Grocery Disrupt: Amazon’s Latest Venture Good Become a Store Near You; Tyson’s New Add-Venture; Trump’s Taxing Tariff Tweets

Move over, humans…

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Just when you to start to wonder what else Amazon could possibly do to disrupt and reinvent the retail shopping experience, along comes Amazon Go, an actual brick-and-mortar-store brought to you by the e-commerce giant. Talk about irony. The concept, which is still being tested by Amazon employees, allows shoppers to literally grab food and walk out. No lines. No cashiers. Customers just take their cellphones and tap them on a turnstile to get logged into the store’s network, which in turn connects to the Amazon Prime app, already conveniently installed on their phones. Customers pick items off the shelf and put them into their cart while, with the aid of sensors and artificial intelligence, the same items are also placed in virtual shopping cart. If a shopper decides that they don’t want an item, they simply place it back on the shelf and the item also disappears from the virtual cart. Like magic. Should you crave something a bit more immediate, the store also offers up fresh food, prepared on site. Once customers are done, they simply walk out while the app does all the work, which basically involves adding everything up and then charging respective Amazon accounts. The company has been on the hunt to gain a big presence in the food retail industry, an industry which still fiscally eludes it, and also happens to be one of the biggest retail industries. Ever.  Its fresh food delivery is nice and all, but Amazon’s set its sights on competing with the big grocery players like Wal-Mart, Krogers and Target. The food retailer index took a 1% dive on Amazon’s news while shares of Amazon went up. But established grocers can breathe a very brief sigh of relief easy as Amazon still has a few months before it opens up the store to the public. And humans, fear not. One tech investor said that people are still a very big, necessary component of the retail experience and to scrap the notion that jobs will be lost to machines. Phew.

Speaking of food…

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What to do when you’re a $20 billion company whose prime business is chicken, beef and pork, and you keep losing money to the alternative-meat and fresh-food industry? Why, you set up a venture capital firm, of course. And that’s just what Tyson Foods did in an attempt to compete with a burgeoning industry that is literally eating into its business model. Apparently, plant-based protein and food sustainability is where it’s at these days and if you can’t beat ’em then join ’em by investing in their start-ups. Hence we have Tyson New Ventures LLC, a $150 million venture capital firm that Tyson launched to tap into a market that favors more plant-based and fresh food. The venture capital firm will look to companies that are working on making food-related “breakthroughs” and new innovative technology and business models that relate to food. Tyson already announced its first investment a few months ago, when it bought a 5% stake in Beyond Meats, a company that makes meat-like products. Tyson has got nothing to lose either, considering its last earnings report was nothing short of dismal, and the news that its long-time CEO Donnie Smith was stepping down did nothing to instill confidence in investors. Tyson isn’t the only firm to try out this venture capital idea. Other companies like Campbells Soup, Coca Cola, General Mills and Kellogg’s have all established similar firms with pretty much the same objective: to continue to be a prominent player in a shifting market and industry landscape.  So far this year venture firms have already thrown $420 million into various food and agricultural companies. In 2015 that number approached $650 million.

A day without Trump?

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Over the weekend, President-elect Donald Trump mentioned, in a series of tweets of course, that he wants to get back at U.S. companies who dare shift jobs and production overseas. His preferred revenge tactic would be in the form of a 35% tariff and, strangely enough, his fellow Republicans don’t seem to be on board. The top House Republican, House Majority Leader Kevin McCarthy, does not support Trump’s tariff idea and thinks that the best, most effective way to create and keep jobs in the U.S. is via major tax reform. There seem to be a whole bunch of issues at play with Trump’s (overly) ambitious tax-revenge plans, including the fact that such a move goes against the whole spirit of free trade and has the potential to spark trade wars. And nobody likes wars, whether they involve armed conflict or goods and services. Tax specialists and other assorted experts have also said that it’s fairly debatable as to whether or not Trump’s tactics are even legal.  Republicans are, however, partial to over-hauling the corporate tax code in an effort to keep U.S. companies from fleeing to more tax-hospitable countries. They’d like to cut that pesky corporate tax rate to 20% or less which would allow the U.S. to be more competitive globally. House Republicans are also in favor of imposing corporate taxes to all imported goods and services and scrapping them for exports. But leave it to the critics to argue that changes like that might be seen as violations of the World Trade Organization.  In any case,  it remains to be seen how exactly Trump will get his way, if he does. That’s because tariffs aren’t typically applied to specific companies but rather entire classes of goods. Besides, the president doesn’t get to make those kinds of decisions anyway. That’s for Congress to decide and Congress doesn’t seem, shall we say, receptive, to Trump’s tariff talk.

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GE is Not too Big Anymore. To Fail, That is.; Diamonds Need a New Best Friend; Kellogg’s Wants to Make Cereal Great Again;

On your own…

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You can rest easy now as GE no longer poses a systemic threat to the financial stability of the United States. Phew. Three months ago, GE officially requested to unload its “Too Big to Fail” designation and voila! Shedding close to $200 billion in assets helped it achieve that lofty goal. Unfortunately, none of those dollars made their way to me. But I digress. With the Financial Stability Oversight Council voting unanimously to remove the label, officially called “Systemically Important Financial Institution” (or SIFI if you’re nasty), GE no longer requires lots of added, and presumably unwanted, scrutiny from the Federal Reserve. So now, nobody cares if it fails. Well, maybe just its employees and shareholders. And if it does (but why would it?), the government won’t have to throw at it a $182 billion taxpayer-funded bail-out like it did for AIG. Boom.

