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Workers at Fred Meyer and Safeway take strike votes

Thousands of workers in the Portland metro area are taking part in a series of strike authorization votes at Fred Meyer, QFC, Safeway and Albertsons. The votes are taking place department by department, and started with meat department workers May 20-23, followed by grocery workers June 10-12 and Fred Meyer central checkout cashiers June 18-20. Fred Meyer workers in non-food departments like apparel will vote June 25-27. The results won’t be publicly announced until all groups have voted.

Bargaining between Local 555 and the multi-employer coalition passed the one-year mark June 19, and Aug. 5 will mark one year since the most recent set of contracts between the union and grocery employers expired. The two sides remain far apart on wages, health insurance and other proposals.

Source: NW Labor Press

Indianapolis-area Kroger employees approve new labor agreement

More than 9,000 union members who work for Indianapolis-area Kroger Co. stores have approved a new three-year labor agreement with the grocery chain.

The agreement covers members of the United Food and Commercial Workers Union Local 700 who work at 71 central Indiana Kroger stores.

According to a statement issued by Kroger on Monday morning, the agreement raises starting wages for most clerks to $10 per hour—up from the previous starting wage of $8.50 per hour—and employees will receive wage increases every six months.

The agreement also “maintains affordable Kroger-sponsored health care and continues investments in our associates’ pension fund for their retirement,” Kroger Central Division President Pam Matthews said in the statement.

UFCW Local 700 President Joe Chorpenning praised the deal.

“We stuck together and reached an agreement that increases pay; protects affordable, quality health care; and secures retirement benefits for the future,” Chorpenning said in written comments.

Chorpenning could not be reached for additional comment Monday morning.

Negotiations between Kroger and UFCW Local 700 began in April. The previous labor agreement was originally set to expire May 12, but it was extended while negotiations continued. Union members voted on the new agreement last week.

Source: Indianapolis Business Journal

whole foods

Two years in, Amazon has hardly launched a revolution at Whole Foods

This weekend will mark two years since Amazon.com Inc. announced it was acquiring Whole Foods Market. It was a thunderclap that demonstrated Amazon’s ever-growing ambitions and all but assured that e-commerce was about to rattle one of the last corners of retail to remain insulated from digital transformation.

By now, Amazon’s fingerprints on Whole Foods are clear. It has expanded grocery delivery and online ordering into dozens of Whole Foods stores, cut prices on select items and offered discounts for Prime members.

Those pricing moves appear to have changed people’s attitudes. YouGov, which surveys shoppers about consumer brands, has found that Whole Foods’ value perception has improved meaningfully in the past two years, showing Amazon has chipped away at the “Whole Paycheck” reputation that had hurt the grocer as rivals perceived as more price-conscious, including Kroger Co. and Walmart Inc., embraced organic food.

By broadening online shopping options and selectively slashing prices, Amazon showed it could execute in groceries the playbook we already know it has mastered. But what about untested things such as in-store merchandising, customer experience and labor allocation? On these merits, let’s be honest: Whole Foods still basically feels like the same old Whole Foods.

Amazon’s lack of imagination at Whole Foods is something we’ve seen repeatedly as the e-commerce giant experiments with physical stores. Amazon’s bookstores aren’t that different from conventional shops. Its 4-star knickknack stores are Hallmark gift stores crossed with Brookstone.

Amazon recently shuttered dozens of mall kiosks where it sold Kindle tablets and other electronics. Those Amazon formats, and those of companies such as Kohl’s Corp. with which Amazon has an in-store partnership, sometimes seem to exist largely as outposts for people to return unwanted Amazon orders.

From Amazon’s earliest years, Chief Executive Jeff Bezos has said that the company was interested in operating physical stores, but only if it had unique ideas. Apart from Amazon’s experimental cashier-less convenience stores, none of its other brick-and-mortar experiences live up to that promise.

Amazon executives have used the word “invention” to describe what the company has done at Whole Foods, but that is a generous assessment.

In addition to expanding home delivery or in-person pick-up of online grocery orders, Amazon has enmeshed its brand more with Whole Foods’. People can buy Whole Foods products on Amazon, use an Amazon-branded credit card to rack up rewards, pick up Amazon packages at lockers inside Whole Foods locations, and use the Alexa digital assistant to start a Whole Foods order.

Amazon says that “the goal has always been to make consistent, smaller innovations over time” to expand the Whole Foods mission of organic and quality food.

It takes time to change an established store chain, and there may be a broader vision for groceries that Amazon hasn’t articulated. In fact, it’s surprising just how little Amazon has said about why it purchased Whole Foods, what it has changed under the hood or future plans for its jumble of food offerings. There may be no other public company that could spend more than $13 billion to expand into a completely new business, and tell investors little about what it was doing or why.

