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March 26, 2015

Publishing News

CEO of WPP, World's Largest Ad Agency: Marketers Should Harness Print's Power
Sir Martin Sorrell, CEO of WPP, the world's largest ad agency, says that after years or urging his clients to spend more on digital media, he is now telling them that they need to reconsider newspapers and magazines because they are more effective than people think. Speaking to the U.K.'s Broadcasting Press Guild, Sorrell said that reassessment of the ROI of print vs. other media is needed.
The Times (U.K.) (paid sub req.)

YouTube Series Spawns YA Print Novels
Nearly five years ago, a chirpy, animated 16-year-old named Paige McKenzie uploaded a 68-second video to YouTube. More than 130M views later, her mockumentary web series, “The Haunting of Sunshine Girl,” has become a full-time job. Each week, Ms. McKenzie spends 80 hours shooting, acting in and editing the show, and frenetically trading messages with viewers. Now, there’s a nonvirtual place her fans can find her: bookstores. In an inversion of the usual page-to-screen adaptation process, McKenzie is extending her brand into print by turning her YouTube show into a series of young adult novels. The story follows the same arc as the early web episodes, as its teenage heroine and narrator, Sunshine Griffith, investigates the mystery behind a spirit haunting her house and tries to rescue her mother from demonic possession. The first book, “The Haunting of Sunshine Girl,” comes out this week from Weinstein Books, with endorsements from horror heavyweights like R. L. Stine and the filmmaker Wes Craven. Sunshine Girl,” written with a collaborator, is the latest literary adaptation to emerge from YouTube as publishers and agents trawl the site in a race to land the biggest web video stars. Some publishers are so bullish about leveraging online audiences into print sales that they have created entire imprints dedicated to YouTube. In 2013, the literary agent Mollie Glick saw a feature on McKenzie in Seventeen magazine, and asked her if she was interested in writing a novel based on her show. Glick paired McKenzie with a young adult novelist, Alyssa B. Sheinmel, who wrote three sample chapters and an outline. A book deal quickly followed. Last spring, Weinstein bought a partial manuscript at auction--in a low-six-figure, two-book deal--and separately optioned screen rights. The company plans to expand the Sunshine series, and recently bought a third book.

Real Value of Postal Monopoly: $18B a Year
The value of the monopoly enjoyed by the U.S. Postal Service is apparently far greater than previously enumerated---four times greater than the government estimate of $4.5B a year, according to economist Robert Shapiro. In a forum on the future of the Postal Service at the Brookings Institution yesterday, the Georgetown professor and former chief of economic affairs in the Clinton administration, applied an economist's sharper pencil to the subsidies enjoyed by USPS and pegged them at closer to $18B per annum. “I'm not saying there's a problem in the [government] accounting,” Shapiro said. “I'm just saying this is how an economist would conceptualize it.” Government bean-counters underestimate the advantages gained by the Postal Service in competitive markets such as shipping due to its exclusive access to business and residential mailboxes. Because USPS's package deliveries ride along on its regular delivery routes, and because other shippers like FedEx and UPS must deliver to customers' doors, the additional burden on private shippers amounted to $14.9B in 2013, according to Shapiro. Article spells out more of the specifics.

Fortune's 'World's Greatest Leaders' List Omits President Obama (Again)
For the second year in a row, President Obama has been left off of Fortune’s “World’s Greatest Leaders” list. Those making this year's list include Taylor Swift and Jimmy Fallon.


Retail News

Retailers Could Feel Kraft-Heinz Merger 'Pinch'
SN: While there have been other big mergers in the CPG industry, the Kraft Foods Group and H.J. Heinz Co. deal is a game changer. “If it can happen to Kraft, it can happen to anyone,” Don Stuart, managing partner at Cadent Consulting Group, Wilton, Conn., said of possible other takeover targets. Stuart describes the Kraft-Heinz deal as a merger in name only, saying it actually will be a 3G-run company. 3G is known for buying consumer companies and aggressively slashing costs. It will strip Kraft’s costs to the bone, both in terms of people and capabilities, just as it did when it led the takeover of Anheuser-Busch and Heinz, said Stuart. The resulting leaner organization could affect retailers in the form of reduced broker and sales support. “Retailers could feel a little pinch,” noted Stuart, saying retailers may be forced to use more of their own resources at store-level. Kraft Heinz Co. may also have more clout in terms of negotiating pricing and promotions with retailers, said Jim Hertel, managing partner for Willard Bishop, Barrington, Ill. For CPGs, meanwhile, the deal will create more pressure to cut costs and operate more efficiently...Separately, Marketing Daily summarizes the views of other consultants who have worked closely with Kraft, Heinz or both. Among their observations: The long-term prospects of the combined company will hinge heavily on willingness to invest in brands, not just slash costs, and ability to drive and/or acquire innovation in the face of consumers' shift away from processed foods. Also, the merger might present possibilities for competitors to actually grab share.

