Walmart's InHome, the other drug crisis and BJ's arrives in Detroit
BJ’s ready to roll in Detroit
Food retailing competition heating up in the Detroit area where BJ’s Wholesale Club is slated to make its market entry next month. The $13 billion operator of 217 membership warehouses is scheduled to open its first location in Taylor on Nov. 19 and a second location in Madison Heights on Nov. 2. A third location in Chesterfield Township is planned for early next year.
BJ’s is appealing to prospective members unfamiliar with its brand of retailing by touting 25% off grocery store prices, low gas prices and key differences relative to Sam’s Club and Costco such as a larger assortment of fresh food, smaller pack sizes and acceptance of manufacturer coupons.
The Detroit entry is a big deal for BJ's. The company hasn't entered a major new market in 20 years and it is primarily known for its presence along the east coast of the U.S. To compensate for lack of awareness in Detroit the company has been running an aggressive ad campaign and pre-opened its gas stations to help with new member sign ups.
Albertsons growth accelerates, online surges
Seven consecutive quarters of identical store sales growth and a store brand penetration rate of 25.3% helped Albertsons Companies generate a $284.8 million second quarter profit versus a prior year loss of $32.4 million. The profit improvement came despite investments to drive 40% sales growth of online home delivery and drive up and go service. The 2.4% second quarter identical store sales increase was the company’s strongest in more than three years.
“We are focused on driving sales growth by running the best stores, growing our loyal customer base, winning in e-commerce, and enhancing our own brands portfolio,” said Vivek Sankaran, president and CEO of the 2,262 store Albertsons chain. "At the same time, we are making strategic investments in the business to better leverage our scale, which are improving productivity and driving cost reductions.”
All eyes on Amazon this week
Amazon expects to report third quarter sales between $66 billion and $70 billion on Thursday, Oct. 24. That represents an increase of between 17% and 24% compared to the prior year, according to guidance the company provided on July 25th when it reported results for its second quarter ended June 30. When guidance was provided, Amazon had the benefit of knowing its performance during the two Prime Day sales promotion that occurred July 15-16, early in the third quarter before second quarter results were reported and guidance was provided. Amazon knew Prime Day sales surpassed its previous Black Friday and Cyber Monday combined so that performance is reflected in the company’s guidance. Prime Day was also the biggest event ever for Amazon devices when comparing other two-day periods
INSIGHTS AND INNOVATION
What is ecosystem manufacturing?
If the phrase “ecosystem manufacturing” is unfamiliar, don’t worry. Brad Bane, EVP of strategic client partnerships, and Ryne Misso, solutions consultant, both with Numerator, will join Retail Leader for a webinar on Nov. 7, on one of the hottest topics in the CPG world. Bane and Misso will define ecosystem manufacturing, explain why CPGs are embracing the shift to drive growth and identify the pillars of a successful ecosystem.
Shopify acquires robot company for fulfillment
Multi-channel commerce platform provider Shopify completed its acquisition of 6 River Systems, a warehouse automation company that developed a robot named Chuck for order picking. The deal will help Shopify improve fulfillment operations for the businesses it serves while 6 River Systems will continue to expand its solutions for warehouses.
The two big problems with Walmart InHome delivery
Residents of Kansas City, Pittsburgh and Vero Beach, Fl., can now have Walmart deliver groceries inside their home. It’s a cool service and there is a universe of shoppers eager to adopt anything that promises to make their life easier, even if it means giving a Walmart employee access to their home and refrigerator. However, the retailer may never discover the true potential of a service that already has limited appeal due to its current cost structure. For starters, assuming a customer lives in a zip code where the service is offered, they will need to buy a $49.95 smart device that allows access to the home. Then there is a monthly fee of $19.95, or a total of $239. Or, they could pay an annual fee of $98 for Walmart’s Delivery Unlimited service and just make sure they are home when they set their delivery window. Delivery Unlimited will be available in 200 metro areas where Walmart already offers grocery delivery by year end.
America’s real drug crisis
A DEA program intended to address the opioid epidemic reveals another type of health care crisis that will be just as difficult to solve. Here’s why. When Walgreens announced recently it had collected and disposed of 885 tons (1.77 million pounds) of prescription drugs through its medication disposal kiosk program, the volume recovered was hailed as a victory.
“We are proud to be the leader in making ‘drug take back day’ available every day, just as we are grateful to the organizations across the health care community who have joined us to address the opioid epidemic,” said Rick Gates, Walgreens SVP of pharmacy and health care.
The 885 tons Walgreens has collected is a huge number, but amazingly it represents only 14% of the 12.5 million pounds the DEA says has been collected since the National Prescription Drug Take Back Day began in the fall of 2010. What neither Walgreens or the DEA says is what percentage of the drugs collected are addictive opioids as opposed expired antibiotics, cholesterol or hypertension drugs.