Shoppers haven’t been bowled over, either. Despite the changing feelings about Whole Foods prices, YouGov data shows that U.S. consumers’ willingness to consider purchasing at Whole Foods has settled right around where it was at the time the deal was announced.

Amazon also hasn’t been transparent about what financial improvements, if any, have resulted from its ownership of Whole Foods. Amazon’s reported revenue from its physical stores, which is principally Whole Foods, posted a 2.7% decline in the fourth quarter of 2018 from a year earlier and a 1% increase in the first quarter. That’s slower than comparable Whole Foods quarterly revenue growth before the acquisition.

Food seems to be a category that keeps bedeviling Amazon. It said last week it will close its 4-year-old restaurant food delivery operation in the U.S., an admission that it had been outgunned by Grubhub Inc., Doordash and Uber Eats. It earlier pared back the footprint of its 12-year-old Amazon Fresh grocery-delivery service, which struggled long before Whole Foods was in its tent.

Amazon won’t give up fighting for a much larger share of the more than $800 billion Americans spend on food shopping every year, and Whole Foods was a big bet that physical stores remain key to cracking that market. What Amazon has done so far is to Amazon-ify Whole Foods in necessary but also obvious ways. What’s perhaps surprising is that two years in, there have been few glimpses of new ideas that Amazon could bring to supermarket shopping.

Source: Los Angeles Times

Grocery Workers to Vote on Potential Strike Against 3 Major SoCal Chains

Members of seven Southern California food workers unions, including San Diego’s, will vote June 24 on whether to authorize a strike against three major grocery chains, it was announced Monday via social media.

Potentially targeted are Albertsons, Kroger-owned Ralphs and Albertsons-owned Vons — which took major losses in the last major supermarket strike in 2003-2004. If a vote succeeds, labor leaders can call a strike at any time.

Todd Walters, president of Mission Valley-based United Food and Commercial Workers Local 135, said Friday that bargaining had stalled in talks that began in March. A three-year contract expired March 3, but provisions are still in force.

On Facebook, Local 135 said the companies were delaying, demanding takeaways and would “slash wages for cashiers,” give “inappropriate wage increases that do not reflect the minimum wage, 20 cents for top rate clerks, less than 1% increase” and “put healthcare plan at risk of bankruptcy.”

The post added: “The time has come to show the corporations we won’t take this anymore and they need to get serious about a fair deal. This will show them we are united and ready to fight for what is right.”

A Ralphs spokesman Monday night said the company is negotiating in good faith for a “fair and balanced contract that is good for everyone.”

“As you know, negotiations are about finding compromise and this can take time,” said the spokesman, John Votava of corporate parent Kroger. “Throughout the negotiations, it’s business as usual in our stores and Ralphs is extremely proud of our associates who remain focused on serving our customers, communities and each other.”

In a June 5 update, Local 135 leaders said negotiators for Ralphs, Vons and Albertsons “continue to play games and push unacceptable takeaways and concessions.” They cited offers of pay raises of under 1% and a funding proposal that “threatens our health plan.”

The decision to call a strike vote apparently came amid Costa Mesa talks Monday between UFCW and the grocery companies. Walters said he was “still in negotiations” in a text at 7:57 p.m.

Last week, the locals said: “Unless there are significant changes in their offer, your employer is giving us no choice but to take action.”

In an interview Friday, Walters said about 60 percent of current UFCW members were hired since the four-month strike ending in February 2004. He pointed to a big disparity in pension plans.

“People hired before the strike, which includes me, … get $44 a month of income for each year of service,” he said. “The people hired after the strike are getting $18 (a month),” yielding about $540 a month after 30 years of work.

Walters said contract issues have been “ignored and kicked down the road for all these years. The pension primarily is staring us in the face right now…. Something’s gotta happen.”

Besides San Diego and Imperial counties’ Local 135, other UFCW locals involved in regional talks are Local 8, based in Bakersfield; Local 324 of Buena Park, Local 770, based in Los Angeles; Local 1167 of Bloomington; Local 1428 of Claremont; and Local 1442 of Inglewood.

In San Diego, voting will take place at the Scottish Rite Center in Mission Valley, near Local 135 offices just north of Interstate 8.

Meanwhile, a bill that would let striking workers collect unemployment insurance benefits is wending its way through the California Statehouse.

AB 1066 by San Diego Assemblywoman Lorena Gonzalez was approved 51-19 by the Assembly and sent to the state Senate in May, where it has been referred to the Committee on Labor, Public Employment and Retirement.

If approved and signed in its present form, workers could get jobless benefits after four weeks on strike.

The California Chamber of Commerce calls the bill a “job killer,” incentivizing strikes and “transforming unemployment insurance into a political tool in trade disputes.”

AB 1066, the chamber added, would “expose employers to a significant cost increase during a time in which they are already struggling with the financial impact of labor negotiations and a strike, thereby jeopardizing the employers’ ability to maintain existing jobs and wages as well as the increased wages and benefits demanded by the union.”