Amazon Expands One-Hour Delivery to Dallas; Extends AmazonFresh to Prime Members Through June
Amazon announced that it's expanding its Prime Now service to Dallas. Amazon said customers in Dallas--who must be members of Amazon’s $99-a-year Prime program—can get one-hour delivery on tens of thousands of items for $7.99 per order, or with no fee for two-hour delivery. The e-commerce giant last week launched Prime Now in some areas of Miami and Baltimore, portending a broader rollout of the service and marking its latest move against brick-and-mortar rivals. An Amazon spokeswoman last week said the company would use existing warehouses in Miami and Baltimore as dispatch points for couriers in cars. Amazon opened two fulfillment centers in the Dallas area in 2013. In addition, Amazon said it will offer use of its grocery delivery service AmazonFresh, at no additional charge, to members of its Prime program through June. At the end of the free trial period, users will have to sign up for a Prime Fresh membership, which costs $299 a year, to continue to use AmazonFresh. Also, Amazon announced two new unlimited storage plans for customers to save their media content on Amazon Cloud Drive. The photos plan, which costs $11.99 a year, allows for the storage of an unlimited amount of photos and includes limited room for videos, documents and other files. The everything plan, which costs $59.99 a year, allows for the storage of photos, videos, files, documents, movies and music. The company said Amazon Prime members and Fire devices owners, both of whom already have unlimited photo storage, can opt for the everything plan. The photos and everything plans also each offer a free three-month trial.

Delhaize's Muller on Selling Off Bottom Dollar: 'We Are Not a Discounter'
Delhaize threw everything it had at making the Bottom Dollar concept work before concluding that discounting “wasn’t in our DNA,” CEO Frans Muller told SN in a recent interview. The company late last year sold all 66 of Bottom Dollar’s locations, located mainly in the Philadelphia and Pittsburgh markets, to Aldi for $15M, and retired the banner, signaling the end of a nearly 10-year experiment with a hard discount format. Although Bottom Dollar at one time was seen as a major growth vehicle for Brussels-based Delhaize Group, Muller said the company was unable to master the economics in the same manner as rivals like Aldi, despite having created a format he described as well run and well liked by shoppers. “I am fully convinced that you can only win in the things you are good at. That sounds cliché, but you need focus. You need an understanding of what you’re good at. You need to listen to your DNA,” Muller said. “We are not a discounter. We do not know how this works. We are a very good supermarket operator. But if you want to complete with Aldi, as we did, then you need a certain P&L. And you need a certain economy in your business model. And those economics did not fit the price and value positioning we need to have,” he added. Muller joined Delhaize in November of 2013 following a rapid expansion of Bottom Dollar under his predecessor, Pierre-Olivier Beckers. Muller said Delhaize’s instincts were right in identifying discount as a growing phenomenon, but said carrying the losses over so many stores made it “too painful” to continue. “I think we went too fast to 60 stores, and then you had a gap in the profitability. You could [withstand that] with 10 stores, but with 60 it was too painful." Aldi has not publicly revealed plans for the acquired stores although observers expect the company could open Aldi stores at several former Bottom Dollar locations shortly.

Retailers Say the Days of Routine 40% Off Sales Are Over
Large department store chains and specialty retailers alike say they're trying to put the brakes on the routine deep-discount sales both in physical stores and e-commerce sites that began during the recession and continued for years thereafter. “They have to differentiate their brand in other ways, because otherwise, it’s a race to the bottom,” said Marcie Merriman, a consumer-engagement consultant at Ernst & Young. Selling items at promotional prices can take a deep toll on a retailer’s profitability. By cutting back on these deals, retailers are betting that while they might sell fewer items, their bottom lines will benefit from the higher profit margins they get from each sale. Retail experts say that this commitment to dialing back on blowout-style promotions doesn’t necessarily mean it will be harder for consumers to nab a deal. “They may be dialing back the mass promotions, but they’re going to be more focused on targeted promotions,” said Virginia Morris, VP of global consumer and innovation strategy at consultancy Daymon Worldwide. In other words, while you might see fewer “30% off your purchase” offers, you might start to receive e-mails touting more narrow or personalized deals, in some cases selected for you based on things you have bought previously.

