The Lempert Report LIVE

Almost Rail Strike, Supermarket Killer?, McDonald's Gold Card

December 05, 2022 Phil Lempert Episode 57
The Lempert Report LIVE
Almost Rail Strike, Supermarket Killer?, McDonald's Gold Card
Show Notes Transcript

Welcome to The Lempert Report LIVE

  • We discuss the lessons from the almost rail strike – and the future
  • Is Circle K the new supermarket killer?
  • An affordable allergen free brand
  • Is the food court a dinosaur never to return?
  • How a Gen Z digital marketplace is changing the market. 
  • A reminder to check out Food News Today for the most up to the minute newsfeed courtesy of our partnership with Cision.
Phil:

Welcome to The Lempert Report Live. Today we discuss the lessons from the almost rail strike– and the future, is Circle K the new supermarket killer? An affordable allergen free brand, is the food court a dinosaur never to return? And how a Gen Z digital marketplace is changing the market. A reminder to check out Food News Today on SupermarketGuru.com for the most up to the minute newsfeed courtesy of our partnership with Cision. In fact, in the past couple hours, here's two stories. Number one, Fu rmanek h as announced that Dragon Fruit is the 2023 flavor of the year, and also really close to home. There's now an underground do nut t our that launched in Santa Monica, so it's called the Underground Do nut T our. It's the world's best do nut t our. So they say it now has been running for seven years across the US, Canada, UK, and Ireland, including Chicago, Philadelphia, New York City, Portland, Seattle, Boston, Nashville, Miami, new Orleans, London, Dublin, Las Vegas, Washington D.C, Toronto, Vancouver. And here's what's interesting to me. They're gonna visit four donut shops here in Santa Monica. It costs 40 bucks to go to four donut stores, all within a three block radius. We'll see. We'll see if that works. Also this just in, the National Christmas Tree Association says that Christmas trees this year are gonna be up 10%. The average Christmas tree last year sold for$70. And also Instacart has decided to get into the Christmas tree business. They're introducing, starting today, deliveries of live Christmas trees up to five foot tall to your home. And also they'll actually trim the tree for you and you can then have it leveled and exactly the way you want it. Courtesy of Instacart, I guess they're searching for what else that they can do. And also from core site research, this just came in in the past, probably 15 minutes. They're 2023 deep dive. They expect US grocery sales to grow 3.9% year over year in 2023. That's compared to 8.3% in 2022. And also they've got three themes to watch in 2023, value and health focused SKU expansions, opening a smaller format stores, much like we talked about last week right here, and M&A mergers that many mid-tier and smaller players will acquire or merge with other independent chains to boost their economies of scale. Especially when we look at the Albertsons and Kroger deal. There's probably gonna be about a thousand stores that are up for grabs, and we can expect both independents, Amazon Fresh, and my take is Instacart to get in on those. So check those all out. And it's time to get started. So, Sally, let's talk about this rail strike. That didn't happen. What's the impact here for food and beverages?

Sally:

Well, what we're talking about here and we all kind of know what happened is that there was this, I think I believe a 96 year old law that actually came into play here where Congress could get involved with, settling this rail strike, which really adds up to it being very, very desperate measures to be taken because we know that President Biden has called himself a pro-labor president. So it was a situation where it was going to really, really affect people, affect our economy. And so the government stepped in. Now what they did was they looked at these conditions that these rail strikers were complaining about, and I think that's what's really important of what we need to talk about is what their grievances were. And some of that was met in Congress's mediation of the agreement and some of them were not. But what is important, I think, to look at here, and I'd love to hear your take on this Phil, is how this translates to all of our industries, but particularly our food industry. When we think about the strikes that took place last year at some really big food companies like PepsiCo, Frito Lay, we need to think about what our workers need and are we taking care of them? We have a labor shortage already that we're dealing with. We need people to work. They, we need them to want to come to work. We need them to be happy about their jobs. So what can we, as a food industry do to help make sure that we've got people packing those products and getting them ready to ship?