In late May, the UFCW Western States Council lauded the bill, and quoted Vons employee Donna Villagomez as saying: “Striking is the last resort of workers working to influence working conditions, but employers keep too many workers in fear because they are one paycheck away from missing the rent or a car payment. When workers are eligible for unemployment insurance, they can stand up for fair treatment and workplace conditions knowing their families won’t become homeless.”

The Local 135 posting said a strike authorization shows the grocers “that we are united in our demand for a fair, balanced contract that respects our contribution to their success, and prepared to fight for it. … Hopefully the corporate negotiators return to the table and get serious about a fair deal.

“If not, we continue to prepare to show them our determination to get a fair deal, and strike if necessary.”

Representatives of Albertsons/Vons didn’t immediately respond to a request for comment.

Source: Times of San Diego

Costco exec says it won’t copy Walmart’s blockbuster online grocery strategy because ‘if somebody wants something in an hour, they’re probably not going to get it from us’

Costco isn’t jumping into the grocery pickup game any time soon.

In response to an earnings-call question from RBC Capital Markets’ Scot Ciccarelli about whether Costco had any plans to jump on the pickup trend like Walmart has, CFO Richard Galanti threw cold water on the idea.

He said that the company will continue to observe the space, but it isn’t planning a new development any time soon.

“We continue to look at it. We continue to scratch our head about it,” Galanti said during the call. “We recognize that they and some others are putting in a lot of financial commitment to doing this. I think what you’re going to find is like everything else in life at Costco, over time, we figure out how to do it our way that makes sense for us, that still works.”

Costco does do some click-and-collect business, but it’s mostly for expensive, small-sized items like electronics, jewelry, or handbags.

For grocery, Galanti says pickup could cannibalize in-store sales, whereas its current two-day delivery offering and its same-day partnership with Instacart are “additive.”

“If somebody wants something in an hour, they’re probably not going to get it from us,” Galanti said. “We still want to drive you into the warehouse.”

Walmart has been one of the biggest proponents of click-and-collect grocery, with plans to expand the service to 3,100 locations by the end of fiscal year 2020, according to a report that Cowen released in March.

There’s a good reason for that: customers seem to be loving the service. As many as 13% of Walmart’s customers have used it, and it will soon account for 33% of Walmart’s online sales, measuring some $7.4 billion in revenue in fiscal year 2020, according to Cowen. It’s also bringing in new customers: 40% to 60% of click-and-collect sales are from new Walmart shoppers.

Source: Business Insider

Walgreens cuts long-time health benefit for retired employees in ‘unusual’ move

Maria Alessio loved working for Walgreens Boots Alliance, especially because of the pharmacy chain’s benefits.

She decided to retire in last fall at age 61 because she could no longer take standing all day filling prescriptions. She and her fellow pharmacists traveled to Italy to celebrate. Then, days after she returned, she received a letter from Walgreens saying it would no longer subsidize Alessio and her family’s health insurance under new restrictions on benefits for retired employees, effective next year.

“I didn’t think that would happen,” said Alessio, who hadn’t taken the cuts into account in her retirement planning. She currently pays $27,600 annually for health insurance for herself, her husband and son, about $10,800 of which was covered by Walgreens. “I was totally shocked.”

Walgreens said in a September letter reviewed by CNBC that it would no longer subsidize medical benefits for its former employees who hadn’t turned 64 by March 31, citing “rising and unpredictable healthcare costs.”

For Alessio, now 62, the cuts have raised uncertainty. Her son, who will turn 26 in September, bought his own health insurance this month, and her husband will be eligible for Medicare next year, which should help bring her total premium down. But she does not yet know how losing the subsidies will affect her financial situation.

Some 550 retirees receive the subsidies from Walgreens before they turn 65 and are eligible for Medicare. Under the age restrictions laid out in the September letter, they won’t receive the payments, which vary in amount based on employees’ years of service.

Neither will employees who were eligible for the benefit upon retirement under the old rules, which made it available to employees who had turned 50 by May 2017 and had worked at the company 20 years. (Employees still needed to be at least 55 with at least 25 years of service at the time of retirement to receive the benefit).

Walgreens tightened the requirements for the subsidies in the past, eliminating eligibility for new hires and younger employees, but until last fall, the company had stopped short of touching the payments of retirees who were already receiving them.

“Pre-65, I do think it’s unusual to take people who already have a subsidy right now and eliminate that subsidy,” said Derek Guyton, a partner in the health and benefits business at Mercer, owned by Marsh & McLennan. “What’s more common is you tell people way ahead of time you’re not going to have this subsidy when you get to 55 or what have you. That obviously has happened a lot and continues to happen, but taking it away from people, some employers consider that almost an employment contract.”

Walgreens has said it is working on a “lower-cost, unsubsidized retiree health program starting in 2020,” according to an October letter it sent to retirees. It has yet to provide details on its plan.