A girl’s best friend?

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It’s called the Lesedi la Rona and is the second biggest diamond mined. Ever. Clocking in at 1,109 carats, about the size of a tennis ball, so they say, this behemoth of a stone is only second to the Cullinan diamond that was discovered more than one hundred years ago. The 3,106 carat Cullinan, however, was cut cut into several polished stones and now shares a very posh home with the British Crown jewels. The same fate could not be said for this latest find. Last night Sotheby’s tried to auction the darn thing off, but the 3 billion years old diamond couldn’t even clear its $70 million reserve price. The rock was expected, according to some estimates, to fetch about $84 million with the bidding starting at $50 million. The bidding went up – “in strained pauses” – in increments of $1 million. But after fifteen minutes, the highest bid only came in at $61 million. Lucara, the Canadian company that owns the precious rock, saw its stock fall 18%  after the news that it failed to sell. Sadly, for the diamond industry anyway, prices for rough diamonds have fallen 18%, the most its fallen since the fiscal crisis of 2008.

Snap, crackle, pop…

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With cereal sales hitting the skids, falling by 1% this year, Kellogg’s has come up with a way it hopes will make cereal great again – cereal cafes. For about double the price of your average box of Apple Jack’s you can walk into Kellogg’s Cereal Cafe in Times Square (where else?) and order yourself a hearty bowl of Froot Loops accompanied by mini marshmallows and passion fruit jam. Yeah. You read that right. Or how about some Rice Krispies doused in green tea powder, fresh strawberries and ice cream. You didn’t see that one coming did you? Sounds swanky and that’s definitely the idea. Cereal sales have gone down 2.4% in the past four years, getting overshadowed by grab-n-go foods and being shunned by that pesky group we call Millennials. Cereal sales fell to about $10 billion in 2015, which might seem impressive except that way back in 2000, cereal sales came in close to $14 billion. According to research firm Mintel, 40% of Millennials could not be bothered with the clean-up required to eat a bowl of cereal and milk. However, 82% of that group still see cereal as a great snack sans the milk. Go figure. Next time you get the urge for a bowl of Special K mixed with Frosted Flakes, pistachios, lemon zest and thyme at 8:00 at night, then you’re in luck. The cafe, which opens July 4, will serve breakfast from 7:00 am until 11:00 pm.

Hey Big Spenders, You Auto know and Why’d You Leggo of Your Eggo?

Score one for the consumers…

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Image courtesy of anankkml/FreeDigitalPhotos.net

People have been shopping lately – a lot – as evidenced by a big jump in consumer spending for March. In fact it was the most spent money in five years. People bought cars, furniture and lots of other merchandise. Household purchases account for 70% of the economy and consumers helped to stimulate the economy with a .9% increase. Go consumers! That’s especially good news since the release of that dismal report showing the economy only grew by a teeny tiny .1%. But alas, jobless claims were up for the third straight week when 344,000 filed people filed unemployment claims. That number was up by 14,000.

Vroom vroom vroom…

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Image courtesy of sattva/FreeDigitalPhotos.net

The auto industry has been bombarding Wall Street with its earnings today. Ford missed the mark with sales that were down by .8%. Analysts predicted it would have a 3.1% gain. Chrysler was up 14% over the same period last year but missed their estimates by 2%. However, they probably weren’t terribly distraught since its Jeep brand had its best monthly sales ever. Ever. But the biggest head scratcher was scandal-wracked GM. It was up 7% despite the fact that its recent recall debacle just about destroyed its quarterly profits. According to CEO Mary Barra, the recall debacle had “no meaningful impact on sales.” Coincidentally, GM is helping to put together “the first shipping container homestead.” It’s exactly what it sounds like. The project will be made primarily from scraps from one of its plants. One company’s scraps is another man’s shipping container homestead.

Snap crackle drop…

Image courtesy of Serge Bertasius Photography/FreeDigitalPhotos.net

Image courtesy of Serge Bertasius Photography/FreeDigitalPhotos.net

Apparently you don’t gotta have your Pops. Kellogg’s, the maker of such iconic products as Eggo Waffles, Pop Tarts and Apple Jacks (my personal favorite) is watching its revenue crumble this quarter by 3%. It pulled in $3.74 billion when Wall Street was hoping it would pull in $3.81 billion. Increased competition, particularly from allegedly healthier alternatives (think Greek yogurt and breakfast sandwiches) has caused first quarter revenues to go soggy. Then there’s that whole McDonalds/Taco Bell breakfast war where the two fast-food chains want you to forego breakfast at home entirely. But Kellogg refuses to refuses to go down without a food fight and is rolling out…are your ready for this? A drinkable cereal. BOOM! Then it plans to further tackle those pesky healthy obstacles showcasing the finer nutritional points of a bowl of cereal swimming in milk. However, I suspect they wont be using Fruit Loops for that campaign.