Could Land Deals Signal H-E-B Push Into Dallas Market?
H-E-B has quietly been gathering acreage in North Texas while building stores in Houston and San Antonio that redefine the traditional Texas supermarket. The San Antonio-based grocer has bought at least a dozen locations in the region, including in Allen, Carrollton, Corinth, Dallas, DeSoto, Fort Worth, Frisco, Grand Prairie, McKinney, Murphy and Plano. “This market is ready for them,” said Karla Smith, senior vice president and partner in the Dallas office of commercial real estate firm CBRE/UCR. “I anticipate H-E-B will open a few stores in Dallas-Fort Worth in 2016.” Smith is echoing what many in the real estate and grocery businesses suspect. But while a full-blown expansion north seems like a natural step to everyone else in Texas, 110-year-old family-owned and -operated H-E-B didn’t make it to the top of its game by rushing into anything. When asked about its local real estate purchases, the company said it has no current plans for H-E-B stores in the Dallas-Fort Worth market. “We continue to include D-FW in our statewide real estate search for future property holdings for the company,” said Winell Herron, H-E-B VP. She said H-E-B considers advance real estate purchases a key part of its strategy for offering low prices in its stores. Herron also said it’s important to note that not all of its land purchases end up meeting the requirements for a store. “For the time being, Central Market will continue to be our primary format and growth vehicle for the D-FW area,” she said. H-E-B, which operates five Central Market specialty food stores in the Dallas area, has land-banked 16 North Texas sites, Smith said.

The Fresh Market Introduces Employee Sales Bonuses
The Fresh Market has developed a bonus plan for its 12,000-plus employees that enables them to earn more money based on sales rather than tenure, a company executive said at the Telsey Advisory Group Spring Consumer Conference in New York. All employees, including hourly workers, can participate in a bonus program based on sales growth, said Jeffrey Ackerman, EVP and CFO of the Greensboro, N.C.-based company. “Until this year it was more tenure-based and more of a fixed amount,” he pointed out. With the new plan in place, “if we execute well in the stores, that will help with traffic growth,” he said. Traffic count was on an upswing during 2014, Ackerman said, with increases of 1.8% in the first quarter, 2.7% in the second, 3% in the third and 3.7% in the fourth, “which is the highest growth we’ve had in 10 quarters, so we feel like we’re still able to attract new customers.” With the economy improving, unemployment shrinking and the price of gas coming down, “there’s more consumer confidence, and while I can’t tell you what it’s worth, it obviously feels more like a tailwind than a headwind,” he said. The Fresh Market is attempting to boost its marketing capabilities, Ackerman noted. “Historically we’ve been very operationally focused and relied on word-of-mouth, but we want to make sure people hear our message and that we’re reaching more people with it. “So we’re trying to bring in some talent that will help us develop digital assets,” Ackerman said. “It’s still really early, but we know that’s something we can get better at.” Ackerman said the company anticipates 12% to 15% new-store growth per year, with half of that coming in the Southeast and the rest “spread randomly” in the Northeast, Midwest and Mid-Atlantic regions.

Pepsi Replaces Diet Coke as #2 U.S. Beverage by Volume
Regular Pepsi supplanted Diet Coke as the No. 2 soda brand in the U.S. by volume in 2014 as Americans continued to flee diet soft drinks, according to new industry data from Beverage Digest. Overall U.S. soda consumption contracted 0.9%, the 10th straight yearly decline, as health-conscious consumers drop traditional carbonated drinks for everything from water to energy drinks to tea. Regular Coke remained the country’s top-selling soda last year with a market share of 17.6% after its volume rose 0.2%. But Diet Coke fell to No. 3, with a soda market share of 8.5%, after volume plunged 6.6% in 2014. Regular Pepsi had a market share of 8.8% after its volumes dropped 1.8%. Diet Coke had leapfrogged Pepsi-Cola for second place in 2010. Article provides more statistics from Beverage Digest on the market shares of various brands and 2014 beverage trends.

Study: Consumers Want Seamless Online/Offline Shopping
Retailers must offer a seamless bridge between online and offline experiences, according to a study of consumer attitudes toward digital shopping by a global management consulting firm. “All sales channels must be equally desirable to the consumer so that the path to purchase is not chosen based on satisfaction in one channel over another but simply on what is most convenient at that time," said Dave Richards, global managing director for Accenture’s retail practices. “It is critical for retailers to build capabilities such as digital marketing and analytics that will enable them to tap into the core strengths of the physical store and seamlessly integrate with the rest of their digital offerings. The winners will be those most successful at transitioning their online visitors into in-store purchasers and vice versa.” Accenture conducted the U.S. portion of the survey online among 750 consumers and 32 retail companies. Asked what aspect of the shopping experience is most in need of an upgrade, 39% of respondents ranked the physical store first, while 32% cited the need for retailers to improve the shopper’s ability to use physical, online and mobile channels in an integrated way. 82% of respondents said they expect retail prices to be the same in-store and online--up from 69% in Accenture’s survey a year ago. However, the study found only 34% of retailers have identical pricing across channels for more than 80% of the items assessed. The survey also found that retailers who don’t have the right online presence and pricing are at risk of losing sales once a physical store closes.


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