Walgreens spokesman Phil Caruso said in an email Friday that the company reviewed a host of factors before deciding to change eligibility requirements for the subsidies.

“We are continuing to work toward a new retiree healthcare program for 2020, paying particular attention to the transition impact for those with current subsidized coverage,” he said. “We will continue to update our retirees.”

The drugstore chain employed roughly 354,000 people as of August, according to its annual report.

A sign of the times

Walgreens’ move to cut the payments comes at a time when U.S. companies are searching for ways to curb rising health costs and trim retirement benefits to reduce obligations.

Companies started offering retiree health benefits in the 1970s when they were a cheap way to recruit and retain employees, said Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute. New regulations in the 1990s forced companies to post the commitments as liabilities on their financial statements, leading companies to rethink them, especially as health-care costs soared.

They have done so in a variety of ways. For instance, companies such as General Electric and IBM moved retirees off group health insurance plans and onto private exchanges, or marketplaces with several plan options that outside benefits firms manage. This helps employers cap their health-care expenses.

Walgreens went even further in 2013, when it was one of more than a dozen companies to move active employees onto the Aon Hewitt Corporate Health Exchange.

Companies that have restricted the subsidies they offer to assist with medical benefits have generally focused their cuts on new hires, younger employees or retirees who are Medicare eligible, benefits experts say.

According to a 2018 survey of 554 employers by insurance broker Willis Towers Watson, 38% offered some type of financial subsidy to help current retired employees pay for medical benefits before they are eligible for Medicare at age 65. Thirty percent extended the benefit to current employees, and just 19% made it available for new hires.

“I can’t think of a company that [eliminated subsidies for current retirees],” said John Barkett, director of policy affairs at Willis Towers Watson. “It gets back to the promise they made to their retirees.” He added that employers “still want to offer their commitment, they just want to do it at a better value.”

Indeed, Walgreens retirees say they trusted the subsidies wouldn’t go away and have found the cuts hard to justify.

“If Walgreens was a struggling company… I could see it,” said Chris Knupp, 61, who retired from Walgreens in 2016 as a senior director in the insurance department. He and his wife will lose his subsidies under the new rules. But this is a company who reported $5 billion of income last year and has posted profits for I don’t know how many years. ”

The new rules are also changing retirement timelines of some current employees, including Ed Meyerink, 52, of Bluffton, South Carolina. Meyerink has worked at Walgreens for 27 years and planned to retire when he turned 55. He and his wife bought an RV so they could see the Grand Canyon, spend the summer in California and maybe spend some time with their son who lives in Boca Raton, Florida.

Without Walgreens subsidizing their health insurance, he plans to keep working as a pharmacist until he’s old enough for Medicare. They will still take the RV for weekend trips, but they’re scrapping their other itineraries.

“Zero does me absolutely no good,” Meyerink said of the subsidies. “It means no traveling. None of the plans we have are going to come to fruition.”

Cost-cutting pressures

Despite its profits, the drugstore chain is under pressure from investors to cut costs.

Pharmacies are getting paid less to fill prescriptions as insurers squeeze them. Prices of the drugs they’re dispensing aren’t increasing at the same rates they used to as drugmakers face pressure from lawmakers. People also aren’t buying as much candy and soap at drugstores, instead buying convenience items online on sites like Amazon.

The company earlier this year ramped up cost-cutting after CEO Stefano Pessina called its second-fiscal quarter the most difficult quarter since Walgreens acquired Boots Alliance in 2015. Walgreens now expects to save $1.5 billion annually by 2022, executives told Wall Street analysts on a conference call in April.

In cutting the subsidies for early retirees, Walgreens reduced its benefit plan obligation by $201 million in 2018 from the previous year, the company said in its annual report.

“It’s kind of odd, the timing,” said Brian Tanquilut, senior vice president of health-care services equity research at Jefferies. “I can’t think of any other companies who are doing this. It feels like a lot of this was done years ago, so for them to do this now shows they’re under pressure and are forced to look at their cost savings options now.”

H/O: Paul Fischer Walgreens retiree health care

Paul Fischer worked at Walgreens as a pharmacist for 29 years before retiring in 2011 when he turned 55. Now 62, Fischer and his wife will lose their health insurance subsidies next year.

Source: Paul Fischer

To be sure, Walgreens has increased some benefits for its current employees even though it is cutting the retiree subsidies. For instance, last year it invested $100 million to boost pay for more than 100,000 store employees.

‘Pretty much chaos’

Walgreens hosted two conference calls that lasted more than an hour each in November to field people’s questions. Paul Fischer, a 62-year-old retiree from Ormond Beach, Florida, described the call as “pretty much chaos” with people telling Walgreens executives how frustrated they were to lose benefits they were already receiving.