Phil:

And also, let's not forget at retail, to have those people who are working at retail be happy as well. And it's really a double edged sword because certainly that means increased costs, which gets passed onto the consumer with increased costs on our shelves that everybody is complaining about already. But also I'm really concerned that what we need to do and this congressional law, I guess, has been played about five or six times since the thirties, where the government has gotten involved and stopped a rail strike because rail is just so important. I think it's time to reimagine the food industry, as we've talked about dozens of times before, that we can't have factories, you know, far away from where the consumers are far away from where the retailers are. And we really, whether it's trucks, whether it's rail cars, we really need to build factories closer to where consumers are. Again, you know, the local movement has really been focused on, you know, not only helping local farmers, but also, you know, the fact that we get fresher foods. So maybe it's time to really rethink all of food and beverage to be local. We averted this strike, but there could be another one on trains, and we're back to the same problem. So Circle K has decided that they're gonna go after supermarkets with their food rocket delivery service. Food Rocket now has over 7,000 SKUs focuses on grocery and convenience products. They're being shipped from two micro fulfillment centers. And also what's really interesting is 60% of all the orders that are being placed on Food Rocket are for fresh grocery and ready to eat meals. The order processing takes just two to three minutes. Delivery window is within 15 minutes. And Sally, you were on Food Rocket earlier today. Tell us what you found.

Sally:

Yes, it's a very interesting, interesting setup. And when you, and when you do look at what they are offering, Phil, it is mostly prepared foods. I love this concept. I love that Circle K is getting involved. You know, even on their website, on Food Rocket Site, they have, you know, Christmas dinners, you can get Christmas sides if you want, or just a Turkey. But it's, it's broken down really nicely into categories. And what I also really found interesting about it is that they're offering subscription services on, on several different levels. It's depending on how many days you'd like your subscription to be for, and that that determines the price. But what else I like about it is, is that each plan offers an opportunity to be a part of a charity. So, for example, one of the options is give the gift of Clean Safe Water. One is Fight for Animals, and then another one is protecting children against abuse and neglect. Now, my only issue with this on the website is they don't really say,"okay, we're giving this much of the profits to this organization". It's, it's really left very vague. So as a person participating in that, I would like to know.

Phil:

Yeah, and also the other thing that's interesting about the subscription, and there's 14 day subscriptions and 30 day subscriptions you get bonuses. I'm looking at the fight for all Animals. With the Humane Society, you get 10% off all groceries, you get 50% off new Rocket Cafe, fresh pastries and desserts, you get a free cup of coffee with every order above$25. So they're really smart about it. I question the whole idea of 14 days and 30 days versus having an annual subscription. And I would expect that if this is successful, they'll move it to an annual fee, you know, probably$99 the way everybody else does it. But to be able to get, you know, 10% off, 50% off, that's a sizable savings, and I think it's really a smart idea. Let's talk about Voyage Foods. How they're changing the way we think about healthier and alternative foods.

Sally:

Yeah. So Voyage Foods is a company that's really interesting because their model is very different than some other things that we've seen out there. And what, what they are is they're a company that makes products. They make a peanut free peanut butter spread, a cocoa free chocolate, and a coffee free coffee. Now, these are products they've chosen to make because they are wild, widely popular globally. And they also contain a common allergen. So they're making an allergen free food available to people worldwide. And what their goal is, is to make this for everyone to be able to afford. So, I mean, the, the CEO is going so far as to say this food is not for rich white people, and which is very bold, but, but really smart. I think, you know, like looking at, you know, let's provide something for everyone that can, they can afford. But what else they're doing that is really interesting to me is they are taking more of a B2B focus and they're offering these ingredients that they have created that taste like peanuts, but isn't peanuts. They're offering these ingredients to other CPGs, working with them and helping them source cheaper ingredients to make something allergen free and tastes like something that that person wants in their products.