What a waste
Regardless of the type of drug being disposed of, 12.5 million pounds is a huge amount. To get an idea of how huge, picture a stadium with 62,500 people each weighing 200 pounds or 13 Boeing 747 airplanes filled with passengers and fuel. All of that weight, very valuable prescriptions drugs, were at one point, medicines health professionals felt were important to treat an ailment, pharmacists determined should be dispensed and in the majority of cases met the requirements of an insurance company that paid the bill.
Opioids are a crisis, to be sure. There were 70,200 drug overdose deaths in 2017 related to opioids, but prescription opioids were deemed the source in only 17,029 of the deaths. Again, not to diminish the significance of that number, but the other epidemic is the combination of over-prescribing, direct-to-consumer advertising, non-compliance and an over-reliance on medicines to address ailments treatable through lifestyle changes.
Why U.S. retail brands aren’t considered valuable
U.S. Retailers don’t rank among most valuable in Interbrand’s Best Global Brands report, but don’t be alarmed. A restrictive methodology ensures most retailers, in the U.S. or based elsewhere, aren’t considered for inclusion. For example, one requirement is that, “at least 30% of revenue must come from outside a brand’s home region.”
As a result, retailers such as Walmart and Costco, despite having a substantial global footprint, are precluded from the ranking because their non-U.S. sales are 23% and 27%, respectively, of total revenues of $513 billion and $153 billion. Further ensuring the exclusion of U.S. retailers is a requirement that a brand has a significant presence in Asia and Europe.
Therefore, brands such as McDonald’s (9) and Starbucks (48) were the only U.S. retail brands to make the cut. Topping the list were Apple, Google, Amazon, Microsoft and Coca-Cola. Other retailers who did make the list were Ikea(26), Zara(29), H&M(30) and eBay(44). Plenty of CPG brands which are sold worldwide were included on the list.
A big day for Beyond Meat
Beyond Meat is expected to report impressive growth and reveal fresh insights on the adoption of plant-based products on Monday, Oct. 28, when it reports results for its third quarter ended Sept. 28. The company will need a big number to satisfy investors who’ve grown concerned about the plant-based burger maker. Recall Beyond Meat went public at $25 a share on May 1 and its stock price surged to a high of $239 on July 26. A few days later, after reporting second quarter sales grew 287% to $67.3 million, the stock began to slide. Then the company sold more shares at $160 in early August and the slide continued. Amid new concerns about increased competition from major CPG companies entering the space and retailers such as Kroger launching plant-based options under its popular Simple Truth store brand, Beyond Meat shares closed Friday at $110.
Unravel the shopper journey at P2PX
The Path to Purchase Expo (P2PX) is happening next month and offering innovative retailers and brands a unique opportunity to discover new sources of inspiration when it comes to engaging and influencing shoppers. Slated for Nov. 13-14 in Chicago, P2PX organizers (Retail Leader and the Path to Purchase Institute are owned by EnsembleIQ) blew up the concept of the traditional trade show to create an attendee experience focused on the pillars of education that empowers, community that matters and solutions that transform. To see what the buzz is about check out the event agenda here.
Retail Leaders on the Move
Former Google and Netflix marketing executive Jessie Becker has joined Impossible Foods in the newly created role of SVP of marketing. Becker’s hiring comes as Impossible Foods pursues retail distribution for its plant-based products, including its flagship Impossible Burger now served as more than 17,000 restaurants.
Casey’s General Stores is already a major food service player and the nation’s fifth largest pizza chain, but look for the operator of 2,000 locations to get more aggressive. The company named Tom Brennan, the former COO of CKE Restaurants Holdings, parent of Carl’s Jr. and Hardee’s, as its new chief merchandising officer. He will report to Casey’s CEO Darren Rebelez and is responsible for the development and implementation of the company’s overall merchandising and prepared foods strategy. Prior to CKE, Brennan spent 11 years at 7-Eleven in a variety of roles and also worked for Target.
US Foods Holding Corp., is searching for an EVP Chief Supply Chain Officer after Tim Connolly resigned Oct. 15. Peitro Satrian, chairman and CEO of the $24 billion company, did not elaborate on Connolly’s sudden departure, but said, his leadership will be missed.
Microsoft CEO Satya Nadella and newly appointed Walmart U.S. CEO John Furner will help the National Retail Federation kick off its annual Big Show in a big way on Sunday, Jan. 12. Nadella was recently added as a keynote speaker and Furner committed to the event while he was still CEO of Sam’s Club. Not to be overlooked, Kohl’s CEO Michelle Gass is also among the Sunday morning keynoters.
Valassis president Cali Tran added the role of CEO at the provider of marketing technology and consumer engagement solutions. Tran will lead Valassis’ growth strategy and go-to-market execution to transform the ways brands connect with consumers and drive the company’s continued success in digital media and marketing. With Valassis the past six years, Tran was named president in January 2019. Former CEO Dan Singleton will becomea senior advisor for Valassis parent company Harland Clarke Holdings.