Robert Montes, who spent most of his 34 years at Walgreens in compensation and benefits, and his colleagues met with Walgreens executives later that month. In their hour-long meeting at Walgreens’ Deerfield, Illinois, headquarters, they asked how the company could say it did not have money for the subsidies, why it said costs were unpredictable and why it thought eliminating subsidies would solve concerns about retirees’ costs.

“They were nice, polite, cordial,” Montes said. “They said you’ve given us some good comments but in essence, they’ve held onto their original game plan and maintained radio silence throughout all this and have not implemented any change management to their relative plan. We sit here frustrated by their silence at this point.”

Caruso, the Walgreens spokesman, said in the email to CNBC that “members of our executive management met with retiree representatives to listen to their concerns, engage in dialogue, and inform them that we are continuing to work toward a new healthcare program for 2020.”

Walgreens told retirees it would share more details sometime this year. Retirees say they have yet to hear from the company. Until then, they’re trying to figure out what to do about their previous spending plans.

Fischer and his wife, Susan, bought land in Jasper, Georgia, where they wanted to build a home when she retired in January. They also considered buying property in Texas. They wanted to travel to Ireland and Italy. Those plans are on hold while they await an answer.

The couple set aside cash to pay for their health insurance. Now, they’re not sure whether it will be enough, said Fischer, who worked at Walgreens for 29 years and retired as a pharmacy manager. They may have to sell some of their investments to cover the lost subsidies.

“It all goes back to how could a financially sound company take away benefits from people who already retired who can’t go back,” he said.

Source: CNBC

As Stores and Online, Health Care Moves Closer to Customers

Health care is moving closer to patients.

Drugstores are expanding the care and support they offer, and telemedicine is bringing doctors and therapists to the family room couch as the system shifts to help people stay healthy and attract customers who want convenience.

CVS Health offered the latest example on Tuesday, announcing plans to expand a new store format that will provide dietitians, help people monitor chronic diseases and add community rooms that can be used for yoga classes. The drugstore chain, which quit selling tobacco several years ago, said it will open 1,500 of these so-called HealthHub stores nationally by the end of 2021.

“The ultimate goal is bring more health services into people’s communities where they can access them as part of their daily life,” Executive Vice President Dr. Alan Lotvin said.

CVS rival Walgreens is experimenting with primary care clinics, and insurers are expanding coverage of things like dietitian visits, hoping that keeping people healthy will reduce costs and keep them out of expensive hospitals.

The added convenience sounds good in theory, but these newer care options will have to earn patient trust, said Harvard researcher Dr. Ateev Mehrotra, who has studied retail clinics.

“This is going to take a lot of cultural change for patients to feel that this is a reasonable option for them,” he said.

CVS Health, based in Woonsocket, Rhode Island, runs more than 9,800 retail locations nationally. Late last year, it added health insurance when it acquired one of the nation’s biggest insurers, Aetna, in a roughly $69 billion deal that is still being reviewed by a federal judge.

Soon after announcing that deal, CVS officials started talking about plans to provide more health care help to customers. Late last year, the company started testing HealthHub stores in Houston.

Aside from visits with dietitians, these stores also give customers a chance to get screened for eye problems caused by diabetes, talk to a pharmacist about their treatment plan or get help tracking their blood pressure.

The stores reduced space for things like seasonal merchandise in order to add amenities that include community rooms that can be used for free chair yoga sessions or nutrition classes.

CVS Health said it will add more of these stores to the Houston market this year and expand to Atlanta, the Philadelphia area and Tampa. The company plans to run 1,500 HealthHub stores by the end of 2021.

Separately, Walgreens will start adding primary care clinics next to some of its stores in the Houston area through a partnership with VillageMD. It’s also testing clinics in Kansas City that focus on older patients through a deal with the insurer Humana.

Walgreens, which still sells tobacco, wants to create what its leaders call “health care neighborhoods” with its stores and improve access to primary care.

“We have an aging population,” Walgreens executive Dr. Pat Carroll said. “It is difficult in many communities to actually find a primary care physician.”

As they expand into care, the drugstore chains will face competition that includes major doctor groups and hospital systems that have their own support staff working to keep patients healthy.

The management of chronic illnesses has become a big source of health care spending, noted Mehrotra, the Harvard researcher.

“This is sort of the pot at the end of the rainbow that everyone wants to get to,” he said.

Mehrotra also said these growing options for care may have to overcome patient reluctance. He said people have grown comfortable using drugstores for flu shots or to treat colds. But asking a drugstore to help manage diabetes is another matter.

In that case, patients worry about whether their regular doctor will be notified of the drugstore care, and they may want to see the same person each time they visit.

Another physician, New Hampshire-based internist Kevin Pho, said he also worries that drugstores may use their health care services to drum up prescription business or sales in the rest of their store.

CVS is offering additional health care in stores many customers already visit routinely and is focused on putting those customers on “a path to better health,” Executive Vice President Kevin Hourican said.

