Walmart’s e-commerce operations, said in an interview.

Walmart does not disclose its online grocery sales. But when the company reported its second-quarter results in August, it said online sales, including grocery, had increased 60 percent from a year earlier.

The company also indicated that overall food sales growth had been the best in five years.

For decades, Walmart was seen as the world’s foremost innovator in retail. But even as the company has become the world’s largest retailer, it has been overshadowed in many ways by Amazon’s rapid growth and many advancements.

Amazon’s long-term strategy for Whole Foods, however, is not clear. Amazon must figure out how to sync its core online business and warehouse network with more than 460 Whole Foods stores, many of which are in high-priced urban areas and can be costly to operate.

Walmart faces a different set of challenges and opportunities with its online grocery pickup — which were on display at the Supercenter in Turnersville, outside Philadelphia.

The strategy’s promise is that Walmart can uses its thousands of stores as mini-fulfillment centers, while also avoiding the costs of home delivery. But the store does not always function like a warehouse.

One morning, Ms. Joseph walked through the aisles, pushing a cart and scrolling through a hand-held device that listed the order a customer had placed online.

Like GPS services for cars, her device mapped out the most efficient route: She grabbed a box of Honeycomb in one aisle then a box of Lipton Berry Tea in another.

But when Ms. Joseph reached the peanut aisle, she hit a snag. The customer had ordered a five-pack of individual-size servings of salted peanuts.

There were no more individual-size packs. She checked the candy and snack displays at the cash registers, but there were none there, either.

So Ms. Joseph improvised. Borrowing a colleague’s iPhone, she calculated the amount of peanuts in the pack of individual servings, and then she selected a jug of peanuts with comparable volume.

“Your instinct needs to kick in,” Ms Joseph said. “And you go with it.”

Each substitution is supposed to be clearly marked with a sticker so the customer is not surprised.

Customers order their groceries online and then can pick them up at the store, a few hours later during a certain time window.

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.

“This is something Walmart could get into easily and quickly,” Mr. German said. “And it would send a message to shareholders: We are not going to be passive. We are going to be proactive.”

Customers who order online choose a one-hour window in which they can pick up their groceries. When they arrive at the Walmart parking lot, they pull into designated grocery pickup spots, which at some stores resemble a gas station with a canopy overhead. Minutes later, a personal shopper emerges from the store with bags of groceries.

When Laura Rothwein of Clayton, N.J., pulled up in her minivan to the side of the Turnersville store, the personal shoppers greeted her 6-year-old son with a treat from the bakery and a bottle of red Gatorade.

A short time later, Sherri Arrison, a retiree, arrived in her Nissan Murano. One personal shopper loaded groceries into the back, while another held out a bright orange umbrella to shelter the food from the rain.

“This is pretty much the only way I shop now,” Ms. Arrison said. “I don’t have to go into the store and keep walking around.”

Source: The New York Times

Market speculates on Kroger-Ahold pairing

Stock in Kroger was up Tuesday on speculation the retailer was pursuing a merger with Ahold Delhaize.

Supermarket News was unable to verify the substance of such a claim, which evidently gained steam after speculation was mentioned in an analyst report out of Europe and reported on in the U.S. Tuesday by the Cincinnati Business Courier.

Spokespeople for both Ahold and Kroger declined comment to SN Wednesday morning.

Kroger stock was up by 4% Tuesday. It had been trading near 52-week lows following an announcement last month that it was dropping its long-term earnings guidance.

Analysts have suggested that Kroger and Ahold could look to one another to gain additional scale as they fight a resurgent Walmart, the expansion of hard discounters and the potential of a significant competitive hit from Amazon, which now controls Whole Foods. One key advantage of such a deal, they said, would be Kroger getting access to Ahold’s Peapod e-commerce platform.

One industry source told SN last week that Kroger and Ahold “should be sprinting toward each other with open arms.” Other sources however have said the timing might not be right, citing Ahold’s ongoing integration of Delhaize and the anticipation that Kroger could be entering a period of significant internal investment.

Ahold and Kroger have pursued similar operating strategies in the U.S. Both have invested cost savings into lower prices, both utilize loyalty data in crafting a personalized proposition to shoppers and both have developed distinct private brands. Ahold’s Northeast store base — which like much of Kroger is staffed with union workers — would complement Kroger’s existing footprint, although they are competitors in the Southeast U.S.

The Courier story said a report from analyst Bruno Monteyne of AB Bernstein mentioned market speculation of Ahold hiring advisors to look into a combination with Kroger.

Monteyne said a Kroger-Ahold combination would have “fantastic firepower,” and could release $1.8 billion in synergies, the Courier said. The analyst, however, also noted it could be two or three years before a such a deal could take place, saying Ahold first needed to complete integration of Delhaize.

Monteyne was not immediately available for comment.

Source: Supermarket News

JBS workers in Utah join Local 99

Local 99 welcomes 1,000 new members at the JBS beef processing plant in Hyrum, Utah.

See President Jim McLaughlin’s message below or download the PDF here

Dear Members:

I am thrilled to announce that workers at JBS International’s beef processing and packing plant in Hyrum, Utah, will join Local 99 in a merger that was approved overwhelmingly by both memberships.

The merger, which becomes effective on Oct. 1, brings nearly 1,000 JBS workers who work under a UFCW Local 435 agreement into Local 99’s fold.

With a pre-merger membership of 22,000, Local 99 is the largest local of the 1.3 million-member UFCW International Union that is based in a “right to work” state. Now, we’re even bigger!

Greater size equates to greater strength at the bar- gaining table for everyone, in all of the industries we serve.

This merger is an example of Local 99’s ability to organize workplaces and recruit new members. In particular, Utah’s Cache Valley provides a great opportunity for our union to grow further in northern Utah.

Merging the two locals makes us stronger together so we can win more together.

In Solidarity,

Jim

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