Phil:

Yeah, it's a really smart idea, no question about it. And one of the examples that he gives is working with an ice cream company where you could have, you know, a peanut butter swirl in an allergy free, peanut free ice cream. To be able to do that. So really smart idea. We've talked a lot about food courts in shopping centers that they're dying. And there's a story in Forbes that Walter Lobe, very smart guy, has written that he talks about why shopping malls, frankly, are not doing that well when it comes to their food courts. He talks about Mr. Beast, we've talked about that, you know, a couple months ago, but also what he says, and I totally disagree with this, is the way to get the food courts back is gonna have white tablecloth restaurants, famous name chefs, more refined restaurants, that'll attract a wealthier and more upscale group of guests in a shopping mall. I totally disagree. I don't think that that's the situation. Would you go to your, you know, local shopping mall to have a fancy dinner?

Sally:

I don't think so, Phil, and I'll tell you what the main deterrent would be for me is, even if they have valet parking, the mall has a massive influx of cars in and out. And if I'm going for a high end dining experience, I don't wanna deal with traffic like that. But I would say what is interesting about this concept to me is I think about my tween son who now really likes to go to the mall. And so I take him to the mall and I see a lot of other tweens there. That's one thing they really like to do in teenagers. They like to go and walk around the mall with their friends. And so I'm thinking more like a bistro style cafe where parents can hang out and let their kids, you know, wander the mall and shop with their friends because they don't want their parents hanging around when they're doing that. And they're old enough to do that when they're 12 at most malls. So, you know, I'm thinking more of a bistro coffee cafe, have a little wine, have a little small plate snack while you wait for your kids to shop.

Phil:

Yeah, I think that's a much smarter, much better idea. And also, let's not forget that as the malls are dying, supermarkets are adding more food courts to supermarkets, Kroger in particular, and they're doing really well. And also the current food court, I think one of the reasons that it's not doing well is it's disgusting, it's filthy. I mean, the, you can't move the chairs, they're bolted into the ground. It's not a comfortable experience. So let's not forget why it's not working. It's not only that there's less people going to malls, but that whole food court experience isn't nearly as good as what it should be. Claire Spackman has created a new company, it's called ConsumerHaus, which is a fully curated online market looking to become a central grocery shopping hub for Generation Z and what she's doing, which is really smart, she's personally now this is gonna launch on January 3rd. She's personally writing the story of all the brands that she has. I think she's got about 700 products from a hundred different brands, food, beverage products, health and wellness goods, pet supplies and personal care items. And she's saying that basically Generation Z wants a more in-depth shopping experience online. They wanna know the, the nitty gritty of the startup story for each brand that Generation Z and choose Generation Z tends to gravitate towards while they're shopping. What do you think is this a format that could work?

Sally:

I think that this is so smart and I'm 100% on board for a lot of the things that she is talking about that she's doing with this company. One thing that I really love is that she's writing each brand that they take on as a partner. She is writing their brand story herself. And they're featuring, they're doing an Instagram series where they're doing what they call founder features, where they actually have the founders of these companies in a video talking about how they found the company, how they created this product, where their idea came from. And I think it is really, really in touch with this Gen z, age demographic. And, you know, they're, they're gonna be turning, I think this age demographic is gonna be turning 26, 27 years old in the next year. So when we think Gen Z, we think, oh, they're so young, but they're actually, they're almost 30 and they have money to buy things. They have jobs now they're out of college. So this is, this is a very interesting concept to me, and I wanted to share one quick example with you, Phil, that I thought of with this, is I thought about my son who is Gen Z, and this weekend he came to me and asked me about buying a band t-shirt. And he said, you know, mom, the band t-shirt that I like is on their website being sold by the band, but it's also being sold on Amazon. And he said, I don't want you to buy it on Amazon. I want you to buy it from the band because I've read about the band, I know their story, and I wanna make sure that all this money that on this t-shirt goes to the band and not Amazon. And to me, that was a great example of this generation and how much they care about the people that they're buying from.

Phil:

I agree. And, you know, a brick and mortar example of, of this is Air One here in Southern California that's doing the same thing as Claire is trying to do. And I think that it's really smart, and I do think not only generation Z, but all generations, you know, really want a smarter, better shopping experience. So look for Consumerhaus it's gonna launch in January and we're gonna keep an eye on it to make sure we understand everything that's going on there and how we in the food industry can learn from these entrepreneurs that are really, you know, paving a whole new way of retail and, and how you sell food and beverages and building that relationship with the shopper. So on Modern Shopper this week I spoke with the founder and CEO of Why Food and Why Food is on a mission to drive innovation in the food industry using tech to solve global food issues that affect us all. Nadia is brilliant, she's great. And here take a look at what she has to say. So I've gotta put you on the spot here. Are these health campaigns from retailers, just a marketing tagline, do retailers actually care about making their shoppers healthier?