Frequent CVS customer Grace Bennett said she thinks the expanded health care services are a “fantastic step.”

The 28-year-old New Yorker has diabetes that led to eye surgery. She said screenings for that condition and other health care services available through the drugstores will make it easier for people to get help without having to juggle schedules or worry about finding an open appointment.

No end in sight to rising drug prices, study finds

The cost of many popular prescription drugs has increased substantially in the U.S. in the past six years, and the trend may continue if bold bipartisan action isn’t taken, according to a study published Friday.

The study, in the journal JAMA Network Open, found a substantial industry-wide rise in insurer and out-of-pocket costs for top-selling, brand-name prescription drugs, highlighting one of the foremost problems in health care today: unimpeded price increases in the pharmaceutical market.

In the study, researchers from the Scripps Research Translational Institute analyzed Blue Cross Blue Shield pharmacy claims from 2012 to 2017, focusing on a total of 49 brand-name drugs that had more than 100,000 total claims each.

All but one of the drugs included in the study saw regular annual or biannual cost increases. The cost of 36 of the drugs increased over the six-year period by more than 50 percent, and the cost of 16 more than doubled. Overall, the median cost of the drugs included in the study increased 76 percent.

Insulin drugs such as Novolog, Humalog and Lantus and rheumatology drugs such as Humira and Enbrel had some of the largest increases in costs. The price of Humira, for example, rose from $1,940 in January 2012, to $4,338 by December 2017.

“Given the median annual cost increase of 9.5 percent, our results suggest the costs for popular brand-name drugs would double every 7 to 8 years,” the researchers wrote. What’s more, competition didn’t seem to stymie costs: Popular diabetes drugs like Humalog and Novolog continued to see large price increases despite doctors’ ability to prescribe them interchangeably.

And the researchers do not believe that this trend will slow or stop any time soon.

“Because most products displayed continual, marked annual increases throughout the observation window, we expect these products to continue along this price escalation course, along with emerging products,” the authors said.

The findings also suggest that prices of brand-name drugs are not largely affected by the availability of generic versions or bio-similar products.

Recent big pharma trends show that the cost of drugs for common conditions such as diabetes, arthritis and cancer will continue to soar, even as Congress investigates rising costs in medicine and the systems that allow for it. In 2018, Novartis raised prices on more than 30 different classes of drugs, from 4.5 percent to 9.9 percent. These drugs included the multiple sclerosis drug Gilenya, the psoriatic arthritis treatment Cosentyx, and the leukemia treatment Tasigna.

Major pharmaceutical companies aren’t in a rush to curb soaring drug prices, either.

In February, top executives from seven major pharmaceutical companies told a Senate committee that they could not commit to lowering the prices of commonly used prescription drugs even as they admitted that they control these prices. One executive even acknowledged that the high cost of medicine hits poorest patients the hardest.

The “list price” of drugs has long been a topic of interest, and the artificial sale prices set by the drug companies have recently become a popular point of discussion in Congress. A Kaiser Family Foundation poll in March found that a large majority of Americans from both parties supports steps to control prescription drug costs, including showing prices in ads, removing barriers to generic drugs and allowing patients to get less expensive drugs from Canada.

Dr. Eric Topol, director and founder of the Scripps Research Translational Institute and a senior study author, and Nathan Wineinger, the lead study author and an associate professor in the department of integrative structural and computational biology at Scripps, wrote that innovative solutions have the potential to find appropriate price points for patients while rewarding drug manufacturers that produce transformative products. However, it’s important for the federal government and the pharmaceutical industry to look at the abuses taking place within the current system.

“The United States provides drug companies with the strongest patent protections in the world, but legal strategies in the pharmaceutical industry … abuse that liberty,” the researchers wrote. “Reasonable drug costs for consumers must be balanced with incentives in the pharmaceutical industry to produce innovative drugs that improve and save lives.”

Source: NBC News

Costco makes strides with grocery, omnichannel initiatives

Costco Wholesale Corp. kept sales on the upswing in its fiscal 2019 third quarter as per-share earnings hit the high end of Wall Street’s estimates.

For the 12-week quarter ended May 12, net sales rose 7.4% to $33.96 billion from $31.62 billion a year earlier, Costco said late Thursday. Membership fee income increased 5.3% to $776 million.

Total comparable-store sales climbed 5.5% year over year. The warehouse club retailer’s core U.S. market led with 7% comp-sales growth, while the Canada and international segments edged up 1.3% and 1.7%, respectively. Traffic was up 3.7% worldwide and 3.4% in the United States. The average ticket size grew 1.8% overall.

On an adjusted basis, total comp sales grew 5.6%. U.S. adjusted comps gained 5.5%, with the Canada and international divisions up 5.1% and 6.9%, respectively. The average ticket size grew 1.9%. Adjusted comps exclude the impact of changes in fuel prices and foreign exchange (FX), as well as an accounting change concerning revenue recognition, the company said.

“Overall, our e-commerce sales increased on a reported comp basis of 22%, and 19.5% excluding FX and gas. These numbers do not include the increases that we’re seeing with Instacart,” Chief Financial Officer Richard Galanti told analysts in a conference call late Thursday. “Instacart comes into our warehouses and purchases, and that goes into warehouse sales.”

Costco has been doing more business via Instacart as the online grocery provider has expanded its geographic footprint, according to Galanti. Members can shop for Costco groceries online from the retailer’s Instacart-powered site as well as through the Instacart marketplace.

“We’ve dramatically improved the value proposition over the last two years,” Galanti said of Costco’s relationship with Instacart. “It’s growing at big numbers — high double-digit numbers — but it’s on a small base,” he added.

Reported net earnings for the third quarter were $906 million, or $2.05 per diluted share, compared with $750 million, or $1.70 per diluted share, a year ago. Excluding the benefit from a non-recurring tax item of $73 million, or 16 cents per diluted share, adjusted earnings per share (diluted) for the 2019 quarter were $1.89.

Analysts, on average, had forecast adjusted EPS of $1.82, with estimates ranging from a low of $1.68 to a high of $1.90, according to Refinitiv/Thomson Reuters.

Jefferies analyst Christopher Mandeville reported that Costco had “another solid showing” in the third quarter in gross margin percentage for its core merchandise categories (food and sundries, hardlines, softlines and fresh foods), which grew 9 basis points year over year and 21 basis points from the previous quarter on a core-on-core basis.

“Management remains laser-focused on driving top-line growth by continuing to execute on various initiatives,” Mandeville said in a research note late Thursday. “Costco’s offering of private-label specialty items, both food and nonfood, as well as organics in fresh and shelf-stable products, continues to expand and resonate with members, as evidenced by consistent, positive mid- to high-single-digit monthly comps in these categories.”

During the quarter, Costco opened three new warehouses, one each in the U.S., South Korea and Australia. The Issaquah, Wash.-based retailer currently operates 773 warehouse clubs overall, up from 750 a year ago. That includes 536 locations in the U.S. and Puerto Rico, compared with 520 a year earlier. The company has 100 clubs in Canada (+2 versus a year ago), 39 in Mexico (+1), 28 in the United Kingdom, 26 in Japan, 16 in South Korea (+2), 13 in Taiwan, 11 in Australia (+2), two in Spain, and one each in Iceland and France.

So far in the 2019 fiscal year, Costco has opened 13 clubs, including three relocations. “In Q4, we’ll open 13 locations — which includes two relos — so net of 11, which should put us in terms of net new openings for the fiscal year at 21, the same number that we had in fiscal 2018,” Galanti said in the call. “About three-quarters of the openings this year are in the U.S. and about a quarter internationally. This also includes our anticipation of opening our first Costco in China, in Shanghai, tentatively scheduled to open on Aug. 27, right before the fiscal year ends.”

Capital expenditures for the fiscal 2019 remain “in line with prior years,” he said. “We’ve got a lot of money being spent on fulfillment — both e-commerce and grocery expansion and automation — the chicken plant, ongoing expansion and depot infrastructure, as well as IT modernization.”

Costco also is moving ahead with efforts to support online channel growth. The retailer has been fulfilling two-day grocery delivery from its business center locations but is now migrating that function to six of its distribution depots.

“During the quarter, we completed the rollout of six regional grocery distribution centers located within our existing depots. Previously, since late 2017 when we began two-day grocery, we had fulfilled through our business centers. As it expands, we pushed that into our depot operations, and we’ll also have in those cases regional assortments,” Galanti said.

Costco, too, is set to expand click-and-collect service via pickup lockers, which has been tested in 10 clubs. “We’re in the process of rolling that out to an additional 100 locations over the next four or five months, before the September through December holiday season,” he said.

In the U.S., Costco also aims to double the number of locations with self-checkout, currently in about 125 clubs. “We’re going to move to 250 in rapid order over the next several months,” said Galanti. “For us, it works best in high-volume locations, particularly if you have a credit card, where you can just use contactless. It’s very fast, and customers are using it. And it’s saving some labor at the front end.”

Source: Supermarket News

Beyond self-checkout: How grocery stores are incorporating tech

Grocery shopping is completely different than it was 50 years ago. Fresh groceries and meal kits can now be dropped off at your doorstep. Retailers are redesigning their warehouses for online shopping. Robots adorned with googly eyes alert staff of spills.

What’s next for the future of food shopping?

Meet Alphabot, a robot that could potentially change how we grocery shop in the future. This little robot can be found at Walmart Superstore in Salem, New Hampshire, in a giant steel structure that stretches from the floor to the ceiling. This robot cage takes up much of the 20,000-square-foot space.