Nadia:

I, yeah. I mean, I think in the honestly, I think in the US we're seeing a lot more, movement from the US retailers to at least try and align themselves with help campaigns or agendas. In the uk we're still super far behind on all of this stuff, and we're not even doing it as a marketing gimmick. It's barely something that's even being recognized at the moment. And I think there's a lot more work and opportunity for these big organizations to take, you know, responsibility. But what we're eating, I think there is an opportunity for the entire food and drink industry to take some form of responsibility for what we're eating. And I think it fundamentally starts with information and transparency and understanding of what we're eating and the impact that that has on me personally, and how we might go about trying to make better decisions, and how we might be able to influence that. And of course, technology and the technologies that are now currently available to support big industry players to make these types of moves in the way they're communicating their messages is available. So yeah, I would like to see and would expect to see a lot more happening within this space over next few years.

Phil:

On today’s Bullseye– back in the day, having an engraved biz card was a sign of success, then came the Amex Black Card, then the 80s hit with Cristal Champagne, Absolut Vodka, Porsches and designer everything. All became showy signs of status– not necessarily success. But status. Fast forward to 2022 and I have to wonder if the newest promotion from one of the worlds largest fast food chains is going to spawn a status revolution for today’s equivalent of the Yuppie. McDonald’s has created the McDonald’s Gold Card. It’s not a credit card that you can apply for– some, like Warren Buffet, Rob Lowe and Bill gates have had it bestowed upon them for loyalty. Until now it’s a perk reserved and paid for by local franchisee owners that have rewarded local heroes, celebs and influencers. Most of the time, it limits the holder to eat free at the franchisees restaurants– often for life. And in rare cases, founder Ray Kroc informally gave lifetime Be Our Guest cards– which actually were pink- to the likes of George Romney. Not sure why Warren Buffet needs one– I think he can afford his own Big Macs- but whatever. It’s certainly a sign of status. So McDonald’s marketing folks took a look and said– if Willy Wonka can do it– so can we. I made that quote up. But it’s a smart idea even if its not an original one, and I don’t expect a movie to be made about it- their newest promotion giving away 3 McDonald’s Gold Cards. Each winner also gets 3 more Gold Cards that they can gift to friends and relatives. If you need my address winners, just text me. So these 12 gold cards will give the winners free McDonald’s meals(up to$10 each meal) twice a week for life– or 50 years– whichever comes first. Seriously McDonald’s? Have to limit to 50 years? That’s a move that just makes you look cheap. Just say for life and leave it at that, please. I’m not sure how much food a twenty-year-old will eat at McDonald’s when they are 81 anyway. So, starting today, December 5 and running through Christmas Day, just download the app and enroll in the MyMcDonald’s Reward program. All you have to do is make one purchase during that time and you are automatically entered. McDonald’s values the card at almost$300,000 over the 50 years. This is a smart concept and if they promote and advertise it correctly can do wonders for the McDonald’s brand. Expect to see others– and not just fast food joints jump on this idea. Hey supermarket CEOS– how about you? Why not offer a Gold card for your supermarket and offer shoppers free groceries for life. Just offer one card– and maybe make it an annual promotion. In this era where shoppers are seeing supermarkets as the bad guy– even though its not true– by raising prices– this Gold Card promotion could be a great way to build loyalty and reward one lucky shopper. It’s not going to cost all that much in the scheme of things– but the value of such a promotion– could be a pot of gold. Thanks for joining us on Lempert Report LIVE. Don't forget to visit supermarket guru.com, sign up for our newsletter. And don't forget, all our archives are right there from previous Lempert Report LIVE's. Have a great week and we'll see you back here next week. Same time.