Alphabot was created by John Lert and his company Alert Innovation. Lert walks us through how robots are taking on some of the work involved with filling online grocery orders. Specifically, for packaged products, like cereal and milk.

Alphabots aren’t little Wall-Es. Think of them as tiny pickup trucks, moving along within the giant metal cage meant only for robots. This store will soon be home to 50 Alphabots.

The system works kind of like a vending machine. Robots move plastic bins called totes that are stocked by humans. The totes are filled with one or a few items of the same kind, like a tote for peanut butter or frozen pizza. The robots move side to side and up and down to fetch the right bins. Then, they zoom to a loading station where a human worker bags your order. Without walking the aisles, workers can build 10 times as many orders per hour.

Beyond Walmart, the demand for robots shows retailers are thinking more about how to expand their online shopping options efficiently. But why? Online shopping only makes up less than 3% of all grocery orders.

“I mean, the only thing that motivates a retailer more than what their shoppers want is what their competitors are doing,” says Keith Anderson, a lead strategist at Profitero, an e-commerce analytics and consultancy company.

He says one of the biggest moves that shook the grocery industry was when Amazon bought Whole Foods for nearly $14 billion in 2017. But he predicts a future with even more radical changes.

“I don’t want people to think ‘Oh, what will be different in 30 years will be you’ll walk into an Amazon Go store and you won’t have to take your wallet out to walk out with a box of Frosted Flakes,’ ” says Anderson. “I think it will be wildly different in 30 years, and I’m not certain that you’ll go into any store in 30 years.”

Anderson thinks stores will have to focus on last-mile automation — or how your avocados get from the store to your door. It’s the most expensive part: Grocers need to pay for fuel, salaries, cooling systems and more. Emerging tech could make a difference.

Improvements in online grocery shopping could also help fix another problem: access to food. Last month, the USDA launched a pilot in New York that allows people to buy groceries online with food stamps for the first time ever.

While some tech upgrades are welcome, some experts have concerns about how retailers focusing on online shopping will use data they collect about customers.

“I’m sure the folks at Amazon are thinking of creative ways of using Amazon Prime to identify customers and to pull all the data that they know about them to make sure that they offer the products that I want when I want,” says Norbert Wilson, a professor at Tufts School of Nutrition. “I wonder if that automation will reach all people equally and successfully.”

Wilson fears low-income residents will not be as much of a priority for companies because those consumers tend to spend less money. He wonders if retailers will use shopping data to give better deals or incentives to shoppers who spend more.

Research shows there’s also no guarantee that increasing access to food changes how people eat.

“Even when you bring in a new grocery store into a low-income area, it doesn’t necessarily lead to this increase in the nutritional quality of the foods that people purchase,” Wilson says. “The key thing would be: How can we ensure that higher quality, higher nutritious foods are available and encouraged?”

Grocery stores are also going to have to adapt to changing consumer preferences. Inside a Stop & Shop in Watertown, Lauren Abda, the founder of Branchfood — the largest community group for food professionals in New England — reimagines what the produce section could look like.

“Perhaps they’ll start growing their own food in market,” Abda says. “You know, right now, some of that’s happening on the roofs of grocery stores, but I suspect that we’re going to start seeing this happening [inside] grocery stores. And so while the produce department area is certainly alive, I think it will start becoming even more so.”

Abda says grocery stores know people crave more engagement — with each other and with technology.

“The phone may be a helpful assist, right?” she explains. “Like maybe you’re walking down an aisle and you’re pinged with a deal because you’ve walked by this particular brand and maybe subscribe to that brand, and they know just based on your geo-location that you’re looking at their products in store.”

But family-owned, regional retailers think they have a lot to offer when it comes to adding a personal touch when educating shoppers about food. And they’re doing this for more than just the benefit of the customer. It’s to stay in business.

“Roche Bros. started as a neighborhood store in Roslindale,” says Arthur Ackles, the company’s vice president of merchandising. “I still like the one-on-one human contact.”

He says the company is opening a new store in Watertown next year that will be designed, in part, around how customers shop and eat.

“If a customer is on a low-salt diet they may want to go to one place to find most of the low-salt items or if you’re on a gluten-free diet you may want to go to one place,” Ackles explains. “We’re going to have to change pretty quickly to do that as well.”

Roche Bros. is embracing technology, too, putting iPads in stores to help shoppers understand nutrition labels. The grocer is also upgrading its pick up and delivery options.
But in its roadmap, Ackles said, Roche Bros. will value human connections above all. Robots need not apply — at least for now.

“Yeah they’re funny, they look cute and you know people might go, ‘Oh wow, look at the robot!’ ” Ackles says. “But ultimately, will it help you sell groceries and does it help the customer? Maybe, maybe not. We’ll see where it goes.”

What’s clear is that the winning equation for grocery stores in the future means giving all customers the ability to shop how they want, when they want.

Source: WBUR.org